Master Agreement - RUBY TUESDAY INC - 8-31-2001

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					MASTER AGREEMENT Dated as of April 30, 2001 among RUBY TUESDAY, INC., as Lessee and Guarantor, ATLANTIC FINANCIAL GROUP, LTD., as Lessor, CERTAIN FINANCIAL INSTITUTIONS PARTY HERETO, as Lenders and SUNTRUST BANK, as Agent

TABLE OF CONTENTS Page SECTION 1............................DEFINITIONS; INTERPRETATION SECTION 2 SECTION SECTION SECTION SECTION SECTION 1

ACQUISITION, CONSTRUCTION AND LEASE; FUNDINGS; NATURE OF TRANSACTION......................................2 2.1 Agreement to Acquire, Construct, Fund and Lease.....2 2.2 Fundings of Purchase Price, Development Costs and Construction Costs....................2 2.3 Funded Amounts and Interest and Yield Thereon; Unused Fee................................4 2.4 Lessee Owner for Tax Purposes.......................5 2.5 Amounts Due Under Lease.............................6

SECTION 3........................CONDITIONS PRECEDENT; DOCUMENTS 6 SECTION 3.1 Conditions to the Obligations of the Funding Parties on each Closing Date........................6 SECTION 3.2 Additional Conditions for the Initial Closing Date.10 SECTION 3.3 Conditions to the Obligations of Lessee............12 SECTION 3.4 Conditions to the Obligations of the Funding Parties on each Funding Date.......................12 SECTION 3.5 Completion Date Conditions.........................13 SECTION 4 ......................................REPRESENTATIONS 15 SECTION 4.1 Representations of Lessee..........................15 SECTION 4.2 Representations of the Lessor......................19 SECTION 4.3 Representations of each Lender.....................21 SECTION 5................COVENANTS OF THE LESSEE AND THE LESSOR 21 SECTION 5.1 Financial Statements and Other Information.........21 SECTION 5.2 Notices of Material Events.........................23 SECTION 5.3 Existence; Conduct of Business.....................23 SECTION 5.4 Compliance with Laws, Etc..........................24 SECTION 5.5 Payment of Obligations.............................24 SECTION 5.6 Books and Records..................................24 SECTION 5.7 Visitation, Inspection, Etc........................24 SECTION 5.8 Maintenance of Properties; Insurance...............24 SECTION 5.9 Use of Proceeds....................................24 SECTION 5.10 Additional Subsidiaries; Additional Guaranties.....25 SECTION 5.11 Minimum Fixed Charge Coverage Ratio................25 SECTION 5.12 Maximum Adjusted Total Debt to EBITDAR Ratio.......25 SECTION 5.13 Maximum Adjusted Total Debt to Adjusted Total Capital Ratio......................................25 SECTION 5.14 Indebtedness.......................................26 SECTION 5.15 Negative Pledge....................................27 SECTION 5.16 Fundamental Changes................................27 SECTION 5.17 Investments, Loans, Etc............................28 SECTION 5.18 Restricted Payments................................29 SECTION 5.19 Sale of Assets.....................................29 SECTION 5.20 Transactions with Affiliates.......................30 SECTION 5.21 Restrictive Agreements.............................30 SECTION 5.22 Sale and Leaseback Transactions....................30 SECTION 5.23 Hedging Agreements.................................31 SECTION 5.24 Amendment to Material Documents....................31 SECTION 5.25 Accounting Changes.................................31 SECTION 5.26 ERISA..............................................31 SECTION 5.27 Further Assurances.................................31 SECTION 5.28 Additional Required Appraisals.....................32 SECTION 5.29 Lessor's Covenants.................................32 SECTION 6.......................TRANSFERS BY LESSOR AND LENDERS 33 SECTION 6.1 Lessor Transfers...................................33 SECTION 6.2 Lender Transfers...................................33 SECTION 7.......................................INDEMNIFICATION 35 SECTION 7.1 General Indemnification............................35 SECTION 7.2 Environmental Indemnity............................37 SECTION 7.3 Proceedings in Respect of Claims...................38 SECTION 7.4 General Tax Indemnity..............................40 SECTION 7.5 Increased Costs, etc...............................45 SECTION 7.6 End of Term Indemnity..............................49 SECTION 8.........................................MISCELLANEOUS 50 SECTION 8.1 Survival of Agreements.............................50

SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION

8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10

SECTION 8.11 SECTION 8.12

Notices............................................50 Counterparts.......................................50 Amendments.........................................50 Headings, etc......................................52 Parties in Interest................................52 GOVERNING LAW......................................52 Expenses...........................................52 Severability.......................................52 Liabilities of the Funding Parties; Sharing of Payments...........................................52 Submission to Jurisdiction; Waivers................53 Liabilities of the Agent...........................54

APPENDIX A

Definitions and Interpretation

SCHEDULES
SCHEDULE SCHEDULE SCHEDULE SCHEDULE SCHEDULE SCHEDULE 2.2 4.1(n) 5.14 5.15 5.17 8.2 Commitments Subsidiaries Indebtedness Liens Investments Notice Information

EXHIBITS
EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT A B C D E F G H I Form of Funding Request Form of Assignment of Lease and Rents Form of Security Agreement and Assignment Form of Mortgage Form of Payment Date Notice Form of Assignment and Assumption Agreement Forms of Opinions of Counsel Form of Lessee Certification of Construction Completion Form of Subsidiary Guaranty Agreement

EXHIBIT J Form of Indemnity, Subrogation and Contribution Agreement

MASTER AGREEMENT THIS MASTER AGREEMENT, dated as of April 30, 2001 (as it may be amended or modified from time to time in accordance with the provisions hereof, this "Master Agreement"), is among RUBY TUESDAY, INC., a Georgia corporation ("Lessee"); ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership (the "Lessor"), certain financial institutions party hereto as lenders (together with any other financial institution that becomes a party hereto as a lender, collectively referred to as "Lenders" and individually as a "Lender"), and SUNTRUST BANK, a Georgia banking corporation, as agent for the Lenders (in such capacity, the "Agent"). PRELIMINARY STATEMENT In accordance with the terms and provisions of this Master Agreement, the Lease, the Loan Agreement and the other Operative Documents, (i) the Lessor contemplates acquiring Land identified by the Lessee from time to time, and leasing such Land to the Lessee, (ii) the Lessee, as Construction Agent for the Lessor, wishes to construct Buildings on such Land for the Lessor and, when completed, to lease such Buildings from the Lessor as part of the Leased Properties under the Lease, (iii) the Lessee, as Construction Agent, wishes to obtain, and the Lessor is willing to provide, funding for the acquisition of the Land and the construction of Buildings, (iv) the Lessor wishes to obtain, and Lenders are willing to provide, from time to time, financing of a portion of the funding of the acquisition of the Land and the construction of the Buildings, and (v) the Lessee is willing to provide its Guaranty Agreement to the Lenders and the Lessor. In consideration of the mutual agreements contained in this Master Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS; INTERPRETATION Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof; and the rules of interpretation set forth in Appendix A hereto shall apply to this Master Agreement. SECTION 2 ACQUISITION, CONSTRUCTION AND LEASE; FUNDINGS; NATURE OF TRANSACTION SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease. (a) Land. Subject to the terms and conditions of this Master Agreement, with respect to each parcel of Land identified by the Lessee, on the related Closing Date (i) the Lessor agrees to acquire such interest in the related Land from the applicable Seller as is transferred, sold, assigned and conveyed to the Lessor pursuant to the applicable Purchase Agreement or to lease such interest in the related Land from the applicable Ground Lessor as is leased to the Lessor pursuant to the applicable Ground Lease, (ii) the Lessor hereby agrees to lease, or sublease, as the case may be, such Land to the Lessee pursuant to the Lease, and (iii) the Lessee hereby agrees to lease, or sublease, as the case may be, such Land from the Lessor pursuant to the Lease. (b) Building. With respect to each parcel of Land, subject to the terms and conditions of this Master Agreement, from and after the Closing Date relating to such Land (i) the Construction Agent agrees, pursuant to the terms of the Construction Agency Agreement, to construct and install the Building on such Land for the Lessor prior to the Scheduled Construction Termination Date, (ii) the Lenders and the Lessor agree to fund all or a portion of the costs of such construction and installation (and interest and yield thereon during the applicable Construction Term), (iii) the Lessor shall lease, or sublease, as the case may be, such Building as part of such Leased Property to the Lessee pursuant to the Lease, and (iv) the Lessee shall lease, or sublease, as the case may be, such Building from the Lessor pursuant to the Lease. SECTION 2.2 Fundings of Purchase Price, Development Costs and Construction Costs. (a) Initial Funding and Payment of Purchase Price for Land and Development Costs on Closing Date. Subject to the terms and conditions of this Master Agreement, on the Closing Date for any Land, each Lender shall make available to the Lessor its Loan with respect to such Land in an amount equal to the product of such Lender's Commitment Percentage times the purchase price for the Land, if applicable, and the development, transaction

and closing costs incurred by the Lessee through such Closing Date with respect to such Leased Property, which funds the Lessor shall use, together with the Lessor's own funds in an amount equal to the product of the Lessor's Commitment Percentage times the purchase price, if applicable, for the related Land and the development, transaction and closing costs incurred by the Lessee, as agent, through such Closing Date with respect to such Leased Property, to purchase the Land from the applicable Seller pursuant to the applicable Purchase Agreement or lease the Land from the applicable Ground Lessor pursuant to the applicable Ground Lease and to reimburse the Lessee for the amount of such development, transaction and closing costs, and the Lessor shall lease, or sublease, as the case may be, such Land to the Lessee pursuant to the Lease. (b) Subsequent Fundings and Payments of Construction Costs during Construction Term. Subject to the terms and conditions of this Master Agreement, on each Funding Date following the Closing Date for each parcel of Land until the related Construction Term Expiration Date, (i) each Lender shall make available to the Lessor a Loan in an amount equal to the product of such Lender's Commitment Percentage times the amount of Funding requested by the Lessee for such Funding Date, which funds the Lessor hereby directs the Lender to pay over to the Lessee as set forth in paragraph (d), and (ii) the Lessor shall pay over to the Lessee its own funds (which shall constitute a part of and an increase in the Lessor's Invested Amount with respect to such Leased Property) in an amount equal to the product of the Lessor's Commitment Percentage times the amount of Funding requested by the Lessee for such Funding Date. (c) Aggregate Limits on Funded Amounts. The aggregate amount that the Funding Parties shall be committed to provide as Funded Amounts under this Master Agreement and the Loan Agreement shall not exceed (x) with respect to each Leased Property the costs of purchase and construction of such Leased Property and the related closing and financing costs, or (y) $50,000,000 in the aggregate for all Leased Properties; provided, however, that in the event that the Lessee exercises a Partial Purchase Option, the amount set forth in this clause (y) shall be reinstated to the extent of the Funded Amounts paid by the Lessee in connection with such Partial Purchase Option. The aggregate amount that any Funding Party shall be committed to fund under this Master Agreement and the Loan Agreement shall not exceed the lesser of (i) such Funding Party's Commitment and (ii) such Funding Party's Commitment Percentage of the aggregate Fundings requested under this Master Agreement. (d) Notice, Time and Place of Fundings. With respect to each Funding, the Lessee shall give the Lessor and the Agent an irrevocable prior written notice not later than 11:00 a.m., Atlanta, Georgia time, three Business Days prior to the proposed Closing Date or other Funding Date, as the case may be, pursuant, in each case, to a funding request in the form of Exhibit A (a "Funding Request"), specifying the Closing Date or subsequent Funding Date, as the case may be, the amount of Funding requested, whether such Funding shall be a LIBOR Advance, a Base Rate Advance or a combination thereof and the Rent Period(s) therefor. The Agent shall notify the Lenders of a requested Funding on the day the Agent receives the related Funding Request if the Agent receives such Funding Request on or before 11:00 a.m., Atlanta, Georgia time; if the Agent receives a Funding Request after such time, it shall promptly notify the Lenders thereof, but in any event by close of business on the next Business Day. All documents and instruments required to be delivered on such Closing Date pursuant to this Master Agreement shall be delivered at the offices of Mayer, Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603, or at such other location as may be determined by the Lessor, the Lessee and the Agent. Each Funding shall occur on a Business Day and shall be in an amount equal to $500,000 or an integral multiple of $100,000 in excess thereof. All remittances made by any Lender and the Lessor for any Funding shall be made in immediately available funds by wire transfer to or, as is directed by, the Lessee, with receipt by the Lessee not later than 12:00 noon, Atlanta, Georgia time, on the applicable Funding Date, upon satisfaction or waiver of the conditions precedent to such Funding set forth in Section 3; such funds shall (1) in the case of the initial Funding on a Closing Date, be used to pay the purchase price to the applicable Seller for the related Land and pay the Lessee development, transaction and closing costs related to such Land, and (2) in the case of each subsequent Funding be paid to the Lessee as the Construction Agent, for the payment or reimbursement of Construction costs. (e) Lessee's Deemed Representation for Each Funding. Each Funding Request by the Lessee shall be deemed a reaffirmation of the Lessee's indemnity obligations in favor of the Indemnitees under the Operative Documents and a representation by the Lessee to the Lessor, the Agent, and the Lenders that on the proposed Closing Date or Funding Date, as the case may be, (i) the amount of Funding requested represents amounts owing in respect of the purchase price of the related Land and development, transaction and closing costs in respect of the Leased Property (in the case of the initial Funding on a Closing Date) or amounts that are then due to third parties in respect of the Construction, or amounts paid by the Lessee to third parties in respect of the Construction for which the Lessee has not previously been reimbursed by a Funding (in the case of any Funding), (ii) no Event of

Default or Potential Event of Default exists, and (iii) the representations of the Lessee set forth in Section 4.1 are true and correct in all material respects as though made on and as of such Funding Date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date. (f) Not Joint Obligations. Notwithstanding anything to the contrary set forth herein or in the other Operative Documents, each Lender's and the Lessor's Commitments shall be several, and not joint. In no event shall any Funding Party be obligated to fund an amount in excess of such Funding Party's Commitment Percentage of any Funding, or to fund amounts in the aggregate in excess of such Funding Party's Commitment. (g) Non-Pro Rata Fundings. Notwithstanding anything to the contrary set forth in this Master Agreement, at the Agent's option, Fundings may be made by drawing on the Lessor's Commitment until such Commitment is fully funded before drawing on the Lenders' Commitments. In such event, when the Lessor's Commitment is fully funded, the Lenders will fund, on a pro rata basis as among themselves, 100% of the amount of the Fundings thereafter. In no event shall any Funding Party have any obligation to fund any amount hereunder in excess of the amount of such Funding Party's Commitment. SECTION 2.3 Funded Amounts and Interest and Yield Thereon; Unused Fee. (a) The Lessor's Invested Amount for any Leased Property outstanding from time to time shall accrue yield ("Yield") at the Lessor Rate, computed using the actual number of days elapsed and a 360 day year. If all or a portion of the principal amount of or Yield on the Lessor's Invested Amounts shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, without limiting the rights of the Lessor under the Lease, to the maximum extent permitted by law, accrue Yield at the Overdue Rate, from the date of nonpayment until paid in full (both before and after judgment). (b) Each Lender's Funded Amount for any Leased Property outstanding from time to time shall accrue interest as provided in the Loan Agreement. (c) During the Construction Term, in lieu of the payment of accrued interest, on each Payment Date, each Lender's Funded Amount in respect of a Construction Land Interest shall automatically be increased by the amount of interest accrued and unpaid on the related Loans pursuant to the Loan Agreement during the Rent Period ending immediately prior to such Payment Date. Similarly, in lieu of the payment of accrued Yield, on each Payment Date, the Lessor's Invested Amount in respect of such Construction Land Interest shall automatically be increased by the amount of Yield accrued on the Lessor's Invested Amount in respect of such Land during the Rent Period ending immediately prior to such Payment Date. Such increases in Funded Amounts shall occur without any disbursement of funds by the Funding Parties. (d) Three Business Days prior to the last day of each Rent Period, the Lessee shall deliver to the Lessor and the Agent a notice substantially in the form of Exhibit E (each, a "Payment Date Notice"), appropriately completed, specifying the allocation of the Funded Amounts related to such Rent Period to LIBOR Advances and Base Rate Advances and the Rent Periods therefor, provided that no such allocation shall be in an amount less than $500,000. Each such Payment Date Notice shall be irrevocable. If no such notice is given, the Funded Amounts shall be allocated to a LIBOR Advance with a Rent Period of three (3) months. (e) Lessor hereby agrees to pay to each Funding Party an unused fee for each day from the date hereof until the Funding Termination Date equal to (i) the Applicable Fee Margin per annum times (ii) the difference between such Funding Party's Commitment and its outstanding Lessor's Invested Amount or the principal of its outstanding Loans, as applicable, times (iii) 1/360. Such unused fee shall be payable with the proceeds of Advances in arrears on each Quarterly Payment Date and on the Funding Termination Date; on each such Quarterly Payment Date and on the Funding Termination Date, each Funding Party's Funded Amount shall be automatically increased by its Commitment Percentage of the aggregate unused fee due on such date pursuant to this Section 2.3(e). (f) If the increase in the Funded Amounts to be effected pursuant to Section 2.3(c) or (e) above would cause any Funding Party's Funded Amount to exceed its Commitment, such increase shall not be made and Lessee may, at its option, pay such amount. If Lessee does not choose to pay such amount, such event shall constitute a Construction Agency Event of Default.

SECTION 2.4 Lessee Owner for Tax Purposes. With respect to each Leased Property, it is the intent of the Lessee and the Funding Parties that for federal, state and local tax purposes (A) the Lessee owns such Leased Property and will be entitled to all tax benefits ordinarily available to an owner of property similar to such Leased Property, (B) the Lease will be treated as a financing arrangement, and (C) the Lessor will be treated as a lender making loans to the Lessee. Each of the Lessee and each Funding Party agrees to file tax returns consistent with such intent. Nevertheless, the Lessee acknowledges and agrees that no Funding Party or any other Person has made any representations or warranties concerning the tax, financial, accounting or legal characteristics or treatment of the Operative Documents and that the Lessee has obtained and relied solely upon the advice of its own tax, accounting and legal advisors concerning the Operative Documents and the accounting, tax, financial and legal consequences of the transactions contemplated therein. SECTION 2.5 Amounts Due Under Lease. Lessor hereby directs Lessee to, and Lessee agrees to, pay all Basic Rent, Leased Property Balances, Lease Balance, Recourse Deficiency Amount and all other amounts due to the Lessor under the Lease and the Construction Agency Agreement to the Agent for distribution pursuant to Section 3 of the Loan Agreement. With respect to each Leased Property, anything else herein or elsewhere to the contrary notwithstanding, it is the intention of the Lessee and the Funding Parties that: (i) the amount and timing of Basic Rent due and payable from time to time from the Lessee under the Lease shall be equal to the aggregate payments due and payable with respect to interest on, and principal of, the Loans in respect of such Leased Property and Yield on, and principal of, the Lessor's Invested Amounts, if any, in respect of such Leased Property on each Payment Date; (ii) if the Lessee elects the Purchase Option or the Partial Purchase Option with respect to a Leased Property or becomes obligated to purchase such Leased Property under the Lease or the Construction Agency Agreement, the Funded Amounts in respect of such Leased Property, all interest and Yield thereon and all other obligations of the Lessee owing to the Funding Parties in respect of the Leased Property shall be paid in full by the Lessee, (iii) if the Lessee properly elects the Remarketing Option, the principal amount of, and accrued interest on, the A Loans in respect of such Leased Property, will be paid out of the Recourse Deficiency Amount, and the Lessee shall only be required to pay to the Lenders in respect of the principal amount of the B Loans in respect of such Leased Property and to the Lessor in respect of the Lessor's Invested Amounts in respect of such Leased Property, the proceeds of the sale of such Leased Property; and (iv) upon an Event of Default resulting in an acceleration of the Lessee's obligation to purchase such Leased Property under the Lease, the amounts then due and payable by the Lessee under the Lease shall include all amounts necessary to pay in full the Loans in respect of such Leased Property, and accrued interest thereon, the Lessor's Invested Amounts in respect of such Leased Property and accrued Yield thereon and all other obligations of the Lessee owing to the Funding Parties in respect of such Leased Property. SECTION 3 CONDITIONS PRECEDENT; DOCUMENTS SECTION 3.1 Conditions to the Obligations of the Funding Parties on each Closing Date. The obligations of the Lessor and each Lender to carry out their respective obligations under Section 2 of this Master Agreement to be performed on the Closing Date with respect to any Leased Property shall be subject to the fulfillment to the satisfaction of, or waiver by, each such party hereto (acting directly or through its counsel) on or prior to such Closing Date of the following conditions precedent, provided that the obligations of any Funding Party shall not be subject to any conditions contained in this Section 3.1 which are required to be performed by such Funding Party: (a) Documents. The following documents shall have been executed and delivered by the respective parties thereto: (i) Deed and Purchase Agreement; Ground Lease. The related original Deed duly executed by the applicable Seller and in recordable form, and copies of the related Purchase Agreement, duly executed by such Seller and the Lessor, shall each have been delivered to the Agent by the Lessee, with copies thereof to each other Funding Party, or the related Ground Lease duly executed by the Lessor and the related Ground Lessor shall have been delivered to the Agent, with copies thereof to each other Funding Party, as applicable (it being understood, that each Purchase Agreement and each Ground Lease shall be satisfactory in form and substance to the Lessor and the Lenders). (ii) Lease Supplement. The original of the related Lease Supplement, duly executed by the Lessee and the Lessor and in recordable form, shall have been delivered to the Agent by the Lessee. (iii) Mortgage and Assignment of Lease and Rents. Counterparts of the Mortgage (substantially in the form of

Exhibit D attached hereto), duly executed by the Lessor and in recordable form, shall have been delivered to the Agent (which Mortgage shall secure all of the debt to the Agent unless such mortgage is subject to a tax based on the amount of indebtedness secured thereby, in which case the amount secured will be limited to debt in an amount equal to 125% of the projected cost of acquisition and construction of such Leased Property); and the Assignment of Lease and Rents (substantially in the form of Exhibit B attached hereto) in recordable form, duly executed by the Lessor, shall have been delivered to the Agent by the Lessor. (iv) Security Agreement and Assignment; Construction Agency Supplement. Counterparts of the Security Agreement and Assignment (substantially in the form of Exhibit C attached hereto), duly executed by the Lessee, with an acknowledgment and consent thereto satisfactory to the Lessor and the Agent duly executed by the related General Contractor and the related Architect, as applicable, and complete copies of the related Construction Contract and the related Architect's Agreement certified by the Lessee, shall have been delivered to the Lessor and the Agent (it being understood and agreed that if no related Construction Contract or Architect's Agreement exists on such Closing Date, such delivery shall not be a condition precedent to the Funding on such Closing Date, and in lieu thereof the Lessee shall deliver complete copies of such Security Agreement and Assignment and consents concurrently with the Lessee's entering into such contracts). Counterparts of the supplement to the Construction Agency Agreement for such Leased Property, duly executed by the Construction Agent and the Lessor, shall have been delivered to the Agent. (v) Survey. The Lessee shall have delivered, or shall have caused to be delivered, to the Lessor and the Agent, at the Lessee's expense, an accurate survey certified to the Lessor and the Agent in a form reasonably satisfactory to the Lessor and the Agent and showing no state of facts unsatisfactory to the Lessor or the Agent and prepared within ninety (90) days of the Closing Date by a Person reasonably satisfactory to the Lessor and the Agent. Such survey shall (1) be acceptable to the Title Insurance Company for the purpose of providing extended coverage to the Lessor and a lender's comprehensive endorsement to the Agent, (2) show no encroachments on such Land by structures owned by others, and no encroachments from any part of such Leased Property onto any land owned by others, and (3) disclose no state of facts reasonably objectionable to the Lessor, the Agent or the Title Insurance Company, and be reasonably acceptable to each such Person. (vi) Title and Title Insurance. On such Closing Date, the Lessor shall receive from a title insurance company acceptable to the Lessor and the Agent an ALTA Owner's Policy of Title Insurance issued by such title insurance company and the Agent shall receive from such title insurance company an ALTA Mortgagee's Policy of Title Insurance issued by such title insurance company, in each case, in the amount of the projected cost of acquisition and construction of such Leased Property, reasonably acceptable in form and substance to the Lessor and the Agent, respectively (collectively, the "Title Policy"). The Title Policy shall be dated as of the Closing Date, and, to the extent permitted under Applicable Law, shall include a pending disbursements clause reasonably satisfactory to the Lessor and the Agent and coverage over the creditors' rights exclusion and the general exceptions to such policy, and shall contain such affirmative endorsements as to mechanic's liens, easements and rights-of-way, encroachments, the non-violation of covenants and restrictions, survey matters and other matters as the Lessor or the Agent shall reasonably request. (vii) Appraisal. Unless the Lessee shall have previously delivered to the Agent Appraisals with respect to Leased Properties that are expected by the Lessee, based on reasonable estimates, to have an aggregate Leased Property Balance in excess of $15,000,000, each Funding Party shall have received a report of the Appraiser (an "Appraisal"), paid for by the Lessee, which shall meet the requirements of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, shall be satisfactory to such Funding Party and shall state in a manner satisfactory to such Funding Party the estimated "as vacant" value of such Land and the Building to be constructed thereon. Such Appraisal must show that (1) the estimated Fair Market Sales Value of the Leased Property (determined as if the Building had already been completed in accordance with the related Plans and Specifications and by excluding from such value the amount of assessments on such Leased Property) at the commencement of the Lease Term with respect thereto is equal to the projected cost of acquisition and construction of such Leased Property, and (2) the "as vacant" value described above is at least 45% of the total cost of the Leased Property, including the trade fixtures, equipment and personal property utilized in connection with the Leased Property and to be funded by the Funding Parties. Upon request by the Lessee, the Funding Parties agree to waive delivery on such Closing Date of an Appraisal, provided that no subsequent Funding with respect to such Leased Property shall occur until such Appraisal has been delivered. (viii) Environmental Audit and related Reliance Letter. The Lessor and the Agent shall have received an

Environmental Audit for such Leased Property, which shall not include a recommendation for further investigation and is otherwise satisfactory to the Lessor and the Agent; and the firm that prepared the Environmental Audit for such Leased Property shall have delivered to the Lessor and the Agent a letter (substantially in the form of Exhibit F attached hereto) stating that the Lessor, the Agent and the Lenders may rely upon such firm's Environmental Audit of such Land, it being understood that the Lessor's and the Agent's acceptance of any such Environmental Audit shall not release or impair the Lessee's obligations under the Operative Documents with respect to any environmental liabilities relating to such Leased Property. (ix) Evidence of Insurance. The Lessor and the Agent shall have received from the Lessee certificates of insurance evidencing compliance with the provisions of Article VIII of the Lease (including the naming of the Lessor, the Agent and the Lenders as additional insured or loss payee with respect to such insurance), in form and substance reasonably satisfactory to the Lessor and the Agent. (x) UCC Financing Statement; Recording Fees; Transfer Taxes. Each Funding Party shall have received satisfactory evidence of (i) the execution and delivery to Agent of a UCC-1 and, if required by applicable law, UCC-2 financing statement to be filed with the Secretary of State of the applicable State (or other appropriate filing office) and the county where the related Land is located, respectively, and such other Uniform Commercial Code financing statements as any Funding Party deems necessary or desirable in order to perfect such Funding Party's interests and (ii) the payment of all recording and filing fees and taxes with respect to any recordings or filings made of the related Deed, the Lease, the related Lease Supplement, the related Mortgage and the related Assignment of Lease and Rents. (xi) Opinions. The opinion of local counsel for the Lessee qualified in the jurisdiction in which such Leased Property is located, substantially in the form set forth in Exhibit G-2 attached hereto, and containing such other matters as the parties to whom they are addressed shall reasonably request, shall have been delivered and addressed to each of the Lessor, the Agent and the Lenders, and to the extent requested by the Agent, opinions supplemental to those delivered under Section 3.2(vii) and reasonably satisfactory to the Agent shall have been delivered and addressed to each of the Lessor, the Agent and the Lenders. (xii) Good Standing Certificates. The Agent shall have received good standing certificates for the Lessor and the Lessee from the appropriate offices of the state where the related Land is located. (b) Litigation. No action or proceeding shall have been instituted or threatened nor shall any governmental action, suit, proceeding or investigation be instituted or threatened before any Governmental Authority, nor shall any order, judgment or decree have been issued or proposed to be issued by any Governmental Authority, to set aside, restrain, enjoin or prevent the performance of this Master Agreement or any transaction contemplated hereby or by any other Operative Document or which is reasonably likely to materially adversely affect the Leased Property or any transaction contemplated by the Operative Documents or which could reasonably be expected to result in a Material Adverse Effect. (c) Legality. In the opinion of such Funding Party or its counsel, the transactions contemplated by the Operative Documents shall not violate any Applicable Law, and no change shall have occurred or been proposed in Applicable Law that would make it illegal for such Funding Party to participate in any of the transactions contemplated by the Operative Documents. (d) No Events. (i) No Event of Default, Potential Event of Default, Event of Loss or Event of Taking relating to such Leased Property shall have occurred and be continuing, (ii) no action shall be pending or threatened by a Governmental Authority to initiate a Condemnation or an Event of Taking, and (iii) there shall not have occurred any event that could reasonably be expected to have a Material Adverse Effect since June 4, 2000. (e) Representations. Each representation and warranty of the parties hereto or to any other Operative Document contained herein or in any other Operative Document shall be true and correct in all material respects as though made on and as of the Closing Date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date. (f) Cutoff Date. No Closing Date shall occur after the Funding Termination Date.

(g) Rejection. The Agent shall not have rejected such Leased Property for inclusion in the Transaction by written notice to the Lease. SECTION 3.2 Additional Conditions for the Initial Closing Date. The obligations of the Lessor and each Lender to carry out their respective obligations under Section 2 of this Master Agreement to be performed on the initial Closing Date shall be subject to the satisfaction of, or waiver by, each such party hereto (acting directly or through its counsel) on or prior to the initial Closing Date of the following conditions precedent in addition to those set forth in Section 3.1, provided that the obligations of any Funding Party shall not be subject to any conditions contained in this Section 3.2 which are required to be performed by such Funding Party: (i) Guaranty; Subsidiary Guaranty Agreement. Counterparts of the Guaranty Agreement, duly executed by the Lessee, shall have been delivered to each Funding Party. Counterparts of the Subsidiary Guaranty Agreement and Indemnity, Subrogation and Contribution Agreement duly executed by the Subsidiary Guarantors, shall have been delivered to each Funding Party. (ii) Loan Agreement; Notes. Counterparts of the Loan Agreement, duly executed by the Lessor, the Agent and each Lender shall have been delivered to each of the Lessor and the Agent. An A Note and a B Note, duly executed by the Lessor, shall have been delivered to the Agent. (iii) Master Agreement. Counterparts of this Master Agreement, duly executed by the parties hereto, shall have been delivered to each of the parties hereto. (iv) Construction Agency Agreement. Counterparts of the Construction Agency Agreement, duly executed by the parties thereto shall have been delivered to each of the parties hereto. (v) Lease. Counterparts of the Lease, duly executed by the Lessee and the Lessor, shall have been delivered to each Funding Party and the original, chattel paper copy of the Lease shall have been delivered to the Agent. (vi) Lessee's Resolutions and Incumbency Certificate, etc. Each of the Agent and the Lessor shall have received (x) a certificate of the Secretary or an Assistant Secretary of the Lessee and each other Obligor, attaching and certifying as to (i) the Board of Directors' (or appropriate committee's) resolution duly authorizing the execution, delivery and performance by it of each Operative Document to which it is or will be a party, (ii) the incumbency and signatures of persons authorized to execute and deliver such documents on its behalf, (iii) its articles or certificate of incorporation or certificate of formation, certified as of a recent date by the Secretary of State of the state of its incorporation and (iv) its by-laws, and (y) good standing certificates for the Lessee or such other Obligor from the appropriate offices of the States of such Person's incorporation or organization and principal place of business. (vii) Opinions of Counsel. The opinion of Powell Goldstein Frazer & Murphy LLP and of in-house counsel to Lessee and the other Obligors, each dated the initial Closing Date, substantially in the forms set forth in Exhibit G1 attached hereto, and containing such other matters as the parties to whom it is addressed shall reasonably request, shall have been delivered and addressed to each of the Lessor, the Agent and the Lenders. The opinion of Brown McCarroll & Oakes Hartline, LLP, counsel to Lessor, dated the initial Closing Date, substantially in the form set forth in Exhibit G-3 attached hereto, and containing such other matters as the parties to whom it is addressed shall reasonably request, shall have been delivered to each of the Agent and the Lenders. (viii) Good Standing Certificate. The Agent shall have received a good standing certificate for the Lessor and the General Partner from the appropriate offices of the State of Texas. (ix) Lessor's Consents and Incumbency Certificate, etc. The Agent shall have received a certificate of the Secretary or an Assistant Secretary of the General Partner of the Lessor attaching and certifying as to (i) the consents of the partners of the Lessor duly authorizing the execution, delivery and performance by it of each Operative Document to which it is or will be a party, (ii) the incumbency and signatures of persons authorized to execute and deliver such documents on its behalf, and (iii) the Partnership Agreement. (x) Credit Agreement Commitments. The Aggregate Revolving Credit Commitments (as defined in the Credit Agreement) under the Credit Agreement shall have been reduced to $50,000,000. SECTION 3.3 Conditions to the Obligations of Lessee. The obligations of the Lessee to lease a Leased

Property from the Lessor are subject to the fulfillment on the related Closing Date to the satisfaction of, or waiver by, the Lessee, of the following conditions precedent: (a) General Conditions. The conditions set forth in Sections 3.1 and 3.2 that require fulfillment by the Lessor or the Lenders shall have been satisfied, including the delivery of good standing certificates by the Lessor pursuant to Sections 3.1(a)(xiv) and 3.2(b)(viii) and the delivery of an opinion of counsel for the Lessor pursuant to Section 3.2(b)(vii). (b) Legality. In the opinion of the Lessee or its counsel, the transactions contemplated by the Operative Documents shall not violate any Applicable Law, and no change shall have occurred or been proposed in Applicable Law that would make it illegal for the Lessee to participate in any of the transactions contemplated by the Operative Documents. (c) Purchase Agreement; Ground Lease. The Purchase Agreement and, if applicable, the Ground Lease with respect to such Leased Property shall be reasonably satisfactory to the Lessee. SECTION 3.4 Conditions to the Obligations of the Funding Parties on each Funding Date. The obligations of the Lessor and each Lender to carry out their respective obligations under Section 2 of this Master Agreement to be performed on each Funding Date shall be subject to the fulfillment to the satisfaction of, or waiver by, each such party hereto (acting directly or through their respective counsel) on or prior to each such Funding Date of the following conditions precedent, provided that the obligations of any Funding Party shall not be subject to any conditions contained in this Section 3.4 which are required to be performed by such Funding Party: (a) Funding Request. The Lessor and the Agent shall have received from the Lessee the Funding Request therefor pursuant to Section 2.2(d). (b) Condition Fulfilled. As of such Funding Date, the condition set forth in Section 3.1(d)(i) shall have been satisfied. (c) Representations. As of such Funding Date, both before and after giving effect to the Funding requested by the Lessee on such date, the representations and warranties that the Lessee is deemed to make pursuant to Section 2.2(e) shall be true and correct in all material respects on and as of such Funding Date as though made on and as of such Funding Date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date. (d) No Bonded Stop Notice or Filed Mechanics Lien. As of each Funding Date, and as to any Funded Amount requested for any Leased Property on each such Funding Date, (i) neither the Lessor, the Agent nor any Lender has received (with respect to such Leased Property) a bonded notice to withhold Loan funds that has not been discharged by the Lessee, and (ii) no mechanic's liens or materialman's liens have been filed against such Leased Property that have not been discharged by the Lessee, bonded over in a manner reasonably satisfactory to the Agent or insured over by the Title Insurance Company. (e) Lease Supplement. If the Funding relates to a Building that will be leased under a Lease Supplement separate from the Lease Supplement for the related Land, the original of such separate Lease Supplement, duly executed by the Lessee and the Lessor and in recordable form, shall have been delivered to the Agent. SECTION 3.5 Completion Date Conditions. The occurrence of the Completion Date with respect to any Leased Property shall be subject to the fulfillment to the satisfaction of, or waiver by, each party hereto (acting directly or through its counsel) of the following conditions precedent: (a) Title Policy Endorsements. The Construction Agent shall have furnished to each Funding Party the following endorsements to the related Title Policy (each of which shall be subject to no exceptions other than those reasonably acceptable to the Agent): a date-down endorsement (redating and confirming the coverage provided under the Title Policy and each endorsement thereto) and a "Form 9" endorsement (if available in the applicable jurisdiction), in each case, effective as of a date not earlier than the date of completion of the Construction. The Construction Agent shall also deliver to the Agent true and complete copies of a certificate or certificates of occupancy for such Leased Property or other legally equivalent permission to occupy such Leased Property.

(b) Construction Completion. The related Construction shall have been completed substantially in accordance with the related Plans and Specifications, the related Deed and all Applicable Laws, and such Leased Property shall be ready for occupancy and operation. All fixtures, equipment and other property contemplated under the Plans and Specifications to be incorporated into or installed in such Leased Property shall have been substantially incorporated or installed, free and clear of all Liens except for Permitted Liens. (c) Lessee Certification. The Construction Agent shall have furnished the Lessor, the Agent and each Lender with a certification of the Construction Agent (substantially in the form of Exhibit H) that: (i) all amounts owing to third parties for the related Construction have been paid in full (other than contingent obligations for which the Construction Agent has made adequate reserves), and no litigation or proceedings are pending, or to the best of the Construction Agent's knowledge, are threatened, against such Leased Property or the Construction Agent which could reasonably be expected to have a Material Adverse Effect; (ii) all material consents, licenses and permits and other governmental authorizations or approvals required for such Construction and operation of such Leased Property have been obtained and are in full force and effect; (iii) such Leased Property has available all services of public facilities and other utilities necessary for use and operation of such Leased Property for its intended purposes including, without limitation, adequate water, gas and electrical supply, storm and sanitary sewerage facilities, telephone, other required public utilities and means of access between the related Building and public highways for pedestrians and motor vehicles; (iv) all material agreements, easements and other rights, public or private, which are necessary to permit the lawful use and operation of such Leased Property as the Lessee intends to use the Leased Property under the Lease and which are necessary to permit the lawful intended use and operation of all then intended utilities, driveways, roads and other means of egress and ingress to and from the same have been obtained and are in full force and effect and the Construction Agent has no knowledge of any pending modification or cancellation of any of the same; and the use of such Leased Property does not depend on any variance, special exception or other municipal approval, permit or consent that has not been obtained and is in full force and effect for its continuing legal use; (v) all of the requirements and conditions set forth in Section 3.5(b) hereof have been completed and fulfilled with respect to such Leased Property and the related Construction; and (vi) such Leased Property is in compliance in all material respects with all applicable zoning laws and regulations. SECTION 4 REPRESENTATIONS SECTION 4.1 Representations of Lessee. Effective as of the date of execution hereof, as of each Closing Date and as of each Funding Date, the Lessee represents and warrants to each of the other parties hereto as follows: (a) Existence; Powers. Each of the Lessee and each of its Subsidiaries (i) is duly organized, validly existing and in good standing as a corporation or limited liability company under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business as now conducted and (iii) is duly qualified to do business, and is in good standing in each jurisdiction (A) where a Leased Property is located, in the case of the Lessee, and (B) where such qualification is required, except where a failure to be so qualified could not reasonably be expected to have a Material Adverse Effect (b) Organizational Power; Authorization. The execution, delivery and performance by each Obligor of the Operative Documents to which it is a party are within such Obligor's organizational powers and have been duly authorized by all necessary organizational, and if required, shareholder action. This Master Agreement and each other Operative Document to which the Lessee is a party has been duly executed and delivered by the Lessee, and constitutes, and each other Operative Document to which any Obligor is a party, when executed and delivered by such Obligor, will constitute, valid and binding obligations of the Lessee or such Obligor (as the case may be), enforceable against it in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. (c) Governmental Approvals; No Conflicts. The execution, delivery and performance by the Lessee of this

Master Agreement and each other Operative Document to which it is a party, and by each Obligor of the other Operative Documents to which it is a party (a) do not require any consent or approval of, registration or filing with, or any action by, any Governmental Authority, except those as have been obtained or made and are in full force and effect, (b) will not violate any applicable law, rule or regulation or the charter, bylaws or other organizational documents of the Lessee or any of its Subsidiaries or any judgment, order or ruling of any Governmental Authority, (c) will not violate or result in a default under any indenture, material agreement or other material instrument binding on the Lessee or any of its Subsidiaries or any of its assets or give rise to a right thereunder to require any payment to be made by the Lessee or any of its Subsidiaries and (d) will not result in the creation or imposition of any Lien on any asset of the Lessee or any of its Subsidiaries, except Liens created under the Operative Documents. (d) Financial Statements. The Lessee has furnished to the Agent and each Funding Party the audited consolidated balance sheet of the Lessee and its Subsidiaries as of June 4, 2000 and the related consolidated statements of income, shareholders' equity and cash flows for the fiscal year then ended prepared in accordance with GAAP and audited by KPMG LLP. Such financial statements fairly present the consolidated financial condition of the Lessee and its Subsidiaries as of such dates and the consolidated results of operations for such periods in conformity with GAAP consistently applied. Since June 4, 2000, there have been no changes with respect to the Lessee and its Subsidiaries which have had or could reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect. (e) Litigation and Environmental Matters. (i) No litigation, investigation or proceeding of or before any arbitrators or Governmental Authorities is pending against or, to the knowledge of the Lessee, threatened against or affecting the Lessee or any of its Subsidiaries (A) as to which there is a reasonable possibility of an adverse determination that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect or (B) which in any manner draws into question the validity or enforceability of this Master Agreement or any other Operative Document. (ii) Neither the Lessee nor any of its Subsidiaries (A) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (B) has become subject to any Environmental Liability, (C) has received notice of any claim with respect to any Environmental Liability or (D) knows of any basis for any Environmental Liability, except for any failure or Environmental Liability that would not have a Material Adverse Effect. (f) Compliance with Laws and Agreements. The Lessee and each Subsidiary is in compliance with (i) all applicable laws, rules, regulations, judgments, orders and rulings of any Governmental Authority, and (ii) all indentures, agreements or other instruments binding upon it or its properties, except in either case where noncompliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. (g) Investment Company Act, Etc. Neither the Lessee nor any of its Subsidiaries is (i) an "investment company", or is "controlled" by an "investment company", as such terms are defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, (ii) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended or (iii) otherwise subject to any other regulatory scheme limiting its ability to incur debt. (h) Taxes. The Lessee and its Subsidiaries and each other Person for whose taxes the Lessee or any Subsidiary could become liable have timely filed or caused to be filed all Federal income tax returns and all other material tax returns that are required to be filed by them, and have paid all taxes shown to be due and payable on such returns or on any assessments made against it or its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except (i) to the extent the failure to do so would not have a Material Adverse Effect or (ii) where the same are currently being contested in good faith by appropriate proceedings and for which the Lessee or such Subsidiary, as the case may be, has set aside on its books adequate reserves in accordance with GAAP. As of the Initial Closing Date, the charges, accruals and reserves on the books of the Lessee and its Subsidiaries in respect of such taxes are adequate, and no tax liabilities that could be materially in excess of the amount so provided are anticipated. (i) Margin Regulations. None of the proceeds of any Advance will be used for "purchasing" or "carrying" any "margin stock" with the respective meanings of each of such terms under Regulation U as now and from time to

time hereafter in effect or for any purpose that violates the provisions of the applicable Margin Regulations. (j) ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans. (k) Ownership of Property. (i) As of the Initial Closing Date, each of the Lessee and its Subsidiaries has good title to, or valid leasehold or other appropriate legal interests in, all of its real and personal property material to the operation of its business, free and clear of any Liens except General Permitted Liens. (ii) Each of the Lessee and its Subsidiaries owns, or is licensed, or otherwise has the right, to use, all patents, trademarks, service marks, trade names, copyrights, franchises, licenses, and other intellectual property material to its business, and the use thereof by the Lessee and its Subsidiaries does not infringe on the rights of any other Person, except for any such infringements that, individually or in the aggregate, would not have a Material Adverse Effect. (l) Disclosure. The Lessee has disclosed to the Agent and the Funding Parties all agreements, instruments, and corporate or other restrictions to which the Lessee or any of its Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports (including without limitation all reports that the Lessee is required to file with the Securities and Exchange Commission), financial statements, certificates or other information furnished by or on behalf of the Lessee to the Agent or any Funding Party, or anyone on their behalf, in connection with the negotiation or syndication of this Master Agreement or any other Operative Document or delivered hereunder or thereunder (as modified or supplemented by any other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, taken as a whole, in light of the circumstances under which they were made, not misleading. (m) Labor Relations. There are no strikes, lockouts or other material labor disputes, or grievances against the Lessee or any of its Subsidiaries, or, to the Lessee's knowledge, threatened against or affecting the Lessee or any of its Subsidiaries, and no significant unfair labor practice, charges or grievances are pending against the Lessee or any of its Subsidiaries, or to the Lessee's knowledge, threatened against any of them before any Governmental Authority. All payments due from the Lessee or any of its Subsidiaries pursuant to the provisions of any collective bargaining agreement have been paid or accrued as a liability on the books of the Lessee or any such Subsidiary, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. (n) Subsidiaries. As of the Initial Closing Date, Schedule 4.1(n) sets forth the name of, the ownership interest of the Lessee in, the jurisdiction of incorporation or organization of, and the type of, each Subsidiary and identifies each Material Subsidiary that is a Subsidiary Guarantor. (o) Rights in Respect of the Leased Property. The Lessee is not a party to any contract or agreement to sell any interest in any Leased Property or any part thereof, other than pursuant to the Operative Documents. (p) Hazardous Materials. (i) To the best knowledge of the Lessee, except as described in the related Environmental Audit, on the Closing Date for each Leased Property, there are no Hazardous Materials present at, upon, under or within such Leased Property or released or transported to or from such Leased Property (except in compliance in all material respects with all Applicable Law). (ii) On the related Closing Date, no Governmental Actions have been taken or, to the best knowledge of the Lessee, are in process or have been threatened, which could reasonably be expected to subject such Leased Property, any Lender or the Lessor with respect to such Leased Property to any Claims or Liens under any Environmental Law which would have a Material Adverse Effect, or would have a materially adverse effect on

the Lessor or any Lender. (iii) The Lessee has, or will obtain on or before the date required by Applicable Law, all Environmental Permits necessary to operate such Leased Property in accordance with Environmental Laws and is complying with and has at all times complied with all such Environmental Permits, except to the extent the failure to obtain such Environmental Permits or to so comply would not have a Material Adverse Effect. (iv) Except as set forth in the related Environmental Audit or in any notice subsequently furnished by the Lessee to the Agent and approved by the Agent in writing prior to the respective times that the representations and warranties contained herein are made or deemed made hereunder, no notice, notification, demand, request for information, citations, summons, complaint or order has been issued or filed to or with respect to the Lessee, no penalty has been assessed on the Lessee and no investigation or review is pending or, to its best knowledge, threatened by any Governmental Authority or other Person in each case relating to the Leased Property with respect to any alleged material violation or liability of the Lessee under any Environmental Law. To the best knowledge of the Lessee, no material notice, notification, demand, request for information, citations, summons, complaint or order has been issued or filed to or with respect to any other Person, no material penalty has been assessed on any other Person and no investigation or review is pending or threatened by any Governmental Authority or other Person relating to such Leased Property with respect to any alleged material violation or liability under any Environmental Law by any other Person. (v) Such Leased Property and each portion thereof are presently in compliance in all material respects with all Environmental Laws, and, to the best knowledge of the Lessee, there are no present or past facts, circumstances, activities, events, conditions or occurrences regarding such Leased Property (including without limitation the release or presence of Hazardous Materials) that could reasonably be anticipated to (A) form the basis of a material Claim against such Leased Property, any Funding Party or the Lessee, (B) cause such Leased Property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law, (C) require the filing or recording of any notice or restriction relating to the presence of Hazardous Materials in the real estate records in the county or other appropriate municipality in which such Leased Property is located, or (D) prevent or materially interfere with the continued operation and maintenance of such Leased Property as contemplated by the Operative Documents. (q) Leased Property. The present condition and use of such Leased Property conforms in all material respects with all conditions or requirements of all existing material permits and approvals issued with respect to such Leased Property, and the present use of such Leased Property and the Lessee's future intended use of such Leased Property under the Lease does not, in any material respect, violate any Applicable Law. To the best knowledge of the Lessee, no material notices, complaints or orders of violation or non-compliance have been issued or threatened or contemplated by any Governmental Authority with respect to such Leased Property or any present or intended future use thereof. All material agreements, easements and other rights, public or private, which are necessary to permit the lawful use and operation of such Leased Property as the Lessee intends to use such Leased Property under the Lease and which are necessary to permit the lawful intended use and operation of all presently intended utilities, driveways, roads and other means of egress and ingress to and from the same have been, or to the Lessee's best knowledge will be, obtained and are or will be in full force and effect, and the Lessee has no knowledge of any pending material modification or cancellation of any of the same. SECTION 4.2 Representations of the Lessor. Effective as of the date of execution hereof, as of each Closing Date and as of each Funding Date, in each case, with respect to each of the Leased Properties, the Lessor represents and warrants to the Agent, the Lenders and the Lessee as follows: (a) Securities Act. The interest being acquired or to be acquired by the Lessor in such Leased Property is being acquired for its own account, without any view to the distribution thereof or any interest therein, provided that the Lessor shall be entitled to assign, convey or transfer its interest in accordance with Section 6.1. (b) Due Organization, etc. The Lessor is a limited partnership duly organized and validly existing in good standing under the laws of Texas and each state in which a Leased Property is located and has full power, authority and legal right to execute, deliver and perform its obligations under the Lease, this Master Agreement and each other Operative Document to which it is or will be a party. (c) Due Authorization; Enforceability, etc. This Master Agreement and each other Operative Document to which the Lessor is or will be a party have been or will be duly authorized, executed and delivered by or on behalf of

the Lessor and are, or upon execution and delivery will be, legal, valid and binding obligations of the Lessor enforceable against it in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting creditors' rights generally and by general equitable principles. (d) No Conflict. The execution and delivery by the Lessor of the Lease, this Master Agreement and each other Operative Document to which the Lessor is or will be a party, are not or will not be, and the performance by the Lessor of its obligations under each will not be, inconsistent with its Partnership Agreement, do not and will not contravene any Applicable Law and do not and will not contravene any provision of, or constitute a default under, any Contractual Obligation of Lessor, do not and will not require the consent or approval of, the giving of notice to, the registration with or taking of any action in respect of or by, any Governmental Authority, except such as have been obtained, given or accomplished, and the Lessor possesses all requisite regulatory authority to undertake and perform its obligations under the Operative Documents. (e) Litigation. There are no pending or, to the knowledge of the Lessor, threatened actions or proceedings against the Lessor before any Governmental Authority with respect to any Operative Document or that would have a material adverse effect upon the ability of the Lessor to perform its obligations under this Master Agreement or any other Operative Documents to which it is or will be a party. (f) Lessor Liens. No Lessor Liens exist on the Closing Date on the Leased Property, or any portion thereof, and the execution, delivery and performance by the Lessor of this Master Agreement or any other Operative Document to which it is or will be a party will not subject the Leased Property, or any portion thereof, to any Lessor Liens. (g) Employee Benefit Plans. The Lessor is not and will not be making its investment hereunder, and is not performing its obligations under the Operative Documents, with the assets of an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as defined in Section 4975(e) (1)) of the Code. (h) General Partner. The sole general partner of the Lessor is Atlantic Financial Managers, Inc. (i) Financial Information. (A) The unaudited balance sheet of the Lessor as of December 31, 2000 and the related statements of income, partners' capital and cash flows for the year then ended, copies of which have been delivered to the Agent and each Lender, fairly present, in conformity with sound accounting principles, the financial condition of the Lessor as of such dates and the results of operations and cash flows for such periods. (B) Since December 31, 2000, there has been no event, act, condition or occurrence having a material adverse effect upon the financial condition, operations, performance or properties of the Lessor, or the ability of the Lessor to perform in any material respect under the Operative Documents. (j) No Offering. The Lessor has not offered the Notes to any Person in any manner that would subject the issuance thereof to registration under the Securities Act. SECTION 4.3 Representations of each Lender. Effective as of the date of execution hereof, as of each Closing Date and as of each Funding Date, each Lender represents and warrants to the Lessor and to the Lessee as follows: (a) Securities Act. The interest being acquired or to be acquired by such Lender in the Funded Amounts is being acquired for its own account, without any view to the distribution thereof or any interest therein, provided that such Lender shall be entitled to assign, convey or transfer its interest in accordance with Section 6.2. Such Lender is an accredited investor as that term is defined in Rule 501(a) under the Securities Act. (b) Employee Benefit Plans. Such Lender is not and will not be making its investment hereunder, and is not performing its obligations under the Operative Documents, with the assets of an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as defined in Section 4975(e) (1)) of the Code. SECTION 5 COVENANTS OF THE LESSEE AND THE LESSOR

SECTION 5.1 Financial Statements and Other Information. The Lessee will deliver to the Agent and each Funding Party: (a) as soon as available and in any event within 90 days after the end of each fiscal year of Lessee, a copy of the annual audited report for such fiscal year for the Lessee and its Subsidiaries, containing consolidated balance sheets of the Lessee and its Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, stockholders' equity and cash flows (together with all footnotes thereto) of the Lessee and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and reported on by KPMG LLP or other independent public accountants of nationally recognized standing (without a "going concern" or like qualification, exception or explanation and without any qualification or exception as to scope of such audit) to the effect that such financial statements present fairly in all material respects the financial condition and the results of operations of the Lessee and its Subsidiaries for such fiscal year on a consolidated basis in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (b) as soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Lessee, an unaudited consolidated balance sheet of the Lessee and its Subsidiaries as of the end of such fiscal quarter and the related unaudited consolidated statements of income and cash flows of the Lessee and its Subsidiaries for such fiscal quarter and the then elapsed portion of such fiscal year, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Lessee's previous fiscal year, all certified by the chief financial officer or treasurer of the Lessee as presenting fairly in all material respects the financial condition and results of operations of the Lessee and its Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with the delivery of the financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or treasurer, (i) certifying as to whether there exists a Default or Event of Default on the date of such certificate, and if a Default or an Event of Default then exists, specifying the details thereof and the action which the Lessee has taken or proposes to take with respect thereto, (ii) setting forth in reasonable detail calculations demonstrating compliance with Sections 5.11, 5.12 and 5.13, (iii) setting forth whether the Lessee is in compliance with Section 5.10(b) and (iv) stating whether any change in GAAP or the application thereof has occurred since the date of the Lessee's audited financial statements referred to in Section 4.1(d) or which have been previously delivered hereunder and, if any change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with the delivery of the financial statements referred to in clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained any knowledge during the course of their examination of such financial statements of any Default or Event of Default (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all functions of said Commission, or with any national securities exchange, or distributed by the Lessee to its shareholders generally, as the case may be; and (f) promptly following any request therefor, such other information regarding the results of operations, business affairs and financial condition of the Lessee or any Subsidiary as the Agent or any Funding Party may reasonably request. SECTION 5.2 Notices of Material Events. The Lessee will furnish to the Agent and each Funding Party prompt written notice of the following: (a) the occurrence of any Default or Event of Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of the Lessee, affecting the Lessee or any Subsidiary which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

(c) the occurrence of any event or any other development by which the Lessee or any of its Subsidiaries (i) fails to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) becomes subject to any Environmental Liability, (iii) receives notice of any claim with respect to any Environmental Liability, or (iv) becomes aware of any basis for any Environmental Liability, and in each of the preceding clauses, which individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect; (d) the occurrence of any ERISA Event that alone, or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Lessee and its Subsidiaries in an aggregate amount exceeding $2,500,000; and (e) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. (f) Each notice delivered under this Section shall be accompanied by a written statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.3 Existence; Conduct of Business. The Lessee will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence and its respective rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business and will continue to engage in the same business as presently conducted or such other businesses that are reasonably related thereto; provided, however, that nothing in this Section shall prohibit any merger, consolidation, liquidation or dissolution permitted under Section 5.16. SECTION 5.4 Compliance with Laws, Etc. The Lessee will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and requirements of any Governmental Authority applicable to its business and properties, including without limitation, all Environmental Laws, ERISA and OSHA, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.5 Payment of Obligations. The Lessee will, and will cause each of its Subsidiaries to, pay and discharge at or before maturity, all of its obligations and liabilities (including without limitation all tax liabilities and claims that could result in a statutory Lien) before the same shall become delinquent or in default, except where (i) (a) the validity or amount thereof is being contested in good faith by appropriate proceedings and (b) the Lessee or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP or (ii) the failure to make payment thereof, when aggregated with all other such unpaid obligations and liabilities, could not reasonably be expected to result in a Material Adverse Effect or (iii) the failure to make payment thereof could not result in a statutory Lien. SECTION 5.6 Books and Records. The Lessee will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities to the extent necessary to prepare the consolidated financial statements of Lessee in conformity with GAAP. SECTION 5.7 Visitation, Inspection, Etc. The Lessee will, and will cause each of its Subsidiaries to, permit any representative of the Agent or any Funding Party, to visit and inspect its properties, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with any of its officers and with its independent certified public accountants, all at such reasonable times and as often as the Agent or any Funding Party may reasonably request after reasonable prior notice to the Lessee; provided, however, if an Event of Default has occurred and is continuing, no prior notice shall be required. SECTION 5.8 Maintenance of Properties; Insurance. The Lessee will, and will cause each of its Subsidiaries to, (a) keep and maintain good and marketable title to all property subject to no Liens except General Permitted Liens and keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear except where the failure to do so, either individually or it the aggregate, could not reasonably be expected to result in a Material Adverse Effect and (b) maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds customarily insured against by companies in the same or similar businesses operating in the same or similar locations.

SECTION 5.9 Use of Proceeds. The Lessee will use the proceeds of all Advances for the purchase and construction of the Leased Properties, and for transaction and closing costs related thereto. No part of the proceeds of any Advance will be used, whether directly or indirectly, for any purpose that would violate any rule or regulation of the Board of Governors of the Federal Reserve System, including Regulations T, U or X. SECTION 5.10 Additional Subsidiaries; Additional Guaranties. (a) If any additional Material Subsidiary is acquired or formed after the Initial Closing Date, the Lessee will, within thirty (30) days after such Material Subsidiary is acquired or formed, notify the Agent and the Funding Parties thereof and will cause such Material Subsidiary to become a Subsidiary Guarantor by executing agreements in the form of Annex I to Exhibit I and Annex I to Exhibit J in form and substance satisfactory to the Agent and the Required Funding Parties and will cause such Material Subsidiary to deliver simultaneously therewith similar documents applicable to such Material Subsidiary required under Section 3.2 as reasonably requested by the Agent. (b) If at the end of any fiscal quarter of the Lessee: (i) the total assets of Subsidiaries that are not Subsidiary Guarantors constitute more than ten percent (10%) of the total assets of the Consolidated Companies, or (ii) the Consolidated Net Income of Subsidiaries that are not Subsidiary Guarantors constitute more than ten percent (10%) of the Consolidated Net Income of the Consolidated Companies, then the Lessee shall (A) notify the Agent thereof in the certificate delivered pursuant to Section 5.1(c) for such fiscal quarter and (B) within 15 days thereafter, cause the appropriate number of Subsidiaries to become Subsidiary Guarantors (by execution of a joinder agreement to the Subsidiary Guaranty in form and substance satisfactory to the Agent) such that the statements set forth in clauses (i) and (ii) above are not true. SECTION 5.11 Minimum Fixed Charge Coverage Ratio. The Consolidated Companies will maintain, as of the last day of each Fiscal Quarter, through and including the Fiscal Quarter ending June 3, 2001, a Fixed Charge Coverage Ratio of not less than 2.00:1.00, and for each Fiscal Quarter thereafter, a Fixed Charge Coverage Ratio of not less than 2.50:1.00. SECTION 5.12 Maximum Adjusted Total Debt to EBITDAR Ratio. The Consolidated Companies will maintain, as of the end of each Fiscal Quarter, an Adjusted Total Debt to EBITDAR Ratio of not greater than 3.00:1.00. SECTION 5.13 Maximum Adjusted Total Debt to Adjusted Total Capital Ratio. The Consolidated Companies will maintain, as of the end of each Fiscal Quarter, an Adjusted Total Debt to Adjusted Total Capital Ratio of not greater than 0.60:1.00. SECTION 5.14 Indebtedness. The Lessee will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness created pursuant to the Operative Documents and the Credit Agreement; (b) Indebtedness existing on the date hereof and set forth on Schedule 5.14 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; (c) Indebtedness of the Lessee or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets secured by a Lien on any such assets prior to the acquisition thereof; provided, that such Indebtedness is incurred prior to or within 180 days after such acquisition or the completion of such construction or improvements or extensions, renewals, and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; provided, further, that the aggregate principal amount of such Indebtedness does not exceed $5,000,000;

(d) Indebtedness of the Lessee owing to any Subsidiary and of any Subsidiary owing to the Lessee or any other Subsidiary; provided, however, that any such Indebtedness that is owed to a Subsidiary that is not a Subsidiary Obligor shall be subject to Section 5.17; (e) Guaranties by the Lessee of Indebtedness of any Subsidiary and by any Subsidiary of Indebtedness of the Lessee or any other Subsidiary; provided, however, that Guaranties by any Obligor of Indebtedness of any Subsidiary that is not a Subsidiary Obligor shall be subject to Section 5.17; (f) Subordinated Debt of the Lessee (but not Subsidiaries of the Lessee); (g) Indebtedness in respect of obligations under Hedging Agreements permitted by Section 5.23; (h) Synthetic Lease Obligations so long as no Default or Event of Default has occurred and is continuing or would result after giving pro forma effect to the incurrence of such Synthetic Lease Obligation, including without limitation under the covenants set forth in Sections 5.11, 5.12 and 5.13; and (i) other unsecured Indebtedness of the Lessee and its Subsidiaries in an aggregate principal amount at any time outstanding not to exceed 10% of Consolidated Net Worth of the Lessee as calculated on the last day of Fiscal Quarter for which the Lessee has delivered, or is required to have delivered, financial statements to the Funding Parties pursuant to this Master Agreement. SECTION 5.15 Negative Pledge. The Lessee will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or hereafter acquired or, except: (a) Permitted Encumbrances; (b) any Liens on any property or asset of the Lessee or any Subsidiary existing on the Initial Closing Date set forth on Schedule 5.15; provided, that such Lien shall not apply to any other property or asset of the Lessee or any Subsidiary; (c) purchase money Liens upon or in any fixed or capital assets to secure the purchase price or the cost of construction or improvement of such fixed or capital assets or to secure Indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of such fixed or capital assets (including Liens securing any Capital Lease Obligations); provided, however, that (i) such Lien secures Indebtedness permitted by Section 5.14(c), (ii) such Lien attaches to such asset concurrently or within 180 days after the acquisition, improvement or completion of the construction thereof; (iii) such Lien does not extend to any other asset; and (iv) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets; (d) any Lien (i) existing on any asset of any Person at the time such Person becomes a Subsidiary of the Lessee, (ii) existing on any asset of any Person at the time such Person is merged with or into the Lessee or any Subsidiary of the Lessee or (iii) existing on any asset prior to the acquisition thereof by the Lessee or any Subsidiary of the Lessee; provided, however, that any such Lien was not created in the contemplation of any of the foregoing and any such Lien secures only those obligations which it secures on the date that such Person becomes a Subsidiary or the date of such merger or the date of such acquisition; and (e) extensions, renewals, or replacements of any Lien referred to in paragraphs (a) through (d) of this Section; provided, however, that the principal amount of the Indebtedness secured thereby is not increased and that any such extension, renewal or replacement is limited to the assets originally encumbered thereby. SECTION 5.16 Fundamental Changes. (a) Except as permitted in Section 5.19, the Lessee will not, and will not permit any Subsidiary to, merge into or consolidate into any other Person, or permit any other Person to merge into or consolidate with it, or sell, lease, transfer or otherwise dispose of (in a single transaction or a series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired) or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired) or liquidate or dissolve; provided, however, that if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall

have occurred and be continuing (i) the Lessee or any Subsidiary may merge with a Person if the Lessee (or such Subsidiary if the Lessee is not a party to such merger) is the surviving Person, (ii) any Subsidiary may merge into another Subsidiary; provided, however, that if any party to such merger is a Subsidiary Guarantor, the Subsidiary Guarantor shall be the surviving Person, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the Lessee or to a Subsidiary Guarantor and (iv) any Subsidiary may liquidate or dissolve into a Subsidiary Guarantor or into the Lessee if the Lessee determines in good faith that such liquidation or dissolution is in the best interests of the Lessee and is not materially disadvantageous to the Funding Parties; provided, however, that any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 5.17. (b) The Lessee will not, and will not permit any of its Subsidiaries to, engage in any business other than businesses of the type conducted by the Lessee and its Subsidiaries on the date hereof and businesses reasonably related thereto. SECTION 5.17 Investments, Loans, Etc. The Lessee will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger), any common stock, evidence of indebtedness or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guaranty any obligations of, or make or permit to exist any investment or any other interest in, any other Person (all of the foregoing being collectively called "Investments"), or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person that constitute a business unit, or create or form any Subsidiary, except: (a) Investments (other than Permitted Investments) existing on the date hereof and set forth on Schedule 5.17 (including Investments in Subsidiaries); (b) Permitted Investments; (c) Guaranties constituting Indebtedness permitted by Section 5.14; (d) Investments made by any Obligor in or to any other Obligor; (e) loans or advances to employees, officers or directors of the Lessee or any Subsidiary in the ordinary course of business for travel, relocation and related expenses; (f) Hedging Agreements permitted by Section 5.23; (g) promissory notes issued to the Lessee as a part of the purchase price in connection with the sale of American Cafe, Tia's or L&N Seafood; (h) Investments in franchise operators through the Franchise Partner Program; (i) Investments received in settlement of Indebtedness created in the ordinary course of business; (j) Investments in the stock or other assets of any other Person that is engaged in a business permitted by Section 5.16(b) that, as a result of such Investment, becomes a Subsidiary of Lessee (other than Hostile Acquisitions); provided, however, that the aggregate purchase price of Investments made pursuant to this subsection (j) shall not exceed at any time ten percent (10%) of the Consolidated Net Worth of the Lessee as calculated on the last day of Fiscal Quarter for which the Lessee has delivered, or is required to have delivered, financial statements to the Funding Parties pursuant to this Master Agreement; and (k) Investments in common stock of the Lessee to the extent permitted under Section 5.18. SECTION 5.18 Restricted Payments. The Lessee will not, and will not permit its Subsidiaries to, (x) declare or make, or agree to pay or make, directly or indirectly, any dividend on any class of its stock, or (y) make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption,

retirement, defeasance or other acquisition of, any shares of common stock or Indebtedness subordinated to the Obligations of the Lessee or any options, warrants, or other rights to purchase such common stock or such Indebtedness, whether now or hereafter outstanding (each, a "Restricted Payment"), except for (i) dividends payable by the Lessee solely in shares of any class of its common stock, (ii) Restricted Payments made by any Subsidiary to the Lessee or to another Obligor and (iii) cash dividends paid on, and cash redemptions of, the common stock of the Lessee; provided, however, that no Event of Default has occurred and is continuing before or after giving effect to the payment of such dividend or redemption. SECTION 5.19 Sale of Assets. The Lessee will not, and will not permit any of its Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of, any of its assets, business or property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's common stock to any Person other than the Lessee or any wholly owned Subsidiary of the Lessee or a Subsidiary Obligor (or to qualify directors if required by applicable law), except: (a) the sale or other disposition for fair market value of obsolete or worn out property or other property not necessary for operations, disposed of in the ordinary course of business; (b) the sale of inventory and Permitted Investments in the ordinary course of business; (c) the sale, lease or transfer of assets of any Subsidiary to the Lessee or any other Obligor; (d) the sale of any assets pertaining to Ruby Tuesday units pursuant to the Lessee's Franchise Partner Program; and (e) any other sale of the Lessee's assets with an aggregate book value, when aggregated with all other such sales since the Initial Closing Date, not exceeding 7.5% of the aggregate book value of all of the Lessee's assets on the date of such transfer; provided, however, that no Default or Event of Default has occurred and is continuing or would occur as a result of such transaction. SECTION 5.20 Transactions with Affiliates. The Lessee will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Lessee or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Lessee and its wholly owned Subsidiaries not involving any other Affiliates and (c) any Restricted Payment permitted by Section 5.18. SECTION 5.21 Restrictive Agreements. The Lessee will not, and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement that prohibits, restricts or imposes any condition upon (a) the ability of the Lessee or any Subsidiary to create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to its common stock, to make or repay loans or advances to the Lessee or any other Subsidiary, to Guaranty Indebtedness of the Lessee or any other Subsidiary or to transfer any of its property or assets to the Lessee or any Subsidiary of the Lessee; provided, however, that (i) the foregoing shall not apply to restrictions or conditions imposed by law or by this Master Agreement or any other Operative Document, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is sold and such sale is permitted hereunder, and (iii) clause (a) shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted under Section 5.14(c) of this Master Agreement if such restrictions and conditions apply only to the property or assets securing such Indebtedness. SECTION 5.22 Sale and Leaseback Transactions. The Lessee will not, and will not permit any of the Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred (such arrangement referred to as a "Sale Leaseback"). Notwithstanding the preceding limitation, the Lessee may enter into a Sale Leaseback, provided the aggregate amount of such transactions does not exceed $50,000,000.

SECTION 5.23 Hedging Agreements. The Lessee will not, and will not permit any of the Subsidiaries to, enter into any Hedging Agreement, other than Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Lessee or any Subsidiary is exposed in the conduct of its business or the management of its liabilities. Solely for the avoidance of doubt, the Lessee acknowledges that a Hedging Agreement entered into for speculative purposes or of a speculative nature (which shall be deemed to include any Hedging Agreement under which the Lessee or any of the Subsidiaries is or may become obliged to make any payment (i) in connection with the purchase by any third party of any common stock or any Indebtedness or (ii) as a result of changes in the market value of any common stock or any Indebtedness) is not a Hedging Agreement entered into in the ordinary course of business to hedge or mitigate risks. SECTION 5.24 Amendment to Material Documents. The Lessee will not, and will not permit any Subsidiary to, amend, modify or waive any of its rights in a manner materially adverse to the Lessee's or any Subsidiary's duties or the Funding Parties' rights under this Master Agreement or any other Operative Document under (a) its certificate of incorporation, bylaws or other organizational documents or (b) any contract, agreement, document, or instrument to which the Lessee or any Subsidiary is a party. SECTION 5.25 Accounting Changes. The Lessee will not, and will not permit any Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP or approved by the Lessee's independent accountants, or change the fiscal year of the Lessee or of any Subsidiary, except to change the fiscal year of a Subsidiary to conform its fiscal year to that of the Lessee and except that Lessee or any Subsidiary may change its fiscal year end from the first Sunday following May 30 to the first Tuesday or Wednesday following May 30. SECTION 5.26 ERISA. The Lessee will not, and will not permit any Subsidiary to engage in any transaction in connection with which the Lessee or such Subsidiary could reasonably be expected to be subject to a civil penalty assessed pursuant to ERISA which would have a Material Adverse Effect on the Lessee or such Subsidiary. SECTION 5.27 Further Assurances. Upon the written request of the Lessor or the Agent, the Lessee, at its own cost and expense, will cause all financing statements (including precautionary financing statements), fixture filings and other similar documents, to be recorded or filed at such places and times in such manner, as may be necessary to preserve, protect and perfect the interest of the Lessor, the Agent and the Lenders in the related Leased Property as contemplated by the Operative Documents. SECTION 5.28 Additional Required Appraisals. If, as a result of any change in Applicable Law after the date hereof, an appraisal of all or any of the Leased Property is required during the Lease Term under Applicable Law with respect to any Funding Party's interest therein, such Funding Party's Funded Amount with respect thereto or the Operative Documents, then the Lessee shall pay the reasonable cost of such appraisal. SECTION 5.29 Lessor's Covenants. The Lessor covenants and agrees that, unless the Agent and the Lenders shall have otherwise consented in writing: (a) it shall not amend its Partnership Agreement, except to admit limited partners in connection with lease transactions similar to the Transactions; (b) it shall not incur any indebtedness or other monetary obligation or liability, other than (i) non-recourse indebtedness incurred in connection with the Transactions or similar transactions and (ii) operating expenses incurred in the ordinary course of business that are not delinquent; (c) the proceeds of the Loans received from the Lenders will be used by the Lessor solely to acquire the Leased Property and to pay the Lessee for certain closing and transaction costs associated therewith and for the costs of Construction. No portion of the proceeds of the Loans will be used by the Lessor (i) in connection with, whether directly or indirectly, any tender offer for, or other acquisition of, stock of any corporation with a view towards obtaining control of such other corporation, (ii) directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any Margin Stock, or (iii) for any purpose in violation of any Applicable Law; (d) it shall not engage in any business or activity, or invest in any Person, except for activities similar to its activities conducted on the date hereof, the Transactions and lease transactions similar to the Transactions;

(e) it will maintain tangible net worth in an amount no less than the sum of (i) $100,000 plus (ii) 3% of its total assets (calculated assuming no reduction in the value of any leased property from its original cost to the Lessor); (f) it will deliver to the Agent, as soon as available and in any event within 90 days after the end of each fiscal year, a balance sheet of the Lessor as of the end of such fiscal year and the related statements of income, partners' capital and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, together with copies of its tax returns, all certified by an officer of the general partner (and if the Lessor ever prepares audited financial statements, it shall deliver copies thereto the Agent); (g) it will permit the Agent and its representatives to examine, and make copies from, the Lessor's books and records, and to visit the offices and properties of the Lessor for the purpose of examining such materials, and to discuss the Lessor's performance hereunder with any of its, or its general partner's, officers and employees; (h) it shall not consent to or suffer or permit any Lien against the Leased Property, other than as expressly contemplated pursuant to the Operative Documents; (i) it shall not consent to or suffer or permit the creation of any easement or other restriction against the Leased Property other than as permitted pursuant to Article VI of the Lease; and (j) it shall promptly discharge each Lessor Lien and shall indemnify the Lenders and the Lessee for any diminution in value of any Leased Property resulting from such Lessor Liens. SECTION 6 TRANSFERS BY LESSOR AND LENDERS SECTION 6.1 Lessor Transfers. The Lessor shall not assign, convey or otherwise transfer all or any portion of its right, title or interest in, to or under any Leased Property or any of the Operative Documents without the prior written consent of the Lenders and, unless an Event of Default has occurred and is continuing, the Lessee. Any proposed transferee of the Lessor shall make the representation set forth in Section 4.2(b) to the other parties hereto. SECTION 6.2 Lender Transfers. (a) Any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Master Agreement and the Loan Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Agent) shall not be less than $1,000,000, unless each of the Agent and, so long as no Event of Default has occurred and is continuing, the Lessee otherwise consent (each such consent not to be unreasonably withheld or delayed), (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Master Agreement and the Loan Agreement with respect to the Loan or the Commitment assigned, except that this clause (ii) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Commitments on a non-pro rata basis, and (iii) the parties to each assignment shall execute and deliver to the Agent an Assignment and Acceptance, together with a processing and recordation fee of $1,000, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Agent an administrative questionnaire. Each assignment by a Lender shall be of a pro rata portion of such Lender's A Loans and B Loans. Subject to acceptance and recording thereof by the Agent pursuant to paragraph (b) of this Section, from and after the effective date specified in each Assignment and Acceptance, the Eligible Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Master Agreement and the Loan Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Master Agreement and the Loan Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Master Agreement and the Loan Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 7. Any assignment or transfer by a Lender of rights or obligations under this Master Agreement and the Loan Agreement that does not comply with this paragraph shall be treated for purposes of this Master Agreement and the Loan Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this

Section. (b) The Agent, acting solely for this purpose as an agent of the Lessee, shall maintain at one of its offices in Atlanta, Georgia a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Lessee, the Agent, the Lessor and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Master Agreement and the Loan Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Lessee, the Lessor and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (c) Any Lender may, without the consent of, or notice to, the Lessee, the Agent or the Lessor sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and/or obligations under this Master Agreement and the Loan Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender's obligations under this Master Agreement and the Loan Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Lessee, the Agent, the Lessor and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Master Agreement and the Loan Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Master Agreement and the Loan Agreement and to approve any amendment, modification or waiver of any provision of this Master Agreement and the Loan Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver with respect to the following to the extent affecting such Participant: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 3 of the Loan Agreement in a manner that would alter the pro rata sharing of payments required thereby , without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender; (vi) release any guarantor or limit the liability of any such guarantor under any guaranty agreement without the written consent of each Lender except to the extent such release is expressly provided under the terms of the Guaranty Agreement or the Subsidiary Guaranty; or (vii) release all or substantially all collateral (if any) securing any of the Obligations. Subject to paragraph (d) of this Section, the Lessee agrees that each Participant shall be entitled to the benefits of Section 7, to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (a) of this Section. (d) A Participant shall not be entitled to receive any greater payment under Section 7.5 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Lessee's prior written consent. (e) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Master Agreement and the Loan Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or under the Loan Agreement or substitute any such pledgee or assignee for such Lender as a party hereto. SECTION 7 INDEMNIFICATION SECTION 7.1 General Indemnification. The Lessee agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and to indemnify, protect, defend, save and hold harmless each Indemnitee, on an After-Tax Basis, from and against, any and all Claims that may be imposed on, incurred by or asserted, or threatened to be asserted, against such Indemnitee (whether because of action or omission by

such Indemnitee or otherwise), whether or not such Indemnitee shall also be indemnified as to any such Claim by any other Person and whether or not such Claim arises or accrues prior to any Closing Date or after the Lease Termination Date, in any way relating to or arising out of: (a) any of the Operative Documents or any of the transactions contemplated thereby, and any amendment, modification or waiver in respect thereof; or (b) any Land, any Building or any part thereof or interest therein, including any Ground Lease; (c) the purchase, design, construction, preparation, installation, inspection, delivery, non-delivery, acceptance, rejection, ownership, management, possession, operation, rental, lease, sublease, repossession, maintenance, repair, alteration, modification, addition, substitution, storage, transfer of title, redelivery, use, financing, refinancing, disposition, operation, condition, sale (including, without limitation, any sale pursuant to the Lease), return or other disposition of all or any part of any interest in any Leased Property or the imposition of any Lien, other than a Lessor Lien (or incurring of any liability to refund or pay over any amount as a result of any Lien, other than a Lessor Lien) thereon, including, without limitation: (1) Claims or penalties arising from any violation or alleged violation of law or in tort (strict liability or otherwise), (2) latent or other defects, whether or not discoverable, (3) any Claim based upon a violation or alleged violation of the terms of any restriction, easement, condition or covenant or other matter affecting title to any Leased Property or any part thereof, (4) the making of any Alterations in violation of any standards imposed by any insurance policies required to be maintained by the Lessee pursuant to the Lease which are in effect at any time with respect to any Leased Property or any part thereof, (5) any Claim for patent, trademark or copyright infringement, (6) Claims arising from any public improvements with respect to any Leased Property resulting in any charge or special assessments being levied against any Leased Property or any Claim for utility "tap-in" fees, and (7) Claims for personal injury or real or personal property damage occurring, or allegedly occurring, on any Land, Building or Leased Property; (d) the offer, issuance, sale or delivery of the Notes by the Lessor; (e) the breach or alleged breach by the Lessee of any representation or warranty made by it or deemed made by it in any Operative Document or any certificate required to be delivered by any Operative Document; (f) the retaining or employment of any broker, finder or financial advisor by the Lessee to act on its behalf in connection with this Master Agreement or the Transaction, or the incurring of any fees or commissions to which the Lessor, the Agent or any Lender might be subjected by virtue of their entering into the transactions contemplated by this Master Agreement (other than fees or commissions due to any broker, finder or financial advisor retained by the Lessor, the Agent or any Lender); (g) the existence of any Lien on or with respect to any Leased Property, the Construction, any Basic Rent or Supplemental Rent, title to any Leased Property, or any interest therein, including any Liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of any Leased Property or by reason of labor or materials furnished or claimed to have been furnished to the Lessee, or any of its contractors or agents or by reason of the financing of any personalty or equipment purchased or leased by the Lessee or Alterations constructed by the Lessee, except in all cases the Liens listed as items (a) and (b) in the definition of Permitted Liens; (h) the transactions contemplated hereby or by any other Operative Document, in respect of the application of Parts 4 and 5 of Subtitle B of Title I of ERISA and any prohibited transaction described in Section 4975(c) of the Code; or (i) any act or omission by the Lessee under any Purchase Agreement or any other Operative Document, and any breach of any requirement, condition, restriction or limitation in any Deed, Purchase Agreement or Ground Lease; provided, however, the Lessee shall not be required to indemnify any Indemnitee under this Section 7.1 for any of the following: (1) any Claim to the extent that such Claim results from the willful misconduct or gross negligence of such Indemnitee, or (2) any Claim resulting from Lessor Liens which the Lessor is responsible for discharging under the Operative Documents, in each case, as determined by a court of competent jurisdiction in a final and nonappealable judgment, and, provided, further, that with respect to each Construction Land Interest, the

Lessee's indemnity obligations with respect to such Leased Property, shall be governed by Section 3.4 of the Construction Agency Agreement during the Construction Term therefor. It is expressly understood and agreed that the indemnity provided for herein shall survive the expiration or termination of, and shall be separate and independent from any other remedy under this Master Agreement, the Lease or any other Operative Document. All amounts payable by the Lessee pursuant to this Section 7.1 shall be Supplemental Rent. SECTION 7.2 Environmental Indemnity. In addition to and without limitation of Section 7.1 or Section 3.4 of the Construction Agency Agreement, the Lessee agrees to indemnify, hold harmless and defend each Indemnitee from and against any and all claims (including without limitation third party claims for personal injury or real or personal property damage), losses (including but not limited to any loss of value of any Leased Property), damages, liabilities, fines, penalties, charges, suits, settlements, demands, administrative and judicial proceedings (including informal proceedings) and orders, judgments, remedial action, requirements, enforcement actions of any kind, and all reasonable costs and expenses actually incurred in connection therewith (including, but not limited to, reasonable attorneys' and/or paralegals' fees and expenses), including, but not limited to, all costs incurred in connection with any investigation or monitoring of site conditions or any clean-up, remedial, removal or restoration work by any federal, state or local government agency, arising directly or indirectly, in whole or in part, out of (i) the presence on or under any Land of any Hazardous Materials, or any releases or discharges of any Hazardous Materials on, under, from or onto any Land, (ii) any activity, including, without limitation, construction, carried on or undertaken on or off any Land, and whether by the Lessee or any predecessor in title or any employees, agents, contractors or subcontractors of the Lessee or any predecessor in title, or any other Person, in connection with the handling, treatment, removal, storage, decontamination, clean-up, transport or disposal of any Hazardous Materials that at any time are located or present on or under or that at any time migrate, flow, percolate, diffuse or in any way move onto or under any Land, (iii) loss of or damage to any property or the environment (including, without limitation, clean-up costs, response costs, remediation and removal costs, cost of corrective action, costs of financial assurance, fines and penalties and natural resource damages), or death or injury to any Person, and all expenses associated with the protection of wildlife, aquatic species, vegetation, flora and fauna, and any mitigative action required by or under Environmental Laws, in each case to the extent related to any Leased Property, (iv) any claim concerning any Leased Property's lack of compliance with Environmental Laws, or any act or omission causing an environmental condition on or with respect to any Leased Property that requires remediation or would allow any governmental agency to record a lien or encumbrance on the land records, or (v) any residual contamination on or under any Land, or affecting any natural resources on any Land, and to any contamination of any property or natural resources arising in connection with the generation, use, handling, storage, transport or disposal of any such Hazardous Materials on or from any Leased Property; in each case irrespective of whether any of such activities were or will be undertaken in accordance with applicable laws, regulations, codes and ordinances; in any case with respect to the matters described in the foregoing clauses (i) through (v) that arise or occur (w) prior to or during the Lease Term, (x) at any time during which the Lessee or any Affiliate thereof owns any interest in or otherwise occupies or possesses any Leased Property or any portion thereof, (y) during any period after and during the continuance of any Event of Default or (z) during any period of three years following the date an Indemnitee takes possession of any Leased Property; provided, however, the Lessee shall not be required to indemnify any Indemnitee under this Section 7.2 for any Claim to the extent that such Claim results from the willful misconduct or gross negligence of such Indemnitee, as determined by a court of competent jurisdiction in a final and nonappealable judgment. It is expressly understood

and agreed that the indemnity provided for herein shall survive the expiration or termination of and shall be separate and independent from any other remedy under this Master Agreement, the Lease or any other Operative Document. All amounts payable by the Lessee pursuant to this Section 7.2 shall be Supplemental Rent. SECTION 7.3 Proceedings in Respect of Claims. With respect to any amount that the Lessee is requested by an Indemnitee to pay by reason of Section 7.1 or 7.2, such Indemnitee shall, if so requested by the Lessee and prior to any payment, submit such additional information to the Lessee as the Lessee may reasonably request and which is in the possession of, or under the control of, such Indemnitee to substantiate properly the requested payment. In case any action, suit or proceeding shall be brought against any Indemnitee, such Indemnitee promptly shall notify the Lessee of the commencement thereof (provided that the failure of such Indemnitee to promptly notify the Lessee shall not affect the Lessee's obligation to indemnify hereunder except to the extent that the Lessee's ability to contest is materially prejudiced by such failure), and the Lessee shall be entitled, at its expense, to participate in, and, to the extent that the Lessee desires to, assume and control the defense thereof with counsel reasonably satisfactory to such Indemnitee; provided, however, that such Indemnitee may pursue a motion to dismiss such Indemnitee from such action, suit or proceeding with counsel of such Indemnitee's choice at the Lessee's expense; and provided further that the Lessee may assume and control the defense of such proceeding only if the Lessee shall have acknowledged in writing its obligations to fully indemnify such Indemnitee in respect of such action, suit or proceeding, the Lessee shall pay all reasonable costs and expenses related to such action, suit or proceeding as and when incurred and the Lessee shall keep such Indemnitee fully apprised of the status of such action suit or proceeding and shall provide such Indemnitee with all information with respect to such action suit or proceeding as such Indemnitee shall reasonably request; and, provided further, that the Lessee shall not be entitled to assume and control the defense of any such action, suit or proceeding if and to the extent that, (A) in the reasonable opinion of such Indemnitee, (x) such action, suit or proceeding involves any possibility of imposition of criminal liability or any material risk of material civil liability on such Indemnitee or (y) such action, suit or proceeding will involve a material risk of the sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted Lien) on any Leased Property or any part thereof unless the Lessee shall have posted a bond or other security satisfactory to the relevant Indemnitees in respect to such risk or (z) the control of such action, suit or proceeding would involve an actual or potential conflict of interest, (B) such proceeding involves Claims not fully indemnified by the Lessee which the Lessee and the Indemnitee have been unable to sever from the indemnified claim(s), or (C) an Event of Default has occurred and is continuing. The Indemnitee may participate in a reasonable manner at its own expense and with its own counsel in any proceeding conducted by the Lessee in accordance with the foregoing. If the Lessee fails to fulfill the conditions to the Lessee's assuming the defense of any claim after receiving notice thereof on or prior to the date that is 15 days prior to the date that an answer or response is required, the Indemnitee may undertake such defense, at the Lessee's expense. The Lessee shall not enter into any settlement or other compromise with respect to any Claim in excess of $1,000,000 which is entitled to be indemnified under Section 7.1 or 7.2 without the prior written consent of the related Indemnitee, which consent shall not be unreasonably withheld. Unless an Event of Default shall have occurred and be continuing, no Indemnitee shall enter into any settlement or other compromise with respect to any claim which is entitled to be indemnified under Section 7.1 or 7.2 without the prior written consent of the Lessee, which consent shall not be unreasonably withheld, unless such Indemnitee waives its right to be indemnified under Section 7.1 or 7.2 with respect to such Claim. Upon payment in full of any Claim by the Lessee pursuant to Section 7.1 or 7.2 to or on behalf of an Indemnitee, the Lessee, without any further action, shall be subrogated to any and all claims that such Indemnitee may have relating thereto (other than claims in respect of insurance policies maintained by such Indemnitee at its own expense), and such Indemnitee shall execute such instruments of assignment and conveyance, evidence of claims and payment and such other documents, instruments and agreements as may be reasonably necessary to preserve any such claims and otherwise cooperate with the Lessee and give such further assurances as are reasonably necessary or advisable to enable the Lessee vigorously to pursue such claims. Any amount payable to an Indemnitee pursuant to Section 7.1 or 7.2 shall be paid to such Indemnitee promptly upon, but in no event later than 30 days after, receipt of a written demand therefor from such Indemnitee, accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. If for any reason the indemnification provided for in Section 7.1 or 7.2 is unavailable to an Indemnitee or is

insufficient to hold an Indemnitee harmless, then the Lessee agrees to contribute to the amount paid or payable by such Indemnitee as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by such Indemnitee on the one hand and by the Lessee on the other hand but also the relative fault of such Indemnitee as well as any other relevant equitable considerations. It is expressly understood and agreed that the right to contribution provided for herein shall survive the expiration or termination of and shall be separate and independent from any other remedy under this Master Agreement, the Lease or any other Operative Document. SECTION 7.4 General Tax Indemnity. (a) Tax Indemnity. Except as otherwise provided in this Section 7.4, the Lessee shall pay on an After-Tax Basis, and on written demand shall indemnify and hold each Tax Indemnitee harmless from and against, any and all fees (including, without limitation, documentation, recording, license and registration fees), taxes (including, without limitation, income, gross receipts, sales, rental, use, turnover, valueadded, property, excise and stamp taxes), levies, imposts, duties, charges, assessments or withholdings of any nature whatsoever, together with any penalties, fines or interest thereon or additions thereto (any of the foregoing being referred to herein as "Taxes" and individually as a "Tax" (for the purposes of this Section 7.4, the definition of "Taxes" includes amounts imposed on, incurred by, or asserted against each Tax Indemnitee as the result of any prohibited transaction, within the meaning of Section 406 or 407 of ERISA or Section 4975(c) of the Code, arising out of the transactions contemplated hereby or by any other Operative Document)) imposed on or with respect to any Tax Indemnitee, the Lessee, any Leased Property or any portion thereof or any Land, or any sublessee or user thereof, by the United States or by any state or local government or other taxing authority in the United States in connection with or in any way relating to (i) the acquisition, financing, mortgaging, construction, preparation, installation, inspection, delivery, non-delivery, acceptance, rejection, purchase, ownership, possession, rental, lease, sublease, maintenance, repair, storage, transfer of title, redelivery, use, operation, condition, sale, return or other application or disposition of all or any part of any Leased Property or the imposition of any Lien (or incurrence of any liability to refund or pay over any amount as a result of any Lien) thereon, (ii) Basic Rent or Supplemental Rent or the receipts or earnings arising from or received with respect to any Leased Property or any part thereof, or any interest therein or any applications or dispositions thereof, (iii) any other amount paid or payable pursuant to the Notes, or any other Operative Documents, (iv) any Leased Property, any Land or any part thereof or any interest therein (including, without limitation, all assessments payable in respect thereof, including, without limitation, all assessments noted on the related Title Policy), (v) all or any of the Operative Documents, any other documents contemplated thereby, any amendments and supplements thereto, and (vi) otherwise with respect to or in connection with the transactions contemplated by the Operative Documents. (b) Exclusions from General Tax Indemnity. Section 7.4(a) shall not apply to: (i) Taxes on, based on, or measured by or with respect to net income of the Lessor, the Agent and the Lenders (including, without limitation, minimum Taxes, capital gains Taxes, Taxes on or measured by items of tax preference or alternative minimum Taxes) other than (A) any such Taxes that are, or are in the nature of, sales, use, license, rental or property Taxes, and (B) withholding Taxes imposed by the United States or any state in which Leased Property is located (i) on payments with respect to the Notes, to the extent imposed by reason of a change in Applicable Law occurring after the date on which the holder of such Note became the holder of such Note or (ii) on Rent, to the extent the net payment of Rent after deduction of such withholding Taxes would be less than amounts currently payable with respect to the Funded Amounts; (ii) Taxes on, based on, or in the nature of or measured by Taxes on doing business, business privilege, franchise, capital, capital stock, net worth, or mercantile license or similar taxes other than (A) any increase in such Taxes imposed on such Tax Indemnitee by any state in which Leased Property is located, net of any decrease in such taxes realized by such Tax Indemnitee, to the extent that such tax increase would not have occurred if on each Funding Date the Lessor and the Lenders had advanced funds to the Lessee in the form of loans secured by the Leased Property in an amount equal to the Funded Amounts funded on such Funding Date, with debt service for such loans equal to the Basic Rent payable on each Payment Date and a principal balance at the maturity of such loans in a total amount equal to the Funded Amounts at the end of the Lease Term, or (B) any Taxes that are or are in the nature of sales, use, rental, license or property Taxes relating to any Leased Property; (iii) Taxes that are based on, or measured by, the fees or other compensation received by a Person acting as Agent (in its individual capacities) or any Affiliate of any thereof for acting as trustee under the Loan Agreement;

(iv) Taxes that result from any act, event or omission, or are attributable to any period of time, that occurs after the earliest of (A) the expiration of the Lease Term with respect to any Leased Property and, if such Leased Property is required to be returned to the Lessor in accordance with the Lease, such return and (B) the discharge in full of the Lessee's obligations to pay the Lease Balance, or any amount determined by reference thereto, with respect to any Leased Property and all other amounts due under the Lease, unless such Taxes relate to acts, events or matters occurring prior to the earliest of such times or are imposed on or with respect to any payments due under the Operative Documents after such expiration or discharge; (v) Taxes imposed on a Tax Indemnitee that result from any voluntary sale, assignment, transfer or other disposition or bankruptcy by such Tax Indemnitee or any related Tax Indemnitee of any interest in any Leased Property or any part thereof, or any interest therein or any interest or obligation arising under the Operative Documents, or from any sale, assignment, transfer or other disposition of any interest in such Tax Indemnitee or any related Tax Indemnitee, it being understood that each of the following shall not be considered a voluntary sale: (A) any substitution, replacement or removal of any of the Leased Property by the Lessee, (B) any sale or transfer resulting from the exercise by the Lessee of any termination option, any purchase option or sale option, (C) any sale or transfer while an Event of Default shall have occurred and be continuing under the Lease, and (D) any sale or transfer resulting from the Lessor's exercise of remedies under the Lease; (vi) any Tax which is being contested in accordance with the provisions of Section 7.4(c), during the pendency of such contest; (vii) any Tax that is imposed on a Tax Indemnitee as a result of such Tax Indemnitee's gross negligence or willful misconduct (other than gross negligence or willful misconduct imputed to such Tax Indemnitee solely by reason of its interest in any Leased Property); (viii) any Tax that results from a Tax Indemnitee engaging, with respect to any Leased Property, in transactions other than those permitted by the Operative Documents; (ix) to the extent any interest, penalties or additions to tax result in whole or in part from the failure of a Tax Indemnitee to file a return or pay a Tax that it is required to file or pay in a proper and timely manner, unless such failure (A) results from the transactions contemplated by the Operative Documents in circumstances where the Lessee did not give timely notice to such Tax Indemnitee (and such Tax Indemnitee otherwise had no actual knowledge) of such filing or payment requirement that would have permitted a proper and timely filing of such return or payment of such Tax, as the case may be, or (B) results from the failure of the Lessee to supply information necessary for the proper and timely filing of such return or payment of such Tax, as the case may be, that was not in the possession of such Tax Indemnitee; and (x) any Tax that results from the breach by the Lessor of its representation and warranty made in Section 4.2(b) or the breach of any Lender of its representation and warranty made in Section 4.3(b). (c) Contests. If any claim shall be made against any Tax Indemnitee or if any proceeding shall be commenced against any Tax Indemnitee (including a written notice of such proceeding) for any Taxes as to which the Lessee may have an indemnity obligation pursuant to Section 7.4, or if any Tax Indemnitee shall determine that any Taxes as to which the Lessee may have an indemnity obligation pursuant to Section 7.4 may be payable, such Tax Indemnitee shall promptly notify the Lessee. The Lessee shall be entitled, at its expense, to participate in, and, to the extent that the Lessee desires to, assume and control the defense thereof; provided, however, that the Lessee shall have acknowledged in writing its obligation to fully indemnify such Tax Indemnitee in respect of such action if requested to do so by the Lessee, suit or proceeding if the contest is unsuccessful; and, provided further, that the Lessee shall not be entitled to assume and control the defense of any such action, suit or proceeding (but the Tax Indemnitee shall then contest, at the sole cost and expense of the Lessee, on behalf of the Lessee with representatives reasonably satisfactory to the Lessee) if and to the extent that, (A) in the reasonable opinion of such Tax Indemnitee, such action, suit or proceeding (x) involves any meaningful risk of imposition of criminal liability or any material risk of material civil liability on such Tax Indemnitee or (y) will involve a material risk of the sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted Lien) on any Leased Property or any part thereof unless the Lessee shall have posted a bond or other security satisfactory to the relevant Tax Indemnitees in respect to such risk, (B) such proceeding involves claims not fully indemnified by the Lessee which the Lessee and the Tax Indemnitee have been unable to sever from the indemnified claim(s), (C) an Event of Default has occurred and is continuing, (D) such action, suit or proceeding involves matters which extend beyond or are unrelated to the Transaction and if determined adversely could be materially detrimental to the interests of

such Tax Indemnitee notwithstanding indemnification by the Lessee or (E) such action, suit or proceeding involves the federal or any state income tax liability of the Tax Indemnitee. With respect to any contests controlled by a Tax Indemnitee, (i) if such contest relates to the federal or any state income tax liability of such Tax Indemnitee, such Tax Indemnitee shall be required to conduct such contest only if the Lessee shall have provided to such Tax Indemnitee an opinion of independent tax counsel selected by the Tax Indemnitee and reasonably satisfactory to the Lessee stating that a reasonable basis exists to contest such claim or (ii) in the case of an appeal of an adverse determination of any contest relating to any Taxes, an opinion of such counsel to the effect that such appeal is more likely than not to be successful, provided, however, such Tax Indemnitee shall in no event be required to appeal an adverse determination to the United States Supreme Court. The Tax Indemnitee may participate in a reasonable manner at its own expense and with its own counsel in any proceeding conducted by the Lessee in accordance with the foregoing. Each Tax Indemnitee shall at the Lessee's expense supply the Lessee with such information and documents in such Tax Indemnitee's possession reasonably requested by the Lessee as are necessary or advisable for the Lessee to participate in any action, suit or proceeding to the extent permitted by this Section 7.4. Unless an Event of Default shall have occurred and be continuing, no Tax Indemnitee shall enter into any settlement or other compromise with respect to any claim which is entitled to be indemnified under this Section 7.4 without the prior written consent of the Lessee, which consent shall not be unreasonably withheld, unless such Tax Indemnitee waives its right to be indemnified under this Section 7.4 with respect to such claim. Notwithstanding anything contained herein to the contrary, (a) a Tax Indemnitee will not be required to contest (and the Lessee shall not be permitted to contest) a claim with respect to the imposition of any Tax if such Tax Indemnitee shall waive its right to indemnification under this Section 7.4 with respect to such claim (and any related claim with respect to other taxable years the contest of which is precluded as a result of such waiver) and (b) no Tax Indemnitee shall be required to contest any claim if the subject matter thereof shall be of a continuing nature and shall have previously been decided adversely, unless there has been a change in law which in the opinion of Tax Indemnitee's counsel creates substantial authority for the success of such contest. Each Tax Indemnitee and the Lessee shall consult in good faith with each other regarding the conduct of such contest controlled by either. (d) Reimbursement for Tax Savings. If (x) a Tax Indemnitee shall obtain a credit or refund of any Taxes paid by the Lessee pursuant to this Section 7.4 or (y) by reason of the incurrence or imposition of any Tax for which a Tax Indemnitee is indemnified hereunder or any payment made to or for the account of such Tax Indemnitee by the Lessee pursuant to this Section 7.4, such Tax Indemnitee at any time realizes a reduction in any Taxes for which the Lessee is not required to indemnify such Tax Indemnitee pursuant to this Section 7.4, which reduction in Taxes was not taken into account in computing such payment by the Lessee to or for the account of such Tax Indemnitee, then such Tax Indemnitee shall promptly pay to the Lessee (xx) the amount of such credit or refund, together with the amount of any interest received by such Tax Indemnitee on account of such credit or refund or (yy) an amount equal to such reduction in Taxes, as the case may be; provided that no such payment shall be made so long as an Event of Default shall have occurred and be continuing and, provided, further, that the amount payable to the Lessee by any Tax Indemnitee pursuant to this Section 7.4(d) shall not at any time exceed the aggregate amount of all indemnity payments made by the Lessee under this Section 7.4 to such Tax Indemnitee with respect to the Taxes which gave rise to the credit or refund or with respect to the Tax which gave rise to the reduction in Taxes less the amount of all prior payments made to the Lessee by such Tax Indemnitee under this Section 7.4(d). Each Tax Indemnitee agrees to act in good faith to claim such refunds and other available Tax benefits, and take such other actions as may be reasonable to minimize any payment due from the Lessee pursuant to this Section 7.4. The disallowance or reduction of any credit, refund or other tax savings with respect to which a Tax Indemnitee has made a payment to the Lessee under this Section 7.4(d) shall be treated as a Tax for which the Lessee are obligated to indemnify such Tax Indemnitee hereunder without regard to Section 7.4(b) hereof. (e) Payments. Any Tax indemnifiable under this Section 7.4 shall be paid by the Lessee directly when due to the applicable taxing authority if direct payment is practicable and permitted. If direct payment to the applicable taxing authority is not permitted or is otherwise not made, any amount payable to a Tax Indemnitee pursuant to Section 7.4 shall be paid within thirty (30) days after receipt of a written demand therefor from such Tax Indemnitee accompanied by a written statement describing in reasonable detail the amount so payable, but not before the date that the relevant Taxes are due. Any payments made pursuant to Section 7.4 shall be made to the Tax Indemnitee entitled thereto or the Lessee, as the case may be, in immediately available funds at such bank or to such account as specified by the payee in written directions to the payor, or, if no such direction shall have

been given, by check of the payor payable to the order of the payee by certified mail, postage prepaid at its address as set forth in this Master Agreement. Upon the request of any Tax Indemnitee with respect to a Tax that the Lessee is required to pay, the Lessee shall furnish to such Tax Indemnitee the original or a certified copy of a receipt for the Lessee's payment of such Tax or such other evidence of payment as is reasonably acceptable to such Tax Indemnitee. (f) Reports. If the Lessee knows of any report, return or statement required to be filed with respect to any Taxes that are subject to indemnification under this Section 7.4, the Lessee shall, if the Lessee is permitted by Applicable Law, timely file such report, return or statement (and, to the extent permitted by law, show ownership of the applicable Leased Property in the Lessee); provided, however, that if the Lessee is not permitted by Applicable Law or does not have access to the information required to file any such report, return or statement, the Lessee will promptly so notify the appropriate Tax Indemnitee, in which case Tax Indemnitee will file such report. In any case in which the Tax Indemnitee will file any such report, return or statement, the Lessee shall, upon written request of such Tax Indemnitee, prepare such report, return or statement for filing by such Tax Indemnitee or, if such Tax Indemnitee so requests, provide such Tax Indemnitee with such information as is reasonably available to the Lessee. (g) Verification. At the Lessee's request, the amount of any indemnity payment by the Lessee or any payment by a Tax Indemnitee to the Lessee pursuant to this Section 7.4 shall be verified and certified by an independent public accounting firm selected by the Lessee and reasonably acceptable to the Tax Indemnitee. Unless such verification shall disclose an error in the Lessee's favor of 5% or more of the related indemnity payment, the costs of such verification shall be borne by the Lessee. In no event shall the Lessee have the right to review the Tax Indemnitee's tax returns or receive any other confidential information from the Tax Indemnitee in connection with such verification. The Tax Indemnitee agrees to cooperate with the independent public accounting firm performing the verification and to supply such firm with all information reasonably necessary to permit it to accomplish such verification, provided that the information provided to such firm by such Tax Indemnitee shall be for its confidential use. The parties agree that the sole responsibility of the independent public accounting firm shall be to verify the amount of a payment pursuant to this Master Agreement and that matters of interpretation of this Master Agreement are not within the scope of the independent accounting firm's responsibilities. SECTION 7.5 Increased Costs, etc. (a) Interest Rate Not Ascertainable, etc. In the event that the Agent shall have determined (which determination shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all parties) that on any date for determining the Adjusted LIBOR Rate for any Rent Period, by reason of any changes arising after the date of this Master Agreement affecting the London interbank market, or the Agent's position in such market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Adjusted LIBOR Rate, then, and in any such event, the Agent shall forthwith give notice (by telephone confirmed in writing) to Lessee and to the Funding Parties, of such determination and a summary of the basis for such determination. Until the Agent notifies Lessee that the circumstances giving rise to the suspension described herein no longer exist, the obligations of the Funding Parties to make or permit portions of the Loans to remain outstanding past the last day of the then current Rent Periods as LIBOR Advances shall be suspended, and such affected Advances shall bear the same interest as Base Rate Advances. (b) Illegality. (i) In the event that any Funding Party shall have determined (which determination shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all parties) at any time that the making or continuance of any LIBOR Advance has become unlawful by compliance by such Funding Party in good faith with any Applicable Law, governmental rule, regulation, guideline or order (whether or not having the force of law and whether or not failure to comply therewith would be unlawful), then, in any such event, the Funding Party shall give prompt notice (by telephone confirmed in writing) to Lessee and to the Agent of such determination and a summary of the basis for such determination (which notice the Agent shall promptly transmit to the other Funding Parties). (ii) Upon the giving of the notice to Lessee referred to in subsection (i) above, (A) Lessee's right to request and such Funding Party's obligation to make LIBOR Advances shall be immediately suspended, and such Funding Party shall make an Advance as part of the requested Funding of LIBOR Advances as a Base Rate Advance, which Base Rate Advance shall, for all other purposes, be considered part of such Advance, and (B) if the

affected LIBOR Advance or Advances are then outstanding, Lessee shall immediately, or if permitted by Applicable Law, no later than the date permitted thereby, upon at least one Business Day's written notice to the Agent and the affected Funding Party, convert each such Advance into a Base Rate Advance or Advances, provided that if more than one Funding Party is affected at any time, then all affected Funding Parties must be treated the same pursuant to this Section 7.5(b). (c) Increased Costs. If, by reason of (x) after the date hereof, the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation, or (y) the compliance with any guideline or request from any central bank or other Governmental Authority or quasi-governmental authority exercising control over banks or financial institutions generally made after the date hereof (whether or not having the force of law): (i) any Funding Party (or its applicable Lending Office) shall be subject to any tax, duty or other charge with respect to its LIBOR Advances or its obligation to make LIBOR Advances or the basis of taxation of payments to any Funding Party of the principal of or interest on its LIBOR Advances or its obligation to make LIBOR Advances shall have changed (except for changes in the tax on the overall net income of such Funding Party or its applicable Lending Office imposed by the jurisdiction in which such Funding Party's principal executive office or applicable Lending Office is located); or (ii) any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Funding Party's applicable Lending Office shall be imposed or deemed applicable or any other condition affecting its LIBOR Advances or its obligation to make LIBOR Advances shall be imposed on any Funding Party or its applicable Lending Office or the London interbank market; and as a result thereof there shall be any increase in the cost to such Funding Party of agreeing to make or making, funding or maintaining LIBOR Advances (except to the extent already included in the determination of the applicable Adjusted LIBOR Rate for LIBOR Advances) or its obligation to make LIBOR Advances, or there shall be a reduction in the amount received or receivable by such Lender or its applicable Lending Office, then Lessee shall from time to time, upon written notice from and demand by such Lender on Lessee (with a copy of such notice and demand to the Agent), pay to the Agent for the account of such Funding Party within five Business Days after the date of such notice and demand, additional amounts sufficient to indemnify such Funding Party against such increased cost. A certificate as to the amount of such increased cost, submitted to Lessee and the Agent by such Funding Party in good faith and accompanied by a statement prepared by such Funding Party describing in reasonable detail the basis for and calculation of such increased cost, shall, except for manifest error, be final, conclusive and binding for all purposes. (d) Conversion to Base Rate Advances. If any Funding Party shall advise the Agent that at any time, because of the circumstances described in clause (x) or (y) in Section 7.5(c) or any other circumstances beyond such Funding Party's reasonable control arising after the date of this Master Agreement affecting such Funding Party or the London interbank market or such Lender's position in such market, the Adjusted LIBOR Rate as determined by the Agent will not adequately and fairly reflect the cost to such Lender of funding its LIBOR Advances, then, and in any such event: (i) the Agent shall forthwith give notice (by telephone confirmed in writing) to Lessee and to the other Funding Parties of such advice; (ii) Lessee's right to request and such Funding Party's obligation to make or permit portions of the Advances to remain outstanding past the last day of the then current Rent Periods as LIBOR Advances shall be immediately suspended; and (iii) such Funding Party shall make an Advance as part of the requested Funding of LIBOR Advances as a Base Rate Advance, which such Base Rate Advance shall, for all other purposes, be considered part of such Funding. (e) Alternative Lending Office. Each Funding Party agrees that, if requested by Lessee, it will use reasonable efforts (subject to overall policy considerations of such Funding Party) to designate an alternate Lending Office with respect to any of its LIBOR Advances affected by the matters or circumstances described in paragraphs (a), (b), (c) or (d) above to reduce the liability of Lessee or avoid the results provided thereunder, so long as such designation is not disadvantageous to such Funding Party as reasonably determined by such Funding Party, which

determination shall be conclusive and binding on all parties hereto. Nothing in this Section 7.5(e) shall affect or postpone any of the obligations of Lessee or any right of any Funding Party provided hereunder. (f) Funding Losses. Lessee shall compensate each Funding Party, upon its written request to Lessee (which request shall set forth the basis for requesting such amounts in reasonable detail and which request shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all of the parties hereto), for all losses, expenses and liabilities (including, without limitation, any interest paid by such Funding Party to lenders of funds borrowed by it to make or carry its LIBOR Advances to the extent not recovered by such Lender in connection with the re-employment of such funds and including loss of anticipated profits), which the Funding Party may sustain: (i) if for any reason (other than a default by such Lender) a borrowing of, or conversion to or continuation of, LIBOR Advances to Lessee does not occur on the date specified therefor in a Funding Request or Payment Date Notice (whether or not withdrawn), (ii) if any repayment (including any conversions pursuant to this Section 7.5) of any LIBOR Advances to Lessee occurs on a date which is not the last day of a Rent Period applicable thereto, or (iii), if, for any reason, Lessee defaults in its obligation to repay the Funded Amounts when required by the terms of the Lease. (g) Assumptions Concerning Funding of LIBOR Advances. Calculation of all amounts payable to a Funding Party under this Section 7.5 shall be made as though such Funding Party had actually funded its relevant LIBOR Advances through the purchase of deposits in the relevant market bearing interest at the rate applicable to such LIBOR Advances in an amount equal to the amount of the LIBOR Advances and having a maturity comparable to the relevant Rent Period and through the transfer of such LIBOR Advances from an offshore office of that Funding Party to a domestic office of that Funding Party in the United States of America; provided, however, that each Funding Party may fund each of its LIBOR Advances in any manner it sees fit and the foregoing assumption shall be used only for calculation of amounts payable under this Section 7.5. (h) Capital Adequacy. Without limiting any other provision of this Master Agreement, in the event that any Funding Party shall have determined that any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy not currently in effect or fully applicable as of the Initial Closing Date, or any change therein or in the interpretation or application thereof, or compliance by such Lender with any request or directive regarding capital adequacy not currently in effect or fully applicable as of the Initial Closing Date (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) from a central bank or governmental authority or body having jurisdiction, does or shall have the effect of reducing the rate of return on such Funding Party's capital as a consequence of its obligations hereunder to a level below that which such Funding Party could have achieved but for such law, treaty, rule, regulation, guideline or order, or such change or compliance (taking into consideration such Funding Party's policies with respect to capital adequacy) by an amount deemed by such Funding Party to be material, then within ten (10) Business Days after written notice and demand by such Funding Party (with copies thereof to the Agent), Lessee shall from time to time pay to such Funding Party additional amounts sufficient to compensate such Funding Party for such reduction (but, in the case of outstanding Base Rate Advances, without duplication of any amounts already recovered by such Funding Party by reason of an adjustment in the applicable Base Rate), provided that the Lessee shall not be obligated to pay such compensation with respect to reductions incurred by such Lender more than 120 days prior to the date that such Lender had actual knowledge thereof. Each certificate as to the amount payable under this Section 7.5(h) (which certificate shall set forth the basis for requesting such amounts in reasonable detail), submitted to Lessee by any Funding Party in good faith, shall, absent manifest error, be final, conclusive and binding for all purposes. (i) Replacement of Lender. In the event that any Lender makes a claim for increased costs, or is subject to a circumstance making LIBOR Advances unavailable, pursuant to this Section 7.5, the Lessee shall have the right to replace such Lender with another financial institution that is reasonably acceptable to the Agent. In the event that the Lessee identifies such a replacement financial institution, and the Agent consents thereto, the Lender that is to be replaced shall assign its Loans and its Commitment to such replacement lender pursuant to an assignment and assumption agreement in substantially the form set forth as Exhibit J hereto upon payment to it of the outstanding principal, and accrued interest on, its outstanding Loans, plus all other amounts then due to it pursuant to the Operative Documents. (j) Construction Land Interests. Notwithstanding anything to the contrary set forth in this Section 7.5, any

amounts due pursuant to this Section 7.5 with respect to any Construction Land Interest during the Construction Term therefor shall be payable by the Lessor from the proceeds of Advances (and Construction Agent shall provide a Funding Request for such Advances upon notice from the Lessor or the Agent). SECTION 7.6 End of Term Indemnity. In the event that at the end of the Lease Term for a Leased Property: (i) the Lessee elects the option set forth in Section 14.6 of the Lease, and (ii) after the Lessor receives the sales proceeds from such Leased Property under Section 14.6 or 14.7 of the Lease, together with the Lessee's payment of the Recourse Deficiency Amount, the Lessor shall not have received the entire Lease Balance, then, within 90 days after the end of the Lease Term, the Lessor or the Agent may obtain, at the Lessee's sole cost and expense, a report from the Appraiser (or, if the Appraiser is not available, another appraiser reasonably satisfactory to the Lessor or the Agent, as the case may be, and approved by the Lessee, such approval not to be unreasonably withheld) in form and substance satisfactory to the Lessor and the Agent (the "Report") to establish the reason for any decline in value of such Leased Property from the Lease Balance. The Lessee shall promptly reimburse the Lessor (which amount shall be distributed pursuant to Section 3 of the Loan Agreement) for the amount equal to such decline in value to the extent that the Report indicates that such decline was due to (w) extraordinary use, failure to maintain, to repair, to restore, to rebuild or to replace, failure to comply with all Applicable Laws, failure to use good workmanship, method of installation or removal or maintenance, repair, rebuilding or replacement, or any other cause or condition within the power of the Lessee to control or effect resulting in the Building failing to be a restaurant unit of the type and quality contemplated by the Appraisal (excepting in each case ordinary wear and tear), or (x) any Alteration made to, or any rebuilding of, the Leased Property or any part thereof by the Lessee, or (y) any restoration or rebuilding carried out by the Lessee or any condemnation of any portion of the Leased Property pursuant to Article X of the Lease, or (z) any use of such Leased Property or any part thereof by the Lessee other than as permitted by the Lease, or any act or omission constituting a breach of any requirement, condition, restriction or limitation set forth in the related Deed or the related Purchase Agreement. SECTION 8 MISCELLANEOUS SECTION 8.1 Survival of Agreements. The representations, warranties, covenants, indemnities and agreements of the parties provided for in the Operative Documents, and the parties' obligations under any and all thereof, shall survive the execution and delivery and the termination or expiration of this Master Agreement and any of the Operative Documents, the transfer of any Land to the Lessor as provided herein (and shall not be merged into any Deed), any disposition of any interest of the Lessor in any Leased Property, the purchase and sale of the Notes, payment therefor and any disposition thereof and shall be and continue in effect notwithstanding any investigation made by any party hereto or to any of the other Operative Documents and the fact that any such party may waive compliance with any of the other terms, provisions or conditions of any of the Operative Documents. SECTION 8.2 Notices. Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be addressed to such parties at the addresses therefor as set forth in Schedule 8.2, or such other address as any such party shall specify to the other parties hereto, and shall be deemed to have been given (i) the Business Day after being sent, if sent by overnight courier service; (ii) the Business Day received, if sent by messenger; (iii) the day sent, if sent by facsimile and confirmed electronically or otherwise during business hours of a Business Day (or on the next Business Day if otherwise sent by facsimile and confirmed electronically or otherwise); or (iv) three Business Days after being sent, if sent by registered or certified mail, postage prepaid. SECTION 8.3 Counterparts. This Master Agreement may be executed by the parties hereto in separate counterparts (including by facsimile), each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 8.4 Amendments. No Operative Document nor any of the terms thereof may be terminated,

amended, supplemented, waived or modified with respect to the Lessee or any Funding Party, except (a) in the case of a termination, amendment, supplement, waiver or modification to be binding on the Lessee, with the written agreement or consent of the Lessee, and (b) in the case of a termination, amendment, supplement, waiver or modification to be binding on the Funding Parties, with the written agreement or consent of the Required Funding Parties; provided, however, that (x) notwithstanding the foregoing provisions of this Section 8.4, the consent of each Funding Party affected thereby shall be required for any amendment, modification or waiver directly: (i) modifying any of the provisions of this Section 8.4, changing the definition of "Required Funding Parties" or "Required Lenders", or increasing the Commitment of such Funding Party; (ii) amending, modifying, waiving or supplementing any of the provisions of Section 3 of the Loan Agreement or the representations of such Funding Party in Section 4.2 or 4.3 or the covenants of such Funding Party in Section 6 of this Master Agreement; (iii) reducing any amount payable to such Funding Party under the Operative Documents or extending the time for payment of any such amount, including, without limitation, any Rent, any Funded Amount, any fees, any indemnity, the Leased Property Balance, the Lease Balance, any Funding Party Balance, Recourse Deficiency Amount, interest or Yield; or (iv) consenting to any assignment of the Lease, releasing any of the collateral assigned to the Agent and the Lenders pursuant to any Mortgage and any Assignment of Lease and Rents (but excluding a release of any rights that the Lenders may have in any Leased Property, or the proceeds thereof as contemplated in the definition of "Release Date"), releasing the Lessee from its obligations in respect of the payments of Rent and the Lease Balance, releasing any Obligor from its obligations under the Guaranty Agreement, the Subsidiary Guaranty or the other Operative Documents or changing the absolute and unconditional character of any such obligation; and (y) no termination, amendment, extension, supplement, waiver or modification shall be made to the Lease, without the written agreement or consent of the Lessor and all of the Lenders; and (z) subject to the foregoing clauses (x) and (y), so long as no Event of Default has occurred and is continuing, the Lessor, the Agent and the Lenders may not amend, supplement, waive or modify any terms of the Loan Agreement, the Notes, the Mortgages and the Assignments of Lease and Rents without the consent of the Lessee (such consent not to be unreasonably withheld or delayed); provided that in no event may the Loan Agreement or the Notes be amended so as to increase the amount of Basic Rent payable by the Lessee without the consent of the Lessee; the Lessor and the Lessee may not amend, supplement, waive or modify any terms of the Lease or any Security Agreement and Assignment without the consent of the Agent and the Lenders. SECTION 8.5 Headings, etc. The Table of Contents and headings of the various Articles and Sections of this Master Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. SECTION 8.6 Parties in Interest. Except as expressly provided herein, none of the provisions of this Master Agreement is intended for the benefit of any Person except the parties hereto and their respective successors and permitted assigns. SECTION 8.7 GOVERNING LAW. THIS MASTER AGREEMENT HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. SECTION 8.8 Expenses. Whether or not the transactions herein contemplated are consummated, the Lessee agrees to pay, as Supplemental Rent, all actual, reasonable and documented out-of-pocket costs and expenses of the Lessor, the Agent and the Lenders in connection with the preparation, execution and delivery of the Operative Documents and the documents and instruments referred to therein and any amendment, waiver or

consent relating thereto (including, without limitation, the reasonable fees and disbursements of Mayer, Brown & Platt, but not including any fees and disbursements for any other outside counsel representing any Lender) and of the Lessor, the Agent and the Lenders in connection with the enforcement of the Operative Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees actually incurred and disbursements of counsel for the Lessor, the Agent and the Lenders). All references in the Operative Documents to "attorneys' fees" or "reasonable attorneys fees" shall mean reasonable attorneys' fees actually incurred, without regard to any statutory definition thereof. Notwithstanding the foregoing, any amounts due pursuant to this Section 8.8 with respect to any Construction Land Interest during the Construction Term therefor shall be payable by the Lessor from the proceeds of Advances (and the Construction Agent shall provide a Funding Request for such Advances upon notice from the Lessor or the Agent). SECTION 8.9 Severability. Any provision of this Master Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 8.10 Liabilities of the Funding Parties; Sharing of Payments. (a) No Funding Party shall have any obligation to any other Funding Party or to the Lessee with respect to the transactions contemplated by the Operative Documents except those obligations of such Funding Party expressly set forth in the Operative Documents or except as set forth in the instruments delivered in connection therewith, and no Funding Party shall be liable for performance by any other party hereto of such other party's obligations under the Operative Documents except as otherwise so set forth. No Lender shall have any obligation or duty to the Lessee, any other Funding Parties or any other Person with respect to the transactions contemplated hereby except to the extent of the obligations and duties expressly set forth in this Master Agreement or the Loan Agreement. (b) If any Funding Party shall obtain any payment (whether voluntary or involuntary, or through the exercise of any right of set-off or otherwise) on account of the Advances made by it in excess of its ratable share of payments on account of the Advances obtained by all the Funding Parties, such Funding Parties shall forthwith purchase from the other Funding Parties such participations in the Advances owed to them as shall be necessary to cause such purchasing Funding Party to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Funding Party, such purchase from each Funding Party shall be rescinded and such Funding Party shall repay to the purchasing Funding Party the purchase price to the extent of such Funding Party's ratable share (according to the proportion of (i) the amount of the participation purchased from such Funding Party as a result of such excess payment to (ii) the total amount of such excess payment) of such recovery together with an amount equal to such Funding Party's ratable share (according to the proportion of (i) the amount of such Funding Party's required repayment to (ii) the total amount so recovered from the purchasing Funding Party) of any interest or other amount paid or payable by the purchasing Funding Party in respect of the total amount so recovered. Each Funding Party agrees that any Funding Party so purchasing a participation from another Funding Party pursuant to this Section 8.10 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Funding Party were the direct creditor of such Funding Party in the amount of such participation. SECTION 8.11 Submission to Jurisdiction; Waivers. Each party hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Master Agreement or any other Operative Document, or for recognition and enforcement of any judgment in respect thereof, to the nonexclusive general jurisdiction of the Courts of the State of Georgia sitting in Fulton County, Georgia, the courts of the United States of America for the Northern District of Georgia, and appellate courts from any thereof; (ii) consents that any such action or proceedings may be brought to such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address set forth in Schedule 8.2 or at such other address of which the other parties hereto shall have been notified

pursuant to Section 8.2; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS MASTER AGREEMENT, ANY OTHER OPERATIVE DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. SECTION 8.12 Liabilities of the Agent. The Agent shall have no duty, liability or obligation to any party to this Master Agreement with respect to the transactions contemplated hereby except those duties, liabilities or obligations expressly set forth in this Master Agreement or the Loan Agreement, and any such duty, liability or obligations of the Agent shall be as expressly limited by this Master Agreement or the Loan Agreement, as the case may be.

IN WITNESS WHEREOF, the parties hereto have caused this Master Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. RUBY TUESDAY, INC., as the Lessee
By: /s/ J. Russell Mothershed -----------------------------------------------Name Printed: J. Russell Mothershed -------------------------------------Title: Senior Vice President ---------------------------------------------

ATLANTIC FINANCIAL GROUP, LTD., as Lessor By: Atlantic Financial Managers, Inc., its General Partner
/s/ Stephen S. Brookshire ------------------------------------------------Name Printed: Stephen S. Brookshire --------------------------------------Title: President --------------------------------------------By:

SUNTRUST BANK, as Agent and as a Lender
/s/ Vipul Patel -----------------------------------------------Name Printed: Vipul Patel -------------------------------------Title: Vice President --------------------------------------------By:

BANK OF AMERICA, N.A., as a Lender
/s/ Richard G. Parkhurst, Jr. ----------------------------------------------Name Printed: Richard G. Parkhurst, Jr. ------------------------------------Title: Managing Director -------------------------------------------By:

FLEET NATIONAL BANK, as a Lender
/s/ Robert W. MacElhiney ----------------------------------------------Name Printed: Robert W. MacElhiney ------------------------------------Title: Director -------------------------------------------By:

FIRSTAR BANK, N.A., as a Lender
/s/ Russell S. Rogers -----------------------------------------------Name Printed: Russell S. Rogers -------------------------------------Title: Vice President --------------------------------------------By:

AMSOUTH BANK, as a Lender
/s/ J. Harvey White -----------------------------------------------Name Printed: J. Harvey White -------------------------------------Title: Senior Vice President --------------------------------------------By:

WACHOVIA BANK, N.A., as a Lender
/s/ Karen E. Reel -----------------------------------------------Name Printed: Karen E. Reel -------------------------------------Title: Vice President --------------------------------------------By:

SOUTHTRUST BANK, N.A., as a Lender
/s/ Bradford Vieira -----------------------------------------------Name Printed: Bradford Vieira -------------------------------------Title: A.V.P. --------------------------------------------By:

SCHEDULE 2.2 AMOUNT OF EACH FUNDING PARTY'S COMMITMENT Lessor Commitment Percentage: 3.5% Lessor Commitment: $1,750,000 Lender Commitment Percentages:
SunTrust Bank Bank of America, N.A. Wachovia Bank, N.A. Firstar Bank, N.A. Fleet National Bank SouthTrust Bank, N.A AM South Bank 18.38% 21.88% 12.5% 12.5% 12.5% 12.5% 6.25%

Lender Commitments: A Loans SunTrust Bank Bank of America, N.A. Wachovia Bank, N.A. Firstar Bank, N.A. Fleet National Bank SouthTrust Bank, N.A. AmSouth Bank $8,092,616.58 $9,634,067.36 $5,505,181.35 $5,505,181.35 $5,505,181.35 $5,505,181.35 $2,752,590.67 B Loans $1,094,883.42 $1,303,432.64 $744,818.65 $744,818.65 $744,818.65 $744,818.65 $372,409.33 Total $9,187,500 $10,937,500 $6,250,000 $6,250,000 $6,250,000 $6,250,000 $3,125,000

SCHEDULE 8.2 ADDRESSES FOR NOTICES
Lessee: Ruby Tuesday, Inc. 150 West Church Avenue Maryville, Tennessee 37801 Attn: CFO Telephone: 865/379-5741 Facsimile: 865/379-6817 Atlantic Financial Group, Ltd. 2808 Fairmount Suite 250 LB9 Dallas, Texas 75201 Attn: Stephen Brookshire Telephone: 214/720-9237 Facsimile: 214/871-2799 SunTrust Bank 201 Fourth Avenue North Nashville, Tennessee 37244 Attn: Vipul Patel Telephone: 615/748-4322 Facsimile: 615/748-5269 with a copy to: SunTrust Equitable Securities Corporation 303 Peachtree Street 24th Floor MC3951 Atlanta, Georgia 30308 Attn: Robert Kennedy Telephone: 404/532-0714 Facsimile: 404/230-1344 AmSouth Bank 505 South Gay Street Knoxville, Tennessee 37902 Attn: Eric Schwarzentraub Telephone: Facsimile: 865/521-5352 Wachovia Bank, N.A. 191 Peachtree Street Atlanta, Georgia 30303 Attn: Karen Reel Telephone: 404/332-5187

Lessor:

Lender and Agent:

Facsimile: 404/332-4058 Bank of America, N.A. 100 North Tryon Street Charlotte, North Carolina 28255 Attn: Dick Parkhurst Telephone: 704/386-1828 Facsimile: 704/386-3271 Fleet National Bank 100 Federal Street Boston, Massachusetts 02110 Attn: Rob MacElhiney Telephone: 617/434-7068 Facsimile: 617/434-0637

Firstar Bank, N.A. 150 Fourth Avenue North Nashville, Tennessee 37219 Attn: Russell S. Rogers, Vice President, Corporate Banking Telephone: 615-251-9280 Facsimile: 615-251-9247 SouthTrust Bank 230 4th Avenue 8th Floor Nashville, Tennessee 37219 Attn: Bradford Vieira Telephone: 615/880-4115 Facsimile: 615/880-4044

APPENDIX A to Master Agreement, Lease, Loan Agreement and Construction Agency Agreement DEFINITIONS AND INTERPRETATION

A. Interpretation. In each Operative Document, unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by the Operative Documents; (iii) reference to any gender includes each other gender; (iv) reference to any agreement (including any Operative Document), document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other Operative Documents and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor; (v) reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) reference in any Operative Document to any Article, Section, Appendix, Schedule or Exhibit means such Article or Section thereof or Appendix, Schedule or Exhibit thereto; (vii) "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to an Operative Document as a whole and not to any particular Article, Section, paragraph or other provision of such Operative Document; (viii) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; (ix) "or" is not exclusive; and (x) relative to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding". B. Accounting Terms. In each Operative Document, unless expressly otherwise provided, accounting terms shall be construed and interpreted, and accounting determinations and computations shall be made, in accordance with GAAP. C. Conflict in Operative Documents. If there is any conflict between any Operative Documents, each such Operative Document shall be interpreted and construed, if possible, so as to avoid or minimize such conflict but, to the extent (and only to the extent) of such conflict, the Master Agreement shall prevail and control. D. Legal Representation of the Parties. The Operative Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring any Operative Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof. E. Defined Terms. Unless a clear contrary intention appears, terms defined herein have the respective indicated meanings when used in each Operative Document. "A Loan" means the A Percentage of Fundings made pursuant to the Loan Agreement and the Master Agreement. "A Note" is defined in Section 2.2 of the Loan Agreement. "A Percentage" means 85%.

"Address" means with respect to any Person, its address set forth in Schedule 8.2 to the Master Agreement or such other address as it shall have identified to the parties to the Master Agreement in writing in the manner provided for the giving of notices thereunder. "Adjusted LIBO Rate" shall mean, with respect to each Rent Period for a LIBOR Advance, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the following formula: Adjusted LIBO Rate = LIBOR

1.00 - LIBOR Reserve Percentage As used herein, LIBOR Reserve Percentage shall mean, for any Rent Period for a LIBOR Advance, the aggregate of the maximum reserve percentages (including, without limitation, any emergency, supplemental, special or other marginal reserves) expressed as a decimal (rounded upwards to the next 1/100th of 1%) in effect on any day to which the Agent is subject with respect to the Adjusted LIBO Rate pursuant to regulations issued by the Board of Governors of the Federal Reserve System (or any Governmental Authority succeeding to any of its principal functions) with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities" under Regulation D). LIBOR Advances shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Funding Party under Regulation D. The LIBOR Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Adjusted Total Capital" shall mean, as of any date of determination, the sum of (i) Adjusted Total Debt as of such date and (ii) Consolidated Net Worth as of such date. "Adjusted Total Debt" shall mean, as of any date of determination, (i) all Indebtedness of the Lessee and its Subsidiaries on a consolidated basis, including without limitation all Loans and LC Exposure (as defined in the Credit Agreement), but excluding all Indebtedness of the type described in subsection (xi) of the definition of Indebtedness and excluding any Synthetic Lease Obligations to the extent that such Synthetic Lease Obligations are included in clause (ii) below, plus (ii) to the extent not included in clause (i), the present value of all lease obligations arising under operating leases of Lessee and its Subsidiaries as determined in accordance with GAAP, applying a discount rate of ten percent (10%). "Adjusted Total Debt to Adjusted Total Capital Ratio" shall mean, as of any date of determination, the ratio of (i) Adjusted Total Debt as of such date to (ii) Adjusted Total Capital as of such date. "Adjusted Total Debt to EBITDAR Ratio" shall mean, as of any date of determination, the ratio of (i) Adjusted Total Debt as of such date to (ii) Consolidated EBITDAR as of such date, measured for the four Fiscal Quarter period ending on such date. "Advance" means a LIBOR Advance or a Base Rate Advance. "Affiliate" shall mean as to any Person, any other Person that directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is common Control with, such Person. "After-Tax Basis" means (a) with respect to any payment to be received by an Indemnitee (which, for purposes of this definition, shall include any Tax Indemnitee), the amount of such payment supplemented by a further payment or payments so that, after deducting from such payments the amount of all Taxes (net of any current credits, deductions or other Tax benefits arising from the payment by the Indemnitee of any amount, including Taxes, for which the payment to be received is made) imposed currently on the Indemnitee by any Governmental Authority or taxing authority with respect to such payments, the balance of such payments shall be equal to the original payment to be received and (b) with respect to any payment to be made by any Indemnitee, the amount of such payment supplemented by a further payment or payments so that, after increasing such payment by the amount of any current credits or other Tax benefits realized by the Indemnitee under the laws of any Governmental Authority or taxing authority resulting from the making of such payments, the sum of such payments (net of such credits or benefits) shall be equal to the original payment to be made; provided, however, for the purposes of this definition, and for purposes of any payment to be made to either the Lessee or an Indemnitee on an after-tax basis, it shall be assumed that (i) federal, state and local taxes are payable at the highest combined

marginal federal and state statutory income tax rate (taking into account the deductibility of state income taxes for federal income tax purposes) applicable to corporations from time to time and (ii) such Indemnitee or the Lessee has sufficient income to utilize any deductions, credits (other than foreign tax credits, the use of which shall be determined on an actual basis) and other Tax benefits arising from any payments described in clause (b) of this definition. "Agent" means SunTrust Bank, a Georgia banking corporation, in its capacity as agent under the Master Agreement and the Loan Agreement. "Alterations" means, with respect to any Leased Property, fixtures, alterations, improvements, modifications and additions to such Leased Property. "American Cafe" shall mean "American Cafe", "Silverspoon" or "Mozzarella's American Cafe", an operating concept of SRG LLC, a Delaware limited liability company. "Applicable Fee Margin" shall mean, as of any date, the percentage per annum determined by reference to the applicable Adjusted Total Debt to EBITDAR Ratio in effect on such date as set forth on Schedule 1.1 attached hereto; provided, that a change in the Applicable Fee Margin resulting from a change in the Adjusted Total Debt to EBITDAR Ratio shall be effective on the second Business Day after the date the Lessee is required to deliver the financial statements required by Section 5.1(a) or (b) of the Master Agreement and the compliance certificate required by Section 5.1 (c) of the Master Agreement; provided, further, that if at any time the Lessee shall have failed to deliver such financial statements and such certificate, the Applicable Fee Margin shall be at Level V until such time as such financial statements and certificate are delivered, at which time the Applicable Fee Margin shall be determined as provided above. Notwithstanding the foregoing, the Applicable Fee Margin from the date of the Master Agreement until the first financial statement and compliance certificate are required to be delivered shall be at Level IV. "Applicable Law" means all existing and future applicable laws (including Environmental Laws and zoning laws), rules, regulations (including proposed, temporary and final income tax regulations and the Margin Regulations), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by, any Governmental Authority, and applicable judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction (including those pertaining to health, safety or the environment (including, without limitation, wetlands) and those pertaining to the construction, use or occupancy of any Leased Property). "Applicable Margin" shall mean, as of any date, the percentage per annum determined by reference to the applicable Adjusted Total Debt to EBITDAR Ratio in effect on such date as set forth on Schedule 1.1 attached hereto; provided, that a change in the Applicable Margin resulting from a change in such ratio shall be effective on the second Business Day after the date the Lessee is required to deliver the financial statements required by Section 5.1(a) or (b) and the compliance certificate required by Section 5.1 (c) of the Master Agreement; provided, further, that if at any time the Lessee shall have failed to deliver such financial statements and such certificate, the Applicable Margin shall be at Level V until such time as such financial statements and certificate are delivered, at which time the Applicable Margin shall be determined as provided above. Notwithstanding the foregoing, the Applicable Margin from the date of the Master Agreement until the first financial statement and compliance certificate are required to be delivered shall be at Level IV. "Appraisal" is defined in Section 3.1 of the Master Agreement. "Appraiser" means an MAI appraiser reasonably satisfactory to the Agent. "Approved Fund" means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Architect" means with respect to any Leased Property the architect engaged in connection with the construction of the related Building, if any, who may be an employee of the General Contractor for such Leased Property. "Architect's Agreement" means, with respect to any Leased Property, the architectural services agreement, if any,

between the Lessee and the related Architect. "Assignment of Lease and Rents" means, with respect to any Leased Property, the Assignment of Lease and Rents, dated as of the related Closing Date, from the Lessor to the Agent, substantially in the form of Exhibit B to the Master Agreement. "Award" means any award or payment received by or payable to the Lessor or the Lessee on account of any Condemnation or Event of Taking (less the actual costs, fees and expenses, including reasonable attorneys' fees, incurred in the collection thereof, for which the Person incurring the same shall be reimbursed from such award or payment). "B Loan" means the B Percentage of Fundings made pursuant to the Loan Agreement and the Master Agreement. "B Note" is defined in Section 2.2 of the Loan Agreement. "B Percentage" means 11.5%. "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended. "Base Rate" means the higher of (i) the rate which the Agent publicly announces from time to time as its prime lending rate, as in effect from time to time, and (ii) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%) per annum. The Agent's prime lending rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to customers; the Agent may make commercial loans or other loans at rates of interest at, above or below the Agent's prime lending rate. Each change in the Agent's prime lending rate or the Federal Funds Rate shall be effective from and including the date such change is publicly announced as being effective and without notice to the Lessee. "Base Term" means, with respect to any Leased Property, (a) the period commencing on the Initial Closing Date and ending on April 29, 2006 or (b) such shorter period as may result from earlier termination of the Lease as provided therein. "Base Rate Advance" means that portion of the Funded Amount bearing interest at the Base Rate. "Basic Rent" means, for any Lease Term, the rent payable pursuant to Section 3.1 of the Lease, determined in accordance with the following: each installment of Basic Rent payable on any Payment Date shall be in an amount equal to the sum of (A) the aggregate amount of Lender Basic Rent payable on such Payment Date, plus (B) the aggregate amount of Lessor Basic Rent payable on such Payment Date, in each case for the Leased Property or Properties that are then subject to the Lease. "Board of Directors", with respect to a corporation, means either the Board of Directors or any duly authorized committee of that Board which pursuant to the by-laws of such corporation has the same authority as that Board as to the matter at issue. "Building" means, with respect to any Leased Property, the buildings, structures and improvements located or to be located on the related Land, along with all fixtures used or useful in connection with the operation of such Leased Property, including, without limitation, all furnaces, boilers, compressors, elevators, fittings, pipings, connectives, conduits, ducts, partitions, equipment and apparatus of every kind and description now or hereafter affixed or attached or used or useful in connection with the Building, all equipment financed by the Lessor and/or the Lenders and all Alterations (including all restorations, repairs, replacements and rebuilding of such buildings, improvements and structures) thereto (but in each case excluding trade fixtures financed other than by the Lessor or the Lenders). "Business Day" means any day other than a Saturday, Sunday or other day on which banks are required or authorized by law to be closed for business in Atlanta, Georgia and, if the applicable Business Day relates to a LIBOR Advance, on which trading is not carried on by and between banks in the London interbank market. "Capital Expenditures" shall mean for any period, without duplication, (a) the additions to property, plant and equipment and other capital expenditures of the Lessee and its

Subsidiaries that are (or would be) set forth on a consolidated statement of cash flows of the Lessee for such period prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by the Lessee and its Subsidiaries during such period. "Capital Lease Obligations" of any Person shall mean all obligations of such Person to pay rent or other amounts under any lease (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Change in Control" shall mean the occurrence of one or more of the following events: (a) any sale, lease, exchange or other transfer (in a single transaction or a series of related transactions) of all or substantially all of the assets of the Lessee to any Person or "group" (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder in effect on the date hereof), (b) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or "group" (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of 30% or more of the outstanding shares of the voting stock of the Lessee; or (c) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Lessee by Persons who were neither (i) nominated by the current board of directors or (ii) appointed by directors so nominated. "Casualty" means an event of damage or casualty relating to all or part of any Leased Property that does not constitute an Event of Loss. "Claims" means liabilities, obligations, damages, losses, demands, penalties, fines, claims, actions, suits, judgments, proceedings, settlements, utility charges, costs, expenses and disbursements (including, without limitation, reasonable legal fees and expenses) of any kind and nature whatsoever. "Closing Date" means, with respect to each parcel of Land, the date on which such Land is acquired by the Lessor pursuant to a Purchase Agreement or such Land is leased to the Lessor pursuant to a Ground Lease and the initial Funding occurs with respect to such Land under the Master Agreement. "Code" or "Tax Code" means the Internal Revenue Code of 1986, as amended. "Commitment" means as to each Funding Party, its obligation to make Fundings as investments in each Leased Property, or to make Loans to the Lessor, in an aggregate amount not to exceed at any one time outstanding the amount set forth for such Funding Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time to time pursuant to Section 6 of the Master Agreement). "Commitment Percentage" means as to any Funding Party, at a particular time, the percentage of the aggregate Commitments in effect at such time represented by such Funding Party's Commitment, as such percentage is shown for such Funding Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time to time pursuant to Section 6 of the Master Agreement). "Completion Date" with respect to any Leased Property means the Business Day on which the conditions specified in Section 3.5 of the Master Agreement have been satisfied or waived with respect to such Leased Property. "Condemnation" means any condemnation, requisition, confiscation, seizure or other taking or sale of the use, occupancy or title to any Leased Property or any part thereof in, by or on account of any actual eminent domain proceeding or other action by any Governmental Authority or other Person under the power of eminent domain or any transfer in lieu of or in anticipation thereof, which in any case does not constitute an Event of Taking. A Condemnation shall be deemed to have "occurred" on the earliest of the dates that use is prevented or occupancy or title is taken. "Consolidated Companies" shall mean, collectively, the Lessee and any of its Subsidiaries, and "Consolidated Company" shall mean, individually, the Lessee or any of its Subsidiaries. "Consolidated EBITDA" shall mean, for the Lessee and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus (b) to the extent deducted in determining Consolidated

Net Income for such period, (i) Consolidated Interest Expense, (ii) income tax expense determined on a consolidated basis in accordance with GAAP, (iii) depreciation and amortization determined on a consolidated basis in accordance with GAAP and (iv) all other non-cash charges determined on a consolidated basis in accordance with GAAP, in each case for such period. "Consolidated EBITDAR" shall mean, for the Lessee and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated EBITDA plus (b) Consolidated Lease Expense, in each case for such period. "Consolidated EBITR" shall mean, for the Lessee and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus (b) to the extent deducted in determining Consolidated Net Income for such period, (i) Consolidated Interest Expense, (ii) income tax expense determined on a consolidated basis in accordance with GAAP, (iii) all other non-cash charges, determined on a consolidated basis in accordance with GAAP, and (iv) Consolidated Lease Expense, in each case for such period. "Consolidated Fixed Charges" shall mean, for the Lessee and its Subsidiaries for any period, the sum (without duplication) of (a) Consolidated Interest Expense for such period and (d) Consolidated Lease Expense for such period. "Consolidated Interest Expense" shall mean, for the Lessee and its Subsidiaries for any period determined on a consolidated basis in accordance with GAAP, the sum of (i) total interest expense, including without limitation the interest component of any payments in respect of Capital Leases Obligations capitalized or expensed during such period (whether or not actually paid during such period) plus (ii) the net amount payable (or minus the net amount receivable) under Hedging Agreements during such period (whether or not actually paid or received during such period). "Consolidated Lease Expense" shall mean, for any period, the aggregate amount of fixed and contingent rental and operating lease expense payable by the Lessee and its Subsidiaries with respect to leases of real and personal property (excluding Capital Lease Obligations) determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Net Income" shall mean, for any period, the net income (or loss) of the Lessee and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any extraordinary gains or losses, (ii) any gains attributable to write-ups of assets, (iii) any equity interest of the Lessee or any Subsidiary of the Lessee in the unremitted earnings of any Person that is not a Subsidiary and (iv) any income (or loss) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Lessee or any Subsidiary on the date that such Person's assets are acquired by the Lessee or any Subsidiary. "Consolidated Net Worth" shall mean, as of any date, (i) the total assets of the Lessee and its Subsidiaries that would be reflected on the Lessee's consolidated balance sheet as of such date prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries, minus the sum of (i) the total liabilities of the Lessee and its Subsidiaries that would be reflected on the Lessee's consolidated balance sheet as of such date prepared in accordance with GAAP and (ii) the amount of any write-up in the book value of any assets resulting from a revaluation thereof or any write-up in excess of the cost of such assets acquired reflected on the consolidated balance sheet of the Lessee as of such date prepared in accordance with GAAP. "Control" shall mean the power, directly or indirectly, either to (i) vote 5% or more of securities having ordinary voting power for the election of directors (or persons performing similar functions) of a Person or (ii) direct or cause the direction of the management and policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms "Controlling", "Controlled by", and "under common Control with" have meanings correlative thereto. "Construction" means, with respect to any parcel of Land, the construction and development of the related Building pursuant to the related Plans and Specifications. "Construction Agency Agreement" means the Construction Agency Agreement, dated as of April 30, 2001, between the Lessee and the Lessor.

"Construction Agent" means the Lessee in its capacity as construction agent pursuant to the Construction Agency Agreement. "Construction Budget" is defined in Section 2.4 of the Construction Agency Agreement. "Construction Commencement Date" is defined in Section 2.3 of the Construction Agency Agreement. "Construction Conditions" means the conditions set forth in Section 3.5 of the Master Agreement. "Construction Contract" means, with respect to any Leased Property, that certain construction contract, if any, between the Lessee and a General Contractor for the Construction of the related Building, provided that such contract shall be assigned by the Lessee to the Lessor, and such assignment shall be consented to by such General Contractor, pursuant to an assignment of such construction contract substantially in the form of the Security Agreement and Assignment set forth as Exhibit D to the Master Agreement. "Construction Documents" is defined in Section 2.6 of the Construction Agency Agreement. "Construction Failure Payment" with respect to any Leased Property means the amount equal to the sum of (i) 89.9% of the acquisition cost of the related Land, if the cost of the related Land is less than 25% of the total expected cost of such Leased Property or 100% of the acquisition cost of the related Land, if the cost of the related Land is equal to or more than 25% of the total expected cost of such Leased Property, plus (ii) 89.9% of the Construction costs (including development and transaction costs) related to such Leased Property that have been incurred through the date of payment that are or would be considered project costs in accordance with GAAP, plus (iii) any amounts owed with respect to such Leased Property pursuant to Section 3.4 of the Construction Agency Agreement or Section 7.2 of the Master Agreement, plus (iv) the cost of tenant improvements not paid by the Construction Agent that were not part of the Construction Budget for such Leased Property. "Construction Force Majeure Event" means, with respect to any Leased Property: (a) an act of God arising after the related Closing Date, or (b) any change in any Applicable Law arising after such Closing Date and relating to the use of the Land or the construction of a Building on the Land, or (c) strikes, lockouts, labor troubles, unavailability of materials, riots, insurrections or other causes beyond the Lessee's control which prevents the Construction Agent from completing the Construction prior to the Scheduled Construction Termination Date and which could not have been avoided or which cannot be remedied by the Construction Agent through the exercise of all commercially reasonable efforts or the expenditure of funds and, in the case of (b) above, the existence or potentiality of which was not known to and could not have been discovered prior to such Closing Date through the exercise of reasonable due diligence by the Construction Agent. "Construction Land Interest" means each parcel of Land for which the Completion Date has not yet occurred. "Construction Term" means, with respect to any Leased Property, the period commencing on the related Closing Date and ending on the related Construction Term Expiration Date, or such shorter period as may result from earlier termination of the Lease as provided therein. "Construction Term Expiration Date" means, with respect to any Leased Property, the earliest of the following: (a) the related Completion Date, (b) the date on which the aggregate Funded Amounts equal the Commitments, and (c) the related Scheduled Construction Termination Date.

"Contractual Obligation", as applied to any Person, means any provision of any Securities issued by that Person or any indenture, mortgage, deed of trust, contract, undertaking, agreement, instrument or other document to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject (including, without limitation, any restrictive covenant affecting any of the properties of such Person). "Credit Agreement" means the Revolving Credit Agreement, dated as of October 11, 2000, among the Lessee, the lenders listed therein and SunTrust Bank, as administrative agent, issuing bank and swingline lender. "Deed" means, with respect to any Land, a General Warranty Deed (or, if the related Title Policy is acceptable to the Lessee and the Agent, a Special or Limited Warranty Deed), dated the applicable Closing Date, from the applicable Seller to the Lessor, conveying such Land. "Default" means any event, condition or failure which, with notice or lapse of time or both, would become an Event of Default. "Disbursement Agreement" means the Disbursement/Transfer Agreement, dated as of April 30, 2001, between the Lessee and SunTrust Bank. "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c) any other Person (other than a natural Person) approved by the Agent and unless an Event of Default has occurred and is continuing, the Lessee (each such approval not to be unreasonably withheld or delayed). If the consent of the Lessee to an assignment or to an Eligible Assignee is required under the Master Agreement (including a consent to an assignment which does not meet the minimum assignment thresholds specified in paragraph (a)(i) of Section 6.2 of the Master Agreement), the Lessee shall be deemed to have given its consent five Business Days after the date notice thereof has actually been delivered by the assigning Lender (through the Agent) to the Lessee, unless such consent is expressly refused by the Lessee prior to such fifth Business Day. "Environmental Audit" means, with respect to each parcel of Land, a Phase I Environmental Assessment, dated no more than 60 days prior to the related Closing Date, by an environmental services firm satisfactory to the Funding Parties. "Environmental Laws" means and include the Resource Conservation and Recovery Act of 1976, (RCRA) 42 U.S.C. ss.ss. 6901-6987, as amended by the Hazardous and Solid Waste Amendments of 1984, the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601-9657, (CERCLA), the Hazardous Materials Transportation Act of 1975, 49 U.S.C. ss.ss. 1801-1812, the Toxic Substances Control Act, 15 U.S.C. ss.ss. 2601-2671, the Clean Air Act, 42 U.S.C. ss.ss. 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss.ss. 136 et seq., and all similar federal, state and local environmental laws, ordinances, rules, orders, statutes, decrees, judgments, injunctions, codes and regulations, and any other federal, state or local laws, ordinances, rules, codes and regulations, and any other federal, state or local laws, ordinances, rules, codes and regulations relating to the environment, human health or natural resources or the regulation or control of or imposing liability or standards of conduct concerning human health, the environment, Hazardous Materials or the clean-up or other remediation of any Leased Property, or any part thereof, as any of the foregoing may have been from time to time amended, supplemented or supplanted. "Environmental Permits" means all permits, licenses, authorizations, certificates and approvals of Governmental Authorities required by Environmental Laws. "Environmental Liability" shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental investigation and remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities), of the Lessee or any Subsidiary directly or indirectly resulting from or based upon (a) any actual or alleged violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time or any successor federal statute.

"ERISA Affiliate" shall mean any trade or business (whether or not incorporated), which, together with the Lessee, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for the purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Lessee or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Lessee or any ERISA Affiliate from the PBGC or a plan administrator appointed by the PBGC of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Lessee or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Lessee or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Lessee or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Event of Default" means any event or condition designated as an "Event of Default" in Article XII of the Lease. "Event of Loss" is defined in Section 10.1 of the Lease. "Event of Taking" is defined in Section 10.2 of the Lease. "Executive Officer" means with respect to any Person, the President, Vice Presidents, Chief Financial Officer, Treasurer, Secretary and any Person holding comparable offices or duties. "Fair Market Rental Value" means, with respect to any Leased Property, the fair market rent as determined by an independent appraiser chosen by the Lessor, with the consent of the Lessee, not to be unreasonably withheld or delayed (unless an Event of Default has occurred and is continuing, in which case, no consent shall be required) that would be obtained in an arm's-length lease between an informed and willing lessee and an informed and willing lessor, in either case under no compulsion to lease, and neither of which is related to or affiliated with the Lessor or Lessee for the lease of such Leased Property on the terms (other than the amount of Basic Rent) set forth, or referred to, in the Lease. Such fair market rent shall be calculated as the value for the use of such Leased Property to be leased in place at the Land, assuming, in the determination of such fair market rental value, that such Leased Property is in the condition and repair required to be maintained by the terms of the related Lease (unless such fair market rental value is being determined for the purposes of Section 13.1 of the Lease and except as otherwise specifically provided in the Lease, in which case this assumption shall not be made). "Fair Market Sales Value" means, with respect to any Leased Property or any portion thereof, the fair market sales value as determined by an independent appraiser chosen by the Lessor or, so long as the Funded Amounts are outstanding, the Agent, with the consent of the Lessee, not to be unreasonably withheld or delayed (unless an Event of Default has occurred and is continuing, in which case, no consent shall be required) that would be obtained in an arm's-length transaction between an informed and willing buyer (other than a lessee currently in possession) and an informed and willing seller, under no compulsion, respectively, to buy or sell and neither of which is related to the Lessor or Lessee, for the purchase of such Leased Property. Such fair market sales value shall be calculated as the value for such Leased Property, assuming, in the determination of such fair market sales value, that such Leased Property is in the condition and repair required to be maintained by the terms of the Lease (unless such fair market sales value is being determined for purposes of Section 13.1 of the Lease and except as otherwise specifically provided in the Lease or the Master Agreement, in which case this assumption shall not be made). "Federal Funds Rate" means for any day, the rate per annum (rounded upwards, if necessary, to the next 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published by the Federal Reserve Bank of New York on the next succeeding Business Day or if such rate is not so published for any Business Day, the

Federal Funds Rate for such day shall be the average rounded upwards, if necessary, to the next 1/100th of 1% of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent. "Final Rent Payment Date" with respect to any Leased Property is defined in Section 13.1(e) of the Lease. "Fiscal Quarter" shall mean any fiscal quarter of the Lessee or the Consolidated Companies, as applicable. "Fixed Charge Coverage Ratio" shall mean, as of any date of determination, the ratio of (a) Consolidated EBITR to (b) Consolidated Fixed Charges, in each case measured for the four Fiscal Quarter period ending on such date. "Foreign Subsidiary" shall mean any Subsidiary that is organized under the laws of a jurisdiction other than one of the fifty states of the United States or the District of Columbia. "Franchise Partner Program" shall mean the optional financing and business structuring program offered by the Lessee to a limited number of qualified restaurant operators, such operators to be determined by the Lessee in its sole discretion, which provided such restaurant operators a business structure for organizing, owning and funding the establishment and operation of restaurants doing business under operating concepts owned by the Lessee. "Funded Amount" means, as to the Lessor, the Lessor's Invested Amounts, and, as to each Lender, the outstanding principal amount of such Lender's Loans. "Funding" means any funding by the Funding Parties pursuant to Section 2.2 of the Master Agreement. "Funding Date" means each Closing Date and each other date during the Construction Term on which a Funding occurs under Section 2 of the Master Agreement. "Funding Parties" means the Lessor, the Agent and the Lenders, collectively. "Funding Party Balance" means, with respect to any Leased Property, (i) for the Lessor as of any date of determination, an amount equal to the sum of the outstanding related Lessor's Invested Amount, all accrued and unpaid Yield on such outstanding related Lessor's Invested Amount, all unpaid related fees owing to the Lessor under the Operative Documents, and all other related amounts owing to the Lessor by the Lessee under the Operative Documents, and (ii) for any Lender as of any date of determination, an amount equal to the sum of the outstanding related Loans of such Lender, all accrued and unpaid interest thereon, all unpaid related fees owing to such Lender under the Operative Documents, and all other related amounts owing to such Lender by the Lessee under the Operative Documents. "Funding Request" is defined in Section 2.2 of the Master Agreement. "Funding Termination Date" means the earlier of (i) October 1, 2002 and (ii) the termination of the Lenders' Commitments pursuant to Section 5.2 of the Loan Agreement. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time. "General Contractor" means with respect to any Leased Property the general contractor under the related Construction Contract as may be selected by the Lessee. "General Partner" means Atlantic Financial Managers, Inc., a Texas corporation. "General Permitted Liens" mean Liens permitted pursuant to Section 5.15 of the Master Agreement. "Governmental Action" means all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Applicable Law and shall include, without limitation, all citings, environmental and operating permits and licenses that are required for the use, occupancy, zoning and operation of any Leased Property.

"Governmental Authority" means any foreign or domestic federal, state, county, municipal or other governmental or regulatory authority, agency, board, body, commission, instrumentality, court or any political subdivision thereof. "Ground Lease" means, with respect to any Land, the ground lease between the related Ground Lessor and the Lessor pursuant to which a leasehold estate is conveyed in the Land to the Lessor. "Ground Lessor" means, as to any Land, the ground lessor of such Land. "Guarantor" means the Lessee, in its capacity as guarantor under the Guaranty Agreement. "Guaranty" of or by any Person (the "guarantor") shall mean any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of Guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly and including any obligation, direct or indirect, of the guarantor (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued in support of such Indebtedness or obligation; provided, that the term "Guaranty" shall not include endorsements for collection or deposits in the ordinary course of business. The amount of any Guaranty shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which Guaranty is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. The term "Guaranty" used as a verb has a corresponding meaning. "Guaranty Agreement" means the Guaranty, dated as of April 30, 2001 by the Guarantor in favor of the Funding Parties. "Hazardous Material" means any substance, waste or material which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous, including petroleum, crude oil or any fraction thereof, petroleum derivatives, by products and other hydrocarbons, or which is or becomes regulated under any Environmental Law by any Governmental Authority, including any agency, department, commission, board or instrumentality of the United States, any jurisdiction in which a Leased Property is located or any political subdivision thereof and also including, without limitation, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs") and radon gas. "Hedging Agreements" shall mean interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity agreements and other similar agreements or arrangements designed to protect against fluctuations in interest rates, currency values or commodity values, in each case to which any Lessee or any Subsidiary is a party. "Hostile Acquisition" shall mean any Investment resulting in control of a Person involving a tender offer or proxy contest that has not been recommended or approved by the board of directors of the Person that is the subject of the Investment prior to the first public announcement or disclosure relating to such Investment. "Indebtedness" of any Person shall mean, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business; provided, that for purposes of Article XII(e) of the Lease, trade payables overdue by more than 120 days shall be included in this definition except to the extent that any of such trade payables are being disputed in good faith and by appropriate measures), (iv) all obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (v) all Capital Lease Obligations of such Person, (vi) all obligations, contingent or otherwise, of such Person in respect of letters of credit, acceptances or similar extensions of credit, (vii) all Guarantees of such Person of the type of Indebtedness described in clauses (i) through (vi) above, (viii) all Indebtedness of a third party secured by any Lien on property owned by such Person, whether or not such Indebtedness has been

assumed by such Person, (ix) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any common stock of such Person, (x) Off-Balance Sheet Liabilities and (xi) all obligations under Hedging Agreements. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor. "Indemnitee" means the Agent (in its individual capacity and in its capacity as Agent), each Lender, and the Lessor, and their respective Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents; provided, however, that in no event shall the Lessee be an Indemnitee. "Indemnitee Group" means the respective Affiliates, employees, officers, directors and agents of the Agent (in its individual capacity), each Lender or the Lessor, as applicable; provided, however, that in no event shall the Lessee be a member of the Indemnitee Group. "Indemnity and Contribution Agreement" shall mean the Indemnity, Subrogation and Contribution Agreement substantially in the form of Exhibit J to the Master Agreement, among the Lessee, the Subsidiary Guarantors and the Agent. "Initial Closing Date" means the Closing Date for the first Leased Property acquired by the Lessor. "Investment" means, when used with respect to any Person, any direct or indirect advance, loan or other extension of credit (other than the creation of receivables in the ordinary course of business) or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any Person, or any direct or indirect purchase or other acquisition by such Person of, or of a beneficial interest in, capital stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. "Issuing Bank" shall mean SunTrust Bank or any other lender under the Credit Agreement in its capacity as an issuer of Letters of Credit thereunder. "L&N" shall mean "L&N Seafood" or "L&N Seafood Grill", which are operating concepts of SRG LLC, a Delaware limited liability company. "Land" means the land described in Appendix B to the related Lease Supplement. "Laws" means all ordinances, statutes, rules, regulations, orders, injunctions, writs, treaties or decrees of any Governmental Authority, or of any court or similar entity established by any thereof. "LC Disbursement" shall mean a payment made by the Issuing Bank pursuant to a Letter of Credit. "LC Exposure" shall mean, at any time, the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit at such time, plus (ii) the aggregate amount of all LC Disbursements that have not been reimbursed by or on behalf of the Lessee at such time. "Lease" means the Lease Agreement, dated as of April 30, 2001, together with each Lease Supplement thereto, between the Lessee and the Lessor, with such modifications as are satisfactory to the Lessor and the Agent in conformity with Applicable Law to assure customary remedies in favor of the Funding Parties in the jurisdiction where the Leased Property is located. "Lease Balance" means, with respect to the Leased Properties, as of any date of determination, an amount equal to the aggregate sum of the outstanding Funded Amounts of all Funding Parties, all accrued and unpaid interest on the Loans, all accrued and unpaid Yield on the Lessor's Invested Amounts, all unpaid fees owing to the Funding Parties under the Operative Documents, including all other amounts owing to the Funding Parties by the Lessee under the Operative Documents. "Lease Supplement" is defined in Section 2.1 of the Lease. "Lease Term" with respect to the Lease means (a) the Base Term, as it may be renewed pursuant to Section 14.9 of the Lease or (b) such shorter period as may result from earlier termination of the Lease as provided therein.

"Lease Termination Date" means the last day of the Lease Term. "Leased Property" means Land and the related Building(s). For purposes of the Lease, "Leased Property" means the Land identified in a Lease Supplement and the Buildings related thereto, unless the context provides otherwise. "Leased Property Balance" means, with respect to any Leased Property, as of any date of determination, an amount equal to the aggregate sum of the outstanding related Funded Amounts of all Funding Parties, all accrued and unpaid interest on the related Loans, all accrued and unpaid Yield on the related Lessor's Invested Amounts, all related unpaid fees owing to the Funding Parties under the Operative Documents, including all other amounts owing to the Funding Parties by the Lessee under the Operative Documents. "Lender Basic Rent" means, for any Rent Period under the Lease, the aggregate amount of interest accrued on the Loans related to the Leased Property subject to the Lease pursuant to Section 2.5 of the Loan Agreement during such Rent Period. "Lenders" means such financial institutions as are, or who may hereafter become, parties to the Loan Agreement as Lenders to the Lessor. "Lending Office" for each Lender means the office such Lender designates in writing from time to time to Lessee and the Agent. "Lessee" is defined in the preamble to the Master Agreement. "Lessor" is defined in the preamble to the Master Agreement. "Lessor Basic Rent" means, for any Rent Period under the Lease, the aggregate amount of Yield accrued and unpaid on the Lessor's Invested Amounts under the Lease under Section 2.3(a) of the Master Agreement during such Rent Period. "Lessor Liens" means Liens on or against any Leased Property, the Lease, any other Operative Document or any payment of Rent (a) which result from any act or omission of, or any Claim against, the Lessor unrelated to the Transactions or from Lessor's failure to perform as required under the Operative Documents or (b) which result from any Tax owed by the Lessor, except any Tax for which the Lessee is obligated to indemnify (including, without limitation, in the foregoing exception, any assessments with respect to any Leased Property noted on the related Title Policy or assessed in connection with any construction or development by the Lessee). "Lessor Rate" is defined in the Lessor Side Letter. "Lessor Side Letter" means the letter agreement, dated as of April 30, 2001, between Lessee and the Lessor. "Lessor's Invested Amount" means the amounts funded by the Lessor pursuant to Section 2 of the Master Agreement that are not proceeds of Loans by a Lender, as such amount may be increased during the related Construction Term pursuant to Section 2.3(c) of the Master Agreement. "Letter of Credit" shall mean any letter of credit issued pursuant to Section 2.22 of the Credit Agreement by the Issuing Bank for the account of the Lessee. "LIBOR" means, for any Rent Period, with respect to LIBOR Advances the British Bankers' Association Interest Settlement Rate per annum for deposits in Dollars for a period equal to such Rent Period appearing on the display designated as Page 3750 on the Dow Jones Markets Service (or such other page on that service or such other service designated by the British Bankers' Association for the display of such Association's Interest Settlement Rates for Dollar Deposits) as of 11:00 a.m. (London, England time) on the day that is two Business Days prior to the first day of the Rent Period or if such page 3750 is unavailable for any reason at such time, the rate which appears on the Reuters Screen ISDA Page as of such date and such time; provided, that if the Agent determines that the relevant foregoing sources are unavailable for the relevant Rent Period, LIBOR shall mean the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the nearest 1/100th of 1%) of the rates per annum at which deposits in Dollars are offered to the Agent two (2) Business Days preceding the first day of such Rent Period by leading banks in the London interbank market as of 10:00 a.m. for

delivery on the first day of such Rent Period, for the number of days comprised therein and in an amount comparable to the amount of the LIBOR Advance of the Agent. "LIBOR Advance" means that portion of the Funded Amount bearing interest at a rate based on the Adjusted LIBO Rate. "Lien" means any mortgage, deed of trust, security deed, pledge, security interest, encumbrance, lien, easement, servitude or charge of any kind, including, without limitation, any irrevocable license, conditional sale or other title retention agreement, any lease in the nature thereof, or any other right of or arrangement with any creditor to have its claim satisfied out of any specified property or asset with the proceeds therefrom prior to the satisfaction of the claims of the general creditors of the owner thereof, whether or not filed or recorded, or the filing of, or agreement to execute as "debtor", any financing or continuation statement under the Uniform Commercial Code of any jurisdiction or any federal, state or local lien imposed pursuant to any Environmental Law. "Loan" shall have the meaning specified in Section 2.1 of the Loan Agreement. "Loan Agreement" means the Loan Agreement, dated as of April 30, 2001, among the Lessor, the Agent and the Lenders. "Loan Documents" means the Loan Agreement, the Notes, the Assignments of Lease and Rents, the Mortgages and all documents and instruments executed and delivered in connection with each of the foregoing. "Loan Event of Default" means any of the events specified in Section 5.1 of the Loan Agreement, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, event or act has been satisfied. "Loan Potential Event of Default" means any event, condition or failure which, with notice or lapse of time or both, would become a Loan Event of Default. "Loss Proceeds" is defined in Section 10.6 of the Lease. "Margin Regulations" means Regulations T, U and X of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time. "Master Agreement" means the Master Agreement, dated as of April 30, 2001, among the Lessee, the Lessor, the Agent and the Lenders. "Material Adverse Effect" means, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration or governmental investigation or proceeding), whether singularly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect on, (i) the business, results of operations, financial condition, assets, liabilities or prospects of the Lessee and its Subsidiaries, taken as a whole, or (ii) the ability of the Lessee or any other Obligor to perform in any material respect under the Operative Documents or (iii) the value, utility or useful life of any Leased Property, or (iv) the validity, enforceability or legality of any of the Operative Documents, or the rights or remedies of the Agent or any Funding Party thereunder, or (v) the priority, perfection or status of any Funding Party's interest in any Leased Property. "Material Indebtedness" shall mean Indebtedness or obligations in respect of one or more Hedging Agreements, of any one or more of the Lessee and the Subsidiaries in an aggregate principal amount exceeding $2,500,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Lessee or any Subsidiary in respect to any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Lessee or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Material Subsidiary" shall mean (i) each Obligor other than the Lessee, and (ii) each other Subsidiary of the Lessee, now existing or hereafter established or acquired, that at any time prior to the Lease Termination Date, has or acquires total assets in excess of $5,000,000, or that accounted for or produced more than 5% of the Consolidated Net Income (Loss) of the Lessee on a consolidated basis during any of the three most recently

completed Fiscal Years of the Lessee, or that is otherwise material to the operations or business of the Lessee or another Material Subsidiary. "Moody's" means Moody's Investor Service, Inc. "Mortgage" means, with respect to any Leased Property, that certain mortgage, deed of trust or security deed, dated as of the related Closing Date, by the Lessor to the Agent, in the form of Exhibit D attached to the Master Agreement, with such modifications as are satisfactory to the Lessor and the Agent in conformity with Applicable Law to assure customary remedies in favor of the Agent in the jurisdiction where the Leased Property is located. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Net Proceeds" means, with respect to any equity offering or issuance of Subordinated Debt, (i) all cash received with respect thereto, whether by way of deferred payment pursuant to a promissory note, a receivable or otherwise (and interest paid thereon), plus (ii) the higher of the book value or the fair market value of any assets (including any stock) received with respect thereto, in each case, net of reasonable and customary sale expenses, fees and commissions incurred and taxes paid or expected to be payable within the next twelve months in connection therewith. "Notes" means each A Note and each B Note issued by the Lessor under the Loan Agreement, and any and all notes issued in replacement or exchange therefor in accordance with the provisions thereof. "Obligations" means all amounts owed by, and obligations of, the Lessor to the Lenders or the Agent under the Loan Agreement, Notes and other Operative Documents. "Obligor" means the Lessee and each Subsidiary Guarantor. "Off-Balance Sheet Liabilities" of any Person shall mean (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability of such Person under any sale and leaseback transactions which do not create a liability on the balance sheet of such Person, (iii) any Synthetic Lease Obligation or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person in accordance with GAAP. "Officer's Certificate" of a Person means a certificate signed by the Chairman of the Board or the President or any Executive Vice President or any Senior Vice President or any other Vice President of such Person signing with the Treasurer or any Assistant Treasurer or the Controller or any Assistant Controller or the Secretary or any Assistant Secretary of the such Person, or by any Vice President who is also Controller or Treasurer signing alone. "Operative Documents" means the Master Agreement, the Guaranty Agreement, the Purchase Agreements, the Deeds, the Lease, the Security Agreement and Assignment, the Notes, the Loan Agreement, the Disbursement Agreement, the Construction Agency Agreement, the Assignments of Lease and Rents, the Mortgages, the Ground Leases and the other documents delivered in connection with the transactions contemplated by the Master Agreement. "OSHA" shall mean the Occupational Safety and Health Act of 1970, as amended from time to time, and any successor statute. "Overdue Rate" means the lesser of (a) the highest interest rate permitted by Applicable Law and (b) an interest rate per annum (calculated on the basis of a 365-day (or 366-day, if appropriate) year equal to 2.0% above the Base Rate in effect from time to time or, in the case of Yield, 2% above the Lessor Rate. "Partial Purchase Option" is defined in Section 14.1(b) of the Lease. "Participant" is defined in Section 6.2(c) of the Master Agreement. "Partnership Agreement" means the Agreement of Limited Partnership of AFG, dated as of February 28, 1996, among the General Partner and the persons listed on Schedule A thereto as limited partners.

"Payment Date" means the last day of each Rent Period (and if such Rent Period is longer than three months, the day that is 90 days after the first day of such Rent Period) or, if such day is not a Business Day, the next Business Day. "Payment Date Notice" is defined in Section 2.3(e) of the Master Agreement. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA, and any successor entity performing similar functions. "Permitted Encumbrances" shall mean (i) Liens imposed by law for taxes not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (iii) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (iv) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (v) judgment and attachment liens not giving rise to an Event of Default or Liens created by or existing from any litigation or legal proceeding that are currently being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; and (vi) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of the Lessee and its Subsidiaries taken as a whole; provided, that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. "Permitted Investments" shall mean: (i) direct obligations of, or obligations the principal of and interest on which are unconditionally Guaranteed by, the United States (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States), in each case maturing within one year from the date of acquisition thereof; (ii) commercial paper having the highest rating, at the time of acquisition thereof, of S&P or Moody's and in either case maturing within six months from the date of acquisition thereof; (iii) certificates of deposit, bankers' acceptances and time deposits maturing within 180 days of the date of acquisition thereof issued or Guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; (iv) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria described in clause (iii) above; and (v) mutual funds investing solely in any one or more of the Permitted Investments described in clauses (i) through (iv) above. "Permitted Liens" means the following with respect to any Leased Property: (a) the respective rights and interests of the Lessee, the Lessor, the Agent and any Lender, as provided in the Operative Documents, (b) Liens for

Taxes either not yet due or being contested in good faith and by appropriate proceedings, so long as enforcement thereof is stayed pending such proceedings, (c) materialmen's, mechanics', workers', repairmen's, employees' or other like Liens arising after the related Closing Date in the ordinary course of business for amounts either not yet due or being contested in good faith and by appropriate proceedings, so long as enforcement thereof is stayed pending such proceedings, (d) Liens arising after such Closing Date out of judgments or awards with respect to which at the time an appeal or proceeding for review is being prosecuted in good faith, so long as the enforcement thereof has been stayed pending such appeal or review, (e) easements, rights of way, reservations, servitudes and rights of others against the Land which do not materially and adversely affect the value or the utility of such Leased Property, (f) other Liens incidental to the conduct of Lessee's business which were not incurred in connection with the borrowing of money or the obtaining of advances or credit and which do not in the aggregate materially detract from the value of such Leased Property or materially impair the use thereof, and (g) assignments, leases and subleases expressly permitted by the Operative Documents. "Person" means an individual, corporation, partnership, limited liability company, joint venture, association, jointstock company, trust, nonincorporated organization or government or any agency or political subdivision thereof. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Lessee or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Plans and Specifications" means with respect to any Building the final plans and specifications for such Building prepared by the Architect, and, if applicable, referred to by the Appraiser in the Appraisal, as such Plans and Specifications may be hereafter amended, supplemented or otherwise modified from time to time. "Potential Event of Default" means any event, condition or failure which, with notice or lapse of time or both, would become an Event of Default. "Purchase Agreement" means with respect to any Land, the purchase agreement with the Seller for the conveyance of such Land to the Lessor. "Purchase Option" is defined in Section 14.1(a) of the Lease. "Quarterly Payment Date" means the last Business Day of each March, June, September and December of each year. "Recourse Deficiency Amount" means, as of any date of determination thereof, the sum of (i) the aggregate principal amount of the A Loans then outstanding, plus (ii) all accrued and unpaid interest on the A Loans. "Register" is defined in Section 6.2(b) of the Master Agreement. "Regulations" means the income tax regulations promulgated from time to time under and pursuant to the Code. "Release" means the release, deposit, disposal or leak of any Hazardous Material into or upon or under any land or water or air, or otherwise into the environment, including, without limitation, by means of burial, disposal, discharge, emission, injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring, escaping, emptying, placement and the like. "Release Date" means, with respect to any Leased Property, the earlier of (i) the date that the Lease Balance has been paid in full, and (ii) the date on which the Agent gives notice to the Lessor that the Lenders release any and all interest they may have in such Leased Property, and all proceeds thereof, and any rights to direct, consent or deny consent to any action by the Lessor with respect to such Leased Property. "Remarketing Option" is defined in Section 14.6 of the Lease. "Rent" means Basic Rent and Supplemental Rent, collectively.

"Rent Period" means (x) in the case of Base Rate Advances, means the period from, and including, a Quarterly Payment Date to, but excluding, the next succeeding Quarterly Payment Date and (y) in the case of LIBOR Advances, either a 1, 2, 3 or 6 month period; provided that: (a) The initial Rent Period for any Funding shall commence on the Funding Date of such Funding and each Rent Period occurring thereafter in respect of such Funding shall commence on the day on which the next preceding Rent Period expires; (b) If any Rent Period would otherwise expire on a day which is not a Business Day, such Rent Period shall expire on the next succeeding Business Day, provided that if any Rent Period in respect of LIBOR Advances would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Rent Period shall expire on the next preceding Business Day; (c) Any Rent Period in respect of LIBOR Advances which begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Rent Period shall, subject to paragraph (d) below, expire on the last Business Day of such calendar month; and (d) No Rent Period shall extend beyond the Lease Termination Date. "Report" is defined in Section 7.6 of the Master Agreement. "Required Lenders" means, at any time, Lenders holding at least 51% of the aggregate Commitments of the Lenders, or, if the Commitments are no longer in effect, Lenders holding at least 51% of the aggregate outstanding principal amount of the Loans. "Required Funding Parties" means, at any time, Funding Parties holding at least 51% of the Commitments of the Funding Parties, or, if the Commitments are no longer in effect, Funding Parties holding at least 51% of the aggregate outstanding principal amount of the Funded Amounts. "Requirements of Law" means, as to any Person, the charter and by-laws or other organizational or governing documents of such Person, and any law, rule or regulation, permit, approval, authorization, license or variance, order or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, including, without limitation, the Securities Act, the Securities Exchange Act, Regulations T, U and X of the Board of Governors of the Federal Reserve System, and any building, environmental or land use requirement or permit or occupational safety or health law, rule or regulation. "Responsible Officer" means the president, the chief executive officer, the chief operating officer, the chief financial officer, the treasurer or a vice president of the Lessee or such other representative of the Lessee as may be designated in writing by one of the foregoing with the consent of the Agent; and, with respect to the financial covenants only, the chief financial officer or treasurer of the Lessee. "Restricted Payment" shall have the meaning set forth in Section 5.19 of the Master Agreement. "Scheduled Construction Termination Date" means with respect to any Building the earlier of (i) the Funding Termination Date and (ii) one year after the commencement of the Construction Commencement Date. "SEC" means the United States Securities and Exchange Commission. "Securities" means any stock, shares, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities", or any certificates of interest, shares, or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire any of the foregoing. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Security Agreement and Assignment" means, with respect to any Leased Property, the Security Agreement and Assignment (Construction Contract, Architect's Agreement, Permits, Licenses and Governmental Approvals, and Plans, Specifications and Drawings) from the Lessee to the Lessor, substantially in the form of Exhibit C to the Master Agreement. "Seller" means as to any Leased Property, the seller thereof to the Lessor on the related Closing Date. "Subordinated Debt" shall mean all Indebtedness of Lessee subordinated to all Obligations incurred or assumed on terms and conditions satisfactory in all respects to the Agent and the Required Lenders, including without limitation, with respect to interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies, and subordination provisions, as evidenced by the written approval of the Agent and Required Lenders. "Subsidiary" shall mean, with respect to any Person (the "parent"), any corporation, partnership, joint venture, limited liability company, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, partnership, joint venture, limited liability company, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power, or in the case of a partnership, more than 50% of the general partnership interests are, as of such date, are directly or indirectly owned, controlled (intentionally lowercase) or held by the parent. Unless otherwise indicated, all references to "Subsidiary" hereunder shall mean a Subsidiary of the Lessee. "Subsidiary Guaranty Agreement" shall mean the Subsidiary Guaranty Agreement substantially in the form of Exhibit I to the Master Agreement, made by the Subsidiary Guarantors in favor of the Agent for the benefit of the Funding Parties. "Subsidiary Guarantor" shall mean any Material Subsidiary that is not a Foreign Subsidiary. "SunTrust Bank" means SunTrust Bank, a Georgia banking corporation. "Supplemental Rent" means any and all amounts, liabilities and obligations other than Basic Rent which the Lessee assumes or agrees or is otherwise obligated to pay under the Lease or any other Operative Document (whether or not designated as Supplemental Rent) to the Lessor, the Agent, any Lender or any other party, including, without limitation, amounts under Article XVI of the Lease, and indemnities and damages for breach of any covenants, representations, warranties or agreements, and all overdue or late payment charges in respect of any Funded Amount. "Synthetic Lease" means a lease transaction under which the parties intend that (i) the lease will be treated as an "operating lease" by the lessee pursuant to Statement of Financial Accounting Standards No. 13, as amended and (ii) the lessee will be entitled to various tax and other benefits ordinarily available to owners (as opposed to lessees) of like property. "Synthetic Lease Obligations" shall mean, with respect to any Person, the sum of (i) all remaining rental obligations of such Person as lessee under Synthetic Leases which are attributable to principal and, without duplication, (ii) all rental and purchase price payment obligations of such Person under such Synthetic Leases assuming such Person exercises the option to purchase the lease property at the end of the lease term. "Tax" or "Taxes" is defined in Section 7.4 of the Master Agreement. "Tax Indemnitee" means the Lessor, the Agent, any Lender and their respective Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents thereof, provided, however, that in no event shall the Lessee be a Tax Indemnitee; provided, further, that with respect to indemnities payable pursuant to Section 7.4 of the Master Agreement related to Construction Land Interests during the Construction Term, only the Lessor shall be a Tax Indemnitee. "Telerate" shall mean, when used in connection with any designated page and LIBOR, the display page so

designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to LIBOR). "Tia's" shall mean "Tia's Mexican Restaurants", an operating concept of SRG LLC, a Delaware limited liability company. "Title Insurance Company" means the company that has or will issue the title policies with respect to a Leased Property, which company shall be reasonably acceptable to the Funding Parties. "Title Policy" is defined in Section 3.1 of the Master Agreement. "Transaction" means all the transactions and activities referred to in or contemplated by the Operative Documents. "UCC" means the Uniform Commercial Code of Georgia, as in effect from time to time. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. "Yield" is defined in Section 2.3 of the Master Agreement.

SCHEDULE 1.1 Applicable Margins
------- -------------------------Pricing Adjusted Level Total Debt to EBITDAR Ratio ------- -------------------------I Less than 1.00:1.00 ------- -------------------------II Less than 1.50:1.00 but greater than or equal to 1.00:1.00 ------- -------------------------III Less than 2.00:1.00 but greater than or equal to 1.50:1.00 ------- -------------------------IV Less than 2.50:1.00 but greater than or equal to 2.0:1.00 ------- -------------------------V Greater than or equal to 2.50:1.00 ------- ------------------------------------------- ----------------Applicable Applicable Margin for Fee Margin LIBOR Advances ------------------ ----------------0.875% per annum 0.15% per annum ------------------ ----------------1.00% per annum 0.20 per annum

------------------ ----------------1.25% per annum 0.225% per annum

------------------ ----------------1.50% per annum 0.25% per annum

------------------ ----------------1.75% per annum 0.375% per annum ------------------ -----------------

LEASE AGREEMENT Dated as of April 30, 2001 between ATLANTIC FINANCIAL GROUP, LTD., as Lessor, and RUBY TUESDAY, INC., as Lessee

TABLE OF CONTENTS (Lease Agreement) Page ARTICLE I. ARTICLE II. 2.1 2.2 ARTICLE III. 3.1 3.2 3.3 3.4 3.5 3.6 3.7 ARTICLE IV. ARTICLE V. ARTICLE VI. 6.1 6.2 6.3 ARTICLE VII. ARTICLE VIII. ARTICLE IX. ARTICLE X. 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 ARTICLE XI. ARTICLE XII. ARTICLE XIII. 13.1 13.2 13.3 ARTICLE XIV. 14.1 14.2 14.3 14.4 14.5 14.6 14.7 14.8 14.9 ARTICLE XV. ARTICLE XVI. ARTICLE XVII. 17.1 17.2 DEFINITIONS...............................................1 LEASE OF LEASED PROPERTY..................................1 Acceptance and Lease of Property.....................1 Acceptance Procedure.................................2 RENT......................................................2 Basic Rent...........................................2 Supplemental Rent....................................3 Method of Payment....................................3 Late Payment.........................................3 Net Lease; No Setoff, Etc............................4 Certain Taxes........................................5 Utility Charges......................................6 WAIVERS...................................................6 LIENS; EASEMENTS; PARTIAL CONVEYANCES.....................7 MAINTENANCE AND REPAIR; ALTERATIONS, MODIFICATIONS AND ADDITIONS.............................................9 Maintenance and Repair; Compliance With Law..........9 Alterations.........................................10 Title to Alterations................................10 USE......................................................10 INSURANCE................................................11 ASSIGNMENT AND SUBLEASING................................12 LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE................13 Event of Loss.......................................13 Event of Taking.....................................14 Casualty............................................15 Condemnation........................................15 Verification of Restoration and Rebuilding..........15 Application of Payments.............................16 Prosecution of Awards...............................17 Application of Certain Payments Not Relating to an Event of Taking................................17 Other Dispositions..................................18 No Rent Abatement...................................18 INTEREST CONVEYED TO LESSEE..............................18 EVENTS OF DEFAULT........................................19 ENFORCEMENT..............................................22 Remedies............................................22 Remedies Cumulative; No Waiver; Consents............25 Certain Limitations.................................26 SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL ....27 Lessee's Option to Purchase.........................27 Conveyance to Lessee................................28 Acceleration of Purchase Obligation.................28 Determination of Purchase Price.....................28 Purchase Procedure..................................29 Option to Remarket..................................30 Rejection of Sale...................................32 Return of Leased Property...........................33 Renewal.............................................33 LESSEE'S EQUIPMENT.......................................34 RIGHT TO PERFORM FOR LESSEE..............................35 MISCELLANEOUS............................................35 Reports.............................................36 Binding Effect; Successors and Assigns; Survival....36

17.3 17.4 17.5 17.6 17.7 17.8 17.9 17.10 17.11 17.12 17.13 17.14 17.15 17.16 17.17 17.18 17.19 17.20 17.21 17.22 17.23

Quiet Enjoyment.....................................36 Notices.............................................36 Severability........................................37 Amendment; Complete Agreements......................38 Construction........................................38 Headings............................................38 Counterparts........................................38 GOVERNING LAW.......................................38 Discharge of Lessee's Obligations by its Affiliates.39 Liability of Lessor Limited.........................39 Estoppel Certificates...............................39 No Joint Venture....................................40 No Accord and Satisfaction..........................40 No Merger...........................................40 Survival............................................41 Chattel Paper.......................................41 Time of Essence.....................................41 Recordation of Lease................................41 Investment of Security Funds........................41 Ground Leases.......................................42 Land and Building...................................42

APPENDICES AND EXHIBITS APPENDIX A EXHIBIT A Defined Terms Lease Supplement

THIS LEASE AGREEMENT (as from time to time amended or supplemented, this "Lease"), dated as of April 30, 2001, is between ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership (together with its successors and assigns hereunder, the "Lessor"), as Lessor, and RUBY TUESDAY, INC., a Georgia corporation (together with its successors and permitted assigns hereunder, the "Lessee"), as Lessee. PRELIMINARY STATEMENT A. Lessor will purchase, or acquire a leasehold interest in, from one or more third parties designated by Lessee, on each Closing Date, certain parcels of real property to be specified by Lessee, together with any improvements thereon. B. Lessor desires to lease to Lessee, and Lessee desires to lease from Lessor, each such property. C. Lessee will construct certain improvements on such parcels of real property which as constructed will be the property of Lessor and will become part of such property subject to the terms of this Lease. In consideration of the mutual agreements herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, Lessor and Lessee hereby agree as follows:

ARTICLE I. DEFINITIONS Terms used herein and not otherwise defined shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof. ARTICLE II. LEASE OF LEASED PROPERTY Section II.1 Acceptance and Lease of Property. On each Closing Date, Lessor, subject to the satisfaction or waiver of the conditions set forth in Section 3 of the Master Agreement, hereby agrees to accept delivery on such Closing Date of the Land designated by Lessee to be delivered on such Closing Date pursuant to the terms of the Master Agreement, together with any improvements thereon and simultaneously to lease to Lessee hereunder for the Lease Term, Lessor's interest in such Land and in such improvements, together with any Building which thereafter may be constructed thereon pursuant to the Construction Agency Agreement, and Lessee hereby agrees, expressly for the direct benefit of Lessor, commencing on such Closing Date for the Lease Term, to lease from Lessor Lessor's interest in such Land to be delivered on such Closing Date together with Lessor's interest in any Building and other improvements thereon or which thereafter may be constructed thereon pursuant to the Construction Agency Agreement. Section II.2 Acceptance Procedure. Lessor hereby authorizes one or more employees of Lessee, to be designated by Lessee, as the authorized representative or representatives of Lessor to accept delivery on behalf of Lessor of that Leased Property identified on the applicable Funding Request, subject to the satisfaction of the conditions in Section 3 of the Master Agreement. Lessee hereby agrees that such acceptance of delivery by such authorized representative or representatives and the execution and delivery by Lessee on each Closing Date of a Lease Supplement in substantially the form of Exhibit A hereto (appropriately completed) shall, without further act, constitute the irrevocable acceptance by Lessee of that Leased Property which is the subject thereof for all purposes of this Lease and the other Operative Documents on the terms set forth therein and herein, and that such Leased Property, together with any improvements constructed thereon pursuant to the Construction Agency Agreement, shall be deemed to be included in the leasehold estate of this Lease and shall be subject to the terms and conditions of this Lease as of such Closing Date. The demise and lease of each Building pursuant to this Section 2.2 shall include any additional right, title or interest in such Building which may at any time be acquired by Lessor, the intent being that all right, title and interest of Lessor in and to such Building shall at all times be demised and leased to Lessee hereunder. ARTICLE III. RENT Section III.1 Basic Rent. Beginning with and including the first Payment Date occurring after the Closing Date, Lessee shall pay to the Agent (as assignee of Lessor) the Basic Rent for the Leased Properties, in installments, payable in arrears on each Payment Date during the Lease Term, it being understood that, pursuant to Section 2.3(c) of the Master Agreement, no Basic Rent shall be payable with respect to Construction Land Interests during the Construction Term therefor.

Section III.2 Supplemental Rent. Lessee shall pay to the Agent, or to whomever shall be entitled thereto as expressly provided herein or in any other Operative Document, any and all Supplemental Rent within five (5) Business Days of the date the same shall become due and payable and in the event of any failure on the part of Lessee to pay any Supplemental Rent, the Agent shall have all rights, powers and remedies provided for herein or by law or in equity or otherwise in the case of nonpayment of Basic Rent. All Supplemental Rent to be paid pursuant to this Section 3.2 shall be payable in the type of funds and in the manner set forth in Section 3.3. Section III.3 Method of Payment. Basic Rent shall be paid to the Agent, and Supplemental Rent (including amounts due under Article XIV hereof) shall be paid to the Agent (or to such Person as may be entitled thereto) or, in each case, to such Person as the Agent (or such other Person) shall specify in writing to Lessee, and at such place as the Agent (or such other Person) shall specify in writing to Lessee, which specifications by the Agent (or such other Person) shall be given by the Agent at least five (5) Business Days prior to the due date therefor. Each payment of Rent (including payments under Article XIV hereof) shall be made by Lessee prior to 12:00 p.m. (noon) Atlanta, Georgia time at the place of payment in funds consisting of lawful currency of the United States of America which shall be immediately available on the scheduled date when such payment shall be due, unless such scheduled date shall not be a Business Day, in which case such payment shall be made on the next succeeding Business Day. Section III.4 Late Payment. If any Basic Rent shall not be paid on the date when due, Lessee shall pay to the Agent, as Supplemental Rent, interest (to the maximum extent permitted by law) on such overdue amount from and including the due date thereof to but excluding the Business Day of payment thereof at the Overdue Rate. Section III.5 Net Lease; No Setoff, Etc. This Lease is a net lease and notwithstanding any other provision of this Lease, Lessee shall pay all Basic Rent and Supplemental Rent, and all costs, charges, Taxes (other than Taxes covered by the exclusion described in Section 7.4(b) of the Master Agreement), assessments and other expenses foreseen or unforeseen, for which Lessee or any Indemnitee is or shall become liable by reason of Lessee's or such Indemnitee's estate, right, title or interest in the Leased Properties, or that are connected with or arise out of the acquisition (except the initial costs of purchase by Lessor of its interest in any Leased Property, which costs, subject to the terms of the Master Agreement, shall be funded by the Funding Parties pursuant to the Master Agreement), installation, possession, use, occupancy, maintenance, ownership, leasing, repairs and rebuilding of, or addition to, the Leased Properties or any portion thereof, and any other amounts payable hereunder and under the other Operative Documents without counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and Lessee's obligation to pay all such amounts throughout the Lease Term, including the Construction Term, is absolute and unconditional. The obligations and liabilities of Lessee hereunder shall in no way be released, discharged or otherwise affected for any reason, including without limitation: (a) any defect in the condition, merchantability, design, quality or fitness for use of any Leased Property or any part thereof, or the failure of any Leased Property to comply with all Applicable Law, including any inability to occupy or use any Leased Property by reason of such non-compliance; (b) any damage to, removal, abandonment, salvage, loss, contamination of or Release from, scrapping or destruction of or any requisition or taking of any Leased Property or any part thereof; (c) any restriction, prevention or curtailment of or interference with any use of any Leased Property or any part thereof including eviction; (d) any defect in title to or rights to any Leased Property or any Lien on such title or rights or on any Leased Property; (e) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by Lessor, the Agent or any Lender; (f) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to Lessee, Lessor, any Lender, the Agent or any other Person, or any action taken with respect to this Lease by any trustee or receiver of Lessee, Lessor, any Lender, the Agent, any Ground Lessor or any other Person, or by any court, in any such proceeding; (g) any claim that Lessee has or might have against any Person, including without limitation, Lessor, any vendor, manufacturer, contractor of or for any Building or any part thereof, the Agent, any Ground Lessor or any Lender; (h) any failure on the part of Lessor to perform or comply with any of the terms of this Lease, any other Operative Document or of any other agreement; (i) any invalidity or unenforceability or illegality or disaffirmance of this Lease against or by Lessee or any provision hereof or any of the other Operative Documents or any provision of any thereof whether or not related to the Transaction; (j) the impossibility or illegality of performance by Lessee, Lessor or both; (k) any action by any court, administrative agency or other Governmental Authority; (l) any restriction, prevention or curtailment of or interference with the Construction or any use of any Leased Property or any part thereof; or (m) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether or not Lessee shall have notice or knowledge of any of the foregoing. Except as specifically set forth in Article XIV or X of this Lease, this Lease shall be noncancellable by Lessee in any circumstance whatsoever and Lessee, to the

extent permitted by Applicable Law, waives all rights now or hereafter conferred by statute or otherwise to quit, terminate or surrender this Lease, or to any diminution, abatement or reduction of Rent payable by Lessee hereunder. Each payment of Rent made by Lessee hereunder shall be final and Lessee shall not seek or have any right to recover all or any part of such payment from Lessor, the Agent, any Lender or any party to any agreements related thereto for any reason whatsoever. Lessee assumes the sole responsibility for the condition, use, operation, maintenance, and management of the Leased Properties and Lessor shall have no responsibility in respect thereof and shall have no liability for damage to the property of either Lessee or any subtenant of Lessee on any account or for any reason whatsoever, other than solely by reason of Lessor's willful misconduct or gross negligence. Section III.6 Certain Taxes. Without limiting the generality of Section 3.5, Lessee agrees to pay when due all real estate taxes, personal property taxes, gross sales taxes, including any sales or lease tax imposed upon the rental payments hereunder or under a sublease, occupational license taxes, water charges, sewer charges, assessments of any nature and all other governmental impositions and charges of every kind and nature whatsoever (the "tax (es)"), when the same shall be due and payable without penalty or interest; provided, however, that this Section shall not apply to any of the taxes covered by the exclusion described in Section 7.4(b) of the Master Agreement. It is the intention of the parties hereto that, insofar as the same may lawfully be done, Lessor shall be, except as specifically provided for herein, free from all expenses in any way related to the Leased Properties and the use and occupancy thereof. Any tax relating to a fiscal period of any taxing authority falling partially within and partially outside the Lease Term, shall be apportioned and adjusted between Lessor and Lessee. Lessee covenants to furnish Lessor and the Agent, upon the Agent's request, within forty-five (45) days after the last date when any tax must be paid by Lessee as provided in this Section 3.6, official receipts of the appropriate taxing, authority or other proof satisfactory to Lessor, evidencing the payment thereof. So long as no Event of Default has occurred and is continuing, Lessee may defer payment of a tax so long as the validity or the amount thereof is contested by Lessee with diligence and in good faith; provided, however, that Lessee shall furnish to Lessor and the Agent a bond or other adequate security in an amount and on terms reasonably satisfactory to Lessor and the Agent and shall pay the tax in sufficient time to prevent delivery of a tax deed. Such contest shall be at Lessee's sole cost and expense. Lessee covenants to indemnify and save harmless Lessor, the Agent and each Lender from any actual and reasonable costs or expenses incurred by Lessor, the Agent or any Lender as a result of such contest. Section III.7 Utility Charges. Lessee agrees to pay or cause to be paid as and when the same are due and payable all charges for gas, water, sewer, electricity, lights, heat, power, telephone or other communication service and all other utility services used, rendered or supplied to, upon or in connection with the Leased Properties. ARTICLE IV. WAIVERS During the Lease Term, Lessor's interest in the Building(s) (whether or not completed) and the Land is demised and let by Lessor "AS IS" subject to (a) the rights of any parties in possession thereof, (b) the state of the title thereto existing at the time Lessor acquired its interest in the Leased Properties, (c) any state of facts which an accurate survey or physical inspection might show (including the survey delivered on the Closing Date), (d) all Applicable Law, and (e) any violations of Applicable Law which may exist upon or subsequent to the commencement of the Lease Term. LESSEE ACKNOWLEDGES THAT, ALTHOUGH LESSOR WILL OWN AND HOLD TITLE TO THE LEASED PROPERTIES, LESSOR IS NOT RESPONSIBLE FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE BUILDING(S) OR ANY ALTERATIONS. NEITHER LESSOR, THE AGENT NOR ANY LENDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE, MERCHANTABILITY, TITLE, HABITABILITY, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE LEASED PROPERTIES (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTIES (OR ANY PART THEREOF), ALL SUCH WARRANTIES BEING HEREBY DISCLAIMED, AND NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF ANY LEASED PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAW, except that Lessor hereby represents and warrants that each Leased Property is and shall be free of Lessor Liens. As

between Lessor and Lessee, Lessee has been afforded full opportunity to inspect each Leased Property, is satisfied with the results of its inspections of such Leased Property and is entering into this Lease solely on the basis of the results of its own inspections and all risks incident to the matters discussed in the two preceding sentences, as between Lessor, the Agent or the Lenders on the one hand, and Lessee, on the other, are to be borne by Lessee. The provisions of this Article IV have been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by Lessor, the Agent or the Lenders, express or implied, with respect to the Leased Properties, that may arise pursuant to any law now or hereafter in effect, or otherwise. ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES Lessee shall not directly or indirectly create, incur or assume, any Lien on or with respect to any Leased Property, the title thereto, or any interest therein, including any Liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of any Leased Property or by reason of labor or materials furnished or claimed to have been furnished to Lessee, or any of its contractors or agents or Alterations constructed by Lessee, except, in all cases, Permitted Liens. Notwithstanding the foregoing paragraph, at the request of Lessee, Lessor shall, from time to time during the Lease Term and upon reasonable advance written notice from Lessee, and receipt of the materials specified in the next succeeding sentence, consent to and join in any (i) grant of easements, licenses, rights of way and other rights in the nature of easements, including, without limitation, utility easements to facilitate Lessee's use, development and construction of the Leased Properties, (ii) release or termination of easements, licenses, rights of way or other rights in the nature of easements which are for the benefit of the Land or the Building(s) or any portion thereof, (iii) dedication or transfer of portions of the Land, not improved with a Building, for road, highway or other public purposes, (iv) execution of agreements for ingress and egress and amendments to any covenants and restrictions affecting the Land or the Building(s) or any portion thereof and (v) request to any Governmental Authority for platting or subdivision or replatting or resubdivision approval with respect to the Land or any portion thereof or any parcel of land of which the Land or any portion thereof forms a part or a request for any variance from zoning or other governmental requirements. Lessor's obligations pursuant to the preceding sentence shall be subject to the requirements that: (a) any such action shall be at the sole cost and expense of Lessee and Lessee shall pay all actual and reasonable out-of-pocket costs of Lessor, the Agent and any Lender in connection therewith (including, without limitation, the reasonable fees of attorneys, architects, engineers, planners, appraisers and other professionals reasonably retained by Lessor, the Agent or any Lender in connection with any such action), (b) Lessee shall have delivered to Lessor and Agent a certificate of a Responsible Officer of Lessee stating that (1) such action will not cause any Leased Property, the Land or any Building or any portion thereof to fail to comply in any material respect with the provisions of the Lease or any other Operative Documents, or in any material respect with Applicable Law; and (2) such action will not materially reduce the Fair Market Sales Value, utility or useful life of any Leased Property, the Land or any Building nor Lessor's interest therein; and (c) in the case of any release or conveyance, if Lessor, the Agent or any Lender so reasonably requests, Lessee will cause to be issued and delivered to Lessor and the Agent by the Title Insurance Company an endorsement to the Title Policy pursuant to which the Title Insurance Company agrees that its liability for the payment of any loss or damage under the terms and provisions of the Title Policy will not be affected by reason of the fact that a portion of the real property referred to in Schedule A of the Title Policy has been released or conveyed by Lessor. ARTICLE VI. MAINTENANCE AND REPAIR; ALTERATIONS, MODIFICATIONS AND ADDITIONS Section VI.1 Maintenance and Repair; Compliance With Law. Lessee, at its own expense, shall at all times (a)

maintain each Leased Property in good repair and condition, and in good and efficient working order (subject to ordinary wear and tear), in accordance with prudent industry standards and, in any event, in no less a manner as other similar restaurant units owned or leased by Lessee or its Affiliates, (b) make all Alterations in accordance with, and maintain (whether or not such maintenance requires structural modifications or Alterations) and operate and otherwise keep each Leased Property in compliance in all material respects with, all Applicable Laws and insurance requirements, and (c) make all material repairs, replacements and renewals of each Leased Property or any part thereof which may be required to keep such Leased Property in the condition required by the preceding clauses (a) and (b). Lessee shall perform the foregoing maintenance obligations regardless of whether any Leased Property is occupied or unoccupied. Lessee waives any right that it may now have or hereafter acquire to (i) require Lessor, the Agent or any Lender to maintain, repair, replace, alter, remove or rebuild all or any part of any Leased Property or (ii) make repairs at the expense of Lessor, the Agent or any Lender pursuant to any Applicable Law or other agreements or otherwise. NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE LIABLE TO LESSEE OR TO ANY CONTRACTORS, SUBCONTRACTORS, LABORERS, MATERIALMEN, SUPPLIERS OR VENDORS FOR SERVICES PERFORMED OR MATERIAL PROVIDED ON OR IN CONNECTION WITH ANY LEASED PROPERTY OR ANY PART THEREOF. Neither Lessor, the Agent nor any Lender shall be required to maintain, alter, repair, rebuild or replace any Leased Property in any way. Section VI.2 Alterations. Lessee may, without the consent of Lessor, at Lessee's own cost and expense, make Alterations which do not materially diminish the Fair Market Sales Value, utility or useful life of any Leased Property. Section VI.3 Title to Alterations. Title to all Alterations shall without further act vest in Lessor (subject to Lessee's right to remove trade fixtures, personal property and equipment which do not constitute Alterations and which were not acquired with funds advanced by Lessor or any Lender) and shall be deemed to constitute a part of the Leased Properties and be subject to this Lease. ARTICLE VII. USE Lessee may use each Leased Property or any part thereof for any lawful purpose, and in a manner consistent with the standards applicable to properties of a similar nature in the geographic area in which such Leased Property is located, provided that such use does not materially adversely affect the Fair Market Sales Value, utility, remaining useful life or residual value of such Leased Property, and does not materially violate or conflict with, or constitute or result in a material default under, any Applicable Law or any insurance policy required hereunder. In the event Lessee's use substantially changes the character of any Building in a manner or to an extent that, in Lessor's or the Lenders' reasonable opinion, adversely affects the Fair Market Sales Value and/or marketability of such Building, Lessee shall, immediately prior to the termination or expiration of this Lease, at Lessor's request, restore such Leased Property to its general character at the Completion Date (ordinary wear and tear excepted). Lessee shall not commit or permit any waste of any Leased Property or any material part thereof. ARTICLE VIII. INSURANCE (a) At any time during which any part of any Building or any Alteration is under construction and as to any part of any Building or any Alteration under construction, Lessee shall maintain, or cause to be maintained, at its sole cost and expense, as a part of its blanket policies or otherwise, "all risks" non-reporting completed value form of builder's risk insurance. (b) During the Lease Term, Lessee shall maintain, at its sole cost and expense, as a part of its blanket policies or otherwise, insurance against loss or damage to any Leased Property by fire and other risks, including comprehensive boiler and machinery coverage, on terms and in amounts no less favorable than insurance covering other similar properties owned or leased by Lessee and that are in accordance with normal industry practice, but in no event less than the replacement cost of such Leased Property from time to time. (c) During the Lease Term, Lessee shall maintain, at its sole cost and expense, commercial general liability insurance with respect to the Leased Properties, as is ordinarily procured by Persons who own or operate similar properties in the same geographic area. Such insurance shall be on terms and in amounts that are no less

favorable than insurance maintained by Lessee or its Affiliates with respect to similar properties that it owns or leases and that are in accordance with normal industry practice, but in no event less than $1,000,000 per occurrence. Such insurance policies shall also provide that Lessee's insurance shall be considered primary insurance. Nothing in this Article VIII shall prohibit Lessor, the Agent or any Lender from carrying at its own expense other insurance on or with respect to the Leased Properties, provided that any insurance carried by Lessor, the Agent or any Lender shall not prevent Lessee from carrying the insurance required hereby. (d) Each policy of insurance maintained by Lessee pursuant to clauses (a) and (b) of this Article VIII shall provide that all insurance proceeds in respect of any loss or occurrence shall be adjusted by Lessee, except if, and for so long as an Event of Default exists, all losses shall be adjusted solely by, and all insurance proceeds shall be paid solely to, the Agent (or Lessor if the Loans have been fully paid) for application pursuant to this Lease. (e) On the Closing Date for each Leased Property, on the Completion Date and on each anniversary of the Initial Closing Date, Lessee shall furnish Lessor with certificates showing the insurance required under this Article VIII to be in effect and naming Lessor, the Agent and the Lenders as additional insureds or loss payee, as the case may be. Such certificates shall include a provision for thirty (30) days' advance written notice by the insurer to Lessor and the Agent in the event of cancellation or expiration or nonpayment of premium with respect to such insurance, and shall include a customary breach of warranty clause. (f) Each policy of insurance maintained by Lessee pursuant to this Article VIII shall (1) contain the waiver of any right of subrogation of the insurer against Lessor, the Agent and the Lenders, and (2) provide that in respect of the interests of Lessor, the Agent and the Lenders, such policies shall not be invalidated by any fraud, action, inaction or misrepresentation of Lessee or any other Person acting on behalf of Lessee. (g) All insurance policies carried in accordance with this Article VIII shall be maintained with insurers rated at least A by A.M. Best & Company, and in all cases the insurer shall be qualified to insure risks in the State where such Leased Property is located. ARTICLE IX. ASSIGNMENT AND SUBLEASING Lessee may not assign any of its right, title or interest in, to or under this Lease, except as set forth in the following sentence. Lessee may (i) assign this Lease as it relates to all or any portion of any Leased Property to any Affiliate of Lessee so long as Lessee's guaranty pursuant to the Guaranty Agreement continues in full force and effect and (ii) sublease all or any portion of any Leased Property, provided that (a) all obligations of Lessee shall continue in full effect as obligations of a principal and not of a guarantor or surety, as though no sublease had been made; (b) such sublease shall be expressly subject and subordinate to this Lease, the Loan Agreement and the other Operative Documents; and (c) each such sublease shall terminate on or before the Lease Termination Date. Lessee shall give the Agent and Lessor written notice of any such assignment or sublease. Except pursuant to an Operative Document, this Lease shall not be mortgaged or pledged by Lessee, nor shall Lessee mortgage or pledge any interest in any Leased Property or any portion thereof. Any such mortgage or pledge shall be void. ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE Section X.1 Event of Loss. Any event (i) which would otherwise constitute a Casualty during the Base Term, and (ii) which, in the good-faith judgment of Lessee, renders repair and restoration of a Leased Property impractical or uneconomical, and (iii) as to which Lessee, within sixty (60) days after the occurrence of such event, delivers to Lessor an Officer's Certificate notifying Lessor of such event and of such judgment, shall constitute an "Event of Loss". In the case of any other event which constitutes a Casualty, Lessee shall restore such Leased Property pursuant to Section 10.3. If an Event of Loss other than an Event of Taking shall occur, Lessee shall pay to Lessor on the next Payment Date following delivery of the Officer's Certificate pursuant to clause (iii) above an amount equal to the related Leased Property Balance. Upon Lessor's receipt of such Leased Property Balance on such date, Lessor shall cause Lessor's interest in such Leased Property to be conveyed to Lessee in accordance with and subject to the provisions of Section 14.5 hereof; upon completion of such purchase, but not prior thereto, this Lease and all obligations hereunder with respect to such Leased Property shall terminate,

except with respect to obligations and liabilities hereunder and under the other Operative Documents, actual or contingent, that have arisen or relate to events occurring on or prior to such date of purchase, or which are expressly stated herein to survive termination of this Lease. Upon the consummation of the purchase of any Leased Property pursuant to this Section 10.1, any proceeds derived from insurance required to be maintained by Lessee pursuant to this Lease for such Leased Property remaining after payment of such purchase price, and all costs and expenses incurred by Lessor or the Agent in connection with such Event of Loss, shall be paid over to, or retained by, Lessee or as it may direct, and Lessor shall assign to Lessee, without warranty, all of Lessor's rights to and interest in insurance required to be maintained by Lessee pursuant to this Lease with respect to such Leased Property. Section X.2 Event of Taking. Any event (i) which constitutes a Condemnation of all of, or substantially all of, a Leased Property, or (ii) (A) which would otherwise constitute a Condemnation, (B) which, in the good-faith judgment of Lessee, renders restoration and rebuilding of a Leased Property impossible, impractical or uneconomical, and (C) as to which Lessee, within sixty (60) days after the occurrence of such event, delivers to Lessor an Officer's Certificate notifying Lessor of such event and of such judgment, shall constitute an "Event of Taking". In the case of any other event which constitutes a Condemnation, Lessee shall restore and rebuild such Leased Property pursuant to Section 10.4. If an Event of Taking shall occur, Lessee shall pay to Lessor (1) on the next Payment Date following the occurrence of such Event of Taking, in the case of an Event of Taking described in clause (i) above, or (2) on the next Payment Date following delivery of the Officer's Certificate pursuant to clause (ii) above, in the case of an Event of Taking described in clause (ii) above, an amount equal to the related Leased Property Balance. Upon Lessor's receipt of such Leased Property Balance on such date, Lessor shall cause Lessor's interest in such Leased Property to be conveyed to Lessee in accordance with and subject to the provisions of Section 14.5 hereof (provided that such conveyance shall be subject to all rights of the condemning authority); upon completion of such purchase, but not prior thereto, this Lease and all obligations hereunder with respect to such Leased Property shall terminate, except with respect to obligations and liabilities hereunder and under the other Operative Documents, actual or contingent, that have arisen or relate to events occurring on or prior to such date of purchase, or which are expressly stated herein to survive termination of this Lease. Upon the consummation of the purchase of a Leased Property pursuant to this Section 10.2, all Awards received by Lessor, after deducting any reasonable costs incurred by Lessor in collecting such Awards, received or payable on account of an Event of Taking with respect to such Leased Property during the related Lease Term shall be paid to Lessee, and all rights of Lessor in Awards related to such Leased Property not then received shall be assigned to Lessee by Lessor. Section X.3 Casualty. If a Casualty shall occur, Lessee shall rebuild and restore the affected Leased Property, will complete the same prior to the Lease Termination Date, and will cause the condition set forth in Section 3.5 (c) of the Master Agreement to be fulfilled with respect to such restoration and rebuilding prior to the Lease Termination Date, regardless of whether insurance proceeds received as a result of such Casualty are sufficient for such purpose. Section X.4 Condemnation. If a Condemnation shall occur, Lessee shall rebuild and restore the affected Leased Property, will complete the same prior to the Lease Termination Date, and will cause the condition set forth in Section 3.5(c) of the Master Agreement to be fulfilled with respect to such restoration and rebuilding prior to the Lease Termination Date, regardless of whether the Awards received as a result of such Condemnation are sufficient for such purpose. Section X.5 Verification of Restoration and Rebuilding. In the event of Casualty or Condemnation, to verify Lessee's compliance with the foregoing Sections 10.3 and 10.4, Lessor, the Agent, the Lenders and their respective authorized representatives may, upon five (5) Business Days' notice to Lessee, make inspections of the affected Leased Property with respect to (i) the extent of the Casualty or Condemnation and (ii) the restoration and rebuilding of the related Building and the Land. All actual and reasonable out-of-pocket costs of such inspections incurred by Lessor, the Agent or any Lender will be paid by Lessee promptly after written request. No such inspection shall unreasonably interfere with Lessee's operations or the operations of any other occupant of such Leased Property. None of the inspecting parties shall have any duty to make any such inspection or inquiry and none of the inspecting parties shall incur any liability or obligation by reason of making or not making any such inspection or inquiry.

Section X.6 Application of Payments. All proceeds (except for payments under insurance policies maintained other than pursuant to Article VIII of this Lease) received at any time by Lessor, Lessee or the Agent from any Governmental Authority or other Person with respect to any Condemnation or Casualty to any Leased Property or any part thereof or with respect to an Event of Loss or an Event of Taking, plus the amount of any payment that would have been due from an insurer but for Lessee's self-insurance or deductibles ("Loss Proceeds"), shall (except to the extent Section 10.9 applies) be applied as follows: (a) In the event Lessee purchases such Leased Property pursuant to Section 10.1 or Section 10.2, such Loss Proceeds shall be applied as set forth in Section 10.1 or Section 10.2, as the case may be; (b) In the event of a Casualty at such time when no Event of Default has occurred and is continuing and Lessee is obligated to repair and rebuild such Leased Property pursuant to Section 10.3, Lessee may, in good faith and subsequent to the date of such Casualty, certify to Lessor and to the applicable insurer that no Event of Default has occurred and is continuing, in which event the applicable insurer shall pay the Loss Proceeds to Lessee; (c) In the event of a Condemnation at such time when no Event of Default has occurred and is continuing and Lessee is obligated to repair and rebuild such Leased Property pursuant to Section 10.4, Lessor shall upon Lessee's request assign to Lessee Lessor's interest in any applicable Awards; and (d)As provided in Section 10.8, if such section is applicable. During any period of repair or rebuilding pursuant to this Article X, this Lease will remain in full force and effect and Basic Rent shall continue to accrue and be payable without abatement or reduction. Lessee shall maintain records setting forth information relating to the receipt and application of payments in accordance with this Section 10.6. Such records shall be kept on file by Lessee at its offices and shall be made available to Lessor, the Lenders and the Agent upon request. Section X.7 Prosecution of Awards. (a) If, during the continuance of any Event of Default, any Condemnation shall occur, Lessee shall give to Lessor and the Agent promptly, but in any event within thirty (30) days after the occurrence thereof, written notice of such occurrence and the date thereof, generally describing the nature and extent of such Condemnation. With respect to any Event of Taking or any Condemnation, Lessee shall control the negotiations with the relevant Governmental Authority as to any proceeding in respect of which Awards are required, under Section 10.6, to be assigned or released to Lessee, unless an Event of Default shall have occurred and be continuing, in which case (1) the Agent (or Lessor if the Loans have been fully paid) shall control such negotiations; and (2) Lessee hereby irrevocably assigns, transfers and sets over to Lessor all rights of Lessee to any Award made during the continuance of an Event of Default on account of any Event of Taking or any Condemnation and, if there will not be separate Awards to Lessor and Lessee on account of such Event of Taking or Condemnation, irrevocably authorizes and empowers the Agent (or Lessor if the Loans have been fully paid) during the continuance of an Event of Default, with full power of substitution, in the name of Lessee or otherwise (but without limiting the obligations of Lessee under this Article X), to file and prosecute what would otherwise be Lessee's claim for any such Award and to collect, receipt for and retain the same; provided, however, that in any event Lessor and the Agent may participate in such negotiations, and no settlement will be made without the prior consent of the Agent (or Lessor if the Loans have been fully paid), not to be unreasonably withheld. (b) Notwithstanding the foregoing, Lessee may prosecute, and Lessor shall have no interest in, any claim with respect to Lessee's personal property and equipment not financed by Lessor and Lessee's relocation expenses. Section X.8 Application of Certain Payments Not Relating to an Event of Taking. In case of a requisition for temporary use of all or a portion of any Leased Property which is not an Event of Taking, this Lease shall remain in full force and effect with respect to such Leased Property, without any abatement or reduction of Basic Rent, and the Awards for such Leased Property shall, unless an Event of Default has occurred and is continuing, be paid to Lessee. Section X.9 Other Dispositions. Notwithstanding the foregoing provisions of this Article X, so long as an Event of Default shall have occurred and be continuing, any amount that would otherwise be payable to or for the account of, or that would otherwise be retained by, Lessee pursuant to this Article X shall be paid to the Agent (or Lessor if the Loans have been fully paid) as security for the obligations of Lessee under this Lease and, at such time thereafter as no Event of Default shall be continuing, such amount shall be paid promptly to Lessee to the extent

not previously applied by Lessor or the Agent in accordance with the terms of this Lease or the other Operative Documents. Section X.10 No Rent Abatement. Rent shall not abate hereunder by reason of any Casualty, any Event of Loss, any Event of Taking or any Condemnation of any Leased Property, and Lessee shall continue to perform and fulfill all of Lessee's obligations, covenants and agreements hereunder notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation until the Lease Termination Date. ARTICLE XI. INTEREST CONVEYED TO LESSEE Lessor and Lessee intend that this Lease be treated, for accounting purposes, as an operating lease. For tax and bankruptcy purposes, Lessee and Lessor intend that the transaction represented by this Lease be treated as a financing transaction; for such purposes, it is the intention of the parties hereto (i) that this Lease be treated as a mortgage or deed of trust (whichever is applicable in the jurisdictions in which the Leased Properties are located) and security agreement, encumbering the Leased Property, and that Lessee, as grantor, hereby grants to Lessor, as mortgagee or beneficiary and secured party, or any successor thereto, a first and paramount Lien on each Leased Property, (ii) that Lessor shall have, as a result of such determination, all of the rights, powers and remedies of a mortgagee, deed of trust beneficiary or secured party available under Applicable Law to take possession of and sell (whether by foreclosure or otherwise) any Leased Property, (iii) that the effective date of such mortgage, security deed or deed of trust shall be the effective date of this Lease, (iv) that the recording of this Lease (or memorandum thereof) or a Lease Supplement (or memorandum thereof) shall be deemed to be the recording of such mortgage, security deed or deed of trust, and (v) that the obligations secured by such mortgage, security deed or deed of trust shall include the Funded Amounts and all Basic Rent and Supplemental Rent hereunder and all other obligations of and amounts due from Lessee hereunder and under the Operative Documents. ARTICLE XII. EVENTS OF DEFAULT The following events shall constitute Events of Default (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) Lessee shall fail to make any payment of Basic Rent when due, and such failure shall continue for three (3) or more Business Days; (b) Lessee shall fail to make any payment of Supplemental Rent or any other amount payable hereunder or under any of the other Operative Documents (other than Basic Rent and other than as set forth in clause (c)), and such failure shall continue for a period of ten (10) days; (c) Lessee shall fail to pay the Funded Amount or Lease Balance when due pursuant to Sections 10.1, 10.2, 14.1 or 14.2, or Lessee shall fail to pay the Recourse Deficiency Amount when required pursuant to Article XIV or Lessee shall fail to make any payment when due under the Construction Agency Agreement; (d) Lessee shall fail to maintain insurance as required by Article VIII hereof, and such failure shall continue until the earlier of (i) 15 days after written notice thereof from Lessor and (ii) the day immediately preceding the date on which any applicable insurance coverage would otherwise lapse or terminate; (e) the Lessee or any Subsidiary (whether as primary obligor or as guarantor or other surety) shall fail to pay any principal of or premium or interest on any Material Indebtedness that is outstanding, when and as the same shall become due and payable (whether at scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument evidencing such Material Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Material Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or permit the acceleration of, the maturity of such Material Indebtedness; or any such Material Indebtedness shall be declared to be due and payable; or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to prepay, redeem, purchase or

defease such Material Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; or (f) the Lessee or any Material Subsidiary shall (i) commence a voluntary case or other proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar official of it or any substantial part of its property, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (i) of this Section, (iii) apply for or consent to the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Lessee or any such Material Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or (vi) take any action for the purpose of effecting any of the foregoing; or (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Lessee or any Material Subsidiary or its debts, or any substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or (ii) the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Lessee or any Material Subsidiary or for a substantial part of its assets, and in any such case, such proceeding or petition shall remain undismissed for a period of 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or (h) the Lessee or any Material Subsidiary shall become unable to pay, shall admit in writing its inability to pay, or shall fail to pay, its debts as they become due; or (i) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with other ERISA Events that have occurred, could reasonably be expected to result in liability to the Lessee and the Subsidiaries in an aggregate amount exceeding $2,500,000; or (j) any judgment or order for the payment of money in excess of $2,500,000 in the aggregate shall be rendered against the Lessee or any Subsidiary, and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (k) any nonmonetary judgment or order shall be rendered against the Lessee or any Subsidiary that could reasonably be expected to have a Material Adverse Effect, and there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (l) a Change in Control shall occur or exist; or (m) any provision of any Subsidiary Guaranty Agreement shall for any reason cease to be valid and binding on, or enforceable against, any Subsidiary Guarantor, or any Subsidiary Guarantor shall so state in writing, or any Subsidiary Guarantor shall seek to terminate its Subsidiary Guaranty Agreement; (n) any representation or warranty by Lessee in any Operative Document or in any certificate or document delivered to Lessor, the Agent or any Lender pursuant to any Operative Document shall have been incorrect in any material respect when made; (o) Lessee shall repudiate or terminate the Guaranty Agreement, or the Guaranty Agreement shall at any time cease to be in full force and effect or cease to be the legal, valid and binding obligation of Lessee; (p) Lessee shall fail to observe or perform any covenant or agreement contained in Section 5.1, 5.2, 5.3 (with respect to Lessee's existence), 5.7, 5.9 or Section 5.10 through 5.26 of the Master Agreement; (q) Lessee shall fail in any material respect to timely, perform or observe any covenant, condition or agreement (not included in any other clause of this Article XII) to be performed or observed by it hereunder or under any other Operative Document and such failure shall continue for a period of 30 days after Lessee's receipt of written notice thereof from Lessor, the Agent or any Lender; or

(r) An event of default occurs under the Lease Agreement, dated as of May 30, 1997, between Lessor and Lessee, as amended or supplemented from time to time, under the Lease Agreement, dated as of June 3, 1999, between Lessor and Lessee, as amended or supplemented from time to time, or under the Lease Agreement, dated as of October 11, 2000, between Lessor and Lessee, as amended from time to time. ARTICLE XIII. ENFORCEMENT Section XIII.1 Remedies. Upon the occurrence and during the continuance of any Event of Default, Lessor may do one or more of the following as Lessor in its sole discretion shall determine, without limiting any other right or remedy Lessor may have on account of such Event of Default (including, without limitation, the obligation of Lessee to purchase the Leased Properties as set forth in Section 14.3): (a) Lessor may, by notice to Lessee, rescind or terminate this Lease as of the date specified in such notice; however, (A) no reletting, reentry or taking of possession of any Leased Property by Lessor will be construed as an election on Lessor's part to terminate this Lease unless a written notice of such intention is given to Lessee, (B) notwithstanding any reletting, reentry or taking of possession, Lessor may at any time thereafter elect to terminate this Lease for a continuing Event of Default, and (C) no act or thing done by Lessor or any of its agents, representatives or employees and no agreement accepting a surrender of any Leased Property shall be valid unless the same be made in writing and executed by Lessor; (b) Lessor may (i) demand that Lessee, and Lessee shall upon the written demand of Lessor, return the Leased Properties promptly to Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of, Articles VI and XIV hereof as if the Leased Properties were being returned at the end of the Lease Term, and Lessor shall not be liable for the reimbursement of Lessee for any costs and expenses incurred by Lessee in connection therewith and (ii) without prejudice to any other remedy which Lessor may have for possession of the Leased Properties, and to the extent and in the manner permitted by Applicable Law, enter upon any Leased Property and take immediate possession of (to the exclusion of Lessee) any Leased Property or any part thereof and expel or remove Lessee and any other person who may be occupying such Leased Property, by summary proceedings or otherwise, all without liability to Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or otherwise and, in addition to Lessor's other damages, Lessee shall be responsible for the actual and reasonable costs and expenses of reletting, including brokers' fees and the reasonable costs of any alterations or repairs made by Lessor; (c) Lessor may (i) sell all or any part of any Leased Property at public or private sale, as Lessor may determine, free and clear of any rights of Lessee and without any duty to account to Lessee with respect to such action or inaction or any proceeds with respect thereto (except to the extent required by clause (ii) below if Lessor shall elect to exercise its rights thereunder) in which event Lessee's obligation to pay Basic Rent hereunder for periods commencing after the date of such sale shall be terminated or proportionately reduced, as the case may be; and (ii) if Lessor shall so elect, demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (the parties agreeing that Lessor's actual damages would be difficult to predict, but the aforementioned liquidated damages represent a reasonable approximation of such amount) (in lieu of Basic Rent due for periods commencing on or after the Payment Date coinciding with such date of sale (or, if the sale date is not a Payment Date, the Payment Date next preceding the date of such sale)), an amount equal to (a) the excess, if any, of (1) the sum of (A) all Rent due and unpaid to and including such Payment Date and (B) the Lease Balance, computed as of such date, over (2) the net proceeds of such sale (that is, after deducting all costs and expenses incurred by Lessor, the Agent or any Lender incident to such conveyance (including, without limitation, all costs, expenses, fees, premiums and taxes described in Section 14.5(b))); plus (b) interest at the Overdue Rate on the foregoing amount from such Payment Date until the date of payment; (d) Lessor may, at its option, not terminate this Lease, and continue to collect all Basic Rent, Supplemental Rent, and all other amounts (including, without limitation, the Funded Amount) due Lessor (together with all costs of collection) and enforce Lessee's obligations under this Lease as and when the same become due, or are to be performed, and at the option of Lessor, upon any abandonment of any Leased Property by Lessee or re-entry of same by Lessor, Lessor may, in its sole and absolute discretion, elect not to terminate this Lease with respect thereto and may make such reasonable alterations and necessary repairs, at Lessee's expense, in order to relet such Leased Property, and relet such Leased Property or any part thereof for such term or terms (which may be

for a term extending beyond the term of this Lease) and at such rental or rentals and upon such other terms and conditions as Lessor in its reasonable discretion may deem advisable; and upon each such reletting all rentals actually received by Lessor from such reletting shall be applied to Lessee's obligations hereunder in such order, proportion and priority as Lessor may elect in Lessor's sole and absolute discretion; it being agreed that under no circumstances shall Lessee benefit from its default from any increase in market rents. If such rentals received from such reletting during any Rent Period are less than the Rent to be paid during that Rent Period by Lessee hereunder, Lessee shall pay any deficiency, as calculated by Lessor, to Lessor on the Payment Date for such Rent Period; (e) Lessor may, whether or not Lessor shall have exercised or shall thereafter at any time exercise any of its rights under paragraph (b), (c) or (d) of this Article XIII with respect to such Leased Property, demand, by written notice to Lessee specifying a date (the "Final Rent Payment Date") not earlier than 30 days after the date of such notice, that Lessee purchase, on the Final Rent Payment Date, any or all of the Leased Properties in accordance with the provisions of Sections 14.2, 14.4 and 14.5; provided, however, that (1) such purchase shall occur on the date set forth in such notice, notwithstanding the provision in Section 14.2 calling for such purchase to occur on the Lease Termination Date; and (2) Lessor's obligations under Section 14.5(a) shall be limited to delivery of a special or limited warranty deed and quitclaim bill of sale of such Leased Property, without recourse or warranty, but free and clear of Lessor Liens; (f) Lessor may exercise any other right or remedy that may be available to it under Applicable Law, or proceed by appropriate court action (legal or equitable) to enforce the terms hereof or to recover damages for the breach hereof. Separate suits may be brought to collect any such damages for any Rent Period(s), and such suits shall not in any manner prejudice Lessor's right to collect any such damages for any subsequent Rent Period(s), or Lessor may defer any such suit until after the expiration of the Lease Term, in which event such suit shall be deemed not to have accrued until the expiration of the Lease Term; or (g) Lessor may retain and apply against Lessor's damages all sums which Lessor would, absent such Event of Default, be required to pay to, or turn over to, Lessee pursuant to the terms of this Lease. Section XIII.2 Remedies Cumulative; No Waiver; Consents. To the extent permitted by, and subject to the mandatory requirements of, Applicable Law, each and every right, power and remedy herein specifically given to Lessor or otherwise in this Lease shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by Lessor, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any right, power or remedy. No delay or omission by Lessor in the exercise of any right, power or remedy or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of Lessee or to be an acquiescence therein. Lessor's consent to any request made by Lessee shall not be deemed to constitute or preclude the necessity for obtaining Lessor's consent, in the future, to all similar requests. No express or implied waiver by Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Potential Event of Default or Event of Default. To the extent permitted by Applicable Law, Lessee hereby waives any rights now or hereafter conferred by statute or otherwise that may require Lessor to sell, lease or otherwise use any Leased Property or part thereof in mitigation of Lessor's damages upon the occurrence of an Event of Default or that may otherwise limit or modify any of Lessor's rights or remedies under this Article XIII. Section XIII.3 Certain Limitations. Notwithstanding the foregoing in this Article XIII, if Lessor declares an Event of Default based on an event described in paragraph (e) of Article XII that arose solely by virtue of an event that permits the acceleration of Material Indebtedness, which event is the occurrence of a "material adverse effect" that is subjectively determined, then Lessee shall either, at its option (i) purchase all of the Leased Properties for the Lease Balance on a date not more than ten (10) Business Days after such declaration by Lessor or (ii) pay to Lessor the sum of all accrued and unpaid Rent, plus the Recourse Deficiency Amount on the date that is ten (10) Business Days after such declaration and either, as directed in writing by Lessor and (A) remarket the Leased Properties as if Lessee had exercised the Remarketing Option pursuant to Section 14.6 (without giving effect to paragraph (a) thereof) or (B) return the Leased Properties to Lessor pursuant to Section 14.8. ARTICLE XIV.

SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL Section XIV.1 Lessee's Option to Purchase. (a) Subject to the terms, conditions and provisions set forth in this Article XIV, Lessee shall have the option (the "Purchase Option"), to be exercised as set forth below, to purchase from Lessor, Lessor's interest in all of the Leased Properties for the purchase price referred to in Section 14.4; provided that, except as set forth in paragraph (b) below, such option must be exercised with respect to all, but not less than all, of the Leased Properties. Such option must be exercised by written notice to Lessor not later than twelve months prior to the Lease Termination Date which notice shall be irrevocable; such notice shall specify the date that such purchase shall take place, which date shall be a Payment Date occurring not less than thirty (30) days after such notice or the Lease Termination Date (whichever is earlier). If the Purchase Option is exercised pursuant to the foregoing, then, subject to the provisions set forth in this Article XIV, on the applicable purchase date or the Lease Termination Date, as the case may be, Lessor shall convey to Lessee, without recourse or warranty (other than as to the absence of Lessor Liens) and Lessee shall purchase from Lessor, Lessor's interest in the Leased Properties. (b) Subject to the terms, conditions and provisions set forth in this Article XIV, Lessee shall have the option (the "Partial Purchase Option"), to be exercised as set forth below, to purchase from Lessor Lessor's interest in any Leased Property for the purchase price referred to in Section 14.4; provided that such option may be exercised only if, after giving effect thereto, there are at least 15 Leased Properties subject to this Lease, unless it is exercised with respect to all Leased Properties as set forth in paragraph (a) above. Such option must be exercised by written notice to Lessor not later than twelve months prior to the Lease Termination Date, which notice shall be irrevocable; such notice shall specify the Leased Property to be purchased and the date that such purchase shall take place, which date shall be a Payment Date occurring not less than thirty (30) days after such notice or the Lease Termination Date (whichever is earlier). If a Partial Purchase Option is exercised pursuant to the foregoing, subject to the provisions set forth in this Article XIV, on the applicable purchase date or the Lease Termination Date, as the case may be, Lessor shall convey to Lessee, without recourse or warranty (other than as to the absence of Lessor Liens) and Lessee shall purchase from Lessor, Lessor's interest in the Leased Property that is the subject of such Partial Purchase Option. Section XIV.2 Conveyance to Lessee. Unless (a) Lessee shall have properly exercised the Purchase Option and purchased the Leased Properties pursuant to Section 14.1(a) hereof, or (b) Lessee shall have properly exercised the Remarketing Option and shall have fulfilled all of the conditions of Section 14.6 hereof, then, subject to the terms, conditions and provisions set forth in this Article XIV, Lessee shall purchase from Lessor, and Lessor shall convey to Lessee, on the Lease Termination Date all of Lessor's interest in the Leased Properties. Lessee may designate, in a notice given to Lessor not less than ten (10) Business Days prior to the closing of such purchase (time being of the essence), the transferee to whom the conveyance shall be made (if other than to Lessee), in which case such conveyance shall (subject to the terms and conditions set forth herein) be made to such designee; provided, however, that such designation of a transferee shall not cause Lessee to be released, fully or partially, from any of its obligations under this Lease. Section XIV.3 Acceleration of Purchase Obligation. Lessee shall be obligated to purchase Lessor's interest in the Leased Properties immediately, automatically and without notice upon the occurrence of any Event of Default specified in clause (f) or (g) of Article XII, for the purchase price set forth in Section 14.4. Upon the occurrence and during the continuance of any other Event of Default, Lessee shall be obligated to purchase Lessor's interest in the Leased Properties for the purchase price set forth in Section 14.4 upon notice of such obligation from Lessor. Section XIV.4 Determination of Purchase Price. Upon the purchase by Lessee of Lessor's interest in the Leased Properties pursuant to Section 14.1(a), 14.2 or 14.3, the aggregate purchase price for all of the Leased Properties shall be an amount equal to the Lease Balance as of the closing date for such purchase, plus any amount due pursuant to Section 7.5(f) of the Master Agreement as a result of such purchase. Upon the purchase by Lessee of Lessor's interest in a Leased Property upon the exercise of a Partial Purchase Option, the purchase price for such Leased Property shall be an amount equal to the Leased Property Balance for such Leased Property as of the closing date for such purchase, plus any amount due pursuant to Section 7.5(f) of the Master Agreement as a result of such purchase. Section XIV.5 Purchase Procedure. (a) If Lessee shall purchase Lessor's interest in a Leased Property pursuant to any provision of this Lease, (i) Lessee shall accept from Lessor and Lessor shall convey such Leased Property by a duly executed and acknowledged special or limited warranty deed and quitclaim bill of sale of such Leased

Property in recordable form, (ii) upon the date fixed for any purchase of Lessor's interest in Leased Property hereunder, Lessee shall pay to the order of the Agent (or Lessor if the Loans have been paid in full) the Lease Balance or Leased Property Balance, as applicable, plus any amount due pursuant to Section 7.5(f) of the Master Agreement as a result of such purchase by wire transfer of immediately available funds, and (iii) Lessor will execute and deliver to Lessee such other documents, including releases, termination agreements and termination statements, as may be legally required or as may be reasonably requested by Lessee in order to effect such conveyance, free and clear of Lessor Liens and the Liens of the Operative Documents, as they related to such Leased Property. (b) Lessee shall, at Lessee's sole cost and expense, obtain all required governmental and regulatory approval and consents and in connection therewith shall make such filings as required by Applicable Law; in the event that Lessor is required by Applicable Law to take any action in connection with such purchase and sale, Lessee shall pay all costs incurred by Lessor in connection therewith. In addition, all costs incident to such conveyance, including, without limitation, Lessee's attorneys' fees, Lessor's attorneys' fees, commissions, Lessee's and Lessor's escrow fees, recording fees, title insurance premiums and all applicable documentary transfer or other transfer taxes and other taxes required to be paid in order to record the transfer documents that might be imposed by reason of such conveyance and the delivery of such deed shall be borne entirely by and paid by Lessee. (c) Upon expiration or termination of this Lease resulting in conveyance of Lessor's interest in the title to the Leased Properties to Lessee, there shall be no apportionment of rents (including, without limitation, water rents and sewer rents), taxes, insurance, utility charges or other charges payable with respect to the Leased Properties, all of such rents, taxes, insurance, utility or other charges due and payable with respect to the Leased Properties prior to termination being payable by Lessee hereunder and all due after such time being payable by Lessee as the then owner of the Leased Properties. Section XIV.6 Option to Remarket Subject to the fulfillment of each of the conditions set forth in this Section 14.6, Lessee shall have the option to market all of, but not less than all of, the Leased Properties for Lessor (the "Remarketing Option"). Lessee's effective exercise and consummation of the Remarketing Option shall be subject to the due and timely fulfillment of each of the following provisions, the failure of any of which, unless waived in writing by Lessor and the Lenders, shall render the Remarketing Option and Lessee's exercise thereof null and void, in which event, Lessee shall be obligated to perform its obligations under Section 14.2. (a) Not later than twelve months prior to the Lease Termination Date, Lessee shall give to Lessor and the Agent written notice of Lessee's exercise of the Remarketing Option, which exercise shall be irrevocable. (b) Not later than ten (10) Business Days prior to the Lease Termination Date, Lessee shall deliver to Lessor and the Agent an environmental assessment of each Leased Property dated not later than forty-five (45) days prior to the Lease Termination Date. Such environmental assessment shall be prepared by an environmental consultant selected by the Required Funding Parties, shall be in form, detail and substance reasonably satisfactory to the Required Funding Parties, and shall otherwise indicate the environmental condition of each Leased Property to be the same as described in the related Environmental Audit. (c) On the date of Lessee's notice to Lessor and the Agent of Lessee's exercise of the Remarketing Option each of the Construction Conditions shall have been timely satisfied and no Event of Default or Potential Event of Default shall exist, and thereafter, no Event of Default or Potential Event of Default shall exist under this Lease. (d) Lessee shall have completed all Alterations, restoration and rebuilding of the Leased Properties pursuant to Sections 6.1, 6.2, 10.3 and 10.4 (as the case may be) and shall have fulfilled all of the conditions and requirements in connection therewith pursuant to said Sections, in each case by the date on which Lessor and the Agent receive Lessee's notice of Lessee's exercise of the Remarketing Option (time being of the essence), regardless of whether the same shall be within Lessee's control. (e) Lessee shall promptly provide any maintenance records relating to each Leased Property to Lessor, the Agent and any potential purchaser upon request, and shall otherwise do all things necessary to deliver possession of such Leased Property to the potential purchaser. Lessee shall allow Lessor, the Agent and any potential purchaser access to any Leased Property for the purpose of inspecting the same.

(f) On the Lease Termination Date, Lessee shall surrender the Leased Properties in accordance with Section 14.8 hereof. (g) In connection with any such sale of the Leased Properties, Lessee will provide to the purchaser all customary "seller's" indemnities, representations and warranties regarding title, absence of Liens (except Lessor Liens) and the condition of the Leased Properties, including, without limitation, an environmental indemnity. Lessee shall fulfill all of the requirements set forth in clause (b) of Section 14.5, and such requirements are incorporated herein by reference. As to Lessor, any such sale shall be made on an "as is, with all faults" basis without representation or warranty by Lessor, other than the absence of Lessor Liens. (h) Lessee shall pay to the Agent on the Lease Termination Date (or to such other Person as Agent shall notify Lessee in writing, or in the case of Supplemental Rent, to the Person entitled thereto) an amount equal to the Recourse Deficiency Amount, plus all accrued and unpaid Basic Rent and Supplemental Rent, and all other amounts hereunder which have accrued prior to or as of such date, in the type of funds specified in Section 3.3 hereof. If Lessee has exercised the Remarketing Option, the following additional provisions shall apply: During the period commencing on the date twelve months prior to the scheduled expiration of the Lease Term, Lessee shall, as nonexclusive agent for Lessor, use commercially reasonable efforts to sell Lessor's interest in the Leased Properties and will attempt to obtain the highest purchase price therefor. Lessee shall submit all bids to Lessor and the Agent and Lessor and the Agent will have the right to review the same and the right to submit any one or more bids. All bids shall be on an all-cash basis. In no event shall such bidder be Lessee or any Subsidiary or Affiliate of Lessee. The written offer must specify the Lease Termination Date as the closing date. If, and only if, the selling price (net of closing costs and prorations, as reasonably estimated by the Agent) is less than the difference between the Lease Balance at such time minus the Recourse Deficiency Amount, then Lessor or the Agent may, in its sole and absolute discretion, by notice to Lessee, reject such offer to purchase, in which event the parties will proceed according to the provisions of Section 14.7 hereof. If neither Lessor nor the Agent rejects such purchase offer as provided above, the closing of such purchase of the Leased Properties by such purchaser shall occur on the Lease Termination Date, contemporaneously with Lessee's surrender of the Leased Properties in accordance with Section 14.8 hereof, and the net proceeds of the sale (i.e., after deduction for any reasonable marketing, closing or other costs, prorations or commissions) shall be paid directly to the Agent to be distributed in accordance with Section 3 of the Loan Agreement; provided, however, that if the sum of the gross proceeds from such sale, plus the Recourse Deficiency Amount paid by Lessee on the Lease Termination Date pursuant to Section 14.6(h), minus any and all costs and expenses (including broker fees, appraisal costs, legal fees, closing costs, prorations, commissions and transfer taxes) incurred in connection with the marketing of the Leased Properties or the sale thereof exceeds the Lease Balance as of such date, then the excess shall be paid to Lessee on the Lease Termination Date. If there are no offers to purchase, the provisions of Section 14.7 shall apply. Lessee shall have no right, power or authority to bind Lessor in connection with any proposed sale of the Leased Properties. Section XIV.7 Rejection of Sale. Notwithstanding anything contained herein to the contrary, if Lessor or the Agent rejects the purchase offer for the Leased Properties as provided in Section 14.6 or there are no offers to purchase the Leased Properties, then (a) Lessee shall pay to the Agent all accrued and unpaid Rent, plus the Recourse Deficiency Amount pursuant to Section 14.6(h), and (b) Lessor shall retain title to the Leased Properties. Section XIV.8 Return of Leased Property. If Lessor retains title to any Leased Property pursuant to Section 14.7 hereof, then Lessee shall, on the Lease Termination Date, and at its own expense, return possession of such Leased Property to Lessor for retention by Lessor or, if Lessee properly exercises the Remarketing Option and fulfills all of the conditions of Section 14.6 hereof, there is a purchase offer with respect to the Leased Properties and neither Lessor nor the Agent rejects such purchase offer pursuant to Section 14.6, then Lessee shall, on such Lease Termination Date, and at its own cost, transfer possession of the Leased Property to the independent purchaser thereof, in each case by surrendering the same into the possession of Lessor or such purchaser, as the case may be, free and clear of all Liens other than Lessor Liens, in as good condition as it was on the Completion Date (as modified by Alterations permitted by this Lease), ordinary wear and tear excepted, and in compliance in all material respects with Applicable Law. Lessee shall, on and within a reasonable time before and after the Lease Termination Date, cooperate with Lessor and the independent purchaser of such Leased Property in order to facilitate the ownership and operation by such purchaser of such Leased Property after the Lease Termination Date, which cooperation shall include the following, all of which Lessee shall do on or before the Lease

Termination Date or as soon thereafter as is reasonably practicable: providing all books and records regarding the maintenance and ownership of such Leased Property and all know-how, data and technical information relating thereto, providing a copy of the Plans and Specifications, granting or assigning all licenses (to the extent assignable) necessary for the operation and maintenance of such Leased Property, and cooperating in seeking and obtaining all necessary Governmental Action. Lessee shall have also paid the cost of all Alterations commenced prior to the Lease Termination Date. The obligations of Lessee under this Article XIV shall survive the expiration or termination of this Lease. Section XIV.9 Renewal. Subject to the conditions set forth herein, Lessee may, by written notice to Lessor and the Agent given not later than twelve months and not earlier than sixteen months, prior to the Lease Termination Date, renew this Lease, for up to five years commencing on the date following the Lease Termination Date, provided that in no event shall the term of this Lease exceed fifteen (15) years. No later than the date that is 45 days after the date the request to renew has been delivered to each of Lessor and the Agent, the Agent will notify Lessee whether or not Lessor and the Lenders consent to such renewal request (which consent, in the case of Lessor and the Lenders, may be granted or denied in their sole discretion, and may be conditioned on such conditions precedent as may be specified by Lessor and the Lenders). If the Agent fails to respond within such time frame, such failure shall be deemed to be a rejection of such request. If the Agent notifies Lessee of Lessor's and the Lenders' consent to such renewal, such renewal shall be effective. ARTICLE XV. LESSEE'S EQUIPMENT After any repossession of any Leased Property (whether or not this Lease has been terminated), Lessee, at its expense and so long as such removal of such trade fixture, personal property or equipment shall not result in a violation of Applicable Law, shall, within a reasonable time after such repossession or within sixty (60) days after Lessee's receipt of Lessor's written request (whichever shall first occur), remove all of Lessee's trade fixtures, personal property and equipment from such Leased Property (to the extent that the same can be readily removed from such Leased Property without causing material damage to such Leased Property); provided, however, that Lessee shall not remove any such trade fixtures, personal property or equipment that (i) has been financed by Lessor under the Operative Documents or otherwise constituting Leased Property (or that constitutes a replacement of such property) or (ii) with respect to which Lessor notifies Lessee that it is exercising the purchase option with respect thereto, which purchase option Lessee hereby grants to Lessor (in which case, Lessor shall pay to Lessee the fair market value of such trade fixture, personal property or equipment on such date of repossession (as determined by mutual agreement of Lessor and Lessee or, if no mutual agreement is promptly achieved, by an appraiser reasonably acceptable to Lessor and Lessee) and Lessee shall execute and deliver a bill of sale therefor to Lessor), provided that the purchase option set forth in this clause (ii) shall not apply to Lessee's inventory or to any personal property of Lessee not used or useful in connection with the Leased Property. Any of Lessee's trade fixtures, personal property and equipment not so removed by Lessee within such period shall be considered abandoned by Lessee, and title thereto shall without further act vest in Lessor, and may be appropriated, sold, destroyed or otherwise disposed of by Lessor without notice to Lessee and without obligation to account therefor and Lessee will pay Lessor, upon written demand, all reasonable costs and expenses incurred by Lessor in removing, storing or disposing of the same and all costs and expenses incurred by Lessor to repair any damage to such Leased Property caused by such removal. Lessee will immediately repair at its expense all damage to such Leased Property caused by any such removal (unless such removal is effected by Lessor, in which event Lessee shall pay all reasonable costs and expenses incurred by Lessor for such repairs). Lessor shall have no liability in exercising Lessor's rights under this Article XV except as set forth in clause (ii) of the first sentence hereof, nor shall Lessor be responsible for any loss of or damage to Lessee's personal property and equipment. ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE If Lessee shall fail to perform or comply with any of its agreements contained herein, Lessor, upon notice to Lessee, may perform or comply with such agreement, and Lessor shall not thereby be deemed to have waived any default caused by such failure, and the amount of such payment and the amount of the expenses of Lessor (including actual and reasonable attorneys' fees and expenses) incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, shall be deemed Supplemental Rent, payable by Lessee to Lessor within thirty (30) days after written demand therefor.

ARTICLE XVII. MISCELLANEOUS Section XVII.1 Reports. To the extent required under Applicable Law and to the extent it is reasonably practical for Lessee to do so, Lessee shall prepare and file in timely fashion, or, where such filing is required to be made by Lessor or it is otherwise not reasonably practical for Lessee to make such filing, Lessee shall prepare and deliver to Lessor (with a copy to the Agent) within a reasonable time prior to the date for filing and Lessor shall file, any material reports with respect to the condition or operation of such Leased Property that shall be required to be filed with any Governmental Authority. Section XVII.2 Binding Effect; Successors and Assigns; Survival. The terms and provisions of this Lease, and the respective rights and obligations hereunder of Lessor and Lessee, shall be binding upon their respective successors, legal representatives and assigns (including, in the case of Lessor, any Person to whom Lessor may transfer any Leased Property or any interest therein in accordance with the provisions of the Operative Documents), and inure to the benefit of their respective permitted successors and assigns, and the rights hereunder of the Agent and the Lenders shall inure (subject to such conditions as are contained herein) to the benefit of their respective permitted successors and assigns. Lessee hereby acknowledges that Lessor has assigned all of its right, title and interest to, in and under this Lease to the Agent and the Lenders, and that all of Lessor's rights hereunder may be exercised by the Agent. Section XVII.3 Quiet Enjoyment. Lessor covenants that it will not interfere in Lessee's or any of its permitted sublessees' quiet enjoyment of the Leased Properties in accordance with this Lease during the Lease Term, so long as no Event of Default has occurred and is continuing. Such right of quiet enjoyment is independent of, and shall not affect, Lessor's rights otherwise to initiate legal action to enforce the obligations of Lessee under this Lease. Section XVII.4 Notices. Unless otherwise specified herein, all notices, offers, acceptances, rejections, consents, requests, demands or other communications to or upon the respective parties hereto shall be in writing and shall be deemed to have been given as set forth in Section 8.2 of the Master Agreement. All such notices, offers, acceptances, rejections, consents, requests, demands or other communications shall be addressed as follows or to such other address as any of the parties hereto may designate by written notice:
If to Lessor: Atlantic Financial Group, Ltd. 2808 Fairmont Suite 250 LB9 Dallas, Texas 75201 Attn: Stephen Brookshire Ruby Tuesday, Inc. 150 West Church Avenue Maryville, Tennessee 37801 Attn: CFO General Counsel at same address

If to Lessee:

with a copy to:

If to Agent:

SunTrust Bank 201 Fourth Avenue North Nashville, Tennessee 37244 Attn: Vipul Patel

If to a Lender, to the address provided in the Master Agreement. Section XVII.5 Severability. Any provision of this Lease that shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction, and Lessee shall remain liable to perform its obligations hereunder except to the extent of such unenforceability. To the extent permitted by Applicable Law, Lessee hereby waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect. Section XVII.6 Amendment; Complete Agreements. Neither this Lease nor any of the terms hereof may be

terminated, amended, supplemented, waived or modified orally, except by an instrument in writing signed by Lessor and Lessee in accordance with the provisions of Section 8.4 of the Master Agreement. This Lease, together with the other Operative Documents, is intended by the parties as a final expression of their lease agreement and as a complete and exclusive statement of the terms thereof, all negotiations, considerations and representations between the parties having been incorporated herein and therein. No course of prior dealings between the parties or their officers, employees, agents or Affiliates shall be relevant or admissible to supplement, explain, or vary any of the terms of this Lease or any other Operative Document. Acceptance of, or acquiescence in, a course of performance rendered under this or any prior agreement between the parties or their Affiliates shall not be relevant or admissible to determine the meaning of any of the terms of this Lease or any other Operative Document. No representations, undertakings, or agreements have been made or relied upon in the making of this Lease other than those specifically set forth in the Operative Documents. Section XVII.7 Construction. This Lease shall not be construed more strictly against any one party, it being recognized that both of the parties hereto have contributed substantially and materially to the preparation and negotiation of this Lease. Section XVII.8 Headings. The Table of Contents and headings of the various Articles and Sections of this Lease are for convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof. Section XVII.9 Counterparts. This Lease may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section XVII.10 GOVERNING LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER, AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATES IN WHICH SUCH ESTATES ARE LOCATED. Section XVII.11 Discharge of Lessee's Obligations by its Affiliates. Lessor agrees that performance of any of Lessee's obligations hereunder by one or more of Lessee's Affiliates or one or more of Lessee's sublessees of the Leased Properties or any part thereof shall constitute performance by Lessee of such obligations to the same extent and with the same effect hereunder as if such obligations were performed by Lessee, but no such performance shall excuse Lessee from any obligation not performed by it or on its behalf under the Operative Documents. Section XVII.12 Liability of Lessor Limited. Except as otherwise expressly provided below in this Section 17.12, it is expressly understood and agreed by and between Lessee, Lessor and their respective successors and assigns that nothing herein contained shall be construed as creating any liability of Lessor or any of its Affiliates or any of their respective officers, directors, employees or agents, individually or personally, to perform any covenant, either express or implied, contained herein, all such liability (other than that resulting from Lessor's gross negligence or willful misconduct, except to the extent imputed to Lessor by virtue of Lessee's action or failure to act), if any, being expressly waived by Lessee and by each and every Person now or hereafter claiming by, through or under Lessee, and that, so far as Lessor or any of its Affiliates or any of their respective officers, directors, employees or agents, individually or personally, is concerned, Lessee and any Person claiming by, through or under Lessee shall look solely to the right, title and interest of Lessor in the Leased Properties and any proceeds from Lessor's sale or encumbrance thereof (provided, however, that Lessee shall not be entitled to any double recovery) for the performance of any obligation under this Lease and under the Operative Documents and the satisfaction of any liability arising therefrom (other than that resulting from Lessor's gross negligence or willful misconduct, except to the extent imputed to Lessor by virtue of Lessee's action or failure to act). Section XVII.13 Estoppel Certificates. Each party hereto agrees that at any time and from time to time during the Lease Term, it will promptly, but in no event later than thirty (30) days after request by the other party hereto, execute, acknowledge and deliver to such other party or to any prospective purchaser (if such prospective purchaser has signed a commitment or letter of intent to purchase any Leased Property or any part thereof or any Note), assignee or mortgagee or third party designated by such other party, a certificate stating (a) that this Lease is unmodified and in force and effect (or if there have been modifications, that this Lease is in force and effect as

modified, and identifying the modification agreements); (b) the date to which Basic Rent has been paid; (c) whether or not there is any existing default by Lessee in the payment of Basic Rent or any other sum of money hereunder, and whether or not there is any other existing default by either party with respect to which a notice of default has been served, and, if there is any such default, specifying the nature and extent thereof; (d) whether or not, to the knowledge of the signer after due inquiry and investigation, there are any setoffs, defenses or counterclaims against enforcement of the obligations to be performed hereunder existing in favor of the party executing such certificate and (e) other items that may be reasonably requested; provided that no such certificate may be requested unless the requesting party has a good faith reason for such request. Section XVII.14 No Joint Venture. Any intention to create a joint venture, partnership or other fiduciary relationship between Lessor and Lessee is hereby expressly disclaimed. Section XVII.15 No Accord and Satisfaction. The acceptance by Lessor of any sums from Lessee (whether as Basic Rent or otherwise) in amounts which are less than the amounts due and payable by Lessee hereunder is not intended, nor shall be construed, to constitute an accord and satisfaction of any dispute between Lessor and Lessee regarding sums due and payable by Lessee hereunder, unless Lessor specifically deems it as such in writing. Section XVII.16 No Merger. In no event shall the leasehold interests, estates or rights of Lessee hereunder, or of the holder of any Notes secured by a security interest in this Lease, merge with any interests, estates or rights of Lessor in or to the Leased Properties, it being understood that such leasehold interests, estates and rights of Lessee hereunder, and of the holder of any Notes secured by a security interest in this Lease, shall be deemed to be separate and distinct from Lessor's interests, estates and rights in or to the Leased Properties, notwithstanding that any such interests, estates or rights shall at any time or times be held by or vested in the same person, corporation or other entity. Section XVII.17 Survival. The obligations of Lessee to be performed under this Lease prior to the Lease Termination Date and the obligations of Lessee pursuant to Article III, Articles X, XI, XIII, Articles XIV, XV, and XVI, and Sections 17.10 and 17.12 shall survive the expiration or termination of this Lease. The extension of any applicable statute of limitations by Lessor, Lessee, the Agent or any Indemnitee shall not affect such survival. Section XVII.18 Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the sole original counterpart, which shall be identified as the original counterpart by the receipt of the Agent. Section XVII.19 Time of Essence. Time is of the essence of this Lease. Section XVII.20 Recordation of Lease. Lessee will, at its expense, cause this Lease, or the applicable Lease Supplement or a memorandum of lease in form and substance reasonably satisfactory to Lessor and Lessee (if permitted by Applicable Law) to be recorded in the proper office or offices in the States and the municipalities in which such parcel of Land is located. Section XVII.21 Investment of Security Funds. Any amounts not payable to Lessee pursuant to any provision of Article VIII, X or XIV or this Section 17.21 solely because an Event of Default shall have occurred and be continuing shall be held by the Agent (or Lessor if the Loans have been fully paid) as security for the obligations of Lessee under this Lease and the Master Agreement. At such time as no Event of Default shall be continuing, such amounts, net of any amounts previously applied to Lessee's obligations hereunder or under the Master Agreement, shall be paid to Lessee. Any such amounts which are held by the Agent (or Lessor if the Loans have been fully paid) pending payment to Lessee shall until paid to Lessee, as provided hereunder or, as long as the Loan Agreement is in effect, until applied against Lessee's obligations herein and under the Master Agreement and distributed as provided in the Loan Agreement or herein (after the Loan Agreement is no longer in effect) in connection with any exercise of remedies hereunder, be invested by the Agent or Lessor, as the case may be as directed from time to time in writing by Lessee (provided, however, if an Event of Default has occurred and is continuing it will be directed by the Agent or, if the Loans have been fully paid, Lessor) and at the expense and risk of Lessee, in Permitted Investments. Any gain (including interest received) realized as the result of any such investment (net of any fees, commissions and other expenses, if any, incurred in connection with such investment) shall be applied in the same manner as the principal invested. In no event shall Lessor or the Agent be responsible for any losses as the result of any such investment.

Section XVII.22 Ground Leases. Lessee will, at its expense, timely perform all of the obligations of Lessor, in its capacity as ground lessee, under each Ground Lease and, if requested by Lessor shall provide satisfactory evidence to Lessor of such performance. Section XVII.23 Land and Building. If the cost of the Land related to any Leased Property exceeds 25% of the projected Leased Property Balance for such Leased Property, the Land and the Building related to such Leased Property shall be leased under separate Lease Supplements. If any Building and the Land on which such Building is located are subject to separate Lease Supplements, at any time that Lessee exercises an option to purchase such Building or such Land, or to renew this Lease with respect to such Building or such Land, or is obligated to purchase such Building or such Land as a result of an Event of Loss, an Event of Taking or an Event of Default, such purchase or renewal shall be made simultaneously with respect to all of such Building and such Land. [Signature page follows]

4900591 99539306 IN WITNESS WHEREOF, the undersigned have each caused this Lease Agreement to be duly executed and delivered and attested by their respective officers thereunto duly authorized as of the day and year first above written. RUBY TUESDAY, INC. as Lessee
By /s/ J. Russell Mothershed Name: J. Russell Mothershed Title: Senior Vice President

ATLANTIC FINANCIAL GROUP, LTD., as Lessor By: Atlantic Financial Managers, Inc., its General Partner
By: /s/ Stephens S. Brookshire Name: Stephens S. Brookshire Title: President

STATE OF Texas ) ss.: COUNTY OF Dallas The foregoing Lease was acknowledged before me, the undersigned Notary Public, in the County of Dallas, Texas, this 24th day of April, 2001, by Stephen S. Brookshire, as President of Atlantic Financial Group, Ltd., on behalf of such partnership.
[Notarial Seal] /s/Lisa M. Williams Notary Public

My commission expires: December 17, 2001

STATE OF Tennessee ) ss.: COUNTY OF Blount The foregoing Lease was acknowledged before me, the undersigned Notary Public, in the County of Blount, Tennessee, this 30th day of April, 2001, by J. Russell Mothershed, as Senior Vice President, of Ruby Tuesday, Inc., a Georgia corporation, on behalf of the corporation.
[Notarial Seal] /s/ Mary Jane Trainer Notary Public

My commission expires: July 31, 2002

Receipt of this original counterpart of the foregoing Lease is hereby acknowledged as of the date thereof. SUNTRUST BANK, as the Agent
By: /s/ Vipul Patel

Name: Vipul Patel Title:Vice President

EXHIBIT A TO THE LEASE LEASE SUPPLEMENT NO. __ AND MEMORANDUM OF LEASE THIS LEASE SUPPLEMENT NO. __ (this "Lease Supplement") dated as of [ ], between ATLANTIC FINANCIAL GROUP, LTD., as the lessor (the "Lessor"), and RUBY TUESDAY, INC., a Georgia corporation, as lesse (the "Lessee"). WHEREAS Lessor is the owner of the Land described on Schedule I hereto and wishes to lease the Land together with any Building and other improvements thereon or which thereafter may be constructed thereon pursuant to the Lease to Lessee; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions; Interpretation. For purposes of this Lease Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Lease Agreement, dated as of April 30, 2001, between Lessee and Lessor; and the rules of interpretation set forth in Appendix A to the Lease shall apply to this Lease Supplement. SECTION 2. The Properties. Attached hereto as Schedule I is the description of certain Land (the "Subject Property"). Effective upon the execution and delivery of this Lease Supplement by Lessor and Lessee, such Land, together with any Building and other improvements thereon or which thereafter may be constructed thereon pursuant to the Lease shall be subject to the terms and provisions of the Lease and Lessor hereby grants, conveys, transfers and assigns to Lessee those interests, rights, titles, estates, powers and privileges provided for in the Lease with respect to the Subject Property. SECTION 3. Amendments to Lease with Respect to Subject Property. Effective upon the execution and delivery of this Lease Supplement by Lessor and Lessee, the following terms and provisions shall apply to the Lease with respect to the Subject Property: [Insert Applicable Sections per Local Law as contemplated by the Master Agreement] SECTION 4. Ratification; Incorporation. Except as specifically modified hereby, the terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. The terms of the Lease (as amended by this Lease Supplement) are by this reference incorporated herein and made a part hereof. SECTION 5. Original Lease Supplement. The single executed original of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed Counterpart"). To the extent that this Lease Supplement constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF GEORGIA, BUT EXCLUDING ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATE HEREUNDER, AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH SUCH ESTATE IS LOCATED. SECTION 7. Counterpart Execution. This Lease Supplement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument.

IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. ATLANTIC FINANCIAL GROUP, LTD., as the Lessor By: Atlantic Financial Managers, Inc., its General Partner By____________________________ Name: Title: RUBY TUESDAY, INC., as the Lessee By____________________________ Name: Title:

STATE OF _________________ ) ) ss.: COUNTY OF ________________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of ______________, ____ ____, this _____ day of __________, _______________, by _____________________, as ____________________ of Atlantic Financial Group, Ltd., on behalf of such partnership. [Notarial Seal] ___________________________ Notary Public My commission expires: _____________ STATE OF _________________ ) ) ss.: COUNTY OF ________________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of ______________, ___ ____, this _____ day of __________, __________, by ___________, as _____________, of Ruby Tuesday, Inc., a Georgia corporation, on behalf of the corporation.
[Notarial Seal] ______________________________ Notary Public

My commission expires:

______________

Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged as of the date hereof. SUNTRUST BANK, as the Agent By___________________________ Name: Title:

CONSTRUCTION AGENCY AGREEMENT dated as of April 30, 2001 among ATLANTIC FINANCIAL GROUP, LTD. and RUBY TUESDAY, INC. as Construction Agent

TABLE OF CONTENTS Page ARTICLE I 1.1. ARTICLE II 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7. 2.8. ARTICLE III 3.1. 3.2. 3.3. 3.4. ARTICLE IV 4.1. DEFINITIONS.............................................2 Defined Terms...........................................2 APPOINTMENT OF CONSTRUCTION AGENT.......................2 Appointment.............................................2 Acceptance; Construction................................2 Commencement of Construction............................2 Supplements to this Agreement...........................3 Term....................................................3 Identification of Properties; Construction Documents............................................4 Scope of Authority......................................4 Covenants of the Construction Agent.....................5 THE BUILDINGS...........................................7 Construction............................................7 Amendments; Modifications...............................7 Casualty and Condemnation...............................7 Indemnity...............................................8 PAYMENT OF FUNDS........................................9 Funding of Property Acquisition Costs and Property Buildings Costs.............................9 CONSTRUCTION AGENCY EVENTS OF DEFAULT...................9 Construction Agency Events of Default...................9 Damages................................................11 Remedies; Remedies Cumulative..........................11 NO CONSTRUCTION AGENCY FEE.............................12 Lease as Fulfillment of Lessor's Obligations...........12 LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS...........13 Exercise of the Lessor's Rights........................13 Lessor's Right to Cure Construction Agent's Defaults............................................13 MISCELLANEOUS..........................................13 Notices................................................13 Successors and Assigns.................................13 GOVERNING LAW..........................................13 Amendments and Waivers.................................14 Counterparts...........................................14 Severability...........................................14 Headings and Table of Contents.........................14 Jurisdiction; Waivers..................................14

ARTICLE V 5.1. 5.2. 5.3. ARTICLE VI 6.1. ARTICLE VII 7.1. 7.2.

ARTICLE VIII 8.1. 8.2. 8.3. 8.4. 8.5. 8.6. 8.7. 8.8.

EXHIBITS Exhibit A Form of Supplement to Construction Agency Agreement

CONSTRUCTION AGENCY AGREEMENT CONSTRUCTION AGENCY AGREEMENT, dated as of April 30, 2001 (as amended, supplemented or otherwise modified from time to time, this "Agreement"), between ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership, (the "Lessor"), and RUBY TUESDAY, INC., a Georgia corporation ("RTI", and in its capacity as construction agent, the "Construction Agent"). PRELIMINARY STATEMENT A. Ruby Tuesday, Inc., as lessee (the "Lessee"), and Lessor, as lessor, are parties to that certain Lease Agreement, dated as of April 30, 2001 (as amended, supplemented or otherwise modified from time to time pursuant thereto, the "Lease"), pursuant to which the Lessee has agreed to lease from Lessor, and Lessor has agreed to lease to Lessee, Lessor's interests in certain Leased Properties. B. Lessor, the Lessee, the Lenders signatory thereto and SunTrust Bank, as agent for such Lenders (in such capacity, the "Agent") are parties to that certain Master Agreement, dated as of April 30, 2001 (as amended, supplemented or otherwise modified from time to time pursuant thereto, the "Master Agreement"). C. Subject to the terms and conditions hereof, (i) the Lessor desires to appoint RTI as the Construction Agent to act as its sole and exclusive agent for the identification and acquisition of the Land pursuant to the Master Agreement and construction of the Buildings in accordance with the Plans and Specifications and pursuant to the Master Agreement, and (ii) the Construction Agent desires, for the benefit of the Lessor, to cause the Buildings to be constructed in accordance with the Plans and Specifications and pursuant to the Master Agreement and this Agreement, in each case in accordance with the terms herein set forth. NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:

ARTICLE I DEFINITIONS I.1. Defined Terms. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings set forth in Appendix A to the Master Agreement. ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT II.1. Appointment. Pursuant to and subject to the terms and conditions set forth herein and in the Master Agreement and the other Operative Documents, the Lessor hereby irrevocably designates and appoints RTI as the Construction Agent to act as its exclusive agent for (i) the identification and acquisition from time to time of Land to be acquired or leased by the Lessor and leased or subleased to RTI and (ii) the construction of the Buildings in accordance with the Plans and Specifications on such Land. II.2. Acceptance; Construction. RTI hereby unconditionally accepts the designation and appointment as Construction Agent. The Construction Agent will cause the Buildings to be constructed on the Land substantially in accordance with the Plans and Specifications and, in accordance with the Operative Documents, to be equipped in substantial compliance in all material respects with all Applicable Law and insurance requirements. II.3. Commencement of Construction. Subject to Construction Force Majeure Events, the Construction Agent hereby agrees, unconditionally and for the benefit of the Lessor, to cause Construction of a Building to commence on each parcel of Land as soon as is reasonably practicable, in its reasonable judgment, after the Closing Date in respect of such Land. For purposes hereof, Construction of a Building shall be deemed to commence on the date (the "Construction Commencement Date") on which excavation for the foundation for such Building commences. Without limiting the foregoing, no phase of such Construction shall be undertaken until all permits required for such phase have been issued therefor. II.4. Supplements to this Agreement. On the Closing Date of each parcel of Land, the Lessor and the Construction Agent shall each execute and deliver to the Agent a supplement to this Agreement in the form of Exhibit A to this Agreement, appropriately completed, pursuant to which the Lessor and the Construction Agent shall, among other things, each acknowledge and agree that the Construction of such parcel of Land will be governed by the terms of this Agreement. Following the execution and delivery of a supplement to this Agreement as provided above, such supplement and all supplements previously delivered under this Agreement shall constitute a part of this Agreement. On or prior to the Closing Date of each parcel of Land, the Construction Agent shall prepare and deliver to the Lessor and the Agent a construction budget (the "Construction Budget") for the related Leased Property, setting forth in reasonable detail the budget for the Construction of the proposed Building on such Land in accordance with the Plans and Specifications therefor, and all related costs including the capitalized interest and Yield expected to accrue during the related Construction Term; such Construction Budget shall include a line item for the amount of self-insurance applicable to such Leased Property. II.5. Term. This Agreement shall commence on the date hereof and shall terminate with respect to any given Leased Property upon the first to occur of: (a) payment by the Lessee of the Leased Property Balance and termination of the Lease with respect to such Leased Property in accordance with the Lease; (b) the expiration or earlier termination of the Lease; (c) termination of this Agreement pursuant to Article V hereof; (d) the Completion Date for such Leased Property and the completion of all punch list items as set forth in Section 2.8(d); and (e) the payment by the Construction Agent of the Leased Property Balance or the Construction Failure Payment

with respect to such Leased Property pursuant to this Agreement. II.6. Identification of Properties; Construction Documents. The Construction Agent may execute any of its duties and obligations under this Agreement by or through agents, contractors, developers, Affiliates, employees or attorneys-in-fact, and the Construction Agent shall enter into such agreements with architects and contractors as the Construction Agent deems necessary or desirable for the construction of the Buildings pursuant hereto (the "Construction Documents"); provided, however, that no such delegation shall limit or reduce in any way the Construction Agent's duties and obligations under this Agreement; provided, further, that contemporaneously with the execution and delivery of a Construction Document, the Construction Agent will execute and deliver to the Lessor the Security Agreement and Assignment, pursuant to which the Construction Agent assigns to the Lessor, among other things, all of the Construction Agent's rights under and interests in such Construction Documents. Each construction contract shall be with a reputable general contractor with experience in constructing projects that are similar in scope and type to the proposed Building, and shall provide for a guaranteed maximum project cost and at least 10% retainage. II.7. Scope of Authority. (a) Subject to the terms, conditions, restrictions and limitations set forth in the Operative Documents, the Lessor hereby expressly authorizes the Construction Agent, or any agent or contractor of the Construction Agent, and the Construction Agent unconditionally agrees, for the benefit of the Lessor, to take all action necessary or desirable for the performance and satisfaction of all of the Construction Agent's obligations hereunder with respect to the Leased Properties acquired or leased by the Lessor, including, without limitation: (i) the identification and assistance with the acquisition or lease of Land in accordance with the terms and conditions of the Master Agreement; (ii) all design and supervisory functions relating to the construction of the Buildings and performing all engineering work related to the construction of the Buildings; (iii) negotiating and entering into all contracts or arrangements to procure the equipment and services necessary to construct the Buildings on such terms and conditions as are customary and reasonable in light of local standards and practices; (iv) obtaining all necessary permits, licenses, consents, approvals and other authorizations, including those required under Applicable Law, from all Governmental Authorities in connection with the construction and the development of the Leased Property on the Land in accordance with the Plans and Specifications; (v) maintaining all books and records with respect to the construction, operation and management of the Leased Properties; and (vi) performing any other acts necessary or appropriate in connection with the identification, and acquisition (or leasing) and development of the Land and construction of the Buildings in accordance with the Plans and Specifications, and all other functions typically undertaken for the construction and development of similar properties. (b) Neither the Construction Agent nor any of its Affiliates or agents shall enter into any contract which would, directly or indirectly, impose any liability or obligation on the Lessor unless such contract expressly contains an acknowledgment by the other party or parties thereto that the obligations of the Lessor are non-recourse, and that the Lessor shall have no personal liability with respect to such obligations. Any contract entered into by the Construction Agent or any of its Affiliates or agents not meeting the requirements of the foregoing sentence shall be ineffective. Subject to the foregoing, the Lessor shall execute such documents and take such other actions as the Construction Agent shall reasonably request, at the Construction Agent's expense, to permit the Construction Agent to perform its duties hereunder. (c) Subject to the terms and conditions of this Agreement and the other Operative Documents, the Construction Agent shall have sole management and control over the means, methods, sequences and procedures with respect to the Construction. II.8. Covenants of the Construction Agent. The Construction Agent hereby covenants and agrees that it will: (a) following the Construction Commencement Date for each parcel of Land, cause construction of a Building on

such Land to be prosecuted diligently and without undue interruption substantially in accordance with the Plans and Specifications for such Land, in accordance with the Construction Budget for such Leased Property and in compliance in all material respects with all Applicable Law and insurance requirements; (b) notify the Lessor and the Agent in writing not less than five (5) Business Days after the occurrence of each Construction Force Majeure Event; (c) take all reasonable and practical steps to cause the Completion Date for such Leased Property to occur on or prior to the Scheduled Construction Termination Date for such Leased Property, and cause all Liens (including, without limitation, Liens or claims for materials supplied or labor or services performed in connection with the construction of the Buildings), other than Permitted Liens and Lessor Liens, to be discharged; (d) following the Completion Date for each Leased Property, cause all outstanding punch list items with respect to the Buildings on such Leased Property to be completed within sixty (60) days after said Completion Date; (e) at all times during Construction, cause all title to all personalty financed by the Lessor on or within such Leased Property to be and remain vested in the Lessor and cause to be on file with the applicable filing office or offices all necessary documents under Article 9 of the Uniform Commercial Code to perfect such title free of all Liens other than Permitted Liens, it being understood and acknowledged that such Lessor's rights, title and interest in and to said personalty have been assigned to the Agent pursuant to the Operative Documents; and (f) not enter into any agreements or arrangements with any Person (other than the Funding Parties pursuant to the Operative Documents) that would result in any claim against, or liability of, the Agent or any Funding Party resulting from the fact that any Leased Property is not completed on or prior to the Scheduled Construction Termination Date therefor. ARTICLE III THE BUILDINGS III.1. Construction. The Construction Agent shall cause the Buildings to be constructed and equipped (as provided in the Plans and Specifications) in compliance in all material respects with all Applicable Law and insurance requirements. III.2. Amendments; Modifications. The Construction Agent may, subject to the conditions, restrictions and limitations set forth herein and in the Operative Documents (but not otherwise), at any time during the term hereof revise, amend or modify the Plans and Specifications and the related Construction Documents without the consent of the Lessor; provided, however, that the Lessor's prior written consent will be required in the following instances: (x) such revision, amendment or modification by its terms would result in the Completion Date of the Buildings occurring after the Scheduled Construction Termination Date, or (y) such revision, amendment or modification would result in the cost for such Leased Property exceeding the then remaining Commitments or increase the Construction Budget therefor, or (z) the aggregate effect of such revision, amendment or modification, when taken together with any previous or contemporaneous revision, amendment or modification to the Plans and Specifications for such Leased Property, would be to reduce the Fair Market Sales Value of such Leased Property in a material respect when completed. III.3. Casualty and Condemnation. If at any time prior to the Completion Date with respect to any Building there occurs a Casualty or the Lessor or the Construction Agent receives notice of a Condemnation, then, in each case the Construction Agent shall promptly and diligently take all commercially reasonable and practical steps to cause the Construction of the related Building to be completed substantially in accordance with the Plans and Specifications and with the terms hereof, and cause the Completion Date to occur on or prior to the Scheduled Construction Termination Date. The Construction Agent shall use all insurance proceeds or Awards received by it with respect to such Casualty or Condemnation, as the case may be, to pay the construction costs incurred in connection with such rebuilding or restoration. The Lessor shall make all insurance proceeds or Awards received with respect to such Casualty or Condemnation available to the Construction Agent to reimburse the Construction Agent for, or to pay, all construction costs incurred in connection with such rebuilding or restoration. To the extent that such insurance proceeds are insufficient to pay such construction costs, such construction costs shall be paid with the proceeds of Advances made pursuant to the Master Agreement. In the event that Lessor does not make such insurance proceeds or Advances available, then the provisions of Section

5.3 shall apply to the related Leased Property. III.4. Indemnity. During the Construction Term for each Leased Property, the Construction Agent agrees to assume liability for, and to indemnify, protect, defend, save and hold harmless the Lessor on an After-Tax Basis, from and against, any and all Claims that may be imposed on, incurred by or asserted or threatened to be asserted, against the Lessor, whether or not the Lessor shall also be indemnified as to any such Claim by any other Person, in any way relating to or arising out of (i) any event, condition or circumstance within the Construction Agent's control,(ii) fraud, misapplication of funds, illegal acts or willful misconduct on the part of the Construction Agent, or (iii) any event described in paragraph (f), (g) or (h) of Article XII of the Lease with respect to the Construction Agent. As used in clause (i) of the foregoing sentence, the term "within the Construction Agent's control" shall mean caused by or arising from any failure by any Obligor to comply with any of its obligations under the Operative Documents (including its insurance obligations), any representation by any Obligor in any of the Operative Documents not being true, any negligence or wilful misconduct of any Obligor, or any claim by any third party against the Lessor based upon the action or inaction of or by any Obligor; provided, however, that if such Claim is related to an inability or the failure to complete the construction of a Leased Property on or prior to Scheduled Construction Termination Date therefor and such Claim does not arise out of or result from events or circumstances described in the foregoing clause (ii) or (iii), the Construction Agent's liability shall be limited to an amount equal to the Construction Failure Payment. Any Claims that are incurred by any Indemnified Party for which the Construction Agent is not obligated to indemnify pursuant to this Section 3.4 or the Master Agreement shall, if requested by the Agent by written notice to Lessor be capitalized, and result in an increase to the Funded Amounts related to the relevant Leased Property. The foregoing indemnities are in addition to, and not in limitation of, the indemnities with respect to environmental claims set forth in Section 7.2 of the Master Agreement. The provisions of Section 7.3 of the Master Agreement shall apply to any amounts that the Construction Agent is requested to pay pursuant to this Section 3.4. ARTICLE IV PAYMENT OF FUNDS IV.1. Funding of Property Acquisition Costs and Property Buildings Costs. (a) In connection with the acquisition or lease of any Land and during the course of the construction of the Buildings on any Land, the Construction Agent may request that the Lessor advance funds for the payment of acquisition, transaction and closing costs or property improvement costs, and the Lessor will comply with such request to the extent provided for under, and subject to the conditions, restrictions and limitations contained in, the Master Agreement and the other Operative Documents. (b) The proceeds of any funds made available to the Lessor to pay acquisition, transaction and closing costs or improvement costs shall be made available to the Construction Agent in accordance with the Funding Request relating thereto and the terms of the Master Agreement. The Construction Agent will use such proceeds only to pay the acquisition, transaction and closing costs or improvement costs for Leased Properties set forth in the Funding Request relating to such funds. ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT V.1. Construction Agency Events of Default. If any one or more of the following events (each a "Construction Agency Event of Default") shall occur and be continuing: (a) the Construction Agent fails to apply any funds paid by, or on behalf of, the Lessor to the Construction Agent for the acquisition or lease of the Land and the construction of the Buildings to the payment of acquisition, transaction and closing costs or improvements costs for such Leased Property; (b) subject to Construction Force Majeure Events, the Construction Commencement Date with respect to any Leased Property shall fail to occur for any reason on or prior to the date that is one year after the Closing Date with respect to such Leased Property; (c) the Completion Date with respect to any Leased Property shall fail to occur for any reason on or prior to the

earlier of the Funding Termination Date and the Scheduled Construction Termination Date for such Leased Property; (d) any Event of Default shall have occurred and be continuing; or (e) the Construction Agent shall fail to observe or perform in any material respect any term, covenant or condition of this Agreement (except those specified in clauses (a) through (d) above), and such failure shall remain uncured for a period of thirty (30) days after notice thereof to the Construction Agent; provided, however, no Construction Agency Event of Default shall be deemed to occur if such failure or breach cannot reasonably be cured within such period, so long as the Construction Agent shall have promptly commenced the cure thereof and continues to act with diligence to cure such failure or breach and such failure or breach is cured within one hundred eighty (180) days after notice thereof to the Construction Agent; then, in any such event, the Lessor may, in addition to the other rights and remedies provided for in this Article, immediately terminate this Agreement as to any Leased Property or Properties or all of the Leased Properties, separately, successively or concurrently (all in Lessor's sole discretion) by giving the Construction Agent written notice of such termination, and upon the giving of such notice, this Agreement shall terminate as to such Leased Property or Properties or all of the Leased Properties (as the case may be) and all rights of the Construction Agent and, subject to the terms of the Operative Documents, all obligations of the Lessor under this Agreement with respect to such Leased Property or Properties or all of the Leased Properties (as the case may be) shall cease. The Construction Agent shall pay upon demand all reasonable costs, expenses, losses, expenditures and damages (including, without limitation, attorneys' fees and disbursements) actually incurred by or on behalf of the Lessor in connection with any Construction Agency Event of Default. V.2. Damages. The termination of this Agreement pursuant to Section 5.1 shall in no event relieve the Construction Agent of its liability and obligations hereunder, all of which shall survive any such termination. V.3. Remedies; Remedies Cumulative. (a) If a Construction Agency Event of Default shall have occurred and be continuing, the Lessor shall have all rights and remedies available under the Operative Documents or available at law, equity or otherwise. Notwithstanding the foregoing, if a Construction Agency Event of Default hereunder relates only to a specific Leased Property or specific Leased Properties but not all Leased Properties (but in any event excluding any Event of Default), the Construction Agent shall have the right to cure such Construction Agency Event of Default by purchasing such Leased Property or Properties for the Leased Property Balance(s) therefor from the Lessor in accordance with the terms and subject to the conditions, restrictions and limitations of Section 14.5 of the Lease. In the event that the Construction Agent does not exercise its option to purchase such Leased Property or Properties, the Construction Agent shall pay to the Lessor the Construction Failure Payment (s) therefor within five (5) Business Days of the demand therefor by the Lessor, and shall surrender and return such Leased Property or Properties to the Lessor or its designee in accordance with the terms of Section 14.8 of the Lease (provided that the obligation to surrender the Leased Property in as good condition as it was on the Completion Date, ordinary wear and tear excepted, shall not apply). In the event that the Construction Agent returns any Leased Property to the Lessor pursuant to the previous or the next sentence, the Construction Agent shall take such action as the Lessor may reasonably request in order to transfer to the Lessor (or its designee) all of the Construction Agent's rights and claims in, to and under the related Construction Contract(s), Architect's Agreement(s), all other Construction Documents, all agreements, security deposits, guaranties and surety bonds related thereto and all governmental permits related to such Construction, and the Construction Agent shall provide to the Lessor copies of all books, records and documentation with respect to the foregoing. In addition, the Construction Agent shall provide such assistance as the Lessor may request in order to remarket the Leased Property. Notwithstanding the foregoing, (A) if a Construction Agency Event of Default pursuant to Section 5.1 (c) occurs solely as a result of a Construction Force Majeure Event, if the Construction Agent does not exercise its option to purchase Leased Property, the Construction Agent shall surrender and return such Leased Property to Lessor or its designee in accordance with the terms of Section 14.8 of the Lease and (B) if a Construction Agency Event of Default occurs due to the fraud, misapplication of funds, illegal acts or wilful misconduct on the part of the Construction Agent or any event described in paragraph (f), (g) or (h) of Article XII of the Lease, the Construction Agent shall be obligated to purchase all of the Leased Properties for the Lease Balance within five (5) Business Days of demand by Lessor. (b) No failure to exercise and no delay in exercising, on the part of the Lessor, any right, remedy, power or

privilege under this Agreement or under the other Operative Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. ARTICLE VI NO CONSTRUCTION AGENCY FEE VI.1. Lease as Fulfillment of Lessor's Obligations. All obligations, duties and requirements imposed upon or allocated to the Construction Agent shall be performed by the Construction Agent at the Construction's Agent's sole cost and expense, and the Construction Agent will not be entitled to, and the Lessor shall not have any obligation to pay, any agency fee or other fee or compensation, and the Construction Agent shall not be entitled to, and the Lessor shall not have any obligation to make or pay, any reimbursement therefor, it being understood that this Agreement is being entered into as consideration for and as an inducement to the Lessor entering into the Lease and the other Operative Documents. ARTICLE VII LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS VII.1. Exercise of the Lessor's Rights. The Construction Agent hereby acknowledges and agrees that the rights and powers of the Lessor under this Agreement have been assigned to, and may be exercised by, the Agent. VII.2. Lessor's Right to Cure Construction Agent's Defaults. The Lessor, without waiving or releasing any obligation or Construction Agency Event of Default, may, upon prior written notice to the Construction Agent (but shall be under no obligation to), remedy any Construction Agency Event of Default for the account of and at the sole cost and expense of the Construction Agent. All reasonable out of pocket costs and expenses so incurred (including actual and reasonable fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by the Lessor, shall be paid by the Construction Agent to the Lessor on demand. ARTICLE VIII MISCELLANEOUS VIII.1. Notices. All notices, consents, directions, approvals, instructions, requests, demands and other communications required or permitted by the terms hereof to be given to any Person shall be given in writing in the manner provided in, shall be sent to the respective addresses set forth in, and the effectiveness thereof shall be governed by the provisions of, Section 8.2 of the Master Agreement. VIII.2. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Lessor, the Construction Agent and their respective legal representatives, successors and permitted assigns. The Construction Agent shall not assign its rights or obligations hereunder without the prior written consent of the Lessor and the Agent. VIII.3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. VIII.4. Amendments and Waivers. Subject to Section 8.4 of the Master Agreement, the Lessor and the Construction Agent may from time to time, enter into written amendments, supplements or modifications hereto. VIII.5. Counterparts. This Agreement may be executed on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same agreement. VIII.6. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction

shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. VIII.7. Headings and Table of Contents. The headings and table of contents contained in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. VIII.8. Jurisdiction; Waivers. The Lessor and the Construction Agent hereby acknowledge that the terms of Section 8.11 of the Master Agreement apply to this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. RUBY TUESDAY, INC.
By: /s/ J. Russell Mothershed Name: J. Russell Mothershed Title: Senior Vice President

ATLANTIC FINANCIAL GROUP, LTD. By: Atlantic Financial Managers, Inc., its General Partner
By: /s/ Stephens S. Brookshire Name: Stephens S. Brookshire Title: President

EXHIBIT A Supplement to Construction Agency Agreement SUPPLEMENT to Construction Agency Agreement, dated as of ______________, 200_, between ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership (the "Lessor"), and RUBY TUESDAY, INC., a Georgia corporation (in its capacity as construction agent, the "Construction Agent"). Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Construction Agency Agreement. The Lessor and the Construction Agent are parties to that certain Construction Agency Agreement, dated as of April 30, 2001 (as amended, supplemented or otherwise modified, the "Construction Agency Agreement"), pursuant to which (i) the Lessor has appointed the Construction Agent as its sole and exclusive agent in connection with the identification and acquisition of Land and construction of the Buildings in accordance with the Plans and Specifications, and (ii) the Construction Agent has agreed, for the benefit of the Lessor, to cause the construction of the Buildings to be completed in accordance with the Plans and Specifications. Subject to the terms and conditions of the Construction Agency Agreement, the Lessor and the Construction Agent desire that the terms of the Construction Agency Agreement apply to the Land described in Schedule 1 and wish to execute this Supplement to provide therefor. NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: 1. The Construction Agent agrees to act as Construction Agent and to perform its obligations under the Construction Agency Agreement in connection with the completion of construction of the Building on the Land described in Schedule 1 in accordance with the Plans and Specifications for such Land. The Construction Agent hereby represents and warrants to Lessor that the Construction Agent has heretofore delivered to Lessor a true, correct and complete copy of the Plans and Specifications for the Building on the Land described in Schedule 1 or, if not available on the date hereof, will deliver such Plans and Specifications as soon as available. 2. Each of the Lessor and the Construction Agent acknowledges and agrees that the development of the Land described in Schedule 1 and the construction of the Buildings thereon shall be governed by the terms of the Construction Agency Agreement. 3. The anticipated construction budget relating to the construction and development of the Building on the Land described in Schedule 1 is $__________. The acquisition cost of the Land described in Schedule 1 is $----------. 4. This Supplement shall, upon its execution and delivery, constitute a part of the Construction Agency Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. RUBY TUESDAY, INC. By Name: Title: ATLANTIC FINANCIAL GROUP, LTD. By: Atlantic Financial Managers, Inc., its General Partner By Name: Title:

LOAN AGREEMENT Dated as of April 30, 2001 among ATLANTIC FINANCIAL GROUP, LTD. as Lessor and Borrower, the financial institutions party hereto, as Lenders and SUNTRUST BANK, as Agent

TABLE OF CONTENTS Page SECTION 1 SECTION 2 SECTION SECTION SECTION SECTION SECTION SECTION SECTION 3 SECTION 3.1 SECTION 3.2 SECTION 3.3 2.1 2.2 2.3 2.4 2.5 2.6 DEFINITIONS; INTERPRETATION.................................1 AMOUNT AND TERMS OF COMMITMENTS; REPAYMENT AND PREPAYMENT OF LOANS..................................................1 Commitment...............................................1 Notes....................................................1 Scheduled Principal Repayment............................2 Interest.................................................2 Allocation of Loans to Leased Properties.................3 Prepayment...............................................3 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN PAYMENTS IN RESPECT OF LEASE AND LEASED PROPERTY...................3 Distribution and Application of Rent Payments............3 Distribution and Application of Purchase Payment.........3 Distribution and Application to Funding Party Balances of Lessee Payment of Recourse Deficiency Amount Upon Exercise of Remarketing Option.........................4 Distribution and Application to Funding Party Balance of Remarketing Proceeds of Leased Property.............4 Distribution and Application of Payments Received When an Event of Default Exists or Has Ceased to Exist Following Rejection of a Lease.........................5 Distribution of Other Payments...........................6 Timing of Agent Distributions............................6 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE AND GUARANTY...6 Covenant of Lessor.......................................6 Lessor Obligations Nonrecourse; Payment from Certain Lease and Guaranty Obligations and Certain Proceeds of Leased Property Only................................7 Exercise of Remedies Under Lease and Guaranty............8 Indemnity by Lessor......................................8 LOAN EVENTS OF DEFAULT; REMEDIES............................9 Loan Events of Default...................................9 Remedies................................................10 THE AGENT..................................................10 Appointment.............................................10 Delegation of Duties....................................11 Exculpatory Provisions..................................11 Reliance by Agent.......................................11 Notice of Default.......................................12 Non-Reliance on Agent and Other Lenders.................12 Indemnification.........................................12 Agent in Its Individual Capacity........................13 Successor Agent.........................................13 MISCELLANEOUS..............................................14 Amendments and Waivers..................................14 Notices.................................................14 No Waiver; Cumulative Remedies..........................14 Successors and Assigns..................................14 Counterparts............................................14 GOVERNING LAW...........................................14 Survival and Termination of Agreement...................14 Entire Agreement........................................14 Severability............................................15 WAIVER OF JURY TRIAL....................................15 Definitions and Interpretation

SECTION 3.4 SECTION 3.5

SECTION 3.6 SECTION 3.7 SECTION 4 SECTION 4.1 SECTION 4.2

SECTION 4.3 SECTION 4.4 SECTION 5 SECTION 5.1 SECTION 5.2 SECTION 6 SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION 7 SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION

6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9

7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10

APPENDIX A

EXHIBITS EXHIBIT A-1 Form of A Note EXHIBIT A-2 Form of B Note

THIS LOAN AGREEMENT (as it may be amended or modified from time to time in accordance with the provisions hereof, this "Loan Agreement") dated as of April 30, 2001 is among ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership, as Lessor and Borrower (the "Lessor"); the financial institutions which may from time to time become party hereto as lenders (the "Lenders") and SUNTRUST BANK, a Georgia banking corporation, as agent for the Lenders (in such capacity, the "Agent"). PRELIMINARY STATEMENT In accordance with the terms and provisions of the Master Agreement, the Lease, this Loan Agreement and the other Operative Documents, (i) the Lessor contemplates acquiring the Leased Properties and leasing the Leased Properties to the Lessee, (ii) the Lessee, as Construction Agent for the Lessor, wishes to construct Buildings on the Land for the Lessor and, when completed, to lease the Buildings from the Lessor as part of the Leased Property under the Lease, (iii) the Lessee wishes to obtain, and the Lessor is willing to provide, funding for the acquisition of the Land and the construction of the Buildings, (iv) the Lessor wishes to obtain, and the Lenders are willing to provide, financing of a portion of the funding for the acquisition of the Land and the construction of the Buildings, and (v) the Lessee is willing to provide its Guaranty Agreement to the Funding Parties. In consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1 DEFINITIONS; INTERPRETATION Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof; and the rules of interpretation set forth in Appendix A hereto shall apply to this Loan Agreement. SECTION 2 AMOUNT AND TERMS OF COMMITMENTS; REPAYMENT AND PREPAYMENT OF LOANS; CONDITIONS TO LOANS SECTION 2.1 Commitment. (a) Subject to the terms and conditions hereof and of the Master Agreement, each Lender agrees to make term loans to the Lessor ("Loans") from time to time during the period from and including the Initial Closing Date through the Funding Termination Date, on each Closing Date and on each subsequent Funding Date, in the amounts required under Section 2.2 of the Master Agreement. Each such Loan shall consist of an A Loan in the amount of such Lender's pro rata share of the A Percentage of the aggregate amount to be funded by the Funding Parties on such date and a B Loan in the amount of such Lender's pro rata share of the B Percentage of such the aggregate amount to be funded by the Funding Parties on such date. SECTION 2.2 Notes. The A Loans made by each Lender to the Lessor shall be evidenced by a note of the Lessor (an "A Note"), substantially in the form of Exhibit A-1 with appropriate insertions, and the B Loans made by each Lender to the Lessor shall be evidenced by a note of the Lessor (a "B Note") substantially in the form of Exhibit A-2 with appropriate insertions, each duly executed by the Lessor and payable to the order of the Agent, for the benefit of the Lenders, and in a principal amount equal to the A Percentage of the aggregate Commitments and the B Percentage of the aggregate Commitments, respectively (or, if less, the aggregate unpaid principal amount of all A Loans or B Loans, as the case may be, made by the Lenders to the Lessor). The Notes shall be dated the Initial Closing Date and delivered to the Agent in accordance with Section 3.2 of the Master Agreement. The Agent is hereby authorized to record the date and amount of each Loan made by the Lenders to the Lessor on the Notes, but the failure by the Agent to so record such Loan shall not affect or impair any obligations with respect thereto. Each Note shall (i) be stated to mature no later than the final Lease Termination Date and (ii) bear interest on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum determined as provided in, and payable as specified in, Section 2.4. Upon the occurrence of an Event of Default under clauses (f) or (g) of Article XII of the Lease, or upon Acceleration as described in Section 4.3(b) hereof, each Note shall automatically become due and payable in full. SECTION 2.3 Scheduled Principal Repayment. On the Lease Termination Date, the Lessor shall pay the aggregate unpaid principal amount of all Loans as of such date. SECTION 2.4 Interest. (a) Each Loan related to a LIBOR Advance shall bear interest during each Rent Period at a rate equal to the sum of (i) the Adjusted LIBO Rate for such Rent Period, computed using the actual number of days elapsed and a 360 day year, plus (ii) the Applicable Margin per annum; each Loan related to a Base Rate Advance shall bear interest at a rate equal to the Base Rate, computed using the actual number of days elapsed and a 360 day year. (b) If all or a portion of the principal amount of or interest on the Loans shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, without limiting the rights of the Lenders under Section 5, bear interest at the Overdue Rate, in each case from the date of nonpayment until paid in full (as well after as before judgment). (c) Interest accruing on each Loan with respect to any Leased Property during the Construction Term of such Leased Property shall, subject to the limitations set forth in Section 2.3(c) of the Master Agreement, be added to the outstanding principal amount of such Loan from time to time. Following the date each Loan is made (or in the case of Loans with respect to a Construction Land Interest, the Construction Term Expiration Date), interest on such Loan shall be payable in arrears on each Payment Date with respect thereto. (d) Any change in the interest rate on the Loans resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such Base Rate changes as provided in the definition thereof. SECTION 2.5 Allocation of Loans to Leased Properties. Pursuant to each Funding Request, each Loan shall be

allocated to the Leased Property, the cost of acquisition or construction of which the proceeds of such Loan are used to pay. For purposes of the Operative Documents, the "related Loans" with respect to any Leased Property or Loans "related to" any Leased Property shall mean those Loans allocated to such Leased Property as set forth in the foregoing sentence. SECTION 2.6 Prepayment. Except in conjunction with a payment by the Lessee of the Lease Balance or a Leased Property Balance pursuant to the terms of the Lease or the Leased Property Balance or Construction Failure Payment pursuant to the Construction Agency Agreement, the Lessor shall have no right to prepay the Loans. SECTION 2.7 Condition to Initial Loans. The obligation of each Lender to make its initial Loan hereunder is subject to the Agent's receipt of documentation (in form and substance satisfactory to the Agent) evidencing a permanent reduction in the Aggregate Revolving Commitment Amount (as defined in the Credit Agreement) under the Credit Agreement in the amount of $50,000,000. SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN PAYMENTS IN RESPECT OF LEASE AND LEASED PROPERTY SECTION 3.1 Distribution and Application of Rent Payments. (a) Basic Rent. Each payment of Basic Rent with respect to any Leased Property (and any payment of interest on overdue installments of Basic Rent) received by the Agent shall be distributed first, pro rata to the Lenders to be applied to the amounts of accrued and unpaid interest (including overdue interest) on the Loans and second, to the Lessor to be applied to accrued and unpaid Yield (including overdue Yield) on the Lessor's Invested Amounts related to such Leased Property. (b) Supplemental Rent. Each payment of Supplemental Rent received by the Agent shall be paid to or upon the order of the Person owed the same in accordance with the Operative Documents. SECTION 3.2 Distribution and Application of Purchase Payment. With respect to any Leased Property, the payment by the Lessee of: (a) the purchase price for a consummated sale of such Leased Property received by the Agent in connection with the Lessee's exercise of the Purchase Option or Partial Purchase Option under Section 14.1(a) or (b) of the Lease, or the Lessee's exercise of its option to purchase such Leased Property under Section 5.3 of the Construction Agency Agreement, or (b) the purchase price paid as a result of the Lessee's compliance with its obligation to purchase the Leased Property in accordance with Section 14.2 or 14.3 of the Lease, or (c) a Leased Property Balance for a Leased Property in accordance with Section 10.1 or Section 10.2 of the Lease, shall be distributed by Agent as promptly as possible first, to the Lenders pro rata in accordance with, and for application to, their respective Funding Party Balances in respect of such Leased Property and second, to the Lessor for application to its Funding Party Balance in respect of such Leased Property. SECTION 3.3 Distribution and Application to Funding Party Balances of Lessee Payment of Recourse Deficiency Amount Upon Exercise of Remarketing Option. The payment by the Lessee of the Recourse Deficiency Amount to the Agent on the Lease Termination Date in accordance with Section 14.6 or Section 14.7 of the Lease upon the Lessee's exercise of the Remarketing Option, shall be distributed by the Agent to the Lenders, pro rata, for application to the accrued and unpaid interest on, and the outstanding principal of, the A Loans. With respect to any Leased Property, the payment by the Lessee of the Construction Failure Payment with respect thereto pursuant to the Construction Agency Agreement shall be distributed by the Agent first, to the Lenders, pro rata, for application to the accrued and unpaid interest on, and the outstanding principal of, the A Loans in respect of such Leased Property, second, to the Lenders, pro rata, for application to the accrued and unpaid interest on, and outstanding principal of, the B Loans related to such Leased Property and third, to the Lessor for application to the accrued and unpaid Yield on, and outstanding Lessor Invested Amount related to such Leased Property.

SECTION 3.4 Distribution and Application to Funding Party Balance of Remarketing Proceeds of Leased Property. (a) Any payments received by the Agent as proceeds from the sale of the Leased Properties sold pursuant to the Lessee's exercise of the Remarketing Option pursuant to Section 14.6 of the Lease or Lessor's sale of the Leased Properties, shall be distributed by the Agent as promptly as possible (it being understood that any such payment received by the Agent on a timely basis and in accordance with the provisions of the Lease shall be distributed on the date received in the funds so received) in the following order of priority: first, to the Lenders pro rata for application to their remaining Funding Party Balances in respect of all the Leased Properties, an amount equal to their Funding Party Balances in respect of all the Leased Properties; second, to the Lessor for application to its Funding Party Balance in respect of all the Leased Properties; and third, (i) if sold by the Lessee pursuant to Section 14.6 of the Lease, the excess, if any, to the Lessee, and (ii) otherwise, the excess, if any, to the Lessor. (b) Any payments received by the Agent as proceeds from the sale of any Leased Property after a return to the Lessor pursuant to the Construction Agency Agreement shall be distributed by the Lessor as promptly as possible (it being understood that any such payment received by the Agent on a timely basis and in accordance with the provisions of the Lease shall be distributed on the date received in the funds so received) in the following order of priority: first, to the Lenders pro rata for application to their remaining Funding Party Balances in respect of such Leased Property (including both that portion of the A Loans and that portion of the B Loans allocated to such Leased Property), an amount equal to such Funding Party Balances in respect of such Leased Property; second, to Lessor for application to its Funding Party Balance in respect of such Leased Property; and third, the excess to Lessor. SECTION 3.5 Distribution and Application of Payments Received When an Event of Default Exists or Has Ceased to Exist Following Rejection of a Lease. (a) Proceeds of Leased Property. Any payments received by the Lessor or the Agent when an Event of Default exists (or has ceased to exist by reason of a rejection of the Lease in a proceeding with respect to the Lessee described in Article XII(f) or (g) of the Lease), as (i) proceeds from the sale of any or all of the Leased Property sold pursuant to the exercise of the Lessor's remedies pursuant to Article XIII of the Lease, or (ii) proceeds of any amounts from any insurer or any Governmental Authority in connection with an Event of Loss or Event of Taking shall if received by the Lessor be paid to the Agent as promptly as possible, and shall be distributed or applied by the Agent in the following order of priority prior to the Release Date: first, to the Agent for any amounts expended by it in connection with any Leased Property or the Operative Documents and not previously reimbursed to it; second, to the Lenders pro rata for application to their Funding Party Balances in respect of all the Leased Properties (first to accrued and unpaid interest, second to outstanding principal and third to outstanding fees and expenses), an amount equal to the outstanding principal, and accrued interest on, the Loans; third, to the Lessor for application to its Funding Party Balances in respect of all the Leased Properties; fourth, to the Indemnified Parties, on a pro rata basis, for any other amounts due to them under the Operative Documents; and

fifth, to the Lessee or the Person or Persons otherwise legally entitled thereto, the excess, if any; and on and after such Release Date such amounts shall be paid over to the Lessor and shall be distributed or applied by the Lessor, first to the Lessor for application to any amounts owed to it in respect of such Leased Property, and second to the Lessee or the Person or Persons otherwise legally entitled thereto, the excess, if any. (b) Proceeds of Recoveries from Lessee and Guarantor. Any payments received by any Funding Party when an Event of Default exists (or has ceased to exist by reason of a rejection of the Lease in a proceeding with respect to the Lessee described in Article XII(f) or (g) of the Lease), from (i) the Lessee as a payment in accordance with such Lease, or (ii) the Guarantor as a payment in accordance with the Guaranty Agreement, including, without limitation, any payment made by the Guarantor in satisfaction of the guaranty of payment of the Notes pursuant to the Guaranty Agreement, shall be paid to the Agent as promptly as possible, and shall then be distributed or applied by the Agent as promptly as possible in the order of priority set forth in paragraph (a) above. SECTION 3.6 Distribution of Other Payments. All payments under Section 7.6 of the Master Agreement shall be made first, to the Lenders, pro rata, until their Funding Party Balances have been paid in full, and second, to the Lessor who shall be entitled to retain all such remaining amounts. Except as otherwise provided in this Section 3, any payment received by the Lessor which is to be paid to Agent pursuant hereto or for which provision as to the application thereof is made in an Operative Document but not elsewhere in this Section 3 shall, if received by the Lessor, be paid forthwith to the Agent and when received shall be distributed forthwith by the Agent to the Person and for the purpose for which such payment was made in accordance with the terms of such Operative Document. SECTION 3.7 Timing of Agent Distributions. Payments received by the Agent in immediately available funds before 12:00 p.m. (noon), Atlanta, Georgia time, on any Business Day shall be distributed to the Funding Parties in accordance with and to the extent provided in this Section 3 on such Business Day. Payments received by the Agent in immediately available funds after 12:00 p.m. (noon), Atlanta, Georgia time shall be distributed to the Funding Parties in accordance with and to the extent provided in this Section 3 on the next Business Day. SECTION 4 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE AND GUARANTY SECTION 4.1 Covenant of Lessor. So long as any Lender's Commitment remains in effect, any Loan remains outstanding and unpaid or any other amount is owing to any Lender with respect to its Funding Party Balances, subject to Section 4.2, the Lessor will promptly pay all amounts payable by it under this Loan Agreement and the Notes issued by it in accordance with the terms hereof and thereof and shall duly perform each of its obligations under this Loan Agreement, the Notes and the other Operative Documents to which it is a party. The Lessor agrees to provide to the Agent a copy of each estoppel certificate that the Lessor proposes to deliver pursuant to Section 17.13 of the Lease at least five (5) days prior to such delivery and to make any corrections thereto reasonably requested by the Agent prior to such delivery. The Lessor shall keep each Leased Property owned by it free and clear of all Lessor Liens. The Lessor shall not reject any sale of any Leased Property pursuant to Section 14.6 of the Lease unless all of the related Loans have been paid in full or all of the Lenders consent to such rejection. In the event that all of the Lenders reject any sale of any Leased Property pursuant to Section 14.6 of the Lease or the Lessee returns any Leased Property pursuant to the Construction Agency Agreement, the Lessor agrees to take such action as the Required Lenders reasonably request to effect a sale or other disposition of such Leased Property, provided that the Lessor shall not be required to expend its own funds in connection with such sale or disposition. SECTION 4.2 Lessor Obligations Nonrecourse; Payment from Certain Lease and Guaranty Obligations and Certain Proceeds of Leased Property Only. All payments to be made by the Lessor in respect of the Loans, the Notes and this Loan Agreement shall be made only from certain payments received under the Lease, the Construction Agency Agreement, the Subsidiary Guaranty Agreement and the Guaranty Agreement and certain

proceeds of the Leased Properties and only to the extent that the Lessor or the Agent shall have received sufficient payments from such sources to make payments in respect of the Loans in accordance with Section 3. Each Lender agrees that it will look solely to such sources of payments to the extent available for distribution to such Lender as herein provided and that neither the Lessor nor the Agent is or shall be personally liable to any Lender for any amount payable hereunder or under any Note. Nothing in this Loan Agreement, the Notes or any other Operative Document shall be construed as creating any liability (other than for willful misconduct, gross negligence, misrepresentation, fraud or breach of contract (other than the failure to make payments in respect of the Loans if it has not received the funds available therefor)) of the Lessor individually to pay any sum or to perform any covenant, either express or implied, in this Loan Agreement, the Notes or any other Operative Documents (all such liability, if any, being expressly waived by each Lender) and that each Lender, on behalf of itself and its successors and assigns, agrees in the case of any liability of the Lessor hereunder or thereunder (except for such liability attributable to its willful misconduct, gross negligence, misrepresentation, fraud or breach of contract (other than the failure to make payments in respect of the Loans)) that it will look solely to those certain payments received under the Lease, the Construction Agency Agreement, the Subsidiary Guaranty Agreement and the Guaranty Agreement and those certain proceeds of the Leased Properties, provided, however, that the Lessor in its individual capacity shall in any event be liable with respect to (i) the removal of Lessor's Liens or involving its gross negligence, willful misconduct, misrepresentation, fraud or breach of contract (other than the failure to make payments in respect of the Loans) or (ii) failure to turn over payments the Lessor has received in accordance with Section 3; and provided further that the foregoing exculpation of the Lessor shall not be deemed to be exculpations of the Lessee, the Guarantor or any other Person. SECTION 4.3 Exercise of Remedies Under Lease and Guaranty. (a) Event of Default. With respect to any Potential Event of Default as to which notice thereof by the Lessor to the Lessee is a requirement to cause such Potential Event of Default to become an Event of Default, the Lessor may at any time in its discretion give or withhold such notice, provided that the Lessor agrees to give such notice to such Lessee promptly upon receipt of a written request by any Lender or the Agent. (b) Acceleration of Lease Balance. When an Event of Default exists, the Lessor, upon the direction of the Required Funding Parties, shall exercise remedies under Article XIII of the Lease and under the Guaranty Agreement to demand payment in full of the Lease Balance by the Lessee or the Guarantor (the "Acceleration"). Following the Acceleration, the Lessor shall consult with the Lenders regarding actions to be taken in response to such Event of Default. The Lessor (1) shall not, without the prior written consent of Required Funding Parties and (2) shall (subject to the provisions of this Section), if so directed by Required Funding Parties, do any of the following: commence eviction or foreclosure proceedings, or make a demand under the Guaranty Agreement, or file a lawsuit against the Lessee under the Lease, or file a lawsuit against the Guarantor under the Guaranty Agreement, or sell the Leased Property, or exercise other remedies against the Lessee or the Guarantor under the Operative Documents in respect of such Event of Default; provided, however, that any payments received by the Lessor shall be distributed in accordance with Section 3. Notwithstanding any such consent, direction or approval by the Required Funding Parties of any such action or omission, the Lessor shall not have any obligation to follow such direction if the same would, in the Lessor's reasonable judgment, require the Lessor to expend its own funds or expose the Lessor to liability, expense, loss or damages unless and until the Lenders advance to the Lessor an amount which is sufficient, in the Lessor's reasonable judgment, to cover such liability, expense, loss or damage (excluding the Lessor's pro rata share thereof, if any). Notwithstanding the foregoing, on and after the related Release Date, the Lenders shall have no rights to the related Leased Property or any proceeds thereof, the Lenders shall have no rights to direct or give consent to any actions with respect to such Leased Property and the proceeds thereof, the Lessor shall have absolute discretion (but in all events subject to the terms of the Operative Documents) with respect to such exercise of remedies with respect to such Leased Property, and the proceeds thereof, including, without limitation, any foreclosure or sale of such Leased Property, and the Lessor shall have no liability to the Lenders with respect to the Lessor's actions or failure to take any action with respect to such Leased Property. SECTION 4.4 Indemnity by Lessor. During the Construction Term for any Leased Property, Lessor hereby indemnifies each Lender and its Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents from and against any and all Claims that may be imposed on, incurred by or asserted or threatened to be asserted against, any such Person, arising out of or related to such Leased Property, or the leasing or financing thereof; it being understood that the foregoing provision is subject to Section 4.2.

SECTION 5 LOAN EVENTS OF DEFAULT; REMEDIES SECTION 5.1 Loan Events of Default. Each of the following events shall constitute a Loan Event of Default (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority) and each such Loan Event of Default shall continue so long as, but only as long as, it shall not have been remedied: (a) Lessor shall fail to distribute in accordance with the provisions of Section 3 any amount received by the Lessor pursuant to the Lease, the Guaranty Agreement, the Construction Agency Agreement or the Master Agreement within two (2) Business Days of receipt thereof if and to the extent that the Agent or the Lenders are entitled to such amount or a portion thereof; or (b) the Lessor shall fail to pay to the Agent, within two (2) Business Days of the Lessor's receipt thereof, any amount which the Lessee or the Guarantor is required, pursuant to the Operative Documents, to pay to the Agent but erroneously pays to the Lessor; or (c) failure by the Lessor to perform in any material respect any other covenant or condition herein or in any other Operative Document to which the Lessor is a party, which failure shall continue unremedied for thirty (30) days after receipt by the Lessor of written notice thereof from the Agent or any Lender; or (d) any representation or warranty of the Lessor contained in any Operative Document or in any certificate required to be delivered thereunder shall prove to have been incorrect in a material respect when made and shall not have been cured within thirty (30) days of receipt by the Lessor of written notice thereof from the Agent or any Lender; or (e) the Lessor or the General Partner shall become bankrupt or make an assignment for the benefit of creditors or consent to the appointment of a trustee or receiver; or a trustee or a receiver shall be appointed for the Lessor or the General Partner or for substantially all of its property without its consent and shall not be dismissed or stayed within a period of sixty (60) days; or bankruptcy, reorganization or insolvency proceedings shall be instituted by or against the Lessor or the General Partner and, if instituted against the Lessor or the General Partner, shall not be dismissed or stayed for a period of sixty (60) days; or (f) any Event of Default shall occur and be continuing. SECTION 5.2 Remedies. (a) Upon the occurrence of a Loan Event of Default hereunder, (i) if such event is a Loan Event of Default specified in clause (e) of Section 5.1 with respect to the Lessor or the General Partner, automatically the Lenders' Commitments shall terminate and the outstanding principal of, and accrued interest on, the Loans shall be immediately due and payable, and (ii) if such event is any other Loan Event of Default, upon written request of the Required Lenders, the Agent shall, by notice of default to the Lessor, declare the Commitments of the Lenders to be terminated forthwith and the outstanding principal of, and accrued interest on, the Loans to be immediately due and payable, whereupon the Commitments of the Lenders shall immediately terminate and the outstanding principal of, and accrued interest on, the Loans shall become immediately due and payable. (b) When a Loan Event of Default exists, the Agent may, and upon the written instructions of the Required Funding Parties shall, exercise any or all of the rights and powers and pursue any and all of the remedies available to it hereunder, under the Notes, the Mortgages and the Assignments of Lease and Rents and shall have and may exercise any and all rights and remedies available under the Uniform Commercial Code or any provision of law. When a Loan Event of Default exists, the Agent may, and upon the written instructions of the Required Funding Parties shall, have the right to exercise all rights of the Lessor under the Lease pursuant to the terms and in the manner provided for in the Mortgages and the Assignments of Lease and Rents. (c) Except as expressly provided above, no remedy under this Section 5.2 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy provided under this Section 5.2 or under the other Operative Documents or otherwise available at law or in equity. The exercise by the Agent or any Lender of any one or more of such remedies shall not preclude the simultaneous or later exercise of any other remedy or remedies. No express or implied waiver by the Agent or any Lender of any Loan Event of Default shall in any

way be, or be construed to be, a waiver of any future or subsequent Loan Event of Default. The failure or delay of the Agent or any Lender in exercising any rights granted it hereunder upon any occurrence of any of the contingencies set forth herein shall not constitute a waiver of any such right upon the continuation or recurrence of any such contingencies or similar contingencies and any single or partial exercise of any particular right by the Agent or any Lender shall not exhaust the same or constitute a waiver of any other right provided herein. SECTION 6 THE AGENT SECTION 6.1 Appointment. Each Lender hereby irrevocably designates and appoints the Agent as the agent of such Lender under this Loan Agreement and the other Operative Documents, and each such Lender irrevocably authorizes the Agent, in such capacity, to take such action on its behalf under the provisions of this Loan Agreement and the other Operative Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Loan Agreement and the other Operative Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Loan Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Loan Agreement or any other Operative Document or otherwise exist against the Agent. SECTION 6.2 Delegation of Duties. The Agent may execute any of its duties under this Loan Agreement and the other Operative Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. SECTION 6.3 Exculpatory Provisions. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Loan Agreement or any other Operative Document (except for its or such Person's own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Lessor, the Guarantor or the Lessee or any officer thereof contained in this Loan Agreement or any other Operative Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Loan Agreement or any other Operative Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Loan Agreement or any other Operative Document or for any failure of the Lessor, the Guarantor or the Lessee to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Loan Agreement or any other Operative Document, or to inspect the properties, books or records of the Lessor, the Guarantor or the Lessee. SECTION 6.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Lessor, the Guarantor or the Lessee), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Loan Agreement or any other Operative Document unless it shall first receive such advice or concurrence of the Required Funding Parties as it deems appropriate or it shall first be indemnified to its satisfaction by the Funding Parties against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Loan Agreement and the other Operative Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes. SECTION 6.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Loan Potential Event of Default or Loan Event of Default hereunder unless the Agent has received notice from a Lender referring to this Loan Agreement, describing such Loan Potential Event of Default or Loan Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice,

the Agent shall give notice thereof to the Lenders. The Agent shall take such action with respect to such Loan Potential Event of Default or Loan Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Loan Potential Event of Default or Loan Event of Default as it shall deem advisable in the best interests of the Lenders. SECTION 6.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Lessor, the Guarantor or the Lessee, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Lessor, the Guarantor and the Lessee and made its own decision to make its Loans hereunder and enter into this Loan Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Loan Agreement and the other Operative Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Lessor, the Guarantor and the Lessee. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Lessor, the Guarantor or the Lessee which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. SECTION 6.7 Indemnification. The Lenders agree to indemnify the Agent in its capacity as such (to the extent not reimbursed by the Lessee or Guarantor and without limiting the obligation of the Lessee or Guarantor to do so), ratably according to the percentage each Lender's Commitment bears to the total commitments of all of the Lenders on the date on which indemnification is sought under this Section 6.7 (or, if indemnification is sought after the date upon which the Lenders Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with the percentage that each Lender's Commitment bears to the Commitments of all of the Lenders immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of, the Commitments, this Loan Agreement, any of the other Operative Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from the Agent's gross negligence or willful misconduct. The agreements in this Section 6.7 shall survive the payment of the Notes and all other amounts payable hereunder. SECTION 6.8 Agent in Its Individual Capacity. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Lessor, the Guarantor or the Lessee as though the Agent were not the Agent hereunder and under the other Operative Documents. With respect to Loans made or renewed by it and any Note issued to it, the Agent shall have the same rights and powers under this Loan Agreement and the other Operative Documents as any Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. Each Lender acknowledges that the Agent in its individual capacity has had and continues to have other business relations and transactions with the Lessee and the Lessor. SECTION 6.9 Successor Agent. The Agent may resign as Agent upon 20 days' notice to the Lenders. If the Agent shall resign as Agent under this Loan Agreement and the other Operative Documents, then the Required Funding Parties shall appoint a successor agent for the Lenders, which successor agent shall be a commercial bank organized under the laws of the United States of America or any State thereof or under the laws of another country which is doing business in the United States of America and having a combined capital, surplus and undivided profits of at least $100,000,000, whereupon such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall mean such successor agent effective upon such appointment

and approval, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Loan Agreement or any holders of the Notes. After any retiring Agent's resignation as Agent, all of the provisions of this Section 6 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Loan Agreement and the other Operative Documents. SECTION 7 MISCELLANEOUS SECTION 7.1 Amendments and Waivers. Neither this Loan Agreement, any Note, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of Section 8.4 of the Master Agreement. SECTION 7.2 Notices. Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be given in accordance with Section 8.2 of the Master Agreement. SECTION 7.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. SECTION 7.4 Successors and Assigns. This Loan Agreement shall be binding upon and inure to the benefit of the Lessor, the Agent, the Lenders, all future holders of the Notes and their respective successors and permitted assigns. SECTION 7.5 Counterparts. This Loan Agreement may be executed by one or more of the parties to this Loan Agreement on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same agreement. A set of the counterparts of this Loan Agreement signed by all the parties hereto shall be lodged with the Lessor and the Agent. SECTION 7.6 GOVERNING LAW. THIS LOAN AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS LOAN AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF GEORGIA. SECTION 7.7 Survival and Termination of Agreement. All covenants, agreements, representations and warranties made herein and in any certificate, document or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Loan Agreement, and the Notes and shall continue in full force and effect so long as any Note or any amount payable to any Lender under or in connection with this Loan Agreement or the Notes is unpaid, at which time this Loan Agreement shall terminate. SECTION 7.8 Entire Agreement. This Loan Agreement and the other Operative Documents set forth the entire agreement of the parties hereto with respect to its subject matter, and supersedes all previous understandings, written or oral, with respect thereto. SECTION 7.9 Severability. Any provision of this Loan Agreement or of the Notes which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or thereof or affecting the validity, enforceability or legality of any such provision in any other jurisdiction. SECTION 7.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS LOAN AGREEMENT, THE NOTES, ANY OTHER OPERATIVE DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

4900593 99539306 IN WITNESS THEREOF, the parties hereto have caused this Loan Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. SUNTRUST BANK, as Agent
By: /s/ Vipul Patel -------------------------------------Name Printed: Vipul Patel ---------------------------Title: Vice President -----------------------------------

ATLANTIC FINANCIAL GROUP, LTD., as Lessor and Borrower By: Atlantic Financial Managers, Inc., its General Partner
By: /s/ Stephen S. Brookshire -------------------------------------Name Printed: Stephen S. Brookshire ---------------------------Title: President -----------------------------------

SUNTRUST BANK, as a Lender
By: /s/ Vipul Patel -------------------------------------Name Printed: Vipul Patel ---------------------------Title: Vice President -----------------------------------

BANK OF AMERICA, N.A., as a Lender
By: /s/ Richard G. Parkhurst, Jr. -------------------------------------Name Printed: Richard G. Parhurst, Jr. ---------------------------Title: Managing Director -----------------------------------

FLEET NATIONAL BANK, as a Lender
By: /s/ Robert W. MacElhiney -------------------------------------Name Printed: Robery W. MacElhiney ---------------------------Title: Director -----------------------------------

FIRSTAR BANK, N.A., as a Lender
By: /s/ Russell S. Rogers -------------------------------------Name Printed: Russell S. Rogers ---------------------------Title: Vice President -----------------------------------

AMSOUTH BANK, as a Lender
By: /s/ J. Harvey White -------------------------------------Name Printed: J. Harvey White ---------------------------Title: Senior Vice President -----------------------------------

WACHOVIA BANK, N.A., as a Lender
By: /s/ Karen E. Reel -------------------------------------Name Printed: Karen E. Reel ---------------------------Title: Vice President -----------------------------------

SOUTHTRUST BANK, N.A., as a Lender
By: /s/ Bradford Vieira -------------------------------------Name Printed: Bradford Vieira ---------------------------Title: A.V.P. -----------------------------------

GUARANTY from RUBY TUESDAY, INC. Dated as of April 30, 2001

TABLE OF CONTENTS Page SECTION 1. SECTION 2. SECTION 3. SECTION 4. SECTION 5. SECTION 6. SECTION 7. SECTION 8. SECTION 9. SECTION 10. Guaranty...................................................2 Bankruptcy.................................................3 Right of Set-Off...........................................3 Continuing Guaranty........................................3 Reinstatement..............................................4 Certain Actions............................................4 Application................................................5 Waiver.....................................................5 Assignment.................................................5 Miscellaneous.............................................5

THIS GUARANTY, dated as of April 30, 2001 (as amended from time to time, this "Guaranty"), is made by Ruby Tuesday, Inc., a Georgia corporation ("Ruby Tuesday" or the "Guarantor"). W I T N E S S E T H: WHEREAS, Ruby Tuesday, as Lessee and Guarantor, Atlantic Financial Group, Ltd., as Lessor, the financial institutions party thereto, as Lenders, and SunTrust Bank, as Agent, have entered into that certain Master Agreement, dated as of April 30, 2001 (as it may be modified, amended or restated from time to time as and to the extent permitted thereby, the "Master Agreement"; and, unless otherwise defined herein, terms which are defined or defined by reference in the Master Agreement (including Appendix A thereto) shall have the same meanings when used herein as such terms have therein); and WHEREAS, it is a condition precedent to the Funding Parties consummating the transactions to be consummated on each Closing Date that the Guarantor execute and deliver this Guaranty; and WHEREAS, it is in the best interests of the Guarantor that the transactions contemplated by the Master Agreement be consummated on each Closing Date; and WHEREAS, this Guaranty, and the execution, delivery and performance hereof, have been duly authorized by all necessary corporate action of the Guarantor; and WHEREAS, this Guaranty is offered by the Guarantor as an inducement to the Funding Parties to consummate the transactions contemplated in the Master Agreement, which transactions, if consummated, will be of benefit to the Guarantor; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor hereby agrees as follows:

SECTION 1. Guaranty. The Guarantor hereby unconditionally guarantees the full and prompt payment when due, whether by acceleration or otherwise, and at all times thereafter, and the full and prompt performance, of all of the Liabilities (as hereinafter defined), including interest and earnings on any such Liabilities whether accruing before or after any bankruptcy or insolvency case or proceeding involving Guarantor, or any other Person and, if interest or earnings on any portion of such obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, including such interest and earnings as would have accrued on any such portion of such obligations if such case or proceeding had not commenced, and further agrees to pay all reasonable expenses (including reasonable attorneys' fees and legal expenses) actually paid or incurred by each of the Funding Parties in endeavoring to collect the Liabilities, or any part thereof, and in enforcing this Guaranty. The term "Liabilities", as used herein, shall mean all of the following, in each case howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due: (i) all amounts payable by the Lessee under the Lease (including, without limitation, Basic Rent, Supplemental Rent and Recourse Deficiency Amounts), the Master Agreement (including the unused fee), the Construction Agency Agreement or any other Operative Document, and (ii) all principal of the Notes and interest accrued thereon, the Lessor's Invested Amount and accrued Yield thereon and all additional amounts and other sums at any time due and owing, and required to be paid, to the Funding Parties under the terms of the Master Agreement, the Loan Agreement, the Assignment of Leases and Rents, the Mortgages, the Notes or any other Operative Document; provided, however, that, notwithstanding anything to the contrary contained herein, the Guarantor will not be obligated under any circumstances to pay under this Guaranty, and the term "Liabilities" shall not include, any amounts greater than that which the Lessee would have had to pay, under the Lease, the Master Agreement, the Construction Agency Agreement and the other Operative Documents assuming that such documents were enforced in accordance with their terms (and without giving effect to any discharge or limitation thereon resulting or arising by reason of the bankruptcy or insolvency of the Lessee), plus all reasonable costs actually incurred of enforcing this Guaranty; and provided, further that with respect to indemnities that arise pursuant to Section 7.1 of the Master Agreement with respect to any Construction Land Interest during the Construction Term therefor, only the Lessor may make a claim under this Guaranty. By way of extension and not in limitation of any of its other obligations hereunder, but subject to the immediately preceding sentence, the Guarantor stipulates and agrees that in the event any foreclosure proceedings are commenced and result in the entering of a foreclosure judgment, any such foreclosure judgment, to the extent related to the Liabilities, shall be treated as part of the Liabilities, and the Guarantor unconditionally guarantees the full and prompt payment of such judgment. SECTION 2. Bankruptcy. The Guarantor agrees that, in the event of the dissolution, bankruptcy or insolvency of the Guarantor, or the inability or failure of the Guarantor generally to pay debts as they become due, or an assignment by the Guarantor for the benefit of creditors, or the commencement of any case or proceeding in respect of the Guarantor under any bankruptcy, insolvency or similar laws, which event occurs at a time when any of the Liabilities are not then be due and payable, the Guarantor will pay to the Funding Parties forthwith the full amount which would be payable hereunder by the Guarantor if all Liabilities were then due and payable. SECTION 3. Right of Set-Off. To secure all obligations of the Guarantor hereunder, each Funding Party shall have a right to set-off, without demand or notice of any kind, at any time and from time to time when any amount shall be due and payable by the Guarantor hereunder against any and all balances, credits, deposits, accounts or moneys of or in the Guarantor's name now or hereafter, for any reason or purpose whatsoever, in the possession or control of, or in transit to, any Funding Party or any agent or bailee for any Funding Party, and apply any such amounts toward the payment of the Liabilities then due in such order as in accordance with the Operative Documents. Each Funding Party promptly shall notify the Guarantor of the exercise by such Funding Party of any setoff; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. SECTION 4. Continuing Guaranty. This Guaranty shall in all respects be a continuing, absolute and unconditional guaranty of prompt and, subject to the limitations contained herein, complete payment and performance (and not merely of collection), and shall remain in full force and effect (notwithstanding, without limitation, the dissolution of the Guarantor) until the termination of the Commitments and the full and final payment of all of the Liabilities. The Guarantor shall pay all amounts due hereunder without counterclaim, set-off, deduction or abatement. SECTION 5. Reinstatement. The Guarantor further agrees that, if at any time all or any part of any payment theretofore applied to any of the Liabilities is or must be rescinded or returned for any reason whatsoever

(including, without limitation, the insolvency, bankruptcy or reorganization of the Guarantor), such Liabilities shall, for the purposes of this Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application, and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such Liabilities, all as though such application had not been made. SECTION 6. Certain Actions. The Funding Parties may, from time to time at their discretion and, except as expressly provided for under the Operative Documents, without notice to the Guarantor, take any or all of the following actions: (a) retain or obtain (i) a security interest in the Lessee's interests in the Lease and (ii) a lien or a security interest hereafter granted by any Person upon or in any property, in each case to secure any of the Liabilities or any obligation hereunder; (b) retain or obtain the primary or secondary obligation of any obligor or obligors, in addition to the Guarantor, with respect to any of the Liabilities; (c) extend or renew for one or more periods (regardless of whether longer than the original period), or release or compromise any obligation of the Guarantor hereunder or any obligation of any nature of any other obligor (including, without limitation, the Lessor) with respect to any of the Liabilities; (d) release or fail to perfect its Lien upon or security interest in, or impair, surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Liabilities or any obligation hereunder, or extend or renew for one or more periods (regardless of whether longer than the original period) or release or compromise any obligations of any nature of any obligor with respect to any such property; and (e) resort to the Guarantor for payment of any of the Liabilities, regardless of whether the Agent or any other Person shall have resorted to any property securing any of the Liabilities or any obligation hereunder or shall have proceeded against any other obligor primarily or secondarily obligated with respect to any of the Liabilities (all of the actions referred to in this clause (e) being hereby expressly waived by the Guarantor to the extent permitted by law). SECTION 7. Application. Any amounts received by any Funding Party from whatever source on account of the Liabilities shall be applied by it toward the payment of such of the Liabilities, and in such order of application, as is set forth in Section 3 of the Loan Agreement. SECTION 8. Waiver. Subject in each event to the notice, if any, otherwise expressly required under the Operative Documents, the Guarantor hereby expressly waives: (a) notice of the acceptance of this Guaranty; (b) notice of the existence or creation or non-payment of all or any of the Liabilities; (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever; and (d) except as provided to the contrary in the Operative Documents, all diligence in collection or protection of or realization upon the Liabilities or any thereof, any obligation hereunder, or any security for or guaranty of any of the foregoing. SECTION 9. Assignment. Subject to Section 6 of the Master Agreement, each Funding Party may, from time to time, at its sole discretion and without notice to the Guarantor, assign or transfer any or all of its portion of the Liabilities or any interest therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Liabilities shall be and remain Liabilities for the purposes of this Guaranty, and each and every such immediate and successive assignee or transferee of any of the Liabilities or of any interest therein shall, to the extent of such assignee's or transferee's interest in the Liabilities, be entitled to the benefits of this Guaranty to the same extent as if such assignee or transferee were such Funding Party. SECTION 10. Miscellaneous. No delay in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this Guaranty be binding upon any Funding Party except as expressly set forth in a writing duly signed and delivered on its behalf. No action permitted hereunder shall in any way affect or impair any Funding Party's rights or the Guarantor's obligations under this Guaranty. For the purposes of this Guaranty, Liabilities shall include all of the obligations described in the definition thereof, notwithstanding any right or power of the Lessee or the Lessor or anyone else to assert any claim or defense (other than final payment) as to the invalidity or unenforceability of any such obligation, and no such claim or defense shall affect or impair the obligations of the Guarantor hereunder. The Guarantor's obligations under this Guaranty shall be absolute and unconditional irrespective of any circumstance whatsoever which might constitute a legal or equitable discharge or defense of the Guarantor. The Guarantor hereby acknowledges that there are no conditions to the effectiveness of this Guaranty which have not been satisfied as of the date hereof. This Guaranty shall be binding upon the Guarantor and upon the Guarantor's successors and permitted assigns; and all references herein to the Guarantor shall be deemed to include any successor or successors, whether immediate or remote, to such Person; provided that the Guarantor shall not assign, other than by operation of

law, its obligations hereunder without the prior written consent of the Funding Parties. Wherever possible each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Guaranty shall be prohibited by or invalid thereunder, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. The Guarantor: (a) submits for itself and its property in any legal action or proceeding relating to this Guaranty, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of Georgia sitting in Fulton County, Georgia, the courts of the United States of America for the Northern District of Georgia, and appellate courts from any thereof; (b) consents that any such action or proceedings may be brought to such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by delivering a copy thereof to it at its address set forth below or at such other address of which the other parties to the Master Agreement shall have been notified pursuant to Section 8.2 of the Master Agreement; and (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right of the Funding Parties to sue in any other jurisdiction. All notices, demands, declarations, consents, directions, approvals, instructions, requests and other communications required or permitted by this Guaranty shall be in writing and shall be deemed to have been duly given when addressed to the appropriate Person and delivered in the manner specified in Section 8.2 of the Master Agreement. THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. THE GUARANTOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY.

IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. RUBY TUESDAY, INC.
By: /s/ J. Russell Mothershed Name Printed: J. Russell Mothershed Title: Senior Vice President

SUBSIDIARY GUARANTY AGREEMENT dated as of April 30, 2001, among each of the Subsidiaries listed on Schedule I hereto (each such subsidiary individually, a "Guarantor" and collectively, the "Guarantors") of Ruby Tuesday, Inc., a Georgia corporation (the "Lessee"), and SunTrust Bank, a Georgia banking corporation as agent (the "Agent") for the Lenders (as defined in the Master Agreement referred to below). Reference is made to the Master Agreement dated as of April 30, 2001 (as amended, supplemented or otherwise modified from time to time, the "Master Agreement"), among the Lessee, Atlantic Financial Group, Ltd. (the "Lessor"), certain financial institutions party thereto (the "Lenders") and SunTrust Bank, as agent for the Lenders (in such capacity, the "Agent"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in Appendix A to the Master Agreement. The Funding Parties have agreed to make Advances to the Lessee, pursuant to, and upon the terms and subject to the conditions specified in, the Master Agreement. Each of the Guarantors is a direct or indirect wholly-owned Subsidiary of the Lessee and acknowledges that it will derive substantial benefit from the making of the Advances by the Funding Parties. The obligations of the Funding Parties to make Advances are conditioned on, among other things, the execution and delivery by the Guarantors of a Subsidiary Guaranty Agreement in the form hereof. As consideration therefor and in order to induce the Funding Parties to make Advances, the Guarantors are willing to execute this Subsidiary Guaranty Agreement. Accordingly, the parties hereto agree as follows:

SECTION 1. Guaranty. Each Guarantor unconditionally guaranties, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of all of the Obligations (as hereinafter defined), including interest and earnings on any such Obligations, whether accruing before or after any bankruptcy or insolvency case or proceeding involving the Lessee or any Guarantor, or any other Person and, if interest or earnings on any portion of such Obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, including such interest and earnings as would have accrued on any such portion of such Obligations if such case or proceeding had not commenced, and further agrees to pay all reasonable expenses (including reasonable attorneys' fees and legal expenses) actually paid or incurred by each of the Funding Parties in endeavoring to collect the Obligations or any part thereof, and in enforcing this Subsidiary Guaranty Agreement. The term "Obligations", as used herein, shall mean all of the following, in each case howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due: (i) all amounts payable by the Lessee under the Lease (including, without limitation, Basic Rent, Supplemental Rent and Recourse Deficiency Amount), the Master Agreement (including the unused fee), the Construction Agency Agreement or any other Operative Document, and (ii) all principal of the Notes and interest accrued thereon, the Lessor's Invested Amount and accrued Yield thereon and all additional amounts and other sums at any time due and owing, and required to be paid, to the Funding Parties under the terms of the Master Agreement, the Loan Agreement, the Assignment of Leases and Rents, the Mortgages, the Notes or any other Operative Document; provided, however, that, notwithstanding anything to the contrary contained herein, the Guarantors will not be obligated under any circumstances to pay under this Subsidiary Guaranty Agreement, and the term "Obligations" shall not include, any amounts greater than that which the Lessee would have had to pay under the Lease, the Master Agreement, the Construction Agency Agreement and the other Operative Documents assuming that such documents were enforced in accordance with their terms (and without giving effect to any discharge or limitation thereon resulting or arising by reason of the bankruptcy or insolvency of the Lessee), plus all reasonable costs actually incurred of enforcing this Subsidiary Guaranty Agreement; and provided, further that with respect to indemnities that arise pursuant to Section 7.1 of the Master Agreement with respect to any Construction Land Interest during the Construction Term therefor, only the Lessor may make a claim under this Subsidiary Guaranty Agreement. Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, each Guarantor waives presentment to, demand of payment from and protest to the Lessee of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be affected by (a) the failure of the Agent or any Funding Party to assert any claim or demand or to enforce or exercise any right or remedy against the Lessee or any other Guarantor under the provisions of any Operative Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Subsidiary Guaranty Agreement, any other Operative Document or any other agreement, including with respect to any other Guarantor under this Subsidiary Guaranty Agreement, or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Agent or any Funding Party. SECTION 3. Guaranty of Payment. Each Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Agent or any Funding Party to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Agent or any Funding Party in favor of the Lessee or any other person. SECTION 4. No Discharge or Diminishment of Guaranty. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Agent or any Funding Party to assert any claim or demand or to enforce any remedy under the Lease, any other Operative Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to the extent vary the risk of any Guarantor or that would otherwise operate as a discharge of each

Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). SECTION 5. Defenses of Lessee Waived. To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Lessee or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Lessee, other than the final and indefeasible payment in full in cash of the Obligations. The Agent and the Funding Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Lessee or any other guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Lessee or any other Guarantor or guarantor, as the case may be, or any security. SECTION 6. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Agent or any Funding Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Lessee or any other Obligor to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Agent for the benefit of the Funding Parties in cash the amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to the Agent, all rights of such Guarantor against the Lessee arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Lessee now or hereafter held by any Guarantor is hereby subordinated in right of payment to the prior payment in full in cash of the Obligations. If any amount shall erroneously be paid to any Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Lessee, such amount shall be held in trust for the benefit of the Agent and the Funding Parties and shall forthwith be paid to the Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Operative Documents. SECTION 7. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Lessee's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Agent or the Funding Parties will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks. SECTION 8. Representations and Warranties. Each Guarantor represents and warrants as to itselfthat all representations and warranties relating to it (as a Subsidiary of the Lessee) contained in the Master Agreement are true and correct. SECTION 9. Termination. The guaranties made hereunder (a) shall terminate when all the Obligations have been paid in full in cash and the Funding Parties have no further commitment to advance under the Master Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Funding Party or any Guarantor upon the bankruptcy or reorganization of the Lessee, any Guarantor or otherwise. SECTION 10. Binding Effect; Several Agreement; Assignments. Whenever in this Subsidiary Guaranty Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Guarantors that are contained in this Subsidiary Guaranty Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Subsidiary Guaranty Agreement shall become effective as to any Guarantor when a counterpart hereof executed on behalf of such Guarantor shall have been delivered to the Agent, and a counterpart hereof shall have been executed on behalf of the Agent, and thereafter shall be binding upon such Guarantor and the Agent and their respective successors and assigns, and shall inure to the benefit of such Guarantor, the Agent and the Funding Parties and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). If all of the capital stock or other equity interest of a Guarantor is sold, transferred or otherwise disposed of pursuant to a transaction permitted by the Master Agreement, such

Guarantor shall be released from its obligations under this Subsidiary Guaranty Agreement without further action, and upon request of the Guarantor or the Lessee, the Agent will execute and deliver to the Lessee, at the Lessee's expense, such additional documents, instruments or agreements (all of which shall be prepared by the Lessee) as the Lessee or Guarantor shall reasonably request to further evidence the termination of this Subsidiary Guaranty Agreement. This Subsidiary Guaranty Agreement shall be construed as a separate agreement with respect to each Guarantor and may be amended, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Guarantor and without affecting the obligations of any other Guarantor hereunder. SECTION 11. Waivers; Amendment. (a) No failure or delay of the Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agent hereunder and of the Funding Parties under the other Operative Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Subsidiary Guaranty Agreement or consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice in similar or other circumstances. (b) Neither this Subsidiary Guaranty Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantors with respect to which such waiver, amendment or modification relates and the Agent, with the prior written consent of the Required Funding Parties (except as otherwise provided in the Master Agreement). SECTION 12. Governing Law. THIS SUBSIDIARY GUARANTY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. SECTION 13. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 8.2 of the Master Agreement. All communications and notices hereunder to each Guarantor shall be given to it at its address set forth on Schedule I attached hereto. SECTION 14. Survival of Agreement; Severability. (a) All covenants, agreements representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Subsidiary Guaranty Agreement or the other Operative Document shall be considered to have been relied upon by the Agent and the Funding Parties and shall survive the making by the Funding Parties of the Advances regardless of any investigation made by any of them or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Advance or any other fee or amount payable under this Subsidiary Guaranty Agreement or any other Operative Document is outstanding and unpaid and as long as the Commitments have not been terminated. (b) In the event one or more of the provisions contained in this Subsidiary Guaranty Agreement or in any other Operative Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 15. Counterparts. This Subsidiary Guaranty Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract (subject to Section 10), and shall become effective as provided in Section 10. Delivery of an executed signature page to this Subsidiary Guaranty Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Subsidiary Guaranty Agreement. SECTION 16. Rules of Interpretation. The rules of interpretation specified in Appendix A of the Master Agreement shall be applicable to this Subsidiary Guaranty Agreement.

SECTION 17. Jurisdiction; Consent to Service of Process. (a) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any Georgia State court or Federal court of the United States of America sitting in Atlanta, Georgia, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Subsidiary Guaranty Agreement or the other Operative Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Georgia State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Subsidiary Guaranty Agreement shall affect any right that the Agent or any Funding Party may otherwise have to bring any action or proceeding relating to this Subsidiary Guaranty Agreement or the other Operative Documents against any Guarantor or its properties in the courts of any jurisdiction. (b) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Subsidiary Guaranty Agreement or the other Operative Documents in any Georgia State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Subsidiary Guaranty Agreement irrevocably consents to service of process in the manner provided for notices in Section 13. Nothing in this Subsidiary Guaranty Agreement will affect the right of any party to this Subsidiary Guaranty Agreement to serve process in any other manner permitted by law. SECTION 18. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SUBSIDIARY GUARANTY AGREEMENT OR THE OTHER OPERATIVE DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SUBSIDIARY GUARANTY AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 18. SECTION 19. Additional Guarantors. Pursuant to Section 5.10 of the Master Agreement, each Subsidiary Guarantor that was not in existence on the date of the Master Agreement is required to enter into this Subsidiary Guaranty Agreement as a Guarantor upon becoming a Subsidiary Guarantor. Upon execution and delivery after the date hereof by the Agent and such Subsidiary Guarantor of an instrument in the form of Annex 1, such Subsidiary Guarantor shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Subsidiary Guaranty Agreement shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Subsidiary Guaranty Agreement. SECTION 20. Waiver of Certain Damages. To the extent permitted by applicable law, no Guarantor shall assert and each Guarantor hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to actual or direct damages) arising out of, in connection with or as a result of, this Subsidiary Guaranty Agreement or any agreement or instrument contemplated hereby, the transactions contemplated herein, any Advance or the use of proceeds thereof. Section 21. Savings Clause. It is the intent of each Guarantor and the Funding Parties that each Guarantor's maximum obligations hereunder shall be, but not in excess of: (a) in a case or proceeding commenced by or against any Guarantor under the Bankruptcy Code on or within one year from the date on which any of the Obligations are incurred, the maximum amount which would not otherwise cause the Obligations (or any other obligations of such Guarantor to the Funding Parties) to be avoidable or unenforceable against such Guarantor under (A) Section 548 of the Bankruptcy Code or (B) any

state fraudulent transfer or fraudulent conveyance act or statute applied in such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or (b) in a case or proceeding commenced by or against any Guarantor under the Bankruptcy Code subsequent to one year from the date on which any of the Obligations are incurred, the maximum amount which would not otherwise cause the Obligations (or any other obligations of such Guarantor to the Funding Parties) to be avoidable or unenforceable against such Guarantor under any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or (c) in a case or proceeding commenced by or against any Guarantor under any law, statute or regulation other than the Bankruptcy Code (including, without limitation, any other bankruptcy, reorganization, arrangement, moratorium, readjustment of debt, dissolution, liquidation or similar debtor relief laws), the maximum amount which would not otherwise cause the Obligations (or any other obligations of such Guarantor to the Funding Parties) to be avoidable or unenforceable against such Guarantor under such law, statute or regulation including, without limitation, any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding. (The substantive laws under which the possible avoidance or unenforceability of the Obligations (or any other obligations of such Guarantor to the Funding Parties) shall be determined in any such case or proceeding shall hereinafter be referred to as the "Avoidance Provisions"). (d) To the extent set forth in Sections 21(a),(b), and (c), but only to the extent that the Obligations would otherwise be subject to avoidance under the Avoidance Provisions, if any Guarantor is not deemed to have received valuable consideration, fair value or reasonably equivalent value for the Obligations, or if the Obligations would render such Guarantor insolvent, or leave such Guarantor with an unreasonably small capital to conduct its business, or cause such Guarantor to have incurred debts (or to have intended to have incurred debts) beyond its ability to pay such debts as they mature, in each case as of the time any of the Obligations are deemed to have been incurred under the Avoidance Provisions and after giving effect to the contribution by such Guarantor, the maximum Obligations for which such Guarantor shall be liable hereunder shall be reduced to that amount which, after giving effect thereto, would not cause the Obligations (or any other obligations of such Guarantor to the Funding Parties), as so reduced, to be subject to avoidance under the Avoidance Provisions. This Section 21 is intended solely to preserve the rights of the Funding Parties hereunder to the maximum extent that would not cause the Obligations of such Guarantor to be subject to avoidance under the Avoidance Provisions, and neither the Guarantors nor any other Person shall have any right or claim under this Section 21 as against the Funding Parties that would not otherwise be available to such Person under the Avoidance Provisions. SECTION 22. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Funding Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Funding Party to or for the credit or the account of any Guarantor against any or all the obligations of such Guarantor now or hereafter existing under this Subsidiary Guaranty Agreement and the other Operative Documents held by such Funding Party, irrespective of whether or not such Person shall have made any demand under this Subsidiary Guaranty Agreement or any other Operative Document and although such obligations may be unmatured. The rights of each Funding Party under this Section 21 are in addition to other rights and remedies (including other rights of setoff) which such Funding Party may have.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. RUBY TUESDAY BUSINESS DEVELOPMENT, INC.
By: /s/ J. Russell Mothershed -------------------Name: J. Russell Mothershed Title: President

RUBY TUESDAY, LLC
By: /s/ Daniel T. Cronk -------------------Name: Daniel T. Cronk Title: Vice President

SUNTRUST BANK, as Agent
By: /s/ Vipul Patel -------------------Name: Vipul Patel Title:Vice President

SCHEDULE I TO THE SUBSIDIARY GUARANTY AGREEMENT
Guarantor(s) Address ----------------------------------------- -------------------------------------Ruby Tuesday Business Development, Inc. 300 Delaware Avenue, Suite 907 Wilmington, Delaware 19801 ----------------------------------------- -------------------------------------Ruby Tuesday, LLC 150 West Church Avenue Maryland, Tennessee 37801 ----------------------------------------- --------------------------------------

ANNEX 1 TO THE SUBSIDIARY GUARANTY AGREEMENT SUPPLEMENT NO. [ ] dated as of [ ], to the Subsidiary Guaranty Agreement (as amended from time to time, the "Guaranty Agreement") dated as of April 30, 2001 among each of the subsidiaries listed on Schedule I thereto (each such Subsidiary individually, a "Guarantor" and collectively, the "Guarantors") of RUBY TUESDAY, INC., a Georgia corporation (the "Lessee"), and SUNTRUST BANK, a Georgia banking corporation, as Agent (the "Agent") for the Lenders (as defined in the Master Agreement referred to below). A. Reference is made to the Master Agreement dated as of April 30, 2001 (as amended, supplemented or otherwise modified from time to time, the "Master Agreement"), among the Lessee, Atlantic Financial Group, Ltd., the lenders from time to time party thereto (the "Lenders") and SunTrust Bank, as Agent. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Guaranty Agreement and in Appendix A to the Master Agreement. C. The Guarantors have entered into the Guaranty Agreement in order to induce the Funding Parties to make Advances. Pursuant to Section 5.10 of the Master Agreement, each Subsidiary Guarantor that was not in existence or not a Subsidiary Guarantor on the date of the Master Agreement is required to enter into the Guaranty Agreement as a Guarantor upon becoming a Subsidiary Guarantor. Section 19 of the Guaranty Agreement provides that additional Subsidiaries of the Lessee may become Guarantors under the Guaranty Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Lessee (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Master Agreement to become a Guarantor under the Guaranty Agreement in order to induce the Funding Parties to make additional Advances and as consideration for Advances previously made. Accordingly, the Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 19 of the Guaranty Agreement, the New Guarantor by its signature below becomes a Guarantor under the Guaranty Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guaranty Agreement applicable to it as Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a Guarantor in the Guaranty Agreement shall be deemed to include the New Guarantor. The Guaranty Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Agent and the Funding Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Guaranty Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guaranty Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of

which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 13 of the Guaranty Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature below, with a copy to the Lessee. SECTION 8. The New Guarantor agrees to reimburse the Agent for its out-of-pocket expenses in connection with this Supplement, including the reasonable fees, disbursements and other charges actually incurred of counsel for the Agent.

IN WITNESS WHEREOF, the New Guarantor and the Agent have duly executed this Supplement to the Guaranty Agreement as of the day and year first above written. [Name of New Guarantor] By: Name:

Title: Address: SUNTRUST BANK, as Agent By: Name:

INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated as of April 30, 2001 , among RUBY TUESDAY, INC., a Georgia corporation (the "Lessee"), each Subsidiary listed on Schedule I hereto (the "Guarantors"), SUNTRUST BANK, a Georgia banking corporation, as agent (in such capacity, the "Agent") for the Lenders (as defined in the Master Agreement referred to below). Reference is made to (a) the Master Agreement dated as of April 30, 2001 (as amended, supplemented or otherwise modified from time to time, the "Master Agreement"), among the Lessee, Atlantic Financial Group, Ltd. (the "Lessor"), the lenders from time to time party thereto (the "Lenders") and SunTrust Bank, as Agent, and (b) the Subsidiary Guaranty Agreement dated as April 30, 2001 , among the Guarantors and the Agent (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guaranty Agreement"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in Appendix A to the Master Agreement. The Funding Parties have agreed to make Advances to the Lessee pursuant to, and upon the terms and subject to the conditions specified in, the Master Agreement. The Guarantors have guaranteed such Advances and the other Obligations (as defined in the Subsidiary Guaranty Agreement) of the Lessee under the Operative Documents pursuant to the Subsidiary Guaranty Agreement. The obligations of the Funding Parties to make Advances are conditioned on, among other things, the execution and delivery by the Lessee and the Guarantors of an agreement in the form hereof. Accordingly, the Lessee, each Guarantor and the Agent agree as follows:

SECTION 1. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 3), the Lessee agrees that in the event a payment shall be made by any Guarantor under the Subsidiary Guaranty Agreement, the Lessee shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment. SECTION 2. Contribution and Subrogation. Each Guarantor (a "Contributing Guarantor") agrees (subject to Section 3) that, in the event a payment shall be made by any other Guarantor under the Subsidiary Guaranty Agreement and such other Guarantor (the "Claiming Guarantor") shall not have been fully indemnified by the Lessee as provided in Section 1, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 12, the date of the Supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 2 shall be subrogated to the rights of such Claiming Guarantor under Section 1 to the extent of such payment. SECTION 3. Subordination. Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 1 and 2 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Lessee or any Guarantor to make the payments required under applicable law or otherwise shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder. SECTION 4. Termination. This Agreement shall survive and be in full force and effect so long as any Obligation is outstanding and has not been indefeasibly paid in full in cash, and so long as any of the Commitments under the Master Agreement have not been terminated, and shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Funding Party or any Guarantor upon the bankruptcy or reorganization of the Lessee, any Guarantor or otherwise. SECTION 5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. SECTION 6. No Waiver; Amendment. (a) No failure on the part of the Agent or any Guarantor to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Agent or any Guarantor preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. None of the Agent and the Guarantors shall be deemed to have waived any rights hereunder unless such waiver shall be in writing and signed by such parties. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Lessee, the Guarantors and the Agent, with the prior written consent of the Required Funding Parties (except as otherwise provided in the Master Agreement). SECTION 7. Notices. All communications and notices hereunder shall be in writing and given as provided in the Subsidiary Guaranty Agreement and addressed as specified therein. SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the parties that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. Neither the Lessee nor any Guarantor may assign or transfer any of its rights or obligations hereunder (and any such attempted assignment or transfer shall be void) without the prior written consent of the Required Funding Parties. Notwithstanding the foregoing, at the time any Guarantor is released from its obligations under the Subsidiary Guaranty Agreement in accordance with such Subsidiary Guaranty Agreement and the Master Agreement, such Guarantor will cease to have any rights or

obligations under this Agreement. SECTION 9. Survival of Agreement; Severability. (a) All covenants and agreements made by the Lessee and each Guarantor herein and in the certificates or other instruments prepared or delivered in connection with this Agreement or the other Operative Documents shall be considered to have been relied upon by the Agent, the Funding Parties and each Guarantor and shall survive the making by the Funding Parties of the Advances, and shall continue in full force and effect as long as the principal of or any accrued interest on any Advance or any other fee or amount payable under the Master Agreement or this Agreement or under any of the other Operative Documents is outstanding and unpaid and as long as the Commitments have not been terminated. (b) In case one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 10. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts) each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement shall be effective with respect to any Guarantor when a counterpart bearing the signature of such Guarantor shall have been delivered to the Agent. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. SECTION 11. Rules of Interpretation. The rules of interpretation specified in Appendix A to the Master Agreement shall be applicable to this Agreement. SECTION 12. Additional Guarantors. Pursuant to Section 5.10 of the Master Agreement, each Subsidiary Guarantor of the Lessee that was not in existence or not such a Subsidiary Guarantor on the date of the Master Agreement is required to enter into the Subsidiary Guaranty Agreement as Guarantor upon becoming such a Subsidiary Guarantor. Upon the execution and delivery, after the date hereof, by the Agent and such Subsidiary of an instrument in the form of Annex I hereto, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor hereunder. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first appearing above. RUBY TUESDAY, INC.
By: /s/ J. Russell Mothershed ------------------Name: J. Russell Mothershed Title: Senior Vice President

RUBY TUESDAY BUSINESS DEVELOPMENT, INC.
By: /s/ J. Russell Mothershed ------------------Name: J. Russell Mothershed Title: President

RUBY TUESDAY, LLC
By: /s/ Daniel T. Cronl ------------------Name: Daniel T. Cronk Title: Vice President

SUNTRUST BANK, as Agent
By: /s/ Vipul Patel -------------------Name: Vipul Patel Title: Vice President

SCHEDULE I TO THE INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT
Guarantors --------------------------------------Address --------------------------------------300 Delaware Avenue, Suite 907 Wilmington, Delaware 19801 ---------------------------------------- --------------------------------------Ruby Tuesday, LLC 150 West Church Avenue Maryland, Tennessee 37801 ---------------------------------------- -----------------------------------------------------------------------------Name ---------------------------------------Ruby Tuesday Business Development, Inc.

ANNEX I TO THE INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT SUPPLEMENT NO. [ ] dated as of [ ], to the Indemnity, Subrogation and Contribution Agreement dated as of April __, 2001 (as the same may be amended, supplemented or otherwise modified from time to time, the "Indemnity, Subrogation and Contribution Agreement") among RUBY TUESDAY, INC., a Georgia corporation (the "Lessee"), each Subsidiary listed on Schedule I thereto (the "Guarantors") and SUNTRUST BANK, a Georgia banking corporation, as agent (the "Agent") for the Lenders (as defined in the Master Agreement referred to below). A. Reference is made to (a) the Master Agreement dated as of April __, 2001 (as amended, supplemented or otherwise modified from time to time, the "Master Agreement"), among the Lessee, Atlantic Financial Group, Ltd., the lenders from time to time party thereto (the "Lenders") and SunTrust Bank, as the Agent, and (b) the Subsidiary Guaranty Agreement dated as April __, 2001, among the Guarantors and the Agent (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guaranty Agreement"). B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Indemnity, Subrogation and Contribution Agreement and the Master Agreement. C. The Lessee and the Guarantors have entered into the Indemnity, Subrogation and Contribution Agreement in order to induce the Funding Parties to make Advances. Pursuant to Section 5.10 of the Master Agreement, each Subsidiary Guarantor that was not in existence or not such a Subsidiary Guarantor on the date of the Master Agreement is required to enter into the Subsidiary Guaranty Agreement as a Guarantor upon becoming a Subsidiary Guarantor. Section 12 of the Indemnity, Subrogation and Contribution Agreement provides that additional Subsidiaries may become Guarantors under the Indemnity, Subrogation and Contribution Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Master Agreement to become a Guarantor under the Indemnity, Subrogation and Contribution Agreement in order to induce the Funding Parties to make additional Advances and as consideration for Advances previously made. Accordingly, the Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation and Contribution Agreement, the New Guarantor by its signature below becomes a Guarantor under the Indemnity, Subrogation and Contribution Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby agrees to all the terms and provisions of the Indemnity, Subrogation and Contribution Agreement applicable to it as Guarantor thereunder. Each reference to a Guarantor in the Indemnity, Subrogation and Contribution Agreement shall be deemed to include the New Guarantor. The Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Agent and the Funding Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts) each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Agent shall have received counterparts of this Supplement that, when taken together, bear the signature of the New Guarantor and the Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Indemnity, Subrogation and Contribution Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.

SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Indemnity, Subrogation and Contribution Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 7 of the Indemnity, Subrogation and Contribution Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature. SECTION 8. The New Guarantor agrees to reimburse the Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Agent.

IN WITNESS WHEREOF, the New Guarantor and the Agent have duly executed this Supplement to the Indemnity, Subrogation and Contribution Agreement as of the day and year first above written. [Name of New Guarantor] By: Name:

Title: Address: SUNTRUST BANK, as Agent By: Name:

Title:

SCHEDULE I TO SUPPLEMENT NO. ____ TO THE INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT Guarantors Name

SIXTH AMENDMENT TO THE RUBY TUESDAY, INC. MANAGEMENT RETIREMENT PLAN THIS FIRST AMENDMENT is made on this 9th day of April, 2001, by RUBY TUESDAY, INC., a corporation duly organized and existing under the laws of the State of Georgia (the "Primary Sponsor"). WITNESSETH: WHEREAS, the Primary Sponsor maintains the Ruby Tuesday, Inc. Management Retirement Plan (the "Plan") as most recently amended on December 18, 1996. WHEREAS, the Primary Sponsor now wishes to amend the Plan to cease the accrual of benefits under the Plan for all existing participants and to prohibit the addition of any new participants. NOW, THEREFORE, the Primary Sponsor does hereby amend the Plan pursuant to Section 12.01 thereof, effective as of June 1, 2001 (the "Freeze Date"), as follows: 1. By adding the following new final sentence to Section 1.01: "Notwithstanding any other provision of this Section 1.01, the Accrued Benefit of a Participant shall be frozen as of the Freeze Date, such that no Compensation paid after the Freeze Date and no Years of Credited Service (or fractional portion thereof) completed after the Freeze Date shall be taken into account for purposes of determining a Participant's Accrued Benefit." 2. By adding the following new final sentence to Section 1.07: "Notwithstanding any other provision of this Section 1.07, no Compensation paid to a Participant after the Freeze Date shall be taken into account for purposes of determining a Participant's Accrued Benefit." 3. By adding the following new final sentence to Section 1.22: "Notwithstanding any other provision of this Section 1.22, no Years of Credited Service (or fractional portion thereof) completed by a Participant after the Freeze Date shall be taken into account for purposes of determining a Participant's Accrued Benefit." 4. By adding the following new Section 2.03: "2.03 Freeze Date. Notwithstanding any other provision of this Section 2, no person who has failed to satisfy the eligibility criteria as of the Freeze Date shall become a Participant in the Plan." 5. By deleting the final sentence of Section 4.04(b). 6. By deleting the first sentence of Section 6.01 and by substituting therefor the following: "The Accrued Benefit of a Participant who terminates employment with the Company and its Affiliates prior to attaining age fifty-five (55) shall be payable as of the first day of the month following his attainment of age sixtyfive (65), unless the affected Participant elects to have payments commence as early as the first day of the month following his attainment of age fifty-five (55)." Except as specifically amended hereby, the Plan shall remain in full force and effect prior to this Sixth Amendment. IN WITNESS WHEREOF, the Primary Sponsor has caused this Sixth Amendment to be executed on the day and year first above written. RUBY TUESDAY, INC.
/s/ Samuel E. Beall, III By: Samuel E. Beall, III

Chairman and Chief Executive Officer

ATTEST:

/s/ Daniel T. Cronk Daniel T. Cronk Secretary

[CORPORATE SEAL] ::ODMA\PCDOCS\ATL\470744\1 6thAmendtoMRP0401

2 FIRST AMENDMENT TO THE RUBY TUESDAY, INC. EXECUTIVE SUPPLEMENTAL PENSION PLAN THIS FIRST AMENDMENT is made as of this 9th day of April, 2001, 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 July 1, 1999. WHEREAS, the Primary Sponsor desires to amend the Plan to provide an enhanced early retirement window opportunity to certain eligible employees, as described herein. 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 April 1, 2001, as follows: 1. By adding a new Subsection (d) to Section 4.02, as follows: "(d) 2001 Early Retirement Window. A Participant holding the position of Senior Vice President or above, other than the position of Chief Executive Officer (each, an `Executive Officer Position'), as of April 1, 2001 who is designated in writing by the Chief Executive Officer of the Company as eligible for the early retirement opportunity provided by this Subsection (d) may commence receiving benefits pursuant to this Subsection (d) if the Participant resigns from each and every Executive Officer Position held by the Participant effective on or before August 1, 2001 (such a Participant is referred to herein as a `Subsection (d) Participant'). Notwithstanding any other provision of the Plan to the contrary, a Subsection (d) Participant may commence receiving benefits from the Plan pursuant to this Section 4.02(d) effective as of the first day of the month following the effective date of his or her resignation from the last Executive Officer Position held by the Subsection (d) Participant. The Accrued Benefit will be determined in accordance with Section 3.01, with the following exceptions: (1) only Annual Base Salary paid through the effective date of the Subsection (d) Participant's resignation from the last Executive Officer Position held by the Subsection (d) Participant prior to August 1, 2001 shall be taken into account; regardless of whether the Subsection (d) Participant continues in the employ of the Company or any of its subsidiaries following such resignation or is subsequently rehired by the Company or any of its subsidiaries; and (2) the Subsection (d) Participant's Continuous Service shall be deemed to be thirty (30) years. The benefits payable pursuant to this Section 4.02(d) will not be subject to actuarial reduction and will be payable in accordance with all of the remaining provisions of the Plan to the extent not inconsistent with the express provisions of this Subsection (d)." Except as specifically amended hereby, the Plan shall remain in full force and effect as prior to this First Amendment. IN WITNESS WHEREOF, the Primary Sponsor has caused this First Amendment to be executed as of 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

[CORPORATE SEAL]

ATTEST: /s/ Daniel T. Cronk Daniel T. Cronk Secretary

::ODMA\PCDOCS\ATL\470782\1 1stAmend99RestatedESP-0401

RUBY TUESDAY, INC. SALARY DEFERRAL PLAN THIS INDENTURE is made on the 9th day of April, 2001, by Ruby Tuesday, Inc., a corporation duly organized and existing under the laws of the State of Georgia (hereinafter called the "Primary Sponsor"). W I T N E S S E T H: WHEREAS, the Primary Sponsor established by indenture dated June 1, 1968, the Morrison Employees Retirement Savings Trust (the "Plan"), which was last amended and restated, as the Morrison Restaurants Inc. Salary Deferral Plan, by indenture dated December 31, 1993; and WHEREAS, the Primary Sponsor now wishes to amend and restate the Plan primarily to comply with and make changes permitted by the provisions of the Small Business Job Protection Act of 1996 and the Taxpayer Relief Act of 1997; and WHEREAS, the Plan is intended to be a profit sharing plan within the meaning of Treasury Regulations Section 1.401-1(b)(1)(ii) and also contains a cash or deferred arrangement as described in Section 401(k) of the Internal Revenue Code of 1986; and WHEREAS, the provisions of the Plan, as amended and restated herein, shall apply to Plan Years beginning after January 1, 1997, except to the extent the provisions are required to apply at an earlier date or to any other members to comply with applicable law; NOW, THEREFORE, the Primary Sponsor does hereby amend and restate the Plan in its entirety, generally effective as of January 1, 1997, except as otherwise provided herein, to read as follows:

RUBY TUESDAY, INC. SALARY DEFERRAL PLAN
Page SECTION 1 SECTION 2 SECTION 3 SECTION 4 SECTION 5 SECTION 6 SECTION 7 SECTION 8 SECTION 9 SECTION 10 SECTION 11 SECTION 12 SECTION 13 SECTION 14 SECTION 15 SECTION 16 SECTION 17 SECTION 18 SECTION 19 SECTION 20 SECTION 21 APPENDIX A APPENDIX B APPENDIX C DEFINITIONS................................................1 ELIGIBILITY................................................9 CONTRIBUTIONS.............................................10 ALLOCATIONS...............................................12 INVESTMENT FUNDS AND INVESTMENTS OF TRUST ASSETS..........12 PLAN LOANS................................................13 HARDSHIP WITHDRAWALS......................................15 PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT..........17 PAYMENT OF BENEFITS ON RETIREMENT.........................18 DEATH BENEFITS............................................19 GENERAL RULES ON DISTRIBUTIONS............................19 ADMINISTRATION OF THE PLAN................................21 CLAIM REVIEW PROCEDURE....................................24 INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS............25 PROHIBITION AGAINST DIVERSION.............................26 LIMITATION OF RIGHTS......................................27 AMENDMENT TO OR TERMINATION OF THE PLAN AND THE TRUST.....27 ADOPTION OF PLAN BY AFFILIATES............................28 QUALIFICATION AND RETURN OF CONTRIBUTIONS.................29 SECTION 16 OF SECURITIES EXCHANGE ACT OF 1934.............29 INCORPORATION OF SPECIAL LIMITATIONS......................30 LIMITATION ON ALLOCATIONS................................A-1 TOP-HEAVY PROVISIONS.....................................B-1 SPECIAL NONDISCRIMINATION RULES..........................C-1

30 SECTION 1 DEFINITIONS Wherever used herein, the masculine pronoun shall be deemed to include the feminine, and the singular to include the plural, unless the context clearly indicates otherwise and the following words and phrases shall, when used herein, have the meanings set forth below: 1.1 "Account" means a Participant's aggregate balance in the following accounts, as adjusted pursuant to the Plan as of any given date: (a) "Employee Deferred Account" which shall reflect a Participant's interest in contributions made by a Plan Sponsor under Plan Section 3. 1. (b) "Company Matching Account" which shall reflect a Participant's interest in matching contributions made by a Plan Sponsor under Plan Section 3.2. (c) "Voluntary Contribution Account" which shall reflect a Participant's interest in Voluntary Contributions made by a Participant to the Fund pursuant to Plan Section 3.3. (d) "Rollover Account" which shall reflect a Participant's interest in Rollover Amounts. In addition, the Plan Administrator shall allocate the interest of a Participant in any funds transferred to the Plan in a trust-to-trust transfer (other than Rollover Amounts) or pursuant to the merger of another tax-qualified retirement plan with the Plan among the above accounts as the Plan Administrator determines best reflects the interest of the Participant or among such other accounts as the Plan Administrator may establish from time to time. 1.2 "Affiliate" means (a) any corporation which is a member of the same controlled group of corporations (within the meaning of Code Section 414(b)) as is a Plan Sponsor, (b) any other trade or business (whether or not incorporated) under common control (within the meaning of Code Section 414(c)) with a Plan Sponsor, (c) any other corporation, partnership or other organization which is a member of an affiliated service group (within the meaning of Code Section 414(m)) with a Plan Sponsor, and (d) any other entity required to be aggregated with a Plan Sponsor pursuant to regulations under Code Section 414(o). Notwithstanding the foregoing, for purposes of applying the limitations set forth in Appendix A and for purposes of determining Annual Compensation under Appendix A, the references to Code Sections 414(b) and (c) above shall be as modified by Code Section 415(h). 1.3 "Annual Compensation" means, effective June 1, 2001, an Employee's wages, salaries, fees for professional services, and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with a Plan Sponsor and its Affiliates during a Plan Year to the extent that the amounts are includible in gross income (to the extent contemplated by Treasury Regulations Section 1.415-2(d)(2), but limited to the extent contemplated by Treasury Regulations Section 1.415-2(d)(3) (including amounts realized from the exercise of non-qualified stock options)), to the extent not in excess of the Annual Compensation Limit for all purposes under the Plan except for purposes of determining who are Highly Compensated Employees. Notwithstanding the above, Annual Compensation shall be determined as follows: (a) (1) for purposes of determining, with respect to each Plan Sponsor, the amount of contributions made by or on behalf of an Employee under Plan Section 3 and allocations under Plan Section 4, and (2) for purposes of applying the provisions of Appendix C hereto for such Plan Years as the Secretary of the Treasury may allow, Annual Compensation shall only include amounts received for the portion of the Plan Year during which the Employee was a Participant; (b) for all purposes under the Plan, Annual Compensation shall not include reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation, and welfare benefits;

(c) in determining the amount of contributions under Plan Section 3 and allocations under Plan Section 4 made by or on behalf of an Employee, Annual Compensation shall include tip income only to the extent of the greater of (1) the amount actually reported by the Employee to the Plan Sponsor, or (2) the amount the Plan Sponsor is required to report in accordance with Code Section 6053(c); (d) for all purposes under the Plan, except as provided in Subsection (e) of this Section, Annual Compensation shall include any amount which would have been paid during a Plan Year, but was contributed by a Plan Sponsor on behalf of an Employee pursuant to a salary reduction agreement which is not includable in the gross income of the Employee under Code Section 125, 402(g)(3), or 457; and (e) effective until December 31, 1997, for purposes of applying the annual addition limits in Appendix A, Annual Compensation shall not include the amounts described in Subsection (d). 1.4 "Annual Compensation Limit" means, effective January 1, 2000, $170,000, which amount may be adjusted in subsequent Plan Years based on changes in the cost of living as announced by the Secretary of the Treasury. 1.5 "Beneficiary" means the person or trust that a Participant designated most recently in writing to the Plan Administrator; provided, however, that if the Participant has failed to make a designation, no person designated is alive, no trust has been established, or no successor Beneficiary has been designated who is alive, the term "Beneficiary" means (a) the Participant's spouse or (b) if no spouse is alive, the Participant's surviving children, or (c) if no children are alive, the Participant's parent or parents, or (d) if no parent is alive, the Participant's estate. Notwithstanding the preceding sentence, the spouse of a married Participant shall be his Beneficiary unless that spouse has consented in writing to the designation by the Participant of some other person or trust and the spouse's consent acknowledges the effect of the designation and is witnessed by a notary public or a Plan representative. A Participant may change his designation at any time. However, a Participant may not change his designation without further consent of his spouse under the terms of the preceding sentence unless the spouse's consent permits designation of another person or trust without further spousal consent and acknowledges that the spouse has the right to limit consent to a specific beneficiary and that the spouse voluntarily relinquishes this right. Notwithstanding the above, the spouse's consent shall not be required if the Participant establishes to the satisfaction of the Plan Administrator that the spouse cannot be located, if the Participant has a court order indicating that he is legally separated or has been abandoned (within the meaning of local law) unless a "qualified domestic relations order" (as defined in Code Section 414(p)) provides otherwise, or if there are other circumstances as the Secretary of the Treasury prescribes. If the spouse is legally incompetent to give consent, consent by the spouse's legal guardian shall be deemed to be consent by the spouse. If, subsequent to the death of a Participant, the Participant's Beneficiary dies while entitled to receive benefits under the Plan, the successor Beneficiary, if any, or the Beneficiary listed under Subsection (a) or, if no spouse is alive, Subsection (d) shall be the Beneficiary. 1.6 "Board of Directors" means the Board of Directors of the Primary Sponsor. 1.7 "Break in Service" means the failure of an Employee, in connection with a termination of employment other than by reason of death or attainment of a Retirement Date, to complete more than 500 Hours of Service in any Plan Year. 1.8 "Code" means the Internal Revenue Code of 1986, as amended. 1.9 "Company Stock" means shares of any class of stock issued by the Primary Sponsor or any Affiliate and constituting "qualifying employer securities" within the meaning of ERISA Section 407(d)(3). 1.10 "Deferral Amount" means a contribution of a Plan Sponsor on behalf of a Participant pursuant to Plan Section 3.1. 1.11 "Direct Rollover" means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 1.12 "Disability" means a disability of a Participant within the meaning of Code Section 72(m)(7), to the extent that the Participant is, or would be, entitled to disability retirement benefits under the federal Social Security Act or to the extent that the Participant is entitled to recover benefits under any long term disability plan or policy maintained by the Plan Sponsor. The determination of whether or not a Disability exists shall be determined by

the Plan Administrator and shall be substantiated by competent medical evidence. 1.13 "Distributee" means an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order (as defined in Code Section 414(p)), are Distributees with regard to the interest of the spouse or former spouse. 1.14 "Elective Deferrals" means, with respect to any taxable year of the Participant, the sum of (a) any Deferral Amounts; (b) any contributions made by or on behalf of a Participant under any other qualified cash or deferred arrangement as defined in Code Section 401(k), whether or not maintained by a Plan Sponsor, to the extent such contributions are not or would not, but for Code Section 402(g)(1) be included in the Participant's gross income for the taxable year; and (c) any other contributions made by or on behalf of a Participant pursuant to Code Section 402(g)(3). 1.15 "Eligibility Service" means, effective June 1, 2001, a six-consecutive-month period beginning on the date on which the Employee first performs an Hour of Service upon his employment or reemployment with the Plan Sponsor. 1.16 "Eligible Employee" means any Employee of a Plan Sponsor other than an Employee who is (a) covered by a collective bargaining agreement between a union and a Plan Sponsor, provided that retirement benefits were the subject of good faith bargaining, unless the collective bargaining agreement provides for participation in the Plan, (b) a leased employee within the meaning of Code Section 414(n)(2), (c) deemed to be an Employee of a Plan Sponsor pursuant to regulations under Code Section 414(o), or (d) a Highly Compensated Employee. A Participant who is first identified as a Highly Compensated Employee with respect to a Plan Year shall cease to be an Eligible Employee as soon as that identification can reasonably be made following the first day of that Plan Year. In addition, no person who is initially classified by a Plan Sponsor as an independent contractor for federal income tax purposes shall be regarded as an Eligible Employee for that period, regardless of any subsequent determination that any such person should have been characterized as a common law employee of the Plan Sponsor for the period in question. 1.17 "Eligible Retirement Plan" means an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403 (a) or a qualified trust described in Code Section 401(a) that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. 1.18 "Eligible Rollover Distribution" means any distribution of all or any portion of the Distributee's Account, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and, effective for distributions made after December 31, 1999, any distribution of amounts described in Treasury Regulations Section 1.401(k)-1(d)(2)(ii). 1.19 "Employee" means any person who is (a) a common law employee of a Plan Sponsor or an Affiliate, (b) a leased employee within the meaning of Code Section 414(n)(2) with respect to a Plan Sponsor, or (c) deemed to be an employee of a Plan Sponsor pursuant to regulations under Code Section 414(o). 1.20 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.21 "Fiduciary" means each Named Fiduciary and any other person who exercises or has any discretionary authority or control regarding management or administration of the Plan, any other person who renders investment advice for a fee or has any authority or responsibility to do so with respect to any assets of the Plan, or any other person who exercises or has any authority or control respecting management or disposition of assets

of the Plan. 1.22 "Fund" means the amount at any given time of cash and other property held by the Trustee pursuant to the Plan. 1.23 "Highly Compensated Employee" means, with respect to a Plan Year, each Employee who: (a) was at any time during the Plan Year or the immediately preceding Plan Year an owner of more than five percent (5%) of the outstanding stock of a Plan Sponsor or Affiliate or more than five percent (5%) of the total combined voting power of all stock of a Plan Sponsor or Affiliate; or (b) received Annual Compensation in excess of $85,000 during the immediately preceding Plan Year ($80,000 for immediately preceding Plan Years beginning on or prior to January 1, 1999), which amount shall be adjusted for changes in the cost of living as provided in regulations issued by the Secretary of the Treasury and was in the top-paid group of employees for such preceding year. (c) is a former Employee who met the requirements of Subsection (a) or (b) at the time the former Employee separated from service with the Plan Sponsor or an Affiliate or at any time after the former Employee attained age 55. Pursuant to Code Section 414(q)(3), an Employee is in the top-paid group for any year if an Employee is in the group consisting of the top twenty percent (20%) of Employees of the Plan Sponsor ranked on the basis of Annual Compensation paid to Employees during such year (the "top-paid group"). For purposes of this Section, an Employee (who is not a five percent (5%) owner) who has Annual Compensation in excess of the applicable dollar limit is not a Highly Compensated Employee if the Employee is not in the top-paid group. 1.24 "Hour of Service" means: (a) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for a Plan Sponsor or any Affiliate during the applicable computation period, and such hours shall be credited to the computation period in which the duties are performed; (b) Each hour for which an Employee is paid, or entitled to payment, by a Plan Sponsor or any Affiliate on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence; (c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by a Plan Sponsor or any Affiliate, and such hours shall be credited to the computation period or periods to which the award or agreement for back pay pertains rather than to the computation period in which the award, agreement or payment is made; provided, that the crediting of Hours of Service for back pay awarded or agreed to with respect to periods described in Subsection (b) of this Section shall be subject to the limitations set forth in Subsection (f); (d) Solely for purposes of determining whether a Break in Service has occurred, each hour during any period that the Employee is absent from work (1) by reason of the pregnancy of the Employee, (2) by reason of the birth of a child of the Employee, (3) by reason of the placement of a child with the Employee in connection with the adoption of the child by the Employee, or (4) for purposes of caring for such child for a period immediately following its birth or placement shall be credited (A) only in the computation period in which the absence from work begins, if the Employee would be prevented from incurring a Break in Service in that year solely because of that credit, or (B), in any other case, in the next following computation period; (e) Without duplication of the Hours of Service counted pursuant to Subsection (d) hereof and solely for such purposes as required pursuant to the Family and Medical Leave Act of 1993 and the regulations thereunder (the "FMLA"), each hour (as determined pursuant to the FMLA) for which an Employee is granted leave under the FMLA (1) for the birth of a child, (2) for placement with the Employee of a child for adoption or foster care, (3) to care for the Employee's spouse, child or parent with a serious health condition, or (4) for a serious health condition that makes the Employee unable to perform the functions of the Employee's job;

(f) The Plan Administrator shall credit Hours of Service in accordance with the provisions of Section 2530.200b2(b) and (c) of the U.S. Department of Labor Regulations or such other federal regulations as may from time to time be applicable and determine Hours of Service from the employment records of a Plan Sponsor or in any other manner consistent with regulations promulgated by the Secretary of Labor, and shall construe any ambiguities in favor of crediting Employees with Hours of Service. Notwithstanding any other provision of this Section, in no event shall an Employee be credited with more than 501 Hours of Service during any single continuous period during which he performs no duties for the Plan Sponsor or Affiliate; and (g) In the event that a Plan Sponsor or an Affiliate acquires substantially all of the assets of another corporation or entity or a controlling interest of the stock of another corporation or merges with another corporation or entity and is the surviving entity, then service of an Employee who was employed by the prior corporation or entity and who is employed by the Plan Sponsor or an Affiliate at the time of the acquisition or merger shall be counted in the manner provided, with the consent of the Primary Sponsor, in resolutions adopted by the Plan Sponsor which authorizes the counting of such service. 1.25 "Investment Committee" means a committee, which may be established to direct the Trustee with respect to investments of the Fund. 1.26 "Investment Fund" means individual subfunds of the Fund as may be established by the Plan Administrator from time to time for the investment of the Fund. 1.27 "Investment Manager" means a Fiduciary, other than the Trustee, the Plan Administrator, or a Plan Sponsor, who may be appointed by the Primary Sponsor: (a) who has the power to manage, acquire, or dispose of any assets of the Fund or a portion thereof; and (b) who (1) is registered as an investment adviser under the Investment Advisers Act of 1940; (2) is a bank as defined in the Investment Advisers Act of 1940; or (3) is an insurance company qualified to perform services described in Subsection (a) above under the laws of more than one state; and (c) who has acknowledged in writing that he is a Fiduciary with respect to the Plan. 1.28 "Named Fiduciary" means only the following: (a) the Plan Administrator; (b) the Trustee; (c) the Investment Committee; and (d) the Investment Manager. 1.29 "Normal Retirement Age" means age 65. 1.30 "Participant" means any Employee or former Employee who has become a participant in the Plan for so long as his vested Account has not been fully distributed pursuant to the Plan. 1.31 "Plan Administrator" means the organization or person designated to administer the Plan by the Primary Sponsor and, in lieu of any such designation, means the Primary Sponsor. 1.32 "Plan Sponsor" means individually the Primary Sponsor and any Affiliate or other entity which has adopted the Plan and Trust. 1.33 "Plan Year" means the calendar year. 1.34 "Retirement Date" means the date on which the Participant terminates employment on or after (a) attaining Normal Retirement Age or (b) becoming subject to a Disability.

1.35 "Rollover Amount" means any amount transferred to the Fund by a Participant, which amount qualifies as an Eligible Rollover Distribution under Code Section 402(c)(4), or for rollover treatment under Code Sections 403 (a)(4) or 408(d)(3)(A)(ii), and any regulations issued thereunder. 1.36 "Termination of Employment" means the termination of employment of an Employee from all Plan Sponsors and Affiliates for any reason other than death or attainment of a Retirement Date. Any absence from active employment of the Plan Sponsor and Affiliates by reason of an approved leave of absence shall not be deemed for any purpose under the Plan to be a Termination of Employment. Transfer from an Employee from one Plan Sponsor to another Plan Sponsor or to an Affiliate shall not be deemed for any purpose under the Plan to be a Termination of Employment. In addition, transfer of an Employee to another employer in connection with a corporate transaction involving a sale of assets, merger or sale of stock, shall not be deemed to be a Termination of Employment, for purposes of the timing of distributions under Plan Section 8.1, if the employer to which such Employee is transferred agrees with the Plan Sponsor to accept a transfer of assets from the Plan to its taxqualified plan in a trust-to-trust transfer meeting the requirements of Code Section 414(l). If the employer to which such Employee is transferred does not agree to accept a transfer of assets from the Plan to its tax-qualified Plan, Plan Section 8.5 is applicable in the event that such Termination of Employment is not a distributable event under Code Section 401(k)(10)(A). 1.37 "Trust" means the trust established under an agreement between the Primary Sponsor and the Trustee to hold the Fund or any successor agreement. 1.38 "Trustee" means the trustee under the Trust. 1.39 "Valuation Date" means each regular business day or any other day which the Plan Administrator declares to be a Valuation Date. 1.40 "Voluntary Contribution" means a non-deductible contribution to the Fund made by the Participant pursuant to Section 3.3. 1.41 "Year of Service" means each Plan Year during which a Participant has completed no less than 1,000 Hours of Service. Notwithstanding the foregoing, any individual who was an employee of Morrison Restaurants Inc. immediately prior to the effective date of the distributions by Morrison Restaurants Inc. to its stockholders of all of the outstanding shares of common stock, respectively, of Morrison Fresh Cooking, Inc. and Morrison Health Care, Inc., but who did not continue in the employ of Ruby Tuesday, Inc. immediately after such distributions, shall not be given credit for any Year of Service with Morrison Restaurants Inc. completed on or prior to the effective date of such distributions. SECTION 2 ELIGIBILITY 2.1 Each Eligible Employee shall become a Participant as of the first day of the first payroll period coinciding with or next following the later of the date he (a) completes his Eligibility Service or (b) attains age 21. 2.2 Each individual who was a Participant on December 31, 1996 shall continue to be a Participant as of January 1, 1997. 2.3 Each former Participant who is reemployed by a Plan Sponsor shall become a Participant as of the date of his reemployment as an Eligible Employee. 2.4 Each former Employee who completes his Eligibility Service but terminates employment with a Plan Sponsor before becoming a Participant shall become a Participant as of the latest of the date he (a) is reemployed, (b) would have become a Participant if he had not incurred a Termination of Employment, or (c) becomes an Eligible Employee. 2.5 Solely for the purpose of contributing a Rollover Amount to the Plan, an Eligible Employee who has not yet become a Participant pursuant to any other provision of this Section 2 shall become a Participant as of the date on which the Rollover Amount is contributed to the Plan. 2.6 In the event that an individual becomes an Eligible Employee of a Plan Sponsor by reason of (a) an

acquisition by the Plan Sponsor of substantially all of the assets of a trade or business or a controlling interest in the ownership interests of another entity; or (b) a merger of the individual's prior employer with and into the Plan Sponsor, then any such individual who becomes an Eligible Employee may become a Participant on any earlier date than otherwise provided hereinabove, in the manner and subject to such conditions, if any, provided in resolutions adopted by the Plan Sponsor. SECTION 3 CONTRIBUTIONS 3.1 (a) Deferral Amounts. The Plan Sponsor shall make a contribution to the Fund on behalf of each Participant who is an Eligible Employee and has elected to defer a portion of Annual Compensation otherwise payable to him for the Plan Year and to have such portion contributed to the Fund. The election must be made before the Annual Compensation is payable and may only be made pursuant to an agreement between the Participant and the Plan Sponsor which shall be in such form and subject to such rules and limitations as the Plan Administrator may prescribe and shall specify the percentage of Annual Compensation that the Participant desires to defer and to have contributed to the Fund. Once a Participant has made an election for a Plan Year, the Participant may revoke or modify his election to increase or reduce the rate of future deferrals, as provided in the administrative procedures provided by the Plan Administrator. The contribution made by a Plan Sponsor on behalf of a Participant under this Section 3.1 shall be in an amount equal to the amount specified in the Participant's deferral agreement, but not less than two percent (2%) nor greater than ten percent (10%) of the Participant's Annual Compensation. The Plan Administrator shall revoke as soon as administratively practicable any election in effect pursuant to this Section 3.1(a) with respect to a Participant who is identified as a Highly Compensated Employee for a Plan Year. (b) Limits on Deferral Amounts. Elective Deferrals shall in no event exceed $10,500 (for 2001) in any one taxable year of the Participant, which amount shall be adjusted for changes in the cost of living as provided by the Secretary of the Treasury. In the event the amount of Elective Deferrals exceeds $10,500 (for 2001) as adjusted, in any one taxable year then, (1) not later than the immediately following March 1, the Participant may designate to the Plan the portion of the Participant's Deferral Amount which consists of excess Elective Deferrals, and (2) not later than the immediately following April 15, the Plan may distribute the amount designated to it under Paragraph (1) above, as adjusted to reflect income, gain, or loss attributable to it through the end of the Plan Year, and reduced by any "Excess Deferral Amounts," as defined in Appendix C hereto, previously distributed or recharacterized with respect to the Participant for the Plan Year beginning with or within that taxable year. The payment of the excess Elective Deferrals, as adjusted and reduced, from the Plan shall be made to the Participant without regard to any other provision in the Plan. In the event that a Participant's Elective Deferrals exceed $10,500 (for 2001), as adjusted, in any one taxable year under the Plan and other plans of the Plan Sponsor and its Affiliates, the Participant shall be deemed to have designated for distribution under the Plan the amount of excess Elective Deferrals, as adjusted and reduced, by taking into account only Elective Deferral amounts under the Plan and other plans of the Plan Sponsor and its Affiliates. 3.2 (a) Each Plan Sponsor proposes to make contributions to the Fund with respect to each Plan Year on behalf of each Participant who is an Eligible Employee in an amount equal to (i) twenty percent (20%) of the Participant's Annual Compensation deferred by the Participant pursuant to Plan Section 3.1 in the case of a Participant who has completed at least three (3) Years of Service but fewer than ten (10) Years of Service; (ii) thirty percent (30%) of the Participant's Annual Compensation deferred by the Participant pursuant to Plan Section 3.1 in the case of a Participant who has completed at least ten (10) Years of Service but fewer than twenty (20) Years of Service; and (iii) forty percent (40%) of the Participant's Annual Compensation deferred by the Participant pursuant to Plan Section 3.1 in the case of a Participant who has completed at least twenty (20) Years of Service. Plan Sponsor contributions made pursuant to this Section 3.2 may be made in cash or in kind, including shares of Company Stock, at the discretion of the Plan Sponsor. Unless the Primary Sponsor directs otherwise, the Trustee shall use Plan Sponsor matching contributions made in cash to acquire shares of Company Stock that are issued and outstanding. The Primary Sponsor may request the Trustee to acquire the necessary shares by purchasing newly issued shares of Company Stock or shares of Company Stock held as treasury shares. (b) In the case of a Participant who is identified as a Highly Compensated Employee during a Plan Year, the Plan Sponsor proposes to make a matching contribution on behalf of such Highly Compensated Employee, in lieu of any contribution on behalf of such Highly Compensated Employee under Section 3.2(a), in an amount equal to

twenty percent (20%) of the Highly Compensated Employee's Annual Compensation contributed to the Participant's Employee Deferred Account pursuant to Section 3.1, regardless of the Participant's Years of Service. (c) For purposes of determining the amount of matching contributions to be credited to a Participant's Company Matching Account, all or a portion of a Participant's years of employment with a predecessor employer may be counted if the Participant became an Eligible Employee of a Plan Sponsor by reason of (i) an acquisition by the Plan Sponsor of substantially all of the assets of a trade or business or a controlling interest in the ownership interests of another entity; or (ii) a merger of the individual's prior employer with and into the Plan Sponsor; in the manner and subject to such conditions, if any, provided in resolutions adopted by the Plan Sponsor. 3.3 Subject to such rules and limitations as the Plan Administrator may from time to time prescribe, each Participant who is an Eligible Employee may contribute as a Voluntary Contribution to the Fund an amount of his Annual Compensation not in excess of ten percent (10%) of the Participant's Annual Compensation for the Plan Year. Voluntary Contributions shall be made to the Fund through regular payroll deductions or in such other manner as shall be agreed upon by each Participant and the Plan Administrator. The Plan Administrator may, at any time, suspend the making of any further Voluntary Contributions. The Plan Administrator shall revoke as soon as practicable any election in effect pursuant to this Section 3.3 with respect to a Participant who is identified as a Highly Compensated Employee with respect to the Plan Year. 3.4 Any Eligible Employee may, with the consent of the Plan Administrator and subject to such rules and conditions as the Plan Administrator may prescribe, transfer a Rollover Amount to the Fund. 3.5 Contributions may be made only in cash or other property which is acceptable to the Trustee. In no event will the sum of contributions under Plan Sections 3.1 and 3.2 exceed the deductible limits under Code Section 404. 3.6 Effective December 12, 1994, notwithstanding any provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code. 3.7 Notwithstanding any provision of the Plan to the contrary, the Plan Sponsor may make corrective distributions or allocations as required to comply with any program provided pursuant to the Employee Plans Compliance Resolution System (or any successor program as may established by the Internal Revenue Service). SECTION 4 ALLOCATIONS 4.1 As soon as reasonably practicable following the date of withholding by the Plan Sponsor, if applicable, and receipt by the Trustee, Plan Sponsor contributions made on behalf of each Participant under Plan Sections 3.1 and 3.2, and Voluntary Contributions and Rollover Amounts contributed by the Participant, shall be allocated to the Employee Deferred Account, Company Matching Account, Voluntary Contribution Account and Rollover Account, respectively, of the Participant on behalf of whom the contributions were made. 4.2 As of each Valuation Date, the Trustee shall allocate the net income or net loss of each Investment Fund to each Account in the proportion that the value of the Account as of the Valuation Date bears to the value of all Accounts invested in that Investment Fund as of the Valuation Date. SECTION 5 INVESTMENT FUNDS AND INVESTMENTS OF TRUST ASSETS 5.1 Until such time as the Plan Administrator may direct otherwise, each Participant may direct the Plan Administrator to invest contributions to his Account, other than the Company Matching Account, in one or more Investment Funds as the Participant shall designate by providing notice to the Plan Administrator according to the procedures established by the Plan Administrator for that purpose. (a) All investment directions of contributions shall be made in such multiples as prescribed by the Plan Administrator. Participants may change the investment of contributions to their Accounts in accordance with the procedures established by the Plan Administrator. New investment directions shall be effective as of the date that such directions are processed by the Plan Administrator in accordance with the procedures established for such

purpose. (b) An investment direction, once given, shall be deemed to be a continuing direction until changed as otherwise provided herein. If no direction is effective for the date a contribution is to be made, all contributions which are to be made for such date shall be invested in such Investment Fund as the Plan Administrator, the Investment Manager, the Investment Committee, or the Trustee, as applicable, may determine. To the extent permissible by law, no Fiduciary shall be liable for any loss, which results from a Participant's exercise or failure to exercise his investment discretion. 5.2 A Participant may elect according to the procedures established by the Plan Administrator, to transfer, in such multiples as the Plan Administrator may prescribe, portions of his Account between Investment Funds. An election under this Section 5.2 shall be effective as of the date that such directions are processed by the Plan Administrator in accordance with the procedures established for such purpose. 5.3 A Participant who makes an election pursuant to Plan Section 5.1 or Plan Section 5.2 may apply the new investment direction to his current Account, all future contributions, or both his current Account and all future contributions, except to the extent the Plan Administrator may otherwise prescribe. 5.4 A "Loan Fund" shall be established by the Trustee on behalf of each Participant for whom a loan is made pursuant to Plan Section 6. The Loan Fund shall be credited with the amount of any loan made by the Plan to the Participant and shall be debited with all principal and interest repayments of any such loans. Under rules established by the Plan Administrator, a Participant's interest in the Investment Funds shall be debited by the amount credited to the Participant's Loan Fund. All principal and interest repayments debited to the Loan Fund shall be invested as contributions to the Participant's Account pursuant to Plan Section 5.1. Each Loan Fund shall be invested in a note or notes made by the Participant evidencing the promised repayment of monies loaned to the Participant from the Fund. SECTION 6 PLAN LOANS 6.1 Subject to the provisions of the Plan and the Trust, each Participant who is an Employee shall have the right, subject to prior approval by the Plan Administrator, to borrow from the Fund. In addition, each "party in interest," as defined in ERISA Section 3(14), who is (a) a Participant but no longer an Employee, (b) the Beneficiary of a deceased Participant, or (c) an alternate payee of a Participant pursuant to the provisions of a "qualified domestic relations order," as defined in Code Section 414(p), shall also have the right, subject to prior approval by the Plan Administrator, to borrow from the Fund; provided, however, that loans to such parties in interest may not discriminate in favor of Highly Compensated Employees. 6.2 In order to apply for a loan, a borrower must complete and submit to the Plan Administrator documents or information required by the Plan Administrator for this purpose. 6.3 Loans shall be available to all eligible borrowers on a reasonably equivalent basis which may take into account the borrower's creditworthiness, ability to repay, and ability to provide adequate security. Loans shall not be made available to Highly Compensated Employees, officers or shareholders of a Plan Sponsor in an amount greater than the amount made available to other borrowers. This provision shall be deemed to be satisfied if all borrowers have the right to borrow the same percentage of their interest in the Participant's vested Account, notwithstanding that the dollar amount of such loans may differ as a result of differing values of Participants' vested Accounts. 6.4 Each loan shall bear a "reasonable rate of interest" and provide that the loan be amortized in substantially level payments, made no less frequently than quarterly, over a specified period of time. A "reasonable rate of interest" shall be that rate that provides the Plan with a return commensurate with the interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances. 6.5 Each loan shall be adequately secured, with the security for the outstanding balance of all loans to the borrower to consist of one-half (1/2) of the borrower's interest in the Participant's vested Account, or such other security as the Plan Administrator deems acceptable. No portion of the Participant's Employee Deferred Account shall be used as security for any loan hereunder unless and until such time as the loan amount exceeds the value of the borrower's interest in the Participant's vested amounts in all other Accounts.

6.6 Each loan, when added to the outstanding balance of all other loans to the borrower from all retirement plans of the Plan Sponsor and its Affiliates which are qualified under Code Section 401, shall not exceed the lesser of: (a) $50,000, reduced by the excess, if any, of (1) the highest outstanding balance of loans made to the borrower from all retirement plans qualified under Code Section 401 of the Plan Sponsor and its Affiliates during the one (1) year period immediately preceding the day prior to the date on which such loan was made, over (2) the outstanding balance of loans made to the borrower from all retirement plans qualified under Code Section 401 of the Plan Sponsor and its Affiliates on the date on which such loan was made, or (b) one-half (1/2) of the value of the borrower's interest in the vested Account attributable to the Participant's Account. For purposes of this Section, the value of the vested Account attributable to a Participant's Account shall be established as of the latest preceding Valuation Date, or any later date on which an available valuation was made, and shall be adjusted for any distributions or contributions made through the date of the origination of the loan. 6.7 Each loan, by its terms, shall be repaid within five (5) years, except that any loan which is used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as the principal residence of the borrower may, by its terms, be repaid within a longer period of time. 6.8 The Plan Administrator may impose a minimum loan amount. 6.9 The Plan Administrator may limit the number of loans that a borrower may have existing under the Plan at any one time. 6.10 The entire unpaid principal sum and accrued interest shall, at the option of the Plan Administrator, become due and payable if (a) a borrower fails to make any loan payment when due (including the expiration of any applicable grace period), (b) a borrower ceases to be a "party in interest", as defined in ERISA Section 3(14), (c) the vested Account held as security under the Plan for the borrower will, as a result of an impending distribution or withdrawal, be reduced to an amount less than the amount of all unpaid principal and accrued interest then outstanding under the loan, or (d) a borrower makes any untrue representations or warranties in connection with the obtaining of the loan. In that event, the Plan Administrator may take such steps as it deems necessary to preserve the assets of the Plan, including, but not limited to, the following: (1) direct the Trustee to deduct the unpaid principal sum, accrued interest, and any other applicable charge under the note evidencing the loan from any benefits that may become payable out of the Plan to the borrower, (2) direct the Plan Sponsor to deduct and transfer to the Trustee the unpaid principal balance, accrued interest, and any other applicable charge under the note evidencing the loan from any amounts owed by the Plan Sponsor to the borrower, or (3) liquidate the security given by the borrower, other than amounts attributable to a Participant's Employee Deferred Account, and deduct from the proceeds the unpaid principal balance, accrued interest, and any other applicable charge under the note evidencing the loan. If any part of the indebtedness under the note evidencing the loan is collected by law or through an attorney, the borrower shall be liable for attorneys' fees in an amount equal to ten percent of the amount then due and all costs of collection. Notwithstanding the foregoing, a loan may be satisfied upon a Participant's termination of employment by distributing the note evidencing the debt as part of an Eligible Rollover Distribution; provided, however, that the Trustee, custodian or administrator for the Eligible Retirement Plan indicates its willingness to accept such property. 6.11 Each loan shall be made only in accordance with regulations and rulings of the Internal Revenue Service and the Department of Labor. The Plan Administrator shall be authorized to administer the loan program of this Section and shall act in his sole discretion to ascertain whether the requirements of such regulations and rulings and this Section have been met. SECTION 7 HARDSHIP WITHDRAWALS 7.1 The Trustee shall, upon the direction of the Plan Administrator, withdraw all or a portion of a Participant's Employee Deferred Account consisting of Deferral Amounts (but not earnings thereon) prior to the time such account is otherwise distributable in accordance with the other provisions of the Plan; provided, however, that

any such withdrawal shall be made only if the Participant demonstrates that he is suffering from "hardship" as determined herein. For purposes of this Section, a withdrawal will be deemed to be an account of hardship if the withdrawal is on account of: (a) expenses for medical care described in Code Section 213(d) incurred by the Participant, his spouse, or any dependents of the Participant (as defined in Code Section 152) or necessary for these persons to obtain medical care described in Code Section 213(d); (b) purchase (excluding mortgage payments) of a principal residence for the Participant; (c) payment of tuition and related educational fees for the next twelve (12) months of post-secondary education for the Participant, his spouse, children, or dependents; (d) the need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; or (e) any other contingency determined by the Internal Revenue Service to constitute an "immediate and heavy financial need" within the meaning of Treasury Regulations Section 1.401(k)-l(d). 7.2 In addition to the requirements set forth in Plan Section 7.1, any withdrawal pursuant to Plan Section 7.1 shall not be in excess of the amount necessary to satisfy the need determined under Section 7.1 and shall also be subject to the requirements of either Subsection (a) or (b) of this Section. (a) (1) The Participant shall first obtain all withdrawals, other than hardship withdrawals, and all nontaxable loans currently available under all plans maintained by the Plan Sponsor; (2) the Plan Sponsor shall not permit Elective Deferrals or after-tax employee contributions to be made to the Plan or any other plan maintained by the Plan Sponsor, for a period of twelve (12) months after the Participant receives the withdrawal pursuant to this Section; and (3) the Plan Sponsor shall not permit Elective Deferrals to be made to the Plan or any other plan maintained by the Plan Sponsor for the Participant's taxable year immediately following the taxable year of the hardship withdrawal in excess of the limit under Plan Section 3.1(b) for the taxable year, less the amount of the Elective Deferrals made to the Plan or any other plan maintained by the Plan Sponsor for the taxable year in which the withdrawal under this Section occurs. (b) the Plan Administrator relies on the Participant's certification by execution of a form provided by the Plan Administrator, unless the Plan Administrator has actual knowledge to the contrary, that the need determined under Plan Section 7.1 cannot be relieved (1) through reimbursement or compensation by insurance or otherwise, (2) by reasonable liquidation of the assets of the Participant, his spouse and minor children, to the extent that the liquidation would not itself cause an immediate and heavy financial need and to the extent that the assets of the spouse and minor children are reasonably available to the Participant, (3) by cessation of Elective Deferrals, or (4) by other distributions or nontaxable (at the time of the distribution) loans from plans maintained by the Plan Sponsor or any other employer, or by borrowing from commercial sources on reasonable commercial terms. Such withdrawals shall be made only in accordance with such other rules, policies, procedures, restrictions, and conditions as the Plan Administrator may from time to time adopt. Any determination of the existence of hardship and the amount to be withdrawn on account thereof shall be made by the Plan Administrator (or such other person as may be required to make such decisions) in accordance with the foregoing rules as applied in a uniform and nondiscriminatory manner; provided that, unless the Participant requests otherwise, any such withdrawal shall include the amount necessary to pay any federal, state and local income taxes and penalties reasonably anticipated to result from the withdrawal. A withdrawal under this Section shall be made in a lump sum to the

Participant. 7.3 Subject to the rules and conditions as the Plan Administrator may prescribe, by request, a Participant may receive a distribution as soon as administratively practicable of all or a portion of the balance of his Rollover Account and Voluntary Contribution Account; provided any such Rollover Amounts have been held in the Plan for a minimum of two (2) years. Any request for a distribution under this Section shall be made on the forms and in the manner prescribed by the Plan Administrator and, if such request is granted, such distribution shall be made in a lump sum. SECTION 8 PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT 8.1 (a) In the event of a Termination of Employment, a Participant whose vested Account exceeds $5,000, effective January 1, 1998, may request that payment of his vested Account be made at any time after the Participant's Termination of Employment occurs. Payment of a Participant's Account shall be in the form elected by such Participant under Plan Section 8.1(b). All payments will be made as soon as administratively feasible following a Participant's request. No distribution of the Participant's Account will be made without his consent prior to his "required beginning date", as defined in Section 11.3(c), or death. (b) Payment of a Participant's vested Account may be made in the form of a lump-sum payment in cash; provided, however, if the Participant's interest in the Investment Fund investing primarily in shares of Company Stock equals or exceeds the value of hundred (100) shares of Company Stock, that interest may be distributed in the form of whole shares of Company Stock if the Participant so elects, in the manner prescribed by the Plan Administrator. (c) In the event of a Termination of Employment, a Participant whose vested Account is $5,000, effective January 1, 1998, or less shall be distributed in a lump sum payment as soon as administratively feasible after the Participant's Termination of Employment. 8.2 The balance of a Participant's Account which is to be paid under this Section 8 shall be determined as of the Valuation Date coinciding with or immediately preceding the date the Account is valued for imminent payout purposes pursuant to normal administrative procedures and shall be increased by any contributions allocated to the Participant's Account after that Valuation Date and reduced by any distributions made from the Participant's Account after that Valuation Date. 8.3 If a Plan amendment directly or indirectly changes the vesting schedule, the vesting percentage for each Participant in his Account accumulated to the date when the amendment is adopted shall not be reduced as a result of the amendment. In addition, any Participant with at least three (3) Years of Service may irrevocably elect to remain under the pre-amendment vesting schedule with respect to all of his benefits accrued both before and after the amendment. 8.4 If a Participant has a Termination of Employment and is subsequently reemployed by a Plan Sponsor or an Affiliate prior to receiving a distribution of his Account under the Plan, such Participant shall not be entitled to a distribution under this Section while he is an Employee. 8.5 If a Participant has a Termination of Employment which is not a distributable event as provided under Code Section 401(k)(10)(A), the Plan Sponsor is not required to distribute such Participant's Account to the Participant prior to the time for distribution as otherwise provided under the Plan. SECTION 9 PAYMENT OF BENEFITS ON RETIREMENT 9.1 (a) A retired Participant whose Account exceeds $5,000, effective January 1, 1998, may request that payment of his Account be made at any time after the Participant attains a Retirement Date. All payments will be made as soon as administratively feasible following a Participant's request. No distribution of the Participant's Account will be made without his consent prior to his "required beginning date", as defined in Section 11.3(c), or death. (b) A retired Participant whose Account is $5,000 or less, effective January 1, 1998, shall be distributed as soon as administratively feasible after the Participant attains a Retirement Date.

(c) Payment of a Participant's Account pursuant to Subsection (a) or (b) above may be made in one of the forms as described in Section 8.1(b) elected by such Participant, subject, however, to the limitations set forth therein and in Section 8.1(c). 9.2 The Account of a Participant who has attained a Retirement Date or has attained Normal Retirement Age shall be fully vested and nonforfeitable. The balance of a Participant's Account which is to be paid under this Section 9 shall be determined as of the Valuation Date coinciding with or immediately preceding the date the Account is valued for imminent payout purposes pursuant to normal administrative procedures and shall be increased by any contributions allocated to the Participant's Account after that Valuation Date and reduced by any distributions made from the Participant's Account after that Valuation Date. SECTION 10 DEATH BENEFITS If a Participant dies before receiving a distribution of his Account, his Beneficiary shall receive the Participant's Account in one lump sum as soon as administratively feasible following the death of the Participant or, if the Beneficiary so elects, at any later date permitted under Section 11. SECTION 11 GENERAL RULES ON DISTRIBUTIONS 11.1 Accounts shall not be adjusted for earnings or losses incurred after the Valuation Date with respect to which the Account is valued for imminent payout purposes. Prior to distribution of an Account, the Account shall be reduced by the amount necessary to satisfy the unpaid principal, accrued interest, and penalties on any loan made to the Participant. 11.2 Notwithstanding any provisions of the Plan to the contrary that would otherwise limit a Distributee's election under this Section 11, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of a distribution pursuant to this Section which is an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover so long as all Eligible Rollover Distributions to a Distributee for a calendar year total or are expected to total at least $200 and, in the case of a Distributee who elects to directly receive a portion of an Eligible Rollover Distribution and directly roll the balance over to an Eligible Retirement Plan, the portion that is to be directly rolled over totals at least $500. If the Eligible Rollover Distribution is one to which Code Sections 401(a)(11) and 417 do not apply, such Eligible Rollover Distribution may commence less than thirty (30) days after the notice required under Treasury Regulations Section 1.411(a)-11(c) is given, provided that: (a) the Plan Administrator clearly informs the Distributee that the Distributee has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (b) the Distributee, after receiving the notice, affirmatively elects a distribution. 11.3 Notwithstanding any other provisions of the Plan, (a) Prior to the death of a Participant, all retirement payments hereunder shall (1) be distributed to the Participant not later than the required beginning date (as defined below) or, (2) be distributed, commencing not later than the required beginning date (as defined below) (A) in accordance with regulations prescribed by the Secretary of the Treasury, over the life of the Participant or over the lives of the Participant and his designated individual Beneficiary, if any, or (B) in accordance with regulations prescribed by the Secretary of the Treasury, over a period not extending beyond the life expectancy of the Participant or the joint life and last survivor expectancy of the Participant and his designated individual Beneficiary, if any. (b) (1) If -

(A) the distribution of a Participant's retirement payments have begun in accordance with Subsection (a)(2) of this Section, and (B) the Participant dies before his entire vested Account has been distributed to him, then the remaining portion of his vested Account shall be distributed at least as rapidly as under the method of distribution being used under Subsection (a)(2) of this Section as of the date of his death. (2) If a Participant dies before the commencement of retirement payments hereunder, the entire interest of the Participant shall be distributed within five (5) years after his death. (3) If (A) any portion of a Participant's vested Account is payable to or for the benefit of the Participant's designated individual Beneficiary, if any, (B) that portion is to be distributed, in accordance with regulations prescribed by the Secretary of the Treasury, over the life of the designated individual Beneficiary or over a period not extending beyond the life expectancy of the designated individual Beneficiary, and (C) the distributions begin not later than one (1) year after the date of the Participant's death or such later date as the Secretary of the Treasury may by regulations prescribe, then, for purposes of Paragraph (2) of this Subsection (b), the portion referred to in Subparagraph (A) of this Paragraph (3) shall be treated as distributed on the date on which the distributions to the designated individual Beneficiary begin. (4) If the designated individual Beneficiary referred to in Paragraph (3)(A) of this Subsection (b) is the surviving spouse of the Participant, then (A) the date on which the distributions are required to begin under Paragraph (3)(C) of this Subsection (b) shall not be earlier than the date on which the Participant would have attained age 70 1/2, and (B) if the surviving spouse dies before the distributions to such spouse begin, this Subsection (b) shall be applied as if the surviving spouse were the Participant. (c) For purposes of this Section, the term "required beginning date" means April 1 of the calendar year following the later of the calendar year in which the Participant attains age 70 1/2 or the calendar year in which the Participant retires, except that in the case of a person described in Section l(b)(3) of Appendix B the "required beginning date" shall be April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2. Notwithstanding the foregoing, with respect to a Participant who attains age 70 1/2 prior to January 1, 1997, such Participant may elect to receive minimum required distributions in accordance with Section 401(a) (9) as in effect prior to January 1, 1997, or, in the alternative, such Participant may elect to defer distribution, in which event benefits will be paid in accordance with the remaining provisions of the Plan. (d) Distributions will be made in accordance with the regulations under Code Section 401(a)(9), including the minimum distribution incidental benefit requirement of Treas. Reg. Section 1.401(a)(9)-2. SECTION 12 ADMINISTRATION OF THE PLAN 12.1 Trust Agreement. The Primary Sponsor shall establish a Trust with the Trustee designated by the Board of Directors for the management of the Fund, which Trust shall form a part of the Plan and is incorporated herein by reference. 12.2 Operation of the Plan Administrator. The Primary Sponsor shall appoint a Plan Administrator. If an organization is appointed to serve as the Plan Administrator, then the Plan Administrator may designate in writing one or more persons who may act on behalf of the Plan Administrator. If more than one person is so designated with respect to the same administrative function, a majority of such persons shall constitute a quorum for the transaction of business and shall have the full power to act on behalf of the Plan Administrator. The Primary Sponsor shall have the right to remove the Plan Administrator at any time by notice in writing. The Plan

Administrator may resign at any time by written notice of resignation to the Trustee and the Primary Sponsor. Upon removal or resignation of the plan Administrator, or in the event of the dissolution of the Plan Administrator, the Primary Sponsor shall appoint a successor. 12.3 Fiduciary Responsibility. (a) The Plan Administrator, as a Named Fiduciary, may allocate its fiduciary responsibilities among Fiduciaries other than the Trustee, designated in writing by the Plan Administrator and may designate in writing persons other than the Trustee to carry out its fiduciary responsibilities under the Plan. The Plan Administrator may remove any person designated to carry out its fiduciary responsibilities under the Plan by notice in writing to such person. (b) The Plan Administrator and each other Fiduciary may employ persons to perform services and to render advice with regard to any of the Fiduciary's responsibilities under the Plan. Charges for all such services performed and advice rendered may be paid by the Fund to the extent permitted by ERISA. (c) Each Plan Sponsor shall indemnify and hold harmless each person constituting the Plan Administrator or the Investment Committee, except those individuals who are not a Plan Sponsor or a director, officer or employee of a Plan Sponsor, if any, from and against any and all claims, losses, costs, expenses (including, without limitation, attorney's fees and court costs), damages, actions or causes of action arising from, on account of or in connection with the performance by such person of his duties in such capacity, other than such of the foregoing arising from, on account of or in connection with the willful neglect or willful misconduct of such person. 12.4 Duties of the Plan Administrator. (a) The Plan Administrator shall advise the Trustee with respect to all payments under the terms of the Plan and shall direct the Trustee in writing to make such payments from the Fund; provided, however, in no event shall the Trustee be required to make such payments if the Trustee has actual knowledge that such payments are contrary to the terms of the Plan and the Trust. (b) The Plan Administrator shall from time to time establish rules, not contrary to the provisions of the Plan and the Trust, for the administration of the Plan and the transaction of its business. All elections and designations under the Plan by a Participant or Beneficiary shall be made on forms prescribed by the Plan Administrator. The Plan Administrator shall have discretionary authority to construe the terms of the Plan and shall determine all questions arising in the administration, interpretation and application of the Plan, including, but not limited to, those concerning eligibility for benefits and it shall not act so as to discriminate in favor of any person. All determinations of the Plan Administrator shall be conclusive and binding on all Employees, Participants, Beneficiaries and Fiduciaries, subject to the provisions of the Plan and the Trust and subject to applicable law. (c) The Plan Administrator shall furnish Participants and Beneficiaries with all disclosures now or hereafter required by ERISA or the Code. The Plan Administrator shall file, as required, the various reports and disclosures concerning the Plan and its operations as required by ERISA and by the Code, and shall be solely responsible for establishing and maintaining all records of the Plan and the Trust. (d) The statement of specific duties for a Plan Administrator in this Section is not in derogation of any other duties which a Plan Administrator has under the provisions of the Plan or the Trust or under applicable law. 12.5 Investment Manager. The Primary Sponsor may, by action in writing certified by notice to the Trustee, appoint an Investment Manager. Any Investment Manager may be removed in the same manner in which appointed, and in the event of any removal, the Investment Manager shall, as soon as possible, but in no event more than thirty (30) days after notice of removal, turn over all assets managed by it to the Trustee or to any successor Investment Manager appointed, and shall make a full accounting to the Primary Sponsor with respect to all assets managed by it since its appointment as an Investment Manager. 12.6 Investment Committee. The Primary Sponsor may, by action in writing certified by notice to the Trustee, appoint an Investment Committee. The Primary Sponsor shall have the right to remove any person on the Investment Committee at any time by notice in writing to such person. A person on the Investment Committee may resign at any time by written notice of resignation to the Primary Sponsor. Upon such removal or resignation, or in the event of the death of a person on the Investment Committee, the Primary Sponsor may appoint a

successor. Until a successor has been appointed, the remaining persons on the Investment Committee may continue to act as the Investment Committee. 12.7 Action by a Plan Sponsor. Any action to be taken by a Plan Sponsor shall be taken by resolution or written direction duly adopted by its board of directors or appropriate governing body, as the case may be; provided, however, that by such resolution or written direction, the board of directors or appropriate governing body, as the case may be, may delegate to any officer or other appropriate person of a Plan Sponsor the authority to take any such actions as may be specified in such resolution or written direction, other than the power to amend, modify or terminate the Plan or the Trust or to determine the basis of any Plan Sponsor contributions. SECTION 13 CLAIM REVIEW PROCEDURE 13.1 If a Participant or Beneficiary is denied a claim for benefits under a Plan, the Plan Administrator shall provide to the claimant written notice of the denial within ninety (90) days after the Plan Administrator receives the claim, unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall the extension exceed a period of ninety (90) days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render the final decision. 13.2 If the claimant is denied a claim for benefits, the Plan Administrator shall provide, within the time frame set forth in Plan Section 13.1, written notice of the denial which shall set forth: (a) the specific reasons for the denial; (b) specific references to the pertinent provisions of the Plan on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why the material or information is necessary; and (d) an explanation of the Plan's claim review procedure. 13.3 After receiving written notice of the denial of a claim or that a domestic relations order is a qualified domestic relations order, a claimant or his representative may: (a) request a full and fair review of the denial or determination that a domestic relations order is a qualified domestic relations order by written application to the Plan Administrator; (b) review pertinent documents; and (c) submit issues and comments in writing to the Plan Administrator. 13.4 If the claimant wishes a review of the decision denying his claim to benefits under the Plan or if a claimant wishes to appeal a decision that a domestic relations order is a qualified domestic relations order, the claimant must deliver the written application to the Plan Administrator within sixty (60) days after receiving written notice of the denial or notice that the domestic relations order is a qualified domestic relations order. Delivery shall be considered effected only upon actual receipt by the Plan Administrator. 13.5 Upon receiving the written application for review, the Plan Administrator may schedule a hearing for purposes of reviewing the claimant's claim, which hearing shall take place not more than thirty (30) days from the date on which the Plan Administrator received the written application for review. 13.6 At least ten (10) days prior to the scheduled hearing, the claimant and his representative designated in writing by him, if any, shall receive written notice of the date, time, and place of the scheduled hearing. The claimant or his representative may request that the hearing be rescheduled for his convenience on another reasonable date or at another reasonable time or place. 13.7 All claimants requesting a review of the decision denying their claim for benefits may employ counsel for purposes of the hearing.

13.8 No later than sixty (60) days following the receipt of the written application for review, the Plan Administrator shall submit its decision on the review in writing to the claimant involved and to his representative, if any; provided, however, a decision on the written application for review may be extended, in the event special circumstances such as the need to hold a hearing require an extension of time, to a day no later than one hundred twenty (120) days after the date of receipt of the written application for review. The decision shall include specific reasons for the decision and specific references to the pertinent provisions of the Plan on which the decision is based. SECTION 14 INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS 14.1 No benefit which shall be payable under the Plan to any person shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void; and no such benefit shall in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person, nor shall it be subject to attachment or legal process for, or against, such person, and the same shall not be recognized under the Plan, except to such extent as may be required by law. Notwithstanding the above, this Section shall not apply to a "qualified domestic relations order" (as defined in Code Section 414(p)), and benefits may be paid pursuant to the provisions of such an order. The Plan Administrator shall develop procedures (in accordance with applicable federal regulations) to determine whether a domestic relations order is qualified, and, if so, the method and the procedures for complying therewith. In addition, a distribution to an "alternate payee" (as defined in Code Section 414(p)) shall be permitted if such distribution is authorized by a qualified domestic relations order, even if the affected Participant has not yet separated from service and has not yet reached the "earliest retirement age" (as defined in Code Section 414(p)). 14.2 Notwithstanding any other provision of the Plan, effective August 5, 1997, the benefit of a Participant shall be subject to legal process and may be assigned, alienated or attached pursuant to a court judgment or settlement provided: (a) such Participant is ordered or required to pay the Plan in accordance with the following: (1) a judgment or conviction for a crime involving the Plan; (2) a civil judgment entered by a court in an action brought in connection with a violation of part 4 of subtitle B of Title I of ERISA; or (3) a settlement agreement between such Participant and the Secretary of Labor, in connection with a violation (or alleged violation) of part 4 of subtitle B of Title I of ERISA by a fiduciary or any other person; and (b) the judgment, order, decree, or settlement agreement shall expressly provide for the offset of all or part of the amount ordered or required to be paid to the Plan against such Participant's benefits under the Plan. 14.3 If any person who shall be entitled to any benefit under the Plan shall become bankrupt or shall attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge such benefit under the Plan, then the payment of any such benefit in the event a Participant or Beneficiary is entitled to payment shall, in the discretion of the Plan Administrator, cease and terminate and in that event the Trustee shall hold or apply the same for the benefit of such person, his spouse, children, other dependents or any of them in such manner and in such proportion as the Plan Administrator shall determine. 14.4 Whenever any benefit which shall be payable under the Plan is to be paid to or for the benefit of any person who is then a minor or determined to be incompetent by qualified medical advice, the Plan Administrator need not require the appointment of a guardian or custodian, but shall be authorized to cause the same to be paid over to the person having custody of such minor or incompetent, or to cause the same to be paid to such minor or incompetent without the intervention of a guardian or custodian, or to cause the same to be paid to a legal guardian or custodian of such minor or incompetent if one has been appointed or to cause the same to be used for the benefit of such minor or incompetent. 14.5 If the Plan Administrator cannot ascertain the whereabouts of any Participant to whom a payment is due under the Plan, the Plan Administrator may direct that the payment and all remaining payments otherwise due to the Participant be cancelled on the records of the Plan and the amount thereof applied to reduce future Plan

Sponsor contributions; except that, in the event the Participant later notifies the Plan Administrator of his whereabouts and requests the payments due to him under the Plan, the forfeited amount shall be restored either from Trust income or by a special contribution by the Plan Sponsor to the Plan, as determined by the Plan Administrator, in an amount equal to the cancelled payment(s). SECTION 15 PROHIBITION AGAINST DIVERSION At no time shall any part of the Fund be used for or diverted to purposes other than the exclusive benefit of the Participants or their Beneficiaries, subject, however, to the payment of all taxes and administrative expenses and subject to the provisions of the Plan with respect to returns of contributions. Expenses incurred in the administration of the Plan shall be paid from the Trust, to the extent permitted by ERISA, unless such expenses are paid by the Plan Sponsor; provided, further, that the Plan Sponsor may be reimbursed by the Fund, to the extent permitted by ERISA, for Plan expenses originally paid by the Plan Sponsor. SECTION 16 LIMITATION OF RIGHTS Participation in the Plan shall not give any Employee any right or claim except to the extent that such right is specifically fixed under the terms of the Plan. The adoption of the Plan and the Trust by any Plan Sponsor shall not be construed to give any Employee a right to be continued in the employ of a Plan Sponsor or as interfering with the right of a Plan Sponsor to terminate the employment of any Employee at any time. SECTION 17 AMENDMENT TO OR TERMINATION OF THE PLAN AND THE TRUST 17.1 The Primary Sponsor reserves the right at any time to modify or amend or terminate the Plan or the Trust in whole or in part; provided, however, that the Primary Sponsor shall have no power to modify or amend the Plan in such manner as would cause or permit any portion of the funds held under a Plan to be used for, or diverted to, purposes other than for the exclusive benefit of Participants or their Beneficiaries, or as would cause or permit any portion of a fund held under the Plan to become the property of a Plan Sponsor; and provided further, that the duties or liabilities of the Trustee shall not be increased without its written consent. No such modifications or amendments shall have the effect of retroactively changing or depriving Participants or Beneficiaries of rights already accrued under the Plan. No Plan Sponsor other than the Primary Sponsor shall have the right to so modify, amend or terminate the Plan or the Trust. Notwithstanding the foregoing, each Plan Sponsor may terminate its own participation in the Plan and Trust pursuant to the Plan. 17.2 Each Plan Sponsor other than the Primary Sponsor shall have the right to terminate its participation in the Plan and Trust by resolution of its board of directors or other appropriate governing body and notice in writing to the Primary Sponsor and the Trustee unless such termination would result in the disqualification of the Plan or the Trust or would adversely affect the exempt status of the Plan or the Trust as to any other Plan Sponsor. If contributions by or on behalf of a Plan Sponsor are completely terminated, the Plan and Trust shall be deemed terminated as to such Plan Sponsor. Any termination by a Plan Sponsor, shall not be a termination as to any other Plan Sponsor. 17.3 (a) If the Plan is terminated by the Primary Sponsor or if contributions to the Trust should be permanently discontinued, it shall terminate as to all Plan Sponsors and the Fund shall be used, subject to the payment of expenses and taxes, for the benefit of Participants and Beneficiaries, and for no other purposes, and the Account of each affected Participant shall be fully vested and nonforfeitable, notwithstanding the provisions of the Section of the Plan which sets forth the vesting schedule. (b) In the event of the partial termination of the Plan, each affected Participant's Account shall be fully vested and nonforfeitable, notwithstanding the provisions of the Section of the Plan which sets forth the vesting schedule. 17.4 In the event of the termination of the Plan or the Trust with respect to a Plan Sponsor, the Accounts of the Participants with respect to the Plan as adopted by such Plan Sponsor shall be distributed in lump sum payments pursuant to the instructions of the Plan Administrator; provided that the Trustee shall not be required to make any distribution until it receives a copy of an Internal Revenue Service determination letter to the effect that the termination does not affect the qualified status of the Plan or the exempt status of the Trust or, in the event that such letter is applied for and is not issued, until the Trustee is reasonably satisfied that adequate provision has been made for the payment of all taxes which may be due and owing by the Trust.

17.5 In the case of any merger or consolidation of the Plan with, or any transfer of the assets or liabilities of the Plan to, any other plan qualified under Code Section 401, the terms of the merger, consolidation or transfer shall be such that each Participant would receive (in the event of termination of the Plan or its successor immediately thereafter) a benefit which is no less than the benefit which the Participant would have received in the event of termination of the Plan immediately before the merger, consolidation or transfer. 17.6 Notwithstanding any other provision of the Plan, an amendment to the Plan (a) which eliminates or reduces an early retirement benefit, if any, or which eliminates or reduces a retirementtype subsidy (as defined in regulations issued by the Department of the Treasury), if any, or (b) which eliminates an optional form of benefit shall not be effective with respect to benefits attributable to service before the amendment is adopted. In the case of a retirement-type subsidy described in Subsection (a) above, this Section shall be applicable only to a Participant who satisfies, either before or after the amendment, the preamendment conditions for the subsidy. SECTION 18 ADOPTION OF PLAN BY AFFILIATES Any corporation or other business entity related to the Primary Sponsor by function or operation and any Affiliate, if the corporation, business entity or Affiliate is authorized to do so by written direction adopted by the Board of Directors, may adopt the Plan and the related Trust by action of the board of directors or other appropriate governing body of such corporation, business entity or Affiliate. Any adoption shall be evidenced by certified copies of the resolutions of the foregoing board of directors or governing body indicating the adoption and by the execution of the Trust by the adopting corporation, or business entity or Affiliate. The resolution shall state and define the effective date of the adoption of the Plan by the Plan Sponsor and, for the purpose of Code Section 415, the "limitation year" as to such Plan Sponsor. Notwithstanding the foregoing, however, if the Plan and Trust as adopted by an Affiliate or other corporation or business entity under the foregoing provisions shall fail to receive the initial approval of the Internal Revenue Service as a qualified Plan and Trust under Code Sections 401(a) and 501(a), any contributions by the Affiliate or other corporation or business entity after payment of all expenses will be returned to such Plan Sponsor free of any trust, and the Plan and Trust shall terminate, as to the adopting Affiliate or other corporation or business entity. SECTION 19 QUALIFICATION AND RETURN OF CONTRIBUTIONS 19.1 If the Plan and the related Trust fail to receive the initial approval of the Internal Revenue Service as a qualified plan and trust within one (1) year after the date of denial of qualification (a) the contribution of a Plan Sponsor after payment of all expenses will be returned to a Plan Sponsor free of the Plan and Trust, (b) contributions made by a Participant shall be returned to the Participant who made the contributions, and (c) the Plan and Trust shall thereupon terminate. 19.2 All Plan Sponsor contributions to the Plan are contingent upon deductibility. To the extent permitted by the Code and other applicable laws and regulations thereunder, upon a Plan Sponsor's request, a contribution which was made by reason of a mistake of fact or which was nondeductible under Code Section 404, shall be returned to a Plan Sponsor within one (1) year after the payment of the contribution, or the disallowance of the deduction (to the extent disallowed), whichever is applicable. In the event of a contribution which was made by reason of a mistake of fact or which was nondeductible, the amount to be returned to the Plan Sponsor shall be the excess of the contribution above the amount that would have been contributed had the mistake of fact or the mistake in determining the deduction not occurred, less any net loss attributable to the excess. Any net income attributable to the excess shall not be returned to the Plan Sponsor. No return of any portion of the excess shall be made to the Plan Sponsor if the return would cause the balance in a Participant's Account to be less than the balance would have been had the mistaken contribution not been made. SECTION 20 SECTION 16 OF SECURITIES EXCHANGE ACT OF 1934 Notwithstanding any other provision of this Plan, to the extent required, the persons subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934 shall be subject to such withdrawal,

investment and other restrictions necessary to satisfy Rule 16b-3 promulgated under such Act. This Section 20 is intended to comply with Rule 16b-3 and shall be effective only to the extent required by such rule and shall be interpreted and administered in accordance with such rule. SECTION 21 INCORPORATION OF SPECIAL LIMITATIONS Appendices A, B, and C to the Plan, attached hereto, are incorporated by reference and the provisions of the same shall apply notwithstanding anything to the contrary contained herein. WHEREOF, the Primary Sponsor has caused this indenture to be executed as of the date first above written. RUBY TUESDAY, INC.
By:/s/ Samuel E. Beall, III Samuel E. Beall, III Chairman and Chief Executive Officer

ATTEST: /s/ Daniel T. Cronk Daniel T. Cronk Secretary ::ODMA\PCDOCS\ATL\470105\1

A-3 APPENDIX A LIMITATION ON ALLOCATIONS SECTION 1 The "annual addition" for any Participant for any one limitation year may not exceed the lesser of: (a) $30,000, as adjusted for changes in the cost of living as provided in regulations issued by the Secretary of the Treasury; or (b) 25% of the Participant's Annual Compensation. SECTION 2 For the purposes of this Appendix A, the term "annual addition" for any Participant means for any limitation year, the sum of certain Plan Sponsor, Affiliate, and Participant contributions, forfeitures, and other amounts as determined in Code Section 415(c)(2) in effect for that limitation year. SECTION 3 Effective until December 31, 1999, in the event that a Plan Sponsor or an Affiliate maintains a defined benefit plan under which a Participant also participates, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any limitation year for any Participant may not exceed 1.0. (a) The defined benefit plan fraction for any limitation year is a fraction: (1) the numerator of which is the projected annual benefit of the Participant under the defined benefit plan (determined as of the close of such year); and (2) the denominator of which is the lesser of (A) the product of 1.25, multiplied by the maximum annual benefit allowable under Code Section 415(b)(1)(A), or (B) the product of (i) 1.4, multiplied by (i) the maximum amount which may be taken into account under Section 415(b)(1)(B) of the Code with respect to the Participant under the defined benefit plan for the limitation year (determined as of the close of the limitation year). (b) The defined contribution plan fraction for any limitation year is a fraction: (1) the numerator of which is the sum of a Participant's annual additions as of the close of the year; and (2) the denominator of which is the sum of the lesser of the following amounts determined for the year and for all prior limitation years during which the Participant was employed by a Plan Sponsor or an Affiliate: (A) the product of 1.25, multiplied by the dollar limitation in effect under Code Section 415(c)(1)(A) for the limitation year (determined without regard to Section 415(c)(6) of the Code); or (B) the product of (i) 1.4, multiplied by (ii) the amount which may be taken into account under Code Section 415(c)(1)(B) (or Code Section 415(c)(7), if applicable) with respect to the Participant for the limitation year.

SECTION 4 For purposes of this Appendix A, the term "limitation year" shall mean a Plan Year unless a Plan Sponsor elects, by adoption of a written resolution, to use any other twelve month period adopted in accordance with regulations issued by the Secretary of the Treasury. SECTION 5 For purposes of applying the limitations of this Appendix A, all defined contribution plans maintained or deemed to be maintained by a Plan Sponsor shall be treated as one defined contribution plan, and all defined benefit plans now or previously maintained or deemed to be maintained by a Plan Sponsor shall be treated as one defined benefit plan. In the event any of the actions to be taken pursuant to Section 6 of this Appendix A or pursuant to any language of similar import in another defined contribution plan are required to be taken as a result of the annual additions of a Participant exceeding the limitations set forth in Section 1 of this Appendix A, because of the Participant's participation in more than one defined contribution plan, the actions shall be taken first with regard to this Plan. SECTION 6 In the event that as a result of the allocation of forfeitures to the Account of a Participant, a reasonable error in estimating the Participant's Annual Compensation or other similar circumstances, the annual addition allocated to the Account of a Participant exceeds the limitations set forth in Section 1 of this Appendix A or in the event that the aggregate contributions made on behalf of a Participant under both a defined benefit plan and a defined contribution plan, subject to the reduction of allocations in other defined contribution plans required by Section 5 of this Appendix A, cause the aggregate limitation fraction set forth in Section 3 of this Appendix A to be exceeded, the Plan Administrator shall, in writing, direct the Trustee to take such of the following actions as the Plan Administrator shall deem appropriate, specifying in each case the amount or amounts of contributions involved: (a) A Participant's annual addition shall be reduced by distributing to the Participant Voluntary Contributions made by the Participant which cause the annual addition to exceed such limitations; (b) If further reduction is necessary, contributions made by the Plan Sponsor on behalf of the Participant pursuant to Plan Section 3.1 with respect to which no contribution is made under Plan Section 3.2 shall be reduced in the amount of the remaining excess and distributed to the Participant; (c) If further reduction is necessary, contributions made by the Plan Sponsor on behalf of the Participant pursuant to Plan Section 3.1 and contributions of the Plan Sponsor thereon pursuant to Plan Section 3.2 shall be reduced in the amount of the remaining excess. The amount of the reduction under Plan Section 3.1 shall be distributed to the Participant. The amount of the reduction under Plan Section 3.2 shall be reallocated to the Company Matching Accounts of Participants who are not affected by the limitation in the same proportion as the contribution of the Plan Sponsor for the year is allocated under Plan Section 4.1 to the Accounts of such Participants; and (d) If the contributions of the Plan Sponsor would cause the annual addition to exceed the limitations set forth herein with respect to all Participants under the Plan, the portion of such contribution in excess of the limitations shall be segregated in a suspense account. While the suspense account is maintained, (1) no Plan Sponsor contributions under the Plan shall be made which would be precluded by this Appendix A, (2) income, gains and loses of the Fund shall not be allocated to such suspense account and (3) amounts in the suspense account shall be allocated in subsequent limitation years as Plan Sponsor contributions and forfeitures under the Plan as of each Valuation Date on which Plan Sponsor contributions may be allocated for each such limitation year until the suspense account is exhausted. In the event of the termination of the Plan, the amounts in the suspense account shall be returned to the Plan Sponsor to the extent that such amounts may not then be allocated to Participants' Accounts.

B-6 APPENDIX B TOP-HEAVY PROVISIONS SECTION 1 As used in this Appendix B, the following words shall have the following meanings: (a) "Determination Date" means, with respect to any Plan Year, the last day of the preceding Plan Year, or, in the case of the first Plan Year, means the last day of the first Plan Year. (b) "Key Employee" means an Employee or former Employee (including a Beneficiary of a Key Employee or former Key Employee) who at any time during the Plan Year containing the Determination Date or any of the four (4) preceding Plan Years is: (1) Was at any time an officer of the Plan Sponsor or of any Affiliate whose Annual Compensation was greater than fifty percent (50%) of the amount in effect under Code Section 415(b)(1)(A) for the calendar year in which the Plan Year ends, where the term "officer" means an administrative executive in regular and continual service to the Plan Sponsor or Affiliate; provided, however, that in no event shall the number of officers exceed the lesser of Clause (A) or (B) of this Subparagraph (1), where: (A) equals fifty (50) Employees; and (B) equals the greater of (I) three (3) Employees or (II) ten percent (10%) of the number of Employees during the Plan Year, with any non-integer being increased to the next integer. If for any year no officer of the Plan Sponsor meets the requirements of this Subparagraph (b), the highest paid officer of the Plan Sponsor for the Plan Year shall be considered an officer for purposes of this Subparagraph (b) (1); (2) One of the ten (10) Employees owning both (A) more than one-half percent (1/2%) of the outstanding stock of the Plan Sponsor or an Affiliate, more than one-half percent (1/2%) of the total combined voting power of all stock of the Plan Sponsor or an Affiliate, or more than one-half percent (1/2%) of the capital or profits interest in the Plan Sponsor or an Affiliate, and (B) the largest percentage ownership interests in the Plan Sponsor or any of its Affiliates, and whose Annual Compensation is equal to or greater than the amount in effect under Section l(a) of Appendix A to the Plan for the calendar year in which the Determination Date falls; or (3) An owner of more than five percent (5%) of the outstanding stock of the Plan Sponsor or an Affiliate or more than five percent (5%) of the total combined voting power of all stock of the Plan Sponsor or an Affiliate; or (4) An owner of more than one percent (1%) of the outstanding stock of the Plan Sponsor or an Affiliate or more than one percent (1%) of the total combined voting power of all stock of the Plan Sponsor or an Affiliate, and who in such Plan Year had Annual Compensation from the Plan Sponsor and all of its Affiliates of more than $150,000. Employees other than Key Employees are sometimes referred to in this Appendix B, as "non-key employees." (c) "Required Aggregation Group" means: (1) each plan of the Plan Sponsor and its Affiliates which qualifies under Code Section 401 (a) in which a Key Employee is a participant, and (2) each other plan of the Plan Sponsor and its Affiliates which qualifies under Code Section 401 (a) and which enables any plan described in Subsection (a) of this Section to meet the requirements of Section 401(a)(4) or 410 of the Code. (d) (1) "Top-Heavy" means: (A) if the Plan is not included in a Required Aggregation Group, the Plan's condition in a Plan Year for which, as of the Determination Date:

(i) the present value of the cumulative Accounts under the Plan for all Key Employees exceeds sixty percent (60%) of the present value of the cumulative Accounts under the Plan for all Participants; and (ii) the Plan, when included in every potential combination, if any, with any or all of: (I) any Required Aggregation Group, and (II) any plan of the Plan Sponsor which is not part of any Required Aggregation Group and which qualifies under Code Section 401 (a) is part of a Top-Heavy Group (as defined in Paragraph (2) of this Subsection); and (B) if the Plan is included in a Required Aggregation Group, the Plan's condition in a Plan Year for which, as of the Determination Date: (i) the Required Aggregation Group is a Top-Heavy Group (as defined in Paragraph (2) of this Subsection); and (ii) the Required Aggregation Group, when included in every potential combination, if any, with any or all of the plans of the Plan Sponsor and its Affiliates which are not part of the Required Aggregation Group and which qualify under Code Section 401(a), is part of a Top-Heavy Group (as defined in Paragraph (2) of this Subsection). (C) For purposes of Subparagraphs (A)(ii) and (B)(ii) of this Paragraph (1), any combination of plans must satisfy the requirements of Sections 401(a)(4) and 410 of the Code. (2) A group shall be deemed to be a Top-Heavy Group if: (A) the sum, as of the Determination Date, of the present value of the cumulative accrued benefits for all Key Employees under all plans included in such group exceeds (B) sixty percent (60%) of a similar sum determined for all participants in such plans. (3) (A) For purposes of this Section, the present value of the accrued benefit for any participant in a defined contribution plan as of any Determination Date or last day of a plan year shall be the sum of: (i) as to any defined contribution plan other than a simplified employee pension, the account balance as of the most recent valuation date occurring within the plan year ending on the Determination Date or last day of a plan year, and (ii) as to any simplified employee pension, the aggregate employer contributions, and (iii) an adjustment for contributions due as of the Determination Date or last day of a plan year. In the case of a plan that is not subject to the minimum funding requirements of Code Section 412, the adjustment in Clause (iii) of this Subparagraph (A) shall be the amount of any contributions actually made after the valuation date but on or before the Determination Date or last day of the plan year to the extent not included under Clause (i) or (ii) of this Subparagraph (A); provided, however, that in the first plan year of the plan, the adjustment in Clause (iii) of this Subparagraph (A) shall also reflect the amount of any contributions made thereafter that are allocated as of a date in such first plan year. In the case of a plan that is subject to the minimum funding requirements, the account balance in Clause (i) and the aggregate contributions in Clause (ii) of this Subparagraph (A) shall include contributions that would be allocated as of a date not later than the Determination Date or last day of a plan year, even though those amounts are not yet required to be contributed, and the adjustment in Clause (iii) of this Subparagraph (A) shall be the amount of any contribution actually made (or due to be made) after the valuation date but before the expiration of the extended payment period in Code Section 412(c)(10) to the extent not included under Clause (i) or (ii) of this Subparagraph (A). (B) For purposes of this Subsection, the present value of the accrued benefit for any participant in a defined benefit plan as of any Determination Date or last day of a plan year must be determined as of the most recent

valuation date which is within a 12-month period ending on the Determination Date or last day of a plan year as if such participant terminated as of such valuation date; provided, however, that in the first plan year of a plan, the present value of the accrued benefit for a current participant must be determined either (i) as if the participant terminated service as of the Determination Date or last day of a plan year or (ii) as if the participant terminated service as of such valuation date, but taking into account the estimated accrued benefit as of the Determination Date or last day of a plan year. For purposes of this Subparagraph (B), the valuation date must be the same valuation date used for computing plan costs for minimum funding, regardless of whether a valuation is performed that year. The actuarial assumptions utilized in calculating the present value of the accrued benefit for any participant in a defined benefit plan for purposes of this Subparagraph (B) shall be established by the Plan Administrator after consultation with the actuary for the plan, and shall be reasonable in the aggregate and shall comport with the requirements set forth by the Internal Revenue Service in Q&A T-26 and T-27 of Regulation Section 1.416-1. (C) For purposes of determining the present value of the cumulative accrued benefit under a plan for any participant in accordance with this Subsection, the present value shall be increased by the aggregate distributions made with respect to the participant (including distributions paid on account of death to the extent they do not exceed the present value of the cumulative accrued benefit existing immediately prior to death) under each plan being considered, and under any terminated plan which if it had not been terminated would have been in a Required Aggregation Group with the Plan, during the 5-year period ending on the Determination Date or last day of the plan year that falls within the calendar year in which the Determination Date falls. (D) For purposes of this Paragraph (3), participant contributions which are deductible as "qualified retirement contributions" within the meaning of Code Section 219 or any successor, as adjusted to reflect income, gains, losses, and other credits or charges attributable thereto, shall not be considered to be part of the accrued benefits under any plan. (E) For purposes of this Paragraph (3), if any employee is not a Key Employee with respect to any plan for any plan year, but such employee was a Key Employee with respect to such plan for any prior plan year, any accrued benefit for such employee shall not be taken into account. (F) For purposes of this Paragraph (3), if any employee has not performed any service for any Plan Sponsor or Affiliate maintaining the plan during the five-year period ending on the Determination Date, any accrued benefit for that employee shall not be taken into account. (G) (i) In the case of an "unrelated rollover" (as defined below) between plans which qualify under Code Section 401(a), (a) the plan providing the distribution shall count the distribution as a distribution under Subparagraph (C) of this Paragraph (3), and (b) the plan accepting the distribution shall not consider the distribution part of the accrued benefit under this Section; and (ii) in the case of a "related rollover" (as defined below) between plans which qualify under Code Section 401(a), (a) the plan providing the distribution shall not count the distribution as a distribution under Subparagraph (C) of this Paragraph (3), and (b) the plan accepting the distribution shall consider the distribution part of the accrued benefit under this Section. For purposes of this Subparagraph (G), an "unrelated rollover" is a rollover as defined in Code Section 402(c)(4) or 408(d)(3) or a plan-to-plan transfer which is both initiated by the participant and made from a plan maintained by one employer to a plan maintained by another employer where the employers are not Affiliates. For purposes of this Subparagraph (G), a "related rollover" is a rollover as defined in Code Section 402(c)(4) or 408(d)(3) or a plan-to-plan transfer which is either not initiated by the participant or made to a plan maintained by the employer or an Affiliate. SECTION 2 (a) Notwithstanding anything contained in the Plan to the contrary, except as otherwise provided in Subsection (b) of this Section, in any Plan Year during which the Plan is Top-Heavy, allocations of Plan Sponsor contributions for the Plan Year for the Account of each Participant who is not a Key Employee and who has not separated from service with the Plan Sponsor prior to the end of the Plan Year shall not be less than three percent (3%) of the Participant's Annual Compensation. For purposes of this Subsection, an allocation to a Participant's Account resulting from any Plan Sponsor contribution attributable to a salary reduction or similar

arrangement shall not be taken into account. (b) (1) The percentage referred to in Subsection (a) of this Section for any Plan Year shall not exceed the percentage at which allocations are made or required to be made under the Plan for the Plan Year for the Key Employee for whom the percentage is highest for the Plan Year. For purposes of this Paragraph, an allocation to the Account of a Key Employee resulting from any Plan Sponsor contribution attributable to a salary reduction or similar agreement shall be taken into account. (2) For purposes of this Subsection (b), all defined contribution plans which are members of a Required Aggregation Group shall be treated as part of the Plan. (3) This Subsection (b) shall not apply to any plan which is a member of a Required Aggregation Group if the plan enables a defined benefit plan which is a member of the Required Aggregation Group to meet the requirements of Code Section 401(a)(4) or 410. SECTION 3 Effective until December 31, 1999, in any limitation year (as defined in Section 4 of Appendix A to the Plan) which contains any portion of a Plan Year in which the Plan is Top-Heavy, the number "1.0" shall be substituted for the number "1.25" in Section 3 of Appendix A to the Plan. SECTION 4 Notwithstanding anything contained in the Plan to the contrary, in any Plan Year during which the Plan is TopHeavy, a Participant's interest in his Account shall not vest at any rate which is slower than the following schedule, effective as of the first day of that Plan Year:
Full Years of Vesting Service Less than 3 3 or more Percentage Vested 0% 100%

The Schedule set forth above in this Section 4 shall be inapplicable to a Participant who has failed to perform an Hour of Service after the Determination Date on which the Plan has become Top-Heavy. When the Plan ceases to be Top-Heavy, the Schedule set forth above in this Section 4 shall cease to apply; provided however, that the provisions of the Plan Section dealing with changes in the vesting schedule shall apply.

C-7 APPENDIX C SPECIAL NONDISCRIMINATION RULES SECTION 1 As used in this Appendix, the following words shall have the following meanings: (a) "Eligible Participant" means a Participant who is an Employee during any particular Plan Year. (b) "Highly Compensated Eligible Participant" means any Eligible Participant who is a Highly Compensated Employee. (c) "Matching Contribution" means any contribution made by a Plan Sponsor to a Company Matching Account and any other contribution made to a plan by a Plan Sponsor or an Affiliate on behalf of an Employee on account of a contribution made by an Employee or on account of an Elective Deferral. (d) "Qualified Matching Contributions" means Matching Contributions which are immediately nonforfeitable when made, and which would be nonforfeitable, regardless of the age or service of the Employee or whether the Employee is employed on a certain date, and which may not be distributed, except upon one of the events described under Section 401(k)(2)(B) of the Code and the regulations thereunder. (e) "Qualified Nonelective Contributions" means contributions of the Plan Sponsor or an Affiliate, other than Matching Contributions or Elective Deferrals, which are nonforfeitable when made, and which would be nonforfeitable regardless of the age or service of the Employee or whether the Employee is employed on a certain date, and which may not be distributed, except upon one of the events described under Code Section 401(k)(2) (B) and the regulations thereunder. SECTION 2 In addition to any other limitations set forth in the Plan, for each Plan Year one of the following tests must be satisfied: (a) the actual deferral percentage for the Highly Compensated Eligible Participants for the Plan Year must not be more than the actual deferral percentage of all other Eligible Participants for the preceding Plan Year multiplied by 1.25; or (b) the excess of the actual deferral percentage for the Highly Compensated Eligible Participants for the Plan Year over that of all other Eligible Participants for the preceding Plan Year must not be more than two (2) percentage points, and the actual deferral percentage for the Highly Compensated Eligible Participants for the Plan Year must not be more than the actual deferral percentage of all other Eligible Participants for the preceding Plan Year multiplied by two (2). The "actual deferral percentage" for the Highly Compensated Eligible Participants and all other Eligible Participants for a Plan Year is the average in each group of the ratios, calculated separately for each Employee, of the Deferral Amounts contributed by the Plan Sponsor on behalf of an Employee for the Plan Year to the Annual Compensation of the Employee in the Plan Year. In addition, for purposes of calculating the "actual deferral percentage" as described above, Deferral Amounts of Employees who are not Highly Compensated Employees which are prohibited by Code Section 401(a)(30) shall not be taken into consideration. Except to the extent limited by Treasury Regulations Section 1.401(k)-l(b)(5) and any other applicable regulations promulgated by the Secretary of the Treasury, all or part of the Qualified Matching Contributions and Qualified Nonelective Contributions made pursuant to the Plan may be treated as Deferral Amounts for purposes of determining the "actual deferral percentage." SECTION 3 If the Deferral Amounts contributed on behalf of any Highly Compensated Eligible Participant exceeds the amount permitted under the "actual deferral percentage" test described in Section 2 of this Appendix C for any

given Plan Year, then before the end of the Plan Year following the Plan Year for which the Excess Deferral Amount was contributed, (a) the portion of the Excess Deferral Amount for the Plan Year attributable to a Highly Compensated Participant, as adjusted to reflect income, gain, or loss attributable to it through the date the end of the Plan Year for which the test is being performed and reduced by any excess Elective Deferrals as determined pursuant to Plan Section 3.1 previously distributed to a Participant for the Participant's taxable year ending with or within the Plan Year, may be distributed to the Highly Compensated Eligible Participant or (b) to the extent provided in regulations issued by the Secretary of the Treasury, the Plan Administrator may permit the Participant to elect, within two and one-half months after the end of the Plan Year for which the Excess Deferral Amount was contributed, to treat the Excess Deferral Amount, unadjusted for earnings, gains, and losses, but as so reduced, as an amount distributed to the Participant and then contributed as an after-tax contribution by the Participant to the Plan ("recharacterized amounts"). The income allocable to such Excess Deferral Amount shall be determined in a similar manner as described in Section 4.2 of the Plan. The Excess Deferral Amount to be distributed or recharacterized shall be reduced by Deferral Amounts previously distributed or recharacterized for the taxable year ending in the same Plan Year, and shall also be reduced by Deferral Amounts previously distributed or recharacterized for the Plan Year beginning in such taxable year. For all other purposes under the Plan other than this Appendix C recharacterized amounts shall continue to be treated as Deferral Amounts. In the event the multiple use of limitations contained in Sections 2(b) and 5(b) of this Appendix C, pursuant to Treasury Regulations Section 1.401(m)-2 as promulgated by the Secretary of the Treasury, requires a corrective distribution, such distribution shall be made pursuant to this Section 3, and not Section 6 of Appendix C. The portion of the Matching Contribution on which such Excess Deferral Amount was based shall be forfeited upon the distribution or recharacterization, as the case may be, of such Excess Deferral Amount. (a) For purposes of this Section 3, "Excess Deferral Amount" means, with respect to a Plan Year, the excess of: (1) the aggregate amount of Deferral Amounts contributed by a Plan Sponsor on behalf of Highly Compensated Eligible Participants for the Plan Year, over (2) the maximum amount of Deferral Amounts permitted under Section 2 of this Appendix C for the Plan Year, which shall be determined by reducing the Deferral Amounts contributed on behalf of Highly Compensated Eligible Participants in order of the actual deferral percentages beginning with the highest of such percentages. (b) Distribution of the Excess Deferral Amount for any Plan Year shall be made to Highly Compensated Eligible Participants on the basis of the dollar amount of Deferral Amounts attributable to each Highly Compensated Eligible Participant. The Plan Sponsor shall determine the amount of Excess Deferral Amounts which shall be distributed to each Highly Compensated Eligible Participant as follows. (1) The Deferral Amounts allocated to the Highly Compensated Eligible Participant with the highest dollar amount of Deferral Amounts for the Plan Year shall be reduced by the amount required to cause that Highly Compensated Eligible Participant's remaining Deferral Amounts for the Plan Year to be equal to the dollar amount of the Deferral Amounts allocated to the Highly Compensated Eligible Participant with the next highest dollar amount of Deferral Amounts for the Plan Year. This amount is then distributed to the Highly Compensated Eligible Participant with the highest dollar amount of Deferral Amounts, unless a smaller reduction, when added to the total dollar amount already distributed pursuant to this Paragraph (1), equals the total Excess Deferral Amounts. (2) If the total amount distributed under Paragraph (1) of this Section 3(b) is less than the total Excess Deferral Amounts, the procedure in Paragraph (1) shall be successively repeated until the total dollar amount distributed is equal to the total Excess Deferral Amounts attributable to Highly Compensated Eligible Participants. If a distribution of the Excess Deferral Amounts attributable to the Highly Compensated Eligible Participants is made in accordance with Paragraphs (1) and (2) of this Section, the limitations in Section 2 of this Appendix C shall be treated as being met regardless of whether the actual deferral percentage, if recalculated after such distributions, would have satisfied the requirements of Section 2. SECTION 4

The Plan Administrator shall have the responsibility of monitoring the Plan's compliance with the limitations of this Appendix C and shall have the power to take all steps it deems necessary or appropriate to ensure compliance, including, without limitation, restricting the amount, if any, which Highly Compensated Eligible Participants can elect to have contributed pursuant to Plan Section 3.1. Any actions taken by the Plan Administrator pursuant to this Section 4 shall be pursuant to non-discriminatory procedures consistently applied. SECTION 5 In addition to any other limitations set forth in the Plan, Matching Contributions under the Plan and the amount of nondeductible employee contributions under the Plan, for each Plan Year must satisfy one of the following tests: (a) The contribution percentage for Highly Compensated Eligible Participants for the Plan Year must not exceed 125% of the contribution percentage for all other Eligible Participants for the preceding Plan Year; or (b) The contribution percentage for Highly Compensated Eligible Participants for the Plan Year must not exceed the lesser of (1) 200 % of the contribution percentage for all other Eligible Participants for the preceding Plan Year, and (2) the contribution percentage for all other Eligible Participants for the preceding Plan Year plus two (2) percentage points. Notwithstanding the foregoing, for purposes of this Section 5, the terms Highly Compensated Eligible Participant and Eligible Participant shall not include any Participant who is not eligible to receive a Matching Contribution under the provisions of the Plan, other than as a result of the Participant failing to contribute to the Plan or failing to have an Elective Deferral contributed to the Plan on the Participant's behalf. Notwithstanding the foregoing, if Qualified Matching Contributions are taken into account for purposes of applying the test contained in Section 2 of this Appendix C, they shall not be taken into account under this Section 5. In applying the above tests, the Plan Administrator shall comply with any regulations promulgated by the Secretary of the Treasury which prevent or restrict the use of the test contained in Section 2(b) of this Appendix C and the test contained in Section 5(b) of this Appendix C. The "contribution percentage" for Highly Compensated Eligible Participants and for all other Eligible Participants for a Plan Year shall be the average of the ratios, calculated separately for each Participant, of (A) to (B), where (A) is the amount of Matching Contributions under the Plan (excluding Qualified Matching Contributions which are used to apply the test set forth in Section 2 of this Appendix C or Matching Contributions which are used to satisfy the minimum required contributions to the Accounts of Eligible Participants who are not Key Employees pursuant to Section 1 of Appendix B to the Plan) and nondeductible employee contributions made under the Plan for the Eligible Participant for the Plan Year, and where (B) is the Annual Compensation of the Eligible Participant for the Plan Year. Except to the extent limited by Treasury Regulations Section 1.401(m)-l(b)(5) and any other applicable regulations promulgated by the Secretary of the Treasury, a Plan Sponsor may elect to treat Deferral Amounts and Qualified Nonelective Contributions as Matching Contributions for purpose of determining the "contribution percentage," provided the Deferral Amounts, excluding those treated as Matching Contributions, satisfy the test set forth in Section 2 of Appendix C. SECTION 6 If either (a) the Matching Contributions and, if taken into account under Section 5 of this Appendix C, the Deferral Amounts, Qualified Nonelective Contributions and/or Qualified Matching Contributions made on behalf of Highly Compensated Eligible Participants, or (b) the nondeductible employee contributions made by Highly Compensated Eligible Participants exceed the amount permitted under the "contribution percentage test" for any given Plan Year, then, before the close of the Plan Year following the Plan Year for which the Excess Aggregate Contributions were made, the amount of the Excess Aggregate Contributions attributable to the Plan for the Plan Year under either Section (6)(a)(1) or (2), or both, as adjusted to reflect any income, gain or loss attributable to such contributions through the date the Excess Aggregate Contributions are distributed shall be distributed or, if the Excess Aggregate Contributions are forfeitable, forfeited. The income allocable to such contributions shall be determined in a similar manner as described in Section 4.2 of the Plan. As to any Highly Compensated Employee, any distribution or forfeiture of his allocable portion of the Excess Aggregate Contributions for a Plan Year shall first be attributed to any nondeductible employee contributions made by the Participant during the Plan Year for which no corresponding Plan Sponsor contribution is made and then to any remaining nondeductible employee contributions made by the Participant during the Plan Year and any Matching Contributions thereon. As between the Plan and any other plan or plans maintained by the Plan Sponsor in which Excess Aggregate Contributions for

a Plan Year are held, each such plan shall distribute or forfeit a pro-rata share of each class of contribution based on the respective amounts of a class of contribution made to each plan during the Plan Year. The payment of the Excess Aggregate Contributions shall be made without regard to any other provision in the Plan. In the event the multiple use of limitations contained in Sections 2(b) and 5(b) of this Appendix C, pursuant to Treasury Regulations Section 1.401(m)-2 as promulgated by the Secretary of the Treasury, requires a corrective distribution, such distribution shall be made pursuant to Section 3 of Appendix C, and not this Section 6. For purposes of this Section 6, with respect to any Plan Year, "Excess Aggregate Contributions" means the excess of: (a) the aggregate amount of the Matching Contributions and nondeductible employee contributions (and any Qualified Nonelective Contributions or Qualified Matching Contributions) and, it taken into account under Section 5 of this Appendix C, the Deferral Amounts actually made on behalf of Highly Compensated Eligible Participants for the Plan Year, over (b) the maximum amount of contributions permitted under the limitations of Section 5 of this Appendix C, determined by reducing contributions made on behalf of Highly Compensated Eligible Participants in order of their contribution percentages beginning with the highest of such percentages. The determination of the amount of Excess Aggregate Contributions under this Section 6 shall be made after (1) first determining the excess Elective Deferrals under Section 3.1(b) of the Plan and (2) then determining the Excess Deferral Amounts under Section 3 of this Appendix C. (c) Distribution or forfeiture of nondeductible employee contributions or Matching Contributions in the amount of the Excess Aggregate Contributions for any Plan Year shall be made with respect to Highly Compensated Eligible Participants on the basis of the dollar amount of the Excess Aggregate Contributions attributable to each Highly Compensated Eligible Participant. Forfeitures of Excess Aggregate Contributions may not be allocated to Participants whose contributions are reduced under this Section 6. The Plan Sponsor shall determine the amount of Excess Aggregate Contributions which shall be distributed to each Highly Compensated Eligible Participant as follows. (1) The Matching Contributions and nondeductible contributions allocated to the Highly Compensated Eligible Participant with the highest dollar amount of such contributions for the Plan Year shall be reduced by the amount required to cause that Highly Compensated Eligible Participant's remaining Matching Contributions and nondeductible contributions for the Plan Year to be equal to the dollar amount of such contributions allocated to the Highly Compensated Eligible Participant with the next highest dollar amount of Matching Contributions and nondeductible contributions for the Plan Year. This amount is then distributed to the Highly Compensated Eligible Participant with the highest dollar amount of Matching Contributions and nondeductible contributions, unless a smaller reduction, when added to the total dollar amount already distributed pursuant to this Subsection (1), equals the total Excess Aggregate Contributions. (2) If the total amount distributed under Paragraph (1) is less than the total Excess Aggregate Contributions, the procedure in Paragraph (1) shall be repeated until the total dollar amount of Matching Contributions and nondeductible contributions distributed is equal to the total Excess Aggregate Contributions attributable to Highly Compensated Eligible Participants. If a distribution of the total Excess Aggregate Contributions is made in accordance with Paragraphs (1) and (2) of this Section 6(c), the limitations in Section 5 of this Appendix C shall be treated as being met regardless of whether the actual contribution percentage, if recalculated after such distributions, would have satisfied the requirements of Section 5. SECTION 7 Except to the extent limited by rules promulgated by the Secretary of the Treasury, if a Highly Compensated Eligible Participant is a participant in any other plan of the Plan Sponsor or any Affiliate which includes Matching Contributions, deferrals under a cash or deferred arrangement pursuant to Code Section 401(k), or nondeductible employee contributions, any contributions made by or on behalf of the Participant to the other plan shall be allocated with the same class of contributions under the Plan for purposes of determining the "actual deferral percentage" and "contribution percentage" under the Plan; provided, however,

contributions that are made under an "employee stock ownership plan" (within the meaning of Code Section 4975(e)(7)) shall not be combined with contributions under any plan which is not an employee stock ownership plan (within the meaning of Code Section 4975(e)(7)). Except to the extent limited by rules promulgated by the Secretary of the Treasury, if the Plan and any other plans which include Matching Contributions, deferrals under a cash or deferred arrangement pursuant to Code Section 401(k), or nondeductible employee contributions are considered as one plan for purposes of Code Section 401 (a)(4) and 410(b)(1), any contributions under the other plans shall be allocated with the same class of contributions under the Plan for purposes of determining the "contribution percentage" and "actual deferral percentage" under the Plan; provided, however, contributions that are made under an "employee stock ownership plan" (within the meaning of Code Section 4975(e)(7)) shall not be combined with contributions under any plan which is not an employee stock ownership plan (within the meaning of Code Section 4975(e)(7)). ::ODMA\PCDOCS\ATL\470105\1

1 Ruby Tuesday, Inc. Deferred Compensation Plan Trust Agreement WHEREAS, Employer maintains the Ruby Tuesday, Inc. Deferred Compensation Plan (the "Plan"), which was established by indenture dated December 18, 1989, to provide benefits in the form of deferred compensation to a select group of highly compensated employees of the Employer or any of its related corporations or businesses; and WHEREAS, Employer desires to amend and restate the trust agreement originally executed by and between Morrison Restaurants, Employer's predecessor-in-interest, and AmSouth Bank, N.A., dated December 1, 1992, which agreement, as amended, contains the original terms of the Trust (the "Original Trust Agreement"); and WHEREAS, Employer further desires to amend and restate the existing trust agreement executed by and between Employer and The Prudential Trust Company, dated July 1, 1997, which agreement, as amended, contains the existing terms of the Trust (the "Prior Trust Agreement"); and WHEREAS, the Board of Directors of Employer has approved the amendment and restatement of the Original and Prior Trust Agreements as embodied herein (the "Trust"); WHEREAS, the Trust assets that shall be held therein shall be subject to the claims of Employer's creditors in the event of the Employer's insolvency until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan; and WHEREAS, it is the intention of the parties that the Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; NOW, THEREFORE, Employer hereby restates the Trust, effective as of June 1, 2001, as follows: Section 1 Incorporation of Plan All terms and conditions set forth in the Plan are incorporated by reference except to the extent that the terms of the Trust indicate to the contrary. In the event of a conflict between the terms and provisions of the Trust Agreement and those in the Plan, the terms and provisions of the Trust Agreement shall be given precedence. However, nothing contained in the Trust Agreement is intended to diminish the amount of the benefits required to be paid for the benefit of any participant under the terms of the Plan. To the extent possible, the terms and provisions of the Plan and those of the Trust Agreement shall be interpreted as mutually consistent. Section 2 Establishment of Trust (a) Employer hereby deposits with Trustee in trust such cash and/or marketable securities, if any, listed in Appendix A, which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement. (b) The Trust hereby established shall be irrevocable. (c) The Trust is intended to be a grantor trust, of which Employer is the grantor, within the meaning of subpart E, part 1, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon, shall be held separate and apart from other funds of Employer and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against Employer. Any assets held by the Trust will be subject to the claims of Employer's general creditors under federal and state law in the event

of Insolvency, as defined in Section 3(a) herein. (e) The Employer, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property in trust with Trustee to augment the principal to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Neither Trustee nor any Plan participant or beneficiary shall have any right to compel such additional deposits. (f) The Trustee shall have no duty or authority to (i) require any deposits to be made under the Plan or to Trustee; (ii) compute any amount to be deposited under the Plan to Trustee; or (iii) determine whether amounts received by Trustee comply with the Plan. Assets of the Trust may be held, in Trustee's discretion, in an account with an affiliate of Trustee. Section 3 Trustee Responsibility Regarding Payments to Trust Beneficiary When Employer is Insolvent (a) Trustee shall cease payment of benefits to Plan participants and their beneficiaries if the Employer is Insolvent. Employer shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Employer is unable to pay its debts as they become due, (ii) Employer is subject to a pending proceeding as a debtor under the United States Bankruptcy Code; or (iii) Employer is determined to be insolvent, or incapable of operating as a going concern by any governmental agency having jurisdiction of the Employer. (b) At all times during the continuance of this Trust, as provided in Section 2(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Employer under federal and state law as set forth below. (1) The Board of Directors and the Chief Executive Officer of Employer (or, if there is no Chief Executive Officer, the highest ranking officer) shall have the duty to inform Trustee in writing of Employer's Insolvency. If a person claiming to be a creditor of Employer alleges in writing to Trustee that Employer has become Insolvent, Trustee shall determine whether Employer is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to Plan participants or their beneficiaries. (2) Unless Trustee has actual knowledge of Employer's Insolvency, or has received notice from Employer or a person claiming to be a creditor alleging that Employer is Insolvent, Trustee shall have no duty to inquire whether Employer is Insolvent. Trustee may in all events rely on such evidence concerning Employer's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Employer's solvency. In determining whether the Employer is Insolvent for purposes of this Trust, the Trustee may engage the services of legal, accounting, financial and other advisors, which may be advisors to the Employer, to assist it in the determination. The Employer agrees to cooperate fully with any reasonable inquiry of the Trustee or such advisors in making the determination of Employer's Insolvency. During the determination of the Employer's Insolvency, the Trustee may, in its discretion, suspend payment of benefits to the Employer or Participants. To the extent that the Trustee engages the services of an advisor to the Employer, the Trustee may rely, without further inquiry, on the written determination of that advisor as to the solvency or insolvency of the Employer. All costs reasonably incurred by the Trustee in making the determination of Employer's Insolvency shall be reimbursed to the Trustee by the Employer, and if not so reimbursed, shall be chargeable against the Trust. (3) If at any time Trustee has determined that Employer is Insolvent, Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of Employer's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of Employer with respect to benefits due under the Plan or otherwise. (4) Trustee shall resume the payment of benefits to Plan participants or their beneficiaries in accordance with Section 10 of this Trust Agreement only after Trustee has determined that Employer is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments

made to Plan participants or their beneficiaries by Employer in lieu of the payments provided for hereunder during any such period of discontinuance; provided that Employer has given Trustee the information with respect to such payments made during the period of discontinuance prior to resumption of payments by Trustee. Section 4 Payments to Employer Except as provided in Sections 3 and 10 hereof, Employer shall have no right or power to direct Trustee to return to Employer or to divert to others any of the Trust assets before all payment of benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plan. Section 5 Investment Authority (a) Except as otherwise provided in this Agreement, The Trustee shall administer the Trust as a nondiscretionary Trustee, and the Trustee shall not have any discretion or authority with regard to the investment of the assets of the Trust and shall act solely as directed by the Employer. The Trustee, as may be directed by the Employer (or pursuant to the terms of the Plan), is authorized and empowered, by way of limitation, with the following powers, rights and duties, each of which the Trustee shall exercise in a nondiscretionary manner as directed in accordance with the direction of the Employer (or pursuant to the terms of the Plan): (1) To invest and reinvest Trust assets, together with the income therefrom, in common stock, preferred stock, convertible preferred stock, bonds, debentures, convertible debentures and bonds, mortgages, notes, commercial paper and other evidences of indebtedness (including those issued by Trustee), shares of mutual funds, guaranteed investment contracts, bank investment contracts, other securities, policies of life insurance, annuity contracts, options, options to buy or sell securities or other assets, and all other property of any type (personal, real or mixed, and tangible or intangible); (2) To deposit or invest all or any part of the assets of the Trust in savings accounts or certificates of deposit or other deposits in a bank or savings and loan association or other depository institution, including Trustee or any of its affiliates, provided with respect to such deposits with Trustee or an affiliate the deposits bear a reasonable interest rate; (3) To hold, manage, improve, repair and control all property, real or personal, forming part of the Trust; to sell, convey, transfer, exchange, partition, lease for any term, even extending beyond the duration of this Trust, and otherwise dispose of the same from time to time; (4) To hold in cash, without liability for interest, such portion of the Trust as is pending investment, or payment of expenses, or the distribution of benefits; (5) To take such actions as may be necessary or desirable to protect the Trust from loss due to the default on bonds and mortgages held in the Trust including the appointment of agents or trustees in such other jurisdictions as may seem desirable, to transfer property to such agents or trustees, to grant to such agents such powers as are necessary or desirable to protect the Trust, to direct such agent or trustee, or to delegate such power to direct, and to remove such agent or trustee; (6) To settle, compromise or abandon all claims and demands in favor of or against the Trust; (7) The exercise all of the further rights, powers, options and privileges granted, provided for, or vested in trustees generally under the laws of the state in which Trustee is incorporated as set forth above, so that the powers conferred upon Trustee herein shall not be in limitation of any authority conferred by law, but shall be in addition thereto; (8) To borrow money from any source and to execute promissory notes, mortgages or other obligations and to pledge or mortgage any trust assets as security; and (9) To maintain accounts at and execute transactions through any brokerage or other firm, including any firm which is an affiliate of Trustee. (b) Trustee may invest in securities (including stock or rights to acquire stock) or obligations issued by Employer. All rights associated with assets of the Trust shall be exercised by Trustee or the person designated by Trustee,

and shall in no event be exercisable by or rest with Plan Participants, except that voting rights with respect to Trust assets will be exercised in accordance with the provisions of Section 16(g). Employer shall have the right at anytime, and from time to time in its sole discretion, to substitute assets of equal fair market value for any asset held by the Trust. This right is exercisable by Employer in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity. (c) To the extent necessary or which it deems appropriate to implement its powers under this Section or otherwise to fulfill any of its duties and responsibilities as Trustee of the Trust, Trustee shall have the following additional powers and authority: (1) To register securities, or any other property, in its name or in the name of any nominee, or to hold securities in bearer form, provided the books and records of Trustee shall indicate at all times the true ownership of such property, and to deposit any securities or other property in a depository or clearing corporation; (2) To designate and engage the services of, and to delegate powers and responsibilities to, such agents, representatives, advisers, counsel and accountants as Trustee considers necessary or appropriate, any of whom may be an affiliate of Trustee or a person who renders services to such an affiliate, and, as a part of its expenses under this Trust Agreement, to pay their reasonable expenses and compensation; (3) To make, execute and deliver, as Trustee, any and all deeds, leases, mortgages, conveyances, waivers, releases or other instruments in writing necessary or appropriate for the accomplishment of any of the powers listed in this Trust Agreement; and (4) Generally, to do all other acts which Trustee deems necessary or appropriate for the protection of the Trust. Section 6 Investment Manager (a) Prior to the date a Change of Control (as defined in Section 16(f) hereof) occurs, Employer, and on or after the date a Change of Control occurs, the Trustee, may appoint one or more investment managers ( the "Investment Managers") which shall be banks, investment advisers registered under the Investment Advisers Act of 1940, or insurance companies, to direct the Trustee as to the investment of all or a portion of the assets of the Trust for the exclusive benefit of the participants of the Plans and their beneficiaries. Notwithstanding the foregoing, prior to the date a Change of Control occurs, the Employer may appoint the Trustee (or any of its affiliates) as an Investment Manager, if it is otherwise qualified to serve as an Investment Manager and in such instance, the Trustee shall have discretion over the investment of the assets of the Trust. Employer shall notify the Trustee of the appointment of any Investment Manager (other than the Trustee) under this Subsection by delivering to the Trustee (i) an executed copy of an instrument under which the Investment Manger was appointed to act hereunder and setting forth the investment powers of the Investment Manger and (ii) a written instrument executed by the Investment Manager in which it acknowledges that it has agreed to act as such. Any notice of appointment pursuant to this Subsection shall constitute a representation and warranty by the Employer that the Investment Manager is qualified under and has been appointed in accordance with the provisions hereof. Notwithstanding anything herein contained to the contrary, during the term of its appointment, the Investment Manager shall have the sole responsibility for the investment and reinvestment of the portion of the assets of the Trust for which it was appointed to act, and shall have full power in its discretion to direct the Trustee with respect to the exercise by it of its investment powers, including the voting of shares (except as otherwise provided by Section 16(g)). Pending receipt of instructions from any Investment Manager with respect thereto and subject to any investment guidelines agreed to in writing from time to time, any cash received by the Trustee from time to time shall be invested by the Trustee in demand and term notes (including those commonly known as "master notes") maturing not more than three years after the date of purchase thereof, United States Treasury bills, other government and agency obligations maturing not more than three years after the date of purchase thereof, group annuity or other contracts providing a guaranteed rate of return with a maturity not exceeding three years, certifications of deposit, commercial paper, government guaranteed paper, common or collective trust funds, money market mutual funds, other money market instruments, savings accounts or other deposits with a financial institution (including the Trustee, if a financial institution is serving as such) and part interests in any one or more of the foregoing. Employer may terminate its appointment of an Investment Manager at any time and shall in writing notify the Trustee of such termination, and may thereafter appoint a successor Investment Manager in the same manner as

provided above in this Subsection. Any successor Investment Manager shall thereafter, until its appointment is terminated, be deemed to be an "Investment Manager" for all purposes of this Agreement. If there shall be more than one Investment Manager, the portion of the assets of the Trust to be invested by each Investment Manager shall be held in a separate account and the powers and authority of each Investment Manager shall be divided as set forth in the instruments appointing such Investment Managers. So long as an Investment Manager (other than the Trustee or one of its affiliates) is serving as such, the Trustee shall be under no duty or obligation to review the assets comprising any portion of the assets of the Trust managed by the Investment Manager, to make any recommendations with respect to the investment or reinvestment thereof, or to determine whether any direction received from any Investment Manager is proper or within the terms of this Trust Agreement or to monitor the activities of any Investment Manager. (b) The Trustee shall have no liability or responsibility to Employer or any persons claiming any interest in the assets of the Trust for acting without question on the direction of, or for failing to act in the absence of any direction from, any Investment Manager unless the Trustee participated knowingly in, or knowingly undertook to conceal, an act or omission of any Investment Manager constituting a breach of its duties hereunder, knowing such act or omission was a breach of such duties; provided, however, that the Trustee shall not be deemed to have "participated" in a breach by any Investment Manager for the purposes of this undertaking solely as a result of the performance by the Trustee or its officers, employees or agents of any custodial, reporting, recording, and bookkeeping functions with respect to any assets of the Trust managed by an Investment Manager or solely as a result of settling purchase and sale transactions entered into or directed by any Investment Manager, or to have "knowledge" of any such breach solely as a result of the information received by the Trustee or its officers, employees or agents in the normal course in performing such functions or settling such transactions. If the Trustee has actual knowledge of a breach committed by any Investment Manager, it shall promptly notify Employer in writing thereof, and the Trustee, except as required by applicable law, shall thereafter have no responsibility to remedy such breach. (c) Employer may, prior to a Change of Control, direct the Trustee in writing to transfer any portion of the assets of the Trust to a subtrustee and to enter into an agreement with the subtrustee reflecting the subtrust arrangement. In the event of a Change of Control, Employer may only direct the Trustee to transfer a portion of the assets of the Trust to a subtrustee with the consent of a majority of the participants of the Plan and the designated beneficiaries of deceased participants. The Trustee may terminate a subtrust at any time and direct the subtrustee to return the portion of the assets of the Trust held by the subtrustee; provided that prior to a Change of Control the subtrust may only be terminated with the consent of Employer. Section 7 Investment Funds (a) The assets of the Trust shall be invested in individual funds (each of which is sometimes hereinafter referred to as an "Individual Fund"), with varying investment objectives, as Employer shall from time to time determine. (b) Employer, in its sole discretion may, from time to time, establish one or more additional Individual Funds, or may change or terminate the availability of any then existing Individual Funds for all Members. (c) The Trustee, to the extent directed, may purchase for an Individual Fund any property of another Individual Fund which would then be appropriate for purchase by that Individual Fund and may exchange property of one Individual Fund for property of another Individual Fund if the exchanged properties would be appropriate for the purchase by the respective Individual Funds. Each purchase or exchange shall be made at the fair market value of the property so purchased or exchanged. (d) The authority, powers and duties of the Trustee as described in this Trust Agreement shall be subject to and exercised only in a manner consistent with any selection of Investment Funds by the Employer. Section 8 Investment Direction by Members (a) Subject to any other rules and restrictions as the Employer may prescribe from time to time, with respect to amounts allocated to Employee Deferred Accounts only, each Member may (1) direct that a portion or all of his interest in one or more of the Investment Funds to be transferred to one or more of the other Investment Funds or (2) change his election as to the Investment Funds in which future contributions on his behalf to his Employee Deferred Account shall be invested. The provisions of this Section are contingent upon the availability of transfers among the Investment Funds under the terms of the investments made by each Investment Fund. An investment

direction, once given, shall be deemed to be a continuing direction until changed as otherwise provided herein. (b) If no investment election is outstanding, all such contributions shall be allocated to such Investment Fund as the Employer shall, in its sole discretion, determine. (c) Investment directions by Members shall be subject to the following: (1) Investment directions by Members to the Employer shall be made in the manner and pursuant to the rules established by the Employer and shall indicate the manner in which contributions are to be invested in, or the allocation of a Member's Account among, the available Investment Funds. (2) Directions provided to the Trustee shall remain in effect until superseded by subsequent directions. (d) Each direction under the preceding paragraphs received by the Employer shall be promptly delivered to the Trustee, and shall be effective as to the Trustee only when received by the Trustee. If a Member directs that all or a portion of his Account be invested in a particular Investment Fund, the Trustee shall use its best efforts to carry out the investment as soon as practicable. However, the Trustee shall never be held liable for failure to carry out an investment direction within the terms of the Trust if the Trustee has made a bona fide effort to follow the direction. (e) Any distribution to a Member pursuant to the Plan shall be pro rata from each Investment Fund, except as otherwise directed by the Employer. Section 9 Valuation and Allocation (a) For all purposes under the Plan and the Trust, including particularly, but without limitation, valuing the Trust assets and each Member's Account and allocating to each member's Account its share of the net income or net loss of the assets of the Trust, the following rules shall apply: (1) Transfers or payments of funds or assets and the income, gain, loss, or expenses attributable thereto between Investment Funds shall be deemed made as of the Valuation Date coinciding with or immediately following the actual receipt of transfer or payment instructions in good order, and the funds or assets shall not be credited or charged after such date with any earnings or losses of the Investment Fund from which transferred or paid but shall be credited or charged after such date with any earnings or losses of the Investment Fund to which transferred or paid. (2) Transfers or payments from an Investment Fund to a Member or his Beneficiary between Valuation Dates shall be charged against the interest of the Member in the Investment Fund as of the Valuation Date coinciding with or immediately following the actual receipt of transfer or payment instructions in good order and contributions to an Investment Fund which are allocated to the Account of a member between Valuation Dates shall be credited to the interest of such Member in such Investment Fund as of the Valuation Date coinciding with or immediately following the actual receipt of transfer or payment instructions in good order. (3) Fair market value of the assets of each Investment Fund shall be determined separately and the net income or net loss of each Investment Fund shall be determined separately. (4) The value of a Member's Account, to the extent invested in Investment Funds, shall be the sum of his proportionate interests in each of the Investment Funds, and the aggregate net income or net loss allocated to a Member's Account shall be the aggregate of the net income or net loss allocated to his proportionate interests in each of the Investment Funds. (b) Subject to the provisions of Subsections (c) and (d) below, the Trustee shall as of each Valuation Date, and at such additional times as Employer may in writing direct, determine the net income or net loss and the fair market value of the assets in the Trust and each Investment Fund, respectively, as determined below: (1) To the cash income, if any, since the last Valuation Date, there shall be added or subtracted, as the case may be, any net increase or decrease, since the last Valuation Date, in the fair market value of the assets of the Trust or Investment Fund, as applicable, since the last Valuation Date, any gain or loss on the sale or exchange of the assets of the Trust or Investment Fund, as applicable, since the last Valuation Date, accrued interest since the last

Valuation Date with respect to any interest-bearing security as to which the purchaser would be required to pay the accrued interest in addition to the quoted price, the amount of any dividend which shall have been declared since the last Valuation Date but not paid on shares of stock owned by the Trustee if the market quotation used in determining the value of such shares is ex-dividend, and the amount of any other assets of the Trust or Investment Fund determined by the Trustee to be income since the last Valuation Date: (2) From the sum thereof there shall be deducted all charges, expenses, and liabilities accrued since the last Valuation Date which are proper under the provisions of the Plan and the Trust and which in the discretion of the Trustee are properly chargeable against income for the period. (c) Notwithstanding Subsection (b) hereof, in the event than an Investment Manager is designated by Employer, or the Trustee after a Change of Control, and if the Investment Manager either directs the investment of or itself invests any assets of the Trust, and if any of such assets are non-listed securities or are not publicly traded or if the fair market value of any of such assets cannot be readily determined, then the Investment Manager shall determine the net income or net loss and the fair market value of such assets and the Trustee shall be entitled to rely upon such determination. (d) In the event that an Investment Manager is designated by Employer, or the Trustee after a Change of Control, and if the Trustee gives the Investment Manager possession of any portion of the assets of the Trust, then the Investment Manager shall determine the net income or net loss and the fair market value of those assets and the Trustee shall be entitled to rely upon the determination. Section 10 Duties of the Trustee (a) Except for records dealing solely with the Trust and its investments and disbursements, which shall be maintained by the Trustee, Employer shall maintain all records contemplated by the Plan. (b) Employer shall furnish to the Trustee all the information necessary to determine the benefits payable to or with respect to each Member in the Plan, including any benefits payable after a Member's death. Employer shall from time to time, and at least annually, and promptly upon the request of the Trustee furnish updated information to the Trustee. In the event Employer refuses or neglects to provide any updated information as contemplated herein, the Trustee shall rely upon the most recent information furnished to it by Employer; provided, however, that on or after a Change of Control, the Trustee shall rely in its discretion upon (1) information furnished to it by the Employer prior to a Change of Control, (2) information furnished to it by Employer on or after a Change of Control and/or (3) any information received by it from a Member or designated beneficiary unless the recipient actually knows that any such information is false. The Trustee has not responsibility to verify information provided to them by Employer or any Member or designated beneficiary. (c) Upon proper notification from Employer prior to a Change of Control or upon an independent determination by the Trustee on or after a Change of Control (based on such information as the Trustee shall be entitled to rely upon pursuant to Subsection (b) above), when, in the opinion of Employer prior to a Change of Control or Trustee on or after a Change of Control, as applicable, a Member's benefits under the Plan have become payable, Employer or Trustee, as applicable, shall notify the Member or the beneficiary of a deceased Member and, if applicable, the Trustee. Such notice shall include the amount of such benefits, the terms of payment, the amount of any taxes required to be withheld from such amount, and the name, address and social security number of the recipient. Upon the receipt of a notification or after making its determination, as applicable, the Trustee shall commence distributions from the assets of the Trust in accordance therewith to the person or persons so indicated. (d) Employer shall have full responsibility for the payment of all taxes of any nature levied, assessed or imposed upon the Assets of the Trust, including the payment of all withholding taxes to the appropriate taxing authority and shall provide the Trustee with such information as necessary to allow it to furnish each Member or beneficiary with the appropriate tax information form evidencing such payment and the amount thereof. (e) Prior to a Change of Control, the Trustee shall have no responsibility for determining whether any Member or beneficiary has died or whether a Member's rights under the terms of the Plan have been forfeited and shall be entitled to rely upon information furnished by Employer. On or after a Change of Control, the Trustee shall determine whether a Member's benefit shall be deemed forfeited or whether a Member or beneficiary has died based on information supplied under Subsection (b) hereof; provided, however, that a certified death certificate

received by the Trustee shall be conclusive evidence of the death of any person regardless of the source of such certificate. (f) Nothing provided in this Trust Agreement shall relieve Employer of its liabilities to pay the benefits provided under the Plan except to the extent such liabilities are met by application of the assets of the Trust. (g) In discharging its duties and responsibilities under this Section 10, the Employer acknowledges that the Trustee may delegate such obligations to one or more independent third parties. The fees and expenses incurred by reason of any delegation effected by the Trustee pursuant to this Subsection (g) shall be paid by the Employer, but, if not so paid, may be paid by the Trustee from the Trust. The provisions of this Subsection (g) are supplemental to, and are in no way in derogation of, any other provisions of this Agreement concerning any authority of the Trustee to delegate the performance of its other duties and responsibilities or any other authority of the Trustee to pay fees and expenses from the Trust. Section 11 Responsibility and Indemnity of Trustee (a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by Employer which is contemplated by, and in conformity with, the terms of the Plan or this Trust and is given in writing by Employer. Trustee shall also incur no liability to any person for any failure to act in the absence of direction, request or approval from Employer which is contemplated by, and in conformity with, the terms of this Trust. In the event of a dispute between Employer and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) Employer agrees to indemnify and save harmless the Trustee against any and all claims, losses, damages, expenses and liabilities the Trustee may incur in the exercise and performance of the Trustee's powers and duties hereunder, unless the same are determined to be due to negligence or willful misconduct. If Trustee undertakes or defends any litigation arising in connection with this Trust, Employer agrees to indemnify Trustee against Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If Employer does not pay such costs, expenses and liabilities in a reasonably timely manner, Trustee may obtain payment from the Trust. (c) Trustee may consult with legal counsel (who may also be counsel for Employer generally) with respect to any of its duties or obligations hereunder. Trustee may hire any agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. (d) Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. (e) However, notwithstanding the provisions of Section 11(d) above, Trustee may loan to Employer the proceeds of any borrowing against an insurance policy held as an asset of the Trust. (f) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. Section 12 Compensation and Expenses of Trustee The compensation and expenses of the Trustee and the administrative expenses of the Plan shall be paid from the assets of the Trust. Expenses of the Trustee shall include the reasonable expenses and compensation of third parties employed by the Trustee pursuant to Sections 6 and 11 hereof. The Trustee shall be authorized to deduct its compensation and expenses from the Trust and to deduct and pay other expenses no earlier than thirty (30) days after it delivers an invoice for same to Employer.

Section 13 Resignation and Removal of Trustee (a) Trustee may resign at any time by written notice to Employer, which shall be effective 90 days after receipt of such notice unless Employer and Trustee agree otherwise. (b) Trustee may be removed by Employer on 90 days notice or upon shorter notice accepted by Trustee (c) Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed as soon as practical after expiration of the notice period described above. (d) If Trustee resigns or is removed, a successor shall be appointed, in accordance with this Trust, by the effective date of resignation or removal under Subsections (a) or (b) of this section. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. (e) Upon settlement of the account and transfer of the Trust assets to the successor Trustee, all rights and privileges under this Trust Agreement shall vest in the successor Trustee and all responsibility and liability of Trustee with respect to the Trust and assets thereof shall terminate subject only to the requirement that Trustee execute all necessary documents to transfer the Trust assets to the successor Trustee. Section 14 Appointment of Successor (a) If Trustee resigns or is removed in accordance with Section 13(a) or (b) hereof, Employer may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by Employer or the successor Trustee to evidence the transfer. (b) The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 8 and 9 hereof. The successor Trustee shall not be responsible for and Employer shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee. (c) Upon the removal or resignation of the Trustee, any successor appointed shall have the same powers and duties as those conferred upon the Trustee under this Trust. Prior to a Change of Control, the appointment of any successor Trustee shall be in the sole discretion of the Employer. On or after a Change of Control, the appointment of any successor Trustee shall be made only with the consent of a majority of the Members of the Plan and the designated beneficiaries of the deceased Members. Upon receipt by the Trustee of a written acceptance of the appointment by the successor Trustee, the Trustee shall transfer to the successor Trustee the assets constituting the Trust; provided, however, the Trustee shall not be required to pay over assets to a successor Trustee unless the Trustee shall be discharged from all liability for any taxes which may be due and owing by the Trust, or unless the successor Trustee, who must be acceptable to the Trustee, indemnifies the Trustee and the Trustee in its sole discretion agrees to accept indemnification. In the event that within ninety (90) days after the removal or resignation of the Trustee the Employer shall have failed to appoint a successor Trustee or the Trustee shall not have received a written acceptance from a successor Trustee, then the Trustee may file an appropriate action in a court of competent jurisdiction and transfer to the custody of the court the assets then held by the Trustee constituting the Trust. Upon transfer to a successor Trustee or to the court, as the case may be, the Trustee shall be relieved of all further responsibilities and liabilities in connection with the Trust. The Trustee is authorized, however, to reserve therefrom any assets as it may deem advisable for payment of its fees and expenses in connection with the settlement of its account or otherwise,! and any balance of the reserve remaining after the payment of the Trustee's fees and expenses shall be paid over to the successor Trustee or to the court. Section 15 Amendment or Termination (a) Prior to a Change of Control, the Trust Agreement may be amended any time and to any extent by a written

instrument executed by the Employer, provided, however, that no such amendment shall be effective to the extent that it purports to make the Trust revocable. In addition, no such amendment shall have the effect of reducing benefits accrued by Members under the Plan, delaying the times at which distributions are made from the Fund to Members and their beneficiaries or allowing the Employer or any other person to receive distributions of the assets of the Fund not then permitted under the terms of the Trust Agreement. On or after a Change of Control, this Trust Agreement may only be amended with the consent of a majority of the Members of the Plan and the designated beneficiaries of deceased Members. No amendment that purports to increase the duties or responsibilities of the Trustee or to alter materially the manner in which the Trustee is to discharge any continuing duties or responsibilities shall be given effect without the consent of the Trustee and no other amendment shall be given effect without first providing notice of same to the Trustee. The Trustee and Employer or, if applicable, a majority of the Members of the Plan and the designated beneficiaries of deceased Members may amend the Trust Agreement in any manner not otherwise specifically precluded by this Subsection, including any amendment regarding the removal of an existing Trustee or the appointment of a successor Trustee. (b) Notwithstanding any other provision of the Trust Agreement to the contrary, the Trust shall terminate and all Fund assets shall be distributed (1) on the complete distribution of the Fund in accordance with the terms and provisions of the Plan; (2) upon the delivery to the Trustee of a writing terminating the Trust signed by the Employer, all Members of the Plan and the designated beneficiaries of deceased Members; or (3) in the event the Internal Revenue Service makes a final determination that the assets of the Fund constitute compensation currently taxable as income to Members. Any assets remaining in the Fund after satisfaction of all liabilities and expenses of the Plan shall be returned to the Employer. Section 16 Miscellaneous (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (c) This Trust Agreement shall be governed by and construed in accordance with the laws of the state in which Trustee is incorporated as set forth above. (d) The provisions of Sections 2(d), 3(b)(3) and 10(b) of this Agreement shall survive termination of this Agreement. (e) The rights, duties, responsibilities, obligations and liabilities of Trustee are as set forth in this Trust Agreement and no provision of the Plan or any other documents shall affect such rights, responsibilities, obligations and liabilities. If there is a conflict between provisions of the Plan and this Trust Agreement with respect to any subject involving Trustee, including but not limited to the responsibility, authority or powers of Trustee, the provisions of this Trust Agreement shall be controlling. (f) As used in this Trust Agreement, the term "Change of Control" means any event that pursuant to the requirements of Article X of Employer's Certificate of Incorporation, as amended from time to time, requires the affirmative vote of the holders of not less than eighty percent (80%) of the Voting Stock (as defined therein); provided, however, that no event shall constitute a Change of Control if approved by the Board of Directors of Employer a majority of whom are "present directors" and "new directors." For purposes of the preceding sentence, "present directors" shall mean individuals who as of the date of this Trust Agreement were members of the Board of Directors of Employer and "new directors" shall mean any director whose election by the Board of Directors of Employer (in the event of vacancy) or whose nomination for election by Employer's stockholders was approved by a vote of at least three-fourths of the directors then still in office who are present directors and new directors; provided that any director elected to the Board of Directors of Employer to settle a threatened or actual proxy contest shall in no event be deemed to be a new director. The board of directors of Employer shall immediately notify the Trustee of the occurrence of a Change of Control. Upon receipt of such written notice or in the event the Trustee has actual knowledge that a Change of Control has occurred, the Trustee shall take no action nor facilitate the taking of any action contemplated by the Trust Agreement as being taken prior to a Change of Control if (1) an alternative procedure for taking such action is prescribed on or after a Change of Control, or

(2) any action of the type described is expressly limited to the period prior to a Change of Control. If the Trustee should receive any written allegation to the effect that a Change of Control has occurred, the Trustee shall take no action or facilitate the taking of any action described: in the immediately preceding sentence until making an independent determination as to whether a Change of Control has occurred. The Trustee shall make this determination within a period of sixty (60) days after the receipt of the written allegation. Following the determination, the Trustee shall discharge its duties under the Trust Agreement in a manner consistent with that determination. (g) Prior to a Change of Control, authority and responsibility with regard to the voting of and control over any securities of Employer held in the Trust shall be exercised as follows: (1) Employer shall direct the Trustee in writing as to the manner in which such securities are to be voted; and (2) all other decisions affecting such securities, including, limitation, decisions to oppose or consent to tender or exchange offers, shall be similarly directed by Employer. The Trustee shall take such steps as may be necessary or appropriate to carry out the directions of Employer given pursuant to this Subsection. On or after a Change of Control, voting and all other decisions relating to the securities of Employer shall be made by the Trustee, or if such securities are subject to the investment authority of an Investment Manager, by that Investment Manager. IN WITNESS WHEREOF, the parties have hereunto caused this Trust Agreement to be duly executed.
Employer: Ruby Tuesday, Inc. By: /s/Franklin E. Southall Trustee: UMB Bank, N.A. By: /s/ Ken Bachman

RUBY TUESDAY, INC. PARTNER AGREEMENT THIS PARTNER AGREEMENT ("Agreement") is made as of the 6th day of June, 2001 (the "Effective Date"), by and between RUBY TUESDAY, INC., a Georgia corporation ("RTI"), and ROBERT D. McCLENAGAN, JR., an employee of RTI ("Partner"). STATEMENT OF BACKGROUND INFORMATION A. RTI desires that the Partner serve as a concept partner regarding Company operated Ruby Tuesday restaurants. B. The Partner desires to serve in such capacity pursuant to the terms and conditions of this Agreement. C. The parties wish to set forth Partner's duties, obligations, and compensation during the Term (hereinafter defined). STATEMENT OF AGREEMENT NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and promises herein contained, and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties agree as follows: ARTICLE I. AUTHORITY AND RESPONSIBILITIES 1.1 The Partner shall serve as a concept partner of RTI responsible for the development and operation of RTI's Ruby Tuesday(R) concept restaurants (the "Concept"; restaurants in the Concept are herein referred to as a "Restaurant" or "Restaurants") as directed by RTI from time to time. In such capacity, the Partner shall be charged with the general supervision, operation, growth (at a rate not less than fifty (50) new Restaurants each Fiscal Year [hereinafter defined]) and management of the Concept including, without limitation, those objectives set forth on the Strategic Plan attached as Exhibit A hereto. RTI shall have the right to amend, prospectively, Exhibit A, in its sole discretion. Partner shall further perform such other duties related to the Concept as directed and determined from time to time by RTI. The Partner shall report to the Chief Executive Officer of RTI. 1.2 Reconfiguration of the Concept. RTI reserves the right, in its sole discretion, to reconfigure the Concept, including the closing and opening of Restaurants in its sole discretion. In the event a Restaurant is closed, such Restaurant shall be included in all elements of the bonus calculation (including calculations that may reduce bonus) through the date of closing and for purposes of any post-closing charges or expenses. In the event a new Restaurant is opened, such Restaurant shall be included in calculation of all elements of the bonus (including calculations that may reduce bonus) as of the date of opening. All such adjustments described in this Section 1.2 shall be determined by RTI according to its normal policies and procedures, but in RTI's sole discretion. ARTICLE II. PARTNER PERFORMANCE COMMITMENT 2.1 Delivery of RTI Stock. Within ten (10) days following Partner's execution of this Agreement, the Partner shall deliver to RTI a number of shares of RTI common stock registered in the name of Partner having a value, in total, equal to at least Three Hundred Thousand Dollars ($300,000.00) to secure satisfactory performance by Partner of the duties and responsibilities to be discharged by the Partner pursuant to the terms of this Agreement. The number of such shares to be delivered shall be determined based upon the highest per share closing price of RTI common stock reported for any trading day within the thirty (30) day period prior to the Effective Date. The shares of RTI common stock delivered to RTI pursuant to this Section 2.1 (or the proceeds thereof if the shares have been converted or exchanged for other securities in connection with a corporate event affecting RTI's capital structure including, without limitation, stock splits and stock dividends) are referred to hereafter as the "Escrowed Shares." Partner shall hold good title to the Escrowed Shares, free and clear of all liens, charges and encumbrances or restrictions on transferability. With the Escrowed Shares, the Partner shall also tender an irrevocable stock power in favor of the Secretary of RTI (or any other officer of RTI designated in writing to the Partner), in a form acceptable to RTI for the purpose of implementing the provisions of Section 4.5 hereof.

2.2 Title and Stock Power covering Stock. Until the Escrowed Shares are either returned to, or forfeited by, the Partner, as provided below, at the expiration of the Term , the Escrowed Shares shall be held in escrow by RTI. During such period, RTI shall make appropriate provisions allowing the Partner to vote any Escrowed Shares and collect dividends with respect to the Escrowed Shares. Stock dividends and stock splits with respect to the Escrowed Shares shall be a part thereof and delivered to RTI. 2.3 Disposition of Escrowed Shares. At the expiration of the Term, the Escrowed Shares shall be returned to, or forfeited by, the Partner in accordance with Section 4.5 below. 2.4 Failure to Deliver. In the event Partner fails to deliver the Escrowed Shares in the manner and within the time period specified by Section 2.1 above, then this Agreement shall not become effective, notwithstanding any other provision of this Agreement to the contrary. If this Agreement fails to become effective pursuant to this Section 2.4, Partner's future eligibility to participate in any arrangement of the type represented by this Agreement shall be determined by RTI in its sole discretion. ARTICLE III. COMPENSATION During the Term, RTI agrees to provide the Partner with the following compensation and benefits: 3.1 Annual Salary. RTI shall pay to the Partner an annual salary of Three Hundred Eighty-Eight Thousand Dollars ($388,000.00), which amount shall be payable in bi-weekly installments (the "Salary"). The Salary shall not be increased during the Term. 3.2 Bonuses. (a) Subject to the terms and conditions of this Agreement, including without limitation, Sections 3.2 (c), 3.2(d), 3.4, 3.5 and 4.4 below, for each Fiscal Year during the Term, the Partner shall be paid a bonus in an amount which is a multiple of Salary based upon the same store sales performance of the Concept as shown on Exhibit B attached hereto and incorporated herein. The determination of all elements related to the calculation of bonus criteria and bonus amount shall be made by RTI in its sole discretion consistent with its internal accounting practices in effect from time to time (including adjustments related to, or elimination of, any so-called "53rd week" in Fiscal Years containing 53 accounting weeks). Regardless of its internal accounting practices in effect from time to time, RTI shall charge the Concept with any expenses attributable to legal, administrative or regulatory proceedings, including the cost of judgments, penalties, fines or settlements (collectively "Legal Costs") as RTI determines, in its sole discretion, are attributable to the Concept. The timing of any such charges and the number of Fiscal Quarters (hereinafter defined) over which the charges may be amortized shall be determined by RTI in its sole discretion. RTI may, in its sole discretion, charge the Concept for the estimated liability related to any such matter prior to the resolution of such matter, and such estimates may be adjusted by the Company from time to time. (b) Fiscal Year/Fiscal Quarter. The term "Fiscal Year" shall mean the appropriate fiscal year of RTI as from time to time determined by RTI. The term "Fiscal Quarter" shall mean the fiscal quarters of RTI as determined from time to time by RTI. (c) Conditions. Any bonus amount applicable to a Fiscal Year shall be (i) paid only if this Agreement is in effect through the last day of that Fiscal Year or if Partner dies or becomes disabled during that Fiscal Year, and (ii) may be reduced as described on Exhibit B unless, in each case, the payment is otherwise expressly precluded by the provisions of Section 4.5 below. (d) Timing of Bonus Payments. Any bonus amount described in Section 3.2(a) and Exhibit B, with respect to which the Partner has satisfied the applicable conditions of Section 3.2(c) and Exhibit B, and which is not otherwise reduced or forfeited pursuant to the terms of this Agreement, shall be paid to the Partner in cash in a lump sum no later than forty-five (45) days after the end of the Fiscal Year to which the bonus applies. 3.3 Miscellaneous Benefits. RTI shall extend to the Partner all company-wide employee benefits and any benefits extended generally to concept partners of RTI during the Term. Any such participation by the Partner in RTI employee benefit programs generally shall be on the terms available to similarly situated participants or on such other terms as any such particular program may provide; provided, further, that the undertaking in this Section 3.3 shall in no way limit RTI's ability to amend or terminate any such program at any time.

3.4 Withholding, Etc. RTI shall be entitled to withhold appropriate employment and income taxes, as required by applicable law, with respect to compensation and other benefits provided by this Agreement. 3.5 Maximum Salary and Bonus. The total aggregate amount of Salary plus bonus applicable for any Fiscal Year shall not exceed three (3) times Salary. ARTICLE IV. TERM AND TERMINATION 4.1 Term. The term of this Agreement shall begin as of the Effective Date and shall continue until the end of the third Fiscal Year following the Effective Date (the "Term"). 4.2 Termination by Mutual Agreement or Due to Death. Notwithstanding Section 4.1 hereof, this Agreement may be terminated at any time prior to the expiration of the Term by the mutual written agreement of the parties. In the event of the Partner's death during the Term, this Agreement shall terminate immediately. 4.3 Termination by RTI. Notwithstanding Section 4.1 hereof, this Agreement may be terminated by RTI: (a) immediately for "cause", as determined by RTI in the exercise of its sole discretion. As used herein, the term "cause" shall mean (1) Partner knowingly or negligently violates any law, statute, rule or regulation as reasonably determined by RTI; (2) commission of acts involving dishonesty or fraud (including, but not limited to, falsifying, misrepresenting or failing to follow RTI policy or procedure regarding inventory, sales, profit, profit margin, employee turnover, cash handling, bank deposits or credit card processing, irrespective of whether Partner seeks to profit therefrom) by Partner with respect to RTI; (3) any material violation of RTI's harassment policy or any violation of law in connection with discriminatory or harassing treatment of any RTI employee; (4) any gross or continuing failure to treat any RTI employee with courtesy and respect; (5) any failure by the Concept to achieve "norm" performance as determined pursuant to RTI's "WOW Report" measured over any period of six (6) consecutive Fiscal Quarters or; (6) a material violation or breach by Partner of RTI's philosophies, policies, procedures and standards; or (7) other than the matters listed above in this subsection (a), a course of conduct determined by RTI to be in violation of Partner's duties under this Agreement (including, but not limited to, a violation or breach by Partner of RTI's philosophies, policies, procedures and standards which does not rise to the level described in subsection (6) above) if such conduct referenced in sub-subsection (a)(7) is not corrected within ten (10) days following receipt of written notice from RTI addressing such conduct (no notice of correction need be given with respect to a course of conduct for which a previous notice was given hereunder). (b) immediately upon a determination by RTI that the Partner has become mentally or physically disabled in a manner that shall prevent performance of substantially all of the Partner's duties for a period of not less than thirty (30) days, which determination shall be supported by the written opinion of a physician competent in the branch of medicine to which such disability relates; or (c) at any time upon one hundred twenty (120) days notice to Partner. 4.4 Payments upon Termination. Except as otherwise provided in this Section 4.4, upon termination of this Agreement for any reason, the Partner shall receive only that portion of Salary due but unpaid through the date of termination of the Agreement. (a) Terminations Other Than for Cause or Due to Partner Resignation. In the event this Agreement is terminated pursuant to Section 4.2 hereof or is terminated by RTI pursuant to Section 4.3(b) or (c) hereof, then RTI shall return the Escrowed Shares to Partner and the Partner shall also receive any bonus applicable to Section 3.2 above, but unpaid, through the date of termination of this Agreement. If this Agreement is terminated due to the Partner's death or disability during a Fiscal Year, RTI also shall pay a pro rata portion of any bonus that would otherwise be payable for the Fiscal Year to the Partner or the Partner's surviving spouse in the event of the Partner's death or, if there is no surviving spouse, to the Partner's estate. (b) Terminations for Cause or Due to Partner Resignation. In the event this Agreement is terminated by RTI pursuant to Section 4.3(a) hereof or should Partner resign his employment with RTI, then the Partner shall receive only due but unpaid Salary and shall forfeit all other amounts otherwise payable or reimbursable pursuant to this Agreement, including, without limitation, the Escrowed Shares and any bonus then unpaid.

Subject to Section 5.6 below, any amounts payable to the Partner pursuant to this Section 4.4 shall be paid by RTI as soon as practicable following the date of termination of this Agreement. RTI shall be authorized to instruct the attorney-in-fact named on the irrevocable stock power to deliver any Escrowed Shares to the appropriate party as determined in accordance with this Section. 4.5 Liquidated Damages. The parties agree that RTI payments made pursuant to Section 4.4 hereof, if any, shall be in lieu of any other damages, payments or amounts which the Partner might otherwise be due from or claim against RTI or its affiliates arising from or attributable to the Partner`s employment relationship with RTI. 4.6 Terminations of Agreement not Resulting in a Termination of Employment. This Agreement does not guaranty Partner's employment with RTI for any period of time. If Partner's employment status with RTI is not terminated in connection with a termination of this Agreement, the terms of this Agreement shall not apply for purposes of establishing, interpreting or otherwise implying the terms and conditions of the Partner's employment with RTI following the termination of this Agreement. ARTICLE V. PROTECTIVE COVENANTS 5.1 Trade Secrets. As a concept president of RTI, the Partner has access to Trade Secrets (as defined under the Uniform Trade Secrets Act or other applicable law), which are the sole and exclusive property of RTI. The Partner agrees that throughout the Term and for the maximum period of time allowable under applicable law, except to the extent necessary to perform the Partner's obligations hereunder, the Partner shall not reproduce, use, distribute or disclose any Trade Secrets to any other person including, without limitation, any competitors or potential competitors of the RTI. 5.2 Confidential Information. As a senior management employee of RTI, the Partner has access to Confidential Information (as defined herein). The Partner agrees to maintain the confidentiality of all Confidential Information throughout the Term and for a period of two (2) years after the termination of this Agreement. For purposes of this Section, the term "Confidential Information" means data and information relating to the business of RTI which does not rise to the level of a Trade Secret and which is or has been disclosed to the Partner or of which the Partner has become aware as a consequence of or through his employment relationship with RTI and which has value to RTI 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 RTI (except where such public disclosure was effected by the Partner without authorization) or that has been independently developed and disclosed by others or that otherwise enters the public domain through lawful means. 5.3 No Solicitation. During the Term and for a period of twelve (12) months immediately following the termination of this Agreement or the termination of Partner's employment with RTI, whichever occurs later, the Partner shall not, for himself or on behalf of or for the benefit of any other person, corporation or entity, seek to employ, solicit or recruit any employee of RTI or any of its franchisees or licensees for employment by a "Competing Business", or induce or encourage any such employee to terminate employment with RTI or such franchisee or licensee, nor will the Partner knowingly provide the name of any employee of RTI or such franchisee or licensee for the purpose of solicitation or recruitment by or for the benefit of a Competing Business. For purposes of this section, "Competing Business" means a casual dining restaurant business offering the same or similar products and services as offered by Concept Restaurants or restaurants in any other system owned, operated, franchised or licensed by RTI or any affiliate including, without limitation, varied menu (to include, without limitation, any combination of soups, sandwiches, chicken, ethnic cuisine, health/fitness oriented dishes), waiter/waitress service, sit-down dining and bar services. "Competing Business" shall not include so called "fast food" restaurants. The parties agree that the damages which RTI will suffer in the event of Partner's breach of the foregoing covenant are difficult to quantify and determine. Therefore, the parties agree that in the event of each such breach, Partner shall pay to RTI, as liquidated damages and not as a penalty, the amount of $25,000.00. 5.4 Covenant Not to Compete. The Partner agrees, acknowledges and understands that the nature, kind and character of the business conducted by RTI is highly competitive. Incident to the terms and conditions hereof and for the considerations contained herein, the Partner agrees that: (a) throughout the Term and for a period of two (2) years following the termination of this Agreement or the termination of Partner's employment with RTI, whichever occurs later, and for whatever reason, the Partner will not enter into any employment, consulting or similar relationship with any person, organization or entity which is in the same or similar business as RTI in an executive, managerial or other capacity. The Partner acknowledges that

this covenant is reasonable and necessary to protect the interests of RTI; and (b) by virtue of the duties and special knowledge of the affairs and operations of RTI that the Partner has and will obtain as a result of his employment relationship with RTI, a breach or threatened breach by him of the provisions of this covenant not to compete shall cause irreparable injury to RTI and shall entitle RTI, in addition to any other remedy, to injunctive relief against such breach or threatened breach. 5.5 No Other Employment. The Partner agrees, acknowledges and understands that the nature, kind and character of RTI's business is highly competitive. Incident to the Partner's engagement hereunder and for the considerations contained herein, the Partner agrees that throughout the Term of this Agreement Partner will devote all of his/her full time, energy, skills and best efforts to the supervision and management of the Restaurants in the Concept and the Partner's duties and responsibilities under this Agreement (with earned vacations and reasonable absences because of illness or permitted leaves of absence excepted), and will not enter into any employment, consulting or similar relationship with any organization or entity. The Partner acknowledges that this covenant is reasonable and necessary to protect the interests of RTI. 5.6 Default. In the event the Partner shall breach any covenant contained in Sections 5.1, 5.2, 5.3, 5.4 or 5.5 hereof, and such breach shall not be cured to the reasonable satisfaction of RTI within five (5) days after delivery of a written notice thereof from RTI, then in addition to all other rights and remedies of RTI with respect thereto, RTI shall thereupon be relieved of liability for all obligations then remaining under Section 5 above. ARTICLE VI. MISCELLANEOUS 6.1 Headings and Capitalized Terms. Titles or captions of Articles or Sections contained in this Agreement are intended for reference convenience only, and shall not define, limit, extend or describe the scope of this Agreement or the meaning of any provision hereof. Capitalized terms not otherwise defined herein shall have the customary meaning then being ascribed to them in the course of RTI's general business operations. 6.2 Amendment. This Agreement may not be amended (in whole or in part) orally or by course of performance, but only by a written instrument signed by both parties. 6.3 Notice. Except as otherwise required under this Agreement, any notice required or permitted to be given pursuant to this Agreement shall be sufficiently given: (a) to the Partner if in writing and personally delivered, or mailed (and if mailed shall be deemed given three (3) business days after mailing) registered or certified mail addressed to the Partner at Partner's residence as shown in the records of RTI or at such other address as the Partner shall designate in writing to RTI in accordance with this Section 6.3(a); and (b) to RTI if in writing and personally delivered to the Chief Executive Officer of RTI or mailed (and if mailed shall be deemed given three (3) business days after mailing) registered or certified mail addressed to the Chief Executive Officer of RTI at 150 West Church Avenue, Maryville, Tennessee 37801, or to such other person and address as RTI shall designate in writing to the Partner in accordance with this Section 6.3(b). 6.4 Binding Effect. This Agreement shall inure to the benefit of and be binding upon the Partner and the Partner's executor, administrator, heirs and personal representatives and upon RTI and its successors and assigns. The Partner may not assign his rights and obligations hereunder without the written consent of RTI. RTI may assign its rights hereunder without Partner's consent. 6.5 Relationship. Nothing herein shall be construed as creating a joint venture, unincorporated association, partnership or other relationship. 6.6 Applicable Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Tennessee, without regard to the principles of conflicts of laws. 6.7 No Defense. The existence of any claim or cause of action of the Partner against RTI, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by RTI of any covenant contained in this Agreement. No claim or proceeding may be made, brought or maintained by Partner (his/her successors, assigns or legal representatives) to enforce any liability or obligation of RTI under this Agreement, unless brought

before the first to occur of one (1) year after (a) the date any Salary amount or bonus is paid (or required to be paid) to Partner with respect to such Salary amount or bonus, or (b) the expiration or termination of this Agreement with respect to all other matters. 6.8 Survival. The provisions of Sections 4.4, 4.5 and Article V hereof shall survive any termination of this Agreement. IN WITNESS WHEREOF, RTI has executed and delivered by its duly authorized officer, and Partner has executed and delivered, this Agreement all as of the day and year first above written. RUBY TUESDAY, INC.
By:/s/Samuel E. Beall, III Title: Chairman and Chief Executive Officer

PARTNER:
/s/ Robert D. McClenagan, Jr. ROBERT D. McCLENAGAN, JR.

IRREVOCABLE STOCK POWER FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ______________________________________ a total of _____________ shares of the Common Stock, par value $.01 per share, of Ruby Tuesday, Inc. registered in the name of the undersigned on the stock transfer records of Ruby Tuesday, Inc. and represented by Stock Certificate No(s). ________________ of Ruby Tuesday, Inc.; and the undersigned does hereby irrevocably constitute and appoint Daniel T. Cronk, his attorneyin-fact, to transfer the aforesaid shares on the books of Ruby Tuesday, Inc., with full power of substitution; and the undersigned does hereby ratify and confirm all that said attorney-in-fact lawfully shall do by virtue hereof.
Date: June 21, 2001 Robert D. McClenagan Print Name

/s/ Robert D. McClenagan Signature

IN THE PRESENCE OF: Kay Parsons Mayes Print Name
/s/ Kay Parsons Mayes Signature 00812762.W51

Ptnr Agrmt McClenagan 52901.doc RUBY TUESDAY, INC.

13 PROPOSAL For [GRAPHIC OMITTED] RUBY TUESDAY, INC. July 25, 2001 by PFG CUSTOMIZED DISTRIBUTION

PFG CUSTOMIZED DISTRIBUTION PROPOSAL FOR RUBY TUESDAY, INC. PRICING 1. This proposal includes servicing Ruby Tuesday, Inc (RTI), participating RTI Franchisees, and Specialty Restaurant Group, LLC (SRG) collectively described herein as "Customer". SRG will be required to execute a copy of this agreement. After RTI's contractual obligations to service SRG is concluded, PFG agrees to seriously consider continuing it's relationship with SRG. 2. PFG agrees to supply Customer's requirements of food and non-food items including produce, disposables, smallwares, and chemicals ordered by Customer in the operation of the restaurants listed on Exhibit "B" and "C". Customer agrees to purchase such ordered items pursuant to the terms hereof. This proposal/agreement does not create an exclusive relationship between or among the parties. 3. PFG will invoice customer at prices supplied to PFG by RTI from time to time. RTI will specify the order or delivery day the price is to take effect. 4. Customer guarantees PFG a raw gross margin of $142.15 per ideal delivery plus $1.01 per piece delivered plus or minus the performance measure adjustments outlined on Exhibit "D". PFG will submit a report detailing the actual sales and gross margin and any amount due PFG under the gross margin guarantee within four (4) weeks after the end of each PFG accounting period. Ideal delivery is defined as the regularly scheduled deliveries per week per restaurant. PFG and RTI agree to review our business relationship, the delivery fee, and the per piece fee in March of each year with the agreed upon changes to take effect July 1st of each year. 5. Costs will be based on the actual landed product cost at each PFG Customized Distribution center. The definition of "cost" is our actual FOB invoice cost plus any applicable freight, not to exceed the standard rate applicable for that route, less manufacturer's volume discounts, off-invoice promotions, and billback promotions. Cash discounts, buy-in incentives, rebates, and growth programs offered by manufacturers to distributors will accrue to the benefit of PFG Customized Distribution. 6. Our actual costs will reflect the lowest possible buy bracket within shelf life limitations and a maximum 28 day inventory on hand. To achieve the lowest possible buy bracket for customer, inbound shipments for customer will be combined with inbound shipments for all other customers served by each distribution center. Once the lowest possible buy bracket is achieved, PFG will carry less than a 28 day inventory while maintaining sufficient safety stock. 7. PFG will work with RTI to drive down cost through inbound freight and purchasing synergies. The dollar savings suggested by PFG and accepted by RTI will be shared by RTI , SRG, Ruby Tuesday Franchisees, and PFG. The savings will be calculated using customer's current actual or projected future cost in effect at the time PFG initiates a savings suggestion. The dollar savings will be agreed to and signed off on by both parties. The shared savings will be calculated on a program to date basis and disbursed to each party within 30 days after the end of each RTI fiscal quarter.
RTI - PFG SHARED SAVINGS PROGRAM RTI 90% 85% 80% 75% PFG 10% 15% 20% 25%

1ST $100,000 $100,001 - $200,000 $200,001 - $300,000 $300,001 & Above

Our purchasing department will continually make suggestions to lower your product costs. A formal once a year review of your program will be performed by our category managers and our recommendations will be presented to you.

8. PFG will assist RTI to continue, enhance, and track existing and new rebates offered by manufacturers to restaurant operators. 9. Upon the signature of this agreement, a quick review of customer's product requirements will be performed with the mutual goal of reducing the number of items stocked in PFG's warehouses but in all cases maintaining RTI's high quality standards. RTI will authorize all product changes and substitutions. 10. Backhaul charges built into our product costs will be the lowest competitive freight rate offered by the manufacturer for the agreed upon shipping bracket. If customer's supplier contract is on a delivered price basis, customer authorizes PFG to negotiate appropriate backhaul allowances with the supplier. 11. A fee of .05 cents per gross weight pound, will be added to the cost of items transferred via inter-company shuttle. 12. Customer acknowledges PFG requires inbound carriers to offload and palletize each item on the shipment according to PFG's warehouse tie and high. Alternatively PFG offers the carrier a lumping service. The current lumping fees charged carriers are detailed on Exhibit "A" and may be changed from time to time by PFG. 13. To recover our rail siding capital investment and unloading labor costs, the cost of products received by rail will include a charge of $.15 per case for items where gross weight is less than 35 pounds and $.20 per case if the gross weight is 35 pounds or more. 14. PFG Customized Distribution agrees to inventory all items on the RTI approved product list, and Customer agrees to purchase each lot of product within no more than 30 days from the date the product is received at PFG's distribution center. In the event SRG, a RTI franchisee partner, or an RTI region wants to use an item which is not on the RTI approved product list a minimum movement of 50 cases per month per PFG distribution center will be required to carry the item in our inventory 15. PFG will supply RTI with a Dead & Slow Moving Inventory Report on a monthly basis totaled by item, by distribution center. 16. Customer will be responsible for the disposition of dead and slow moving inventory in excess of a 28 day supply and for short shelf life items with one third or less of it's total shelf life remaining (Dead Inventory). PFG shall notify RTI in writing when one third or more of a lot's shelf life is remaining and RTI shall instruct PFG of the final disposition of the short shelf life lot before it's shelf life has expired. If dead inventory is not distributed to Customer before it's shelf life expires or within twenty-eight (28) days after being reported on the Dead and Slow Moving Inventory Report. The dead inventory will be either; (a) returned to vendor with the vendor's written consent; (b) sold through channels other than to Customer; (c) donated in the name of the Customer with PFG providing Customer with original documents confirming the donation, or (d) dumped. Upon disposition of dead inventory, Customer will be responsible for reimbursing PFG for PFG's actual landed product cost; plus the guaranteed piece fee; plus freight incurred delivering the dead inventory to the vendor, third party, donee, or dump; plus restocking fees if any; plus disposal fees if any; and less any proceeds or credits obtained by PFG in returning product to vendors or selling product through channels other than to Customer. All reasonable efforts will be made to require vendors, third parties, and donation recipients to pick the dead inventory up at PFG's warehouse. 17. Market conditions will, from time to time, necessitate PFG Customized Distribution taking an extended inventory position on certain products to assure continuity of supply to customer. This could be precipitated by drought, excessive rain or other natural causes. Should this situation occur, and with customer `s prior written agreement, we will add a 2.5% per month carrying charge to the price of those items affected by such natural causes after they have been in stock for a period of 30 days. If product must be put into outside storage, then customer will in addition pay the actual storage costs and freight from the outside storage to our distribution centers. 18. The delivery fee is based on a base diesel fuel cost of $1.50 per gallon. The "Fuel Collar" will be from $1.40 to $1.60 per gallon. For each PFG accounting period, PFG will calculate it's actual fuel cost per gallon and

submit same to RTI by the 30th of the following month. PFG will debit or credit (as applicable) customer for any difference over or under the fuel cost collar of $1.40 to $1.60 per gallon, based on the pieces shipped to customer pursuant to this agreement from each PFG distribution center as a percent of the total pieces shipped from the distribution center. 19. Our pricing includes a 3 cents per piece WOW University accrual fund. Dispersement from this fund will be as directed by RTI. An accounting of this fund will be provided to RTI within 30 days after the close of each PFG financial month end. Disbursement from this account to RTI will occur annually within 30 days after the close of each RTI fiscal year, or within thirty (30) days after termination of this agreement. 20. PFG agrees to submit to periodic on site price verification by RTI of invoices, bills of lading and other documents that substantiate the costs charged to customer. RTI will provide PFG thirty (30) days advance notice of price verification in writing. Price verification will be limited to: (a) one hundred (100) items per verification, (b) a time period of the previous ninety (90) days, and (c) four (4) verifications per year, unless a specific item is in question. PFG agrees to refund customer the amount of any net overcharges verified by price verification which were sustained by customer through the twelve (12) months preceding the price verification, and customer agrees to reimburse PFG the net amounts of any undercharges verified by price verification which were sustained by PFG through the twelve (12) months preceding the price verification. Only PFG and RTI will participate in the price verification. RTI guarantees the confidentiality of information provided by PFG. Disclosure of information will be restricted to senior management of RTI, participating RTI franchisees, and SRG. 21. In the event PFG disputes any specific amount due customer as a result of price verification, PFG shall notify RTI within ten (10) days of the specific amount disputed and the reason for such dispute. Any amounts that are not disputed shall be paid to customer within thirty (30) days of the settlement of such dispute between RTI and PFG. 22. In the event of any such dispute, PFG shall verify RTI's findings at PFG's sole expense by a verification of a Certified Public Accountant mutually agreeable to RTI and PFG. PFG and RTI will accept the findings of that verification. SERVICE 1. Customer will initially be serviced by PFG's Gainesville, Florida customized distribution center in the areas shown and defined on Exhibit "B". In November 2001 or January 2002 PFG's Tennessee distribution center will commence service to the areas shown and defined on Exhibit "C". Other distribution centers will be added as determined by PFG and RTI. 2. Customer will be the personal responsibility of each distribution center's general manager, assisted by a branch multi-unit account manager. An overall PFG multi-unit account executive will also be assigned to the RTI account. 3. Order inventory guides containing current pricing will be provided to RTI's corporate office and each unit via PFG connection. 4. Orders may be placed and confirmed electronically on an agreed upon skip working day call schedule. PFG Customized Distribution will provide our order entry and inventory management software at no charge to customer. The cost of personal computers and modems at each restaurant will be customer's responsibility. 5. PFG's customer service department will call restaurants unable to order electronically for their order according to an agreed upon skip working day call schedule. It is imperative that the unit has it's order ready at the agreed upon time, and in any event no later than 3 p.m. local branch time. 6. A minimum of one primary and one back-up customer service representative at each distribution center will be assigned to customer to review edits of the orders and to resolve any problems in advance of the delivery. Limited add-on orders can be called in up to 9 a.m. local branch time on the day the truck is being loaded. 7. When orders are received on a skip working day basis PFG Customized Distribution agrees to maintain a

99.5% order fill rate. Out of stock and short items will be delivered on the next available truck going to the store's area and no later than the next regularly scheduled delivery day. When measuring order fill, service failures to be excluded from the calculation are: a) An act or omission on the part of customer or the restaurants, b) An act or omission on the part of customer's supplier, c) Recovery shipments received by customer the same day as the scheduled delivery, or d) Force majeure. 8. Customer orders will be delivered on temperature controlled trucks with separate temperature controlled freezer, cooler, and dry grocery compartments. 9. Deliveries will be made twice per week Monday through Saturday between 7 a.m. to off the lot by 11:00 a.m. and from 2:00 p.m. to off the lot by 5:30 p.m. on a mutually agreeable delivery schedule. By mutual agreement locations may take a delivery as early as 6 a.m. and we may request a few remote locations to take deliveries between 7 p.m. and 10 p.m. Deliveries will be made within, plus or minus one hour of the scheduled delivery time. Regular and holiday week delivery schedules will be agreed upon at least 2 weeks before the changes are put into effect. By mutual agreement, key drop deliveries may become necessary. 10. Our driver will place the merchandise in the proper temperature area of the store. The unit manager on duty will check the merchandise off at the entrance to the restaurant and sign each page of the invoice before the driver leaves the store. Each piece's individual catch weight will be listed on the delivery invoice. 11. Restaurants may from time to time request that PFG make special deliveries outside of the normal ordering and delivery schedule to compensate for restaurant business surges or ordering mistakes. The restaurant shall be responsible to pay PFG the regular per piece fee plus: a) The regular delivery fee plus $1.50 per out of route mile if sent to the restaurant by a PFG delivery vehicle, b) PFG's actual shipping cost if shipped via a third party. 12. Restaurants shall be responsible for a restocking fee of $3.50 per case for products returned to the distribution center due to an error by the restaurant and a late fee of $10.00 per order for any orders accepted by a distribution center after the established add-on order cut off time. Restaurants where the managers are unable to place their orders via PFG Connection will be charged a telephone order service fee of $10.00. These fees are set forth as a tool to keep customer's and PFG's distribution cost down. The above fees will only be charged with the approval of RTI's Director of Purchasing or Director of Distribution. 13. Monthly reports on product usage will be provided to RTI's corporate office, in RTI's required data file format. Our capable in-house programming staff using our modern IBM AS400 computers can provide you with almost any report you might request. QUALITY 1. It is understood that PFG is not the manufacturer of any of the products. PFG will assign to customer all assignable rights against manufacturers and suppliers of goods supplied to customer by PFG under warranties and indemnification's PFG receives from such manufacturers and suppliers. PFG agrees to cooperate with customer in the enforcement of any such warranties or indemnification's against manufacturers or suppliers. 2. To the best of PFG's knowledge each product supplied hereunder shall, at the time title passes to customer: (a) not be adulterated or misbranded within the definition of the Food, Drug and Cosmetic Act, as amended, or other applicable federal or state law, or otherwise spoiled, adulterated or out-of-code and (b) comply in all respects with any and all other laws, rules and regulations similar thereto or applicable to the supply of products and services by PFG to the restaurants. MERCHANDISE CREDITS AND RETURNS 1. Credits due because of shortages, damaged goods or incorrect merchandise if any at the time of delivery, must be noted on all copies of the PFG Customized Distribution invoice and the invoice total changed and initialed by the restaurant manager and our driver. Credit memos will be issued internally at PFG Customized Distribution's distribution centers. 2. In the event of concealed damage or defective product, the PFG Customer Service Representative should be notified and the following information provided: a) Item code number and description b) Quantity c) Invoice price

d) Invoice number and date e) Nature of problem An on the spot credit memo will be sent with the next delivery and posted to your account when the product is returned to our warehouse. 3. PFG will notify customer's quality assurance department of singularly serious or recurring issues. CREDIT APPROVAL AND PAYMENT TERMS 1. PFG Customized Distribution will require a separate credit application for each legal entity to be sold under this agreement, and reserves the right to approve or disapprove open payment terms for each individual legal entity. 2. Payment for each delivery is to be received in PFG's bank no later than 1:00 p.m. eastern standard time, 14 days after the date of delivery. Payments are to be made by ACH wire transfer to the account of Performance Food Group Company, ABA# 051400549, Account # 205000424870, Reference: PFG Customized/RTI, First Union Bank, Richmond, VA. 3. Within 15 days following receipt of a request from PFG, RTI and each legal entity to be sold hereunder shall furnish PFG with its quarterly financial statement for its most recently completed fiscal quarter, certified as accurate by an appropriate officer of RTI or such legal entity. 4. PFG will supply RTI's purchasing department every thirty (30) days with copies of all skipped or short paid invoices due PFG from Customer. If copies are not furnished within ninety (90) days from date of delivery Customer will not be responsible for paying for the merchandise. PROGRAM IMPLEMENTATION PFG Customized Distribution represents and warrants it has had considerable experience implementing programs of this nature. We are fully aware of the importance of proper planning, inventory build up, scheduling and coordination of all facets necessary for a smooth and successful transition. In view of the above, we ask that the roll-out schedule begin no sooner than 75 days after notification of your decision to accept this proposal. PFG Customized Distribution will buy your present distributor's inventory at PFG's delivered cost. We will be responsible for picking up the product and delivering it to our warehouse at our expense. We prefer to pick up initial stocking quantities the present distributor is long on 3 weeks before our delivery starts, and to clean out the distributor's remaining inventory within 3 weeks after our delivery starts. PFG Customized Distribution will pick up from your former distributor only those items and quantities which your purchasing department approves including specifying the cost to be paid. COMMITMENTS FROM CUSTOMER This type of program is commonly referred to as a "Prime Vendor Contract". The term, in itself, indicates a mutual agreement between the customer and the distributor to make certain commitments to each other. We look to customer to agree to the following commitments: 1. Average Order Size Customer agrees to maintain a system wide average order size of at least 150 pieces two times per week per restaurant, an average piece weight of 24.5 pounds, and an average piece cube of 1.0 cubic feet, and an average sell price not to exceed $29.00. Under-performing restaurants will be reviewed by the management of each company on a monthly basis. 2. Equal Deliveries Customer agrees to split its deliveries into, generally, 2 equal deliveries per restaurant per week. PFG will provide customer with a monthly pieces by delivery report. A 48% - 52% split is acceptable. Restaurants falling outside this range will be reviewed on a monthly basis by PFG and customer. 3. Cost Containment The profit margin of a "Prime Vendor" contract dictates that the distributor operate under a sound cost containment policy in relation to inventory turns, orders placed at the agreed upon times, cooperation in quickly receiving the merchandise, and payment according to the agreed upon payment terms. This proposal has been customized to meet customer's requirements while minimizing each of these distributor cost areas.

MISCELLANEOUS TERMS 1. BREACH. Upon the occurrence of a Breach (as defined below), the non-breaching party may terminate at its option upon written notice of termination to the breaching party, and in addition, may seek any and all remedies available at law or in equity in connection with the Breach. A breach is defined as: (a) RTI's (or SRG or an RTI Franchisee with respect to a breach by SRG or such RTI Franchisee) or PFG's, as the case may be, failure to perform any material term, covenant or agreement contained herein or in any document or instrument delivered pursuant to or in connection with this Agreement, and such failure continues for thirty (30) days after written notice of such failure has been delivered by the non-breaching party; (b) RTI's (SRG's or an RTI Franchisee's) or PFG's application for or consent towards the appointment of a receiver, custodian, trustee, or liquidator; inability to pay its debts as such debts become due; general assignment for the benefit of its creditors; commencement of a voluntary case under the United States Bankruptcy Code; filing a petition seeking to take advantage of any other law of any jurisdiction relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts; or commencement by any person against such party of a proceeding commenced for any similar relief under any law of any jurisdiction relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, and such proceeding shall continue un-dismissed for a period of thirty (30) days; (c) RTI's (SRG's or an RTI Franchisee's) or PFG's assignment of its rights and obligations under this Agreement, in whole or in part, to another entity (other than an affiliate of RTI or PFG) without prior written consent of the other, which consent shall not be unreasonably withheld or delayed; or (d) RTI's (SRG's or an RTI Franchisee's) or PFG's failure to comply with the payment terms hereof if not cured within fifteen (15) days following written notice. (e) Notwithstanding the foregoing, PFG acknowledges that RTI Franchisees and SRG are each independent contractors and, as such, RTI is not liable to PFG for or with respect to any of SRG's or such Franchisee's purchases or performance hereunder. In the event of a Breach by SRG or such Franchisee of any of its obligations hereunder, including payment, after notice as required pursuant hereto, PFG may bar SRG or such Franchisee from continued participation hereunder; provided, however, that same shall not constitute a Breach by RTI, or any other Franchisee or SRG (if SRG is not the primary breaching party). 2. ASSIGNMENT. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This agreement may not be assigned by either party without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed. 3. RISK OF LOSS. Title to all goods shall pass upon delivery to the receiving unit and acceptance by authorized signature, subject to rejection of certain items as provided herein. PFG shall bear all risk of loss, damage or destruction until title passes. 4. CONFIDENTIALITY. Neither this proposal nor any discussion, negotiation, or agreement entered into pursuant to it shall be used by PFG, RTI, participating RTI franchise partner, or SRG, in publicity or promotional material, nor shall any party hereto disclose any information regarding this proposal nor any discussion, negotiation, or agreement entered into pursuant to it without the express written consent of the other parties. This provision shall not preclude PFG or RTI from making public statements that RTI is a customer of PFG. 5. CONSTRUCTION/APPLICABLE LAW. This Agreement shall be deemed to have been made at the Ruby Tuesday, Inc. Restaurant Support Center located at 150 West Church Avenue, Maryville, Tennessee 37801, and shall be construed in accordance with the laws of the State of Tennessee. 6. NOTICES. All notices and other communications provided for hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, sent by telegram or facsimile transmission, or mailed, postage prepaid, registered or certified mail, to the parties at their principal executive offices or at such other addresses as the parties hereto may designate from time to time in writing. Notices to RTI shall be directed to the attention of Lee Wallace. Notices to PFG shall be directed to the attention of Troy Curtis, Vice President of Business Development.

7. SRG and each RTI Franchisee purchasing hereunder shall receive all of the benefits and rights of RTI hereunder, including pricing, incentives, freight charges, and service level. All of SRG's and RTI Franchisees' purchases hereunder shall be aggregated with RTI purchases for pricing, incentive and other similar purposes. 8. The terms of this proposal will remain firm for thirty (30) days. 9. This agreement may be amended or modified only by a written agreement executed by each of the parties hereto. 10. Upon acceptance, this agreement will be effective until terminated as provided for in paragraph 1 of the "MISCELLANEOUS TERMS" or until terminated by either Ruby Tuesday, Inc. or PFG Customized Distribution upon one hundred eighty (180) days written notice to the other party. In the event of termination, Ruby Tuesday, Inc. will be responsible for the purchase and removal of all products from each distribution center within thirty (30) days.

[GRAPHIC OMITTED] This agreement has been accepted and executed by: RUBY TUESDAY, INC. KENNETH O. LESTER COMPANY, INC. DBA PFG CUSTOMIZED DISTRIBUTION
BY: /s/Samuel E. Beall III NAME: Samuel E. Beall III TITLE: Chairman and Chief Executive Officer DATE: July 31, 2001 BY: /s/ Troy G. Curtis NAME: TROY G. CURTIS TITLE: Vice President Business Development DATE: August 8, 2001

[GRAPHIC OMITTED] SPECIALTY RESTAURANT GROUP, LLC
BY: /s/_James H. Carmichael James H. Carmichael

NAME:

TITLE: President/CEO DATE: August 8, 2001

Annual Report for Fiscal year end 6/5/01 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Ruby Tuesday, Inc. owns and operates Ruby Tuesday(R) casual dining restaurants. The Company also franchises its Ruby Tuesday concept in selected domestic and international markets. As of June 5, 2001, the Company owned and operated 374 Ruby Tuesday restaurants, located in 27 states. As of fiscal year end, there were 151 domestic Ruby Tuesday franchise units located in 19 states and 12 international Ruby Tuesday franchise units located in the Asian Pacific Region, India, Iceland, Central and South America and Puerto Rico. On November 20, 2000, the Company completed the planned sale of all 69 of its American Cafe (including L&N Seafood) and Tia's Tex-Mex restaurants to Specialty Restaurant Group, LLC ("SRG"), a limited liability company owned by the former president and partner of the Company's American Cafe and Tia's Tex-Mex concepts and certain members of his management team. For an understanding of the significant factors that influenced the Company's performance during the past three fiscal years, the following should be read in conjunction with the Consolidated Financial Statements and related Notes found on pages 28 to 45.

Results of Operations The following table sets forth selected restaurant operating data as a percentage of revenues for the periods indicated. All information is derived from the Consolidated Financial Statements of the Company included elsewhere in this Annual Report. Fiscal 2000 amounts include a $10.0 million pre-tax charge recorded in conjunction with the planned sale of the American Cafe and Tia's Tex-Mex restaurants.
2001 -----98.4% 1.6 -----100.0 2000 -----99.0% 1.0 -----100.0 1999 ----99.3% 0.7 ----100.0

Company restaurant sales Franchise revenues

Total revenues Operating costs and expenses: (As a percentage of Company restaurant sales): Cost of merchandise 27.4 Payroll and related costs 31.9 Other restaurant operating costs 19.0 Loss on sale of American Cafe and Tia's Tex-Mex restaurants Depreciation and amortization 4.4 (As a percentage of Total revenues): Selling, general and administrative 7.3 Interest (income) expense, net (0.5) -----Total operating costs and expenses 88.3 -----Income before income taxes Provision for income taxes Net income 11.7 4.2 -----7.5% ======

27.1 31.9 20.2 1.3 5.3

27.4 32.0 20.4

5.5

7.1 0.2 -----92.1 -----7.9 3.3 -----4.6% ======

6.9 0.4 ----92.1 ----7.9 2.8 ----5.1% ======

Fiscal 2001 Compared to Fiscal 2000 Overview During Fiscal 2001, the Company opened 55 Ruby Tuesday restaurants (nine of which related to the reacquisition of RT Southwest Franchise, LLC, an Arizona franchise), while closing 17 Ruby Tuesday restaurants (six were closed due to normal lease expirations, six were sold to a new franchise partner, two were leased to SRG, and three underperforming units were closed in Texas). The six Ruby Tuesday restaurants were sold to a domestic franchise partner (a "refranchising" transaction) for aggregate consideration of $7.4 million in cash and $1.8 million in the form of a promissory note due in Fiscal 2011 bearing an interest rate of 10.0%. The sale of these units resulted in a pre-tax gain of $1.7 million which is included in other restaurant operating costs. Concurrent with each sale of Ruby Tuesday units, the Company enters into a franchise agreement for each restaurant and a development agreement with the franchise partners whereby the partners commit to open a varying number of Ruby Tuesday restaurants over the next five to six years in their respective areas. During Fiscal 2001, 21 domestic and three international Ruby Tuesday franchise units were opened in conjunction with development agreements. Subsequent to June 5, 2001, the Company entered into a purchase agreement with three new franchise partners and one current franchise partner for the sale of 20 Ruby Tuesday restaurants in Fiscal 2002. The sales of these units, if effected under the terms of the purchase agreements, are expected to result in minimal pre-tax gains. Revenues The Company's revenues decreased to $789.6 million in Fiscal 2001 from $797.5 million in Fiscal 2000. The $7.9 million revenue decrease was the result of the sale of the American Cafe, Tia's Tex-Mex, and L&N Seafood units to SRG which accounted for 28 weeks of revenue not included in Fiscal 2001 that included in Fiscal 2000 coupled with the loss of revenue associated with the refranchising of 42 Ruby Tuesday restaurants in the third and fourth quarters of Fiscal 2000. Ruby Tuesday concept same store sales, however, increased 3.7% due to both check average increases and higher customer counts. In conjunction with the new menus introduced during Fiscal 2001, the Company continued to focus on combination platters. This focus, along with shrimp promotions, not only increased gross profits, but also allowed the Company to benefit from purchases of large quantities of singular items. The Company receives revenue from its franchise partners in the form of development and license fees at the initial opening of the franchised unit. Revenue based on the fees is recognized when all material services have been substantially performed by the Company and the restaurant has opened for business. Franchise revenues increased $4.2 million as a result of increased royalties and license fees attributable to the growth of the domestic franchise partner program including the sale of six units to a new franchise partner and 21 new openings. Operating Profits Pre-tax profit increased $29.5 million in Fiscal 2001 to $92.3 million despite the revenue decrease of $7.9 million discussed above. This increase resulted from the cost changes discussed below. Cost of merchandise, as a percentage of Company restaurant sales, increased 0.3% due to higher red meat and rib costs throughout the year and the inclusion of more costly shrimp and seafood menu items, offset by volume discounts and rebates through price renegotiations, and efficiencies realized through redesign of menu mix. Payroll and related costs remained unchanged as a percentage of Company restaurant sales. Other restaurant operating costs decreased 2.5% as a percentage of Company restaurant sales due to leveraging associated with higher unit volume sales and the prior fiscal year's inclusion of a $10.0 million estimated loss on the sale of the American Cafe (including L&N Seafood) and Tia's Tex-Mex units offset by higher oil and gas prices in the current year. Depreciation and amortization decreased 0.9% as a percentage of Company restaurant sales as a result of higher average unit volumes and increased use of the synthetic leasing program. Selling, general, and administrative expenses increased 0.2% as a percentage of total revenues due to increased use of the neighborhood introduction marketing program which offers guests discounts through the form of direct mail coupons. Net interest expense decreased 0.7% as a percentage of total revenues due to the paydown of debt accomplished through the proceeds of the sales to SRG and a new franchise partner, and increased interest income associated with higher notes receivable due from franchise partners and SRG. Income tax expense increased 0.9% as a percentage of total revenues. The effective income tax rate for Fiscal 2001 was 35.8% as compared to 41.8% in Fiscal 2000. The decrease resulted from the nondeductibility of goodwill written off in association with the planned sale of Tia's Tex-Mex restaurants in Fiscal 2000. Excluding

the effect of the planned sale of the American Cafe and Tia's Tex-Mex restaurants, the effective income tax rate for Fiscal 2000 was 36.0%.

Fiscal 2000 Compared to Fiscal 1999 Overview During Fiscal 2000, the Company opened 46 Ruby Tuesday (three of which related to the re-acquisition of franchised units) and three Tia's Tex-Mex restaurants while closing three Ruby Tuesday, four American Cafe, and one Tia's Tex-Mex restaurant. In addition, the Company sold 42 Ruby Tuesday restaurants to six domestic franchise partners for aggregate consideration of $38.0 million in cash and $20.5 million in the form of promissory notes due through Fiscal 2011 bearing interest at rates ranging from 8.0%-10.0% with one note accruing interest at 15.6%. The sale of these units resulted in a pre-tax gain of $5.4 million which is included in other restaurant operating costs. Concurrent with the sale of the Ruby Tuesday units, the Company also entered into a franchise agreement for each restaurant and a development agreement with the franchise partners whereby the partners have committed to open a varying number of Ruby Tuesday restaurants over the next five to nine years in their respective areas. During Fiscal 2000, 22 Ruby Tuesday franchise units were opened in conjunction with development agreements. As a result of franchise transactions, unit closings, and the underperformance of four Ruby Tuesday units operating in the state of Texas, the Company recorded restaurant asset impairment charges of $6.3 million in Fiscal 2000. Revenues The Company's revenues increased to $797.5 million in Fiscal 2000 from $722.3 million in Fiscal 1999. The 10.4% revenue increase was the result of a 3.8% increase in same-store sales for the Ruby Tuesday concept resulting from increased traffic and an emphasis on combo promotions causing a slight average check increase. In conjunction with the new menus introduced during Fiscal 2000, the Company focused on its combination platters which not only increased gross profits, but also allowed the Company to benefit from purchases of large quantities of singular items. In addition, franchise revenues increased $3.5 million as a result of increased royalties and license fees attributable to the growth of the domestic franchise partner program including the sale of 42 units and 22 new openings. These increases were offset by the reduction in total revenues resulting from the sale of 42 Ruby Tuesday restaurants to franchisees. Operating Profits Pre-tax profit increased $5.6 million in Fiscal 2000 to $62.8 million. This increase resulted from the revenue increase of $75.2 million as previously discussed, coupled with the cost changes discussed below. Cost of merchandise, as a percentage of Company restaurant sales, decreased 0.3% due to large volume discounts and rebates associated with the current year combo platters and fajita and rib promotions, and efficiencies realized through redesign of menu mix. Payroll and related costs decreased 0.1% as a percentage of Company restaurant sales due to savings in training costs associated with lower hourly turnover. Other restaurant operating costs decreased 0.2% as a percentage of Company restaurant sales due to leveraging associated with higher unit volumes and lower general liability insurance expense as a result of favorable claims experience offset by increased closing expenses, a substantial portion of which related to the relocation of the Mobile, Alabama Support Services Center which was closed in Fiscal 2000. As a result of the planned sale of the American Cafe and Tia's Tex-Mex restaurants, the Company recorded a pre-tax loss of $10.0 million on the transaction in Fiscal 2000. Depreciation and amortization decreased 0.2% as a percentage of Company restaurant sales as a result of higher average unit volumes and increased use of the synthetic leasing program. Selling, general, and administrative expenses increased 0.2% as a percentage of total revenues due to higher management training payroll attributable to more unit openings and slightly increased management turnover and an increased use of the WOW-USM training facilities. Net interest expense decreased 0.2% as a percentage of total revenues due to increased interest income associated with refranchising notes receivable. Income tax expense increased 0.5% as a percentage of total revenues. The effective income tax rate for Fiscal 2000 was 41.8% as compared to 36.2% in 1999. The increase resulted from the nondeductibility of goodwill written off in association with the planned sale of Tia's Tex-Mex restaurants, which was offset by the decrease which resulted from increases in tax credits. Excluding the effect of the planned sale of the American Cafe and Tia's Tex-Mex restaurants, the effective income tax rate was 36.0%.

LIQUIDITY AND CAPITAL RESOURCES Cash Flow The following table presents a summary of the Company's cash flows from operating, investing and financing activities for the periods indicated (in thousands).
Fifty-Two Weeks Ended June 5, 2001 -----------cash provided by operating activities $76,578 cash used by investing activities (24,508) cash used by financing activities (51,588) -------increase in cash and short-term investments $ 482 ======== Fifty-Two Weeks Ended June 4, 2000 -----------$102,994 (53,598) (48,359) -------$ 1,037 =========

Net Net Net Net

Cash provided by operating activities was $76.6 million for the fiscal year ended June 5, 2001, a decrease of $26.4 million from Fiscal 2000. Cash provided by operating activities as compared to the prior year reflected an increase in net income of $22.7 million. Offsetting this, however, were increases in cash used for operating activities such as increases in accounts and notes receivable, and decreases in accounts payable (which includes accrued and other liabilities) and income taxes payable. Fiscal 2001 increases in accounts and notes receivable exceeded those of Fiscal 2000 by $2.0 million due to the growth of franchising and increases in vendor rebates receivable. Payments in Fiscal 2001 for accounts payable and accrued liabilities used $36.6 million more cash than Fiscal 2000. This was due to a reduction in payables which resulted from the sale of 69 units to SRG and the timing of operational cash payments. Fiscal 2001 income taxes payable decreased by $10.7 million as compared to the prior year primarily due to higher deductions from employee exercises of stock options and higher tax depreciation. Net cash used in investing activities was $29.1 million less than Fiscal 2000 due to increased proceeds from the sale of assets ($26.4 million) primarily due to the sale of units to SRG and $32.2 million less spending for capital expenditures, which was attributable to increased use of the synthetic lease program, offset by lower proceeds from the sale of restaurant properties to franchisees ($30.6 million). Net cash used in Fiscal 2001 financing activities was $3.2 million more than Fiscal 2000 due to the net paydown of debt ($29.0 million) which primarily resulted from funds received from the sale of American Cafe and Tia's Tex-Mex units to SRG ($30.0 million). Partially offsetting this use of cash was an increase over the prior year in proceeds from issuance of stock ($21.0 million) due to increased stock option exercises by employees and a reduction of $4.8 million from the prior year level of stock repurchases. During Fiscal 2001, $36.6 million of the Company's common stock was reacquired and dividends of $2.8 million were paid to shareholders. Capital Expenditures The Company requires capital principally for new restaurants, equipment replacement, and remodeling of existing units. Property and equipment expenditures for Fiscal 2001 were $62.0 million for new units, capital projects on existing units, and information technology projects. In addition, $70.7 million was reimbursed to the Company for new unit construction under its synthetic lease program. During Fiscal 2001, 46 Ruby Tuesday restaurants were opened. The Company also acquired nine Ruby Tuesday restaurants in Arizona from a former franchise partner. As part of acquiring the nine units, the Company recorded the franchise partner's liabilities, including long-term debt. Capital expenditures for Fiscal 2002 are budgeted to be approximately $110.0 million which the Company intends to fund with cash provided by operating activities and cash received in conjunction with refranchising efforts. Expenditures for units to be leased by the Company under synthetic leases are budgeted to be $35.0 to $40.0 million for Fiscal 2002. Planned Company-owned Ruby Tuesday openings for Fiscal 2002 include approximately 45 to 50 Ruby Tuesday restaurants. There can be no assurance, however, that the Company will be able to open the projected number of restaurants in Fiscal 2002 or invest the projected amount of money in capital expenditures and lease commitments. See "Special Note Regarding Forward-Looking Information."

Borrowings and Credit Facilities During Fiscal 2001 the Company entered into a five-year $50.0 million Senior Revolving Credit Facility with several banks. This facility, which replaced the $100.0 million credit facility then in place, includes a $10.0 million current credit line ("Swing Line") and a $15.0 million Letter of Credit sub-facility. Borrowings under the Senior Revolving Credit Facility bear interest at various rate options to be chosen by the Company. The Company had $8.0 million and $63.0 million of borrowings outstanding under these agreements at June 5, 2001 and June 4, 2000, respectively. As of June 5, 2001, the interest rate associated with the current facility approximated 5.09%. The credit facility provides for certain restrictions on incurring additional indebtedness, payment of dividends, and certain covenants regarding funded debt, net worth, and fixed charge coverage requirements. At June 5, 2001, the Company was in compliance with all such covenants. At June 5, 2001, the Company had committed lines of credit (including the Swing Line) amounting to $22.5 million with several banks at various interest rates approximating 4.9%. All of these lines are subject to periodic review by each bank and may be canceled by the Company at any time. The Company utilized its lines of credit to meet operational cash needs during Fiscal 2001 and 2000. Borrowings on these lines of credit were $14.7 million and $3.4 million at June 5, 2001 and June 4, 2000, respectively. The Company has entered into five interest rate swap agreements with notional amounts aggregating $125.0 million. These swap agreements fix the interest rate on an equivalent amount of the Company's floating-rate lease obligations to rates ranging from 5.99% to 6.63% for periods up through December 7, 2003. Since Fiscal 1998, the Company has entered into master synthetic lease agreements totaling $235.0 million for the purpose of leasing new free-standing units and the Maryville, Tennessee Restaurant Support Services Center. Included in this total is a $50.0 million master operating lease agreement entered into on April 30, 2001. Under the terms of master synthetic lease agreements, an operating lease agreement is entered into for each facility providing for an initial lease term of five years from the applicable agreement date with two five-year renewal options. The leases also provide for substantial residual value guarantees and include purchase options at the lessor's original cost of the properties. As of June 5, 2001, the Company has entered into leases for 94 units (70 of which were open at June 5, 2001) and the Maryville, Tennessee Restaurant Support Services Center at an aggregated original funded cost to the lessor of approximately $166.1 million. During Fiscal 2002, the Company expects to fund operations, capital expansion, the repurchase of common stock, and the payment of dividends from operating cash flows, proceeds from sales of units to franchisees, bank lines of credit, the five-year revolving line of credit, and through operating leases. See "Special Note Regarding Forward-Looking Information." (See Note 6 to Consolidated Financial Statements for a further discussion of borrowings and credit facilities.) Total long-term debt including current maturities decreased a net $48.1 million in Fiscal 2001 due to lower utilization of the revolving credit facility while short-term borrowings under bank lines of credit increased $11.3 million. The Company anticipates a net increase of debt in Fiscal 2002 of approximately $6.0 million. A larger increase in debt could result if actual cash flows from operations are lower than currently anticipated or if capital expenditures exceed budgeted amounts. See "Special Note Regarding Forward-Looking Information." Guarantee of Indebtedness of Others As part of its domestic franchising program, the Company has negotiated with various lenders a $52.5 million credit facility to assist franchise partners with operational cash flow requirements. The Company, as sponsor of the credit facility, serves as partial guarantor of the draws made on this revolving line-of-credit facility. As of June 5, 2001, the amount guaranteed by the Company on the facility was $18.5 million. Working Capital The Company's working capital deficiency and current ratio as of June 5, 2001 were $24.0 million and 0.7:1, respectively. As is common in the restaurant industry, the Company typically carries current liabilities in excess of current assets because cash (a current asset) generated from operating activities is reinvested in capital expenditures (a long-term asset). Dividends During Fiscal 1997, the Board of Directors approved a dividend policy as an additional means of returning excess capital to its shareholders. This policy calls for payment of semi-annual dividends of 2.25 per share. In accordance with this policy, the Company paid dividends of $2.8 million in Fiscal 2001. The payment of a dividend in any particular future period and the 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. See "Special Note Regarding Forward-Looking information." In addition, the Company's credit facilities contain certain limitations on the payment of dividends. See Note 6 to Consolidated Financial Statements

for more information.

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 its weighted average cost of capital while allowing financial flexibility and the equivalent of an investment-grade (BBB) bond rating. The strategy provides for repurchasing Company stock whenever cash flow exceeds funding requirements while maintaining the target capital structure. During Fiscal 2001, the Company purchased 2.7 million shares of Company common stock at a total purchase price of $36.6 million under its stock repurchase program. After taking into account the repurchases made during Fiscal 2001, the total number of remaining shares authorized to be repurchased as of June 5, 2001 was approximately 7.4 million. Franchising and Development Agreements Subsequent to June 5, 2001, the Company entered into purchase agreements with three new franchise partners and one existing franchise partner which provide, among other things, for the sale of twenty units in Missouri, Indiana, Illinois, Arkansas and Kansas. The closing of the sales of nineteen of the units in Missouri, Indiana, Illinois and Arkansas are expected to occur in the second quarter of Fiscal 2002, while the closing of the sale of the unit in Kansas occurred on August 8, 2001. The closings of these sales are subject to various conditions, including the transfer of liquor licenses, third party consents, and availability of financing. If the sales are completed as contemplated by the purchase agreements, the units will be operated as Ruby Tuesday restaurants and the Company will receive an aggregate purchase price of $32.2 million, of which approximately $21.0-$24.0 million is expected to be paid in cash. The remaining amount will be in the form of interest bearing notes due through Fiscal 2012. The sales of these units are expected to result in minimal pre-tax gains. As of June 5, 2001, nineteen of the twenty units to be sold were open. The remaining unit is expected to open by the date of sale. Fiscal 2001 revenues from the nineteen units in operation totaled $34.3 million, with operating profits of $3.2 million. In addition, the Company also entered into an agreement with an existing partner for the Company's acquisition of three units in Massachusetts for a purchase price of $1.7 million. This transaction will permit the Company to further develop the Boston Market while the Franchise Partner continues to focus on developing the territory northeast of Boston. The closing is expected to occur in the second quarter of Fiscal 2002. In accordance with the terms of the franchise agreement, the Company anticipates acquiring an additional 49% interest of one of its franchises for $0.5 million late in the first quarter of Fiscal 2002. See "Special Note Regarding Forward-Looking Information." Disclosures About Market Risk The Company manages its exposure to changes in short-term interest rates, particularly to reduce the impact on its debt and floating-rate lease obligations, by entering into interest rate swap agreements. The counterparties to these contracts are high credit quality commercial banks. Consequently, credit risk, which is inherent in all swaps, had been minimized to a large extent. Interest expense (or rent expense when applicable to floating-rate lease obligations) is adjusted for the differential to be paid or received as interest rates change. The effect of such adjustments on interest or rent expense has not been significant. The level of floating-rate debt and floating-rate lease obligations not fixed by swap agreements was not significant during the year, and management does not expect a significant increase in these amounts in Fiscal 2002. Accordingly, the Company does not presently believe it has material exposure to potential, near-term losses in future earnings and/or cash flows from reasonably possible near-term changes in market rates. New Accounting Standards In June 2000, the Financial Accounting Standards Board ("FASB") issued Statement of Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" ("FAS 138"), which is an amendment of a similarly titled statement, FAS 133. Both FAS 138 and FAS 133 are effective for the Company beginning in Fiscal 2002. FAS 133 requires recognition of all derivatives as either assets or liabilities on the balance sheet measured at fair value. Changes in the fair value of derivatives will be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designed as part of a hedge transaction and, if it is, the type of hedge transaction. The Company utilizes interest rate swap agreements to manage interest rate exposure. Adoption of this new accounting standard is expected to result in a cumulative effect charge net of tax totaling $0.2 million to expense and $0.9 million to other comprehensive income. In July 2001, the FASB issued Statement No. 141, "Business Combinations", and Statement No. 142, "Goodwill and Other Intangible Assets" ("FAS 141" and "FAS 142", respectively). FAS 141 requires that the purchase

method of accounting be used for all business combinations initiated after June 30, 2001, as well as all purchase method business combinations completed after June 30, 2001. FAS 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of FAS 142. FAS 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."

The Company is required to adopt the provisions of FAS 141 immediately and FAS 142 effective for Fiscal 2003 although early adoption is allowed. FAS 141 will require upon adoption of FAS 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in FAS 141 for recognition apart from goodwill. Upon adoption of FAS 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of FAS 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. The Company currently has unamortized goodwill remaining from the original Ruby Tuesday acquisition in 1982 by the Company, then known as Morrison Restaurants Inc., in the amount of $7.8 million which will be subject to the transition provisions of FAS 141 and 142. Amortization expense related to goodwill was $0.6 million, $0.7 million, and $0.7 million for Fiscal 2001, 2000, and 1999, respectively. The Company is currently studying the expected impact of FAS 141 and 142 on the consolidated financial statements, but anticipates this impact to be insignificant. Impact of Inflation Historically, the Company has been able to recover inflationary cost increases to items such as food and beverages through increased menu prices coupled with more efficient purchasing practices and productivity improvements. There have been, and there may be in the future, delays in the implementation of such menu price increases. Competitive pressures may also limit the Company's ability to recover such cost increases in their entirety. Historically, the effect of inflation on the Company's net income has not been materially adverse. Management's Outlook The Company continues to strategically position itself for growth through the continuing emphasis on its Ruby Tuesday brand and focus on its franchising and partnering programs. Ruby Tuesday, with its menu that features fun-to-eat food, large portions, and wide variety, including a signature salad bar, burgers, ribs, fajitas, chicken, soups and sandwiches, will maintain its aggressive posture. In Fiscal 2002, the Company will continue its focus on improving same-store sales, average-unit volume, customer frequency, and check average through constant improvement of guest service, food quality, and appealing promotions. Also, the Company is committed to continually focus on building the best teams through the use of our six-step interview process, "certified programs", career pathway opportunities into management, and our WOW-U training facilities for managers. The Company strongly believes proper staffing, good teams and low turnover are essential to the success of its business. The Company continues to identify potential restaurant managers - internal and external -- to become partners. Internally, approximately one-half of the Company's restaurant managers have a financial stake in the success of their units as internal managing partners. Externally, the Company currently has 21 domestic Ruby Tuesday franchise partners and signed purchase agreements with three others as previously discussed. In addition to operating existing restaurants, these agreements provide for the development of new restaurants in the partner's region over the next five to six years. The domestic franchising program provides the Company with the opportunity to have restaurants operating outside its priority growth markets. Internationally, the Company is continually developing relationships with existing and potential franchisees. The Company has plans which call for the franchise opening of 30 to 35 units (including international and excluding the twenty units to be sold to franchise partners) in Fiscal 2002 and the continuous identification of potential new franchisees in targeted areas in the United States and around the world. See "Special Note Regarding Forward-Looking Information." 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 the following: future financial performance and unit growth (both Company-owned and franchised), future capital expenditures, future borrowings and repayment of debt, and payment of dividends. 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; mall-traffic trends; 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 prototypes; 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; changes in the availability of capital; and general economic conditions.

RUBY TUESDAY, INC. STATEMENT OF OPERATIONS (In thousands except per-share data)
Fiscal Year 2001 2000 1999 1998 1997 $789,634 $797,495 $722,338 $711,420 $655,407 ========= ======= ======= ======= ======= $92,274 33,035 --------$59,239 ========= $0.94 ========= $0.91 ========= $62,771* 26,231 ------$36,540 ======= $0.58 ======= $0.57 ======= $57,208 20,694 -------$36,514 ======== $45,031 15,951 ------$29,080 ======= $38,813 13,768 ------$25,045 ======= $ 0.36 ======= $ 0.35 =======

Revenues

Income before income taxes Provision for income taxes Net income Earnings per share: Basic: Diluted:

$0.56 $0.44 ======= ======= $0.54 $0.42 ======= =======

Weighted average common and common equivalent shares: Basic 62,900 62,532 64,774 66,410 ========= ======= ======= ======= Diluted 65,088 64,576 67,528 69,140 ========= ======= ======= =======

70,380 ======= 71,500 =======

All fiscal years are composed of 52 weeks except for 1998 which is composed of 53 weeks. Weighted average shares and all per-share data for years prior to a stock split have been restated from their original presentation to give effect to the 2-for-1 stock splits which occurred in Fiscal year 2000 and 1998.
Other financial data: Total assets $445,667 $439,212 $428,650 $409,628 Long-term debt $15,212 $636 $76,767 $65,895 Shareholders' equity $284,271 $229,824 $221,801 $212,150 Cash dividends per share of common stock (in cents) 4.50 4.50 4.50 2.25

$418,871 $78,006 $223,640 0.00

* Includes a pre-tax charge of $10.0 million recorded in conjunction with the planned sale of the American Cafe and Tia's Tex-Mex restaurants

RUBY TUESDAY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except per-share data)
For the Fiscal Year Ended June 5, June 4, June 6, 2001 2000 1999 Revenues: Restaurant sales and operating revenues Franchise revenues $777,178 $789,240 $717,629 12,456 8,255 4,709 -----------------------------789,634 797,495 722,338 ------------------------------

Operating costs and expenses: Cost of merchandise 213,064 214,136 196,341 Payroll and related costs 248,078 251,463 229,949 Other restaurant operating costs 147,853 159,398 146,723 Loss on sale of American Cafe and Tia's Tex-Mex restaurants 10,003 Depreciation and amortization 34,380 41,855 39,390 Selling, general and administrative 57,521 56,454 49,865 Interest (income)/expense net of interest income totaling $6,501 in 2001, $2,944 in 2000 and $1,691 in 1999 (3,536) 1,415 2,862 -----------------------------697,360 734,724 665,130 -----------------------------Income before income taxes 92,274 62,771 57,208 Provision for income taxes 33,035 26,231 20,694 -----------------------------Net income $ 59,239 $ 36,540 $ 36,514 ============================== Earnings per share: Basic Diluted Weighted average shares: Basic Diluted

$ 0.94 $ 0.58 $ 0.56 ============================== $ 0.91 $ 0.57 $ 0.54 ============================== 62,900 62,532 64,774 ============================== 65,088 64,576 67,528 ==============================

The accompanying notes are an integral part of the consolidated financial statements.

RUBY TUESDAY, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
June 5, 2001 Assets: Current assets: Cash and short-term investments Accounts and notes receivable Inventories: Merchandise China, silver and supplies Income tax receivable Prepaid rent Deferred income taxes Other prepaid expenses Assets held for disposal Total current assets Property and equipment - at cost: Land Buildings Improvements Restaurant equipment Other equipment Construction in progress June 4, 2000

$10,636 6,754 6,661 2,711 7,671 2,917 64 4,809 22,197 -------64,420 --------

$10,154 6,880 5,763 3,615 3,392 312 5,282 59,057 -------94,455 -------36,265 73,298 165,855 114,489 46,134 15,433 -------451,474 169,609 -------281,865 -------8,229 -------23,126 -------5,355 -------26,182 -------$439,212 ========

31,928 71,760 180,440 120,112 50,552 17,545 -------472,337 Less accumulated depreciation and amortization 182,202 -------290,135 -------Goodwill, net 7,845 -------Notes receivable, net 56,881 -------Deferred income taxes -------Other assets 26,386 -------Total assets $445,667 ========

Liabilities and Shareholders' Equity: Current liabilities: Accounts payable Short-term borrowings Accrued liabilities: Taxes, other than income taxes Payroll and related costs Insurance Income taxes payable Rent and other Current portion of long-term debt Total current liabilities Long-term debt Deferred income taxes Deferred escalating minimum rent Other deferred liabilities

$27,910 14,700 6,349 18,670 4,221 16,083 500 -------88,433 -------15,212 -------4,127 -------8,810 -------44,814 --------

$35,346 3,400 10,831 17,809 4,071 222 16,983 63,134 -------151,796 -------636 --------------11,416 -------45,540 --------

Shareholders' equity: Common stock, $0.01 par value; (authorized: 100,000 shares; issued: 2001-63,211 shares, 2000-61,719 shares)

632

617

Capital in excess of par value Retained earnings

14,830 270,556 -------286,018 4,248 (4,248) (1,747) -------284,271 -------$445,667 ========

4,597 225,219 -------230,433 3,507 (3,507) (609) -------229,824 -------$439,212 ========

Deferred compensation liability payable in Company stock Company stock held by deferred compensation plan Accumulated other comprehensive income

Total liabilities and shareholders' equity

The accompanying notes are an integral part of the consolidated financial statements.

RUBY TUESDAY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (In thousands except per-share data)
Company Stock Held by Deferred Capital in Deferred Common Stock Issued Compensation Plan Excess of Retained Compensation Shares Amount Shares Amount Par Value Earnings Liability --------------------------------------------------------------------------------------------------------Balance, June 6, 1998 65,574 $656 $(539) $(3,155) $4,922 $207,034 $3,155 Net income 36,514 Minimum pension liability adjustment, net of taxes of $73 Comprehensive income Shares issued under stock bonus and stock options plans 3,604 35 22,009 Cash dividends of 4.50 cents per common share (2,940) Stock Repurchases (5,144) (51) (23,202) (22,601) Changes in Deferred Compensation Plan 85 268 (268) --------------------------------------------------------------------------------------------------------Balance, June 6, 1999 64,034 640 (454) (2,887) 3,729 218,007 2,887 Net income 36,540 Minimum pension liability adjustment, net of taxes of $22 Comprehensive income Shares issued under stock bonus and stock option plans 2,176 22 15,066 Cash dividends of 4.50 cents per common share (2,811) Stock repurchases (4,491) (45) (14,877) (26,517) Acceleration of vesting of stock options held by American Cafe and Tia's Tex-Mex employees 679 Changes in Deferred Compensation Plan (62) (620) 620 --------------------------------------------------------------------------------------------------------Balance, June 4, 2000 61,719 617 (516) (3,507) 4,597 225,219 3,507 Net income 59,239 Minimum pension liability adjustment net of taxes of $736 Comprehensive income Shares issued under stock bonus and stock option plans 4,197 42 35,753 Cash dividends of 4.50 cents per common share (2,819) Stock repurchases (2,705) (27) (25,520) (11,083) Changes in Deferred Compensation Plan (36) (741) 741 --------------------------------------------------------------------------------------------------------Balance, June 5, 2001 63,211 $632 (552) $(4,248) $14,830 $270,556 $4,248 =========================================================================================================

The accompanying notes are an integral part of the consolidated financial statements.

RUBY TUESDAY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
For the Fiscal Year Ended June 5, June 4, June 6, 2001 2000 1999 -------------------------------------------------------------------------------Operating activities: Net income $59,239 $36,540 $36,514 Adjustments to reconcile net income to net cash provided by operating activities: Loss on sale of American Cafe and Tia's Tex-Mex restaurants 10,003 Depreciation and amortization 34,380 41,855 39,390 Amortization of intangibles 577 708 727 Deferred income taxes 10,175 (6,865) (2,545) (Gain)/Loss on impairment and disposition of assets (342) 3,090 328 Other 485 754 496 Changes in operating assets and liabilities: Receivables (5,642) (3,689) 309 Inventories (1,826) (820) (140) Income tax receivable (7,893) 2,766 (831) Prepaid and other assets 1,745 (3,600) (548) Accounts payable, accrued and other liabilities 14,320 22,252 12,803 -----------------------------Net cash provided by operating activities 76,578 102,994 86,503 -----------------------------Investing activities: Purchases of property and equipment (62,045) (94,264) (72,582) Proceeds from disposal of assets 32,315 5,945 2,095 Proceeds from sale of restaurant properties to franchisees 7,352 37,972 11,399 Other, net (2,130) (3,251) (2,731) -----------------------------Net cash used by investing activities (24,508) (53,598) (61,819) -----------------------------Financing activities: Proceeds from long-term debt 24,000 9,000 16,000 Net change in short-term borrowings 11,300 (5,312) (7,500) Principal payments on long-term debt (82,749) (22,131) (5,112) Proceeds from issuance of stock, including treasury stock 35,310 14,334 21,548 Stock repurchases, net of changes in the Deferred Compensation Plan (36,630) (41,439) (45,854) Dividends paid (2,819) (2,811) (2,940) -----------------------------Net cash used by financing activities (51,588) (48,359) (23,858) -----------------------------Increase in cash and short-term investments 482 1,037 826 Cash and short-term investments: Beginning of period 10,154 9,117 8,291 -----------------------------End of period $10,636 $10,154 $9,117 ==============================

Supplemental disclosure of cash flow information - Cash paid for: Interest (net of amount capitalized) $ 4,008 $3,757 $4,750 Income taxes, net $15,899 $26,087 $17,812 Significant non-cash investing and financial activity-Promissory note received from sale of American Cafe and Tia's Tex-Mex restaurants $28,753 The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Basis of Presentation Ruby Tuesday, Inc. including its wholly-owned subsidiaries (the "Company") develops, franchises, and operates casual dining restaurants in the United States, Puerto Rico, and seven other countries under the Ruby Tuesday(R) brand. At June 5, 2001, the Company owned and operated 374 restaurants concentrated primarily in the Northeast, Southeast, Mid-Atlantic and the Midwest. As of year-end, there were 151 domestic franchise units located in nineteen states (primarily in Florida, the Northeast and Western regions) and twelve international Ruby Tuesday franchise units located in the Asia Pacific Region, India, Puerto Rico, Iceland, and Central and South America. Fiscal Year The Company's fiscal year ends on the first Tuesday following May 30. Prior to Fiscal 2001, the Company's fiscal year ended on the first Sunday following May 30. The change in fiscal year end resulted in the addition of two days in the fourth quarter of Fiscal 2001. The impact on net income was not significant. Cash and Short-Term Investments The Company's cash management program provides for the investment of excess cash balances in short-term money market instruments. Short-term investments are stated at cost, which approximates market value. The Company considers amounts receivable from credit card companies and marketable securities with a maturity of three months or less when purchased to be short-term investments. Inventories Inventories consist of materials, food supplies, china and silver and are stated at the lower of cost (first-in, firstout) or market. Property and Equipment and Depreciation Depreciation for financial reporting purposes is computed using the straight-line method over the estimated useful lives of the assets or, for capital lease property, over the term of the lease, if shorter. Annual rates of depreciation range from 3% to 5% for buildings and improvements and from 8% to 34% for restaurant and other equipment. Income Taxes Deferred income taxes are determined utilizing the asset and liability approach. This method gives consideration to the future tax consequences associated with differences between financial accounting and tax bases of assets and liabilities. Pre-Opening Expenses Salaries, personnel training costs and other expenses of opening new facilities are charged to expense as incurred. Intangible Assets In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("FAS 142") which will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. The Company currently has unamortized goodwill remaining from its acquisition of the Ruby Tuesday concept in 1982 by the Company, then known as Morrison Restaurants Inc., in the amount of $7.8 million which will be subject to the transition provisions of FAS 142. Amortization expense, which the Company has previously expensed on a straight-line basis over 40 years, was $0.6 million, $0.7 million, and $0.7 million for Fiscal 2001, 2000, and 1999, respectively. The Company is currently studying the expected impact of FAS 142 on the consolidated financial statements, but anticipates this impact to be insignificant. At June 5, 2001 and June 4, 2000, accumulated amortization for goodwill was $6.8 million and $6.4 million, respectively. Advertising Costs The Company expenses advertising costs as incurred. Advertising expense totaled $11.1 million, $8.2 million, and $7.5 million for Fiscal 2001, 2000, and 1999, respectively. Included in advertising expense are coupon

expenses totaling $7.2 million, $3.6 million, and $2.1 million for Fiscal 2001, 2000, and 1999, respectively. In accordance with Emerging Issues Task Force No. 00-14, "Accounting for Certain Sales Incentives" the Company will reclassify the coupon expenses against revenues beginning in Fiscal 2002. Prior year amounts will be reclassified.

Fair Value of Financial Instruments The Company's financial instruments at June 5, 2001 and June 4, 2000 consisted of cash and short-term investments, Deferred Compensation Plan investments, notes receivable, short-term borrowings, long-term debt and interest rate swap agreements. The fair value of these financial instruments approximated the carrying amounts reported in the Consolidated Balance Sheets with the exception of Company common stock held by the Deferred Compensation Plan, which is included in shareholders' equity at cost, and the interest rate swaps, which had a negative value to the Company at June 5, 2001 of $1.8 million. Estimates of the fair value of the financial instruments are based upon current market conditions, quoted market prices, and present values of future cash flows. Derivative Instruments In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" ("FAS 138"), which delayed the effective date of required adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative and Hedging Activities" ("FAS 133"). The Company will adopt FAS 133 in Fiscal 2002. FAS 133 requires recognition of all derivatives as either assets or liabilities on the balance sheet measured at fair value. Adoption of this new accounting standard is expected to result in a cumulative effect charge net of tax totaling $0.2 million to expense and $0.9 million to other comprehensive income. The Company utilizes interest rate swap agreements to manage interest rate exposure. For Fiscal 2001, 2000 and 1999, the Company recognized the interest differential paid or received on interest rate swap agreements as an adjustment to interest expense (or rent expense when the swaps were used to fix floating-rate lease obligations). Interest differentials not yet settled in cash were reflected as current payables in the accompanying Consolidated Balance Sheets. Franchise Revenues Franchise development and license fees received are recognized when all material services have been substantially performed by the Company and the restaurant has opened for business. Franchise royalties (generally 4% of monthly sales) are recognized as franchise revenue on the accrual basis. Included as an offset to selling, general and administrative expenses for Fiscal 2001, 2000, and 1999 are support service fees and marketing fees (generally 4% of monthly sales in the aggregate) of $9.7 million, $6.0 million, and $3.7 million, respectively. The terms of the support services agreements coincide with those of the respective operating agreements. Costs associated with franchise operations are expensed as incurred. Refranchising Gains (Losses) Refranchising gains (losses), included in other restaurant operating costs, include gains or losses on sales of restaurants to franchisees. All direct costs associated with refranchising are included in the calculation of the gain or loss. Upon making the decision to sell a restaurant to a franchisee, the restaurant is reclassified to assets held for disposal at the lower of book value or fair market value and any anticipated loss is immediately recognized. When the sale occurs, any loss not previously recognized is recorded concurrently with the sale. The Company records an appropriate allowance for doubtful notes for any gain up to the full amount of the note received in conjunction with the transaction. Gains in excess of the notes are recognized currently. Allowance for Doubtful Notes The allowance for doubtful notes represents management's best estimate of losses inherent in the notes receivable. The allowance for doubtful notes is increased by the amount of any gain not received in cash in refranchising transactions, and reduced by receivables charged off. The adequacy of the allowance for doubtful notes is determined based on reviews and evaluations of specific notes, and current economic conditions. Earnings Per Share Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during each year presented. Diluted earnings per share gives effect to options outstanding during the applicable periods. The effect of the Company's stock options increased the diluted weighted average shares outstanding by 2,188,000, 2,044,000, and 2,754,000 for Fiscal 2001, 2000, and 1999, respectively. Stock-Based Employee Compensation Plans The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock issued to Employees" ("APB 25") and related Interpretations in accounting for its employee stock options and adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-

Based Compensation" ("FAS 123"). The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant and, accordingly, recognizes no compensation expense for the stock option grants.

Impairment of Long-Lived Assets The Company reviews underlying assets related to each of its restaurants for impairment when circumstances indicate the carrying amount may not be recoverable. An impairment is recognized when the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. In order to determine the amount of an impairment loss, the Company reviews future cash flows (including salvage value). In the instance of a potential refranchising deal, the expected purchase price is used as the estimate of future cash flows. Otherwise, discounted cash flows are projected at a unit level. Impairment write-downs are determined accordingly. Comprehensive Income Comprehensive income includes net income adjusted for certain revenues, expenses, gains and losses that are excluded from net income in accordance with generally accepted accounting principles, such as adjustments to the minimum pension liability. Comprehensive income is shown as a separate component in the Consolidated Statements of Shareholders' Equity and Comprehensive Income. Segment Reporting Operating segments are components of an enterprise about which separate financial information is available that is reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company aggregates similar operating segments into a single operating segment if the businesses are considered similar under the criteria of accounting principles generally accepted in the United States of America. The Company considers its restaurant and franchising operations as similar and has aggregated them. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported net income. 2. Franchising The Company's domestic franchise program currently includes 21 franchise partners. In conjunction with this program, the Company has sold 105 Ruby Tuesday restaurants to these franchise partners as of June 5, 2001. These units are operating as franchised Ruby Tuesday restaurants under separate franchising agreements. During Fiscal 2001 and 2000, the Company sold six and 42 units, respectively, to franchise partners for collective sales prices of $9.2 million and $58.5 million, respectively. The portion of sales prices not received in cash ($1.8 million in 2001 and $20.5 million in 2000) was received in the form of notes bearing interest at rates ranging from 8.0% to 10.0% with one note at 15.6% and due through 2013. The sales of these units resulted in a pre-tax gain of $1.7 million in 2001 and $5.4 million in 2000. The gains are included in other restaurant operating costs. The Company has entered into development agreements with its domestic franchise partners whereby they will open varying numbers of Ruby Tuesday restaurants over the next five to six years following their respective agreement dates. During Fiscal 2001 and 2000, 21 and 22 Ruby Tuesday franchise units were opened, respectively, by franchisees pursuant to development agreements which resulted in the recognition of development and licensing fees of $0.9 million and $1.0 million, respectively. Deferred development fees associated with all domestic franchisees totaled $1.4 million and $1.5 million as of June 5, 2001 and June 4, 2000, respectively. As discussed in Note 11 to the Consolidated Financial Statements, the Company sponsors and serves as partial guarantor for a revolving line-of-credit to assist franchise partners with working capital and operational cash flow requirements. On March 5, 2001, the Company acquired all of the member interests of RT Southwest Franchise, LLC, formerly a franchise partner with nine units in Arizona, for a cash purchase price of $0.1 million. As a result of this transaction, the Company recorded the franchise partner's liabilities, including long-term debt. See Note 6 to the Consolidated Financial Statements for more information. Also, during Fiscal 2001 the Company acquired an additional 49% limited partnership interest in RT Tampa Franchise, LP for $0.5 million, pursuant to the terms of the Limited Partnership Agreement, bringing the

Company's limited partnership interest of the Tampa franchise to 50%. The Company accounts for this investment under the equity method. Income recognized during Fiscal 2001 from the Company's 50% limited partnership interest of the Tampa Franchise was not significant. During Fiscal 2001 and 2000, three and four Ruby Tuesday international franchise units were opened, respectively, by franchisees pursuant to territorial development agreements which resulted in the recognition of development and licensing fees of $0.8 million and $0.4 million, respectively. Deferred territorial development fees, which will be recognized as income as units are opened in accordance with the various development agreements, totaled $0.8 million and $1.1 million at June 5, 2001 and June 4, 2000, respectively.

3. Sale of American Cafe and Tia's Tex-Mex Restaurants On November 20, 2000, the Company completed the sale of all of its American Cafe (including L&N Seafood) and Tia's Tex-Mex restaurants to Specialty Restaurant Group, LLC ("SRG"), a limited liability company owned by the former President/Partner of the Company's American Cafe and Tia's Tex-Mex concepts and certain members of his management team. The 69 restaurants sold to SRG had revenues of $50.0 million and operating losses of $1.1 million for the twenty-four weeks ended November 20, 2000 and revenues of $108.2 million and operating losses of $2.3 million for Fiscal 2000. The sale of these restaurants was effected pursuant to an Agreement and Plan of Merger dated as of October 4, 2000, as amended by First Amendment to Agreement and Plan of Merger dated November 20, 2000, (collectively the "Merger Agreement") among the Company, Tia's, LLC and SRG. The purchase price for these restaurants was determined in arms-length negotiations between the Company and SRG. The consideration received by the Company pursuant to the Merger Agreement consisted of (i) $30.0 million in cash, (ii) a promissory note payable by SRG to the Company (the "Note") in the principal amount of $28.8 million, (iii) an option to acquire a 33% membership interest in SRG during the five-year period following November 20, 2000 at varying amounts, and (iv) a nonsolicitation agreement for the period during which the Note is outstanding and two years after the Note is paid in full. The Note has a term of 10 years, the first three of which are interest only, bears interest at a rate of 10% per annum, and is secured by a pledge of all of the outstanding member interests of SRG. As a result of the planned sale, a pre-tax loss of $10.0 million was recorded in Fiscal 2000. Included in the loss was $8.5 million, which represented an impairment charge on a majority of the Tia's TexMex goodwill, $0.7 million for compensation expense resulting from the acceleration of unvested options held by employees of these concepts, and $0.8 million for other write-offs and charges. The accelerated stock options had original vesting dates ranging from September, 2000 through October, 2002. Included in assets held for disposal at June 4, 2000 was $56.0 million which represented the remaining book value of the American Cafe and Tia's Tex-Mex fixed assets and goodwill. 4. Impairment of Long-Lived Assets The Company periodically reviews the recorded value of its long-lived assets to determine if the future cash flows to be derived from those assets will be sufficient to recover the remaining recorded asset values. Restaurants in particular are reviewed on a quarterly basis for negative cash flows. Management believes that units with recurring negative cash flows might be impaired based upon poor operating performance. Based upon its reviews in Fiscal 2001, 2000, and 1999, the Company recorded restaurant impairments of $0.9 million, $6.3 million, and $2.9 million, respectively. The impairment charge in Fiscal 2001 included impairments for five underperforming restaurants, all of which were closed prior to June 5, 2001. The charges for Fiscal 2000 included $4.0 million for five underperforming Ruby Tuesday units in the state of Texas, which were subsequently sold or closed. In addition to the restaurant impairments, the Company recorded a $2.8 million impairment charge in Fiscal 2000 for capitalized software and systems resulting from the abandonment of a restaurant system which had been intended to assist unit managers in administration, food cost management, payroll and other functions. The project is not currently in development and the Company has redirected efforts to obtain the desired system information from other sources. The impairment charges discussed above are included as a component of other restaurant operating costs in the Consolidated Statements of Income and are included with gains/losses on impairments and disposition of assets in the Consolidated Statements of Cash Flows. 5. Notes Receivable Notes Receivable consists of the following: (In Thousands)
Fiscal Year 2001 2000 Notes receivable from franchisees $47,882 $48,470 Notes receivable from Specialty Restaurant Group, LLC 28,883 0 Other 150 165 -------- -------76,915 48,635 Less current maturities (included in accounts and

notes receivable)

Less allowance for doubtful notes

305 -------76,610 (19,729) -------$56,881 ========

394 -------48,241 (25,115) -------$23,126 ========

Notes receivable from franchisees generally arise when Company-owned restaurants are sold to franchise partners ("refranchising"). These notes, which accrue interest at rates varying from 8.0%-10.0% with one note at 15.6%, generally allow for deferral of interest during the first one to three years and interest only payments for the following three years. The SRG note receivable bears interest at 10.0% with principal repayments scheduled to begin in Fiscal 2004. Scheduled repayments of notes receivable at June 5, 2001 are as follows: (In Thousands)
2002 2003 2004 2005 2006 Subsequent years Total 305 416 3,561 6,016 7,389 59,228 ------$76,915 ======= $

6. Long-Term Debt Long-term debt consists of the following: (In Thousands)
Fiscal Year 2001 2000 Revolving credit facility Term notes payable to banks Term note payable to CNL Financial I, Inc. Other long-term debt $ 8,000 0 7,078 634 ------15,712 500 ------$15,212 ======= $13,000 50,000 0 770 ------63,770 63,134 ------$ 636 =======

Less current maturities

Annual maturities of long-term debt at June 5, 2001 are as follows: (In Thousands) 2002 $ 500 2003 546 2004 507 2005 508 2006 8,554 Subsequent Years 5,097 ------Total $15,712

During Fiscal 2001, the Company entered into a five-year $50.0 million Senior Revolving Credit Facility with several banks. This facility includes a $10.0 million current credit line ("Swing Line") and a $15.0 million Letter of Credit sub-facility. Borrowings under the Revolving Credit Facility bear interest at various rate options to be chosen by the Company. The rate will either be the Base Rate (which is defined to be the higher of the issuing bank's prime lending rate or the Federal Funds rate plus 0.5%) or LIBOR plus the Applicable Margin (which ranges from 0.875% to 1.75% and is based on Adjusted Funded Debt to Earnings Before Interest, Taxes, Depreciation, Amortization and Rent). Commitment fees ranging from 0.15% to 0.375% are payable quarterly on the unused portion of the Revolving Credit Facility. At June 5, 2001, the Company had $8.0 million of borrowings outstanding with various banks under the Senior Revolving Credit Facility at interest rates approximating 5.09% per annum. Borrowings under the Swing Line are reflected with lines of credit as shortterm borrowings in the Consolidated Balance Sheets. See further discussion below. The credit facility contains restrictions on incurring additional indebtedness and payment of dividends and has certain covenants regarding funded debt, net worth, and fixed charge coverage. At June 5, 2001, the Company was in compliance with all such covenants. In connection with the acquisition of RT Southwest Franchise LLC, which was discussed further in Note 2 to Consolidated Financial Statements, the Company recorded a term note payable to CNL Financial I, Inc. totaling $7.1 million, at a fixed rate of interest approximating 8.64%, which is secured by the property of the related Arizona restaurants. In addition, at June 5, 2001, the Company had committed lines of credit amounting to $12.5 million with several banks, all of which are subject to periodic review. As previously mentioned, the Company's $50.0 million revolving credit facility includes a $10.0 million Swing Line. The Company utilized its lines of credit to meet operational cash needs during Fiscal 2001 and 2000. Borrowings on these lines of credit, including the Swing Line, and associated interest rates were $14.7 million and 4.87%, respectively, at June 5, 2001, and $3.4 million and 6.91%, respectively, at June 4, 2000. Interest expense capitalized in connection with financing additions to property and equipment amounted to approximately $ 0.4 million and $ 0.7 million for Fiscal 2001 and 2000, respectively. 7. Leases

Various operations of the Company are conducted in leased premises. Initial lease terms expire at various dates over the next 20 years and may provide for escalation of rent during the lease term. Most of these leases provide for additional contingent rents based upon sales volume and contain options to renew (at adjusted rentals for some leases).

The following is a schedule by year of future minimum lease payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of June 5, 2001:
(In Thousands) -----------------------------------------2002 $ 48,316 2003 48,081 2004 47,421 2005 45,458 2006 42,857 Subsequent years 236,437 -------Total minimum lease payments $468,570 ========

Future minimum sub-lease payments to be received for the next five years and in the aggregate under noncancelable sub-lease agreements are as follows:
(In Thousands) -----------------------------------------2002 $ 14,443 2003 14,450 2004 14,112 2005 13,313 2006 12,386 Subsequent years 55,304 -------Total minimum sub-lease payments $124,008 ========

Rental expense pursuant to operating leases is summarized as follows: (In Thousands)
2001 2000 1999 ------------------------$34,912 $36,806 $35,809 2,613 4,307 3,527 ------------------------$37,525 $41,113 $39,336 =========================

Minimum rent Contingent rent

Since Fiscal 1998, the Company has entered into master synthetic lease agreements totaling $235.0 million for the purpose of leasing new free-standing units and the Maryville, Tennessee Restaurant Support Services Center. Included in this total is a $50.0 million master operating lease agreement entered into on April 30, 2001. Under the terms of these master synthetic lease agreements, an operating lease agreement is entered into for each facility providing for an initial lease term of five years from the applicable agreement date with two five-year renewal options. Each lease also provides for substantial residual value guarantees and includes purchase options at the lessor's original cost of the properties. As of June 5, 2001, the Company has entered into leases for 94 units (70 of which were open at June 5, 2001) and the Maryville, Tennessee Restaurant Support Services Center at an aggregated original funded cost to the lessor of approximately $166.1 million. Lease commitments applicable to such leases entered into are included in the commitment amounts presented above. The Company has entered into five interest rate swap agreements with notional amounts aggregating $125.0 million. These swap agreements fix the interest rate on an equivalent amount of the Company's debt and floatingrate lease obligations to rates ranging from 5.99% to 6.63% (including interest rate spreads) for periods up through December 7, 2003. A summary of these swaps is presented in the table below.
Notional Amount ---------$25.0 mm Fixed Rate(Pay) ----------5.35% Variable Rate(Receive) ------------3 Month LIBOR Maturity Date ---------01/15/03

1.

2. 3. 4. 5.

$25.0 $25.0 $25.0 $25.0

mm mm mm mm

5.73% 5.23% 5.05% 5.35%

3 3 3 3

Month Month Month Month

LIBOR LIBOR LIBOR LIBOR

05/06/03 11/17/03 12/07/03 01/16/03

The first two swaps presented in the above table are currently callable.

8. Income Taxes The components of income tax expense are as follows:
(In Thousands) 2001 2000 1999 ----------------------------------------Current: Federal State $ 21,726 $ 28,987 $ 20,144 1,134 4,109 3,095 ----------------------------------------22,860 33,096 23,239

Deferred: Federal State

8,511 (5,372) (2,162) 1,664 (1,493) (383) ----------------------------------------10,175 (6,865) (2,545) ----------------------------------------$ 33,035 $ 26,231 $ 20,694 =========================================

Taxes payable were reduced by $14.2 million, $3.7 million, and $6.6 million in 2001, 2000, and 1999, respectively, as a result of stock options exercises. Deferred tax assets and liabilities are comprised of the following:
(In Thousands) 2001 2000 -----------------------------Deferred tax assets: Employee benefits Allowance for doubtful Insurance reserves Escalating rents Closed unit and asset impairment reserves Deferred development fees Acquired net operating losses Other Total deferred tax assets Deferred tax liabilities: Depreciation Assets held for disposal Prepaid deductions Retirement plans Other Total deferred tax liabilities Net deferred tax asset (liability) $ 13,209 7,746 4,292 3,459 $ 11,697 9,860 4,283 4,483

3,366 3,568 1,179 1,316 0 1,532 1,566 2,568 -----------------------------34,817 39,289 -----------------------------34,228 28,112 2,251 2,075 1,619 1,687 26 991 756 757 -----------------------------38,880 33,622 -----------------------------$ (4,063) $ 5,667

Management believes it is more likely than not the Company will realize the benefits of its deferred tax assets and therefore no valuation allowance has been provided. A reconciliation from the statutory federal income tax expense to the reported income tax expense is as follows:
(In Thousands) 2001 2000 1999 ------------------------------------$ 32,296 $ 21,970 $ 20,023

Statutory federal income taxes State income taxes, net

of federal income tax benefit Tax credits Write-off of Tia's Tex-Mex goodwill Other, net

1,819 (1,769)

1,690 (1,907)

1,763 (1,123)

558 2,985 131 1,493 31 ------------------------------------$ 33,035 $ 26,231 $ 20,694 =====================================

9. Employee Benefit Plans Salary Deferral Plan - The Company maintains the Ruby Tuesday, Inc. Salary Deferral Plan, which is a 401(k) plan. The Company makes matching contributions to the Plan based on each eligible employee's pre-tax contribution and years of service. The Company contributes 20% of the employee's pre-tax contribution after three years of service, 30% after ten years of service and 40% after 20 years of service. The Company's expense related to the Plan approximated $0.2 million for each of Fiscal 2001, 2000, and 1999. Deferred Compensation Plan - The Company maintains the Ruby Tuesday, Inc. Deferred Compensation Plan for certain selected employees. The provisions of this Plan are similar to those of the Salary Deferral Plan except that the Plan allows up to 100% deferral of annual earnings (net of withholdings). The Company's expenses under the Plan approximated $0.2 million for Fiscal 2001 and 2000 and $0.1 million for Fiscal 1999. Company assets earmarked to pay benefits under the Plan are held by a rabbi trust. Assets and liabilities of a rabbi trust must be accounted for as if they are assets or liabilities of the Company, therefore, all earnings and expenses are recorded in the Company's financial statements. The Plan's assets and liabilities, which approximated $17.5 million and $16.9 million in Fiscal 2001 and 2000, respectively, are included in other assets and other liabilities in the Consolidated Balance Sheets, except for the investment in Company common stock and the related liability payable in Company common stock which are reflected in Shareholders' Equity in the Consolidated Balance Sheets. Retirement Plan - The Company, along with Morrison Fresh Cooking, Inc. (which was subsequently purchased by Piccadilly Cafeterias, Inc.) and Morrison Management Specialists, Inc. (which was subsequently purchased by Compass Group, PLC), sponsors the Morrison Restaurants Inc. Retirement Plan. Effective December 31, 1987, the Plan was amended so that no additional benefits will accrue and no new participants will enter the Plan after that date. Participants receive benefits based upon salary and length of service. Certain responsibilities involving the administration of the Plan are jointly shared by each of the three companies. No contribution was made to the Plan in Fiscal 2001, 2000, or 1999. Executive Supplemental Pension Plan and Management Retirement Plan - Under these unfunded defined benefit pension plans, eligible employees earn supplemental retirement income based upon salary and length of service, reduced by social security benefits and amounts otherwise receivable under other specified Company retirement plans. Effective June 1, 2001, the Management Retirement Plan was amended so that no additional benefits will accrue and no new participants will enter the Plan after that date. The cost of the curtailment in Fiscal 2001 was $0.6 million. To provide a source for the payment of benefits under these Plans, the Company owns whole-life insurance contracts on some of the participants. The cash value of these policies net of policy loans is $9.1 million and $7.1 million at June 5, 2001 and June 4, 2000, respectively. The Company maintains a rabbi trust to hold the policies and death benefits as they are received. During Fiscal 2000, the Company received 147,200 shares of common stock from an insurance company which provides a majority of the whole-life policies as a result of the insurance company's demutualization. In accordance with this receipt, the Company recognized income of $1.7 million.

The following table details the reconciliation of the benefit obligations and fair value of plan assets in addition to the components of pension expense, the funded status and amounts recognized in the Company's Consolidated Financial Statements for the Management Retirement Plan, the Executive Supplemental Pension Plan, and the Retirement Plan. Amounts presented are in thousands.
Pension Benefits 2001 2000 1999 ---------------------Change in benefit obligation: Benefit obligation at beginning of year Service cost Interest cost Actuarial (gain) loss Effect of curtailment Benefits paid Benefit obligation at end of year $20,802 221 1,615 (1,133) (558) (1,627) --------19,320 --------$20,002 170 1,472 705 (1,547) --------20,802 --------$17,825 159 1,288 2,291 (1,561) --------20,002 ---------

Change in plan assets: Fair value of plan assets at beginning of year 8,061 Actual return on plan assets (1,495) Benefits paid (953) --------Fair value of plan assets at end of year 5,613 --------Reconciliation of funded status: Funded status Unrecognized net actuarial loss Unrecognized transition obligation Unrecognized prior service cost Accrued benefit cost

8,199 780 (918) --------8,061 ---------

7,883 1,251 (935) --------8,199 ---------

(13,707) 3,744 292 300 --------$(9,371) =========

(12,741) 3,632 759 545 --------$(7,805) =========

(11,803) 3,491 927 333 --------$(7,052) =========

Amounts recognized in the Consolidated Balance Sheets consist of: (Accrued)/prepaid benefit cost $(8,815) $ 1,441 Accrued benefit liability (3,497) (11,333) Intangible asset 65 1,084 Accumulated other comprehensive income 2,876 1,003 --------- --------Net amount recognized at year-end $(9,371) $(7,805) ========= =========

$ 1,331 (10,255) 925 947 --------$(7,052) =========

Additional year-end information for pension plans with benefit obligations in excess of plan assets: Projected benefit obligation $19,314 $13,068 $11,821 Accumulated benefit obligation 17,644 11,333 10,255 Fair value of plan assets 5,613 Components of net periodic benefit cost: Service cost $ 221 $ 170 $ 159 Interest cost 1,615 1,472 1,288 Expected return on plan assets (763) (778) (752) Amortization of transition obligation 168 168 168 Amortization of prior service cost 204 169 169 Recognized actuarial loss 139 181 67 --------- --------- --------Net periodic benefit cost $ 1,584 $ 1,382 $ 1,099 ========= ========= ========= Assumptions used: Discount Rate Expected return on plan assets Rate of compensation increase

7.75% 10.00% 4.00%

8.00% 10.00% 4.00%

7.50% 10.00% 4.00%

10. Capital Stock, Options and Bonus Plans Preferred Stock - Under its Certificate of Incorporation, the Company is authorized to issue preferred stock with a par value of $0.01 in an amount not to exceed 250,000 shares which may be divided into and issued in designated series, with dividend rates, rights of conversion, redemption, liquidation prices and other terms or conditions as determined by the Board of Directors. No preferred shares have been issued as of June 5, 2001. The Ruby Tuesday, Inc. 1996 Stock Incentive Plan - A Committee, appointed by the Board, administers the Ruby Tuesday, Inc. 1996 Stock Incentive Plan on behalf of the Company and has complete discretion to determine participants and the terms and provisions of Stock Incentives, subject to the Plan. The Plan permits the Committee to make awards of shares of common stock, awards of derivative securities related to the value of the common stock, and certain cash awards to eligible persons. These discretionary awards may be made on an individual basis or pursuant to a program approved by the Committee for the benefit of a group of eligible persons. All options awarded under the Plan have been at the prevailing market value at the time of grant. At June 5, 2001, the Company had reserved a total of 7,199,000 shares of common stock for this Plan. The Ruby Tuesday, Inc. Stock Incentive and Deferred Compensation Plan for Directors - Under the Ruby Tuesday, Inc. Stock Incentive and Deferred Compensation Plan for Directors, non-employee directors have the opportunity to defer the receipt of their retainer fees or to allocate their retainer fees to the purchase of shares of the Company. The Plan provides that the directors must use 60% of their retainer to purchase shares of the Company if they have not attained a specified level of ownership of shares of Company common stock. Each director purchasing stock receives additional shares equal to 15% of the shares purchased and three times the total shares in options, which after six months are exercisable for five years from the grant date. All options awarded under the Plan have been at the prevailing market value at the time of grant. A Committee, appointed by the Board, administers the Plan on behalf of the Company. At June 5, 2001, the Company had reserved 290,000 shares of common stock for the Plan. The Ruby Tuesday, Inc. 1996 Non-Executive Stock Incentive Plan - A Committee, appointed by the Board, administers the Ruby Tuesday, Inc. 1996 Non-Executive Stock Incentive Plan on behalf of the Company and has full authority in its discretion to determine the officers and key employees to whom Stock Incentives are granted and the terms and provisions of Stock Incentives, subject to the Plan. The Plan permits the Committee to make awards of shares of common stock, awards of derivative securities related to the value of the common stock, and certain cash awards to eligible persons. These discretionary awards may be made on an individual basis or pursuant to a program approved by the Committee for the benefit of a group of eligible persons. All options awarded under the Plan have been at the prevailing market value at the time of grant. At June 5, 2001, the Company had reserved a total of 9,012,000 shares of common stock for this Plan. In addition to the above plans, stock options are outstanding under a terminated plan, the Ruby Tuesday, Inc. Stock Bonus and Non-Qualified Stock Option Plan, which was effective from 1986 to 1992. Options to purchase 206,000 shares remain outstanding under the terms of the Plan at June 5, 2001. The Company applies APB 25 and related interpretations in accounting for its employee stock options. In contrast to the intrinsic value based method employed by APB 25, FAS 123 utilizes a fair value based method. FAS 123 requires the use of option valuation models developed for estimating the fair value of traded options which are fully transferable and have no vesting restrictions. Option valuation models also utilize highly subjective assumptions such as expected stock price volatility. Changes in the assumptions can materially impact the fair value estimate and, in management's opinion, do not necessarily provide a reliable single measure of the fair value of its employee stock options. Since the Company has elected to account for its employee stock options in accordance with APB 25, the required pro forma disclosures as if the option valuation models were used are presented below in accordance with FAS 123.

All stock options are awarded at the prevailing market rate on the date of grant; therefore, under the intrinsic value method employed by APB 25, no compensation expense is recognized. For purposes of FAS 123 disclosure, the estimated fair value of the options is expensed over the vesting period of the options. Fair value was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for Fiscal 2001, 2000, and 1999:
2001 5.56% 0.32% 0.362 3.5-7 2000 6.02% 0.48% 0.359 3.5-7 1999 5.50% 0.56% 0.465 3.5-4

Risk-free interest rate Expected dividend yield Stock price volatility factor Expected life of options (in years)

If the Company had adopted FAS 123 in accounting for its stock options granted in 2001, 2000, and 1999, its net income and earnings per share would approximate the pro forma amounts below (in thousands except for per share data):
2001 As Pro Reported Forma $59,239 $54,591 2000 As Pro Reported Forma $36,540 $33,236 1999 As Pro Reported Forma $36,514 $33,089

Net income Earnings per share: Basic Diluted

$ 0.94 $ 0.91

$ 0.87 $ 0.84

$ 0.58 $ 0.57

$ 0.53 $ 0.51

$ 0.56 $ 0.54

$ 0.51 $ 0.49

As discussed in Note 3 of Notes to Consolidated Financial Statements, the Company recorded a charge of $0.7 million in Fiscal 2000 as a result of the acceleration of vesting of Company stock options for American Cafe and Tia's Tex-Mex employees. The following table summarizes the activity in options under these stock option plans:
(In Thousands Except Per-Share Data) Number of Shares Under Option -----------------------------------------------------Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise 2001 Price 2000 Price 1999 Price ------ ------------- -------------- -------Beginning of year 10,119 $ 6.80 9,738 $ 5.73 9,587 $ 4.65 Granted 2,262 $17.23 2,626 $ 9.23 2,682 $ 8.43 Exercised (4,049) $ 4.82 (1,966) $ 4.75 (2,144) $ 4.38 Forfeited (265) $ 8.25 (279) $ 6.78 (387) $ 5.31 ------ ------------- -------------- -------End of year 8,067 $10.66 10,119 $ 6.80 9,738 $ 5.73 ====== ======== ====== ======== ======= ======== Exercisable 1,930 $ 6.55 5,005 $ 4.70 4,204 $ 4.49 ====== ======== ====== ======== ======= ======== Outstanding option prices $2.17-$18.80 $2.17-$9.91 $2.17-$9.78 ================ ================ ================ Exercised option prices $2.78-$12.25 $2.78-$7.11 $2.31-$7.11 ================ ================ ================ Granted option prices $10.69-$18.80 $8.53-$9.91 $6.53-$9.78 ================ ================ ================ Weighted avg. fair value of options granted during the year $6.14 $3.34 $3.42

The following table summarizes information about stock options outstanding at June 5, 2001:
Options Outstanding Range of Exercise Prices Options Exercisable Weighted-Average Weighted Number Remaining Average Number WeightedOutstanding Contractual Exercise Exercisable Average (In Thousands) Life Price (In Thousands) Exercise Price

$ 2.17 - $ 3.16 $ 3.72 - $ 5.38 $ 6.53 - $ 9.78 $ 9.91 - $12.88 $13.75 - $18.80 --------------$ 2.17 - $18.80

91 728 4,994 443 1,811 ----8,067

0.85 0.93 3.31 6.06 4.82 ---3.56

$ 2.87 $ 4.32 $ 8.76 $11.62 $18.60 -----$10.66

91 728 1,076 31 4 ----1,930

$ 2.87 $ 4.32 $ 8.06 $11.55 $15.75 -----$ 6.55

11. Commitments and Contingencies At June 5, 2001, the Company was committed under letters of credit totaling $7.2 million issued primarily in connection with its workers' compensation and casualty insurance programs. As part of its domestic franchise partner program, the Company has negotiated with various lenders a $52.5 million credit facility to assist franchise partners with working capital and operational cash flow requirements. The Company, as sponsor of the credit facility, serves as partial guarantor of the draws made on this revolving line-ofcredit. As of June 5, 2001, the amount guaranteed by the Company on the facility was $18.5 million. The Company is presently, and from time to time, subject to pending claims and lawsuits arising in the ordinary course of its business. In the opinion of management, the ultimate resolution of these pending legal proceedings will not have a material adverse effect on the Company's operations, financial position or liquidity. 12. Subsequent Event Subsequent to June 5, 2001, the Company entered into purchase agreements with three new franchise partners and one existing franchise partner which provide, among other things, for the sale of twelve units in Missouri, five in Indiana, and one each in Kansas, Arkansas, and Illinois. The closing of the sales of the nineteen units in Missouri, Indiana, Arkansas, and Illinois is expected to occur in the second quarter of Fiscal 2002, while the closing of the sale of the unit in Kansas occurred on August 8, 2001. The closings of these sales are subject to various conditions, including the transfer of liquor licenses, third party consents, and availability of financing. Upon completion of the sales, the twenty units will be operated as Ruby Tuesday restaurants and the Company will receive an aggregate purchase price of $32.2 million, of approximately $21.0 to 24.0 million is expected to be paid in cash. The remaining amount will be in the form of interest bearing notes due through 2012. The sales of these units are expected to result in minimal pre-tax gains. As of June 5, 2001, nineteen of the twenty units to be sold were open. The remaining unit is expected to open during the second quarter of Fiscal 2002. Fiscal 2001 revenues from the nineteen units in operation totaled $34.3 million, with operating profits of $3.2 million. The Company also entered into an agreement with an existing partner for the Company's acquisition of three units in Massachusetts, which is expected to close in the second quarter of Fiscal 2002. The negotiated purchase price for the three units is $1.7 million.

13. Supplemental Quarterly Financial Data (Unaudited) Quarterly financial results for the years ended June 5, 2001 and June 4, 2000, are summarized below.
(In Thousands Except Per-Share Data) -------------------------------------------------------------------------------For the Year Ended June 5, 2001 FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL ---------------------------------1----------------------------------------------Revenues $205,010 $196,702 $191,480 $196,442 $789,634 ================================================================================ Gross profit* $ 44,682 $ 40,648 $ 48,567 $ 46,742 $180,639 ================================================================================ Income before income taxes $ 20,076 $ 17,106 $ 28,409 $ 26,683 $ 92,274 Provision for income taxes 7,187 6,124 10,172 9,552 33,035 -------------------------------------------------------------------------------Net income $ 12,889 $ 10,982 $ 18,237 $ 17,131 $ 59,239 ================================================================================ Earnings per share: Basic $ 0.21 $ 0.17 $ 0.29 $ 0.27 $ 0.94 Diluted $ 0.20 $ 0.17 $ 0.28 $ 0.26 $ 0.91 ================================================================================

(In Thousands Except Per-Share Data) -------------------------------------------------------------------------------For The Year Ended June 4, 2000 FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL -------------------------------------------------------------------------------Revenues $195,285 $193,779 $209,222 $199,209 $797,495 ================================================================================ Gross profit* $ 40,292 $ 38,795 $ 46,352 $ 47,059 $172,498 ================================================================================ Income before income taxes $ 16,161 $ 13,151 $ 21,417 $ 12,042** $ 62,771** Provision for income taxes 5,861 4,719 7,687 7,964 26,231 -------------------------------------------------------------------------------Net income $ 10,300 $ 8,432 $ 13,730 $ 4,078 $ 36,540 ================================================================================ Earnings per share: Basic $ 0.16 $ 0.14 $ 0.21 $ 0.07 $ 0.58 Diluted $ 0.16 $ 0.13 $ 0.21 $ 0.07** $ 0.57** ================================================================================

* The Company defines gross profit as revenue less cost of merchandise, payroll and related costs, and other restaurant operating costs. ** Includes a pre-tax charge of $10.0 million recorded in conjunction with the planned disposition of American Cafe and Tia's Tex-Mex restaurants. Diluted earnings per share excluding this loss would have been $0.22 for the quarter and $0.72 for the year. Ruby Tuesday, Inc. common stock is publicly traded on the New York Stock Exchange under the ticker symbol RI. The following table sets forth the reported high and low prices of the common stock and cash dividends paid thereon for each quarter during Fiscal 2001 and 2000.
----------------------------------------------Fiscal Year Ended June 5, 2001 ----------------------------------------------Per Share Cash Quarter High Low Dividends ----------------------------------------------First $13.75 $10.56 2.25 cents Second $16.63 $11.00 -Third $19.55 $13.23 2.25 cents

Fourth

$20.00

$16.12

--

----------------------------------------------Fiscal Year Ended June 4, 2000 ----------------------------------------------Per Share Cash Quarter High Low Dividends ----------------------------------------------First $11.03 $ 8.85 2.25 cents Second $11.03 $ 9.00 -Third $ 9.94 $ 7.85 2.25 cents Fourth $11.56 $ 8.09 --

On July 9, 2001, the Company's Board of Directors declared a semi-annual cash dividend of 2.25 cents per share payable on August 6, 2001, to shareholders of record on July 23, 2001. As of July 27, 2001, there were approximately 5,700 holders of record of the Company's common stock.

Report of Independent Auditors Shareholders and Board of Directors Ruby Tuesday, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheets of Ruby Tuesday, Inc. and subsidiaries as of June 5, 2001 and June 4, 2000, and the related consolidated statements of income, shareholders' equity and comprehensive income, and cash flows for the two years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The accompanying consolidated financial statements of Ruby Tuesday, Inc. and subsidiaries for the year ended June 6, 1999 were audited by other auditors whose report dated June 28, 1999, expressed an unqualified opinion on those statements. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the 2001 and 2000 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ruby Tuesday, Inc. and subsidiaries as of June 5, 2001 and June 4, 2000, and the results of their operations and their cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ KPMG LLP

Louisville, Kentucky June 29, 2001

1 RUBY TUESDAY, INC. AND SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF REGISTRANT (a) The Registrant has no parent. (b) The Registrant's subsidiaries and their jurisdictions of each organization are as follows (100% of voting securities of each subsidiary owned by the Registrant): Delaware: Ruby Tuesday Business Development, Inc. Tennessee: Quality Outdoor Services, Inc. In addition to the subsidiaries listed above, the Registrant has a minority ownership in several operating companies, several wholly-owned subsidiaries which hold minority interests in operating companies, and several wholly- owned subsidiaries and/or minority interests in non-operating companies created solely for the purpose of holding certain licenses.

Page 1 Consent of KPMG LLP, Independent Auditors The Board of Directors Ruby Tuesday, Inc.: We consent to incorporation by reference in the registration statements (Nos. 33-32697, 333-03165, 3320585, 333-03153, 2-97120, 33-13593, 33-46220, 33- 56452, 333-03155, 333-77965, 33-46218 and 33388879) on Form S-8 and (No. 33- 57159) on Form S-3 of our report dated June 29, 2001, relating to the consolidated balance sheets of Ruby Tuesday, Inc. and Subsidiaries as of June 5, 2001 and June 4, 2000, and the related consolidated statements of income, shareholders' equity and comprehensive income, and cash flows for the two years then ended, which report appears in the June 5, 2001 annual report on Form 10-K of Ruby Tuesday, Inc.
/s/ KPMG LLP

Louisville, Kentucky August 30, 2001

Consent of Ernst & Young LLP, Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-32697) pertaining to the Ruby Tuesday, Inc. Deferred Compensation Plan, in the Registration Statement (Form S-8 No. 33303165) pertaining to the Ruby Tuesday, Inc. Deferred Compensation Plan, in the Registration Statement (Form S-8 No. 33-20585) pertaining to the Ruby Tuesday, Inc. Salary Deferral Plan, in the Registration Statement (Form S-8 No. 333-03153) pertaining to the Ruby Tuesday, Inc. Salary Deferral Plan, in the Registration Statement (Form S-8 No. 2-97120) pertaining to Ruby Tuesday, Inc. Long-Term Incentive Plan, in the Registration Statement (Form S-8 No. 33-13593) pertaining to the Ruby Tuesday, Inc. 1987 Stock Bonus and Non-Qualified Stock Option Plan, in the Registration Statement (Form S-8 No. 33-46220) pertaining to the Ruby Tuesday, Inc. Compensatory Non-Qualified Stock Option Arrangements, in the Registration Statement (Form S-8 No. 33-56452) pertaining to the Ruby Tuesday, Inc. Stock Incentive and Compensation Plan for Directors, Stock Incentive Plan and Non-Qualified Management Stock Option Agreements, in the Registration Statement (Form S-8 No. 333-03155) pertaining to the Ruby Tuesday, Inc. 1996 Stock Incentive Plan, in the Registration Statement (Form S-8 No. 33-77965) pertaining to the Ruby Tuesday, Inc. 1996 Non-Executive Stock Incentive Plan (formerly the 1993 Non-Executive Stock Incentive Plan), in the Registration Statement (Form S-8 No. 33-46218) pertaining to the Ruby Tuesday, Inc. 1989 Non-Qualified Stock Option Plan, in the Registration Statement (Form S-8 No. 333-88879) pertaining to the Ruby Tuesday, Inc. 1996 Stock Incentive Plan, and in the Registration Statement (Form S-3 No. 33-57159) of Ruby Tuesday, Inc., of our report dated June 28, 1999, with respect to the consolidated statements of income, shareholders' equity, and cash flows of Ruby Tuesday, Inc. for the year ended June 6, 1999, incorporated by reference in the Annual Report (Form 10K) for the year ended June 5, 2001.
/s/ Ernst & Young LLP Atlanta, Georgia August 28, 2001

tner agrees to maintain the confidentiality of all Confidential Information throughout the Term and for a period of two (2) years after the termination of this Agreement. For purposes of this Section, the term "Confidential Information" means data and information relating to the business of RTI which does not rise to the level of a Trade Secret and which is or has been disclosed to the Partner or of which the Partner has become aware as a consequence of or through his employment relationship with RTI and which has value to RTI 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 RTI (except where such public disclosure was effected by the Partner without authorization) or that has been independently developed and disclosed by others or that otherwise enters the public domain through lawful means. 5.3 No Solicitation. During the Term and for a period of twelve (12) months immediately following the termination of this Agreement or the termination of Partner's employment with RTI, whichever occurs later, the Partner shall not, for himself or on behalf of or for the benefit of any other person, corporation or entity, seek to employ, solicit or recruit any employee of RTI or any of its franchisees or licensees for employment by a "Competing Business", or induce or encourage any such employee to terminate employment with RTI or such franchisee or licensee, nor will the Partner knowingly provide the name of any employee of RTI or such franchisee or licensee for the purpose of solicitation or recruitment by or for the benefit of a Competing Business. For purposes of this section, "Competing Business" means a casual dining restaurant business offering the same or similar products and services as offered by Concept Restaurants or restaurants in any other system owned, operated, franchised or licensed by RTI or any affiliate including, without limitation, varied menu (to include, without limitation, any combination of soups, sandwiches, chicken, ethnic cuisine, health/fitness oriented dishes), waiter/waitress service, sit-down dining and bar services. "Competing Business" shall not include so called "fast food" restaurants. The parties agree that the damages which RTI will suffer in the event of Partner's breach of the foregoing covenant are difficult to quantify and determine. Therefore, the parties agree that in the event of each such breach, Partner shall pay to RTI, as liquidated damages and not as a penalty, the amount of $25,000.00. 5.4 Covenant Not to Compete. The Partner agrees, acknowledges and understands that the nature, kind and character of the business conducted by RTI is highly competitive. Incident to the terms and conditions hereof and for the considerations contained herein, the Partner agrees that: (a) throughout the Term and for a period of two (2) years following the termination of this Agreement or the termination of Partner's employment with RTI, whichever occurs later, and for whatever reason, the Partner will not enter into any employment, consulting or similar relationship with any person, organization or entity which is in the same or similar business as RTI in an executive, managerial or other capacity. The Partner acknowledges that

this covenant is reasonable and necessary to protect the interests of RTI; and (b) by virtue of the duties and special knowledge of the affairs and operations of RTI that the Partner has and will obtain as a result of his employment relationship with RTI, a breach or threatened breach by him of the provisions of this covenant not to compete shall cause irreparable injury to RTI and shall entitle RTI, in addition to any other remedy, to injunctive relief against such breach or threatened breach. 5.5 No Other Employment. The Partner agrees, acknowledges and understands that the nature, kind and character of RTI's business is highly competitive. Incident to the Partner's engagement hereunder and for the considerations contained herein, the Partner agrees that throughout the Term of this Agreement Partner will devote all of his/her full time, energy, skills and best efforts to the supervision and management of the Restaurants in the Concept and the Partner's duties and responsibilities under this Agreement (with earned vacations and reasonable absences because of illness or permitted leaves of absence excepted), and will not enter into any employment, consulting or similar relationship with any organization or entity. The Partner acknowledges that this covenant is reasonable and necessary to protect the interests of RTI. 5.6 Default. In the event the Partner shall breach any covenant contained in Sections 5.1, 5.2, 5.3, 5.4 or 5.5 hereof, and such breach shall not be cured to the reasonable satisfaction of RTI within five (5) days after delivery of a written notice thereof from RTI, then in addition to all other rights and remedies of RTI with respect thereto, RTI shall thereupon be relieved of liability for all obligations then remaining under Section 5 above. ARTICLE VI. MISCELLANEOUS 6.1 Headings and Capitalized Terms. Titles or captions of Articles or Sections contained in this Agreement are intended for reference convenience only, and shall not define, limit, extend or describe the scope of this Agreement or the meaning of any provision hereof. Capitalized terms not otherwise defined herein shall have the customary meaning then being ascribed to them in the course of RTI's general business operations. 6.2 Amendment. This Agreement may not be amended (in whole or in part) orally or by course of performance, but only by a written instrument signed by both parties. 6.3 Notice. Except as otherwise required under this Agreement, any notice required or permitted to be given pursuant to this Agreement shall be sufficiently given: (a) to the Partner if in writing and personally delivered, or mailed (and if mailed shall be deemed given three (3) business days after mailing) registered or certified mail addressed to the Partner at Partner's residence as shown in the records of RTI or at such other address as the Partner shall designate in writing to RTI in accordance with this Section 6.3(a); and (b) to RTI if in writing and personally delivered to the Chief Executive Officer of RTI or mailed (and if mailed shall be deemed given three (3) business days after mailing) registered or certified mail addressed to the Chief Executive Officer of RTI at 150 West Church Avenue, Maryville, Tennessee 37801, or to such other person and address as RTI shall designate in writing to the Partner in accordance with this Section 6.3(b). 6.4 Binding Effect. This Agreement shall inure to the benefit of and be binding upon the Partner and the Partner's executor, administrator, heirs and personal representatives and upon RTI and its successors and assigns. The Partner may not assign his rights and obligations hereunder without the written consent of RTI. RTI may assign its rights hereunder without Partner's consent. 6.5 Relationship. Nothing herein shall be construed as creating a joint venture, unincorporated association, partnership or other relationship. 6.6 Applicable Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Tennessee, without regard to the principles of conflicts of laws. 6.7 No Defense. The existence of any claim or cause of action of the Partner against RTI, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by RTI of any covenant contained in this Agreement. No claim or proceeding may be made, brought or maintained by Partner (his/her successors, assigns or legal representatives) to enforce any liability or obligation of RTI under this Agreement, unless brought

before the first to occur of one (1) year after (a) the date any Salary amount or bonus is paid (or required to be paid) to Partner with respect to such Salary amount or bonus, or (b) the expiration or termination of this Agreement with respect to all other matters. 6.8 Survival. The provisions of Sections 4.4, 4.5 and Article V hereof shall survive any termination of this Agreement. IN WITNESS WHEREOF, RTI has executed and delivered by its duly authorized officer, and Partner has executed and delivered, this Agreement all as of the day and year first above written. RUBY TUESDAY, INC.
By:/s/Samuel E. Beall, III Title: Chairman and Chief Executive Officer

PARTNER:
/s/ Robert D. McClenagan, Jr. ROBERT D. McCLENAGAN, JR.

IRREVOCABLE STOCK POWER FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ______________________________________ a total of _____________ shares of the Common Stock, par value $.01 per share, of Ruby Tuesday, Inc. registered in the name of the undersigned on the stock transfer records of Ruby Tuesday, Inc. and represented by Stock Certificate No(s). ________________ of Ruby Tuesday, Inc.; and the undersigned does hereby irrevocably constitute and appoint Daniel T. Cronk, his attorneyin-fact, to transfer the aforesaid shares on the books of Ruby Tuesday, Inc., with full power of substitution; and the undersigned does hereby ratify and confirm all that said attorney-in-fact lawfully shall do by virtue hereof.
Date: June 21, 2001 Robert D. McClenagan Print Name

/s/ Robert D. McClenagan Signature

IN THE PRESENCE OF: Kay Parsons Mayes Print Name
/s/ Kay Parsons Mayes Signature 00812762.W51

Ptnr Agrmt McClenagan 52901.doc RUBY TUESDAY, INC.

13

IRREVOCABLE STOCK POWER FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ______________________________________ a total of _____________ shares of the Common Stock, par value $.01 per share, of Ruby Tuesday, Inc. registered in the name of the undersigned on the stock transfer records of Ruby Tuesday, Inc. and represented by Stock Certificate No(s). ________________ of Ruby Tuesday, Inc.; and the undersigned does hereby irrevocably constitute and appoint Daniel T. Cronk, his attorneyin-fact, to transfer the aforesaid shares on the books of Ruby Tuesday, Inc., with full power of substitution; and the undersigned does hereby ratify and confirm all that said attorney-in-fact lawfully shall do by virtue hereof.
Date: June 21, 2001 Robert D. McClenagan Print Name

/s/ Robert D. McClenagan Signature

IN THE PRESENCE OF: Kay Parsons Mayes Print Name
/s/ Kay Parsons Mayes Signature 00812762.W51

Ptnr Agrmt McClenagan 52901.doc RUBY TUESDAY, INC.

13 PROPOSAL For [GRAPHIC OMITTED] RUBY TUESDAY, INC. July 25, 2001 by PFG CUSTOMIZED DISTRIBUTION

PFG CUSTOMIZED DISTRIBUTION PROPOSAL FOR RUBY TUESDAY, INC. PRICING 1. This proposal includes servicing Ruby Tuesday, Inc (RTI), participating RTI Franchisees, and Specialty

13 PROPOSAL For [GRAPHIC OMITTED] RUBY TUESDAY, INC. July 25, 2001 by PFG CUSTOMIZED DISTRIBUTION

PFG CUSTOMIZED DISTRIBUTION PROPOSAL FOR RUBY TUESDAY, INC. PRICING 1. This proposal includes servicing Ruby Tuesday, Inc (RTI), participating RTI Franchisees, and Specialty Restaurant Group, LLC (SRG) collectively described herein as "Customer". SRG will be required to execute a copy of this agreement. After RTI's contractual obligations to service SRG is concluded, PFG agrees to seriously consider continuing it's relationship with SRG. 2. PFG agrees to supply Customer's requirements of food and non-food items including produce, disposables, smallwares, and chemicals ordered by Customer in the operation of the restaurants listed on Exhibit "B" and "C". Customer agrees to purchase such ordered items pursuant to the terms hereof. This proposal/agreement does not create an exclusive relationship between or among the parties. 3. PFG will invoice customer at prices supplied to PFG by RTI from time to time. RTI will specify the order or delivery day the price is to take effect. 4. Customer guarantees PFG a raw gross margin of $142.15 per ideal delivery plus $1.01 per piece delivered plus or minus the performance measure adjustments outlined on Exhibit "D". PFG will submit a report detailing the actual sales and gross margin and any amount due PFG under the gross margin guarantee within four (4) weeks after the end of each PFG accounting period. Ideal delivery is defined as the regularly scheduled deliveries per week per restaurant. PFG and RTI agree to review our business relationship, the delivery fee, and the per piece fee in March of each year with the agreed upon changes to take effect July 1st of each year. 5. Costs will be based on the actual landed product cost at each PFG Customized Distribution center. The definition of "cost" is our actual FOB invoice cost plus any applicable freight, not to exceed the standard rate applicable for that route, less manufacturer's volume discounts, off-invoice promotions, and billback promotions. Cash discounts, buy-in incentives, rebates, and growth programs offered by manufacturers to distributors will accrue to the benefit of PFG Customized Distribution. 6. Our actual costs will reflect the lowest possible buy bracket within shelf life limitations and a maximum 28 day inventory on hand. To achieve the lowest possible buy bracket for customer, inbound shipments for customer will be combined with inbound shipments for all other customers served by each distribution center. Once the lowest possible buy bracket is achieved, PFG will carry less than a 28 day inventory while maintaining sufficient safety stock. 7. PFG will work with RTI to drive down cost through inbound freight and purchasing synergies. The dollar savings suggested by PFG and accepted by RTI will be shared by RTI , SRG, Ruby Tuesday Franchisees, and

PFG CUSTOMIZED DISTRIBUTION PROPOSAL FOR RUBY TUESDAY, INC. PRICING 1. This proposal includes servicing Ruby Tuesday, Inc (RTI), participating RTI Franchisees, and Specialty Restaurant Group, LLC (SRG) collectively described herein as "Customer". SRG will be required to execute a copy of this agreement. After RTI's contractual obligations to service SRG is concluded, PFG agrees to seriously consider continuing it's relationship with SRG. 2. PFG agrees to supply Customer's requirements of food and non-food items including produce, disposables, smallwares, and chemicals ordered by Customer in the operation of the restaurants listed on Exhibit "B" and "C". Customer agrees to purchase such ordered items pursuant to the terms hereof. This proposal/agreement does not create an exclusive relationship between or among the parties. 3. PFG will invoice customer at prices supplied to PFG by RTI from time to time. RTI will specify the order or delivery day the price is to take effect. 4. Customer guarantees PFG a raw gross margin of $142.15 per ideal delivery plus $1.01 per piece delivered plus or minus the performance measure adjustments outlined on Exhibit "D". PFG will submit a report detailing the actual sales and gross margin and any amount due PFG under the gross margin guarantee within four (4) weeks after the end of each PFG accounting period. Ideal delivery is defined as the regularly scheduled deliveries per week per restaurant. PFG and RTI agree to review our business relationship, the delivery fee, and the per piece fee in March of each year with the agreed upon changes to take effect July 1st of each year. 5. Costs will be based on the actual landed product cost at each PFG Customized Distribution center. The definition of "cost" is our actual FOB invoice cost plus any applicable freight, not to exceed the standard rate applicable for that route, less manufacturer's volume discounts, off-invoice promotions, and billback promotions. Cash discounts, buy-in incentives, rebates, and growth programs offered by manufacturers to distributors will accrue to the benefit of PFG Customized Distribution. 6. Our actual costs will reflect the lowest possible buy bracket within shelf life limitations and a maximum 28 day inventory on hand. To achieve the lowest possible buy bracket for customer, inbound shipments for customer will be combined with inbound shipments for all other customers served by each distribution center. Once the lowest possible buy bracket is achieved, PFG will carry less than a 28 day inventory while maintaining sufficient safety stock. 7. PFG will work with RTI to drive down cost through inbound freight and purchasing synergies. The dollar savings suggested by PFG and accepted by RTI will be shared by RTI , SRG, Ruby Tuesday Franchisees, and PFG. The savings will be calculated using customer's current actual or projected future cost in effect at the time PFG initiates a savings suggestion. The dollar savings will be agreed to and signed off on by both parties. The shared savings will be calculated on a program to date basis and disbursed to each party within 30 days after the end of each RTI fiscal quarter.
RTI - PFG SHARED SAVINGS PROGRAM RTI 90% 85% 80% 75% PFG 10% 15% 20% 25%

1ST $100,000 $100,001 - $200,000 $200,001 - $300,000 $300,001 & Above

Our purchasing department will continually make suggestions to lower your product costs. A formal once a year review of your program will be performed by our category managers and our recommendations will be presented to you.

8. PFG will assist RTI to continue, enhance, and track existing and new rebates offered by manufacturers to restaurant operators. 9. Upon the signature of this agreement, a quick review of customer's product requirements will be performed with the mutual goal of reducing the number of items stocked in PFG's warehouses but in all cases maintaining RTI's high quality standards. RTI will authorize all product changes and substitutions. 10. Backhaul charges built into our product costs will be the lowest competitive freight rate offered by the manufacturer for the agreed upon shipping bracket. If customer's supplier contract is on a delivered price basis, customer authorizes PFG to negotiate appropriate backhaul allowances with the supplier. 11. A fee of .05 cents per gross weight pound, will be added to the cost of items transferred via inter-company shuttle. 12. Customer acknowledges PFG requires inbound carriers to offload and palletize each item on the shipment according to PFG's warehouse tie and high. Alternatively PFG offers the carrier a lumping service. The current lumping fees charged carriers are detailed on Exhibit "A" and may be changed from time to time by PFG. 13. To recover our rail siding capital investment and unloading labor costs, the cost of products received by rail will include a charge of $.15 per case for items where gross weight is less than 35 pounds and $.20 per case if the gross weight is 35 pounds or more. 14. PFG Customized Distribution agrees to inventory all items on the RTI approved product list, and Customer agrees to purchase each lot of product within no more than 30 days from the date the product is received at PFG's distribution center. In the event SRG, a RTI franchisee partner, or an RTI region wants to use an item which is not on the RTI approved product list a minimum movement of 50 cases per month per PFG distribution center will be required to carry the item in our inventory 15. PFG will supply RTI with a Dead & Slow Moving Inventory Report on a monthly basis totaled by item, by distribution center. 16. Customer will be responsible for the disposition of dead and slow moving inventory in excess of a 28 day supply and for short shelf life items with one third or less of it's total shelf life remaining (Dead Inventory). PFG shall notify RTI in writing when one third or more of a lot's shelf life is remaining and RTI shall instruct PFG of the final disposition of the short shelf life lot before it's shelf life has expired. If dead inventory is not distributed to Customer before it's shelf life expires or within twenty-eight (28) days after being reported on the Dead and Slow Moving Inventory Report. The dead inventory will be either; (a) returned to vendor with the vendor's written consent; (b) sold through channels other than to Customer; (c) donated in the name of the Customer with PFG providing Customer with original documents confirming the donation, or (d) dumped. Upon disposition of dead inventory, Customer will be responsible for reimbursing PFG for PFG's actual landed product cost; plus the guaranteed piece fee; plus freight incurred delivering the dead inventory to the vendor, third party, donee, or dump; plus restocking fees if any; plus disposal fees if any; and less any proceeds or credits obtained by PFG in returning product to vendors or selling product through channels other than to Customer. All reasonable efforts will be made to require vendors, third parties, and donation recipients to pick the dead inventory up at PFG's warehouse. 17. Market conditions will, from time to time, necessitate PFG Customized Distribution taking an extended inventory position on certain products to assure continuity of supply to customer. This could be precipitated by drought, excessive rain or other natural causes. Should this situation occur, and with customer `s prior written agreement, we will add a 2.5% per month carrying charge to the price of those items affected by such natural causes after they have been in stock for a period of 30 days. If product must be put into outside storage, then customer will in addition pay the actual storage costs and freight from the outside storage to our distribution centers. 18. The delivery fee is based on a base diesel fuel cost of $1.50 per gallon. The "Fuel Collar" will be from $1.40 to $1.60 per gallon. For each PFG accounting period, PFG will calculate it's actual fuel cost per gallon and

submit same to RTI by the 30th of the following month. PFG will debit or credit (as applicable) customer for any difference over or under the fuel cost collar of $1.40 to $1.60 per gallon, based on the pieces shipped to customer pursuant to this agreement from each PFG distribution center as a percent of the total pieces shipped from the distribution center. 19. Our pricing includes a 3 cents per piece WOW University accrual fund. Dispersement from this fund will be as directed by RTI. An accounting of this fund will be provided to RTI within 30 days after the close of each PFG financial month end. Disbursement from this account to RTI will occur annually within 30 days after the close of each RTI fiscal year, or within thirty (30) days after termination of this agreement. 20. PFG agrees to submit to periodic on site price verification by RTI of invoices, bills of lading and other documents that substantiate the costs charged to customer. RTI will provide PFG thirty (30) days advance notice of price verification in writing. Price verification will be limited to: (a) one hundred (100) items per verification, (b) a time period of the previous ninety (90) days, and (c) four (4) verifications per year, unless a specific item is in question. PFG agrees to refund customer the amount of any net overcharges verified by price verification which were sustained by customer through the twelve (12) months preceding the price verification, and customer agrees to reimburse PFG the net amounts of any undercharges verified by price verification which were sustained by PFG through the twelve (12) months preceding the price verification. Only PFG and RTI will participate in the price verification. RTI guarantees the confidentiality of information provided by PFG. Disclosure of information will be restricted to senior management of RTI, participating RTI franchisees, and SRG. 21. In the event PFG disputes any specific amount due customer as a result of price verification, PFG shall notify RTI within ten (10) days of the specific amount disputed and the reason for such dispute. Any amounts that are not disputed shall be paid to customer within thirty (30) days of the settlement of such dispute between RTI and PFG. 22. In the event of any such dispute, PFG shall verify RTI's findings at PFG's sole expense by a verification of a Certified Public Accountant mutually agreeable to RTI and PFG. PFG and RTI will accept the findings of that verification. SERVICE 1. Customer will initially be serviced by PFG's Gainesville, Florida customized distribution center in the areas shown and defined on Exhibit "B". In November 2001 or January 2002 PFG's Tennessee distribution center will commence service to the areas shown and defined on Exhibit "C". Other distribution centers will be added as determined by PFG and RTI. 2. Customer will be the personal responsibility of each distribution center's general manager, assisted by a branch multi-unit account manager. An overall PFG multi-unit account executive will also be assigned to the RTI account. 3. Order inventory guides containing current pricing will be provided to RTI's corporate office and each unit via PFG connection. 4. Orders may be placed and confirmed electronically on an agreed upon skip working day call schedule. PFG Customized Distribution will provide our order entry and inventory management software at no charge to customer. The cost of personal computers and modems at each restaurant will be customer's responsibility. 5. PFG's customer service department will call restaurants unable to order electronically for their order according to an agreed upon skip working day call schedule. It is imperative that the unit has it's order ready at the agreed upon time, and in any event no later than 3 p.m. local branch time. 6. A minimum of one primary and one back-up customer service representative at each distribution center will be assigned to customer to review edits of the orders and to resolve any problems in advance of the delivery. Limited add-on orders can be called in up to 9 a.m. local branch time on the day the truck is being loaded. 7. When orders are received on a skip working day basis PFG Customized Distribution agrees to maintain a

99.5% order fill rate. Out of stock and short items will be delivered on the next available truck going to the store's area and no later than the next regularly scheduled delivery day. When measuring order fill, service failures to be excluded from the calculation are: a) An act or omission on the part of customer or the restaurants, b) An act or omission on the part of customer's supplier, c) Recovery shipments received by customer the same day as the scheduled delivery, or d) Force majeure. 8. Customer orders will be delivered on temperature controlled trucks with separate temperature controlled freezer, cooler, and dry grocery compartments. 9. Deliveries will be made twice per week Monday through Saturday between 7 a.m. to off the lot by 11:00 a.m. and from 2:00 p.m. to off the lot by 5:30 p.m. on a mutually agreeable delivery schedule. By mutual agreement locations may take a delivery as early as 6 a.m. and we may request a few remote locations to take deliveries between 7 p.m. and 10 p.m. Deliveries will be made within, plus or minus one hour of the scheduled delivery time. Regular and holiday week delivery schedules will be agreed upon at least 2 weeks before the changes are put into effect. By mutual agreement, key drop deliveries may become necessary. 10. Our driver will place the merchandise in the proper temperature area of the store. The unit manager on duty will check the merchandise off at the entrance to the restaurant and sign each page of the invoice before the driver leaves the store. Each piece's individual catch weight will be listed on the delivery invoice. 11. Restaurants may from time to time request that PFG make special deliveries outside of the normal ordering and delivery schedule to compensate for restaurant business surges or ordering mistakes. The restaurant shall be responsible to pay PFG the regular per piece fee plus: a) The regular delivery fee plus $1.50 per out of route mile if sent to the restaurant by a PFG delivery vehicle, b) PFG's actual shipping cost if shipped via a third party. 12. Restaurants shall be responsible for a restocking fee of $3.50 per case for products returned to the distribution center due to an error by the restaurant and a late fee of $10.00 per order for any orders accepted by a distribution center after the established add-on order cut off time. Restaurants where the managers are unable to place their orders via PFG Connection will be charged a telephone order service fee of $10.00. These fees are set forth as a tool to keep customer's and PFG's distribution cost down. The above fees will only be charged with the approval of RTI's Director of Purchasing or Director of Distribution. 13. Monthly reports on product usage will be provided to RTI's corporate office, in RTI's required data file format. Our capable in-house programming staff using our modern IBM AS400 computers can provide you with almost any report you might request. QUALITY 1. It is understood that PFG is not the manufacturer of any of the products. PFG will assign to customer all assignable rights against manufacturers and suppliers of goods supplied to customer by PFG under warranties and indemnification's PFG receives from such manufacturers and suppliers. PFG agrees to cooperate with customer in the enforcement of any such warranties or indemnification's against manufacturers or suppliers. 2. To the best of PFG's knowledge each product supplied hereunder shall, at the time title passes to customer: (a) not be adulterated or misbranded within the definition of the Food, Drug and Cosmetic Act, as amended, or other applicable federal or state law, or otherwise spoiled, adulterated or out-of-code and (b) comply in all respects with any and all other laws, rules and regulations similar thereto or applicable to the supply of products and services by PFG to the restaurants. MERCHANDISE CREDITS AND RETURNS 1. Credits due because of shortages, damaged goods or incorrect merchandise if any at the time of delivery, must be noted on all copies of the PFG Customized Distribution invoice and the invoice total changed and initialed by the restaurant manager and our driver. Credit memos will be issued internally at PFG Customized Distribution's distribution centers. 2. In the event of concealed damage or defective product, the PFG Customer Service Representative should be notified and the following information provided: a) Item code number and description b) Quantity c) Invoice price

d) Invoice number and date e) Nature of problem An on the spot credit memo will be sent with the next delivery and posted to your account when the product is returned to our warehouse. 3. PFG will notify customer's quality assurance department of singularly serious or recurring issues. CREDIT APPROVAL AND PAYMENT TERMS 1. PFG Customized Distribution will require a separate credit application for each legal entity to be sold under this agreement, and reserves the right to approve or disapprove open payment terms for each individual legal entity. 2. Payment for each delivery is to be received in PFG's bank no later than 1:00 p.m. eastern standard time, 14 days after the date of delivery. Payments are to be made by ACH wire transfer to the account of Performance Food Group Company, ABA# 051400549, Account # 205000424870, Reference: PFG Customized/RTI, First Union Bank, Richmond, VA. 3. Within 15 days following receipt of a request from PFG, RTI and each legal entity to be sold hereunder shall furnish PFG with its quarterly financial statement for its most recently completed fiscal quarter, certified as accurate by an appropriate officer of RTI or such legal entity. 4. PFG will supply RTI's purchasing department every thirty (30) days with copies of all skipped or short paid invoices due PFG from Customer. If copies are not furnished within ninety (90) days from date of delivery Customer will not be responsible for paying for the merchandise. PROGRAM IMPLEMENTATION PFG Customized Distribution represents and warrants it has had considerable experience implementing programs of this nature. We are fully aware of the importance of proper planning, inventory build up, scheduling and coordination of all facets necessary for a smooth and successful transition. In view of the above, we ask that the roll-out schedule begin no sooner than 75 days after notification of your decision to accept this proposal. PFG Customized Distribution will buy your present distributor's inventory at PFG's delivered cost. We will be responsible for picking up the product and delivering it to our warehouse at our expense. We prefer to pick up initial stocking quantities the present distributor is long on 3 weeks before our delivery starts, and to clean out the distributor's remaining inventory within 3 weeks after our delivery starts. PFG Customized Distribution will pick up from your former distributor only those items and quantities which your purchasing department approves including specifying the cost to be paid. COMMITMENTS FROM CUSTOMER This type of program is commonly referred to as a "Prime Vendor Contract". The term, in itself, indicates a mutual agreement between the customer and the distributor to make certain commitments to each other. We look to customer to agree to the following commitments: 1. Average Order Size Customer agrees to maintain a system wide average order size of at least 150 pieces two times per week per restaurant, an average piece weight of 24.5 pounds, and an average piece cube of 1.0 cubic feet, and an average sell price not to exceed $29.00. Under-performing restaurants will be reviewed by the management of each company on a monthly basis. 2. Equal Deliveries Customer agrees to split its deliveries into, generally, 2 equal deliveries per restaurant per week. PFG will provide customer with a monthly pieces by delivery report. A 48% - 52% split is acceptable. Restaurants falling outside this range will be reviewed on a monthly basis by PFG and customer. 3. Cost Containment The profit margin of a "Prime Vendor" contract dictates that the distributor operate under a sound cost containment policy in relation to inventory turns, orders placed at the agreed upon times, cooperation in quickly receiving the merchandise, and payment according to the agreed upon payment terms. This proposal has been customized to meet customer's requirements while minimizing each of these distributor cost areas.

MISCELLANEOUS TERMS 1. BREACH. Upon the occurrence of a Breach (as defined below), the non-breaching party may terminate at its option upon written notice of termination to the breaching party, and in addition, may seek any and all remedies available at law or in equity in connection with the Breach. A breach is defined as: (a) RTI's (or SRG or an RTI Franchisee with respect to a breach by SRG or such RTI Franchisee) or PFG's, as the case may be, failure to perform any material term, covenant or agreement contained herein or in any document or instrument delivered pursuant to or in connection with this Agreement, and such failure continues for thirty (30) days after written notice of such failure has been delivered by the non-breaching party; (b) RTI's (SRG's or an RTI Franchisee's) or PFG's application for or consent towards the appointment of a receiver, custodian, trustee, or liquidator; inability to pay its debts as such debts become due; general assignment for the benefit of its creditors; commencement of a voluntary case under the United States Bankruptcy Code; filing a petition seeking to take advantage of any other law of any jurisdiction relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts; or commencement by any person against such party of a proceeding commenced for any similar relief under any law of any jurisdiction relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, and such proceeding shall continue un-dismissed for a period of thirty (30) days; (c) RTI's (SRG's or an RTI Franchisee's) or PFG's assignment of its rights and obligations under this Agreement, in whole or in part, to another entity (other than an affiliate of RTI or PFG) without prior written consent of the other, which consent shall not be unreasonably withheld or delayed; or (d) RTI's (SRG's or an RTI Franchisee's) or PFG's failure to comply with the payment terms hereof if not cured within fifteen (15) days following written notice. (e) Notwithstanding the foregoing, PFG acknowledges that RTI Franchisees and SRG are each independent contractors and, as such, RTI is not liable to PFG for or with respect to any of SRG's or such Franchisee's purchases or performance hereunder. In the event of a Breach by SRG or such Franchisee of any of its obligations hereunder, including payment, after notice as required pursuant hereto, PFG may bar SRG or such Franchisee from continued participation hereunder; provided, however, that same shall not constitute a Breach by RTI, or any other Franchisee or SRG (if SRG is not the primary breaching party). 2. ASSIGNMENT. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This agreement may not be assigned by either party without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed. 3. RISK OF LOSS. Title to all goods shall pass upon delivery to the receiving unit and acceptance by authorized signature, subject to rejection of certain items as provided herein. PFG shall bear all risk of loss, damage or destruction until title passes. 4. CONFIDENTIALITY. Neither this proposal nor any discussion, negotiation, or agreement entered into pursuant to it shall be used by PFG, RTI, participating RTI franchise partner, or SRG, in publicity or promotional material, nor shall any party hereto disclose any information regarding this proposal nor any discussion, negotiation, or agreement entered into pursuant to it without the express written consent of the other parties. This provision shall not preclude PFG or RTI from making public statements that RTI is a customer of PFG. 5. CONSTRUCTION/APPLICABLE LAW. This Agreement shall be deemed to have been made at the Ruby Tuesday, Inc. Restaurant Support Center located at 150 West Church Avenue, Maryville, Tennessee 37801, and shall be construed in accordance with the laws of the State of Tennessee. 6. NOTICES. All notices and other communications provided for hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, sent by telegram or facsimile transmission, or mailed, postage prepaid, registered or certified mail, to the parties at their principal executive offices or at such other addresses as the parties hereto may designate from time to time in writing. Notices to RTI shall be directed to the attention of Lee Wallace. Notices to PFG shall be directed to the attention of Troy Curtis, Vice President of Business Development.

7. SRG and each RTI Franchisee purchasing hereunder shall receive all of the benefits and rights of RTI hereunder, including pricing, incentives, freight charges, and service level. All of SRG's and RTI Franchisees' purchases hereunder shall be aggregated with RTI purchases for pricing, incentive and other similar purposes. 8. The terms of this proposal will remain firm for thirty (30) days. 9. This agreement may be amended or modified only by a written agreement executed by each of the parties hereto. 10. Upon acceptance, this agreement will be effective until terminated as provided for in paragraph 1 of the "MISCELLANEOUS TERMS" or until terminated by either Ruby Tuesday, Inc. or PFG Customized Distribution upon one hundred eighty (180) days written notice to the other party. In the event of termination, Ruby Tuesday, Inc. will be responsible for the purchase and removal of all products from each distribution center within thirty (30) days.

[GRAPHIC OMITTED] This agreement has been accepted and executed by: RUBY TUESDAY, INC. KENNETH O. LESTER COMPANY, INC. DBA PFG CUSTOMIZED DISTRIBUTION
BY: /s/Samuel E. Beall III NAME: Samuel E. Beall III TITLE: Chairman and Chief Executive Officer DATE: July 31, 2001 BY: /s/ Troy G. Curtis NAME: TROY G. CURTIS TITLE: Vice President Business Development DATE: August 8, 2001

[GRAPHIC OMITTED] SPECIALTY RESTAURANT GROUP, LLC
BY: /s/_James H. Carmichael James H. Carmichael

NAME:

TITLE: President/CEO DATE: August 8, 2001

Annual Report for Fiscal year end 6/5/01 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Ruby Tuesday, Inc. owns and operates Ruby Tuesday(R) casual dining restaurants. The Company also franchises its Ruby Tuesday concept in selected domestic and international markets. As of June 5, 2001, the Company owned and operated 374 Ruby Tuesday restaurants, located in 27 states. As of fiscal year end, there were 151 domestic Ruby Tuesday franchise units located in 19 states and 12 international Ruby Tuesday franchise units located in the Asian Pacific Region, India, Iceland, Central and South America and Puerto Rico. On November 20, 2000, the Company completed the planned sale of all 69 of its American Cafe (including L&N Seafood) and Tia's Tex-Mex restaurants to Specialty Restaurant Group, LLC ("SRG"), a limited liability company owned by the former president and partner of the Company's American Cafe and Tia's Tex-Mex

[GRAPHIC OMITTED] This agreement has been accepted and executed by: RUBY TUESDAY, INC. KENNETH O. LESTER COMPANY, INC. DBA PFG CUSTOMIZED DISTRIBUTION
BY: /s/Samuel E. Beall III NAME: Samuel E. Beall III TITLE: Chairman and Chief Executive Officer DATE: July 31, 2001 BY: /s/ Troy G. Curtis NAME: TROY G. CURTIS TITLE: Vice President Business Development DATE: August 8, 2001

[GRAPHIC OMITTED] SPECIALTY RESTAURANT GROUP, LLC
BY: /s/_James H. Carmichael James H. Carmichael

NAME:

TITLE: President/CEO DATE: August 8, 2001

Annual Report for Fiscal year end 6/5/01 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Ruby Tuesday, Inc. owns and operates Ruby Tuesday(R) casual dining restaurants. The Company also franchises its Ruby Tuesday concept in selected domestic and international markets. As of June 5, 2001, the Company owned and operated 374 Ruby Tuesday restaurants, located in 27 states. As of fiscal year end, there were 151 domestic Ruby Tuesday franchise units located in 19 states and 12 international Ruby Tuesday franchise units located in the Asian Pacific Region, India, Iceland, Central and South America and Puerto Rico. On November 20, 2000, the Company completed the planned sale of all 69 of its American Cafe (including L&N Seafood) and Tia's Tex-Mex restaurants to Specialty Restaurant Group, LLC ("SRG"), a limited liability company owned by the former president and partner of the Company's American Cafe and Tia's Tex-Mex concepts and certain members of his management team. For an understanding of the significant factors that influenced the Company's performance during the past three fiscal years, the following should be read in conjunction with the Consolidated Financial Statements and related Notes found on pages 28 to 45.

Results of Operations The following table sets forth selected restaurant operating data as a percentage of revenues for the periods indicated. All information is derived from the Consolidated Financial Statements of the Company included elsewhere in this Annual Report. Fiscal 2000 amounts include a $10.0 million pre-tax charge recorded in conjunction with the planned sale of the American Cafe and Tia's Tex-Mex restaurants.
2001 -----2000 -----1999 -----

Annual Report for Fiscal year end 6/5/01 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Ruby Tuesday, Inc. owns and operates Ruby Tuesday(R) casual dining restaurants. The Company also franchises its Ruby Tuesday concept in selected domestic and international markets. As of June 5, 2001, the Company owned and operated 374 Ruby Tuesday restaurants, located in 27 states. As of fiscal year end, there were 151 domestic Ruby Tuesday franchise units located in 19 states and 12 international Ruby Tuesday franchise units located in the Asian Pacific Region, India, Iceland, Central and South America and Puerto Rico. On November 20, 2000, the Company completed the planned sale of all 69 of its American Cafe (including L&N Seafood) and Tia's Tex-Mex restaurants to Specialty Restaurant Group, LLC ("SRG"), a limited liability company owned by the former president and partner of the Company's American Cafe and Tia's Tex-Mex concepts and certain members of his management team. For an understanding of the significant factors that influenced the Company's performance during the past three fiscal years, the following should be read in conjunction with the Consolidated Financial Statements and related Notes found on pages 28 to 45.

Results of Operations The following table sets forth selected restaurant operating data as a percentage of revenues for the periods indicated. All information is derived from the Consolidated Financial Statements of the Company included elsewhere in this Annual Report. Fiscal 2000 amounts include a $10.0 million pre-tax charge recorded in conjunction with the planned sale of the American Cafe and Tia's Tex-Mex restaurants.
2001 -----98.4% 1.6 -----100.0 2000 -----99.0% 1.0 -----100.0 1999 ----99.3% 0.7 ----100.0

Company restaurant sales Franchise revenues

Total revenues Operating costs and expenses: (As a percentage of Company restaurant sales): Cost of merchandise 27.4 Payroll and related costs 31.9 Other restaurant operating costs 19.0 Loss on sale of American Cafe and Tia's Tex-Mex restaurants Depreciation and amortization 4.4 (As a percentage of Total revenues): Selling, general and administrative 7.3 Interest (income) expense, net (0.5) -----Total operating costs and expenses 88.3 -----Income before income taxes Provision for income taxes Net income 11.7 4.2 -----7.5% ======

27.1 31.9 20.2 1.3 5.3

27.4 32.0 20.4

5.5

7.1 0.2 -----92.1 -----7.9 3.3 -----4.6% ======

6.9 0.4 ----92.1 ----7.9 2.8 ----5.1% ======

Fiscal 2001 Compared to Fiscal 2000 Overview During Fiscal 2001, the Company opened 55 Ruby Tuesday restaurants (nine of which related to the reacquisition of RT Southwest Franchise, LLC, an Arizona franchise), while closing 17 Ruby Tuesday restaurants (six were closed due to normal lease expirations, six were sold to a new franchise partner, two were leased to SRG, and three underperforming units were closed in Texas). The six Ruby Tuesday restaurants were sold to a domestic franchise partner (a "refranchising" transaction) for aggregate consideration of $7.4 million in cash and $1.8 million in the form of a promissory note due in Fiscal 2011 bearing an interest rate of 10.0%. The sale of these units resulted in a pre-tax gain of $1.7 million which is included in other restaurant operating costs. Concurrent with each sale of Ruby Tuesday units, the Company enters into a franchise agreement for each restaurant and a development agreement with the franchise partners whereby the partners commit to open a varying number of Ruby Tuesday restaurants over the next five to six years in their respective areas. During Fiscal 2001, 21 domestic and three international Ruby Tuesday franchise units were opened in conjunction with development agreements. Subsequent to June 5, 2001, the Company entered into a purchase agreement with three new franchise partners and one current franchise partner for the sale of 20 Ruby Tuesday restaurants in Fiscal 2002. The sales of these units, if effected under the terms of the purchase agreements, are expected to result in minimal pre-tax gains. Revenues The Company's revenues decreased to $789.6 million in Fiscal 2001 from $797.5 million in Fiscal 2000. The $7.9 million revenue decrease was the result of the sale of the American Cafe, Tia's Tex-Mex, and L&N Seafood units to SRG which accounted for 28 weeks of revenue not included in Fiscal 2001 that included in Fiscal 2000 coupled with the loss of revenue associated with the refranchising of 42 Ruby Tuesday restaurants in the third and fourth quarters of Fiscal 2000. Ruby Tuesday concept same store sales, however, increased 3.7% due to both check average increases and higher customer counts. In conjunction with the new menus introduced during Fiscal 2001, the Company continued to focus on combination platters. This focus, along with shrimp promotions, not only increased gross profits, but also allowed the Company to benefit from purchases of large quantities of singular items. The Company receives revenue from its franchise partners in the form of development and license fees at the initial opening of the franchised unit. Revenue based on the fees is recognized when all material services have been substantially performed by the Company and the restaurant has opened for business. Franchise revenues increased $4.2 million as a result of increased royalties and license fees attributable to the growth of the domestic franchise partner program including the sale of six units to a new franchise partner and 21 new openings. Operating Profits Pre-tax profit increased $29.5 million in Fiscal 2001 to $92.3 million despite the revenue decrease of $7.9 million discussed above. This increase resulted from the cost changes discussed below. Cost of merchandise, as a percentage of Company restaurant sales, increased 0.3% due to higher red meat and rib costs throughout the year and the inclusion of more costly shrimp and seafood menu items, offset by volume discounts and rebates through price renegotiations, and efficiencies realized through redesign of menu mix. Payroll and related costs remained unchanged as a percentage of Company restaurant sales. Other restaurant operating costs decreased 2.5% as a percentage of Company restaurant sales due to leveraging associated with higher unit volume sales and the prior fiscal year's inclusion of a $10.0 million estimated loss on the sale of the American Cafe (including L&N Seafood) and Tia's Tex-Mex units offset by higher oil and gas prices in the current year. Depreciation and amortization decreased 0.9% as a percentage of Company restaurant sales as a result of higher average unit volumes and increased use of the synthetic leasing program. Selling, general, and administrative expenses increased 0.2% as a percentage of total revenues due to increased use of the neighborhood introduction marketing program which offers guests discounts through the form of direct mail coupons. Net interest expense decreased 0.7% as a percentage of total revenues due to the paydown of debt accomplished through the proceeds of the sales to SRG and a new franchise partner, and increased interest income associated with higher notes receivable due from franchise partners and SRG. Income tax expense increased 0.9% as a percentage of total revenues. The effective income tax rate for Fiscal 2001 was 35.8% as compared to 41.8% in Fiscal 2000. The decrease resulted from the nondeductibility of goodwill written off in association with the planned sale of Tia's Tex-Mex restaurants in Fiscal 2000. Excluding

the effect of the planned sale of the American Cafe and Tia's Tex-Mex restaurants, the effective income tax rate for Fiscal 2000 was 36.0%.

Fiscal 2000 Compared to Fiscal 1999 Overview During Fiscal 2000, the Company opened 46 Ruby Tuesday (three of which related to the re-acquisition of franchised units) and three Tia's Tex-Mex restaurants while closing three Ruby Tuesday, four American Cafe, and one Tia's Tex-Mex restaurant. In addition, the Company sold 42 Ruby Tuesday restaurants to six domestic franchise partners for aggregate consideration of $38.0 million in cash and $20.5 million in the form of promissory notes due through Fiscal 2011 bearing interest at rates ranging from 8.0%-10.0% with one note accruing interest at 15.6%. The sale of these units resulted in a pre-tax gain of $5.4 million which is included in other restaurant operating costs. Concurrent with the sale of the Ruby Tuesday units, the Company also entered into a franchise agreement for each restaurant and a development agreement with the franchise partners whereby the partners have committed to open a varying number of Ruby Tuesday restaurants over the next five to nine years in their respective areas. During Fiscal 2000, 22 Ruby Tuesday franchise units were opened in conjunction with development agreements. As a result of franchise transactions, unit closings, and the underperformance of four Ruby Tuesday units operating in the state of Texas, the Company recorded restaurant asset impairment charges of $6.3 million in Fiscal 2000. Revenues The Company's revenues increased to $797.5 million in Fiscal 2000 from $722.3 million in Fiscal 1999. The 10.4% revenue increase was the result of a 3.8% increase in same-store sales for the Ruby Tuesday concept resulting from increased traffic and an emphasis on combo promotions causing a slight average check increase. In conjunction with the new menus introduced during Fiscal 2000, the Company focused on its combination platters which not only increased gross profits, but also allowed the Company to benefit from purchases of large quantities of singular items. In addition, franchise revenues increased $3.5 million as a result of increased royalties and license fees attributable to the growth of the domestic franchise partner program including the sale of 42 units and 22 new openings. These increases were offset by the reduction in total revenues resulting from the sale of 42 Ruby Tuesday restaurants to franchisees. Operating Profits Pre-tax profit increased $5.6 million in Fiscal 2000 to $62.8 million. This increase resulted from the revenue increase of $75.2 million as previously discussed, coupled with the cost changes discussed below. Cost of merchandise, as a percentage of Company restaurant sales, decreased 0.3% due to large volume discounts and rebates associated with the current year combo platters and fajita and rib promotions, and efficiencies realized through redesign of menu mix. Payroll and related costs decreased 0.1% as a percentage of Company restaurant sales due to savings in training costs associated with lower hourly turnover. Other restaurant operating costs decreased 0.2% as a percentage of Company restaurant sales due to leveraging associated with higher unit volumes and lower general liability insurance expense as a result of favorable claims experience offset by increased closing expenses, a substantial portion of which related to the relocation of the Mobile, Alabama Support Services Center which was closed in Fiscal 2000. As a result of the planned sale of the American Cafe and Tia's Tex-Mex restaurants, the Company recorded a pre-tax loss of $10.0 million on the transaction in Fiscal 2000. Depreciation and amortization decreased 0.2% as a percentage of Company restaurant sales as a result of higher average unit volumes and increased use of the synthetic leasing program. Selling, general, and administrative expenses increased 0.2% as a percentage of total revenues due to higher management training payroll attributable to more unit openings and slightly increased management turnover and an increased use of the WOW-USM training facilities. Net interest expense decreased 0.2% as a percentage of total revenues due to increased interest income associated with refranchising notes receivable. Income tax expense increased 0.5% as a percentage of total revenues. The effective income tax rate for Fiscal 2000 was 41.8% as compared to 36.2% in 1999. The increase resulted from the nondeductibility of goodwill written off in association with the planned sale of Tia's Tex-Mex restaurants, which was offset by the decrease which resulted from increases in tax credits. Excluding the effect of the planned sale of the American Cafe and Tia's Tex-Mex restaurants, the effective income tax rate was 36.0%.

Fiscal 2000 Compared to Fiscal 1999 Overview During Fiscal 2000, the Company opened 46 Ruby Tuesday (three of which related to the re-acquisition of franchised units) and three Tia's Tex-Mex restaurants while closing three Ruby Tuesday, four American Cafe, and one Tia's Tex-Mex restaurant. In addition, the Company sold 42 Ruby Tuesday restaurants to six domestic franchise partners for aggregate consideration of $38.0 million in cash and $20.5 million in the form of promissory notes due through Fiscal 2011 bearing interest at rates ranging from 8.0%-10.0% with one note accruing interest at 15.6%. The sale of these units resulted in a pre-tax gain of $5.4 million which is included in other restaurant operating costs. Concurrent with the sale of the Ruby Tuesday units, the Company also entered into a franchise agreement for each restaurant and a development agreement with the franchise partners whereby the partners have committed to open a varying number of Ruby Tuesday restaurants over the next five to nine years in their respective areas. During Fiscal 2000, 22 Ruby Tuesday franchise units were opened in conjunction with development agreements. As a result of franchise transactions, unit closings, and the underperformance of four Ruby Tuesday units operating in the state of Texas, the Company recorded restaurant asset impairment charges of $6.3 million in Fiscal 2000. Revenues The Company's revenues increased to $797.5 million in Fiscal 2000 from $722.3 million in Fiscal 1999. The 10.4% revenue increase was the result of a 3.8% increase in same-store sales for the Ruby Tuesday concept resulting from increased traffic and an emphasis on combo promotions causing a slight average check increase. In conjunction with the new menus introduced during Fiscal 2000, the Company focused on its combination platters which not only increased gross profits, but also allowed the Company to benefit from purchases of large quantities of singular items. In addition, franchise revenues increased $3.5 million as a result of increased royalties and license fees attributable to the growth of the domestic franchise partner program including the sale of 42 units and 22 new openings. These increases were offset by the reduction in total revenues resulting from the sale of 42 Ruby Tuesday restaurants to franchisees. Operating Profits Pre-tax profit increased $5.6 million in Fiscal 2000 to $62.8 million. This increase resulted from the revenue increase of $75.2 million as previously discussed, coupled with the cost changes discussed below. Cost of merchandise, as a percentage of Company restaurant sales, decreased 0.3% due to large volume discounts and rebates associated with the current year combo platters and fajita and rib promotions, and efficiencies realized through redesign of menu mix. Payroll and related costs decreased 0.1% as a percentage of Company restaurant sales due to savings in training costs associated with lower hourly turnover. Other restaurant operating costs decreased 0.2% as a percentage of Company restaurant sales due to leveraging associated with higher unit volumes and lower general liability insurance expense as a result of favorable claims experience offset by increased closing expenses, a substantial portion of which related to the relocation of the Mobile, Alabama Support Services Center which was closed in Fiscal 2000. As a result of the planned sale of the American Cafe and Tia's Tex-Mex restaurants, the Company recorded a pre-tax loss of $10.0 million on the transaction in Fiscal 2000. Depreciation and amortization decreased 0.2% as a percentage of Company restaurant sales as a result of higher average unit volumes and increased use of the synthetic leasing program. Selling, general, and administrative expenses increased 0.2% as a percentage of total revenues due to higher management training payroll attributable to more unit openings and slightly increased management turnover and an increased use of the WOW-USM training facilities. Net interest expense decreased 0.2% as a percentage of total revenues due to increased interest income associated with refranchising notes receivable. Income tax expense increased 0.5% as a percentage of total revenues. The effective income tax rate for Fiscal 2000 was 41.8% as compared to 36.2% in 1999. The increase resulted from the nondeductibility of goodwill written off in association with the planned sale of Tia's Tex-Mex restaurants, which was offset by the decrease which resulted from increases in tax credits. Excluding the effect of the planned sale of the American Cafe and Tia's Tex-Mex restaurants, the effective income tax rate was 36.0%.

LIQUIDITY AND CAPITAL RESOURCES Cash Flow The following table presents a summary of the Company's cash flows from operating, investing and financing activities for the periods indicated (in thousands).
Fifty-Two Weeks Ended June 5, 2001 -----------cash provided by operating activities $76,578 cash used by investing activities (24,508) cash used by financing activities (51,588) -------increase in cash and short-term investments $ 482 ======== Fifty-Two Weeks Ended June 4, 2000 -----------$102,994 (53,598) (48,359) -------$ 1,037 =========

Net Net Net Net

Cash provided by operating activities was $76.6 million for the fiscal year ended June 5, 2001, a decrease of $26.4 million from Fiscal 2000. Cash provided by operating activities as compared to the prior year reflected an increase in net income of $22.7 million. Offsetting this, however, were increases in cash used for operating activities such as increases in accounts and notes receivable, and decreases in accounts payable (which includes accrued and other liabilities) and income taxes payable. Fiscal 2001 increases in accounts and notes receivable exceeded those of Fiscal 2000 by $2.0 million due to the growth of franchising and increases in vendor rebates receivable. Payments in Fiscal 2001 for accounts payable and accrued liabilities used $36.6 million more cash than Fiscal 2000. This was due to a reduction in payables which resulted from the sale of 69 units to SRG and the timing of operational cash payments. Fiscal 2001 income taxes payable decreased by $10.7 million as compared to the prior year primarily due to higher deductions from employee exercises of stock options and higher tax depreciation. Net cash used in investing activities was $29.1 million less than Fiscal 2000 due to increased proceeds from the sale of assets ($26.4 million) primarily due to the sale of units to SRG and $32.2 million less spending for capital expenditures, which was attributable to increased use of the synthetic lease program, offset by lower proceeds from the sale of restaurant properties to franchisees ($30.6 million). Net cash used in Fiscal 2001 financing activities was $3.2 million more than Fiscal 2000 due to the net paydown of debt ($29.0 million) which primarily resulted from funds received from the sale of American Cafe and Tia's Tex-Mex units to SRG ($30.0 million). Partially offsetting this use of cash was an increase over the prior year in proceeds from issuance of stock ($21.0 million) due to increased stock option exercises by employees and a reduction of $4.8 million from the prior year level of stock repurchases. During Fiscal 2001, $36.6 million of the Company's common stock was reacquired and dividends of $2.8 million were paid to shareholders. Capital Expenditures The Company requires capital principally for new restaurants, equipment replacement, and remodeling of existing units. Property and equipment expenditures for Fiscal 2001 were $62.0 million for new units, capital projects on existing units, and information technology projects. In addition, $70.7 million was reimbursed to the Company for new unit construction under its synthetic lease program. During Fiscal 2001, 46 Ruby Tuesday restaurants were opened. The Company also acquired nine Ruby Tuesday restaurants in Arizona from a former franchise partner. As part of acquiring the nine units, the Company recorded the franchise partner's liabilities, including long-term debt. Capital expenditures for Fiscal 2002 are budgeted to be approximately $110.0 million which the Company intends to fund with cash provided by operating activities and cash received in conjunction with refranchising efforts. Expenditures for units to be leased by the Company under synthetic leases are budgeted to be $35.0 to $40.0 million for Fiscal 2002. Planned Company-owned Ruby Tuesday openings for Fiscal 2002 include approximately 45 to 50 Ruby Tuesday restaurants. There can be no assurance, however, that the Company will be able to open the projected number of restaurants in Fiscal 2002 or invest the projected amount of money in capital expenditures and lease commitments. See "Special Note Regarding Forward-Looking Information."

Borrowings and Credit Facilities During Fiscal 2001 the Company entered into a five-year $50.0 million Senior Revolving Credit Facility with several banks. This facility, which replaced the $100.0 million credit facility then in place, includes a $10.0 million

Borrowings and Credit Facilities During Fiscal 2001 the Company entered into a five-year $50.0 million Senior Revolving Credit Facility with several banks. This facility, which replaced the $100.0 million credit facility then in place, includes a $10.0 million current credit line ("Swing Line") and a $15.0 million Letter of Credit sub-facility. Borrowings under the Senior Revolving Credit Facility bear interest at various rate options to be chosen by the Company. The Company had $8.0 million and $63.0 million of borrowings outstanding under these agreements at June 5, 2001 and June 4, 2000, respectively. As of June 5, 2001, the interest rate associated with the current facility approximated 5.09%. The credit facility provides for certain restrictions on incurring additional indebtedness, payment of dividends, and certain covenants regarding funded debt, net worth, and fixed charge coverage requirements. At June 5, 2001, the Company was in compliance with all such covenants. At June 5, 2001, the Company had committed lines of credit (including the Swing Line) amounting to $22.5 million with several banks at various interest rates approximating 4.9%. All of these lines are subject to periodic review by each bank and may be canceled by the Company at any time. The Company utilized its lines of credit to meet operational cash needs during Fiscal 2001 and 2000. Borrowings on these lines of credit were $14.7 million and $3.4 million at June 5, 2001 and June 4, 2000, respectively. The Company has entered into five interest rate swap agreements with notional amounts aggregating $125.0 million. These swap agreements fix the interest rate on an equivalent amount of the Company's floating-rate lease obligations to rates ranging from 5.99% to 6.63% for periods up through December 7, 2003. Since Fiscal 1998, the Company has entered into master synthetic lease agreements totaling $235.0 million for the purpose of leasing new free-standing units and the Maryville, Tennessee Restaurant Support Services Center. Included in this total is a $50.0 million master operating lease agreement entered into on April 30, 2001. Under the terms of master synthetic lease agreements, an operating lease agreement is entered into for each facility providing for an initial lease term of five years from the applicable agreement date with two five-year renewal options. The leases also provide for substantial residual value guarantees and include purchase options at the lessor's original cost of the properties. As of June 5, 2001, the Company has entered into leases for 94 units (70 of which were open at June 5, 2001) and the Maryville, Tennessee Restaurant Support Services Center at an aggregated original funded cost to the lessor of approximately $166.1 million. During Fiscal 2002, the Company expects to fund operations, capital expansion, the repurchase of common stock, and the payment of dividends from operating cash flows, proceeds from sales of units to franchisees, bank lines of credit, the five-year revolving line of credit, and through operating leases. See "Special Note Regarding Forward-Looking Information." (See Note 6 to Consolidated Financial Statements for a further discussion of borrowings and credit facilities.) Total long-term debt including current maturities decreased a net $48.1 million in Fiscal 2001 due to lower utilization of the revolving credit facility while short-term borrowings under bank lines of credit increased $11.3 million. The Company anticipates a net increase of debt in Fiscal 2002 of approximately $6.0 million. A larger increase in debt could result if actual cash flows from operations are lower than currently anticipated or if capital expenditures exceed budgeted amounts. See "Special Note Regarding Forward-Looking Information." Guarantee of Indebtedness of Others As part of its domestic franchising program, the Company has negotiated with various lenders a $52.5 million credit facility to assist franchise partners with operational cash flow requirements. The Company, as sponsor of the credit facility, serves as partial guarantor of the draws made on this revolving line-of-credit facility. As of June 5, 2001, the amount guaranteed by the Company on the facility was $18.5 million. Working Capital The Company's working capital deficiency and current ratio as of June 5, 2001 were $24.0 million and 0.7:1, respectively. As is common in the restaurant industry, the Company typically carries current liabilities in excess of current assets because cash (a current asset) generated from operating activities is reinvested in capital expenditures (a long-term asset). Dividends During Fiscal 1997, the Board of Directors approved a dividend policy as an additional means of returning excess capital to its shareholders. This policy calls for payment of semi-annual dividends of 2.25 per share. In accordance with this policy, the Company paid dividends of $2.8 million in Fiscal 2001. The payment of a dividend in any particular future period and the 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. See "Special Note Regarding Forward-Looking information." In addition, the Company's credit facilities contain certain limitations on the payment of dividends. See Note 6 to Consolidated Financial Statements

for more information.

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 its weighted average cost of capital while allowing financial flexibility and the equivalent of an investment-grade (BBB) bond rating. The strategy provides for repurchasing Company stock whenever cash flow exceeds funding requirements while maintaining the target capital structure. During Fiscal 2001, the Company purchased 2.7 million shares of Company common stock at a total purchase price of $36.6 million under its stock repurchase program. After taking into account the repurchases made during Fiscal 2001, the total number of remaining shares authorized to be repurchased as of June 5, 2001 was approximately 7.4 million. Franchising and Development Agreements Subsequent to June 5, 2001, the Company entered into purchase agreements with three new franchise partners and one existing franchise partner which provide, among other things, for the sale of twenty units in Missouri, Indiana, Illinois, Arkansas and Kansas. The closing of the sales of nineteen of the units in Missouri, Indiana, Illinois and Arkansas are expected to occur in the second quarter of Fiscal 2002, while the closing of the sale of the unit in Kansas occurred on August 8, 2001. The closings of these sales are subject to various conditions, including the transfer of liquor licenses, third party consents, and availability of financing. If the sales are completed as contemplated by the purchase agreements, the units will be operated as Ruby Tuesday restaurants and the Company will receive an aggregate purchase price of $32.2 million, of which approximately $21.0-$24.0 million is expected to be paid in cash. The remaining amount will be in the form of interest bearing notes due through Fiscal 2012. The sales of these units are expected to result in minimal pre-tax gains. As of June 5, 2001, nineteen of the twenty units to be sold were open. The remaining unit is expected to open by the date of sale. Fiscal 2001 revenues from the nineteen units in operation totaled $34.3 million, with operating profits of $3.2 million. In addition, the Company also entered into an agreement with an existing partner for the Company's acquisition of three units in Massachusetts for a purchase price of $1.7 million. This transaction will permit the Company to further develop the Boston Market while the Franchise Partner continues to focus on developing the territory northeast of Boston. The closing is expected to occur in the second quarter of Fiscal 2002. In accordance with the terms of the franchise agreement, the Company anticipates acquiring an additional 49% interest of one of its franchises for $0.5 million late in the first quarter of Fiscal 2002. See "Special Note Regarding Forward-Looking Information." Disclosures About Market Risk The Company manages its exposure to changes in short-term interest rates, particularly to reduce the impact on its debt and floating-rate lease obligations, by entering into interest rate swap agreements. The counterparties to these contracts are high credit quality commercial banks. Consequently, credit risk, which is inherent in all swaps, had been minimized to a large extent. Interest expense (or rent expense when applicable to floating-rate lease obligations) is adjusted for the differential to be paid or received as interest rates change. The effect of such adjustments on interest or rent expense has not been significant. The level of floating-rate debt and floating-rate lease obligations not fixed by swap agreements was not significant during the year, and management does not expect a significant increase in these amounts in Fiscal 2002. Accordingly, the Company does not presently believe it has material exposure to potential, near-term losses in future earnings and/or cash flows from reasonably possible near-term changes in market rates. New Accounting Standards In June 2000, the Financial Accounting Standards Board ("FASB") issued Statement of Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" ("FAS 138"), which is an amendment of a similarly titled statement, FAS 133. Both FAS 138 and FAS 133 are effective for the Company beginning in Fiscal 2002. FAS 133 requires recognition of all derivatives as either assets or liabilities on the balance sheet measured at fair value. Changes in the fair value of derivatives will be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designed as part of a hedge transaction and, if it is, the type of hedge transaction. The Company utilizes interest rate swap agreements to manage interest rate exposure. Adoption of this new accounting standard is expected to result in a cumulative

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 its weighted average cost of capital while allowing financial flexibility and the equivalent of an investment-grade (BBB) bond rating. The strategy provides for repurchasing Company stock whenever cash flow exceeds funding requirements while maintaining the target capital structure. During Fiscal 2001, the Company purchased 2.7 million shares of Company common stock at a total purchase price of $36.6 million under its stock repurchase program. After taking into account the repurchases made during Fiscal 2001, the total number of remaining shares authorized to be repurchased as of June 5, 2001 was approximately 7.4 million. Franchising and Development Agreements Subsequent to June 5, 2001, the Company entered into purchase agreements with three new franchise partners and one existing franchise partner which provide, among other things, for the sale of twenty units in Missouri, Indiana, Illinois, Arkansas and Kansas. The closing of the sales of nineteen of the units in Missouri, Indiana, Illinois and Arkansas are expected to occur in the second quarter of Fiscal 2002, while the closing of the sale of the unit in Kansas occurred on August 8, 2001. The closings of these sales are subject to various conditions, including the transfer of liquor licenses, third party consents, and availability of financing. If the sales are completed as contemplated by the purchase agreements, the units will be operated as Ruby Tuesday restaurants and the Company will receive an aggregate purchase price of $32.2 million, of which approximately $21.0-$24.0 million is expected to be paid in cash. The remaining amount will be in the form of interest bearing notes due through Fiscal 2012. The sales of these units are expected to result in minimal pre-tax gains. As of June 5, 2001, nineteen of the twenty units to be sold were open. The remaining unit is expected to open by the date of sale. Fiscal 2001 revenues from the nineteen units in operation totaled $34.3 million, with operating profits of $3.2 million. In addition, the Company also entered into an agreement with an existing partner for the Company's acquisition of three units in Massachusetts for a purchase price of $1.7 million. This transaction will permit the Company to further develop the Boston Market while the Franchise Partner continues to focus on developing the territory northeast of Boston. The closing is expected to occur in the second quarter of Fiscal 2002. In accordance with the terms of the franchise agreement, the Company anticipates acquiring an additional 49% interest of one of its franchises for $0.5 million late in the first quarter of Fiscal 2002. See "Special Note Regarding Forward-Looking Information." Disclosures About Market Risk The Company manages its exposure to changes in short-term interest rates, particularly to reduce the impact on its debt and floating-rate lease obligations, by entering into interest rate swap agreements. The counterparties to these contracts are high credit quality commercial banks. Consequently, credit risk, which is inherent in all swaps, had been minimized to a large extent. Interest expense (or rent expense when applicable to floating-rate lease obligations) is adjusted for the differential to be paid or received as interest rates change. The effect of such adjustments on interest or rent expense has not been significant. The level of floating-rate debt and floating-rate lease obligations not fixed by swap agreements was not significant during the year, and management does not expect a significant increase in these amounts in Fiscal 2002. Accordingly, the Company does not presently believe it has material exposure to potential, near-term losses in future earnings and/or cash flows from reasonably possible near-term changes in market rates. New Accounting Standards In June 2000, the Financial Accounting Standards Board ("FASB") issued Statement of Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" ("FAS 138"), which is an amendment of a similarly titled statement, FAS 133. Both FAS 138 and FAS 133 are effective for the Company beginning in Fiscal 2002. FAS 133 requires recognition of all derivatives as either assets or liabilities on the balance sheet measured at fair value. Changes in the fair value of derivatives will be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designed as part of a hedge transaction and, if it is, the type of hedge transaction. The Company utilizes interest rate swap agreements to manage interest rate exposure. Adoption of this new accounting standard is expected to result in a cumulative effect charge net of tax totaling $0.2 million to expense and $0.9 million to other comprehensive income. In July 2001, the FASB issued Statement No. 141, "Business Combinations", and Statement No. 142, "Goodwill and Other Intangible Assets" ("FAS 141" and "FAS 142", respectively). FAS 141 requires that the purchase

method of accounting be used for all business combinations initiated after June 30, 2001, as well as all purchase method business combinations completed after June 30, 2001. FAS 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of FAS 142. FAS 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."

The Company is required to adopt the provisions of FAS 141 immediately and FAS 142 effective for Fiscal 2003 although early adoption is allowed. FAS 141 will require upon adoption of FAS 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in FAS 141 for recognition apart from goodwill. Upon adoption of FAS 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of FAS 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. The Company currently has unamortized goodwill remaining from the original Ruby Tuesday acquisition in 1982 by the Company, then known as Morrison Restaurants Inc., in the amount of $7.8 million which will be subject to the transition provisions of FAS 141 and 142. Amortization expense related to goodwill was $0.6 million, $0.7 million, and $0.7 million for Fiscal 2001, 2000, and 1999, respectively. The Company is currently studying the expected impact of FAS 141 and 142 on the consolidated financial statements, but anticipates this impact to be insignificant. Impact of Inflation Historically, the Company has been able to recover inflationary cost increases to items such as food and beverages through increased menu prices coupled with more efficient purchasing practices and productivity improvements. There have been, and there may be in the future, delays in the implementation of such menu price increases. Competitive pressures may also limit the Company's ability to recover such cost increases in their entirety. Historically, the effect of inflation on the Company's net income has not been materially adverse. Management's Outlook The Company continues to strategically position itself for growth through the continuing emphasis on its Ruby Tuesday brand and focus on its franchising and partnering programs. Ruby Tuesday, with its menu that features fun-to-eat food, large portions, and wide variety, including a signature salad bar, burgers, ribs, fajitas, chicken, soups and sandwiches, will maintain its aggressive posture. In Fiscal 2002, the Company will continue its focus on improving same-store sales, average-unit volume, customer frequency, and check average through constant improvement of guest service, food quality, and appealing promotions. Also, the Company is committed to continually focus on building the best teams through the use of our six-step interview process, "certified programs", career pathway opportunities into management, and our WOW-U training facilities for managers. The Company strongly believes proper staffing, good teams and low turnover are essential to the success of its business. The Company continues to identify potential restaurant managers - internal and external -- to become partners. Internally, approximately one-half of the Company's restaurant managers have a financial stake in the success of their units as internal managing partners. Externally, the Company currently has 21 domestic Ruby Tuesday franchise partners and signed purchase agreements with three others as previously discussed. In addition to operating existing restaurants, these agreements provide for the development of new restaurants in the partner's region over the next five to six years. The domestic franchising program provides the Company with the opportunity to have restaurants operating outside its priority growth markets. Internationally, the Company is continually developing relationships with existing and potential franchisees. The Company has plans which call for the franchise opening of 30 to 35 units (including international and excluding the twenty units to be sold to franchise partners) in Fiscal 2002 and the continuous identification of potential new franchisees in targeted areas in the United States and around the world. See "Special Note Regarding Forward-Looking Information."

The Company is required to adopt the provisions of FAS 141 immediately and FAS 142 effective for Fiscal 2003 although early adoption is allowed. FAS 141 will require upon adoption of FAS 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in FAS 141 for recognition apart from goodwill. Upon adoption of FAS 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of FAS 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. The Company currently has unamortized goodwill remaining from the original Ruby Tuesday acquisition in 1982 by the Company, then known as Morrison Restaurants Inc., in the amount of $7.8 million which will be subject to the transition provisions of FAS 141 and 142. Amortization expense related to goodwill was $0.6 million, $0.7 million, and $0.7 million for Fiscal 2001, 2000, and 1999, respectively. The Company is currently studying the expected impact of FAS 141 and 142 on the consolidated financial statements, but anticipates this impact to be insignificant. Impact of Inflation Historically, the Company has been able to recover inflationary cost increases to items such as food and beverages through increased menu prices coupled with more efficient purchasing practices and productivity improvements. There have been, and there may be in the future, delays in the implementation of such menu price increases. Competitive pressures may also limit the Company's ability to recover such cost increases in their entirety. Historically, the effect of inflation on the Company's net income has not been materially adverse. Management's Outlook The Company continues to strategically position itself for growth through the continuing emphasis on its Ruby Tuesday brand and focus on its franchising and partnering programs. Ruby Tuesday, with its menu that features fun-to-eat food, large portions, and wide variety, including a signature salad bar, burgers, ribs, fajitas, chicken, soups and sandwiches, will maintain its aggressive posture. In Fiscal 2002, the Company will continue its focus on improving same-store sales, average-unit volume, customer frequency, and check average through constant improvement of guest service, food quality, and appealing promotions. Also, the Company is committed to continually focus on building the best teams through the use of our six-step interview process, "certified programs", career pathway opportunities into management, and our WOW-U training facilities for managers. The Company strongly believes proper staffing, good teams and low turnover are essential to the success of its business. The Company continues to identify potential restaurant managers - internal and external -- to become partners. Internally, approximately one-half of the Company's restaurant managers have a financial stake in the success of their units as internal managing partners. Externally, the Company currently has 21 domestic Ruby Tuesday franchise partners and signed purchase agreements with three others as previously discussed. In addition to operating existing restaurants, these agreements provide for the development of new restaurants in the partner's region over the next five to six years. The domestic franchising program provides the Company with the opportunity to have restaurants operating outside its priority growth markets. Internationally, the Company is continually developing relationships with existing and potential franchisees. The Company has plans which call for the franchise opening of 30 to 35 units (including international and excluding the twenty units to be sold to franchise partners) in Fiscal 2002 and the continuous identification of potential new franchisees in targeted areas in the United States and around the world. See "Special Note Regarding Forward-Looking Information." 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 the following: future financial performance and unit growth (both Company-owned and franchised), future capital expenditures, future borrowings and repayment of debt, and payment of dividends. 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; mall-traffic trends; 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 prototypes; 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; changes in the availability of capital; and general economic conditions.

RUBY TUESDAY, INC. STATEMENT OF OPERATIONS (In thousands except per-share data)
Fiscal Year 2001 2000 1999 1998 1997 $789,634 $797,495 $722,338 $711,420 $655,407 ========= ======= ======= ======= ======= $92,274 33,035 --------$59,239 ========= $0.94 ========= $0.91 ========= $62,771* 26,231 ------$36,540 ======= $0.58 ======= $0.57 ======= $57,208 20,694 -------$36,514 ======== $45,031 15,951 ------$29,080 ======= $38,813 13,768 ------$25,045 ======= $ 0.36 ======= $ 0.35 =======

Revenues

Income before income taxes Provision for income taxes Net income Earnings per share: Basic: Diluted:

$0.56 $0.44 ======= ======= $0.54 $0.42 ======= =======

Weighted average common and common equivalent shares: Basic 62,900 62,532 64,774 66,410 ========= ======= ======= ======= Diluted 65,088 64,576 67,528 69,140 ========= ======= ======= =======

70,380 ======= 71,500 =======

All fiscal years are composed of 52 weeks except for 1998 which is composed of 53 weeks. Weighted average shares and all per-share data for years prior to a stock split have been restated from their original presentation to give effect to the 2-for-1 stock splits which occurred in Fiscal year 2000 and 1998.
Other financial data: Total assets $445,667 $439,212 $428,650 $409,628 Long-term debt $15,212 $636 $76,767 $65,895 Shareholders' equity $284,271 $229,824 $221,801 $212,150 Cash dividends per share of common stock (in cents) 4.50 4.50 4.50 2.25

$418,871 $78,006 $223,640 0.00

* Includes a pre-tax charge of $10.0 million recorded in conjunction with the planned sale of the American Cafe and Tia's Tex-Mex restaurants

RUBY TUESDAY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except per-share data)
For the Fiscal Year Ended June 5, June 4, June 6, 2001 2000 1999 Revenues: Restaurant sales and operating revenues Franchise revenues $777,178 $789,240 $717,629 12,456 8,255 4,709 -----------------------------789,634 797,495 722,338 -----------------------------213,064 248,078 214,136 251,463 196,341 229,949

Operating costs and expenses: Cost of merchandise Payroll and related costs

RUBY TUESDAY, INC. STATEMENT OF OPERATIONS (In thousands except per-share data)
Fiscal Year 2001 2000 1999 1998 1997 $789,634 $797,495 $722,338 $711,420 $655,407 ========= ======= ======= ======= ======= $92,274 33,035 --------$59,239 ========= $0.94 ========= $0.91 ========= $62,771* 26,231 ------$36,540 ======= $0.58 ======= $0.57 ======= $57,208 20,694 -------$36,514 ======== $45,031 15,951 ------$29,080 ======= $38,813 13,768 ------$25,045 ======= $ 0.36 ======= $ 0.35 =======

Revenues

Income before income taxes Provision for income taxes Net income Earnings per share: Basic: Diluted:

$0.56 $0.44 ======= ======= $0.54 $0.42 ======= =======

Weighted average common and common equivalent shares: Basic 62,900 62,532 64,774 66,410 ========= ======= ======= ======= Diluted 65,088 64,576 67,528 69,140 ========= ======= ======= =======

70,380 ======= 71,500 =======

All fiscal years are composed of 52 weeks except for 1998 which is composed of 53 weeks. Weighted average shares and all per-share data for years prior to a stock split have been restated from their original presentation to give effect to the 2-for-1 stock splits which occurred in Fiscal year 2000 and 1998.
Other financial data: Total assets $445,667 $439,212 $428,650 $409,628 Long-term debt $15,212 $636 $76,767 $65,895 Shareholders' equity $284,271 $229,824 $221,801 $212,150 Cash dividends per share of common stock (in cents) 4.50 4.50 4.50 2.25

$418,871 $78,006 $223,640 0.00

* Includes a pre-tax charge of $10.0 million recorded in conjunction with the planned sale of the American Cafe and Tia's Tex-Mex restaurants

RUBY TUESDAY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except per-share data)
For the Fiscal Year Ended June 5, June 4, June 6, 2001 2000 1999 Revenues: Restaurant sales and operating revenues Franchise revenues $777,178 $789,240 $717,629 12,456 8,255 4,709 -----------------------------789,634 797,495 722,338 -----------------------------214,136 251,463 159,398 10,003 41,855 56,454 196,341 229,949 146,723

Operating costs and expenses: Cost of merchandise 213,064 Payroll and related costs 248,078 Other restaurant operating costs 147,853 Loss on sale of American Cafe and Tia's Tex-Mex restaurants Depreciation and amortization 34,380 Selling, general and administrative 57,521 Interest (income)/expense net of interest

39,390 49,865

RUBY TUESDAY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except per-share data)
For the Fiscal Year Ended June 5, June 4, June 6, 2001 2000 1999 Revenues: Restaurant sales and operating revenues Franchise revenues $777,178 $789,240 $717,629 12,456 8,255 4,709 -----------------------------789,634 797,495 722,338 ------------------------------

Operating costs and expenses: Cost of merchandise 213,064 214,136 196,341 Payroll and related costs 248,078 251,463 229,949 Other restaurant operating costs 147,853 159,398 146,723 Loss on sale of American Cafe and Tia's Tex-Mex restaurants 10,003 Depreciation and amortization 34,380 41,855 39,390 Selling, general and administrative 57,521 56,454 49,865 Interest (income)/expense net of interest income totaling $6,501 in 2001, $2,944 in 2000 and $1,691 in 1999 (3,536) 1,415 2,862 -----------------------------697,360 734,724 665,130 -----------------------------Income before income taxes 92,274 62,771 57,208 Provision for income taxes 33,035 26,231 20,694 -----------------------------Net income $ 59,239 $ 36,540 $ 36,514 ============================== Earnings per share: Basic Diluted Weighted average shares: Basic Diluted

$ 0.94 $ 0.58 $ 0.56 ============================== $ 0.91 $ 0.57 $ 0.54 ============================== 62,900 62,532 64,774 ============================== 65,088 64,576 67,528 ==============================

The accompanying notes are an integral part of the consolidated financial statements.

RUBY TUESDAY, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
June 5, 2001 Assets: Current assets: Cash and short-term investments Accounts and notes receivable Inventories: Merchandise China, silver and supplies Income tax receivable Prepaid rent Deferred income taxes Other prepaid expenses Assets held for disposal Total current assets June 4, 2000

$10,636 6,754 6,661 2,711 7,671 2,917 64 4,809 22,197 -------64,420

$10,154 6,880 5,763 3,615 3,392 312 5,282 59,057 -------94,455

RUBY TUESDAY, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
June 5, 2001 Assets: Current assets: Cash and short-term investments Accounts and notes receivable Inventories: Merchandise China, silver and supplies Income tax receivable Prepaid rent Deferred income taxes Other prepaid expenses Assets held for disposal Total current assets Property and equipment - at cost: Land Buildings Improvements Restaurant equipment Other equipment Construction in progress June 4, 2000

$10,636 6,754 6,661 2,711 7,671 2,917 64 4,809 22,197 -------64,420 --------

$10,154 6,880 5,763 3,615 3,392 312 5,282 59,057 -------94,455 -------36,265 73,298 165,855 114,489 46,134 15,433 -------451,474 169,609 -------281,865 -------8,229 -------23,126 -------5,355 -------26,182 -------$439,212 ========

31,928 71,760 180,440 120,112 50,552 17,545 -------472,337 Less accumulated depreciation and amortization 182,202 -------290,135 -------Goodwill, net 7,845 -------Notes receivable, net 56,881 -------Deferred income taxes -------Other assets 26,386 -------Total assets $445,667 ========

Liabilities and Shareholders' Equity: Current liabilities: Accounts payable Short-term borrowings Accrued liabilities: Taxes, other than income taxes Payroll and related costs Insurance Income taxes payable Rent and other Current portion of long-term debt Total current liabilities Long-term debt Deferred income taxes Deferred escalating minimum rent Other deferred liabilities

$27,910 14,700 6,349 18,670 4,221 16,083 500 -------88,433 -------15,212 -------4,127 -------8,810 -------44,814 --------

$35,346 3,400 10,831 17,809 4,071 222 16,983 63,134 -------151,796 -------636 --------------11,416 -------45,540 --------

Shareholders' equity: Common stock, $0.01 par value; (authorized: 100,000 shares; issued: 2001-63,211 shares, 2000-61,719 shares)

632

617

Capital in excess of par value Retained earnings

14,830 270,556 -------286,018 4,248 (4,248) (1,747) -------284,271 -------$445,667 ========

4,597 225,219 -------230,433 3,507 (3,507) (609) -------229,824 -------$439,212 ========

Deferred compensation liability payable in Company stock Company stock held by deferred compensation plan Accumulated other comprehensive income

Total liabilities and shareholders' equity

The accompanying notes are an integral part of the consolidated financial statements.

RUBY TUESDAY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (In thousands except per-share data)
Company Stock Held by Deferred Capital in Deferred Common Stock Issued Compensation Plan Excess of Retained Compensation Shares Amount Shares Amount Par Value Earnings Liability --------------------------------------------------------------------------------------------------------Balance, June 6, 1998 65,574 $656 $(539) $(3,155) $4,922 $207,034 $3,155 Net income 36,514 Minimum pension liability adjustment, net of taxes of $73 Comprehensive income Shares issued under stock bonus and stock options plans 3,604 35 22,009 Cash dividends of 4.50 cents per common share (2,940) Stock Repurchases (5,144) (51) (23,202) (22,601) Changes in Deferred Compensation Plan 85 268 (268) --------------------------------------------------------------------------------------------------------Balance, June 6, 1999 64,034 640 (454) (2,887) 3,729 218,007 2,887 Net income 36,540 Minimum pension liability adjustment, net of taxes of $22 Comprehensive income Shares issued under stock bonus and stock option plans 2,176 22 15,066 Cash dividends of 4.50 cents per common share (2,811) Stock repurchases (4,491) (45) (14,877) (26,517) Acceleration of vesting of stock options held by American Cafe and Tia's Tex-Mex employees 679 Changes in Deferred Compensation Plan (62) (620) 620 --------------------------------------------------------------------------------------------------------Balance, June 4, 2000 61,719 617 (516) (3,507) 4,597 225,219 3,507 Net income 59,239 Minimum pension liability adjustment net of taxes of $736 Comprehensive income Shares issued under stock bonus and stock

RUBY TUESDAY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (In thousands except per-share data)
Company Stock Held by Deferred Capital in Deferred Common Stock Issued Compensation Plan Excess of Retained Compensation Shares Amount Shares Amount Par Value Earnings Liability --------------------------------------------------------------------------------------------------------Balance, June 6, 1998 65,574 $656 $(539) $(3,155) $4,922 $207,034 $3,155 Net income 36,514 Minimum pension liability adjustment, net of taxes of $73 Comprehensive income Shares issued under stock bonus and stock options plans 3,604 35 22,009 Cash dividends of 4.50 cents per common share (2,940) Stock Repurchases (5,144) (51) (23,202) (22,601) Changes in Deferred Compensation Plan 85 268 (268) --------------------------------------------------------------------------------------------------------Balance, June 6, 1999 64,034 640 (454) (2,887) 3,729 218,007 2,887 Net income 36,540 Minimum pension liability adjustment, net of taxes of $22 Comprehensive income Shares issued under stock bonus and stock option plans 2,176 22 15,066 Cash dividends of 4.50 cents per common share (2,811) Stock repurchases (4,491) (45) (14,877) (26,517) Acceleration of vesting of stock options held by American Cafe and Tia's Tex-Mex employees 679 Changes in Deferred Compensation Plan (62) (620) 620 --------------------------------------------------------------------------------------------------------Balance, June 4, 2000 61,719 617 (516) (3,507) 4,597 225,219 3,507 Net income 59,239 Minimum pension liability adjustment net of taxes of $736 Comprehensive income Shares issued under stock bonus and stock option plans 4,197 42 35,753 Cash dividends of 4.50 cents per common share (2,819) Stock repurchases (2,705) (27) (25,520) (11,083) Changes in Deferred Compensation Plan (36) (741) 741 --------------------------------------------------------------------------------------------------------Balance, June 5, 2001 63,211 $632 (552) $(4,248) $14,830 $270,556 $4,248 =========================================================================================================

The accompanying notes are an integral part of the consolidated financial statements.

RUBY TUESDAY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

RUBY TUESDAY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
For the Fiscal Year Ended June 5, June 4, June 6, 2001 2000 1999 -------------------------------------------------------------------------------Operating activities: Net income $59,239 $36,540 $36,514 Adjustments to reconcile net income to net cash provided by operating activities: Loss on sale of American Cafe and Tia's Tex-Mex restaurants 10,003 Depreciation and amortization 34,380 41,855 39,390 Amortization of intangibles 577 708 727 Deferred income taxes 10,175 (6,865) (2,545) (Gain)/Loss on impairment and disposition of assets (342) 3,090 328 Other 485 754 496 Changes in operating assets and liabilities: Receivables (5,642) (3,689) 309 Inventories (1,826) (820) (140) Income tax receivable (7,893) 2,766 (831) Prepaid and other assets 1,745 (3,600) (548) Accounts payable, accrued and other liabilities 14,320 22,252 12,803 -----------------------------Net cash provided by operating activities 76,578 102,994 86,503 -----------------------------Investing activities: Purchases of property and equipment (62,045) (94,264) (72,582) Proceeds from disposal of assets 32,315 5,945 2,095 Proceeds from sale of restaurant properties to franchisees 7,352 37,972 11,399 Other, net (2,130) (3,251) (2,731) -----------------------------Net cash used by investing activities (24,508) (53,598) (61,819) -----------------------------Financing activities: Proceeds from long-term debt 24,000 9,000 16,000 Net change in short-term borrowings 11,300 (5,312) (7,500) Principal payments on long-term debt (82,749) (22,131) (5,112) Proceeds from issuance of stock, including treasury stock 35,310 14,334 21,548 Stock repurchases, net of changes in the Deferred Compensation Plan (36,630) (41,439) (45,854) Dividends paid (2,819) (2,811) (2,940) -----------------------------Net cash used by financing activities (51,588) (48,359) (23,858) -----------------------------Increase in cash and short-term investments 482 1,037 826 Cash and short-term investments: Beginning of period 10,154 9,117 8,291 -----------------------------End of period $10,636 $10,154 $9,117 ==============================

Supplemental disclosure of cash flow information - Cash paid for: Interest (net of amount capitalized) $ 4,008 $3,757 $4,750 Income taxes, net $15,899 $26,087 $17,812 Significant non-cash investing and financial activity-Promissory note received from sale of American Cafe and Tia's Tex-Mex restaurants $28,753 The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Basis of Presentation Ruby Tuesday, Inc. including its wholly-owned subsidiaries (the "Company") develops, franchises, and operates casual dining restaurants in the United States, Puerto Rico, and seven other countries under the Ruby Tuesday(R) brand. At June 5, 2001, the Company owned and operated 374 restaurants concentrated primarily in the Northeast, Southeast, Mid-Atlantic and the Midwest. As of year-end, there were 151 domestic franchise units located in nineteen states (primarily in Florida, the Northeast and Western regions) and twelve international Ruby Tuesday franchise units located in the Asia Pacific Region, India, Puerto Rico, Iceland, and Central and South America. Fiscal Year The Company's fiscal year ends on the first Tuesday following May 30. Prior to Fiscal 2001, the Company's fiscal year ended on the first Sunday following May 30. The change in fiscal year end resulted in the addition of two days in the fourth quarter of Fiscal 2001. The impact on net income was not significant. Cash and Short-Term Investments The Company's cash management program provides for the investment of excess cash balances in short-term money market instruments. Short-term investments are stated at cost, which approximates market value. The Company considers amounts receivable from credit card companies and marketable securities with a maturity of three months or less when purchased to be short-term investments. Inventories Inventories consist of materials, food supplies, china and silver and are stated at the lower of cost (first-in, firstout) or market. Property and Equipment and Depreciation Depreciation for financial reporting purposes is computed using the straight-line method over the estimated useful lives of the assets or, for capital lease property, over the term of the lease, if shorter. Annual rates of depreciation range from 3% to 5% for buildings and improvements and from 8% to 34% for restaurant and other equipment. Income Taxes Deferred income taxes are determined utilizing the asset and liability approach. This method gives consideration to the future tax consequences associated with differences between financial accounting and tax bases of assets and liabilities. Pre-Opening Expenses Salaries, personnel training costs and other expenses of opening new facilities are charged to expense as incurred. Intangible Assets In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("FAS 142") which will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. The Company currently has unamortized goodwill remaining from its acquisition of the Ruby Tuesday concept in 1982 by the Company, then known as Morrison Restaurants Inc., in the amount of $7.8 million which will be subject to the transition provisions of FAS 142. Amortization expense, which the Company has previously expensed on a straight-line basis over 40 years, was $0.6 million, $0.7 million, and $0.7 million for Fiscal 2001, 2000, and 1999, respectively. The Company is currently studying the expected impact of FAS 142 on the consolidated financial statements, but anticipates this impact to be insignificant. At June 5, 2001 and June 4, 2000, accumulated amortization for goodwill was $6.8 million and $6.4 million, respectively. Advertising Costs The Company expenses advertising costs as incurred. Advertising expense totaled $11.1 million, $8.2 million, and $7.5 million for Fiscal 2001, 2000, and 1999, respectively. Included in advertising expense are coupon

expenses totaling $7.2 million, $3.6 million, and $2.1 million for Fiscal 2001, 2000, and 1999, respectively. In accordance with Emerging Issues Task Force No. 00-14, "Accounting for Certain Sales Incentives" the Company will reclassify the coupon expenses against revenues beginning in Fiscal 2002. Prior year amounts will be reclassified.

Fair Value of Financial Instruments The Company's financial instruments at June 5, 2001 and June 4, 2000 consisted of cash and short-term investments, Deferred Compensation Plan investments, notes receivable, short-term borrowings, long-term debt and interest rate swap agreements. The fair value of these financial instruments approximated the carrying amounts reported in the Consolidated Balance Sheets with the exception of Company common stock held by the Deferred Compensation Plan, which is included in shareholders' equity at cost, and the interest rate swaps, which had a negative value to the Company at June 5, 2001 of $1.8 million. Estimates of the fair value of the financial instruments are based upon current market conditions, quoted market prices, and present values of future cash flows. Derivative Instruments In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" ("FAS 138"), which delayed the effective date of required adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative and Hedging Activities" ("FAS 133"). The Company will adopt FAS 133 in Fiscal 2002. FAS 133 requires recognition of all derivatives as either assets or liabilities on the balance sheet measured at fair value. Adoption of this new accounting standard is expected to result in a cumulative effect charge net of tax totaling $0.2 million to expense and $0.9 million to other comprehensive income. The Company utilizes interest rate swap agreements to manage interest rate exposure. For Fiscal 2001, 2000 and 1999, the Company recognized the interest differential paid or received on interest rate swap agreements as an adjustment to interest expense (or rent expense when the swaps were used to fix floating-rate lease obligations). Interest differentials not yet settled in cash were reflected as current payables in the accompanying Consolidated Balance Sheets. Franchise Revenues Franchise development and license fees received are recognized when all material services have been substantially performed by the Company and the restaurant has opened for business. Franchise royalties (generally 4% of monthly sales) are recognized as franchise revenue on the accrual basis. Included as an offset to selling, general and administrative expenses for Fiscal 2001, 2000, and 1999 are support service fees and marketing fees (generally 4% of monthly sales in the aggregate) of $9.7 million, $6.0 million, and $3.7 million, respectively. The terms of the support services agreements coincide with those of the respective operating agreements. Costs associated with franchise operations are expensed as incurred. Refranchising Gains (Losses) Refranchising gains (losses), included in other restaurant operating costs, include gains or losses on sales of restaurants to franchisees. All direct costs associated with refranchising are included in the calculation of the gain or loss. Upon making the decision to sell a restaurant to a franchisee, the restaurant is reclassified to assets held for disposal at the lower of book value or fair market value and any anticipated loss is immediately recognized. When the sale occurs, any loss not previously recognized is recorded concurrently with the sale. The Company records an appropriate allowance for doubtful notes for any gain up to the full amount of the note received in conjunction with the transaction. Gains in excess of the notes are recognized currently. Allowance for Doubtful Notes The allowance for doubtful notes represents management's best estimate of losses inherent in the notes receivable. The allowance for doubtful notes is increased by the amount of any gain not received in cash in refranchising transactions, and reduced by receivables charged off. The adequacy of the allowance for doubtful notes is determined based on reviews and evaluations of specific notes, and current economic conditions. Earnings Per Share Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during each year presented. Diluted earnings per share gives effect to options outstanding during the applicable periods. The effect of the Company's stock options increased the diluted weighted average shares

Fair Value of Financial Instruments The Company's financial instruments at June 5, 2001 and June 4, 2000 consisted of cash and short-term investments, Deferred Compensation Plan investments, notes receivable, short-term borrowings, long-term debt and interest rate swap agreements. The fair value of these financial instruments approximated the carrying amounts reported in the Consolidated Balance Sheets with the exception of Company common stock held by the Deferred Compensation Plan, which is included in shareholders' equity at cost, and the interest rate swaps, which had a negative value to the Company at June 5, 2001 of $1.8 million. Estimates of the fair value of the financial instruments are based upon current market conditions, quoted market prices, and present values of future cash flows. Derivative Instruments In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" ("FAS 138"), which delayed the effective date of required adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative and Hedging Activities" ("FAS 133"). The Company will adopt FAS 133 in Fiscal 2002. FAS 133 requires recognition of all derivatives as either assets or liabilities on the balance sheet measured at fair value. Adoption of this new accounting standard is expected to result in a cumulative effect charge net of tax totaling $0.2 million to expense and $0.9 million to other comprehensive income. The Company utilizes interest rate swap agreements to manage interest rate exposure. For Fiscal 2001, 2000 and 1999, the Company recognized the interest differential paid or received on interest rate swap agreements as an adjustment to interest expense (or rent expense when the swaps were used to fix floating-rate lease obligations). Interest differentials not yet settled in cash were reflected as current payables in the accompanying Consolidated Balance Sheets. Franchise Revenues Franchise development and license fees received are recognized when all material services have been substantially performed by the Company and the restaurant has opened for business. Franchise royalties (generally 4% of monthly sales) are recognized as franchise revenue on the accrual basis. Included as an offset to selling, general and administrative expenses for Fiscal 2001, 2000, and 1999 are support service fees and marketing fees (generally 4% of monthly sales in the aggregate) of $9.7 million, $6.0 million, and $3.7 million, respectively. The terms of the support services agreements coincide with those of the respective operating agreements. Costs associated with franchise operations are expensed as incurred. Refranchising Gains (Losses) Refranchising gains (losses), included in other restaurant operating costs, include gains or losses on sales of restaurants to franchisees. All direct costs associated with refranchising are included in the calculation of the gain or loss. Upon making the decision to sell a restaurant to a franchisee, the restaurant is reclassified to assets held for disposal at the lower of book value or fair market value and any anticipated loss is immediately recognized. When the sale occurs, any loss not previously recognized is recorded concurrently with the sale. The Company records an appropriate allowance for doubtful notes for any gain up to the full amount of the note received in conjunction with the transaction. Gains in excess of the notes are recognized currently. Allowance for Doubtful Notes The allowance for doubtful notes represents management's best estimate of losses inherent in the notes receivable. The allowance for doubtful notes is increased by the amount of any gain not received in cash in refranchising transactions, and reduced by receivables charged off. The adequacy of the allowance for doubtful notes is determined based on reviews and evaluations of specific notes, and current economic conditions. Earnings Per Share Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during each year presented. Diluted earnings per share gives effect to options outstanding during the applicable periods. The effect of the Company's stock options increased the diluted weighted average shares outstanding by 2,188,000, 2,044,000, and 2,754,000 for Fiscal 2001, 2000, and 1999, respectively. Stock-Based Employee Compensation Plans The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock issued to Employees" ("APB 25") and related Interpretations in accounting for its employee stock options and adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-

Based Compensation" ("FAS 123"). The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant and, accordingly, recognizes no compensation expense for the stock option grants.

Impairment of Long-Lived Assets The Company reviews underlying assets related to each of its restaurants for impairment when circumstances indicate the carrying amount may not be recoverable. An impairment is recognized when the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. In order to determine the amount of an impairment loss, the Company reviews future cash flows (including salvage value). In the instance of a potential refranchising deal, the expected purchase price is used as the estimate of future cash flows. Otherwise, discounted cash flows are projected at a unit level. Impairment write-downs are determined accordingly. Comprehensive Income Comprehensive income includes net income adjusted for certain revenues, expenses, gains and losses that are excluded from net income in accordance with generally accepted accounting principles, such as adjustments to the minimum pension liability. Comprehensive income is shown as a separate component in the Consolidated Statements of Shareholders' Equity and Comprehensive Income. Segment Reporting Operating segments are components of an enterprise about which separate financial information is available that is reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company aggregates similar operating segments into a single operating segment if the businesses are considered similar under the criteria of accounting principles generally accepted in the United States of America. The Company considers its restaurant and franchising operations as similar and has aggregated them. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported net income. 2. Franchising The Company's domestic franchise program currently includes 21 franchise partners. In conjunction with this program, the Company has sold 105 Ruby Tuesday restaurants to these franchise partners as of June 5, 2001. These units are operating as franchised Ruby Tuesday restaurants under separate franchising agreements. During Fiscal 2001 and 2000, the Company sold six and 42 units, respectively, to franchise partners for collective sales prices of $9.2 million and $58.5 million, respectively. The portion of sales prices not received in cash ($1.8 million in 2001 and $20.5 million in 2000) was received in the form of notes bearing interest at rates ranging from 8.0% to 10.0% with one note at 15.6% and due through 2013. The sales of these units resulted in a pre-tax gain of $1.7 million in 2001 and $5.4 million in 2000. The gains are included in other restaurant operating costs. The Company has entered into development agreements with its domestic franchise partners whereby they will open varying numbers of Ruby Tuesday restaurants over the next five to six years following their respective agreement dates. During Fiscal 2001 and 2000, 21 and 22 Ruby Tuesday franchise units were opened, respectively, by franchisees pursuant to development agreements which resulted in the recognition of development and licensing fees of $0.9 million and $1.0 million, respectively. Deferred development fees associated with all domestic franchisees totaled $1.4 million and $1.5 million as of June 5, 2001 and June 4, 2000, respectively. As discussed in Note 11 to the Consolidated Financial Statements, the Company sponsors and serves as partial guarantor for a revolving line-of-credit to assist franchise partners with working capital and operational cash flow requirements. On March 5, 2001, the Company acquired all of the member interests of RT Southwest Franchise, LLC,

Impairment of Long-Lived Assets The Company reviews underlying assets related to each of its restaurants for impairment when circumstances indicate the carrying amount may not be recoverable. An impairment is recognized when the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. In order to determine the amount of an impairment loss, the Company reviews future cash flows (including salvage value). In the instance of a potential refranchising deal, the expected purchase price is used as the estimate of future cash flows. Otherwise, discounted cash flows are projected at a unit level. Impairment write-downs are determined accordingly. Comprehensive Income Comprehensive income includes net income adjusted for certain revenues, expenses, gains and losses that are excluded from net income in accordance with generally accepted accounting principles, such as adjustments to the minimum pension liability. Comprehensive income is shown as a separate component in the Consolidated Statements of Shareholders' Equity and Comprehensive Income. Segment Reporting Operating segments are components of an enterprise about which separate financial information is available that is reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company aggregates similar operating segments into a single operating segment if the businesses are considered similar under the criteria of accounting principles generally accepted in the United States of America. The Company considers its restaurant and franchising operations as similar and has aggregated them. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported net income. 2. Franchising The Company's domestic franchise program currently includes 21 franchise partners. In conjunction with this program, the Company has sold 105 Ruby Tuesday restaurants to these franchise partners as of June 5, 2001. These units are operating as franchised Ruby Tuesday restaurants under separate franchising agreements. During Fiscal 2001 and 2000, the Company sold six and 42 units, respectively, to franchise partners for collective sales prices of $9.2 million and $58.5 million, respectively. The portion of sales prices not received in cash ($1.8 million in 2001 and $20.5 million in 2000) was received in the form of notes bearing interest at rates ranging from 8.0% to 10.0% with one note at 15.6% and due through 2013. The sales of these units resulted in a pre-tax gain of $1.7 million in 2001 and $5.4 million in 2000. The gains are included in other restaurant operating costs. The Company has entered into development agreements with its domestic franchise partners whereby they will open varying numbers of Ruby Tuesday restaurants over the next five to six years following their respective agreement dates. During Fiscal 2001 and 2000, 21 and 22 Ruby Tuesday franchise units were opened, respectively, by franchisees pursuant to development agreements which resulted in the recognition of development and licensing fees of $0.9 million and $1.0 million, respectively. Deferred development fees associated with all domestic franchisees totaled $1.4 million and $1.5 million as of June 5, 2001 and June 4, 2000, respectively. As discussed in Note 11 to the Consolidated Financial Statements, the Company sponsors and serves as partial guarantor for a revolving line-of-credit to assist franchise partners with working capital and operational cash flow requirements. On March 5, 2001, the Company acquired all of the member interests of RT Southwest Franchise, LLC, formerly a franchise partner with nine units in Arizona, for a cash purchase price of $0.1 million. As a result of this transaction, the Company recorded the franchise partner's liabilities, including long-term debt. See Note 6 to the Consolidated Financial Statements for more information. Also, during Fiscal 2001 the Company acquired an additional 49% limited partnership interest in RT Tampa Franchise, LP for $0.5 million, pursuant to the terms of the Limited Partnership Agreement, bringing the

Company's limited partnership interest of the Tampa franchise to 50%. The Company accounts for this investment under the equity method. Income recognized during Fiscal 2001 from the Company's 50% limited partnership interest of the Tampa Franchise was not significant. During Fiscal 2001 and 2000, three and four Ruby Tuesday international franchise units were opened, respectively, by franchisees pursuant to territorial development agreements which resulted in the recognition of development and licensing fees of $0.8 million and $0.4 million, respectively. Deferred territorial development fees, which will be recognized as income as units are opened in accordance with the various development agreements, totaled $0.8 million and $1.1 million at June 5, 2001 and June 4, 2000, respectively.

3. Sale of American Cafe and Tia's Tex-Mex Restaurants On November 20, 2000, the Company completed the sale of all of its American Cafe (including L&N Seafood) and Tia's Tex-Mex restaurants to Specialty Restaurant Group, LLC ("SRG"), a limited liability company owned by the former President/Partner of the Company's American Cafe and Tia's Tex-Mex concepts and certain members of his management team. The 69 restaurants sold to SRG had revenues of $50.0 million and operating losses of $1.1 million for the twenty-four weeks ended November 20, 2000 and revenues of $108.2 million and operating losses of $2.3 million for Fiscal 2000. The sale of these restaurants was effected pursuant to an Agreement and Plan of Merger dated as of October 4, 2000, as amended by First Amendment to Agreement and Plan of Merger dated November 20, 2000, (collectively the "Merger Agreement") among the Company, Tia's, LLC and SRG. The purchase price for these restaurants was determined in arms-length negotiations between the Company and SRG. The consideration received by the Company pursuant to the Merger Agreement consisted of (i) $30.0 million in cash, (ii) a promissory note payable by SRG to the Company (the "Note") in the principal amount of $28.8 million, (iii) an option to acquire a 33% membership interest in SRG during the five-year period following November 20, 2000 at varying amounts, and (iv) a nonsolicitation agreement for the period during which the Note is outstanding and two years after the Note is paid in full. The Note has a term of 10 years, the first three of which are interest only, bears interest at a rate of 10% per annum, and is secured by a pledge of all of the outstanding member interests of SRG. As a result of the planned sale, a pre-tax loss of $10.0 million was recorded in Fiscal 2000. Included in the loss was $8.5 million, which represented an impairment charge on a majority of the Tia's TexMex goodwill, $0.7 million for compensation expense resulting from the acceleration of unvested options held by employees of these concepts, and $0.8 million for other write-offs and charges. The accelerated stock options had original vesting dates ranging from September, 2000 through October, 2002. Included in assets held for disposal at June 4, 2000 was $56.0 million which represented the remaining book value of the American Cafe and Tia's Tex-Mex fixed assets and goodwill. 4. Impairment of Long-Lived Assets The Company periodically reviews the recorded value of its long-lived assets to determine if the future cash flows to be derived from those assets will be sufficient to recover the remaining recorded asset values. Restaurants in particular are reviewed on a quarterly basis for negative cash flows. Management believes that units with recurring negative cash flows might be impaired based upon poor operating performance. Based upon its reviews in Fiscal 2001, 2000, and 1999, the Company recorded restaurant impairments of $0.9 million, $6.3 million, and $2.9 million, respectively. The impairment charge in Fiscal 2001 included impairments for five underperforming restaurants, all of which were closed prior to June 5, 2001. The charges for Fiscal 2000 included $4.0 million for five underperforming Ruby Tuesday units in the state of Texas, which were subsequently sold or closed. In addition to the restaurant impairments, the Company recorded a $2.8 million impairment charge in Fiscal 2000 for capitalized software and systems resulting from the abandonment of a restaurant system which had been intended to assist unit managers in administration, food cost management, payroll and other functions. The project is not currently in development and the Company has redirected efforts to obtain the desired system information from other sources. The impairment charges discussed above are included as a component of other restaurant operating costs in the Consolidated Statements of Income and are included with gains/losses on impairments and disposition of assets in the Consolidated Statements of Cash Flows. 5. Notes Receivable

3. Sale of American Cafe and Tia's Tex-Mex Restaurants On November 20, 2000, the Company completed the sale of all of its American Cafe (including L&N Seafood) and Tia's Tex-Mex restaurants to Specialty Restaurant Group, LLC ("SRG"), a limited liability company owned by the former President/Partner of the Company's American Cafe and Tia's Tex-Mex concepts and certain members of his management team. The 69 restaurants sold to SRG had revenues of $50.0 million and operating losses of $1.1 million for the twenty-four weeks ended November 20, 2000 and revenues of $108.2 million and operating losses of $2.3 million for Fiscal 2000. The sale of these restaurants was effected pursuant to an Agreement and Plan of Merger dated as of October 4, 2000, as amended by First Amendment to Agreement and Plan of Merger dated November 20, 2000, (collectively the "Merger Agreement") among the Company, Tia's, LLC and SRG. The purchase price for these restaurants was determined in arms-length negotiations between the Company and SRG. The consideration received by the Company pursuant to the Merger Agreement consisted of (i) $30.0 million in cash, (ii) a promissory note payable by SRG to the Company (the "Note") in the principal amount of $28.8 million, (iii) an option to acquire a 33% membership interest in SRG during the five-year period following November 20, 2000 at varying amounts, and (iv) a nonsolicitation agreement for the period during which the Note is outstanding and two years after the Note is paid in full. The Note has a term of 10 years, the first three of which are interest only, bears interest at a rate of 10% per annum, and is secured by a pledge of all of the outstanding member interests of SRG. As a result of the planned sale, a pre-tax loss of $10.0 million was recorded in Fiscal 2000. Included in the loss was $8.5 million, which represented an impairment charge on a majority of the Tia's TexMex goodwill, $0.7 million for compensation expense resulting from the acceleration of unvested options held by employees of these concepts, and $0.8 million for other write-offs and charges. The accelerated stock options had original vesting dates ranging from September, 2000 through October, 2002. Included in assets held for disposal at June 4, 2000 was $56.0 million which represented the remaining book value of the American Cafe and Tia's Tex-Mex fixed assets and goodwill. 4. Impairment of Long-Lived Assets The Company periodically reviews the recorded value of its long-lived assets to determine if the future cash flows to be derived from those assets will be sufficient to recover the remaining recorded asset values. Restaurants in particular are reviewed on a quarterly basis for negative cash flows. Management believes that units with recurring negative cash flows might be impaired based upon poor operating performance. Based upon its reviews in Fiscal 2001, 2000, and 1999, the Company recorded restaurant impairments of $0.9 million, $6.3 million, and $2.9 million, respectively. The impairment charge in Fiscal 2001 included impairments for five underperforming restaurants, all of which were closed prior to June 5, 2001. The charges for Fiscal 2000 included $4.0 million for five underperforming Ruby Tuesday units in the state of Texas, which were subsequently sold or closed. In addition to the restaurant impairments, the Company recorded a $2.8 million impairment charge in Fiscal 2000 for capitalized software and systems resulting from the abandonment of a restaurant system which had been intended to assist unit managers in administration, food cost management, payroll and other functions. The project is not currently in development and the Company has redirected efforts to obtain the desired system information from other sources. The impairment charges discussed above are included as a component of other restaurant operating costs in the Consolidated Statements of Income and are included with gains/losses on impairments and disposition of assets in the Consolidated Statements of Cash Flows. 5. Notes Receivable Notes Receivable consists of the following: (In Thousands)
Fiscal Year 2001 2000 Notes receivable from franchisees $47,882 $48,470 Notes receivable from Specialty Restaurant Group, LLC 28,883 0 Other 150 165 -------- -------76,915 48,635 Less current maturities (included in accounts and

notes receivable)

Less allowance for doubtful notes

305 -------76,610 (19,729) -------$56,881 ========

394 -------48,241 (25,115) -------$23,126 ========

Notes receivable from franchisees generally arise when Company-owned restaurants are sold to franchise partners ("refranchising"). These notes, which accrue interest at rates varying from 8.0%-10.0% with one note at 15.6%, generally allow for deferral of interest during the first one to three years and interest only payments for the following three years. The SRG note receivable bears interest at 10.0% with principal repayments scheduled to begin in Fiscal 2004. Scheduled repayments of notes receivable at June 5, 2001 are as follows: (In Thousands)
2002 2003 2004 2005 2006 Subsequent years Total 305 416 3,561 6,016 7,389 59,228 ------$76,915 ======= $

6. Long-Term Debt Long-term debt consists of the following: (In Thousands)
Fiscal Year 2001 2000 Revolving credit facility Term notes payable to banks Term note payable to CNL Financial I, Inc. Other long-term debt $ 8,000 0 7,078 634 ------15,712 500 ------$15,212 ======= $13,000 50,000 0 770 ------63,770 63,134 ------$ 636 =======

Less current maturities

Annual maturities of long-term debt at June 5, 2001 are as follows: (In Thousands) 2002 $ 500 2003 546 2004 507 2005 508 2006 8,554 Subsequent Years 5,097 ------Total $15,712

During Fiscal 2001, the Company entered into a five-year $50.0 million Senior Revolving Credit Facility with

6. Long-Term Debt Long-term debt consists of the following: (In Thousands)
Fiscal Year 2001 2000 Revolving credit facility Term notes payable to banks Term note payable to CNL Financial I, Inc. Other long-term debt $ 8,000 0 7,078 634 ------15,712 500 ------$15,212 ======= $13,000 50,000 0 770 ------63,770 63,134 ------$ 636 =======

Less current maturities

Annual maturities of long-term debt at June 5, 2001 are as follows: (In Thousands) 2002 $ 500 2003 546 2004 507 2005 508 2006 8,554 Subsequent Years 5,097 ------Total $15,712

During Fiscal 2001, the Company entered into a five-year $50.0 million Senior Revolving Credit Facility with several banks. This facility includes a $10.0 million current credit line ("Swing Line") and a $15.0 million Letter of Credit sub-facility. Borrowings under the Revolving Credit Facility bear interest at various rate options to be chosen by the Company. The rate will either be the Base Rate (which is defined to be the higher of the issuing bank's prime lending rate or the Federal Funds rate plus 0.5%) or LIBOR plus the Applicable Margin (which ranges from 0.875% to 1.75% and is based on Adjusted Funded Debt to Earnings Before Interest, Taxes, Depreciation, Amortization and Rent). Commitment fees ranging from 0.15% to 0.375% are payable quarterly on the unused portion of the Revolving Credit Facility. At June 5, 2001, the Company had $8.0 million of borrowings outstanding with various banks under the Senior Revolving Credit Facility at interest rates approximating 5.09% per annum. Borrowings under the Swing Line are reflected with lines of credit as shortterm borrowings in the Consolidated Balance Sheets. See further discussion below. The credit facility contains restrictions on incurring additional indebtedness and payment of dividends and has certain covenants regarding funded debt, net worth, and fixed charge coverage. At June 5, 2001, the Company was in compliance with all such covenants. In connection with the acquisition of RT Southwest Franchise LLC, which was discussed further in Note 2 to Consolidated Financial Statements, the Company recorded a term note payable to CNL Financial I, Inc. totaling $7.1 million, at a fixed rate of interest approximating 8.64%, which is secured by the property of the related Arizona restaurants. In addition, at June 5, 2001, the Company had committed lines of credit amounting to $12.5 million with several banks, all of which are subject to periodic review. As previously mentioned, the Company's $50.0 million revolving credit facility includes a $10.0 million Swing Line. The Company utilized its lines of credit to meet operational cash needs during Fiscal 2001 and 2000. Borrowings on these lines of credit, including the Swing Line, and associated interest rates were $14.7 million and 4.87%, respectively, at June 5, 2001, and $3.4 million and 6.91%, respectively, at June 4, 2000. Interest expense capitalized in connection with financing additions to property and equipment amounted to approximately $ 0.4 million and $ 0.7 million for Fiscal 2001 and 2000, respectively. 7. Leases

Various operations of the Company are conducted in leased premises. Initial lease terms expire at various dates over the next 20 years and may provide for escalation of rent during the lease term. Most of these leases provide for additional contingent rents based upon sales volume and contain options to renew (at adjusted rentals for some leases).

The following is a schedule by year of future minimum lease payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of June 5, 2001:
(In Thousands) -----------------------------------------2002 $ 48,316 2003 48,081 2004 47,421 2005 45,458 2006 42,857 Subsequent years 236,437 -------Total minimum lease payments $468,570 ========

Future minimum sub-lease payments to be received for the next five years and in the aggregate under noncancelable sub-lease agreements are as follows:
(In Thousands) -----------------------------------------2002 $ 14,443 2003 14,450 2004 14,112 2005 13,313 2006 12,386 Subsequent years 55,304 -------Total minimum sub-lease payments $124,008 ========

Rental expense pursuant to operating leases is summarized as follows: (In Thousands)
2001 2000 1999 ------------------------$34,912 $36,806 $35,809 2,613 4,307 3,527 ------------------------$37,525 $41,113 $39,336 =========================

Minimum rent Contingent rent

Since Fiscal 1998, the Company has entered into master synthetic lease agreements totaling $235.0 million for the purpose of leasing new free-standing units and the Maryville, Tennessee Restaurant Support Services Center. Included in this total is a $50.0 million master operating lease agreement entered into on April 30, 2001. Under the terms of these master synthetic lease agreements, an operating lease agreement is entered into for each facility providing for an initial lease term of five years from the applicable agreement date with two five-year renewal options. Each lease also provides for substantial residual value guarantees and includes purchase options at the lessor's original cost of the properties. As of June 5, 2001, the Company has entered into leases for 94 units (70 of which were open at June 5, 2001) and the Maryville, Tennessee Restaurant Support Services Center at an aggregated original funded cost to the lessor of approximately $166.1 million. Lease commitments applicable to such leases entered into are included in the comm