10.

Share-Based Employee Compensation

Preferred Stock

RTI is authorized, under its Certificate of Incorporation, to issue up to

250,000

shares of preferred stock with a par value of

$0.01.

These shares

may

be issued from time to time in

one

or more series. Each series will have dividend rates, rights of conversion and

redemption, liquidation prices, and other terms or conditions as determined by the Board of Directors.

preferred shares have been issued as of

February

28,

2017

and

May

31,

2016.

The Ruby Tuesday, Inc. Stock Incentive Plan and the Ruby Tuesday, Inc.

1996

Stock Incentive Plan

A committee, appointed by the Board of Directors, administers the Ruby Tuesday, Inc. Stock Incentive Plan (“SIP”) and the Ruby Tuesday, Inc.

1996

Stock Incentive Plan

(“1996

SIP”), and has full authority in its discretion to determine the key employees, officers, and non-employee directors to whom share-based incentives are granted and the terms and provisions of share-based incentives. Stock option grants under the SIP and

1996

SIP can have varying vesting provisions and exercise periods as determined by such committee. A majority of currently outstanding stock options granted under the SIP and

1996

SIP vest within

three

years following the date of grant and expire

seven

years after the date of grant. The SIP and

1996

SIP permit the committee to make awards of shares of common stock, awards of stock options or other 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 for the benefit of a group of eligible persons. All stock options awarded under the SIP and

1996

SIP have been awarded with an exercise price equal to the fair market value at the time of grant.

February

28,

2017,

we had reserved a total of

6,557,000

shares of common stock for the SIP and

1996

SIP. Of the reserved shares at

February

28,

2017,

1,749,000

were subject to stock options outstanding. Stock option exercises are settled with the issuance of new shares. Net shares of common stock available for issuance at

February

28,

2017

were

4,808,000.

Stock Options

The following table summarizes our stock option activity under these stock option plans for the

weeks ended

February

28,

2017

(Stock Options and Aggregate Intrinsic Value are in thousands):

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Service-based vesting:
Outstanding at May 31, 2016		2,066		$	7. 89
Granted		1,126			3.46
Cancellations and forfeitures		(40	)		4.53
Expired		(1,403	)		6.62
Outstanding at February 28, 2017		1,749		$	6.13		3.64	$	–
Exercisable at February 28, 2017		910		$	8.62		1.10	$	–

February

28,

2017,

there was approximately

$0.6

million of unrecognized pre-tax compensation expense related to non-vested stock options. This cost is expected to be recognized over a weighted average period of

1.4

years.

During the

weeks ended

February

28,

2017,

we granted

247,000

service-based stock options to our Interim Chief Executive Officer under the terms of the SIP. The stock options awarded cliff vest at the end of fiscal year

2017

and have a maximum life of

seven

years.

During the

weeks ended

February

2017,

we granted

878,000

service-based stock options to certain employees under the terms of the SIP. The stock options awarded vest in equal annual installments over a

three

-year period following grant of the award, and have a maximum life of

seven

years.

Restricted Stock and Restricted Stock Units (“RSU”)

The following table summarizes our restricted stock and RSU activity for the

weeks ended

February

28,

2017

(in thousands, except per-share data):

	Shares			Weighted Average Fair Value
Service-Based Vesting:
Unvested at May 31, 2016		564		$	6. 29
Granted		538			3.22
Vested		(535	)		5.79
Cancellations and forfeitures		(41	)		5.70
Unvested at February 28, 2017		526		$	3.71

Performance-Based Vesting:
Unvested at May 31, 2016		225		$	6.51
Cancellations and forfeitures		(84	)		6.51
Unvested at February 28, 2017		141		$	6.51

The fair value of restricted stock and RSU awards is based on the closing price of our common stock on the date prior to the grant date. At

February

2017,

unrecognized compensation expense related to restricted stock and RSU grants expected to vest totaled

$1.2

million and will be recognized over a weighted average vesting period of

1.2

years.

During the

weeks ended

February

28,

2017,

we granted

219,000

restricted shares to non-employee directors under the terms of the SIP.

These shares cliff vest over a

one

year period following the grant date of the award.

During

the

weeks ended

February

28,

2017

, we granted

319,000

service-based RSUs to certain employees under the terms of the SIP and

1996

SIP. The service-based RSUs will vest in

three

equal installments over a

three

-year period following the date of grant.

Phantom Stock Units

We began granting phantom stock units during fiscal year

2017.

Each phantom stock unit entitles the recipient to receive a cash payment equal to the value of a single share of our common stock upon vesting. During the

second

quarter of fiscal year

2017

, we granted

81,000

service-based phantom stock units to our Interim Chief Executive Officer. The phantom stock units will cliff vest at the end of fiscal year

2017.

Also during the

second

quarter of fiscal year

2017,

we granted

407,000

service-based phantom stock units to our senior executive team.

The phantom stock units will cliff vest

two

years following the grant date of the award.

uring the

first

quarter of fiscal year

2017,

we granted

571,000

performance-based phantom stock units that will vest approximately

three

years after the grant date. Vesting of the performance-based phantom stock units is contingent upon the Company’s achievement of a same-restaurant sales performance condition related to the next

three

fiscal years. During the

second

quarter of fiscal year

2017,

210,000

of these performance-based phantom stock units were forfeited primarily in connection with the departure of our former President and Chief Executive Officer.

Included in our Condensed Consolidated Balance Sheets

are amounts within Accrued liabilities: Payroll and related costs of

$0.1

million as of

February

28,

2017

and amounts within Other deferred liabilities of

$0.3

million and

$0.2

million as of

February

28,

2017

and

May

31,

2016,

respectively, relating to all of our long-term incentive awards that will settle in cash.

ncluded within General and administrative expenses in our Consolidated Statements of Operations and Comprehensive Loss is share-based compensation expense of

$0.5

million and

$3.0

million for the

and

weeks ended

February

28,

2017,

respectively, and

$0.9

million and

$1.7

million for the

and

weeks ended

March

2016.