Exhibit 10.5

RED ROBIN GOURMET BURGERS, INC.

SECOND AMENDED AND RESTATED
2007 PERFORMANCE INCENTIVE PLAN

 

FORM OF

PERFORMANCE BASED CASH AWARD AGREEMENT

 

This Performance Based Cash Award Agreement (this “Agreement”) between RED ROBIN
GOURMET BURGERS, INC. (the “Corporation”) and [                      ]
(“Participant”) is dated effective [                        ] (the “Date of
Grant”).

 

AGREEMENT

 

1.             Award.  Subject to the terms and conditions hereof and of the Red
Robin Gourmet Burgers, Inc. Second Amended and Restated 2007 Performance
Incentive Plan (the “Plan”), the Corporation hereby grants to Participant the
right to earn a cash bonus (the “Award”) based upon the Corporation’s
achievement of certain performance goals over the three fiscal year period
commencing on December 27, 2010 and ending on December 29, 2013 (the
“Performance Period”).  The target amount of Participant’s Award shall be
$[                ] (“Target Award”).  The actual amount of the Award, if any,
shall be determined pursuant to Sections 2 through 4 below and may be greater
than, equal to, or less than the Target Award based on the Corporation’s
performance during the Performance Period.  Except as provided below,
Participant must be employed continuously in the position of General Manager or
above from the date hereof through the last day of the Performance Period in
order to receive any payment hereunder.

 

2.             Calculation of Award Amount.  The amount of Participant’s Award,
if any, shall be determined based on the Corporation’s performance over the
Performance Period as measured by the following two metrics: Cumulative EBITDA
(as defined below) and Average Return on Invested Capital (also defined below). 
One half of the Target Award shall be assigned to each performance metric, and
the amount earned as a result of each metric shall be calculated separately, in
accordance with the table below.   The total Award amount, if any, shall be the
sum of the amounts earned in respect of each performance metric.

 

Cumulative EBITDA
Amount earned in respect of this metric shall equal:
(Target Award * 1/2 * EBIDTA % Payout)

 

Average Return on Invested Capital
Amount earned in respect of this metric shall equal:
(Target Award * 1/2 * ROIC % Payout)

 

 

 

Cumulative EBITDA for
the Performance Period as
a Percentage of Target

 

EBITDA %
Payout *

 

 

 

Average Return on
Invested Capital for the
Performance Period as a
Percentage of Target

 

ROIC %
Payout *

 

 

 

 

 

 

 

 

 

 

 

 

 

Threshold

 

90.0

%

50.0

%

Threshold

 

85.0

%

50.0

%

 

 

92.0

%

60.0

%

 

 

88.0

%

60.0

%

 

 

94.0

%

70.0

%

 

 

91.0

%

70.0

%

 

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96.0

%

80.0

%

 

 

94.0

%

80.0

%

 

 

98.0

%

90.0

%

 

 

97.0

%

90.0

%

Target

 

100.0

%

100.0

%

Target

 

100.0

%

100.0

%

 

 

102.0

%

110.0

%

 

 

102.5

%

110.0

%

 

 

104.0

%

120.0

%

 

 

105.0

%

120.0

%

 

 

106.0

%

130.0

%

 

 

107.5

%

130.0

%

 

 

108.0

%

140.0

%

 

 

110.0

%

140.0

%

 

 

110.0

%

150.0

%

 

 

112.5

%

150.0

%

 

 

112.0

%

160.0

%

 

 

115.0

%

160.0

%

 

 

114.0

%

170.0

%

 

 

117.5

%

170.0

%

 

 

116.0

%

180.0

%

 

 

120.0

%

180.0

%

 

 

118.0

%

190.0

%

 

 

122.5

%

190.0

%

Maximum

 

120.0

%

200.0

%

Maximum

 

125.0

%

200.0

%

 

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*                 If the Corporation’s performance during the Performance Period
falls between any of the percentages in the table above, the EBITDA % Payout or
ROIC % Payout, as applicable, shall be calculated using linear interpolation
(e.g. if Cumulative EBITDA for the Performance Period is 103% of the target, the
EBITDA % Payout would be 115%).

 

The Cumulative EBITDA and Average Return on Invested Capital targets to be used
in accordance with the table above were established in writing by the
Administrator on [March]    , 2011.  Such targets are not set forth herein and
the parties agree that they shall not be specifically disclosed to the
Participant as they relate to or contain future financial goals of the
Corporation which have not and will not be disclosed to the public.  The
Administrator shall adjust such targets to exclude the effect of any of the
following events that occur during the Performance Period:  (i) asset
write-downs, (ii) extraordinary litigation, claims, judgments, or settlements,
(iii) the effect of changes in tax law, accounting principles or other such laws
or provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs, (v) material changes to invested capital from pension
and post-retirement benefits-related items and similar non-operational items,
and (vi) any other extraordinary, unusual, non-recurring or non-comparable items
(A) as described in management’s discussion and analysis of financial condition
and results of operations appearing in the Corporation’s Annual Report to
stockholders, (B) as described in Accounting Principles Board Opinion No. 30 (or
successor guidance thereto) or (C) as publicly announced by the Corporation in
a  press release or conference call relating to the Corporation’s results of
operations or financial condition for a completed quarterly or annual fiscal
period.

 

3.             Service Requirements; Termination of Employment.

 

(a)           General.  Participant shall be eligible to receive an Award only
if (i) Participant remains employed by the Corporation through the last day of
the Performance Period and (ii) Participant continues to serve in a job level of
General Manager or above through the last day of the Performance Period. If
Participant ceases to be employed by the Corporation at any time prior to the
last day of the Performance Period or is demoted to a level lower than General
Manager, then, except as otherwise provided in this Section 3, this Agreement
shall be canceled immediately on the Separation Date or the date of demotion, as
applicable, and Participant shall cease to have any right or entitlement to
receive any payment hereunder.  Nothing contained in this Agreement or in the
Plan shall confer upon Participant any right to continue in the employment of
the Corporation or to continue at the same job level that Participant holds as
of the Date of Grant.

 

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(b)           Accelerated Vesting upon Participant’s Death or Total Disability. 
Notwithstanding Section 3(a) above, if Participant’s employment with the
Corporation is terminated prior to the last day of the Performance Period as a
result of Participant’s death or Total Disability, then at the Separation Date
the Performance Period shall be deemed to have ended and Participant’s Award, if
any, shall be calculated in the manner set forth in Section 2 above except
(i) appropriate adjustments shall be made by the Administrator to the targets
for Cumulative EBITDA and Average Return on Invested Capital, and (ii) the
amount of the Award, if any, will be pro-rated based on the number of days that
Participant was employed by the Corporation between the Date of Grant and the
Separation Date as a percentage of the total number of days in the Performance
Period.

 

(c)           Accelerated Vesting upon Participant’s Retirement. 
Notwithstanding Section 3(a) above, if Participant’s employment with the
Corporation is terminated prior to the last day of the Performance Period as a
result of Participant’s Retirement, then at the Separation Date, the Performance
Period shall be deemed to have ended and Participant’s Award, if any, shall be
calculated in the manner set forth in Section 2 above except (i) appropriate
adjustments shall be made by the Administrator to the targets for Cumulative
EBITDA and Average Return on Invested Capital, and (ii) the amount of the Award,
if any, will be pro-rated based on the number of days that Participant was
employed by the Corporation between the Date of Grant and the Separation Date as
a percentage of the total number of days in the Performance Period.

 

4.             Change in Control Event.  If the Corporation undergoes a Change
in Control Event prior to the last day of the Performance Period, then the
Performance Period shall be deemed to have ended on the effective date of the
Change in Control Event, and Participant shall be entitled to an Award
calculated in the manner set forth in Section 2 above except appropriate
adjustments shall be made by the Administrator to the targets for Cumulative
EBITDA and Average Return on Invested Capital.

 

5.             Payment of Awards.  Participant’s Award, if any, shall be paid in
cash within sixty-five (65) days after (i) the end of the Performance Period, or
(ii) the Separation Date, if Section 3(b) or 3(c) is applicable (subject to any
payment delay required by Section 10(b), below), or (iii) the Change in Control
Event, if Section 4 is applicable.

 

6.             Tax Withholding.  The Corporation shall withhold from any Award
payable hereunder all federal, state, local and other income and employment
taxes required to be withheld from such Award.

 

7.             Binding Effect.  This Agreement shall bind Participant and the
Corporation and their beneficiaries, survivors, executors, administrators and
transferees.

 

8.             Conflicts and Interpretation.  Participant acknowledges receipt
of a copy of the Plan, and agrees that this Award shall be subject to all of the
terms and conditions set forth in the Plan, including future amendments thereto,
if any, pursuant to the terms thereof, which Plan is incorporated herein by
reference as a part of this Agreement.  In the event of any conflict between the
terms and conditions of this Agreement and the terms and conditions of the Plan,
the terms and conditions of the Plan shall control.

 

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9.             Amendment.  The Corporation may modify, amend or waive the terms
of the Award, prospectively or retroactively, but no such modification,
amendment or waiver shall impair the rights of Participant without his or her
consent, except as required by applicable law or as necessary to avoid adverse
tax or accounting consequences.  Prior to the effectiveness of any modification,
amendment or waiver, the Corporation will provide notice to Participant and the
opportunity for Participant to consult with the Corporation regarding such
modification, amendment or waiver.  The waiver by either party of compliance
with any provision of this Agreement shall not operate or be construed as a
waiver of any other provision of this Agreement, or of any subsequent breach by
such party of a provision of this Agreement.

 

10.           Compliance with Code Section 409A.

 

(a)           It is the intention of the parties that compensation payable under
this Agreement shall not be subject to the additional tax imposed pursuant to
Section 409A of the Code and the parties shall interpret this Agreement in a
manner consistent with such intent.

 

(b)           If Participant is a specified employee within the meaning of
Section 409A(a)(2)(B)(i) of the Code and would receive any payment sooner than
6 months after Participant’s Separation Date that, absent the application of
this Section 10(b), would be subject to additional tax imposed pursuant to
Section 409A of the Code as a result of such status as a specified employee,
then such payment shall instead be payable on the date that is the earliest of
(i) 6 months after Participant’s Separation Date or (ii) Participant’s death.

 

11.           Definitions.  Capitalized terms not otherwise defined herein shall
have the same meanings ascribed to them in the Plan.  Whenever the following
terms are used in this Agreement, they shall have the meanings set forth below.

 

(a)           “Average Return on Invested Capital” means (x) the Return on
Invested Capital for each fiscal year of the Corporation during the Performance
Period ÷ (y) the total number of fiscal years in the Performance Period.

 

(b)           “Change in Control Event” means a “Change in Control Event” as
defined in the Plan, that also qualifies as a “change in control event” pursuant
to Treasury Regulation Section 1.409A-3(i)(5).

 

(c)           “Cumulative EBITDA” means the net earnings of the Corporation over
the relevant period plus (i) pre-opening expenses, (ii) impairments, (iii) stock
option expense, (iv) interest expense, (v) income taxes, (vi) depreciation and
(vii) amortization expense.

 

(d)           “Retirement” means the voluntary termination of employment by
Participant from the Corporation when the Participant’s age plus years of
service with the Corporation (in each case measured in complete, whole years)
equals or exceeds 67, provided that at the date of termination the Participant
is at least 58 years of age and has completed at least five years of service
with the Corporation

 

(e)           “Return on Invested Capital” for a relevant period means:

 

NOPAT ÷ Invested Capital

 

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“NOPAT” means Net Operating Profit for the relevant period multiplied by (1- the
Corporation’s effective tax rate for the relevant period).

 

“Net Operating Profit” means net earnings for the relevant period plus
(i) interest expense, and (ii) income taxes.

 

“Invested Capital” means the Corporation’s total long term debt plus the
Corporation’s total equity.

 

(f)            “Separation Date” shall be the date on which Participant’s
employment with the Corporation ceases for any reason in a manner that
constitutes a “separation from service” within the meaning of Treasury
Regulation Section 1.409A-1(h), including Participant’s resignation for any
reason, the Corporation’s termination of Participant’s employment for any reason
including Total Disability, or Participant’s death.

 

(g)           “Total Disability” means a “permanent and total disability”
(within the meaning of Section 22(e)(3) of the Internal Revenue Code or as
otherwise determined by the Administrator).

 

[Signature Page Follows.]

 

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IN WITNESS WHEREOF, the parties have executed this Performance Based Cash Award
Agreement effective as of the Date of Grant.

 

 

RED ROBIN GOURMET BURGERS, INC.

 

 

 

 

 

By:

 

 

 

 

Name:

Date

 

 

Title:

 

 

 

 

 

 

PARTICIPANT:

 

 

 

 

 

 

Name:

Date

 

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