EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of this 30th day of
September, 2013, by and between RED ROBIN GOURMET BURGERS, INC., a Delaware
corporation (the “Company”), and Michael L. Kaplan (“Executive”).

 

RECITAL

 

WHEREAS, the parties desire to enter into this Agreement setting forth the terms
and conditions for the employment relationship between Executive and the
Company.

 

NOW, THEREFORE, in consideration of the promises and mutual covenants and
agreements herein contained and intending to be legally bound hereby, the
Company and Executive hereby agree as follows:

 

AGREEMENT

 

1.                                      Employment Period.  The Company, through
its wholly-owned subsidiary, Red Robin International, Inc., a Nevada corporation
(“RRI”), hereby employs Executive, and Executive hereby accepts such employment,
upon the terms and conditions hereinafter set forth.  The term of Executive’s
employment hereunder shall be deemed to have commenced on October 1, 2013 (the
“Effective Date”), and shall continue indefinitely, subject to termination as
provided herein (such term being referred to herein as the “Employment
Period”).  Executive and the Company acknowledge that, except as may otherwise
be provided by this Agreement or under any other written agreement between
Executive and the Company, the employment of Executive by the Company and RRI is
“at will” and Executive’s employment may be terminated by either Executive or
the Company at any time for any reason, or no reason.  RRI shall be the
“employer” for tax, legal reporting, payroll processing and similar purposes.

 

2.                                      Position and Duties.

 

(a)                                 During the Employment Period, Executive
shall be employed as and hold the title of Chief Legal Officer of the Company,
with such duties and responsibilities that are customary for public company
chief legal officer positions.  In addition, the Chief Executive Officer may
assign Executive such duties and responsibilities that are not substantially
inconsistent with his position as Chief Legal Officer of the Company.

 

(b)                                 During the Employment Period, Executive
shall devote substantially all of his skill, knowledge and working time to the
business and affairs of the Company and its subsidiaries; provided that in no
event shall this sentence prohibit Executive from performing personal and
charitable activities and any other activities approved by the Board, so long as
such activities do not materially and adversely interfere with Executive’s
duties for the Company and are in compliance with the Company’s policies. 
Executive shall perform his services at the Company’s headquarters, presently
located in Greenwood Village, Colorado.  Executive shall use his best efforts to
carry out his responsibilities under this Agreement faithfully and efficiently.

 

1

--------------------------------------------------------------------------------

 

3.                                      Compensation.

 

(a)                                 Base Salary.  During the Employment Period,
Executive shall receive from the Company an annual base salary (“Annual Base
Salary”) at the rate of $335,000.00, with such salary to be adjusted at such
times, if any, and in such amounts as recommended by the Chief Executive
Officer  and approved by the Board or a committee thereof.  Executive’s Annual
Base Salary shall be subject to annual review by the Chief Executive Officer and
the Board during the Employment Term.  The Company shall pay the Annual Base
Salary to Executive in accordance with the Company’s and RRI’s normal payroll
policy.

 

(b)                                 Annual Incentive Compensation.  In addition
to the Annual Base Salary, Executive is eligible to receive an annual cash bonus
each fiscal year during the Employment Period as determined in accordance with
the Company’s annual incentive plan and as approved by the Compensation
Committee (the “Annual Bonus”).  For the 2013 fiscal year, the Annual Bonus
shall be targeted at 70% of Executive’s Annual Base Salary (pro-rated for 2013
and other partial years of employment).  The actual amount of any Annual Bonus
shall depend on the level of achievement of the applicable performance criteria
established with respect to the Annual Bonus by the Board and the Compensation
Committee in their sole discretion.

 

(c)                                  Equity Awards.  On the Effective Date,
Executive will receive an equity award pursuant to the Company’s Second Amended
and Restated 2007 Performance Incentive Plan (the “Plan”) as follows:
time-vested restricted stock units having a grant date target value of $20,000,
of which 25% shall vest on each of the first, second, third and fourth
anniversaries of the Effective Date.  For 2014, Executive’s long-term incentive
grant will be guaranteed at 80% of his Annual Base Salary. All future annual
equity awards granted to Executive shall be contingent on the attainment of
certain performance criteria established with respect to such award by the Board
and the Compensation Committee in their sole discretion.

 

(d)                                 Other Benefits.

 

(i)             Welfare and Benefit Plans.  During the Employment Period:
(A) Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs of the Company and RRI to the
same extent as other senior executive employees, including, among other things,
participation in the Company’s Non-Qualified Deferred Compensation Plan; and
(B) Executive and/or Executive’s family, as the case may be, shall be eligible
to participate in, and shall receive all benefits under, all welfare benefit
plans, practices, policies and programs provided by the Company and RRI
(including, to the extent provided, without limitation, medical, prescription,
dental, disability, salary continuance, employee life insurance, group life
insurance, accidental death and travel accident insurance plans and programs) to
the same extent as other senior executive employees.

 

(ii)          Expenses.  During the Employment Period, Executive shall be
entitled to receive prompt reimbursement for all reasonable travel and other
expenses incurred by Executive in carrying out Executive’s duties under this
Agreement, provided that Executive complies with the policies, practices and
procedures of the Company and RRI for submission of expense reports, receipts or
similar

 

2

--------------------------------------------------------------------------------

 

documentation of the incurrence and purpose of such expenses (collectively
referred to herein as “Expense Policies”).

 

(iii)       Vacation.  Executive shall be entitled to no less than three
(3) weeks of paid vacation and/or paid time off per calendar year (as prorated
for partial years) in accordance with the Company’s policies on accrual and use
applicable to executive officers as in effect from time to time.

 

(iv)      Car Allowance.  During the Employment Period, Executive shall be paid
a monthly car allowance in the gross amount of $833.33.

 

(v)         Moving and Relocation Expenses.  It is expected that Executive shall
reside permanently in the Denver, Colorado metropolitan area during the
Employment Period.  Employer will pay on Executive’s behalf relocation expenses
as set forth below (inclusive of the Relocation Gross-Up (as defined below))
(“Relocation Expenses”), subject to Employer’s customary payroll practices and
legal requirements regarding withholding.  The Company shall also provide
Executive with a tax gross-up for applicable federal, state and local taxes paid
by Executive in connection with the reimbursement provided under this
Section 3(d)(v) and the tax gross-up payment itself (the “Relocation
Gross-Up”).  The Relocation Gross-Up shall be paid no later than April 15th of
the year following the year to which such taxable income relates.  The
Relocation Expenses shall include (A) any brokerage commissions incurred in the
sale of Executive’s current home (up to 6% of the sales price of Executive’s
current home), (B) new loan financing fees, (C) up to one “point” on a new
mortgage loan, and (D) other costs associated with buying or selling a home in
an amount not to exceed $30,000.  In addition, Relocation Expenses shall be
provided for (A) reasonable expenses actually incurred by Executive to move
personal effects from Scottsdale, Arizona to the Denver, Colorado metropolitan
area, (B) reasonable costs incurred for round trips between Denver, Colorado and
Scottsdale, Arizona to search for a home and (C) reimbursement for rent,
electricity, gas and water expenses actually incurred by Executive for interim
housing in the Denver, Colorado metropolitan area for a period of up to nine
months commencing on the Effective Date (or such earlier date as Executive is no
longer incurring such interim housing expenses).  Notwithstanding the foregoing,
Relocation Expenses shall not include “loss on sale” protection for Executive’s
current home.  The Company’s total reimbursement obligation in respect of the
Relocation Expenses shall not exceed $400,000.  If Executive terminates his
employment without Good Reason or is terminated by the Company for Cause prior
to the first anniversary of the Effective Date, Executive shall be required to
repay the Company the gross amount of the Relocation Expenses incurred pursuant
to this Section 3(d)(v) within forty-five days of the termination date. 
Executive shall submit to the Company receipts and other applicable
documentation evidencing the Relocation Expenses, and the Company shall remit
payment for such Relocation Expenses in accordance with its standard accounts
payable practices, but in any event no later than the last day of the calendar
year following the calendar year in which the expense was incurred.  In no event
shall Reimbursement Expenses incurred in one year affect reimbursements or
payments or benefits due or payable in any other calendar year.

 

3

--------------------------------------------------------------------------------

 

(e)                                  Reservation of Rights.  The Company
reserves the right to modify, suspend or discontinue any and all of the employee
benefit plans, practices, policies and programs referenced in subsections
(d)(i), (ii) and (iii) above at any time without recourse by Executive so long
as such action is taken with respect to senior executives generally and does not
single out Executive.

 

4.                                      Termination.

 

(a)                                 Death or Disability.  Executive’s employment
and all associated rights and benefits shall terminate automatically upon
Executive’s death.  If the Company determines in good faith that the Disability
of Executive has occurred, it may give to Executive written notice of its
intention to terminate Executive’s employment.  In such event, Executive’s
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by Executive, provided that, within the 30 days after
such receipt, Executive shall not have returned to full-time performance of his
duties.

 

(b)                                 Cause.  The Company may terminate
Executive’s employment at any time for Cause.

 

(c)                                  By the Company without Cause.  The Company
may terminate Executive’s employment at any time without Cause.

 

(d)                                 By Executive for Good Reason.  Executive may
terminate his employment at any time for Good Reason by delivery of not less
than fourteen (14) days’ advance written notice to the Company of the effective
date of termination.

 

(e)                                  Change in Control.  Executive’s employment
may be terminated within twenty-four (24) months following a Change in Control
Event by the Company without Cause or by Executive for Good Reason.

 

(f)                                   Obligations of the Company Upon
Termination.

 

(i)             Death; Disability; For Cause; Resignation without Good Reason. 
If Executive’s employment is terminated by reason of Executive’s Death or
Disability or by the Company for Cause or Executive resigns without Good Reason,
this Agreement shall terminate without further obligations to Executive or his
legal representatives under this Agreement, other than for (A) payment of the
sum of (1) Executive’s Annual Base Salary through the date of termination to the
extent not theretofore paid, and (2) any accrued vacation pay, in each case to
the extent not theretofore paid (the sum of the amounts described in
clauses (1) and (2) shall be hereinafter referred to as the “Accrued
Obligations”), which Accrued Obligations shall be paid to Executive or his
estate or beneficiary, as applicable, in a lump sum in cash within 30 days of
the effective date of termination; and (B) payment to Executive or his estate or
beneficiary, as applicable, of any amounts due pursuant to the terms of any
applicable employee benefit plans; provided, however, that as conditions
precedent to receiving the payments and benefits provided for in this
Section 4(f)(i) in the event of Executive’s resignation (other than payment of
the Accrued Obligations or payments or benefits due under employee benefit
plans),

 

4

--------------------------------------------------------------------------------

 

Executive shall first execute and deliver to the Company and RRI a general
release agreement in a form that is satisfactory to the Company and RRI and all
rights of Executive thereunder or under applicable law to rescind or revoke the
release shall have expired no later than the 45 days after the date of
termination.  If Executive fails to timely execute the general release, all
payments and benefits set forth in this Section 4(f)(i) (other than payment of
the Accrued Obligations or payments or benefits due under employee benefit
plans) shall be forfeited.

 

(ii)          By the Company without Cause or by Executive for Good Reason
(Before or Following a Change in Control).  If, prior to the expiration of the
stated term of this Agreement, the Company terminates Executive’s employment for
any reason other than for Cause or Executive terminates his employment for Good
Reason (in either case before, or within twenty-four (24) months following a
Change in Control), this Agreement shall terminate without further obligations
to Executive other than:

 

(A)                               payment of Accrued Obligations through the
effective date of termination in a lump sum in cash within 30 days of the
effective date of termination;

 

(B)                               payment of the equivalent of twelve (12)
months of Executive’s Annual Base Salary as in effect immediately prior to the
date of termination in a lump sum in cash within 30 days of the effective date
of termination, subject to standard withholdings and other authorized
deductions;

 

(C)                               payment of Executive’s target Annual Bonus for
the fiscal year of the effective date of termination in a lump sum in cash
within 30 days of the effective date of termination, subject to standard
withholdings and other authorized deductions;

 

provided, however, that as conditions precedent to receiving the payments and
benefits provided for in this Section 4(f)(ii) (other than payment of the
Accrued Obligations), Executive shall first execute and deliver to the Company
and RRI a general release agreement  in a  form that is satisfactory to the
Company and RRI, and all rights of Executive thereunder or under applicable law
to rescind or revoke the release shall have expired no later than the 45 days
after the date of termination. If Executive fails to timely execute the general
release, all payments and benefits set forth in this Section 4(f)(ii) (other
than the payment of the Accrued Obligations) shall be forfeited.

 

(iii)       Exclusive Remedy.  Executive agrees that the payments contemplated
by this Section 4(f) shall constitute the exclusive and sole remedy for any
termination of his employment, and Executive covenants not to assert or pursue
any other remedies, at law or in equity, with respect to any termination of
employment; provided, however, that nothing contained in this
Section 4(f)(iii) shall prevent Executive from otherwise challenging in a
subsequent arbitration proceeding

 

5

--------------------------------------------------------------------------------

 

a determination by the Company that it was entitled to terminate Executive’s
employment hereunder for Cause.

 

(iv)      Termination of Payments.  Anything in this Agreement to the contrary
notwithstanding, the Company shall have the right to terminate all payments and
benefits owing to Executive pursuant to this Section 4(f) upon the Company’s
discovery of any breach or threatened breach by Executive of his obligations
under the general release or Sections 5, 6, 7 and 8 of this Agreement.

 

(g)                                  Survival of Certain Obligations Following
Termination.  Notwithstanding any other provision contained in this Agreement,
the provisions in Sections 5 through 11 and 14 through 21 of this Agreement
shall survive any termination of Executive’s employment hereunder (but shall be
subject to Executive’s right to receive the payments and benefits provided under
this Section 4).

 

5.                                      Confidential Information.  Except in the
good-faith performance of his duties hereunder, Executive shall not disclose to
any person or entity or use, any information not in the public domain, in any
form, acquired by Executive while he was employed or associated with the Company
or RRI or, if acquired following the termination of such association, such
information which, to Executive’s knowledge, has been acquired, directly or
indirectly, from any person or entity owing a duty of confidentiality to the
Company or RRI, relating to the Company or its business.  Executive agrees and
acknowledges that all of such information, in any form, and copies and extracts
thereof are and shall remain the sole and exclusive property of the Company, and
Executive shall on request return to the Company the originals and all copies of
any such information provided to or acquired by Executive in connection with his
association with the Company or RRI, and shall return to the Company all files,
correspondence and/or other communications received, maintained and/or
originated by Executive during the course of such association.

 

6.                                      Covenant Not to Compete.  Executive
agrees that, for the period commencing on the Effective Date and ending twelve
months after the date of termination of Executive’s employment as Chief Legal
Officer (the “Restrictive Period”), Executive shall not, in the state of
Colorado  directly or indirectly, either for himself or for, with or through any
other Person, own, manage, operate, control, be employed by, participate in,
loan money to or be connected in any manner with, or permit his name to be used
by, any business that, in the reasonable judgment of the Board, competes with
the Company and its subsidiaries in the burger focused  restaurant business (a
“Competitive Activity”).  In making its judgment as to whether any business is
engaged in a Competitive Activity, the Board shall act in good faith, and shall
first provide Executive with a reasonable opportunity to present such
information as Executive may desire for the Board’s consideration.  For purposes
of this Agreement, the term “participate” includes any direct or indirect
interest, whether as an officer, director, employee, partner, sole proprietor,
trustee, beneficiary, agent, representative, independent contractor, consultant,
advisor, provider of personal services, creditor, owner (other than by ownership
of less than five percent of the stock of a publicly-held corporation whose
stock is traded on a national securities exchange (a “Public Company”).

 

6

--------------------------------------------------------------------------------

 

7.                                      No Interference.  During the Restrictive
Period, Executive shall not, without the prior written approval of the Company,
directly or indirectly through any other Person (a) induce or attempt to induce
any employee of the Company or RRI at the level of Director or higher to leave
the employ of the Company or RRI, or in any way interfere with the relationship
between the Company or RRI and any employee thereof, (b) hire any Person who was
an employee of the Company or RRI at the level of Director or higher within
twelve months after such Person’s employment with the Company or RRI was
terminated for any reason or (c) induce or attempt to induce any supplier or
other business relation of the Company or RRI to cease doing business with the
Company or RRI, or in any way interfere with the relationship between any such
supplier or business relation and the Company or RRI.

 

8.                                      Return of Documents.  In the event of
the termination of Executive’s employment for any reason, Executive shall
deliver to the Company all of (a) the property of the Company or any of its
subsidiaries, and (b) non-personal documents and data of any nature and in
whatever medium of the Company or any of its subsidiaries, and he shall not take
with him any such property, documents or data or any reproduction thereof, or
any documents containing or pertaining to any Confidential Information.

 

9.                                      Reasonableness of Restrictions. 
Executive agrees that the covenants set forth in Sections 5, 6, 7 and 8 are
reasonable with respect to their duration, geographical area and scope.  In the
event that any of the provisions of Sections 5, 6, 7 and 8 relating to the
geographic or temporal scope of the covenants contained therein or the nature of
the business or activities restricted thereby shall be declared by a court of
competent jurisdiction to exceed the maximum restrictiveness such court deems
enforceable, such provision shall be deemed to be replaced herein by the maximum
restriction deemed enforceable by such court.

 

10.                               Injunctive Relief.  The parties hereto agree
that the Company would suffer irreparable harm from a breach by Executive of any
of the covenants or agreements contained herein, for which there is no adequate
remedy at law.  Therefore, in the event of the actual or threatened breach by
Executive of any of the provisions of this Agreement, the Company, or its
respective successors or assigns, may, in addition and supplementary to other
rights and remedies existing in their favor, apply to any court of law or equity
of competent jurisdiction for specific performance, injunctive or other relief
in order to enforce compliance with, or prevent any violation of, the provisions
hereof; and that, in the event of such a breach or threat thereof, the Company
shall be entitled to obtain a temporary restraining order and/or a preliminary
or permanent injunction restraining Executive from engaging in activities
prohibited hereby or such other relief as may be required to specifically
enforce any of the covenants contained herein.

 

11.                               Extension of Restricted Periods.  In addition
to the remedies the Company may seek and obtain pursuant to this Agreement, the
restricted periods set forth herein shall be extended by any and all periods
during which Executive shall be found by a court to have been in violation of
the covenants contained herein.

 

12.                               Stock Ownership Requirement.  While employed
by the Company, Executive shall be expected to maintain ownership of common
stock or stock equivalents in such amounts and on such terms and conditions as
are set forth in the Company’s Executive Stock Ownership Guidelines established
by the Compensation Committee and in effect from time to time (the

 

7

--------------------------------------------------------------------------------

 

“Ownership Guidelines”).  Executive is expected to meet the ownership
requirements set forth in the Ownership Guidelines within the time period stated
in the Ownership Guidelines.  In the event Executive is unable to meet his
ownership requirements within the defined time period, Executive shall retain
all net after tax profit shares following option exercise and/or the vesting of
restricted stock units until Executive has satisfied the requirements set forth
in this Section 12.  No additional liability shall apply to Executive if
Executive fails to satisfy the stock ownership requirements set forth in this
Section 12.

 

13.                               Definitions.  As used herein, unless the
context otherwise requires, the following terms have the following respective
meanings:

 

“Cause” means with respect to the termination by the Company of Executive as an
employee of the Company:

 

(i)             Executive’s continual or deliberate neglect in the performance
of his material duties; provided that Company gives written notice to the
Executive of the existence of such a condition within 90 days of the initial
existence of the condition and the Executive has at least 30 days from the date
when such notice is provided to cure the condition, if curable.

 

(ii)          Executive’s failure to devote substantially all of his working
time to the business of the Company and its subsidiaries (other than as
expressly permitted in this Agreement);

 

(iii)       Executive’s failure to follow the lawful directives of the Board in
any material respect;

 

(iv)      Executive’s engaging in misconduct in connection with the performance
of any of his duties, including, without limitation, falsifying or attempting to
falsify documents, books or records of the Company or its subsidiaries,
misappropriating or attempting to misappropriate funds or other property, or
securing or attempting to secure any personal profit in connection with any
transaction entered into on behalf of the Company or its subsidiaries;

 

(v)         the violation by Executive, in any material respect, of any policy
or of any code or standard of behavior or conduct generally applicable to
employees of the Company or its subsidiaries;

 

(vi)      Executive’s breach of the material provisions of this Agreement or any
other non-competition, non-interference, non-disclosure, confidentiality or
other similar agreement executed by Executive with the Company or any of its
subsidiaries or other act of disloyalty to the Company or any of its
subsidiaries (including, without limitation, aiding a competitor or unauthorized
disclosure of confidential information); or

 

(vii)   Executive’s engaging in conduct which is reasonably likely to result in
material injury to the reputation of the Company or any of its subsidiaries,

 

8

--------------------------------------------------------------------------------

 

including, without limitation, commission of a felony, fraud, embezzlement or
other crime involving moral turpitude.

 

“Change in Control Event” means:

 

(i)    The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”)) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of more than 50% or more of either (1) the then-outstanding shares of common
stock of the Company (the “Outstanding Company Common Stock”) or (2) the
combined voting power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that, for purposes of this
definition, the following acquisitions shall not constitute a Change in Control
Event; (A) any acquisition directly from the Company, (B) any acquisition by the
Company, (C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any affiliate of the Company or a
successor, or (D) any acquisition by any entity pursuant to a transaction that
complies with subsections (iii)(A), (B) and (C) below;

 

(ii)   In the event the Board is a classified board, a majority of the
individuals who serve in the same class of directors that constitute the Board
as of the Effective Date (the “Incumbent Board”) cease for any reason to
constitute at least a majority of that class of directors, or in the event the
Board is not a classified board, members of the Incumbent Board cease for any
reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the Effective Date whose
election, or nomination for election by the Company’s stockholders, was approved
by a vote of at least two-thirds of the directors then comprising the Incumbent
Board (including for these purposes, the new members whose election or
nomination was so approved, without counting the member and his predecessor
twice) shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board;

 

(iii)  Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the Company or any of
its Subsidiaries, a sale or other disposition of all or substantially all of the
assets of the Company, or the acquisition of assets or stock of another entity
by the Company or any of its Subsidiaries (each, a “Business Combination”), in
each case unless, following such Business Combination, (A) all or substantially
all of the individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the then-outstanding shares of common stock and the
combined voting power of the

 

9

--------------------------------------------------------------------------------

 

then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity that, as a result of such
transaction, owns the Company or all or substantially all of the Company’s
assets directly or through one or more subsidiaries (a “Parent”)) in
substantially the same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (B) no Person (excluding any
entity resulting from such Business Combination or a Parent or any employee
benefit plan (or related trust) of the Company or such entity resulting from
such Business Combination or Parent) beneficially owns, directly or indirectly,
more than 50% of, respectively, the then-outstanding shares of common stock of
the entity resulting from such Business Combination or the combined voting power
of the then-outstanding voting securities of such entity, except to the extent
that the ownership in excess of more than 50% existed prior to the Business
Combination, and (C) at least a majority of the members of the board of
directors or trustees of the entity resulting from such Business Combination or
a Parent were members of the Incumbent Board at the time of the execution of the
initial agreement or of the action of the Board providing for such Business
Combination; or

 

(iv)  Approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.

 

“Disability” means a physical or mental impairment which substantially limits a
major life activity of Executive and which renders Executive unable to perform
the essential functions of his position, even with reasonable accommodation
which does not impose an undue hardship on the Company.  The Company reserves
the right, in good faith, to make the determination of disability under this
Agreement based upon information supplied by Executive and/or his medical
personnel, as well as information from medical personnel (or others) selected by
the Company or its insurers.

 

“Good Reason” shall mean the occurrence, without Executive’s express written
consent, of: (i) a reduction in Executive’s compensation other than as permitted
pursuant to Section 3 hereof; (ii) a relocation of the Company’s headquarters to
a location more than twenty (20) miles from the location of the Company’s
headquarters prior to such relocation; (iii) any willful breach by the Company
of any material provision of this Agreement; or (iv) a significant reduction in
the then-effective responsibilities of the Chief Legal Officer; provided that
Executive gives written notice to the Company of the existence of such a
condition within 90 days of the initial existence of the condition and the
Company has at least 30 days from the date when such notice is provided to cure
the condition without being required to make payments due to termination by the
Executive for Good Reason or upon a Change in Control Event.

 

14.          Arbitration.  Any controversy arising out of or relating to this
Agreement, its enforcement or interpretation, or because of an alleged breach,
default, or misrepresentation in connection with any of its provisions, or any
other controversy arising out of Executive’s employment, including, but not
limited to, any state or federal statutory or common law claims, shall be
submitted to arbitration in Denver, Colorado, before a sole arbitrator selected
from

 

10

--------------------------------------------------------------------------------

 

Judicial Arbiter Group, Inc., Denver, Colorado, or its successor (“JAG”), or if
JAG is no longer able to supply the arbitrator, such arbitrator shall be
selected from the Judicial Arbitration and Mediation Services, Inc. (“JAMS”), or
other mutually agreed upon arbitration provider, as the exclusive forum for the
resolution of such dispute.  Provisional injunctive relief may, but need not, be
sought by either party to this Agreement in a court of law while arbitration
proceedings are pending, and any provisional injunctive relief granted by such
court shall remain effective until the matter is finally determined by the
Arbitrator.  Final resolution of any dispute through arbitration may include any
remedy or relief which the Arbitrator deems just and equitable, including any
and all remedies provided by applicable state or federal statutes.  At the
conclusion of the arbitration, the Arbitrator shall issue a written decision
that sets forth the essential findings and conclusions upon which the
Arbitrator’s award or decision is based.  Any award or relief granted by the
Arbitrator hereunder shall be final and binding on the parties hereto and may be
enforced by any court of competent jurisdiction.  The parties acknowledge and
agree that they are hereby waiving any rights to trial by jury in any action,
proceeding or counterclaim brought by either of the parties against the other in
connection with any matter whatsoever arising out of or in any way connected
with this Agreement or Executive’s employment, and under no circumstances shall
class claims be processed or participated in by Executive.  The parties agree
that Company shall be responsible for payment of the forum costs of any
arbitration hereunder, including the Arbitrator’s fee.  Executive and the
Company further agree that in any proceeding to enforce the terms of this
Agreement, the prevailing party shall be entitled to its or his reasonable
attorneys’ fees and costs incurred by it or his in connection with resolution of
the dispute in addition to any other relief granted.

 

15.          Governing Law.  This Agreement and the legal relations hereby
created between the parties hereto shall be governed by and construed under and
in accordance with the internal laws of the State of Colorado, without regard to
conflicts of laws principles thereof.  Each Participant shall submit to the
venue and personal jurisdiction of the Colorado state and federal courts
concerning any dispute for which judicial redress is permitted pursuant to this
Agreement; however the Company is not limited in seeking relief in those courts.

 

16.          Taxes.

 

(a)           Except as otherwise provided in Section 3(d)(v) and Section 20,
and to the extent specifically provided in Section 17, Executive shall be solely
liable for Executive’s tax consequences of compensation and benefits payable
under this Agreement, including any consequences of the application of
Section 409A of the Code.

 

(b)           In order to comply with all applicable federal or state income tax
laws or regulations, the Company may withhold from any payments made under this
Agreement all applicable federal, state, city or other applicable taxes.

 

17.          Section 409A Savings Clause.

 

(a)           It is the intention of the parties that compensation or benefits
payable under this Agreement not be subject to the additional tax imposed
pursuant to Section 409A of the Code.  To the extent such potential payments or
benefits could become subject to additional tax under such Section, the parties
shall cooperate to amend this Agreement with the goal of

 

11

--------------------------------------------------------------------------------

 

giving Executive the economic benefits described herein in a manner that does
not result in such tax being imposed.

 

(b)           Each payment or benefit made pursuant to Section 4(f) of this
Agreement shall be deemed to be a separate payment for purposes of 409A.  In
addition, payments or benefits pursuant to Section 4(f) shall be exempt from the
requirements of Code Section 409A to the maximum extent possible as “short-term
deferrals” pursuant to Treasury Regulation Section 1.409A-1(b)(4), as
involuntary separation pay pursuant to Treasury Regulation
Section 1.409A-1(b)(9)(iii), and/or under any other exemption that may be
applicable, and this Agreement shall be construed accordingly.

 

(c)           For purposes of this Agreement, phrases such as “termination of
employment” shall be deemed to mean “separation from service,” as defined in
Section 409A of the Code and the Treasury Regulations thereunder.

 

(d)           If Executive 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 Executive’s “separation from service” that, absent the
application of this Section 17(d), 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 Executive’s “separation from service,” or
(ii) Executive’s death.

 

18.          Entire Agreement.  This Agreement (including Exhibits) constitutes
and contains the entire agreement and final understanding concerning Executive’s
employment with the Company and the other subject matters addressed herein
between the parties.  It is intended by the parties as a complete and exclusive
statement of the terms of their agreement.  It supersedes and replaces all prior
negotiations and all agreements proposed or otherwise, whether written or oral,
concerning the subject matter hereof.  Any representation, promise or agreement
not specifically included in this Agreement shall not be binding upon or
enforceable against either party.  This is a fully integrated agreement.

 

19.          Amendment and Waiver.  The provisions of this Agreement may be
amended or waived only with the prior written consent of the Board (or a person
expressly authorized thereby) and Executive, and no course of conduct or failure
or delay in enforcing the provisions of this Agreement shall affect the
validity, binding effect or enforceability of this Agreement.

 

20.          Excise Tax Payment.

 

(a)         Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise)  (a
“Payment”) including, by example and not by way of limitation, acceleration (by
the Company or otherwise) of the date of vesting or payment under any plan,
program, arrangement or agreement of the Company, would be subject to the excise
tax imposed by Code Section 4999 or any interest or penalties with respect to
such excise tax (such excise tax together with any such interest and penalties,
shall be referred to as the “Excise Tax”), then there shall be made a
calculation under which such Payments provided to Executive are reduced to the

 

12

--------------------------------------------------------------------------------

 

extent necessary so that no portion thereof shall be subject to the Excise Tax
(the “4999 Limit”).  A comparison shall then be made between (A) Executive’s Net
After-Tax Benefit (as defined below) assuming application of the 4999 Limit; and
(B) Executive’s Net After-Tax Benefit without application of the 4999 Limit.  If
(B) exceeds (A) by $100,000 or more, then no limit on the Payments received by
Executive under this Agreement shall be imposed by this Section 21.  Otherwise,
the amount payable to Executive pursuant to this Agreement shall be reduced so
that no such Payment is subject to the Excise Tax.  “Net After-Tax Benefit”
shall mean the sum of (x) all payments that Executive receives or is entitled to
receive from the Company that are contingent on a change in the ownership or
effective control of the Company or in the ownership of a substantial portion of
the assets of the Company within the meaning of Code section 280G(b)(2) (either,
a “Section 280G Transaction”), less (y) the amount of federal, state, local and
employment taxes and Excise Tax (if any) imposed with respect to such payments.

 

(b)       All determinations required to be made under this Section 21,
including whether and when a Payment is cut back pursuant to Section 21(a) and
the amount of such cut-back, and the assumptions to be utilized in arriving at
such determination, shall be made by a professional services firm designated by
the Board that is experienced in performing calculations under Section 280G (the
“Professional Services Firm”) which shall provide detailed supporting
calculations both to the Company and Executive.  If the Professional Services
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control Event, the Board shall appoint another qualified
professional services firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Professional Services Firm
hereunder).  All fees and expenses of the Professional Services Firm shall be
borne solely by the Company.

 

(c)       In the event that a reduction in Payments is required pursuant to this
Section, then, except as provided below with respect to Payments that consist of
health and welfare benefits, the reduction in Payments shall be implemented by
determining the “Parachute Payment Ratio” (as defined below) for each Payment
and then reducing the Payments in order beginning with the Payment with the
highest Parachute Payment Ratio.  For Payments with the same Parachute Payment
Ratio, such Payments shall be reduced based on the time of payment of such
Payments, with amounts being paid furthest in the future being reduced first. 
For Payments with the same Parachute Payment Ratio and the same time of payment,
such Payments shall be reduced on a pro-rata basis (but not below zero) prior to
reducing Payments next in order for reduction.  For purposes of this Section,
“Parachute Payment Ratio” shall mean a fraction, the numerator of which is the
value of the applicable Payment as determined for purposes of Code Section 280G,
and the denominator of which is the financial present value of such Parachute
Payment, determined at the date such payment is treated as made for purposes of
Code Section 280G (the “Valuation Date”).  In determining the denominator for
purposes of the preceding sentence (1) present values shall be determined using
the same discount rate that applies for purposes of discounting payments under
Code Section 280G; (2) the financial value of payments shall be determined
generally under Q&A 12, 13 and 14 of Treasury Regulation 1.280G-1; and (3) other
reasonable valuation assumptions as determined by the Company shall be used. 
Notwithstanding the foregoing, Payments that consist of health and welfare
benefits shall be reduced after all other Payments, with health and welfare
Payments being made furthest in the future being reduced first.  Upon any
assertion by the Internal Revenue Service that any such Payment is subject to
the Excise Tax, Executive shall be obligated to return to the Company any

 

13

--------------------------------------------------------------------------------

 

portion of the Payment determined by the Professional Services Firm to be
necessary to appropriately reduce the Payment so as to avoid any such Excise
Tax.

 

21.          Miscellaneous.

 

(a)           Binding Effect.  This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive, the Company and their respective
heirs, successors and assigns, except that Executive may not assign his rights
or delegate his obligations hereunder without the prior written consent of the
Company.

 

(b)           Notices.  All notices required to be given hereunder shall be in
writing and shall be deemed to have been given if (i) delivered personally or by
documented courier or delivery service, (ii) transmitted by facsimile during
normal business hours or (iii) mailed by registered or certified mail (return
receipt requested and postage prepaid) to the following listed persons at the
addresses and facsimile numbers specified below, or to such other persons,
addresses or facsimile numbers as a party entitled to notice shall give, in the
manner hereinabove described, to the others entitled to notice:

 

If to the Company, to:

 

Red Robin Gourmet Burgers, Inc.
6312 South Fiddler’s Green Circle, Suite 200N
Greenwood Village, CO  80111
Attention:  Chief Executive Officer
Facsimile No.:  303-846-6048

 

with a copy to:

 

Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, Colorado  80202
Attention: Ronald R. Levine, II
Facsimile No.:  303-893-1379

 

If to Executive, to:

 

Michael L. Kaplan
6312 South Fiddler’s Green Circle, Suite 200N
Greenwood Village, CO  80111
Facsimile No.:  303-846-6048

 

If given personally or by documented courier or delivery service, or transmitted
by facsimile, a notice shall be deemed to have been given when it is received. 
If given by mail, it shall be deemed to have been given on the third business
day following the day on which it was posted.

 

14

--------------------------------------------------------------------------------

 

(c)           Headings.  The section and other headings contained in this
Agreement are for the convenience of the parties only and are not intended to be
a part hereof or to affect the meaning or interpretation hereof

 

(d)           Counterparts.  This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.

 

(e)           Construction.  Each party has cooperated in the drafting and
preparation of this Agreement.  Hence, in any construction to be made of this
Agreement, the same shall not be construed against any party on the basis that
the party was the drafter.

 

(f)            Savings Clause.  If any provision of this Agreement or the
application thereof is held invalid, the invalidity shall not affect other
provisions or applications of the Agreement which can be given effect without
the invalid provisions or applications and to this end the provisions of this
Agreement are declared to be severable.

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

15

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

 

 

RED ROBIN GOURMET BURGERS, INC.

 

 

 

 

 

By:

/s/ Stephen E. Carley

 

Name:

Stephen E. Carley

 

Title:

Chief Executive Officer

 

 

 

EXECUTIVE:

 

 

 

 

 

/s/ Michael L. Kaplan

 

 

Michael L. Kaplan

 

 

16

--------------------------------------------------------------------------------