EXHIBIT 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made effective as of June 23,
2008, by and between GRILL CONCEPTS, INC., a Delaware corporation (the
“Company”) and PHILIP GAY (“Employee’).

RECITALS

WHEREAS, the Company and Employee are party to an Employment Agreement dated
March 3, 2006 (the “Previous Agreement”), setting forth the terms and conditions
of the Company’s employment of Employee as its President and Chief Executive
Officer; and

WHEREAS, the Company and Employee have heretofore entered into Change of Control
Agreement dated, September 30, 2005 and as amended and restated as of the date
hereof (the “Change In Control Agreement”), setting forth certain benefits that
the employee would be entitled in the event of a change in control (as defined
in the Change in Control Agreement); and

WHEREAS, the Company and Employee desire that Employee continue his employment
with the Company and employ the Employee as its President and Chief Executive
Officer on the terms and conditions hereinafter set forth in this agreement
which shall replace the Previous Agreement, but which shall have no force and
effect to the Change In Control Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the parties hereby agree as follows:

1. EMPLOYMENT.

1.1 The Company hereby employs Employee as its President and Chief Executive
Officer for a term of three (3) years, commencing as of June 23, 2008 and ending
as of June 22, 2011 (the “Term”); provided, however, that the Term may be
extended for one year by mutual written agreement of the parties. Employee
hereby accepts such position, upon the terms and conditions set forth in the
Agreement.

1.2 During the Term, Employee shall devote his full-time, energies and skills to
the performance of his duties hereunder, which shall include, but not be limited
to, the active development, management and operation of the Company’s business,
provided, that the foregoing shall not prohibit employee from serving on the
boards of directors of up to three other non competitive (all restaurant
operating and management companies shall be deemed competitive for purposes
hereof) companies, whether for profit or not for profit

1.3 During the Term, Employee shall not, directly or indirectly, alone or as a
member of a partnership or other association, or as an officer, director or
stockholder, be engaged in or concerned with any other duties or pursuits in a
business activity which compete, directly or indirectly, with the business of
the Company without written consent with the Company, other than owning
securities in a publicly traded company, provided that such ownership by
Employee does not exceed ten percent (10%) of any class of securities of such
company.

 

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1.4 In the course of Employee’s employment hereunder, it is anticipated that
Employee may from time to time be allowed access to confidential information and
trade secrets (collectively the “Confidential Information”) owned by the Company
and used in the course of its business. The parties acknowledge and agree that
there is a competitive value and confidential nature with respect to the
Confidential Information, and that material damage will result to the Company if
the Confidential Information is disclosed to a third party. Employee therefore
agrees that during the Term, and for a period of three (3) years thereafter,
Employee will not, directly or indirectly disclose or use any of the
Confidential Information except as required in the ordinary course of the
Company’s business and Employee’s employment hereunder or if information becomes
publicly available earlier. All records, files, documents and materials relating
to the Company’s business which the Employee shall prepare, use or be provided
with during the Term shall be and remain sole property of the Company and shall
not be removed form the Company’s premises or otherwise utilized by the Employee
for other than the benefit of the Company without the Company’s written consent.

1.5 Employee acknowledges and agrees that in the event of a breach by Employee
of any of the provisions of paragraphs 1.3 and 1.4 above, that in addition to
any other remedies it may have at law or in equity, the Company shall be
entitled to injunctive relief without the necessity of proving the inadequacy of
such other remedies.

2. SALARY. Employee shall receive an annual base salary during each year of the
Term of this agreement as follows:

 

June 23, 2008 to June 22, 2009

   $ 350,000

June 23, 2009 to June 22, 2010:

   $ 375,000

June 23, 2010 to June 22, 2011:

   $ 400,000

3. OTHER COMPENSATION. Employee shall be entitled to the following benefits and
other compensation during the Term:

3.1 Vacation. Five (5) weeks vacation during each year of the Term, at such
times as shall be mutually agreed upon between the Employee and the Company;
provided, however, that Employee may not accumulate any unused vacation time
from one employment year to the next during the Term.

3.2 Automobile. Unlimited use of an automobile of a make and model commensurate
with Employee’s position as Chief Executive Officer of the Company. The Company
shall pay all expenses for repair, maintenance and insurance for such automobile
in an amount not to exceed Fifteen Thousand Dollars per year.

3.3 Travel and Entertainment. Subject to compliance with the Company’s
documentation and procedural policies regarding reimbursement of expenses,
unlimited reimbursement by the Company of Employee for entertainment, dining and
travel expenses incurred by Employee in the course of performing his duties
hereunder.

3.4 Intentionally Omitted.

3.5 Health Benefits. During the Term and any extension thereof, unless the
Employee is terminated for cause, each of the Employee and his spouse (or widow)
shall be entitled to receive, at the sole expense of the Company, such benefits,
including without limitation, participation in group life, health, accident,
disability, liability or hospitalization insurance plans, pension plans,
severance plans or retirement plans, as the Company currently makes available to
its highest level of executive employees as a group or as such programs and
benefits are amended.

 

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3.6 Life Insurance. Life insurance in such amount and on such terms as Employee
shall determine, the premiums and all other costs for which shall be paid in
full by the Company; provided that the total annual premiums and costs paid by
the Company shall not exceed $3,000.

3.7 Stock Options. Company hereby grants to Employee fifty thousand
(50,000) shares of stock at a price equal to the closing price of the Company’s
common stock on the date of this agreement, in accordance with provisions of the
Company’s Stock Option plan (the “Plan”). The options will vest one-third
(1/3) June 22, 2009, one-third June 22, 2010 and the final one-third on June 22,
2011. Nothing herein shall preclude the Company’s Board of Directors from
granting additional stock options to the Employee in accordance with its
customary practices.

3.8 Bonus Plan. Employee shall be eligible for participation in the Company’s
Executive Bonus Plan (the “Bonus Plan”), the metrics of which shall be
established annually by the Compensation Committee of the Company’s Board of
Directors; provided, however, that, in any event, Employee shall be eligible to
receive an annual performance based bonus of a maximum (the “Maximum Bonus”) of
not less than sixty percent (60%) of salary based on satisfaction of performance
goals established periodically and reflected in the Bonus Plan; and, provided,
further, that, should performance exceed the goals so reflected in the Bonus
Plan by one hundred twenty five percent (125%) or more, the Maximum Bonus so
established shall increase by fifty percent (50%), to a maximum of not less than
ninety percent (90%) of salary.

3.9 Other Benefits. Such other benefits as Employee may be eligible to receive
in accordance with the Company’s announced employee benefit programs in effect
from time to time. Nothing contained in this paragraph shall be deemed to
restrict, limit or affect any stock options that may have previously been
granted to Employee.

4. TERMINATION. This Agreement shall terminate upon earlier of any of the
following:

4.1 The expiration of the Term hereof.

4.2 The mutual written consent of the parties hereto.

4.3 The death of the employee.

4.4 The permanent disability of the Employee, as such term is defined in
paragraph 7 below.

4.5 For cause, at the option of the Company, as provided in paragraph 6 below.

4.6 A “Qualifying Termination” as defined in the Change in Control Agreement.

Nothing contained in this paragraph 4 shall be construed, however, to abrogate
the payment by the Company to Employee or Employee’s personal representative or
heirs, as the case may be, of any benefits or compensation that had accrued and
was due to Employee prior to termination of this Agreement.

5. COMPENSATION UPON TERMINATION. Upon termination of this Agreement under
paragraph 4, the Company shall pay to, or for the benefit of, the Employee:

5.1 Upon termination under paragraphs 4.1, 4.2, 4.3 and 4.5, the Company shall
pay to the Employee, or the Employee’s estate in the case of paragraph 4.3, all
compensation and benefits accrued and due to employee through the date of
termination and the Company shall have no other obligations to the Employee
under this Agreement.

 

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5.2 In the event of permanent disability of the Employee, the Company shall
continue to pay to the Employee all amounts otherwise payable to the Employee
hereunder until the date of termination under paragraph 4.4 and, following
termination pursuant to paragraph 4.4, for the remainder of the Term (without
regard to termination), the Company shall pay to the Employee, in the monthly
installments, fifty percent (50%) of the base salary provided for under
paragraph 2.

5.3 In the event of a “Qualifying Termination” under the Change in Control
Agreement, the Company shall pay to the Employee, at the option of the Employee,
either (a) all salary and benefits otherwise payable under this Agreement for
the balance of the Term (without regard to termination), which amounts shall be
payable on the dates and in the amounts that would otherwise apply had no
Qualifying Termination occurred; or (b) the amounts otherwise payable under the
Change in Control Agreement. The Employee shall deliver to the Company his
written election under this paragraph 5.3 within ten (10) days following a
Qualifying Termination.

5.4 In the event that the Company terminates, or attempts to terminate, the
Employee other than as permitted under paragraph 4 hereof, notwithstanding such
purported termination, the Company shall remain obligated hereunder to pay to
the Employee all amounts otherwise payable hereunder for the remainder of the
stated Term of this Agreement.

6. TERMINATION FOR CAUSE. The Company shall have the right, at its sole
election, to terminate Employee’s employment hereunder at any time during the
Term for cause, which, for purposes of this Agreement shall be constituted by
any of the following events:

6.1 Employee is convicted by any federal, state or local authority with (i) an
act of dishonesty; or (ii) an act involving moral turpitude; or (iii) an act
constituting a felony.

6.2 Narcotics addiction or habitual intemperance.

6.3 The continued failure by Employee, following written notice from the
Company, to fulfill Employee’s obligations under or comply with any of the
provisions of this Agreement.

Any election by the Company to terminate this Agreement for cause under
paragraphs 6.1, 6.2 or 6.3 above shall be made by giving Employee written notice
to such effect by certified or registered mail at Employee’s last known address,
or by personal delivery of such notice to Employee; provided, however, that in
the event Employee is either convicted or pleads guilty or nolo contendere to
any of the charges set forth in paragraph 6.1 above, the Company may immediately
terminate this Agreement thereupon. The waiver by the Company of any such acts
of Employee as described in this paragraph 5 shall not be construed as a waiver
of any subsequent acts by Employee.

7. PERMANENT DISABILITY.

7.1 The terms “permanent disability” as used in this Agreement shall mean six
(6) months of substantially continuous disability. Disability shall be deemed
“substantially continuous” if, as a practical matter, Employee, by reason of
mental or physical health, is unable to sustain reasonably long periods of
substantial performance of his duties. Frequent long illnesses, though different
from a preceding illness and though separated by relatively short period of
Employee’s performance of his duties hereunder, shall be deemed to be
“substantially continuous.”

 

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7.2 In the event of any dispute concerning the permanent disability of Employee,
the Company and Employee shall each select a physician licensed to practice
medicine in the State of California, who shall then select a third physician so
licensed. Such selection shall be made within thirty (30) days after Employee
gives notice to the Company that he disputes the Company’s determination that
the Employee is permanently disabled. The determination of a majority of the
three (3) physicians concerning whether or not Employee is permanently disabled
shall be conclusive and binding upon the parties. Such determination shall be
made by the three (3) physicians within sixty (60) days of their selection. In
the event that either the Company of Employee fails to select a physician within
the prescribed time period, then either it or he shall be deemed to have waived
its or his right to do so, and the determination regarding Employee’s disability
hereunder shall be made by the sole physician selected.

8. ASSIGNMENT. Employee may not assign or otherwise transfer this Agreement or
any of the Employee’s rights, duties, interests or obligations hereunder without
the written request of the Company.

9. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties with respect to the subject matter hereof, and
supercedes all prior and contemporaneous agreements and understandings relating
to such subject matter, whether oral or written, including, without limitation,
the Previous Agreement. The parties acknowledge and agree that neither has made
any representations with respect to the subject matter of this Agreement except
as specifically set forth in this Agreement.

10. AMENDMENT. This Agreement may not be amended except by a written document
executed by both parties.

11. SEVERABILITY. If any provision of this Agreement shall be held unenforceable
as applied to any circumstance, the remainder of this Agreement and the
application of such provision to other circumstances shall be interpreted so as
best affect the intent of the parties. The parties further agree to replace any
such unenforceable provision with an enforceable provision (and to take such
other action) which will achieve, to the extent possible, the purposes of the
unenforceable provision.

12. GOVERNING LAW. This agreement shall be governed by and construed under the
laws of the State of California.

13. ARBITRATION. Any and all controversies, claims or disputes arising out of or
related to this Agreement will be submitted to final and binding arbitration.
The arbitration will be initiated and conducted according to either the JAMS
Streamlined (for claims under $250,000) or the JAMS Comprehensive (for claims
over $250,000) Arbitration Rules and Procedures, except as modified herein,
including the Optional Appeal Procedure, at the Los Angeles office of JAMS, or
its successor (“JAMS”) in effect at the time the request for arbitration is made
(the “Arbitration Rules”). The arbitration will be conducted in Los Angeles
County before a single neutral arbitrator appointed in accordance with the
Arbitration Rules. The arbitrator will follow California law and the Federal
Rules of Evidence in adjudicating the dispute. The parties waive the right to
seek punitive damages and the arbitrator will have no authority to award such
damages. The arbitrator will provide a detailed written statement of decision,
which will be part of the arbitration award and admissible in any judicial
proceeding to confirm, correct or vacate the award. Unless the parties agree
otherwise, the neutral arbitrator and the members of any appeal panel will be
former or retired judges or justices of any California state or federal court
with experience in matters involving the hospitality industry. If either party
refuses to perform any or all of its obligations under the final arbitration
award (following appeal, if applicable) within thirty (30) days of such award
being rendered, then the other party may enforce the final award in any court of
competent jurisdiction in Los Angeles County. The party seeking enforcement will
be entitled to an award of all costs, fees and expenses, including attorneys’
fees, incurred in enforcing the award, to be paid by the

 

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party against whom enforcement is ordered. Any dispute or portion thereof, or
any claim for a particular form of relief (not otherwise precluded by any other
provision of this Agreement), that may not be arbitrated pursuant to applicable
state or federal law may be heard only in a court of competent jurisdiction in
Los Angeles County, California.

14. ATTORNEY’S FEES. In any arbitration or action to enforce this Agreement, the
prevailing party shall be entitled to recover from the non-prevailing party all
reasonable costs, including, without limitation, attorneys’ fees.

15. ADDITIONAL DOCUMENTS. The parties agree to execute such additional documents
and perform such other acts as may be necessary or appropriate to achieve the
purposes of this Agreement.

16. NON-WAIVER. No waiver by a party of any failure by the other party to keep
any provision of this Agreement shall be deemed a waiver of any preceding or
succeeding breach of the same or any other provision.

17. BINDING EFFECT. Subject to paragraph 7 above, this Agreement is binding upon
and shall inure to the benefit of the parties and their respective successors,
assigns, heirs, and legal representatives.

18. NOTICE. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, addressed to the parties as indicated below:

 

If to the Company:    Grill Concepts, Inc.    6300 Canoga Avenue, Suite 1700   
Woodland Hills, CA 91367    Attn: Chairman of the Board If to Employee:   
Philip Gay    5575 Clee Court    Agoura Hills, CA 91301

Or to such other address as the parties may designate in writing pursuant to
this paragraph. Notice shall be deemed to have been given on the date of
mailing, except notices of change of address, which shall be deemed to have been
given when received.

19. COUNTERPARTS. This Agreement may be executed in one or more counterparts
and/or by facsimile, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Facsimile signatures
shall be accepted by the parties as valid and binding in lieu of original
signatures; however, if facsimile signatures are presented by any party in lieu
of original signatures, within two (2) business days after execution of the
Agreement such party shall also deliver to counsel for the other party(ies) an
original signed by that party.

20. ACKNOWLEDGEMENT OF INDEPENDENT COUNSEL. Both the Company and Employee
acknowledge that each of them has read and understands this Agreement. In
connection with the foregoing, the parties acknowledge that each of them has had
an opportunity to have the Agreement reviewed by independent counsel, and that
each of the parties is aware of and understands the form, content and legal
effect of this Agreement and their rights and obligations hereunder.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 

The Company:

    Grill Concepts, Inc.     a Delaware corporation       By    /s/ Robert
Spivak       Its:   Co-Chairman

 

Employee:

          /s/ Philip Gay       Philip Gay

 

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