Document:

Robert J. Merullo option agreement, dated September 1, 2005

 Exhibit 10.5 
  
 RED ROBIN GOURMET BURGERS, INC. 
 2004 PERFORMANCE INCENTIVE PLAN 
 NONQUALIFIED STOCK OPTION AGREEMENT 
  
 THIS NONQUALIFIED STOCK OPTION AGREEMENT (this “Option
Agreement”) dated September 1, 2005 by and between RED ROBIN GOURMET BURGERS, INC., a Delaware corporation (the “Corporation”), and Bob Merullo, (the “Grantee”) evidences the nonqualified stock
option (the “Option”) granted by the Corporation to the Grantee as to the number of shares of the Corporation’s Common Stock first set forth below. 
  

			
	 Number of Shares of Common Stock: 1        10,000
	  	Award Date:         9/1/2005
		
	 Exercise Price per Share: 1        $46.22
	  	Expiration Date: 1,2
        9/1/2015

  
 Vesting 1,2 The Option shall become vested as to 25% of the total number of shares of Common Stock subject to the Option on the first
anniversary of the Award Date. The remaining 75% of the total number of shares of Common Stock subject to the Option shall become vested in 36 substantially equal monthly installments, with the first installment vesting on the same day of the month
following the month in which the first anniversary of the Award Date occurs and an additional installment vesting on the same day of each of the 35 months thereafter. 
  
 The Option is granted under the Red Robin Gourmet Burgers, Inc. 2004 Performance Incentive Plan (the
“Plan”) and subject to the Terms and Conditions of Nonqualified Stock Option (the “Terms”) attached to this Option Agreement (incorporated herein by this reference) and to the Plan. The Option has been granted to
the Grantee in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Grantee. Capitalized terms are defined in the Plan if not defined herein. The parties agree to the terms of the Option set forth
herein. The Grantee acknowledges receipt of a copy of the Terms, the Plan and the Prospectus for the Plan. 
  

					
	“GRANTEE”	  	RED ROBIN GOURMET BURGERS, INC.
	 	  	a Delaware corporation
			
	 /s/ Bob Merullo

 Signature
	  	By:	  	 /s/ Dennis B. Mullen

	  
 Bob Merullo

	  	Print Name:	  	 Dennis B. Mullen

	Print Name	  	Title:	  	  
 Chief Executive Officer

  
 CONSENT OF SPOUSE

  
 In consideration of the Corporation’s execution of
this Option Agreement, the undersigned spouse of the Grantee agrees to be bound by all of the terms and provisions hereof and of the Plan. 
  
  

			
	
 Signature of Spouse
	 	
 Date

  

	1	Subject to adjustment under Section 7.1 of the Plan. 

	2	Subject to early termination under Section 4 of the Terms and Section 7.4 of the Plan. 

 TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTION 
  

	1.	Vesting; Limits on Exercise; Incentive Stock Option Status. 

  
 The Option shall vest and become exercisable in percentage installments of the aggregate number of shares subject to the Option as set forth on the cover
page of this Option Agreement. The Option may be exercised only to the extent the Option is vested and exercisable. 
  

	 	•	 	Cumulative Exercisability. To the extent that the Option is vested and exercisable, the Grantee has the right to exercise the Option (to the extent not previously exercised),
and such right shall continue, until the expiration or earlier termination of the Option. 

  

	 	•	 	No Fractional Shares. Fractional share interests shall be disregarded, but may be cumulated. 

  

	 	•	 	Minimum Exercise. No fewer than 1001
shares of Common Stock may be purchased at any one time, unless the number purchased is the total number at the time exercisable under the Option. 

  

	 	•	 	Nonqualified Stock Option. The Option is a nonqualified stock option and is not, and shall not be, an incentive stock option within the meaning of Section 422 of the
Code. 

  

	2.	Continuance of Employment/Service Required; No Employment/Service Commitment. 

  
 The vesting schedule requires continued employment or service through each applicable vesting date as a condition to the
vesting of the applicable installment of the Option and the rights and benefits under this Option Agreement. Employment or service for only a portion of the vesting period, even if a substantial portion, will not entitle the Grantee to any
proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services as provided in Section 4 below or under the Plan. 
  
 Nothing contained in this Option Agreement or the Plan constitutes a
continued employment or service commitment by the Corporation or any of its Subsidiaries, affects the Grantee’s status, if he or she is an employee, as an employee at will who is subject to termination without cause, confers upon the Grantee
any right to remain employed by or in service to the Corporation or any Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at any time to terminate such employment or service, or affects the right of the
Corporation or any Subsidiary to increase or decrease the Grantee’s other compensation. 
  

	3.	Method of Exercise of Option. 

  
 The Option shall be exercisable by the delivery to the Secretary of the Corporation (or such other person as the Administrator may require pursuant to
such administrative exercise procedures as the Administrator may implement from time to time) of: 
  

	 	•	 	a written notice stating the number of shares of Common Stock to be purchased pursuant to the Option or by the completion of such other administrative exercise procedures as the
Administrator may require from time to time, 

  

	1	Subject to adjustment under Section 7.1 of the Plan. 

	2	Subject to early termination under Section 4 of the Terms and Section 7.4 of the Plan. 

  
  

	 	•	 	payment in full for the Exercise Price of the shares to be purchased in cash, check or by electronic funds transfer to the Corporation, or (subject to compliance with all applicable
laws, rules, regulations and listing requirements and further subject to such rules as the Administrator may adopt as to any non-cash payment) in shares of Common Stock already owned by the Participant, valued at their Fair Market Value on the
exercise date, provided, however, that any shares initially acquired upon exercise of a stock option or otherwise from the Corporation must have been owned by the Participant for at least six (6) months before the date of such
exercise; 

  

	 	•	 	any written statements or agreements required pursuant to Section 8.1 of the Plan; and 

  

	 	•	 	satisfaction of the tax withholding provisions of Section 8.5 of the Plan. 

  
 The Administrator also may, but is not required to, authorize a non-cash payment alternative by notice and third party payment in such
manner as may be authorized by the Administrator. 
  

	4.	Early Termination of Option. 

  
 4.1 Possible Termination of Option upon Change in Control. The Option is subject to termination in connection with a Change in Control Event
or certain similar reorganization events as provided in Section 7.4 of the Plan. 
  
 4.2 Termination of Option upon a Termination of Grantee’s Employment or Services. Subject to earlier termination on the Expiration Date of the Option or pursuant to Section 4.1 above, if the Grantee
ceases to be employed by or ceases to provide services to the Corporation or a Subsidiary, the following rules shall apply (the last day that the Grantee is employed by or provides services to the Corporation or a Subsidiary is referred to as the
Grantee’s “Severance Date”): 
  

	 	•	 	other than as expressly provided below in this Section 4.2, (a) the Grantee will have until the date that is 90 days after his or her Severance Date to exercise the Option
(or portion thereof) to the extent that it was vested on the Severance Date, (b) the Option, to the extent not vested on the Severance Date, shall terminate on the Severance Date, and (c) the Option, to the extent exercisable for the
90-day period following the Severance Date and not exercised during such period, shall terminate at the close of business on the last day of the 90-day period; 

  

	 	•	 	if the termination of the Grantee’s employment or services is the result of the Grantee’s death or Total Disability (as defined below), then the Grantee (or his
beneficiary or personal representative, as the case may be) will have until the date that is 12 months after the Grantee’s Severance Date to exercise the Option, (b) the Option, to the extent not vested on the Severance Date, shall
terminate on the Severance Date, and (c) the Option, to the extent exercisable for the 12-month period following the Severance Date and not exercised during such period, shall terminate at the close of business on the last day of the 12-month
period; 

  

	 	•	 	if the Grantee voluntarily terminates his or her employment or services (other than due to the Grantee’s death or Total Disability) or if the Grantee’s employment or
services are terminated by the Corporation or a Subsidiary for Cause (as defined below), the Option (whether vested or not) shall terminate on the Severance Date. 

  

	1.	Subject to adjustment under Section 7.1 of the Plan. 

	2.	Subject to early termination under Section 4 of the Terms and Section 7.4 of the Plan. 

 For purposes of the Option, “Total Disability” means a “permanent and total
disability” (within the meaning of Section 22(e)(3) of the Code or as otherwise determined by the Administrator). 
  
 For purposes of the Option, “Cause” means that the Grantee: 
  

	 	(1)	has been negligent in the discharge of his or her duties to the Corporation or any of its Subsidiaries, has refused to perform stated or assigned duties or is incompetent in or
(other than by reason of a disability or analogous condition) incapable of performing those duties; 

  

	 	(2)	has been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure or use of inside information, customer
lists, trade secrets or other confidential information; has breached a fiduciary duty, or willfully and materially violated any other duty, law, rule, regulation or policy of the Corporation, any of its Subsidiaries or any affiliate of the
Corporation or any of its Subsidiaries; or has been convicted of a felony or misdemeanor (other than minor traffic violations or similar offenses); 

  

	 	(3)	has materially breached any of the provisions of any agreement with the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries; or

  

	 	(4)	has engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets of, the Corporation, any of its Subsidiaries or
any affiliate of the Corporation or any of its Subsidiaries; has improperly induced a vendor or customer to break or terminate any contract with the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries;
or has induced a principal for whom the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries acts as agent to terminate such agency relationship. 

  
 In all events the Option is subject to earlier termination on the Expiration
Date of the Option or as contemplated by Section 4.1. The Administrator shall be the sole judge of whether the Grantee continues to render employment or services for purposes of this Option Agreement. 
  

	5.	Non-Transferability. 

  
 The Option and any other rights of the Grantee under this Option Agreement or the Plan are nontransferable and exercisable only by the Grantee, except as
set forth in Section 5.7 of the Plan. 
  

	6.	Notices. 

  
 Any notice to be given under the terms of this Option Agreement shall be in writing and addressed to the Corporation at its principal office to the
attention of the Secretary, and to the Grantee at the address last reflected on the Corporation’s payroll records, or at such other address as either party may hereafter designate in writing to the other. Any such notice shall be delivered in
person or shall be enclosed in a properly sealed envelope addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United
States Government. Any such notice shall be given only when received, but if the Grantee is no longer employed by the Corporation or a 
  

	1.	Subject to adjustment under Section 7.1 of the Plan. 

	2.	Subject to early termination under Section 4 of the Terms and Section 7.4 of the Plan. 

  
  

 
Subsidiary, shall be deemed to have been duly given five business days after the date mailed in accordance with the foregoing provisions of this
Section 6. 
  

	7.	Plan. 

  
 The Option and all rights of the Grantee under this Option Agreement are subject to, and the Grantee agrees to be bound by, all of the terms and
conditions of the Plan, incorporated herein by this reference. In the event of a conflict or inconsistency between the terms and conditions of this Option Agreement and of the Plan, the terms and conditions of the Plan shall govern. The Grantee
agrees to be bound by the terms of the Plan and this Option Agreement (including these Terms). The Grantee acknowledges having read and understanding the Plan, the Prospectus for the Plan, and this Option Agreement. Unless otherwise expressly
provided in other sections of this Option Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not and shall not be deemed to create any rights in the Grantee unless such rights are expressly set
forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof. 
  

	8.	Entire Agreement. 

  
 This Option Agreement (including these Terms) and the Plan together constitute the entire agreement and supersede all prior understandings and agreements,
written or oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Option Agreement may be amended pursuant to Section 8.6 of the Plan. Such amendment must be in writing and signed by the Corporation. The
Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Grantee hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of
the same provision or a waiver of any other provision hereof. 
  

	9.	Governing Law. 

  
 This Option Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to conflict of
law principles thereunder. 
  

	10.	Effect of this Agreement. 

  
 Subject to the Corporation’s right to terminate the Option pursuant to Section 7.4 of the Plan, this Option Agreement shall be assumed by, be
binding upon and inure to the benefit of any successor or successors to the Corporation. 
  

	11.	Counterparts. 

  
 This Option Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together
shall constitute one and the same instrument. 
  

	12.	Section Headings. 

  
 The section headings of this Option Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

  

	1.	Subject to adjustment under Section 7.1 of the Plan. 

	2.	Subject to early termination under Section 4 of the Terms and Section 7.4 of the Plan.SECOND AMENDMENT TO THE EMPLOYMENT AGREEMENT

THE SECOND AMENDMENT TO THE EMPLOYMENT
AGREEMENT (the “Second Amendment”) is made and entered effective
the 18 day of May 2005, by Ross Stores, Inc. (the “Company”) and
Michael Balmuth (the “Executive”). The Executive and the Company
previously entered into an Employment Agreement effective May 31, 2001 and a
First Amendment to the Employment Agreement effective January 30, 2003 (the
original Agreement and First Amendment to the Employment Agreement are attached
and collectively referred to herein as “the Agreement”), and it is now
the intention of the Executive and the Company to further amend the Agreement as
set forth below. Accordingly, the Executive and the Company now enter into this
Second Amendment.

	
  
I.
  	
  
The Executive and the Company amend the
Agreement by deleting Paragraph 1 of the Agreement in its entirety and replacing
it with the following new paragraph 1:
 
	
  
 
  	
  
 
  
	
  
 
  	
  
1.
  	
  
Term. The employment of the
Executive by the Company will continue as of the date hereof and end on January
29, 2009, unless extended or terminated in accordance with this Agreement,
including the extensions contemplated both in paragraphs 1 and 4(b). During
August 2007, and during August every other year thereafter (every two years) for
so long as the Executive is employed by the Company, upon the written request of
the Executive, the Board shall consider extending the Executive’s
employment with the Company. Such request must be delivered to the Chairman of
the Compensation Committee no later than the July 31st which precedes
the August in which the requested extension will be considered. The Board shall
advise the Executive, in writing, on or before the September 1st
following its consideration of the Executive’s written request, whether it
approves of such extension. The failure of the Board to provide such written
advice shall constitute approval of the Executive’s request for the
extension. If the Executive’s request for an extension is approved, this
Agreement shall be extended two additional years.
 
	
   
  	
  
 
  	
  
 
  
	
  
II.
  	
  
The Executive and the Company further
amend the Agreement by deleting the first sentence of Paragraph 2 of the
Agreement in its entirety and replacing it with the following new
sentence:
 
	
  
 
  	
  
 
  
	
  
 
  	
  
2.
  	
  
Position and Duties. The Executive shall   continue to serve as the Vice Chairman of the Board, President and Chief   Executive Officer of the Company with overall responsibility for its   corporate policy making, organization and operation, and accomplishment of   its plans and objectives.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
III.
  	
  
The   Executive and the Company further amend the Agreement by deleting Paragraph   4(a) of the Agreement in its entirety and replacing it with the following new   Paragraph 4(a):
  
	
  
 
  	
  
 
  
	
   
  	
  
4(a).
  	
  
Salary. During his employment, the   Company shall pay the Executive a base salary of not less than Nine Hundred   and Thirty Eight Thousand Dollars ($938,000) per annum. The base salary shall   be payable in equal installments in accordance with the Company’s normal   payroll practices applicable to senior officers. Subject to the first   sentence of this paragraph, the Executive’s base salary may be adjusted from   time to time by the Board in accordance with normal business practices by the   Company. In addition, the Company shall pay the Executive each year an amount   (“Premium Payment”) equal to the sum of: (i) the total premiums for such year   on certain life insurance policies held in an irrevocable life insurance   trust established by the Executive, with an aggregate face value of $12   million; and (ii) an amount necessary to gross-up Executive for any federal,   state and local income tax liability attributable to
the premium amounts. The   Premium Payment shall be adjusted each year to reflect changes in the annual   premiums with respect to such policies.
  

	
  
IV.
  	
  
The Executive   and the Company further amend the Employment Agreement by adding the   following paragraph 22:
  
	
   
  	
  
 
  
	
  
 
  	
  
22.
  	
  
Compliance with Section 409A. It is the   mutual intention of Executive and the Company that the provision of all   payments and benefits pursuant to this Agreement be made in compliance with   the requirements of Section 409A of the Internal Revenue Code (concerning the   treatment of nonqualified deferred compensation plans), but only to the   extent that Section 409A is applicable to such payments and benefits and only   to the extent that Executive determines, in his discretion, that compliance   with Section 409A with respect to any such payment or benefit will result in   the greatest after-tax or other benefit to Executive. For purposes of this   paragraph 22, references to Section 409A include all regulations and other   guidance promulgated by the Secretary of the Treasury pursuant to such   Section. Notwithstanding any provision of this paragraph 22 to the contrary,   this Agreement shall not be modified pursuant to this paragraph 22 with
respect to any payment or benefit which Executive and the Company mutually   determine is an amount treated as deferred prior to January 1, 2005 for   purposes of Section 409A(d).
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
(a)
  	
  
Further Amendment. As soon as reasonably   practicable following the effective date of this Second Amendment, but in any   event on or before December 31, 2005:
  
	
   
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
(i)
  	
  
Executive and the Company shall mutually
determine in good faith the extent to which any one or more present provisions
of this Agreement would fail to comply with the applicable requirements of
Section 409A and such modifications to the Agreement, if any, as would be
required to avoid the imposition of additional tax pursuant to Section
409A(a)(1)(B) with respect to any payment or benefit to be provided to Executive
under the Agreement. Except as provided by paragraph 22(b) below, such
modifications to this Agreement shall, to the maximum extent permitted in
compliance with the requirements of Section 409A, preserve (but not increase)
the aggregate monetary face value of such payments and benefits in the absence
of such modifications.
 
	
  
 
  	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
(ii)
  	
  
Executive   shall determine, in his discretion, which, if any, of such modifications to   this Agreement determined in accordance with paragraph 22(a)(i) above would   result in the greatest after-tax or other benefit to Executive. If requested   by Executive, the Company and Executive shall further amend this Agreement to   reflect any one or more of such modifications elected by Executive. Executive   shall be solely responsible for any additional tax or interest imposed by   Section 409A as a result of Executive’s failure to elect any modification to   this Agreement determined in accordance with paragraph 22(a)(i).
  
	
   
  	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
(b)
  	
  
Interest. If, in accordance with paragraph   22(a), this Agreement is modified to delay the date of any payment or benefit   which, in the absence of such modification, would have occurred within six   (6) months following the date of termination of Executive’s employment with   the Company (the “Original Payment Date”) to a date six (6) months or more   following the date of termination of Executive’s employment with the Company   (the “Delayed Payment Date”), then the principal amount of such payment or   benefit shall accrue interest from the Original Payment Date to the Delayed   Payment Date at the applicable Federal rate provided for in Section   7872(f)(2)(A) of the Internal Revenue Code. The Company shall pay such   accrued interest to Executive on the Delayed Payment Date.
  

	
  
 
  	
  
 
  	
  
(c)
  	
  
Attorney’s Fees and Costs. Any dispute or   claim relating to or arising out of any delay in the Company’s provision of   payments or benefits in accordance with any modification of this Agreement   pursuant to paragraph 22(a) or the provision of interest in accordance with   paragraph 22(b) shall be resolved by binding arbitration in accordance with   paragraph 19. However, notwithstanding the provisions of paragraph 20   regarding attorney’s fees and costs to the contrary, the Company shall   reimburse Executive for any and all attorney’s fees and costs reasonably   incurred by Executive in clarifying or enforcing Executive’s rights with   respect to such delayed payments or benefits or interest if Executive   establishes liability with respect to the merits of the claim in respect of   which such attorney’s fees and costs are incurred. Executive shall reimburse   the Company for any and all attorney’s fees and costs
reasonably incurred by   Company in defending any such claim brought by Executive if the arbitrator   determines that such claim by Executive is frivolous or maintained in bad   faith.
  

Except for the amendments, as set forth above, the Agreement and all of its terms remain in force and in effect.

	 	
  
ROSS STORES, INC.
  	
  
 
  	
  
EXECUTIVE
  
	 	
  
 
  	
  
 
  	
  
 
  
	 	
  
/s/ Norman A. Ferber
  	
  
 
  	
  
/s/ Michael Balmuth
  
	 	

   	 	

	 	
  
Norman   Ferber
  	
  
 
  	
  
Michael   Balmuth
  
	 	
  
 
  	
  
 
  	
  
 
  
	 	
  5/18/05
  	
   
  	  
	 	
  Date
  	
   
  	
  Date

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