Red Robin Gourmet Burgers (RRGB)

Stock Option Tender Offer

        In February 2009, we completed an offer to purchase certain stock options for shares of our common stock held by certain eligible employees, including the named executive officers. The eligible options were those outstanding as of January 13, 2009, that were granted under certain of our incentive plans, with an exercise price equal to or greater than $32.00 per share. Pursuant to the offer, the Company accepted elections by eligible employees to tender 1,576,306 options, representing 96.32% of the options that were eligible to be tendered in the offer. 484,800 of the eligible options accepted for

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tender in the offer were originally issued under the 2007 Plan and will be available for future issuance under such plan. The Company paid an aggregate of $3,497,696 to acquire options that were held by the eligible employees participating in the offer. The named executive officers received aggregate net proceeds of $732,342, the majority of which, $636,800, was used by such officers to acquire shares of the Company's common stock.

(1)

The aggregate amount of $636,800 does not total the aggregate net proceeds because a portion of the net proceeds were used by certain of the named executive officers to pay taxes, commissions or other costs associated with the acquisition of the shares.

        In considering the tender offer, the board concluded, after a comprehensive review of our current compensation program and the impact of the decline in our common stock price on our incentive awards, that the offer was consistent with restoring the incentive value of our long-term performance award programs to all employees who receive equity incentives. The sharp decline in the market price of our common stock since the beginning of 2008 significantly eroded the value of a substantial number of outstanding options held by our employees, as the exercise price of those options far exceeded the market price of our common stock. Unfortunately, this decline in our stock price substantially eliminated the incentive and retention value of the options granted to our employees, including our key members of management. Moreover, the board also did not believe that the market price for our stock reflected accurately the achievements of management over the past few years when the options were issued, as reflected in metrics other than stock price, for example, in our growth in revenue, restaurant units and earnings.

        The tender offer was designed to restore such incentive value by providing eligible employees with an opportunity to obtain the more certain benefit associated with the cash payment. Future compensation expense associated with the unvested options that were tendered will be eliminated. Further, the cancellation of the outstanding options reduced market overhang to stockholders, thereby reducing potential dilution.