Exhibit 10.1

 

Red Robin Gourmet Burgers, Inc.
6312 South Fiddlers Green Circle, # 200N
Greenwood Village, CO 80111

 

April 5, 2011

 

Oak Street Capital Management, LLC

111 South Wacker Drive, 33rd floor

Chicago, IL 60606

 

Dear Sirs:

 

This letter constitutes the agreement (the “Agreement”) among David Makula
(“Mr. Makula”) and Oak Street Capital Management, LLC (“Oak Street”), each on
behalf of itself and its affiliated funds, persons and entities, both current
and future, including without limitation Mr. Makula and the other persons listed
on Schedule 1 hereto (collectively, the “Investor Group”), and Red Robin Gourmet
Burgers, Inc., a Delaware corporation (the “Company”).

 

WHEREAS, on March 10, 2011, Oak Street, on behalf of the record stockholder
indicated therein, sent a letter (the “Nomination Letter”) to the Company
stating its intention to nominate two (2) directors to the board of directors of
the Company (the “Board”).

 

WHEREAS, the Company and Investor Group have agreed that it is in their mutual
interests to enter into this Agreement, among other things, to set forth certain
agreements concerning the composition of the Board and other corporate
governance matters, as hereinafter described.

 

NOW, THEREFORE, in consideration of the promises and the representations,
warranties and agreements contained herein, and other good and valuable
consideration, the parties hereto mutually agree as follows:

 

1.             As promptly as practicable following the date of this Agreement
(but in no event later than April 12, 2011), the Board shall, pursuant to the
powers granted to the Board under Article II of the Bylaws of the Company (the
“Bylaws”), increase the size of the Board to eleven and appoint Mr. Makula as a
Class I director of the Company to fill the new directorship so created on the
Board and to serve in such capacity until the 2012 annual meeting of the
stockholders of the Company (the “2012 Meeting”).

 

(a)           Without limiting the previous paragraph, Mr. Makula agrees to
serve as a director of the Company through at least December 31, 2011, unless he
becomes unable to do so due to injury, illness, death or similar circumstance. 
If Mr. Makula becomes unable to serve as a director of the Company due to
injury, illness, death or other similar circumstance on or before December 31,
2011, or if Mr. Makula leaves the Board after

 

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December 31, 2011 for any reason prior to the end of his then-current term, Oak
Street shall be entitled to recommend to the Board one or more replacement
directors, to serve in succession (each, a “Replacement Director”).  The Board
may withhold approval of any Replacement Director recommended by Oak Street;
provided, however, that such approval shall not be unreasonably withheld.  In
the event that the Board does not accept a Replacement Director recommended by
Oak Street, Oak Street shall have the right to recommend additional Replacement
Directors for consideration by the Board.  The Board shall, no later than five
business days after the Board’s approval of such Replacement Director, appoint
such Replacement Director to the Board as a Class I director to serve until the
end of the then-current term of such Replacement Director’s predecessor.

 

(b)           If the Investor Group is not in material breach of this Agreement
and Mr. Makula or the then-current Replacement Director is serving as a director
at the time, then, in its sole discretion of the Board, the Board may nominate
(or re-nominate) Mr. Makula or the then-current Replacement Director for
election (or re-election) at the 2012 Meeting.

 

(c)           No later than April 12, 2011, Mr. Makula shall be appointed to the
Audit Committee of the Board.  In addition, Mr. Makula shall be appointed to any
special committee of the Board (“Committee”) that is created after the date
hereof for the purpose of considering strategic alternatives of the Company
(including without limitation, a sale, merger,  disposition of all or
substantially all of the Company’s assets, or financing involving a strategic
change in the Company’s financing strategy).  Subject to Section 1(a) of this
Agreement, if Mr. Makula or the then-current Replacement Director leaves the
Board for any reason prior to the end of his then-current term, the Replacement
Director appointed pursuant to Section 1(a) shall replace such Replacement
Director’s predecessor and, assuming such Replacement Director meets the
applicable qualifications necessary to serve on any such committee, shall
continue to serve on any committee on which such predecessor served immediately
prior to his departure from the Board for the remainder of such predecessor’s
then-current term.

 

2.             If at any time during the Support Period (defined below), any
member of the Investor Group materially breaches the terms of this Agreement,
Mr. Makula or the then-current Replacement shall resign from the Board within
five days thereafter, and the Investor Group shall have no further rights under
Section 1 of this Agreement to designate any member of the Board.

 

3.             Each member of the Investor Group shall (a) in the case of all
shares of the Company’s Common Stock (the “Common Stock”) owned of record by it
as of the record date for the 2011 Annual Meeting (the “Record Date”), and
(b) in the case of all shares of the Common Stock beneficially owned by any
member of the Investor Group as of the Record Date (whether held in street name
or by some other arrangement), instruct the record holder to:  in each case at
the 2011 Annual Meeting, (i) publicly support and vote for the election of each
of Steve Carley, Pattye Moore and Marcus Zanner or such other director nominees
as are supported by the Board; (ii) vote to abstain or against any shareholder
nominations for director or shareholder proposals (whether made pursuant to
Rule 14a-8 or Rule 14a-4 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act,” and such proposals, “Shareholder Proposals”)) that are not
approved and recommended by the Board, (iii) publicly support and

 

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vote for ratification of the Company’s auditors for the 2011 fiscal year, and
(iv) publicly support and vote for the proposal to approve an amendment to the
Company’s equity incentive plan.

 

4.             Except for the Investor Group’s agreement to support the
Company’s nominees and proposals described in this Agreement, from the date of
this Agreement until the date immediately following the day on which the 2012
Meeting is held or, if later, such date that is five months following the latest
date on which either Mr. Makula or the then-current Replacement Director is a
director of the Company (the “Support Period”), no member of the Investor Group
shall, and will cause its affiliates not to, directly or indirectly:

 

(a)           make, or in any way participate, directly or indirectly, in any
“solicitation” (as such term is used in the proxy rules of the Securities and
Exchange Commission (the “SEC”)) of proxies or consents, conduct or suggest any
binding or nonbinding referendum or resolution or seek to advise, encourage or
influence any individual, partnership, corporation, limited liability company,
group, association or entity (collectively, a “Person”) with respect to the
voting of any of the Common Stock;

 

(b)           initiate, propose or otherwise “solicit” (as such term is used in
the proxy rules of the SEC) shareholders of the Company for the approval of
shareholder proposals or cause or encourage any person to initiate any such
shareholder proposal;

 

(c)           propose or nominate, or cause or encourage any person to propose
or nominate, any candidates to stand for election to the Board, or seek the
removal of any member of the Board;

 

(d)           except as previously disclosed in the Investor Group’s Schedule
13D filings, form, join or otherwise participate in a “partnership, limited
partnership, syndicate or other group” within the meaning of Section 13(d)(3) of
the Exchange Act (other than the group already formed among the Investor Group)
with respect to the Common Stock or deposit any shares of Common Stock in a
voting trust or similar arrangement or subject any shares of Common Stock to any
voting agreement or pooling arrangement, or grant any proxy with respect to any
shares of Common Stock (other than to a designated representative of the Company
pursuant to a proxy statement of the Company);

 

(e)           take any public action to act alone or in concert with others to
control or seek to control, or to influence or seek to influence, the
management, the Board or the policies of the Company;

 

(f)            seek to call, or to request the call of, or call a special
meeting of the shareholders of the Company, or make a request for a list of the
Company’s shareholders or other Company records;

 

(g)           otherwise take, or solicit, cause or encourage others to take (or
disclose publicly or in a manner that could reasonably be expected to become
public, any intention to take) any action inconsistent with any of the
foregoing;

 

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(h)           acquire, offer or propose to acquire, or agree to acquire (except
by the way of stock dividends, stock splits, reverse stock splits or other
distributions or offerings made available to holders of shares of Common Stock
generally), whether by purchase, tender or exchange offer, through the
acquisition of control of another Person, by joining a partnership, limited
partnership, syndicate or other group (as defined under Section 13(d) of the
Exchange Act) or otherwise, any shares of Common Stock if, as a result of such
acquisition, the members of the Investor Group would beneficially own in the
aggregate in excess of 16.5% of the then outstanding shares of Common Stock; or

 

(i)            publicly, or in a manner that could reasonably be expected to
become public, seek to amend or request a waiver of any of the foregoing.

 

For the avoidance of doubt, any actions of Mr. Makula or the then-current
Replacement Director taken in his capacity as a member of the Board shall not be
deemed to violate the foregoing clauses (a) through (i).

 

5.             During the Support Period, no member of the Investor Group shall,
and each of them shall not solicit, cause or encourage others to, make any
comments or statements regarding the Company or its current or former officers,
directors or employees, which are derogatory or detrimental to, or which
disparage, any of the Company or its current or former officers, directors or
employees, provided, however, that nothing in this Agreement to the contrary
shall prohibit the Investor Group from (i) making public statements (including
statements contemplated by Rule 14a-1(1)(2)(iv) under the Exchange Act),
(ii) engaging in discussions with other stockholders or (iii) soliciting, or
encouraging or participating in the solicitation of, proxies or consents with
respect to voting securities of the Company (so long as such discussions are in
compliance with subsection 4(d) hereof) in each case with respect to any
transaction that has been publicly announced by the Company involving (1) the
recapitalization of the Company, (2) an acquisition, disposition or sale of
assets or a business by the Company where the consideration to be received or
paid in such transaction requires approval by the holders of the Common Stock or
(3) a change of control of the Company.  During the Support Period, neither the
Company nor any of its officers or directors shall, nor shall any of them
solicit, cause or encourage others to, make any comments or statements regarding
the Investor Group or any of their respective partners, officers, directors or
employees, which are derogatory or detrimental to, or which disparage, any of
them.  The foregoing shall not apply to compelled testimony, either by legal
process, subpoena or otherwise, or to communications that are required by an
applicable fiduciary or legal obligation and are subject to contractual
provisions providing for confidential disclosure.

 

6.             Effective as of the date of this Agreement, Oak Street hereby
withdraws the Nomination Letter. Further, effective as of the date of this
Agreement, Oak Street hereby represents to the Company that Oak Street is
dissolving the group of Reporting Persons formed with Kovitz Investment Group
and its affiliates.

 

7.             The Company shall issue a press release substantially in the form
attached hereto as Exhibit A (the “Press Release”) as soon as practicable on or
after the date hereof, but in no event later than April 7, 2011 and the Company
shall file a corresponding Form 8-K that includes both the Press Release and
this Agreement.  As soon as practicable on or after the date hereof, but in no
event later than April 7, 2011, the Investor Group shall file a corresponding

 

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amendment to its Schedule 13D.  Neither the Company nor the Investor Group shall
make any public announcement or statement that is inconsistent with or contrary
to the statements made in the Press Release, except as required by law or the
rules of any stock exchange or with the prior written consent of the other
party.  Each member of the Investor Group represents and warrants to the Company
that it is unaware of any fact or circumstance that would require them to make
any such disclosure.

 

8.             Mr. Makula and each Replacement Director and each of their
affiliates shall comply with those policies and procedures of the Company
applicable to members of the Board of Directors and affiliates of such persons
that are currently in effect or that may be in effect from time to time.

 

9.             The Company and the members of the Investor Group each
acknowledge and agree that (a) a breach or a threatened breach by either party
may give rise to irreparable injury inadequately compensable in damages and
accordingly each party shall be entitled to injunctive relief, without proof of
actual damages, to prevent a breach or threatened breach of the provisions
hereof and to enforce specifically the terms and provisions hereof in any state
or federal court having jurisdiction, (b) neither party shall plead in defense
for any such relief that there would be an adequate remedy at law, (c) any
applicable right or requirement that a bond be posted by either party is waived
and (d) such remedies shall not be the exclusive remedies for a breach of this
Agreement, but will be in addition to all other remedies available at law or in
equity.  The members of the Investor Group understand and acknowledge that the
United States securities laws prohibit any person who has material, non-public
information from purchasing or selling securities of a company to which such
information relates or from communicating such information to any other person
or entity under circumstances in which it is reasonably foreseeable that such
person or entity is likely to purchase or sell such securities.

 

10.           All notices and other communications under this Agreement shall be
in writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person or by facsimile, or by Federal Express or
registered or certified mail, postage pre-paid, return receipt requested, as
follows:

 

If to the Company:

 

Red Robin Gourmet Burgers, Inc.
6312 South Fiddlers Green Circle, #200N
Greenwood Village, CO  80111
Attn:       General Counsel

 

with a copy (which shall not constitute notice) to:

 

Ronald R. Levine, II, Esq.

Davis Graham & Stubbs LLP

1550 17th Street, Suite 500

Denver, CO  80202

 

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If to Oak Street:

 

Oak Street Capital Management, LLC

111 South Wacker Drive, 33rd floor

Chicago, IL 60606

Attn:       David Makula

 

with a copy (which shall not constitute notice) to:

 

Drinker Biddle & Reath LLP

191 North Wacker Drive

Suite 3700

Chicago, IL 60606

Attn:       Jeffrey Blumberg, Esq.

 

11.           This Agreement may be executed by the signatories hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.

 

12.           This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to its conflict of laws
principles.  The parties hereto consent to exclusive jurisdiction and venue in
any action to enforce this Agreement in any court of competent jurisdiction
located in Wilmington, Delaware.

 

13.           This Agreement constitutes the only agreement between the Investor
Group and the Company with respect to the subject matter hereof and supersedes
all prior agreements, understandings, negotiations and discussions whether oral
or written.  This Agreement shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.  This Agreement may not be
assigned by any party without the express written consent of the other party.
 No amendment, modification, supplement or waiver of any provision of this
Agreement may in any event be effective unless in writing and signed by the
party or parties affected thereby.

 

14.           The Company represents and warrants that (a) the Company has the
power and authority to execute, deliver and carry out the terms and provisions
of this Agreement and to consummate the transactions contemplated hereby, and
(b) this Agreement has been duly and validly authorized, executed and delivered
by the Company, constitutes a valid and binding obligation and agreement of the
Company and is enforceable against the Company in accordance with its terms.

 

15.           Oak Street represents and warrants that (a) it has the power and
authority to execute, deliver and carry out the terms and provisions of this
Agreement and to consummate the transactions contemplated hereby, and (b) this
Agreement has been duly and validly authorized, executed and delivered by Oak
Street, constitutes a valid and binding obligation and agreement of Oak Street
and is enforceable against Oak Street in accordance with its terms.

 

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16.           The Company shall be responsible for reimbursing the Investor
Group for its reasonable and documented travel and legal (for services actually
rendered, and not for retainers) expenses incurred by the Investor Group prior
to the date hereof in connection with the investment by the Investor Group in
the Company, provided that in no event shall the Company be required to
reimburse the Investor Group an amount more than $62,500.

 

[signature page follows]

 

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Very truly yours,

 

 

 

 

 

RED ROBIN GOURMET BURGERS, INC.

 

 

 

 

 

By:

/s/ Pattye L. Moore

 

 

Name: Pattye L. Moore

 

 

Title: Chair

 

Accepted and agreed to:

 

 

 

 

 

/s/ David Makula

 

David Makula

 

 

 

OAK STREET CAPITAL MANAGEMENT, LLC

 

on behalf of itself and its affiliates

 

 

 

 

 

By:

/s/ David Makula

 

 

Name: David Makula

 

 

Title: Manager

 

 

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Schedule 1

 

Oak Street Capital SPV 1 LP

Oak Street Capital Master Fund, Ltd.

Patrick Walsh

 

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Exhibit A

 

Red Robin Appoints David Makula to the Board of Directors

 

Signs Support Agreement with Oak Street Capital Management

 

Greenwood Village, Colo. — April 5, 2011 —Red Robin Gourmet Burgers, Inc.,
(NASDAQ: RRGB) today announced the appointment of David Makula, the Managing
Member and Chief Investment Officer of Oak Street Capital Management, LLC (“Oak
Street”), to its Board of Directors.  The Company also announced it has signed a
“Support Agreement” with Oak Street in conjunction with Mr. Makula’s appointment
to the Board.  Under the terms of the Support Agreement, Oak Street has agreed
to support Red Robin’s anticipated proposals at the 2011 Annual Meeting and to a
number of “standstill” agreements through the day following the 2012 Annual
Meeting.

 

“I’m pleased to welcome David to the Red Robin Board of Directors and I look
forward to his future contributions to Red Robin,” said Pattye Moore, Red
Robin’s independent Board Chair.  “With David’s appointment, we have now added
five new independent directors in the last year, as well as our new CEO, Steve
Carley, substantially enhancing the quality of our corporate governance.  We are
also making great strides strategically and operationally as we continue to
focus intensely on our strategic plan, Project RED.  The Board will continue to
work very closely with management to maximize the benefits associated with our
plan to drive long-term shareholder value.”

 

“I’m very pleased to join the Red Robin Board of Directors and look forward to
contributing to the Board’s effort to drive long-term shareholder value,” said
Mr. Makula.

 

Mr. Makula founded Oak Street, one of the largest beneficial owners of Red Robin
stock, in 2005, and continues to serve as its Managing Member and Chief
Investment Officer.  Oak Street manages fundamentally-driven investment
portfolios for institutional and high net worth investors.  Mr. Makula has
gained significant experience in the restaurant industry through Oak Street’s
investments.  Previously, Mr. Makula participated in the management of a $700
million Chicago-based investment firm.  Mr. Makula began his career as a
Mergers & Acquisitions investment banker at Salomon Smith Barney in New York,
New York.  He holds a B.S. in Accountancy from the University of Illinois at
Urbana-Champaign, graduating with high honors.  He is also a Certified Public
Accountant.

 

The Company will increase the size of the Board to 11 members with the
appointment of Mr. Makula as a Class I director.  Oak Street has agreed to
withdraw its separate nomination of Mr. Makula and Patrick Walsh to the board of
directors and to support our nominees at the upcoming Annual Meeting.

 

About Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB)

Red Robin Gourmet Burgers, Inc. (www.redrobin.com), a casual dining restaurant
chain founded in 1969 that operates through its wholly-owned subsidiary, Red
Robin International, Inc., serves up wholesome, fun, feel-good experiences in a
family-friendly environment.  Red Robin®

 

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restaurants are famous for serving more than two dozen insanely delicious,
high-quality gourmet burgers in a variety of recipes with Bottomless Steak
Fries®, as well as salads, soups, appetizers, entrees, desserts, and signature
Mad Mixology® Beverages.  There are more than 450 Red Robin® restaurants located
across the United States and Canada, including company-owned locations and those
operating under franchise agreements.

 

For further information contact:

ICR

Don Duffy/Raphael Gross

203-682-8200

 

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