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Exhibit 10.31
RETENTION AND
CHANGE IN CONTROL AGREEMENT
This
Retention and Change in Control Agreement (this "Agreement"), dated
October 9, 2006, is made by and between BACK YARD BURGERS,
INC., a Delaware corporation (as hereinafter defined, the
"Corporation"), and Michael G. Webb (as hereinafter defined, the
"Executive"), and is intended to supersede and replace in its
entirety that certain Amended and Restated Severance Agreement
dated as of October 11, 2004 between the Corporation and the
Executive (the "Amended and Restated Severance Agreement").
WHEREAS,
the Board of Directors of the Corporation (as hereinafter defined,
the "Board") recognizes that services of the Executive are integral
to the success of the operations of the Company, that the
possibility of a Change in Control (as hereinafter defined) of the
Corporation exists, and that such possibility, and the uncertainty
it may cause, may result in the departure or distraction of key
management employees of the Corporation to the detriment of the
Corporation and its stockholders; and
WHEREAS,
the Executive is a key management employee of the Corporation;
and
WHEREAS,
the Board has determined that the Corporation should encourage the
continued employment of the Executive by the Corporation and the
continued dedication of the Executive to his assigned duties
without distraction as a result of the circumstances arising from
the possibility of a Change in Control;
NOW THEREFORE , in consideration of the premises and the
mutual covenants herein contained, the Corporation and the
Executive hereby agree as follows:
1. Defined Terms .
For purposes of this Agreement,
the following terms shall have the meanings indicated below:
(A) "Board" shall
mean the Board of Directors of the Corporation, as constituted from
time to time.
(B) "Cause" for
termination by the Corporation of the Executive’s employment
shall mean (i) the willful failure by the Executive substantially
to perform the Executive’s duties with the Corporation, other
than any failure resulting from the Executive’s incapacity
due to physical or mental illness, that continues for at least
30 days after the Board delivers to the Executive a written
demand for performance that identifies specifically and in detail
the manner in which the Board believes that the Executive willfully
has failed substantially to perform the Executive’s duties;
or (ii) the willful engaging by the Executive in misconduct
that is demonstrably and materially injurious to the Corporation,
monetarily. For purposes of this definition, no act, or failure to
act, on the Executive’s part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive’s act, or
failure to act, was in the best interest of the Corporation.
(C) A "Change in
Control" shall mean, if subsequent to the date of this
Agreement:
(i) any "person," as defined
in Section 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), other than the Corporation, any of
its subsidiaries, or any employee benefit plan maintained by the
Corporation or any of its subsidiaries, becomes the "beneficial
owner" (as defined in Rule l3d-3 under the Exchange Act) of
(a) 30% or more, but no greater than 50%, of the outstanding
voting capital stock of the Corporation, unless prior thereto, the
Continuing Directors approve the transaction that results in the
person becoming the beneficial owner of 30% or more, but no greater
than 50%, of the outstanding voting capital stock of the
Corporation or (b) more than 50% of the outstanding voting
capital stock of the Corporation, regardless whether the
transaction or event by which the foregoing 50% level is exceeded
is approved by the Continuing Directors;
(ii) at any time Continuing
Directors no longer constitute a majority of the directors of the
Corporation; or
(iii) The consummation of
(a) a merger or consolidation of the Corporation, statutory
share exchange, or other similar transaction with another
corporation, partnership, or other entity or enterprise in which
either the Corporation is not the surviving or continuing
corporation or shares of common stock of the Corporation are to be
converted into or exchanged for cash, securities other than common
stock of the Corporation, or other property, (b) a sale or
disposition of all or substantially all of the assets of the
Corporation, or (c) the dissolution of the Corporation.
(D) "Code" shall mean
the Internal Revenue Code of 1986, as amended from time to
time.
(E) "Continuing
Directors" means directors who were directors of the
Corporation as of the date hereof or who are appointed, elected or
nominated to the Board in accordance with the following sentence.
It is understood that any person becoming a member of the Board
subsequent to the date hereof whose appointment was approved by a
vote of at least a majority of the Continuing Directors remaining
in office at the time of appointment or whose election or
nomination for election by the Corporation’s stockholders was
approved by a vote of at least a majority of the Continuing
Directors remaining in office at the time of election or nomination
shall be considered, for purposes of this Agreement, as though such
person were a Continuing Director on the date hereof.
(F) "Corporation"
shall mean Back Yard Burgers, Inc. and any successor to its
business or assets, by operation of law or otherwise.
(G) "Date of
Termination" shall have the meaning stated in Paragraph
(B) of Section 5 hereof.
(H) "Disability"
shall be deemed the reason for the termination by the Corporation
of the Executive’s employment, if, as a result of the
Executive’s incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time performance of
the Executive’s duties with the Corporation for a period of
six consecutive months, the Corporation shall have given the
Executive a Notice of Termination for Disability, and, within 20
business
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days after the Notice of Termination is given, the Executive
shall not have returned to the full-time performance of the
Executive’s duties.
(I) "Executive" shall
mean the individual named in the first paragraph of this
Agreement.
(J) "Notice of
Termination" shall have the meaning stated in Paragraph
(A) of Section 5 hereof.
(K) "Payment Trigger"
shall mean the earliest to occur of (i) a Change in Control
while Executive remains employed by the Corporation during the term
of this Agreement, (ii) termination of the Executive’s
employment by the Corporation, without Cause, prior to the
occurrence of any other Payment Trigger described in this Paragraph
(K), or (iii) the later of March 1, 2007 or the date of
filing of the Corporation’s Annual Report on Form 10-K,
including exhibits and schedules, for the fiscal year ending
December 30, 2006 with the Securities and Exchange
Commission.
(L) "Person" shall
have the meaning given in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended from time to time, as modified and
used in Sections 13(d) and 14(d) thereof; except that, a Person
shall not include (i) the Corporation, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan
of the Corporation, or (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities.
2. Term of Agreement .
This Agreement shall become
effective on the date hereof and shall continue in effect until the
earliest of (i) a Date of Termination in accordance with
Section 5 or the death of the Executive shall have occurred
prior to a Change in Control, or (ii) if a Payment Trigger
shall have occurred during the term of this Agreement, the
performance by the Corporation of all its obligations, and the
satisfaction by the Corporation of all its obligations and
liabilities, under this Agreement.
3. General Provisions .
(A) The Corporation hereby
represents and warrants to the Executive that the execution and
delivery of this Agreement and the performance by the Corporation
of the actions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Corporation. This
Agreement is a legal, valid and legally binding obligation of the
Corporation enforceable in accordance with its terms.
(B) No amount or benefit
shall be payable under this Agreement unless there shall have
occurred a Payment Trigger during the term of this Agreement. In no
event shall payments in accordance with this Agreement be made in
respect of more than one Payment Trigger.
(C) This Agreement shall not
be construed as creating an express or implied contract of
employment and, except as otherwise agreed in writing between the
Executive and the Corporation, the Executive shall not have any
right to be retained in the employ of the Corporation.
Notwithstanding the immediately preceding sentence or any other
provision of this
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Agreement, no purported termination of the Executive’s
employment that is not effected in accordance with a Notice of
Termination satisfying Paragraph (A) of Section 5 shall
be effective for purposes of this Agreement. In the absence of
compliance with this Agreement by the Corporation, the
Executive’s right, following the occurrence of a Change in
Control, to receive payment under this Agreement shall not be
affected by the Executive’s Disability or incapacity. The
Executive’s continued employment for any period of time after
a Payment Trigger shall not constitute a waiver of the
Executive’s rights with respect to any payment obligations of
the Corporation under this Agreement.
4. Payments Due Upon a Payment Trigger .
(A) The Corporation shall pay
to the Executive the payments described in this Section 4 upon
the occurrence of a Payment Trigger during the term of this
Agreement.
(B) (i) Upon the
occurrence of a Payment Trigger during the term of this Agreement
arising by reason of the circumstances described in Paragraph
(K)(i) of Section 1:
(a) the Corporation shall pay to
the Executive a lump sum payment, in cash, equal to the sum of
(1) the Executive’s annual bas
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