EXHIBIT 10.23
SEVERANCE AGREEMENT
THIS AGREEMENT, dated October 11, 2004, is made by and between Back Yard
Burgers, Inc., a Delaware corporation (as hereinafter defined, the
"Corporation"), and Xxxxxxx X. Xxxxxxxx (as hereinafter defined, the
"Executive").
WHEREAS, the Board of Directors of the Corporation (as hereinafter
defined, the "Board") recognizes that the services of the Executive are integral
to the success of the operations of the Company, and the possibility of a Change
in Control (as hereinafter defined) of the Corporation and the uncertainty it
could 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 or any actual or anticipated failure after the
issuance of a Notice of Termination for Good Reason by the Executive in
accordance with paragraph (A) of Section 5, 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) l5% 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 15% 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 being
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, for purposes of this Agreement, considered 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
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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 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) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence, without the Executive's
express written consent, of any one of the following:
(i) the assignment to the Executive of any duties inconsistent
with the Executive's status as an executive officer of the
Corporation or a substantial adverse alteration in the nature or
status of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(ii) a reduction by the Corporation in the Executive's annual
base salary to any amount less than the Executive's annual base
salary as in effect immediately prior to the Change in Control;
(iii) the relocation of the principal executive offices of the
Corporation to a location more than 35 miles from the location of
such offices immediately prior to the Change in Control or the
Corporation's requiring the Executive to be based anywhere other
than the principal executive offices of the Corporation except for
required business travel to an extent substantially consistent with
the Executive's business travel obligations immediately prior to the
Change in Control;
(iv) the failure by the Corporation to pay to the Executive
any portion of the Executive's current compensation, or to pay to
the Executive any deferred compensation under any deferred
compensation program of the Corporation, within five (5) days after
notice from the Executive of the date the compensation was due;
(v) the failure by the Corporation to continue in effect any
compensation plan(s), singularly or in aggregate, in which the
Executive participates immediately prior to the Change in Control
that is material to the Executive's total compensation, including
but not limited to, stock option, restricted stock, stock
appreciation right, incentive compensation, bonus, and other plans,
unless an equitable alternative arrangement embodied in an ongoing
substitute or alternative plan has been made, or the failure by the
Corporation to continue the Executive's participation therein (or in
a substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of
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compensation provided and the level of the Executive's participation
relative to other participants, than existed immediately prior to
the Change in Control;
(vi) the failure by the Corporation to continue to provide the
Executive with benefits substantially similar to those enjoyed by
the Executive under any of the Corporation's pension,
profit-sharing, life insurance, medical, health and accident,
disability, or other employee benefit plans in which the Executive
was participating immediately prior to the Change in Control; the
failure by the Corporation to continue to provide the Executive any
material fringe benefit or perquisite enjoyed by the Executive
immediately prior to the Change in Control; or the failure by the
Corporation to provide the Executive with the number of paid
vacation days to which the Executive is entitled in accordance with
the Corporation's normal vacation policy in effect immediately prior
to the Change in Control; or
(vii) any purported termination by the Corporation of the
Executive's employment that is not effected in accordance with a
Notice of Termination satisfying the requirements of paragraph (A)
of Section 5 hereof.
(K) "Notice of Termination" shall have the meaning stated in
paragraph (A) of Section 5 hereof.
(L) "Payment Trigger" shall mean the occurrence of a Change in
Control during the term of this Agreement concurrent with or followed by,
at any time before the end of the 24th month immediately following the
month in which the Change in Control occurred, the termination of the
Executive's employment with the Corporation for any reason other than (A)
by the Executive without Good Reason, (B) by the Corporation as a result
of the Disability of the Executive or with Cause, or (C) as a result of
the death of the Executive.
(M) "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.
(N) "Subsidiary" shall mean any corporation or other entity or
enterprise, whether incorporated or unincorporated, of which at least a
majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or
others serving similar functions with respect to such corporation or other
entity or enterprise is owned by the Corporation or other entity or
enterprise of which the Corporation directly or indirectly owns securities
or other interests having all the voting power.
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2. TERM OF AGREEMENT.
(A) This Agreement shall become effective on the date hereof and,
subject to the second sentence of this Section 2, 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, (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, (iii) the two (2) year anniversary of
the date of this Agreement if, as of that two (2) year anniversary, a
Change in Control shall not have occurred and be continuing, or (iv) in
the event, as of the two (2) year anniversary of the date of this
Agreement, a Change in Control shall have occurred and be continuing,
either the expiration of such period thereafter within which a Payment
Trigger does not or can not occur or the ensuing occurrence of a Payment
Trigger and the performance by the Corporation of all of its obligations
and liabilities under this Agreement. Any Change in Control during the
term of this Agreement that for any reason ceases to constitute a Change
in Control or is not followed by a Payment Trigger shall not effect a
termination or lapse of this Agreement. Any transfer of the Executive's
employment from the Corporation to a Subsidiary, from a Subsidiary to the
Corporation, or from one Subsidiary to another Subsidiary shall not
constitute a termination of the Executive's employment for purposes of
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
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. The Executive's right, following the occurrence of a Change in
Control, to terminate his employment under this Agreement for Good Reason
shall not be affected by the Executive's Disability or incapacity. The
Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting
Good Reason under this Agreement.
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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) Upon the occurrence of a Payment Trigger during the term of this
Agreement: (i) the Corporation shall pay to the Executive a lump sum
payment, in cash, equal to the sum of (a) the higher of the Executive's
annual base salary in effect immediately prior to the occurrence of the
Change in Control or the Executive's annual base salary in effect
immediately prior to the Payment Trigger, plus (b) Executive's bonus for
the fiscal year immediately preceding the year in which such termination
occurs; and (ii) any then unvested stock option awards previously granted
to Executive by the Corporation shall become immediately one-hundred
percent vested - any portion of a stock option award accelerated pursuant
to this Section 4 shall be exercisable pursuant to the terms of the stock
option plan and the stock option award agreement applicable to such award.
(C) Notwithstanding any provision of any incentive compensation
plan, the Corporation shall pay to the Executive a lump sum amount, in
cash, equal to the amount of any incentive compensation that has been
allocated or awarded to the Executive for a completed fiscal year or other
measuring period preceding the occurrence of a Payment Trigger under any
incentive compensation plan but has not yet been paid to the Executive.
(D) The payments provided for in paragraphs (B) and (C) of this
Section 4 shall be made not later than the fifth day following the
occurrence of a Payment Trigger, unless the amounts of such payments
cannot be finally determined on or before that day, in which case, the
Corporation shall pay to the Executive on that day an estimate, as
reasonably determined in good faith by the Corporation, of the minimum
amount of the payments to which the Executive is clearly entitled and
shall pay the remainder of the payments.
5. TERMINATION PROCEDURES.
(A) During the term of this Agreement, any purported termination of
the Executive's employment (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 10 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice that
indicates the specific termination provision in this Agreement relied
upon, and, if applicable, the notice shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated. Further, a
Notice of Termination for Cause shall include a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board at a meeting of the Board that was called and held
for the purpose of considering the termination finding that, in the
informed, reasonable, good faith judgment of the Board,
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the Executive was guilty of conduct set forth in the definition of Cause
in Section 1(B), and specifying the particulars thereof in detail.
(B) "Date of Termination" with respect to any purported termination
of the Executive's employment during the term of this Agreement (other
than by reason of death) shall mean (i) if the Executive's employment is
terminated for Disability, 20 business days after Notice of Termination is
given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during that 20 business
day period) and (ii) if the Executive's employment is terminated for any
other reason, the date specified in the Notice of Termination, which, in
the case of a termination by the Corporation, shall not be less than ten
(10) business days except in the case of a termination for Cause, and, in
the case of a termination by the Executive, shall not be less than ten
(10) business days nor more than 20 business days, respectively, after the
date such Notice of Termination is given.
6. NO MITIGATION. The Executive shall not be required to seek other
employment or to attempt in any way to reduce any amounts payable to the
Executive by the Corporation pursuant to this Agreement. Further, the amount of
any payment or benefit provided for in this Agreement shall not be reduced by
any compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Corporation, or otherwise.
7. DISPUTES.
(A) If a dispute or controversy arises out of or in connection with
this Agreement, the parties shall first attempt in good faith to settle
the dispute or controversy by mediation under the Commercial Mediation
Rules of the American Arbitration Association before resorting to
arbitration or litigation. Thereafter, any remaining unresolved dispute or
controversy arising out of or in connection with this Agreement shall be
settled exclusively by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in a city
located within the continental United States designated by the Executive
and reasonably acceptable to the Corporation. Judgment may be entered on
the arbitrator's award in any court having jurisdiction. The Executive
shall, however, be entitled to seek specific performance of the
Corporation's obligations hereunder during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
(B) Any legal action concerning this Agreement, other than a
mediation or an arbitration described in paragraph (A) of this Section 7,
whether instituted by the Corporation or the Executive, shall be brought
and resolved only in a state court of competent jurisdiction located in
the territory that encompasses the city, county, or parish in which the
Executive's principal residence is located at the time such action is
commenced. The Corporation hereby irrevocably consents and submits to and
shall take any action necessary to subject itself to the personal
jurisdiction of that court and hereby irrevocably agrees that all claims
in respect of the action shall be instituted, heard, and determined in
that court. The Corporation agrees that such court is a convenient forum,
and hereby irrevocably waives, to the fullest extent it may effectively do
so, the defense
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of an inconvenient forum to the maintenance of the action. Any final
judgment in the action may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
(C) The Corporation shall pay all costs and expenses, including
attorneys' fees and disbursements, of the Corporation and the Executive in
connection with any legal proceeding (including arbitration), whether or
not instituted by the Corporation or the Executive, relating to the
interpretation or enforcement of any provision of this Agreement, that is
resolved in favor of the Executive pursuant to a final, unappealable
judgment. The Executive shall pay all costs and expenses, including
attorneys' fees and disbursements, of the Corporation and the Executive in
connection with any legal proceeding (including arbitration), whether or
not instituted by the Corporation or the Executive, relating to the
interpretation or enforcement of any provision of this Agreement, that is
resolved in favor of the Corporation pursuant to a final, unappealable
judgment. The non-prevailing party, as set forth above, shall pay
prejudgment interest on any money judgment obtained by the prevailing
party as a result of such proceeding, calculated at the rate provided in
Section 1274(b)(2)(B) of the Code.
8. SUCCESSORS; BINDING AGREEMENT.
(A) In addition to any obligations imposed by law upon any successor
to the Corporation, the Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to
all or substantially all of the business or assets of the Corporation
expressly to assume and agree to perform this Agreement in the same manner
and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to
obtain the assumption and agreement prior to the effectiveness of any
succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Corporation in the same amount and on
the same terms as the Executive would be entitled to hereunder if the
Executive were to terminate his employment for Good Reason immediately
after a Change in Control and during the term of this Agreement, except
that, for purposes of implementing the foregoing, the date on which any
succession becomes effective shall be deemed the Payment Trigger
occasioned by the foregoing deemed termination of employment for Good
Reason immediately following a Change in Control. The provisions of this
Section 8 shall continue to apply to each subsequent employer of Executive
bound by this Agreement in the event of any merger, consolidation, or
transfer of all or substantially all of the business or assets of that
subsequent employer.
(B) This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees.
If the Executive shall die while any amount would be payable to the
Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live,
the amount, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal
representatives, or administrators of the Executive's estate.
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9. EXCLUSIVE REMEDY. In the event of a Payment Trigger, the provisions of
Section 4 are intended to be and are exclusive and in lieu of any other rights
or remedies to which Executive or the Corporation may otherwise be entitled
(including any contrary provisions in any written or oral employment agreement
or arrangement Executive may have with the Company, including, but not limited
to, that certain Executive Employment Agreement, dated as of June 6, 1993,
between the Executive and the Corporation), whether at law, tort or contract, in
equity, or under this Agreement. Executive shall not be entitled to any
severance benefits, compensation or other payments or rights upon a Payment
Trigger other than those benefits expressly set forth in Section 4.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Corporation: Back Yard Burgers, Inc.
0000 X. Xxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000-0000
Attention: President
To the Executive: Xxxxxxx X. Xxxxxxxx
_________________________
_________________________
11. MISCELLANEOUS. No provision of this Agreement may be modified, waived,
or discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by the Executive and an officer of the Corporation
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction, and performance of this
Agreement shall be governed by the laws of the State of Tennessee. All
references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state, or local law and any additional withholding to which the
Executive has agreed.
12. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
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13. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
set forth above.
BACK YARD BURGERS, INC.
By: /s/ Xxxxxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxxxxx M. Michael
Title: Chairman and Chief Executive Officer
/s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxx
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