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.

 

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     (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 base salary in effect immediately
prior to the Payment Trigger, plus (2) the Executive’s bonus for the fiscal year
immediately preceding the year in which such termination occurs; and
     (b) 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 Paragraph (B)(i)(b)
shall be exercisable pursuant to the terms of the stock option plan and the
stock option award agreement applicable to such award.
     (ii) Upon the occurrence of a Payment Trigger during the term of this
Agreement arising by reason of the circumstances described in Paragraph (K)(ii)
of Section 1:
     (a) the Corporation shall pay to the Executive a lump sum payment, in cash,
equal to the sum of (1) one-half (1/2) the Executive’s annual base salary in
effect immediately prior to the Payment Trigger, plus (2) one half (1/2) the
Executive’s bonus for the fiscal year immediately preceding the year in which
such termination occurs; provided, that if a Change in Control shall occur
within ninety (90) days after the payment of the amount otherwise due to the
Executive under this Paragraph (B)(ii), the Corporation shall upon the date of
such Change in Control pay to the Executive an additional lump sum payment, in
cash, equal to the amounts specified in clauses (1) and (2) of this Paragraph
(B)(ii)(a); and
     (b) any then vested stock option award previously granted to Executive by
the Corporation shall continue to be exercisable pursuant to the terms of the
stock option plan and the stock option award agreement applicable to such award.
     (iii) Upon the occurrence of a Payment Trigger during the term of this
Agreement arising by reason of the circumstances described in Paragraph (K)(iii)
of Section 1:

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     (a) the Corporation shall pay to the Executive, in periodic installments
made at the same time and at such intervals as other executives of the
Corporation receive payments of salary, a cash amount equal to the base salary
the Executive was receiving immediately prior to the occurrence of the Payment
Trigger plus a pro-rated amount of the Executive’s bonus for the fiscal year
immediately preceding the year in which such Payment Trigger occurs, until such
time as the Executive shall have received an aggregate amount equal to the sum
of (1) one-half (1/2) the Executive’s annual base salary in effect immediately
prior to the Payment Trigger, plus (2) one half (1/2) the Executive’s bonus for
the fiscal year immediately preceding the year in which such termination occurs;
and
     (b) any then vested stock option award previously granted to Executive by
the Corporation shall continue to 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, and
in addition to any payments under Paragraph (B) hereof, 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 clauses (i) and (ii) of Paragraph (B) and,
if applicable, Paragraph (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 within thirty(30) days following the occurrence of a
Payment Trigger.
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 11 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, the Executive was guilty
of conduct set forth in the definition of Cause in Paragraph (B) of Section 1,
and specifying the particulars thereof in detail.

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     (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 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.

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     (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, and whether or not
such a transaction constitutes a Change in Control) 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 for
which the Employee shall have any and all of the remedies available to him under
this Agreement. 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, whether or not that transaction
constitutes a Change in Control.
     (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.
9. Effect on Prior Agreements.
     This Agreement contains the entire understanding among the parties hereto
and supersedes in all respects any prior or other agreement or understanding
among the parties or any affiliate or predecessor of the Corporation and
Executive with respect to Executive’s employment, including but not limited to
the Amended and Restated Severance Agreement. Under no circumstances shall
Executive be entitled to any other severance payments or benefits of any kind,
except for the payments and benefits described herein.
10. Exclusive Remedy.

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     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), 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.
11. 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.    
 
      1657 N. Shelby Oaks Drive, Suite 105    
 
      Memphis, Tennessee 38134-7401    
 
      Attention: President    
 
           
 
  To the Executive:   Michael G. Webb    
 
           
 
     
 
   
 
           
 
     
 
   

12. 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.
13. Validity.

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     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.
14. 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/ Lattimore M. Michael    
 
  Name:  
 
Lattimore M. Michael    
 
  Title:   Chairman and Chief Executive Officer    
 
                /s/ Michael G. Webb                   Michael G. Webb    

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