<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
BACK YARD BURGERS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
BACK YARD BURGERS, INC.
2768 Colony Park Drive
Memphis, Tennessee 38118
(901) 367-0888
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: NONE
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[LOGO]
BACK YARD BURGERS, INC.
2768 COLONY PARK DRIVE
MEMPHIS, TENNESSEE 38118
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of the Stockholders
(the "Meeting") of Back Yard Burgers, Inc., a Delaware corporation (the
"Company"), to be held at Country Suites by Carlson, 4300 American Way, Memphis,
Tennessee 38118 (The Memphis Room) on May 21, 1998, at 10:00 a.m., central time,
for the following purposes:
1. To elect two Class I directors, to hold office until their successors
are elected and qualified.
2. To ratify the selection of the accounting firm of Price Waterhouse LLP
as independent public accountants for the Company for 1998.
3. To consider a proposal to amend the Company's 1995 Incentive Award Plan
to reserve an additional 225,000 shares of common stock for issuance pursuant to
the plan.
4. To consider a proposal to amend the Company's 1995 Incentive Award Plan
to increase the annual grant of stock options to non-employee Directors from
1,000 shares to 2,500 shares.
5. To transact such other business as may properly come before the Meeting
or any postponements, continuations or adjournments thereof.
Only holders of record of shares of the Company's $.01 par value common
stock (the "Common Stock") and the Company's $.01 par value preferred stock (the
"Preferred Stock") at the close of business on March 27, 1998, are entitled to
notice of and to vote at the Meeting and at any and all postponements,
continuations or adjournments thereof.
The Company's Proxy Statement is submitted herewith. The annual report for
the year ended January 3, 1998, is being mailed to Stockholders together with
the mailing of this Notice and Proxy Statement.
By Order of the Board of Directors
LATTIMORE M. MICHAEL
CHAIRMAN and CHIEF EXECUTIVE OFFICER
Memphis, Tennessee
April 10, 1998
================================================================================
YOUR VOTE IS IMPORTANT. YOU ARE REQUESTED TO COMPLETE, SIGN, DATE AND
RETURN THE PROXY CARD SUBMITTED HEREWITH IN THE RETURN ENVELOPE PROVIDED FOR
YOUR USE. THE GIVING OF SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE THE
PROXY OR TO VOTE IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THE MEETING.
================================================================================
<PAGE> 3
BACK YARD BURGERS, INC.
2768 COLONY PARK DRIVE
MEMPHIS, TENNESSEE 38118
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Back Yard Burgers, Inc., a Delaware
corporation (the "Company"), to be used in voting at the Annual Meeting of
Stockholders of the Company to be held May 21, 1998 (the "Meeting"), and at any
and all postponements, continuations or adjournments thereof. This Proxy
Statement, the accompanying Form of Proxy and the Notice of Annual Meeting are
first being mailed or given to Stockholders of the Company on or about April 10,
1998. The principal executive offices of the Company are located at 2768 Colony
Park Drive, Memphis, Tennessee 38118.
Stockholders of the common stock and preferred stock (collectively, the
"Stockholders"), whose names appeared of record on the books of the Company at
the close of business on March 27, 1998 (the "Record Date"), will be entitled to
vote at the Meeting and any postponements, continuations or adjournments
thereof. On the Record Date, there were 4,540,404 shares of the Company's $.01
par value common stock (the "Common Stock") and 40,556 shares of the Company's
$.01 par value preferred stock (the "Preferred Stock") issued, outstanding and
entitled to vote at the Annual Meeting. Since April 5, 1995, 1,159,423 shares of
the Company's Preferred Stock have been converted into Common Stock at the
option of the Stockholders in accordance with their rights. The Common Stock and
the Preferred Stock shall be counted as a single class for purposes of
calculating votes with respect to each matter submitted at the Meeting. Each
share of Common Stock and Preferred Stock is entitled to one vote on each matter
submitted at the Meeting.
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the shares of the Company entitled to vote at the Meeting will
constitute a quorum. Votes cast by proxy or in person will be tabulated by the
inspectors of election appointed by the Board of Directors of the Company (the
"Board of Directors" or, the "Board") for the Meeting. The affirmative vote of a
majority of the shares of Common Stock and Preferred Stock cast at the Meeting
by the holders of the shares entitled to vote thereon, voting as a single class,
is required to approve the proposals to be considered at the Meeting.
Abstentions and votes withheld in the absence of instructions from street name
holders (broker non-votes) are included in the determination of those shares
present and voting as to "routine" matters and may be voted in the discretion of
brokers with respect to such "routine" matters. Abstentions are also counted in
voting as to "non-routine" matters and thus, have the effect of a negative vote
on "non-routine" matters. Broker non-votes are not counted in voting as to "non-
routine" matters.
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders on the proxy card will vote for the approval of all
of the proposals to be considered at the Meeting, and as recommended by the
Board of Directors with regard to all other matters or, if no such
recommendation is given, in their own discretion. Each Stockholder may revoke a
previously granted proxy at any time before it is exercised by filing with the
Secretary of the Company a revoking instrument or a duly executed proxy bearing
a later date. The powers of the proxy holders will be suspended if the person
executing the proxy attends the Annual Meeting in person and so requests.
Attendance at the Annual Meeting will not, in itself, constitute a revocation of
a previously granted proxy.
<PAGE> 4
ELECTION OF DIRECTORS
Under the Company's Second Amended and Restated Certificate of
Incorporation, members of the Board of Directors are to be elected by classes
with staggered terms of three years each. The Board of Directors presently
consists of seven persons divided into three approximately equal classes. The
Board of Directors may consist of not less than five nor more than twelve
directors, whose membership shall be spread as evenly as practicable among the
three classes. At the 1998 Annual Meeting of Stockholders, two Class I directors
will be elected to a term expiring in 2001.
The Board of Directors has the authority under the by-laws of the Company
to elect additional directors during the year to fill any vacant positions until
the next annual meeting of Stockholders. The directors will serve a term as
indicated below, and until their successors are duly elected and qualified.
Management has nominated the following individuals to serve as directors in
the indicated class:
CLASS I TERM EXPIRES 2001
William B. Raiford, III
Stephen J. King
Proxies will be voted FOR the nominees listed above, unless otherwise
instructed. The affirmative vote of a plurality of the shares of Common Stock
and Preferred Stock cast at the Meeting by the holders of the shares entitled to
vote thereon is required to elect the directors. It is expected that the
nominees will serve, if elected, but if for any unforeseen reason any such
nominees should decline or be unable to serve, the proxies will be voted to fill
any such vacancy in accordance with the discretionary authority of the persons
named in the proxies.
The following table sets forth the name, age, position with the Company
and/or principal occupation, and term of office as director for each current
director and each nominee:
<TABLE>
<CAPTION>
Director Year Term
Name Age Principal Occupation During Past 5 Years Since Will Expire
- --------------------------- ----- ---------------------------------------- -------- -----------
<S> <C> <C> <C> <C>
CLASS I DIRECTORS:
William B. Raiford, III 37 Attorney at Law, Merkel & Cocke, P.A. 1993 2001*
Stephen J. King 46 Chief Financial Officer and Principal 1995 2001*
Accounting Officer since July 1993; from 1988
to 1993, Mr. King was the Comptroller for
Southland Racing Corporation. Prior to 1988,
Mr. King practiced accounting at Price
Waterhouse.
CLASS II DIRECTORS:
W. Kurt Henke 39 Attorney at Law, Henke, Heaton & Bufkin since 1993 1999
1992; From 1986 to 1991, Mr. Henke was an
Attorney at Law, Holcomb, Dunbar, Connell,
Chaffin and Willard.
</TABLE>
- --------
* Assumes election at the 1998 Annual Meeting of Stockholders with respect to
Class I Directors.
2
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Joe Colonnetta 37 Vice Chairman and Chief Executive Officer of 1996 1999
Del Monte - Latin America since 1996.
General Partner of The RMP Group, Inc., an
investment and management firm specializing in
the foodservice and retail industries since 1994.
Chairman of the Board of Triangle FoodService
Corporation, a Dallas-based cafeteria chain
since 1994. From 1990 to 1994, Mr. Colonnetta
was Chief Financing Officer of The Restaurant
Company, a Chicago-based holding company of
Perkins and Friendly's Family Restaurants.
CLASS III DIRECTORS:
Lattimore M. Michael 54 Chairman and Chief Executive Officer since 1987 2000
1993; From 1987 to 1992, Mr. Michael was the
Company's President and Chief Executive
Officer.
Joseph L. Weiss 38 President and Chief Operating Officer since 1989 2000
1993; From 1989 to 1993, Mr. Weiss was the
Company's Secretary/Treasurer; From 1989 to
1993, Mr. Weiss was also the President of
Double S Development, Inc., a Mississippi
corporation, which owned and operated
franchised Company restaurants in the Memphis
metropolitan area.
William N. Griffith 35 Executive Vice President and Secretary/ 1989 2000
Treasurer of the Company since 1993; From
1989 to 1992, Mr. Griffith was the Company's
Senior Vice President - Operations.
</TABLE>
PROPOSAL TO AMEND THE COMPANY'S 1995 INCENTIVE AWARD PLAN TO RESERVE AN
ADDITIONAL 225,000 SHARES OF COMMON STOCK FOR ISSUANCE PURSUANT TO THE PLAN
At the Company's 1995 annual meeting, the Stockholders of the Company
approved the 1995 Incentive Award Plan. The Board proposed such plan to the
Stockholders based upon its belief in compensating eligible officers, directors
and employees by granting options and other forms of non-cash compensation
through the use of a comprehensive incentive award plan in order to provide for
a measure of ownership in the Company by its eligible officers and directors, as
well as to tie officers' and directors' compensation to the overall performance
of the Company. The Board presently believes that it is important that the 1995
Incentive Award Plan continue to be beneficial to the Company and that an
adequate number of shares be reserved for issuance pursuant to such plan so that
the Company may remain competitive in attracting and retaining well-qualified
persons.
As originally adopted , the 1995 Incentive Award Plan allowed the Company
to issue a total of 225,000 shares of its Common Stock. As of March 20, 1998,
options had been granted to 116 persons, 7 of whom are directors and/or officers
and 109 of whom are employees only, for a total of 202,796 shares, leaving
22,204 shares for options to be granted in the future.
On March 26, 1998, the Company's Board of Directors approved further
amendments to the plan, which amendments would (i) increase the number of shares
of Common Stock subject to the plan from 225,000 to 450,000 and (ii) increase
the annual grant of stock options to non-employee directors from 1,000 shares to
2,500 shares (See proposal below).
3
<PAGE> 6
A summary of the provisions of the plan as currently in place is set forth
under "Executive Compensation" below. The affirmative vote of the holders of a
majority of the shares of Common Stock entitled to vote on the matter and
represented in person or by proxy at the annual meeting is required for approval
of the proposed amendment of the plan.
To the extent that favorable action is taken with respect to the proposed
ammendment to the 1995 Incentive Award Plan, the Company's directors and
executive officers who are eligible to participate in the 1995 Incentive Award
Plan stand to benefit to the same extent as all other participants. The Board
believes that it is in the best interests of the Company to ensure that adequate
shares of Common Stock are available to provide incentive to the Company's
employees.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE PROPOSED AMENDMENT TO THE 1995 INCENTIVE AWARD PLAN.
PROPOSAL TO AMEND THE COMPANY'S 1995 INCENTIVE AWARD PLAN TO INCREASE THE ANNUAL
GRANT OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS FROM 1,000 SHARES TO 2,500
SHARES.
The 1995 Incentive Award Plan also provides that a non-qualified option
will be granted automatically to each non-employee director 10 days after each
annual meeting of the Stockholders. Each option currently covers 1,000 shares of
Common Stock and has an exercise price equal to the fair market value of the
Common Stock on the date of grant. The exercise period of each option commences
six months after the date of grant of the option and ends five years after such
grant date, provided that options terminate upon the termination of the holder's
service as a director of the Company, subject to certain grace periods if such
termination of service occurs after the option has vested.
The Compensation Committee has no authority, direction or power with
respect to participants, exercise price, number of shares or option period or to
alter any terms or condition insofar as such non-employee director options are
concerned. To the extent that favorable action is taken with respect to the
proposed ammendment to the 1995 Incentive Award Plan, the Company's non-employee
directors stand to benefit from such ammendment. However, the employee members
of the Board have determined that it is in the Company's best interest to
further encourage the attraction and retention of non-employee directors and to
provide such persons with an appropriate incentive to serve diligently on the
Company's behalf. Therefore, the Board believes that it is important that the
annual grant of options to non-employee directors be increased to 2,500 shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE PROPOSED AMENDMENT TO THE 1995 INCENTIVE AWARD PLAN.
BOARD OF DIRECTORS
Since the beginning of the Company's fiscal year on December 29, 1996, the
Board of Directors has held six meetings. Each member of the Board of Directors,
with the exception of Messrs. Henke and Colonnetta, attended 75% or more of the
total number of meetings of the Board held during the period that he served.
The Board of Directors has an Audit Committee whose members are Messrs.
Colonnetta, Raiford and Griffith. The Audit Committee makes recommendations
regarding the selection of independent public accountants, reviews the scope and
results of the audit conducted by the independent public accountants, reviews
the adequacy of the Company's accounting, financial and operating controls, and
supervises special investigations, if any. The Audit Committee held one meeting
in 1997, which was attended by all members.
The Board of Directors has a Compensation Committee whose members are
Messrs. Henke, Raiford and Weiss. The Compensation Committee reviews and
approves annual salaries and bonuses for all corporate officers and management
personnel and reviews and recommends to the Board of Directors the terms and
conditions of the employee benefit plans and/or changes thereto. The
Compensation Committee held one meeting in 1997, which was attended by all
members.
4
<PAGE> 7
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Common Stock, to file
reports of beneficial ownership and changes in beneficial ownership with the
Securities and Exchange Commission and to furnish copies of all filed Section
16(a) forms to the Company. Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no Form 5 filings were required for those persons, the Company believes
that all such filings required under the Exchange Act in 1997 were filed in a
timely fashion.
PRINCIPAL STOCKHOLDERS
The following information sets forth certain information with respect to
the beneficial ownership of the Company's Common Stock as of March 20, 1998 by
(i) each person or entity known to the Company to be the beneficial owner of
more than 5% of each class of the Company's voting shares, (ii) each of the
Company's Directors and executive officers and (iii) all of the Company's
Directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount & Nature of
Beneficial Ownership
of Common
Name and Address (3) Stock (1)(2) Percent of Class
-------------------- ----------- ----------------
<S> <C> <C>
Lattimore M. Michael 470,461 10.27%
Joseph L. Weiss 531,437(4) 11.60%
William N. Griffith 76,782(5) 1.65%
Michael C. McDermott 12,000(5) .26%
Stephen J. King 29,591(5) .64%
Stephen C. Reid 39,444(5) .85%
Joe Colonnetta 2,000(5) .04%
William B. Raiford, III 3,000(5) .07%
W. Kurt Henke 3,000(5) .07%
Barnett Chiz 249,950(6) 5.46%
Lawrence Chiz 249,950(6) 5.46%
All Officers &
Directors (9 persons) 1,167,715 24.70%
</TABLE>
- --------------------
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to the shares of
Common Stock. None of said persons set forth above owns any shares of
Preferred Stock.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days upon the exercise of warrants or
options. Each beneficial owner's percentage ownership is determined by
assuming that options or warrants that are held by such person (but not
those held by any other person) and which are exercisable within 60 days
from March 20, 1998, have been exercised (includes shares exercisable
pursuant to incentive stock options that have been granted to certain
executive officers of the Company as of March 20, 1998).
(3) The address of Mr. Michael (currently the Company's Chairman and Chief
Executive Officer and a Director), Mr. Weiss (currently the Company's
President and Chief Operating Officer and a Director), Mr. Griffith
(currently the Company's Executive Vice President, Secretary-Treasurer and
a Director), Mr. McDermott (currently the Company's Executive Vice
President - Company Operations), Mr. King (currently the Company's Chief
Financial Officer and Principal Accounting Officer and a Director), and Mr.
Reid (currently the Company's Vice President-Research and Development),
respectively, is c/o the Company at 2768 Colony Park Drive, Memphis,
Tennessee 38118. The address of Mr. Raiford is 30 Delta Avenue, Clarksdale,
Mississippi 38614. The address of Mr. Henke is 408 Hopson Street, Lyon,
Mississippi 38645. The address of Mr. Barnett Chiz and Mr. Lawrence Chiz is
P. O. Box 466, Shaw, Mississippi 38773.
(4) Mr. Weiss' wife owns 16,660 shares of Common Stock, each of Mr. Weiss' two
minor children own 9,640 shares of Common Stock, and Mr. Weiss' father owns
20,000 of the 531,437 shares of Common Stock reflected in the table.
(5) The number shown reflects that portion of stock options granted pursuant to
the Company's Incentive Stock Plan of 1993 (the "1993 Stock Option Plan")
and the 1995 Incentive Award Plan which are exercisable as of and within 60
days after March 20, 1998, except that (i) with respect to Mr. Griffith,
such amount includes 17,470 shares of Common Stock held directly by Mr.
Griffith and (ii) with respect to Mr. King, such amount includes 2,613
shares of Common Stock held directly by Mr. King.
(6) Mr. Barnett Chiz and Mr. Lawrence Chiz are brothers.
5
<PAGE> 8
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company receive a $500 fee for
each Board meeting attended.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation for each of the last three
years of the Company's Chief Executive Officer, President and Executive Vice
President (the Company did not have any other executive officers whose
compensation exceeded $100,000):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------------------- ---------------------
Securities Underlying All Other
Name Year Salary ($)(1) Bonus ($) Options/SARS (#) Compensation($)(2)
---- ---- ------------- --------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Lattimore M. Michael, 1997 114,556 47,500 6,850
Chairman and Chief 1996 111,674 18,000
Executive Officer 1995 111,087 21,535
Joseph L. Weiss, President 1997 122,317 4,000 4,588
and Chief Operating Officer 1996 117,180 18,000
1995 116,665 21,535
William N. Griffith, 1997 84,812 14,204 8,000 2,895
Executive Vice President 1996 80,416 14,204 8,000
and Secretary/Treasurer 1995 80,158 14,204 8,200
</TABLE>
- --------------------
(1) The amounts indicated include indirect compensation to Mr. Michael for use
of a Company automobile, and direct compensation to Messrs. Weiss and
Griffith in the form of an automobile allowance, although such amounts are
less than $50,000 or 10% of their respective total annual salaries and
bonuses for each respective year.
(2) The amounts indicated represent life and/or disability insurance premiums
paid on behalf of such persons.
6
<PAGE> 9
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base
Name granted (#) Fiscal YR (%) Price ($/Sh) Expiration Date
---- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Lattimore M. Michael -- -- -- --
Joseph L. Weiss -- -- -- --
William N. Griffith 8,000 9.4% $1.875 3-31-07
</TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Unexercised Securities Value of Unexercised In-the-Money
Underlying Options/SARs Options/SARs at
at FY-End FY-End (1)
-------------------------------- ---------------------------------
Shares
Acquired
Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lattimore M. Michael -- -- -- -- -- --
Joseph L. Weiss -- -- -- -- -- --
William N. Griffith -- -- 51,312 -- $20,000 --
</TABLE>
- --------------------
(1) The dollar amount shown represents the product of the number of shares
purchasable upon exercise of the related options times the difference of
the average of the high and low sales prices reported on January 3, 1998
($2.94) and the weighted average purchase price per share payable upon such
exercise ($1.69).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Weiss, the Company's President and Chief Operating Officer, was a
member of the Company's Compensation Committee during 1996. As a member of the
Compensation Committee, Mr. Weiss participated in deliberations with other
committee members concerning compensation of officers and non-management
personnel.
EMPLOYMENT AGREEMENTS
Michael Employment Agreement. The Company entered into a five-year
employment agreement dated April 15, 1993 with Lattimore M. Michael. The
agreement is automatically extended for an additional one-year period at the end
of each year under the agreement, unless terminated pursuant to its provisions.
Pursuant to the employment agreement, Mr. Michael is employed as the Chairman
and Chief Executive Officer of the Company. Pursuant to the terms of Mr.
Michael's employment agreement, his current annual base salary is $112,702. In
addition to the base salary payments to Mr. Michael, the agreement provides for
certain fixed bonuses to Mr. Michael. On December 31 of each calendar year
beginning in 1995, Mr. Michael received bonuses of $18,000, $18,000 and $4,000
per year. Mr. Michael is also eligible to receive a fixed cash bonus of $43,500
per year for the third, fourth and fifth fiscal years of the employment
agreement, payable in a lump sum at the end of each year.
In the event of the termination of Mr. Michael's employment by the Company
during the term of the employment agreement, Mr. Michael shall be entitled to
(i) his base salary through the last day of the month in which the date of
termination occurs, at the annual rate in effect at the date of termination, to
the extent unpaid prior to such date of termination; and (ii) any fixed bonus
described above which shall have been earned prior to the date of termination to
the extent unpaid prior to such date, except no such bonus payment shall be made
if Mr. Michael is terminated for cause. The employment agreement contains a
non-competition provision which prohibits Mr. Michael, during the period of his
employment and for a period of one year after termination of employment, from
engaging in any business, directly or
7
<PAGE> 10
indirectly, in competition with the Company anywhere within a 150 mile radius of
the City of Memphis, Tennessee and anywhere within a 50 mile radius of any
Company-operated or franchised restaurant located in the United States.
Weiss Employment Agreement. On June 25, 1993, the Company entered into a
five-year employment agreement with Joseph L. Weiss. The agreement is
automatically extended for an additional one-year period at the end of each year
under the agreement, unless terminated pursuant to its provisions. Pursuant to
the employment agreement, Mr. Weiss is employed as the President and Chief
Operating Officer of the Company. Pursuant to the terms of Mr. Weiss' employment
agreement, his current annual base salary is $112,702. In addition to the base
salary payments to Mr. Weiss, the agreement would provide for certain fixed
bonuses to Mr. Weiss. On December 31 of each calendar year beginning in 1995,
Mr. Weiss received bonuses of $18,000, $18,000 and $4,000 per year. The
termination and non-competition provisions set forth in Mr. Weiss' agreement are
consistent with those found in Mr. Michael's agreement, as described above.
Griffith Employment Agreement. On June 6, 1993, the Company entered into a
five-year employment agreement with William N. Griffith. The agreement is
automatically extended for an additional one-year period at the end of each year
under the agreement, unless terminated pursuant to its terms. Mr. Griffith
serves as Executive Vice President and Secretary/Treasurer of the Company.
Pursuant to the terms of the agreement, his current annual base salary is
$76,712. Subject to certain conditions, in addition to the base salary payments,
the agreement provides for fixed bonuses of $3,551 per quarter, to be paid to
Mr. Griffith. The termination and non-competition provisions set forth in Mr.
Griffith's agreement are consistent with those found in Mr. Michael's agreement,
as described above.
COMPENSATION PURSUANT TO PLANS
STOCK PURCHASE PLAN. The Board of Directors of the Company and its Stockholders
adopted the Company's Stock Purchase Plan in May, 1995. As of March 20, 1998,
33,928 shares had been purchased under the Stock Purchase Plan. A description of
the Stock Purchase Plan is set forth below.
Terms and Conditions. Each Eligible Employee on each Offering Date (as such
terms are defined in the Stock Purchase Plan), as determined in accordance with
the Stock Purchase Plan, shall be entitled to purchase, in the manner and on the
terms therein provided, whole shares of the Company's Common Stock at a purchase
price determined in accordance with the Stock Purchase Plan. Notwithstanding any
provision in the Stock Purchase Plan to the contrary, if any person entitled to
purchase shares in any offering under the Stock Purchase Plan would be deemed,
for purposes of Section 423(b)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"), to own more than 5% of the total combined voting power of
the Company, the maximum number of shares which such person shall be able to
purchase pursuant to the Stock Purchase Plan shall be reduced to that amount
which, when added to all other shares of the Company which such person is deemed
to own, is less than 5% of the total combined voting power of the Company.
Entry into the Stock Purchase Plan. Any Eligible Employee may become a
participant in the Stock Purchase Plan by filing with the Company a stock
purchase agreement, a form of which is provided in the Stock Purchase Plan,
prior to any offering date on which an offering under the Stock Purchase Plan
commences. Once an Eligible Employee has filed a stock purchase agreement with
the Company, such Eligible Employee shall remain as a participant in the Stock
Purchase Plan until withdrawing therefrom.
Payment for Shares. Payment for shares of Common Stock purchased under the
Stock Purchase Plan shall be made by authorized payroll deductions from a
participant's compensation or by supplemental payments made in accordance with
the terms of the Stock Purchase Plan.
Option Price. The purchase price of each share issued pursuant to the Stock
Purchase Plan shall be 85% of the average of the reported highest and lowest bid
price of the Company's Common Stock on NASDAQ on the applicable exercise date.
Should no sale of Common Stock occur on any exercise date, the purchase price
will be determined on the basis of sales of Common Stock on the next preceding
day on which sales were made. Anything in the Stock Purchase Plan
notwithstanding, the purchase price per share shall not be less than the par
value of a share of Common Stock.
Purchase of Shares. If, on any exercise date under the Stock Purchase Plan,
there is credited to the stock purchase account of a participant an amount at
least equal to the purchase price per share of the Common Stock on an exercise
date, the participant shall buy and the Company shall sell to the participant at
the purchase price as determined under the Stock Purchase Plan, the largest
number of whole shares of the Common Stock which can be purchased with the
amount in the participant's stock purchase account.
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<PAGE> 11
Issuance of Shares. The shares of the Common Stock purchased by the
participant on any exercise date shall for all purposes be deemed to have been
issued and sold at the close of business on such exercise date.
Withdrawal from the Stock Purchase Plan. A participant may withdraw from
the Stock Purchase Plan at any time by filing a notice of withdrawal. Upon a
participant's withdrawal, the entire amount credited to such participant's stock
purchase account shall be refunded. Any participant who withdraws from the Stock
Purchase Plan may again become a participant by complying with the terms and
provisions of the Stock Purchase Plan.
Termination of Continuous Service. In the event of a termination of a
participant's continuous service for any reason, the entire amount of such
participant's stock purchase account as of the effective date of such
termination shall be used to purchase shares of the Common Stock on the next
succeeding exercise date and any remaining balance shall be refunded, provided,
however, that if a participant's continuous service is terminated for any reason
at least three months prior to the next exercise date, the entire amount in such
participant's stock purchase account shall be refunded to him.
Insufficient Shares. In the event that on any exercise date the aggregate
funds available for the purchase of shares of the Common Stock would purchase a
number of shares which would exceed the number of shares available for purchase
under the Stock Purchase Plan, the administrator of the Stock Purchase Plan
shall proportionately reduce the number of shares which would be otherwise
purchased by each participant on such exercise date in order to eliminate such
excess, and the Stock Purchase Plan would then immediately terminate after such
exercise date and any remaining balances credited to the stock purchase account
of each participant shall be refunded.
Rights not Transferable. Rights to purchase shares of the Common Stock
under the Stock Purchase Plan are exercisable only by a participant during such
participant's lifetime and are not transferable by such participant other than
by will or the laws of decent and distribution. If a participant attempts to
transfer its rights to purchase shares of the Common Stock under the Stock
Purchase Plan other than by will, such participant shall be deemed to have
requested withdrawal from the Stock Purchase Plan.
Administration of the Stock Purchase Plan. Subject to the general control
of, and superseding action by, the Board, the Secretary of the Company shall
have full power to administer the Stock Purchase Plan, including to adopt rules
not inconsistent with the provisions of the Stock Purchase Plan for its
administration and shall adopt the form of stock purchase agreement, all notices
required under the Stock Purchase Plan and restrictions, if any, on the
registration of certificates for shares purchased under the Stock Purchase Plan.
Amendments. The Board may from time to time, insofar as permitted by law,
revise or amend the Stock Purchase Plan in any way, except that no amendments
may be made without the approval of the Stockholders if such amendments (i)
increase the maximum number of shares which may be issued under the Stock
Purchase Plan, except as otherwise provided therein, (ii) change the manner of
determination of the purchase price, (iii) extend the maximum period during
which stock may be purchased, (iv) materially modify the requirements as to
eligibility for participation in the Stock Purchase Plan, or (v) materially
increase the benefits accruing to participants under the Stock Purchase Plan.
Expiration and Termination. The Stock Purchase Plan shall continue in
effect through December 31, 2005, unless terminated prior thereto in accordance
with the terms of the Stock Purchase Plan. The Board shall have the right to
terminate the Stock Purchase Plan or any offering thereunder at any time. In the
event of the expiration of the Stock Purchase Plan or its termination or the
termination of any offering thereunder, the entire amount credited to the stock
purchase account of each participant shall be refunded.
1995 INCENTIVE AWARD PLAN. The Board of Directors of the Company and its
Stockholders adopted the 1995 Incentive Award Plan in May, 1995. As of March 20,
1998, 202,796 options had been granted under the 1995 Incentive Award Plan.
A description of the 1995 Incentive Award Plan is set forth below.
Terms and Conditions of Options; Payment. Incentive stock options granted
under the 1995 Incentive Award Plan are exercisable for a period of not more
than ten (10) years from the date of the grant. Any non-qualified options
granted under the 1995 Incentive Award Plan are exercisable at such times, in
such amounts and during such periods as the Compensation Committee determines at
the date of the grant. If the optionee exercises the options, payment may be
made either in cash, certified check or other immediately available funds and
shares or any other consideration permitted under applicable law. The
Compensation Committee may allow a delay in payment up to 30 days from the date
the option is exercised, however, the Company will not issue stock certificates
until it has received full payment for the shares.
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<PAGE> 12
Option Price. The purchase price of each share issued pursuant to the
exercise of an incentive stock option granted under the 1995 Incentive Award
Plan may not be less than 100% of the fair market value per share on the date of
the grant. The purchase price of each share issued pursuant to the exercise of a
non-qualified stock option granted under the 1995 Incentive Award Plan shall be
determined by the Compensation Committee.
Adjustments; Mergers and Consolidations. The 1995 Incentive Award Plan
provides that in the event of any change in the outstanding shares through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares,
or other like change in capital structure of the Company, an adjustment will be
made to each outstanding option or performance awards granted under the 1995
Incentive Award Plan such that each such option shall thereafter be exercisable
for such securities, cash and/or other property as would have been received with
respect to the shares subject to such option had the option been exercised in
full immediately prior to such change.
Vesting. The period during which the right to exercise an option in whole
or in part vests shall be set by the Compensation Committee. Generally, no
portion of an option which is unexercisable at termination of employment shall
thereafter become exercisable. While an option is generally only exercisable by
the optionee while he is an employee, the Compensation Committee may allow
exercise subsequent to an optionee's termination of employment, subject to
certain additional limitations.
Acceleration of Vesting Provisions. The 1995 Incentive Award Plan
authorizes the Compensation Committee to accelerate the vesting of an
outstanding option upon written notice to the optionholder. An acceleration of
the vesting period in accordance with such authority would not affect the
expiration date of the option.
Reduction of Vesting Period. The 1995 Incentive Award Plan provides that
outstanding options or performance awards will become immediately exercisable in
the event of a change of control of the Company. For purposes of the 1995
Incentive Award Plan unless otherwise defined in any applicable agreement, a
change in control would severally be deemed to have occurred when (a) any person
becomes the beneficial owner of 80% or more of the total number of the shares of
the Company then outstanding; (b) the Board or Stockholders approve the sale of
all or substantially all of the assets of the Company or any merger,
consolidation, issuance of securities, the result of which would be the
occurrence of an event described in clause (a) above; (c) as a result of, or in
connection with, any cash tender offer, exchange offer, merger or other business
combination, sale of assets or contested election, or any combination of the
foregoing.
Cancellation and Regrant of Options. The 1995 Incentive Award Plan allows
the Compensation Committee to modify, extend or renew outstanding options
granted under the 1995 Incentive Award Plan, or accept the surrender of options
outstanding under the 1995 Incentive Award Plan (to the extent not theretofore
exercised), and authorize the granting of a like number of new options under the
1995 Incentive Award Plan in substitution for the original options, regardless
of whether the vesting schedules or exercise prices are the same or different
from the original options being surrendered. The grant of new options would be
subject to the terms and conditions of and within the limitations of the 1995
Incentive Award Plan, and any modification which would alter or impair any
rights or obligations of the optionholder under an option would be prohibited in
the absence of such holder's consent.
Amendments. The Board may from time to time, insofar as permitted by law,
revise or amend the 1995 Incentive Award Plan in any way, except that no
amendments may be made without the approval of the Stockholders if such
amendments (i) increase the maximum number of shares which may be issued under
the 1995 Incentive Award Plan, except as otherwise provided therein, (ii) change
the manner of determination of exercise price, (iii) extend the maximum period
during which options may be granted or exercised, (iv) materially modify the
requirements as to eligibility for participation in the 1995 Incentive Award
Plan, or (v) materially increase the benefits accruing to participants under the
1995 Incentive Award Plan. In addition, the provisions in the Incentive Award
Plan providing for non-discretionary formula grants to non-employee directors
may not be amended more than once every six months, other than to comport with
the Code, the Employee Retirement Income Security Act of 1974, as amended, or
any rules promulgated thereunder.
Non-qualified Stock Options. The Compensation Committee may grant
non-qualified stock options to employee directors, officers, employees and other
persons and such options may provide for the right to purchase shares at a
specified price which may be less than fair market value on the date of grant
(but not less than par value), and usually will become exercisable in
installments after the grant date. Non-qualified stock options may be granted to
employee directors, officers and employees for any reasonable term.
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<PAGE> 13
Incentive Stock Options. Incentive Stock Options will be designed to comply
with the provisions of the Code, and will be subject to restrictions contained
in the Code, including a requirement that exercise prices are equal to at least
100% of the fair market value of the Shares on the grant date and a ten-year
restriction on the option term, but may be subsequently modified to disqualify
them from treatment as incentive stock options. To the extent the aggregate fair
market value of stock with respect to which incentive stock options are
exercisable for the first time by the optionee during any calendar year under
the 1995 Incentive Award Plan exceeds $100,000, such options shall be treated as
non-qualified options to the extent required by the Code.
Restricted Stock. Restricted stock may be sold to participants at various
prices (but not below par value) and made subject to such restrictions as may be
determined by the Compensation Committee. Restricted stock may typically be
repurchased by the Company at the original purchase price if certain conditions
or restrictions are not met. In general, restricted stock may not be sold, or
otherwise transferred or hypothecated, until restrictions are removed or expire.
Purchasers of restricted stock, unlike recipients of options, will have voting
rights and will receive dividends prior to the time when the restrictions lapse.
Performance Awards. The value of performance awards may be limited to the
market value, book value or other measure of the Common Stock or other specific
performance criteria determined to be appropriate by the Compensation Committee.
In making such determinations, the Compensation Committee considers, among other
factors it deems relevant, the contributions, responsibilities and other
compensation of the key employee at issue. The manner of exercise, payment of
consideration and term of the performance awards are severally the same as those
applying to stock options granted under the 1995 Incentive Award Plan.
Options for Non-employee Directors. The 1995 Incentive Award Plan also
provides that a non-qualified option will be granted automatically to each
non-employee director 10 days after each annual meeting of Stockholders with the
first such option granted on May 28, 1995. Each option covers 1,000 shares of
Common Stock and will have an exercise price equal to the fair market value of
the Common Stock on the date of grant. The exercise period of each option will
commence six months after the date of grant of the option and end five years
after such grant date, provided that an option will terminate upon the
termination of the holder's service as a director of the Company, subject to
certain grace periods if such termination of service occurs after the option has
vested. The Compensation Committee shall have no authority, discretion or power
with respect to participants, exercise price, number of shares or option period
or to alter any terms or conditions insofar as such non-employee director
options are concerned.
Board Policy. Notwithstanding the summary description above, the Board has
unanimously adopted a policy which provides that the Compensation Committee
shall not be authorized to grant any non-qualified stock option awards, sell any
restricted stock, or otherwise provide for any other types of awards under the
1995 Incentive Award Plan that would attribute any value to the shares less than
(i) 100% of the fair market value of the shares on the grant date without first
making a good faith determination that the specific grant in question is
materially important to the Company's ability to attract and/or retain a
"well-qualified person" as an employee of the Company (provided that, except as
otherwise set forth below, such awards shall not be granted at less than 85% of
the fair market value of the Shares on the date of grant) or (ii) 85% of the
fair market value of the shares on the grant date without first making a good
faith determination that the specific grant in question is materially important
to the Company's ability to attract and/or retain a "key employee" and having
further obtained not less than a two-thirds majority approval of the
disinterested members of the Board.
Federal Income Tax Consequences. Under current federal income tax laws,
neither the grant nor the exercise of an option that qualifies for treatment as
an incentive stock option will result in the recognition of income by the
optionee. To qualify for the foregoing treatment, the optionee must hold shares
acquired through the exercise of an incentive stock option for at least two
years from the date of the grant of the option and at least one year from the
date of its exercise. If an optionee satisfies the holding period requirements,
the sale of the shares acquired through the exercise of the incentive stock
option will result in long-term capital gain (or loss) to the optionee. If an
optionee does not satisfy the holding period requirements, the optionee will
recognize, at the time of the disposition of the shares, ordinary income equal
to the amount by which the lesser of (i) the fair market value of the shares on
the date of the exercise and (ii) the fair market value of the shares on the
date of disposition exceeds the exercise price of the incentive stock option.
Any gain realized in excess of such ordinary income will be either long-term or
short-term capital gain depending on the optionee's holding period for the
shares.
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As a general matter, no deduction is permitted to the optionor as a result
of the grant or exercise of an incentive option. However, in the event an
optionee recognizes ordinary income for federal tax purposes in connection with
the disposition of shares acquired though exercise of an incentive stock option
under the circumstances discussed above, the Company will generally be entitled
to a deduction for federal income tax purposes equal to the amount of ordinary
income recognized by the optionee.
A grantee of a non-qualified stock option will not recognize taxable income
and the Company will not receive a deduction upon the grant of such option. Upon
an optionee's exercise of a non-qualified stock option, (i) the optionee will
recognize ordinary income in an amount equal to the difference between the fair
market value on the exercise date and the exercise price of the shares; and (ii)
if certain conditions are satisfied, the Company will be entitled to a tax
deduction in an amount equal to the amount of income realized by the optionee.
Following exercise, the optionee will realize gain or loss at disposition in an
amount equal to the difference between the disposition price and the basis of
the shares.
The federal tax law is subject to changes in the Code and in the
regulations promulgated by the Internal Revenue Service, as well as in court and
administrative interpretations thereof.
Section 162 of the Code was recently amended by adding Section 162(m).
Section 162(m) places limitations on the deductibility of compensation paid to
employees to the extent such compensation exceeds $1,000,000 for any employee
during any taxable year. An exception to such treatment exists where certain
requirements are met which qualify compensation by the attainment of certain
performance-based criteria. The Company is currently not subject to the
limitations imposed by Section 162(m). However, in the future, the Company
intends to take all necessary steps in consideration of the provisions of
Section 162(m).
ISOP. The Board of Directors of the Company and its Stockholders adopted the
1993 Stock Option Plan in April 1993. Under the 1993 Stock Option Plan, the
Company may grant to eligible salaried individuals, incentive stock options, as
defined in Section 422(b) of the Code. As of March 20, 1998, the Company had
granted to certain executive officers and employees incentive stock options to
purchase 176,873 of the 176,969 shares available for issuance under the 1993
Stock Option Plan.
The purpose of the 1993 Stock Option Plan is to encourage stock ownership
by key employees, including executive officers of the Company. The 1993 Stock
Option Plan is administered by the Company's Compensation Committee. Subject to
the provisions of the 1993 Stock Option Plan, the Compensation Committee has the
authority, among other things, to determine the individuals to whom options will
be granted, including the number of shares to be covered by each option. An
aggregate of 176,969 shares of Common Stock may be issued under the 1993 Stock
Option Plan. No stock options may be granted under the 1993 Stock Option Plan
subsequent to April 1, 2003. Each option entitles the optionee to purchase one
share of Common Stock.
Options granted under the 1993 Stock Option Plan may not be granted at a
price less than the fair market value of the Common Stock on the date of grant
(or 110% of fair market value in the case of persons holding 10% or more of the
voting stock of the Company). The aggregate fair market value of shares for
which options are granted to any employee during any calendar year may not
exceed $100,000. Options granted under the 1993 Stock Option Plan are not
transferable during an optionee's lifetime, but are transferable at death by
will or by the laws of descent and distribution.
All options under the 1993 Stock Option Plan, including those described
above, are subject to a five-year level vesting schedule, at the rate of 20% per
year. Optionees are given credit toward vesting of granted options at the rate
of 20% of the vesting schedule for each year of service to the Company,
including years of service prior to the date of grant.
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<PAGE> 15
CERTAIN TRANSACTIONS
From time to time in the ordinary course of business, the Company does
business with and/or engages in certain transactions between itself and certain
affiliated parties. Management of the Company believes that such dealings and
transactions are immaterial in nature and have been on terms no less favorable
to the Company than those that could have been obtained from unaffiliated
parties.
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed the firm of Price
Waterhouse LLP, certified public accountants, as independent accountants for the
Company for 1998 subject to ratification by the Stockholders. Price Waterhouse
LLP, which has served as independent accountants for the Company since it
consummated its initial public offering in July 1993, has advised the Company
that neither the accounting firm nor any of its members or associates has any
direct financial interest in or any connection with the Company or any of its
subsidiaries other than as independent public accountants. Representatives of
Price Waterhouse LLP are expected to be present at the meeting and will be given
the opportunity to make a statement if they desire to do so and to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO RATIFY THE SELECTION OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR 1998.
PROXY SOLICITATION
The expense of the Board's solicitation of proxies will be borne by the
Company. In addition to the use of the mails, proxies may be solicited by
personal interview, by telephone or telegraph. Banks, brokerage houses, and
other institutions, nominees and fiduciaries will be requested to forward the
soliciting materials to beneficial owners of the Common Stock and the Preferred
Stock and to obtain authorizations for the execution of proxies; and if they in
turn so request, the Company will reimburse such banks, brokerage houses and
other institutions, nominees and fiduciaries for their expenses in forwarding
such materials. Directors, officers and regular employees of the Company and its
subsidiaries may also solicit proxies without additional remuneration therefor.
Stockholders are urged to sign the accompanying proxy, solicited on behalf
of the Board of Directors of the Company, and return it at once in the envelope
provided for that purpose. Proxies will be voted in accordance with the
Stockholders' directions. If no directions are given, the proxies will be voted
FOR all proposals. A Stockholder giving a proxy has the power to revoke it any
time prior to its exercise by executing another proxy bearing a later date, by
written notice to the Company's Secretary or by oral or written statement at the
Meeting.
STOCKHOLDER PROPOSALS
Proposals by Stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders of the Company must be received by the Company no later
than December 12, 1998 in order to be included in the proxy statement and proxy
relating to such annual meeting.
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OTHER MATTERS
The Board of Directors does not know of any matters which may be presented
at the Meeting other than those specifically set forth in the Notice of Annual
Meeting. If any other matter should come properly before the Meeting or any
postponements, continuations or adjournments thereof, the holders of the proxies
will vote in accordance with their best judgment with respect to such matter.
ADDITIONAL INFORMATION AVAILABLE
The Company will provide, without charge, to any person receiving a copy of
this Proxy Statement, upon written request of such person, a copy of the
Company's Annual Report on Form 10-KSB for the fiscal year ended January 3,
1998, including the financial statements thereto. Such requests should be
addressed to Stephen J. King, Chief Financial Officer, Back Yard Burgers, Inc.,
2768 Colony Park Drive, Memphis, Tennessee 38118.
BY ORDER OF THE BOARD OF DIRECTORS,
WILLIAM N. GRIFFITH
SECRETARY/TREASURER
April 10, 1998
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<PAGE> 17
APPENDIX A
PROXY BACK YARD BURGERS, INC.
The undersigned hereby appoints Lattimore M. Michael and Joseph L. Weiss,
and each of them, as proxies for the undersigned, each with full power of
appointment and substitution, and hereby authorizes them to represent and to
vote, as designated below, all shares of the $.01 par value common stock and/or
the $.01 par value preferred stock of Back Yard Burgers, Inc. (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of the
Stockholders to be held at Country Suites by Carlson, 4300 American Way,
Memphis, Tennessee 38118 (The Memphis Room) on May 21, 1998, at 10:00 a.m.,
central time (the "Meeting"), or at any and all postponements, continuations or
adjournments thereof. This proxy, when properly executed, will be voted in the
manner directed herein by the undersigned Stockholder.
1. Proposal to elect two Class I directors, to hold office until their
successors are elected and qualified.
<TABLE>
<S> <C>
For all nominees listed below: Withhold authority to vote for the nominees listed
(except as marked to the contrary below). [ ] below. [ ]
FOR WITHHOLD AUTHORITY
William B. Raiford, III [ ] [ ]
Stephen J. King [ ] [ ]
</TABLE>
2. Proposal to ratify the selection of the accounting firm of Price Waterhouse
LLP as independent public accountants for the Company for 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to amend the Company's 1995 Incentive Award Plan to reserve an
additional 225,000 shares of common stock for issuance pursuant to the plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to amend the Company's 1995 Incentive Award Plan to increase the
annual grant of stock options to non-employee Directors from 1,000 shares to
2,500 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on reverse side)
5. In the discretion of such proxy holders, upon such other business as may
properly come before the Meeting or at any and all postponements,
continuations or adjournments thereof.
THIS PROXY WHICH IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY, WILL BE VOTED FOR THE ABOVE PROPOSALS, UNLESS A CONTRARY DIRECTION IS
INDICATED IN WHICH CASE IT WILL BE VOTED AS DIRECTED.
NOTE: Please date Proxy
and sign as name appears
hereon. When shares are
held by joint tenants,
both should sign. If
signer is a corporation,
please sign full corporate
name by authorized
officer.
Dated:
-----------------------
Sign here:
----------------------
(Please sign exactly as
name appears hereon.
Administrators, executors,
trustees, etc. should so
indicate when signing.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
