-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kd3YwzmDPMYsjoWv5YYi309p422HC6tm+JYT8cEREh7p98YY3shzyHD3z5zECTje hjObwZrWMdeYYw7a5qkuGA== 0001193125-07-133613.txt : 20070612 0001193125-07-133613.hdr.sgml : 20070612 20070611214241 ACCESSION NUMBER: 0001193125-07-133613 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20070612 DATE AS OF CHANGE: 20070611 GROUP MEMBERS: CHEROKEE ADVISORS, LLC GROUP MEMBERS: REID M. ZEISING SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BACK YARD BURGERS INC CENTRAL INDEX KEY: 0000901495 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 640737163 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-45950 FILM NUMBER: 07913674 BUSINESS ADDRESS: STREET 1: 1657 NORTH SHELBY OAKS DRIVE STREET 2: SUITE 105 CITY: MEMPHIS STATE: TN ZIP: 38134 BUSINESS PHONE: 9013670888 MAIL ADDRESS: STREET 1: 1657 NORTH SHELBY OAKS DRIVE STREET 2: SUITE 105 CITY: MEMPHIS STATE: TN ZIP: 38134 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BBAC LLC CENTRAL INDEX KEY: 0001364995 IRS NUMBER: 203711951 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 3060 PEACHTREE ROAD NW STREET 2: SUITE 1410 CITY: ATLANTA STATE: GA ZIP: 30305 BUSINESS PHONE: 404-495-7400 MAIL ADDRESS: STREET 1: 3060 PEACHTREE ROAD NW STREET 2: SUITE 1410 CITY: ATLANTA STATE: GA ZIP: 30305 SC 13D/A 1 dsc13da.htm AMENDMENT #4 TO SC 13D Amendment #4 to SC 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO

RULE 13d-2(a)

(Amendment No. 4)

 

Back Yard Burgers, Inc.

(Name of Issuer)

 

Common Stock, $0.01 Par Value Per Share

(Title of Class of Securities)

 

05635W101

(CUSIP Number)

 

Reid M. Zeising

Chairman of the Board of Managers

BBAC, LLC

3060 Peachtree Road

Suite 1410

Atlanta, GA 30305

(404) 495-7400

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

 

With a copy to:    

S. Joel Cartee

Alston & Bird LLP

One Atlantic Center

1201 West Peachtree Street

Atlanta, GA 30309

(404) 881-7000

June 10, 2007

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box.  ¨

Note:  Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

 

*   The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

SCHEDULE 13D

CUSIP No.

 

  1.  

Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).

 

            BBAC, LLC

    
  2.  

Check the Appropriate Box if a Member of a Group (See Instructions)

(a)  ¨

(b)  x

    
  3.  

SEC Use Only

 

    
  4.  

Source of Funds (See Instructions)

 

            WC

    
  5.  

Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)

 

    
  6.  

Citizenship or Place of Organization

 

            Delaware

    

NUMBER OF  

SHARES  

BENEFICIALLY  

OWNED BY  

EACH  

REPORTING  

PERSON  

WITH  

  

  7.    Sole Voting Power

 

                None

 

  8.    Shared Voting Power

 

                1,806,728*

 

  9.    Sole Dispositive Power

 

                None

 

10.    Shared Dispositive Power

 

                435,404

11.  

Aggregate Amount Beneficially Owned by Each Reporting Person

 

            1,806,728*

    
12.  

Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

 

    
13.  

Percent of Class Represented by Amount in Row (11)

 

            35.24%**

    
14.  

Type of Reporting Person (See Instructions)

 

            OO (limited liability company)

    

* Beneficial ownership of 1,371,324 shares of the common stock of Back Yard Burgers, Inc. referred to herein is being reported hereunder solely because the reporting person may be deemed to have beneficial ownership of such shares as a result of the Stockholder Voting Agreements described in Items 3, 4 and 5 hereof. Neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission by any of the Reporting Persons that it is the beneficial owner of such 1,371,324 shares of common stock for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, or for any other purpose, and such beneficial ownership is expressly disclaimed.

**The calculation of the percentage is based on 5,126,688 shares of common stock being issued and outstanding as of May 7, 2007, as set forth in Back Yard Burgers, Inc.’s 10-Q for the quarterly period ended March 31, 2007.

SCHEDULE 13D

CUSIP No.

 

  1.  

Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).

 

            Cherokee Advisors, LLC

    
  2.  

Check the Appropriate Box if a Member of a Group (See Instructions)

(a)  ¨

(b)  x

    
  3.  

SEC Use Only

 

    
  4.  

Source of Funds (See Instructions)

 

            AF

    
  5.  

Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)

 

    
  6.  

Citizenship or Place of Organization

 

            Georgia

    

NUMBER OF  

SHARES  

BENEFICIALLY  

OWNED BY  

EACH  

REPORTING  

PERSON  

WITH  

  

  7.    Sole Voting Power

 

                None

 

  8.    Shared Voting Power

 

                1,806,728*

 

  9.    Sole Dispositive Power

 

                None

 

10.    Shared Dispositive Power

 

                435,404

11.  

Aggregate Amount Beneficially Owned by Each Reporting Person

 

            1,806,728*

    
12.  

Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

 

    
13.  

Percent of Class Represented by Amount in Row (11)

 

            35.24%**

    
14.  

Type of Reporting Person (See Instructions)

 

            OO (limited liability company)

    

* Beneficial ownership of 1,371,324 shares of the common stock of Back Yard Burgers, Inc. referred to herein is being reported hereunder solely because the reporting person may be deemed to have beneficial ownership of such shares as a result of the Stockholder Voting Agreements described in Items 3, 4 and 5 hereof. Neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission by any of the Reporting Persons that it is the beneficial owner of such 1,371,324 shares of common stock for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, or for any other purpose, and such beneficial ownership is expressly disclaimed.

**The calculation of the percentage is based on 5,126,688 shares of common stock being issued and outstanding as of May 7, 2007, as set forth in Back Yard Burgers, Inc.’s 10-Q for the quarterly period ended March 31, 2007.

SCHEDULE 13D

CUSIP No.

 

  1.  

Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).

 

            Reid M. Zeising

    
  2.  

Check the Appropriate Box if a Member of a Group (See Instructions)

(a)  ¨

(b)  x

    
  3.  

SEC Use Only

 

    
  4.  

Source of Funds (See Instructions)

 

            OO

    
  5.  

Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)

 

    
  6.  

Citizenship or Place of Organization

 

            United States of America

    

NUMBER OF  

SHARES  

BENEFICIALLY  

OWNED BY  

EACH  

REPORTING  

PERSON  

WITH  

  

  7.    Sole Voting Power

 

                None

 

  8.    Shared Voting Power

 

                1,806,728*

 

  9.    Sole Dispositive Power

 

                None

 

10.    Shared Dispositive Power

 

                435,404

11.  

Aggregate Amount Beneficially Owned by Each Reporting Person

 

            1,806,728*

    
12.  

Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

 

    
13.  

Percent of Class Represented by Amount in Row (11)

 

            35.24%**

    
14.  

Type of Reporting Person (See Instructions)

 

            IN

    

* Beneficial ownership of 1,371,324 shares of the common stock of Back Yard Burgers, Inc. referred to herein is being reported hereunder solely because the reporting person may be deemed to have beneficial ownership of such shares as a result of the Stockholder Voting Agreements described in Items 3, 4 and 5 hereof. Neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission by any of the Reporting Persons that it is the beneficial owner of such 1,371,324 shares of common stock for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, or for any other purpose, and such beneficial ownership is expressly disclaimed.

**The calculation of the percentage is based on 5,126,688 shares of common stock being issued and outstanding as of May 7, 2007, as set forth in Back Yard Burgers, Inc.’s 10-Q for the quarterly period ended March 31, 2007.

Introductory Note.

This Amendment No. 4 (as defined herein) is being filed by BBAC, LLC (“BBAC”), Cherokee Advisors, LLC (“Cherokee”) and Reid M. Zeising (collectively, the “Reporting Persons”) to update the Amended Statement (as defined herein). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to them in the Amended Statement.

Item 1. Security and Issuer.

Item 1 of the Statement is hereby amended and restated in its entirety as follows:

This Amendment No. 4 to Schedule 13D (“Amendment No. 4”) relates to shares of common stock, par value $0.01 per share (the “Common Stock”), of Back Yard Burgers, Inc., a Delaware corporation (the “Issuer”). This Amendment No. 4 amends the initial statement on Schedule 13D filed by the Reporting Persons on June 5, 2006, as amended by Amendment No. 1 to Schedule 13D filed by the Reporting Persons on August 24, 2006, Amendment No. 2 to Schedule 13D filed by the Reporting Persons on September 5, 2006, and Amendment No. 3 to Schedule 13D filed by the Reporting Persons on December 7, 2006 (the “Amended Statement” and, collectively with this Amendment No. 4, the “Statement”). The address of the Issuer’s principal executive office is 1657 N. Shelby Oaks Drive, N. Suite 105, Memphis, Tennessee 38134.

Item 3. Source and Amount of Funds or Other Consideration.

Item 3 of the Statement is hereby amended by adding the following at the end of Item 3:

The aggregate value of the transactions (the “Transactions”) contemplated by the Agreement and Plan of Merger (the “Merger Agreement”), dated as of June 10, 2007, by and among the Issuer, BBAC, and BBAC Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and wholly owned subsidiary of BBAC, which are described in Item 4 below, is approximately $37.6 million, including approximately $6.2 million of debt which BBAC intends to repay at closing.

With respect to funds to be used in connection with the Merger, BBAC has obtained equity contributions and commitments from investors totaling approximately $14.5 million (the “Equity Contributions”). Moreover, BBAC has entered into written commitment letters with Regions Bank and Harbert Mezzanine Partners II, L.P., which provide for $24.5 million in revolving and term loans (the “Financing”). BBAC and Merger Sub will use the proceeds of the Equity Contributions and the Financing (a) to pay the Merger consideration to the Issuer’s stockholders, (b) to pay the other costs and expenses incurred by BBAC and Merger Sub in connection with the consummation of the Merger, the Financing, and related transactions, and (c) for Merger Sub’s (and, after the consummation of the Merger, the Issuer’s) ongoing working capital and general corporate purposes. Obtaining the Financing is a condition of the obligation of BBAC and Merger Sub to consummate the Merger. The commitment letters relating to the Financing are attached hereto as Exhibit K and Exhibit L and are incorporated by reference in their entirety into this Item 3.

As an inducement for BBAC to enter into the Merger Agreement with the Issuer, and in consideration thereof, certain stockholders of the Issuer entered into Stockholder Voting Agreements, dated as of June 10, 2007, with BBAC and the Issuer (the “Voting Agreements”) in the form of Exhibit M attached hereto. The names of such stockholders and number of shares of

Common Stock owned by each is set forth in Exhibit N attached hereto. Such stockholders (collectively, the “Voting Holders” and each a “Voting Holder”) hold 1,371,324 shares of Common Stock.

Each Voting Holder has agreed to vote all shares of Common Stock owned by such Voting Holder in favor of the approval and adoption of the Merger Agreement. For a description of the Voting Agreement see Item 4 below, which description is incorporated herein by reference in response to this Item 3. BBAC did not pay additional consideration to the Voting Holders in connection with the execution and delivery of the Voting Agreements.

Item 4. Purpose of Transaction.

Item 4 of the Statement is hereby amended by adding the following at the end of Item 4:

On June 10, 2007 BBAC, Merger Sub and the Issuer entered into the Merger Agreement, pursuant to which Merger Sub, a wholly owned subsidiary of BBAC, will be merged with and into the Issuer, with the Issuer continuing as the surviving corporation and a wholly owned subsidiary of BBAC (the “Merger”). Upon consummation of the Merger, the holders of the Common Stock and preferred stock of the Issuer (other than the Reporting Persons) will have the right to receive $6.50 per share in cash in exchange for such shares of Common Stock and preferred stock. At the effective time of the Merger, each outstanding option to acquire the Issuer’s Common Stock will become fully vested and immediately exercisable and shall be cancelled and converted into the right to receive a cash payment of an amount equal to (1) the excess, if any, of $6.50 over the exercise price per share of the option to acquire Common Stock, multiplied by (2) the number of shares of Common Stock subject to the option, without interest and less any applicable withholding taxes. The Merger remains subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, including obtaining approval of the Merger by the existing stockholders of the Issuer. The foregoing summary of the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement which is filed as Exhibit O, and incorporated by reference in its entirety into this Item 4.

In connection with the Merger Agreement, each Voting Holder entered into a Voting Agreement with BBAC and the Issuer, pursuant to which the Voting Holder agreed, subject to certain conditions, (i) to approve and vote in favor of the Merger Agreement and the transactions contemplated by the Merger Agreement and any other actions or agreements required in furtherance thereof; (ii) against any action or agreement that would result in a breach of any covenant, representation or warranty or any of their other obligations or agreements under the Merger Agreement; and (iii) against any action or agreement (other than the Merger Agreement or the transactions contemplated thereby) that would impede, interfere with, delay, postpone or attempt to discourage the transactions. The Voting Agreements terminate upon the earliest to occur of (1) the termination of the Merger Agreement in accordance with its terms, (2) the effective time of the Merger, (3) the mutual agreement of the parties to terminate the Voting Agreements, or (4) at such time as the Merger Agreement is amended in any material respect in connection with the consideration to be received by the stockholders. The purpose of the Voting Agreements is to enable BBAC and the Issuer to consummate the transactions contemplated by the Merger Agreement. This summary of the Voting Agreements does not purport to be complete and is qualified in its entirety by reference to the Form of Voting Agreement, which is attached hereto as Exhibit M and incorporated by reference in its entirety into this Item 4.

The purpose of the Transactions is to acquire all of the outstanding shares of capital stock of the Issuer (other than shares owned by Reporting Persons). If the Transactions are consummated, the

Common Stock will be delisted from the NASDAQ Capital Market and will cease to be registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Issuer will be privately held.

Item 5. Interest in Securities of the Issuer.

Item 5 of the Statement is hereby amended by adding the following:

(a)-(b) As of the filing date of this Amendment No. 4, BBAC owns of record 435,404 shares of Common Stock, constituting 8.49% of the outstanding shares of Common Stock of the Issuer. In addition, as a result of the Voting Agreements, the Reporting Persons may be deemed to have (i) beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) and (ii) shared power to vote or direct the vote of an additional 1,371,324 shares of Common Stock, which represents approximately 26.75% of the shares of Common Stock deemed to be outstanding pursuant to Rule 13d-3(d)(1), subject to the conditions and limitations of the Voting Agreements. With respect to the 1,371,324 shares of Common Stock and apart from the terms and conditions set forth in the Voting Agreements, the Reporting Persons are not entitled to any rights of a stockholder of the Issuer.

(c) Other than the Merger Agreement and the Voting Agreements described in Items 3 and 4, none of the Reporting Persons have effected any transaction in the Issuer’s Common Stock during the past 60 days.

Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.

Item 6 of the Statement is hereby amended by adding the following at the end of Item 6:

The information set forth in Items 3, 4 and 5 is incorporated herein by reference. Other than as described elsewhere in this Statement and as previously reported, the Reporting Persons have no understandings, arrangements, relationships or contracts relating to the Issuer’s Common Stock which are required to be described hereunder.

Item 7. Material to be Filed as Exhibits.

Item 7 of the Statement is hereby amended by adding the following exhibits:

 

Exhibit K:

    Regions Bank Commitment Letter

Exhibit L:

    Harbert Mezzanine Partners II, L.P. Commitment Letter

Exhibit M:

    Form of Stockholder Voting Agreement

Exhibit N:

    Names and Number of Shares of Common Stock owned by each Voting Holder

Exhibit O:

    Agreement and Plan of Merger, dated June 10, 2007, by and among Back Yard Burgers, Inc., BBAC, LLC and BBAC Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to Back Yard Burgers, Inc.’s Current Report on Form 8-K, dated June 10, 2007 and hereby incorporated by reference)

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Amendment No. 4 is true, complete and correct.

 

June 11, 2007
(Date)

 

 

BBAC, LLC
By: Reid M. Zeising
Chairman
/s/ Reid M. Zeising
(Signature)

 

 

CHEROKEE ADVISORS, LLC
By: Reid M. Zeising
Managing Member
/s/ Reid M. Zeising
(Signature)

 

 

REID M. ZEISING
/s/ Reid M. Zeising
(Signature)
 EX-99.K 2 dex99k.htm REGIONS BANK COMMITMENT LETTER Regions Bank Commitment letter

Exhibit K

LOGO

June 6, 2007

BBAC, LLC and its Subsidiaries

3060 Peachtree Road, N.W.

Suite 1410

Atlanta, Georgia 30305

Attention: Mr. Reid M. Zeising

$18,500,000 Senior Secured Revolving Credit and Term Loan Facility

Commitment Letter

Ladies and Gentlemen:

Regions Bank, an Alabama banking corporation (“Lender”) is pleased to confirm to BBAC, LLC, a Delaware limited liability company (“Parent”), and BBAC Merger Sub, Inc., a Delaware corporation (“Merger Sub”; Parent and Merger Sub are collectively referred to herein as “Companies” and individually as a “Company”), the commitment of Lender to provide a senior secured revolving and term loan facility to the Companies in an aggregate amount of up to $18,500,000 (the “Credit Facility”), based upon and subject to the terms and conditions set forth in this letter and the term sheet attached as Exhibit A hereto (the “Term Sheet”, and together with this letter, collectively, the “Commitment Letter”). The proceeds of the Credit Facility will be used by Merger Sub to acquire the stock of Back Yard Burgers, Inc. (“Target”) and for ongoing working capital needs of the Companies.

Each Company hereby represents, warrants and covenants that (i) all information (other than the Projections) (as defined below)), which has been or is hereafter made available to Lender by such Company, or on behalf of such Company, in connection with the business of such Company and its subsidiaries or in connection with the Target (“Information”) is and will be complete and correct as to the subject matter thereof in all material respects as of the date made available to Lender and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not materially misleading and (ii) all financial projections concerning the Companies, their affiliates and the Target which have been or are hereafter made available to Lender by the Companies or any of its representatives (the “Projections”) have been or will be prepared in good faith based upon reasonable assumptions at the time such Projections were (or hereafter are) prepared. Each Company agrees to furnish to Lender such Information and Projections as Lender may reasonably request and to supplement the Information and the Projections from time to time until the closing date of the Credit Facility so that the representation, warranty and covenant in the preceding sentence is correct on the closing date of the Credit Facility.

The Companies will promptly reimburse Lender for all reasonable costs and expenses actually incurred by Lender in connection with its continuing review of the transaction and the preparation and negotiation of this Commitment Letter (including any amendment or

modification hereto), and the loan documentation of the Credit Facility, including reasonable attorneys’ fees and legal expenses, appraisal fees, environmental assessments, filing and search charges, recording taxes and field examination expenses (including the then-standard per diem charges per person per day plus out-of-pocket expenses for the field examiners of Lender in the field and in the office, including travel, hotel and all other reasonable out-of-pocket expenses).

All such charges and expenses are to be paid to Lender promptly upon demand, and Lender may from time to time request or Lender may require that the Companies pay such charges directly, including as to appraisals. Lender has the right to apply to such charges and expenses any sums received from or on behalf of the Companies or any of their subsidiaries. The Company shall provide to Lender concurrently with the execution of this Commitment Letter a due diligence deposit of $75,000 (the “Expense Deposit”). Such Expense Deposit, together with any other deposits at any time received, will be retained as a fee if either (i) the transaction does not close on or before September 30, 2007, if due to delays or actions of the Companies or their inability to fulfill the conditions to closing or (ii) Companies elect not to pursue the closing of the Credit Facility. The arrangements with respect to such charges after the closing of the Credit Facility will be governed by the terms of the loan documentation.

In consideration for Lender’s willingness to issue this Commitment Letter, Companies agree to pay to Lender an aggregate non-refundable closing fee in the amount of $262,500 in immediately available funds (the “Closing Fee”), which Closing Fee shall be fully earned and payable, if not sooner paid, on the closing date of the transactions contemplated by this Commitment Letter.

Each Company and its subsidiaries agree to jointly and severally indemnify and hold harmless Lender and each director, officer, employee, attorney, advisor, agent and affiliate of Lender (each such person or entity referred to hereafter in this paragraph as an “Indemnified Person”) from any losses, claims, costs, damages, expenses or liabilities (or actions, suits or proceedings, including any inquiry or investigation, with respect thereto) to which any Indemnified Person may become subject, insofar as such losses, claims, costs, damages, expenses or liabilities (or actions, suits, or proceedings, including any inquiry or investigation, with respect thereto) arise out of, in any way relate to, or result from, this Commitment Letter, reports or other information provided by or on behalf of any Company to any Indemnified Person or contemplated by or referred to herein or therein or the other transactions contemplated hereby and thereby and to reimburse upon demand each Indemnified Person for any and all legal and other expenses actually incurred in connection with investigating, preparing to defend or defending any such loss, claim, cost, damage, expense or inquiry or investigation, with respect thereto; provided, that the Companies and their subsidiaries shall have no obligation to any Indemnified Person under this indemnity provision for liabilities to the extent that such liabilities are determined by a final, nonappealable judgment of a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of such Indemnified Person. The foregoing provisions of this paragraph shall be in addition to any right that an Indemnified Person shall have at common law or otherwise.

This Commitment Letter is addressed solely to the Companies and is not intended to confer any obligations to or on, or benefits to or on, any third party. No Indemnified Person shall be responsible or liable for special, indirect, consequential, exemplary, incidental or punitive damages which may be alleged as a result of this Commitment Letter.

 

- 2 -

Except as required by applicable law, regulatory authority, order or decree, this Commitment Letter and the contents of such documents shall not be disclosed by the Companies or their affiliates to any third party without the prior consent of Lender, other than to Cherokee Advisors LLC, Harbert Mezzanine Fund II, L.P., the Target, the investors from time to time in Parent, and their respective attorneys, employees, boards of directors (or similar governing body), financial and professional advisors and accountants.

Each Company acknowledges and agrees that Lender may share with its affiliates any information relating to the Credit Facility, the Companies, their subsidiaries or the Target.

This Commitment Letter will be of no force and effect unless a counterpart hereof is accepted in writing by the Companies and received by Lender by 5:00 p.m. in Atlanta, Georgia on June 9, 2007, together with the Expense Deposit. The commitment of Lender under this Commitment Letter, if timely accepted and agreed to by the Companies, will terminate upon the earliest of (i) the occurrence of any event that Lender reasonably believes in good faith has, or would be expected to have, a material adverse effect on the business, assets, liabilities (actual or contingent) operations, or financial condition of the Companies and their subsidiaries, taken as a whole, or the Target, since March 31, 2007, and (ii) as of the close of business on September 30, 2007, if the initial borrowings under the Credit Facility have not occurred on or prior to such date. All indemnities and obligations of the Companies and their subsidiaries and affiliates hereunder shall be joint and several and shall survive the termination of this Commitment Letter or the commitment of Lender hereunder.

This Commitment Letter contains the entire commitment of Lender for this transaction and, upon acceptance by the Companies, supersedes all prior proposals, commitment letter, negotiations, discussions and correspondence. This Commitment Letter may not be contradicted by evidence of any alleged oral agreement. No party has been authorized by Lender to make any oral or written statements inconsistent with this Commitment Letter.

This Commitment Letter may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile transmission or other electronic means shall be effective as delivery of a manually executed counterpart hereof.

This Commitment Letter may not be assigned by the Companies without the prior written consent of Lender and may not be amended, waived or modified, except in writing signed by Lender and the Companies. Lender may terminate this Commitment Letter if, in Lender’s good faith judgment, any condition to the obligations of Lender set forth in this Commitment Letter or in the proposed definitive documentation is or becomes incapable of satisfaction. This Commitment Letter is governed by and construed in accordance with the laws of the State of Georgia, without regard to principles of conflicts of law.

This Commitment Letter supersedes and replaces in all respects the Commitment Letter dated June 5, 2007, executed by Lender but not accepted by the Companies (the “Previous Commitment Letter”). The Previous Commitment Letter is hereby rescinded and shall be of no further force or effect.

 

- 3 -

LENDER AND COMPANIES EACH WAIVE THEIR RIGHT TO A JURY TRIAL IN ANY ACTION OR PROCEEDING ARISING OUT OF OR IN ANY WAY RELATING TO THIS COMMITMENT LETTER OR THE TRANSACTIONS REFERRED TO IN THIS COMMITMENT LETTER.

[Remainder of page intentionally left blank;

signatures begin on following page.]

 

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If the Companies accept and agree to the foregoing, please so indicate by executing and returning the enclosed copy of this letter for itself and its subsidiaries to Lender, together with the Expense Deposit.

We look forward to continuing to work with you to complete this transaction.

 

Very truly yours,
REGIONS BANK
By:   /s/ Joseph M. Rusnic
  Joseph M. Rusnic
  Executive Vice President
BBAC, LLC,
for itself and BBAC Merger Sub, Inc.
By:   /s/ Reid M. Zeising
Name:   Reid M. Zeising
Title:   Managing Member

EXHIBIT A

BBAC, LLC

$18,500,000 Senior Secured Revolving Credit and Term Loan Facility (“Credit Facility”)

Summary of Proposed Terms and Conditions

June 6, 2007

 

Borrower(s):    BBAC Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and any other operating company that is a subsidiary of Merger Sub after giving effect to the acquisition.
Guarantors:    Any subsidiary of Merger Sub that is not a Borrower
Pledgor:    BBAC, LLC, a Delaware limited liability company (“Parent”)
Lender:    Regions Bank, an Alabama banking corporation
Credit Facility:   

$18,500,000 (the “Maximum Credit”) consisting of:

 

(a)     revolving loans (“Revolving Loans”) up to a maximum amount outstanding at any time of $2,000,000 (which maximum amount shall be reduced to $1,000,000 at the end of business on the third (3rd) business day after the closing date), including a sublimit for letters of credit in an amount to be determined (letters of credit will be 100% reserved against borrowing availability under the revolving credit facility).

 

(b)    a term loan of up to $16,500,000 (“Term Loan”).

 

Revolving Loans may be drawn, repaid and reborrowed. The Term Loan will be drawn in a single advance at closing and, once repaid, may not be reborrowed.

Repayment of

Revolving Loans

and Annual “Clean-Up”:

   

The principal balance of the Revolving Loans shall be reduced to zero on the third (3rd) business day after the closing date, and, thereafter, shall only be used by Borrowers for ordinary working capital purposes. Borrowers will be required to reduce the principal balance of the Revolving Loans to zero for 30 days in each loan year.

 

The principal balance of the Revolving Loans shall be repaid in full on the maturity date.

Repayment of Term

Loan:

   

Interest only on the Term Loan shall be payable on the first day of each month. The principal amount of the Term Loan shall be payable on the maturity of the Term Loan.

 

The principal amount of the Term Loan also shall be subject to mandatory prepayment as follows:

 

(i) if 18 months after the closing date, the outstanding balance of the Term Loan exceeds $6,500,000, then the principal amount of the Term Loan shall be immediately prepaid by Borrowers by an amount equal to the excess above $6,500,000;

 

(ii) the principal amount of the Term Loan shall also be prepaid to the from the proceeds of any sale of real estate or franchises after the closing date, except to the extent otherwise provided in the section of this Term Sheet titled “Real Estate and Franchise Release Provisions”; and

 

(iii) annually (within 120 days after the end of any fiscal year, beginning with the fiscal year ending December 31, 2008) the principal amount of the Term Loan shall also be prepaid from Excess Cash Flow (as defined below) for the respective fiscal year in an amount equal to one hundred percent (100%) of such Excess Cash Flow, which amount will be reduced to: (A) seventy-five percent (75%) if the Senior Leverage Ratio as of the end of such fiscal year is greater than 2.50x but less than or equal to 4.00x, and (B) fifty percent (50%) if the Senior Leverage Ratio as of the end of such fiscal year is less than or equal to 2.50x.

 

“Excess Cash Flow” will be equal to (a) Borrower’s consolidated net income (disregarding extraordinary transactions) before interest, taxes, depreciation and amortization, plus (b) decreases in working capital, less (c) scheduled amortization of indebtedness paid in cash, any permitted voluntary prepayments of indebtedness, interest expense paid in cash, unfinanced capital expenditures, increases in working capital, and taxes paid in cash.

Interest and Fees:   

Borrowers may elect that Revolving Loans and the Term Loan bear interest at a rate per annum equal to (a) the Prime Rate plus the Applicable Margin or (b) the LIBOR index rate plus the Applicable Margin.

 

“Prime Rate” means the rate of interest publicly announced by Lender as its “prime rate”, subject to each increase or decrease in such prime rate, effective as of the day any such change occurs.

 

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  “Applicable Margin” means (i) 2.75% as to Revolving Loans bearing interest using the Prime Rate and 3.75% as to Revolving Loans bearing interest using the LIBOR index rate, (ii) 2.75% as to any portion of the Term Loan bearing interest using the Prime Rate and 3.75% as to any portion of the Term Loan bearing interest using the LIBOR index rate, in each case, until the last day of the twelfth (12th) month after closing; the Applicable Margin shall increase or decrease on a quarterly basis thereafter based upon the following pricing grid:

 

Senior Debt/
EBITDA		   LIBOR
Rate
Margin		     Prime
Rate
Margin		  
> 4.00x   3.75 %   2.75 %
< 4.00x - > 3.50x   3.50 %   2.50 %
< 3.50x - > 3.00x   3.25 %   2.25 %
< 3.00x   3.00 %   2.00 %

 

  

Borrowers shall pay to Lender an unused line fee calculated at 0.375% per annum on the average daily unused portion of the Revolving Loan facility, payable monthly in arrears.

 

After an event of default, the applicable rates of interest shall, at Lender’s option, be increased by 2% per annum above the highest pre-default rates.

 

All per annum rates and fees will be computed on the basis of actual days elapsed over a 360 day year.

Collateral:    First priority perfected security interests and liens to secure all obligations of Borrowers and Guarantors to Lender upon all of Borrowers’ and Guarantors’ present and future assets, including all accounts, general intangibles, chattel paper, documents, instruments, supporting obligations, letter-of-credit rights, deposit accounts (subject to certain exceptions for deposit accounts in which de minimis balances are maintained), investment property, inventory, equipment (other than any vehicle, to the extent perfection of a security interest in such vehicle would require compliance with any certificate of title statute), fixtures and real property, and all products and proceeds thereof, a pledge of all of the equity interests in subsidiaries of Borrowers and Guarantors, and a pledge of all of the equity interests in Merger Sub owned at any time by Parent (the “Collateral”), provided that the Collateral will not include any rights or interests of a Borrower or Guarantor in any contract if, under the terms of such contract or any applicable law with respect thereto, the valid grant of a security interest or other lien therein to Lender is prohibited and such prohibition has not been or is not waived or the consent of the other party to such contract has not been or is not otherwise obtained or under applicable law such prohibition cannot be waived, and provided further that the foregoing exclusion shall in no

 

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way be construed (i) to apply if any such prohibition is ineffective or unenforceable under the UCC (including Sections 9-406, 9-407, 9-408 or 9-409) or any other applicable law or (ii) so as to limit, impair or otherwise affect Lender’s unconditional continuing security interest in and lien upon any rights or interests of any Borrower or Guarantor in or to monies due or to become due under any such contract (including any accounts).

 

Notwithstanding the foregoing, the Collateral will not include any interest of any Borrower or Guarantor as a tenant or lessee of any real property. In addition, Lender agrees not to record a mortgage, deed of trust or other security deed on any properties listed on Schedule 1 attached hereto, which are intended to be subject to a sale-leaseback transaction within 120 days after the closing date (the “Sale-Leaseback Properties”), provided that, with respect to each such Sale-Leaseback Property: (a) on the closing date, Borrowers shall execute and deliver to Lender a mortgage, deed of trust or other security deed otherwise in accordance with the terms hereof, (b) on the closing date, Borrowers shall execute and deliver to Lender a negative pledge agreement in form and substance satisfactory to Lender, which Lender shall be entitled, at Borrowers’ expense, to record in the appropriate real estate recording office at closing, (c) Lender shall be entitled to record such mortgage, deed of trust or other security deed, at Borrowers’ expense, upon the sooner to occur of 120 days after the closing date (if Borrowers have not consummated a sale-leaseback transaction with respect to such Sale-Leaseback Property), or the date that a default or event of default occurs (subject to any applicable cure periods), and (d) on the closing date, Lender shall have received satisfactory results of a title search.

 

The obligations secured may include hedging and bank product obligations of Borrowers and Guarantors.

 

The Revolving Loans and the Term Loan shall be cross-collateralized.

 

Prior to the closing of the transaction set forth herein, Borrowers, each Guarantor and Parent agree that Lender is irrevocably and unconditionally authorized to file UCC financing statements naming Lender, as secured party, and each Borrower, Guarantor or Parent, as debtor, with respect to the Collateral (provided that, with respect to Parent, such UCC financing statement shall list as collateral only the equity interests in Merger Sub owned by Parent). Lender agrees to terminate such filings, at the applicable obligor’s expense, promptly upon Lender’s receipt of written request therefor after September 30, 2007 (or after termination of the Commitment Letter, if sooner), if the transactions contemplated hereby have not closed on or before such date.

 

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Use of Proceeds:    Proceeds of the Credit Facility shall be used to finance the acquisition of the stock of Back Yard Burgers, Inc. (the “Target”), to finance capital expenditures, for costs, expenses and fees in connection with the Credit Facility and for working capital of Borrowers and other proper corporate purposes, provided that, beginning at the end of business on the third (3rd) calendar day after the closing date, proceeds of Revolving Loans may only be used for ordinary working capital of Borrowers.

Real Estate and

Franchise Release

Provisions:

   

After the closing date, Borrowers may request that Lender consent to the sale of certain real estate and franchises of Borrowers and Guarantors and that Lender release its liens therein. Any such sale and release of liens shall be subject to Lender’s consent, which consent shall not be unreasonably withheld, and Lender may consider, among other factors at the time of any such request, the nature of the transaction, the amount of the term loans then outstanding, the amount of term loans to be repaid from the proceeds of such sale, and the value of the other remaining collateral after giving effect to such sale.

 

Borrowers and Guarantors shall not be permitted to sell any such real estate or franchises or to request Lender’s release of liens therein, if any default or event of default exists at the time of such proposed sale or would result therefrom. The applicable Borrower or Guarantor shall receive the full amount of the purchase price (net of broker’s commissions, transaction fees and similar costs) in cash or immediately available funds simultaneously with the consummation of any such sale to which Lender consents, which proceeds shall be remitted as follows: (i) 100% of such net sale proceeds shall be remitted to Lender for application to the Term Loan, if the outstanding principal balance of the Term Loan is greater than $6,500,000 or the Senior Debt Leverage Ratio is greater than 2.0 to 1.0, and (ii) 50% of such net sale proceeds shall be remitted to Lender for application to the Term Loan, if the outstanding principal balance of the Term Loan is less than $6,500,000 and the Senior Debt Leverage Ratio is less than 2.0 to 1.0.

Term:   

Revolving Loan Facility: Forty-eight (48) months from the date of closing.

 

Term Loan: Forty-eight (48) months from the date of closing.

Cash Management:    The Borrowers’ and Guarantors’ cash management system shall be reasonably acceptable to Lender. Where reasonably practicable, the Borrowers and Guarantors shall maintain their primary depository banking relationship with Lender.

 

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Documentation:    Definitive loan documentation (collectively, the “Loan Documents”), including, without limitation, a loan and security agreement, supplemental security agreements, mortgages, pledge agreements, guarantees, control agreements (subject to certain exceptions for deposit accounts in which de minimis balances are maintained), intercreditor and debt subordination agreements, UCC financing statements, collateral access agreements for leased and third party locations, opinion letters of counsel to Borrowers and Guarantors, and related documents, each in form and substance satisfactory to Lender.
   The loan documentation will also provide that Lender may assign loans and commitments and/or sell participations in the Credit Facility, subject to Borrowers’ consent unless a default or event of default has occurred and is continuing at the time any such assignment or participation is consummated.

Representations and

Warranties:

    Usual and customary for facilities of this nature, including, but not limited to, representations and warranties concerning: the Collateral; corporate existence and good standing, power and authority; accuracy of financial information; solvency; absence of material adverse changes as of the date of closing; locations of jurisdiction of incorporation, chief executive office and Collateral; priority of Lender’s security interests; ownership of properties, and absence of other liens (except as specifically agreed to by Lender); filing of tax returns and payment of taxes; absence of material litigation or investigations; compliance with other agreements and applicable law, regulation, etc.; identification of bank accounts; environmental matters; employee benefit matters; accuracy and completeness of information furnished to Lender; survival and continuing nature of representations and warranties.
Financial Covenants:   

Financial covenants will include and be limited to the following:

 

•        Minimum Adjusted EBITDA, measured as of the last day of each fiscal quarter

 

•         Fixed Charge Coverage Ratio, measured as of the last day of each fiscal quarter

(Adjusted EBITDAR minus maintenance capex minus cash taxes minus cash dividends)/(scheduled principal payments plus interest plus annual cash rent)

 

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•         Senior Debt Leverage Ratio, measured as of the last day of each fiscal quarter

(Senior Funded Debt including Capital Leases minus cash on hand/Adjusted EBITDA)

 

•         Maximum annual growth/remodel capital expenditures, measured as of the last day of each fiscal quarter: to be defined and amount to be set in a manner reasonably satisfactory to Lender and Borrowers.

 

The required covenant levels (other than covenant levels relating to Maximum growth/remodel capital expenditures) for each fiscal quarter of Borrowers on a consolidated basis are set forth on Schedule 2. Adjusted EBITDA is defined on Schedule 3. The financial covenants shall be calculated so as to give pro forma effect to any asset disposition (including, without limitation, the sale/leaseback transactions) occurring during the applicable period as if such disposition occurred at the beginning of the period.

 

Borrowers’ failure to comply any financial covenant which is based, in part, on a determination of Adjusted EBTIDA or EBITDAR for a period of time (a “Financial Covenant Default”), shall not constitute an Event of Default if the Borrowers receive additional capital contributions within five business days following the date on which the Borrowers are required to deliver their compliance certificate for such period (which additional capital contributions shall be added dollar-for-dollar to Adjusted EBITDA and/or EBITDAR for such period) and, as a result of adding such additional capital contribution to Adjusted EBITDA and/or EBITDAR, Borrowers are not in default under such financial covenant, provided that, Borrowers shall not be permitted to cure Financial Covenant Defaults more than one time during any 365-day period, and until the cure period for any such Financial Covenant Default has expired, a default (but not an event of default) shall exist under the Loan Documents.

Affirmative

Covenants:

    Usual and customary for facilities of this nature, including, but not limited to: maintenance of corporate existence and rights; requirements for new locations; compliance with laws; performance of obligations; maintenance of properties in good repair; maintenance of appropriate and adequate insurance; Lender’s rights to inspect books and properties; payment of taxes and claims; delivery of financial statements, financial projections and other information; collateral reporting, notices and appraisal requirements; and further assurances.

 

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Financial reporting will include audited fiscal year end financial statements within 120 days after fiscal year end; monthly comparative financial statements within 45 days after the previous month end (provided that if the Senior Debt Leverage Ratio is less than 2.5 to 1.0, then Lender will require delivery of quarterly financial statements rather than monthly financial statements); monthly budgets and/or forecasts including, but not limited to, balance sheet, income statement and cash flows for upcoming fiscal year within 30 days before the fiscal year end; and monthly financial information regarding the performance of franchises (provided that if the Senior Debt Leverage Ratio is less than 2.5 to 1.0, then Lender will require delivery of quarterly financial information rather than monthly financial information).

 

Within 18 months after the closing date, the Borrowers shall have received net proceeds from sales of real estate and franchises, which shall be remitted to the Lender to repay the principal balance of the Term Loan, in an amount not less than $10,000,000.

Negative Covenants:   

Usual and customary for facilities of this nature (subject to certain exceptions and baskets as may be acceptable to Lender), including, but not limited to, limitations on: dividends, redemptions and repurchases of capital stock; incurrence of debt (including capital leases) and guarantees; repurchases or prepayment of debt; management fees not to exceed $50,000 in any calendar year; creation or suffering of liens; loans, investments and acquisitions; affiliate transactions (other than salaries and incentive compensation paid to employees of Borrowers in the ordinary course of business of Borrowers, notwithstanding that such employees may also be investors in, or employees of, Cherokee Advisors, LLC or Parent); changes in business conducted; asset sales (other than permitted sales of real estate and franchises, as provided below), mergers and consolidations; capital expenditures; restrictions affecting subsidiaries; etc.

 

Notwithstanding the foregoing, on and after twelve months following the closing date, Borrowers would be permitted to make annual cash dividends to Parent (for further distribution to the holders of Series A Preferred shares of Parent), so long as (a) no default or event of default is in existence or would result therefrom, (b) Borrowers demonstrate pro forma compliance with the Fixed Charge Coverage Ratio after giving effect to each such dividend, (c) the Senior Leverage Ratio, after giving effect to each such dividend, would be less than 3.50x, and (d) the aggregate amount of such dividends does not exceed, in any year, $1,200,000.

 

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   In addition, in consideration of Lender’s agreement not to require Parent to guaranty the Credit Facility, and without limiting the generality of any of the foregoing, Borrowers, each Guarantor and Parent acknowledge and agree that Borrowers and Guarantors shall not be permitted to (i) transfer, sell or otherwise dispose of any of their assets to Parent or any subsidiary of Parent that is not a Borrower, (ii) pay any dividends, distributions, redemptions, repurchases or other amounts in respect of the equity interests of Merger Sub owned by Parent, except as expressly provided in the preceding paragraph, or (iii) make any loans to or other investments in Parent or any subsidiary of Parent that is not a Borrower, or receive any loans from Parent or any such subsidiary. In no event shall Parent be permitted to grant in favor of any person other than Lender or Subordinated Lender (as defined below) a lien or security interest in any of the equity interests of Merger Sub owned by Parent.
Events of Default:    Usual and customary for facilities of this nature to include, but not be limited to, payment and performance defaults under any of the loan documentation, cross-defaults to other indebtedness and documents (including, but not limited to, the indebtedness under the Credit Facility), breach of representations, warranties and covenants, insolvency, voluntary and involuntary bankruptcy, judgments and attachments, revocation of any guaranty, dissolution, change in control (to be defined as the change of ownership or control of more than 35% of the voting equity interests in any Borrower) and change of management.
Conditions:    Subject to such conditions as may be established in connection with the credit approval, the closing of the Credit Facility will be subject to the satisfaction, in a manner acceptable to Lender, of those conditions precedent customarily required by Lender in similar financings, including, without limitation, the following:
   (a) Receipt by Lender of all financial information, projections, budgets, business plans, cash flows and such other information as Lender shall request from time to time, on a consolidated and consolidating basis, including (i) projected monthly balance sheets, income statements, statements of cash flows of Borrowers, Guarantors and Target for the period through the end of the 2007 fiscal year, (ii) projected annual balance sheets, income statements and statements of cash flows of Borrowers and Guarantors through the maturity date of the Term Loan, in each case as to the projections described in clauses (i) and (ii), with the results and assumptions set forth in all of such projections in form and substance satisfactory to Lender, and an opening pro forma balance sheet for Borrowers and Guarantors in form and substance satisfactory to Lender, and (iii) any updates or modifications to the projected financial statements of Borrowers and Guarantors previously received by Lender, in each case in form and substance satisfactory to Lender.

 

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  (b) Lender’s completion of its business and legal due diligence, with results satisfactory to Lender, including (i) receipt and review of third party and real estate appraisals, in form and containing assumptions and appraisal methods satisfactory to Lender by an appraiser reasonably acceptable to Lender on which Lender is permitted to rely, (ii) field examinations of the business and collateral of Borrowers, Guarantors and Target in accordance with Lender’s customary procedures and practices and as otherwise required by the nature and circumstances of the businesses of Borrowers, Guarantors and Target, (iii) environmental assessments of the stores and restaurants of Borrowers and Guarantors conducted by an independent environmental engineering firm reasonably acceptable to Lender and in form, scope and methodology acceptable to Lender, (iv) background checks with respect to Borrowers, Guarantors and their principals, officers and affiliates as determined by Lender and acceptable to Lender in all respects, and (v) receipt and review of organizational documents of Borrowers, any Guarantors and Parent, including shareholders and similar agreements which shall contain “drag-along” provisions acceptable to Lender with respect to equity interests in Merger Sub not owned by Parent. Lender shall be satisfied with the corporate and capital structure and management of Borrowers and Guarantors and with all legal, tax and accounting matters relating to Borrowers and Guarantors, and, in the exercise of Lender’s reasonable discretion, any other matters relating to Borrowers and Guarantors
  (c) Execution and delivery of the Loan Documents by all parties thereto, all in form and substance satisfactory to Lender and including all consents, waivers, acknowledgments and other agreements from third persons that Lender may deem necessary or desirable, in form and substance satisfactory to Lender and including delivery to Lender of evidence of insurance coverage and a lender’s loss payee endorsement in favor of Lender as to casualty and business interruption insurance, and mortgagee’s title insurance by a company and in amounts reasonably acceptable to Lender, each of the foregoing in form and substance satisfactory to Lender.
  (d) Lender shall hold perfected, first priority security interests in and liens upon the Collateral (subject only to exceptions that are acceptable to Lender in its sole discretion) and Lender shall have received such evidence thereof as it requires.

 

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  (e) Receipt by Lender of releases, terminations and such other documents as Lender may request to evidence and effectuate the termination by the existing lenders to Borrowers, Guarantors and Target of their respective financing arrangements with Borrowers, Guarantors and Target and the termination and release by it or them, as the case may be, of any interest in and to any assets and properties of Borrowers, Guarantors and Target, each in form and substance satisfactory to Lender.
  (f) No material misstatements in or omissions from the materials previously furnished to Lender by Borrowers and Guarantors shall have been made. Lender must be satisfied that any financial statements delivered to it fairly present the business and financial conditions of Borrowers, Guarantors and Target.
  (g) No defaults or events of default on the closing date under the loan documents for the Credit Facility or on any other debt or any material contract of Borrowers, Guarantors or Target shall exist.
 

(h) Lender shall have reviewed and found acceptable in all material respects the Agreement and Plan of Merger among Borrowers and Target (the “Merger Agreement”) and all other material documents, agreements and instruments executed in connection therewith and pursuant thereto and all conditions contained in the Merger Agreement shall have been satisfied or waived in accordance with the terms of the Merger Agreement and consented to by Lender (such consent not to be unreasonably withheld or delayed) and the transactions contemplated thereby consummated.

 

(i) Lender shall have received evidence satisfactory to Lender that, on the closing date, not less than $14,000,000 in cash shall have been contributed to the equity of Companies, and that Parent owns not less than 435,404 shares of the capital stock of Target (assuming Target has approximately 5,100,000 issued and outstanding shares of capital stock).

 

(j) Lender shall have reviewed and found acceptable the subordinated debt documents among Companies and Harbert Mezzanine Partners (“Subordinated Lender”), and the Companies shall have received not less than $6,000,000 in cash in secured subordinated debt from Subordinated Lender.

 

(k) Subordinated Lender shall have executed and delivered to Lender a duly executed debt and lien subordination agreement, in form and substance satisfactory to Lender in all respects.

 

(l) Except to the extent otherwise provided above with respect to Sale-Leaseback Properties, with respect to each parcel of real property owned by any Borrower or Guarantor, Lender shall have received, no

 

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   later than 15 days prior to the closing date, such customary appraisals, environmental reports, surveys, and flood zone certifications as Lender may require in its reasonable discretion, and at the closing, the applicable Borrower or Guarantor shall execute and deliver to Lender (or cause to be executed and delivered to Lender): (a) a mortgage, deed of trust or other security deed with respect to each such parcel of owned real property, (b) an opinion letter of local counsel to such Borrower or Guarantor in each state in which a mortgage, deed of trust or other security deed is to be recorded, (c) a commitment for the issuance of a lender’s policy of title insurance covering Lender’s interest under each such mortgage, deed of trust or other security deed, in an amount not less than 110% of the appraised value of such real property, and (d) an environmental indemnity agreement with respect to such real property, in each case, in form and substance satisfactory to the Lender in all respects.
  

(m) No material adverse change in the business, operations, profits or assets of Borrowers, Guarantors or Target shall have occurred since the date of the most recent financial statements received by Lender or its latest field examination and no material pending litigation, proceeding, bankruptcy or insolvency, injunction, order or claims with respect to Borrowers, Guarantors or Target shall exist.

 

(n) Lender shall have confirmed that all financial reporting, financial and collateral systems and transition plans following the consummation of the acquisition are acceptable to Lender in all respects.

Governing Law:    Georgia (without regard to conflicts of laws).
USA PATRIOT Act:    Lender hereby notifies Borrowers and Guarantors that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub.L. 107-56 (signed into law October 26, 2001) (the “Act”), it is required to obtain, verify and record information that identifies each person or corporation who opens an account and/or enters into a business relationship with it, which information includes the names and addresses of Borrowers and Guarantors and other information that will allow such Lender to identify such person in accordance with the Act. Borrowers and Guarantors are hereby advised that this commitment is subject to satisfactory results of such verification.

Each term used but not defined in this Exhibit A shall have the meaning assigned to such term in the Commitment Letter to which this Exhibit A is attached.

This Summary of Principal Terms and Conditions is not meant to be, nor shall it be construed as an attempt to describe all of, or the specific phrasing for, the provisions of the documentation. Rather, it is intended only to outline principal terms to be included in the Loan Documents; provided that nothing in the Loan Documents shall be materially inconsistent with the provisions set forth herein.

 

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SCHEDULE 1

List of Sale-Leaseback Properties

Fourteen (14) parcels of real estate of Borrowers in the following locations:

Panama City, FL

Southaven, MS

Germantown, TN

Memphis, TN

North Little Rock, AR

Destin, FL

Olive Branch, MS

Cordova, TN

Fort Walton Beach, FL

Memphis, TN

Jackson, TN

Little Rock, AR

Crestview, FL

Jonesboro, AR

SCHEDULE 2

Financial Covenants

 

Quarterly
Period End		    Adjusted
EBITDA		    Senior Debt
Leverage
Ratio		     Fixed Charge
Coverage
Ratio		  
Q3 - 2007    $ 3,500,000    4.50 x   1.10 x
Q4 - 2007    $ 3,500,000    4.50 x   1.10 x
Q1 - 2008    $ 3,500,000    4.00 x   1.10 x
Q2 - 2008    $ 4,000,000    4.00 x   1.10 x
Q3 - 2008    $ 4,000,000    4.00 x   1.15 x
Q4 - 2008    $ 4,000,000    4.00 x   1.15 x
Q1 - 2009    $ 4,000,000    3.00 x   1.15 x
Q2 - 2009    $ 4,000,000    3.00 x   1.15 x
Q3 - 2009    $ 4,000,000    3.00 x   1.20 x
Q4 - 2009    $ 4,000,000    3.00 x   1.20 x
Q1 - 2010    $ 4,000,000    2.00 x   1.20 x
Q2 - 2010    $ 4,000,000    2.00 x   1.20 x
Q3 - 2010    $ 4,000,000    2.00 x   1.20 x
Q4 - 2010    $ 4,000,000    2.00 x   1.20 x
Q1 - 2011    $ 4,000,000    2.00 x   1.20 x
Q2 - 2011    $ 4,000,000    2.00 x   1.20 x

SCHEDULE 3

Definition of Adjusted EBITDA

“Adjusted EBITDA” means, at any date of determination, an amount equal to consolidated net income of Borrowers and their subsidiaries on a consolidated basis determined in accordance with GAAP for the most recently completed four fiscal quarters (the “Measurement Period”), plus (without duplication) the following to the extent deducted in calculating consolidated net income for such Measurement Period (i) depreciation and amortization expense, (ii) consolidated interest charges, (iii) consolidated restaurant preopening costs in an amount not to exceed $130,000 per year, (iv) non-cash rent expense (v) non-cash compensation expense, (vi) non-recurring expenses (or minus non-recurring income items) reducing (or in the case of non-recurring income, increasing) such consolidated net income which do not represent a cash item in such a period or any future period, (vii) income tax paid or payable (less any income tax credits received) for such period, determined in accordance with GAAP (in each case of or by Borrowers and their subsidiaries for such Measurement Period), (viii) fees and out-of-pocket expenses incurred and actually paid by Borrowers in connection with the Credit Facility, the merger and the subordinated loan facility, in an aggregate amount not to exceed $1,500,000, (ix) one-time option review costs incurred during the operating period ending December 31, 2006, such amount not to exceed $350,000, (x) one-time private company savings not to exceed $250,000, minus (xi) one-time $350,000 for selected, underperforming franchisees.

EX-99.L 3 dex99l.htm HARBERT MEZZANINE PARTNERS II, L.P. COMMITMENT LETTER Harbert Mezzanine Partners II, L.P. Commitment Letter

Exhibit L

LOGO

HARBERT MEZZANINE PARTNERS II, L.P.

618 Church Street, Suite 500

Nashville, TN 37219

Commitment Letter

Up to $7,000,000 Senior Subordinated Second Lien Term Notes

$1,000,000 Equity Co-Investment

June 7, 2007

BBAC, LLC

3060 Peachtree Road, NW

Suite 1410

Atlanta, GA 30305

Ladies and Gentlemen:

BBAC, LLC (“you” or “BBAC”) has advised Harbert Mezzanine Partners II, L.P. (together with certain of its affiliates selected by Harbert Mezzanine Partners II, L.P. in its sole discretion, collectively “Harbert”) that you are seeking a commitment for senior subordinated second lien term notes in the aggregate principal amount not to exceed $7,000,000 (the “Notes”) to be issued by a subsidiary wholly owned by you (“Merger Sub”) and created for purposes of facilitating the Acquisition (as defined below) and up to a $1,000,000 equity co-investment in BBAC (the “Equity Co-Investment”; collectively with the Notes, the “Investment”) in connection with the acquisition (the “Acquisition”) of all of the capital stock of Back Yard Burgers, Inc. and its subsidiaries (the “Company”) by BBAC through a merger between Merger Sub and the Company (with the Company being the surviving entity). In that connection, you have requested that Harbert commit to lend the full principal amount of the Notes, and provide the Equity Co-Investment, upon the terms and conditions set forth in the Summary of Terms and Conditions attached hereto as Exhibit A (the “Term Sheet”).

Harbert is pleased to advise you by this letter (the “Commitment Letter”) of its commitment to provide the full principal amount of the Notes and provide the Equity Co-Investment, subject to the terms and conditions set forth herein and in the Term Sheet.

You have provided to Harbert, and agree to continue to provide, all information with respect to the Company, BBAC, the Acquisition and the transactions contemplated hereby, including all financial information and projections (the “Projections”), as Harbert may reasonably request in connection with the Investment. You hereby represent and covenant that (a) all information other than the Projections (the “Information”) that has been or will be made available to Harbert by you or any of your representatives is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to

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Harbert by you or any of your representatives have been or will be prepared in good faith based upon reasonable assumptions at the time such Projections were created. You understand that in structuring the Investment, Harbert may use and rely on the Information and Projections without independent verification thereof.

Regardless of whether definitive documentation shall be executed and delivered or whether the transactions contemplated by this Commitment Letter or in the Term Sheet are consummated or shall have occurred, upon your execution of this Commitment Letter, you hereby commit that you shall pay the reasonable out-of-pocket fees and expenses incurred by Harbert and the reasonable fees, disbursements, and other charges of Harbert’s counsel and consultants related to or in connection with the Investment and the transactions contemplated by this Commitment Letter or in the Term Sheet; provided that if the Investment is consummated, the expenses incurred by Harbert in connection with any accounting review shall be paid solely by Harbert; and, provided further, that the balance, if any, of the “Working Fee,” as such term is defined and used in that certain letter from Harbert to you dated May 11, 2007 (the “Working Fee Letter”), shall also be applied to the fees, expenses, disbursements, and charges referred to in this paragraph.

Harbert’s commitment hereunder and its agreement to perform the services described herein are subject to (a) satisfactory completion of Harbert’s business and legal due diligence (including, but not limited to, (i) environmental due diligence, (ii) intellectual property rights, (iii) insurance review, (iv) tax lien review, (v) review of leases and lease summaries, and (vi) satisfactory review of all material pending or threatened litigation or proceeding in court or any administrative forum), (b) there not occurring or becoming known to Harbert any material adverse condition or material adverse change in or affecting the business, operations, property, condition (financial or otherwise), or prospects of the Company and its subsidiaries, taken as a whole or with BBAC, (c) Harbert not becoming aware after the date hereof of any information or other matter affecting the Company, its subsidiaries, BBAC or the transactions contemplated hereby which is inconsistent in a material and adverse manner with any such information or other matter disclosed to Harbert prior to the date hereof, (d) with respect to the definitive documentation for, and closing of, the Acquisition, (i) the merger agreement (the “Merger Agreement”) shall be reasonably acceptable to Harbert, (ii) all of the conditions precedent to the Acquisition set forth in the Merger Agreement shall have been satisfied in all material respects (or waived with the consent of Harbert (which consent will not be unreasonably withheld or delayed)) and (iii) BBAC shall have received minimum contributed cash equity (inclusive of the Equity Co-Investment and other cash investments which will be made contemporaneously with the closing of the Investment) of no less than $14,000,000, (e) the negotiation, execution and delivery on or before September 30, 2007 of definitive documentation for the Investment satisfactory to Harbert and its counsel (the “Loan Documentation”), (f) both before and after giving effect to the closing, (i) the absence of any default or event of default under the Loan Documentation or under any material contract or agreement of BBAC, the Company, or their respective subsidiaries, (ii) the accuracy of the Representations and Warranties in all material respects, and (iii) your compliance with the terms of this Commitment Letter and the Term Sheet and (g) the other conditions set forth or referred to in the Term Sheet, including Exhibit A thereto. The terms and conditions of Harbert’s commitment hereunder and of the Investment are not limited to those set forth herein and in the Term Sheet, but any other terms or conditions not otherwise covered herein or in the Term Sheet shall not be materially inconsistent with the terms and conditions herein or in the Term Sheet. Those matters that are not covered by the provisions hereof and of the Term Sheet are subject to the approval and agreement of Harbert and BBAC.

You agree to indemnify and hold harmless Harbert, its affiliates and the officers, directors, employees, advisors and agents of the foregoing (each, an “indemnified person”) from and against any and all losses, claims, damages and liabilities to which any such indemnified person may become subject arising out of or in connection with this Commitment Letter and the Investment, the use of the proceeds

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thereof or any related transaction or any claim, litigation, investigation or proceeding relating to any of the foregoing (collectively, “Indemnifiable Claims”), regardless of whether any indemnified person is a party thereto, and to reimburse each indemnified person upon demand for any legal or other expenses incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any indemnified person, apply to (i) losses, claims, damages, liabilities or related expenses to the extent they are found by a final, non-appealable judgment of a court of competent jurisdiction to arise from the willful misconduct or gross negligence of such indemnified person or (ii) a diminution in value of the securities purchased pursuant to the Equity Co-Investment (provided that this clause (ii) does not constitute a waiver of any rights or remedies that Harbert may have at law or equity with respect to the Equity Co-Investment). You also agree to reimburse each indemnified person on demand for all out-of-pocket expenses (including due diligence expenses, consultant’s fees and expenses, travel expenses, and reasonable fees, charges and disbursements of counsel) incurred in connection with the Indemnifiable Claims. To the fullest extent permitted by applicable law, you (on behalf of yourself and your affiliates) agree not to assert, and each hereby irrevocably and unconditionally waive, to the maximum extent not prohibited by law, any claim against any indemnified person, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Commitment Letter or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby or the use of the proceeds of the Investment. No indemnified person shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Commitment Letter or the Investment or the transactions contemplated hereby or thereby.

The obligations of Harbert with respect to the Investment shall not become effective unless each of the foregoing conditions are satisfied or waived by Harbert at or prior to 5:00 p.m., Nashville, Tennessee time, on September 30, 2007 (and, in the event such conditions are not so satisfied or waived, Harbert’s commitment with respect to the Investment shall terminate at such time).

This Commitment Letter shall not be assignable by you without the prior written consent of Harbert (and any purported assignment without such consent shall be null and void) and is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter may not be amended or waived except by an instrument in writing signed by you and Harbert. This Commitment Letter may be executed in any number of counterparts, each of which shall upon execution and delivery be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter (together with the Term Sheet and the Working Fee Letter) is the only agreement that has been entered into between or among Harbert and you with respect to the Investment and sets forth the entire understanding of the parties with respect thereto. Notwithstanding anything to the contrary contained herein (except as set forth in the penultimate paragraph of this Commitment Letter), your and our obligations and commitments under this Commitment Letter and the Working Fee Letter will be superseded in their entirety by the parties’ respective obligations as set forth in the Definitive Documents. This Commitment Letter and its enforcement shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to conflicts-of-law principles.

You acknowledge that Harbert may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the transactions described herein and otherwise. Harbert will not use or disclose confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter or its other relationships with you in connection with the performance by it of

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services for other companies, and Harbert will not furnish any such information to other companies. You also acknowledge that Harbert has no obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, confidential information obtained by it from other companies.

This Commitment Letter is delivered to you on the understanding that neither this Commitment Letter nor the Term Sheet nor any of their terms or substance shall be disclosed, directly or indirectly, to any other person except (a) to the Company’s or Purchaser’s officers, agents and advisors who are directly involved in the consideration of this matter, (b) as may be compelled in a judicial or administrative proceeding or as otherwise required by law (in which case you agree to inform us promptly thereof, to the extent you are not prohibited from doing so under applicable law) or (c) disclosure as may be necessary under the rules and regulations of the Securities Exchange Commission.

In order to enable Harbert to bring its relevant expertise to bear on its engagement under this Commitment Letter from among its affiliates, you agree that Harbert may perform the services contemplated hereby in conjunction with its affiliates, and that any affiliates of Harbert performing services hereunder shall be entitled to the benefits and subject to the terms and conditions of this Commitment Letter.

The compensation (including payment of the Funding Fee), reimbursement (including, but not limited to, the reimbursement of the reasonable out-of-pocket fees and expenses of Harbert (including the reasonable fees, disbursements, and other charges of Harbert’s counsel and consultants set forth above)), indemnification and confidentiality provisions contained herein shall remain in full force and effect notwithstanding the termination of this Commitment Letter or Harbert’s commitment hereunder.

If the foregoing correctly sets forth the agreement between you and Harbert, please indicate your acceptance of the terms hereof, including without limitation the fees set forth herein, and your acceptance of the Term Sheets by returning to Harbert executed counterparts hereof not later than 5:00 p.m., Nashville, Tennessee time, on June 9, 2007. Harbert’s commitment and agreements herein will expire at such time in the event Harbert has not received such executed counterparts and such amounts in accordance with the immediately preceding sentence.

[Signature Page Follows]

Harbert Mezzanine Partners II, L.P. is pleased to have been given the opportunity to assist you in connection with the Investment.

 

Very truly yours,
  HARBERT MEZZANINE PARTNERS II, L.P.
  By:   HMP II SBIC GP, LLC, its General Partner
  By:   Harbert Mezzanine Partners II GP, LLC, its Sole Manager
  By:   Harbert Mezzanine Manager II, Inc., its Sole Manager
  By:   /s/ J. Pryor Smartt
  Name:   J. Pryor Smartt
  Title:   Director of Investments

 

Accepted and agreed to as of the date first written above by:
BBAC, LLC
By:   /s/ Reid M. Zeising
Name:   Reid M. Zeising
Title:   Managing Member

LOGO

HARBERT MEZZANINE PARTNERS II, L.P.

618 Church Street, Suite 500

Nashville, TN 37219

BBAC, LLC

SUMMARY OF TERMS AND CONDITIONS

June 7, 2007

 

Company    BBAC, LLC (“BBAC”), the operating entity formed by the Sponsors to acquire Back Yard Burgers, Inc. and its subsidiaries (“Target”).
Borrower    A subsidiary wholly owned by BBAC (“Merger Sub”), with it being understood that, upon completion of the merger of Merger Sub with and into Target (with Target being the surviving entity of such merger), Back Yard Burgers, Inc., would be the Borrower.
Sponsors    Each of Cherokee Advisors, LLC and Pharos Capital Group, LLC.
Lender    Harbert Mezzanine Partners II, L.P.
Amount    Up to $7,000,000 senior subordinated second lien term loan and an equity co-investment of $1,000,000.
Term/Amortization    5 years. Interest only. Prepayment premium of 4% in Year 1, 3% in Year 2 and 2% in Year 3.
Loan    Senior Subordinated Second Lien Term Loan.
Collateral    Second priority perfected security interests and liens to secure all obligations of Borrower and Guarantors to Lender upon all of Borrower’s and Guarantors’ present and future assets, including all accounts, general intangibles, chattel paper, documents, instruments, supporting obligations, letter-of-credit rights, deposit accounts (subject to certain exceptions for deposit accounts in which de minimis balances are maintained), investment property, inventory, equipment (other than any vehicle, to the extent perfection of a security interest in such vehicle would require compliance with any certificate of title statute), fixtures and real property, and all products and proceeds thereof, a pledge of all of the equity interests in subsidiaries of Borrower and Guarantors, and a pledge of all of the equity interests in Merger Sub and Borrower owned at any

  

time by BBAC (the “Collateral”), provided that the Collateral will not include any rights or interests of Borrower or Guarantor in any contract if, under the terms of such contract or any applicable law with respect thereto, the valid grant of a security interest or other lien therein to Lender is prohibited and such prohibition has not been or is not waived or the consent of the other party to such contract has not been or is not otherwise obtained or under applicable law such prohibition cannot be waived, and provided further that the foregoing exclusion shall in no way be construed (i) to apply if any such prohibition is ineffective or unenforceable under the UCC (including Sections 9-406, 9-407, 9-408 or 9-409) or any other applicable law or (ii) so as to limit, impair or otherwise affect Lender’s unconditional continuing security interest in and lien upon any rights or interests of Borrower or any Guarantor in or to monies due or to become due under any such contract (including any accounts).

 

Notwithstanding the foregoing, the Collateral will not include any interest of Borrower or any Guarantor as a tenant or lessee of any real property. In addition, Lender agrees not to record a mortgage, deed of trust or other security deed on any properties listed on Schedule 1 attached hereto, which are intended to be subject to a sale-leaseback transaction within 120 days after the closing date (the “Sale-Leaseback Properties”), provided that, with respect to each such Sale-Leaseback Property: (a) on the closing date, Borrower shall execute and deliver to Lender a mortgage, deed of trust or other security deed otherwise in accordance with the terms hereof, (b) on the closing date, Borrower shall execute and deliver to Lender a negative pledge agreement in form and substance satisfactory to Lender, which Lender shall be entitled, at Borrower’s expense, to record in the appropriate real estate recording office at closing, (c) Lender shall be entitled to record such mortgage, deed of trust or other security deed, at Borrower’s expense, upon the sooner to occur of 120 days after the closing date (if Borrower has not consummated a sale-leaseback transaction with respect to such Sale-Leaseback Property), or the date that a default or event of default occurs (subject to any applicable cure periods), and (d) on the closing date, Lender shall have received satisfactory results of a title search.

 

The obligations secured may include hedging and bank product obligations of Borrower and Guarantors.

 

Prior to the closing of the transaction set forth herein, Borrower, each Guarantor and BBAC agree that Lender is irrevocably and unconditionally authorized to file UCC financing statements naming Lender, as secured party, and Borrower, each Guarantor or BBAC, as debtor, with respect to

   the Collateral (provided that, with respect to BBAC, such UCC financing statement shall list as collateral only the equity interests in Merger Sub and Borrower owned by BBAC). Lender agrees to terminate such filings, at the applicable obligor’s expense, promptly upon Lender’s receipt of written request therefor after September 30, 2007 (or after termination of the Commitment Letter if sooner), if the transactions contemplated hereby have not closed on or before such date.
Guarantees    Obligations under the Loan will be guaranteed by all domestic subsidiaries of the Borrower and any intermediate parent company of the Borrower (together, the “Guarantors”), which guarantees shall become effective only upon consummation of the merger. BBAC will provide only a non-recourse pledge of its equity interests in Merger Sub and, simultaneously with the consummation of the aforementioned merger, the Target and any intermediate parent company.
Real Estate and Franchise Release Provisions   

After the closing date, Borrower may request that Lender consent to the sale of certain real estate and franchises of Borrower and Guarantors and that Lender release its liens therein. Any such sale and release of liens shall be subject to Lender’s consent, which consent shall not be unreasonably withheld, and Lender may consider, among other factors at the time of any such request, the nature of the transaction, the amount of the term loans then outstanding, the amount of term loans to be repaid from the proceeds of such sale, and the value of the other remaining collateral after giving effect to such sale.

 

Borrower and Guarantors shall not be permitted to sell any such real estate or franchises or to request Lender’s release of liens therein, if any default or event of default exists at the time of such proposed sale or would result therefrom.

Funding Fee    2.0% of the initial principal balance of the Notes (the “Funding Fee”) payable at closing.
Visitation Rights    Until such time as the Notes are repaid in full, the Lender will be entitled to send one representative, which shall be designated by the Lenders holding a majority of the Notes, to attend all meetings of the Board of Directors (and committees thereof), or similar governing body, of the Company (and its subsidiaries) as an observer (subject to customary exceptions) without the right to vote. Such representative will be entitled to receive copies of all materials prepared for such meetings and will be reimbursed by the Company for all reasonable expenses incurred in connection with attending such meetings.

Coupon    17.00% per annum, comprised of (i) 12.00% per annum, payable monthly in cash in arrears by automatic bank draft and (ii) 5.00% per annum, payable-in-kind and compounded monthly; provided, that Borrower may, at its election from time to time, pay all or any portion of the interest attributable to the aforementioned 5.00% per annum in cash rather than in-kind. Interest will be computed on the basis of a 360-day year, calculated for the actual number of days elapsed. At the beginning of each calendar month, the then outstanding principal balance of the Loan shall be increased by an amount (the “PIK Amount”) equal to the difference between: (i) interest accruing on the principal balance and (ii) interest paid in cash on the principal balance. At the end of each calendar month, interest accrued and interest paid shall be calculated on the then outstanding principal balance of the Notes, as increased by all PIK Amounts and decreased by all principal repayments and prepayments, with the end result that interest shall be compounded monthly.
Equity Co-Investment    Subject to the satisfaction of the terms and conditions of the definitive documents, Lender shall invest $1,000,000 in BBAC and will become a Class A Member in BBAC with such rights and obligations as specified in the Second Amended and Restated Operating Agreement of BBAC. No consideration has or will be paid to any equityholder of BBAC, in their capacity as an equityholder, other than as set forth in the Second Amended and Restated Operating Agreement of BBAC.
Conditions to Closing    The closing and funding of the Loan shall be subject to the conditions listed on Exhibit A attached hereto and such other conditions which are customary for financings of this type, and which are materially consistent with the conditions otherwise set forth herein.

Representations, Warranties

and Covenants

    Those customarily found in investment agreements for similar financings and any additional representations, warranties, and covenants reasonably deemed appropriate by the Lender in the context of the proposed transaction, and where applicable subject to baskets to be mutually agreed upon. Covenants restricting additional indebtedness (including an anti-layering covenant), asset sales (excluding the Sale-Leaseback Properties and the sale of corporate stores), affiliate transactions (but allowing the payment of salaries and incentive compensation to employees of Borrower who might also be investors in, or employees of, Cherokee Advisors, LLC, or BBAC), payments or distributions to equity and customary restrictions on amendments or modifications to the Senior Credit Facility shall

  

also be included. All payments, on account of borrowed funds and dividends and/or distributions on account of equity (but not including cash payment for the purchase price of shares made to effectuate the merger of the Merger Sub into Target) to former or existing equity holders (and their affiliates) of the Target or its predecessors shall be subject to (x) restrictions to be determined and (y) a subordination agreement in form and substance reasonably satisfactory to the Lender; provided however, on and after twelve months following the closing date, Borrower would be permitted to make annual cash dividends to BBAC (for further distribution to the holders of Series A Preferred shares of BBAC), so long as (a) no default or event of default is in existence or would result therefrom, (b) Borrower demonstrates pro forma compliance with the Fixed Charge Coverage Ratio after giving effect to each such dividend, (c) the Senior Debt Leverage Ratio, after giving effect to each such dividend, would be less than 3.50x, and (d) the aggregate amount of such dividends does not exceed, in any year, $1,200,000.

 

In addition, in consideration of Lender’s agreement not to require BBAC to guaranty the Loan, and without limiting the generality of any of the foregoing, Borrower, each Guarantor and BBAC acknowledge and agree that Borrower and Guarantors shall not be permitted to (i) transfer, sell or otherwise dispose of any of their assets to BBAC or any subsidiary of BBAC, that is not a Guarantor, (ii) pay any dividends, distributions, redemptions, repurchases or other amounts in respect of the equity interests of Merger Sub owned by BBAC, except as expressly provided in the preceding paragraph, or (iii) make any loans to or other investments in BBAC or any subsidiary of BBAC that is not a Guarantor, or receive any loans from BBAC or any such subsidiary. In no event shall BBAC be permitted to grant in favor of any person, other than Lender or Senior Lender (as defined below), a lien or security interest in any of the equity interests of Merger Sub owned by BBAC.

 

Such representations and covenants will generally conform to the analogous provisions of the Senior Credit Facility (except as they relate to equity co-investment matters and the covenants described above) and shall terminate upon repayment of the Notes (leaving Lender (and any other permitted holders of the equity co-investment) with only such rights as are afforded Class A Members under the BBAC Second Amended and Restated Operating Agreement).

Financial Covenants   

The definitive loan agreement shall include standard and reasonable financial covenants customary for a debt financing of this type. Including but not limited to, which shall be tested quarterly and generally conform to the financial covenants contained in the Senior Credit Facility:

 

(1)    Minimum Adjusted EBITDA, measured as of the last day of each fiscal quarter

 

(2)    Fixed Charge Coverage Ratio, measured as of the last day of each fiscal quarter: (Adjusted EBITDAR minus maintenance capex minus cash taxes minus cash dividends)/(scheduled principal payments plus interest plus annual cash rent)

 

(3)    Total Debt Leverage Ratio, measured as of the last day of each fiscal quarter: (Total Funded Debt including Capital Leases minus cash on hand/Adjusted EBITDA)

 

(4)    Senior Debt Leverage Ratio, measured as of the last day of each fiscal quarter: (Senior Funded Debt including Capital Leases minus cash on hand/Adjusted EBITDA)

 

(5)    Maximum annual growth/remodel capital expenditures: measured as of the last day of each fiscal quarter to be defined and amounts to be set in a manner reasonably satisfactory to Lender and Borrower.

 

The required covenant levels (other than covenant levels relating to the Maximum annual growth/remodel capital expenditures) for each fiscal quarter of Borrower on a consolidated basis are set forth on Exhibit B. The financial covenants shall be calculated so as to give pro forma effect to any asset disposition (including, without limitation, the sale/leaseback transactions) occurring during the applicable period as if such disposition occurred at the beginning of the period.

Equity Covenants    Events of Default under the Financial Covenants will include equity cure rights where, to avoid default, the Borrower may receive dollar for dollar EBITDA credit from new cash from equity issuances to BBAC.
Reporting Requirements    To include, without limitation, (i) monthly unaudited financial statements and operational summaries (45 days after the end of each fiscal month), (ii) annual audited financial statements, (iii) annual financial and operational budgets/projections and (iv) other financial reporting as reasonably required by Lender. Notwithstanding the foregoing, reporting requirements, with the exception of any and all reporting requirements mandated by the Small Business Administration, shall be no more burdensome than those contained in the Senior Credit Facility Documents.

Subordination/Intercreditor    The Notes will be subordinated pursuant to a subordination and intercreditor agreement (the “Intercreditor Agreement”) on customary terms for financings of this type reasonably acceptable to the Lender only to debt arising under the first lien credit facility (the “Senior Credit Facility”) with the provider thereof in a maximum principal amount to be agreed upon (as reduced by reductions of principal or committed revolver capacity), and senior to all other indebtedness of the Borrower and the Guarantors.
Assignments    Lender shall have the right at any time to sell and assign the Notes in accordance with customary terms; provided that, until such time as there shall have occurred a default or an event of default, Borrower’s consent to assignments to non-affiliates of the Lender shall be required, such consent not to be unreasonably withheld.
Expenses and Indemnification   

The Company and/or the Borrower shall pay all reasonable expenses of Lender, including but not limited to attorneys’ fees and other out-of-pocket expenses, associated with the closing of the proposed Loan (except with respect to the financial review as contemplated in the related commitment letter and subject to application of the balance of the “Working Fee,” if any, as contemplated in the related commitment letter, which shall be paid by the Lender). The Company shall be liable for and shall pay to Lender all such expenses, regardless of whether or not the Loan closes, including the aforementioned financial review if the Loan does not close.

 

The Company shall indemnify the Lender and hold it harmless against all claims, losses , liabilities, and expenses (including reasonable fees and disbursements of counsel) arising out of or relating to the proposed financing contemplated hereby and the other transactions connected therewith, except (i) to the extent of Lender’s gross negligence or willful misconduct that directly relates to the proposed financing or (ii) any diminution in value of the securities purchased pursuant to the equity co-investment.

Use of Proceeds    Acquisition capital.
Confidentiality    Any disclosure to a third party (other than to the Sponsors and the Sponsor’s investors, the Company and its Subsidiaries, and their respective senior executive officers, boards of directors, managers, members, legal counsel, accountants and financial advisors), without the Lender’s consent, is strictly prohibited; provided, however, that the Company may, to the extent it reasonably believes it is required to do so, publicly disclose this term sheet and the related commitment letter as part of any filing made by the Company pursuant to Section 13(d) of the Securities Exchange Act of 1934.

Lenders’ Counsel    Moore & Van Allen PLLC
Governing Law and Forum    State of New York, without regard to conflict of law principles

This Term Sheet does not reference all of the terms, conditions, representations, warranties, covenants, and other provisions which shall be contained in the definitive documentation for the Notes and the transactions contemplated thereby but which shall not be inconsistent with the terms contained herein. The information herein is considered confidential and shall not be distributed or discussed with any outside party other than as described herein and in the accompanying Commitment Letter.

SCHEDULE 1

List of Sale-Leaseback Properties

Fourteen (14) parcels of real estate of Borrower in the following locations:

Panama City, FL

Southaven, MS

Germantown, TN

Memphis, TN

North Little Rock, AR

Destin, FL

Olive Branch, MS

Cordova, TN

Fort Walton Beach, FL

Memphis, TN

Jackson, TN

Little Rock, AR

Crestview, FL

Jonesboro, AR

EXHIBIT A

CONDITIONS TO CLOSING

In addition to the conditions to closing set forth in the Commitment Letter and in the Term Sheet, the closing and funding of the Loan shall be subject to satisfaction of conditions customary for financings of this nature, including, without limitation, the following:

 

1. The Total Senior Debt of Company on a consolidated basis (including the Senior Credit Facility, but excluding existing capital leases) at closing not to exceed $18,500,000.

 

2. Receipt by Lender of Target’s 10Q filing for Q1 2007, most recent internal monthly financial statements, and historical stock option review. Lender shall have also received a proforma closing balance sheet, adjusted to give effect to the transaction contemplated hereby.

 

3. Lender shall be reasonably satisfied, based on financial statements (actual and pro forma), projections and other evidence provided by Company, or requested by Lender, that Company after incurring the indebtedness contemplated by the Loan, will be solvent, able to satisfy its obligations as they mature and adequately capitalized.

 

4. Except to the extent otherwise provided above with respect to Sale-Leaseback Properties, with respect to each parcel of real property owned by Borrower or any Guarantor, Lender shall have received, no later than 15 days prior to the closing date, such customary appraisals, environmental reports, surveys, and flood zone certifications as Lender may require in its reasonable discretion, and at the closing, the Borrower or applicable Guarantor shall execute and deliver to Lender (or cause to be executed and delivered to Lender): (a) a mortgage, deed of trust or other security deed with respect to each such parcel of owned real property, (b) an opinion letter of local counsel to Borrower or such Guarantor in each state in which a mortgage, deed of trust or other security deed is to be recorded, (c) a commitment for the issuance of a lender’s policy of title insurance covering Lender’s interest under each such mortgage, deed of trust or other security deed, in an amount not less than 110% of the appraised value of such real property, and (d) an environmental indemnity agreement with respect to such real property, in each case, in form and substance satisfactory to the Lender in all respects.

 

5. No material adverse change in the business, operations, profits or assets of Borrower, Guarantors or Target shall have occurred since the date of the most recent financial statements received by Lender or its latest field examination and no material pending litigation, proceeding, bankruptcy or insolvency, injunction, order or claims with respect to Borrower, Guarantors or Target shall exist.

 

6. The preparation, execution and delivery of a senior credit agreement with the provider thereof (“Senior Lender”) and other documents executed in connection therewith (collectively, with the credit agreement, the “Senior Credit Facility Documents”) mutually acceptable to the Company and Lender, consistent with the terms and conditions as outlined in the commitment letter and term sheet or otherwise reasonably acceptable to Company and the Lender.

 

7.

There being no order or injunction or pending litigation in which there is a reasonable possibility of a decision which would have a material adverse effect on Company, Target and

 

their respective subsidiaries taken as a whole, and no pending litigation seeking to enjoin or prevent the transactions contemplated hereby that could reasonably be expected to impose materially adverse conditions or which could reasonably be expected to have a material adverse effect upon the consummation of the Acquisition.

 

8. Lender’s receipt of satisfactory corporate approval of the acquisitions and the financing as well as customary opinions of counsel reasonably satisfactory to Lender. All governmental, regulatory and other third-party approvals and consents required by the Acquisition Agreement with respect to the proposed transactions shall have been obtained and shall be final and non-appealable. The acquisition shall have been consummated in compliance with applicable law.

 

9. Lender shall be satisfied with the terms, conditions and the amount of its Equity Co-Investment.

Exhibit B

Financial Covenants

 

Quarterly
Period End		    Adjusted
EBITDA		    Senior Debt
Leverage
Ratio		     Fixed Charge
Coverage
Ratio		     Total Debt
Leverage
Ratio		  
Q3 - 2007    $ 3,250,000    4.75 x   1.05 x   6.75 x
Q4 - 2007    $ 3,250,000    4.75 x   1.05 x   6.75 x
Q1 - 2008    $ 3,250,000    4.25 x   1.05 x   6.25 x
Q2 - 2008    $ 3,750,000    4.25 x   1.05 x   5.75 x
Q3 - 2008    $ 3,750,000    4.25 x   1.10 x   5.75 x
Q4 - 2008    $ 3,750,000    4.25 x   1.10 x   5.75 x
Q1 - 2009    $ 3,750,000    3.25 x   1.10 x   4.75 x
Q2 - 2009    $ 3,750,000    3.25 x   1.10 x   4.75 x
Q3 - 2009    $ 3,750,000    3.25 x   1.15 x   4.75 x
Q4 - 2009    $ 3,750,000    3.25 x   1.15 x   4.75 x
Q1 - 2010    $ 3,750,000    2.25 x   1.15 x   3.75 x
Q2 - 2010    $ 3,750,000    2.25 x   1.15 x   3.75 x
Q3 - 2010    $ 3,750,000    2.25 x   1.15 x   3.75 x
Q4 - 2010    $ 3,750,000    2.25 x   1.15 x   3.75 x
Q1 - 2011    $ 3,750,000    2.25 x   1.15 x   3.75 x
Q2 - 2011    $ 3,750,000    2.25 x   1.15 x   3.75 x

Exhibit C

Definition of Adjusted EBITDA

“Adjusted EBITDA” means, at any date of determination, an amount equal to consolidated net income of Borrower and it’s subsidiaries on a consolidated basis determined in accordance with GAAP for the most recently completed four fiscal quarters (the “Measurement Period”), plus (without duplication) the following to the extent deducted in calculating consolidated net income for such Measurement Period (i) depreciation and amortization expense, (ii) consolidated interest charges, (iii) consolidated restaurant preopening costs in an amount not to exceed $130,000 per year, (iv) non-cash rent expense (v) non-cash compensation expense, (vi) non-recurring expenses (or minus non-recurring income items) reducing (or in the case of non-recurring income, increasing) such consolidated net income which do not represent a cash item in such a period or any future period, (vii) income tax paid or payable (less any income tax credits received) for such period, determined in accordance with GAAP (in each case of or by Borrower and it’s subsidiaries for such Measurement Period), (viii) fees and out-of-pocket expenses incurred and actually paid by Borrower in connection with the Loan, the merger and the senior loan facilities, in an aggregate amount not to exceed $1,500,000, (ix) one-time option review costs incurred during the operating period ending December 31, 2006, such amount not to exceed $350,000, (x) one-time private company savings not to exceed $250,000, minus (xi) one-time $350,000 for selected, underperforming franchisees.

EX-99.M 4 dex99m.htm FORM OF STOCKHOLDER VOTING AGREEMENT Form of Stockholder Voting Agreement

Exhibit M

STOCKHOLDER VOTING AGREEMENT

THIS STOCKHOLDER VOTING AGREEMENT (this “Agreement”) is made and entered into as of June 10, 2007, by and among BBAC, LLC, a Delaware limited liability company (“Parent”), BACK YARD BURGERS, INC., a Delaware corporation (the “Company”), and the undersigned stockholder (“Stockholder”) of the Company.

RECITALS

A. Concurrently with the execution and delivery hereof, Parent, BBAC Merger Sub, INC., a Delaware corporation and a direct wholly owned subsidiary of Parent (“Merger Sub”), and the Company are entering into an Agreement and Plan of Merger of even date herewith (as it may be amended or supplemented from time to time pursuant to the terms thereof, the “Merger Agreement”), which provides for the merger (the “Merger”) of Merger Sub with and into the Company in accordance with its terms.

B. Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of shares of each class of capital stock of the Company as is indicated on the signature page of this Agreement.

C. In consideration of the execution and delivery of the Merger Agreement by Parent and Sub, Stockholder desires to agree to vote the Shares (as defined herein) over which Stockholder has voting power so as to facilitate the consummation of the Merger.

NOW, THEREFORE, intending to be legally bound, the parties hereto hereby agree as follows:

1. Certain Definitions.

(a) Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. For all purposes of and under this Agreement, the following terms shall have the following respective meanings:

“Constructive Sale” means with respect to any security, a short sale with respect to such security, entering into or acquiring an offsetting derivative contract with respect to such security, entering into or acquiring a futures or forward contract to deliver such security or entering into any other hedging or other derivative transaction that has the effect of either directly or indirectly materially changing the economic benefits and risks of ownership.

“Shares” means (i) all shares of capital stock of the Company owned, beneficially or of record, by Stockholder as of the date hereof, and (ii) all additional shares of capital stock of the Company acquired by Stockholder, beneficially or of record, during the period commencing with the execution and delivery of this Agreement and expiring on the Expiration Date (as such term is defined in Section 11 below).

“Transfer” means, with respect to any security, the direct or indirect assignment, sale, transfer, tender, exchange, pledge, hypothecation, or the grant, creation or suffrage of a lien, security interest or encumbrance in or upon, or the gift, placement in trust, or the Constructive Sale or other disposition of such security (including transfers by testamentary or intestate succession or otherwise by operation of law) or any right, title or interest therein (including, but not limited to, any right or power to vote to which the holder thereof may be entitled, whether such right or power is granted by proxy or otherwise), or the record or beneficial ownership thereof, the offer to make such a sale, transfer,

Constructive Sale or other disposition, and each agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing.

2. Transfer and Voting Restrictions.

(a) At all times during the period commencing with the execution and delivery of this Agreement and expiring on the Expiration Date, Stockholder shall not, except in connection with the Merger or as the result of the death of Stockholder, Transfer any of the Shares, or discuss, negotiate, make an offer or enter into an agreement, commitment or other arrangement with respect thereto.

(b) Stockholder understands and agrees that if Stockholder attempts to Transfer, vote or provide any other person with the authority to vote any of the Shares other than in compliance with this Agreement, the Company shall not, and Stockholder hereby unconditionally and irrevocably instructs the Company to not, (i) permit any such Transfer on its books and records, (ii) issue a new certificate representing any of the Shares or (iii) record such vote unless and until Stockholder shall have complied with the terms of this Agreement.

(c) From and after the date hereof, except as otherwise permitted by this Agreement or by order of a court of competent jurisdiction, Stockholder will not commit any act that could restrict or affect his legal power, authority and right to vote all of the Shares then owned of record or beneficially by him or otherwise prevent or disable Stockholder from performing any of his obligations under this Agreement. Without limiting the generality of the foregoing, except for this Agreement and as otherwise permitted by this Agreement, from and after the date hereof, Stockholder will not enter into any voting agreement with any person or entity with respect to any of the Shares, grant any person or entity any proxy (revocable or irrevocable) or power of attorney with respect to any of the Shares, deposit any of the Shares in a voting trust or otherwise enter into any agreement or arrangement with any person or entity limiting or affecting Stockholder’s legal power, authority or right to vote the Shares in favor of the approval of the Proposed Transaction (as such term is defined in Section 3 below).

3. Agreement to Vote Shares.

(a) Prior to the Expiration Date, subject to the terms and conditions hereof, at every meeting of the stockholders of the Company called, and at every adjournment or postponement thereof, and on every action or approval by written consent of the stockholders of the Company, Stockholder (in Stockholder’s capacity as such) shall appear at the meeting or otherwise cause the Shares to be present thereat for purposes of establishing a quorum and, to the extent not voted by the persons appointed as proxies pursuant to this Agreement, vote (i) in favor of approval of the Merger, the Merger Agreement and the other transactions contemplated thereby (collectively, the “Proposed Transaction”), (ii) against the approval or adoption of any proposal made in opposition to, or in competition with, the Proposed Transaction, and (iii) against any of the following (to the extent unrelated to the Proposed Transaction): (A) any merger, consolidation or business combination involving the Company or any of its Subsidiaries other than the Proposed Transaction; (B) any sale, lease or transfer of all or substantially all of the assets of the Company or any of its Subsidiaries; (C) any reorganization, recapitalization, dissolution, liquidation or winding up of the Company or any of its Subsidiaries; or (D) any other action that is intended, or could reasonably be expected to result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or of Stockholder under this Agreement or otherwise impede, interfere with, delay, postpone, discourage or adversely affect the consummation of the Proposed Transaction (each of (ii) and (iii), a “Competing Transaction”).

(b) If Stockholder is the beneficial owner, but not the record holder, of the Shares, Stockholder agrees to take all actions necessary to cause the record holder and any nominees to vote all of the

Shares in accordance with Section 3; provided, however, that to the extent Stockholder’s beneficial ownership does not include the right or power to vote shares beneficially owned, Stockholder will be obligated only to use reasonable best efforts to cause the record holder and any nominee to vote such shares in accordance with Section 3.

4. Grant of Irrevocable Proxy.

(a) Stockholder hereby irrevocably (to the fullest extent permitted by law) grants to, and appoints, Parent and each of its executive officers and any of them, in their capacities as officers of Parent (the “Grantees”), Stockholder’s proxy and attorney-in-fact (with full power of substitution and re-substitution), for and in the name, place and stead of Stockholder, to vote the Shares, to instruct nominees or record holders to vote the Shares, or grant a consent or approval in respect of such Shares in accordance with Section 3 hereof and, in the discretion of the Grantees with respect to any proposed adjournments or postponements of any meeting of Stockholders at which any of the matters described in Section 3 hereof is to be considered.

(b) Stockholder represents that any proxies heretofore given in respect of Stockholder’s Shares that may still be in effect are not irrevocable, and such proxies are hereby revoked.

(c) Stockholder hereby affirms that the irrevocable proxy set forth in this Section 4 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of Stockholder under this Agreement. Stockholder hereby further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked except as provided in subparagraph (e) below. Stockholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 212 of the Delaware General Corporation Law.

(d) The Grantees may not exercise this irrevocable proxy on any other matter except as provided above. Stockholder may vote the Shares on all matters.

(e) Parent may terminate this proxy with respect to Stockholder at any time at its sole election by written notice provided to Stockholder. Notwithstanding any other provision herein to the contrary, the proxy granted herein shall be automatically revoked upon termination of the Agreement in accordance with its terms.

5. No Solicitation. Stockholder, in his capacity as a Stockholder, shall not directly or indirectly, (i) solicit, initiate, encourage, induce or facilitate the making, submission or announcement of any Acquisition Proposal or take any action that could reasonably be expected to lead to an Acquisition Proposal, (ii) furnish any information regarding any of the Company or any of its Subsidiaries to any Person in connection with or in response to an Acquisition Proposal or an inquiry or indication of interest that could reasonably be expected to lead to an Acquisition Proposal, (iii) engage in discussions or negotiations with any Person with respect to any Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into any letter of intent or similar document or any Contract contemplating or otherwise relating to any Acquisition Transaction.

6. Action in Stockholder Capacity Only. Stockholder makes no agreement or understanding herein as a director or officer of the Company. Stockholder signs solely in his capacity as a record holder and beneficial owner, as applicable, of Shares, and nothing herein shall limit or affect any actions taken in his capacity as an officer or director of the Company.

7. Representations and Warranties of Stockholder.

(a) Stockholder hereby represents and warrants to Parent as follows: (i) Stockholder is the beneficial or record owner of the shares of capital stock of the Company indicated on the signature page of this Agreement free and clear of any and all pledges, liens, security interests, mortgages, claims, charges, restrictions, options, title defects or encumbrances; (ii) Stockholder does not beneficially own any securities of the Company other than the shares of capital stock and rights to purchase shares of capital stock of the Company set forth on the signature page of this Agreement; (iii) Stockholder has full power and authority to make, enter into and carry out the terms of this Agreement and to grant the irrevocable proxy as set forth in Section 4; and (iv) this Agreement has been duly and validly executed and delivered by Stockholder and constitutes a valid and binding agreement of Stockholder enforceable against him in accordance with its terms, subject to bankruptcy, insolvency, moratorium and other laws affecting the rights of creditors, generally, and to general principles of equity. Stockholder agrees to notify Parent promptly of any additional shares of capital stock of the Company that Stockholder becomes the beneficial owner of after the date of this Agreement.

(b) As of the date hereof and for so long as this Agreement remains in effect (including as of the date of the Company Stockholders’ Meeting, which, for purposes of this Agreement, includes any adjournment or postponement thereof), except for this Agreement or as otherwise permitted by this Agreement, Stockholder has full legal power, authority and right to vote all of the Shares then owned of record or beneficially by him, in favor of the approval and authorization of the Proposed Transaction without the consent or approval of, or any other action on the part of, any other person or entity (including, without limitation, any governmental entity). Without limiting the generality of the foregoing, Stockholder has not entered into any voting agreement (other than this Agreement) with any person or entity with respect to any of the Shares, granted any person or entity any proxy (revocable or irrevocable) or power of attorney with respect to any of the Shares, deposited any of the Shares in a voting trust or entered into any arrangement or agreement with any person or entity limiting or affecting his legal power, authority or right to vote the Shares on any matter.

(c) The execution and delivery of this Agreement and the performance by Stockholder of his agreements and obligations hereunder will not result in any breach or violation of or be in conflict with or constitute a default under any term of any agreement, judgment, injunction, order, decree, law, regulation or arrangement to which Stockholder is a party or by which Stockholder (or any of his assets) is bound, except for any such breach, violation, conflict or default which, individually or in the aggregate, would not impair or adversely affect Stockholder’s ability to perform his obligations under this Agreement or render inaccurate any of the representations made by him herein.

(d) Except as disclosed pursuant to the Merger Agreement, no investment banker, broker, finder or other intermediary is entitled to a fee or commission from Parent, Merger Sub or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of Stockholder.

(e) Stockholder understands and acknowledges that Parent, Merger Sub and the Company are entering into the Merger Agreement in reliance upon Stockholder’s execution and delivery of this Agreement and the representations and warranties of Stockholder contained herein.

8. Exchange of Shares; Waiver of Rights of Appraisal. If the Merger is consummated, the Shares shall, pursuant to the terms of the Merger Agreement, be exchanged for the consideration provided in the Merger Agreement. Stockholder hereby waives, and agrees to prevent the exercise of, any rights of appraisal with respect to the Merger, or rights to dissent from the Merger, that such Stockholder may have by virtue of his beneficial ownership of the Shares.

9. Regulatory Approvals. Each of the provisions of this Agreement is subject to compliance with applicable regulatory conditions and receipt of any required governmental authorization.

10. Confidentiality. Stockholder recognizes that successful consummation of the transactions contemplated by the Merger Agreement may be dependent upon confidentiality with respect to the matters referred to herein. In this connection, pending public disclosure thereof, and so that the Company may rely on the safe harbor provisions of Rule 100(b)(2)(ii) of Regulation FD, Stockholder hereby agrees not to disclose or discuss such matters with anyone not a party to this Agreement (other than its counsel and advisors, if any) without the prior written consent of Parent and the Company, except for disclosures Stockholder’s counsel advises are necessary in order to fulfill any legal requirement, in which event Stockholder shall give notice of such disclosure to Parent and the Company as promptly as practicable so as to enable Parent and the Company to seek a protective order from a court of competent jurisdiction with respect thereto.

11. Termination. This Agreement shall terminate and be of no further force or effect whatsoever as of the earliest of (i) such date and time as the Merger Agreement shall have been validly terminated pursuant to the terms of Article 10 thereof (ii) any material reduction in the amount, or any change in the form, of the consideration to be delivered to Stockholders pursuant to the Merger Agreement without the written consent of Stockholder, or (iii) the Effective Time, or (iv) execution by all parties hereto of a written document terminating this agreement (the “Expiration Date”).

12. Miscellaneous Provisions.

(a) Amendments, Modifications and Waivers. No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by Parent, Company and Stockholder.

(b) Entire Agreement. This Agreement and the Merger Agreement constitute the entire agreement among the parties to this Agreement and supersede all other prior agreements and understandings, both written and oral, among or between any of the parties with respect to the subject matter hereof and thereof.

(c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof.

(d) Consent to Jurisdiction; Venue. In any action or proceeding between any of the parties arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement, each of the parties: (a) irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the state courts of the State of Delaware and to the jurisdiction of the United States District Court for the District of Delaware, and (b) agrees that all claims in respect of such action or proceeding may be heard and determined exclusively in any Delaware state or federal court sitting in the State of Delaware.

(e) WAIVER OF JURY TRIAL. EACH OF THE PARTIES IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

(f) Attorneys’ Fees. In any action at law or suit in equity to enforce this Agreement or the rights of any of the parties hereunder, the prevailing party in such action or suit shall be entitled to receive a reasonable sum for its attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.

(g) Assignment and Successors. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, including, without limitation, Stockholder’s estate and heirs upon the death of Stockholder, provided that except as otherwise specifically provided herein, neither this Agreement nor any of the rights, interests or obligations of the parties hereto may be assigned by any of the parties hereto without prior written consent of the other parties

hereto except that Parent, without obtaining the consent of any other party hereto, shall be entitled to assign this Agreement or all or any of its rights or obligations hereunder to any one or more Affiliates of Parent or any Person providing financing to Parent or Sub. No assignment by Parent under this Section 12(g) shall relieve Parent of its obligations under this Agreement. Any assignment in violation of the foregoing shall be void and of no effect.

(h) No Third Party Rights. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person (other than the parties hereto) any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

(i) Cooperation. Stockholder agrees to cooperate fully with Parent and to execute and deliver such further documents, certificates, agreements and instruments and to take such other actions as may be reasonably requested by Parent to evidence or reflect the transactions contemplated by this Agreement and to carry out the intent and purpose of this Agreement. Stockholder hereby agrees that the Company may publish and disclose in the Company Proxy Statement (including all documents filed with the SEC), such Stockholder’s identity and ownership of Shares and the nature of such Stockholder’s commitments, arrangements and understandings under this Agreement and may further file this Agreement in any filing made by Parent or the Company with the SEC relating to the Proposed Transaction.

(j) Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

(k) Time of Essence. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.

(l) Specific Performance; Injunctive Relief. The parties hereto acknowledge that Parent and the Company shall be irreparably harmed and that there shall be no adequate remedy at law for a violation of any of the covenants or agreements of Stockholder set forth in this Agreement. Therefore, Stockholder hereby agrees that, in addition to any other remedies that may be available to Parent or the Company, as applicable upon any such violation, such party shall have the right to enforce such covenants and agreements by specific performance, injunctive relief or by any other means available to such party at law or in equity without posting any bond or other undertaking.

(m) Notices. All notices, consents, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if (a) delivered to the appropriate address by hand or overnight courier (providing proof of delivery), or (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment confirmed with a copy delivered as provided in clause (a), in each case to the parties at the following address, facsimile or e-mail address (or at such other address, facsimile or e-mail address for a party as shall be specified by like notice): (i) if to Parent or the Company, to the address, e-mail address or facsimile provided in the Merger Agreement, including to the persons designated therein to receive copies; and (ii) if to Stockholder, to Stockholder’s address, e-mail address or facsimile shown below Stockholder’s signature on the last page hereof.

(n) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument, and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties; it being understood that all parties need not sign the same counterpart.

(o) Headings. The headings contained in this Agreement are for the convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

(p) Legal Representation. This Agreement was negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation thereof.

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed as of the date first above written.

 

PARENT:

    STOCKHOLDER:
BBAC, LLC   

 

   

 

By:    By:
Its:    Its:
   Address:
  

 

  

 

  

 

  

COMPANY:

    Telephone:

BACK YARD BURGERS, INC.

   

(___) _____-____________

Facsimile:

 

   

(___) _____-____________

E-Mail Address:

By:

   

Its:

   
  

Shares Beneficially Owned by Stockholder:

___________ shares of Company Common Stock

___________ shares of Company Preferred Stock

___________ Options to acquire Company Common Stock

 EX-99.N 5 dex99n.htm NAMES AND NUMBER OF SHARES OF COMMON STOCK Names and Number of Shares of Common Stock

EXHIBIT N

Names and Number of Shares of Common Stock owned by each Voting Holder

 

Voting Holder

    # of Shares  

Lattimore M. Michael

    477,323  

Joseph L. Weiss

    472,854  

Jim L. Peterson

    5,000  

W. Kurt Henke

    7,500  

William B. Raiford, III

    10,500  

Dane C. Andreeff

    390,347 *

Gina A. Balducci

    —    

Michael G. Webb

    7,800  

* Mr. Andreeff disclaims beneficial ownership of all of these shares, except to the extent of his pecuniary interest in them.

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