IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re BACK YARD BURGERS, INC., et al.1 Debtors.

(Jointly Administered)
Objection Deadline: November 1, 2012 at 4:00 p.m Hearing Date: November 8, 2012 at 1:30 p.m.

Chapter 11 Case No. 12-12882 (PJW)

MOTION OF THE DEBTORS FOR ENTRY OF AN ORDER AUTHORIZING THE DEBTORS TO REJECT CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES NUNC PRO TUNC AS OF THE PETITION DATE The above-captioned debtors and debtors-in-possession (collectively, the Debtors) hereby move the Court (the Motion) pursuant to section 365(a) of title 11 of the United States Code, 11 U.S.C. 101-1532 (the Bankruptcy Code) and Rule 6006 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules) for entry of an order: (a) authorizing the Debtors to reject certain executory contracts and unexpired leases, nunc pro tunc as of the Petition Date (as defined herein), and (b) providing any additional relief required in order to effectuate the foregoing. In support of this Motion, the Debtors respectfully state as follows: Status of the Case 1. On October 17, 2012 (the Petition Date), the Debtors commenced these cases

by filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code. 2. The Debtors have continued in possession of their properties and are operating

and managing their business as debtors-in-possession pursuant to sections 1107(a) and 1108 of

The Debtors in these chapter 11 Cases, along with the last four digits of each Debtors federal tax identification number, are: Back Yard Burgers, Inc. (7163), BYB Properties, Inc. (9046), Nashville BYB, LLC (6507) and Little Rock Back Yard Burgers, Inc. (9133). The mailing address of the Debtors is: St. Clouds Building, 500 Church Street, Suite 200, Nashville, TN 37219.

the Bankruptcy Code. 3. No request has been made for the appointment of a trustee or examiner, and a

creditors committee has not yet been appointed in these cases. Jurisdiction, Venue, and Statutory Predicates 4. The Court has jurisdiction over this Motion pursuant to 28 U.S.C. 157 and

1334. Venue is proper in this district pursuant to 28 U.S.C. 1408. This matter is core within the meaning of 28 U.S.C. 157(b)(2). 5. The statutory predicates for the relief sought herein are section 365(a) of the

Bankruptcy Code and Bankruptcy Rule 6006. Background 6. The Debtors are an established quick-service restaurant chain with approximately

90 locations concentrated in the Southeast United States. The Debtors operate company owned locations and maintain a franchise network of individually owned restaurants which collectively employ approximately five hundred and twelve (512) employees. Back Yard Burgers began as a single restaurant in Cleveland, Mississippi in 1987, and today, the Debtors pride themselves on having a strong reputation for offering big and bold backyard tastes served straight from the grill at value prices. The Debtors compete for business by offering black-angus hamburgers and chicken grilled on-site on charcoal grills, providing savory flavors most usually found only in neighborhood back yards. Meal offerings include chicken sandwiches, turkey burgers, hot dogs, salads, sides, and desserts; however, the main focus of the menu is centered on the Debtors premium Black Angus burgers. 7. The Debtors own and operate approximately 25 restaurants (excluding franchised

locations), positioned as quick-service dining destinations where families and children can enjoy

a wide variety of freshly prepared meals and desserts for lunch and dinner.

Restaurant

operations generated $18.4 million in revenue in the first eight (8) months of 2012 with a $2.4 million EBITDA loss. 8. The Debtors also have contracted with approximately forty-two (42) franchisees

to operate more than sixty-four (64) restaurants under franchise agreements. Franchisees are offered the right to operate a Back Yard Burgers restaurant for an upfront fee, and franchised locations are operated under strict guidelines to present and preserve a unified brand image. Franchising offers stable cash flows from the collection of royalties and product purchases, accounting for approximately $1.3 million in revenue in the first eight (8) months of 2012. 9. In the first nine months of 2012, the Debtors reported a 0.8 percent decline and

1.8 percent incline in same store sales of franchise and companyoperated stores, respectively. In the same segments, the Debtors reported declines of 4.0 percent and 5.7 percent, respectively, in 2011. These decreases were driven by a decline in guest traffic. 10. A more detailed factual background of the Debtors business and operations, as

well as the events precipitating the commencement of these cases, is fully set forth in the Declaration of James E. Boyd, Jr. in Support of the Debtors Chapter 11 Petitions and Requests for First Day Relief (the First Day Declaration), filed on the Petition Date and incorporated herein by reference. Relief Requested 11. By this Motion, the Debtors respectfully request entry of an order, substantially in

the form attached hereto, authorizing and approving the Debtors rejection of certain executory contracts (collectively, the Rejected Contracts)2 and unexpired leases of real property (the
2

The designation of any agreement on the Rejected Contracts list is not a determination or admission that such agreement is executory in nature.

Rejected Leases and, together with the Rejected Contracts, the Rejected Agreements), which are set forth on Exhibit A hereto, all nunc pro tunc to the Petition Date. The Debtors have determined it is in their best interests to close twenty locations, accordingly, most of the Rejected Agreements relate to the closed locations. The Debtors also seek to reject a contract which relates to certain security services. The Debtors have therefore decided to eliminate the unnecessary potential expenses related to maintaining the agreements. Copies of the Rejected Agreements are available upon reasonable request to counsel to the Debtors. Basis for Relief Requested A. Rejection of the Rejected Agreements is an Exercise of the Debtors Sound Business Judgment 12. Section 365(a) of the Bankruptcy Code provides in pertinent part: (a) Except as provided in section 765 and 766 of this title and in subsections (b), (c) and (d) of this section, the trustee, subject to the courts approval, may assume or reject any executory contract or unexpired lease of the debtor.

11 U.S.C. 365(a). 13. Rejection of an executory contract is appropriate where, in the exercise of the

debtors sound business judgment, the debtor determines that rejection of the contract would benefit the estate. See Sharon Steel Corp. v. Natl Fuel Gas Distribution Corp. (In re Sharon Steel Corp.), 872 F.2d 36, 40 (3d Cir. 1989). The decision to assume or reject an executory contract is a matter within the business judgment of the debtor. See, e.g., Natl Labor Relations Bd. v. Bildisco (In re Bildisco), 682 F.2d 72, 79 (3d Cir. 1982); see also Jr. Food Mart of Arkansas, Inc. v. Attebury (In re Jr. Food Mart of Arkansas, Inc.), 131 B.R. 116, 120 (Bankr. E.D. Ark. 1991) (approving the debtors decision in its business judgment to reject an employment contract).

14.

The Debtors have reviewed their revenues, general and administrative costs and

have identified certain executory contracts and unexpired leases that are no longer necessary and can therefore be rejected, resulting in a cost savings for the Debtors. As a part of this review, the Debtors determined, in the exercise of their sound business judgment, to reject the Rejected Agreements for the reasons that follow. 15. The Debtors have determined to reject that certain Commercial Sales

Proposal/Agreement (as amended or modified, the ADT Agreement) entered into on or around August 9, 2002 between ADT Security Services, Inc. (ADT) and Back Yard Burgers, Inc. Pursuant to the ADT Agreement, ADT provides certain security equipment and security monitoring services to the Debtors. The Debtors have determined that the ADT Agreement has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. On or about the Petition Date, the Debtors ceased using the ADT Agreement. Therefore, the Debtors request that the Court approve the rejection of the ADT Agreement, effective as of the Petition Date. 16. The Debtors have determined to reject that certain Professional Services

Agreement (as amended or modified, the Strategic Agreement) entered into on or around December 2, 2011 between Strategic Purchasing Services (SRS) and Back Yard Burgers, Inc. Pursuant to the Strategic Agreement, SRS is to develop, implement and manage a foodservice supply-chain purchasing program for the procurement and distribution of food, packaging, supplies, and smallwares. The Debtors have determined that the SRS Agreement has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. On or about the Petition Date the Debtors ceased using the Strategic Agremeent. Therefore, the Debtors request that the Court approve the rejection of the SRS Agreement,

effective as of the Petition Date. 17. The Debtors have determined to reject that certain Commercial Lease Agreement

(as amended or modified, the Shelby Drive Lease) entered into on or around August 23, 2001 between J. A. Curtis Companies, LLC and Back Yard Burgers, Inc. The Debtors have

determined that the Shelby Drive Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to

commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Shelby Drive Lease. The Debtors vacated the premises subject to the Shelby Drive Lease before the Petition Date and the filing of this Motion and have made arrangements to return the keys and security codes to J. A. Curtis Companies, LLC. Therefore, the Debtors request that the Court approve the rejection of the Shelby Drive Agreement, effective as of the Petition Date. 18. The Debtors have determined to reject that certain Ground Lease Agreement (as

amended or modified, the Austin Peay Lease) entered into on or around October 25, 1979, between Broadmoor Investment Corp. and Back Yard Burgers, Inc. The Debtors have

determined that the Austin Peay Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to

commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Austin Peay Lease. The Debtors vacated the premises subject to the Austin Peay Lease before the Petition Date and the filing of this Motion, and have made arrangements to return the keys and security codes to Broadmoor Investment Corp. Therefore, the Debtors request that the Court approve the rejection of the Austin Peay Lease, effective as of the Petition Date.

19.

The Debtors have determined to reject that certain Retail Shopping Center Lease

(as amended or modified, the Poplar Marney Lease) entered into on or around August 29, 2002, between Chickasaw Gardens, LLC. and Back Yard Burgers, Inc. The Debtors have determined that the Poplar Marney Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to

commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Poplar Marney Lease. The Debtors vacated the premises subject to the Poplar Marney Lease before the Petition Date and the filing of this Motion and have made arrangements to return keys and security codes to the Chickasaw Gardens, LLC. Therefore, the Debtors request that the Court approve the rejection of the Poplar Marney Lease, effective as of the Petition Date. 20. The Debtors have determined to reject that certain Lease Agreement (as amended

or modified, the Summer Lease) entered into on or around November 14, 1994, between Benjamin D. Rasner and Laurie H. Rasner and Back Yard Burgers, Inc. The Debtors have determined that the Summer Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Summer Lease. The Debtors vacated the premises subject to the Summer Lease before the Petition Date and the filing of this Motion and have made arrangements to return the keys and security codes to the Benjamin D. Rasner and Laura H. Rasner. Therefore, the Debtors request that the Court approve the rejection of the Summer Lease, effective as of the Petition Date. 21. The Debtors have determined to reject that certain Land and Building Lease

Agreement (as amended or modified, the Caraway Jonesboro Lease) entered into on or

around November 16, 2007, between Realty Income Corporation and Back Yard Burgers, Inc. The Debtors have determined that the Caraway Jonesboro Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed,

immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Caraway Jonesboro Lease. The Debtors vacated the premises subject to the Caraway Jonesboro Lease before the Petition Date and the filing of this Motion and returned the keys and security codes to Realty Income Corporation via overnight mail on October 15, 2012. Therefore, the Debtors request that the Court approve the rejection of the Caraway Jonesboro Lease, effective as of the Petition Date. 22. The Debtors have determined to reject that certain Build-To-Suit Lease

Agreement (as amended or modified, the Alexander Jonesboro Lease) entered into on or around January 11, 2001, between Elk Park, LLC and Back Yard Burgers, Inc. The Debtors have determined that the Alexander Jonesboro Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Alexander Jonesboro Lease. The Debtors vacated the premises subject to the Alexander Jonesboro Lease before the Petition Date and the filing of this Motion and returned the keys and security codes via overnight mail to Elk Park, LLC on October 15, 2012. Therefore, the Debtors request that the Court approve the rejection of the Alexander Jonesboro Lease, effective as of the Petition Date. 23. The Debtors have determined to reject that certain Lease Agreement (as amended

or modified, the Hickory Hill Lease) entered into on or around November 1, 1988, between William J. Webb and Double S. Development Corporation. The Debtors have determined that

the Hickory Hill Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Hickory Hill Lease. The Debtors vacated the premises subject to the Hickory Hill Lease before the Petition Date and the filing of this Motion, and have made arrangements to return the keys and security codes to William J. Webb. Therefore, the Debtors request that the Court approve the rejection of the Hickory Hill Lease, effective as of the Petition Date. 24. The Debtors have determined to reject that certain Lease Agreement (as amended

or modified, the Clarksville Lease) entered into on or around July 6, 2010, between Hometown Development, Inc. and Back Yard Burgers, Inc. The Debtors have determined that the Clarksville Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Clarksville Lease. The Debtors vacated the premises subject to the Clarksville Lease before the Petition Date and the filing of this Motion, and returned the keys and security codes to Hometown Development, Inc. The landlord has already changed the locks on the property and is in sole possession of the property. Therefore, the Debtors request that the Court approve the rejection of the Clarksville Lease, effective as of the Petition Date. 25. The Debtors have determined to reject that certain Ground Lease Agreement (as

amended or modified, the Millington Lease) entered into on or around November 14, 1991, between Millington Partners, Millington Partners, Ltd., and Back Yard Burgers, Inc. The

Debtors have determined that the Millington Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately

prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Millington Lease. The Debtors vacated the premises subject to the Millington before the Petition Date and the filing of this Motion, and have made arrangements to return the keys and security codes to Millington Partners, LLC. Therefore, the Debtors request that the Court approve the rejection of the Millington Lease, effective as of the Petition Date. 26. The Debtors have determined to reject that certain Land and Building Lease

Agreement (as amended or modified, the Jackson Lease) entered into on or around November 16, 2011, between Realty Income Corporation and Back Yard Burgers, Inc. The Debtors have determined that the Jackson Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Jackson Lease. The Debtors vacated the premises subject to the Jackson Lease before the Petition Date and the filing of this Motion, and returned the keys and security codes via overnight mail to Realty Income Corporation on October 15, 2012. Therefore, the Debtors request that the Court approve the rejection of the Jackson Lease, effective as of the Petition Date. 27. The Debtors have determined to reject that certain Lease Agreement (as amended

or modified, the Murfreesboro Lease) entered into on or around May 13, 2009, between July Realty Company and Back Yard Burgers, Inc. The Debtors have determined that the

Murfreesboro Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the

10

Murfreesboro Lease. The Debtors vacated the premises subject to the Murfreesboro Lease before the Petition Date and the filing of this Motion, and have made arrangements to return the keys and security codes to July Realty Company. Therefore, the Debtors request that the Court approve the rejection of the Murfreesboro Lease, effective as of the Petition Date. 28. The Debtors have determined to reject that certain Shopping Center Lease

Agreement (as amended or modified, the Hermitage Lease) entered into on or around August 11, 2010, between Hermitage Commons II, LLC and Back Yard Burgers, Inc. The Debtors have determined that the Hermitage Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Hermitage Lease. The Debtors vacated the premises subject to the Hermitage Lease before the Petition Date and the filing of this Motion, and have made arrangements to return the keys and security codes to counsel for Hermitage Commons II, LLC. Therefore, the Debtors request that the Court approve the rejection of the Hermitage Lease, effective as of the Petition Date. 29. The Debtors have determined to reject that certain Land and Building Lease

Agreement (as amended or modified, the Shackleford Lease) entered into on or around November 16, 2007, between Realty Income Corporation and Little Rock Back Yard Burgers, Inc. The Debtors have determined that the Shackleford Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed,

immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Shackleford Lease. The Debtors vacated the premises subject to the Shackleford Lease before the Petition Date and the filing of this Motion, and returned the keys and security codes to Realty Income Corporation via overnight mail on

11

October 14, 2012. Therefore, the Debtors request that the Court approve the rejection of the Shackleford Lease, effective as of the Petition Date. 30. The Debtors have determined to reject that certain Land and Building Lease

Agreement (as amended or modified, the McCain Lease) entered into on or around November 16, 2007, between Realty Income Corporation and Little Rock Back Yard Burgers, Inc. The Debtors have determined that the McCain Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the McCain Lease. The Debtors vacated the premises subject to the McCain Lease before the Petition Date and the filing of this Motion, and returned the keys and security codes to Realty Income Corporation via overnight mail on October 14, 2012. Therefore, the Debtors request that the Court approve the rejection of the McCain Lease, effective as of the Petition Date. 31. The Debtors have determined to reject that certain Amended and Restated Lease

Agreement (as amended or modified, the Cantrell Lease) entered into on or around April 17, 1995, between Tommy Hilburn and Karla Kay Hilburn and Little Rock Back Yard Burgers, Inc. The Debtors have determined that the Cantrell Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Cantrell Lease. The Debtors vacated the premises subject to the Cantrell Lease before the Petition Date and the filing of this Motion, and returned the keys and security codes to Tommy and Karla Kay Hilburn via overnight mail on October 14, 2012. Therefore, the Debtors request that the Court approve the rejection of the Cantrell Lease,

12

effective as of the Petition Date. 32. The Debtors have determined to reject that certain Lease Agreement (as amended

or modified, the Conway Lease) entered into on or around June 1, 1997, between 64/64 Partnership and Little Rock Back Yard Burgers, Inc. The Debtors have determined that the Conway Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Conway Lease. The Debtors vacated the premises subject to the Conway before the Petition Date and the filing of this Motion, and returned the keys and security codes to 64/64 Partnership via overnight mail on October 14, 2012. Therefore, the Debtors request that the Court approve the rejection of the Conway Lease, effective as of the Petition Date. 33. The Debtors have determined to reject that certain Lease Agreement (as amended

or modified, the Markham Lease) entered into on or around October 13, 1993, between Baird, Inc. and Little Rock Back Yard Burgers, Inc. The Debtors have determined that the Markham Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Markham Lease. The Debtors vacated the premises subject to the Markham Lease before the Petition Date and the filing of this Motion, and returned the keys and security codes to Baird, Inc via overnight mail on October 14, 2012. Therefore, the Debtors request that the Court approve the rejection of the Markham Lease, effective as of the Petition Date. 34. The Debtors have determined to reject that certain Lease Agreement (as amended

or modified, the Smyrna Lease) entered into on or around November 30, 2010, between

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Genie Place, LLC and Back Yard Burgers, Inc. The Debtors have determined that the Symrna Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Symrna Lease. The Debtors vacated the premises subject to the Symrna Lease before the Petition Date and the filing of this Motion, and have made arrangements to return the keys and security codes to Genie Place, LLC. Therefore, the Debtors request that the Court approve the rejection of the Symrna Lease, effective as of the Petition Date 35. The Debtors have determined to reject that certain Ground Lease Agreement (as

amended or modified, the Park Plaza Lease) entered into on or around August 31, 1993, between J.C. Michael and Back Yard Burgers, Inc. The Debtors have determined that the Park Plaza Lease has become unduly burdensome to the Debtors estates and does not provide a significant benefit to the estates. Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Park Plaza Lease. The Debtors vacated the premises subject to the Park Plaza Lease before the Petition Date and the filing of this Motion, and returned the keys and security codes to J.C. Michael via overnight mail on October 14, 2012. Therefore, the Debtors request that the Court approve the rejection of the Park Plaza Lease, effective as of the Petition Date. 36. The Debtors have determined to reject that certain Lease (as amended or

modified, the Broadway Lease) entered into on or around November 1, 1992, between R.M. Foster and Marilyn Foster and Shelby Foster and Francis Foster (collectively, the Fosters) and HRS, Inc. The Debtors have determined that the Broadway Lease has become unduly

burdensome to the Debtors estates and does not provide a significant benefit to the estates.

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Indeed, immediately prior to commencing these chapter 11 cases, the Debtors decided to cease operations at the location leased pursuant to the Broadway Lease. The Debtors vacated the premises subject to the Broadway before the Petition Date and the filing of this Motion, and returned the keys and security codes to the Fosters or one of their representatives via overnight mail on October 14, 2012. Therefore, the Debtors request that the Court approve the rejection of the Park Plaza Lease, effective as of the Petition Date. 37. The Debtors submit that rejection of the Rejected Agreements is justified under

the business judgment standard. As a result of the Debtors decision to close several locations and to file for bankruptcy, the Rejected Agreements have become unduly burdensome to the Debtors estates. Many of the Rejected Agreements represent leases of property at above-market rates. The Debtors are seeking to streamline their operations to the greatest extent possible while still preserving the value of the business to maximize such value for the Debtors estates. 38. The Debtors believe that potentially accruing administrative expenses on account

of the Rejected Agreements will not offer any additional value to their estates and, hence, the Rejected Agreements are appropriate for immediate rejection in order to relieve the burden on the Debtors estates. Rather, the Rejected Agreements impose an unnecessary burden at a time when the Debtors are experiencing liquidity restraints resulting from the filing of the chapter 11 cases. In this context, the Debtors, in their sound and reasonable business judgment, believe that the Rejected Contracts and Rejected Leases are no longer necessary for the Debtors business and that their rejection is in the best interests of the Debtors and their creditors. B. Nunc Pro Tunc Rejection is Appropriate 39. To avoid potentially incurring unnecessary administrative expenses relating to the

Rejected Agreements, the Debtors seek to reject each Rejected Contract and Reject Leases nunc

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pro tunc effective as of the Petition Date. Several courts have allowed the retroactive rejection of an executory contract or unexpired lease under section 365(a) of the Bankruptcy Code. See Republic Underwriters Ins. Co. v. DBSI Republic, LLC (In re DBSI, Inc.), 409 B.R. 720, 734 (Bankr. D. Del. 2009) (holding that a bankruptcy court may enter a lease rejection order with an effective date earlier than the date the order is entered); In re Chi-Chis, Inc., 305 B.R. 396, 399 (Bankr. D. Del. 2004) (court used equitable powers to determine whether to allow retroactive rejection of leases and subleases); see also In re Namco Cybertainment, Inc., Case No. 98-00173 (PJW) (January 21, 1998). 40. In Namco, while addressing the rejection of an unexpired non-residential real

property lease, this Court noted that an effective rejection date prior to the hearing to consider rejection is permissible when: (a) prior to the filing of the motion, the keys were surrendered, and the premises surrendered with an unequivocal statement to the landlord of abandonment; (b) the motion is served and filed on the landlord; (c) the motion states that the committee agrees with the motion; and (d) that the debtor acknowledges that it will not have the right to withdraw the motion prior to the hearing. Namco, Transcript of Proceeding, April 15, 1998 at 35. 41. In the instant matter, nunc pro tunc rejection of the Rejected Leases to the Petition The Debtors vacated the premises subject to the Rejected Leases (the

Date is proper.

Premises) before the Petition Date and the filing of this Motion, and have either returned the keys and security codes to the Premises at that time or have made arrangements to do so promptly. The Motion has been filed and served on the landlords for the Premises. The Debtors

16

acknowledge that they will not have the right to withdraw this Motion prior to the hearing on the Motion. Finally, an Official Committee of Unsecured Creditors has not yet been formed. Request for Deadline to File Rejection Damage Proofs of Claim 42. The Debtors also request that the Court require non-Debtor counterparties to the

Rejected Agreements to file any rejection damage proofs of claim by December 10, 2012 (approximately 34 days after entry of an order granting the relief requested in this Motion) (the Rejection Bar Date). The Debtors propose to (a) provide notice of the Rejection Bar Date to the non-Debtor counterparties to the Rejected Contracts by serving by pre-paid, first class mail, a notice substantially in the form of that attached hereto as Exhibit B within five days after entry of an order herein, and (b) file proof of service thereof. Bankruptcy Rule 6003 Satisfied and Request for Waiver of Stay 43. The Debtors further submit that because the relief requested in this Motion is

necessary to avoid immediate and irreparable harm to the Debtors for the reasons set forth herein and in the First Day Declaration, FED. R. BANKR. P. 6003 has been satisfied and the relief requested herein should be granted. 44. Specifically, FED. R. BANKR. P. 6003 provides: Except to the extent that relief is necessary to avoid immediate and irreparable harm, the court shall not, within 20 days after the filing of the petition, grant relief regarding the following: . . . (b) a motion to use, sell, lease, or otherwise incur an obligation regarding property of the estate, including a motion to pay all or part of a claim that arose before the filing of the petition, but not a motion under Rule 4001. 45. No court within the Third Circuit has interpreted the immediate and irreparable

harm language in the context of FED. R. BANKR. P. 6003 in any reported decision. The Third Circuit Court of Appeals, however, has interpreted the same language in the context of

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preliminary injunctions. In that context, the Third Circuit interpreted irreparable harm to mean a continuing harm that cannot be adequately redressed by final relief on the merits and for which money damages cannot provide adequate compensation. See, e.g., Norfolk S. Ry. Co. v. City of Pittsburgh, 235 Fed. Appx. 907, 910 (3d Cir. 2007) (citing Glasco v. Hills, 558 F.2d 179, 181 (3d Cir. 1977)). Further, the harm must be shown to be actual and imminent, not speculative or unsubstantiated. See, e.g., Acierno v. New Castle County, 40 F.2d 645, 653-55 (3d Cir. 1994). 46. The Debtors further seek a waiver of any stay of the effectiveness of the order

approving this Motion. Pursuant to FED. R. BANKR. P. 6004(h), [an] order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of ten (10) days after entry of the order, unless the court orders otherwise. As set forth above, the relief requested herein is essential to prevent irreparable damage to the Debtors operations, goingconcern value, and their efforts to pursue a sale or restructuring of their assets and liabilities. 47. Accordingly, the relief requested herein is appropriate under the circumstances

and under FED. R. BANKR. P. 6003 and 6004(h). Notice 48. Notice of this Motion has been given to the following parties or, in lieu thereof, to

their counsel, if known: (a) the Office of the United States Trustee for the District of Delaware; (b) counsel to Harbert Mezzanine Partners, L.P., as the Debtors prepetition lender; (c) counsel to Pharos Capital Partners II, L.P. and Pharos Capital Partners II-A, L.P., as the Debtors postpetition lenders; (d) creditors holding the thirty (30) largest unsecured claims as set forth in the consolidated list filed with the Debtors petitions; and (e) those parties requesting notice pursuant to Rule 2002. The Debtors submit that, in light of the nature of the relief requested, no other or further notice need be given.

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No Prior Request 49. other court. Conclusion WHEREFORE, the Debtors respectfully request that this Court enter an order granting the relief requested herein and that it grant the Debtors such other and further relief as is just and proper. No previous application for the relief sought herein has been made to this or any

Dated: October 22, 2012

GREENBERG TRAURIG, LLP

/s/ Dennis A. Meloro Dennis A. Meloro (DE Bar No. 4435) 1007 North Orange Street, Suite 1200 Wilmington, Delaware 19801 Telephone: (302) 661-7000 Facsimile: (302) 661-7360 Email: melorod@gtlaw.com -andNancy A. Mitchell (pro hac vice pending) Maria J. DiConza (pro hac vice pending) Matthew L. Hinker (DE Bar No. 5348) GREENBERG TRAURIG, LLP 200 Park Avenue New York, New York Telephone: (212) 801-9200 Facsimile: (212) 801-6400 Email: mitchelln@gtlaw.com diconzam@gtlaw.com hinkerm@gtlaw.com Proposed Counsel for the Debtors and Debtorsin-Possession

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Exhibit A

Executory Contracts and Unexpired Leases to be Rejected Rejected Agreement ADT Agreement Contact Information ADT Security Services 4895 Outland Center Dr. Building B, Suite 101 Memphis, TN 38118 Strategic Purchasing Services 153 Pierce Butler Drive St. Simons Island, GA 31522 J.A. Curtis Companies, LLC 695 W. Poplar Ave. Suite 1 Collierville, TN 38017 William Scarbrough Broadmoor Investment Corp. 3184 Overbrook Memphis, TN 38128 Robert Fogelman 744 S. White Station Road Memphis, TN 38117 Laurie H. Rasner 7953 Trieste Place Delray Beach, FL 33446 Realty Income Corporation Attn: Legal Department 600 La Terraza Boulevard Escondido, CA 92025 Elk Park, LLC Attn: Mr. Mark Osborn Post Office Box 3017 Jonesboro, AR 72403 William J. Webb 2219 Riverview Drive Murfressboro, TN 37129 Hometown Development, Inc. Harry N. Terry, President P.O. Box 1546 Madisonville, KY 42431 Millington Partners, Ltd. 9756 Wilshire Blvd. Beverly Hills, CA 90212

Strategic Agreement

Shelby Drive Lease

Austin Peay Lease

Poplar Marney Lease

Summer Lease

Caraway Jonesboro Lease

Alexander Jonesboro Lease

Hickory Hill Lease

Clarksville Lease

Millington Lease

Jackson Lease Murfreesboro Lease

Hermitage Lease

Shackleford Lease

McCain Lease

Cantrell Lease

Conway Lease

Markham Lease

Park Plaza Lease

Broadway Lease

Symrna Lease

Realty Income Corporation Attn: Legal Department 600 La Terraza Boulevard Escondido, CA 92025 July Realty Company H. Lynn Greer, Jr, Partner June Greer Bogle, Partner 5137 Boxcroft Place Nashville, TN 37205 Hermitage Commons II, LLC Commercial Realty Services 1550 North Mt. Juliet Road, Suite 121 Mt. Juliet, TN 37122 Realty Income Corporation Attn: Legal Department 600 La Terraza Boulevard Escondido, CA 92025 Realty Income Corporation Attn: Legal Department 600 La Terraza Boulevard Escondido, CA 92025 Tommy and Karla Kay Hilburn #6 Edenfield, Little Rock, AR 72212 J.D. Ashley, Sr. and Associates 2851 Lakewood Village Drive Lakewood Village Shopping Park North Little Rock, AR 72116 Baird, Inc. 400 West Capitol Avenue, Suite 1321 Little Rock, AR 72201 CBL & Associates Management, Inc. CBL Center, Suite 500 2030 Hamilton Place Boulevard Chattanooga, TN 37421 R.M. and Marilyn Foster 409 W. 8th Street Little Rock, AR 72201 Continental Property Management 40 Burton Hills Blvd. Suite 420 Nashville, TN 37215

Exhibit B IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re Chapter 11 BACK YARD BURGERS, INC., et al.1 Case No. 12-12882 (PJW) Debtors. (Jointly Administered)

NOTICE OF LAST DATE FOR FILING PROOFS OF CLAIM FOR REJECTED EXECUTORY CONTRACTS AND UNEXPIRED LEASES TO: ALL CREDITORS AND OTHER PARTIES-IN-INTEREST WITH CLAIMS ARISING FROM THE REJECTION OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES:

PLEASE TAKE NOTICE THAT on November __, 2012, the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court) entered an order (the Order) in the Chapter 11 cases of the above-captioned debtors and debtors-in-possession (the Debtors) authorizing rejection of certain executory contracts and unexpired leases. A true and correct copy of the Order is attached hereto. PLEASE TAKE FURTHER NOTICE THAT any person or entity that holds a claim that arises from the rejection of an executory contract or unexpired lease pursuant to the Order must file a proof of claim substantially complying with Official Bankruptcy Form B10 with supporting documentation so as to actually be received on or before December 10, 2012, which is thirty four (34) days from entry of the Order, at the following address: Back Yard Burgers, Inc., et al. Claims Processing c/o Omni Management Group 5955 DeSoto Ave., Suite 100 Woodland Hills, CA 91367 Facsimile and email proofs of claim will not be accepted. All proofs of claim must be denominated in U.S. dollars and written in the English language. A proof of claim form may obtained during regular business hours at the office of the Clerk of the Bankruptcy Court, 824 Market Street, Wilmington, Delaware, 19801, or at the

The Debtors in these chapter 11 Cases, along with the last four digits of each Debtors federal tax identification number, are: Back Yard Burgers, Inc. (7163), BYB Properties, Inc. (9046), Nashville BYB, LLC (6507) and Little Rock Back Yard Burgers, Inc. (9133). The mailing address of the Debtors is: St. Clouds Building, 500 Church Street, Suite 200, Nashville, TN 37219.

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claims agents website, www.omnimgt.com/backyardburgers. information, you may contact the Claims Agent at 818-906-8300.

If you require additional

Any creditor that is required to file a proof of claim, but fails to do so in a timely manner pursuant to the instructions herein, shall be forever barred from filing such proof of claim and receiving distributions in these cases. Dated: November __, 2012 GREENBERG TRAURIG, LLP

_______________________________ Dennis A. Meloro (DE Bar No. 4435) 1007 North Orange Street, Suite 1200 Wilmington, Delaware 19801 Telephone: (302) 661-7000 Facsimile: (302) 661-7360 Email: melorod@gtlaw.com -andNancy A. Mitchell (pro hac vice pending) Maria J. DiConza (pro hac vice pending) Matthew L. Hinker (DE Bar No. 5348) GREENBERG TRAURIG, LLP 200 Park Avenue New York, New York Telephone: (212) 801-9200 Facsimile: (212) 801-6400 Email: mitchelln@gtlaw.com diconzam@gtlaw.com hinkerm@gtlaw.com Proposed Counsel for the Debtors and Debtorsin-Possession

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re Chapter 11 BACK YARD BURGERS, INC., et al.1 Case No. 12-12882 (PJW) Debtors. (Jointly Administered) Ref. Docket No. ___ ORDER AUTHORIZING THE DEBTORS TO REJECT CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES NUNC PRO TUNC AS OF THE PETITION DATE Upon the motion (the Motion)2, filed by the above-captioned debtors and debtors-inpossession (collectively, the Debtors) pursuant to section 365(a) of title 11 of the United States Code, 11 U.S.C. 101-1532 (the Bankruptcy Code) and Rule 6006 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules) for entry of an order: (a) authorizing the Debtors to reject certain executory contracts and unexpired leases, nunc pro tunc as of the Petition Date (as defined herein), and (b) providing any additional relief required in order to effectuate the foregoing; and upon the Declaration of James E. Boyd, Jr. in Support of the Debtors Chapter 11 Petitions and Requests for First Day Relief (the First Day Declaration); and it appearing that this Court has jurisdiction to consider the Motion pursuant to 28 U.S.C. 157 and 1334; and it appearing that venue of these cases and the Motion in this district is proper pursuant to 28 U.S.C. 1408 and 1409; and it appearing that this matter is a core proceeding pursuant to 28 U.S.C. 157(b); and this Court having determined that the relief requested in the

The Debtors in these chapter 11 Cases, along with the last four digits of each Debtors federal tax identification number, are: Back Yard Burgers, Inc. (7163), BYB Properties, Inc. (9046), Nashville BYB, LLC (6507) and Little Rock Back Yard Burgers, Inc. (9133). The mailing address of the Debtors is: St. Clouds Building, 500 Church Street, Suite 200, Nashville, TN 37219. Capitalized terms not defined herein have meanings ascribed to them in the Motion.

FTL 108899057v8 October 22, 2012

Motion is in the best interests of the Debtors, their estates, their creditors and other parties in interest; and it appearing that proper and adequate notice of the Motion has been given and that no other or further notice is necessary; and after due deliberation thereon; and good and sufficient cause appearing therefor, IT IS HEREBY ORDERED THAT: 1. 2. For the reasons set forth on the record, the Motion is GRANTED. The Rejected Contracts identified on Exhibit A attached to this Order are

hereby rejected, effective nunc pro tunc as of the Petition Date. 3. The Rejected Leases identified on Exhibit A attached to this Order are hereby

rejected, effective nunc pro tunc as of the Petition Date. 4. All proofs of claim related to the Rejected Agreements shall be filed within thirty

four (34) days after entry of this Order (the Rejection Bar Date) with all untimely filed claims related to the Rejected Leases being forever barred. 5. The Debtors shall (a) provide notice of the Rejection Bar Date to non-Debtor

parties to the Rejected Agreements by serving by pre-paid, first-class mail, a notice substantially in the form of that attached to the Motion as Exhibit B within five days after entry hereof, and (b) file proof of service thereof. 6. Rule 6003(b) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy

Rules) has been satisfied because the relief requested in the Motion is necessary to avoid immediate and irreparable harm to the Debtors. 7. Notwithstanding any applicability of Bankruptcy Rule 6004(h), the terms and

conditions of this Order shall be immediately effective and enforceable upon its entry.

FTL 108899057v8 October 22, 2012

8.

This Court shall, and hereby does, retain jurisdiction with respect to all matters

arising from or related to the implementation and interpretation of this Order.

Dated: ______________, 2012 ________________________________________ HONORABLE PETER J. WALSH UNITED STATES BANKRUPTCY JUDGE

FTL 108899057v8 October 22, 2012

Exhibit A to Order Rejected Agreement ADT Agreement Contact Information ADT Security Services 4895 Outland Center Dr. Building B, Suite 101 Memphis, TN 38118 Strategic Purchasing Services 153 Pierce Butler Drive St. Simons Island, GA 31522 J.A. Curtis Companies, LLC 695 W. Poplar Ave. Suite 1 Collierville, TN 38017 William Scarbrough Broadmoor Investment Corp. 3184 Overbrook Memphis, TN 38128 Robert Fogelman 744 S. White Station Road Memphis, TN 38117 Laurie H. Rasner 7953 Trieste Place Delray Beach, FL 33446 Realty Income Corporation Attn: Legal Department 600 La Terraza Boulevard Escondido, CA 92025 Elk Park, LLC Attn: Mr. Mark Osborn Post Office Box 3017 Jonesboro, AR 72403 William J. Webb 2219 Riverview Drive Murfressboro, TN 37129 Hometown Development, Inc. Harry N. Terry, President P.O. Box 1546 Madisonville, KY 42431 Millington Partners, Ltd. 9756 Wilshire Blvd. Beverly Hills, CA 90212 Realty Income Corporation Attn: Legal Department 600 La Terraza Boulevard Escondido, CA 92025

Strategic Agreement

Shelby Drive Lease

Austin Peay Lease

Poplar Marney Lease

Summer Lease

Caraway Jonesboro Lease

Alexander Jonesboro Lease

Hickory Hill Lease

Clarksville Lease

Millington Lease

Jackson Lease

Murfreesboro Lease

Hermitage Lease

Shackleford Lease

McCain Lease

Cantrell Lease

Conway Lease

Markham Lease

Park Plaza Lease

Broadway Lease

Symrna Lease

July Realty Company H. Lynn Greer, Jr, Partner June Greer Bogle, Partner 5137 Boxcroft Place Nashville, TN 37205 Hermitage Commons II, LLC Commercial Realty Services 1550 North Mt. Juliet Road, Suite 121 Mt. Juliet, TN 37122 Realty Income Corporation Attn: Legal Department 600 La Terraza Boulevard Escondido, CA 92025 Realty Income Corporation Attn: Legal Department 600 La Terraza Boulevard Escondido, CA 92025 Tommy and Karla Kay Hilburn #6 Edenfield, Little Rock, AR 72212 J.D. Ashley, Sr. and Associates 2851 Lakewood Village Drive Lakewood Village Shopping Park North Little Rock, AR 72116 Baird, Inc. 400 West Capitol Avenue, Suite 1321 Little Rock, AR 72201 CBL & Associates Management, Inc. CBL Center, Suite 500 2030 Hamilton Place Boulevard Chattanooga, TN 37421 R.M. and Marilyn Foster 409 W. 8th Street Little Rock, AR 72201 Continental Property Management 40 Burton Hills Blvd. Suite 420 Nashville, TN 37215

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re Chapter 11 BACK YARD BURGERS, INC., et al.1 Case No. 12-12882 (PJW) Debtors. (Jointly Administered)
Objection Deadline: November 1, 2012 at 4:00 p.m Hearing Date: November 8, 2012 at 1:30 p.m.

NOTICE OF MOTION OF THE DEBTORS FOR ENTRY OF AN ORDER AUTHORIZING THE DEBTORS TO REJECT CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES NUNC PRO TUNC AS OF THE PETITION DATE PLEASE TAKE NOTICE that on the above-captioned debtors and debtors-inpossession (the Debtors) filed the Motion for Entry of an order Authorizing the Debtors to Reject Certain Executory Contracts and Unexpired Leases Nunc Pro Tunc as of the Petition Date (the Motion) with the United States Bankruptcy Court for the District of Delaware (the Court). PLEASE TAKE FURTHER NOTICE that any response or objection to the relief sought in the Motion must be filed with the Court at 824 North Market Street, 3rd Floor, Wilmington, DE 19801 on or before November 1, 2012 at 4:00 p.m. (prevailing Eastern Time). PLEASE TAKE FURTHER NOTICE that at the same time, you must also serve a copy of the response or objection upon: (a) proposed Debtors counsel, Greenberg Traurig, LLP, The Nemours Building, 1007 North Orange Street, Suite 1200, Wilmington, Delaware 19801, Attn: Dennis A. Meloro, Esq. and Greenberg Traurig, LLP, MetLife Building, 200 Park Avenue, New York, New York 10166, Attn: Nancy A. Mitchell, Esq. and Matthew L. Hinker, Esq.; (b) Office of the U.S. Trustee, 844 King Street, Suite 2207, Lockbox 35, Wilmington, Delaware 19801, Attn: Juliet Sarkessian, Esq.; and (c) counsel to any official committee of unsecured creditors appointed in these cases.
1 The Debtors in these chapter 11 Cases, along with the last four digits of each Debtors federal tax identification number, are: Back Yard Burgers, Inc. (7163), BYB Properties, Inc. (9046), Nashville BYB, LLC (6507) and Little Rock Back Yard Burgers, Inc. (9133). The mailing address of the Debtors is: St. Clouds Building, 500 Church Street, Suite 200, Nashville, TN 37219.

DEL 86420603v1 October 22, 2012

PLEASE TAKE FURTHER NOTICE THAT A HEARING TO CONSIDER THE RELIEF SOUGHT IN THE MOTION WILL BE HELD ON NOVEMBER 8, 2012 AT 1:30 P.M. PREVAILING EASTERN TIME BEFORE THE HONORABLE PETER J. WALSH AT THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE, 824 MARKET STREET, 6TH FLOOR, COURTROOM NO. 2, WILMINGTON, DELAWARE 19801. Dated: October 22, 2012 GREENBERG TRAURIG, LLP

/s/ Dennis A. Meloro Dennis A. Meloro (DE Bar No. 4435) 1007 North Orange Street, Suite 1200 Wilmington, Delaware 19801 Telephone: (302) 661-7000 Facsimile: (302) 661-7360 Email: melorod@gtlaw.com -andNancy A. Mitchell (pro hac vice pending) Maria J. DiConza (pro hac vice pending) Matthew L. Hinker (DE Bar No. 5348) GREENBERG TRAURIG, LLP 200 Park Avenue New York, New York Telephone: (212) 801-9200 Facsimile: (212) 801-6400 Email: mitchelln@gtlaw.com diconzam@gtlaw.com hinkerm@gtlaw.com Proposed Counsel for the Debtors and Debtorsin-Possession

DEL 86420603v1 October 22, 2012