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In re

UNITED STATES BANKRUPTCY COURT


FOR THE DISTRICT OF DELAWARE
Chapter 11
BACKYARD BURGERS, INC., et a/.
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Case No. 12-12882 (PJW)
Debtors.
(Joint Administration Pending)
MOTION OF THE DEBTORS FOR ENTRY OF AN ORDER (A) AUTHORIZING
THE MAINTENANCE OF EXISTING BANK ACCOUNTS AND CONTINUED USE
OF EXISTING BUSINESS FORMS AND CHECKS, (B) AUTHORIZING THE
CONTINUED USE OF EXISTING CASH MANAGEMENT SYSTEM,
(C) WAIVING CERTAIN INVESTMENT AND DEPOSIT GUIDELINES,
AND (D) GRANTING ADMINISTRATIVE EXPENSE STATUS TO
POSTPETITION INTERCOMPANY CLAIMS
The above-captioned debtors and debtors-in-possession (collectively, the "Debtors")
hereby move the Court (the "Motion") pursuant to sections 105, 345, 363, 364 and 553 of title
11 of the United States Code, 11 U.S.C. 101, et seq. (the "Bankruptcy Code"), Rules 6003
and 6004(h) of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), Rules
2015-2(a) and (b) ofthe Local Rules of Bankruptcy Practice and Procedure ofthe United States
Bankruptcy Court for the District of Delaware (the "Local Rules"), and the investment and
deposit guidelines (the "Guidelines") promulgated by the Office of the United States Trustee, for
entry of an order: (a) authorizing the maintenance of existing bank accounts and continued use of
existing business forms and checks; (b) authorizing, but not directing, continued use of existing
cash management system; (c) waiving certain of the investment and deposit Guidelines
established by the United States Trustee for the District of Delaware; (d) granting administrative
expense status to postpetition intercompany claims; and (e) providing any additional relief as is
The Debtors in these chapter 11 cases, along with the last four digits of each Debtor's 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.
necessary to effectuate the foregoing. In support of this Motion, the Debtors respectfully state as
follows:
Status of the Case
1. On the date hereof (the "Petition Date"), each of the Debtors filed a voluntary
petition 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 11 07(a) and 1108 of
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 of28 U.S.C. 157(b)(2).
5. The statutory predicates for the relief sought herein are sections 105(a), 345,
363, 364 and 553 of the Bankruptcy Code, Bankruptcy Rules 6003 and 6004(h), and Local Rules
2015-2(a) and (b).
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
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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 of2012.
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 company -operated 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 detailed factual background of the Debtors' businesses and operations, as
well as the events precipitating the commencement of these cases, is more fully set forth in the
Declaration of James E. Boyd, Jr. in Support of the Debtors' Chapter 11 Petitions and Requests
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for First Day Relief (the "First Day Declaration"), filed contemporaneously herewith and
incorporated herein by reference.
A. The Debtors' Bank Accounts and Cash Management System
11. Prior to the commencement of their chapter 11 cases, and in the ordinary course
of their business, the Debtors maintained fifty-seven (57) bank accounts (the "Bank Accounts").
A list of the Bank Accounts is attached hereto as Exhibit "A". The Bank Accounts are part of a
carefully constructed and highly-automated cash management system (the "Cash Management
System") that ensures the Debtors' ability to efficiently monitor and control their cash position,
as is more fully described below and as set forth in the account flow chart attached hereto as
Exhibit "B". The Debtors' Cash Management System is maintained primarily with Regions
Bank ("Regions Bank"), where the Debtors maintain forty-nine ( 49) of their fifty-five (57) bank
accounts. In addition, the Debtors maintain three (3) accounts with First Tennessee Bank ("First
Tennessee"), one (1) account at 1st Security Bank ("1st Security"), one (1) account at Fifth
Third Bank ("Fifth Third") and one (1) account at First Citizens Bank ("First Citizens").
Currently, the Debtors utilize Regions Bank for a majority of their banking needs, only using the
First Tennessee, First Security, Fifth Third and First Citizens Accounts for locations that do not
have easy access to Regions Bank.
12. The Debtors' Cash Management System as of the Petition Date is summarized
as follows:
Operating Account: Back Yard Burgers, Inc. ("BYBI"), Little Rock Back Yard
Burgers, Inc. ("LRBYB") and Nashville BYB, LLC ("NBYB") each maintain
an operating account (the "BYBI Operating Account," the "LRBYB
Operating Account" and the "NBYB Operating Account," collectively the
"Operating Accounts") with Regions Bank,. which funds all of the Debtors'
operations. The Operating Accounts then distribute those funds to certain of
the accounts described below. In addition, when necessary to pay for certain
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expenses, the Operating Accounts also remit w1re payments and automated
clearinghouse transfers to payees.
In addition, BYB Properties, Inc. ("BYBP") maintains an operating account (the
"BYBP Operating Account") with PNC Bank to pay certain expenses
associated with the Back Yard Burger intellectual property, specifically, the
"Back Yard Burger" trademark, which it owns under its name. These expenses
generally include legal fees in connection with protecting the intellectual
property.
a. Store Accounts: The Debtors maintain approximately forty-five (45) accounts,
for their store locations (the "Store Accounts"). The Store Accounts are only
used to hold the daily customer receipts. The cash receipts are deposited into
the Store Accounts twice a day. The stores managed by BYBI have a total of
thirty-six (36) Store Accounts, thirty-one (31) of which are housed at Regions
Bank (the "BYBI Regions Store Accounts") and five (5) of which are housed
at other banks due to a lack of a Regions Bank in the respective store's
proximity (the "BYBI Other Store Accounts").
The BYBI Regions Store Accounts are all zero balance accounts and every
night, the remaining balance in the Regions Store Accounts are swept into the
BYBI Operating Account. In addition, on a weekly basis, the balance of the
five (5) BYBI Other Store Accounts is manually transferred to the BYBI
Operating Account.
b. Disbursement Accounts: BYBI maintains two (2) disbursement accounts (the
"BYBI Disbursement Accounts"), which operate for certain dedicated
purposes. First, BYBI maintains an accounts payable account (the "BYBI AlP
Account") to process payments to vendors and other trade creditors, as
necessary. Second, BYBI maintains a payroll account (the "BYBI Payroll
Account"), which on a bi-weekly basis, remits payments to the Debtors' payroll
processor in order to fund payroll and certain related employee benefit
obligations. All of the BYBI Disbursement Accounts are zero balance accounts.
c. Ad Fund: In order to cover business development and marketing needs, BYBI
maintains a national advertising fund (the "Ad Fund") with Regions Bank to
receive certain contributions from its wholly owned subsidiaries and its
franchisees. Under their franchise agreements with BYBI, current franchisees
must contribute 1% of gross receipts to a National Advertising Fund (the "Ad
Fund") on a weekly basis. As of 2012, new franchisees and existing
franchisees who wish to renew their agreements with BYBI will be required to
contribute 1.5% of gross receipts to the Ad Fund on a weekly basis. BYBI
owned stores currently contribute 1.5% of their gross receipts to the Ad Fund on
a weekly basis. BYBI applies at least 50% of the contributions to the Ad Fund
to the creation of marketing tools. BYBI generally uses the remainder of the
contributions to the Ad Fund for new product testing and development, market
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research, improvements in operating methods and techniques and other
activities that may improve the restaurants' earnings.
d. Royalty Account: BYBP maintains a money market account (the "BYBP
Royalties Account") with PNC Bank to hold all royalties received from BYBI,
NBYB and LRBYB, as well as BYBI's franchisees, as payment for their use of
the "Back Yard Burgers" trademark, which BYBP owns.
e. Money Market and Gift Card Accounts: BYBI also maintains a money market
account with Regions Bank (the "BYBI Money Market Account") and an
account with First Tennessee Bank to address customers' gift card redemptions
(the "BYBI Gift Card Account").
13. The Debtors reconcile cash receipts on a daily basis, and perform a
reconciliation of all of the deposits and debits in the Cash Management System once a month.
The Debtors' transition into chapter 11 will be significantly less disruptive if the Bank Accounts
are maintained following the commencement of these cases with the same account numbers and,
where applicable, automated relationship. The Debtors further request authority to deposit funds
in and withdraw funds from all such accounts, subject to the same access rights and limitations
existing prior to the Petition Date, including, but not limited to, checks, wire transfers, automated
clearinghouse transfers, electronic funds transfers, and other debits and to treat the Bank
Accounts for all purposes as debtor-in-possession accounts.
B. Existing Business Forms and Checks
14. In the ordinary course ofbusiness, the Debtors use pre-printed check stock with
their respective names printed thereon. In addition, the Debtors maintain pre-printed
correspondence and business forms, including, but not limited to, letterhead, envelopes,
promotional materials, and other business forms (collectively, along with the Debtors' checks,
the "Business Forms") all with their name and information. To minimize administrative
expense and delay, the Debtors request authority to continue to use their Business Forms
substantially in the forms existing immediately prior to the Petition Date, without reference to
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the Debtors' "Debtor-in-Possession" status.
C. Intercompany Transactions
15. The Debtors maintain business relationships with each other that give rise to
intercompany claims (the "Intercompany Transactions"). Specifically, BYBI makes monthly
royalty payments to BYBP for use of the "Back Yard Burgers" trademark, which BYBP owns.
16. In addition, on a monthly basis, BYBP loans money to BYBI under that certain
Intercompany Note between BYBI and BYBP, dated June 1, 2007 (the "Intercompany Note").
As of the Petition Date, the outstanding balance due to BYBP under the Intercompany Note was
approximately $43 million.
17. Further, the Debtors have various Intercompany Transactions with non-debtors.
Specifically, immediately following a capital raise with investors, BBAC, LLC ("BBAC"), the
parent company of the Debtors, generally transfers almost the entirety of the funds raised from
prior capital raises to the BYBI Operating Account.
18. The Debtors maintain records of its Intercompany Transactions, including fund
transfers, and thus can ascertain, trace and account for Intercompany Transactions. The Debtors
reconcile all Intercompany Transactions on a monthly basis. The Debtors will continue to
maintain records and appropriately reconcile all Intercompany Transactions postpetition.
Relief Requested
19. By this Motion, the Debtors seek an order: (a) authorizing, but not directing,
continued use of existing Cash Management System; (b) authorizing the maintenance of existing
Bank Accounts and continued use of existing Business Forms; (c) waiving certain of the
investment and deposit Guidelines set torth by the Office of the United States Trustee; (d)
granting administrative expense status to postpetition intercompany claims; and (e) providing
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any additional relief required in order to effectuate the foregoing. The Debtors submit this
request, subject to the limitation that the Interim Order (I) Authorizing Debtors to Obtain
Postpetition Financing Pursuant to Sections 363 and 364 ofthe Bankruptcy Code, (II) Granting
Liens and Superpriority Claims to the Postpetition Agent and Postpetition Lenders Pursuant to
Section 364 of the Bankruptcy Code, (III) Authorizing Use of Cash Collateral Pursuant to
Section 363 of the Bankruptcy Code, (IV) Providing Adequate Protection to the Postpetition
Agent and the Postpetition Lenders Pursuant to Sections 361, 362, 363 and 364 of the
Bankruptcy Code, and (V)Scheduling Final Hearing (the "Interim DIP Order"), along with
any final Order entered relating thereto (the "Final DIP Order", and together with the Interim
DIP Order, the "DIP Orders"), shall control, to the extent any of the relief requested herein is
inconsistent with the terms of the DIP Orders. The relief requested herein will help ensure the
Debtors' smooth transition into chapter 11 and avoid the possible disruptions and distractions
that could otherwise divert the Debtors' attention from more pressing matters during the initial
days of these cases.
20. The Debtors reserve the right, in their discretion, to close or otherwise modify
the terms of certain of the Bank Accounts and open new debtor-in-possession accounts as may
be necessary to facilitate their chapter 11 cases and operations, or as may otherwise be necessary
to comply with the requirements of any debtor-in-possession financing and/or cash collateral
order entered in these cases.
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Basis for Relief Requested
A. Cash Management System
21. The continued use of a cash management system employed in the ordinary
course of a debtor's prepetition business has been approved as a routine matter in a number of
other cases in this district. See, e.g., In re GameTech Int'l, Inc., Case No. 12-11964 (PJW)
(Bankr. D. Del. Jul. 3, 2012); In re Northstar Aerospace (USA), Inc., Case No. 12-11817 (MFW)
(Bankr. D. Del. Jul. 3, 2012); In re Beacon Power Corp., Case No. 11-13450 (KJC) (Bankr. D.
Del. Nov. 2, 2011); In re Magic Brands, LLC, et al., Case No. 10-11310 (BLS) (Bankr. D. Del.
Apr. 23, 2010); In re International Aluminum Corporation, Case No. 10-10003 (MFW) (Bankr.
D. Del. Jan. 6, 2010); In re Smurfit-Stone Container Corp., Case No. 09-10235 (BLS) (Bankr. D.
Del. Jan. 26, 2009).
22. Indeed, courts in this district have noted that an integrated cash management
system "allows efficient utilization of cash resources and recognizes the impracticalities of
maintaining separate cash accounts for the many different purposes that require cash." In re
Columbia Gas Sys., Inc., 136 B.R. 930, 934 (Bankr. D. Del. 1992), a.ff'd in part and rev'd in
part, 997 F.2d 1039 (3d Cir. 1993). The United States Court of Appeals for the Third Circuit has
agreed, emphasizing that requiring a debtor to maintain separate accounts "would be a huge
administrative burden and economically inefficient." Columbia Gas, 997 F.2d at 1061; see also
In re Southmark Corp., 49 F.3d 1111, 1114 (5th Cir. 1995) (stating a cash management system
allows a debtor "to administer more efficiently and effectively its financial operations and
assets").
23. Further, section lOS( a) of the Bankruptcy Code empowers the Court to "issue
any order, process, or judgment that is necessary to carry out the provisions of this title" and
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section 363(c)(1) of the Bankruptcy Code authorizes the debtor-in-possession to "use property of
the estate in the ordinary course of business without notice or a hearing." 11 U.S.C. 1 05(a)
and 363(c)(1). The purpose of these sections is to provide a debtor-in-possession with the
flexibility to engage in the ordinary transactions required to operate its business without undue
oversight by creditors or the court. See Medical Malpractice Ins. Ass 'n. v. Hirsch (In re
Lavigne), 114 F.3d 379, 384 (2d Cir. 1997).
24. The Debtors' Cash Management System constitutes a customary and essential
business practice that was created and implemented by the management of the Debtors in the
exercise of their business judgment. Moreover, the Cash Management System is similar to those
commonly employed by corporate enterprises comparable to the Debtors in size and complexity.
25. Indeed, the Cash Management System is a practical mechanism that allows the
Debtors to transfer their revenues to the payment of their obligations that decreases the burdens
on the Debtors, and that provides several important benefits, including the ability to: (a) control
and monitor corporate funds; (b) ensure cash availability; and (c) reduce administrative expenses
by facilitating the movement of funds and the development of timely and accurate balance and
presentment information. All of these benefits will assist the Debtors in their efforts to maintain
their operations pending the confirmation of a chapter 11 plan or other disposition of their assets,
making the relief requested herein appropriate under section 1 05( a) of the Bankruptcy Code.
B. The Debtors should be Permitted to Maintain Bank Accounts
26. For similar reasons, the Debtors should be authorized to continue to fund their
business and operations by payments made from the Bank Accounts listed on Exhibit "A" to
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this Motion, and should be exempt from certain of the Guidelines
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established by the United
States Trustee for the District of Delaware. One provision of the Guidelines requires a chapter
11 debtor-in-possession to open new bank accounts and close all existing accounts. This
requirement, designed to provide a clear line of demarcation between prepetition and postpetition
claims and payments, helps to protect against the inadvertent payment of prepetition claims by
preventing banks from honoring checks drawn before the Petition Date.
27. As part of the requested relief, the Debtors also seek a wmver of the
requirement to establish specific bank accounts for tax payments. The Debtors believe that tax
obligations can be paid most efficiently out of the existing Bank Accounts, that the United States
Trustee can adequately monitor the flow of funds into, among, and out of the Bank Accounts,
and that the creation of new debtor-in-possession accounts designated solely for tax obligations
would be unnecessary and inefficient.
28. The Debtors hereby request authority to maintain the Bank Accounts and utilize
them pursuant to the existing Cash Management System described above. The Debtors do not
believe that allowing them to do so will prejudice any party-in-interest or their estates. If the
relief requested herein is granted, the Debtors will not pay any debts incurred before the Petition
Date unless specifically authorized by this Court.
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The Guidelines were issued in order to assist the U.S. Trustee in supervising the administration of chapter II
cases. Such Guidelines require chapter II debtors to, among other things, unless the Court requires
otherwise:
a. Close all existing bank accounts and open new accounts which must be designated debtor-in-
possession bank accounts;
b. Establish and maintain separate debtor-in-possession accounts for the payment of taxes and separate
debtor-in-possession accounts for cash collateral; and
c. Obtain and utilize new checks for all debtor-in-possession accounts which bear the designation
"Debtor-in-Possession" and contain certain other information related to the chapter II case.
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29. Moreover, if the Debtors were forced to close their Bank Accounts, the Debtors
expect that there would be disruption and confusion that would negatively impact their
operations. For instance, funds may be deposited into the wrong account, misapplied, held in
limbo, or otherwise delayed, thus negatively affecting the Debtors' relationships with parties,
who are necessary to the Debtors' efforts, and who already may be burdened by the filing of
these cases. As a result, the Debtors' submit that maintenance of the existing Bank Accounts and
Cash Management System is warranted.
30. Subject to section 553 of the Bankruptcy Code and the DIP Orders, all banks
that maintain the Bank Accounts should be prohibited from offsetting, affecting, freezing, or
otherwise impeding the Debtors' use of any funds deposited in the Bank Accounts on account of,
or by reason of, any claim (as defined in section 1 01 ( 5) of the Bankruptcy Code) of any such
bank against the Debtors that arose before the Petition Date, absent further order of the Court.
C. The Debtors should be Permitted to
Continue Using Existing Business Forms
31. Local Rule 2015-2(a),
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allows the debtors to seek court approval to continue to
use their existing Business Forms without imprinting "DIP" or "Debtor-in-Possession" thereon.
Accordingly, the Debtors request that this Court authorize them to use all correspondence and
Business Forms existing immediately before the Petition Date without reference to the Debtors'
status as "debtors-in-possession." As of the Petition Date, the Debtors had a large stock of
Business Forms that they used in the ordinary course of business. Reprinting their Business
Local Rule. 2015-2(a) provides:
Where the debtor uses pre-printed checks, upon motion of the debtor, the Court may,
without notice and hearing, permit the debtor to use its existing checks without the
designation "Debtor-in-Possession" and use its existing bank accounts. However, once
the debtor's existing checks have been used, the debtor shall, when reordering checks,
require the designation "Debtor-in-Possession" and the corresponding bankruptcy
number on all such checks.
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Forms to indicate that the Debtors are "Debtors-in-Possession" would impose an unnecessary
burden and expense on the Debtors. There is little doubt that the parties with whom the Debtors
do business shortly will become aware that they are chapter 11 debtors-in-possession. In any
event, in accordance with the Guidelines and Local Rule 2015-2(a), the Debtors will add such
"Debtors-in-Possession" designation to any checks that they obtain or create postpetition.
D. The Debtors should be Permitted to Continue
Intercompany Transactions and Intercompany Transactions
Should be Granted Administrative Priority Expense Status
32. As described above, under the Cash Management System, the Debtors enter into
certain Intercompany Transactions with their Debtor and non-Debtor affiliates in the ordinary
course of their business. The Intercompany Transactions allow the Debtors, among other things,
to meet the needs of their customers and vendors efficiently in a cost-effective manner through
the centralization of key administrative functions. If these Intercompany Transactions are
discontinued, the Debtors' cash management process would be disrupted causing irreparable
harm to the Debtors. In particular, it is imperative that the Debtors maintain the ability, as
debtors-in-possession, to continue intercompany transfers with their non-debtor affiliate BBAC
in order to ensure that any funds raised from capital raises may be passed to BYB without any
disruption. Should BBAC not be allowed to transfer these funds to BYBI, BYBI's operations
would be severely impeded in its ability to continue its day to day operations and its long-term
growth strategy.
33. Accordingly, the Debtors believe that the continuation of Intercompany
Transactions in the ordinary course of the Debtors' business is in the best interest of the Debtors'
estates and their creditors. The Debtors seek authority to continue to enter into such
Intercompany Transactions in the ordinary course of their business. The Debtors maintain
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records of substantially all Intercompany Transactions and can ascertain, trace and account for
the Intercompany Transactions at all times. The Debtors will continue to maintain such records
postpetition.
34. As a result of the Intercompany Transactions, at any given time, an individual
Debtor can be rendered a net lender or net borrower. To ensure that each individual Debtor will
not fund, at the expense of its creditors, the operations of another entity, the Debtors respectfully
request that, pursuant to sections 503(b)(1) and 364(b) ofthe Bankruptcy Code, all Intercompany
Transactions be granted administrative priority expense status, junior in priority to any
postpetition claims of Pharos Capital Partners II, L.P. and Pharos Capital Partners 11-A, L.P.
(together, the "DIP Lender"). Administrative expense treatment for intercompany claims has
been granted in other multi-debtor chapter 11 cases in this District. See, e.g., In re Chern Rx
Corporation, 10-11567 (MFW) (Bankr. D. Del. May 13, 2010); In re Stant Parent Corp., 09-
12647 (BLS) (Bankr. D. Del. July 29, 2009); In re Smurjit-Stone Container Corp., Case No. 09-
10235 (BLS) (Bankr. D. Del. Feb. 23, 2009).
35. The Debtors request this authority, subject to the rights, if any, of the parties-in-
interest in these cases to challenge the validity of such claims and Intercompany Transactions,
provided that each Debtor shall forbear from exercising, and shall not be entitled to exercise, any
remedy relating to any Intercompany Transaction including, without limitation, seeking relief
from the automatic stay, or seeking any sale, foreclosure, realization upon, repossession or
liquidation of any property of another Debtor, or taking any position with respect to any
disposition of the property, business operations, or the reorganization of another Debtor, absent
further order of this Court. In an abundance of caution, the Debtors request that this Court
clarify that this relief will not limit the Debtors' ability to reconcile amounts owed between and
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among any Debtor and any affiliate, including netting and setting off obligations arising from
Intercompany Transactions, whether arising pre or postpetition, in the ordinary course of
business, between a particular Debtor and any other Debtor.
E. Bankruptcy Rule 6003 Satisfied and Request for Waiver of Stay
36. 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, Bankruptcy Rule 6003 has been satisfied and the relief
requested herein should be granted.
37. Specifically, Bankruptcy Rule 6003 provides:
Except to the extent that relief is necessary to avoid immediate and
irreparable harm, the court shall not, within 21 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.
38. No court within the Third Circuit has interpreted the "immediate and irreparable
harm" language in the context of Bankruptcy Rule 6003 in any reported decision. However, the
Third Circuit Court of Appeals has interpreted the same language in the context of preliminary
injunctions. In that context, irreparable harm has been interpreted as 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).
39. The Debtors further seek a waiver of any stay of the effectiveness of the order
approving this Motion. Pursuant to Rule 6004(h) of the Bankruptcy Rules, "[an] order
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authorizing the use, sale, or lease of property other than cash collateral is stayed until the
expiration of fourteen (14) 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, going-concern value, and their efforts to pursue a sale or restructuring of their
assets and liabilities.
40. Accordingly, the relief requested herein is appropriate under the circumstances
and under Bankruptcy Rule 6003 and 6004(h).
Notice
41. 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; (e) those parties requesting notice
pursuant to Rule 2002; (f) the Office of the United States Attorney General for the District of
Delaware; (g) the Internal Revenue Service; and and (h) each of the banks holding the Bank
Accounts set forth in Exhibit "A" hereto. As the Motion is seeking "first day" relief, within two
(2) business days of the hearing on the Motion, the Debtors will serve copies of the Motion and
any order entered respecting the Motion in accordance with the Local Rules. The Debtors
submit that, in light ofthe nature ofthe relief requested, no other or further notice need be given.
No Prior Request
42. No prior request for the relief sought in this Motion has been made to this or
any other court.
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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.
Dated: October 17, 2012 GREENBERG TRAURIG, LLP
Is/ 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
-and-
Nancy 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 A venue
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 Debtors-in-
Possession
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Exhibit "A"
List of Bank Accounts
. .
BYB Aj:counts
Aj:count Type Store State
Regions Bank *****673 Main Operating Account NIA TN
Regions Bank *****662 Main NP Account NIA TN
Regions Bank *****670 Main Payroll Account NIA TN
First Tennessee *****624 Gift Card Account NIA TN
Regions Bank *****371 Money Market Account NIA TN
Regions Bank *****832 BBACLLC NIA TN
Regions Bank *****697 Ad Fund NIA TN
Regions Bank *****388 Store Account 5 TN
Regions Bank *****396 Store Account 6 TN
Regions Bank *****418 Store Account 7 TN
Regions Bank *****426 Store Account 8 TN
Regions Bank *****434 Store Account 9 TN
Regions Bank *****442 Store Account 12 TN
Regions Bank *****450 Store Account 13 TN
Regions Bank *****469 Store Account 14 TN
Regions Bank *****477 Store Account 15 TN
Regions Bank *****393 Store Account 16 TN
Regions Bank *****493 Store Account 17 TN
Regions Bank *****507 Store Account 18 TN
Regions Bank *****515 Store Account 19 TN
Regions Bank *****523 Store Account 20 TN
Regions Bank *****531 Store Account 21 TN
Regions Bank *****558 Store Account 22 MS
Regions Bank *****566 Store Account 23 MS
Regions Bank *****574 Store Account 25 TN
Regions Bank *****582 Store Account 26 AR
Regions Bank *****182 Store Account 27 AR
Regions Bank *****123 Store Account 28 TN
Regions Bank *****158 Store Account 30 TN
Regions Bank *****166 Store Account 31 TN
Regions Bank *****174 Store Account 32 TN
Regions Bank *****174 Store Account 33 TN
Regions Bank *****107 Store Account 34 TN
Regions Bank *****115 Store Account 35 TN
Regions Bank *****936 Store Account 37 TN
Regions Bank *****492 Store Account 42 TN
Regions Bank *****163 Store Account 60 FL
Regions Bank *****155 Store Account 61 FL
. '
.
LRB Accounts '
Fhiancial Institution Account Type Store State
Regions Bank *****329 Main Operating Account NIA TN
Regions Bank *****042 Main NP Account NIA TN
Regions Bank *****050 Main Payroll Account NIA TN
Regions Bank *****069 Store Account 101 AR
Regions Bank *****077 Store Account 102 AR
Regions Bank *****085 Store Account 103 AR
Regions Bank *****093 Store Account 104 AR
Regions Bank *****611 Store Account 105 AR
Regions Bank *****654 Store Account 106 AR
Regions Bank *****124 Store Account 108 AR
NBYB Accounts
FinanCiaJ Institll.tion ... Account
.
Type Store State
Regions Bank *****715 Main Operating & NP Account NIA TN
Regions Bank *****731 Main Payroll Account NIA TN
Regions Bank *****723 Store Account 36 TN
1.< . . ..
.
BYB J>rojJerties Accounts
1 Account I Type Store State
PNC ******849 Operating Account NIA TN
PNC ******149 Money Market NIA TN
Exhibit "B"
Cash Management Flowchart
2
Current Back Yard Burgers, Inc.
Cash Management System
Back Yard Burgers, Inc.
BYB Regions Store
Accounts (all ZBA) BYB A/P Account (ZBA)
#*****662
~ ' - - - - - ~ r - - - - - - - 1
~ - - - - - - - - - - - - - - - - - - ~
Deposits from BYB Other Store
Accounts are manually moved
weekly to BYB Operating Account.
BYB Payroll Account (ZBA) r- 1-
#*****670
LRB A/P account (ZBA)
#*****042
Funds manually
moved from
BYB Operating
Account
'II
Properties Money
Market Account
BYB Operating Account
#*****673
Little Rock
Back Yard Burgers, Inc.
LRB Regions Store
Accounts (ZBA)
1
LRB Operating Account
#*****329
Nashville BYB, LLC
NBYB Regions Store
Account
NBYB AP & Operating
Account#*****715
BYB Properties, Inc.
~
(
BYB Ad Fund Account
#*****7697
Funds manually
moved from
BYB Operating
Account
LRB Payroll Account (ZBA)
#*****050
NBYB Payroll account
#*****731
BYB Checking Account
Back Yard Burgers, Inc. Cash
Management System Pre-Chapter 11
Back Yard Burgers, Inc.
BYB Regions Store
Deposits from BYB Other Store
Accounts (all ZBA) Accounts are manually moved
BYB A/P Account (ZBA)
weekly to BYB Operating Accoun
"'
! /
#*****662
~
BYB Operating Account
BYB Ad Fund Account
I
#*****673
(ZBA?) #*****7697
BYB Payroll Account (ZBA)
#*****670
BYB Properties, Inc.
Properties Money
BYB Checking Account
Market Account
t.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re
BACKYARD BURGERS, INC., et a/.
1
Chapter 11
Case No. 12-12882 (PJW)
Debtors.
(Joint Administration Pending)
ORDER (A) AUTHORIZING THE MAINTENANCE OF EXISTING
BANK ACCOUNTS AND CONTINUED USE OF EXISTING BUSINESS FORMS
AND CHECKS, (B) AUTHORIZING THE CONTINUED USE OF EXISTING CASH
MANAGEMENT SYSTEM, (C) WAIVING CERTAIN INVESTMENT AND DEPOSIT
GUIDELINES, AND (D) GRANTING ADMINISTRATIVE EXPENSE STATUS TO
POSTPETITION INTERCOMPANY CLAIMS
Upon the motion (the "Motion")
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filed by the above-captioned debtors and debtors-in-
possession (collectively, the "Debtors") seeking entry of an order: (a) authorizing the
maintenance of the Debtors' existing bank accounts and continued use of existing business forms
and checks; (b) authorizing, but not directing, the continued use of existing cash management
system; (c) waiving certain of the investment and deposit Guidelines promulgated by the Office
of the United States Trustee, and (d) granting administrative expense status to postpetition
intercompany claims; 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
2
The Debtors in these chapter 11 cases, along with the last four digits of each Debtor's 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 used but not defined herein shall have the meanings ascribed to them in the Motion.
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. For the reasons set forth on the record, the Motion is GRANTED.
2. The Debtors are authorized, but not directed, to maintain and use their existing
Cash Management System, as more fully set forth in the Motion.
3. The Debtors are authorized to maintain and use the existing Bank Accounts listed
on Exhibit "A" to the Motion in the name and with the account numbers existing immediately
prior to the Petition Date.
4. The requirement in the Guidelines that the Debtors establish a specific new bank
account for tax payments is waived.
5. The Debtors shall retain the authority to close or otherwise modify certain of their
Bank Accounts and open new debtor-in-possession accounts, or otherwise make changes to their
cash management system as they deem necessary to facilitate their chapter 11 cases and
operations, or as may be necessary to comply with the requirements of any debtor-in-possession
financing facility or cash collateral usage approved by this Court. In the event that the Debtors
open or close any additional bank accounts, such opening or closing shall be timely indicated on
the Debtors' monthly operating reports or notice of such opening or closing shall otherwise be
timely provided to the Office of the United States Trustee for the District of Delaware and
counsel to any official committee of unsecured creditors appointed in these cases (subsequent to
its appointment).
6. The Debtors are authorized to deposit funds in and withdraw funds from their
2
Bank Accounts by all usual means, subject to the same access rights and limitations existing
prior to the Petition Date, including, but not limited to, checks, wire transfers, automated
clearinghouse transfers, electronic funds transfers, and other debits and to treat the Bank
Accounts for all purposes as debtor-in-possession accounts.
7. The Debtors are authorized to continue to use their pre-printed checks,
correspondence, and business forms and checks, including, but not limited to, purchase orders,
letterhead, envelopes, promotional materials, and other business forms, substantially in the forms
existing immediately prior to the Petition Date, without reference to the Debtors' debtor-in-
possession status, provided that the Debtors will add the "Debtor-in-Possession" designation to
any new checks that they obtain or create post-petition.
8. The banks listed on Exhibit "A" to the Motion and any and all other financial
institutions receiving or transferring funds from the Debtors are hereby authorized and directed
to continue to service and administer the Bank Accounts of the relevant Debtor as a debtor-in-
possession without interruption and in the usual and ordinary course, and to receive, process,
honor and pay any and all checks, drafts, wires, or ACH transfers drawn on the Bank Accounts
by the holders or makers thereof, provided that nothing contained herein shall authorize any such
bank to honor any check issued or dated prior to the date of the commencement of these cases,
except as otherwise provided by further order of this Court. In no event shall any of the Banks
be required to honor overdrafts or to pay any check, wire or other debit against any of the Bank
Accounts that is drawn against uncollected funds.
9. The Debtors may continue to pay, and the banks may continue to charge and
collect, all customary and usual fees arising from or related to the Bank Accounts.
10. Subject to section 553 of the Bankruptcy Code and the DIP Orders, all banks that
maintain the Bank Accounts are prohibited from offsetting, affecting, freezing, or otherwise
3
impeding the Debtors' use of any funds in the Bank Accounts on account of, or by reason of, any
claim (as defined in section 101(5) of the Bankruptcy Code) of any such bank against the
Debtors that arose before the Petition Date, absent further order of this Court.
11. In connection with the ongoing utilization of the Cash Management System, the
Debtors shall continue to maintain records with respect to all transfers of cash so that all
transactions (including Intercompany Transactions) may be readily ascertained, traced, recorded
properly, and distinguished between prepetition and postpetition transactions.
12. Intercompany loans and other claims created through Intercompany Transactions
are hereby granted administrative priority status pursuant to 11 U.S.C. 507(a)(2), junior in
priority to any valid and enforceable postpetition claims of the DIP Lender; provided, however,
that each Debtor shall forbear from exercising, and shall not be entitled to exercise, any remedy
relating to any Intercompany Transaction including, without limitation, seeking relief from the
automatic stay, or seeking any sale, foreclosure, realization upon, repossession or liquidation of
any property of another Debtor, or taking any position with respect to any disposition of the
property, business operations, or the reorganization of another Debtor, absent further order of
this Court; provided further, however, that nothing herein shall limit or be construed to limit the
Debtors' ability to reconcile amounts owed between and among any Debtors, including netting
and setting off obligations arising from Intercompany Transactions, whether arising pre or
postpetition, in the ordinary course of business, between a Debtor and another Debtor.
13. Notwithstanding anything to the contrary contained herein any payment to be
made, or authorization contained, hereunder shall be subject to the requirements imposed on the
Debtors under any approved debtor-in-possession financing facility, or any order regarding the
Debtors' postpetition financing or use of cash collateral.
4
14. 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.
15. Notwithstanding any applicability of Bankruptcy Rule 6004(h), the terms and
conditions ofthis Order shall be immediately effective and enforceable upon its entry.
16. The Court shall retain jurisdiction to hear and determine all matters arising from
or relating to the interpretation or implementation of this Order.
Dated:
-------' 2012
PETER J. WALSH
UNITED STATES BANKRUPTCY JUDGE
5