<PAGE>
                                                                    EXHIBIT 10.1

                    SEPARATION AGREEMENT AND GENERAL RELEASE

         This Separation Agreement and General Release ("AGREEMENT") is entered
into by and between MICHAEL W. MYERS ("MYERS") and BACK YARD BURGERS, INC.
("BYB") (collectively "Parties").

                                    RECITALS

         This AGREEMENT is made with reference to the following facts:

         A.       WHEREAS, MYERS served in the position of President and Chief
                  Operating Officer with BYB; and

         B.       WHEREAS, all employment compensation and consideration for
                  this Agreement concededly due to MYERS has been
                  unconditionally paid; and

         C.       WHEREAS, BYB is willing to provide MYERS with certain
                  considerations described below, which it is not ordinarily
                  required to provide, provided MYERS resigns from his
                  employment with BYB and releases BYB from any claims MYERS
                  might make arising out of his employment with BYB, and agrees
                  to comply with the other promises and conditions set forth in
                  this AGREEMENT.

         NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Parties, the Parties agree
to be legally bound by the following terms and conditions, which constitute full
settlement of any and all disputes between them:

         1.       RECITALS: The Parties acknowledge that the "WHEREAS" clauses
                  preceding paragraph 1 are true and correct, and are
                  incorporated herein as material parts to this AGREEMENT.

         2.       DEFINITIONS: Throughout this AGREEMENT, the term "BYB" shall
                  include the following:

                  (A)      BYB as well as any affiliated entity, related entity,
                           or subsidiary entity of BYB; and

                  (B)      Any officer, director, trustee, agent, employee, or
                           insurer of an entity encompassed by subparagraph (A).

         3.       PAYMENT AMOUNT: As consideration for signing this AGREEMENT
                  and compliance with the promises made herein (including
                  without limitation the provisions of paragraph 5 hereof), BYB
                  agrees to pay to MYERS the aggregate sum of Eighty Thousand
                  Dollars ($80,000), less all applicable Federal and State
                  withholdings (the "Payment Amount"). The Payment Amount shall
                  be paid by BYB to MYERS in six (6) equal monthly installments
                  beginning on the eighth




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                  business day after the date of this AGREEMENT and continuing
                  on the same date of the following five months.

                  BYB shall provide the consideration identified in this
                  paragraph 3 after receiving an original of this AGREEMENT
                  appropriately executed and dated by MYERS. This AGREEMENT
                  shall not become effective, therefore, and none of the
                  benefits set forth in this paragraph will become due or
                  payable, until after the Effective Date of this AGREEMENT (the
                  "Effective Date" defined as the first day after MYERS' seven
                  (7) day revocation period has ended and BYB has received from
                  MYERS an original of this Agreement executed by MYERS).

         4.       TERMINATION OF AMENDED AND RESTATED SEVERANCE AGREEMENT: As
                  consideration for the sums paid to MYERS by BYB pursuant to
                  Paragraph 3 herein, MYERS hereby terminates the Amended and
                  Restated Severance Agreement entered into on October 11, 2004
                  between MYERS and BYB. MYERS hereby fully and completely
                  releases BYB forever from any and all obligations imposed on
                  BYB under the aforementioned Amended and Restated Severance
                  Agreement.

         5.       NON-COMPETE: As consideration for the payment by BYB to MYERS
                  of an additional amount of Ten Thousand Dollars ($10,000),
                  payable on the eighth business day after the date of this
                  AGREEMENT, MYERS agrees that during the period that ends on
                  the date that is one (1) year from the date hereof, MYERS will
                  not, directly or indirectly:

                           (A) engage or participate in any way, as an owner,
                  officer, partner, member, employee, agent, independent
                  contractor, board member or stockholder of any entity that is
                  competitive with BYB (i.e., a fast casual/food restaurant
                  whose principal business is the sale of hamburgers) where such
                  entity is either headquartered in or has a majority of its
                  business located anywhere within the metropolitan statistical
                  areas (as defined by the Office of Management and Budget as of
                  the date hereof) that include Memphis, Tennessee, and

                           (B) solicit or otherwise encourage any officer or
                  employee of BYB to terminate his or her employee relationship
                  with BYB.

                  If the final judgment of a court of competent jurisdiction
                  declares that any term or provision of this paragraph 5 is
                  invalid or unenforceable, the parties agree that the court
                  making the determination of invalidity or unenforceability
                  shall have the power to reduce the scope, duration, or area of
                  the term or provision, to delete specific words or phrases, or
                  to replace any invalid or unenforceable term or provision with
                  a term or provision that is valid and enforceable and that
                  comes closest to expressing the intention of the invalid or
                  unenforceable term or provision, and this AGREEMENT shall be
                  enforceable as so modified after the expiration of the time
                  within which the judgment may be appealed.


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<PAGE>

         6.       RETURN OF PROPERTY: MYERS represents that he has (or will
                  within three (3) days after executing this AGREEMENT) returned
                  all equipment and property in his possession that belong to
                  BYB or that relate or refer to BYB or its business, including
                  all files and programs (hard copy, electronic or otherwise),
                  all originals and copies of documents, notes, memoranda or any
                  other materials that relate or refer to BYB or its business
                  (hard copy, electronic or otherwise), and material that
                  constitutes trade secrets or "Confidential Information" as
                  defined in Paragraph 12 of this Agreement. In addition, MYERS
                  acknowledges that BYB has the right to electronically examine
                  all computer or telecommunications equipment that he may have
                  used in the course of performing his job duties and delete any
                  Confidential Information contained therein.

         7.       CONSIDERATION: MYERS understands and agrees that he would not
                  receive the monies and/or benefits specified in paragraphs 3
                  and 5 hereof, but for his execution of this AGREEMENT and the
                  fulfillment of the promises contained herein.

         8.       GENERAL RELEASE OF CLAIMS: In exchange for, and in
                  consideration of, the payments, benefits, and other
                  commitments described above, MYERS, for himself and for each
                  of his heirs, executors, administrators, and assigns, hereby
                  fully releases, acquits, and forever discharges BYB and each
                  of any predecessors, successors and assigns, parent
                  corporations, subsidiary corporations thereof, affiliated
                  corporations, and the officers, directors, shareholders,
                  partners, employees, attorneys and agents, past and present,
                  of each of the aforesaid entities ("Related Persons") of and
                  from any and all claims, liabilities, causes of action,
                  demands to any rights, damages, costs, attorneys' fees,
                  expenses, and compensation whatsoever, of whatever kind or
                  nature, in law, equity or otherwise, whether known or unknown,
                  vested or contingent, suspected or unsuspected, that MYERS may
                  now have, has ever had, or hereafter may have relating
                  directly or indirectly to MYERS' employment with BYB or the
                  separation therefrom including, but not limited to, claims for
                  wages, which, as set forth in "WHEREAS" clause "B" preceding
                  paragraph 1 of this AGREEMENT, as well as paragraph 8 of this
                  AGREEMENT, have been fully paid to MYERS prior to the
                  execution of this AGREEMENT, or are fully paid by way of
                  paragraph 3 of this AGREEMENT; back pay; front pay;
                  reinstatement; damages; or benefits. MYERS also releases any
                  and all claims he may have that arose prior to the date of
                  this AGREEMENT, and hereby specifically waives and releases
                  all claims, including, but not limited to, those arising under
                  Title VII of the Civil Rights Act of 1964, as amended, the
                  Civil Rights Act of 1991; the Equal Pay Act; the Americans
                  With Disabilities Act of 1990; the Rehabilitation Act of 1973,
                  as amended; Sections 1981 through 1988 of Title 42 of the
                  United States Code, as amended; the Immigration Reform and
                  Control Act, as amended; the Workers Adjustment and Retraining
                  Notification Act, as amended; the Occupational Safety and
                  Health Act, as amended; the Sarbanes-Oxley Act of 2002; the
                  Consolidated Omnibus Budget Reconciliation Act (COBRA); the
                  Family and Medical Leave Act; the Employee Retirement Income
                  Security Act of 1974, as amended; the


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                  National Labor Relations Act; the Fair Labor Standards Act;
                  the Age Discrimination in Employment Act of 1967; and any and
                  all state or local statutes, ordinances, or regulations, as
                  well as all claims arising under federal, state, or local law
                  involving any tort, employment contract (express or implied),
                  public policy, wrongful discharge, whistleblower or any other
                  claim.

                  This AGREEMENT shall not apply to rights or claims that may
                  arise after the Effective Date of this AGREEMENT; nor shall
                  any provision of this AGREEMENT be interpreted to waive,
                  release, or extinguish any rights that -- by express and
                  unequivocal terms of law -- may not under any circumstances be
                  waived, released, or extinguished.

         9.       TAX LIABILITY: MYERS understands that BYB shall issue an IRS
                  Form 1099 for those portions of the payment specified in
                  paragraphs 3 and 5 of this AGREEMENT that are not subject to
                  withholding. In paying the amount specified in paragraphs 3
                  and 5, BYB makes no representation regarding the tax
                  consequences or liability arising from said payment. MYERS
                  understands and agrees that any and all tax liability that may
                  be due or become due because of the payment referenced above
                  is his sole responsibility, and that he will pay any such
                  taxes that may be due or become due. BYB has no monetary
                  liability or obligation regarding payment whatsoever (other
                  than delivering a valid check in the sum referenced in
                  paragraphs 3 and 5 of this AGREEMENT to MYERS). MYERS agrees
                  to bear all tax consequences, if any, attendant upon the
                  payment to him of the above-recited sums. MYERS further agrees
                  to hold BYB harmless from and against any tax or tax
                  withholdings claims, amounts, interest, penalties, fines or
                  assessments brought or sought by any taxing authority or
                  governmental agency with regard to the above recited sums. In
                  the event BYB receives written notice that any claim or
                  assessments for taxes, withholding obligations, penalties
                  and/or interest arising out of this settlement are being or
                  will be made against BYB, BYB shall promptly, after receipt of
                  such written notice, notify MYERS in accordance with the
                  notice terms provided by this AGREEMENT.

         10.      AFFIRMATIONS: MYERS represents and affirms that he has no
                  suits, claims, charges, complaints or demands of any kind
                  whatsoever currently pending against BYB with any local,
                  state, or federal court or any governmental, administrative,
                  investigative, civil rights or other agency or board. MYERS
                  further represents and affirms that, except for the fourth
                  (4th) quarter 2005 incentive bonus which will be calculated in
                  the manner and per the criteria used to establish the first
                  (1st) second (2nd) and third (3rd) quarter bonuses, salary
                  through the end of the February 26, 2006, certain reimbursable
                  expenses including a life insurance payment, and payment for
                  accrued yet unused vacation time as per the records of BYB,
                  all of which BYB agrees to pay, he has been paid and/or
                  received all leave (paid or unpaid), compensation, wages,
                  bonuses, commissions, and/or benefits to which he may be
                  entitled and that no other leave (paid or unpaid),
                  compensation, wages, bonuses, commissions, and/or benefits are
                  due him, except as provided for in this AGREEMENT.



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<PAGE>

         11.      CONFIDENTIALITY: MYERS agrees not to make any unauthorized
                  use, publication, or disclosure of any confidential,
                  proprietary and non-public information generated or acquired
                  by MYERS during the course of his employment with BYB,
                  including, but not limited to, any confidential, trade secret
                  or non-public information ("Confidential Information"). MYERS
                  understands that Confidential Information includes information
                  not generally known by or available to the public about or
                  belonging to BYB, or belonging to other companies to whom BYB
                  may have an obligation to maintain information in confidence,
                  and that authorization for disclosure may be obtained only
                  through BYB's general counsel or designee.

         12.      NO ASSIGNMENT: The Parties represent and warrant that no
                  person other than the signatories hereto had or has any
                  interest in the matters referred to in this AGREEMENT, that
                  the Parties have the sole right and exclusive authority to
                  execute this AGREEMENT, and that the Parties have not sold,
                  assigned, transferred, conveyed, or otherwise disposed of any
                  claim, demand or legal right that is the subject of this
                  AGREEMENT.

         13.      NON-DISPARAGEMENT: MYERS agrees that he will not provide
                  information, issue statements, or take any action, directly or
                  indirectly, that would cause BYB embarrassment or humiliation
                  or otherwise cause or contribute to BYB being held in
                  disrepute. BYB agrees that it will not provide information,
                  issue statements, or take any action, directly or indirectly,
                  that would cause MYERS embarrassment or humiliation or
                  otherwise cause or contribute to MYERS being held in
                  disrepute.

         14.      NON-VOLUNTARY COOPERATION. Unless BYB is seeking MYERS'
                  assistance or testimony, MYERS explicitly agrees not to assist
                  or become involved with any litigation in which BYB is a
                  defendant unless ordered by a court to do so. If ordered,
                  MYERS explicitly agrees to provide reasonable notice of such
                  order to BYB pursuant to this AGREEMENT and its notice
                  provision.

         15.      GOVERNING LAW AND JURISDICTION: This AGREEMENT shall be
                  governed and conformed in accordance with the laws of the
                  State of Tennessee without regard to its conflict of laws
                  provision. In the event MYERS or BYB breaches any provision of
                  this AGREEMENT, MYERS and BYB affirm that either may institute
                  an action to specifically enforce any term or terms of this
                  AGREEMENT.

         16.      CONDITIONS: Should MYERS ever breach any provision or
                  obligation under this AGREEMENT, MYERS explicitly agrees to
                  pay all damages (including, but not limited to, litigation
                  and/or defense costs, expenses, and reasonable attorneys'
                  fees) incurred by BYB as a result of MYERS' breach. Nothing in
                  this paragraph shall, or is intended to, limit or restrict any
                  other rights or remedies BYB may


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                  have by virtue of this AGREEMENT or otherwise. Should BYB ever
                  breach any provision or obligation under this AGREEMENT, BYB
                  explicitly agrees to pay all damages (including, but not
                  limited to, litigation and/or defense costs, expenses, and
                  reasonable attorneys' fees) incurred by MYERS as a result of
                  BYB' breach. Nothing in this paragraph shall, or is intended
                  to, limit or restrict any other remedies MYERS may have by
                  virtue of this AGREEMENT or otherwise.

         17.      NO ADMISSION OF LIABILITY: The parties agree that neither this
                  AGREEMENT nor the furnishing of the consideration for this
                  AGREEMENT shall be deemed or construed at anytime for any
                  purpose as an admission by BYB or MYERS of any liability or
                  unlawful conduct of any kind.

         18.      HEADINGS: The headings of the provisions herein are intended
                  for convenient reference only, and the same shall not be, nor
                  be deemed to be, interpretative of the contents of such
                  provision.

         19.      MODIFICATION OF AGREEMENT: This AGREEMENT may not be amended,
                  revoked, changed, or modified in any way, except in writing
                  executed by all Parties. MYERS agrees not to make any claim at
                  any time or place that this AGREEMENT has been verbally
                  modified in any respect whatsoever. No waiver of any provision
                  of this AGREEMENT will be valid unless it is in writing and
                  signed by the party against whom such waiver is charged. The
                  parties acknowledge that only Counsel for BYB has the
                  authority to modify this AGREEMENT on behalf of BYB.

         20.      INTERPRETATION: The language of all parts of this AGREEMENT
                  shall in all cases be construed as a whole, according to its
                  fair meaning, and not strictly for or against any of the
                  Parties. This AGREEMENT has been negotiated by and between
                  attorneys for the Parties and shall not be construed against
                  the "drafter" of the AGREEMENT. If any portion or provision of
                  this AGREEMENT (including, without implication of limitation,
                  any portion or provision of any section of this AGREEMENT) is
                  determined to be illegal, invalid, or unenforceable by any
                  court of competent jurisdiction and cannot be modified to be
                  legal, valid, or enforceable, the remainder of this AGREEMENT
                  shall not be affected by such determination and shall be valid
                  and enforceable to the fullest extent permitted by law, and
                  said illegal, invalid, or unenforceable portion or provision
                  shall be deemed not to be a part of this AGREEMENT. To the
                  extent any provision herein that relates to MYERS' release of
                  claims under paragraph 8 above is deemed to be illegal,
                  invalid, or unenforceable, BYB is not obligated to honor any
                  of the terms set forth herein and MYERS shall return any
                  amounts paid by BYB. In the event of a breach or threatened
                  breach of any of the duties and obligations of MYERS under
                  this AGREEMENT, BYB shall be entitled, in addition to any
                  other legal or equitable remedies it may have in connection
                  therewith (including any right to damages that BYB may
                  suffer), to a temporary, preliminary, and/or permanent
                  injunction restraining such breach or threatened breach.


                                       6
<PAGE>

         21.      BINDING NATURE OF AGREEMENT: This AGREEMENT shall be binding
                  upon each of the Parties and upon their respective heirs,
                  administrators, representatives, executors, successors, and
                  assigns, and shall inure to the benefit of each party and to
                  their respective heirs, administrators, representatives,
                  executors, successors, and assigns.

         22.      ENTIRE AGREEMENT: This AGREEMENT sets forth the entire
                  AGREEMENT between the parties hereto, and fully supersedes any
                  prior obligation of BYB to MYERS. MYERS acknowledges that he
                  has not relied on any representations, promises, or agreements
                  of any kind made to him in connection with his decision to
                  accept this AGREEMENT, except for those set forth in this
                  AGREEMENT.

         23.      NOTICE REQUIREMENTS: Each notice ("Notice") provided for under
                  this AGREEMENT, must comply with the requirements as set forth
                  in this paragraph. Each Notice shall be in writing and sent by
                  facsimile or depositing it with a nationally recognized
                  overnight courier service that obtains receipts (such as
                  Federal Express or UPS Next Day Air), addressed to the
                  appropriate party (and marked to a particular individual's
                  attention, if so indicated) as hereinafter provided. Each
                  Notice shall be effective upon being so telecopied or
                  deposited, but the time period in which a response to any
                  notice must be given or any action taken with respect thereto
                  shall commence to run from the date of receipt of the Notice
                  by the addressee thereof, as evidenced by the return receipt.
                  Rejection or other refusal by the addressee to accept or the
                  inability to deliver because of a changed address of which no
                  Notice was given shall be deemed to be the receipt of the
                  Notice sent. Any party shall have the right from time to time
                  to change the address or individual's attention to which
                  notices to it shall be sent by giving to the other party at
                  least ten (10) days prior Notice thereof. The Parties'
                  addresses for providing Notices hereunder shall be as follows:

                  If to BYB:                  Back Yard Burgers, Inc.
                                              1657 Shelby Oaks Dr. N. Ste. 105
                                              Memphis, Tennessee 38134
                                              Attn: Chief Executive Officer

                  If to Myers:                Michael W. Myers
                                              9116 Grovelawn Cove East
                                              Germantown, TN 38139


         24.      TIME TO SIGN AND RETURN AGREEMENT: MYERS acknowledges and
                  agrees that he first received the original of this Agreement
                  on or before February 23, 2006. MYERS also understands and
                  agrees that he has been given at least 21 calendar days from
                  the date he first received this Agreement to obtain the advice
                  and counsel of the legal representative of his choice and to
                  decide whether to sign it. MYERS acknowledges that he has been
                  advised and has sought the advice of his



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                  own counsel. MYERS understands that he may sign the Agreement
                  at any time on or before the expiration of this 21-day period.
                  MYERS also understands that for seven calendar days after he
                  signs this Agreement he has the right to revoke it, and that
                  this Agreement will not become effective and enforceable until
                  after the expiration of this seven-day period in which he did
                  not exercise his right of revocation. MYERS specifically
                  understands and agrees that any attempt by him to revoke this
                  Agreement after the seven-day period has expired is, or will
                  be, ineffective. MYERS represents and agrees that he has
                  thoroughly discussed all aspects and effects of this Agreement
                  with his attorney, that he has had a reasonable time to review
                  the Agreement, that he fully understands all the provisions of
                  the Agreement and that he is voluntarily entering into this
                  Agreement.

         25.      SELECTIVE ENFORCEMENT: The Parties agree that the failure of
                  any party to enforce or exercise any right, condition, term,
                  or provision of this AGREEMENT shall not be construed as or
                  deemed a relinquishment or waiver thereof, and the same shall
                  continue in full force and effect.

MYERS IS HEREBY ADVISED THAT HE HAS A REASONABLE PERIOD OF TIME TO REVIEW AND
CONSIDER THIS AGREEMENT AND IS HEREBY ADVISED THAT HE SHOULD CONSULT WITH AN
ATTORNEY PRIOR TO THE EXECUTION OF THIS AGREEMENT.

HAVING ELECTED TO EXECUTE THIS AGREEMENT, TO FULFILL THE PROMISES AND TO RECEIVE
THE SUMS AND BENEFITS IN PARAGRAPHS 3 AND 5 ABOVE, MYERS FREELY, VOLUNTARILY AND
KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT INTENDING TO
WAIVE, SETTLE, AND RELEASE ALL CLAIMS HE HAS OR MIGHT HAVE AGAINST BYB.











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<PAGE>


ACCEPTED AND AGREED:


By:      /s/ MICHAEL W. MYERS
         ---------------------------
         MICHAEL W. MYERS


                  2/26/2006
         ---------------------------
                  Date



STATE OF TENNESSEE         )
                           )
COUNTY OF SHELBY           )

         BEFORE ME, the undersigned authority on this 26 day of Feb. 2006,
personally appeared MICHAEL W. MYERS, known to me to be the person whose name is
subscribed to the foregoing instrument and signed in my presence and swore upon
oath this AGREEMENT was executed for the purposes and consideration therein
expressed.

         SUBSCRIBED AND SWORN TO BEFORE ME on this 26 day of Feb. 2006, to
certify which witness my hand and seal of office.

                                       /s/ MARTHA D. TAYLOR
                                       ---------------------------------------
                                       NOTARY PUBLIC

                                       Martha D. Taylor
                                       ---------------------------------------
                                       (Printed Name of Notary)

My Commission Expires:

6-7-2006
----------------------







                                       9

<PAGE>


ACCEPTED AND AGREED:

BACK YARD BURGERS


By:      /s/ Lattimore M. Michael
         ---------------------------
         Lattimore M. Michael

              February 27, 2006
         ---------------------------
              Date



STATE OF TENNESSEE         )
                           )
COUNTY OF SHELBY           )

         BEFORE ME, the undersigned authority on this _____ day of _________
2006, personally appeared Lattimore M. Michael, known to me to be the person
whose name is subscribed to the foregoing instrument and signed in my presence
and swore upon oath this AGREEMENT was executed for the purposes and
consideration therein expressed.

         SUBSCRIBED AND SWORN TO BEFORE ME on this _____ day of ________ 2006,
to certify which witness my hand and seal of office.

                                                     ----------------------
                                                     NOTARY PUBLIC

                                                     ----------------------
                                                     (Printed Name of Notary)

My Commission Expires:

--------------------







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