EXHIBIT 10.44 O'CHARLEY'S INC. DEVELOPMENT AGREEMENT

Development Agreement

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Title: EXHIBIT 10.44 O'CHARLEY'S INC. DEVELOPMENT AGREEMENT
Governing Law: Tennessee Date: 3/12/2004
Industry: Restaurants Sector: Services

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EXHIBIT 10.44

[O'CHARLEY'S LOGO]

O'CHARLEY'S INC.

DEVELOPMENT AGREEMENT

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TABLE OF CONTENTS

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ARTICLE I GRANT..............................................................2

ARTICLE II FEES...............................................................4

ARTICLE III SCHEDULE AND MANNER FOR EXERCISING DEVELOPMENT RIGHTS..............5

ARTICLE IV PREREQUISITES TO OBTAINING LICENSES...............................12

ARTICLE V TERM..............................................................14

ARTICLE VI DUTIES OF DEVELOPER...............................................14

ARTICLE VII DEFAULT AND TERMINATION...........................................19

ARTICLE VIII TRANSFER OF INTEREST..............................................23

ARTICLE IX COVENANTS.........................................................29

ARTICLE X INDEPENDENT CONTRACTOR AND INDEMNIFICATION........................32

ARTICLE XI APPROVALS.........................................................33

ARTICLE XII NON-WAIVER AND REMEDIES...........................................33

ARTICLE XIII NOTICES...........................................................34

ARTICLE XIV SEVERABILITY AND CONSTRUCTION.....................................34

ARTICLE XV ENTIRE AGREEMENT; APPLICABLE LAW..................................35

ARTICLE XVI ACKNOWLEDGMENTS...................................................37

Attachment A Operating Agreement............................................A-1

Attachment B Lease Rider....................................................B-1

Attachment C Confidentiality And Non-Compete Agreement......................C-1

Attachment D Statement Of Ownership Interests and Principals................D-1

Attachment E Guaranty.......................................................E-1

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O'CHARLEY'S INC.

DEVELOPMENT AGREEMENT

THIS DEVELOPMENT AGREEMENT (the "Agreement") is made and entered into

this 22nd day of December, 2003, by and among O'Charley's Inc., a Tennessee

corporation ("Licensor"), OCM Development Company, LLC, a Michigan limited

liability company d/b/a O'Charley's Development Company of Michigan

("Developer"), and Meritage Hospitality Group Inc., a Michigan corporation

("Controlling Principal").

WITNESSETH:

WHEREAS, Licensor, as a result of the expenditure of time, skill,

effort and money, has developed and owns the rights to develop and operate a

unique system of full service varied menu casual dining restaurants which

feature freshly prepared items such as hand-cut and aged steaks, fresh chicken,

seafood, homemade yeast rolls and fresh-cut salads with special recipe dressings

and which serve alcoholic beverages through a full-service bar all under the

trademark O'Charley's(R) (the "System");

WHEREAS, the distinguishing characteristics of the System include,

without limitation, distinctive exterior and interior design, decor, color

schemes, awnings, neons and furnishings, special recipes and menu items, uniform

standards, specifications and procedures for operations, quality and uniformity

of products and services offered, procedures for inventory management and

financial control, training and assistance, and advertising and promotional

programs, all of which may be changed, improved and further developed by

Licensor from time to time;

WHEREAS, Licensor identifies the System by means of certain trade

names, service marks, trademarks, emblems and indicia of origin, including, but

not limited to, the mark O'Charley's(R) and such other trade names, service

marks and trademarks as are now designated (and may hereafter be designated by

Licensor in writing) for use in connection with the System (the "Proprietary

Marks");

WHEREAS, Licensor continues to develop, use and control the use of such

Proprietary Marks in order to identify for the public the source of services and

products marketed thereunder and under the System, and to represent the System's

high standards of quality, appearance and service;

WHEREAS, the value of Licensor's Proprietary Marks is based upon: (a)

the maintenance of uniform high quality standards in connection with the

preparation and sale of Licensor-approved food and beverage products; (b) the

uniform high standards of appearance of the individual restaurant units in the

System; (c) the use of distinctive Proprietary Marks, building designs and

advertising signs representing a uniformly high quality of products and

services; and (d) the assumption by its franchisees of the obligation to

maintain and enhance the goodwill and public acceptance of the System and of the

Proprietary Marks by strict adherence to the high standards required by

Licensor; and

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WHEREAS, Developer wishes to obtain certain development rights to

operate one (1) or more full-service O'Charley's restaurants (each, a

"Restaurant" or "Licensed Business," and together, the "Restaurants" or

"Licensed Businesses") under the System in the territory described in this

Development Agreement.

NOW, THEREFORE, the parties, in consideration of the mutual

representations, warranties, covenants and agreements set forth herein, and

intending to be legally bound, hereby agree as follows:

ARTICLE I

GRANT

A. In reliance on the representations, warranties, covenants and

agreements of Developer and its Controlling Principals hereunder, Licensor

hereby grants to Developer and Developer hereby accepts, pursuant to the terms

and conditions of this Agreement, the right and obligation to develop the number

of Restaurants described in the Development Schedule (as defined below) solely

within the geographic area(s) described below (collectively the "Territory").

State of Michigan, except Lenawee County in Southeast Michigan

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Developer may be granted rights to develop additional Restaurants in Licensor's

sole discretion. Any and all such rights to develop Restaurants are subject to

Developer's full compliance with all conditions precedent to the grant of such

rights outlined in this Agreement, and any such rights shall be exercised in

accordance with Article III.

B. Developer acknowledges and understands that the rights granted

hereunder are for the development of full-service O'Charley's restaurants.

Except as provided in this Agreement, and subject to Developer's full compliance

with this Agreement and any other agreements among Developer, or any of its

Affiliates and Licensor or any of its Affiliates, neither Licensor nor its

Affiliates shall establish or authorize any other person or any other

corporation, limited liability company, partnership, limited partnership, joint

venture, association, trust, unincorporated association or any other business

entity (each, an "Entity"), other than Developer, to establish a Restaurant in

the Territory during the term of this Agreement. Notwithstanding the above,

Developer acknowledges and agrees that Licensor and its Affiliates operate

restaurants under the trademark O'Charley's(R) and further agrees and

acknowledges that the rights granted hereby are only for the development and

operation of one (1) or more full-service O'Charley's restaurants, and,

therefore, Licensor and its Affiliates may conduct (or authorize one or more

third parties to conduct) the following activities:

(1) Licensor, its Affiliates, any O'Charley's developer

or operator and any other authorized person or Entity shall have the right, at

any time, to advertise and promote the System, and fill customer orders by

providing catering and/or delivery services in the Territory.

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(2) Licensor and its Affiliates may offer and sell (or

may authorize others to offer and sell) collateral and ancillary products and

services under the Proprietary Marks which may be similar to those offered by

the Restaurants in the Territory if offered and sold other than through a

full-service O'Charley's restaurant, such as pre-packaged food products,

t-shirts and O'Charley's memorabilia.

(3) Licensor and its Affiliates may offer and sell in the

Territory (or may authorize others to offer and sell) such products and services

under the Proprietary Marks through any permanent, temporary or seasonal food

service facility (e.g., a kiosk, concession or multi-brand facility) that will

provide a limited number or representative sample of the products and services

normally offered by, and be located in a smaller facility than, a full-service

O'Charley's restaurant ("Alternative Distribution Facilities").

(4) Licensor and its Affiliates may operate (or may

authorize others to operate) a full-service O'Charley's restaurant or other

similar food service facilities offering the same products and services offered

by a full-service O'Charley's restaurant or an Alternative Distribution Facility

in any area of retail sales establishments, food courts, transportation

facilities (e.g., airports, train stations, bus terminals or port authorities),

hospitals and other healthcare facilities, cafeterias, commissaries, schools,

hotels, sports and entertainment facilities (e.g., stadiums, arenas, ball parks

or convention centers) and other mass gathering locations or events designated

by Licensor (each, an "Excluded Area"). Licensor may first offer to Developer

the right to offer and sell the O'Charley's restaurant products in the Excluded

Area within the Territory. Developer must meet each of the conditions outlined

in Section IV(B), and any other criteria and qualifications deemed necessary by

Licensor, or any other third party involved in the arrangement such as an

airport or stadium authority, educational institution or other facilities

operator ("Facilities Operator"), to offer and sell the O'Charley's restaurant

products and services in the Excluded Area. If Developer does not meet all of

the criteria and qualifications required by Licensor and the Facilities

Operator, then Developer shall not be granted the right to offer and sell such

products and services within the Excluded Area and Licensor may conduct such

business, or authorize any other person or Entity to do so. If Developer meets

all the conditions, criteria and qualifications, Licensor shall offer to

Developer the right to offer and sell such products and services on such terms

and conditions as such arrangements may be offered to third parties as

determined by Licensor or such Facilities Operator, as applicable. Once such

offer has been made to Developer by Licensor in writing, Developer shall have

the right to accept such offer within thirty (30) days after receipt of such

written notification. If Developer fails to notify Licensor in writing of

Developer's intent to accept the offer within such thirty (30) day time period

or Developer fails to meet any criteria or qualifications imposed by Licensor or

the Facilities Operator, Licensor may conduct such business itself, or authorize

any other person or Entity to do so.

(5) Licensor and its Affiliates may offer and sell (or

may authorize others to offer and sell) products and services under any other

names and marks.

(6) Licensor, its Affiliates, any O'Charley's restaurant

developer or operator and any other authorized person or Entity may establish

and operate a full-service O'Charley's restaurant anywhere outside of the

Territory regardless of proximity to the Territory or the Location (as defined

in the Operating Agreement) of any O'Charley's Restaurant operated by Developer.

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C. This Agreement is not a franchise or license agreement and

does not grant to Developer any right or license to operate a Restaurant,

distribute goods or services, or any right to use or interest in the Proprietary

Marks (such right and license being granted only pursuant to the Operating

Agreement applicable to individual Restaurants as such Operating Agreement may

be entered into and become effective pursuant to this Agreement and such

Operating Agreement).

D. After this Agreement expires or is terminated, Licensor shall

have the complete and unrestricted right to operate or license other persons to

operate one or more restaurants utilizing the System in the Territory (except at

Locations for which Developer has a then outstanding and effective Operating

Agreement).

ARTICLE II

FEES

A. Developer shall pay Licensor an initial license fee of Fifty

Thousand Dollars ($50,000) for each of the first two (2) Restaurants developed

pursuant to this Agreement and Twenty-Five Thousand Dollars ($25,000) for each

additional Restaurant developed pursuant to this Agreement. Simultaneously with

the execution of this Agreement, Developer shall pay to Licensor one half (1/2)

of the license fees for all Restaurants to be developed pursuant to this

Agreement as a fee for such development. The remaining one half (1/2) of the

license fee for each of the Restaurants to be developed during the Development

Periods shall be paid by Developer upon the signing of an Operating Agreement

for each Restaurant.

B. Developer acknowledges that the portion of the license fees

being paid to Licensor simultaneously with the execution of this Agreement is

being paid in partial consideration of the administrative and other expenses

incurred by Licensor in connection with the development rights granted hereunder

and for its lost or deferred opportunity to grant such rights to any other

party. Developer acknowledges that no part of such fees shall be refunded to

Developer under any circumstances, even if no Restaurants are opened by

Developer under this Agreement, and that Developer shall have no right to

recover from Licensor, directly or indirectly, any of such portion of the

license fees.

C. Pursuant to its obligations hereunder and under the applicable

Operating Agreements, Licensor will make various expenditures in connection with

the development of prospective Restaurant sites by Developer, including

expenditures for travel, lodging and meals. Developer shall promptly notify

Licensor of a decision to cease development of a prospective Restaurant site. In

the event that Developer fails to open a Restaurant at any such site, Developer

shall reimburse Licensor for Licensor's expenditures with respect to that site.

In such event, Licensor shall provide Developer with an itemized list of

Licensor's expenditures with respect to that site within sixty (60) days after

Licensor receives notice that Developer no longer intends to develop a

Restaurant at that site, and Developer shall reimburse Licensor for such costs

within thirty (30) days after receiving such list.

D. Developer shall not be entitled to withhold payments due

Licensor under this Agreement on grounds of alleged nonperformance by Licensor

hereunder. Any payment not actually received by Licensor on or before the date

due shall be deemed overdue. Time is of the essence with respect to all payments

to be made by Developer to Licensor. All unpaid obligations under this Agreement

shall bear interest from the date due until paid at the lesser of

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(1) the prime commercial rate of interest as reported in the Wall Street Journal

(Southeastern edition) from time to time or by any bank or financial institution

designated from time to time by Licensor for short term unsecured loans to

substantial and responsible commercial borrowers, plus three percent (3%), or

(2) the maximum rate allowed by applicable law. Notwithstanding anything to the

contrary contained herein, no provision of this Agreement shall require the

payment or permit the collection of interest in excess of the maximum rate

allowed by applicable law. If any excess of interest is provided for herein, or

shall be adjudicated to be so provided in this Agreement, the provisions of this

paragraph shall govern and prevail, and neither Developer nor its Principals

shall be obligated to pay the excess amount of such interest. If for any reason

interest in excess of the maximum rate allowed by applicable law shall be deemed

charged, required or permitted, any such excess shall be applied as a payment

and reduction of any other amounts which may be due and owing hereunder, and if

no such amounts are due and owing hereunder then such excess shall be repaid to

the party that paid such interest.

E. Developer acknowledges that the Development Period extension

fees in Article III and the transfer fee in Section VIII(B)(2)(j) may, in

Licensor's sole discretion, be increased annually effective January 1 of each

year beginning on January 1 of the year following the date of this Agreement, by

an amount equal to the annual percentage increase during the preceding calendar

year in the Consumer Price Index---All Consumers (All Items)---United States

City Average, as compiled and published by the United States Department of

Labor, or such comparable successor index as may be designated by Licensor from

time to time.

ARTICLE III

SCHEDULE AND MANNER FOR EXERCISING DEVELOPMENT RIGHTS

A. Developer shall enter into a separate Operating Agreement with

Licensor for each Restaurant for which a development right is granted. The

Operating Agreement to be executed for each Restaurant to be developed under

this Agreement shall be in the form of the Operating Agreement attached hereto

as Attachment A.

B. (1) Acknowledging that time is of the essence, and subject to

the requirements of Article IV, Developer agrees to exercise its development

rights according to the development schedule below (the "Development Schedule"),

which schedule designates the number of Restaurants in the Territory to be

established and in operation by Developer upon the expiration of each of the

designated development periods (the "Development Periods").

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CUMULATIVE TOTAL NUMBER OF

RESTAURANTS LOCATED IN THE TERRITORY

WHICH DEVELOPER SHALL HAVE OPEN AND

DEVELOPMENT PERIOD EXPIRATION DATE OF DEVELOPMENT PERIOD IN OPERATION*

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One September 30, 2004 1

Two December 31, 2004 2

Three August 31, 2005 3

Four December 31, 2005 4

Five June 30, 2006 5

Six December 31, 2006 6

Seven June 30, 2007 7

Eight December 31, 2007 8

Nine June 30, 2008 9

Ten September 30, 2008 10

Eleven December 31, 2008 11

Twelve June 30, 2009 12

Thirteen September 30, 2009 13

Fourteen December 31, 2009 14

Fifteen June 30, 2010 15

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*includes existing Restaurants, if any, purchased or acquired by Developer from

Licensor.

(a) Developer shall have the obligation to develop each

Restaurant within the Territory during the Development Periods. If Developer has

developed the Restaurant(s) required in the applicable Development Period in

accordance with the Development Schedule and continues to meet the conditions

set forth in Article IV, Developer shall have the right and obligation to

develop the Restaurant(s) required during the next applicable Development

Period. Developer acknowledges that compliance with its development obligations

in each Development Period described above and continued compliance with Article

IV is a condition precedent to the receipt of such additional development

rights. If Developer fails to meet its development obligations or fails to

comply with the Operational Approval, Financial Approval, Legal Approval and

Ownership Approval requirements in Article IV, the conditions to the receipt of

those further development rights shall not have been met, and Developer shall

have no further rights to develop Restaurants hereunder.

(b) During any of the Development Periods set forth

above, subject to the terms and conditions of this Agreement, Developer, with

Licensor's prior written consent (which consent may be withheld in Licensor's

sole discretion), may develop more than the total minimum number of Restaurants

which Developer is required to develop during that Development Period.

Notwithstanding the above, Developer shall not open or operate more than the

cumulative total number of Restaurants Developer is obligated to develop under

this Agreement as set forth above in the Development Schedule without Licensor's

consent, which may be withheld in Licensor's sole discretion. Any Restaurants

developed during a Development Period in excess of the minimum number of

Restaurants required to be developed upon expiration of that Development Period,

shall be applied to satisfy Developer's development obligation during the next

succeeding Development Period, if any.

(2) If during the term of this Agreement, Developer ceases to

operate any Restaurant developed under this Agreement for any reason, Developer

shall develop a

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replacement Restaurant to fulfill Developer's obligation to have open and in

operation the required number of Restaurants upon the expiration of each

Development Period. The replacement Restaurant shall be developed within the

Territory and within a reasonable time to be determined by Licensor after

Developer ceases to operate the Restaurant to be replaced. If during the term of

this Agreement, Developer, in accordance with the terms of any Operating

Agreement for a Restaurant developed under this Agreement, transfers its

interest in such Restaurant, the transferred Restaurant shall continue to be

counted in determining whether Developer has complied with the Development

Schedule so long as it continues to be operated as an O'Charley's restaurant and

the transfer of the Restaurant is made in accordance with Article VIII of this

Agreement. If the transferred Restaurant ceases to be operated as an O'Charley's

restaurant during the term of this Agreement, Developer shall develop a

replacement Restaurant within the Territory and within a reasonable time to be

determined by Licensor after the transferred Restaurant ceases to be operated as

an O'Charley's restaurant. In either case, the reasonable time period shall

apply to the development of the replacement Restaurant only. In Licensor's sole

discretion, however, Licensor may extend the term of the applicable Development

Period to the end of the mutually agreed upon time period for an extension fee

of Five Thousand Dollars ($5,000) to be paid by Operator to Licensor; provided,

however, that in no event shall such time period exceed three (3) months; and,

provided, further, that such agreed time period shall not extend the term of

this Agreement. In addition, Developer shall be required to pay to Licensor a

lost revenue fee for any Restaurant that ceases to be operated as an O'Charley's

restaurant. The lost revenue fee shall be an amount equal to the amount of

revenue that Licensor would have received from Developer during the period

between the closing of the Restaurant and the opening of the replacement

Restaurant had the original Restaurant never closed. The lost revenue fee shall

be determined by multiplying (x) by (y) where (x) equals the number of

Accounting Periods (both complete and partial) between the closing of the

Restaurant and the opening of the replacement Restaurant and (y) equals the

greater of: (i) the closed Restaurant's Gross Sales (as that term is defined in

the Operating Agreement) for its last full Accounting Period of operation, or

(ii) the average of the Restaurant's last twelve (12) Accounting Periods (or

such shorter period the Restaurant has been operating) of Gross Sales. For

purposes of this Agreement, the term "Accounting Period" shall mean the

accounting periods for the Restaurant as established by Licensor from time to

time and described in the Manuals.

(3) Developer shall open each Restaurant developed hereunder and

shall commence business in accordance with the Development Schedule described in

this Article III.

(a) Developer may request in writing that Licensor extend

the Development Period of any one Restaurant to permit Developer to complete

construction and begin operation of such Restaurant. If Licensor determines, in

its sole discretion, to grant any such request, the applicable Development

Period shall be extended for a period of thirty (30) days (each such 30-day

period being referred to as an "Extension Period"). Developer's written request

for extension must be received by Licensor no later than sixty (60) days prior

to the end of the Development Period for that Restaurant, and such written

request must include a description of the reasons for Developer's failure to

develop in a timely manner and the date that Developer expects to complete

construction and opening of the Restaurant.

(b) If Developer has agreed to develop five (5) or more

Restaurants hereunder, unless otherwise agreed to by Licensor, in Licensor's

sole and absolute discretion, Developer shall not be entitled to more than three

(3) Extension Periods for any one Restaurant,

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nor more than six (6) Extension Periods during the term of this Agreement. If

Licensor permits a fourth (4th) Extension Period for any one Restaurant,

Developer must pay Licensor an extension fee of Ten Thousand Dollars ($10,000)

at the beginning of such Extension Period, plus another Ten Thousand Dollar

($10,000) extension fee at the beginning of each Extension Period Licensor

approves thereafter until such Restaurant has begun operation. If Licensor

permits a seventh (7th) Development Period, Developer must pay Licensor an

extension fee of Ten Thousand Dollars ($10,000) at the beginning of such

Extension Period, plus another Ten Thousand Dollar ($10,000) extension fee at

the beginning of Extension Period Licensor approves thereafter until such

Restaurant has begun operation. No extension of any Development Period will

affect the duration of any Development Period for any other Restaurant or any of

Developer's other development obligations hereunder.

Restaurants hereunder, unless otherwise agreed to by Licensor, in Licensor's

sole and absolute discretion, Developer will be permitted no more than three (3)

Extension Periods during the term of this Agreement. If Licensor permits a

fourth (4th) Extension Period, Developer must pay Licensor an extension fee of

Ten Thousand Dollars ($10,000) at the beginning of such Extension Period, plus

another Ten Thousand Dollar ($10,000) extension fee at the beginning of each

Extension Period Licensor approves thereafter until such Restaurant has begun

operation. No extension of any Development Period will affect the duration of

any Development Period for any other Restaurant or any of Developer's other

development obligations hereunder.

C. Developer acknowledges that the projected opening dates

("Projected Opening Dates") for each Restaurant set forth below are reasonable

and consistent with the requirements of the Development Schedule. Subject to

Developer's compliance with Article IV hereof, Developer shall execute an

Operating Agreement for each Restaurant no later than six (6) months prior to

the Projected Opening Date for the applicable Restaurant.

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RESTAURANT PROJECTED OPENING DATE

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One September 30, 2004

Two December 31, 2004

Three August 31, 2005

Four December 31, 2005

Five June 30, 2006

Six December 31, 2006

Seven June 30, 2007

Eight December 31, 2007

Nine June 30, 2008

Ten September 30, 2008

Eleven December 31, 2008

Twelve June 30, 2009

Thirteen September 30, 2009

Fourteen December 31, 2009

Fifteen June 30, 2010

</TABLE>

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D. Developer assumes all cost, liability, expense and

responsibility for locating, obtaining and developing sites for each Restaurant,

and for constructing and equipping each Restaurant at each such site. Developer

shall not make any binding commitment to a prospective vendor or lessor of real

estate with respect to a site for a Restaurant unless the site is accepted as

set forth below. Developer acknowledges that the location, selection,

procurement and development of a site for each Restaurant is Developer's

responsibility; that in discharging such responsibility Operator may consult

with real estate and other professionals of Developer's choosing; and that

Licensor's acceptance of a prospective site and the rendering of assistance in

the selection of a site does not constitute a representation, promise, warranty

or guarantee, express or implied, by Licensor that the Restaurant operated at

that site will be profitable or otherwise successful.

(1) In connection with the development of each Restaurant

hereunder, Licensor shall do the following:

(a) Licensor shall provide Developer with

written site selection guidelines, which may be found within the Manuals or may

otherwise be communicated to Developer, and such site selection assistance as

Licensor may deem advisable.

(b) Licensor shall provide such on-site

evaluation as Licensor may deem necessary on its own initiative or in response

to Developer's reasonable request for site acceptance; provided, however, that

Licensor shall not provide an on-site evaluation for any proposed site prior to

the receipt of all required information and materials concerning such site

prepared pursuant to Section (III)(D)(2)(a). Licensor (or its designee) will

provide at no additional charge to Developer one (1) on-site evaluation.

Thereafter, if additional on-site evaluations are deemed appropriate by

Licensor, or upon Developer's reasonable request, Licensor reserves the right to

charge a fee for each such evaluation representing the reasonable expenses

incurred by Licensor (or its designee) in connection with such on-site

evaluation, including, without limitation, the cost of travel, lodging and

meals.

prototypical architectural and design plans and specifications for an

O'Charley's Restaurant.

(2) (a) Developer shall locate a site for the

Restaurant that satisfies the Licensor's written site selection guidelines.

Developer shall submit to Licensor, in the form specified by Licensor in the

Manuals, a fully completed site selection acceptance request package which shall

include a description of the site, evidence satisfactory to Licensor

demonstrating that the site satisfies Licensor's current site selection

guidelines and criteria, a letter of intent or other evidence satisfactory to

Licensor which confirms Developer's favorable prospects for obtaining the site,

together with such other information and materials as required in the Manuals or

as Licensor may otherwise reasonably require. Recognizing that time is of the

essence, Developer agrees that it will submit each such fully completed site

selection acceptance request package and materials for the proposed site to

Licensor for its acceptance at such time and in accordance with such procedures

as are set forth in the Manuals, or which are otherwise

<PAGE>

communicated to Developer by Licensor. Licensor shall have thirty (30) days

after receipt of this information and materials to accept or reject, in its sole

discretion, the proposed site as the location for the Restaurant. In the event

Licensor rejects the proposed site, Licensor may submit to Operator a document

outlining the reasons why Licensor rejected the proposed site. No site may be

used for the location of the Restaurant unless it is first accepted in writing

by Licensor.

(b) After a location for the Restaurant is

accepted by Licensor and acquired by Developer, the Location shall be described

in Attachment A to the Operating Agreement that will be executed by Developer in

connection with such Restaurant, which description shall be the legal

description and/or street address of the site at which the Restaurant is to be

located.

(3) At least six (6) months prior to the Projected

Opening Date for such Restaurant, Developer shall acquire by purchase or lease,

at Developer's expense, the site for the Restaurant as set forth below.

(a) If Developer intends to purchase the

premises for the Restaurant, Developer shall submit a copy of the proposed

contract of sale to Licensor for its written acceptance prior to Developer's

execution of such contract and shall furnish to Licensor a copy of the executed

contract of sale within ten (10) days after execution. If Developer intends to

occupy the premises of the Restaurant under a lease, Developer shall submit a

copy of the proposed lease to Licensor for Licensor's written acceptance prior

to Developer's execution of such lease and shall furnish to Licensor a copy of

the executed lease within ten (10) days after execution. No lease for the

Restaurant premises shall be accepted by Licensor unless a rider to the lease,

prepared by Licensor and executed by Licensor, Developer and the lessor, in

substantially the form attached as Attachment B, is attached to the lease and

incorporated therein. Licensor shall have thirty (30) days after receipt of the

proposed lease or the proposed contract of sale to either accept, reject or

propose amendments to such documentation prior to its execution. If Licensor

fails to notify Developer of an objection to the proposed lease or the proposed

contract of sale within this time period, Developer may use such lease or

contract of sale; provided, however, the proposed contract or lease satisfies

Licensor's then current criteria and requirements for contracts or leases

outlined in the Manuals or as otherwise communicated to Developer by Licensor.

These criteria and requirements may include financial requirements, specific

lease requirements or other requirements that Licensor deems necessary. Licensor

retains the right to vary from any requirement, add new requirements or make

exceptions to any requirements in Licensor's sole discretion.

(b) Developer shall be responsible for obtaining

all zoning classifications and clearances which may be required by state or

local laws, ordinances or regulations or which may be necessary as a result of

any restrictive covenants relating to the Restaurant premises. Prior to

beginning the construction of the Restaurant, Developer shall (i) obtain all

permits, licenses and certifications (including licenses and permits to sell

alcoholic beverages at the Restaurant) required for the lawful construction or

remodeling and operation of the Restaurant, and (ii) certify in writing to

Licensor that the insurance coverage specified in Article XIII of the Operating

Agreement is in full force and effect and that all required approvals,

clearances, permits and certifications (including alcoholic beverage licenses

and permits) have been obtained. Upon request, Developer shall provide to

Licensor additional copies of Developer's insurance policies or certificates of

insurance and copies of all such approvals, clearances, permits and

certifications.

<PAGE>

architectural, engineering and design services it deems necessary for the

construction of the Restaurant at its own expense from an architectural design

firm, which Licensor reserves the right to approve. Developer shall adapt the

prototypical architectural and design plans and specifications for construction

of the Restaurant provided to Developer by Licensor as necessary for the

construction of the Restaurant and shall submit such adapted plans to Licensor

for review. If Licensor determines, in its sole discretion, that any such plans

do not satisfy Licensor's architectural or design standards and specifications

for a full-service O'Charley's restaurant or are not consistent with the best

interests of the System, Licensor may prohibit the implementation of such plans,

and in this event will notify Developer of any objection(s) within thirty (30)

days of receiving such plans or such other time period as may be specified in

the Manuals. If Licensor fails to notify Developer of an objection to the plans

within this time period, Developer may use such plans, provided such plans

satisfy Licensor's then current architectural and design standards and

specifications for a full-service O'Charley's restaurant. If Licensor objects to

any such plans, it shall provide Developer with a reasonably detailed list of

changes necessary to make the plans acceptable. Licensor shall, upon a

resubmission of the plans with such changes, notify Developer within thirty (30)

days of receiving the resubmitted plans whether the plans are acceptable. If

such changes are not acceptable, Licensor shall notify Developer of such

objections as described above, and Developer shall resubmit such plans in

accordance with the procedures described above until such plans are accepted by

Licensor. If Licensor fails to notify Developer of any objection within such

time period, Developer may use the resubmitted plans. Developer acknowledges

that acceptance by Licensor of such plans does not constitute a representation,

warranty or guarantee, express or implied, by Licensor that such plans are free

of architectural or any design errors and thus, Licensor shall have no liability

to Developer or any other party with respect thereto.

(d) Prior to commencement of construction,

Developer must submit all requested information, including, but not limited to,

architectural and design plans, construction schedules and current budgets in

accordance with Licensor's request. As time is of the essence, Developer shall

timely commence and diligently pursue construction of the Restaurant.

Commencement of construction shall be defined as the time at which any site work

is initiated by or on behalf of Developer at the Location accepted for the

Restaurant. Site work includes, without limitation, paving of parking areas,

installing outdoor lighting and sidewalks, extending utilities and demolishing

of any existing premises, depending on whether the accepted Location for the

Restaurant is freestanding. During the time of construction or remodeling,

Developer shall provide Licensor with such periodic reports regarding the

progress of the construction or remodeling as may be reasonably requested by

Licensor or as required in the Manuals. In addition, Licensor shall make such

on-site inspections as it may deem reasonably necessary to evaluate such

progress. If during such inspections Licensor identifies instances where

Developer's construction is inconsistent with, or does not meet, Licensor's

standards, Licensor shall notify Developer in writing of such deficiencies, and

Developer shall correct such deficiencies prior to opening the Restaurant.

Developer shall notify Licensor of the scheduled date for completion of

construction no later than sixty (60) days prior to such date. Within a

reasonable time after the date of completion of construction, Licensor shall, at

its option, conduct an inspection of the completed Restaurant. Developer

acknowledges and agrees that Developer will not open the Restaurant for business

without written authorization of Licensor and that

<PAGE>

authorization to open shall be conditioned upon Developer's strict compliance

with this Agreement.

ARTICLE IV

PREREQUISITES TO OBTAINING LICENSES

A. Developer and the Controlling Principals understand and

acknowledge that the rights and duties set forth in this Agreement are personal

to Developer and its Controlling Principals (as applicable), are non-delegable

and non-assignable, and that Licensor has granted such rights in reliance on the

business skill, financial capacity and personal character of and expectations of

performance of the duties hereunder by Developer and the Controlling Principals.

Developer and the Controlling Principals have represented to Licensor that they

have entered this Agreement for the purpose of fully complying and with the

intention to fully comply with the Restaurant development obligations hereunder

and not for the purpose of reselling the development rights granted herein.

Developer and the Controlling Principals understand and agree that this

Agreement does not confer upon Developer a right to develop or license to

operate any Restaurant, but is intended by the parties to set forth the terms

and conditions which, if fully satisfied by Developer, shall entitle Developer

to obtain the right to develop and operate each Restaurant under an Operating

Agreement within the Territory.

B. In the event that Developer shall have obtained Licensor's

acceptance of a particular proposed site for a Restaurant and shall have paid to

Licensor all of the license fees due under this Agreement and the applicable

Operating Agreement, and if Licensor, in the exercise of its sole and absolute

discretion, has granted Developer, in writing, "Operational Approval,"

"Financial Approval," "Legal Approval" and "Ownership Approval" (collectively

the "Conditions"), then Licensor will grant Developer a license to operate a

Restaurant at the site in question. As used herein, Licensor will give Developer

Operational Approval, Financial Approval, Legal Approval and Ownership Approval

under the following circumstances:

(1) Operational Approval will be granted if Licensor has

determined, in the exercise of its sole discretion, that:

(a) Developer is in compliance with the

Development Schedule (including any extensions approved by Licensor in writing)

and this Agreement and has opened each Restaurant as required under the

Development Schedule (including any extensions approved by Licensor in writing);

(b) Developer and its Affiliates are in

compliance with any other agreement between Developer and its Affiliates and

Licensor and its Affiliates;

existing Restaurants, if any, and is capable of conducting the operation of each

proposed Restaurant required under the Development Schedule:

(i) in accordance with the terms and

conditions of the Agreement and any amendments thereto;

(ii) in accordance with the provisions

of the respective Operating Agreements and any amendments

thereto; and

<PAGE>

(iii) in accordance with the standards,

specifications and procedures:

(A) set forth and described in

the Manuals (as defined in the Operating Agreement),

as such Manuals may be amended from time to time;

(B) as evaluated by Licensor,

in its sole discretion, in accordance with the

evaluation programs outlined in the Manuals; or

Licensor in writing.

(2) Developer acknowledges and agrees that it is vital to

Licensor's interest that each of its operators be financially sound to avoid

failure of an O'Charley's restaurant and that such failure would adversely

affect the reputation and good name of Licensor and the System. In accordance

with the foregoing criteria, Financial Approval will be granted if:

(a) Developer and the Controlling Principals

satisfy Licensor's then-current financial criteria for developers and

controlling principals of O'Charley's restaurants with respect to Developer's

operation of its existing Restaurants, if any, and the proposed Restaurant;

(b) Developer and the Controlling Principals

have been and are faithfully performing all terms and conditions under each of

the existing Operating Agreements with Licensor, if any;

been in default during the twelve (12) months preceding Developer's request for

financial approval, of any monetary obligations owed to Licensor or its

Affiliates under any Operating Agreement or other agreement between Developer or

any of its Affiliates and Licensor or any of its Affiliates; and

(d) Developer is not in default, and has not

been in default during the twelve (12) months preceding the date of this

Agreement, of any financial covenant or monetary obligation with any of its

lenders or financing sources.

(3) Legal Approval will be granted if Developer has

executed and delivered to Licensor, in a timely manner, all information and

documents requested by Licensor prior to and as a basis for the issuance of

individual licenses or pursuant to any right granted to Developer by this

Agreement or by any Operating Agreement between Developer and Licensor, has

taken such additional actions in connection therewith as may be requested by

Licensor from time to time.

(4) Ownership Approval will be granted if:

(a) neither Developer nor any of its Controlling

Principals (as applicable) shall have transferred a Controlling Interest in

Developer; and

(b) Developer and the Controlling Principals

upon whom Licensor has relied to perform the duties under this Agreement shall

continue to own and exercise control over a Controlling Interest in Developer.

C. (1) If Licensor determines, in its sole discretion, that

Developer and the Controlling Principals:

<PAGE>

(a) have met all of the Conditions prior to the

grant of the right to establish each additional Restaurant, then Licensor shall

grant to Developer the right to develop such additional Restaurants pursuant to

the Development Schedule; or

(b) have not met one (1) or more of the

Conditions, Licensor may, (in addition to any other rights or remedies Licensor

may have) suspend, without extending the term of this Agreement, Developer's

right to develop Restaurants until the Conditions are satisfied in Licensor's

sole discretion, and re-state the Development Schedule (which may include a

reduction in the number of Restaurants and the number of Development Periods).

(2) The Conditions described above shall survive the

termination or expiration of this Agreement and shall apply with respect to any

Operating Agreement executed pursuant to this Development Agreement.

D. It is understood and agreed that the foregoing criteria apply

to the operational, financial, legal and ownership aspects of any Restaurant

franchised by Licensor in which Developer or any Controlling Principal has any

legal or equitable interest. It is further understood and agreed that Developer

and the Controlling Principals have an ongoing responsibility to operate each

Restaurant in which Developer or any Controlling Principal has any legal or

equitable interest in a manner which satisfies the foregoing requirements for

Operational Approval, Financial Approval, Legal Approval and Ownership Approval.

ARTICLE V

TERM

A. Unless sooner terminated in accordance with this Agreement,

the term of this Agreement and all rights granted by Licensor under this

Agreement shall expire on the date on which Developer successfully and in a

timely manner has exercised all of the development rights and completed the

development obligations under this Agreement in accordance with the Development

Schedule (including, if applicable, any extension thereof under Section

III(B)(3)).

B. As set forth in Section VII(E)(3), upon such expiration,

Licensor shall, subject to the terms of the Operating Agreements executed

pursuant hereto, have the right to develop, or authorize any other person or

Entity to develop, O'Charley's restaurants in the Territory and Developer shall

have no further rights with respect to the development of O'Charley's

restaurants in the Territory; provided, however, if an Operating Agreement is

fully executed in accordance with Article III, prior to the expiration of the

Development Schedule, Developer shall complete the development of such

Restaurant subject to the Operating Agreement and shall open and operate such

Restaurant as provided in the Operating Agreement.

ARTICLE VI

DUTIES OF DEVELOPER

A. Developer and the Controlling Principals, as applicable, make

the following representations, warranties and covenants and accept the following

obligations:

(1) If Developer is a corporation, limited liability

company, partnership or other Entity, Developer make the following

representations, warranties and covenants to Licensor:

<PAGE>

(a) Developer is duly organized and validly

existing under the state law of its formation.

(b) Developer is duly qualified and is

authorized to do business in each jurisdiction in which its business activities

or the nature of the properties owned by it require such qualification.

operating agreement or written partnership agreement shall at all times provide

that the activities of Developer are confined exclusively to the development and

operation of O'Charley's restaurants. Unless otherwise consented to by Licensor

in writing, Developer shall not use the Proprietary Marks as part of its

corporate or other legal name, and, in any event, shall obtain Licensor's

approval of such corporate or other legal name prior to applying for or filing

it with the applicable government authority.

(d) The execution of this Agreement and the

consummation of the transactions contemplated hereby are within Developer's

corporate power, if Developer is a corporation, are permitted under Developer's

articles of organization and written operating agreement and have been duly

authorized by Developer, if Developer is a limited liability company, are

permitted under Developer's written partnership agreement and have been duly

authorized by Developer, if Developer is a partnership.

(e) If Developer is a corporation, copies of

Developer's Articles of Incorporation, Bylaws, other governing documents, any

amendments thereto, resolutions of the Board of Directors authorizing entry into

and performance of this Agreement and any certificates, buy-sell agreements or

other documents restricting the sale or transfer of stock of the corporation,

and any other documents as may be reasonably required by Licensor, shall have

been furnished to Licensor prior to the execution of this Agreement; if

Developer is a limited liability company, copies of Developer's articles of

organization, operating agreement, any buy-sell agreements or other documents

restricting the sale or transfer of interests in the limited liability company,

and any other governing documents and any amendments thereto shall have been

furnished to Licensor prior to the execution of this Agreement; or, if Developer

is a partnership, copies of Developer's written partnership agreement, any

buy-sell agreements or other documents restricting the sale or transfer of

interests in the partnership, and any other governing documents and any

amendments thereto shall be furnished to Licensor prior to the execution of this

Agreement. Developer shall also provide to Licensor evidence of consent or

approval of the entry into and performance of this Agreement by the requisite

number or percentage of shareholders, members or partners, if such approval or

consent is required by statute or by Developer's Articles of Incorporation,

Bylaws, articles of organization, operating agreement, written partnership

agreement or other governing documents, as applicable.

(f) If Developer is a corporation, limited

liability company or partnership, the ownership interests in Developer are

accurately and completely described in Attachment D. Further, if Developer is a

corporation, Developer shall maintain at all times a current list of all owners

of record and all beneficial owners of any class of voting securities in

Developer, if Developer is a limited liability company, Developer shall maintain

at all times a current list of all owners of an interest in the limited

liability company, or, if Developer is a partnership, Developer shall maintain

at all times a current list of all owners of an interest in the partnership.

Developer shall immediately provide a copy of the updated list to Licensor upon

the

<PAGE>

occurrence of any change of ownership and otherwise shall make its list of

owners available to Licensor upon request.

(g) If, after the execution of this Agreement,

any person ceases to qualify as a Principal, or if any individual succeeds to or

otherwise comes to occupy a position which would, upon designation by Licensor,

qualify him as a Principal, Developer shall notify Licensor within five (5) days

after any such change and, upon designation of such person by Licensor as a

Principal, or as a Controlling Principal, as the case may be, such person shall

execute such documents and instruments (including, as applicable, this

Agreement) as may be required by Licensor to be executed by others in such

positions.

(h) If Developer is a corporation, Developer

shall maintain stop-transfer instructions against the transfer on its records of

any of its equity and voting securities and each certificate representing an

equity or voting security of the corporation shall have conspicuously endorsed

upon it a statement, in a form satisfactory to Licensor, that it is held subject

to all restrictions imposed upon assignments by this Agreement; provided,

however, that the requirements of this Section VI(A)(1)(h) shall not apply to

the transfer of equity securities of a Publicly-Held Entity that is otherwise

approved to be the Operator. If Developer is a limited liability company, its

operating agreement shall provide that ownership of an interest in the limited

liability company is held subject to all restrictions imposed upon assignments

by this Agreement. If Developer is a partnership, its written partnership

agreement shall provide that ownership of an interest in the partnership is held

subject to all restrictions imposed upon assignments by this Agreement.

(i) Developer and each of the Controlling

Principals have provided Licensor with the most recent financial statements of

Developer and each of the Controlling Principals. Developer shall provide an

annual balance sheet, income statement, statement of shareholders' equity and

statement of cash flows in the form prescribed by Licensor (which may be

unaudited, unless otherwise requested or required by Licensor) within one

hundred twenty (120) days after Developer's fiscal year end. Such financial

statements present fairly the financial position of Developer and each of the

Controlling Principals, as applicable, at the dates indicated therein and with

respect to Developer, the results of its operations, cash flow and owners'

equity for the years then ended. Developer agrees that it shall maintain at all

times during the term of this Agreement, sufficient working capital to fulfill

its obligations under this Agreement. Each of the financial statements mentioned

above shall be certified as true, complete and correct by Developer's treasurer

or chief financial officer (or by the applicable Controlling Principal, as

appropriate) and shall have been prepared in conformity with generally accepted

accounting principles consistently applied to all applicable periods involved.

Developer's treasurer or chief financial officer shall deliver to Licensor,

simultaneously with the financial statements mentioned above, a certificate

certifying that Developer is not in default of any of Developer's financial

covenants or monetary obligations with any of Developer's lenders or financing

sources. No material liabilities, adverse claims, commitments or obligations of

any nature exist as of the date of this Agreement, whether accrued,

unliquidated, absolute, contingent or otherwise, which are not reflected as

liabilities on the financial statements of Developer or such Controlling

Principals or otherwise appropriately disclosed in the notes thereto.

(j) Each of the Principals, except the

Controlling Principals, shall execute and bind themselves to the confidentiality

and non-competition covenants set forth in the Confidentiality and Non-Compete

Agreement attached hereto as Attachment C to this

<PAGE>

Agreement (see Sections IX(B)(2) and IX(I)). The Controlling Principals shall

jointly and severally guarantee Developer's performance of all of Developer's

obligations (including, but not limited to, the payment of fees), covenants and

agreements described in this Agreement pursuant to the terms and conditions of

the guaranty attached hereto as Attachment E, and do otherwise bind themselves

to the terms of this Agreement as stated herein.

(k) Developer and the Controlling Principals

acknowledge and agree, jointly and severally, that the representations,

warranties, covenants and agreements set forth above in Section VI(A)(l)(a)-(j)

are continuing obligations of Developer and the Controlling Principals, as

applicable. Developer and each Controlling Principal will cooperate with

Licensor in any efforts made by Licensor to verify compliance with such

representations, warranties, covenants and agreements.

(2) Upon the execution of this Agreement, Developer shall

designate and retain an individual to serve as Operating Principal of Developer

("Operating Principal"). If Developer is an individual, Developer shall perform

all obligations of Operating Principal. Operating Principal shall, during the

entire period he serves as such, meet the following qualifications:

(a) Operating Principal may, at Operating

Principal's option, and, subject to the approval of Licensor, designate an

individual to perform the duties and obligations of Operating Principal

described herein; provided, however that Operating Principal shall ensure that

such designee meets all the requirements for an Operating Principal outlined

below, conducts and fulfills all of the Operating Principal's obligations in

accordance with the terms of this Agreement; provided, further, Operating

Principal shall remain fully responsible for any such performance.

(b) Operating Principal must maintain a direct

ownership interest in the Developer satisfactory to Licensor. Except as may

otherwise be provided in this Agreement, Operating Principal's interest in

Developer shall be and shall remain free of any pledge, mortgage, hypothecation,

lien, charge, encumbrance, voting agreement, proxy, security interest or

purchase right or options.

designee, as applicable) shall devote their full time and best efforts to the

supervision and conduct of the business contemplated by this Agreement.

Operating Principal shall execute this Agreement as one of the Controlling

Principals, and shall be individually, jointly and severally with the Developer

and the other Controlling Principals, bound by all obligations of Developer, the

Operating Principal and the Controlling Principals hereunder.

(d) Operating Principal (or his designee, as

applicable) shall meet Licensor's standards and criteria for such individual

(including, but not limited to, educational, financial and operational

experience criteria prescribed by Licensor), as set forth in the Manuals (as

defined in the Operating Agreement) or as otherwise communicated by Licensor to

Operator from time to time.

(e) If during the term of this Agreement

Operating Principal (or any designee) is not able to continue to serve in the

capacity of Operating Principal or no longer qualifies to act as such in

accordance with this Section, Developer shall notify Licensor within ten (10)

days and shall designate a replacement within sixty (60) days after Operating

Principal

<PAGE>

(or any designee) ceases to serve or be so qualified, such replacement being

subject to the same qualifications and restrictions listed above. Developer

shall provide for interim management of the activities contemplated under this

Agreement until such replacement is so designated, such interim management is to

be conducted in accordance with this Agreement.

(3) Developer and the Controlling Principals understand

that compliance by all developers and operators operating under the System with

Licensor's training, development and operational requirements is an essential

and material element of the System and that Licensor and developers and

operators operating under the System consequently expend substantial time,

effort and expense in training management personnel for the development and

operation of their respective O'Charley's restaurants. Accordingly, Developer

and the Controlling Principals agree that if during the term of this Agreement,

Developer or any Controlling Principal shall designate or employ any individual

who is at the time or was within the preceding three (3) months employed in a

restaurant managerial position, a multi-restaurant supervisory position or home

office staff position (e.g., officer or director level personnel, management

information systems personnel or human resources and training personnel), by

Licensor or any of its Affiliates, including, but not limited to, individuals

employed by Licensor to work in its O'Charley's restaurants, or at Licensor's

home office, or employed in a restaurant managerial position by any other

developer or operator operating under the System (a "Covered Individual"), then

such former employer of such Covered Individual shall be entitled to

compensation for the reasonable costs and expenses, of whatever nature or kind,

incurred by such employer in connection with the training of such Covered

Individual. The parties hereto agree that such expenditures may be uncertain and

difficult to ascertain and, therefore, agree that the compensation specified

herein reasonably represents such expenditures and is not a penalty. The

employing Developer or Controlling Principal shall pay to the former employer an

amount equal to the salary of such Covered Individual for the six (6) month

period prior to the termination of his employment with such former employer (or

if the Covered Individual was employed less than six (6) months, that Covered

Individual's projected salary had the Covered Individual been employed for the

full six (6) months) for any restaurant level managerial personnel. For any

Covered Individual employed in a multi-restaurant supervisory or home office

staff position, the employing Developer or Controlling Principal shall pay to

the former employer an amount equal to the salary of such Covered Individual for

the twelve (12) month period immediately prior to the termination of his

employment with such former employer (or if the Covered Individual was employed

less than twelve (12) months, that Covered Individual's projected salary had the

Covered Individual been employed for the full twelve (12) months). Such amount

shall be paid by Developer, or the applicable Controlling Principal, as the case

may be, within thirty (30) days after written notice, unless otherwise agreed

with such former employer. The parties hereto expressly acknowledge and agree

that no current or former employee of Licensor, its Affiliates, Developer, or of

any other Entity operating under the System shall be a third party beneficiary

of this Agreement or any provision hereof. Notwithstanding the above, solely for

purposes of bringing an action to collect any payment due under this Section,

such former employer shall be a third-party beneficiary of this Section

VI(A)(3). Licensor hereby expressly disclaims any representations and warranties

regarding the performance of any employee or former employee of Licensor or its

Affiliates, or any developer or operator operating under the System, who is

designated or employed by Developer or any Controlling Principal in any

capacity, and Licensor shall not be liable for any losses, of any nature or

kind, incurred by Developer or any Controlling Principal in connection

therewith.

<PAGE>

(4) Developer shall comply with all requirements of

federal, state and local laws, rules, regulations and orders.

(5) Developer shall obtain and maintain all appropriate

licenses, permits and certificates for the operation of the Restaurant,

including licenses and permits to sell alcoholic beverages in the Restaurant.

(6) Developer and the Controlling Principals shall allow

Licensor and its representatives to review any and all of Developer's and the

Controlling Principals' documents and other materials relating to their

financing arrangements or capital structure.

B. Developer and the Controlling Principals represent, warrant,

covenant and agree that they shall comply with all other requirements and

perform such other obligations as provided in this Agreement and the Manuals.

ARTICLE VII

DEFAULT AND TERMINATION

A. Developer shall be deemed to be materially in default under

this Agreement and all rights granted herein shall automatically terminate

without notice to Developer if:

(1) Developer becomes insolvent or makes a general

assignment for the benefit of creditors or files a voluntary petition under any

section or chapter of federal bankruptcy laws or under any similar law or

statute of the United States or any state thereof ("Bankruptcy Laws") or admits

in writing its inability to pay its debts when due;

(2) Developer is adjudicated bankrupt or insolvent in

proceedings filed against Developer under any section or chapter of any

Bankruptcy Law;

(3) a bill in equity or other proceeding for the

appointment of a receiver of Developer or other custodian for Developer's

business or assets is filed and consented to by Developer, or if a receiver or

other custodian (permanent or temporary) of Developer's assets or property, or

any part thereof, is appointed by any court of competent jurisdiction;

(4) proceedings for a composition with creditors under

any state or federal law are instituted by or against Developer;

(5) a final judgment against Developer remains

unsatisfied or of record for thirty (30) days or longer (unless supersedeas bond

is filed);

(6) Developer is dissolved;

(7) execution is levied against Developer's business or

property;

(8) suit to foreclose any lien or mortgage against the

premises or equipment of any business operated hereunder or under any Operating

Agreement is instituted and not dismissed within thirty (30) days; or

(9) the real or personal property of any business

operated hereunder or under any Operating Agreement shall be sold after levy

thereupon by any sheriff, marshal or other government official.

B. Developer shall be deemed to be in material default and

Licensor may, at its option, terminate this Agreement and all rights granted

hereunder, without affording Developer

<PAGE>

any opportunity to cure the default except as specifically provided below,

effective immediately upon notice to Developer, upon the occurrence of any of

the following events of default:

(1) Developer fails to comply with the Development

Schedule (or any extension, if any, thereof approved by Licensor in writing), or

Developer fails to develop a replacement Restaurant within any time period

agreed upon by the parties under Section III(B)(2);

(2) Developer fails to execute each Operating Agreement

in accordance with Section III(C) (or any extension thereof approved by Licensor

in writing);

(3) Developer or any of the Controlling Principals is

convicted of, or shall have entered a plea of nolo contendere to, a felony, a

crime involving moral turpitude or any other crime or offense that Licensor

believes is reasonably likely to have an adverse effect on the System, the

Proprietary Marks, the goodwill associated therewith or Licensor's interest

therein;

(4) a threat or danger to public health or safety results

from the construction, maintenance or operation of any Restaurant developed

under this Agreement;

(5) Developer fails to designate a qualified replacement

Operating Principal or designee appointed by Operating Principal within sixty

(60) days after any initial or successor Operating Principal or designee ceases

to serve as such, all as required under Section VI(A)(2)(e);

(6) Developer or any of the Controlling Principals breach

any of the representations warranties and covenants in Article VI;

(7) Developer or any of the Controlling Principals

transfers or attempts to transfer any rights or obligations under this

Agreement, any interest in Developer or the assets of Developer, without first

obtaining Licensor's written consent pursuant to Section VIII(B) or offering

Licensor a right of first refusal with respect to such transfer pursuant to

Section VIII(D);

(8) Developer or any of the Controlling Principals fails

to comply with the covenants in Article IX or fails to obtain execution of the

covenants and related agreements required under Article IX hereof within thirty

(30) days after being requested to do so by Licensor;

(9) an approved transfer upon death or Permanent

Disability is not effected within the time period and in the manner prescribed

by Section VIII(E);

(10) Developer or any of the Controlling Principals

misuses or makes any unauthorized use of the Proprietary Marks or otherwise

materially impairs the goodwill associated therewith or with the System or

Licensor's rights therein;

(11) Developer, the Controlling Principals or any of their

Affiliates fails, refuses or neglects promptly to pay when due any monetary

obligation owing to Licensor or any of its Affiliates under this Agreement, any

Operating Agreement or any other agreement (which shall include payments to

lenders where Licensor has guaranteed the underlying indebtedness) and does not

cure such default within five (5) days following notice from Licensor (or such

other applicable cure period contained in such other agreement, unless no cure

period is stated or such period is less than five (5) days, in which case the

five (5) day cure period shall apply);

<PAGE>

(12) Developer, the Controlling Principals or any of their

Affiliates fails or refuses to comply with any term or condition of any sublease

or related agreement, between Licensor or its Affiliates and Developer or its

Affiliates, and does not cure such default within any notice and cure period

provided for in such sublease or related agreement following notice from

Licensor of such default (unless no cure period is specified in the sublease or

other agreement), in which case the notice and cure period in Section VII(C)

shall apply; or

(13) Developer or any of the Controlling Principals

repeatedly commits a material event of default under this Agreement, whether or

not such defaults are of the same or different nature and whether or not such

defaults have been cured by Developer after notice by Licensor.

C. Except as provided above in Sections VII(A) and VII(B), if

Developer fails to comply with any other term or condition imposed by this

Agreement, any Operating Agreement or any other development or operating

agreement between Developer and Licensor, as such may from time to time be

amended, Licensor may terminate this Agreement only by giving written notice of

termination stating the nature of such default to Developer at least thirty (30)

days prior to the effective date of termination; provided, however, that

Developer may avoid termination by immediately initiating a remedy to cure such

default and curing it to Licensor's satisfaction within the thirty (30) day

period and by promptly providing proof thereof to Licensor. Subject to Section

VII(D), if any such default is not cured within the specified time, or such

longer period as applicable law may require, Developer's rights under this

Agreement shall terminate without further notice to Developer effective

immediately upon the expiration of the thirty (30) day period or such longer

period as applicable law may require, unless Licensor gives Developer notice of

Licensor's intent to continue this Agreement.

D. Upon default by Developer under Sections VII(B) or VII(C),

Licensor has the option, in its sole discretion, in addition to exercising its

option to terminate this Agreement as provided in Sections VII(B) and (C), to do

any one or more of the following:

(1) terminate or modify any territorial rights granted to

Developer in Article I;

(2) reduce the area of such territorial rights;

(3) reduce the number of Restaurants which Developer may

establish pursuant to Section III(B)(l);

(4) accelerate the Development Schedule;

(5) with respect to Section VII(B)(l), permit Developer

to obtain an extension of the Development Schedule under Section III(B);

(6) terminate or modify any right granted to Developer in

Section I(B); or

(7) pursue any other remedy Licensor may have at law or

in equity; provided, however, that Licensor shall not be entitled to recover

money damages for lost revenues or profits solely because of a failure of

Developer to meet the Development Schedule set out herein so long as Developer

shall demonstrate that such failure has occurred despite the exercise of all

commercially reasonable efforts on Developer's part to meet such Development

Schedule.

E. (1) Upon the termination or expiration of this Agreement,

Developer shall have no right to establish or operate any Restaurant:

<PAGE>

(a) for which an Operating Agreement has not

been executed by Licensor and delivered to Developer at the time of termination

or expiration, or

(b) with respect to which Developer has not

satisfied the prerequisites for obtaining licenses as described in Article IV

whether or not an Operating Agreement has been executed.

(2) If Licensor elects to terminate the territorial

rights granted to Developer in Article I or modify such territorial rights or

reduce the area of territorial rights as provided in Section VII(D) above,

Developer shall continue to develop Restaurants in accordance with the

Development Schedule or Supplementary Development Schedule, to the extent that

the number of Restaurants Developer is required to develop is reduced and/or the

area in which such Restaurants are required to be developed is reduced by

Licensor pursuant to Sections VII(D)(2) and (3).

(3) If Licensor exercises any of its rights in Section

VII(D) or if this Agreement otherwise expires or terminates, Licensor shall be

entitled to establish, and to license others to establish, Restaurants in the

Territory or in the portion thereof no longer part of the Territory or pursuant

to any other modification of Developer's territorial rights, except as may be

otherwise provided under any Operating Agreement which is then in effect between

Licensor and Developer.

F. Licensors exercise of any of its options under Section VII(D)

shall not, in the event of a default, constitute a waiver by Licensor to

exercise its option to terminate this Agreement at any time with respect to a

subsequent event of default of a similar or different nature.

G. No default under this Agreement shall constitute a default

under any Operating Agreement between the parties hereto, unless the default is

also a default under the terms of such Operating Agreement.

H. Upon default of Developer and the early termination of this

Agreement, Licensor shall have the right to purchase the assets of all of the

Restaurants opened pursuant to Operating Agreements executed under the terms of

this Agreement. The terms and conditions of the purchase transaction, including,

but not limited to, the purchase price for the assets of such Restaurants, shall

be determined in accordance with the provisions contained in the applicable

Operating Agreement permitting the Licensor to purchase, at its option, such

assets upon termination or expiration of the Operating Agreement.

I. No right or remedy herein conferred upon or reserved to

Licensor is exclusive of any other right or remedy provided or permitted by law

or in equity.

J. Upon termination or expiration of this Agreement, Developer

and the Controlling Principals shall comply with the restrictions on

confidential information and the covenants against competition contained in

Article IX. Any other person required to execute similar covenants pursuant to

Article IX shall also comply with such covenants.

K. Developer acknowledges and agrees that each of the obligations

of Developer and the Controlling Principals described in this Agreement is a

material and essential obligation of Developer, that non-performance of such

obligations will adversely and substantially effect the Licensor and the System,

and that the exercise by Licensor of the rights and remedies set forth herein is

appropriate and reasonable.

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L. Any alleged default by Licensor of this Agreement shall be

deemed waived unless: (1) Developer gives Licensor written notice of such

alleged default within thirty (30) days of its occurrence; and (2) Licensor

fails to initiate a remedy to such alleged default within sixty (60) days of

having received written notice thereof.

ARTICLE VIII

TRANSFER OF INTEREST

A. Licensor shall have the right to transfer or assign this

Agreement and all or any part of its rights or obligations herein to any person

or Entity without Developer's consent. Specifically, and without limitation to

the foregoing, Developer and the Controlling Principals expressly affirm and

agree that Licensor may sell its assets, the Proprietary Marks or the System to

a third party; may offer its securities privately or publicly; may merge,

spin-off, acquire other Entities, or be acquired by another Entity; may

undertake a refinancing, recapitalization, leveraged buyout or other economic or

financial restructuring; and, with regard to any or all of the above sales,

assignments and dispositions, Developer and the Controlling Principals expressly

and specifically waive any claims, demands or damages against Licensor arising

from or related to the transfer of the Proprietary Marks (or any variation

thereof) or its assets or the System (or any portion thereof) from Licensor to

any other party. Upon such sale, assignment or disposition, Developer further

agrees that Licensor shall have no further obligations arising out of or related

to this Agreement so long as such obligations are assumed by the transferee.

Nothing contained in this Agreement shall require Licensor to remain in the

business of operating or licensing the operation of O'Charley's restaurants or

other restaurant businesses or to offer any services or products, whether or not

bearing the Proprietary Marks, to Developer, if Licensor exercises its rights

hereunder to assign its rights in this Agreement.

B. (1) Developer and the Controlling Principals understand and

acknowledge that the rights and duties set forth in this Agreement are personal

to Developer and the Controlling Principals and that Licensor has granted such

rights in reliance on the business skill, financial capacity and personal

character of Developer and the Controlling Principals and with the expectation

that the duties and obligations contained in this Agreement will be performed by

Developer and the Controlling Principals signing this Agreement. Accordingly,

neither Developer nor any Controlling Principal, nor any successor or assign of

Developer or any Controlling Principal, shall sell, assign, transfer, convey,

give away, pledge, mortgage or otherwise dispose of or encumber any direct or

indirect interest in this Agreement, in Developer or the assets of Developer,

without the prior written consent of Licensor; provided, however, that

Licensor's prior written consent shall not be required for a transfer of less

than a five percent (5%) interest in a Publicly-Held Entity. Any purported

assignment or transfer, by operation of law or otherwise, made in violation of

this Agreement shall be null and void.

(2) If Developer wishes to transfer all or part of its

interest in this Agreement or if Developer or a Controlling Principal wishes to

transfer any ownership interest in, or assets of, Developer, transferor and the

proposed transferee shall apply to Licensor in writing for Licensor's consent,

which may be withheld in Licensor's sole discretion. Without limiting the

generality of the foregoing, Licensor may require that any or all of the

following conditions be met prior to its approval of the transfer:

<PAGE>

(a) All of the accrued monetary obligations of

Developer and its Affiliates and all other outstanding obligations to Licensor

and its Affiliates arising under this Agreement or any Operating Agreement or

any other agreement shall have been satisfied in a timely manner and Developer

shall have satisfied all trade accounts and other debts, of any nature or kind,

in a timely manner.

(b) Developer and its Affiliates are not in

default of any provision of this Agreement, any amendment hereof or successor

hereto, or any Operating Agreement or any other agreement between Developer or

its Affiliates and Licensor or its Affiliates; and Developer shall have

substantially and timely complied with all the terms and conditions of such

agreements during the terms thereof.

applicable, shall have executed a general release, in a form satisfactory to

Licensor, of any and all claims against Licensor, and its Affiliates, and each

of such Entity's respective officers, directors, shareholders, partners, agents,

representatives, independent contractors and employees, in their corporate and

individual capacities, including, without limitation, claims arising under this

Agreement, any Operating Agreement and any other agreement between Developer and

Licensor or any of their Affiliates or under federal, state or local laws,

rules, and regulations or orders.

(d) The transferee shall enter into a written

agreement, in a form satisfactory to Licensor, assuming full, unconditional,

joint and several liability for and agreeing to perform from the date of the

transfer, all obligations, covenants and agreements of Developer in this

Agreement, and, if transferee is a corporation, limited liability company,

partnership or other Entity, transferee's shareholders, members, partners or

other investors, as applicable, shall also execute such agreement as

transferee's principals, and guarantee the performance of all such obligations,

covenants and agreements.

(e) The transferee shall demonstrate to

Licensor's satisfaction that transferee meets the criteria considered by

Licensor when reviewing a prospective developer's application for development

rights, including, but not limited to, Licensor's educational, managerial and

business standards, transferee's good moral character, business reputation and

credit rating, transferee's aptitude and ability to conduct the business

contemplated hereunder (as may be evidenced by prior related business experience

or otherwise), transferee's financial resources and capital for operation of the

business and the geographic proximity of other territories with respect to which

transferee has been granted development rights or of other O'Charley's

restaurants operated by transferee, if any.

(f) The transferee shall execute the standard

form development agreement then being offered to new System developers or a

revised form of this Agreement, as Licensor deems appropriate, and such other

ancillary agreements as Licensor may require, which agreements shall supersede

this Agreement and its ancillary documents in all respects and the terms of

which agreements may differ from the terms of this Agreement, and if the

transferee is a corporation, limited liability company, partnership or other

Entity, transferee's shareholders, members, partners or other investors, as

applicable, shall also execute such agreements as transferee's principals, and

guarantee the performance of all such obligations, covenants and agreements.

(g) The transferee, at its expense, shall

renovate, modernize and otherwise upgrade the Restaurant and, if applicable, any

Restaurant delivery vehicles to conform

<PAGE>

to the then-current standards and specifications of the System, and shall

complete the upgrading and other requirements within the time period reasonably

specified by Licensor.

(h) The transferor shall remain liable for all

of the obligations to Licensor in connection with this Agreement incurred prior

to the effective date of the transfer and shall execute any and all instruments

reasonably requested by Licensor to evidence such liability.

(i) At the transferee's expense, the transferee,

the transferee's Operating Principal (or his authorized designee), and any other

applicable Restaurant personnel shall complete any training programs then in

effect for operators of O'Charley's restaurants upon such terms and conditions

as Licensor may reasonably require.

(j) Developer shall pay a transfer fee of Five

Thousand Dollars ($5,000), or such greater amount as is necessary, to reimburse

Licensor for its reasonable costs and expenses associated with reviewing the

application to transfer, including, without limitation, legal and accounting

fees.

(k) If transferee is a corporation, limited

liability company, partnership or other Entity, transferee shall make and will

be bound by any or all of the representations, warranties and covenants in

Article VI as Licensor requests. Transferee shall provide to Licensor evidence

satisfactory to Licensor that the terms of Article VI have been satisfied and

are true and correct on the date of transfer.

(l) Developer shall have completed development

of the Restaurants required to be developed during the first three (3)

Development Periods of the Development Schedule.

(3) Developer acknowledges and agrees that each condition

which must be met by the transferee is reasonable and necessary to ensure such

transferee's full performance of the obligations hereunder.

C. In the event the proposed transfer is to a corporation formed

solely for the convenience of ownership, Licensor's consent may be conditioned

upon any of the requirements in Section VIII(B)(2)(a), (b), (d), (h), (i) and

(k). With respect to a transfer to a corporation formed for the convenience of

ownership, Developer shall be the owner of all the voting stock or interest of

the corporation, and if Developer is owned by more than one individual, each

such individual shall have the same proportionate ownership interest in the

corporation as he had in Developer prior to the transfer.

D. (1) If Developer wishes to transfer all or part of its

interest in the assets of a Restaurant or this Agreement, or if Developer or a

Controlling Principal wishes to transfer any ownership interest in Developer

pursuant to an offer received from a third party to purchase such interest, then

such proposed seller shall promptly notify Licensor in writing of each such

offer, shall certify that such offer is bona fide and shall provide and shall

certify in writing as to the accuracy of such information and documentation

relating to the offer as Licensor may require. Licensor shall have the right and

option, exercisable within thirty (30) days after receipt of such written

notification and copies of all documentation requested by Licensor describing

the terms of such offer, to send written notice to the proposed seller that

Licensor intends to purchase the proposed seller's interest on the same terms

and conditions offered by the third party. In the event that Licensor elects to

purchase the proposed seller's interest, closing on such purchase

<PAGE>

must occur within the later of sixty (60) days from the date of notice to the

proposed seller of the election to purchase by Licensor, sixty (60) days after

the date Licensor receives and obtains all necessary permits and approvals to

complete such purchase or such other date the parties mutually agree upon in

writing. Any material change in the terms of any offer prior to closing shall

constitute a new offer subject to the same right of first refusal by Licensor as

in the case of an initial offer. Failure of Licensor to exercise the option

afforded by this Section VIII(D) shall not constitute a waiver of any other

provision of this Agreement, including the consent provisions of Section VIII(B)

and all of the other requirements of this Article VIII relating to a proposed

transfer.

(2) If the offer from a third party provides for payment

of consideration other than cash or involves certain non-cash items or

intangible benefits, Licensor may elect to purchase the interest proposed to be

sold for the reasonable equivalent in cash of such non-cash item or intangible

benefit (the "Cash Equivalent"). If the parties cannot agree within thirty (30)

days on the reasonable equivalent in cash of the non-cash part of the offer,

then the Cash Equivalent will be determined by one (1) or more professional

appraisers or independent certified public accountants who are qualified by

experience and ability to appraise (each, a "Qualified Appraiser"), selected

under the procedures in this Section. If the Cash Equivalent is to be determined

by Qualified Appraisers, Licensor and Developer will each have the opportunity

to appoint, at their own expense, a Qualified Appraiser, within five (5) days

following the expiration of the thirty (30) day period within which Licensor and

Developer could not mutually agree on the Cash Equivalent. If either party shall

fail to appoint a Qualified Appraiser within this five (5) day period, the other

Qualified Appraiser shall unilaterally establish the Cash Equivalent by a

written opinion and the cost of such Qualified Appraiser shall be split between

the two parties equally. If both parties appoint Qualified Appraisers within

this five (5) day period, the two (2) Qualified Appraisers shall establish the

Cash Equivalent in a single written opinion agreed to by both of them. If the

two (2) Qualified Appraisers cannot agree on the Cash Equivalent within ten (10)

days of the appointment of the latter of them, the two (2) Qualified Appraisers

shall together appoint a third Qualified Appraiser whose written opinion shall

establish a Cash Equivalent between the Cash Equivalents established by the

first two (2) Qualified Appraisers. In the event of such appraisal, each party

shall bear its own legal and other costs. In the event that Licensor exercises

its right of first refusal herein provided, it shall have the right to set off

(i) all amounts due from Developer for the Qualified Appraisers' fees and

appraisal costs, and (ii) all amounts due from Developer or any of its

Affiliates, against any payment therefor.

E. (1) Upon the death of Developer (if Developer is a natural

person) or any Controlling Principal who is a natural person (the "Deceased"),

the executor, administrator or other personal representative of the Deceased

shall transfer such interest to a third party in accordance with the conditions

described in this Section VIII(E) within twelve (12) months after the death. If

no personal representative is designated or appointed or no probate proceedings

are instituted with respect to the estate of the Deceased, then the distributee

of such interest must be approved by Licensor. If the distributee is not

approved by Licensor, then the distributee shall transfer such interest to a

third party approved by Licensor within twelve (12) months after the death of

the Deceased.

(2) Upon the Permanent Disability of Developer (if

Developer is a natural person) or any Controlling Principal who is a natural

person, Licensor may, in its sole discretion,

<PAGE>

require such interest to be transferred to a third party approved by Licensor

within six (6) months after notice to Developer of such Permanent Disability.

"Permanent Disability" shall mean any physical, emotional or mental injury,

illness or incapacity which would prevent a person from performing the

obligations set forth in this Agreement or in the guaranty made part of this

Agreement for at least ninety (90) consecutive days. Permanent Disability shall

be determined upon examination of the person by a licensed practicing physician

selected by Licensor; or, if the person refuses to submit to an examination,

then such person shall be automatically deemed permanently disabled as of the

date of such refusal for the purpose of this Section VIII(E). The costs of any

examination required by this Section shall be paid by Licensor.

(3) Upon the death or claim of Permanent Disability of

Developer or any Controlling Principal, Developer or a representative of

Developer, must promptly notify Licensor of such death or claim of Permanent

Disability within fifteen (15) days of its occurrence. Any transfer upon death

or Permanent Disability shall be subject to the same terms and conditions as

described in this Article VIII for any inter vivos transfer. Developer and each

Controlling Principal shall have the right to seek approval of a transfer of

their respective interest to a proposed successor prior to the death or claim of

Permanent Disability by Developer or the Controlling Principal, as applicable.

If Developer or any Controlling Principal, as applicable, desires to obtain

approval of any proposed successor in interest prior to the death or claim of

Permanent Disability, Developer or the Controlling Principal, as applicable,

shall submit to Licensor such information and documentation concerning such

proposed successor required by Licensor in the Manuals or other written

directives. Further, as a condition to approval, Licensor may, in its sole

discretion, require compliance with any of the terms and conditions described in

this Section for any inter vivos transfer.

F. Licensor's consent to a transfer of any interest in Developer

or in this Agreement described herein shall not constitute a waiver of any

claims it may have against the transferring party, nor shall it be deemed a

waiver of Licensor's right to demand exact compliance with any of the terms of

this Agreement by the transferee.

G. Securities of, or other Entity ownership interests in,

Developer may be offered to prospective investors, including existing investors,

by private offering or otherwise, only with the prior written consent of

Licensor. All materials required for such offering by federal or state law shall

be submitted to Licensor for a limited review, as discussed below prior to being

filed with any governmental agency; and any materials to be used in any exempt

offering shall be submitted to Licensor for such review prior to their use. No

offering by Developer shall imply (by use of the Proprietary Marks or otherwise)

that Licensor is participating in an underwriting, issuance or offering of

Developer's securities or other Entity ownership interests or the securities or

other Entity ownership interests of any subsidiary or Affiliate of Licensor; and

Licensor's review of any offering materials shall be limited solely to the

subject of the relationship between Developer and Licensor and their Affiliates.

Licensor may, at its option, require Developer's offering materials to contain a

written statement prescribed by Licensor concerning the limitations described in

the preceding sentence. Developer, its Principals and the other participants in

the offering must prior to the commencement of such offering, agree in writing

to fully indemnify Licensor, Licensor's Affiliates and each of such Entity's

respective officers, directors, shareholders, members, partners, agents,

representatives, independent contractors and employees in connection with the

offering. For each proposed offering, Developer shall reimburse Licensor for its

reasonable costs and expenses associated with reviewing the proposed

<PAGE>

offering materials, including, without limitation, legal and accounting fees.

Developer shall give Licensor written notice at least ninety (90) days prior to

the date of commencement of any offering or other transaction covered by this

Section.

H. Developer and each of its Controlling Principals, as

applicable, may transfer, sell or assign their respective interests in

Developer, by and among themselves only with Licensor's prior written consent;

provided, however, such transfer, sale or assignment shall not result in a

change in the Controlling Interest in Developer. Licensor's consent may be

conditioned on compliance with Section VIII(B)(2)(a), (b), (d), (h), (i), (k)

and (l). For the purpose of this Agreement, "Controlling Interest" shall mean:

(a) if Developer is a corporation, that the

Controlling Principals, either individually or cumulatively, (i) directly or

indirectly own at least fifty-one percent (51%) of the shares of each class of

Developer's issued and outstanding capital stock and (ii) are entitled, under

its governing documents and under any agreements among the shareholders, to cast

a sufficient number of votes to elect a majority of the members of the board of

directors or to require such corporation to take or omit to take any action

which such corporation is required to take or omit to take under this Agreement;

(b) if Developer is a limited liability company,

that the Controlling Principals (i) own at least fifty-one percent (51%) of the

outstanding units of membership interest in the limited liability company, and

(ii) are entitled under its operating agreement to act on behalf of the limited

liability company without the approval or consent of any other member or be able

to cast a sufficient number of votes to require the limited liability company to

take or omit to take any action which the limited liability company is required

to take or omit to take under this Agreement; or

Controlling Principals (i) own at least a fifty-one percent (51 %) interest in

the operating profits and operating losses of the partnership as well as at

least a fifty-one percent (51%) ownership interest in the partnership (and at

least a fifty-one percent (51%) interest in the shares of each class of capital

stock or other ownership interest of any direct or indirect corporate or other

Entity general partner) and (ii) are entitled under its partnership agreement or

other Entity organizational documents or applicable law to act on behalf of the

partnership without the approval or consent of any other partner or owner or be

able to cast a sufficient number of votes to require the partnership or other

Entity to take or omit to take any action which the partnership or other Entity

is required to take or omit to take under this Agreement.

I. If any person holding an interest in Developer (other than

Developer or a Controlling Principal, which parties shall be subject to the

provisions set forth in Section VIII(B) above) transfers such interest, then

Developer shall promptly notify Licensor of such proposed transfer in writing

and shall provide such information relative thereto as Licensor may reasonably

request prior to such transfer. Such transferee must have good moral character a

good business reputation, an acceptable credit rating and may not be one of

Licensor's competitors. Such transferee will be a Developer's Principal and as

such shall execute a confidentiality and non-compete agreement in the form then

required by Licensor, which form shall be in substantially the same form

attached hereto as Attachment C (see Sections IX(B)(2) and IX(I)). Licensor also

reserves the right to designate the transferee as one of the Controlling

Principals.

<PAGE>

ARTICLE IX

COVENANTS

A. Developer and Operating Principal covenant that during the term of

this Agreement (except as otherwise approved in writing by Licensor) Developer

and Operating Principal (and any approved designee for Operating Principal)

shall devote their full time, energy and best efforts to the management and

operation of the development activities contemplated under this Agreement.

B. (1) Neither Developer nor any of the Controlling Principals shall,

during the term of this Agreement and thereafter, communicate or divulge to, or

use for the benefit of, any other person, persons or Entity and following the

termination or expiration of this Agreement, shall not use for their own

benefit, any confidential information, knowledge or know-how concerning the

methods of development and operation of the Restaurants which may be

communicated to Developer or any of the Controlling Principals or of which they

may be apprised under this Agreement. Developer and each of the Controlling

Principals shall disclose such confidential information only to the Controlling

Principals and Developer's personnel who must have access to it in connection

with their employment with Developer. Any and all information, knowledge,

know-how, techniques and any materials used in or related to the System which

Licensor provides to Developer in connection with this Agreement shall be deemed

confidential for the purposes of this Agreement. Neither Developer nor the

Controlling Principals shall at any time, without Licensor's prior written

consent, copy, duplicate, record or otherwise reproduce such materials or

information, in whole or in part, nor otherwise make the same available to any

unauthorized person. The covenants in this Section shall survive the expiration,

termination or transfer of this Agreement or any interest herein and shall be

perpetually binding upon Developer and each of the Controlling Principals;

provided, however, if the jurisdiction in which this covenant is sought to be

enforced does not allow perpetual binding, then the maximum amount of time

allowed under the applicable law.

(2) Developer shall require and obtain execution of covenants

similar to those set forth in Section IX(B)(1) from each of its Principals who

are not required to sign this Agreement as a Controlling Principal or as

Operating Principal. Such covenants shall be substantially in the form contained

in Attachment C. Developer shall provide Licensor with executed copies of all

such agreements ten (10) days after they are executed.

C. Developer and the Controlling Principals specifically acknowledge

that, pursuant to this Agreement, Developer and the Controlling Principals will

receive valuable training, trade secrets and confidential information which are

beyond the present skills and experience of Developer and the Controlling

Principals and Developer's managers and employees and that Developer has the

right and the obligation, arising from this Agreement, to develop the Territory

for the benefit of the System. Developer and the Controlling Principals

acknowledge that such specialized training, trade secrets and confidential

information provide a competitive advantage and will be valuable to them in the

development and operation of the Restaurants and that gaining access to such

specialized training, trade secrets and confidential information is, therefore,

a primary reason for entering into this Agreement. In consideration of such

specialized training, trade secrets, confidential information and rights,

Developer and the Controlling Principals covenant that, during the term of this

Agreement, except as otherwise approved in writing by Licensor, neither

Developer nor any of the Controlling Principals shall,

<PAGE>

either directly or indirectly, for themselves, through, on behalf of or in

conjunction with any person, persons or Entity:

(1) divert, or attempt to divert, any business or customer of

the business described hereunder to any competitor, by direct or indirect

inducement or otherwise, or do or perform, directly or indirectly, any other act

injurious or prejudicial to the goodwill associated with the Proprietary Marks

and the System; or

(2) own, maintain, operate, engage in or have any financial or

beneficial interest in (including through any interest in an Entity that

conducts such activities), advise, assist or make loans to, any business that

operates a full service, varied menu, casual dining restaurant that features

freshly prepared items such as steaks, seafood, homemade baked goods and fresh

cut salads, and that serves alcoholic beverages through a full-service bar, and

which business is located within the United States, its territories or

commonwealths, or any other country, province, state or geographic area in which

Licensor has used, sought registration of or registered the same or similar

Proprietary Marks or operates or licenses others to operate a business under the

same or similar Proprietary Marks.

D. With respect to Developer, and for a continuous uninterrupted period

commencing upon the expiration or termination of (regardless of the cause for

termination), or transfer of all of the Controlling Interest in, this Agreement

(or with respect to each of the Controlling Principals, commencing upon the

earlier of: (i) the expiration, termination of, or transfer of all of the

Controlling Interest in this Agreement or (ii) the time such individual or

Entity ceases to satisfy the definition of Principal as described in this

Agreement), and continuing for two (2) years thereafter, except as otherwise

approved in writing by Licensor, neither Developer nor any of the Controlling

Principals shall, either directly or indirectly, for themselves or through, on

behalf of, or in conjunction with any person, persons or Entity:

(1) divert, or attempt to divert, any business or customer of

the business described hereunder to any competitor, by direct or indirect

inducement or otherwise, or do or perform, directly or indirectly, any other act

injurious or prejudicial to the goodwill associated with Licensor's Proprietary

Marks and the System;

(2) employ, or seek to employ, any person who is at that time,

or has been within the preceding six (6) months, employed by Licensor or any of

its Affiliates or by any other developer or operator of Licensor, or otherwise

directly or indirectly induce such person to leave that person's employment;

provided, however, that Developer may employ such person in a managerial

position with respect to Developer's operation of an O'Charley's restaurant

pursuant to the terms of the Operating Agreement applicable to such O'Charley's

restaurant; or

(3) own, maintain, operate, engage in or have any financial or

beneficial interest in (including through any interest in an Entity that

conducts such activities), advise, assist or make loans or provide guarantees

with respect to loans to, any business that operates a full service, varied

menu, casual dining restaurant that features freshly prepared items such as

steaks, seafood, homemade baked goods and fresh cut salads, and that serves

alcoholic beverages through a full-service bar, which business is, or is

intended to be, located within the Territory or within a fifteen (15) mile

radius of the location of any O'Charley's restaurant or food service facility in

existence or under construction (or where land has been purchased or a lease has

been executed for the construction of an O'Charley's restaurant or other food

service facility) as of the earlier of: (a) the expiration or termination of, or

the transfer of all of Developer's interest in, this

<PAGE>

Agreement; or (b) the time the Controlling Principal ceases to satisfy the

definition of Developer's Principal, as applicable.

E. Sections IX(C)(2) and (D)(3) shall not apply to ownership of less

than a five percent (5%) beneficial interest in the outstanding equity

securities of any Publicly-Held Entity.

F. The parties acknowledge and agree that each of the covenants

contained herein are reasonable limitations as to time, geographical area and

scope of activity to be restrained and do not impose a greater restraint than is

necessary to protect the goodwill or other business interests of Licensor. The

parties agree that each of the above covenants shall be construed as independent

of any other covenant or provision of this Agreement. If all or any portion of a

covenant in this Article IX is held unreasonable or unenforceable by a court or

agency having valid jurisdiction in an unappealed or unappealable final decision

to which Licensor is a party, Developer and the Controlling Principals expressly

agree to be bound by any lesser covenant subsumed within the terms of such

covenant that imposes the maximum duty permitted by law as if the resulting

covenant were separately stated in and made a part of this Section.

G. Developer and the Controlling Principals understand and acknowledge

that Licensor shall have the right, in its sole discretion, to reduce the scope

of any covenant set forth in Section IX(B), or any portion thereof, without

their consent, effective immediately upon notice to Developer. Developer and the

Controlling Principals agree that they shall immediately comply with any

covenant as so modified, which shall be fully enforceable notwithstanding the

provisions of Section XV(A).

H. Developer and the Controlling Principals expressly agree that the

existence of any claims they may have against Licensor whether or not arising

from this Agreement, shall not constitute a defense to the enforcement by

Licensor of the covenants in this Article IX. Developer and the Controlling

Principals agree to pay all costs and expenses (including reasonable attorneys'

fees) incurred by Licensor in connection with the enforcement of this Section.

I. Developer shall require and obtain the execution of covenants

similar to those set forth in Sections IX(C) and (D) (including covenants

applicable upon the termination of a person's employment with Developer) from

each of Principal who is not required to sign this Agreement as a Controlling

Principal. Such covenants shall be substantially in the form set forth in

Attachment C. Licensor reserves the right, in its sole discretion, to decrease

the period of time or geographic scope of the non-competition covenant set forth

in Attachment C or eliminate such non-competition covenant altogether for any

party that is required to execute such agreement under this Article IX.

J. Developer and the Controlling Principals acknowledge that a

violation of this Section would result in irreparable injury to Licensor for

which no adequate remedy at law may be available, and Developer and the

Controlling Principals accordingly consent to the issuance of an injunction

prohibiting any conduct by Developer or the Controlling Principals in violation

of the terms of this Section. Developer and the Controlling Principals agree to

pay all court costs and reasonable legal fees incurred by Licensor in obtaining

specific performance, injunctive relief or any other remedy available to

Licensor for any violation of the requirements of this Section.

<PAGE>

K. Notwithstanding anything else in this Article IX to the contrary, if

there is a state specific non-competition and/or non-solicitation addendum

attached to this Agreement, the terms of such addendum shall supersede the terms

of this Article IX to the extent they are inconsistent with one another.

ARTICLE X

INDEPENDENT CONTRACTOR AND INDEMNIFICATION

A. The parties acknowledge and agree that this Agreement does not

create a fiduciary relationship between them, that Developer shall be an

independent contractor and that nothing in this Agreement is intended to

constitute either party an agent, legal representative, subsidiary, Affiliate,

joint venturer, partner, employee, joint employer or servant of the other for

any purpose.

B. During the term of this Agreement, Developer shall hold itself out

to the public as an independent contractor conducting its development operations

pursuant to development rights granted by Licensor. Developer agrees to take

such action as shall be necessary to that end, including, without limitation,

exhibiting a notice of that fact in a conspicuous place in any Restaurant

established under any Operating Agreement for the purposes hereunder, the

content and form of which Licensor reserves the right to specify in writing.

C. Developer understands and agrees that nothing in this Agreement

authorizes Developer or any of the Controlling Principals to make any contract,

agreement, warranty or representation on Licensor's behalf, or to incur any debt

or other obligation in Licensor's name and that Licensor shall in no event

assume liability for, or be deemed liable under this Agreement as a result of

any such action or for any act or omission of Developer or any of the

Controlling Principals, or any claim or judgment arising therefrom.

D. (1) Developer and each of the Controlling Principals shall indemnify

and hold harmless Licensor and its Affiliates and their officers, directors,

shareholders, employees, managers, members, agents and representatives from any

and all claims, demands, suits, proceedings, fines, losses, liabilities damages,

costs and expenses (including reasonable attorneys' fees) suffered or incurred,

directly or indirectly, by any one or more of them (collectively, "Damages") as

a result of (a) any breach or other failure by Developer, Operating Principal or

any Controlling Principal to perform its or his obligations hereunder or under

any other instrument or agreement executed in connection herewith, or (b) any

other action or inaction by Developer, Operating Principal, any Controlling

Principal or any other person resulting from or in connection with the operation

of any Restaurant; provided, however, that neither Developer, Operating

Principal nor any Controlling Principal shall be liable for Damages resulting

from Licensor's or its Affiliates' gross negligence or willful misconduct.

(2) Developer and each of the Controlling Principals agree to

give Licensor immediate notice of any such action, suit, proceeding, claim,

demand, inquiry or investigation. Licensor shall have the option, in its sole

discretion, to defend any action seeking Damages as a result of any action or

inaction by Developer or any other person resulting from or in connection with

the operation of the Restaurant or to allow Developer to defend such action with

counsel satisfactory to Licensor.

<PAGE>

(3) Developer and the Controlling Principals expressly agree

that the terms of this Section X(D) shall survive the termination, expiration or

transfer of this Agreement or any interest herein.

ARTICLE XI

APPROVALS

A. Whenever this Agreement requires the prior approval or consent of

Licensor, Developer shall make a timely written request to Licensor and such

approval or consent shall be obtained in writing.

B. Licensor makes no warranties or guarantees upon which Developer may

rely and assumes no liability or obligation to Developer or any third party to

which it would not otherwise be subject, by providing any waiver, approval,

advice, consent or suggestion to Developer in connection with this Agreement or

the construction of restaurants, or by reason of any neglect, delay or denial of

any request therefor.

ARTICLE XII

NON-WAIVER AND REMEDIES

A. No delay, waiver, omission or forbearance on the part of Licensor to

exercise any right, option, duty or power arising out of any breach or default

by Developer or the Controlling Principals under this Agreement shall constitute

a waiver by Licensor to enforce any such right, option, duty or power against

Developer or the Controlling Principals, or as to a subsequent breach or default

by Developer or the Controlling Principals. Acceptance by Licensor of any

payments due to it hereunder subsequent to the time at which such payments are

due shall not be deemed to be a waiver by Licensor of any preceding breach by

Developer or the Controlling Principals of any terms, provisions, covenants or

conditions of this Agreement.

B. All rights and remedies of the parties to this Agreement shall be

cumulative and not alternative, in addition to and not exclusive of any other

rights or remedies which are provided for herein or which may be available at

law or in equity in case of any breach, failure or default or threatened breach,

failure or default of any term, provision or condition of this Agreement or any

other agreement between Developer, or its Affiliates, and Licensor or its

Affiliates. The rights and remedies of the parties to this Agreement shall be

continuing and shall not be exhausted by any one or more uses thereof and may be

exercised at any time or from time to time as often as may be expedient. Any

option or election to enforce any such right or remedy may be exercised or taken

at any time and from time to time. The expiration, earlier termination or

exercise of Licensor's rights pursuant to Article VII of this Agreement shall

not discharge or release Developer or any of the Controlling Principals from any

liability or obligation then accrued, or any liability or obligation continuing

beyond, or arising out of, the expiration, the earlier termination or the

exercise of such rights under this Agreement. Additionally, Developer and the

Controlling Principals shall pay all court costs and attorneys' fees incurred by

Licensor in obtaining any remedy available to Licensor for any violation of this

Agreement.

<PAGE>

ARTICLE XIII

NOTICES

All notices and other communications required or permitted to be given

hereunder shall be deemed given when delivered in person, by overnight courier

service, facsimile transmission or mailed by registered or certified mail

addressed to the recipient at the address set forth below, unless that party

shall have given written notice of change of address to the sending party, in

which event the new address so specified shall be used.

Notices to Licensor: O'Charley's Inc.

3038 Sidco Drive

Nashville, Tennessee 37204

Attention: Director of Franchising

Facsimile: (615) 782-5043

Notices to Developer and

the Controlling Principals: c/o Meritage Hospitality Group Inc.

1971 E. Beltline, NE Suite 200

Grand Rapids, Michigan 49525

Attention: Robert E. Schermer, Jr.

Facsimile: (616) 776-2776

ARTICLE XIV

SEVERABILITY AND CONSTRUCTION

A. Except as expressly provided to the contrary herein, each portion,

section, part, term and provision of this Agreement shall be considered

severable. If for any reason any portion, section, part, term or provision is

determined to be invalid and contrary to, or in conflict with, any existing or

future law or regulation by a court or agency having valid jurisdiction, this

shall not impair the operation of, or have any other effect upon, the other

portions, sections, parts, terms or provisions of this Agreement that may remain

otherwise intelligible, and the latter shall continue to be given full force and

effect and bind the parties. The invalid portions, sections, parts, terms or

provisions shall be deemed not to be part of this Agreement and there shall be

automatically added such portion, section, part, term or provision as similar as

possible to that which was severed which shall be valid and not contrary to or

in conflict with any law or regulation.

B. Except as expressly provided to the contrary herein, nothing in this

Agreement is intended, nor shall be deemed to, confer upon any person or legal

Entity other than Developer and Licensor, Licensor's officers, directors and

personnel and such of Developers and Licensors respective successors and assigns

as may be contemplated (and, as to Developer, authorized by Article VIII), any

rights or remedies under or as a result of this Agreement.

C. All captions in this Agreement are intended solely for the

convenience of the parties and shall not affect the meaning or construction of

any provision of this Agreement.

D. All references to the masculine, neuter or singular shall be

construed to include the masculine, feminine, neuter or plural, where

applicable. Without limiting the obligations individually undertaken by the

Controlling Principals under this Agreement, all

<PAGE>

acknowledgments, promises, covenants, agreements and obligations made or

undertaken by Developer in this Agreement shall be deemed, jointly and

severally, undertaken by all of the Controlling Principals.

E. The term "Principals" shall mean, collectively and individually,

Developer's spouse, if Developer is an individual; all officers and directors of

Developer (including the officers and directors of any general partner of

Developer) whom Licensor designates as Principals and all holders of an

ownership interest in Developer and of any Entity directly or indirectly

controlling Developer, and any other person or Entity controlling, controlled by

or under common control with Developer. Each Principal as of the date of this

Agreement is listed on Attachment D.

F. For purposes of this Agreement, the term "Publicly-Held Entity"

means any Entity with a class of securities registered pursuant to Section 12 of

the Securities Exchange Act of 1934, as amended, or an Entity subject to the

requirements of Section 15(d) of such Act. Further, for purposes of this

Agreement, an "Affiliate" of a person or Entity is any person or Entity that is

controlled by, controlling or under common control with such person or Entity.

G. This Agreement may be executed in counterparts and each copy so

executed shall be deemed an original.

H. This Agreement shall not become effective until signed by an

authorized officer of Licensor.

I. The word "including" when used herein shall mean "including without

limitation."

ARTICLE XV

ENTIRE AGREEMENT; APPLICABLE LAW

A. This Agreement, the documents referred to herein and the Attachments

hereto, constitute the entire, full and complete agreement between Licensor,

Developer and the Controlling Principals concerning the subject matter hereof

and shall supersede all prior related agreements between Licensor, Developer and

the Controlling Principals. Except for those permitted to be made unilaterally

by Licensor hereunder, no amendment, change or variance from this Agreement

shall be binding on either party unless mutually agreed to by the parties and

executed by' their authorized officers or agents in writing.

B. Developer and the Controlling Principals hereby irrevocably submit

themselves to the jurisdiction of the state and the federal district courts

located in the state, county or judicial district in which the Licensor's

principal place of business is located at the time such proceeding is commenced.

Developer and the Controlling Principals hereby waive all questions of personal

jurisdiction at the time such proceeding is commenced for the purpose of

carrying out this provision. Developer and the Controlling Principals hereby

agree that service of process may be made upon any of them in any proceeding

relating to or arising out of this Agreement or the relationship created by this

Agreement by any means allowed by applicable state or federal law. Developer and

the Controlling Principals further agree that venue for any proceeding relating

to or arising out of this Agreement shall be the county or judicial district in

which Licensor's principal place of business is located at the time such

proceeding is commenced; provided, however, with respect to any action (1) for

monies owed, (2) for injunctive or other extraordinary

<PAGE>

relief or (3) involving possession or disposition of, or other relief relating

to, the Restaurant premises, Licensor may bring such action in any state or

federal district court which has jurisdiction. With respect to all claims,

controversies, disputes or actions related to this Agreement or the relationship

created thereby. This Agreement and any such related claims, controversies,

disputes or actions, shall be governed, enforced and interpreted under the law

of the state where Licensor's principal place of business is located at the time

any claim, controversy, dispute, or action (without regard to choice of law

rules) arose.

C. Developer, the Controlling Principals and Licensor acknowledge that

each party's agreement regarding applicable state law and forum set forth in

Section XV(B) above provides each of the parties with the mutual benefit of

uniform interpretation of this Agreement and any dispute arising out of this

Agreement or the parties' relationship created by this Agreement. Each of

Developer, the Controlling Principals and Licensor further acknowledges the

receipt and sufficiency of mutual consideration for such benefit, and that each

party's agreement regarding applicable state law and choice of forum have been

negotiated in good faith and are part of the benefit of the bargain reflected by

this Agreement.

D. Developer, the Controlling Principals and Licensor acknowledge that

the execution of this Agreement and acceptance of the terms by the parties

occurred at Licensor's principal place of business, and further acknowledge that

the performance of certain obligations of Developer arising under this

Agreement, including, but not limited to, the payment of monies due hereunder,

shall occur where Licensor's principal place of business is located at the time

such obligation is due.

E. Without limiting any of the foregoing, Developer and each of the

Controlling Principals acknowledge and agree that Licensor has the right, at any

time, to create a dispute resolution program and related specifications,

standards, procedures and rules for the implementation thereof to be

administered by Licensor or its designees for the benefit of all developers and

developers conducting business under the System. The standards, specifications,

procedures and rules for such dispute resolution program shall be made part of

the Manuals, and Developer and the Controlling Principals shall comply with all

such standards, specifications, procedures and rules in seeking resolution of

any claims, controversies or disputes with or involving Licensor or other

developers or operators, if applicable under the program. If Licensor, in its

sole discretion, makes such dispute resolution program mandatory, then

Developer, the Controlling Principals and Licensor hereby agree to submit any

claims, controversies or disputes arising out of or relating to this Agreement

or the relationship created by this Agreement for resolution in accordance with

such dispute resolution program, or if such claim, controversy or dispute

relates to another developer or operator, Developer and the Controlling

Principals agree to participate in the program and submit any such claims,

controversies or disputes in accordance with the program's standards,

specifications, procedures and rules, prior to seeking resolution of such claim

by any other judicial or legally available means.

F. Developer and the Controlling Principals hereby waive, to the

fullest extent permitted by law, any right to or claim of any punitive,

exemplary, incidental, indirect, special, consequential or other damages

(including, without limitation, loss of profits) against Licensor, its

Affiliates, and their respective officers, directors, shareholders, members,

partners, agents, representatives, independent contractors, servants and

employees, in their corporate and individual capacities, arising out of any

cause whatsoever (whether such cause be based in

<PAGE>

contract, negligence, strict liability, other tort or otherwise) and agree that

in the event of a dispute, Developer and the Controlling Principals shall be

limited to the recovery of any actual damages sustained by them. If any other

term of this Agreement is found or determined to be unconscionable or

unenforceable for any reason, the foregoing provisions of waiver by agreement of

punitive, exemplary, incidental, indirect, special, consequential or other

damages (including, without limitation, loss of profits) shall continue in full

force and effect.

G. Licensor, Developer and the Controlling Principals hereby agree that

no form of proceeding permitted hereby will be maintained by any party to

enforce any liability or obligation of the other party, whether arising from

this Agreement or otherwise, unless brought before the expiration of the later

of: (i) one (1) year after the date of discovery of the facts resulting in such

liability or obligation; or (ii) two (2) years after the date of the first act

or omission giving rise to the alleged liability or obligation, except that

where state or federal law mandate or make possible by notice or otherwise a

shorter period, such shorter period shall apply.

H. Any obligation of Developer or the Controlling Principals that

contemplates performance of such obligation after termination or expiration of

this Agreement or the transfer of any interest of Developer or the Controlling

Principals therein, shall be deemed to survive such termination, expiration or

transfer, including the provisions of this Article XV.

I. Developer, the Controlling Principals and Licensor acknowledge that

various provisions of this Agreement specify certain matters that are within the

discretion or judgment of Licensor or are otherwise to be determined

unilaterally by Licensor. If the exercise of Licensor's discretion or judgment

as to any such matter is subsequently challenged, the parties to this Agreement

expressly direct the trier of fact that Licensor's reliance on a business reason

in the exercise of its discretion or judgment is to be viewed as a reasonable

and proper exercise of such discretion or judgment, without regard to whether

other reasons for its decision may exist and without regard to whether the trier

of fact would independently accord the same weight to the business reason.

ARTICLE XVI

ACKNOWLEDGMENTS

A. Developer acknowledges that it has conducted an independent

investigation of the business venture contemplated by this Agreement and

recognizes that the success of this business venture involves substantial

business risks and will largely depend upon the ability of Developer. Licensor

expressly disclaims making, and Developer acknowledges that it has not received

or relied on, any warranty or guarantee, express or implied, as to the potential

volume, profits or success of the business venture contemplated by this

Agreement.

B. Developer acknowledges that Developer has received, read and

understands this Agreement and the related Attachments and Agreements and that

Licensor has afforded Developer sufficient time and opportunity to consult with

advisors selected by Developer about the potential benefits and risks of

entering into this Agreement.

C. Developer acknowledges that it received a complete copy of this

Agreement and all related Attachments and Agreements at least five (5) business

days prior to the date on which this Agreement was executed. Developer further

acknowledges that it has received the disclosure document required by the Trade

Regulation Rule of the Federal Trade Commission

<PAGE>

entitled "Disclosure Requirements and Prohibitions Concerning Franchising and

Business Opportunity Ventures" at least ten (10) business days prior to the date

on which this Agreement was executed.

(remainder of page intentionally left blank)

<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered

this Agreement on the day and year first above written.

LICENSOR:

O'CHARLEY'S INC.,

a Tennessee corporation

By: /s/ Edward C. Hastings

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

Edward C. Hastings

Director of Franchising

DEVELOPER:

OCM DEVELOPMENT, LLC,

a Michigan limited liability company

By: /s/ Robert E. Schermer, Jr.

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

Robert E. Schermer, Jr.*

Chief Executive Officer

CONTROLLING PRINCIPAL:

MERITAGE HOSPITALITY GROUP, INC.,

a Michigan corporation

By: /s/ Robert E. Schermer, Jr.

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

Robert E. Schermer, Jr.

Chief Executive Officer

* Denotes individual who is Developer's Operating Principal

<PAGE>

ATTACHMENT A

TO DEVELOPMENT AGREEMENT

O'CHARLEY'S INC.

OPERATING AGREEMENT

A-1

<PAGE>

[O'CHARLEY'S LOGO]

O'CHARLEY'S INC.

OPERATING AGREEMENT

<PAGE>

TABLE OF CONTENTS

<TABLE>

ARTICLE I Grant.........................................................................................2

ARTICLE II Construction; Opening.........................................................................4

ARTICLE III Prerequisites To License Effectiveness........................................................4

ARTICLE IV Term And Renewal..............................................................................6

ARTICLE V Fees..........................................................................................8

ARTICLE VI Licensor's Obligations.......................................................................11

ARTICLE VII Operator's Agreements, Representations, Warranties And Covenants.............................13

ARTICLE VIII Restaurant Operations........................................................................20

ARTICLE IX Advertising And Related Fees.................................................................25

ARTICLE X Proprietary Marks............................................................................30

ARTICLE XI Confidentiality And Non-competition Covenants................................................32

ARTICLE XII Books And Records............................................................................37

ARTICLE XIII Insurance....................................................................................38

ARTICLE XIV Debts and Taxes..............................................................................40

ARTICLE XV Transfer of Interest.........................................................................41

ARTICLE XVI Indemnification..............................................................................47

ARTICLE XVII Relationship Of The Parties..................................................................48

ARTICLE XVIII Termination..................................................................................48

ARTICLE XIX Post-Termination.............................................................................52

ARTICLE XX Miscellaneous................................................................................56

ARTICLE XXI Acknowledgments..............................................................................60

Attachment A Location and Opening Date.................................................................A-1

Attachment B Statement of Ownership Interests and Principals...........................................B-1

Attachment C Confidentiality and Non-Compete Agreement.................................................C-1

Attachment D Software License Agreement................................................................D-1

Attachment E Electronic Fund Transfer Authorization....................................................E-1

Attachment F Guaranty..................................................................................F-1

</TABLE>

<PAGE>

O'CHARLEY'S INC.

OPERATING AGREEMENT

THIS OPERATING AGREEMENT (the "Agreement") is made and entered into

this _____ day of ________________, 20___, by and among O'Charley's Inc., a

Tennessee corporation ("Licensor"), _________________________ ("Operator"),

____________________, ___________________________ and _______________________

(each a "Controlling Principal;" collectively the "Controlling Principals").