O'CHARLEY'S INC. DEVELOPMENT AGREEMENT

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Title: O'CHARLEY'S INC. DEVELOPMENT AGREEMENT
Date: 2/27/2004
Industry: EATING

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EXHIBIT 10.24

[O'CHARLEY'S INC. 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

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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

</TABLE>

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O'CHARLEY'S INC.

DEVELOPMENT AGREEMENT

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

this _____ 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

_______________________________________________________________________

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.

<PAGE>

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

EXPIRATION DATE OF DEVELOPER SHALL HAVE OPEN

DEVELOPMENT PERIOD DEVELOPMENT PERIOD AND IN OPERATION*

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

One September 30, 2004 1

Two December 31, 2004 2

Three August 31, 2005 3

</TABLE>

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<TABLE>

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

</TABLE>

*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

<PAGE>

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,

<PAGE>

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.

fewer 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.

<TABLE>

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

</TABLE>

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<TABLE>

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Thirteen September 30, 2009

Fourteen December 31, 2009

Fifteen June 30, 2010

</TABLE>

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.

(a) 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

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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;

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.

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: