AGREEMENT


1.   Identification and Parties.
     --------------------------

     This  Agreement   ("Agreement")  is  entered  into  by  and  between  HOTEL
RESTAURANT  PROPERTIES,  INC., a  California  corporation  ("Owner"),  and GRILL
CONCEPTS,  INC.,  a  Delaware  corporation  ("Manager"),  as of this 27th day of
August 1998.

2.   Recitals.
     ---------

     2.1. Owner is a newly-formed company whose shareholders are Keith Wolff and
Adam Keller.  Wolff and Keller have  substantial  experience in the operation of
hotels and have formed Owner for the purpose of obtaining locations in hotels in
which a Grill or Daily  Grill can be  located  as a  restaurant.  Owner may also
obtain  non-hotel  Grill and Daily Grill  locations from time to time subject to
Manager's prior approval.  Owner is knowledgeable  about the unique requirements
for the operation of the food service in a hotel and a restaurant in a hotel.

     2.2.  Manager  owns  and  operates,  among  other  restaurants,  the  Grill
("Grill") and Daily Grill ("Daily Grill")  restaurant chains and has substantial
experience in the management and operation of such restaurants.

     2.3. Manager owns the uniform restaurant operating system necessary for the
establishment  and  operation  of the  Grill and Daily  Grill  restaurants  with
distinctive  features,  equipment,   equipment  design,  menus,  food  formulas,
inventories,  manuals,  training Systems, and accounting Systems  (collectively,
the "Operating System") which restaurant and Operating Systems are identified by
the  service and  trademarks  "Grill"  and "Daily  Grill" and related  words and
symbols  (collectively,  "Existing Marks") identifying the Grill and Daily Grill
restaurants and their goods and services.

     2.4.  Owner and Manager  desire to enter into this Agreement to provide for
the obtaining of locations for the Grill and Daily Grill  restaurants  by Owner,
and the  management  of those  locations  acquired  by Manager as Grill or Daily
Grill  restaurants,  as the case may be,  including  a license of the  Operating
System and Existing  Marks for such  locations,  all on the terms and conditions
hereinafter set forth.

3.   Certain Definitions.
     --------------------

     In addition to the definitions set forth  elsewhere  herein,  the terms set
forth in this Article 3 will have the meanings set forth herein:

     3.1. License Rights.  License Rights mean collectively the Operating System
(defined in Section 2.3),  the Existing Marks (also defined in Section 2.3), and
the Marks.

     3.2.  Marks.  Marks includes the Existing Marks and such other  tradenames,
service marks,  logo types,  trade symbols,  emblems,  signs, logos,  insignias,
trademarks,  designs,  patents and  copyrights  as Manager owns or may hereafter
acquire,  develop,  or  adopt  or  designate  for use in  conjunction  with  the
Operating System.

     3.3.  Managed  Outlet.  Managed  Outlet  means  each  hotel's  or  approved
location's restaurant, bar, room service, and/or banquet operations, which Owner
and Manager agree to lease or manage pursuant to this Agreement.


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<PAGE>

     3.4.  Owner Tax  Deficiency.  Owner Tax  Deficiency  means the extent  that
federal,  state  and local  income  taxes  due by Owner or its  shareholders  on
Owner's  income if it is an S  Corporation,  are greater  than Net Income  After
Manager Loan Payback before Owner Tax Deficiency and after Incentive Fee in each
quarterly period, payable on a quarterly basis.

     3.5.  Manager  Loan  Manager  Loan shall mean the  amounts  loaned to Owner
pursuant to this Agreement. The Manager Loan shall bear an interest rate of nine
percent (9%) per year, simple interest The principal balance of the Manager Loan
shall be repaid in full out of Net Income prior to any payment of Incentive  Fee
(defined  in  Section  9.2) or  retention  of cash by Owner.  The  Manager  Loan
principal  balance shall be payable in full on the fifteenth (l5th)  anniversary
of this Agreement unless paid sooner at the election of Owner.

     3.6.  Manager  Loan  Debt  Service.  Manager  Loan  Debt  Service  shall be
calculated  monthly as follows:  the  Manager  Loan  amount  outstanding  at the
beginning of the month times nine percent (9%) interest divided by twelve (12).

     3.7. Required Capital  Contribution.  Required Capital Contribution for the
purpose  of this  Agreement  shall  mean any Owner  and/or  Manager  expenditure
required by the agreement  with the hotel,  but not funded by the hotel,  to (i)
acquire such lease or management  agreement,  or (ii) for the expenditure of any
sums for  capital  improvements  to the Managed  Outlet.  The  Required  Capital
Contribution  shall not include Operating  Expenses,  Pre-opening  Costs, or the
Overhead  Base Fee as defined  herein.  To the extent not paid for by the hotel,
Manager shall be solely  obligated to obtain the funds for the Required  Capital
Contribution  through Manager Loans or loans or other financial  arrangements to
Owner by others ('Third Party Loan").  Third Party Loan interest  payments shall
be called  "Third  Party Loan Debt  Service"  for the purpose of this  Agreement
Third Party Loan principal  payments shall be called "Third Party Loan Principal
Payments" for the purpose of this  Agreement.  The Manager shall be obligated to
guarantee Third Party Loans if required by the Lender.

     3.8. Start-up Period.  Start-up Period means the period commencing with the
investigation  of any  proposed  Managed  Outlet  and  ending  with  either  the
termination of such proposal or the date two (2) months after the opening to the
public of such Managed Outlet.

     3.9.  Pre-opening  Costs.  For the purpose of this  Agreement,  Pre-opening
Costs shall include all Manager's and/or Owner's actual expenses,  not including
the Required  Capital  Contribution,  incurred by Owner  and/or  Manager and not
funded by the hotel,  during the Start-up Period for any Managed  Outlet.  These
Pre-opening  Costs shall be accounted for in a manner  consistent with Manager's
non-hotel locations and consistent with generally accepted restaurant accounting
principles  except as otherwise  specified  herein.  Preopening  Costs shall not
include  allocations  for  overhead  or home  office  expenes  of Manager or the
compensation  of  corporate   salaried   employees  of  the  Owner  or  Manager.
Pre-opening Costs shall not be included as Operating  Expenses or in determining
the amount of the Actual Monthly Overhead defined herein.

     3.10.  Gross  Receipts.  Gross  Receipts  means  for any  time  period  all
revenues, fees, and payments received by Owner and/or Manager in connection with
or resulting from the Operations at all Managed  Outlets,  not including  items
specifically  excluded  from Gross  Receipts  as  specified  within  each of the
individual Managed Outlet Agreements with a hotel.


                                       2
<PAGE>

     3.11.  Operating Expenses.  Operating Expenses means the sum of the Managed
Outlet Operating Expenses, Owner Operating Expenses, and Manager's Base Overhead
Fee as defined herein. Managed Outlet Operating Expenses shall mean all expenses
incurred in  connection  with the  operation  of all Managed  Outlets as defined
within the  Managed  Outlet  Agreements,  or if not  defined  within the Managed
Outlet Agreements,  then as is customary with Manager's  non-hotel locations and
consistent with generally accepted  restaurant  accounting  procedures except as
otherwise specified herein ("Managed Outlet Operating  Expenses").  In addition,
Operating  Expenses  shall  include all bonafide  expenses  incurred by Owner in
performing Owners  obligations under this Agreement other than Pre-opening Costs
("Owner Operating  Expenses").  However,  no Owner  shareholder  salaries and or
Owner shareholder  distributions shall be deemed as Owner Operating Expenses for
the purpose of this  Agreement.  The Manager Base  Overhead Fee pursuant to this
Agreement  shall  be  deemed  as  Operating  Expenses  for the  purpose  of this
Agreement but no other overhead or administrative allocation of Manager shall be
allowed.  For the  purpose  of this  Agreement,  Operating  Expenses  shall  not
include,  Pre-opening Costs,  Manager Loan Debt Service,  Manager Loan Principal
Payments,  Third  Party  Debt  Service,  Third  Party Loan  Principal  Payments,
Required Capital Contribution,  depreciation,  amortization, goodwill, and Owner
income taxes or Shareholder's of Owner income taxes.

     3.12  Operating  Income.  Operating  Income means for any time period Gross
Receipts less Operating Expenses.
 
     3.13. Net Income.  Net Income for the purpose of this Agreement  shall mean
Operating  Income  less (i) Third  Party Loan Debt  Service and Third Party Loan
Principal  Payments due (including any final principal balance) and (ii) Manager
Loan Debt Service due and (iii) Owner Tax Deficiency, if any.
 
     3.14.  Operating  Losses. Operating Losses shall mean if Net Income is less
than zero in any month.
 
     3.15 Net Income After Manager Loan  Payback.  Net Income After Manager Loan
Payback shall mean the  remaining Net Income after the principal  balance of the
Manager Loan is repaid in full from Net Income.
 
4.   Owner Duties.
     ------------
 
     4.1.  Owner shall seek  locations  in hotels (or  elsewhere  if approved by
Manager) which require  restaurants of the nature and quality of the Daily Grill
or Grill  and  shall  attempt  to  arrange  with  such  hotels  for the lease or
management of the restaurant  space in such hotels,  which will normally include
operating the food service for the hotel,  including its  restaurant,  bar, room
service, and, in some instances,  banquet operations. Owner shall be responsible
for negotiating  such arrangement with the hotel and presenting such arrangement
to Manager for its approval.
 
5.   Manager's Duties.
     ----------------
 
     5.1.  Manager  shall be  obligated  to consult  with Owner with  respect to
potential  locations with respect to the design and operation of a restaurant in
such  location  and to approve or  disapprove  the terms and  conditions  of the
agreement with respect to any location in its sole and absolute  discretion.  In
the event Owner and Manager agree on the terms and  conditions of an arrangement
with a hotel, Owner will enter into a lease or management agreement with respect
to such Managed Outlet, and Manager will enter into a management  agreement with
respect to such Managed Outlet with Owner and hotel,  if required,  on the terms
and conditions set forth herein.  At the  execution  of the  agreement  for each
Managed  Outlet,  Manager and Owner shall execute an exhibit hereto  agreeing to
perform all the terms and conditions with respect to such agreement.


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<PAGE>
 
     5.2. In  connection  with all Managed  Outlets,  Manager  shall  manage and
supervise all day to day  operations  of the Managed  Outlet so that the Managed
Outlets are operated to the same  standards as Manager owned  Grill's and Daily
Grills.  Manager shall provide, at its own expense,  supervisory personnel as it
deems  necessary at its corporate  offices to oversee  management of the Managed
Outlet.  This shall  include,  but not be limited to,  supervision of all of the
following  functions  pertinent  to the  Managed  Outlet:  purchasing,  facility
maintenance,   advertising  and  public  relations,  risk  management,   payroll
processing, human resources, training of personnel, and all accounting functions
such as accounts  payable,  cash  management,  sales tax  returns,  and periodic
financial statements for each Managed Outlet as set forth herein.  Manager shall
be responsible for supervising  all Managed Outlet design and  construction  and
the  retraining of all Managed Outlet  employees and staff.  Except for the Base
Overhead  Fee and  Pre-opening  Costs of home  office  personnel  at the Managed
Outlet as set forth herein,  Manager shall be solely  responsible for paying its
own  corporate  overhead  without  further  compensation,  including  its office
expenses and wages and salaries and fringe benefits of its corporate personnel.

     5.3. During the Term,  Manager shall be obligated to loan Owner any and all
Pre-opening  Costs and Operating Losses  (including Owner Tax Deficiency) in the
form of a Manager  Loan as  specified  herein.  In  addition,  Manager  shall be
obligated to loan any and all  Required  Capital  Contribution  in the form of a
Manager Loan or Third Party Loan as specified herein. There can be no default by
Owner under this  Agreement  for the  failure to pay the Manager  Loan until its
final due date as it is the obligation of Manager to fund all Operating Losses.

     5.4.  During  the Term,  Manager  shall  retain  such  employees  and other
personnel as are required in Manager's  sole  judgment  for the Managed  Outlet
operations.  All such on-site  employees  will be employees of Manager.  Manager
shall prepare the payroll for all employees of the Managed Outlet,  and shall be
solely responsible for all salaries,  fringe benefits,  bonuses (including store
management  bonuses),   health  insurance  and  disability  insurance  programs,
employee  taxes and  worker's  compensation  insurance  of the  employees of the
Managed Outlets.  Manager shall be solely  responsible for the  determination of
the employees'  salaries,  benefits and bonuses,  which shall be reasonably set.
Manager  shall  have  the  sole  responsibility  to  supervise,  hire,  fire and
discipline, if necessary, all on-site employees.

     5.5.  Manager shall have control and signature power over the bank accounts
of the Managed  Outlets and the full power and  authority  to disburse the funds
necessary to operate the Managed  Outlets.  Manager shall promptly  deposit in a
bank  or  banks  designated  by  Manager  and  approved  by  Owner  in  accounts
established in Manager's  name,  any and all Gross Receipts  received by Manager
from the operations of the Managed Outlets. In no event will any moneys received
from the operation of the Managed Outlets be commingled with any other funds. To
the extent that Net Income  After  Manager Loan Payback is greater than zero (in
accordance  with sections 3.5 and 3.6 herein),  Manager  shall  disburse the Net
Income  After  Manager  Loan  Payback  twenty-five  percent  (25%) to Owner  and
seventy-five percent (75%) to Manager for the Incentive Fee hereinafter defined)
after maintaining reasonable reserves for the operation of the Managed Outlets.

     5.6.  Manager  shall,  within  fifteen  (15) days of the end of each of its
accounting  periods,  and  thirty  (30) days of the end of each  calendar  year,
prepare a Statement of Operations for the Managed Outlets  indicating the fiscal
status of the Managed  Outlets.  Such  Statement  shall be  consistent  with the
Statements provided by Manager for its other restaurant  locations.  Owner shall
have the rights,  at its expense,  to audit all such  Statements.  Manager shall
maintain  complete books and records of all costs and expenses  incurred and all
income and receipts  received in  connection  with the  operation of the Managed
Outlets at its office at 11611 San Vicente  Boulevard,  Los Angeles,  California
90049.  The books and records  regarding the Managed  Outlets shall be kept in a
manner  consistent  with  that  maintained  for  its  other  restaurants  unless
otherwise  specified  herein.  All such books and records,  as well as all other
books and  records of  Manager  which  relate to the  Managed  Outlets  shall be
available for inspection and audit by Owner or any of its officers, employees or
agents at all reasonable times during normal business hours.


                                       4
<PAGE>

     5.7.  During  the  term  of the  Agreement,  Manager  shall  obtain,  as an
Operating Expense, insurance for the Managed Outlets of the same type and amount
as it  maintains  for its own  restaurant  locations  and as required by Owner's
leases.

6.   Omitted

7.   Grant of License.
     ----------------

     7.1.  Upon the terms and  conditions  set forth herein,  Manager  grants to
Owner,  and Owner accepts from  Manager,  the right,  license,  and privilege of
utilizing the License Rights during the Term, solely and only in connection with
operation of the Managed Outlets and only in such manner as Manager  approves in
writing.  The License Rights extend only to the Managed  Outlet.  Owner will not
make or authorize any direct or indirect use of any of the License  Rights other
than directly in connection  with operation of the Managed  Outlet,  and only in
such manner as Manager approves in writing.  The license granted hereby shall be
effective only during the Term of this Agreement and shall  automatically end on
the expiration or earlier termination of this Agreement.  Manager may, from time
to time,  institute  promotional and advertising material in connection with the
Managed Outlets. All such promotion and advertising  expenditures will be deemed
Operating  Expenses only to the extent such  advertising is exclusively  for the
Managed Outlet unless otherwise approved by Owner in writing.

     7.2.  Owner  acknowledges  and agrees that the License  Rights shall at all
times  during the Term be the sole and  exclusive  property of Manager.  Manager
expressly  retains and reserves all rights in and to each of the License Rights,
subject only to the rights specifically  granted to Owner herein.  Owner further
acknowledges  and agrees  that  Owner has been  granted  the use of the  License
Rights  solely for the  duration  of the Term and only in  conjunction  with the
Managed Outlets,  and that this Agreement is not intended as Manager's  transfer
or sale  to  Owner  of any of the  License  Rights.  Nothing  contained  in this
Agreement shall be construed to prevent Manager from granting any other licenses
for the use of any or all of the  License  Rights at any other  location or from
utilizing any of the License Rights in any manner whatsoever except as otherwise
specified  herein.  Owner  acknowledges  that it will  not  acquire  any  rights
whatsoever in any of Manager's goodwill and/or proprietary marks,  including any
of the License Rights, as a result of Owner's use thereof.  Owner agrees that it
shall  not,  during  the Term or  thereafter,  take  any  actions  which  affect
Manager's  ownership of its proprietary  marks,  including License Rights or the
validity thereof.

8.   Exclusivity.
     -----------

     8.1.  During the term hereof,  Manager shall directly or indirectly  pursue
the location of its Grill and Daily Grill  restaurants in any hotel only through
the arrangement with Owner as set forth herein,  except as follows. In the event
that Manager desires to locate a Grill or Daily Grill  restaurant in a hotel and
the Manager's capital investrnent,  excluding any improvement allowance provided
to Manager by the hotel or other third- party entity  directly  affiliated  with
the  hotel,  in  that  location  will  exceed  the  sum of One  Million  Dollars
($1,000,000) adjusted by the cost of living from January 1, 1998, using the Cost
of Living  Index of the  Department  of Labor for the area in which the hotel is
located,  then  Manager may arrange for the location of the Grill or Daily Grill
in such hotel free of any obligation  under this Agreement.  In the event anyone
approaches  Manager to locate a restaurant in a hotel and the Manager's  capital
investment, excluding any improvement allowance provided to Manager by the hotel
and/or other third-party entity directly affiliated with the hotel, is less than
the sum of One Million Dollars ($1,000,000)  adjusted by the cost of living from
January 1, 1998,  using the Cost of Living Index of the  Department of Labor for
the area in which the hotel is located,  Manager shall refer such party to Owner
and such location may only be obtained  through the arrangement set forth herein
with Owner so long as Owner desires to acquire the lease or management agreement
with  respect to such  location.  In the event  Manager  presents a location for
management  agreement or lease to Owner,  and Owner  determines that it does not
want to enter into a mangagement  agreement or lease for such location,  Manager
may enter into a  management  agreement or lease for such  location  only if the
management  agreement or lease which Manager enters into for such location is on
the same terms and conditions which have been rejected by Owner. Notwithstanding
anything herein to the contrary, Manager may, as its sole discretion, reject any
proposed location for an outlet of the Grill and/or Daily Grill.

                                       5
<PAGE>


     8.2. Owner and its shareholders shall not engage in the business of finding
locations in hotels other than for Manager,  except as set forth herein.  In the
event that Owner  presents a location  to Manager  for an outlet of the Grill or
Daily Grill,  and Manager  determines that it does not want to locate a Grill or
Daily Grill at such location,  then Owner's  shareholders in another entity, may
attempt to locate a restaurant  in such  location.  Owner hereby  agrees that it
shall not own, lease or manage any assets except  Managed  Outlets for the Grill
or Daily Grill due to the potential  future  combination of Manager and Owner as
set forth herein.

     8.3. Wherever in Article 8 a proposal is made by Manager or Owner, it shall
be made in writing,  and a response shall be required  within fifteen (15) days.
The failure to respond shall be deemed a disapproval.

9.   Fees and Royalties.
     ------------------

     9.1. Base Overhead Fee. In consideration of Manager's  agreement to perform
its duties set forth herein, and in consideration of the license granted herein,
Owner  shall  pay to  Manager a Base  Overhead  Fee per  outlet  eqnal to $4,167
($50,000 divided by 12) per monthly period.

     9.2.  Owner shall pay to Manager,  in addition to the Base Overhead Fee, an
Incentive Fee equal to 75% of Net Income After Manager Loan Payback (as provided
for in Sections 3.5 and 3.6 herein) for any period.  The  Incentive Fee shall be
payable, on a monthly basis, upon the submission of the Statement of Operations.

10.  Corporate Acquisition.
     ---------------------

     10.1.  At any time from and after five (5) years and nine (9)  months  from
the date hereof,  and subject to the Owner's  prior  rights  pursuant to Section
10.2, the Owner shall have the right to cause the Manager to acquire all but not
less than all, of the stock or assets of the Owner for the Agreed Purchase Price
as  defined  below  (such  reorganization  shall  be  referred  to as an  "Owner
Reorganization"),  and the Manager  shall have the right to acquire all, but not
less than all,  of the  stock or  assets  of the Owner for the  Agreed  Purchase
Price (such  reorganization  being  referred to as a "Manager  Reorganization")
(collectively, an Owner Reorganization and a Manager Reorganization are referred
to as a "Reorganization"),  on the terms and subject to the conditions set forth
in this Section 10.

     10.1(a) In the event of a  Reorganiation,  Manager shall have the option of
determining the form of  Reorganization so long as the Manager uses commercially
reasonable  efforts  to  cause  such  Reorganization  to  qualify  as a tax free
reorganization  under Section 368 of the Internal Revenue Code.  Notwithstsnding
the foregoing,  the Owner, or Owner's  shareholders  shall be solely responsible
for any tax  liability  payable by the Owner or Owner's  Shareholders  which may
arise from the  Reorganization  should  Manager be unable,  for any  reason,  to
structure the Reorganization as a tax free Reorganization.

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<PAGE>


     l0.l (b) (i) For  purposes  hereof,  the  Agreed  Purchase  Price  shall be
determined according to the following formula:

     AOP=25%x[(OIx 10)-L]

     AGP Agreed Purchase Price

     OI   Operating  Income of Owner for the twelve (12) month period  ending on
          the Manager  Reorganization  Date, if the  Reorganization is a Manager
          Reorganization, or the Owner Reorganization Date if the Reorganization
          is an Owner Reorganization.

     L    The principal balance of any Manager Loans or Third Party Loans on the
          Manager  Reorganization  Date,  if  the  Reorganization  is a  Manager
          Reorganization, or the Owner Reorganization Date if the Reorganization
          is an Owner Reorganization.

     (ii)  For the  purposes  of  determining  the  Agreed  Purchase  Price  all
Operating  Income and any  principal  balance of Manager  Loans and Third  Party
Loans relating to the Excluded  Outlets,  as defined  herein,  shall be excluded
from the  calculation of the Agreed  Purchase  Price.  "Excluded  Outlets" shall
include the Burbank  Airport Hilton Daily Grill and San Jose Hilton Daily and/or
City Grill.  If the San Jose Managed  Outlet  Agreement is  renegotiated  into a
twenty  (20) year  agreement  (including  Owner  option  periods),  the San Jose
Managed  Outlet will no longer be  considered  an  Excluded  Outlet and shall be
included  in the  calculation  of the  Agreed  Purchase  Price  at the  time  of
Reorganization.

     (iii) For the purposes of determining  the Operating  Income,  annual Owner
Operating  Expenses shall be averaged over the five (5) year period prior to the
Reorganization by taking the sum of all Owners Operating  Expenses over the five
(5)  year   period   ending  on  the  Manager   Reorganization   Date  or  Owner
Reorganization Date, as appropriate, and dividing by five (5).

     (iv) As an  example  only,  assuning  that at the time of  Reorganization,
Operating Income for the prior twelve (12) month period, excluding the Operating
Income of the Excluded Outlets, is $1,000,000,  and the principal balance of all
Manager Loans and Third Party Loans,  excluding any outstanding loan balance for
the Excluded Outlets, is $500,000, the Agreed Purchase Price shall be $2,375,000
[{($1,000,000 x 10) - $500,000} x 25%].

     10.1(c) Owner's right to cause an Owner  Reorganizafion may be exercised by
giving  written notice  ("Owner  Reorganization  Notice") to the Manager of such
election effective on the last day of any month ("Owner  Reorganization  Date"),
provided  however,  that if at the time of such notice Manager's common stock is
traded on an established  exchange or on Nasdaq or is quoted on the OTC Bulletin
Board  or the  National  Ouotation  Bureau's  "pink  sheets"  (collectively,  an
exchange"),  (i) notice of the  exercise of such option may only be given within
thirty (30) days after the release of earnings by Manager for the latest  fiscal
quarter,  and (ii) the closing price of Manager's  common stock on such Exchange
shall  not be less  than  ten  times  (lOx)  cash  flow per  share  for the five
consecutive  trading  days  ending  on  the  date  of  notice  from  the  Owner.
Notwithstanding  the existence of a trading market in Manager's  common stock on
an Exchange, in the event of a "change of control", as defined hereinafter,  the
provisions  of Section 10.  l(c)(i) and (ji) shall not apply.  For the  purposes
hereof;  "cash flow per share" shall be defined as Manager's reported net income
over last four completed  fiscal quarters before all non-cash and  non-recurring
items including,  but not limited to, such items as depreciation,  amortization,
new restaurant start-up costs and extraordinary  items,  divided by the weighted
average of shares outstanding over such period.

                                       7
<PAGE>


     10.1(d) Manager's right to cause a Manager  Reorganization may be exercised
by giving written notice ("Manager  Reorganization Notice") to the Owner of such
election  effective on the last day of any month,  provided  however,  that such
notice shall not become  effective  until the last business day of the fifteenth
(15th)  calendar  month after all Managed  Outlets  contracted  on or before the
Manager  Reorganization  Notice  have  been  open  for  business  to the  public
("Manager  Reorganization  Date") and provided,  further,  that Manager may only
cause a Manager  Reorganization  if (i) the Manager  has  received an opinion of
counsel that the Manager  Reorganization  qualifies as a tax free transaction to
the Owner, and/or its shareholders,  under the Internal Revenue Code, or (ii) at
the time of closing,  there is a Liquid Market in the Manager's common stock, or
(iii) Manager agrees to adjust the Agreed Purchase Price in the manner described
in Section  l0.l(h)(ii) whereby the number of shares of common stock issuable by
the  Manager  is  reduced  and cash is paid in lieu of such  shares in an amount
sufficient  to pay the amount of federal,  state and local  income  taxes on the
Agreed Purchase Price. For purposes of this Section  10.1(d),  a "Liquid Market"
shall be deemed to exist if; and only it,  there is adequate  trading  volume in
the common stock of the Manager (based on the closing bid price of the Manager's
common stock at Closing and the average  daily  trading  volume of the Manager's
common stock over the ten trading days  immediately  preceding  the Closing,  as
reported by an  Exchange)  such that a  sufficient  number of shares may be sold
over a thirty trading day period to pay the estimated  federal,  state and local
income tax liability of the Owner, or the Owner's shareholders.  Upon the giving
of the Manager  Reorganization  Notice, Owner will no longer be allowed to enter
into any new Managed Outlet agreements  without the prior written consent of the
Manager.

     10.1(e)  Notwithstanding  the  receipt of a Manager  Reorganization  Notice
exercising Manager's right to cause a Manager Reorganization,  Owner may provide
an  Owner  reorganization  Notice  exercising  Owner's  right  to cause an Owner
Reorganization in which case the Manager's  Reorganization Notice shall be of no
force or effect provided that the Owner  Reorganization Date occurs prior to the
Manager Reorganization Date.

     10.1(f) Upon receipt of a notice of Reorganization,  the auditors for Owner
shall  compute the Agreed  Purchase  Price  within  thirty  (30) days  following
delivery of an Owner Reorganization  Notice or within thirty (30) days following
the Manager Reorganization Date, as appropriate.

     10.1(g) Closing of the Reorganization ("Closing") shall occur within thirty
(30) calendar days after  determination of the Agreed Purchase Price pursuant to
section 10.1(f).

     10.1(h) At Closing:

          (i) Owner, and/or Owner's shareholders,  shall transfer to Manager all
     of  the  Outstanding  securities,  or  all  of  the  assets  of  Owner,  as
     appropriate  based on the  structure of the  Reorganization  as  determined
     pursuant to Section 10.1(a).

          (ii)  Manager  shall  issue  to  Owner  or  Owner's  shareholders,  as
     appropriate,  common stock of Manager  ("Acquisition Stock") equal in value
     to the  Agreed  Purchase  Price  based  on the  average  closing  price  of
     Manager's  common  stock for the ten (10)  trading  days prior to  closing;
     provided however,  that should Manager's stock not be listed on an Exchange
     at Closing,  Manager shall pay the Agreed Purchase Price in common stock of
     the Manager based on the appraised value per share of the Manager's  common
     stock as determined by an independent appraiser mutually acceptable to both
     Owner and  Manager,  provided  that (other than in a Change of Control) the
     appraised  value per share shall be no less than ten times (lOx) cash flow
     per share as determined in accordance with Section 10.1(c),  and,  provided
     further,   that  if  the   reorganization  is  not  tax  free  to  Owner's
     stockholders,  the amount of Common  Stock of the Manager  shall be reduced
     and cash shall be substituted therefor in the amount of the federal, state,
     and local income taxes on the Agreed  Purchase Price.  For example,  if the
     Agreed Purchase Price is $1,000,000, and the combined effective tax rate is
     30%, $700,000 shall be in stock and $300,000 in cash.

          (iii)  Manager  shall  assume  all of the  liabilities  of the  Owner,
     including the then outstanding  principal  amounts of any Manager Loans and
     Third Party Loans at the time of Closing.

     10.2. The following provisions regulate a change in control:

     10.2 (a) If at any time  during  the term of this  Agreement,  a Change  in
Control of Manager (as hereinalter  defined in this Article 10), is contemplated
or occurs,  the  provisions  of this Article 10 shall become  effective to allow
Owner within thirty days after Manager  notifies  owner in writing of the Change
in Control,  to exercise its option to cause a corporate  reorganization  on, or
after,  the date on which such Change in Control  occurs (the "Change in Control
Date").

     10.2.(b)  For the purpose of this  Agreement,  a "Change in Control"  shall
mean:

     (i) the acquisition by any individual,  entity or group (within the meaning
of Section  13(d)(3) or  14(d)(2) of the  Securities  Exchange  Act of 1934,  as
amended (the "Exchange  Act") (a "Person") of beneficial  ownership  (within the
meaning of Rule 13d-3  promulgated  under the Exchange Act) of the lesser of the
aggregate  percentage  holders  of Robert  Spivak,  Michael  Weinstock,  Richard
Shapiro,  and Lewis Wolff or fifty percent (50%),  but not less than twenty-five
percent (25%) or more of either (A) the then outstanding  shares of common stock
of Manager (the  "Outstanding  Manager Common Stock") or (B) the combined voting
power of the then  outstanding  voting  securities  of Manager  entitled to vote
generally  in  the  election  of  directors  (the  "Outstanding  Manager  Voting
Securities");  provided,  however,  that for  purposes of this  clause (i),  the
following  acquisition shall not constitute a Change in Control: any acquisition
by any  corporation  puruant to a transaction of which complies with clauses (A)
and (B) of clause (iii) of this Section l0.4.(b); or

     (ii)  individuals  who, as of the date  hereof,  constitute  the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board;  provided however,  that any individual becoming a director subsequent to
the date  hereof  whose  election,  or  nomination  for  election by the Manager
stockholders,  was  approved by a vote of at least a majority  of the  directors
then  comprising  the  Incumbent  Board  shall  be  considered  as  though  such
individual  were a  member  of the  Incumbent  Board,  but  excluding,  for this
purpose,  any such  individual  whose  initial  assumption of office occurs as a
result of an actual or threatened  election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than tile Board; or

     (iii) consummation of a reorganization,  merger or consolidation or sale or
other  disposition  of all or  substantially  all of the  assets of  Manager  (a
"Business   Combination"),   in  each  case,  unless,  following  such  Business
Combination, (A) all or substantially all of the Persons who were the beneficial
owners,  respectively,  of the outstanding  Manager Common Stock and Outstanding
Manager  Voting  Securities  immediately  prior  to  such  Business  Combination
beneficially own, directly or indirectly,  more than 50%, respectively,  of the
then  outstanding  shares of common stock and the combined  voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors,  as the case may be, of the corporation  resulting from such Business
Combination (including,  without limitation, a corporation which as a result of
such transaction  owns Manager or all or  substantially  all of Manager's assets
either directly or through one or more  subsidiaries) in substantially  the same
proportions as their ownership,  immediately prior to such Business  Combination
of  the  Outstanding   Manager  Common  Stock  and  Outstanding  Manager  Voting
Securities,  as the case may be, and (B) at least a majority of the  members of
the  board  of  directors  of  the  corporation  resulting  from  such  Business
Combination  were members of the Incumbent Board at the time of the execution of
the  initial  agreement,  or of the  action  of the  Board,  providing  for such
Business Combination; or


                                       8
<PAGE>

          (iv) approval by the stockholders of Manager of a complete liquidation
     or dissolution of Manager.

     10.3. Acquisition Stock shall be issued as follows:

     10.3.(a)  Shareholders  acknowledge that the Acquisition Stock delivered to
the Shareholders at Closing will not be registered,  but will be issued pursuant
to  appropriate  exemptions  from  the  Securities  Act  of  1933.  Shareholders
represent  and warrant that they will be  acquiring  the  Acquisition  Stock for
investment  and  not  for  distribution.  The  Shareholders  will  execute  such
documents and provide such information as may be required to enable the issuance
of such stock by Manager to qualify for the applicable exemptions.  Shareholders
further  acknowledge that the Acquisition  Stock may be sold only pursuant to an
effective  registration  statement  under  the  Securities  Act or an  exemption
therefrom.

     10.3 (b) Each  certificate for the Restricted  Securities shall be stamped
or otherwise imprinted with a legend substantially in the following manner:

          The  securities   represented  by  this   Certificate  have  not  been
          registered  under the  Securities  Act of 1933, nor under  applicable
          State Securities Laws and may not be sold,  transferred,  or otherwise
          disposed of unless they have been  registered  under such laws or such
          disposition  is  in  compliance  with  an  available   exemption  from
          registration.

     10.3  .(c)  Manager   agrees,   pursuant  to  the  specific  terms  of  the
Registration  Rights Agreement attached hereto as Exhibit to file a registration
statement for the Acquisition Stock as soon as practical afler Closing on a Form
S-3  Registration  Statement,  and  to  use  its  best  efforts  to  cause  such
registration statement to become effective as soon as possible.

     10.4.  Notwithstanding  anything  else in this Section 10, in the event the
Manager or its shareholders sell  substantially all of their assets or stock, as
the case may be,  causing a Change in Control  and an  exercise  by Owner of its
rights under Article 10, to a hotel or restaurant operator introduced to Manager
by Owner,  specifically  including but not limited to Hilton Hotels Corporation,
Starwood   Hotels,   Sunstone   Hotels,   CapStar  Hotels,   and  Promus  Hotels
(collectively, the "Existing Introductions") then the minimum purchase price for
Owner under this Article 10 which shall be paid to Owner's shareholders in stock
of Manager or the acquiring  company in the  reorganization or for cash shall be
the  greater  of: (i) Three  Million  Dollars  ($3,000,000)  and (ii) the Agreed
Purchase  Price.  For the purpose of this section,  any hotel and/or  restaurant
operators other than the Existing  Introductions,  shall be deemed introduced to
Manager by Owner only upon the written  acknowledgement  for Manager to Owner to
confirm same not to be unreasonably withheld.

11.  Termination.
     -----------

     Manager  and Owner  acknowledge  that the  decision to acquire and manage a
Managed  Outlet  requires the  commitment  of both parties which may be given or
refused in their sole and absolute  discretion.  However,  it is their agreement
that the terms and conditions of this  agreement,  specifically  the exclusivity
provisions, shall not terminate until fifteen (15) years from and after the date
hereof (the  "Term").  After  fifteen (15) years from and after the date hereof,
the terms and provisions of this agreement  shall be terminated  with respect to
any future  actions of either of the  parties  except as to any  Managed  Outlet
which the parties  have  agreed to acquire  and manage  prior to the end of such
fifteen (15) year period. For such Managed Outlets this agreement shall continue
until  such time as the  lease or  management  agreement  with  respect  to such
Managed Outlet  terminates,  and each party shall be obligated to perform all of
its obligations  hereunder and under any such lease and management agreement for
a  Managed  Outlet  until  the  termination  date of such  lease  or  management
agreement with respect to such Managed Outlet.


                                       9
<PAGE>

12.  Assignment.
     ----------

     Neither Manager nor Owner shall assign its rights or obligations under this
Agreement  without the prior written  approval of the other party which approval
may be granted or  withheld  in the sole and  absolute  discretion  of the other
party.  Notwithstanding the foregoing, in the event that Manager disposes of all
or substantially all of its assets in a sale or reorganization transaction,  the
transferee  who  continues  to operate the company owned  Daily  Grill and Grill
operations must assume the rights and obligations of Manager  hereunder  without
releasing the Manager therefrom.

13.  Miscellaneous
     -------------

     13.1. The following indemnification provisions will apply:

     13.1 .(a) Manager agrees to defend, protect,  indemnify,  and hold harmless
Owner  and its  Affiliates,  and all of their  respective  officers,  directors,
employees,  attorneys,  consultants,  and agents (collectively called the "Owner
Indemnitees"  and individually an "Owner  Indemnitee")  from and against any and
all liabilities,  obligations,  losses, damages, penalties,  actions, judgments,
suits, claims,  costs, expenses and disbursements arising out of any act, event,
transaction,  or  occurrence  which  occurred  in or about the  Managed  Outlets
arising or alleged to have arisen out of the acts,  omissions  or negligence of
Manager or Manager's officers, directors,  employee's consultants,  consultants,
or agents  (collectively,  the "Manager  Indemnified  Matters"),  provided  that
Manager shall have no obligation to an Owner  Indemnitee  hereunder with respect
to Manager  Indemnified  Matters directly caused by or a directly resulting from
the  negligence  or  criminal  or  willfull  misconduct  of Owner  or any  Owner
Indemnitee or from Owner's violation of its obligations under this Agreement. To
the extent that the  undertaking to indemnify,  pay, and hold harmless set forth
in the preceding  sentence may be  unenforceable  because it violates any law or
public policy, Manager shall contribute the maximum portion that it is permitted
to pay and satisfy under  applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Owner Indemnitee,

     13.l(b)If  any claim is asserted  against a Person which,  if  meritorious,
would be  fully or  partially  covered  by any  indemnity  provided  above,  the
indemnified  party shall  immediately  notify Owner and Manager of such claim in
writing.  The indemnified  party agrees not to settle,  compromise,  or take any
other action in respect of such claim without the prior written  approval of the
indemnitor.  To the extent that any claim is covered by any  indemnity  provided
for above,  the  indemnitor  will cause any claim asserted to be defended at the
indemnitor's expense by counsel chosen by Owner who is reasonably  acceptable to
the  indemnified   party.  Each  indemnified  party  shall  cooperate  with  the
indemnitor and its counsel in the defense of any such claim.

     13.  l.(c)  Section  13 and all other  indemnification  provisions  of this
Agreement  shall survive the  expiration or  termination  of this  Agreement and
shall be binding upon,  and inure to the benefit of, Owner,  Manager,  and their
Affiliates, successors and assigns.


                                       10
<PAGE>

     13.1 .(d)The Owner and the Manager hereby  covenant and agree that,  except
as required by law,  they will not  disclose  the terms and  conditions  of this
Agreement  obtained  in  connection  with  exercising  their  rights  under,  or
performing  their  obligations  under,  this  Agreement,  to any other person or
entity without  obtaining the prior written consent of the other party hereto to
such a  disclosure.  Notwithstanding  the  foregoing,  the Owner and the Manager
acknowledge  and agree that certain  disclosures to their counsel,  consultants,
financing sources, partners, governmental authorities and certain other of their
agents will be necessary in order to perform their respective  obligations under
this  Agreement.  The  obligations  set forth in this Section  shall survive the
expiration or termination of this Agreement.

     13.2.  This  Agreement  shall inure to the benefit of; and be binding upon,
the parties hereto,  their respective  permitted heirs,  legal  representatives,
successors and assigns.

     13.3. This document contains the entire agreement between Manager and Owner
with respect to the management of the Managed Outlets and supersedes any and all
prior or contemporaneous agreements or understandings, whether written or oral.

     13.4. This Agreement shall be governed by, and construed in accordance with
the internal laws of the State of Califomia.

     13.5.  This Agreement may be amended or modified only by written instrument
duly executed by Manager and Owner.

     13.6. Any notice,  demand or request  provided for or permitted to be given
pursuant to this Agreement  shall be in writing and shall be deemed to have been
properly given:  (a) upon receipt,  if hand  delivered;  (b) five (5) days after
deposit  thereof at any main or branch  United  States Post  Office,  if sent by
United States registered or certified mail, return receipt requested; (c) on the
first  business  day  following  deposit  thereof at the office of a  nationally
recognized  overnight  delivery  service,  if sent by such service;  or (d) upon
confirmation of receipt, if sent by facsimile, addressed as follows:

         To Manager:           Grill Concepts, Inc.
                               11661 San Vicente Boulevard
                               Suite 404
                               Los Angeles, California 90049

         With copies to:       Herzog Fisher Grayson and Wolfe, L.C.
 
                               9460 Wilshire Boulevard
                               Fifth Floor
                               Beverly Hills, California 90212

         To Owner:             Hotel Restaurant Properties, Inc.
 
                               c/o Wolff DiNapoli
 
                               11828 La Grange Avenue
                               Suite 200
 
                               Los Angeles, California 90025

         With a copy to:       Greenberg Glusker Fields Claman & Machtinger LLP
                               1900 Avenue of the Stars
                               Suite 2100
                               Los Angeles, California 90067

                                       11
<PAGE>


or at such  other  address  as the  party  to be  served  with  notice  may have
furnished in writing to the party seeking or desiring to serve notice as a place
for the service of notice.

     13.7.  In the  event  that any one or more of the  provisions,  paragraphs,
words,  clauses,  phrases  or  sentences  contained  in this  Agreement,  or the
application   thereof  in  any  circumstance,   is  held  invalid,   illegal  or
unenforceable  in any  respect  for  any  reason,  the  validity;  legality  and
enforceability  of any  such  provision,  paragraph,  word,  clause,  phrase  or
sentence in every other respect,  and of the remaining  provisions,  paragraphs,
words, clauses, phrases or sentences of this Agreement,  shall not be in any way
impaired,  it being the  intention of the parties that this  Agreement  shall be
enforceable to the fullest extent permitted by law.

     13.8. Time is of the essence of this Agreement and each and every provision
hereof. If the performance of any obligation  required hereunder or the last day
of any time period as  determined in  accordance  with the terms and  provisions
hereof is to occur on a Saturday,  Sunday or legal holiday under the laws of the
United  States  or of the  State  of  California,  then  the  day on  which  the
performance of any such  obligation is to occur or the last day of any such time
period,  as the case may be, shall be extended to the next  succeeding  business
day.

     13.9. This Agreement man be executed in any number of counterparts,  any or
all of which may  contain  the  signature  of any one of the  parties and all of
which shall be construed  together as a single  instrument.  A facsimile copy or
photocopy  of this  Agreement  containing  a facsimile  copy or photocopy of the
signatures or initials of any party shall be deemed to be sufficient evidence of
that party's action or intent

     13.10.  In connection  with any  litigation or dispute  arising out of this
Agreement, the prevailing party shall be entitled to recover all costs incurred,
including reasonable attorneys' fees and costs.

     13.11.  The  Section  headings  contained  herein  are for  convenience  of
reference  only and are not  intended to define,  limit or describe the scope or
intent of any provision of this Agreement.

     13.12.  None of the obligations  hereunder of either party shall run to, or
be enforceable  by, any party other than the other party to this Agreement or by
a party  deriving  rights  hereunder  as a  result  of an  assignment  permitted
pursuant to the terms hereof.

     13.13. Manager shall in all respects be deemed to be an agent, whose agency
is coupled with an  interest,  and nothing  contained  herein shall be deemed or
construed  by the  parties  hereto  nor by any  third  party,  as  creating  the
relationship of partnership or of joint venture  between the parties hereto,  it
being understood and agreed that neither the method of computation of Management
Fees nor any  other  provision  contained  herein  nor any  acts of the  parties
hereto,  shall be deemed to create any  relationship  between the parties hereto
other than the  relationship  of Owner and  Manager.  The agents or employees of
Owner shall not be  considered or held out to be agents or employees of Manager,
and Owner may not  negotiate or enter into any  agreement  that purports to bind
Manager  or incur  any  liability  in the name of,  or on  behalf  of,  Manager.
Manager,  as agent of Owner, shall only be allowed to act as such agent to carry
out the purposes of this Agreement and for no other purpose.

     13.14.  Any  controversy,  claim or  dispute  arising  out of or in any way
relating to this  Agreement or the alleged breach thereof shall be determined by
binding  arbitration by a retired  California  Superior Court or Court of Appeal
Judge  selected by the American  Arbitration  Association  under its  commercial
arbitration  rules  ("Rules") which are in effect at the time of the arbitration
or the  demand  therefor.  The  Rules  are  hereby  incorporated  by  reference.
California  Code of Civil  Procedure  Sec.  1283.05,  which provides for certain
discovery rights, shall apply to any such arbitration,  and said code section is
also hereby  incorporated by reference.  In reaching a decision,  the arbitrator
shall have no authority to change, extend, modify or suspend any of the terms of
this  Agreement.  The  arbitration  shall be commenced  and heard in Los Angeles
County,  California.  The arbitrator(s) shall apply the substantive law (and the
law of remedies,  if  applicable)  of  California  or federal  law, or both,  as
applicable to the claim(s) asserted. Judgment on the award may be entered in any
court of competent  jurisdiction,  even if a party who received notice under the
Rules fails to appear at the arbitration hearing(s).  The parties may seek, from
a court of competent jurisdiction,  provisional remedies or injunctive relief in
support of their respective  rights and remedies  hereunder  without waiving any
right to  arbitration.  However,  the merits of any action  that  involves  such
provisional remedies or injunctive relief,  including,  without limitation,  the
terms of any permanent injunction, shall be determined by arbitration under this
Section 13.14.

                                       12
<PAGE>

     13.15. The shareholders of Owner shall have no personal liability under any
theory for the Manager  Loan or Third  Party  Loans,  unless  such  shareholders
specifically guarantee such loans in writing.

     13.16. The parties  acknowledge that Manager has been represented by Herzog
Fisher  Grayson & Wolfe,  Law  Corporation  ("HFG&W")  in  connection  with this
Agreement  and  that  Greenberg  Glusker  Fields  Claman  &  Machtinger  LLP has
represented  Owner in  connection  with this  Agreement In view of the fact that
HFG&W  (and/or one or more of its  individual  members) has in the past rendered
legal services to and represented and will continue to render legal services to,
represent  and/or be  involved  with the Owner and  Manager  and/or  with  their
representative  shareholders,  directors and officers in  connection  with other
matters, there is a potential for conflicts of interest. The parties acknowledge
that they are aware of such  conflicts  of interest  and the  potential  adverse
effects to them which may result therefrom,  and,  notwithstanding  same, hereby
consent to HFG&W's  representation of Manager in conjunction with preparation of
this Agreement and waive any potential  conflicts of interest with respect to or
against HFG&W in connection therewith.

     IN WlTNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                        "OWNER"

                                        HOTEL RESTAURANT PROPERTIES, INC.,
                                        a California corporation

                                        By: /s/ Keith M. Wolff
                                           -------------------------------------
                                           Keith M. Wolff
                                        Its:President

                                        "MANAGER"

                                        GRILL CONCEPTS, INC.,
                                        a Delaware corporation

                                        By:/s/ Bob Spivak
                                           -------------------------------------
                                           Bob Spivak
                                        Its: President

                                       13
<PAGE>

August 10, 1998




Grill Concepts, Inc.
Suite 404
11661 San Vicente Boulevard
Los Angeles, CA 90049

     Re: Excluded Outlets

Gentlemen:

     Grill Concepts,  Inc.  ("Manager") and Hotel  Restaurant  Properties,  Inc.
("Owner") are parties to that Certain Agreement dated concurrently herewith (the
"Agreement"). All defined terms herein are as defined in the Agreement. Pursuant
to the  Agreement,  in the  event an  acquisition  of Owner  by  Manager  occurs
pursuant  to Section 10 of the  Agreement,  there are certain  Excluded  Outlets
which are not included for purposes of the  calculation  of the Agreed  Purchase
Price.

     This  letter  will  set  forth  our  agreement  that in the  event  such an
acquisition occurs,  Manager shall continue to pay to the former shareholders of
Owner 25% of the Net Income After Manager Loan Payback for the Excluded  Outlets
for the remaining term of the Manager's  occupancy and operation of a restaurant
in those  Excluded  Outlets.  For  purposes of  computing  the Net Income  Afier
Manager Loan Payback, the parties will assume that the Agreement applies. Please
indicate your  agreement to the foregoing by executing the enclosed copy of this
letter and returning it to the undersigned.

                                             Very truly yours,

                                             HOTEL RESTAURANT PROPERTIES, INC.

                                            By:
                                               ---------------------------------

                                            By:
                                               ---------------------------------


AGREED AND ACCEPTED:
GRILL CONCEPTS, INC.

By:
   -----------------
By: President