Document:

EXHIBIT 10.40

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made effective as of January 14, 2000 by and between
John D. Johnson (hereafter "Johnson") and Cenex Harvest States Cooperatives, a
Minnesota cooperative corporation (together with all affiliates, the "Company").

         WHEREAS, Johnson is an integral part of the Company's management;

         WHEREAS, the Company is contemplating the possible full consolidation
         of its business with the business of Farmland Industries, Inc. through
         a merger or other similar transaction (the "Consolidation") and desires
         to assure both itself and Johnson of continuity in the event of the
         Consolidation; and

         WHEREAS, the Company or its successor, after that Consolidation,
         intends to appoint Johnson as its Chief Executive Officer on or before
         January 1, 2004;

         NOW, THEREFORE, it is hereby agreed to by and between the parties as
follows:

1.       Employment

         (a)      The Company hereby agrees to and does hereby employ Johnson as
                  President and General Manager, and Johnson hereby agrees to
                  accept employment with the Company as President and General
                  Manager, for the period set forth in Paragraph 2 below (the
                  period of employment) upon the other terms and conditions set
                  forth in this Agreement.

         (b)      Upon the Company's consolidation with Farmland Industries,
                  Inc., Johnson will be appointed President of the consolidated
                  entity. Each of the Chief Executive Officer and Johnson will
                  have direct reports from the Senior Management team, as set
                  forth on Exhibit B. The Chief Executive Officer shall not
                  demote or discharge Johnson, unilaterally change the initially
                  agreed reporting relationships, or otherwise cause a material
                  adverse change to Johnson's status without the agreement of
                  the Executive Committee of the Board of Directors. If Johnson
                  claims that any such change in his status has occurred, he
                  will be entitled to seek relief from the Executive Committee
                  of the Board of Directors. If the Executive Committee supports
                  Johnson's position, it shall remedy the change in status. If
                  the Executive Committee does not support Johnson's position,
                  he will be entitled to resign his employment and receive the
                  severance benefits described in paragraph 5(b) below.

2.       Period of Employment; Termination of Agreement

         The period of employment shall commence on the date of this Agreement
         and, subject to the provisions of Paragraphs 5 and 6 below, shall
         continue for a rolling three (3) year

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         period, provided that Johnson's employment may be earlier terminated by
         either party subject to the rights and obligations of the parties set
         forth herein.

3.       Performance

         Throughout the period of employment, Johnson agrees to devote his full
         time and attention during normal business hours to the business of the
         Company, except for earned vacations and except for illness or
         incapacity.

4.       Compensation

         (a)      For all services to be rendered by Johnson in any capacity
                  during the period of employment, Johnson shall be paid as
                  annual compensation a base salary of at least $600,000. The
                  Board will annually review Johnson's annual compensation and
                  determine what is appropriate for a cost of living increase,
                  merit increase, and/or increase in responsibilities or duties.

         (b)      During the term of his employment hereunder, Johnson shall be
                  compensated for fiscal year 2000 (ending August 31, 2000) with
                  annual variable pay of the maximum level eligible of 90% of
                  his base salary. The long term variable pay including the
                  years 1999, 2000, and 2001 shall be at the targeted level of
                  66.6% of the bonus potential. Johnson shall further be
                  entitled to any additional employee benefits separately made
                  available to him from time to time by the Board in its
                  discretion.

         (c)      The Company shall bear such ordinary and necessary business
                  expenses incurred by Johnson in performing his duties
                  hereunder as the Company determines from time to time,
                  provided that Johnson accounts promptly for such expenses to
                  the Company in the manner prescribed from time to time by the
                  Company.

5.       Termination with Severance Allowance

         (a)      Termination by the Company Not for Cause. In the event of
                  termination of the employment of Johnson by the Company during
                  the period of employment for any reason other than for cause,
                  as defined in paragraph 6(a), death or disability, the Company
                  shall:

                  (i) pay Johnson a severance allowance in the amount of 2.99
                  times the greater of

                                    (A) his then-current base salary plus
                           short-term and long-term target bonus ("Target
                           Bonus"), or

                                    (B) the amount payable in base salary plus
                           Target Bonus for calendar year 1999;

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                  (ii) provide a five-year enhancement to his retirement plan,
                  except that no such enhancement shall be provided if the
                  termination occurs after Johnson has attained the age of 60;

                  (iii) include the amount of the severance paid as salary for
                  purposes of pension cash balance calculation;

                  (iv) bear the entire cost of Johnson's COBRA family health
                  insurance coverage for one (1) year;

                  (v) continue his family health insurance thereafter up to age
                  65 (or any revised age for Medicare eligibility), upon
                  Johnson's payment of the retiree premium rate, except for any
                  period during which Johnson is eligible for coverage, without
                  any exclusions for preexisting conditions, through another
                  employee group plan; and

                  (vi) continue his existing executive perquisites for a period
                  of three (3) years.

         Said severance allowance shall be in lieu of all other severance
         payable to Johnson under Company severance policies.

         (b)      Termination by Johnson if the Consolidation is closed on or
                  before December 31, 2001. If the Consolidation is closed on or
                  before December 31, 2001; and if (i) Johnson is not appointed
                  to the position of Chief Executive Officer of the consolidated
                  Company or its successor on or before January 1, 2004, or (ii)
                  Johnson resigns his employment at any time between the closing
                  of the Consolidation and December 31, 2003 pursuant to
                  paragraph 1(b), the Company shall:

                  (i) pay Johnson a severance allowance in the amount of 2.99
                  times the greater of

                           (A) his then-current base salary plus Target Bonus,
                           or

                           (B) the amount payable in base salary plus Target
                           Bonus for calendar year 1999;

                  (ii) provide a five-year enhancement to his retirement plan,
                  except that no such enhancement shall be provided if the
                  termination occurs after Johnson has attained the age of 60;

                  (iii) include the amount of the severance paid as salary for
                  purposes of pension cash balance calculation;

                  (iv) bear the entire cost of Johnson's COBRA family health
                  insurance coverage for one (1) year;

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                  (v) continue his family health insurance thereafter up to age
                  65 (or any revised age for Medicare eligibility), upon
                  Johnson's payment of the retiree premium rate, except for any
                  period during which Johnson is eligible for coverage, without
                  any exclusions for preexisting conditions, through another
                  employee group plan; and

                  (vi) continue his existing executive perquisites for a period
                  of three (3) years.

         Said severance allowance shall be in lieu of all other severance
         payable to Johnson under Company severance policies.

         (c) Termination by Johnson if the Consolidation is not closed on or
         before December 31, 2000. If the Consolidation is not closed on or
         before December 31, 2000 and Johnson is not offered the position of
         Chief Executive Officer of the Company on or before December 31, 2000,
         this shall be deemed an event of termination without cause. In that
         event, the Company shall:

                  (i) pay Johnson a severance allowance in the amount of 2.99
                  times the greater of

                           (A) his then-current base salary plus Target Bonus,
                           or

                           (B) the amount payable in base salary plus Target
                           Bonus for calendar year 1999;

                  (ii) provide a five-year enhancement to his retirement plan,
                  except that no such enhancement shall be provided if the
                  termination occurs after Johnson has attained the age of 60;

                  (iii) include the amount of the severance paid as salary for
                  purposes of pension cash balance calculation;

                  (iv) bear the entire cost of Johnson's COBRA family health
                  insurance coverage for one (1) year;

                  (v) continue his family health insurance thereafter up to age
                  65 (or any revised age for Medicare eligibility), upon
                  Johnson's payment of the retiree premium rate, except for any
                  period during which Johnson is eligible for coverage, without
                  any exclusions for preexisting conditions, through another
                  employee group plan; and

                  (vi) continue his existing executive perquisites for a period
                  of three (3) years.

         Said severance allowance shall be in lieu of all other severance
         payable to Johnson under Company severance policies.

         (d) Additional Payments. In the event that Johnson becomes entitled to
         payments under paragraph 5(a), 5(b), or 5(c) of this Agreement, the
         Company shall cause its independent auditors promptly to review, at the
         Company's sole expense, the applicability

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         of Section 4999 of the Code to such payments. If such auditors shall
         determine that any payment or distribution of any type by the Company
         to Johnson or for his benefit, whether paid or payable or distributed
         or distributable pursuant to the terms of this Agreement or otherwise
         (the "Total Payments"), would be subject to the excise tax imposed by
         Section 4999 of the Code, or any interest or penalties with respect to
         such excise tax (such excise tax, together with any such interest and
         penalties, are collectively referred to as the "Excise Tax"), then
         Johnson shall be entitled to receive an additional cash payment (a
         "Gross-Up Payment") within 30 days of such determination equal to an
         amount such that after payment by Johnson of all taxes (including any
         interest or penalties imposed with respect to such taxes), including
         any Excise Tax, imposed upon the Gross-Up Payment, Johnson would retain
         an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
         the Total Payments. For purposes of the foregoing determination,
         Johnson's tax rate shall be deemed to be the highest statutory marginal
         state and Federal tax rate (on a combined basis) (including Johnson's
         share of F.I.C.A. and Medicare taxes) then in effect. If no
         determination by the Company's auditors is made prior to the time a tax
         return reflecting the Total Payments is required to be filed by
         Johnson, he will be entitled to receive a Gross-Up Payment calculated
         on the basis of the Total Payments reported by Johnson in such tax
         return, within 30 days of the filing of such tax return. In all events,
         if any tax authority determines that a greater Excise Tax should be
         imposed upon the Total Payments than is determined by the Company's
         independent auditors or reflected in Johnson's tax return pursuant to
         this Section 6, Johnson shall be entitled to receive the full Gross-Up
         Payment calculated on the basis of the amount of Excise Tax determined
         to be payable by such tax authority from the Company within 30 days of
         such determination.

         (e) Request and Release. In order to obtain the severance allowance
         provided for in this Agreement, Johnson must submit a request for
         severance and must sign a complete release of all claims. The Company
         shall have no obligation to pay any severance allowance unless and
         until Johnson shall have submitted the request for severance and signed
         a full and complete release of all claims, to be drafted by Legal
         Counsel for the Company.

6.       Termination without Severance Allowance

         (a)      Termination by the Company for Cause. The Company may
                  terminate Johnson's employment for cause without incurring
                  further obligation. For the purpose of this Agreement,
                  termination of Johnson's employment shall be deemed to have
                  been for cause only:

                  (i)      if termination of Johnson's employment shall have
                           been the result of an act or acts of fraud, theft or
                           embezzlement on the part of Johnson which, if
                           convicted, would constitute a felony and which
                           results or which is intended to result directly or
                           indirectly in gain or personal enrichment of Johnson
                           at the expense of the Company; or

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                  (ii)     if termination of Johnson's employment results from
                           Johnson's willful and material misconduct, including
                           willful and material failure to perform his duties,
                           and Johnson has been given written notice by the
                           Board of Directors with respect to such and Johnson
                           does not cure within a reasonable time; or

                  (iii)    if there has been a breach by Johnson during the
                           period of employment of the provisions of Paragraph 3
                           above, relating to the time to be devoted to the
                           affairs of the Company, and with respect to any
                           alleged breach of Paragraph 3 hereof, Johnson shall
                           have substantially failed to remedy such alleged
                           breach within thirty days from Johnson's receipt of
                           notice from the Board of Directors.

         (b)      Nonrenewal of Agreement. Except as otherwise provided in
                  paragraph 5(b) and/or 5(c) above, the Company may elect not to
                  renew this Agreement, and thereby to terminate Johnson's
                  employment hereunder without any severance obligations, upon
                  at least three (3) years' prior written notice to Johnson.

         (c)      Termination by Johnson. Johnson shall have the right to
                  terminate his employment in his sole discretion, with or
                  without cause, by providing thirty (30) days notice of his
                  intent to resign. Except as otherwise provided in paragraph
                  5(b) and/or 5(c) above, Johnson shall in that event receive no
                  further compensation or severance allowance.

         (d)      Death. In the event of Johnson's death during the period of
                  employment, the legal representative of Johnson shall be
                  entitled to the base or fixed salary provided for in Paragraph
                  4(a) above for the month in which death shall have occurred,
                  at the rate being paid at the time of death, and the period of
                  employment shall be deemed to have ended as of the close of
                  business on the last day of the month in which death shall
                  have occurred but without prejudice to any benefits, such as
                  life insurance, otherwise due in respect of Johnson's death.

         (e)      Disability

                  (i)      In the event of Johnson's disability during the
                           period of employment, Johnson shall be entitled to an
                           amount equal to the base or fixed salary provided for
                           in Paragraph 4(a) above, at the rate being paid at
                           the time of the commencement of disability, for the
                           period of such disability but not in excess of twelve
                           (12) months from the beginning of the period that
                           establishes such disability, as described in
                           Paragraph 6(e)(iii) below.

                  (ii)     The amount of any payments due under Paragraph
                           6(e)(i) shall be reduced by any payments to which
                           Johnson may be entitled for the same period because
                           of disability under any disability or pension plan of
                           the Company or of any division, subsidiary, or
                           affiliate thereof, or as the result of

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                           workers' compensation or nonoccupational disability
                           payments received from any government entity.

                  (iii)    The term "Disability" as used in this Agreement,
                           shall mean an illness or accident occurring during
                           the period of employment which prevents Johnson from
                           performing the essential functions of his job under
                           this Agreement, with reasonable accommodations (as
                           defined by federal and Minnesota disability laws),
                           for a period of six consecutive months. The period of
                           employment shall be deemed to have ended as of the
                           close of business on the last day of such six-month
                           period but without prejudice to any payments due
                           Johnson from any disability policy or disability
                           insurance.

7.       Performance Incentive

         If the Company and Farmland Industries, Inc. complete the Consolidation
         prior to December 31, 2001, and Johnson has not by then resigned or
         been terminated for cause, Johnson shall become eligible to receive a
         Performance Incentive payment in an aggregate amount equal to his base
         salary plus short-term and long-term target bonus for calendar year
         1999. The Performance Incentive shall be payable, in part or in whole,
         upon attainment of the objectives set forth in Exhibit A.

8.       Noncompetition

         Johnson agrees that during the term of his employment and thereafter
         for a period of two (2) years, he will not directly or indirectly
         engage in or carry on a business that is in direct competition with any
         significant business unit of the Company as conclusively determined by
         the Board of Directors. Further, Johnson agrees that during this same
         period of time he will not act as an agent, representative, consultant,
         officer, director, independent contractor or employee of any entity or
         enterprise that is in direct competition with any significant business
         unit of the Company as conclusively determined by the Board of
         Directors.

9.       Successor in Interest

         This Agreement and the rights and obligations hereunder shall be
         binding upon and inure to the benefit of the parties hereto and their
         respective legal representatives, and shall also bind and inure to the
         benefit of any successor of the Company by merger or consolidation or
         any purchaser or assignee of all or substantially all of its assets,
         but, except to any such successor, purchaser, or assignee of the
         Company, neither this Agreement nor any rights or benefits hereunder
         may be assigned by either party hereto.

10.      Construction

         Whenever possible, each provision of this Agreement shall be
         interpreted in such a manner as to be effective and valid under
         applicable law, but if any provision of this Agreement shall be
         prohibited by or invalid under applicable law, such provision shall be
         ineffective

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         only to the extent of such prohibition or invalidity without
         invalidating the remainder of such provision or the remaining
         provisions of this Agreement.

11.      Governing Laws

         This Agreement shall be governed by and construed and enforced in
         accordance with the laws of the State of Minnesota.

12.      Notices

         Any notice required or permitted to be given under this Agreement shall
         be sufficient if in writing, sent by Certified Mail, Return Receipt
         Requested:

         If to Johnson:             John D. Johnson
                                    10 Echo Lake Blvd.
                                    Mahtomedi, MN 55115

         If to the Company:         Chairman of the Board
                                    Cenex Harvest States Cooperatives
                                    5500 CENEX Drive
                                    Inver Grove Heights, MN 55077

         With a copy to:            General Counsel
                                    Cenex Harvest States Cooperatives
                                    5500 CENEX Drive
                                    Inver Grove Heights, MN 55077

13.      Entire Agreement

         This Agreement shall constitute the entire agreement between the
         parties, superseding the parties' Agreement of June 16, 1999 and any
         prior agreements. This Agreement may not be modified or amended, and no
         waiver shall be effective, unless by written document signed by the
         Chairman of the Board and Johnson.

         IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date set forth above.

                                        CENEX HARVEST STATES COOPERATIVES

  /s/ John D. Johnson                   By:     /s/ Steven Burnet
------------------------------               ------------------------------
     John D. Johnson
                                        Its:    Chairman of the Board
                                             ------------------------------

                                       8<PAGE>

                                                                   EXHIBIT 10.18

                                Bank of America

                            Business Loan Agreement

     This Agreement dated as of ______________,_____, is among Bank of America,
N.A. (the "Bank"), Grill Concepts, Inc. ("Borrower 1"), Grill Concepts, Inc., a
Delaware Corporation ("Borrower 2") and The Grill On The Alley, Inc. ("Borrower
3") (Borrower 1, Borrower 2 and Borrower 3 are sometimes referred to
collectively as the "Borrowers" and individually as the Borrower).

1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS

     1.1  Line of Credit Amount.

     (a) During the availability period described below, the Bank will provide a
line of credit to the Borrowers. The amount of the line of credit (the "Facility
No.1 Commitment") is equal to the amount indicated for each period specified
below:

Period Amount

     .  From the date of this Agreement
     through March 25, 2000                 $1,000,000.00

     .  From March 26, 2000 and thereafter  $500,000.00

     (b) This is a revolving line of credit providing for cash advances. During
the availability period, the Borrowers may repay principal amounts and re-borrow
them.

     (c) The Borrowers agree not to permit the outstanding principal balance of
advances under the line of credit to exceed the Facility No. 1 Commitment.

     1.2  Availability Period. The line of credit is available between the date
of this Agreement and July 31, 2000, or such earlier date as the availability
may terminate as provided in this Agreement (the "Facility No.1 Expiration
Date").

     1.3 Interest Rate.

     (a) The interest rate is the Bank's Prime Rate plus 0.25 percentage points.

     (b) The Prime Rate is the rate of interest publicly announced from time to
time by the Bank as its Prime Rate. The Prime Rate is set by the Bank based on
various factors, including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans. The Bank may price loans to its customers at, above, or below the Prime
Rate. Any change in the Prime Rate shall take effect at the opening of business
on the day specified in the public announcement of a change in the Bank's Prime
Rate.
<PAGE>

     1.4 Repayment Terms.

     (a) The Borrowers will pay interest on November 30, 1999, and then monthly
thereafter until payment in full of any principal outstanding under this line of
credit.

     (b) The Borrowers will repay in full all principal and any unpaid interest
or other charges outstanding under this line of credit no later than the
Facility No. 1 Expiration Date.

2. FACILITY NO. 2: TERM LOAN AMOUNT AND TERMS

     2.1 Outstanding Term Loan. There is outstanding from the Bank to the
Borrowers a term loan in the original principal amount of One Million Five
Hundred Thousand and 00/100 Dollars ($1,500,000.00). This term loan is currently
subject to the terms and conditions of Facility No. 2 of the Business Loan
Agreement dated July 17, 1998. As of the date of this Agreement, the term loan
shall be deemed to be outstanding as Facility No. 2 under this Agreement, and
shall be subject to all the terms and conditions stated in this Agreement. The
present principal balance of this term loan is One Million One Hundred Twenty
Five Thousand Dollars ($1,125,000).

     2.2 Interest Rate. Unless the Borrowers elect an optional interest rate as
described below, the interest rate is the Bank's Prime Rate plus 0.25 percentage
points.

     2.3 Repayment Terms.

     (a) The Borrowers will pay all accrued but unpaid interest on November 1,
1999, and then monthly thereafter and upon payment in full of the principal of
the loan.

     (b) The Borrowers will repay principal in forty four (44) successive
monthly installments of Twenty Five Thousand and 00/100 Dollars ($25,000.00)
starting December 1, 1999. On August 1, 2003, the Borrowers will repay the
remaining principal balance plus any interest then due.

     (c) The Borrowers may prepay the loan in full or in part at any time. The
prepayment will be applied to the most remote payment of principal due under
this Agreement.

     2.4 Optional Interest Rates. Instead of the interest rate based on the
Bank's Reference Rate, the Borrowers may elect the optional interest rates
listed below during interest periods agreed to by the Bank and the Borrowers.
The optional interest rates shall be subject to the terms and conditions
described later in this Agreement Any principal amount bearing interest at an
optional rate under this Agreement is referred to as a "Portion." The following
optional interest rates are available:

     (a) Short Term Base Rate plus 2 percentage points.
     (b) the IBOR Rate plus 2 percentage points.
     (c) Long Term Rates plus 2 percentage points.

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3. OPTIONAL INTEREST RATES

     3.1 Optional Rates. Each optional interest rate is a rate per year.
Interest will be paid on the last day of each interest period, and on the first
day of each month during the interest period. At the end of any interest period,
the interest rate will revert to the rate based on the Prime Rate, unless the
Borrowers have designated another optional interest rate for the Portion. No
Portion will be converted to a different interest rate during the applicable
interest period Upon the occurrence of an event of default under this Agreement,
the Bank may terminate the availability of optional interest rates for interest
periods commencing after the default occurs.

     3.2 Short Term Base Rate. The election of Short Term Base Rates shall be
subject to the following terms and requirements:

     (a) The "Short Term Base Rate" means the fixed interest rate per annum,
determined solely by the Bank on the first day of the applicable interest period
for the Portion, as the rate at which the Bank would be able to borrow funds in
the Money Market in the amount of the Portion and with an interest payment
frequency and principal repayment schedule equal to the Portion and for a term
equal to the applicable interest period. The Short Term Base Rate shall include
adjustments for reserve requirements, federal deposit insurance, interest
accrual methods, and any other similar adjustment which the Bank deems
appropriate. The Short Term Base Rate is the Bank's estimate only and the Bank
is under no obligation to actually purchase or match funds for any transaction.

     (b) "Money Market" means one or more wholesale funding markets available to
the Bank, including domestic negotiable certificates of deposit, eurodollar
deposits, bank deposit notes or other appropriate money market instruments
selected by the Bank.

     (c) The interest period during which the Short Term Base Rate will be in
effect will be no shorter than 30 days and no longer than one year.

     (d) Each Short Term Base Rate Portion will be for an amount not less than
Five Hundred Thousand Dollars ($500,000).

     (e) Each prepayment of a Short Term Base Rate Portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid, and a prepayment fee as described below.
A "prepayment" is a payment of an amount on a date earlier than the scheduled
payment date for such amount as required by this Agreement. The prepayment fee
shall be equal to the amount (if any) by which:

          (i) the additional interest which would have been payable during the
interest period on the amount prepaid had it not been prepaid, exceeds

          (ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the Money Market for a period starting
on the date on which it was prepaid and ending on the last day of the interest
period for such Portion (or the scheduled payment date for the amount prepaid,
if earlier).

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     3.3 IBOR Rate. The election of IBOR Rates shall be subject to the following
terms and requirements:

     (a) The interest period during which the IBOR Rate will be in effect will
be no shorter than 30 days and no longer than one year. The last day of the
interest period will be determined by the Bank using the practices of the
offshore dollar inter-bank market.

     (b) Each IBOR Rate Portion will be for an amount not less than Five Hundred
Thousand Dollars ($500,000).

     (c) The Borrowers may not elect an IBOR Rate with respect to any principal
amount which is scheduled to be repaid before the last day of the applicable
interest period.

     (d) The "IBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All amounts in the
calculation will be determined by the Bank as of the first day of the interest
period.)

IBOR Rate = IBOR Base Rate

(1.00 - Reserve Percentage)

Where,

     (i) "IBOR Base Rate" means the interest rate at which the Bank's Grand
Cayman Branch, Grand Cayman, British West Indies, would offer U.S. dollar
deposits for the applicable interest period to other major banks in the offshore
dollar inter-bank market.

     (ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member banks of the
Federal Reserve System for Eurocurrency Liabilities, as defined in Federal
Reserve Board Regulation D, rounded upward to the nearest 1/100 of one percent.
The percentage will be expressed as a decimal, and will include, but not be
limited to, marginal, emergency, supplemental, special, and other percentages.

     (e) Each prepayment of an IBOR Rate Portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by the amount of accrued
interest on the amount prepaid, and a prepayment fee as described below. A
prepayment is a payment of an amount on a date earlier than the scheduled
payment date for such amount as required by this Agreement. The prepayment fee
shall be equal to the amount (if any) by which:

          (i) the additional interest which would have been payable during the
interest period on the amount prepaid had it not been prepaid, exceeds

          (ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the domestic certificate of deposit
market, the eurodollar deposit market, or other appropriate money market
selected by the Bank for a period starting on the date on which it was prepaid
and ending on the last day of the Interest period for such Portion (or the
scheduled payment date for the amount prepaid, if earlier).

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     The Bank will have no obligation to accept an election for an IBOR Rate
Portion if any of the following described events has occurred and is continuing:

          (i) Dollar deposits in the principal amount, and for periods equal to
the interest period, of an IBOR Rate Portion are not available in the offshore
dollar inter-bank market; or

          (ii) the IBOR Rate does not accurately reflect the cost of an IBOR
Rate Portion.

     3.4 Long Term Base Rate. The election of Long Term Base Rates shall be
subject to the following terms and requirements:

     (a) The "Long Term Base Rate" means the fixed interest rate per annum,
determined solely by the Bank on the first day of the applicable interest period
for the Portion, as the rate at which the Bank would be able to borrow funds in
the Money Market in the amount of Portion and with an interest payment frequency
and principal repayment schedule equal to the Portion and for a term equal to
the applicable interest period. The Long Term Base Rate shall include
adjustments for reserve requirements, federal deposit insurance, interest
accrual methods, and any other similar adjustment which the Bank deems
appropriate. The Long Term Base Rate is the Bank's estimate only and the Bank is
under no obligation to actually purchase or match funds for any transaction.

     (b) "Money Market" means one or more wholesale funding markets available to
the Bank, Including domestic negotiable certificates of deposit, eurodollar
deposits, bank deposit notes or other appropriate money market instruments
selected by the Bank.

     (c) The interest period during which the Long Term Base Rate will be in
effect will be one year or more.

     (d) Each Long Term Base Rate Portion will be for an amount not less than
Five Hundred Thousand Dollars ($500,000).

     (e) The Borrower may prepay the Long Term Base Rate Portion in whole or in
part in the minimum amount of Five Hundred Thousand Dollars ($500,000). The
Borrower will give the Bank irrevocable written notice of the Borrower's
intention to make the prepayment, specifying the date and amount of the
prepayment. The notice must be received by the Bank at least 5 banking days in
advance of the prepayment. All prepayments of principal on the Long Term Base
Rate Portion will be applied on the most remote payment of principal then
unpaid.

     (f) Each prepayment of a Long Term Base Rate Portion, whether voluntary, by
reason of acceleration or otherwise will be accompanied by payment of all
accrued interest on the amount of the prepayment and the prepayment fee
described below.

     (g) The prepayment fee will be the sum of fees calculated separately for
each Prepaid Installment, as follows:

                                       5
<PAGE>

          (i) The Bank will first determine the amount of interest which would
have accrued each month for the Prepaid Installment had it remained outstanding
until the applicable Original Payment Date, using the interest rate applicable
to the Long Term Base Rate Portion:

          (ii) The Bank will then subtract from each monthly interest amount
determined in (i), above, the amount of interest which would accrue for that
Prepaid Installment if it were reinvested from the date of prepayment through
the Original Payment Date, using the Treasury Rate.

          (iii) If (i) minus (ii) for the Prepaid Installment is greater than
zero, the Bank will discount the monthly differences to the date of prepayment
by the Treasury Rate. The Bank will then add together all of the discounted
monthly differences for the Prepaid Installment.

     (h) The following definitions will apply to the calculation of the
prepayment fee:

          "Original Payment Dates" mean the dates on which principal of the Long
Term Base Rate Portion would have been paid if there had been no prepayment. If
any of the principal would have been paid later than the end of the interest
period in effect at the time of prepayment, then the Original Payment Date for
that amount will be the last day of the interest period.

          "Prepaid Installment" means the amount of the prepaid principal of the
Long Term Base Rate Portion which would have been paid on a single Original
Payment Date.

          "Treasury Rate" means the interest rate yield for U.S. Government
Treasury Securities which the Bank determines could be obtained by reinvesting a
specified Prepaid Installment in such securities from the date of prepayment
through the Original Payment Date.

     (i) The Bank may adjust the Treasury Rate to reflect the compounding,
accrual basis, or other costs of the Long Term Base Rate Portion. Each of the
rates is the Bank's estimate only and the Bank is under no obligation to
actually reinvest any prepayment. The rates will be based on information from
either the Telerate or Reuters information services, The Wall Street Journal, or
other infonmation sources the Bank deems appropriate.

4. FEES AND EXPENSES

     4.1  Fees.

     (a) Waiver fee. If the Bank, at its discretion, agrees to waive or amend
any terms of this Agreement, the Borrowers will at the Bank's option, pay the
Bank a fee for each waiver or amendment in an amount advised by the Bank at the
time the Borrowers request the waiver or amendment. Nothing in this paragraph
shall imply that the Bank is obligated to agree to any waiver or amendment
requested by the Borrowers. The Bank may impose additional requirements as a
condition to any waiver or amendment.

     4.2 Expenses. The Borrowers agree to immediately repay the Bank for
expenses that include, but are not limited to, filing, recording and search
fees, appraisal fees, title report fees and documentation fees.

                                       6
<PAGE>

     4.3 Reimbursement Costs.

     (a) The Borrowers agree to reimburse the Bank for the cost of periodic
audits and appraisals of the personal property collateral securing this
Agreement, at such intervals as the Bank may reasonably require. The audits and
appraisals may be performed by employees of the Bank or by independent
appraisers.

5. COLLATERAL

     5.1 Personal Property. The Borrowers' obligations to the Bank under this
Agreement will be secured by personal properly the Borrowers now own or will own
in the future as listed below. The collateral is further defined in security
agreement(s) executed by the Borrowers. In addition, all personal property
collateral securing this Agreement shall also secure all other present and
future obligations of the Borrowers or any one of them to the Bank (excluding
any consumer credit covered by the federal Truth in Lending law, unless the
Borrowers have otherwise agreed in writing). All personal property collateral
securing any other present or future obligations of the Borrowers or any one of
them to the Bank shall also secure this Agreement.

     (a) Machinery and equipment.

     (b) Inventory,

     (c) Receivables.

6. DISBURSEMENTS, PAYMENTS AND COSTS

     6.1 Requests for Credit; Equal Access by all Borrowers. Any Borrower (or a
person or persons authorized by any one of the Borrowers), acting alone, can
borrow up to the full amount of credit provided under this Agreement. Each
Borrower will be liable for all extensions of credit made under this Agreement
to any other Borrower. Each request for an extension of credit will be made in
writing in a manner acceptable to the Bank, or by another means acceptable to
the Bank.

     6.2 Disbursements and Payments. Each disbursement by the Bank and each
payment by the Borrowers will be:

     (a) made at the Bank's branch (or other location) selected by the Bank from
time to time;

     (b) made for the account of the Bank's branch selected by the Bank from
time to time;

     (c) made in immediately available funds, or such other type of funds
selected by the Bank;

     (d) evidenced by records kept by the Bank. In addition, the Bank may, at
its discretion, require the Borrowers to sign one or more promissory notes.

                                       7
<PAGE>

     6.3 Telephone and Telefax Authorizatlon.

     (a) The Bank may honor telephone or telefax Instructions for advances or
repayments or for the designation of optional interest rates given by any one of
the individuals authorized to sign loan agreements on behalf of each Borrower,
or any other individual designated by any one of such authorized signers.

     (b) Advances will be deposited in and repayments will be withdrawn from the
Borrower's account number 14591-05068, or such other accounts with the Bank as
designated in writing by the Borrowers.

     (c) The Borrowers indemnify and excuse the Bank (including its officers,
employees, and agents) from all liability, loss, and costs in connection with
any act resulting from telephone or telefax instnuctions the Bank reasonably
believes are made by any individual authorized by the Borrowers to give such
instructions. This indemnity and excuse will survive this Agreement's
termination.

     6.4 Direct Debit (Pre-Billing).

     (a) The Borrowers agree that the Bank will debit the Borrower's account
number 14591-05068, or such other of the Borrowers' accounts with the Bank as
designated in writing by the Borrowers the "Designated Account") on the date
each payment of principal and interest and any fees from the Borrowers becomes
due (the "Due Date"). If the Due Date is not a banking day, the Designated
Account will be debited on the next banking day.

     (b) Approximately 10 days prior to each Due Date, the Bank will mail to the
Borrowers a statement of the amounts that will be due on that Due Date (the
"Billed Amount"). The calculation will be made on the assumption that no new
extensions of credit or payments will be made between the date of the billing
statement and the Due Date, and that there will be no changes in the applicable
interest rate.

     (c) The Bank will debit the Designated Account for the Billed Amount,
regardless of the actual amount due on that date (the "Accrued Amount"). If the
Billed Amount debited to the Designated Account differs from the Accrued Amount,
the discrepancy will be treated as follows:

          (i) If the Billed Amount is less than the Accrued Amount, the Billed
Amount for the following Due Date will be increased by the amount of the
discrepancy. The Borrowers will not be in default by reason of any such
discrepancy.

          (ii) If the Billed Amount is more than the Accrued Amount, the Billed
Amount for the following Due Date will be decreased by the amount of the
discrepancy.  Regardless of any such discrepancy, interest will continue to
accrue based on the actual amount of principal outstanding without compounding.
The Bank will not pay the Borrowers interest on any overpayment.

                                       8
<PAGE>

     (d) The Borrowers will maintain sufficient funds in the Designated Account
to cover each debit. If there are insufficient funds in the Designated Account
on the date the Bank enters any debit authorized by this Agreement, the debit
will be reversed.

     6.5 Banking Days. Unless otherwise provided in this Agreement, a banking
day is a day other than a Saturday or a Sunday on which the Bank is open for
business in California. For amounts bearing interest at an offshore rate (if
any), a banking day is a day other than a Saturday or a Sunday on which the Bank
is open for business in California and dealing in offshore dollars. All payments
and disbursements which would be due on a day which is not a banking day will be
due on the next banking day. All payments received on a day which is not a
banking day will be applied to the credit on the next banking day.

     6.6 Taxes. If any payments to the Bank Under this Agreement are made from
outside the United States, the Borrowers will not deduct any foreign taxes from
any payments they make to the Bank. If any such taxes are imposed on any
payments made by the Borrowers (including payments under this paragraph), the
Borrowers will pay the taxes and will also pay to the Bank, at the time interest
is paid, any additional amount which the Bank specifies as necessary to preserve
the after-tax yield the Bank would have received if such taxes had not been
imposed. The Borrowers will confirm that they have paid the taxes by giving the
Bank official tax receipts (or notarized copies) within 30 days after the due
date.

     6.7 Additional Costs. The Borrowers will pay the Bank, on demand, for the
Bank's costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national banks or
a class of all national banks. The costs and losses will be allocated to the
loan in a manner determined by the Bank, using any reasonable method. The costs
include the following:

     (a) any reserve or deposit requirements; and

     (b) any capital requirements relating to the Bank's assets and commitments
for credit.

     6.8 Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used. Installments of principal which are not paid
when due under this Agreement shall continue to bear interest until paid.

     6.9 Default Rate. Upon the occurrence of any default under this Agreement,
principal amounts outstanding under this Agreement will at the option of the
Bank bear interest at a rate which is 2 percentage point(s) higher than the rate
of interest otherwise provided under this Agreement. This will not constitute a
waiver of any default.

     6.10 Interest Compounding. At the Bank's sole option in each instance, any
interest, fees or costs which are not paid when due under this Agreement shall
bear interest from the due date at the Bank's Prime Rate plus 2 percentage
points. This may result in compounding of interest.

                                       9
<PAGE>

7. CONDITIONS

     The Bank must receive the following items, in form and content acceptable
to the Bank, before it is required to extend any credit to the Borrowers under
this Agreement:

     7.1 Authorizations. Evidence that the execution, delivery and performance
by each Borrower and each trust guarantor of this Agreement and any instrument
or agreement required under this Agreement have been duly authorized.

     7.2 Governing Documents. A copy of each Borrowers articles of
incorporation.

     7.3 Security Agreements. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest), which the Bank requires.

     7.4 Evidence of Priority. Evidence that security interests and liens in
favor of the Bank are valid, enforceable, and prior to all others' rights and
interests, except as allowed in Paragraphs 9.5 and 9.6 of this Agreement.

     7.5 Insurance. Evidence of insurance coverage, as required in the
"Covenants" section of this Agreement.

     7.6 Guaranties. Guaranties signed by Michael S. Weinstock as an individual
and as Trustee of the Michael S. Weinstock Living Trust, and Richard Shapiro as
an individual and as Trustee of the Richard Shapiro Family Trust, each in the
amount of Two Million One Hundred Fifty Thousand Dollars ($2,150,000).

     7.7 Subordination Agreements. Subordination agreements in favor of the Bank
signed by Richard Shapiro and Michael S. Weinstock.

     7.8 Other Items. Any other items that the Bank reasonably requires.

8. REPRESENTATIONS AND WARRANTIES

     When the Borrowers sign this Agreement, and until the Bank is repaid in
full, each Borrower makes the following representations and warranties. Each
request for an extension of credit constitutes a renewed representation:

     8.1 Organization of Borrowers. Each Borrower is a corporation duly formed
and existing under the laws of the state where organized.

     8.2 Authorization. This Agreement, and any instrument or agreement required
hereunder, are within each Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers.

                                       10
<PAGE>

     8.3 Enforceable Agreement. This Agreement is a legal, valid and binding
agreement of each Borrower, enforceable against each Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable.

     8.4 Good Standing. In each state in which each Borrower does business, it
is properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.

     8.5 No Conflicts. This Agreement does not conflict with any law, agreement,
or obligation by which any Borrower is bound.

     8.6 Financial Information. All financial and other information that has
been or will be supplied to the Bank is:

     (a) sufficiently complete to give the Bank accurate knowledge of the
Borrowers' (and any guarantors) financial condition, including all material
contingent liabilities.

     (b) in compliance with all government regulations that apply.

     8.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrowers or any one of them which, if lost, would impair
the Borrowers' or any Borrower's financial condition or ability to repay the
loan, except as have been disclosed in writing to the Bank.

     8.8 Collateral. All collateral required in this Agreement is owned by the
grantor of the security interest free of any title defects or any liens or
interests of others.

     8.9 Permits, Franchises. Each Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged.

     8.10 Other Obligations. No Borrower is in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.

     8.11 Income Tax Matters. No Borrower has any knowledge of any pending
assessments or adjustments of its income tax for any year.

     8.12 No Event of Default. There is no event which is, or with notice or
lapse of time or both would be, a default under this Agreement.

     8.13 Insurance. The Borrowers have obtained, and maintained in effect, the
insurance coverage required in the "Covenants" section of this Agreement.

     8.14 Location of Borrowers. Each Borrower's place of business (or, if any
Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrowers' signature on this Agreement.

                                       11
<PAGE>

     8.15 Year 2000 Compliance. Each Borrower has conducted a comprehensive
review and assessment of its systems and equipment applications and made inquiry
of such Borrower's key suppliers, vendors and customers with respect to the
"year 2000 problem" (that is, the inability of computers, as well as embedded
microchips in non-computing devices, to properly perform date-sensitive
functions with respect to certain dates prior to and after December 31, 1999).
Based on that review and inquiry, none of the Borrowers believes the year 2000
problem, including costs of remediation, will result in a material adverse
change in its business condition (financial or otherwise), operations,
properties or prospects, or ability to repay the credit. Each Borrower has
developed adequate contingency plans to ensure uninterrupted and unimpaired
business operation in the event of a failure of its own or a third party's
systems or equipment due to the year 2000 problem, including those of vendors,
customers, and suppliers, as well as a general failure of or interruption in its
communications and delivery infrastructure.

9. COVENANTS

     The Borrowers agree, so long as credit is available under this Agreement
and until the Bank is repaid in full:

     9.1 Use of Proceeds. To use the proceeds of Facility No. 1 only for working
capital and to finance new acquisitions and capital expenditures. The proceeds
of Facility No. 2 were used to repay the Borrowers prior term loan and to repay
a portion of the outstanding principal balance under its prior revolving line of
credit.

     9.2 Financial Information. To provide the following financial information
and statements in form and content acceptable to the Bank, and such additional
information as requested by the Bank from time to time:

     (a) Within 90 days of Borrower's fiscal year end, Borrower's annual
financial statements. These financial statements must be audited by a certified
public accountant ("CPA.") acceptable to the Bank. The statements shall be
prepared on a consolidated basis.

     (b) Within 45 days of the period's end, Borrower's quarterly financial
statements. These financial statements may be Borrower prepared. The statements
shall be prepared on a consolidated basis.

     (c) Copies of Borrower2's Form 10-K Annual Report, Form 10-Q Quarterly
Report and Form 8-K Current Report within 5 days after the date of filing with
the Securities and Exchange Commission.

     (d) Within 90 days of Borrower 2's fiscal year end, Borrower 2's annual
projections with consolidating schedules.

     (e) Each guarantor's annual financial statements in form satisfactory to
the Bank within 90 days of calendar year end.

     These financial statements may be guarantor prepared.

                                       12
<PAGE>

     (f) Copies of each guarantor's federal income tax return (with all forms K-
1 attached), within 30 days of filing, together with a statement of any
contributions made by the guarantor to any subchapter S corporation, trust, or
limited liability corporation and, if requested by the Bank, copies of any
extensions of the filing date.

     9.3 Total Liabilities to Tangible Net Worth. With respect to Borrower 2, to
maintain on a consolidated basis a ratio of total liabilities to tangible net
worth not exceeding the amounts indicated for each period specified below:

          Period Ratio
          For the quarter ending December 26, 1999  2.0:1.0
          For the quarter ending March 26, 2000  1.85:1.0
          For the quarter ending June 25, 2000 and thereafter  1.75 :1.0.

     This covenant will be calculated as of the end of each fiscal quarter of
Borrower 2.

     "Total liabilities" means the sum of current liabilities plus long term
liabilities.

     "Tangible net worth" means the gross book value of Borrower 2's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense. deferred research and
development costs, deferred marketing expenses, deferred receivables, and other
like intangibles, and monies due from affiliates, officers, directors, employees
or shareholders of Borrower 2) plus liquor license less total liabilities and
minority interest, including but not limited to accrued and deferred income
taxes, and any reserves against assets.

     9.4 Debt Service Coverage Ratio. With respect to Borrower 2, to maintain on
a consolidated basis a Debt Service Coverage Ratio of at least the amounts
indicated for each period specified below:

     Period Ratio
     For the fiscal quarter ending September 26,1999    1.0:1.0
     For the fiscal quarter ending December 26, 1999    1.1:1.0
     For the fiscal quarter ending March 26, 2000       1.2:1.0
     For the fiscal quarter ending June 25, 2000
     and each fiscal quarter thereafter                 1.3:1.0.

     "Debt Service Coverage Ratio" is defined as the sum of net income after
taxes plus depreciation and amortization plus interest expense (including
payments on notes payable to related parties) minus dividends divided by the sum
of the current portion of long-term liabilities plus interest expense (including
payments on notes payable to related parties) plus principal payments made
against notes to related parties less $230,000 for quarter ending September
26, 1999, December 26, 1999, and March 26, 2000 or $130,000 for quarter ending
June 25, 2000. This ratio will be calculated at the end of each fiscal quarter,
using the results of that quarter and each of the 3 immediately preceding
quarters. The current portion of long term liabilities will be measured as of
the last day of the calculation period.

                                       13
<PAGE>

     9.5 Other Debts. Not to have outstanding or incur any direct or contingent
liabilities (other than those to the Bank), or become liable for the liabilities
of others, without the Bank's written consent. This does not prohibit:

     (a) Acquiring goods, supplies, or merchandise on normal trade credit.

     (b) Endorsing negotiable instruments received in the usual course of
business.

     (c) Obtaining surety bonds in the usual course of business.

     (d) Liabilities and lines of credit in existence on the date of this
Agreement disclosed in writing to the Bank.

     (e) Obligations under leases or management contracts for the operation of
restaurant locations, including purchase money equipment contracts, in an
unlimited amount.

     9.6 Other Liens. Not to create, assume, or allow any security interest or
lien (including judicial liens) on properly any Borrower now or later owns,
except:

     (a) Deeds of trust and security agreements in favor of the Bank.

     (b) Liens for taxes not yet due.

     (c) Liens outstanding on the date of this Agreement disclosed in writing to
the Bank.

     (d) Liens securing obligations under leases for the operation of restaurant
locations including purchase money equipment contracts.

     9.7 Paydown Period. To reduce the amount of advances outstanding under
Facility No. 1 to zero for a period of at least 30 consecutive days in each
line-year. "Line-year" means the period between the date of this Agreement and
June 30, 2000, and each subsequent one-year period (if any).

     9.8 Notices to Bank. To promptly notify the Bank in writing of:

     (a) any lawsuit over Two Hundred Thousand Dollars ($200,000) against any
one or more of the Borrowers (or any guarantor).

     (b) any substantial dispute between any Borrower (or any guarantor) and any
government authority.

     (c) any event of default under this Agreement, or any event which, with
notice or lapse of time or both, would constitute an event of default.

     (d) any material adverse change in any Borrowers (or any guarantor's)
business condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit.

                                       14
<PAGE>

     (e)  any change in any Borrower's name, legal structure, place of business,
or chief executive office if such Borrower has more than one place of business
any actual contingent liabilities of the Borrower (or any guarantor), and any
such contingent liabilities which are reasonably foreseeable.

     9.9  Books and Records. To maintain adequate books and records.

     9.10 Audits. To allow the Bank and its agents to inspect the Borrowers'
properties and examine, audit, and make copies of books and records at any
reasonable time. If any of the Borrowers' properties, books or records are in
the possession of a third party, the Borrowers authorize that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records. The Bank has no duty to inspect the Borrowers'
properties or to examine, audit, or copy books and records and the Bank shall
not incur any obligation or liability by reason of not making any such
inspection or inquiry. In the event that the Bank inspects any Borrowers
properties or examines, audits, or copies books and records, the Bank will be
acting solely for the purposes of protecting the Bank's security and preserving
the Bank's rights under this Agreement. None of the Borrowers nor any other
parties are entitled to rely on any inspection or other inquiry by the Bank. The
Bank owes no duty of care to protect the Borrowers or any other parties against,
or to inform the Borrowers or any other parties of, any adverse condition that
may be observed as affecting the Borrowers' properties or premises, or the
Borrowers' business. In the event that the Bank has a duty or obligation under
applicable laws, regulations or legal requirements to disclose any report or
findings made as a result of or in connection with, any site visit, observation
or testing by the Bank, the Bank may make such a disclosure to the Borrowers or
any other parties.

     9.11 Compliance with Laws. To comply with the laws (including any
fictitious name statute), regulations, and orders of any government body with
authority over each Borrower's business.

     9.12 Preservation of Rights. To maintain and preserve all rights,
privileges, and franchises each Borrower now has.

     9.13 Maintenance of Properties. To make any repairs, renewals, or
replacements to keep each Borrower's properties in good working condition.

     9.14 Perfection of Liens. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.

     9.15 Cooperation. To take any action reasonably requested by the Bank to
carry out the intent of this Agreement.

                                       15
<PAGE>

     9.16 Insurance.

     (a) Insurance Covering Collateral. To maintain all risk property damage
insurance policies covering the tangible property comprising the collateral.
Each insurance policy must be in an amount acceptable to the Bank. The insurance
must be issued by an insurance company acceptable to the Bank and must include a
lender's loss payable endorsement in favor of the Bank in a form acceptable to
the Bank.

     (b) General Business Insurance. To maintain insurance as is usual for the
business the Borrowers are in.

     (c) Evidence of Insurance. Upon the request of the Bank, to deliver to the
Bank a copy of each insurance policy, or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.

     9.17 Additional Negative Covenants. Not to, without the Bank's written
consent:

     (a) engage in any business activities substantially different from the
Borrowers. or any Borrower's present business.

     (b) liquidate or dissolve the Borrowers' or any Borrower's business
excluding Pizzeria Uno.

     (c) enter into any consolidation, merger, or other combination, or become a
partner in a partnership, a member of a joint venture, or a member of a limited
liability company that would cause the Borrower (i) to incur any contingent
liabilities or (ii) to be in violation of any term or provision of this
Agreement.

     (d) sell, assign, lease, transfer or otherwise dispose of any assets for
less than fair market value, or enter into any agreement to do so.

     (e) sell, assign, lease, transfer or otherwise dispose of part of the
Borrowers' or any Borrowers business or the Borrowers' or any Borrower's assets
excluding Pizzeria Uno.

     (f) enter into any sale and leaseback agreement covering the Borrowers'or
any Borrower's fixed assets.

     (g) acquire or purchase a business or its assets.

     (h) voluntarily suspend the Borrowers' or any Borrower's business for more
than 7 days in any 30 day period.

     9.18 Subsidiaries as Co-Borrower. Any 100% owned subsidiary (excluding
Pizzeria Uno) is to become a Co-Borrower on this Agreement.

                                       16
<PAGE>

10. HAZARDOUS WASTE INDEMNIFICATION

     The Borrowers will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply whether
the hazardous substance is on, under or about the Borrowers' or any Borrowers
property or operations or property leased to the Borrowers or any Borrower. The
indemnity includes but is not limited to attorneys' fees (including the
reasonable estimate of the allocated cost of in-house counsel and staff. The
indemnity extends to the Bank, its parent, subsidiaries and all of their
directors, officers, employees, agents, successors, attorneys and assigns.
"Hazardous substances" means any substance, material or waste that is or becomes
designated or regulated as "toxic," "hazardous," "pollutant," or "contaminant"
or a similar designation or regulation under any federal, state or local law
(whether under common law, statute, regulation or otherwise) or judicial or
administrative interpretation of such, including without limitation petroleum or
natural gas. This indemnity will survive repayment of the Borrowers' obligations
to the Bank.

11. DEFAULT

     If any of the following events occurs, the Bank may do one or more of the
following: declare the Borrowers in default, stop making any additional credit
available to the Borrowers, and require the Borrowers to repay their entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to any Borrower, then the
entire debt outstanding under this Agreement will automatically be due
immediately.

     11.1 Failure to Pay. Any Borrower fails to make a payment under this
Agreement when due.

     11.2 Lien Priority. The Bank fails to have an enforceable first lien
(except for any prior liens to which the Bank has consented in writing) on or
security interest in any property given as security for this Agreement (or any
guaranty).

     11.3 False Information. Any Borrower (or any guarantor) has given the Bank
false or misleading information or representations.

     11.4 Bankruptcy. Any Borrower (or any guarantor) files a bankruptcy
petition, a bankruptcy petition is filed against any Borrower (or any guarantor)
or any Borrower (or any guarantor) makes a general assignment for the benefit of
creditors.

     11.5 Receivers. A receiver or similar official is appointed for any
Borrower's (or any guarantors) business, or the business is terminated.

     11.6 Lawsuits. Any lawsuit or lawsuits are filed against any one or more of
the Borrowers (or any guarantor) in an aggregate amount of Five Hundred Thousand
Dollars ($500,000) or more in excess of any insurance coverage.

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     11.7 Judgments. Any judgments or arbitration awards are entered against any
one or more of the Borrowers (or any guarantor), or any one or more of the
Borrowers (or any guarantor) enters into any settlement agreements with respect
to any litigation or arbitration, in an aggregate amount of Two Hundred Thousand
Dollars ($200,000) or more in excess of any insurance coverage.

     11.8 Government Action. Any government authority takes action that the Bank
believes materially adversely affects any Borrower's (or any guarantor's)
financial condition or ability to repay.

     11.9 Material Adverse Change. A material adverse change occurs, or is
reasonably likely to occur, in any Borrower's (or any guarantor's) business
condition (financial or otherwise), operations, properties or prospects, or
ability to repay the credit.

     11.10 Cross Default. Any default occurs under any agreement in connection
with any credit any Borrower (or any guarantor) or any related entity or
affiliate of any Borrower has obtained from anyone else or which any Borrower
(or any guarantor) or any such related entity or affiliate has guaranteed.

     11.11 Default under Related Documents. Any guaranty, subordination
agreement, security agreement, deed of trust, or other document required by this
Agreement is violated or no longer in effect.

     11.12 Other Bank Agreements. Any Borrower (or any guarantor) fails to meet
the conditions of, or fails to perform any obligation under any other agreement
any Borrower (or any guarantor) has with the Bank or any affiliate of the Bank.

     11.13 Other Breach Under Agreement. Any Borrower fails to meet the
conditions of, or fails to perform any obligation under, any term of this
Agreement not specifically referred to in this Article. This includes any
failure or anticipated failure by any Borrower to comply with any financial
covenants set forth in this Agreement, whether such failure is evidenced by
financial statements delivered to the Bank or is otherwise known to any Borrower
or the Bank.

     11.14 Guarantor Covenants. Robert Shapiro and Michael S. Weinstock (the
"Guarantors") fail to comply with the following covenant:

     (a) Liquidity. The Guarantors, on an aggregate basis, will maintain
unencumbered liquid assets (net of all direct debt due within 24 months and
contingent indebtedness except for non-recourse, real estate debt and debt of
the Borrowers) equal to at least Three Million Dollars ($3,000,000). "Liquid
assets" means the following assets of the Guarantors:

          (i) cash and certificates of deposit:

          (ii) U.S. treasury bills and other obligations of the federal
government; and

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<PAGE>

          (iii) readily marketable securities (including commercial paper, but
excluding restricted stock and stock subject to the provisions of Rule 144 of
the Securities and Exchange Commission).

     Within 30 days of December 31 and June 30, the Borrowers will provide to
the Bank copies of statements from depository institutions or brokerage firms,
or other evidence acceptable to the Bank of the Guarantors' liquid assets.

     If more than 25% of the value of the Guarantors' liquid assets is
represented by margin stock, the Borrowers will provide the Bank a Form U-1
Purpose Statement, and the Bank and the Borrowers will comply with the
restrictions imposed by Regulation U of the Federal Reserve, which may require a
reduction in the amount of credit provided to the Borrowers.

     (b) Trusts. The Guarantors will not transfer any assets to a trust unless
the trust is acceptable to the Bank in form and content, and the trustee
guaranties payment of the Borrowers obligations under this Agreement prior to
any such transfer.

     (c) Divorce Settlement. With respect to Richard Shapiro, upon the issuance
of the Court Order Divorce Settlement between himself and Francine Shapiro,
copies of such settlement will be provided to the Bank.

12. ENFORCING THIS AGREEMENT; MISCELLANEOUS

     12.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.

     12.2 California Law. This Agreement is governed by California law.

     12.3 Successors and Assigns. This Agreement is binding on the Borrowers
and the Bank's successors and assignees. The Borrowers agree that they may not
assign this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrowers with actual or potential participants or assignees; provided
that such actual or potential participants or assignees shall agree to treat all
financial information exchanged as confidential. If a participation is sold or
the loan is assigned, the purchaser will have the right of set-off against the
Borrowers.

     12.4 Arbitration. Any claim or controversy ("Claim") between the parties,
whether arising in contract or tort or by statute including, but not limited to,
Claims resulting from or relating to this Agreement shall, upon the request of
either party, be resolved by arbitration in accordance with the Federal
Arbitration Act (Title 9, US Code). Arbitration proceedings will be conducted in
accordance with the rules for arbitration of financial services disputes of
J.A.M.S./Endispute. The arbitration shall be conducted in any U.S State where
real or tangible personal property collateral for the credit is located or if
there is no such collateral, in California. The arbitration hearing shall
commence within ninety (90) days of the demand for arbitration and close within
ninety (90) days of commencement, and any award, which may include legal fees,
shall be issued (with a brief written statement of the reasons therefore) within
thirty (30) days of the close of

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<PAGE>

hearing. Any dispute concerning whether a claim is arbitrable or barred by the
statute of limitations shall be determined by the arbitrator. This arbitration
provision is not intended to limit the right of any party to exercise self-help
remedies, to seek and obtain interim or provisional relief of any kind or to
initiate judicial or nonjudicial foreclosure against any real or personal
property collateral.

     12.5 Severability; Waivers. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a loan after default. If the Bank waives a default, it
may enforce a later default. Any consent or waiver under this Agreement must be
in writing.

     12.6 Administration Costs. The Borrowers shall pay the Bank for all
reasonable costs incurred by the Bank in connection with administering this
Agreement.

     12.7 Attorneys' Fees. The Borrowers shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and in
connection with any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys' fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator. In the event that any ease is commenced by or against any
of the Borrowers under the Bankruptcy Code (Title 11, United States Code) or any
similar or successor statute, the Bank is entitled to recover costs and
reasonable attorneys' fees incurred by the Bank related to the preservation,
protection, or enforcement of any rights of the Bank in such a case. As used in
this paragraph, "attorneys' fees" includes the allocated costs of the Bank's in-
house counsel.

     12.8 Joint and Several Liability.

     (a) Each Borrower agrees that it is jointly and severally liable to the
Bank for the payment of all obligations arising under this Agreement, and that
such liability is independent of the obligations of the other Borrower(s). The
Bank may bring an action against any Borrower, whether an act on is brought
against the other Borrower(s).

     (b) Each Borrower agrees that any release which may be given by the Bank to
the other Borrower(s) or any guarantor will not release such Borrower from its
obligations under this Agreement.

     (c) Each Borrower waives any right to assert against the Bank any defense,
setoff, counterclaim, or claims which such Borrower may have against the other
Borrower(s) or any other party liable to the Bank for the obligations of the
Borrowers under this Agreement.

     (d) Each Borrower agrees that it is solely responsible for keeping itself
informed as to the financial condition of the other Borrower(s) and of all
circumstances which bear upon the risk of nonpayment. Each Borrower waives any
right it may have to require the Bank to disclose to such Borrower any
information which the Bank may now or hereafter acquire concerning the financial
condition of the other Borrower(s).

                                       20
<PAGE>

     (e) Each Borrower waives all rights to notices of default or nonperformance
by any other Borrower under this Agreement. Each Borrower further waives all
rights to notices of the existence or the creation of new indebtedness by any
other Borrower.

     The Borrowers represent and warrant to the Bank that each will derive
benefit, directly and indirectly, from the collective administration and
availability of credit under this Agreement. The Borrowers agree that the Bank
will not be required to inquire as to the disposition by any Borrower of funds
disbursed in accordance with the terms of this Agreement.

     (f) Until all obligations of the Borrowers to the Bank under this Agreement
have been paid in full, each Borrower waives any right of subrogation,
reimbursement, indemnification and contribution (contractual, statutory or
otherwise), including without limitation, any claim or right of subrogation
under the Bankruptcy Code (Title 11, United States Code) or any successor
statute, which such Borrower may now or hereafter have against any other
Borrower with respect to the indebtedness incurred under this Agreement. Each
Borrower waives any right to enforce any remedy which the Bank now has or may
hereafter have against any other Borrower, and waives any benefit of, and any
right to participate in, any security now or hereafter held by the Bank.

     12.9 One Agreement. This Agreement and any related security or other
agreements required by this Agreement, collectively:

     (a) represent the sum of the understandings and agreements between the Bank
and the Borrowers concerning this credit;

     (b) replace any prior oral or written agreements between the Bank and the
Borrowers concerning this credit; and

     (c) are intended by the Bank and the Borrowers as the final, complete and
exclusive statement of the terms agreed to by them.

     In the event of any conflict between this Agreement and any other
agreements required by this Agreement, this Agreement will prevail.

     12.10 Indemnification. Each Borrower will indemnify and hold the Bank
harmless from any loss, liability, damages, judgments, and costs of any kind
relating to or arising directly or indirectly out of (a) this Agreement or any
document required hereunder, (b) any credit extended or committed by the Bank to
the Borrowers hereunder, and (c) any litigation or proceeding related to or
arising out of this Agreement, any such document, or any such credit. This
indemnity includes but is not limited to attorneys' fees (including the
allocated cost of in-house counsel). This indemnity extends to the Bank, its
parent, subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys, and assigns. This indemnity will survive repayment of the
Borrowers' obligations to the Bank. All sums due to the Bank hereunder shall be
obligations of the Borrowers, due and payable immediately without demand.

                                       21
<PAGE>

     12.11 Notices. All notices required under this Agreement shall be
personally delivered or sent by first class mail, postage prepaid, or by
overnight courier, to the addresses on the signature page of this Agreement, or
sent by facsimile to the fax numbers listed on the signature page, or to such
other addresses as the Bank and the Borrowers may specify from time to time in
writing. Notices sent by first class mail shall be deemed delivered on the
earlier of actual receipt or on the fourth business day after deposit in the
U.S. mail.

     12.12 Headings. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.

     12.13 Counterparts. This Agreement may be executed in as many counterparts
as necessary or convenient, and by the different parties on separate
counterparts each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.

     12.14 Prior Agreement Supeneded. This Agreement supersedes the Business
Loan Agreement entered into as of July 17, 1998 between the Bank and the
Borrowers, and any credit outstanding thereunder shall be deemed to be
outstanding under this Agreement.

     This Agreement is executed as of the date stated at the top of the first
page.

     Bank of America, N.A.
     By: Kurt A. Cardoza, Vice President

     Address where notices to the Bank are to be sent:
     Address for Notices:
     San Gabriel Valley Commercial Banking
     Office #01463
     15625 E. Stafford St.
     City of Industry, CA 91744

Grill Concepts, Inc.
/s/
Robert Spivak
President and Chief Executive Officer

Address for Notices:

11661 SanVicenteBoulevard
Los Angeles, CA 90049

Address for Notices:

9560 Dayton Way
Beverly Hills, CA 90210

                                       22

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