CALIFORNIA BEACH RESTAURANTS INC
<DOCUMENT>
<TYPE>EX-10.85
<SEQUENCE>5
<FILENAME>calbeach_10qex10-85.txt
<TEXT>
<PAGE>


                                                                   EXHIBIT 10.85


                       SENIOR SUBORDINATED LOAN AGREEMENT

THIS SENIOR SUBORDINATED LOAN AGREEMENT (the "AGREEMENT") is entered into as of
the 23rd day of January, 2003, by and among California Beach Restaurants, Inc.,
a California corporation (the "COMPANY") and the party listed on the signature
page hereto (the "LENDER").

         In consideration of the covenants and agreements contained herein, the
Company and the Lender agree as follows:

1.       LOAN.

         1.1      Subject to the terms and conditions contained herein, and in
                  reliance upon the representations, warranties and agreements
                  contained herein, on the date hereof the Lender shall advance
                  amounts (the "LOAN") to the Company in an amount equal to
                  $500,000. The Loan made by the Lender shall be evidenced by a
                  Promissory Note made by the Company to the Lender,
                  substantially in the form of EXHIBIT A (the "NOTE").

         1.2      It is the intent of the parties hereto that the Loan be senior
                  to the rights and claims of the Company's 5% Convertible
                  Subordinated Notes Due October 1, 2003 (the "JUNIOR NOTES").

         1.3      INTEREST. Interest on the Loan shall be payable on the
                  outstanding daily unpaid principal amount until payment in
                  full at the rates set forth herein, to the extent permitted by
                  applicable laws, before and after default, before and after
                  maturity, before and after any judgment and before and after
                  the commencement of any proceeding under any Debtor Relief Law
                  (as hereinafter defined), with interest on overdue interest to
                  bear interest at the Default Rate (as hereinafter defined).
                  Interest shall accrue on the Loan at the rate of fifteen
                  percent (15%) per annum, and shall be due and payable in cash
                  on March 5, 2003. Notwithstanding the foregoing, if any
                  installment of principal or interest under the Note or any
                  other amount payable to the Lender hereunder is not paid when
                  due, or upon and during the continuance of an Event of
                  Default, the outstanding principal amount of the Loan shall
                  bear interest at seventeen percent (17%) per annum (the
                  "DEFAULT RATE") to the extent permitted by applicable law,
                  until paid in full.

         1.4      MATURITY; PREPAYMENT. If not sooner paid, the principal amount
                  of the Loan shall be paid in immediately available funds in
                  cash on March 5, 2003 (the "MATURITY DATE"). The Note may be
                  voluntarily prepaid at any time at the election of the
                  Company; PROVIDED, that (i) any partial prepayment shall be in
                  an amount not less than $25,000 in the aggregate and (ii) each
                  prepayment shall be accompanied by a prepayment of interest
                  accrued to the date of payment on the amount of principal
                  paid. The Company shall provide the Lender a notice setting
                  forth (a) the effective date of such prepayment, (b) the
                  amount of principal to be prepaid, (c) the amount of principal
                  outstanding following such prepayment, and (d) the amount of
                  interest payable with respect to the prepaid principal.

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         1.5      COMPUTATIONS; OTHER PAYMENT PROVISIONS. All computations of
                  interest and fees shall be calculated on the basis of a year
                  of 360 days and paid for the actual number of days elapsed. If
                  any payment to be made by the Company shall come due on a day
                  other than a Business Day, payment shall be made on the next
                  succeeding Business Day and the extension of time shall be
                  reflected in computing interest. The amount of each payment
                  hereunder and under the Note shall be made to the Lender in
                  lawful money of the United States, without deduction, offset
                  or counterclaim and in immediately available funds on the day
                  of payment (which much be a Business Day). All payments of
                  principal received after 1:00 p.m., California time, on any
                  Business Day, shall be deemed received on the next succeeding
                  Business Day for purposes of calculating interest thereon. All
                  payments made under this Agreement and the Note shall be made
                  free and clear of, and without reduction by reason of, any
                  tax, assessment or other charge imposed by any governmental
                  entity or authority. The Lender shall keep a record of
                  advances made by it hereunder and payments of principal with
                  respect to the Note, and such record shall be presumptive
                  evidence of the principal amount owing under the Note;
                  PROVIDED, that failure to keep such record shall in no way
                  affect the obligation of the Company to pay all principal
                  amounts advanced hereunder, and interest thereon, as set forth
                  herein.

         1.6      SUBORDINATION. The payment of the principal of, and interest
                  on, the Loan or the Note and any amendments or replacements
                  thereof and any other security interest, lien, claim or right
                  now or hereafter asserted by the Lender with respect to the
                  indebtedness of the Company to the Lender created hereunder,
                  shall be subject, junior and subordinate, in all respects, to
                  the prior payment in full of Senior Debt (as hereinafter
                  defined) of the Company, and to any security interest, lien,
                  claim or right now or hereafter asserted by Senior Debtholders
                  (as hereinafter defined) or their successors and assigns with
                  respect to such Senior Debt or with respect to any collateral
                  therefor. The Lender further agrees that upon the occurrence
                  of a default or event of default (as such terms are defined in
                  the Senior Debt Documents (a "SENIOR DEBT DEFAULT") and
                  without notice of such Senior Debt Default to the Lender, (x)
                  the Senior Debtholders, or their respective successors or
                  assigns, are entitled to be paid all Senior Debt before the
                  Lender is entitled to receive any payments in respect of this
                  Agreement or the Note, (y) the Company may not make any
                  payments to the Lender or with respect to this Agreement or
                  the Note until such payment of all outstanding Senior Debt to
                  the Senior Debtholders has been made in full in cash and (z)
                  for a period not to exceed one hundred eighty (180) days
                  following such Senior Debt Default the Lender may not pursue
                  any enforcement action against the Company. Any payments made
                  to the Lender in violation of this Section 1.7 shall be held
                  in trust for the benefit of the Senior Debtholders (or their
                  respective successors or assigns) and turned over upon the
                  demand of the Senior Debtholders. Notwithstanding the
                  foregoing, in the absence of a Senior Debt Default, the
                  Company shall be permitted to pay interest on and principal of


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                  the Loan and the Note in accordance with the terms hereof and
                  thereof. "SENIOR DEBT" shall mean all indebtedness of the
                  Company to (i) Lyon Credit Corporation ("LCC") pursuant to a
                  Promissory Note dated as of April 27, 1999 made by the Company
                  to LCC, a Security Agreement dated as of March 15, 1999 by and
                  between the Company and LCC, and a Security Agreement dated as
                  of April 27, 1999 by and between Sea View Restaurants, Inc.
                  ("SEA VIEW") and LCC, as such documents may be amended,
                  modified, supplemented or restated (the "LCC LOAN DOCUMENTS")
                  and (ii) U.S. Bank National Association ("U. S. BANK" and,
                  together with LCC, the "SENIOR DEBTHOLDERS") pursuant to a
                  Business Loan Agreement dated as of June 22, 2001 by and
                  between the Company and U. S. Bank, a Promissory Note dated as
                  of June 22, 2001 made by the Company to U.S. Bank, a
                  Commercial Security Agreement dated as of June 22, 2001 by and
                  among the Company, U.S. Bank and Sea View and a Commercial
                  Pledge Agreement dated as of June 22, 2001 by and among the
                  Company, U.S. Bank and Sea View, as such documents may be
                  amended, modified, supplemented or restated (the "U.S. BANK
                  LOAN DOCUMENTS" and, together with the LCC Loan Documents, the
                  "SENIOR DEBT DOCUMENTS"), and shall include, but shall not be
                  limited to, all principal, unpaid interest, penalties, costs,
                  fees, premiums and other amounts due Senior Debtholders, or
                  their successors or assigns, pursuant to their respective
                  security loan, security, financing and other agreement,
                  documents or loan instruments and any amendments to or
                  replacements of any of the foregoing. Notwithstanding the
                  foregoing, in the absence of a Senior Debt Default, the
                  Company shall be permitted to pay interest on and principal of
                  the Loan in accordance with their terms. The Senior
                  Debtholders are intended third party beneficiaries of this
                  Section 1.6.

2.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
         and warrants to the Lender that:

         2.1      ORGANIZATION AND QUALIFICATION. The Company and each of its
                  Subsidiaries (as hereinafter defined) is a corporation duly
                  organized, validly existing and in good standing under the
                  laws of the state of its incorporation and has the requisite
                  corporate power to carry on its business as it is now being
                  conducted, and to own the properties and assets it now owns.
                  The Company and each of its subsidiaries is duly qualified,
                  licensed or domesticated, and in good standing as a foreign
                  corporation authorized to do business in each state or
                  jurisdiction wherein the nature of its activities or its
                  properties owned or leased makes such qualification, licensing
                  or domestication necessary, except where the failure to so
                  qualify, be licensed, domesticated or in good standing would
                  not have a material adverse effect on the Company and its
                  Subsidiaries, considered as a whole. The Company has delivered
                  to the Lender, if it has requested, complete and accurate
                  copies of its Articles of Incorporation and Bylaws and those
                  of each Subsidiary which owns assets constituting in excess of
                  5% of the total assets of the Company and its Subsidiaries on
                  a consolidated basis, together with all amendments thereto.

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         2.2      AUTHORIZATION. All corporate action on the part of the
                  Company, its directors and shareholders necessary for the
                  authorization, execution, delivery and performance by the
                  Company of this Agreement and the Note and for the
                  consummation of the transactions contemplated herein and in
                  Exhibit B, and otherwise for the authorization, issuance and
                  delivery of the Note, has been taken and all actions by the
                  board of directors have been unanimous by all members of the
                  board of directors, except for one director who abstained from
                  the vote. This Agreement and the Note upon execution and
                  delivery by the Company, will be valid and binding obligations
                  of the Company, enforceable against the Company in accordance
                  with their terms.

         2.2      ABSENCE OF CERTAIN CHANGES. Since October 31, 2002, the
                  Company and each of its Subsidiaries has conducted its
                  business only in the ordinary course and has not, except as
                  fairly described on SCHEDULE 2.3 hereto, or the Company's Form
                  10-Q for the quarter period ended October 31, 2002 (the
                  "Company's 10-Q"), or pursuant to this Agreement:

                  (a)      suffered any material adverse change in its
                           operations, properties or financial condition or
                           prospects;

                  (b)      incurred any increase in indebtedness for borrowed
                           money over the level thereof reflected on its audited
                           consolidated balance sheet as of April 30, 2002 (the
                           "COMPANY BALANCE SHEET"), except for borrowings made
                           in the ordinary course of business;

                  (c)      discharged or paid any obligation or liability
                           material to it, other than current liabilities shown
                           on the Company Balance Sheet and current liabilities
                           incurred since the date of the Company Balance Sheet
                           discharged or paid in the ordinary course of business
                           or consistent with past practice;

                  (d)      permitted any of its assets to be subject to any
                           material security interest, restriction or charge of
                           any kind other than purchase money security
                           interests;

                  (e)      received any notice of termination of, or default
                           under, any contract, lease or other agreement, or
                           suffered any material damage, destruction or loss
                           (whether or not covered by insurance);

                  (f)      issued or sold any of its securities, or issued or
                           sold any options, rights or warrants with respect
                           thereto, or acquired any capital stock or other
                           securities of any corporation or any interest in any
                           business enterprise, or otherwise made any loan or
                           advance to or investment in any person, firm or
                           corporation, except for normal business advances to
                           employees consistent with past practice;

                  (g)      written off as uncollectible any accounts receivable,
                           except for write-offs in the ordinary course of
                           business or consistent with past practice, or in any
                           event in excess of an aggregate of $25,000;

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                  (h)      canceled or compromised any debts or waived or
                           permitted to lapse any claims or rights of
                           substantial value, or sold, leased, transferred or
                           otherwise disposed of any of its properties or assets
                           (real, personal or mixed, tangible or intangible)
                           except in the ordinary course of business or
                           consistent with past practice;

                  (i)      granted any general increase in the compensation of
                           officers or employees (including any such increase
                           pursuant to any bonus, pension, profit sharing or
                           other plan or commitment) or any increase in the
                           compensation payable or to become payable to any
                           officer or employee, except for increases in the
                           ordinary course of business or consistent with past
                           practice;

                  (j)      made any material capital expenditure or commitment
                           for any addition to property, plant or equipment not
                           in the ordinary course of business, or in any event
                           in excess of an aggregate of $50,000;

                  (k)      declared, paid or set aside for payment any dividend
                           or other distribution in respect of its capital
                           stock, or directly or indirectly, redeemed, purchased
                           or otherwise acquired any shares of its capital stock
                           or other securities of the Company or any of its
                           Subsidiaries;

                  (l)      paid, loaned or advanced any amount to, or sold,
                           transferred or leased any properties or assets to, or
                           entered into any agreement or arrangement with, any
                           of its officers, directors or "affiliates," as such
                           term is defined in the rules and regulations of the
                           Securities and Exchange Commission (the "SEC"),
                           except for normal business advances to employees
                           consistent with past practice, directors' fees,
                           compensation to officers and compensation increases
                           permitted by clause (i) of this Section 2.3;

                  (m)      settled any claim, action or proceeding pending or
                           threatened against or relating to the Company or any
                           of its Subsidiaries before any court or governmental
                           or regulatory authority or body for an amount in
                           excess of an aggregate of $25,000; or

                  (n)      agreed, whether in writing or otherwise, to take any
                           action described in this Section 2.3.


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         2.3      FINANCIAL STATEMENTS AND REPORTS.

                  (a)      The Company has timely filed all required forms,
                           reports, statements and documents with the SEC, all
                           of which have complied in all material respects with
                           all applicable requirements of the Securities Act of
                           1933, as amended (the "SECURITIES ACT"), and the
                           Securities Exchange Act of 1934 (the "EXCHANGE ACT").
                           The Company has delivered to the Lender true and
                           complete copies of the Company's (i) Annual Report on
                           Form 10-K for the fiscal years ended April 30, 2000,
                           2001 and 2002, (ii) Proxy Statements relating to all
                           meetings of the Company's shareholders (whether
                           annual or special) held since April 30, 2000, (iii)
                           all other forms, reports, statements and documents
                           filed by the Company with the SEC since April 30,
                           2000, and (iv) all reports, statements, documents and
                           other information provided by the Company to public
                           security holders since April 30, 2000 (collectively,
                           the items referred to in clauses (i) through (iv) are
                           hereinafter referred to as the "COMPANY Reports"). As
                           of their respective dates, the Company Reports did
                           not contain any untrue statement of a material fact
                           or omit to state a material fact required to be
                           stated therein or necessary to make the statements
                           therein, in light of the circumstances under which
                           they were made, not misleading. The financial
                           statements of the Company and its Subsidiaries
                           included or incorporated by reference in the Company
                           Reports were prepared in accordance with generally
                           accepted accounting principles applied on a
                           consistent basis and present fairly the financial
                           position, results of operations and changes in
                           financial position of the Company and its
                           Subsidiaries as of the dates and for the periods
                           indicated, except that the unaudited interim
                           financial statements may not contain all of the
                           footnotes required by generally accepted accounting
                           principles and may be subject to year-end adjustment.

                  (b)      The Company has delivered to the Lender true and
                           complete copies of the Company's balance sheet as of
                           October 31, 2002 (the "INTERIM BALANCE Sheet"). The
                           Interim Balance Sheet was prepared in accordance with
                           (i) generally accepted accounting principles applied
                           on a consistent basis and (ii) the rules and
                           requirements of the SEC. The Interim Balance Sheet
                           presents fairly the consolidated financial position
                           of the Company and its Subsidiaries as of July 31,
                           2002. The total assets of the Company, as set forth
                           on the Interim Balance Sheet, equals or exceeds
                           $2,000,000. The Lender agrees to keep the Interim
                           Balance Sheet confidential.

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         2.4      NO UNDISCLOSED LIABILITIES. Except as and to the extent
                  reflected on the Company Balance Sheet and the footnotes
                  thereto, as of October 31, 2002, neither the Company nor any
                  of its Subsidiaries had any liabilities or obligations
                  (absolute, accrued, contingent or otherwise) material to the
                  Company and its Subsidiaries taken as a whole of a nature
                  required by generally accepted accounting principles to be
                  reflected on a consolidated balance sheet of the Company and
                  its Subsidiaries ("LIABILITIES"). Since October 31, 2002,
                  neither the Company nor any of its Subsidiaries has incurred
                  any Liabilities material to the Company and its Subsidiaries
                  taken as a whole, except Liabilities incurred in the ordinary
                  course of business.

         2.5      CONSENTS AND APPROVALS.

                  (a)      No notice to or filing with, and no authorization,
                           consent or approval of, any domestic or foreign court
                           or any public or governmental body or authority is
                           necessary for the execution and delivery of this
                           Agreement and the Note by the Company and the
                           performance of its obligations hereunder, except for
                           notices or filings the failure to give or make, and
                           authorizations, consents and approvals the failure to
                           obtain, would not, individually or in the aggregate,
                           have a material adverse effect on the financial
                           condition, business or results of operations of the
                           Company and its Subsidiaries taken as a whole or
                           adversely affect the ability of the Company perform
                           its obligations under this Agreement or the Note (a
                           "MATERIAL ADVERSE EFFECT").

                  (b)      No authorization, consent or approval of any person
                           or entity is necessary for the execution and delivery
                           by the Company of this Agreement and the Note, and
                           the performance of its obligations hereunder, other
                           than (i) pursuant to Section 2.6(a) and (ii) the
                           consent of U.S. Bank, which has either been obtained
                           by the Company or which the Company will use its best
                           efforts to obtain.

                  (c)      Upon execution and delivery of a Junior Note Consent
                           by the holder thereof, such Junior Note will be
                           subordinated to, and junior in the right of payment
                           of, the Loan and the Note. True and correct copies of
                           the Junior Note Consents will be provided to the
                           Lender promptly (but in any case within 5 Business
                           Days) after execution and delivery thereof by the
                           parties thereto.

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         2.6      NO VIOLATIONS. Except as set forth on SCHEDULE 2.7 hereto, the
                  execution and delivery of this Agreement does not, and the
                  documents and agreements required to be executed in connection
                  herewith and the performance by the Company and its
                  Subsidiaries of their obligations hereunder and the
                  consummation of the transactions contemplated hereby will not,
                  violate, conflict with or result in a breach of any provision
                  of, or constitute a default (or an event which, with notice or
                  lapse of time or both, would constitute a default) under, or
                  result in the termination of, or accelerate the performance
                  required by, or result in a right of termination or
                  acceleration under, or result in the creation of any lien,
                  security interest, charge or encumbrance upon any of the
                  properties or assets of the Company or any of the Subsidiaries
                  under any of the terms, conditions or provisions of (i) the
                  respective charters or bylaws of the Company or the
                  Subsidiaries, (ii) subject to compliance with the statutes and
                  regulations referred to in Section 2.6 above, any statute,
                  law, ordinance, rule, regulation, judgment, decree, order,
                  injunction or writ applicable to the Company or any of the
                  Subsidiaries or any properties or assets of the Company or any
                  of the Subsidiaries, or (iii) any note, bond, mortgage,
                  indenture, license, franchise, permit, concession, contract,
                  agreement, lease or other instrument or agreement of any kind
                  to which the Company or any of the Subsidiaries is now a party
                  or by which the Company or any of the Subsidiaries or any of
                  their respective properties or assets may be bound, excluding
                  from the foregoing clauses (ii) and (iii) violations,
                  conflicts, breaches, defaults, terminations, accelerations or
                  creations of liens, security interests, charges or
                  encumbrances which would not, individually or in the
                  aggregate, have a Material Adverse Effect. The businesses of
                  the Company and its Subsidiaries are not being conducted in
                  violation of any law, ordinance or regulation of any
                  governmental entity ("VIOLATIONS"), except for Violations
                  which either individually or in the aggregate will not have a
                  Material Adverse Effect. Set forth on SCHEDULE 2.7 hereto is a
                  list of all Violations of which the Company has knowledge
                  which could, individually or in the aggregate, have a Material
                  Adverse Effect.

         2.7      LITIGATION, ETC. Except as described on SCHEDULE 2.8 hereto,
                  there is no claim, action or proceeding pending or, to the
                  best knowledge of the Company, threatened against or relating
                  to the Company or any of its Subsidiaries before any court or
                  governmental or regulatory authority or body acting in an
                  adjudicative capacity which individually or in the aggregate,
                  if adversely determined, would have a Material Adverse Effect.
                  Neither the Company nor any of its Subsidiaries is subject to
                  any outstanding order, writ, injunction or decree which
                  individually or in the aggregate could have a Material Adverse
                  Effect.

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         2.8      LEASE/CONCESSION AGREEMENTS. All leases and concession
                  agreements pursuant to which the Company and each of its
                  Subsidiaries leases real property and improvements material to
                  the conduct of its business and operations (collectively, the
                  "LEASES") are in full force and effect and constitute legal,
                  valid and binding obligations of the parties thereto,
                  enforceable in accordance with their respective terms, except
                  as the same may be limited by bankruptcy, insolvency,
                  reorganization, moratorium or similar laws now or hereafter in
                  effect relating to or limiting creditors' rights or by legal
                  principles of general applicability governing the availability
                  of equitable remedies. Neither the Company nor any of its
                  Subsidiaries has assigned its rights and interests under the
                  Leases. Except as set forth in the Company's 10-Q, nothing has
                  come to the attention of the Company which (whether with or
                  without notice, lapse of time or both) would constitute a
                  material breach or default by any party under the Leases.

         2.9      TAXES. All tax returns required to be filed by the Company and
                  its Subsidiaries have been duly and timely filed, and all
                  taxes, interest, penalties, assessments and/or deficiencies
                  shown to be due on such tax returns or for which the Company
                  has received tax notices have in all respects been paid or
                  adequate provision for the payment thereof has been made. The
                  Company and its Subsidiaries have no material tax deficiency
                  or claim outstanding, assessed or, to the best of knowledge of
                  the Company, proposed against the Company and its
                  Subsidiaries.

         2.10     LICENSES, PERMITS AND AUTHORIZATIONS. The Company and its
                  Subsidiaries have all approvals, licenses or other permits of
                  all governmental or regulatory agencies, whether federal,
                  state or local, the absence of which would materially impair
                  the operations of their businesses taken as a whole as they
                  are presently being conducted. Set forth on SCHEDULE 2.11
                  hereto is a list of all California Department of Alcoholic
                  Beverage Control licenses and permits issued to the Company
                  and its Subsidiaries and in effect on the date hereof or which
                  will be in effect on the Closing Date.

3.       COVENANTS OF THE COMPANY. The Company hereby covenants and agrees as
         follows:


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         3.1      ANNUAL AND QUARTERLY FINANCIAL INFORMATION. The Company will
                  furnish the following reports to the Lender for so long as the
                  Loan is outstanding pursuant to this Agreement:

                  (a)      As soon as practicable after the end of each fiscal
                           year, and in any event within 120 days after the end
                           of each fiscal year, consolidated balance sheets of
                           the Company and its Subsidiaries, as of the end of
                           such fiscal year, and consolidated statements of
                           income and consolidated statements of changes in
                           financial position of the Company and its
                           Subsidiaries for such year, prepared in accordance
                           with generally accepted accounting principles and
                           setting forth in each case in comparative form the
                           figures for the previous fiscal year, all in
                           reasonable detail and certified by independent public
                           accountants of reputable standing selected by the
                           Company. Notwithstanding the foregoing, at any time
                           the Company is required to file reports pursuant to
                           the Exchange Act, the obligation contained in this
                           clause (a) shall be satisfied by delivery of a copy
                           of the Company's annual report on Form 10-K for each
                           fiscal year within fifteen Business Days of filing
                           thereof with the SEC.

                  (b)      As soon as practicable after the end of the first,
                           second and third quarterly accounting periods in each
                           fiscal year of the Company, and in any event within
                           45 days thereafter, a consolidated balance sheet of
                           the Company and its Subsidiaries as of the end of
                           each such quarterly period, and consolidated
                           statements of income and consolidated cash flow
                           statements of the Company and its Subsidiaries for
                           such period and for the current fiscal year to date,
                           prepared in accordance with generally accepted
                           accounting principles (subject to normal audit
                           adjustment and except that no supporting statements,
                           schedules, footnotes or other such disclosure
                           required by generally accepted accounting principles
                           need be included), all in reasonable detail and
                           signed, subject to changes resulting from year-end
                           audit adjustments, by the Chief Financial Officer of
                           the Company. Notwithstanding the foregoing, at any
                           time the Company is required to file reports pursuant
                           to the Exchange Act, the obligation contained in this
                           clause (b) shall be satisfied by delivery of a copy
                           of the Company's quarterly report on Form 10-Q for
                           each quarterly accounting period within fifteen
                           Business Days of filing thereof with the SEC.

                  (c)      The Company will furnish to the Lender promptly (but
                           in any event within fifteen Business Days) after the
                           mailing to its stockholders generally of each annual
                           report, proxy statement or other report or
                           communication, a copy of each such report, proxy
                           statement or other report or communication and
                           promptly (but in any event within fifteen business
                           days) after any filing by the Company with the SEC or
                           any governmental agency or agencies substituted for
                           such commission, or with any national securities
                           exchanges of any annual or periodic or special report
                           or registration statement, a copy of such report or
                           statement and copies of all press releases and other
                           statements made available generally by the Company to
                           the public concerning material developments in the
                           Company's business.

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         3.2      REIMBURSEMENT OF EXPENSES. The Company shall pay all expenses
                  of the Lender included in connection with this Agreement, the
                  Note and the enforcement thereof, including the reasonable
                  fees and expenses of counsel.

         3.3      LIMITATION ON INDEBTEDNESS. The Company will not incur
                  Indebtedness without the prior written consent of the Lender,
                  other than Indebtedness to the Senior Debtholders in
                  accordance with the terms of the Senior Debt Documents.
                  "INDEBTEDNESS" shall mean obligations for money borrowed,
                  obligations evidenced by bonds, debentures, notes or other
                  similar instruments, reimbursement obligations with respect to
                  letters of credit, bankers' acceptances or similar facilities,
                  the purchase price of property or services (excluding trade
                  accounts payable or accrued liabilities arising in the
                  ordinary course of business which are not overdue or which are
                  being contested in good faith), obligations under capitalized
                  leases, and guarantees and other similar obligations.

         3.4      SUBSEQUENT TRANSACTION. The Company agrees to use its
                  reasonable commercial efforts to effectuate the transactions
                  set forth in the Term Sheet attached hereto as Exhibit B on or
                  prior to February 21, 2003.

4.       EVENTS OF DEFAULT; REMEDIES.

         4.1      DEFAULTS AND REMEDIES. The occurrence of any one or more of
                  the following shall constitute an event of default hereunder
                  ("EVENT OF DEFAULT"), whatever the reason therefor:

                  (a)      the Company fails to pay any installment of principal
                           on any of the Notes on the date when due;

                  (b)      the Company fails to pay any installment of interest
                           on any of the Notes within (30) days after the date
                           when due;

                  (c)      the Company fails to perform, observe or comply with
                           any term, covenant or agreement contained in this
                           Agreement or the Note;

                  (d)      any representation or warranty in this Agreement or
                           any document delivered by the Company pursuant to
                           this Agreement, shall fail to be true and correct in
                           all material respects; or

                  (e)      proceedings for relief under any bankruptcy law or
                           any law for the relief of debtors ("DEBTOR RELIEF
                           LAW") shall be instituted by or against the Company,
                           or any order, judgment or dissolution or division;
                           PROVIDED, HOWEVER, with respect to an involuntary
                           petition in bankruptcy, such petition shall not have
                           been dismissed within sixty (60) days after the
                           filing of such petition;

                                       11
<PAGE>


then, and in any such event, so long as the same may be continuing, the Lender
may, by notice in writing to the Company declare all amounts owing with respect
to this Agreement or the Note to be, and it shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Company; PROVIDED
that in the event of any Event of Default specified in Section 5.1(e) all such
amounts shall become immediately due and payable automatically and without any
requirement of notice from the Lender.

         4.2      REMEDIES. Upon the occurrence and continuance of any Event of
                  Default, the Lender may proceed to protect, exercise, and
                  enforce its respective rights and remedies under this
                  Agreement and the Note and all rights available at law or in
                  equity.

         4.3      WAIVER OF DEFAULT. Any Event of Default waived in accordance
                  with Section 6.1 shall be deemed to have been cured and not to
                  be continuing; but no such waiver shall be deemed a continuing
                  waiver or shall extend to or affect any subsequent like
                  default or impair any rights arising therefrom.

5.       MISCELLANEOUS.

         5.1      AMENDMENT; WAIVERS. Any consent or approval required or
                  permitted by this Agreement to be given by the Lender may be
                  given, and any term of this Agreement may be amended, and the
                  performance or observance by the Company of any terms of this
                  Loan Agreement, or the continuance of any Event of Default may
                  be waived (either generally or in a particular instance and
                  either retroactively or prospectively) with, but only with,
                  the written consent of the Company and the Lender.
                  Notwithstanding the foregoing, no amendment, modification or
                  waiver shall, without the written consent of the Lender (i)
                  reduce or forgive the principal amount of the Loan, or reduce
                  the rate or rates of interest on the Note; (ii) postpone or
                  extend the Maturity Date or any other regularly scheduled
                  dates for payments of principal of, or interest on, the Loan,
                  or modify any of the provisions relating to amounts, timing or
                  application of payments or prepayments of the Loan (it being
                  understood that any vote to rescind any acceleration made
                  pursuant to Section 4.1 of amounts owing with respect to the
                  Loan shall require the approval of the Lender); (iii) amend or
                  waive any provision relating to the subordination of the
                  claims of the holders of the Junior Notes or any other
                  obligations subordinated to the Note; or (iv) amend or modify
                  the terms of the subordination of the Note to the claims of
                  the Senior Debtholders or agree to subordinate the Note to any
                  other obligations of the Company.

         5.2      SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided
                  hereinafter, all of the warranties and representations made by
                  the Company and the Lender in this Agreement or any document,
                  certificate, schedule or instrument delivered in connection
                  herewith shall survive the Closing and shall continue in
                  effect, notwithstanding any investigation by or on behalf of
                  the Lender.

                                       12
<PAGE>


         5.3      ENTIRE AGREEMENT; ASSIGNMENT. This Agreement and the Note (a)
                  constitute the entire agreement between the parties with
                  respect to the subject matter hereof and supersede all other
                  prior agreements and understandings, both written and oral,
                  among the parties or any of them with respect to the subject
                  matter hereof and (b) may be assigned, in whole or in part, by
                  the Lender or by operation of law.

         5.4      ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that
                  irreparable damage would occur in the event that any of the
                  provisions of this Agreement were not performed in accordance
                  with their specific terms or were otherwise breached. It is
                  accordingly agreed that the parties shall be entitled to an
                  injunction or injunctions to prevent breaches of this
                  Agreement and to enforce specifically the terms and provisions
                  hereof in any federal or state court located in the State of
                  California (as to which the parties agree to submit to
                  jurisdiction for the purposes of such action), this being in
                  addition to any other remedy to which they are entitled at law
                  or in equity.

         5.5      FURTHER ASSURANCES. The Company shall, at its expense and
                  without expense to the Lender, do, execute and deliver such
                  further acts and documents as the Lender may from time to time
                  reasonably request for the assurance and confirming unto the
                  Lender the rights hereby created or intended now or hereafter
                  so to be, or for carrying out the intention or facilitating
                  the performance of the terms of this Agreement and the Note.

         5.6      VALIDITY. The invalidity or unenforceability of any provision
                  of this Agreement shall not affect the validity or
                  enforceability of any other provisions of this Agreement,
                  which shall remain in full force and effect.

         5.7      NOTICES. All notices, requests, claims, demands and other
                  communications hereunder shall be in writing and shall be
                  deemed to have been duly given when delivered, if delivered in
                  person, when confirmation is received, if sent by telecopier,
                  on the next Business Day, if accepted for overnight delivery
                  by a nationally-known courier guaranteeing overnight delivery
                  service (charges prepaid), or three Business Days after being
                  deposited in the U.S. mail if sent by registered or certified
                  mail (postage prepaid, return receipt requested) to the
                  respective parties at the address or telecopier number set
                  forth opposite each such party's name on the signature page or
                  to such other address as the person to whom notice is given
                  may have previously furnished to the others in writing in the
                  manner set forth above.

         5.8      GOVERNING LAW. This Agreement shall be governed by and
                  construed in accordance with the laws of the State of
                  California regardless of the laws that might otherwise govern
                  under principles of conflicts of laws applicable thereto.

                                       13
<PAGE>


         5.9      DESCRIPTIVE HEADINGS. The descriptive headings herein are
                  inserted for convenience of reference only and are not
                  interpreted to be a part of or to affect the meaning or
                  interpretation of this Agreement.

         5.10     PARTIES IN INTEREST. This Agreement shall be binding upon and
                  inure solely to the benefit of each party hereto, and except
                  as expressly set forth in Section 1.6, nothing in this
                  Agreement, express or implied, is intended to confer upon any
                  other person any rights or remedies of any nature whatsoever
                  under or by reason of this Agreement.

         5.11     COUNTERPARTS. This Agreement may be executed in counterparts,
                  each of which shall be deemed to be an original, but all of
                  which shall constitute one and the same agreement.


                                       14
<PAGE>



                  IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the day and year first above written.

                                      CALIFORNIA BEACH RESTAURANTS, INC.



                                      By: /S/ Richard Powell
                                          ------------------------------
                                              Richard Powell
                                              President

                                      17383 Sunset Boulevard, Suite 140
                                      Pacific Palisades, CA  90272
                                      Attention:  President
                           Address:   Telecopier Number: (310) 459-9356

                                      THE LENDER:


                                      RLH SURF, a California General Partnership


                                      By: /S/ J. Christopher Lewis
                                         --------------------------------
                                              J. Christopher Lewis
                                              General Partner

                                      RLH Surf
                                      300 S. Grand Avenue, 29th Floor
                                      Los Angeles, California  90071
                                      Attention:  J. Christopher Lewis
Address for Notices:                  Telecopier Number: (213) 229-8597



                                       15

</TEXT>
</DOCUMENT>
