CHICAGO PIZZA & BREWERY INC, SB-2/A, 1996-08-22

CHICAGO PIZZA & BREWERY INC
SB-2/A, 1996-08-22
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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 1996

REGISTRATION NO. 333-5182-LA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2
TO
FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CHICAGO PIZZA & BREWERY, INC.
(Exact name of small business issuer as specified in its charter)

26131 MARGUERITE PARKWAY, SUITE A
MISSION VIEJO, CALIFORNIA 92692
(714) 367-8616
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

CALIFORNIA 5812 33-0485615
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)

PAUL A. MOTENKO
CHIEF EXECUTIVE OFFICER
CHICAGO PIZZA & BREWERY, INC.
26131 MARGUERITE PARKWAY
SUITE A
MISSION VIEJO, CALIFORNIA 92692
(714) 367-8616
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:

STEVEN J. INSEL, Esq. CHANNING D. JOHNSON, Esq.
Jeffer, Mangels, Butler & Marmaro LLP Kaye, Scholer, Fierman, Hays &
2121 Avenue of the Stars Handler, LLP
10th Floor 1999 Avenue of the Stars
Los Angeles, California 90067 Suite 1600
(310) 203-8080 Los Angeles, California 90067
Fax: (310) 203-0567 (310) 788-1000
Fax: (310) 788-1200

------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/

If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same Offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
(Continued on next page)

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING
SECURITIES TO BE REGISTERED BE REGISTERED PER SECURITY (1) PRICE (1)
<S> <C> <C> <C>
Common Stock, no par value ("Common Stock")............ 3,491,864 shares (2) $6.00 $20,951,184.00
Common Stock Purchase Warrants (the "Redeemable
Warrants")............................................ 11,739,584 warrants (3) $0.25 $2,934,896.00
Common Stock issuable upon exercise of the Redeemable
Warrants.............................................. 11,739,584 shares (4) $6.60 $77,481,254.00
Representative's Warrants.............................. 1 warrant (5) $50.00 $50.00
Common Stock issuable upon exercise of Representative's
Warrant............................................... 150,000 shares $7.20 $1,080,000.00
Redeemable Warrants issuable upon exercise of the
Representative's Warrants............................. 150,000 warrants $0.30 $45,000.00
Common Stock issuable upon exercise of Redeemable
Warrants issuable upon exercise of the
Representative's Warrants............................. 150,000 shares $6.60 $990,000.00
Total Registration Fee.................................

<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, no par value ("Common Stock")............ $7,224.53
Common Stock Purchase Warrants (the "Redeemable
Warrants")............................................ $1,012.03
Common Stock issuable upon exercise of the Redeemable
Warrants.............................................. $26,717.67
Representative's Warrants.............................. $.02
Common Stock issuable upon exercise of Representative's
Warrant............................................... $372.41
Redeemable Warrants issuable upon exercise of the
Representative's Warrants............................. $15.52
Common Stock issuable upon exercise of Redeemable
Warrants issuable upon exercise of the
Representative's Warrants............................. $341.38
Total Registration Fee................................. $35,683.56*
</TABLE>

* Previously paid.

(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a) under the Securities Act of 1933.

(2) Includes: (i) 1,500,000 shares of Common Stock registered for the account of
the Registrant, (ii) 1,766,864 shares of Common Stock registered for the
account of certain Selling Security Holders (as hereinafter defined) and
(iii) 225,000 shares of Common Stock which the Underwriters have the option
to purchase to cover over-allotments, if any.

(3) Includes: (i) 1,500,000 redeemable warrants registered for the account of
the Registrant (the "Redeemable Warrants"), (ii) 10,014,584 selling security
holders' Redeemable Warrants (the "Selling Security Redeemable Warrants")
which include 4,700,000 special warrants which convert into Redeemable
Warrants upon sale by the current holders and (iii) 225,000 Redeemable
Warrants which the Underwriters have the option to purchase to cover
over-allotments, if any.

(4) Includes: (i) 1,500,000 shares of Common Stock issuable upon exercise of
Redeemable Warrants registered for the account of the Registrant, (ii)
10,014,584 shares of Common Stock issuable upon exercise of Selling Security
Holder Redeemable Warrants and (iii) 225,000 shares of Common Stock issuable
upon exercise of Redeemable Warrants which the Underwriters have the option
to purchase to cover over-allotments, if any.

(5) To be issued to the Representative of the Underwriters.

Pursuant to Rule 416 under the Securities Act of 1933, there are also being
registered hereby such additional indeterminate number of shares of Common Stock
as may become issuable by reason of stock splits, stock dividends and similar
anti-dilutive adjustments as set forth in the Redeemable Warrants and the
Representative's Warrants.
<PAGE>
EXPLANATORY NOTE

This Registration Statement contains two prospectuses.

The first prospectus forming a part of this Registration Statement is to be
used in connection with the underwritten public offering of: 1,725,000 shares of
the Registrant's Common Stock (including 225,000 shares of Common Stock subject
to the Underwriters' over-allotment option); 1,725,000 of the Registrant's
Redeemable Warrants (including 225,000 Redeemable Warrants subject to the
Underwriters' over-allotment option); 1,725,000 shares of Common Stock issuable
upon exercise of the Registrant's Redeemable Warrants (including 225,000 shares
of Common Stock issuable upon exercise of the Redeemable Warrants subject to the
Underwriters' over-allotment option); 150,000 Representative's Warrants; 150,000
shares of Common Stock issuable upon exercise of the Representative's Warrants;
150,000 Redeemable Warrants issuable upon exercise of the Representative's
Warrants; and 150,000 Shares of Common Stock issuable upon exercise of the
Redeemable Warrants issuable upon exercise of the Representative's Warrants, and
immediately follows.

The second prospectus forming a part of this Registration Statement is to be
used in connection with the sale from time to time by certain nonaffiliated
selling security holders and by one independent director of the Company (the
"Selling Director") (the Selling Director and the nonaffiliated selling security
holders are collectively referred to herein as the "Selling Security Holders")
of in the aggregate: 1,766,864 shares of Common Stock (the "Selling Security
Holders' Shares"); 10,014,584 Selling Security Holders' Redeemable Warrants (the
"Selling Security Holders' Redeemable Warrants") which include 4,700,000 special
warrants which convert into Redeemable Warrants upon sale by current holders;
and 10,014,584 shares of Common Stock issuable by the Company upon exercise of
the Selling Security Holders' Redeemable Warrants. With respect to the Selling
Director, only 39,258 shares of Common Stock which the Selling Director
purchased in a January 1995 private placement by the Company and 300,000
warrants are included in the Selling Security Holders Shares and Selling
Security Holders Redeemable Warrants, respectively. The second prospectus will
consist of (i) the cover page and inside cover page immediately following the
first prospectus, (ii) pages 1 through 67 of the first prospectus (other than
the sections entitled "Resale of Outstanding Securities" and "Underwriting") and
pages F-1 through F-31 of the first prospectus, (iii) pages SS-1 through SS-3
(which will appear in place of the section entitled "Resale of Outstanding
Securities"), (iv) pages SS-3 through SS-4 (which will appear in place of the
section entitled "Underwriting") and (v) the back cover page, which is the last
page of the second prospectus.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

SUBJECT TO COMPLETION, DATED AUGUST 22, 1996

PROSPECTUS

[LOGO]
CHICAGO PIZZA & BREWERY, INC.

1,500,000 SHARES OF COMMON STOCK AND
1,500,000 REDEEMABLE WARRANTS
------------------

Chicago Pizza & Brewery, Inc. (the "Company" or "BJ's") hereby offers
1,500,000 shares (the "Shares") of common stock of the Company, no par value
(the "Common Stock"), and 1,500,000 redeemable warrants of the Company (the
"Redeemable Warrants") (the Shares and the Redeemable Warrants are sometimes
collectively referred to herein as the "Securities"). The Shares and the
Redeemable Warrants will be separately tradeable immediately upon issuance and
may be purchased separately. It is currently anticipated that the initial public
offering price will be between $5.00 and $6.00 per Share and $0.25 per
Redeemable Warrant, respectively. Each Redeemable Warrant entitles the holder
thereof to purchase one share of Common Stock at a purchase price equal to 110
percent of the initial public offering price of the Shares, subject to
adjustment, at any time during the 54-month period commencing one year after the
date of this Prospectus, and is redeemable by the Company at a redemption price
of $.25 per Redeemable Warrant commencing one year after the date of this
Prospectus, provided that the average closing bid price of the Common Stock
equals or exceeds 140 percent of the initial public offering price per share for
any 20 trading days within a period of 30 consecutive trading days ending on the
fifth trading day prior to the date of the notice of redemption. See
"Description of Securities -- Redeemable Warrants."

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION.
SEE "RISK FACTORS" AND "DILUTION" COMMENCING ON PAGES 11 AND 21, RESPECTIVELY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share.......................... $ $ $
Per Redeemable Warrant............. $ $ $
Total (3).......................... $ $ $
</TABLE>

(1) Does not include additional compensation to the Representative in the form
of a nonaccountable expense allowance. For indemnification arrangements
with, and additional compensation payable to, the Underwriters, see
"Underwriting."

(2) Before deducting expenses of this Offering payable by the Company, estimated
at approximately $1,058,750 in the aggregate, including the Representative's
nonaccountable expense allowance. See "Underwriting."

(3) For the purpose of covering over-allotments, if any, the Company has granted
to the Underwriters an option, exercisable within 45 days from the date of
this Prospectus, to purchase up to 225,000 additional shares of Common Stock
and/or up to 225,000 additional Redeemable Warrants. If such over-allotment
options are exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."

The Securities are offered by the Underwriters, when, as and if delivered to
and accepted and subject to their right to withdraw, cancel, or modify this
Offering and to reject any orders in whole or in part. It is expected that
delivery of the Securities will be made on or about , 1996.

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

THE BOSTON GROUP, L.P.

The date of this Prospectus is , 1996
<PAGE>
(THIS IS A NARRATIVE DESCRIPTION OF THE PHOTOS)

[On the front cover will be the logo with pictures of pizza boxes as well as
of a menu cover. On the first inside flap there will be a picture of the
Westwood restaurant. On the further inside flap of the inner flap will be a map
of locations and a picture collage of the Westwood restaurant interior with
photos of the brewmaster looking through a microscope as well as photos of food.
On the other inside front flap there will be a picture of the Brea microbrewery
and a collage with employees pouring beer, photographs of food, the Brea
restaurant exterior and employees in uniform. On the inside back cover will be a
photograph of the bar at Brea with the microbrewery showing in the background.]

Prior to this Offering, there has been no public market for the Securities
and there is no assurance that such a market for the Securities will develop or,
if a market develops, that it will be sustained. The Company has applied for
approval for listing of the Common Stock and Redeemable Warrants on the Nasdaq
Small-Cap Market ("Nasdaq") under the symbols CHGO and CHGOW, respectively. The
initial public offering prices for the Shares and Redeemable Warrants and the
exercise price of the Redeemable Warrants have been determined by negotiation
between the Company and The Boston Group, L.P., as representative of the several
Underwriters (the "Representative"), and are not necessarily related to the
Company's asset value, net worth or other established criteria of value. See
"Risk Factors" and "Underwriting."

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND/OR THE REDEEMABLE WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

The Company intends to furnish its security holders annual reports
containing audited consolidated financial statements with a report thereon by
independent accountants, and such other periodic reports as the Company may
determine to be appropriate or as required by law.
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES
THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

Chicago Pizza & Brewery, Inc. (the "Company" or "BJ's") owns eight
restaurants in Southern California (the "California Restaurants") and an
interest in one restaurant in Lahaina, Maui, each of which are currently
operated as either a BJ'S PIZZA, GRILL & BREWERY or a BJ'S PIZZA & GRILL. The
Company recently acquired 19 additional restaurants in Oregon and Washington
(the "Northwest Restaurants") which it plans to convert into BJ's restaurants.
The Company has recently completed a refurbishment program and the expansion of
its menu around its core pizza products in its California Restaurants. In
addition, the Company has introduced handcrafted, micro-brewed beers in its
California Restaurants and has built a micro-brewery in Brea, California. The
Company plans to refurbish the Northwest Restaurants and add its award-winning
pizza products, some or all of the expanded BJ's menu and handcrafted,
micro-brewed beers to the menu offerings at the Northwest Restaurants. If this
plan can be successfully executed, all 28 of the Company's restaurants will fit
into one of the three following BJ's concepts:

- BJ'S PIZZA, GRILL & BREWERY is designed to provide a dining experience in
an operating micro-brewery environment where a variety of proprietary,
hand-crafted beers are produced on-site. The menu features the core pizza
products surrounded by a selection of appetizers, entrees, pastas,
sandwiches, specialty salads and desserts. Currently, the Company operates
one of its California Restaurants as, and plans to convert four of its
Northwest Restaurants into, the BJ'S PIZZA, GRILL & BREWERY concept, as
well as developing a BJ'S PIZZA, GRILL & BREWERY restaurant in Boulder,
Colorado.

- BJ'S PIZZA & GRILL is designed to provide a casual dining experience with
table-service featuring a menu of pizza, pasta, sandwiches, salads and
desserts. Currently, the Company operates seven of its California
Restaurants and the Lahaina, Maui restaurant as, and plans to convert
seven of its Northwest Restaurants into, the BJ'S PIZZA & GRILL concept.

- BJ'S PIZZA is designed to provide an informal dining experience with
counter-service and a menu featuring pizza and a limited selection of
pastas, sandwiches and salads. Currently, the Company plans to operate
none of the California Restaurants as, and plans to convert eight of the
Northwest Restaurants into, the BJ'S PIZZA concept.

Management believes that having three concepts, which can be utilized in
alternative locations, facilities and markets, provides the Company a broader
scope of potential acquisitions and development sites.

According to certain newspaper polls, BJ's pizza is considered among the
best in Orange County, California. It has won numerous awards over the past
years from publications such as the Orange County edition of the Los Angeles
Times, Orange Coast Magazine, Daily Pilot and The Metropolitan, and BJ's pizza
was featured in 1994 on the TV show "Live in LA" as one of the five best pizzas
in the Los Angeles area. Finally, BJ's pizza was voted number one by the readers
of the Orange County Register, a leading Orange County, California-based
newspaper and by the readers of the Maui News.

The Company was formed in 1991 to assume the management of five "BJ's
Chicago Pizzeria" restaurants and to develop additional BJ's restaurants.
Between 1992 and 1995, the Company developed five additional restaurants,
purchased three of those original five restaurants that it managed and
discontinued one of those that it had developed. As a result of these
transactions, at the end of 1995, the Company owned restaurants in California
located in La Jolla Village, Laguna Beach, Belmont Shore, Seal Beach, Huntington
Beach and Balboa in Newport Beach, as well as an interest in a restaurant in
Lahaina, Maui.

3
<PAGE>
Beginning in November 1995, the Company embarked on a campaign to broaden
its customer base by: (i) surrounding its core pizza product with a more
expansive menu including appetizers, grilled sandwiches, specialty salads and
pastas, ii) adding hand-crafted, micro-brewed beers through on-site
micro-breweries in certain locations and the sale of internally-produced beer
through other Company restaurants and iii) differentiating the BJ's identity and
expanding merchandising opportunities through a comprehensive new logo and
identity program, a new interior design concept and redesigned signage.

The Company has also sought to expand through acquisitions and conversions,
such as the acquisition of the Northwest Restaurants and the Brea, California
restaurant. The Company intends to seek other acquisitions if financing is
available.

The first BJ'S PIZZA GRILL & BREWERY opened in Brea, California in April
1996. This 10,000-square-foot restaurant features elaborate brick walls and
archways, high molded tin ceilings, warm lighting and industrial railings. The
on-premises brewing equipment includes a 30-barrel, copper-clad kettle,
60-barrel, stainless steel fermentation tank, kegging equipment and a
40,000-pound-capacity corrugated metal grain silo located at the front entrance
to the restaurant. Management believes the brewery capacity is sufficient to
supply beer for all of the Company's existing Southern California restaurants.
Management believes the low production cost relative to purchased beer and the
premium price often obtained for micro-brewed beer can significantly improve
gross margins.

The Company's current objectives after the closing of this Offering are to
remodel and refurbish each of the Northwest Restaurants into one of the three
BJ's concepts over the next 12 to 18 months while it consolidates the management
of the Northwest Restaurants and the rest of the Company's operations and
attempts to reduce overhead. The Company also plans to acquire and develop
additional BJ's restaurants in order to expand operations to other cities and
towns consistent with the Company's location strategy and market niche. In this
regard, the Company has executed a lease for an approximately 5,500-square-foot
facility in the Pearl Street Mall, a popular, high-traffic pedestrian promenade
in Boulder, Colorado. The Company expects to open a BJ'S PIZZA, GRILL & BREWERY
in this location in Fall of 1996. No assurance can be given that the Company's
objectives can be achieved or that sufficient capital will be available to
finance the Company's business plan. See "Risk Factors."

The Company is organized under the laws of the State of California. The
Company's offices are located at 26131 Marguerite Parkway, Suite A, Mission
Viejo, California 92692. Its telephone number is (714) 367-8616.

4
<PAGE>
THE OFFERING (1)

<TABLE>
<S> <C>
Securities Offered by the Company........ 1,500,000 shares of Common Stock and 1,500,000
Redeemable Warrants. The Common Stock and
Redeemable Warrants can be purchased and will be
tradable separately upon issuance. See
"Description of Securities."
Terms of the Redeemable Warrants......... Each Redeemable Warrant entitles the holder
thereof to purchase one share of Common Stock at
a price equal to 110% of the initial public
offering price of the Shares, subject to
adjustment, during the 54-month period
commencing one year after the date of this
Prospectus.
Redemption of the Redeemable Warrants.... Commencing one year after the date of this
Prospectus, the Redeemable Warrants will be
subject to redemption at the Company's option at
$.25 per Redeemable Warrant if the average
closing bid price of the Common Stock equals or
exceeds 140 percent of the initial public
offering price per Share for any 20 trading days
within a period of 30 consecutive trading days
ending on the fifth trading day prior to the
date of the notice of redemption. In the event
of a proposed redemption by the Company, the
Company will provide the holders with a 30-day
notice, during which period the holders will
have the right to exercise the Redeemable
Warrants in lieu of redemption. See "Description
of Securities -- Redeemable Warrants."
Shares of Common Stock Outstanding:
Before the Offering.................... 4,608,321 shares (1)
After the Offering..................... 6,108,321 shares (1)
Redeemable Warrants Outstanding:
Before the Offering.................... 10,014,584 Redeemable Warrants (1)
After the Offering..................... 11,514,584 Redeemable Warrants (1)
Use of Proceeds.......................... To refurbish certain existing restaurants, to
convert the Northwest Restaurants to one of the
BJ's concepts, to repay certain indebtedness, to
acquire and/or develop additional restaurants
and to use for working capital purposes. See
"Use of Proceeds."
Risk Factors............................. An investment in the Common Stock and Redeemable
Warrants involves a high degree of risk and
immediate substantial dilution. See "Risk
Factors" and "Dilution."
Securities Being Registered for the
Account of the Selling Security
Holders.................................. 1,766,864 shares of Common Stock, 10,014,584
Redeemable Warrants (hereinafter "Selling
Security Holders' Redeemable Warrants") and
10,014,584 shares of Common Stock issuable upon
exercise of such Selling Security Holders'
</TABLE>

5
<PAGE>

<TABLE>
<S> <C>
Redeemable Warrants are being registered and may
be sold by the Selling Security Holders. The
Company will not receive any of the proceeds
from sales by the Selling Security Holders,
although it will receive the exercise price if
the Selling Security Holders' Redeemable
Warrants are exercised. The Selling Security
Holders' Shares and the Selling Security
Holders' Redeemable Warrants are not being
underwritten by the Underwriters. See "Resale of
Outstanding Securities" and "Underwriting."
Nasdaq Small-Cap Market Symbols (2):
Common Stock............................. CHGO
Redeemable Warrants...................... CHGOW
</TABLE>

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

(1) Unless the context otherwise requires, the term "Company" refers to Chicago
Pizza & Brewery, Inc. and its subsidiaries, Chicago Pizza Northwest,
Inc.("CPNI"), a Washington corporation, and Blue Max, Inc., a Hawaii
corporation, as well as BJ's Lahaina, L.P., a California limited partnership
which owns the Company's Lahaina, Maui restaurant with the Company as
managing general partner and Blue Max, Inc. as the co-general partner.
Unless the context otherwise requires, all share and per-share information
in this Prospectus gives effect to a 19,000-for-one stock split effected in
December 1994 and a .34896-for-one reverse stock split effected in May 1995.
Unless otherwise indicated, such share and per-share information does not
give effect to: (i) the exercise of the Underwriters' over-allotment options
to purchase up to 225,000 Shares; (ii) the issuance of 1,500,000 shares of
Common Stock issuable upon exercise of the Redeemable Warrants being offered
by the Company; (iii) the issuance of 10,014,584 shares of Common Stock
issuable upon exercise of the Selling Security Holders' Redeemable Warrants
(see "Shares Eligible for Future Sale"); (iv) the issuance of 225,000 shares
of Common Stock issuable upon exercise of the Redeemable Warrants included
in the Underwriters' over-allotment option; (v) the issuance upon exercise
of the Representative's Warrants of 150,000 shares of Common Stock; (vi) the
issuance upon exercise of Redeemable Warrants issuable upon exercise of the
Representative's Warrants of 150,000 shares of Common Stock or (vii) 600,000
shares of Common Stock reserved for issuance pursuant to the Company's 1996
Stock Option Plan.

(2) There is no assurance that the Common Stock or Redeemable Warrants will be
approved for listing in the Nasdaq Small-Cap Market or that a trading public
market will develop, or, if developed, will be sustained. See "Risk Factors
-- Absence of Public Market" and "Lack of Correlation between Offering Price
and Value of Shares or Company."

6
<PAGE>
SUMMARY COMBINED AND CONSOLIDATED FINANCIAL AND RESTAURANT DATA

The following table sets forth summary combined (1994) and consolidated
(1995) financial and restaurant data of Chicago Pizza & Brewery, Inc., excluding
the assets of Chicago Pizza Northwest, Inc. ("CPNI"), the Company's wholly-owned
subsidiary which owns the 26 restaurants acquired from Pietro's Corp., a
Washington corporation. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation -- Pietro's Corp.'s Business Related to
Purchased Assets." Chicago Pizza & Brewery, Inc., is referred to as the
"Parent." The 26 restaurants acquired and owned by CPNI on March 29, 1996 are
referred to as the "Purchased Assets." The following tables also set forth
summary financial and restaurant operating data for the Parent and the Purchased
Assets on a pro forma combined basis as if the Purchased Assets were acquired on
January 1, 1995. The summary financial data in the table are derived from the
financial statements of the Parent and the Purchased Assets and the pro forma
financial statements. The data should be read in conjunction with the financial
statements, related notes and other financial information included elsewhere
herein. The pro forma financial statements may not be indicative of the results
which may be obtained by the Company in any future period.

<TABLE>
<CAPTION>
PRO FORMA
PURCHASED COMBINED
THE PARENT (1) ASSETS (2)(5) YEAR ENDED
YEAR ENDED DECEMBER YEAR ENDED DECEMBER
31, DECEMBER 25, 31,
-------------------- ------------- -----------
1994 1995 1995 1995
--------- --------- ------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AND
RESTAURANT OPERATING DATA)

<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (1)
Revenues................................ $ 6,453 $ 6,586 $ 14,634 $ 21,220
Cost of sales........................... 1,638 1,848 4,277 6,125
--------- --------- ------------- -----------
Gross profit............................ 4,815 4,738 10,357 15,095
Cost and expenses....................... 5,338 5,789 10,808 16,597
--------- --------- ------------- -----------
Loss from operations.................... (523) (1,051) (451) (1,502 )
Net loss................................ (550) (1,606) (451) (2,057 )
Pro forma net loss (3).................. (2,057 )
Pro forma net loss per common share
(4).................................... (.45 )
Pro forma weighted average common shares
outstanding (4)........................ 4,608,321

RESTAURANT OPERATING DATA (5):
Average sales per restaurant open for
full period (6)........................ $ 888,000 $ 854,000 $ 578,000 $ 616,000
Total number of restaurants open at end
of each period......................... 10 7 26 33
Average sales per square foot for
restaurants open for full period (7)... $ 332 $ 320 $ 114 $ 130
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA COMBINED
PARENT (1) PURCHASED ASSETS (2) AS OF DECEMBER 31,
AS OF DECEMBER 31, 1995 AS OF DECEMBER 25, 1995 1995
----------------------- ----------------------- ----------------------
<S> <C> <C> <C>
BALANCE SHEET DATA: (1)
Working capital (deficit).................. $ 22 $ (247) $ (225)
Intangible assets, net..................... 5,558 5,558
Total assets............................... 9,943 1,541 11,484
Total long-term debt (including current
portion).................................. 4,127 4,127
Minority interest (8)...................... 253 253
Shareholders' equity....................... 4,023 1,091 5,114
</TABLE>

- ------------------------
(1) Statement of Operations Data includes the operating results for the combined
(1994) and consolidated (1995) information for the Parent and the combined
information for the Purchased Assets.

7
<PAGE>

Balance Sheet Data includes the consolidated balance sheet information for
the Parent and the combined balance sheet information for the Purchased
Assets. The 1994 information for the Parent is presented on a combined basis
due to common ownership and control. The Parent acquired the Purchased
Assets on March 29, 1996.

(2) The Purchased Assets represent the 26 restaurants acquired (the "Pietro's
Acquisition") from the former Pietro's Corp., a Washington corporation
("Pietro's"). The financial results for the Purchased Assets represent the
Pietro's Corp.'s Business Related to Purchased Assets acquired by the
Parent. On May 15, 1996 the Parent agreed to sell seven of the restaurants
purchased from Pietro's. The sale was completed during the second quarter of
1996. The operating results of those seven restaurants are still included in
the table. The Company recognized no gain or loss on the sale and adjusted
the goodwill recorded in the acquisition of the Purchased Assets. The sales
for the seven restaurants which the Company sold totaled approximately
$3,492,000 and $3,683,000 for the years ended December 25, 1995 and December
26, 1994, respectively. Operating profit for the seven restaurants excluding
overhead allocation totaled approximately $268,000 and $313,000 for the
years ended December 25, 1995 and December 26, 1994, respectively. Loss
after overhead allocation relating to the seven restaurants totaled
approximately $327,000 and $454,000 for the years ended December 25, 1995
and December 26, 1994, respectively. See the Combined Financial Statements,
Pietro's Corp.'s Business Related to Purchased Assets.

(3) Presented on page 26 of this Prospectus is a more detailed Combined Pro
Forma Statement of Operations showing the net loss as if the Parent had
acquired the Purchased Assets as of the beginning of the period (January 1,
1995).

(4) In December 1994, the Parent effected a 19,000-for-one stock split of its
Common Stock. In May, 1995, the Parent effected a .34896-for-one reverse
stock split of its Common Stock. The weighted-average shares outstanding are
based on the pro forma weighted-average shares outstanding of 4,608,321.

(5) Restaurant Operating Data includes the financial results for restaurants
open for the entire comparable period. The following restaurants were opened
or closed during the period and are therefore excluded due to
noncomparability: Huntington Beach; Seal Beach; and Lahaina, Maui. The
Parent managed but did not subsequently purchase the Santa Ana and San Juan
Capistrano restaurants; instead, they were closed in 1995 along with the La
Jolla -- Prospect restaurant. The Purchased Assets include 26 former
Pietro's restaurants, but the Woodstock restaurant, which opened in 1995 is
excluded as noncomparable.

(6) Determined as total sales divided by the number of all restaurants open for
the full period. Restaurants open for the full period in both years
presented totaled four for the Parent and 25 for the Purchased Assets. The
seven restaurants owned and operated by the Parent for all of 1995 averaged
$916,000 in sales for that period.

(7) Determined as total sales divided by total square feet for all restaurants
open for the full period. Restaurants open for the full period in both years
presented totaled four for the Parent and 25 for the Purchased Assets. The
seven restaurants owned and operated by the Parent for all of 1995 averaged
sales of $323 per square foot for that period.

(8) The minority interest represents the 46.32% limited partners' share in
equity and the accumulated results from operations for the Lahaina, Maui
restaurant, not owned directly by the Parent.

8
<PAGE>

<TABLE>
<CAPTION>
THE PARENT (1)
SIX-MONTH
PERIODS PURCHASED ASSETS (2) PRO FORMA
ENDED JUNE 30, THREE-MONTH COMBINED
----------------------------- PERIOD ENDED JUNE 30,
1995 1996 MARCH 29, 1996 1996 (3)
------------ ------------ --------------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AND
RESTAURANT OPERATING DATA)

<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (1)
Revenues................................ $ 3,207 $ 8,308 $ 3,780 $ 12,088
Cost of sales........................... 894 2,614 1,188 3,802
------------ ------------ ------- --------------
Gross profit............................ 2,313 5,694 2,592 8,286
Cost and expenses....................... 2,745 6,382 2,758 9,140
------------ ------------ ------- --------------
Loss from operations.................... (432) (688) (166) (854)
Net loss................................ (798) (1,075) (166) (1,241)
Pro forma net loss (3).................. (1,241)
Pro forma net loss per common share
(4).................................... (0.27)
Pro forma weighted average common shares
outstanding (4)........................ 4,608,321

RESTAURANT OPERATING DATA: (5)
Average sales per restaurant open for
full period............................ $ 434,000(6) $ 517,000(6) N/A $ 373,000(7)
Total number of restaurants open at end
of each period......................... 7 28 N/A 28
Average sales per square foot for
restaurants open for full period....... $ 153(8) $ 182(8) N/A $ 79(9)
</TABLE>

<TABLE>
<CAPTION>
PARENT (1) ADJUSTED (10)
AS OF JUNE 30, AS OF JUNE 30,
1996 1996
------------------ ------------------
<S> <C> <C>
BALANCE SHEET DATA: (1)
Working capital (deficit)................................................. $ (5,206)(11) $ 4,280
Intangible assets, net.................................................... 5,790 5,790
Total assets.............................................................. 14,890 20,571
Total long-term debt (including current portion).......................... 8,146 4,416
Minority interest (12).................................................... 254 254
Shareholders' equity...................................................... 2,999 12,485
</TABLE>

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

(1) The results of operations of the Purchased Assets for the period from March
30, 1996 (the day after the date of acquisition) to June 30, 1996, are
included in the results of operation of the Parent for the six-month period
ended June 30, 1996. The Balance Sheet Data for the Parent as of June 30,
1996 include the balance sheet information for the Parent and the Purchased
Assets.

(2) The data shown in this column represents operating data of the Purchased
Assets from January 1 through March 29, 1996, the date the Purchased Assets
were acquired by the Company. The Purchased Assets represent the 26
restaurants acquired from the former Pietro's. The financial results for the
Purchased Assets represent the Pietro's Corp.'s Business Related to
Purchased Assets acquired by the Parent. On May 15, 1996 the Parent agreed
to sell seven of the restaurants purchased from Pietro's. The sale was
completed during the second quarter of 1996. The operating results of those
seven restaurants are included in the table until the date of sale. The
Company recognized no gain or loss on the sale and adjusted the goodwill
recorded in the acquisition of the Purchased Assets. The sales for the seven
restaurants sold totaled approximately $841,000 for the three-month period
ended March 29, 1996 and $1,533,000 for the six-month period ended June 30,
1996. Operating profit excluding overhead allocation totaled approximately
$31,000 for the three-month period ended March 29, 1996 and $9,000 for the
six-

9
<PAGE>

month period ended June 30, 1996. Loss after overhead allocation relating to
the seven restaurants totaled approximately $54,000 for the three-month
period ended March 29, 1996 and $133,000 for the six-month period ended June
30, 1996. See the Combined Financial Statements, Pietro's Corp.'s Business
Related to Purchased Assets.

(3) Presented on page 26 of this Prospectus is pro forma net loss as if the
Parent had acquired the Purchased Assets as of the beginning of the period
(January 1, 1995).

(4) In December 1994, the Parent effected a 19,000-for-one stock split of its
Common Stock. In May 1995, the Parent effected a .34896-for-one reverse
stock split of its Common Stock. The weighted average shares outstanding are
based on the pro forma weighted average shares outstanding.

(5) Restaurant Operating Data includes the financial results for restaurants
open for the entire comparable periods. The Westwood Village in Los Angeles,
Brea and restaurants comprising the Purchased Assets were opened during the
periods. The La Jolla -- Prospect restaurant was closed. Both openings and
closures were excluded due to noncomparability. With respect to the
Purchased Assets, the seven restaurants sold during the second quarter 1996
and the Woodstock, Oregon restaurant, were excluded due to noncomparability.

(6) Determined as total sales divided by the number of all restaurants open for
the full period. Restaurants open for the full periods presented for the
Parent totaled seven for the Parent, and none for the Purchased Assets.

(7) Determined as total sales divided by the number of all restaurants open for
the full period. Restaurants open for the full periods presented in the Pro
Forma Combined Data totaled seven for the Parent and 18 for the Purchased
Assets.

(8) Determined as total sales divided by total square feet for all restaurants
open for the full period. Restaurants open for the full periods presented
for the Parent totaled seven for the Parent and none for the Purchased
Assets, because the operations of the Purchased Assets are only included for
the period from March 30, 1996 to June 30, 1996.

(9) Determined as total sales divided by total square feet for all restaurants
open for the full period. Restaurants open for the full periods presented in
the Pro Forma Combined Data totaled seven for the Parent and 18 for the
Purchased Assets, because the pro forma data includes the operations of the
Parent and the Purchased Assets for the full period from January 1, 1996
through June 30, 1996.

(10) As adjusted to reflect the issuance and sale of the 1,500,000 shares of
Common Stock at the assumed public offering price of $5.50 per share and
1,500,000 warrants at $0.25 per warrant, net of estimated expenses of the
offering, the repayment of certain indebtedness with such proceeds, and the
conversion of $3,000,000 in certain Notes Payable to Related Parties and
accrued interest of $75,000 thereon into 750,000 shares of Common Stock and
4,500,000 Special Warrants (as hereinafter defined). See also Note 10 below.
The as adjusted amounts do not reflect the issuance and sale of up to
225,000 shares of Common Stock by the Company to cover over-allotments, if
any, or the exercise of the Representative's Warrants. See "Use of
Proceeds."

(11) Working capital includes certain Notes Payable to Related Parties resulting
from the Purchased Asset acquisition totaling $3,000,000 which are
convertible at the time of the Offering to 750,000 shares and 4,500,000
Special Warrants (as hereinafter defined). These securities are
collateralized by the stock of the Purchased Assets and have a stated
interest rate of ten percent per annum. See the Combined Financial
Statements and "Certain Transactions -- Pietro's Acquisition."

(12) The minority interest represents the 46.32% limited partners' share in the
equity and the accumulated results from operation for the Lahaina, Maui
restaurant, not owned directly by the Parent.

10
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION. IN ADDITION TO THE OTHER INFORMATION
CONTAINED IN THE PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS BEFORE MAKING AN INVESTMENT.

LIMITED OPERATING HISTORY. The Company was founded in 1991 to assume the
management of five BJ's Chicago Pizzeria restaurants and opened its first new
BJ's restaurant in 1992. Of the seven restaurants developed by the Company, as
opposed to pre-existing restaurants for which the Company assumed management,
one was opened in 1992, one in 1993, three in 1994, and two in 1996. The Company
has also only recently acquired an additional 26 restaurants, 19 of which the
Company has retained. Development efforts for the retained restaurants have yet
to begin. Accordingly, the Company has a limited operating history and there can
be no assurance that its restaurants, or the Company as a whole, will be
profitable in the future. See "Business."

PAST OPERATING LOSSES. The Company sustained net losses of $550,000 and
$1,606,000 for the years ended December 31, 1994 and 1995, respectively, and a
net loss of $1,075,000 for the six-month period ended June 30, 1996. See
generally "Management's Discussion and Analysis of Financial Condition and
Results of Operations." In addition, the Pietro's Corp.'s Business Related to
Purchased Assets sustained net losses of $833,000 and $451,000 for the years
ended December 26, 1994 and December 25, 1995, respectively, and a net loss of
$166,000 for the three-month period ended March 29, 1996, the date of
acquisition by the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Company will continue to
sustain losses unless it can successfully increase revenues and reduce food and
administrative costs in accordance with management's business strategy.

IMPACT UPON FUTURE NET INCOME OR LOSS OF THE COMPANY BY CURRENT ACCOUNTING
OF DEBT FINANCING COST. In order to finance the Pietro's Acquisition, the
Company sold certain Convertible Notes (as hereinafter defined) totaling in the
aggregate $3,000,000, which Convertible Notes convert into Shares and warrants
upon the close of this Offering. In connection with this financing, which
financing was obtained through the Representative, the Company paid the
Representative 13% of the total $3,000,000 investment, or $390,000. See "Certain
Transactions -- Pietro's Acquisition." The $390,000 debt financing cost is
currently being amortized over twelve months; however, upon conversion of the
Convertible Notes simultaneously with the closing of this Offering, the
unamortized debt financing cost totaling $292,500 as of June 30, 1996 is
currently anticipated to be expensed in the third quarter of 1996 and will
significantly impact the net income or loss of the Company.

LACK OF DIVERSIFICATION. The Company currently intends to operate pizzeria
restaurants and brew-pubs only. As a result, changes in consumer preferences,
including changes in consumer preferences away from restaurants of the type
operated by the Company, may have a disproportionate and materially adverse
impact on the Company's business, operating results and prospects.

IMMEDIATE SUBSTANTIAL DILUTION. The initial public offering price per Share
will exceed the net tangible book value per share of the Common Stock.
Accordingly, the purchasers of the Shares will experience immediate substantial
dilution of $4.46 per share or 81.1% of their investment based upon the pro
forma net tangible book value of the Company at June 30, 1996. In addition, the
purchasers of the Securities offered hereby will bear a disproportionate part of
the financial risk associated with the Company's business while effective
control will remain with the existing shareholders and Management. See
"Dilution."

RECENTLY FORMED REPRESENTATIVE MAY BE UNABLE TO COMPLETE OFFERING OR MAKE A
MARKET. The Representative was formed in March 1995, has acted as the managing
underwriter for four public offerings and has acted as a member of an
underwriting syndicate on three occasions. Nonetheless, due to the
Representative's limited history, there can be no assurance that the Offering
will be

11
<PAGE>
completed or, if completed, that an active trading market for the Common Stock
will develop. The Representative is not affiliated with the Company or any
controlling person of the Company. See "Underwriting."

NEED FOR ADDITIONAL FINANCING. Although the Company expects that the net
proceeds of this Offering will be sufficient to fund the Company's cash
requirements for the conversion of the Northwest Restaurants and operation of
its existing restaurants for at least 18 months following the completion of this
Offering, this estimate is based on numerous assumptions regarding the Company's
operations, including certain assumptions as to the Company's revenues, net
income and other factors, and there is no assurance that such assumptions will
prove to be accurate or that unbudgeted costs will not be incurred. Future
events, including the problems, delays, additional expenses and difficulties
frequently encountered in the expansion and conversion of facilities, as well as
changes in economic, regulatory or competitive conditions, may lead to cost
increases that could make the net proceeds of this Offering insufficient to fund
the Company's operations in which case the Company would require additional
financing. There can be no assurance that the Company will be able to obtain
such additional financing, or that such additional financing will be available
on terms acceptable to the Company and at the times required by the Company.
Failure to obtain such financing may adversely impact the growth, development or
general operations of the Company. If, on the other hand, such financing can be
obtained, it may result in additional leverage or dilution of existing
shareholders. See "Management's Discussion and Analysis of Financial Condition
and Results of Operation -- Liquidity and Capital Resources."

UNCERTAIN ABILITY TO MANAGE GROWTH AND CONVERSIONS. A significant element
of the Company's business plan is to expand through acquisitions and
conversions. For example, the Company has recently acquired 26 restaurants
located throughout Washington and Oregon under a plan of reorganization, 19 of
which the Company retained and currently plans to convert into BJ's restaurants.
In addition, the Company only recently opened its Westwood Village (Los Angeles)
and Brea, California restaurants. An additional restaurant is being developed in
Boulder, Colorado. The Company's ability to successfully convert recently
acquired restaurants and to expand will depend on a number of factors, including
the selection and availability of suitable locations, the hiring and training of
sufficiently skilled management and other personnel, the availability of
adequate financing, distributors and suppliers, the obtaining of necessary
governmental permits and authorizations, and contracting with appropriate
development and construction firms, some of which are beyond the control of the
Company. There is no assurance that the Company will be able to successfully
convert recently acquired restaurants or to open any new restaurants and/or
brew-pubs, or that any new restaurants and/or brew-pubs will be opened at
budgeted costs or in a timely manner, or that such restaurants can be operated
profitably.

LIMITATIONS AND VULNERABILITY AS A RESULT OF GEOGRAPHIC CONCENTRATION OF
MANAGEMENT'S EXPERIENCE. Until recently, Management's experience was limited to
operating the restaurants in Southern California and one restaurant in Lahaina,
Maui. Because the Company's Management has limited operating experience outside
of Southern California, there is no assurance that the Company will be
successful in other geographic areas. For example, the Company's experience with
construction and development outside the Southern California area is limited,
which may increase associated risks of development and construction as the
Company expands outside this area. Expansion to other geographic areas may
require substantially more funds for advertising and marketing since the Company
will not initially have name recognition or word of mouth advertising available
to it in areas outside of Southern California. The centralization of the
Company's management in Southern California may be a problem in terms of its
current and future expansion to new geographic areas, because the Company lacks
experience with local distributors, suppliers and consumer factors and other
issues as a result of the distance between the Company's main headquarters and
its restaurant sites. These factors could impede the growth of the Company.

12
<PAGE>
GEOGRAPHIC CONCENTRATION OF COMPANY'S OPERATIONS The Company's operations
are concentrated in Southern California, Lahaina, Maui, Oregon and Washington.
Adverse economic conditions in any of these areas could adversely impact the
Company.

RESTAURANT INDUSTRY COMPETITION. The restaurant industry is intensely
competitive with respect to price, service quality, location, ambiance and food
quality, both within the casual dining field and in general. As a result, the
rate of failure for restaurants is very high, and the business of owning and
operating restaurants involves greater risks than for businesses generally.
There are many competitors of the Company in the casual dining segment that have
substantially greater financial and other resources than the Company and may be
better established in those markets where the Company has opened or intends to
open restaurants. There is no assurance that the Company will be able to compete
successfully with its competitors.

SPECIAL BREWERY BUSINESS CONSIDERATIONS. A key element of the Company's
business plan involves the development and/or acquisition of brew-pub-themed
restaurants which will brew beer on site or offer beer produced in a centralized
micro-brewery or offer a variety of micro-brew beers produced by others that
have limited availability. To the extent that the Company brews its own beer,
its business will be highly dependent upon the suppliers of various raw
ingredients and other materials, delivery service and the Company's ability to
retain or replace its expert brewmaster to oversee the Company's brewing
operations. In addition, to the extent that the Company sells beer produced by
its facility to others, the Company will require independent distributors, the
loss of which could adversely impact the Company. Further, brewery operations
are subject to specific hazards, including contamination of brews by
microorganisms and risks of equipment failure. Although Management has procured
insurance to cover such risks, there can be no assurance that such insurance
coverage will be adequate or will continue to be available on price or other
terms satisfactory to the Company.

UNCERTAINTY WITH RESPECT TO GROWTH OF THE MICRO-BREWING INDUSTRY. The sale
and consumption of micro-brewed beer has increased over the past several years.
There can be no assurance that the demand for micro-brewed beer will continue to
grow at the present rate or at all, or that circumstances could develop to cause
the demand for micro-brewed beer to diminish. To meet the demand for micro-
brewed beer, new breweries are being developed. If the demand for micro-brewed
beer does not keep up with increases in supply, the Company's limited brewery
operations will face heightened competition and may not be able to sell
sufficient quantities of its products to achieve profitability.

SIGNIFICANT IMPACT OF BEER AND LIQUOR REGULATIONS. Currently, the sale of
beer and wine accounts for approximately ten percent of total revenue at the
Southern California restaurants. In light of the Company's current focus upon
the development and/or acquisition of brew-pub-themed restaurants, Management
believes that the sale of beer and other alcoholic beverages will constitute a
greater percentage of sales in the future. The Company is required to operate in
compliance with federal licensing requirements imposed by the Bureau of Alcohol,
Tobacco and Firearms of the United States Department of Treasury, as well as the
licensing requirements of states and municipalities where its restaurants are or
will be located. Failure to comply with federal, state or local regulations
could cause the Company's licenses to be revoked and force it to cease the
brewing and/or sale of alcoholic beverages at its restaurants. Additionally,
state liquor laws may prevent or impede the expansion of the Company's
restaurants into certain markets. The liquor laws of certain states prevent the
Company from selling at wholesale the beer brewed at its restaurants. Any
difficulties, delays or failures in obtaining such licenses, permits or
approvals could delay or prevent the opening of a restaurant in a particular
area.

BEER EXCISE TAX. The federal government currently imposes an excise tax of
$7.00 per barrel on each barrel of beer produced for domestic consumption, up to
60,000 barrels per year. Individual states also impose excise taxes on alcoholic
beverages in varying amounts. In the future the excise tax rate could be
increased by either the federal or state governments, or both. Future increases
in excise taxes on alcoholic beverages could adversely affect the Company.

13
<PAGE>
DEPENDENCE UPON CONSUMER TRENDS. The Company's restaurants are, by their
nature, dependent upon consumer trends with respect to the public's tastes,
eating habits (including increased awareness of nutrition), public perception
toward alcohol consumption and discretionary spending priorities, all of which
can shift rapidly. In general, such trends are significantly affected by many
factors, including the national, regional or local economy, changes in area
demographics, public perception and attitudes, increases in regional
competition, food, liquor and labor costs, traffic patterns, weather, natural
disasters and the availability and relative cost of automobile fuel. Any
negative change in any of the above factors could negatively affect the Company
and its operations.

DEPENDENCE ON KEY PERSONNEL. As of the date of the Prospectus there are
three members of senior Management of the Company: Paul Motenko, who serves as
Chairman of the Board, Chief Executive Officer, Vice President and Secretary of
the Company; Jeremiah J. Hennessy, who serves as President, Chief Operating
Officer and Director of the Company; and Laura Parisi who serves as Chief
Financial Officer and Assistant Secretary of the Company. The Company currently
has employment agreements only with Mr. Motenko and Mr. Hennessy. See
"Management -- Employment Agreements." The Company's success depends to a
significant extent on the performance and continued service of its senior
management and certain key employees. Competition for employees with such
specialized training is intense and there can be no assurance that the Company
will be successful in retaining such personnel. In addition, there can be no
assurance that employees will not leave the Company or compete against the
Company. See "Management." The Company does not currently have any key person
life insurance but has applied for $1,000,000 in key person life insurance for
each of Mr. Motenko and Mr. Hennessy. If the services of any members of
Management become unavailable for any reason, it could affect the Company's
business and prospects adversely.

RISKS ASSOCIATED WITH LEASED PROPERTIES. The Company's 28 restaurants are
all on leased premises. Certain of these leases expire in the near term and
there is no automatic renewal or option to renew. See "Business -- Property and
Leases." No assurance can be given that leases can be renewed, or, if renewed,
rents will not increase substantially, either of which could adversely affect
the Company. Other leases are subject to renewal at fair market value, which
could involve substantial rent increases. In addition, there is a potential
eminent domain proceeding against one of the Company's restaurants in Oregon
which, if completed, could require the Company to close the restaurant and lose
its potential revenues and investment therein.

PIETRO'S ACQUISITION OUT OF BANKRUPTCY. The Company recently acquired 26
restaurants pursuant to a plan of reorganization filed by Pietro's with the U.S.
Bankruptcy Court. The Company has sold 7 of the 26 restaurants. The Company
currently plans to retain the remaining 19 restaurants. Pietro's was unable to
operate its restaurants on a profitable basis, and there is no assurance that
the Company will be able to operate these restaurants on a profitable basis in
the future. See "Certain Transactions -- Sale of Restaurants."

INCREASES IN FOOD COSTS. The Company's gross margins are highly sensitive
to changes in food costs, which sensitivity requires Management to be able to
anticipate and react to such changes. Various factors beyond the Company's
control, including adverse weather, labor strikes and delays in any of the
restaurants' frequent deliveries, may negatively affect food costs, quality and
availability. While in the past, Management has been able to anticipate and
react to increasing food costs through, among other things, purchasing
practices, menu changes and price adjustments, there can be no assurance that it
will be able to do so in the future.

INCREASE IN MINIMUM WAGE. On August 20, 1996, President Clinton signed
legislation which will increase the federal minimum wage from $4.25 an hour to
$4.75 effective October 1, 1996 and again to $5.15 effective September 1, 1997.
In addition, California faces an initiative on the November ballot that proposes
another two-step increase making the state minimum wage $5.75 an hour by early
1998. A substantial majority of employees working in restaurants operated by the
Company receive salaries equal to the federal minimum wage and an increase in
the minimum wage is expected to increase the operating expenses of the Company.

14
<PAGE>
POTENTIAL UNINSURED LOSSES. The Company has comprehensive insurance,
including general liability, fire and extended coverage, which the Company
considers adequate. However, there are certain types of losses which may be
uninsurable or not economically insurable. Such hazards may include earthquake,
hurricane and flood losses. While the Company currently maintains limited
earthquake coverage, it may not be economically feasible to do so in the future.
If such a loss should occur, the Company would, to the extent that it is not
covered for such loss by insurance, suffer a loss of the capital invested in, as
well as anticipated profits and/or cash flow from, such damaged or destroyed
properties. Punitive damage awards are generally not covered by insurance; thus,
any awards of punitive damages as to which the Company may be liable could
adversely affect the ability of the Company to continue to conduct its business,
to expand its operations or to develop additional restaurants. There is no
assurance that any insurance coverage maintained by the Company will be
adequate, that it can continue to obtain and maintain such insurance at all or
that the premium costs will not rise to an extent that they adversely affect the
Company or the Company's ability to economically obtain or maintain such
insurance. See "Business -- Insurance."

POTENTIAL "DRAM SHOP" LIABILITY. Restaurants in most states, including
those in which the Company operates, are subject to "dram shop" laws, rules and
regulations, which impose liability on licensed alcoholic beverage servers for
injuries or damages caused by their negligent service of alcoholic beverages to
a visibly intoxicated person or to a minor, if such service is the proximate
cause of the injury or damage and such injury or damage is reasonably
foreseeable. While the Company has limited amounts of liquor liability insurance
and intends to maintain liquor liability insurance as part of its comprehensive
general liability insurance which it believes should be adequate to protect
against such liability, there is no assurance that it will not be subject to a
judgment in excess of such insurance coverage or that it will be able to obtain
or continue to maintain such insurance coverage at reasonable costs, or at all.
The imposition of a judgment substantially in excess of the Company's current
insurance coverage would have a materially adverse effect on the Company and its
operations. The failure or inability of the Company to maintain or increase
insurance coverage could materially and adversely affect the Company and its
operations. In addition, punitive damage awards are generally not covered by
such insurance. Thus, any awards of punitive damages as to which the Company may
be liable could adversely affect the ability of the Company to continue to
conduct its business, to expand its operations or to develop additional
restaurants.

TRADEMARK AND SERVICEMARK RISKS. The Company has not had a challenge to its
use of the "BJ's" servicemark as of this time. However, to date, the Company has
used the servicemark only in Southern California and Lahaina, Maui and will only
recently be attempting to use such servicemark in Washington and Oregon. In
addition, the Company has not secured clear rights to the use of the "BJ's"
servicemark or any other name, servicemark or trademark used in the Company's
business operations. Since there are other restaurants using the "BJ's" name
throughout the United States there can be no assurance that the Company will
ever be able to secure any such proprietary rights or that the Company may not
be subject to claims with respect to the Company's use of the "BJ's" name. See
"Business -- Trademarks and Copyrights."

EFFECTS OF COMPLIANCE WITH GOVERNMENT REGULATION. The Company is subject to
various federal, state and local laws, rules and regulations affecting its
businesses and operations. Each of the Company's restaurants is and shall be
subject to licensing regulation and reporting requirements by numerous
governmental authorities which may include alcoholic beverage control, building,
land use, environmental protection, health and safety and fire agencies in the
state or municipality in which the restaurant is located. Difficulties in
obtaining or failures to obtain the necessary licenses or approvals could delay
or prevent the development or operation of a given restaurant or limit, as with
the inability to obtain a liquor or restaurant license, its products and
services available at a given restaurant. Any problems which the Company may
encounter in renewing such licenses in one jurisdiction may adversely affect its
licensing status on a federal, state or municipal level in other relevant
jurisdictions. See "-- Significant Impact of Beer and Liquor Regulation."

15
<PAGE>
HIGHER COSTS ASSOCIATED WITH POTENTIAL HEALTH CARE REFORM. The Company
currently pays full and in some cases a portion of health insurance coverage for
corporate, managerial and certain non-managerial restaurant personnel. Many
proposals being discussed at the state and federal level for universal or
broadened health care coverage could impose costly requirements to provide
additional coverage, which could adversely impact the Company. At the present
time it is unclear what, if any, reforms in health care coverage will be adopted
at the federal or state level.

POTENTIAL IMPACT OF RECENT TAX LAW DEVELOPMENTS. In June 1995 the Internal
Revenue Service announced a new initiative aimed at improving tip reporting in
the restaurant industry, known as the Tip Reporting Alternative Commitment
("TRAC"). TRAC is a voluntary agreement between a restaurant and the IRS under
which the restaurant agrees to educate employees about tip reporting and assume
responsibility for tracking employees' charge-card tips. In return, a restaurant
that signs and complies with a TRAC receives assurance that the IRS will not
bill the restaurant for Federal Insurance Contributions Act ("FICA") taxes on
previously unreported tips unless the IRS has first determined that individual
employees owe FICA taxes. While entering a TRAC may minimize potential exposure
for back FICA taxes on unreported tips, it will increase expenses for training
and recordkeeping, as well as result in a likely increase in FICA payroll taxes
due to an increase in the amount of tips reported, offset by an income tax
credit equal to the full amount of FICA payroll taxes paid to the extent of the
Company's federal income tax liability. Management of the Company has not made a
determination of whether or not to apply to enter into a TRAC.

LIMITED CONTROL AND INFLUENCE ON THE COMPANY BY NEW INVESTORS. Upon the
consummation of this Offering, the officers and directors of the Company will,
in the aggregate, beneficially own approximately 26.2% of the Common Stock (8.5%
assuming exercise in full of the Redeemable Warrants, the Selling Security
Holders' Redeemable Warrants, and all other outstanding warrants and options).
As a result, it is anticipated that these individuals will be in a position to
materially influence, if not control, the outcome of all matters requiring
shareholder or board approval, including the election of directors. See
"Management," "Principal Shareholders" and "Description of Securities -- Common
Stock." Such influence and control is likely to continue for the foreseeable
future and significantly diminishes control and influence which future
shareholders may have on the Company.

POSSIBLE ADVERSE IMPACT OF FUTURE SALES OF RESTRICTED SHARES ON MARKET
PRICE. All outstanding shares prior to this Offering are restricted securities
under Rule 144 under the Securities Act of 1933. However, of these restricted
securities, the 1,766,864 shares held by the Selling Security Holders may be
sold at any time in the over the counter market and an additional 2,730,052
shares will be eligible for resale in the near future under Rule 144. 1,317,714
of such 2,730,052 shares include shares held by officers and directors who, with
the exception of the Selling Director's shares and warrants included in the
Selling Securities Holders' Shares and Selling Security Holders' Redeemable
Warrants, have agreed not to sell their shares for one year after the date
hereof without the written consent of the Representative. See "Underwriting." In
general, under Rule 144, a person (or persons whose shares are aggregated)
holding restricted securities who has satisfied a two-year holding period may,
commencing 90 days after the date hereof, under certain circumstances, sell
within any three-month period that number of shares which does not exceed the
greater of 1% of the then outstanding shares of Common Stock or the average
weekly reported trading volume during the four calendar weeks prior to filing a
Rule 144 notice. Rule 144 also permits, under certain circumstances, the sale of
shares without any quantity limitation by a person who has satisfied a
three-year holding period and who is not, and has not been for the preceding
three months, an affiliate of the Company. The Securities and Exchange
Commission (the "Commission") has proposed to shorten the two year and three
year holding periods of Rule 144 to one year and two years, respectively. If
such holding periods are shortened, the holders of restricted securities could
accelerate the date that they could sell their shares. Future sales under Rule
144 or by the Selling Security Holders including sales of the Selling Security
Holders' Redeemable Warrants (and the shares issuable upon exercise of the
Selling Security Holders' Redeemable Warrants) may have an adverse effect on the
market price of the shares of Common Stock or Redeemable Warrants should a
public market develop for such Securities.

16
<PAGE>
NO DIVIDENDS. It is the current policy of the Company that it will retain
earnings, if any, for expansion of its operations, remodeling or conversion of
existing restaurants and other corporate purposes and it will not pay any cash
dividends in respect of the Common Stock in the foreseeable future. See
"Dividend Policy."

ABSENCE OF PUBLIC MARKET. Prior to this Offering, there has been no public
market for the Common Stock or the Redeemable Warrants. While the Company has
applied for approval for listing the Common Stock and Redeemable Warrants on the
Nasdaq Small-Cap Market, there is no assurance that a regular public market for
the Common Stock or Redeemable Warrants will develop as a result of this
Offering or, if a regular public market does develop, that it will continue. In
the absence of such a market, investors may be unable to readily liquidate their
investment in the Common Stock or Redeemable Warrants.

NO ASSURANCE OF CONTINUED NASDAQ INCLUSION. In order to qualify for
continued listing on Nasdaq, a company, among other things, must have $2,000,000
in total assets, $1,000,000 in capital and surplus and a minimum bid price of
$1.00 per share. If the Company is unable to satisfy the maintenance
requirements for quotation on Nasdaq, of which there can be no assurance, it is
anticipated that the Securities would be quoted in the over-the-counter market
National Quotation Bureau ("NQB") "pink sheets" or on the NASD OTC Electronic
Bulletin Board. As a result, an investor may find it more difficult to dispose
of, or obtain accurate quotations as to the market price of the Securities which
may materially adversely affect the liquidity of the market of the Securities.

POSSIBLE ADVERSE IMPACT OF PENNY STOCK REGULATION. If the Securities are
delisted from Nasdaq, they might be subject to the low-priced security or
so-called "penny stock" rules that impose additional sales practice requirements
on broker-dealers who sell such securities. For any transaction involving a
penny stock the rules require, among other things, the delivery, prior to the
transaction, of a disclosure schedule required by the Commission relating to the
penny stock market. The broker-dealer also must disclose the commissions payable
to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements must be sent
disclosing recent price information for the penny stocks held in the customer's
account.

Although the Company believes that the Securities are not a penny stock due
to their continued listing on Nasdaq, in the event the Securities subsequently
become characterized as a penny stock, the market liquidity for the Securities
could be severely affected. In such an event, the regulations relating to penny
stocks could limit the ability of broker-dealers to sell the Securities and,
thus, the ability of purchasers in this offering to sell their Securities in the
secondary market.

LACK OF CORRELATION BETWEEN OFFERING PRICE AND VALUE OF SHARES OR
COMPANY. The initial public offering price of the Shares and Redeemable
Warrants will be determined by negotiation between the Company and the
Representative, as representative of the Underwriters, and does not necessarily
bear any relationship to the Company's book value, assets, past operating
results, financial condition or any other established criteria of value. There
is no assurance that the Common Stock or Redeemable Warrants will trade at
market prices in excess of the initial public offering price as prices for the
Common Stock or Redeemable Warrants in any public market which may develop will
be determined in the marketplace and may be influenced by many factors,
including the depth and liquidity of the market for the Common Stock or
Redeemable Warrants, investor perception of the Company and general economic and
market conditions. See "Underwriting" for a discussion of the factors considered
in determining the initial public offering price.

REPRESENTATIVE'S POTENTIAL INFLUENCE ON THE MARKET. Almost all of the
Selling Security Holders are clients of the Representative and are obligated to
sell their respective Securities through the Representative. It is also
anticipated that a significant number of the Securities being offered hereby
will be sold to clients of the Representative. Although the Representative has
advised the Company that it currently intends to make a market in the Securities
following this Offering, it has no legal obligation, contractual or otherwise,
to do so. The Representative, if it becomes a market maker, could be a
significant influence in the market for the Securities, if one develops. The
prices and the liquidity of

17
<PAGE>
the Securities may be significantly affected by the degree, if any, of the
Representative's participation in such market. There is no assurance that any
market activities of the Representative, if commenced, will be continued.

POSSIBLE ADVERSE IMPACT OF SELLING SECURITY HOLDERS' SHARES AND REDEEMABLE
WARRANTS ON MARKET PRICE. As part of the Registration Statement of which this
Prospectus is a part, the Company is registering 1,766,864 shares of Common
Stock, 10,014,584 Selling Security Holders' Redeemable Warrants owned by the
Selling Security Holders, and 10,014,584 shares of Common Stock issuable upon
exercise of such Selling Security Holders' Redeemable Warrants (collectively
referred to herein as the "Selling Security Holders' Securities"). See "Resale
of Outstanding Securities." Concurrently with this Offering, the Selling
Security Holders or their respective transferees, may sell the Selling Security
Holders' Securities. The sale of the Selling Security Holders' Securities may be
effected from time to time in transactions (which may include block transactions
by or for the account of Selling Security Holders) in the over-the-counter
market or negotiated transactions, through the writing of options on the Selling
Security Holders' Securities, through a combination of such methods of sale or
otherwise. Sales of Selling Security Holders' Shares or the shares issuable upon
exercise of the Selling Security Holders' Redeemable Warrants may depress the
price of the Common Stock in any market that may develop for the Common Stock
and sales of the Selling Security Holders' Redeemable Warrants may depress the
price of the Redeemable Warrants in any market that may develop for the
Redeemable Warrants.

CURRENT PROSPECTUS AND STATE REGISTRATION TO EXERCISE WARRANTS. The
Redeemable Warrants and the Selling Security Holders' Redeemable Warrants are
not exercisable unless, at the time of the exercise, the Company has a current
prospectus covering the shares of Common Stock issuable upon exercise of the
Redeemable Warrants and the Selling Security Holders' Redeemable Warrants and
such shares have been registered, qualified or deemed to be exempt under the
securities or "blue sky" laws of the jurisdiction of residence of the exercising
holder of the Redeemable Warrants. In addition, in the event that any holder of
the Redeemable Warrants attempts to exercise any Redeemable Warrants at any time
after nine months from the date of this Prospectus, the Company may be required
to file a post-effective amendment and deliver a current prospectus before the
Redeemable Warrants may be exercised. Although the Company has undertaken to use
its best efforts to have all the shares of Common Stock issuable upon exercise
of the Redeemable Warrants registered or qualified on or before the exercise
date and to maintain a current prospectus relating thereto until the expiration
of the Redeemable Warrants, there is no assurance that it will be able to do so.
The value of the Redeemable Warrants may be greatly reduced if a current
prospectus covering the Common Stock issuable upon the exercise of the
Redeemable Warrants is not kept effective or if such Common Stock is not
qualified or exempt from qualification in the jurisdictions in which the holders
of the Redeemable Warrants then reside.

The Redeemable Warrants will be separately tradeable immediately upon
issuance and may be purchased separately from the Shares. Although the
Securities will not knowingly be sold to purchasers in jurisdictions in which
the Securities are not registered or otherwise qualified for sale, investors may
purchase the Redeemable Warrants in the secondary market or may move to
jurisdictions in which the shares underlying the Redeemable Warrants are not
registered or qualified during the period that the Redeemable Warrants are
exercisable. In such event, the Company would be unable to issue shares to those
persons desiring to exercise their Redeemable Warrants unless and until the
shares could be qualified for sale in jurisdictions in which such purchasers
reside, or an exemption from such qualification exists in such jurisdictions,
and holders of the Redeemable Warrants would have no choice but to attempt to
sell the Redeemable Warrants in a jurisdiction where such sale is permissible or
allow them to expire unexercised. See "Description of Securities -- Redeemable
Warrants."

ADVERSE EFFECT TO HOLDERS OF REDEEMABLE WARRANTS AS A RESULT OF POSSIBLE
REDEMPTION OF SUCH WARRANTS. The Redeemable Warrants are subject to redemption
by the Company, at any time, commencing one year after the date of this
Prospectus, at a price of $.25 per Redeemable Warrant if

18
<PAGE>
the average closing bid price for the Common Stock equals or exceeds 140 percent
of the initial public offering price per share for any 20 trading days within a
period of 30 consecutive trading days ending on the fifth trading day prior to
the date of the notice of redemption. If, prior to exercise, the Company
provides holders of the Redeemable Warrants with the 30-day notice of redemption
and during such notice period, the Redeemable Warrants are not exercised, the
holders thereof would lose their right to exercise their respective Redeemable
Warrants and the benefit of the difference between the market price of the
underlying Common Stock as of such date and the exercise price of such
Redeemable Warrants, as well as any possible future price appreciation in the
Common Stock. Upon the receipt of a notice of redemption of the Redeemable
Warrants, the holders thereof would be required to: (i) exercise the Redeemable
Warrants and pay the exercise price at a time when it may be disadvantageous for
them to do so; (ii) sell the Redeemable Warrants at the market price, if any,
when they might otherwise wish to hold the Redeemable Warrants; or (iii) accept
the redemption price, which is likely to be substantially less than the market
value of the Redeemable Warrants at the time of redemption. Notwithstanding the
above, 4,700,000 of such Redeemable Warrants ("Special Warrants") are not
redeemable until sold by the current holders or their affiliates. See
"Description of Securities -- Redeemable Warrants" and "Underwriting."

POSSIBLE ADVERSE IMPACT ON POTENTIAL BIDS TO ACQUIRE SHARES DUE TO ISSUANCE
OF PREFERRED OR COMMON STOCK. The Board of Directors of the Company has
authority to issue up to 5,000,000 shares of preferred stock of the Company (the
"Preferred Stock") and to fix the rights, preferences, privileges and
restrictions of such shares without any further vote or action by the
shareholders. In addition, the Company has authorized 60,000,000 shares of
Common Stock. Only 6,108,321 shares of Common Stock will be outstanding
immediately after the completion of this Offering, assuming no exercise of the
Underwriters' over-allotment options and assuming that the Representative's
Warrants and all other stock options and warrants then to be outstanding are not
exercised. An additional 12,864,584 shares of Common Stock are reserved for
issuance pursuant to the Underwriters' over-allotment options, Redeemable
Warrants, the Selling Security Holders' Redeemable Warrants, the
Representative's Warrants, the Redeemable Warrants issuable upon exercise of the
Representative's Warrants and options that may be granted under the 1996 Stock
Option Plan. Thus, an additional 41,027,095 shares of Common Stock remain
available for issuance at the discretion of the Board of Directors. The
potential issuance of authorized and unissued Preferred Stock or Common Stock of
the Company may result in special rights and privileges, including voting
rights, to individuals designated by the Company and have the effect of
delaying, deferring or preventing a change in control of the Company. As a
result, such potential issuance may adversely affect the marketability and
potential market price of the shares, as well as the voting and other rights of
the holders of the Common Stock. The Company currently has no plans to issue
shares of Preferred Stock or additional shares of Common Stock. See "Description
of Securities -- Common Stock."

POSSIBLE DILUTIVE EVENT AS A RESULT OF LACK OF PREEMPTIVE RIGHTS. The
holders of Common Stock do not have any subscription, redemption or conversion
rights, nor do they have any preemptive or other rights to acquire or subscribe
for additional, unissued or treasury shares. Accordingly, if the Company were to
elect to sell additional shares of Common Stock, or securities convertible into
or exercisable to purchase shares of Common Stock, following this Offering,
persons acquiring Common Stock in this Offering would have no right to purchase
additional shares, and as a result, their percentage equity interest in the
Company would be diluted. See "Description of Securities -- Common Stock."

19
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the Securities offered
hereby at an assumed offering price of $5.50 per share and $0.25 per warrant,
after deducting underwriting discounts and other estimated expenses of the
Offering, are estimated to be approximately $6,703,750 ($7,829,313 if the
Underwriters' over-allotment options are exercised in full). The Company intends
to apply such proceeds for the general purposes set forth below:

<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE
APPLICATION OF NET PROCEEDS DOLLAR AMOUNT OF NET PROCEEDS
- ------------------------------------------------------------ ------------- ----------------------
<S> <C> <C>
Conversion of 19 Northwest Restaurants (1).................. $4,500,000 67.1%
Repayment of Debt (2)....................................... 730,000 10.9%
Development of Boulder, Colorado Restaurant (3)............. 800,000 11.9%
Working Capital............................................. 673,750 10.1%
------------- -----
Total..................................................... $6,703,750 100.0%
------------- -----
------------- -----
</TABLE>

- ------------------------
(1) Depending on which of the three BJ's concepts a particular restaurant is
converted to, conversion expenditures are estimated to range from $100,000
for a BJ'S PIZZA restaurant to as high as $500,000 for a full BJ'S PIZZA,
GRILL & BREWERY restaurant.

(2) To repay: (i) $526,000 of the $3,270,000 outstanding note payable to Roman
Systems, which note matures on April 1, 2004 and bears interest at a rate of
7%. See "Certain Transactions -- Acquisition of Restaurants and Intellectual
Property," (ii) a $100,000 note due and payable to Ms. Katherine Anderson, a
limited partner of BJ's Lahaina, L.P., the California limited partnership
which operates the Company's Lahaina, Maui restaurant, which note matures on
September 5, 1996 and bears interest at a rate of 19%, (iii) a $79,000 note
due on demand and payable to Paul Motenko, which note bears interest at a
rate of 6% and (iv) a $25,000 note due and payable to Harold Motenko, which
note matures on March 22, 1998 and bears interest at a rate of 12%. See
"Certain Transactions -- Certain Other Transactions and Conflicts of
Interest."

(3) Represents estimated costs of improvements and equipment purchases for the
Boulder, Colorado restaurant not currently expected to be financed through
loans or other financing, as well as amounts expected to be applied toward,
among other things, advertising, preopening expenses (including hiring and
training of personnel) and related expenses in connection with the Boulder,
Colorado site.

The foregoing represents the Company's best estimate of its use of the net
proceeds of this Offering based upon its present plans, the state of its
business operations and current conditions in the restaurant industry. The
Company reserves the right to change the use of the net proceeds if
unanticipated developments in the Company's business, business opportunities, or
changes in economic, regulatory or competitive conditions make shifts in the
allocation of net proceeds necessary or desirable. The net proceeds from the
exercise of the Representative's Warrants, if any, will be added to the general
funds of the Company and used for working capital and other general corporate
purposes. Amounts received by the Company upon exercise of the Underwriters'
over-allotment options, if any, will be used for working capital and other
general corporate purposes. Pending any uses, the Company will invest the net
proceeds from this Offering in short-term, interest-bearing securities or
accounts.

The Company will not receive any proceeds from the sale of the Selling
Security Holders' Securities, although it will receive the exercise price of the
Selling Security Holders' Redeemable Warrants when and if they are exercised.

DIVIDEND POLICY

The Company has not paid any dividends since its inception. Currently, the
Company does not have any funds available for the payment of dividends. In any
case, it is the current policy of the Company that it will retain earnings, if
any, for expansion of its operations, remodeling of existing restaurants and
other general corporate purposes and that it will not pay any cash dividends in
respect of the shares in the foreseeable future. Should the Company decide to
pay dividends in the future such payments would be at the discretion of the
Board of Directors.

20
<PAGE>
DILUTION

As of June 30, 1996, the Company had a pro forma net tangible deficit book
value of $9,144, or approximately $0.00 per share of Common Stock. The pro forma
net tangible book value assumed the conversion of $3,000,000 of debt pursuant to
the Note Purchase Agreements (as hereinafter defined) by and between the Company
and ASSI, Inc. and the Company and Norton Herrick upon the consummation of this
Offering. (See "Certain Transactions -- Pietro's and Other Proposed
Acquisitions") This pro forma net tangible book value per share of Common Stock
is equal to the net tangible assets of the Company (total assets less total
liabilities and intangible assets), divided by the number of shares of Common
Stock outstanding. After giving effect to the issuance of the 1,500,000 Shares
of Common Stock offered hereby (without giving any effect to the net proceeds
from the sale of the Shares and Redeemable Warrants subject to the underwriters'
over-allotment option) at an assumed offering price of $5.50 per share, and
after deduction of estimated offering expenses and the Underwriters' discount,
the pro forma net tangible book value of the Company at June 30, 1996 would have
been $6,368,356 or approximately $1.04 per share of Common Stock, representing
an immediate dilution (i.e., the difference between the purchase price per Share
and the pro forma net tangible book value per share after the Offering) to new
investors of $4.46 or 81.1% per share and an immediate increase in net tangible
book value of $1.04 per share to existing shareholders, as illustrated by the
following table:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common
Stock...................................................... $5.50
Pro forma net tangible deficit book value per share after
conversion of debt into Common Stock at June 30, 1996.... $0.00
Increase per share of Common Stock attributable to new
investors................................................ 1.04
-----
Pro forma net tangible book value per share of Common Stock
after the Offering......................................... 1.04
-----
Dilution per share of Common Stock to new investors......... $4.46
-----
-----
</TABLE>

If the net proceeds of $326,250 from the sale of the Redeemable Warrants
(after deducting the underwriting discounts and the Representative's
nonaccountable expense allowance, but attributing no other costs of this
Offering to the Redeemable Warrants) had been attributed to the net tangible
book value of the shares of Common Stock after this Offering, the pro forma net
tangible book value after this Offering would increase by approximately $.05 per
share of Common Stock and decrease the dilution to new public investors by
approximately $.05 per share of Common Stock.

In the event that the Underwriters exercise their over-allotment options in
full, the pro forma net tangible book value of the Company after this Offering
(after deducting the Underwriters' discount and the Representative's
nonaccountable expense allowance, but attributing no other costs of this
Offering to the over-allotment shares) would be approximately $7,820,168
(including the net proceeds of $326,250 from the sale of the Redeemable
Warrants) or $1.23 per share of Common Stock, which would result in immediate
dilution in net tangible book value to the public investors of approximately
$4.27 per share of Common Stock.

The following table sets forth the number of shares of Common Stock owned by
the current shareholders of the Company, the number of shares of Common Stock to
be purchased from the

21
<PAGE>
Company by the purchasers of the shares of Common Stock offered hereby and the
respective aggregate consideration paid or to be paid to the Company and the
average price per share of Common Stock.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Current shareholders (1).................................... 4,608,321 75.4% $ 9,229,154 52.8% $2.00
New investors (2)........................................... 1,500,000 24.6% $ 8,250,000 47.2% $5.50
--------- ------- ------------ -------
Total..................................................... 6,108,321 100.0% $ 17,479,154 100.0%
--------- ------- ------------ -------
--------- ------- ------------ -------
</TABLE>

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

(1) Includes outstanding Common Stock at June 30, 1996 of 3,788,878 shares, plus
the issuance of Woodbridge Holdings, Inc.'s 69,443 shares and the assumed
conversion of the debt to Common Stock for ASSI, Inc. and Norton Herrick to
750,000 shares upon the closing of this Offering. See "Certain
Transactions."

(2) Does not include the issuance and sale of 1,500,000 Redeemable Warrants, or
up to 225,000 additional Shares of Common Stock and Redeemable Warrants
issuable by the Company upon the exercise of the Underwriters'
over-allotment option, which would raise the total shares of Common Stock
purchased by new investors to 1,725,000 (27.2%) and the total consideration
paid to the Company by new investors to $9,918,750 (51.8%).

22
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1996, as adjusted to give effect to the conversion of $3,000,000 of debt to
Common Stock and warrants (see "Certain Transactions --Pietro's Acquisition")
and to the issuance and sale of the 1,500,000 Shares of Common Stock and the
1,500,000 Redeemable Warrants offered hereby by the Company at an assumed
Offering price of $5.50 per share and $0.25 per warrant, after the deduction of
the estimated expenses of the Offering, and the application of the net proceeds
thereof as set forth in "Use of Proceeds." The information set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
the related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------------
COMPANY ADJUSTMENTS AS ADJUSTED
-------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, including current
portion and capital leases............. $ 1,353 $ 1,353
(3,000)(2)
Notes payable to related parties........ 6,793 (730)(1) 3,063
-------- -----------
Total debt.......................... 8,146 4,416
Minority interest....................... 254 254
Equity:
Preferred stock, no par value,
5,000,000 shares authorized; none
issued and outstanding............... -- --
Common stock, no par value, 60,000,000
shares authorized; 4,608,321 shares 69(2)
issued, and pro forma 6,108,321 2,775(2)
shares to be outstanding (3)......... 5,568 6,377(4) 14,789
Capital surplus:
Warrants: 10,014,584 warrants issued; 6(2)
and pro forma 11,514,584 warrants to 225(2)
be outstanding....................... 330 327(4) 888
Accumulated deficit................... (2,899) (293)(2) (3,192)
-------- -----------
Total equity........................ 2,999 12,485
-------- -----------
Total capitalization.............. $ 11,398 $ 17,155
-------- -----------
-------- -----------
</TABLE>

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

(1) The Company will use a portion of the net proceeds to pay (i) $526,000 of
the $3,270,000 note payable to Roman Systems, Inc., (ii) a $100,000 note
payable to Ms. Katherine Anderson, (iii) a $79,000 note payable to Paul
Motenko and (iv) a $25,000 note payable to Harold Motenko.

(2) Conversion of $3,000,000 debt and related accrued interest thereon under
certain Convertible Notes to 750,000 shares of Common Stock and 4,500,000
warrants. See "Certain Transactions -- Pietro's Acquisition." The expensing
of the unamortized debt issue cost of $292,500 and the related impact on
accumulated deficit is anticipated to be charged to operations in the third
quarter of 1996 upon the closing of this Offering.

(3) Excludes (i) 1,500,000 shares of Common Stock issuable by the Company upon
the full exercise of the Redeemable Warrants offered hereby, (ii) 225,000
shares of Common Stock and 225,000 Redeemable Warrants issuable by the
Company upon the full exercise of the Underwriters' over-allotment options,
(iii) 150,000 shares of Common Stock issuable by the Company upon the full
exercise of the Representative's Warrants, (iv) 150,000 shares of Common
Stock issuable by the Company upon the full exercise of the Redeemable
Warrants issuable upon exercise of the Representative's Warrants, (v)
10,014,584 shares of Common Stock issuable by the Company upon the full
exercise of the Selling Security Holders' Redeemable Warrants and (vi)
600,000 shares reserved for issuance under the Company's proposed 1996 Stock
Option Plan. See "Underwriting."

(4) The net proceeds of this Offering which include 1,500,000 Shares of Common
Stock and the issuance and sale of the 1,500,000 Redeemable Warrants offered
hereby.

In December 1994 and May 1995, the Company effected a 19,000-for-one stock
split and a .34896-for-one reverse stock split of its Common Stock,
respectively. Unless the context otherwise requires, all share and per-share
data in this Prospectus have been revised to reflect these stock splits.

23
<PAGE>
SELECTED COMBINED AND CONSOLIDATED FINANCIAL DATA

The selected financial data presented below for, and as of the year ended
December 31, 1995 and the end of, each of the years in the two-year period ended
December 31, 1995, are derived from the combined (1994) and consolidated (1995)
financial statements of the Company and the financial statements of the Pietro's
Corp. Business Related to Purchased Assets ("Purchased Assets"), which financial
statements have been audited by Coopers & Lybrand L.L.P., independent
accountants. The financial statements as of December 31, 1995, and for each of
the years in the two-year period ended December 31, 1995, and the reports
thereon, are included elsewhere in this Prospectus. The consolidated financial
data for the six-month periods ended June 30, 1995 and June 30, 1996, are
derived from unaudited consolidated financial statements of the Company. The
combined financial data for the Purchased Assets on page 25 hereof for the
three-month periods ended March 27, 1995 and March 29, 1996, are derived from
the unaudited combined financial statements of the Purchased Assets. The
consolidated financial data for the Company for the six-month period ended June
30, 1996 includes the results of operations of the Purchased Assets for the
period from March 30, 1996 through June 30, 1996. All of the unaudited financial
statement data referred to above, in the opinion of the Company's management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations. The operating results for the six-month periods ended June 30, 1995
and 1996 are not necessarily indicative of the operating results for the full
year. The selected combined and consolidated financial data should be read in
conjunction with the Company and the Purchased Assets Combined and Consolidated
Financial Statements and related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus. See Note 1 of Notes to Combined and Consolidated Financial
Statements.

CHICAGO PIZZA & BREWERY, INC. (THE "PARENT")

<TABLE>
<CAPTION>
SIX-MONTH
YEAR ENDED DECEMBER PERIODS ENDED
31, JUNE 30,
-------------------- --------------------
1994 1995 1995 1996
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (1)
Revenues...................................................................... $ 6,453 $ 6,586 $ 3,207 $ 8,308
Cost of sales................................................................. 1,638 1,848 894 2,614
--------- --------- --------- ---------
Gross profit.................................................................. 4,815 4,738 2,313 5,694
--------- --------- --------- ---------
Costs and expenses:
Labor....................................................................... 2,706 2,647 1,269 3,088
Occupancy................................................................... 654 654 314 696
Operating expenses.......................................................... 1,331 1,250 650 1,388
General & administrative.................................................... 474 879 330 833
Depreciation & amortization................................................. 173 359 182 377
--------- --------- --------- ---------
Total costs and expenses................................................ 5,338 5,789 2,745 6,382
--------- --------- --------- ---------
Loss from operations.......................................................... (523) (1,051) (432) (688)
Other income (expense):
Interest expense, net....................................................... (119) (472) (381) (386)
Other....................................................................... (34) (104) 0 7
--------- --------- --------- ---------
Total other expense..................................................... (153) (576) (381) (379)
--------- --------- --------- ---------
Loss before minority interest and taxes....................................... (676) (1,627) (813) (1,067)
Minority interest in partnerships............................................. 132 27 17 (1)
--------- --------- --------- ---------
Loss before taxes....................................................... (544) (1,600) (796) (1,068)
Income tax expense............................................................ (6) (6) (2) (7)
--------- --------- --------- ---------
Net loss................................................................ $ (550) $ (1,606) $ (798) $ (1,075)
--------- --------- --------- ---------
--------- --------- --------- ---------

BALANCE SHEET DATA (END OF PERIOD): (1)
Working capital (deficit)..................................................... $ 22 $ (5,206)
Intangible assets, net........................................................ 5,558 5,790
Total assets.................................................................. 9,943 14,890
Total long-term debt (including current portion).............................. 4,127 8,146
Minority interest (2)......................................................... 253 254
Shareholders' equity.......................................................... 4,023 2,999
</TABLE>

24
<PAGE>

PURCHASED ASSETS (3)

<TABLE>
<CAPTION>
THREE-MONTH
YEAR ENDED DECEMBER YEAR ENDED DECEMBER PERIOD ENDED
26, 1994 25, 1995 MARCH 27, 1995
------------------- ------------------- -----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (4)
Revenues................................. $ 14,609 $ 14,634 $ 3,671
Cost of sales............................ 4,403 4,277 1,121
-------- -------- -------
Gross profit............................. 10,206 10,357 2,550
-------- -------- -------
Costs and expenses:
Labor.................................. 4,755 4,836 1,201
Occupancy.............................. 1,402 1,434 350
Operating expenses..................... 2,276 2,361 644
General & administrative............... 1,944 1,596 403
Depreciation & amortization............ 662 581 140
-------- -------- -------
Total costs and expenses........... 11,039 10,808 2,738
-------- -------- -------
Net loss........................... $ (833) $ (451) $ (188)
-------- -------- -------
-------- -------- -------

BALANCE SHEET DATA (END OF PERIOD): (4)
Working capital (deficit)................ $ (247)
Total assets............................. 1,541
Equity................................... 1,091

<CAPTION>
THREE-MONTH
PERIOD ENDED
MARCH 29, 1996
-----------------------

<S> <C>
STATEMENT OF OPERATIONS DATA: (4)
Revenues................................. $ 3,780
Cost of sales............................ 1,188
-------
Gross profit............................. 2,592
-------
Costs and expenses:
Labor.................................. 1,290
Occupancy.............................. 352
Operating expenses..................... 620
General & administrative............... 382
Depreciation & amortization............ 114
-------
Total costs and expenses........... 2,758
-------
Net loss........................... $ (166)
-------
-------
BALANCE SHEET DATA (END OF PERIOD): (4)
Working capital (deficit)................ $ (105)
Total assets............................. 1,463
Equity................................... 1,125
</TABLE>

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

(1) Statement of Operations Data for the Parent includes the operating results
for the combined (1994) and consolidated (1995) information for the Parent
and the combined information for the Purchased Assets from March 30, 1996
through June 30, 1996. The Balance Sheet Data includes the consolidated
balance sheet information for the Parent and the combined balance sheet
information for the Purchased Assets as of June 30, 1996. The 1994
information for the Parent is presented on a combined basis due to common
ownership and control. The Parent acquired the Purchased Assets on March 29,
1996.

(2) The minority interest represents the 46.32% limited partners' share in
equity and the accumulated results from operations for the Lahaina, Maui
restaurant, not owned directly by the Parent.

(3) The Purchased Assets represent the 26 restaurants acquired (the "Pietro's
Acquisition") from the former Pietro's Corp., a Washington corporation
("Pietro's"). The financial results for the Purchased Assets represent the
Pietro's Corp.'s Business Related to Purchased Assets acquired by the
Parent. On May 15, 1996 the Parent agreed to sell seven of the restaurants
purchased from Pietro's. The sale was completed during the second quarter of
1996. The operating results of those seven restaurants are included in the
table. The Company recognized no gain or loss on the sale and adjusted the
goodwill recorded in the acquisition of the Purchased Assets. The sales for
the seven restaurants which the Company sold totaled approximately
$3,492,000 and $3,683,000 for the years ended December 25, 1995 and December
26, 1994, respectively. Operating profit excluding overhead allocation for
the seven restaurants totaled approximately $268,000 and $313,000 for the
years ended December 25, 1995 and December 26, 1994, respectively. Loss
after overhead allocation relating to the seven restaurants totaled
approximately $327,000 and $454,000 for the years ended December 25, 1995
and December 26, 1994, respectively. See the Combined Financial Statements,
Pietro's Corp.'s Business Related to Purchased Assets. The sales for the
seven restaurants sold totaled approximately $841,000 and $940,000 for the
three-month periods ended March 31, 1996 and 1995, respectively. Operating
profit excluding overhead allocation totaled approximately $31,000 and
$95,000 for the three-month periods ended March 31, 1996 and 1995,
respectively. Loss after overhead allocation relating to the seven
restaurants totaled approximately $54,000 and $42,000 for the three-month
periods ended March 31, 1996 and 1995, respectively. See the Combined
Financial Statements, Pietro's Corp.'s Business Related to Purchased Assets.

(4) Statement of Operations and Balance Sheet Data for the Purchased Assets
include the combined information for the Purchased Assets as of the dates
and for each of the periods presented.

25
<PAGE>
PRO FORMA COMBINED FINANCIAL DATA FOR THE COMPANY

The following unaudited pro forma combined financial information reflects
the acquisition of the Purchased Assets by the Company. The pro forma statement
of operations for the six-month period ended June 30, 1996 and the year ended
December 31, 1995 assumes the transaction occurred January 1, 1995.

The historical financial information of the Company for the six-month period
ended June 30, 1996 and the year ended December 31, 1995 has been derived from
the consolidated and combined financial statements included elsewhere in this
Prospectus. The pro forma financial information should be read in conjunction
with the accompanying notes thereto and with the financial statements of the
Company and the Purchased Assets included elsewhere in this Prospectus. The pro
forma combined financial information does not purport to be indicative of
operating results which would have been achieved had the acquisition of the
Purchased Assets occurred as of the dates indicated and should not be construed
as representative of future operating results. In the opinion of Management, all
adjustments have been made to reflect the effects of the acquisition.

PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
HISTORICAL PRO FORMA PRO FORMA SIX-MONTH PRO FORMA SIX-MONTH
YEAR ENDED ADJUSTMENTS YEAR ENDED PERIOD ENDED ADJUSTMENTS PERIOD ENDED
DECEMBER 31, PURCHASED DECEMBER 31, JUNE 30, PURCHASED JUNE 30,
1995 ASSETS (1) 1995 (5) 1996 ASSETS (2) 1996 (5)
------------ --------------- ------------ ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................ $ 6,586 $14,634 $21,220 $ 8,308 $ 3,780 $12,088
Cost of sales....................... 1,848 4,277 6,125 2,614 1,188 3,802
------------ --------------- ------------ ------------ ------- ------------
Gross profit...................... 4,738 10,357 15,095 5,694 2,592 8,286
Costs and expenses:
Labor............................. 2,647 4,836 7,483 3,088 1,290 4,378
Occupancy......................... 654 1,434 2,088 696 352 1,048
Operating expenses................ 1,250 2,361 3,611 1,388 620 2,008
General & administrative.......... 879 1,596(4) 2,475 833 382(4) 1,215
Depreciation & amortization....... 359 581 940 377 114 491
------------ --------------- ------------ ------------ ------- ------------
Total costs and expenses........ 5,789 10,808 16,597 6,382 2,758 9,140
Loss from operations................ (1,051) (451) (1,502) (688) (166) (854)
Minority interest in partnership.... 27 0 27 (1) 0 (1)
Other income (expense):.............
Interest expense, net............. (472) 0 (472) (386) 0 (386)
Other............................. (104) 0 (104) 7 0 7
------------ --------------- ------------ ------------ ------- ------------
Loss before taxes................. (1,600) (451) (2,051) (1,068) (166) (1,234)
Provision for taxes (3)............. (6) 0 (6) (7) 0 (7)
------------ --------------- ------------ ------------ ------- ------------
Net loss........................ $(1,606) $ (451) $(2,057) $(1,075) $ (166) $(1,241)
------------ --------------- ------------ ------------ ------- ------------
------------ --------------- ------------ ------------ ------- ------------
</TABLE>

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

(1) To adjust operating results for the year ended December 31, 1995 to include
Pietro's Corp.'s business related to the Purchased Assets described further
elsewhere in this Prospectus.

(2) Reflects the results of the operations of the Purchased Assets for the
three-month period from January 1 to March 29, 1996.

(3) No income tax benefit has been provided for the results of the operations of
the Company and the Purchased Assets as it is more likely than not that the
deferred tax assets originated in the net operating losses will not be
realized.

(4) Reflects overhead allocation from Pietro's Corp.

(5) On May 15, 1996 the Parent agreed to sell seven of the restaurants purchased
from Pietro's Corp. The Company recognized no gain or loss on the sale of
these restaurants and adjusted the goodwill related to the acquisition of
the Purchased Assets. The sales for the seven restaurants sold totaled
approximately $3,492,000 and $1,533,000 for the year ended December 31, 1995
and the six-month period ended June 30, 1996, respectively. Operating profit
before allocation of overhead for the locations to be sold total $268,000
and $4,000 for the year ended December 31, 1995 and the six-month period
ended June 30, 1996, respectively. Losses after allocation of overhead for
the locations to be sold totaled $327,000 and $146,000 for the year ended
December 31, 1995 and the six-month period ended June 30, 1996,
respectively.

26
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company's financial condition
and results of operations, for the years ended December 31, 1994 and 1995 and
the six-month periods ended June 30, 1995 and 1996 concern the Company including
the assets of CPNI as of March 30, 1996. The Company including the assets of
CPNI as of March 30, 1996, is referred to as the "Parent." This discussion and
analysis should be read in conjunction with the Parent's combined financial
statements and related notes thereto included elsewhere in this Prospectus.

GENERAL
Chicago Pizza & Brewery, Inc. (the "Company") was formed in 1991 by Mr.
Jeremiah Hennessy and Mr. Paul Motenko (the "Owners") to operate and manage five
existing restaurants that operated as BJ's Chicago Pizzeria restaurants (now all
operated as BJ'S PIZZA & GRILL restaurants) in Southern California. These five
restaurants were owned by Roman Systems, Inc. ("Roman Systems"). The Company
began managing these five restaurants in 1991 pursuant to a Management Agreement
(the "Management Agreement") with Roman Systems. Pursuant to the Management
Agreement, the Company had the right to open, operate and manage BJ's
restaurants. In 1992, the Owners formed CPA-BG, Inc. ("CPA-BG") and opened two
restaurants with CPA-BG as the general partner of BJ's Belmont Shore, L.P. and
BJ's La Jolla, L.P. in 1992 and 1993, respectively. In 1994, the Company opened
BJ's restaurants in Huntington Beach and Seal Beach, California. Additionally in
1994, the Company, through a limited partnership interest in BJ's Lahaina, L.P.,
opened a BJ's restaurant in Lahaina, Maui. The general partners of BJ's Lahaina,
L.P. were CPA010, Inc. ("CPA010"), owned by Messrs. Motenko and Hennessy, and
Blue Max, Inc. ("Blue Max"). In addition to its limited partnership interest,
the Company managed the Lahaina, Maui restaurant.

Effective January 1, 1995, pursuant to the Asset Purchase Agreement between
the Company and Roman Systems (the "Asset Purchase Agreement"), the Company
purchased three of the existing BJ's restaurants operated and managed under the
Management Agreement (Balboa in Newport Beach, La Jolla Village and Laguna
Beach, California) and terminated the Management Agreement. As part of the Asset
Purchase Agreement, the Company assumed responsibility for closing the other two
Roman Systems BJ's restaurants in Santa Ana and San Juan Capistrano, California
and assumed certain liabilities related thereto. The Santa Ana and San Juan
Capistrano, California restaurants were closed in 1995.

Effective January 1, 1995, the Company purchased the limited partnership
interests of BJ's Belmont Shore, L.P. and BJ's La Jolla, L.P. The general
partnership interests of CPA-BG were transferred to the Company for no
consideration prior to the acquisition of the limited partnership interests. The
stock of the corporate general partners of BJ's Lahaina, L.P., CPA010 and Blue
Max, was also transferred to the Company for no consideration. Additionally, in
1995 the Company closed the BJ's restaurant located on Prospect Street in La
Jolla, California ("La Jolla -- Prospect"). As of December 31, 1995, the Company
owned seven BJ's restaurants, all in Southern California and a 53.68% interest
in the BJ's restaurant in Lahaina, Maui. The Company subsequently opened BJ's
restaurants in Westwood Village in Los Angeles, California in March 1996, and
Brea, California in April 1996.

On March 29, 1996, the Company acquired 26 restaurants located in Oregon and
Washington by providing the funding for Pietro's Plan of Reorganization, dated
February 29, 1996, as modified (the "Debtor's Plan") and thereby acquired all of
the stock in the reorganized entity known as Chicago Pizza Northwest, Inc. The
Debtor's Plan was confirmed by an order of the Bankruptcy Court on March 18,
1996 and the Company funded the Debtor's Plan on March 29, 1996. The Company's
consolidated balance sheet as of June 30, 1996 includes CPNI and the Statement
of Operations for the six-month period ended June 30, 1996 includes the results
of CPNI for the period March 30, 1996 through June 30, 1996.

27
<PAGE>
As a result of these transactions the Company owned the following
restaurants during 1995 and 1996, except for the Lahaina, Maui restaurant in
which the Company owned an interest:

<TABLE>
<CAPTION>
LOCATION ACQUIRED FROM DATE ACQUIRED
- ----------------------------------------------------------- ----------------------------- ----------------------
<S> <C> <C>
Seal Beach, California..................................... N.A. (3) February 22, 1994
Lahaina, Maui.............................................. N.A. (3) June 22, 1994
Huntington Beach, California............................... N.A. (3) August 30, 1994
Balboa in Newport Beach, California........................ Roman Systems January 1, 1995
Laguna Beach, California................................... Roman Systems January 1, 1995
La Jolla Village, La Jolla, California..................... Roman Systems January 1, 1995
Belmont Shore, California.................................. BJ's Belmont Shore, L.P. January 1, 1995
La Jolla -- Prospect, California (1)....................... BJ's La Jolla, L.P. January 1, 1995
Westwood Village in Los Angeles, California................ N.A. (3) March 15, 1996
Brea, California........................................... N.A. (3) March 29, 1996
Milwaukie, Oregon.......................................... Pietro's Corp. March 29, 1996
Salem, Oregon.............................................. Pietro's Corp. March 29, 1996
Eugene, Oregon............................................. Pietro's Corp. March 29, 1996
Portland, Oregon........................................... Pietro's Corp. March 29, 1996
Eugene, Oregon............................................. Pietro's Corp. March 29, 1996
Salem, Oregon.............................................. Pietro's Corp. March 29, 1996
Gresham, Oregon............................................ Pietro's Corp. March 29, 1996
Eugene, Oregon............................................. Pietro's Corp. March 29, 1996
Woodstock, Oregon.......................................... Pietro's Corp. March 29, 1996
Jantzen Beach, Oregon...................................... Pietro's Corp. March 29, 1996
Portland, Oregon........................................... Pietro's Corp. March 29, 1996
Portland, Oregon........................................... Pietro's Corp. March 29, 1996
Portland, Oregon........................................... Pietro's Corp. March 29, 1996
Hood River, Oregon......................................... Pietro's Corp. March 29, 1996
The Dalles, Oregon......................................... Pietro's Corp. March 29, 1996
Aloha, Oregon.............................................. Pietro's Corp. March 29, 1996
North Bend, Oregon......................................... Pietro's Corp. March 29, 1996
McMinnville, Oregon........................................ Pietro's Corp. March 29, 1996
Redmond, Oregon (2)........................................ Pietro's Corp. March 29, 1996
Albany, Oregon (2)......................................... Pietro's Corp. March 29, 1996
Madras, Oregon (2)......................................... Pietro's Corp. March 29, 1996
Bend, Oregon (2)........................................... Pietro's Corp. March 29, 1996
Richland, Washington (2)................................... Pietro's Corp. March 29, 1996
Kennewick, Washington (2).................................. Pietro's Corp. March 29, 1996
Longview, Washington....................................... Pietro's Corp. March 29, 1996
Yakima, Washington (2)..................................... Pietro's Corp. March 29, 1996
</TABLE>

- ------------------------
(1) Closed June 1995.

(2) In May of 1996, the Company entered into an agreement to sell these
restaurants. The sale of these restaurants was completed during the second
quarter of 1996. See "Certain Transactions -- Sale of Restaurants."

(3) These restaurants were developed by the Company rather than purchased.

The above list does not include the Boulder, Colorado restaurant, which the
Company is currently developing and expects to open in Fall of 1996.

28
<PAGE>
The Parent's revenues are derived primarily from food and beverage sales at
its restaurants. The Parent's expenses consist primarily of food and beverage
costs, labor costs (consisting of wages and benefits), operating expenses
(consisting of marketing costs, repairs and maintenance, supplies, utilities and
other operating expenses), occupancy costs, general and administrative expenses
and depreciation and amortization expenses.

Certain preopening costs, including direct and incremental costs associated
with the opening of a new restaurant, are amortized over a period of one year
from the opening date of such restaurant. These costs include primarily those
incurred to train a new restaurant management team, food, beverage and supply
costs incurred to test all equipment and systems, and any rent or operating
expenses incurred prior to opening. As of June 30, 1996, approximately $309,000
of preopening costs had been incurred in connection with the opening of the
restaurants in Westwood Village in Los Angeles, California; Brea, California;
and Boulder, Colorado. Construction costs, including leasehold capital
improvements are amortized over the remaining useful life of the related asset,
or, for leasehold improvements, over the initial term, if less.

The Company's conversion of five of its restaurants from "BJ's Chicago
Pizzerias" to BJ'S PIZZA & GRILL restaurants resulted in above-normal food and
labor costs in late 1995, and the first quarter of 1996 -- results which are
similar to that normally experienced in the opening of a new restaurant.
Management believes that the conversions were a significant contributing factor
to substantial comparable store sales increases experienced by the affected
restaurants during the first quarter of 1996. The Parent utilizes a calendar
year-end for financial reporting purposes.

RESULTS OF OPERATIONS

SIX-MONTH PERIOD ENDED JUNE 30, 1996 COMPARED TO SIX-MONTH PERIOD ENDED JUNE
30, 1995

REVENUES. Total revenues for the six-month period ended June 30, 1996
increased to $8,308,000, from $3,207,000 for the comparable period in 1995, an
increase of $5,101,000 or 159.1%. The Northwest Restaurants, acquired on March
29, 1996, accounted for $3,557,000 of revenues from the date of acquisition
through June 30, 1996. Excluding the Northwest Restaurants, total revenues for
the six-month period ended June 30, 1996 increased to $4,751,000 from
$3,207,000, an increase of $1,544,000 for the comparable period in 1995. The
increase was achieved despite the La Jolla -- Prospect restaurant being closed
during 1996. Approximately $1,130,000 of the increase was due to the opening of
the Westwood Village, Los Angeles, California and Brea, California restaurants
in March and April, 1996, respectively. Revenues for the seven stores open the
entire comparable period increased from $3,035,000 to $3,621,000 or 19.3%.
Management primarily attributes the increase in revenues in these stores to the
following factors, in order of their significance: (i) the introduction of the
new BJ's menu and concept, (ii) the winter storms experienced during the first
quarter of 1995 which resulted in reduced customers during that period, and
(iii) the refurbishment of the La Jolla Village restaurant in November, 1995.

COST OF SALES. Cost of food, beverages and paper for the restaurants
increased to $2,614,000 for the six months ended June 30, 1996 from $894,000 for
the comparable period in 1995, an increase of $1,720,000 or 192.4%. As a
percentage of revenues, cost of sales increased to 31.5% for the period ended
June 30, 1996 from 27.9% for the comparable period in 1995. The Northwest
Restaurants, acquired on March 29, 1996, accounted for $1,150,000 of cost of
sales from the date of acquisition through June 30, 1996. Excluding the
Northwest Restaurants, cost of sales for the six-month period ended June 30,
1996 increased to $1,464,000 from $894,000 for the comparable period in 1995, an
increase of 63.8%. Excluding the Northwest Restaurants, as a percentage of
revenues, cost of sales increased to 30.8% for the six-month period ended June
30, 1996 from 27.9% for the comparable period in 1995. Management believes that
food cost as a percentage of sales increased primarily due to costs incurred, as
anticipated, during the testing and initial implementation phase of the menu
expansion and special promotional pricing of certain of the new menu items
through May, 1996. While the Company will continue to test and implement new
menu items, Management anticipates that the

29
<PAGE>

impact of the menu testing and implementation upon cost of sales as a percentage
of revenue will decline. However, a portion of the increased food cost
percentage is associated with higher relative costs of certain of the new menu
items, which will have an ongoing impact on cost of sales.

LABOR. Labor costs for the restaurants increased to $3,088,000 for the
six-month period ended June 30, 1996 from $1,269,000 for the comparable period
in 1995, an increase of $1,819,000 or 143.3%. The Northwest Restaurants,
acquired on March 29, 1996, accounted for $1,199,000 of labor costs from the
date of acquisition through June 30, 1996. Excluding the Northwest Restaurants,
labor costs for the six-month period ended June 30, 1996 increased to $1,889,000
from $1,269,000 for the comparable period in 1995, an increase of 48.9%.
Excluding the Northwest Restaurants, as a percentage of revenues, labor costs
increased to 39.8% for the six-month period ended June 30, 1996 from 39.6% for
the comparable period in 1995. This increase resulted from the implementation of
the new menu and expanded concepts which required the re-training of every
employee in the restaurants. In addition, the Company temporarily increased the
number of staff members per shift in both the kitchen and dining room in order
to maintain a high level of service during the transition period. As of June
1996, labor costs have been reduced to levels which Management believes are more
representative of ongoing staffing requirements. The above-described increase in
labor cost as a percentage of sales was partially offset due to the increased
revenues for the six-month period ended June 30, 1996 relative to the comparable
period in 1995.

OCCUPANCY. Occupancy costs increased to $696,000 for the six-month period
ended June 30, 1996 from $314,000 for the comparable period in 1995, an increase
of $382,000 or 121.7%. The Northwest Restaurants, acquired on March 29, 1996,
accounted for $350,000 of occupancy costs from the date of acquisition through
June 30, 1996. Excluding the Northwest Restaurants, occupancy costs for the
six-month period ended June 30, 1996 increased to $346,000 from $314,000 for the
comparable period in 1995, an increase of 10.2%. The $32,000 increase was due to
the opening of the Westwood, Los Angeles, California and Brea, California
restaurants in March and April, 1996, respectively, offset partially by the
discontinuation of the La Jolla -- Prospect restaurant in June 1995. Excluding
the Northwest Restaurants, as a percentage of revenues, occupancy costs
decreased to 7.3% for the six-month period ended June 30, 1996 from 9.8% for the
comparable period in 1995. This decrease was due to increased revenues.

OPERATING EXPENSES. Operating expenses increased to $1,388,000 for the
six-month period ended June 30, 1996 from $650,000 for the comparable period in
1995, an increase of $738,000 or 113.5%. The Northwest Restaurants, acquired on
March 29, 1996, accounted for $576,000 of operating expenses from the date of
acquisition through June 30, 1996. Excluding the Northwest Restaurants,
operating expenses for the six-month period ended June 30, 1996 increased to
$812,000 from $650,000 for the comparable period in 1995. The $162,000 or 24.9%
increase resulted primarily from the opening of the Westwood, Los Angeles,
California and Brea, California restaurants in March and April, 1996,
respectively. Excluding the Northwest Restaurants, as a percentage of revenue,
operating expenses decreased to 17.1% for the six-month period ended June 30,
1996 from 20.3% for the comparable period in 1995, primarily due to increased
revenue. Operating expenses include restaurant-level operating costs, the major
components of which include marketing, repairs and maintenance, supplies,
utilities and the amortization of pre-opening expenses.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to $833,000 for the six-month period ended June 30, 1996 from $330,000
for the comparable period in 1995, a $503,000 or 152.4% increase. The Northwest
Restaurants, acquired on March 29, 1996, accounted for $365,000 of general and
administrative expenses from the date of acquisition through June 30, 1996,
including an $83,000 reserve for severance pay due to the elimination of
duplicate overhead expenses. Excluding the Northwest Restaurants, general and
administrative expenses for the six-month period ended June 30, 1996 increased
to $468,000 from $330,000 for the comparable period in 1995. Excluding the
Northwest Restaurants, as a percentage of revenue, general and administrative
expenses decreased to 9.8% for the six-month period through June 30, 1996 from

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10.3% for the comparable period in 1995. The decrease resulted from increased
revenues, offset partially by additional administrative expenses related to the
increased company size in preparation for substantial growth and the Offering,
including the hiring of several key employees.

With the opening of the Westwood Village and Brea restaurants in California
which management believes will increase revenues, and the elimination of
duplicate overhead between the Southern California and Northwest locations,
which management believes will decrease general and administrative expenses,
management anticipates that general and administrative expenses as a percentage
of sales will continue to decrease. This is a forward-looking statement, and
there can be no assurance that total revenues will increase, or that general and
administrative expenses will decrease, since each of these items are subject to
a number of risk factors, as described herein. See "Risk Factors."

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$377,000 for the six-month period ended June 30, 1996 from $182,000 for the
comparable period in 1995, an increase of $195,000 or 107.1%. The Northwest
Restaurants, acquired on March 29, 1996, accounted for $124,000 of depreciation
and amortization from the date of acquisition through June 30, 1996. Excluding
the Northwest Restaurants, depreciation and amortization for the six-month
period ended June 30, 1996 increased to $253,000 from $182,000 for the
comparable period in 1995. The increase was primarily due to the depreciation
related to the remodeling of the La Jolla Village restaurant in November 1995
and the opening of the Westwood Village, Los Angeles, California and Brea,
California restaurants in March and April, 1996, respectively.

INTEREST EXPENSE. Interest expense increased to $386,000 for the six-month
period ended June 30, 1996 from $381,000 for the comparable period in 1995, an
increase of $5,000 or 1.3%. During 1995 the Company issued 222,462 shares of
stock as additional interest valued at $.75 per share in conjunction with a
January 1995 debt private placement. For accounting purposes the value of these
shares was treated as interest expense. The debt was fully paid during 1995.
During 1996, the Company incurred $3,000,000 in convertible debt accruing
interest at 10% per annum. In addition, the costs associated with obtaining this
debt financing are being charged to interest expense over the period from March
1996 through February 1997. During the six-month period ended June 30, 1996
$97,500 of these costs were charged to interest expense.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

REVENUES. Revenues for the year ended December 31, 1995 increased to
$6,586,000, from $6,453,000 for the comparable period in 1994, an increase of
$133,000 or 2.1%. The increase resulted from the opening of the Seal Beach,
California, Lahaina, Maui and Huntington Beach, California restaurants in
February, June and August, 1994, respectively, and was partially offset by the
closure of the Santa Ana, San Juan Capistrano and La Jolla -- Prospect,
California restaurants in 1995. The operations of the Santa Ana and San Juan
Capistrano restaurants were reserved as of January 1, 1995 as part of the
purchase price of the Roman Systems acquisition. Revenues for the year ended
December 31, 1994 include revenues derived from these three restaurants closed
in 1995.

Sales at the four restaurants (Balboa in Newport Beach, La Jolla Village,
Laguna Beach and Belmont Shore, California) open during the entire period
decreased to $3,415,000 in 1995 from $3,553,000 in 1994, a decrease of 3.9%.
This decrease was due to the following factors in order of their significance:

(i) The harsh winter of 1995 depressed sales, particularly at the beach
restaurants (Laguna Beach and Balboa in Newport Beach, California). Sales at
these restaurants decreased 4.3% from 1994 to 1995.

(ii) Several competitive restaurants opened in the Fall of 1994 in the
area surrounding the La Jolla Village restaurant, impacting its 1995 sales
prior to the remodeling in November 1995. Sales at La Jolla Village during
1995 prior to and during the remodeling decreased 16.7% from the comparable
period in 1994. A portion of this decrease was due to the closure of La
Jolla Village for

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two weeks during the remodeling. Sales during December 1995, immediately
subsequent to the remodeling of the restaurant and introduction of the new
menu, increased 37.5% from December 1994.

COST OF SALES. Cost of food, beverages and paper increased to $1,848,000
for the year ended December 31, 1995, from $1,638,000 for the comparable period
in 1994, an increase of $210,000 or 12.8%. As a percentage of revenues, cost of
sales increased to 28.1% for the fiscal year ended December 31, 1995, from 25.4%
for the comparable period in 1994. Management believes that this increase is
primarily due to the new menu development and implemenation during the latter
part of 1995. Additionally, extraordinarily high produce costs resulting from
flooding in California during the winter of 1995 contributed to the increase.

LABOR. Labor costs for the restaurants decreased to $2,647,000 for the year
ended December 31, 1995, from $2,706,000 for the comparable period in 1994 a
decrease of $59,000 or 2.2%. As a percentage of revenues, labor costs decreased
to 40.2% for the year ended December 31, 1995, from 41.9% for the comparable
period in 1994. This decrease resulted from the closure of the Santa Ana, San
Juan Capistrano and La Jolla -- Prospect, California restaurants in 1995. The
cost of closing the restaurants as well as the loss from operations for Santa
Ana and San Juan Capistrano restaurants were reserved as part of the purchase
price for the Roman Systems acquisition. In 1994, these restaurants were
included in results from operations. In addition to the reduction of the
Company's labor force due to the Company's discontinuation of these restaurants,
such restaurants had relatively low sales volumes which resulted in higher labor
costs as a percentage of sales.

OCCUPANCY. Occupancy costs remained constant at $654,000 for the year ended
December 31, 1995 and the comparable period in 1994 due to the following
offsetting factors: (i) an increase in occupancy due to a full year of
operations for the Seal Beach and Huntington Beach, California restaurants, as
well as the Lahaina, Maui restaurant and (ii) a decrease in occupancy due to the
closure of the Santa Ana and San Juan Capistrano, California restaurants as
discussed above as well as the Company's closure of the La Jolla -- Prospect,
California restaurant in 1995. As a percentage of revenues, occupancy costs
decreased to 9.9% for the year ended December 31, 1995, from 10.1% for the
comparable period in 1994.

OPERATING EXPENSES. Operating expenses decreased to $1,250,000 for the year
ended December 31, 1995, from $1,331,000 for the comparable period in 1994, a
decrease of $81,000 or 6.1%. As a percentage of revenues, operating expenses
decreased to 19.0% for the fiscal year ended December 31,1995, from 20.6% for
the comparable period in 1994. Management believes that the decrease was
primarily attributable to the closure of the Santa Ana and San Juan Capistrano,
California restaurants as discussed above, the closure of the La Jolla --
Prospect, California restaurant in mid-1995 and preopening costs of $112,000
incurred during 1994 relating to the Lahaina, Maui, and Seal Beach and
Huntington Beach, California restaurants. Operating expenses include restaurant-
level operating costs, the major components of which are marketing, repairs and
maintenance, supplies and utilities.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $879,000 for the fiscal year ended December 31, 1995, from $474,000 for the
comparable period in 1994, an increase of $405,000 or 85.4%. As a percentage of
revenues, general and administrative expenses increased to 13.3% for the year
ended December 31, 1995, from 7.3% in 1994. The increase resulted from
administrative expenses related to the increased company size in preparation for
substantial growth and the IPO, including the hiring of several key employees.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased to $359,000 for the year ended December 31, 1995, from $173,000 for
the comparable period in 1994, an increase of $186,000. The increase resulted
from the amortization of goodwill resulting from the January 1, 1995 acquisition
of Roman Systems, BJ's Belmont Shore, L.P., and BJ's La Jolla, L.P.

INTEREST EXPENSE. Interest expense increased to $472,000 for the year ended
December 31, 1995 from $119,000 in 1994. The $353,000 increase resulted from
interest debt incurred for the Roman Systems acquisition. See the Consolidated
Financial Statements and "Certain Transactions -- Private Placements."

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MINORITY INTEREST. The combined net loss related to restaurants owned by
limited partnerships decreased to $27,000 for the year ended December 31, 1995,
from $132,000 in 1994, due to the acquisition of BJ's Belmont, L.P. and BJ's La
Jolla, L.P., eliminating the minority interest. Additionally, the net loss in
BJ's Lahaina, L.P. decreased to $35,000 for the year ended 1995, from $141,000
in 1994.

LIQUIDITY AND CAPITAL RESOURCES

The Company historically has operated without working capital, but it does
not have significant inventory or trade receivables and customarily receives
several weeks of credit in purchasing food and supplies. The Company's working
capital deficit is primarily due to its operating losses, acquisition costs and
restaurant development costs. Net cash used in operating activities for the year
ended December 31, 1994 and the year ended December 31, 1995, and the six-month
period ended June 30, 1996 were approximately $257,000, $973,000 and $221,000,
respectively.

To date the Company has primarily financed its operations, acquisitions,
development and expansion from private placements completed in January, March
and September 1995, and convertible notes issued in March 1996 (See "Certain
Transactions"). These funds have been used primarily for acquiring and/or
developing the Roman Systems restaurants, the Brea restaurant, the Northwest
Restaurants, menu and restaurant development costs, restaurant refurbishment,
and working capital. Capital expenditures for the year ended December 31, 1994
and December 31, 1995 and the six-month period ended June 30, 1996 were
approximately $997,000, $5,132,000 and $4,917,000, respectively.

In connection with the development of the Huntington Beach restaurant in
1994, the Company issued a demand note payable to a related party in the amount
of $350,000 with interest accruing at a rate of 6%. This demand note is
collateralized by the Huntington Beach restaurant and equipment. $150,000 of
this demand note was repaid in the second quarter of 1996. An additional
$100,000 of this demand note was repaid in July 1996.

In connection with the 1995 Roman Systems acquisition, the Company, in
addition to a $550,000 cash down payment and assumption of certain liabilities,
issued a note in favor of the sellers in the amount of $3,700,000, which note
accrues interest at a rate of 7% per annum and matures on April 1, 2004. This
note is payable in monthly principal and interest installments of $38,195. Under
this note the Company is also required to make additional payments of $25,000
per month toward the total outstanding principal until an aggregate of $875,000
in additional principal payments under the note have been made. The Company
intends to use $526,000 of proceeds derived from this Offering to pay the
remaining portion of this $875,000 principal obligation. See "Use of Proceeds."
This note is collateralized by the restaurants in Balboa in Newport Beach, La
Jolla Village and Laguna Beach, California.

In connection with the 1996 Brea acquisition, the Company issued a note in
favor of the seller in the amount of $228,000 and assumed a bank note payable in
the amount of $751,000, collateralized by a $200,000 certificate of deposit
maturing March 1, 1998. During April 1996 the $228,000 note was repaid. The
$751,000 is payable in monthly principal installments of $12,513 plus interest
accrued at the bank's reference rate plus 2% and matures March 1, 2001.

In connection with the Pietro's Acquisition, the Company funded the Debtor's
Plan of Reorganization in the amount of $2,350,000 and assumed notes payable to
federal and state taxing authorities in the aggregate amount of $506,000. The
Company is required to pay these notes in the following principal installments:
(i) $32,670 per quarter from July 1, 1996 until April 1, 1997, (ii) $20,071 per
quarter from July 1, 1997 until June 30, 2001, and (iii) varying payments
totaling $34,122 from October 1, 2001 until April 1, 2002. In addition, the
Company is required to make interest payments at the rate of 8.25%.

Also in connection with the Pietro's Acquisition, the Company sold an
aggregate of $3,000,000 in Convertible Notes. Upon the closing of this Offering,
the entire principal and interest of the Convertible Notes convert into Shares
and Warrants. See "Certain Transactions -- Pietro's and Other Proposed
Acquisitions."

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With respect to the leases for the La Jolla -- Prospect, California and the
Richland, Washington restaurants, which restaurants were closed and sold by the
Company, respectively, the Company remains liable in the event of default by the
current lessees. Contingent liability for the full remaining term of the leases
is estimated at $716,000 and $466,000 for the La Jolla -- Prospect and Richland
locations, respectively. The Company may also be liable for additional expenses,
such as, insurance, real estate taxes, utilities and maintenance and repairs.
Management currently has no reason to believe that such expenses, if incurred,
will be significant.

With respect to the La Jolla -- Prospect property, the tenant has paid all
rents for a year and Management currently has no reason to believe that the
tenant will not continue to pay rent as due in the future.

With respect to the Richland, Washington site, Abby's Inc. ("Abby's"), an
affiliate of A-II, L.L.C., an Arizona LLC, which is the purchaser (the
"Purchaser") of the site has agreed to guarantee payment under the lease. Both
Abby's and the Purchaser have agreed to indemnify the Company with respect to
such related liabilities. Finally, in the event of a default, the landlord of
the Richland site has agreed to exhaust all remedies against the Purchaser and
Abby's prior to pursuing any remedies against the Company. Management currently
has no reason to believe that the Purchaser and/or Abby's is not capable of
performing under the lease.

During 1995 and early 1996 the Company developed and implemented its
extended menu, restaurant concept change and brewery concept for the BJ'S PIZZA,
GRILL & BREWERY and BJ'S PIZZA & GRILL restaurants. Expenditures for the new
menu items included food development costs, menu development costs, menu design
and printing, management and staff training and new kitchen equipment to
facilitate new menu items. Expenditures for the BJ'S PIZZA, GRILL & BREWERY and
BJ'S PIZZA & GRILL restaurant concepts included new interior design, logo
design, signage design and uniform design. Expenditures for the brewery concept
included the hiring of a director of brewing operations, beer menu development
costs and brewery design. Management believes it has completed the menu
development and restaurant concept development phase of its business plan and
that the costs associated with many of these changes are non-recurring.

Management believes the Company can be profitable through increased sales
relating to its extended menu, reduced costs associated with Company produced
beer and vendor volume purchasing associated with the recent Northwest
Restaurant acquisition, its recent restaurant openings in Westwood Village, Los
Angeles and Brea, California, the future opening of the restaurant in Boulder,
Colorado, the reduction of overhead through consolidation of the general and
administrative expenses of the Company's Southern California operations and its
Northwest operations and the conversion and refurbishment of the Northwest
Restaurants.

The Company currently intends to utilize capital primarily for the
conversion and refurbishment of restaurants in the Northwest, development of the
restaurant in Boulder, Colorado, repayment of certain debts and for working
capital purposes. Management currently anticipates a total of $5,300,000 in
additional capital expenditure requirements, including approximately $4,500,000
for the Northwest Restaurant conversions and $800,000 for the Boulder, Colorado
restaurant development. Management believes the proceeds from this Offering will
be sufficient for the Company to meet its business plan over the next 18 months.
There can be no assurance that future events, including problems, delays,
additional expenses and difficulties encountered in expansion and conversion of
restaurants, will not require additional financing, or that such financing will
be available if necessary. See "Risk Factors -- Need for Additional Financing."

IMPACT OF INFLATION

Impact of inflation on food, labor and occupancy costs can significantly
affect the Parent's operations. Many of the Parent's employees are paid hourly
rates related to the federal minimum wage, which has been increased numerous
times and remains subject to increase. Management believes that food costs,
which increased in the first quarter due to the expanded menu, will stabilize
and efficiencies may be obtained in purchasing and brew-pub operations.

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SEASONALITY AND ADVERSE WEATHER

The Parent's results of operations have historically been impacted by
seasonality, which directly impacts tourism at the Parent's coastal locations.
Further, Management believes that adverse weather impacted the 1995 first
quarter operating results, causing a significant decrease in the Parent's
revenues. For those locations open during the entire years 1994 and 1995 (Balboa
in Newport Beach and La Jolla Village, Laguna and Belmont Shore, California),
the sales for the first quarter of 1995 decreased by approximately $87,000 or
10.5%, compared with the same period in 1994. Management believes that improved
weather conditions during the first half of 1996 partially contributed to the
increase in sales of 22.1% for the first half of 1996, compared with the same
period in 1995 for the same four restaurants.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED ACCOUNTING STANDARDS. In March 1995, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS No. 121"). SFAS No. 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets and
certain identifiable intangibles to be disposed of. The Company is required to
adopt the provisions of SFAS No. 121 for 1996, and currently believes that upon
its adoption there should be no impact on the Company's result of operations.

In November 1995, the FASB also issued SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123 establishes new
accounting standards for the measurement and recognition of stock-based awards.
SFAS No. 123 permits entities to continue to use the traditional accounting for
stock-based awards prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees" however, under this option, the Company will be required to
disclose the pro forma effect of stock-based awards on net income and earnings
per share as if SFAS No. 123 had been adopted. SFAS No. 123 is effective for
1996. The Company intends to continue to use the provisions of APB Opinion No.
25 in accounting for stock-based awards. As such, SFAS No. 123 will have no
impact on the Company's results of operations.

Other recently issued standards of the FASB are not expected to affect the
Company as conditions to which those standards apply are absent.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PIETRO'S CORP.'S BUSINESS RELATED TO PURCHASED ASSETS

The following discussion and analysis of Pietro Corp.'s Business Related to
Purchased Assets' combined financial condition and results of operations for the
three months ended March 29, 1996 and March 27, 1995, and the fiscal years ended
December 25, 1995 and December 26, 1994 should be read in conjunction with the
Purchased Assets' combined financial statements and related notes thereto
included elsewhere in this Prospectus. After March 29, 1996, the financial
condition and results of operations of the Purchased Assets are included in the
consolidated financial data of the Company.

GENERAL

Pietro's Corp., a Washington State corporation ("Debtor" or "Pietro's")
filed a petition for reorganization in the United States Bankruptcy Court for
the Western District of Washington at Seattle under Chapter 11 of title 11 of
the United States Code on September 26, 1995 (the "Petition Date"). The Company
provided the funding for the "Debtor's Plan of Reorganization, Dated February
29, 1996" as modified (the "Plan") and thereby acquired all of the stock in the
reorganized entity known as Chicago Pizza Northwest, Inc. ("CPNI"), a Washington
corporation and defined in the Plan as the "Reorganized Debtor." The Plan was
confirmed by an order of the Bankruptcy Court entered on March 18, 1996.

During the course of the bankruptcy case, the Debtor disposed of some
assets, rejected certain store leases, satisfied certain liabilities and
substantially reduced its operations. For example, although as of the Petition
Date the Debtor consisted of 46 stores and a distribution center, the
Reorganized Debtor consisted of only 26 stores. To the extent the store closings
resulted in claims against the Debtor, such claims became general unsecured
claims against the Debtor only and will be satisfied pursuant to the terms of
the Plan. The Plan also specifies the treatment for the claims of secured
creditors, unsecured creditors, and creditors holding claims relating to the
administration and operation of the Debtor's business and the bankruptcy case.
Except for certain causes of action and other assets which are specified in the
Plan, all of the remaining property of the Debtor's bankruptcy estate vests in
CPNI as Reorganized Debtor. The assets vest in CPNI free and clear of all of the
Debtor's pre-confirmation liabilities except that CPNI is liable to pay the
Debtor's ordinary course post-petition operation expenses outstanding on the
Effective Date (hereinafter defined) and to fund approximately $506,000 in Plan
payments relating to the Debtor's pre-petition tax liability.

The Plan provided that the Company invest $2,850,000 to fund the Plan. The
aggregate funding amount consists of approximately $2,350,000 which was
deposited into a "Reorganization Fund" and of $456,000 and $50,000 to be paid
over six years and one year, respectively, with respect to certain prepetition
priority tax debts of Debtor. The Reorganization Fund will be used to pay the
Debtor's administrative (post-petition), priority and lease cure claims in full
and the balance will be distributed to the Debtor's unsecured creditors on a pro
rata basis. Holders of common stock of the Debtor will receive nothing.

Through the deposit of funds and assumption of tax liabilities, the Company
funded the Plan as described above on March 29, 1996 (the "Effective Date"). On
the Effective Date, the outstanding common stock of the Debtor was cancelled and
common stock in CPNI as the Reorganized Debtor, and a wholly-owned subsidiary of
the Company, was issued.

The financial statements of the Pietro's Corp.'s Business Related to the
Purchased Assets includes 26 pizza restaurants located throughout the States of
Oregon and Washington. Pietro's owned and operated these and other restaurants.
The combined financial statements include the accounts of the Purchased Assets,
including allocations of overhead from Pietro's, for accounting, legal,
information processing, administrative, financing and marketing services. Such
allocation is computed based on the net sales related to the Purchased Assets as
a percentage of the Company's total restaurant net sales. Management believes
such allocation is reasonable as each individual restaurant will incur a

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portion of cost relative to its sales volume. The Purchased Assets, as a
combined entity, have no separate legal status. All significant inter-company
transactions and balances have been eliminated in combination.

On May 15, 1996, CPNI agreed to sell seven of the restaurants purchased from
Pietro's Corp. for approximately $1,000,000. The sales transactions were
completed during the second quarter of 1996. The operating results of those
seven restaurants are also included in the Selected Combined Financial and
Restaurant Data.

CPNI's revenues are derived exclusively from food and beverage sales at its
26 restaurants. The expenses consist primarily of food and beverage costs, labor
costs, operating costs (consisting of marketing costs, repairs and maintenance,
supplies, utilities and other operating expenses) occupancy costs, general and
administrative expenses and depreciation and amortization expenses related to
the acquired operation. There were no pre-opening costs incurred in the periods
presented for CPNI.

CPNI's balance sheet and related statistical data have been presented as
Pietro Corp.'s Business Related to Purchased Assets as defined in its Combined
Financial Statements included in this Prospectus.

Several important factors to consider in evaluating the results of
operations of CPNI are (i) 1995 and 1994 restaurant operations reflect the
Pietro's concept, (ii) Management intends to use a portion of the proceeds from
this Offering to convert each restaurant acquired from what Management believes
is an outdated Pietro's concept to a BJ'S PIZZA, GRILL & BREWERY, a BJ'S PIZZA &
GRILL or a BJ'S PIZZA restaurant over the next 18 months, (iii) Management
believes that conversion of the current BJ's restaurants to one of the three
BJ's concepts may increase sales based on higher present sales volumes and (iv)
the Company has already sold 7 of the 26 restaurants acquired under the Plan.

The sales for the seven restaurants sold totaled approximately $3,492,000
and $3,683,000 for the years ended December 25, 1995 and December 26, 1994,
respectively. Operating profit excluding overhead allocation totaled
approximately $268,000 and $313,000 for the years ended December 25, 1995 and
December 26, 1994, respectively. Loss after overhead allocation relating to the
seven restaurants totaled approximately $327,000 and $454,000 for the years
ended December 25, 1995 and December 26, 1994, respectively.

RESULTS OF OPERATIONS

THREE-MONTH PERIOD ENDED MARCH 27, 1996 COMPARED TO THREE-MONTH PERIOD ENDED
MARCH 29, 1995

REVENUES. Revenues for the three months ended March 29, 1996 increased to
$3,780,000 from $3,671,000 for the comparable period of 1995, an increase of
$109,000 or 3.0%. This increase is primarily due to the opening of the
Woodstock, Oregon restaurant in June 1995.

COSTS OF SALES. Cost of food, beverages and paper supplies (cost of sales)
increased to $1,188,000 for the three months ended March 31, 1996, from
$1,121,000 for the comparable period in 1995, an increase of $67,000 or 6.0%. As
a percentage of revenues, cost of sales increased to 31.4% for the period ended
March 29, 1996, from 30.5% for the comparable period in 1995. This increase is
due to conversion to a third-party distributor from an internal distribution
system in which the operating expenses were treated as part of corporate
overhead.

LABOR. Restaurant labor and benefits expense increased to $1,290,000 for
the three-month period ended March 27, 1996, from $1,201,000 for the comparable
period to 1995, an increase of $89,000 or 7.4%. As a percentage of revenues,
restaurant labor and benefits increased to 34.1%, for the period ended March 29,
1996, from 32.7% for the comparable period in 1995. This increase is principally
due to the labor required to convert from a central commissary to dough
preparation in stores and labor costs associated with the Woodstock, Oregon
restaurant opened in June 1995.

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OCCUPANCY. Occupancy costs remained relatively constant for the three-month
period ended March 31, 1996, as compared to the same period for the prior year
1995, at approximately $350,000.

OPERATING EXPENSES. Operating expenses, including marketing and
advertising, decreased to $620,000 for the three-month period ended March 29,
1996, from $644,000 for the comparable period in 1995, a decrease of $24,000 or
3.7%. Management believes this decrease is principally due to a change in
marketing strategy that relies less on coupon distribution, which was reduced
significantly over the prior period. As a percentage of revenues, operating
expenses decreased to 16.4%, for the period ended March 29, 1996, from 17.5% for
the comparable period in 1995.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
decreased to $114,000 for the three-month period ended March 27, 1996, from
$140,000 for the comparable period in 1995. The $26,000 or 18.6% decrease
resulted from certain assets which became fully depreciated.

YEAR ENDED DECEMBER 25, 1995 COMPARED TO YEAR ENDED DECEMBER 26, 1994

REVENUES. Revenues for the year ended December 25, 1995 increased to
$14,634,000 from $14,609,000 for the comparable period of 1994, an increase of
$25,000 or 0.2%. An increase of $183,000 resulted from the opening of the
Woodstock, Oregon delivery only restaurant, in June 1995, partially offset by a
decrease in comparable store sales of $158,000 or 1.1% due to an increase in the
amount of discount coupons redeemed.

COST OF SALES. Cost of food, beverages and paper supplies (cost of sales)
for the restaurants decreased to $4,277,000 for the year ended December 25,
1995, from $4,403,000 for the comparable period in 1994, a decrease of $126,000
or 2.9%. As a percentage of revenues, cost of sales decreased to 29.2% for the
fiscal year ended December 25, 1995, from 30.1% for the comparable period in
1994. Management believes that price increases on the salad bar and pan pizza
partially offset by an increase in discount coupon redemption was mainly
responsible for this percentage decrease.

LABOR. Labor for the year ended December 25, 1995 increased to $4,836,000
from $4,755,000 for the comparable period in 1994, an increase of $81,000 or
1.7%. As a percentage of revenue, labor increased to 33%, from 32.5% for the
comparable period in 1994, due primarily to the opening of a restaurant in
Woodstock, Oregon in 1995. As a percentage of revenue the Woodstock, Oregon
restaurant's labor cost was 38.6% in 1995, 5.5 percentage points higher than the
Purchased Assets average of 33.1%. This increase was due to training costs
incurred after the opening of the restaurant.

OCCUPANCY. Occupancy costs increased to $1,434,000 for the year ended
December 31, 1995, from $1,402,000 in the comparable period in 1994. The $32,000
or 2.3% increase resulted from scheduled lease increases totaling $25,000 and
the addition of the Woodstock, Oregon restaurant.

OPERATING EXPENSES. Operating expenses, increased to $2,361,000 for the
year ended December 25, 1995, from $2,276,000 for the comparable period in 1994.
The $85,000 or 3.7% increase was due primarily to increased marketing costs
relating to coupon distribution and the opening of the Woodstock, Oregon
restaurant in June 1995. As a percentage of revenues, operating expenses
increased to 16.1%, from 15.6% for the comparable period in 1994.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
decreased to $581,000 for the year ended December 25, 1995, from $662,000 for
the comparable period in 1994. The $81,000 or 12.2% decrease resulted from
certain assets which became fully depreciated.

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<PAGE>
THE COMPANY

HISTORY AND BACKGROUND

Chicago Pizza & Brewery, Inc. (the "Company") was formed in 1991 by Mr.
Jeremiah Hennessy and Mr. Paul Motenko (the "Owners") to operate and manage five
existing restaurants that operated as BJ's Chicago Pizzeria restaurants (now all
operated as BJ'S PIZZA & GRILL restaurants) in Southern California. These five
restaurants were owned by Roman Systems, Inc. ("Roman Systems"). The Company
began managing these five restaurants in 1991 pursuant to a Management Agreement
(the "Management Agreement") with Roman Systems. Pursuant to the Management
Agreement, the Company had the right to open, operate and manage BJ's
restaurants. In 1992, the Owners formed CPA-BG, Inc. ("CPA-BG") and opened two
restaurants with CPA-BG as the general partner of BJ's Belmont Shore, L.P. and
BJ's La Jolla, L.P. in 1992 and 1993, respectively. In 1994, the Company opened
BJ's restaurants in Huntington Beach and Seal Beach, California. Additionally in
1994, the Company, through a limited partnership interest in BJ's Lahaina, L.P.,
opened a BJ's restaurant in Lahaina, Maui. The general partners of BJ's Lahaina,
L.P. were CPA010, Inc. ("CPA010"), owned by Messrs. Motenko and Hennessy, and
Blue Max, Inc. ("Blue Max"). In addition to its limited partnership interest,
the Company managed the Lahaina, Maui restaurant.

Effective January 1, 1995, pursuant to the Asset Purchase Agreement between
the Company and Roman Systems (the "Asset Purchase Agreement"), the Company
purchased three of the existing BJ's restaurants operated and managed under the
Management Agreement (Balboa in Newport Beach, La Jolla Village, and Laguna
Beach, California) and terminated the Management Agreement. As part of the Asset
Purchase Agreement, the Company assumed responsibility for closing the other two
Roman Systems BJ's restaurants in Santa Ana and San Juan Capistrano, California
and assumed certain liabilities related thereto. The Santa Ana and San Juan
Capistrano, California restaurants were closed in 1995.

On March 29, 1996, the Company acquired 26 restaurants located in Oregon and
Washington by providing the funding for Pietro's Plan of Reorganization, dated
February 29, 1996, as modified (the "Debtor's Plan") and thereby acquired all of
the stock in the reorganized entity known as Chicago Pizza Northwest, Inc. The
Debtor's Plan was confirmed by an order of the Bankruptcy Court on March 18,
1996 and the Company funded the Debtor's Plan on March 29, 1996. In May, 1996
the Company agreed to sell seven of the 26 restaurants acquired from Pietro's.
The sale was completed during the second quarter of 1996.

As a result of these transactions the Company owns eight restaurants in
Southern California and an interest in one restaurant in Lahaina, Maui, all
operated as BJ's restaurants, and 19 restaurants in

39
<PAGE>
Oregon and Washington, which restaurants will continue to operate under the
"Pietro's" name awaiting conversion to either the BJ'S PIZZA, GRILL & BREWERY,
BJ'S PIZZA & GRILL or BJ'S PIZZA concept.

<TABLE>
<CAPTION>
DATE CURRENTLY OPERATES PLANNED TO OPERATE
ACQUIRED AS (5) AS (5)
--------- ------------------ ------------------
<S> <C> <C> <C>
CALIFORNIA (1)
Balboa in Newport Beach................. 1/95 Grill Grill
La Jolla Village........................ 1/95 Grill Grill
Laguna Beach............................ 1/95 Grill Grill
Belmont Shore........................... 1/95 Grill Grill
Seal Beach.............................. 2/94 (6) Grill Grill
Huntington Beach........................ 8/94 (6) Grill Grill
Westwood Village, Los Angeles........... 3/96 (6) Grill Grill
Brea.................................... 3/96 (6) Brewery Brewery
HAWAII
Lahaina, Maui........................... 6/94 (6) Grill Grill
OREGON (2)
Hood River.............................. 3/96 Pietro's Brewery
Gresham................................. 3/96 Pietro's Brewery
Eugene I (3)............................ 3/96 Pietro's Brewery
Milwaukie............................... 3/96 Pietro's Brewery
Salem I................................. 3/96 Pietro's Grill
Jantzen Beach (4)....................... 3/96 Pietro's Grill
The Dalles.............................. 3/96 Pietro's Grill
Eugene II............................... 3/96 Pietro's Grill
Eugene III.............................. 3/96 Pietro's Grill
Salem II................................ 3/96 Pietro's Pizza
Portland (Stark)........................ 3/96 Pietro's Grill
Portland (Lloyd Center)................. 3/96 Pietro's Pizza
Portland (Burnside)..................... 3/96 Pietro's Pizza
Portland (Lombard)...................... 3/96 Pietro's Pizza
Aloha................................... 3/96 Pietro's Pizza
North Bend.............................. 3/96 Pietro's Pizza
McMinnville............................. 3/96 Pietro's Pizza
Woodstock............................... 3/96 Pietro's Pizza
WASHINGTON (2)
Longview................................ 3/96 Pietro's Grill
</TABLE>

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

(1) Does not include the La Jolla -- Prospect restaurant which was closed in
1995. Also does not include the Roman Systems restaurants located in Santa
Ana and San Juan Capistrano, California, which restaurants were closed in
1995.

(2) Does not include restaurants which were purchased in March 1996 and which
the Company sold during the second quarter of 1996. (Oregon -- Bend, Albany,
Redmond and Madras; Washington -- Richland, Kennewick and Yakima). See
"Certain Transactions -- Sale of Restaurants."

(3) May require an extension of lease from landlord in order to justify the
expense of conversion to a BJ'S PIZZA, GRILL & BREWERY. In the event an
extension is not granted, the Company will convert the site to a BJ'S PIZZA
& GRILL.

(4) May be taken by government under power of eminent domain.

(5) "Grill" means the BJ'S PIZZA & GRILL concept. "Brewery" means the BJ'S
PIZZA, GRILL & BREWERY concept. "Pizza" means the BJ'S PIZZA concept. See
"Business -- Business and Strategy."

(6) Developed by the Company.

The above list does not include the Boulder, Colorado restaurant which the
Company is currently developing and expects to open in the Fall of 1996.

40
<PAGE>
BUSINESS

BUSINESS AND STRATEGY

- BJ'S PIZZA & GRILL is designed to provide a casual, dining experience with
table service featuring a menu of pizza, pasta, sandwiches, salads and
desserts. Currently, the Company operates seven of its California
Restaurants and the Lahaina, Maui restaurant as, and plans to convert
seven of its Northwest Restaurants into, the BJ'S PIZZA & GRILL concept.

The Company was formed in 1991 to assume the management of five "BJ's
Chicago Pizzeria" restaurants and to develop additional BJ's restaurants.
Between 1992 and 1995, the Company developed five additional restaurants,
purchased three of those original five restaurants that it managed and
discontinued one of those that it had developed. As a result of these
transactions, at the end of 1995 the Company owned restaurants in California
located in La Jolla Village, Laguna Beach, Belmont Shore, Seal Beach, Huntington
Beach, and Balboa in Newport Beach, as well as a 53.68% interest in a restaurant
in Lahaina, Maui.

The Company has embarked on a campaign to broaden its customer base by: i)
surrounding its core pizza product with a more expansive menu including
appetizers, grilled sandwiches, specialty salads and pastas, ii) adding
hand-crafted, micro-brewed beers through on-site micro-breweries in certain
locations and the sale of internally-produced beer through other Company
restaurants and

41
<PAGE>
iii) differentiating the BJ's identity and expanding merchandising opportunities
through a comprehensive new logo and identity program, new uniforms a new
interior design concept and redesigned signage.

During late 1995 and early 1996, the Company converted the restaurants in
Balboa in Newport Beach, La Jolla Village, Laguna Beach, Belmont Shore, Seal
Beach and Huntington Beach, California to the BJ'S PIZZA & GRILL concept and
opened a new BJ'S PIZZA & GRILL restaurant in Westwood Village in Los Angeles,
California. Management believes that customer frequency and sales volumes at the
converted restaurants have been significantly enhanced in the comparable period
of 1995 to 1996, primarily due to the conversion to this expanded concept. The
four California Restaurants open for the entire first half of 1994, 1995 and
1996 (Balboa in Newport Beach, California, La Jolla Village, Laguna Beach and
Belmont Shore, California) had a decrease of sales of 6.4% in the first half of
1995 compared to 1994. Management believes this was primarily due to rains and
flooding in the first half of 1995. However, with the introduction of the new
menu and the refurbishment of the La Jolla Village restaurant at year end 1995,
same store sales in these four restaurants increased 22.1% from the first half
of 1996 compared to the first half of 1995. Same store sales volumes at the
seven restaurants operating during the entire first half of 1995 and 1996 were
up 19.3% in 1996 over the prior year. The La Jolla Village restaurant, which had
the most significant physical upgrade, experienced sales increases of 45.7% in
the comparable periods.

The first BJ'S PIZZA GRILL & BREWERY opened in Brea, California in April
1996. This 10,000-square-foot restaurant features elaborate brick walls and
archways, high molded tin ceilings, warm lighting and industrial railings. The
on-premises brewing equipment includes a 30-barrel, copper-clad kettle,
60-barrel, stainless steel fermentation tanks, kegging equipment, and a
40,000-pound-capacity corrugated metal grain silo located at the front entrance
to the restaurant. Management believes the brewery capacity is sufficient to
supply beer for all of the Company's existing Southern California restaurants.
Management believes the relatively low production cost and high premium pricing
associated with micro-brewed beer can significantly improve margins.

The March, 1996 multi-unit Pietro's Acquisition was a key step in the
strategy to quickly develop a market presence for the thick crust, Chicago style
pizza and micro-brewery concept. Management believes that the Company will
significantly benefit from the Pietro's Acquisition as 19 restaurants in the
Northwest market will provide the Company with an immediate and significant
presence in that market area, without the more cumbersome and time-consuming
licensing and permitting issues which would be involved in the development of
individual restaurants. These 19 restaurants will continue to operate under the
"Pietro's" name awaiting conversion to either BJ'S PIZZA, GRILL & BREWERY, BJ'S
PIZZA & GRILL or BJ'S PIZZA concept. Management believes that it can
significantly capitalize on the Pietro's Acquisition based upon the following
factors:

1. ESTABLISHED CUSTOMER BASE. Each of the restaurants purchased already
has a customer base which Management feels can be expanded with the
renovation and introduction of the BJ's menu and concept.

2. REDUCTION OR ELIMINATION OF DISCOUNTING. Pietro's relied heavily on
discounting to maintain its share of the pizza market. Discounts were as
high as 25% of total sales. BJ's does very little discounting, relying
instead on the quality of its product and service to compete in the
marketplace. As Pietro's restaurants are converted to BJ's restaurants,
Management intends to reduce or eliminate the use of discounting, which
Management believes will have a positive effect on gross profit margins.

3. POSITIVE IMPACT UPON MARKETING COSTS AS A RESULT OF REDUCED
DISCOUNTING. Due to its widespread use of discount coupons, Pietro's
marketing costs, consisting mainly of printing and

42
<PAGE>
distribution, have been extremely high. Marketing costs averaged 7.5% of
sales. BJ's marketing costs average under 2% of sales. Management believes
that the anticipated reduction in discounting upon conversion of the units
to BJ's restaurants will also significantly reduce marketing costs.

4. CAPITALIZATION UPON INCREASED PURCHASING VOLUMES. Management will
attempt, and believes that it can achieve, significant cost reductions from
capitalizing on the increased purchasing volumes resulting from the
operation of the 19 additional restaurants.

5. ELIMINATION OF DUPLICATE OVERHEAD. Management is in the process of
eliminating duplicate overhead in accounting, finance, purchasing and
executive management. Management believes that such reductions will reduce
overhead in total and as a percentage of sales. This is a forward looking
statement, and there can be no assurance that total overhead expenses will
decrease for the reasons described herein. See "Risk Factors."

6. ECONOMIC BENEFITS OF INTERNALLY PRODUCED BEER. The installation of
micro-breweries in several of the converted Pietro's restaurants should
provide the economic benefits of internally produced beer, not only to those
restaurants but to other converted restaurants as well. Management intends
to distribute the beer produced at BJ's micro-breweries, subject to local
regulations, to as many of the other converted restaurants as possible.

7. INCREASED SALES THROUGH RENOVATION AND CONVERSION. Annual sales at
BJ's seven Southern California and one Lahaina, Maui unit open during 1995
averaged $323 per square foot while sales at the Pietro's restaurants
acquired by the Company averaged $114 per square foot. Management believes
that through renovation and conversion of the acquired restaurants to BJ's
restaurants, the sales volumes could increase to be more consistent with the
volumes of the other BJ's restaurants.

The Company's current objectives after the closing of this Offering are to
remodel and refurbish those restaurants acquired from Pietro's to one of the
three "BJ's" concepts over the next 12 to 18 months. The Company has designated
approximately $4.5 million of the net proceeds of this Offering for use in
refurbishment and redesign of these restaurants. The Company also plans to
acquire and develop additional "BJ's" restaurants in order to expand operations
to other cities and towns consistent with the Company's location strategy and
market niche. In this regard, the Company has executed a lease for an
approximately 5,500-square-foot facility in the Pearl Street Mall, a popular,
high-traffic pedestrian promenade in Boulder, Colorado. The Company expects to
open this BJ'S PIZZA, GRILL & BREWERY in Fall of 1996. No assurance can be given
that the Company's objectives can be achieved or that sufficient capital will be
available to finance the Company's business plan. See "Risk Factors."

The BJ's menu has been developed on a foundation of excellence. BJ's core
product, its deep-dish, Chicago-style pizza, has been highly acclaimed since it
was originally developed in 1978. This unique version of Chicago-style pizza is
unusually light, with a crispy, flavorful crust. Management believes BJ's
lighter crust helps give it a broader appeal than some other versions of
deep-dish pizza. The pizza is topped with high-quality meats, fresh vegetables
and whole-milk mozzarella cheese. BJ's pizza consistently has been awarded "best
pizza" honors by restaurant critics and public opinion polls in Orange County,
California. In addition, BJ's recently won the award for "best pizza on Maui" in
a poll conducted by the Maui News.

Management's objective in developing BJ's expanded menu was to ensure that
all items on the menu maintained and enhanced BJ's reputation for quality. BJ's
pasta sauces, soups and salad dressings are made fresh in each restaurant.
Sandwiches are made from freshly grilled chicken and turkey roasted in BJ's
ovens. BJ's developed a dessert several years ago which has become another
signature item. The "Pizookie" is a freshly baked-to-order cookie, served hot
out of the oven in a deep-

43
<PAGE>
dish pizza pan, topped with gourmet vanilla bean ice cream. Since its
introduction in 1992, the Pizookie has become extremely popular and brings
people back to BJ's for a whole meal or just for the dessert itself.

Many of BJ's food portions have been increased in conjunction with the new
menu, creating a real value orientation. Because of the relatively low food cost
associated with pizza, BJ's highest volume item, Management believes it will
still be able to maintain favorable gross profit margins while providing a value
to the consumer. When the new menu items were first developed in late 1995 and
early 1996, they were introduced at promotional prices. Management believes this
artificially low pricing contributed to the higher food cost percentage incurred
during that time period. Prices on most of the new items were increased
effective May 1996. While the menu is still very value-oriented, the new pricing
is more consistent with Management's gross profit margin objectives.

BJ's restaurants provide a constantly evolving selection of domestic,
imported and micro-brewed beers. In addition, subject to local regulations and
the capacity of the restaurants, BJ's restaurants will feature a selection of
beers brewed at one or more of BJ's micro-breweries. Management believes that
this will provide two major benefits:

1. The quality and freshness of the BJ's brewed beers will be under the
constant supervision of the Company's Director of Brewing Operations. This
should have a positive impact on both the actual quality and the perceived
quality of the beer.

2. Management believes that the production costs of the internally
brewed beer will be significantly less than purchased beer. The relatively
low production costs and premium pricing often associated with micro-brewed
beers should have a significant, positive impact on gross profit margins.

MARKETING

To date, the majority of marketing has been accomplished through
community-based promotions and customer referrals. Management's philosophy has
been to "spend its marketing dollars on the plate," or use funds that would
typically be allocated to marketing to provide a better product and value to its
existing guests. Management believes this will result in increased frequency of
visits and greater customer referrals. During the roll-out of the new menu,
however, the Company has utilized more media advertising than usual in order to
gain increased awareness of the significant changes on the menu and in the
restaurants. BJ's expenditures on advertising and marketing are typically 1% to
1.5% of sales.

BJ's is very much involved in the local community and charitable causes,
providing food and resources for many worthwhile events. Management feels very
strongly about its commitment to helping others, and this philosophy has
benefited the Company in its relations with its surrounding communities.

The Company distributes very few coupons and does not try to compete with
other pizza chains that rely on heavy discounting. This philosophy has enabled
BJ's to maintain its quality image and its gross profit margins through a period
of "price wars" which have plagued the pizza industry.

Pietro's had traditionally marketed itself through the widespread use of
discount coupons. Expenditures for advertising were approximately 7.5% of sales
and discounted items accounted for 25% of sales. The resulting reductions in
margins forced Pietro's management to reduce the quality of its product in order
to maintain a reasonable food cost. Management believes that these pizza "price
wars" ultimately resulted in reduced value perceptions among Pietro's clientele,
and Pietro's lacked the financial resources to strategically overcome this
obstacle. Through the refurbishment of the Northwest Restaurants, and the
introduction of BJ's quality food and service, Management believes that
discounting will be reduced or eliminated, and expenditures on marketing should
fall to a range more typical for a BJ's operation. This could have a substantial
positive impact on the Company's profitability.

44
<PAGE>
OPERATIONS

The Company's policy is to staff the restaurants with enthusiastic people,
who can be an integral part of BJ's fun, casual atmosphere. Prior experience in
the industry, is only one of the qualities Management looks for in its
employees. Enthusiasm, motivation and the ability to interact well with the
Company's clientele are the most important qualities for BJ's management and
staff.

Both management and staff undergo thorough formal training prior to assuming
their positions at the restaurants. Management has designated certain managers,
servers and cooks as "trainers," who are responsible for properly training and
monitoring all new employees. In addition, the Company's Director of Operations,
Director of Food and Beverage, and Director of Service supervise the training
functions in their particular areas.

A typical BJ's restaurant is staffed with a general manager, two assistant
managers, between 15 and 25 servers and drivers, 7 to 10 cooks and 5 to 10
support staff. The staffing levels at BJ'S PIZZA, GRILL & BREWERY in Brea,
California are much more substantial, with a general manager, three assistant
managers, a kitchen manager, 65 servers and drivers, 23 cooks, 23 support staff,
and 15 bar staff.

Staffing at Pietro's typically consisted of a general manager, two to three
assistant or shift managers, five drivers and 10 to 15 service/kitchen
personnel. Management believes that as the Pietro's restaurants are converted
into BJ's restaurants, they will be staffed in a manner similar to the current
BJ's restaurants. Staffing levels at each restaurant will be dependent upon the
variation of the BJ's concept to which that particular restaurant is converted.

The Company purchases its food product from several key suppliers. A
majority of food and operating supplies for the California restaurants is
purchased from Jacmar Sales, with which the Company has had a long-term,
valuable relationship. A majority of food and operating supplies for the
Northwest Restaurants is purchased from McDonald Wholesale Company. Product
specifications are very strict, because the Company insists on using fresh,
high-quality ingredients.

Pietro's formerly operated a commissary and distribution center which, as
its number of units was reduced, became an economic and operational burden. In
January 1996, Pietro's discontinued the commissary and distribution center and
contracted with an outside distributor to provide and distribute product to its
restaurants and, as a result, direct food costs have increased. The reduction in
overhead, however, has effectively offset this increase.

As the Pietro's restaurants are converted into BJ's restaurants, the Company
hopes to capitalize on the reduced costs usually associated with higher
purchasing volumes.

COMPETITION

The restaurant industry is highly competitive. A great number of restaurants
and other food and beverage service operations compete both directly and
indirectly with the Company in many areas including: food quality and service,
the price-value relationship, beer quality and selection, and atmosphere, among
other factors. Many competitors who use concepts similiar to that of the Company
are well-established, and often have substantially greater resources.

Because the restaurant industry can be significantly affected by changes in
consumer tastes, national, regional or local economic conditions, demographic
trends, traffic patterns, weather and the type and number of competing
restaurants, any changes in these factors could adversely affect the Company. In
addition, factors such as inflation and increased food, liquor, labor and other
employee compensation costs could also adversely affect the Company. The Company
believes, however, that its ability to offer high-quality food at moderate
prices with superior service in a distinctive dining environment, will be the
key to overcoming these obstacles.

GOVERNMENT REGULATIONS

The Company is subject to various federal, state and local laws, rules and
regulations that affect its business. Each of the Company's restaurants is
subject to licensing and regulation by a number of

45
<PAGE>
governmental authorities, which may include alcoholic beverage control,
building, land use, health, safety and fire agencies in the state or
municipality in which the restaurant is located. Difficulties obtaining the
required licenses or approvals could delay or prevent the development of a new
restaurant in a particular area or could adversely affect the operation of an
existing restaurant. Similar difficulties, such as the inability to obtain a
liquor, restaurant license or a given restaurant's products and services could
also limit restaurant development and/or profitability. Management believes,
however, that the Company is in compliance in all material respects with all
relevant laws, rules, and regulations. Furthermore, the Company has never
experienced abnormal difficulties or delays in obtaining the required licenses
or approvals required to open a new restaurant or continue the operation of its
existing restaurants. Additionally, Management is not aware of any environmental
regulations that have had or that it believes will have a materially adverse
effect upon the operations of the Company.

Alcoholic beverage control regulations require each of the Company's
restaurants to apply to a federal and state authority and, in certain locations,
municipal authorities for a license and permit to sell alcoholic beverages on
the premises. Typically, licenses must be renewed annually and may be revoked or
suspended for cause by such authority at any time. Alcoholic beverage control
regulations relate to numerous aspects of the daily operations of the Company's
restaurants, including minimum age of patrons and employees, hours of operation,
advertising, wholesale purchasing, inventory control and handling, and storage
and dispensing of alcoholic beverages. The Company has not encountered any
material problems relating to alcoholic beverage licenses or permits to date and
does not expect to encounter any material problems going forward. The failure to
receive or retain, or a delay in obtaining, a liquor license in a particular
location could adversely affect the Company's ability to obtain such a license
elsewhere.

The Company is subject to "dram-shop" statutes in California and other
states in which it operates. Those statutes generally provide a person who has
been injured by an intoxicated person, the right to recover damages from an
establishment that has wrongfully served alcoholic beverages to such person. The
Company carries liquor liability coverage as part of its existing comprehensive
general liability insurance which it believes is consistent with coverage
carried by other entities in the restaurant industry and will protect the
Company from possible claims. Even though the Company carries liquor liability
insurance, a judgment against the Company under a dram-shop statute in excess of
the Company's liability coverage could have a materially adverse effect on the
Company. To date, the Company has never been the subject of a "dram-shop" claim.

Various federal and state labor laws, rules and regulations govern the
Company's relationship with its employees, including such matters as minimum
wage requirements, overtime and working conditions. Significant additional,
governmental mandates such as an increased minimum wage, an increase in paid
leaves of absence, extensions in health benefits or increased tax reporting and
payment requirements for employees who receive gratuities, could negatively
impact the Company's restaurants.

EMPLOYEES

As of June 30, 1996, the Company employed 455 employees at its eight
California Restaurants and one Hawaii restaurant. Additionally, 477 are employed
at the recently acquired restaurants in Washington and Oregon. The Company also
employs nine administrative and field supervisory personnel at its corporate
offices. Historically, the Company has experienced relatively little turnover of
key management employees. The Company believes that it maintains favorable
relations with its employees, and currently no unions or collective bargaining
arrangements exist.

INSURANCE

The Company maintains worker's compensation insurance and general liability
coverage which it believes will be adequate to protect the Company, its
business, its assets and its operations. There is no assurance that any
insurance coverage maintained by the Company will be adequate, that it can
continue to obtain and maintain such insurance at all or that the premium costs
will not rise to an

46
<PAGE>

extent that they adversely affect the Company or the Company's ability to
economically obtain or maintain such insurance. The Company does not currently
have any key person life insurance but has applied for $1,000,000 in key person
life insurance for each of Mr. Motenko and Mr. Hennessy.

TRADEMARKS AND COPYRIGHTS

The Company has not secured any rights in connection with its trademarks,
servicemarks or any other proprietary rights related to the use of the BJ'S
PIZZA, GRILL & BREWERY, BJ'S PIZZA & GRILL and BJ'S PIZZA names. There are other
restaurants using the BJ's name throughout the United States, thus, no assurance
can be given that the Company will be able to secure any such rights in the
future or that the use of the BJ's name may not be subject to claims by third
parties.

PROPERTY AND LEASES

The Company's corporate headquarters in California are located in a
2,219-square-foot leased facility in Mission Viejo, California. The initial term
of the lease expires on December 31, 1998. Chicago Pizza Northwest, Inc., the
Company's subsidiary in Washington has headquarters in a 5,337-square-foot
leased facility in Bothell, Washington. This lease expires on April 30, 1999 and
is currently being renegotiated.

All of the Company's 28 restaurants, and the Colorado restaurant to be
opened in the Fall of 1996, are on leased premises and are subject to varying
lease-specific arrangements. For example, some of the leases require a flat
rent, subject to regional cost-of-living increases, while others additionally
include a percentage of gross sales. In addition, certain of these leases expire
in the near future, and there is no automatic renewal or option to renew. No
assurance can be given that leases can be renewed, or, if renewed, that rents
will not increase substantially, both of which would adversely affect the
Company. Other leases are subject to renewal at fair market value, which could
involve substantial increases.

With respect to future restaurant sites, the Company believes the locations
of its restaurants are important to its long-term success and will devote
significant time and resources to analyzing prospective sites. The Company's
strategy is to open its restaurants in high-profile locations with strong
customer traffic during day, evening and weekend hours. The Company has
developed specific criteria for evaluating prospective sites, including
demographic information, visibility and traffic patterns. In connection with a
potential brew-pub joint venture the Company is consulting with ASSI, Inc., a
Nevada corporation with experience in the hospitality industry as well as direct
experience in real estate, construction and development in Las Vegas, Nevada.
See "Certain Transactions."

LEGAL PROCEEDINGS

Restaurants such as those operated by the Company are subject to a
continuous stream of litigation in the ordinary course of business, most of
which the Company expects to be covered by its general liability insurance.
Punitive damages awards, however, are not covered by general liability
insurance. To date, the Company has not paid punitive damages in respect of any
claims, but there can be no assurance that punitive damages will not be given
with respect to any of such claims or in any other actions which may arise in
any future action.

47
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning the Company's
directors and/or executive officers.

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --- ----------------------------------------------------------
<S> <C> <C>
Paul A. Motenko 41 Chairman of the Board, Chief Executive Officer, Vice
President and Secretary

Jeremiah J. Hennessy 37 President, Chief Operating Officer and Director

Laura Parisi 37 Chief Financial Officer, Assistant Secretary

Alexander M. Puchner 35 Director of Brewing Operations and Director

Barry J. Grumman 45 Director

Stanley B. Schneider (1) 60 Director

Stephen P. Monticelli (1) 41 Director

Steven F. Mayer (1) 36 Director
</TABLE>

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

(1) Mr. Schneider has been nominated by Messrs. Motenko and Hennessy. Mr.
Monticelli was nominated by ASSI, Inc. and Mr. Mayer was nominated by Mr.
Herrick, both pursuant to the Note Purchase Agreements. See "Certain
Transactions -- Pietro's Acquisition."

The directors serve until the next annual meeting of shareholders and the
election and qualification of their successors. The officers are elected by the
directors and serve at the discretion of the Board of Directors. The Company has
agreed to grant to the Representative, effective upon the closing of this
Offering, the right to nominate from time to time one individual to be a
director of the Company or to have an individual selected by the Representative
attend all meetings of the Board of Directors of the Company as a non-voting
advisor. At this time the Representative has waived its right to nominate a
director. See "Underwriting."

PAUL A. MOTENKO has been the Chief Executive Officer, Chairman of the Board,
Vice President and Secretary of the Company since its inception in 1991. He is
also Chairman of the Board and Secretary of CPNI. He is a certified public
accountant and was a founding partner in the firm Motenko, Bachtelle & Hennessy
from 1980 to 1991. In this capacity, Mr. Motenko provided accounting and
consulting services to several restaurant companies, including BJ's Chicago
Pizzeria. From 1976 to 1980, Mr. Motenko was employed as an accountant and
consultant for several accounting firms, including Kenneth Leventhal and Company
and Peat, Marwick, Main. Mr. Motenko graduated with high honors from the
University of Illinois in 1976 with a Bachelor of Science in accounting.

JEREMIAH J. HENNESSY has been the President, Chief Operating Officer and a
Director of the Company since its inception in 1991. He is also Chief Executive
Officer and a Director of CPNI. Mr. Hennessy is a certified public accountant
and was a partner in the firm Motenko, Bachtelle & Hennessy from 1988 to 1991.
His public accounting practice involved extensive work for food service and
restaurant clientele. He served as a controller for a large Southern California
construction company and has extensive background in construction and
development. Mr. Hennessy has also worked in various aspects of the restaurant
industry for Marie Callendar's and Knott's Berry Farm. Mr. Hennessy graduated
Magna Cum Laude from National University in 1983 with a Bachelor of Science in
accounting.

LAURA PARISI has been the Chief Financial Officer and Assistant Secretary of
the Company, having served in such capacity since December 1995. She is also
Treasurer and a Director of CPNI. Previously, Ms. Parisi was Vice President of
Finance for Ruby's Diner, Inc. from 1994 to 1995, and before

48
<PAGE>
that served as Corporate Accounting Controller and in other senior-level
positions for Restaurant Enterprises Group, Inc. from 1985 to 1994. Ms. Parisi
received degrees in accounting and business administration from Illinois State
University in 1980. Ms. Parisi is a certified public accountant.

BARRY J. GRUMMAN has been the Senior Partner in the Law Offices of Grumman &
Rockett, a Los Angeles law firm specializing in civil litigation, since 1977.
Mr. Grumman is a principal of FM Records, Inc., a Los Angeles record company.
Mr. Grumman also has extensive experience as an investor in private companies
and has invested in companies which have gone public. Mr. Grumman was named a
Director of the Company in November 1994.

ALEXANDER M. PUCHNER is Director of Brewing Operations for the Company,
having been appointed to such position in January 1996. From 1994 to 1995, Mr.
Puchner served as brew master for Laguna Beach Brewing Co. and from 1993 to 1994
as brewmaster for the Huntington Beach Beer Co. from 1988 to 1993, Mr. Puchner
served as Product Manager for Aviva Sports/Mattel Inc. and Marketing Research
Manager for Mattel Inc. Mr. Puchner was awarded a silver medal in the American
pale ale category at the 1994 Great American Beer Festival. Mr. Puchner has also
earned over 40 awards as a homebrewer, including in the 1991 and 1992 National
Homebrew Competition. Mr. Puchner received a Bachelor of Arts from Cornell
University in 1983 and a Master of Business Administration degree from the
University of Chicago in June 1986.

STANLEY B. SCHNEIDER is a certified public accountant and founding member
and the managing partner of Gursey, Schneider & Co., an independent public
accounting firm founded in 1964 that specializes in general accounting services,
litigation support, audits, tax consulting and compliance as well as business
management and management advisory services. Mr. Schneider serves as a director
of Perceptronics, Inc., a Woodland Hills based high-tech defense firm; American
Recreation Centers Co., the largest publicly-owned bowling center company in the
United States; Jerry's Famous Deli, Inc., a Los Angeles-based restaurant
company; Golden West Baseball Co., the corporate co-owner of the California
Angels; Golden West Broadcasters, Inc., a broadcast media holding company; The
Autry Museum of Western Heritage and P.A.T.H., an organization dedicated to
helping the homeless in Los Angeles. Mr. Schneider obtained a Bachelor of
Science in accounting from the University of California at Los Angeles in 1958.

STEPHEN P. MONTICELLI is the President of Mosaic Ventures, LLC, a venture
capital firm based in San Francisco and currently serves on the Board of
Directors of Meris Laboratories, Inc., a publicly-traded clinical laboratory
company listed on Nasdaq and of Vestro Natural Foods, Inc., a publicly-traded
natural foods company, also listed on Nasdaq. From 1991 to 1995, Mr. Monticelli
was a Managing Director of Baccharis Capital, Inc., a venture capital and buyout
firm located in Menlo Park, California. From 1987 to 1991, Mr. Monticelli was a
Principal in the private ventures group of The Fremont Group (formerly known as
Bechtel Investments, Inc.), a private family investment firm. Prior to 1987, he
was a management consultant with Marakon Associates and a certified public
accountant with Deloitte & Touche. He received a Bachelor of Science and a
Master of Business Administration degree from the Haas School of Business at the
University of California at Berkeley.

STEVEN F. MAYER is currently the president and managing director of Aries
Capital Group, L.L.C., a private investment firm. From April 1992 until June
1994, when he left to co-found Aries Capital Group, Mr. Mayer was an investment
banker with Apollo Advisors, L.P. ("Apollo") and Lion Advisors, L.P. ("Lion"),
affiliated private investment firms, Prior to that time, Mr. Mayer was a lawyer
with Sullivan & Cromwell specializing in mergers, acquisitions, divestitures,
leveraged buyouts and corporate finance. While at Apollo and Lion, Mr. Mayer was
responsible for equity and debt investments in a wide range of industries,
including the aluminum, apparel, automobile parts manufacturing, bedding, cable
television, cosmetics, environmental services, furniture distribution,
homebuilding, hotel, plastics, radio, real estate, retail and textile
industries. Mr. Mayer is a current or former member of the Boards of Directors
of Mednet, MPC Corporation, a publicly traded managed prescription care company,
Electropharmacology, Inc., a publicly traded medical device manufacturer, BDK
Holdings, Inc., a textile manufacturer, Roland International Corporation, a real
estate holding company and The

49
<PAGE>
Greater LA Fund, a non-profit investment group affiliated with Rebuild LA. In
addition, Mr. Mayer has served as the chairman or a member of numerous
creditors' committees. Mr. Mayer is a graduate of Princeton University and
Harvard Law School.

SIGNIFICANT EMPLOYEES

The following table sets forth certain information concerning certain
significant employees of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- --- ------------------------------------------------------------
<S> <C> <C>
Robert B. DeLiema 47 Director of Marketing and Southern California Regional
Operations

Salvador A. Navarro 41 Director of Food and Beverage

Stephen White 42 Director of Operations
</TABLE>

ROBERT B. DELIEMA has been the Director of Marketing and Southern California
Regional Operations for the Company since February 1996. Previously, Mr. Deliema
owned and operated a graphic design, advertising and marketing firm from 1981 to
1996. From 1970-1981, Mr. DeLiema was a principal and Vice President of
Operations for Meyerhof's, a restaurant holding company, where Mr. DeLiema
concentrated on the Back Bay Rowing and Running Club restaurants. Mr. DeLiema
received a Bachelor of Arts in 1970 from the University of California at Santa
Barbara.

SALVADOR A. NAVARRO has served as the Director of Food and Beverage for the
Company since 1995. Previously, Mr. Navarro was Central Operations Manager for
Knott's Berry Farms in Buena Park, California and served as the Director of Food
and Beverages for Southwest Foods, Inc.'s Claim Jumper Restaurants from 1978 to
1994.

STEPHEN WHITE has been the Director of Operations of the Company since July
1994. Mr. White has been in the restaurant business his entire working life.
From 1992 until joining the Company, Mr. White was an independent consultant to
the restaurant industry. From 1980 to 1992, Mr. White was employed with
Southwest Foods, Inc.'s Claim Jumper Restaurants in Irvine, California as
Corporate General Manager and Vice President of Operations. At Claim Jumper, Mr.
White designed and implemented new menus, quality assurance procedures,
personnel training, purchasing and operations protocols.

COMPENSATION OF BOARD OF DIRECTORS

Directors previously have received no cash compensation for serving on the
Board of Directors. Beginning in August 1996, the Company will pay fees to its
non-employee directors for serving on the Board of Directors and for their
attendance at Board and committee meetings. The Company pays each non-employee
director an annual fee of $1,000, plus $750 per board meeting attended in
person, $400 per telephonic board meeting over 30 minutes, $200 per telephonic
board meeting under 30 minutes, $500 per committee meeting in person, $300 per
telephonic committee meeting over 30 minutes, and $100 per telephonic committee
meeting under 30 minutes.

50
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation of the
Chief Executive Officer and each other executive officer who received annual
compensation in excess of $100,000 for the fiscal year ended December 31, 1995:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ----------------------------
NAME AND -------------------- STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION (1) YEAR SALARY BONUS (SHARES) COMPENSATION
- ------------------------------------------------------------ ---- -------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Paul A. Motenko............................................. 1995 $101,289 $ 50,000(2) -0- $8,858(3)
Chief Executive Officer
Jeremiah J. Hennessy........................................ 1995 $101,289 $ 50,000(2) -0- $8,417(4)
Chief Operating Officer
</TABLE>

- ------------------------
(1) No other executive officer received salary and bonuses in excess of $100,000
in respect of the year ended December 31, 1995.

(2) Paid in respect of the acquisition from Roman Systems, Inc. See "Certain
Transactions -- Acquisition of Restaurants and Intellectual Property."

(3) The amount shown above is the estimated value of perquisites and other
personal benefits, including health insurance (approximately $7,757) and
life insurance (approximately $1,101).

(4) The amount shown above is the estimated value of perquisites and other
personal benefits, including health insurance (approximately $7,316), and
life insurance (approximately $1,101).

EMPLOYMENT AGREEMENTS

The terms summarized below are qualified in their entirety by the respective
employment agreements filed as exhibits to the registration statement of which
this Prospectus is a part.

The Company has entered into identical eight-year term employment agreements
with Paul Motenko and Jeremiah J. Hennessy (sometimes referred to herein as the
"Executives"), effective as of March 25, 1996. Pursuant to such agreements,
Messrs. Motenko and Hennessy are each to receive annual cash compensation of
$135,000, subject to escalation annually in accordance with the Consumer Price
Index (the "CPI"). In addition, Messrs. Motenko and Hennessy's employment
agreements entitle each of them to receive two annual bonuses based on the
Company's financial performance, one for attainment of specified earnings before
interest, amortization, depreciation and income taxes ("EBITDA"), and one for
attainment of specified pre-tax income.

The EBITDA bonus would entitle Messrs. Motenko and Hennessy each to receive
the following amounts if the following EBITDA amounts are attained for each
fiscal year during the term of their respective employment agreements:

<TABLE>
<CAPTION>
EBITDA CUMULATIVE CASH BONUS
---------- ---------------------
<S> <C>
$2,000,000 $ 25,000
$3,000,000 $ 35,000
$6,000,000 $ 80,000
$9,000,000 $150,000
</TABLE>

51
<PAGE>
The pre-tax income bonus would entitle each of Messrs. Motenko and Hennessy
to receive the following amounts if the following pre-tax income amounts (as
determined by the Company's independent public accountants in accordance with
GAAP) are attained for each fiscal year during the term of their respective
employment agreements, commencing with the fiscal year ending December 31, 1997:

<TABLE>
<CAPTION>
PRE-TAX
INCOME CUMULATIVE CASH BONUS
---------- ---------------------
<S> <C>
$2,000,000 $ 25,000
$4,000,000 $ 75,000
$8,000,000 $150,000
</TABLE>

The pre-tax income levels required to receive each bonus level for each
fiscal year following the 1997 fiscal year will be increased by 20% per year.

Pursuant to their respective employment agreements, Messrs. Motenko and
Hennessy are each entitled to certain other fringe benefits including use of a
Company automobile or automobile allowance, life insurance coverage, disability
insurance, family health insurance and the right to participate in the Company's
customary executive benefit plans. Messrs. Motenko and Hennessy's employment
agreements further provide that following the voluntary or involuntary
termination of their employment by the Company, each of them is entitled to two
demand registration rights with respect to the Common Stock held by or issuable
to him. Upon the occurrence of any Termination Event (as hereinafter defined),
the Company may terminate the employment agreements. If such termination occurs,
Mr. Motenko or Mr. Hennessy, as the case may be, will be entitled to receive all
amounts payable by the Company under his respective employment agreement to the
date of termination. If the Company terminates the employment agreement for a
reason other than the occurrence of a Termination Event or if Mr. Motenko or Mr.
Hennessy terminates the employment agreement because of a breach by the Company
of its obligations thereunder or for Good Reason (as hereinafter defined), Mr.
Motenko or Mr. Hennessy, as the case may be, will be entitled to receive any and
all payments and benefits which would have been due to him by the Company up to
and including March 24, 2004 or any extension thereof had he not been terminated
and any and all damages resulting therefrom.

"Termination Event" means any of the following: (i) the willful and
continued failure by the Executive to substantially perform his duties under the
Employment Agreement (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) after demand for substantial
performance is delivered by the Company specifically identifying the manner in
which the Company believes the Executive has not substantially performed his
duties; (ii) the Executive being convicted of a crime constituting a felony;
(iii) the Executive intentionally committing acts or failing to act, either of
which involves willful malfeasance with the intent to maliciously harm the
business of the Company; (iv) the Executive's willful violation of the
confidentiality provisions under the Employment Agreement; or (v) death or
physical or mental disability which results in the inability of the Executive to
perform the required services for an aggregate of 180 calendar days during any
period of 12 consecutive months. No act, or failure to act, on the Executive's
part shall be considered "willful" unless intentionally done, or intentionally
omitted to be done, by him not in good faith and without reasonable belief that
his action or omission was in the best interest of the Company. Notwithstanding
the foregoing, a Termination Event shall not have been deemed to have occurred
unless and until there shall have been delivered to the Executive a copy of a
resolution, duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice to the Executive and an opportunity for
him, together with his counsel, to be heard before the Board), finding that, in
the good faith opinion of the Board, the Executive conducted, or failed to
conduct, himself in a manner set forth above in clauses (i)-(iv), and specifying
the particulars thereof in detail.

For purposes of the Employment Agreement, "Good Reason" shall mean (i) any
removal of the Executive from, or any failure to re-elect the Executive to his
current office except in connection with termination of the Executive's
employment for disability; provided, however, that any removal of the

52
<PAGE>
Executive from, or any failure to re-elect the Executive to his current office
(except in connection with termination of the Executive's employment for
disability) shall not diminish or reduce the obligations of the Company to the
Executive under the employment agreement; (ii) a reduction of ten percent (10%)
or more in the Executive's then current base salary; (iii) any failure by the
Company to comply with any of its obligations to the Executive under the
employment agreement; (iv) for any reason within 120 days following a Change of
Control (as defined in the employment agreement); or (v) the failure of the
Company to obtain the assumption of the employment agreement by any successor to
the Company, as provided in the employment agreement.

OPTIONS

There are currently no arrangements to issue options other than pursuant to
the Company's 1996 Stock Option Plan.

1996 STOCK OPTION PLAN

The Company has adopted a 1996 Stock Option Plan (the "1996 Plan"). The
following summary of the 1996 Plan is qualified in its entirety by the proposed
form of Stock Option Plan filed as an exhibit to the Registration Statement of
which this Prospectus is a part.

The 1996 Plan is designed to promote and advance the interests of the
Company and its stockholders by (1) enabling the Company to attract, retain and
reward managerial and other key employees and non-employee directors and (2)
strengthening the mutuality of interests between participants in the 1996 Plan
and the stockholders of the Company in its long-term growth, profitability and
financial success by offering stock options.

SUMMARY OF THE 1996 PLAN. The 1996 Plan empowers the Company to award or
grant from time to time until May 31, 2006, to officers, directors, outside
consultants and employees of the Company and its subsidiaries, Incentive and
Non-Qualified Stock Options ("Options") authorized by the Stock Option Committee
of the Board of Directors (the "Committee"), which will administer the 1996
Plan.

ADMINISTRATION. The 1996 Plan will be administered by the Committee. The
1996 Plan provides that the Committee must consist of at least two directors of
the Company who are "disinterested directors" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee has the sole authority to construe and interpret the 1996 Plan, to
make rules and procedures relating to the implementation of the 1996 Plan, to
select participants, to establish the terms and conditions of Options and to
grant Options, with broad authority to delegate its responsibilities to others,
except with respect to the selection for participation of, and the granting of
Options to, persons subject to Sections 16(a) and 16(b) of the Exchange Act.
Members of the Committee will not be eligible to receive discretionary Options
under the 1996 Plan. On or after August 15, 1996, the requirement that all
members of the Board of Directors or the Committee be "disinterested persons"
shall not apply. However, all members of the Committee must be "non-employee
directors" within the meaning of Rule 16b-3(b)(3)(i) promulgated by the
Securities and Exchange Commission.

ELIGIBILITY CONDITIONS. All employees (including officers) of the Company,
its subsidiaries, non-employee directors and outside consultants will be
eligible to receive Options under the 1996 Plan. Non-employee directors and
outside consultants are only eligible to receive Non-Qualified Stock Options
under the 1996 Plan. Except for Non-Qualified Stock Options granted to
non-employee directors, the selection of recipients of, and the nature and size
of, Options granted under the 1996 Plan will be wholly within the discretion of
the Committee. Subject to specific formula provisions relating to the grant of
options to non-employee directors and except with respect to the exercisability
of Incentive Stock Options and the total shares available for option grants
under the 1996 Plan, there is no limit on the number of shares of Common Stock
or type of option in respect of which Options may be granted to or exercised by
any person.

SHARES SUBJECT TO 1996 PLAN. The maximum number of shares of Common Stock
in respect of which Options may be granted under the 1996 Plan (the "Plan
Maximum") is 600,000. However,

53
<PAGE>
options for no more than 250,000 shares may be issued to any optionee in any
calendar year. For the purpose of computing the total number of shares of Common
Stock available for Options under the 1996 Plan, the above limitations shall be
reduced by the number of shares of Common Stock subject to issuance upon
exercise or settlement of Options previously granted, determined at the date of
the grant of such Options. However, if any Options previously granted are
forfeited, terminated, settled in cash or exchanged for other Options or expire
unexercised, the shares of Common Stock previously subject to such Options shall
again be available for further grants under the 1996 Plan. The shares of Common
Stock which may be issued to participants in the 1996 Plan upon exercise of an
Option may be either authorized and unissued Common Stock or issued Common Stock
reacquired by the Company. No fractional shares may be issued under the 1996
Plan.

The maximum numbers of shares of Common Stock issuable upon the exercise of
Options granted under the 1996 Plan are subject to appropriate equitable
adjustment in the event of a reorganization, stock split, stock dividend,
combination of shares, merger, consolidation or other recapitalization of the
Company.

TRANSFERABILITY. No Option granted under the 1996 Plan, and no right or
interest therein shall be assignable or transferable by a participant except by
will or the laws of descent and distribution.

TERM, AMENDMENT AND TERMINATION. The 1996 Plan will terminate on May 31,
2006, except with respect to Options then outstanding. The Board of Directors of
the Company may amend or terminate the 1996 Plan at any time, except that, (i)
to the extent restricted by Rule 16b-3 promulgated under the Exchange Act, as
amended and in effect from time to time (or any successor rule), the Board of
Directors may not, without approval of the stockholders of the Company, make any
amendment that would (1) increase the total number of shares available for
issuance (except as permitted by the 1996 Plan to reflect changes in capital
structure), (2) materially change the eligibility requirements, or (3)
materially increase the benefits accruing to participants under the 1996 Plan,
and (ii) prior to August 15, 1996, the provisions of the 1996 Plan governing the
award of options to Non-Employee Directors may not be amended more than once
every six months other than to comport with changes to the Code, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or the regulations
promulgated thereunder.

INCENTIVE STOCK OPTIONS. Options designated as Incentive Stock Options,
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), in an amount up to the Plan Maximum may be granted under
the 1996 Plan. The number of shares of Common Stock in respect of which
Incentive Stock Options are first exercisable by any participant in the 1996
Plan during any calendar year shall not have a fair market value (determined at
the date of grant) in excess of $100,000 (or such other limit as may be imposed
by the Code). To the extent the fair market value of the shares for which
options are designated as Incentive Stock Options that are first exercisable by
any optionee during any calendar year exceed $100,000, the excess amount shall
be treated as Non-Qualified Stock Options. Incentive Stock Options shall be
exercisable for such period or periods, not in excess of ten years after the
date of grant, as shall be determined by the Committee.

NON-QUALIFIED STOCK OPTIONS. Non-Qualified Stock Options may be granted for
such number of shares of Common Stock and will be exercisable for such period or
periods as the Committee shall determine.

OPTIONS TO NON-EMPLOYEE DIRECTORS. The 1996 Plan also provides for the
grant of Options to non-employee directors of the Company without any action on
the part of the Board or the Committee, only upon the terms and conditions set
forth in the 1996 Plan. Each non-employee director shall automatically receive
Non-Qualified Options to acquire 25,000 shares of Common Stock upon appointment,
and shall receive Options to acquire an additional 10,000 shares of Common Stock
for each additional year that the non-employee director continues to serve on
the Board of Directors. Each Option shall become exercisable as to 50% of the
shares of Common Stock subject to the Option on the first anniversary date of
the grant and 50% on the second anniversary date of the grant, and will expire
on the earlier of ten years from the date the Option was granted, upon
expiration of the 1996

54
<PAGE>
Plan or three months after the optionee ceases to be a director of the Company
(one year if due to the director's death or disability). The exercise price of
such Options shall be equal to 100% of the fair market value of the Common Stock
subject to the Option on the date on which such Options are granted. Each Option
shall be subject to the other provisions of the 1996 Plan.

OPTION EXERCISE PRICES. The exercise price of any Option granted under the
1996 Plan shall be at least 85% of the fair market value of the Common Stock on
the date of grant, except that the exercise price of any Option granted to any
participant in the 1996 Plan who owns in excess of 10% of the outstanding voting
stock of the Company shall be 110% of the fair market value of the Common Stock
on the date of grant. The exercise price of any Incentive Stock Options shall be
at least 100% of the fair market value on the date of grant. Fair market value
per share of Common Stock shall be determined as the closing price per share on
the last trading day if the Common Stock is listed on an established stock
exchange, or as the average of the closing bid and asked prices per share if the
Common Stock is quoted by the Nasdaq National Market, or as the amount
determined in good faith by the Committee if the Common Stock is neither listed
for trading on an exchange or quoted by the Nasdaq National Market. Options
granted effective as of the closing date of this Offering will have an exercise
price equal to the initial public offering price per share.

EXERCISE OF OPTIONS. Each option shall become exercisable according to the
terms specified in the Option Agreement. No Option may be exercised, except as
provided below, unless the holder thereof remains in the continuous employ or
service of the Company. No Options shall be exercisable after the earlier of ten
years from grant or three months after employment or service as a director of
the Company or its subsidiary terminates (one year if such termination is due to
the participant's death or disability). Options shall be exercisable upon the
payment in full of the applicable option exercise price in cash or, if approved
by the Committee, by instruction to a broker directing the broker to sell the
Common Stock for which such Option is exercised and remit to the Company the
aggregate exercise price of the Option or, in the discretion of the Plan
Administrator, upon such terms as the Committee shall approve, in shares of the
Common Stock then owned by the optionee (at the fair market value thereof at
exercise date). The Plan Administrator also has discretion to extend or arrange
for the extension of credit to the optionee to finance the purchase of shares on
exercise.

GRANT OF OPTIONS. In addition to the Options for 25,000 shares of Common
Stock each granted to the Company's four non-employee directors, the Company has
granted Options to acquire a total of 453,500 shares of Common Stock to certain
employees, including executive officers of the Company, effective as of the
closing date of this Offering, at an exercise price equal to the initial public
offering price per share. The exercise price of such Options shall be equal to
100% of the fair market value of the Common Stock subject to the Option on the
date on which such Options are granted. No more than 250,000 shares may be
granted to any optionee under any option in any calendar year. Each Option shall
become exercisable according to the terms specified in the individual Option
Agreement.

The following executive officers and non-officer directors of the Company
will receive Incentive Stock Options for the following amounts of shares of
Common Stock:

<TABLE>
<CAPTION>
DOLLAR
NAME VALUE NUMBER OF SHARES
- ----------------------------------------------------------------------- ----------- -----------------
<S> <C> <C>
Laura Parisi........................................................... * 75,000
Alexander M. Puchner................................................... * 75,000
Non-officer directors as a group (4)................................... * 100,000
--------
Executive officers and directors as a group (8 persons)................ * 250,000
--------
--------
</TABLE>

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

* Not yet determinable.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS

Pursuant to provisions of the California General Corporation Law, the
Articles of Incorporation of the Company, as amended, include a provision which
eliminates the personal liability of its directors to the Company and its
shareholders for monetary damage to the fullest extent permissible under

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<PAGE>
California law. This limitation has no effect on a director's liability (i) for
acts or omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) for acts or omissions that a director believes to be
contrary to the best interests of the Company or its shareholders or that
involve the absence of good faith on the part of the director, (iii) for any
transaction from which a director derived an improper personal benefit, (iv) for
acts or omissions that show a reckless disregard for the director's duty to the
Company or its shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing his or her duties,
of a risk of a serious injury to the Company or its shareholders, (v) for acts
or omissions that constitute an unexcused pattern of inattention that amounts to
an abdication of the director's duty to the Company or its shareholders, (vi)
under Section 310 of the California General Corporation Law (concerning
contracts or transactions between the Company and a director) or (vii) under
Section 316 of the California General Corporation Law (concerning directors'
liability for improper dividends, loans and guarantees). The provision does not
eliminate or limit the liability of an officer for any act or omission as an
officer, notwithstanding that the officer is also a director or that his
actions, if negligent or improper, have been ratified by the Board of Directors
of the Company. Further, the provision has no effect on claims arising under
federal or state securities or blue sky laws and does not affect the
availability of injunctions and other equitable remedies available to the
Company's shareholders for any violation of a director's fiduciary duty to the
Company or its shareholders.

The Company's Articles of Incorporation authorize the Company to indemnify
its officers, directors and other agents to the fullest extent permitted by
California law. The Company's Articles of Incorporation also authorize the
Company to indemnify its officers, directors and agents for breach of duty to
the corporation and its shareholders through bylaw provisions, agreements or
both, in excess of the indemnification otherwise provided under California law,
subject to certain limitations. The Company has entered into indemnification
agreements with its non-employee directors whereby the Company will indemnify
each such person (an "indemnitee") against certain claims arising out of certain
past, present or future acts, omissions or breaches of duty committed by an
indemnitee while serving in his employment capacity. Such indemnification does
not apply to acts or omissions which are knowingly fraudulent, deliberately
dishonest or arise from willful misconduct. Indemnification will only be
provided to the extent that the indemnitee has not already received payments in
respect of a claim from the Company or from an insurance company. Under certain
circumstances, such indemnification (including reimbursement of expenses
incurred) will be allowed for liability arising under the Securities Act.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.

The Company intends to purchase a directors' and officers' liability policy
insuring directors and officers of the Company effective upon the closing of
this Offering.

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PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 1996 as to (a) each
director, (b) each executive officer identified in the Summary Compensation
Table, (c) all officers and directors of the Company as a group and (d) each
person who beneficially owns 5% or more of the outstanding shares of Common
Stock.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
---------------------------------------------------
PERCENT
OWNED PRIOR PERCENT
NUMBER TO THE OWNED AFTER
NAME AND ADDRESS (2) OF SHARES OFFERING (3) THE OFFERING (3)
- ---------------------------------------- ------------- ---------------- ----------------
<S> <C> <C> <C>
Paul Motenko............................ 658,857(4) 14.30% 10.79%
Jeremiah Hennessy....................... 658,857(4) 14.30% 10.79%
Louis Habash............................ 526,172(5) 11.42% 8.61%
ASSI, Inc............................... 500,000(6) 10.85% 8.19%
Norton Herrick.......................... 250,000 5.42% 4.09%
Barry Grumman........................... 285,579(7) 6.20% 4.68%
Laura Parisi............................ (80) 0% 0%
Alexander M. Puchner.................... (80) 0% 0%
Stanley B. Schneider.................... (80) 0% 0%
Stephen P. Monticelli................... (80) 0% 0%
Steven Mayer............................ (80) 0% 0%
All directors and executive officers as
a group (8 persons).................... 1,603,293 34.79% 26.25%
</TABLE>

- ------------------------
(1) The persons named in the table, to the Company's knowledge, have sole voting
and sole investment power with respect to all shares of Common Stock shown
as beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes hereunder. For
purposes of this table, information as to shares of Common Stock assumes
that the Underwriters' over-allotment options are not exercised and that the
Representative's Warrants are not exercised.

(2) The address of the aforementioned individuals is at the Company's principal
executive offices at 26131 Marguerite Parkway, Suite A, Mission Viejo,
California 92692.

(3) Shares of Common Stock which a person had the right to acquire within 60
days are deemed outstanding in calculating the percentage ownership of the
person, but not deemed outstanding as to any other person. The Percent Owned
Prior to the Offering is calculated based on 4,608,321 shares of Common
Stock outstanding as of the date hereof, which amount includes: (i) 500,000
shares of Common Stock to be issued to ASSI, Inc. and (ii) 250,000 shares of
Common Stock to be issued to Mr. Norton Herrick, all of which are to be
issued upon the completion of this Offering in connection with the financing
of the Pietro's Acquisition. See "Certain Transactions -- Pietro's
Acquisition." The Percent Owned After the Offering is calculated based upon
6,108,321 shares of Common Stock outstanding, assuming the issuance and sale
of all of the 1,500,000 Company Shares by the Company and no exercise of the
Underwriters' over-allotment options or the Representative's Warrants, and
does not include shares issuable upon exercise of any warrants issued by the
Company.

(4) Certain of the shares beneficially owned by Messrs. Motenko and Hennessy
have been pledged to the Sellers in the Roman Systems, Inc. acquisition. See
"Certain Transactions -- Acquisition of Restaurants and Intellectual
Property."

(5) Includes 26,172 shares held by Mr. Habash personally and 500,000 shares to
be issued to ASSI, Inc., a Nevada corporation controlled by Mr. Habash. (See
Footnote 3 above.)

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<PAGE>
(6) ASSI, Inc. is controlled by Louis Habash, and its shares are also included
in Mr. Habash's beneficial ownership.

(7) Includes 184,862 shares of Common Stock which were issued to and retained by
Mr. Grumman upon completion of the Company's acquisition of certain
partnership interests owned by Mr. Grumman, 10,000 of which are held in a
Professional Corporation Money Purchase Plan of which Mr. Grumman is the
beneficiary. Does not include warrants to acquire up to 300,000 shares of
Common Stock issued to Mr. Grumman in May 1995 which are not currently
exercisable but are included in the Selling Security Holders' Redeemable
Warrants. See "Certain Transactions -- Private Placements."

(8) Does not include shares of Common Stock purchasable upon exercise of options
which will be granted to these individuals.

As a result of their share ownership and positions with the Company, Messrs.
Hennessy and Motenko may be deemed "parents" of the Company as defined pursuant
to the rules and regulations of the Securities and Exchange Commission. However,
in connection with the Pietro's Acquisition and certain consulting arrangements,
the Company has issued a significant percentage of shares and warrants which may
result in a change of control. See "Certain Transactions."

RESALE OF OUTSTANDING SECURITIES

This Prospectus relates to the sale by the Company of 1,500,000 shares of
Common Stock and 1,500,000 Redeemable Warrants for aggregate gross consideration
of $8,625,000 assuming an Offering price of $5.50 per Share and $0.25 per
Redeemable Warrant. A separate Prospectus is being filed with the Registration
Statement of which this Prospectus is a part, which relates in part to the sale
by the Selling Security Holders of 1,766,864 shares of Common Stock, 10,014,584
Selling Security Holders' Redeemable Warrants, and 10,014,584 shares of Common
Stock issuable upon exercise of the Selling Security Holders' Redeemable
Warrants. None of the Selling Security Holders' Shares, Selling Security
Holders' Redeemable Warrants, or shares issuable upon exercise of the Selling
Security Holders' Redeemable Warrants are being underwritten by the
Underwriters.

The Company will not receive any of the proceeds of the sale of the Selling
Security Holder's Shares, Selling Security Holders' Redeemable Warrants or
shares issuable upon exercise of the Selling Security Holders' Redeemable
Warrants, although it will receive the exercise price of such Selling Security
Holders' Redeemable Warrants when and if they are exercised. Except for Messrs.
Grumman and Schneider, and as described in "Certain Transactions," none of the
Selling Security Holders had any position, office or material relationship with
the Company or its affiliates during the last three years. Of the Selling
Security Holders, Mr. Barry Grumman has been an independent director of the
Company since 1994 and Mr. Stanley Schneider has been an independent director of
the Company since August 1996.

Prior to this offering, the Selling Security Holders collectively held
1,766,864 shares of Common Stock of the Company and warrants to purchase
10,014,584 shares of Common Stock of the Company. Assuming the sale of all such
Selling Security Holders' Shares and Selling Security Holders' Redeemable
Warrants which the respective Selling Security Holders are registering pursuant
to the separate Prospectus referred to above, the Selling Security Holders will
own approximately 1,008,820 shares of Common Stock of the Company after the
completion of such offering.

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<PAGE>
CERTAIN TRANSACTIONS

ACQUISITION OF RESTAURANTS AND INTELLECTUAL PROPERTY

"BJ's Chicago Pizzeria" restaurants, as the Company's restaurants were
originally known, were established in Southern California in 1978 by entities
controlled by Michael L. Phillips ("Phillips") and William A. Cunningham, Jr.
("Cunningham"). Phillips and Cunningham built the chain to five locations in
Southern California by 1991.

The Company was formed in October 1991 by Paul Motenko ("Motenko") and Jerry
Hennessy ("Hennessy") to assume the management of the five existing "BJ's
Chicago Pizzeria" restaurants. In addition, the Company obtained the right to
use the trademarks, servicemarks, recipes and other intellectual property ("BJ's
Intellectual Property") from the owners of the five restaurants for use in the
development of additional "BJ's Chicago Pizzeria" restaurants. This arrangement
was pursuant to a management agreement ("Management Agreement") which gave the
Cunningham and Phillips entities certain guaranteed payments and rights in newly
developed BJ's restaurants. From the date of the Management Agreement through
December 1994, the Company opened five additional restaurants, the first in July
1992 followed by one more in 1993 and three in 1994. As discussed in detail
below, in January 1995 the Management Agreement was terminated in connection
with the closing of the Company's acquisition of the BJ's Intellectual Property
and three of the restaurants managed by the Company for the prior owners (the
"Acquisition").

Pursuant to the terms of an Asset Purchase Agreement, dated as of November
7, 1994 (the "Acquisition Agreement"), Roman Systems, Inc., a California
corporation, Bristol Restaurants, a California general partnership, William A.
Cunningham, Jr. and Michael L. Phillips (collectively, "Sellers") transferred to
the Company the three BJ's Chicago Pizzeria Restaurants located in Balboa in
Newport Beach, California, La Jolla and Laguna Beach, California, and all of the
right, title and interest of the Sellers in trademarks, trademark registrations,
servicemarks, menus, recipes, trade secrets and other know-how or intangible
property utilized in the operation of the BJ's Chicago Pizzeria Restaurants that
Sellers may own (the "BJ's Intellectual Property"). Two other restaurants,
located in Santa Ana and San Juan Capistrano, California, owned by Sellers were
not transferred. The Santa Ana and San Juan, Capistrano restaurants were
operated by the Company until such restaurants were sold in 1995.

Pursuant to the terms of the Acquisition Agreement, the payment by the
Company for the Acquisition was scheduled to occur in three parts: (i) a
$550,000 payment was made to Sellers by the Company simultaneously with the
closing of the Acquisition; (ii) a payment to Sellers of $38,195 per month for
108 consecutive months starting April 30, 1995, for a total of $4,125,060; and
(iii) a total of $875,000 was payable by the Company to Sellers from 15% of
adjusted net proceeds of additional equity offerings of the Company, provided
that any amounts which were not paid from a percentage of offerings by July 11,
1995 were to be paid at the rate of $25,000 per month until the payments to
Sellers from 15% of adjusted net equity offering proceeds plus the monthly
$25,000 payments totaled the $875,000 owed by the Company to Sellers. In
addition to the aforementioned consideration for the Acquisition, simultaneously
with the closing of the Acquisition the Company also issued 500,000 shares of
Common Stock of the Company to each of Mr. Cunningham and Mr. Phillips, which as
a result of the May 1995 stock split are currently equivalent to 174,480 shares
of Common Stock of the Company outstanding to each of Mr. Phillips and Mr.
Cunningham. The Company also assumed certain liabilities of the Sellers,
including approximately $873,000 in loans, accrued salaries, certain accounts
payable, sales tax payable and accrued operating expenses of the purchased
restaurants.

In regard to the Acquisition, the Company has granted Phillips a limited
license to operate up to four pizzeria restaurants in areas outside of
California and Hawaii or other areas where they may compete with the Company's
restaurants. These restaurants operated by Phillips or his family may use the
intellectual property associated with the operation of BJ's Chicago Pizzeria
restaurants, except for the name "BJ's" or any name so similar as to confuse the
public. The Company has been granted a right of first refusal to purchase the
restaurants of Phillips or his family if they are sold. A similar license has
been given to Cunningham for up to two restaurants. Pursuant to the Acquisition,

59
<PAGE>
the Company is obligated to provide Phillips and Cunningham, and their
respective spouses, with health insurance, or reimburse them for the cost of
mutually satisfactory arrangements regarding health insurance coverage, until
they each turn 65 years of age.

The Company assumed responsibility for the operation and divestment costs of
restaurants excluded from the purchase (Santa Ana and San Juan Capistrano,
California). At the time of purchase, January 1, 1995, a reserve for restaurant
closure totaling $157,000 was established for the operating and divestment costs
incurred by the restaurants excluded from the sale.

In connection with the Acquisition, Motenko and Hennessy have pledged all of
their stock for the benefit of Sellers. In the event of default, Sellers have
the right and ability to vote all of the stock so pledged by Motenko and
Hennessy. In addition, in event of a default, Sellers have the right to
foreclose upon and cause to be sold for their benefit half of the stock of
Motenko and Hennessy so pledged. An event of default will occur if, on four
occasions in any one calendar year, the Company shall fail to make a scheduled
payment due to Sellers which failure remains uncured for 30 days after the
Company's receipt of written notice of the failure until such time as Sellers
have received the $875,000 payment noted above. After such time, a default shall
be considered to have occurred under the Note if the Company shall fail to make
a scheduled payment under the Note which remains uncured for six months after
the debt is received after written notice of such failure. All payments have
been timely. The pledge shall remain in force and effect until the earlier of
the date upon which all amounts owed to Sellers in respect to the Acquisition
have been fully paid or both of the following have occurred: (i) the Company has
made the $875,000 payment to Sellers as specified above, and (ii) the Company
has registered its stock pursuant to the Securities Exchange Act of 1934 and its
Common Stock is listed or reported by a national/regional securities exchange or
market quotation system.

In addition, each of the three restaurants obtained by the Company pursuant
to the Acquisition have been pledged to Sellers to secure the payments owed to
Sellers.

As of June 30, 1996 the principal amount outstanding under the Acquisition
Agreement is $3,270,000. After the completion of this Offering and the
application of proceeds as set forth in "Use of Proceeds," the outstanding
principal amount under the Acquisition Agreement will be $2,744,000.

ACQUISITION AND SALE OF LIMITED PARTNERSHIP INTERESTS

The Company owned and/or operated restaurants in addition to those purchased
under the Acquisition Agreement through the acquisition and sale of limited
partnership interests. Restaurants in Belmont Shore and La Jolla -- Prospect
were both owned by limited partnerships, BJ's Belmont Shore, L.P. and BJ's La
Jolla, L.P., respectively. The general partner of each of these partnerships was
CPA-BG, Inc., a wholly-owned subsidiary of the Company that was transferred to
the Company for no consideration by Motenko and Hennessy prior to the closing of
the acquisition of the partnership interests.

Prior to the acquisition of the partnership interests, the sole limited
partner of BJ's Belmont Shore, L.P. was Barry Grumman ("Grumman"). The sole
limited partner of BJ's La Jolla, L.P. was BJ's La Jolla, Ltd., a limited
partnership of which Grumman was the sole general partner. In addition, pursuant
to an agreement dated November 14, 1994, Grumman and BJ's La Jolla, Ltd. agreed
to transfer all of their right, title and interest in BJ's Belmont Shore, L.P.
and BJ's La Jolla, L.P., respectively, for an aggregate of 226,824 shares of
Common Stock in the Company, which shares are valued at $.75 per share or
$170,118. The aggregate amount of liabilities assumed in the acquisition of the
limited partnership interests totaled $277,000, including $70,000 in acquisition
costs and $207,000 in assumed liabilities. $55,000 of the latter assumed
liabilities included capitalized equipment leases, sales tax payable and accrued
operating expenses of the purchased restaurants. Following the acquisition of
the partnership interests, both BJ's Belmont Shore, L.P. and BJ's La Jolla, L.P.
were terminated, and CPA-BG, Inc. was merged into the Company.

The BJ's in Lahaina, Maui will continue to be owned by BJ's Lahaina, L.P., a
limited partnership. The two general partners of BJ's Lahaina, L.P. were CPA010,
Inc. and Blue Max, Inc. Blue Max, Inc. was wholly-owned by CPA010, Inc., which
was formerly owned by Motenko and Hennessy. Motenko

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<PAGE>
and Hennessy transferred their ownership of such corporation to the Company for
nominal consideration prior to the closing of the acquisition of the partnership
interests. CPA010, Inc. has recently been merged into the Company. As a result,
the Company is currently the managing general partner of BJ's Lahaina, L.P. and
owns an approximately 54% interest in the partnership. The Company purchased the
54% interest for approximately $114,000, which interest consists of a 40%
general partnership interest and an approximately 14% limited partnership
interest.

CONSULTING AGREEMENT

On November 1, 1994 the Company entered into an agreement with Woodbridge
Holdings, Inc. ("WHI"), a consulting firm in Newport Beach, California. The
agreement was for services related to selection of professional advisers and
general corporate development. WHI was to assist the Company in the selection of
legal counsel and accountants, in designing public relations materials and
printed materials, in formulating a description of the Company's business plan,
in designing a stock compensation plan and negotiating for printing services.
The contract expired on May 1, 1995 and was not renewed. Actual services
provided by WHI were limited to logo printing design, printing arrangements and
selection of professionals. For its services in that period, WHI received
$60,000, from which WHI was required to pay for printing expenses. In addition,
for services rendered during that period, WHI received 69,792 shares of Common
Stock which were earned and issuable on May 1, 1995 and the right to receive an
additional 69,443 shares of Common Stock ("Additional Shares") issuable after
completion of an initial public offering, such as this Offering, by the Company.
The value attributed to the 69,792 shares earned and issuable to WHI as of May
1, 1995 is $0.75 per share or $52,344 and the value currently attributed to the
69,443 shares to be issued is $6.00 or $416,658. On August , 1996, on the
assumption that this Offering would close, the Company issued WHI the Additional
Shares. WHI has the right to have its shares registered by the Company at WHI's
cost.

PRIVATE PLACEMENTS
In January 1995, the Company raised $850,000 through a private placement of
17 Units at $50,000 per Unit, consisting of (i) a Series A Promissory Note in
the principal amount of $50,000 and due December 31, 1995 and (ii) 13,086 shares
of Common Stock. The Series A Promissory Notes bear interest, payable quarterly,
at a rate of 10% until June 30, 1995 and 13.5% thereafter. The proceeds of the
January 1995 private placement were used to close the Acquisition and for
working capital. The Series A Promissory Notes were repaid in the third quarter
of 1995 with proceeds from the September 1995 placement described below. The
shares issued in this placement are being registered concurrently with this
Offering and are included as Selling Security Holder Shares which may be sold by
the holders or respective transferees commencing on the date of this Prospectus.

In March 1995, the Company raised $400,000 through a private placement of
four Units at $100,000 per Unit, consisting of (i) a $98,000 promissory note
bearing interest at a rate of 10% per annum (the "Promissory Notes") with
interest and principal due upon the earlier of completion of an initial public
offering of the Company's Common Stock, or 18 months from the date of issuance
and (ii) warrants to purchase 34,896 shares of Common Stock at a price of $2.87
per share. The proceeds of the private placement were used for working capital.
The Promissory Notes were repaid in the third quarter of 1995 with proceeds from
the September 1995 private placement described below. Upon effectiveness of the
Registration Statement of which this Prospectus is a part, the warrants issued
in this placement convert into a like number of Redeemable Warrants which are
being registered concurrently with this Offering as Selling Security Holders'
Redeemable Warrants. The Selling Security Holders' Redeemable Warrants and all
of the shares issuable upon exercise of such Selling Security Holders'
Redeemable Warrants may be sold by the holders or respective transferees
commencing on the date of this Prospectus.

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<PAGE>
Prospectus is a part, the warrants issued in this placement convert into a like
number of Redeemable Warrants which are being registered concurrently with this
Offering as Selling Security Holders' Redeemable Warrants. The Selling Security
Holders' Redeemable Warrants and all of the shares issuable upon exercise of
such Selling Security Holders' Redeemable Warrants may be sold by the holders or
respective transferees commencing on the date of this Prospectus.

In September 1995, the Company completed an offering of $6,100,000 in Units,
each consisting of 25,000 shares of Common Stock at a price of $3.85 per share
and 75,000 warrants at a price of $0.05 per warrant. Half of the shares issued
in this placement are being registered concurrently with this Offering and are
included in the Selling Security Holders' Shares. Upon effectiveness of the
Registration Statement of which this Prospectus is a part, all of the warrants
issued in this placement convert into a like number of Redeemable Warrants which
are also being registered concurrently with this Offering and are included in
the Selling Security Holders' Redeemable Warrants. As a result, half of the
shares, the Selling Security Holders' Redeemable Warrants and all of the shares
issuable upon exercise of such Selling Security Holders' Redeemable Warrants may
be sold by the holders or respective transferees commencing on the date of this
Prospectus.

In March 1996, there was a private placement of convertible debt to ASSI,
Inc. and Norton Herrick. See "-- Pietro's Acquisition."

Almost all of the Selling Security Holders are clients of the Representative
and are obligated to sell their respective Securities through the
Representative.

CERTAIN OTHER TRANSACTIONS AND CONFLICTS OF INTEREST

Paul Motenko and Jeremiah Hennessy advanced $204,028 to the Company in the
form of deferred salary ($125,000) and direct loans ($79,028). Messrs. Motenko
and Hennessy agreed to defer repayment of the loans without interest until all
of the Company's Series A Promissory Notes (the "Notes") issued in connection
with the January 1995 private placement were repaid. The direct loans to Messrs.
Motenko and Hennessy have not been paid; however, the Notes and deferred
salaries were repaid in 1995.

Pursuant to the terms of the Acquisition, Messrs. Motenko and Hennessy
pledged their ownership interest in the Company to Sellers. As a result, a
conflict of interest may exist between Messrs. Motenko and Hennessy and the
Company with respect to the determination of which obligations will be paid out
of the proceeds of this Offering or the Company's operating cash flow and when
such payments will be made. The Company also had notes payable to Sydney Feldman
in the amount of $40,000, which note accrued interest at a rate of 12%. This
note was repaid in 1995.

In addition, the Company currently has the following debt outstanding with
related parties: (i) a $100,000 note due and payable to Ms. Katherine Anderson,
a limited partner of BJ's Lahaina, L.P., the California limited partnership
which operates the Company's Lahaina, Maui restaurant, which note matures on
September 5, 1996 and bears interest at a rate of 19%, (ii) a $79,000 note due
on demand and payable to Paul Motenko, which note bears interest at a rate of 6%
and is referenced above in connection with certain advances by Mr. Motenko and
Mr. Hennessy and (iii) a $28,000 note due and payable to Harold Motenko, which
note matures on March 22, 1998 and bears interest at a rate of 12%. The Company
plans to pay the foregoing debt with proceeds from the sale of the Securities
offered hereby. See "Use of Proceeds."

Finally, in May 1995 the Company issued warrants to purchase up to 300,000
shares of Common Stock. The shares issuable upon exercise of the warrants are
currently valued at $21,000. Mr. Grumman's liability for payment of the warrants
was extinguished in consideration for past services as a director of the Company
which were not previously compensated.

Management believes that the transactions with the officers and/or
shareholders of the Company and their affiliates were made in terms no less
favorable than would have occurred with unaffiliated third parties. The Company
has adopted a policy not to engage in transactions with officers, directors,

62
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principal shareholders or affiliates of any of them unless such actions have
been approved by a majority of the disinterested directors and are upon terms no
less favorable to the Company than could be obtained from an unaffiliated third
party in an arms length transaction.

PIETRO'S ACQUISITION

In order to finance the Pietro's Acquisition, on February 20, 1996, the
Company sold to ASSI, Inc. and to Mr. Norton Herrick for $2,000,000 and
$1,000,000, respectively, certain convertible notes (the "Convertible Notes")
pursuant to certain note purchase agreements (the "Note Purchase Agreements")
with substantially similar terms. Under the Note Purchase Agreements, the
Company issued to each of ASSI, Inc. and to Mr. Herrick, Convertible Notes in
the principal amounts of $2,000,000 and $1,000,000, respectively, which
Convertible Notes, plus accrued interest thereon, both convert simultaneously
with the closing of this Offering. The Convertible Note, plus accrued interest
thereon, issued to ASSI, Inc. converts into 500,000 shares of Common Stock and
into Special Warrants to purchase 3,000,000 shares of Common Stock. See
"Description of Securities -- Redeemable Warrants." The Convertible Note, plus
accrued interest thereon, issued to Mr. Herrick converts into 250,000 shares of
Common Stock and into Special Warrants to purchase 1,500,000 shares of Common
Stock. The 4,700,000 Redeemable Warrants into which the 4,700,000 Special
Warrants convert upon sale of the Special Warrants by the current holders or
their affiliates are included in the Selling Security Holders' Redeemable
Warrants. In addition, in connection with the above financing, the Company has
agreed subject to the terms of the Note Purchase Agreements, to use its best
reasonable efforts to cause one individual designated by each of ASSI, Inc. and
Mr. Norton Herrick to be elected to the Board of Directors of the Company or to
have such selected individuals attend all meetings of the Board of Directors as
non-voting advisors. ASSI, Inc's current nominee to the Board of Directors of
the Company is Mr. Stephen Monticelli. Mr. Herrick's current nominee to the
Board of Directors is Mr. Steven Mayer. See "Principal Shareholders."

In connection with the Pietro's Acquisition, the Company has also assumed
liability to Edward Peabody and Christopher Wheeler in the amount of $25,000 in
exchange for which Messrs. Peabody and Wheeler agreed to release the Company and
its subsidiary, Chicago Pizza Northwest, Inc., for any and all other finder's
fees related to the Pietro's Acquisition.

On February 20, 1996, the Company entered into a consulting agreement with
ASSI, Inc. regarding the Pietro's Acquisition (the "Pietro's Consulting
Agreement"). Under this Agreement, ASSI, Inc. agrees to advise the Company in
connection with the reconstruction, expansion, marketing and strategic
development of the restaurants acquired from Pietro's. In consideration for such
services, the Company shall pay to ASSI, Inc. an annual fee equal to 5% of Net
Profits (as hereinafter defined) of the restaurants acquired under the plan of
reorganization and retained by the Company. As additional consideration for the
consulting services, the Company has issued to ASSI, Inc. an additional
aggregate of 100,000 Special Warrants to purchase shares of common stock of the
Company. These Special Warrants convert into Redeemable Warrants upon their sale
by the current holders or their affiliates and such Redeemable Warrants are also
included in the Selling Security Holders' Redeemable Warrants. See "Description
of Securities -- Redeemable Warrants." The Pietro's Consulting Agreement
terminates on December 31, 2000.

For purposes of the Vegas Consulting Agreements (as hereinafter defined) and
the Pietro's Consulting Agreement, "Net Profits" shall mean net profits of the
respective operations as determined under generally accepted accounting
principles ("GAAP") before payment of the Annual Fee, less income, franchise and
like taxes. In addition, GAAP is to be applied as if the acquired operations
were owned in a stand-alone, separate legal entity and without regard to: (i)
parent company overhead which is not directly attributable to the acquired
operations and (ii) any amortization of goodwill related to the acquisition of
the respective acquired operations.

63
<PAGE>
OTHER CONSULTING ARRANGEMENTS

On February 20, 1996, the Company entered into a consulting agreement with
ASSI, Inc. (the "Vegas Consulting Agreement") pursuant to which ASSI, Inc.
agrees to advise the Company with site selection and marketing and development
strategy for penetrating the Las Vegas, Nevada market. In consideration for such
services, the Company shall pay to ASSI, Inc. an annual fee (the "Annual Fee")
equal to 10% of Net Profits (as hereinafter defined) of the acquired Las Vegas
restaurants. As additional consideration for the consulting services, the
Company has issued to ASSI, Inc. an aggregate of 100,000 Special Warrants. The
Vegas Consulting Agreement terminates on December 31, 2000. These Special
Warrants convert into Redeemable Warrants upon their sale by the current holders
or their affiliates and such Redeemable Warrants are included in the Selling
Security Holders' Redeemable Warrants. See "Description of Securities --
Redeemable Warrants."

In summary, under the Pietro's Consulting Agreement, ASSI, Inc. will be
entitled to a total consideration of 5% of Net Profits of the Pietro's
Restaurants acquired and retained by the Company plus 100,000 Special Warrants
to purchase shares of Common Stock of the Company. Under the Vegas Consulting
Agreement ASSI, Inc. will be entitled to a total consideration of 10% of Net
Profits of restaurants acquired in Las Vegas plus 100,000 Special Warrants to
purchase shares of Common Stock of the Company. Finally, pursuant to the
financing of the Pietro's Acquisition, ASSI, Inc. will be entitled to 500,000
shares of Common Stock of the Company and 3,000,000 Special Warrants to purchase
shares of Common Stock of the Company. See "-- Pietro's Acquisition." All of the
Special Warrants to which ASSI, Inc. is entitled convert into Redeemable
Warrants upon their sale by the current holders or their affiliates and such
Redeemable Warrants are included in the Selling Security Holders' Redeemable
Warrants.

SALE OF RESTAURANTS

The Company and CPNI entered into an Asset Purchase Agreement (the "Abby's
Purchase Agreement") dated May 15, 1996 with A-II L.L.C. ("A-II") and Abby's,
Inc., pursuant to which CPNI agreed to sell to A-II substantially all of the
assets and liabilities of seven of the restaurants acquired from Pietro's. All
of the sales transactions were completed during the second quarter of 1996. The
restaurants sold were located in Richland, Kennewick and Yakima, Washington, and
in Albany, Madras, Redmond, and Bend, Oregon. Under the terms of the Abby's
Purchase Agreement, Abby's agreed to pay total consideration of $1,000,000, to
be adjusted for certain deposits, liabilities assumed and inventory levels. The
Abby's Purchase Agreement further provided that $400,000 of the consideration
was to be paid on May 31, 1996, concurrent with the closing of the sale of the
Bend and Albany restaurants, with the remainder payable on July 1, 1996. The
sale of the Albany and Bend restaurants was consummated on May 31, 1996, and the
$400,000 of consideration, plus an aggregate of $150,000 as an earnest money
deposit for purchase of the balance of the seven restaurants was paid. $100,000
of the $150,000 earnest money deposit was paid directly to CPNI as of that date
and the remaining $50,000 was held in a trust account. Under the Abby's Purchase
Agreement, the Company and CPNI also agreed to not become affiliated with any
pizza-style restaurant or any restaurant with a menu substantially similar to
those restaurants operated by CPNI in any of the cities of Yakima, Kennewick,
and Richland, Washington, or Albany, Madras, Redmond and Bend, Oregon, for a
period of three years from the date of the Abby's Purchase Agreement. Finally,
under the Abby's Purchase Agreement, the Company has granted A-II the right to
use trademarks associated with Pietro's for a period of four months in the case
of the Albany restaurant and a period of one year in the case of the other six
restaurants sold by the Company.

64
<PAGE>
DESCRIPTION OF SECURITIES

The Company's authorized capital stock consists of 60,000,000 shares of
Common Stock, no par value, and 5,000,000 shares of Preferred Stock, no par
value. As of the date hereof, there were 4,608,321 shares of Common Stock
outstanding, held by 104 persons or entities, and no shares of Preferred Stock
outstanding.

COMMON STOCK

The holders of outstanding Common Stock are entitled to receive dividends
out of assets legally available therefor at such times and in such amounts as
the Board of Directors may from time to time determine. The Company has no
present intention of paying dividends on its Common Stock. See "Dividend
Policy." Upon liquidation, dissolution or winding up of the Company, and subject
to the priority of any outstanding Preferred Stock, the assets legally available
for distribution to shareholders are distributable ratably among the holders of
the Common Stock at the time outstanding.

No holder of shares of Common Stock has a preemptive right to subscribe to
future issuances of securities by the Company. Accordingly, all investors in
this Offering will suffer dilution of their percentage interest in the Company
upon future sales of Common Stock or securities convertible into Common Stock.

Holders of Common Stock are entitled to cast one vote for each share held of
record on all matters presented to shareholders, other than with respect to the
election of directors, for which cumulative voting is currently required under
certain circumstances by applicable provisions of California law. Under
cumulative voting, each shareholder may give any one candidate whose name is
placed in nomination prior to the commencement of voting a number of votes equal
to the number of directors to be elected, multiplied by the number of votes to
which the shareholder's shares are normally entitled, or distribute such number
of votes among as many candidates as the shareholder sees fit. The effect of
cumulative voting is that the holders of a majority of the outstanding shares of
Common Stock may not be able to elect all of the Company's directors. The Common
Stock will be, when issued pursuant to the terms of this Prospectus, fully paid
and nonassessable.

PREFERRED STOCK

The Company is authorized to issue 5,000,000 shares of Preferred Stock. The
Company's Board of Directors is authorized to issue the Preferred Stock in one
or more series and, with respect to each series, to determine the preferences
and rights and the qualifications, limitations or restrictions thereof,
including the dividends rights, conversion rights, voting rights, redemption
rights and terms, liquidation preferences, sinking fund provisions, the number
of shares constituting the series and the designation of such series. The Board
of Directors could, without shareholder approval, issue Preferred Stock with
voting and other rights that could adversely affect the voting rights of the
holders of Common Stock and could have certain anti-takeover effects.

REDEEMABLE WARRANTS

The following is a brief summary of certain provisions of the Redeemable
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the warrant agreement between
the Company and The Boston Group, L.P., as warrant solicitation agent (the
"Warrant Agreement"). A copy of the Warrant Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. See
"Additional Information."

Each Redeemable Warrant entitles the holder thereof to purchase, at any time
during the 54-month period commencing one year after the date of this
Prospectus, one share of Common Stock at a price of 110% of the initial public
offering price per share, subject to adjustment in accordance with the
anti-dilution and other provisions referred to below.

The Redeemable Warrants are subject to redemption by the Company, at any
time, commencing one year after the date of this Prospectus, at a price of $.25
per Redeemable Warrant if the average closing bid price of the Common Stock
equals or exceeds 140% of the initial public offering price per

65
<PAGE>
share for any 20 trading days within a period of 30 consecutive trading days
ending on the fifth trading day prior to the date of notice of redemption.
Redemption of the Redeemable Warrants can be made only after 30 days notice,
during which period the holders of the Redeemable Warrants may exercise the
Redeemable Warrants. If the Redeemable Warrants are redeemed, the holders
thereof may lose the benefit of the difference between the market price of the
underlying Common Stock as of such date and the exercise price of such
Redeemable Warrants, as well as any possible future price appreciation in the
Common Stock. Notwithstanding the above, the Special Warrants described below
are not redeemable until sold by the current holder or their affiliates.

The exercise price and the terms of the Redeemable Warrants bear no relation
to any objective criteria of value and should in no event be regarded as an
indication of any future market price of the Securities offered hereby.

The exercise price and the number of shares of Common Stock purchasable upon
the exercise of the Redeemable Warrants are subject to adjustment upon the
occurrence of certain events, including stock dividends, stock splits,
combinations or reclassification on or of the Common Stock and issuances of
shares of Common Stock for a consideration less than the exercise price of the
Redeemable Warrants. Additionally, an adjustment would be made in the case of a
reclassification or exchange of Common Stock, consolidation or merger of the
Company with or into another corporation or sale of all or substantially all of
the assets of the Company in order to enable holders of Redeemable Warrants to
acquire the kind and number of shares of stock or other securities or property
receivable in such event by a holder of the number of shares that might
otherwise have been purchased upon the exercise of the Redeemable Warrant. No
adjustments will be made unless such adjustment would require an increase or
decrease of at least $.10 or more in such exercise price. No adjustment to the
exercise price of the shares subject to the Redeemable Warrants will be made for
dividends (other than stock dividends), if any, paid on the Common Stock.

The Redeemable Warrants may be exercised upon surrender of the warrant
certificate on or prior to the expiration date at the offices of the Warrant
Agent, with the exercise form on the reverse side of the certificate completed
and executed as indicated, accompanied by full payment of the exercise price (by
certified check payable to the Company) to the Warrant Agent for the number of
Redeemable Warrants being exercised. The holders of Redeemable Warrants do not
have the rights or privileges of holders of Common Stock.

No Redeemable Warrant will be exercisable unless at the time of exercise the
Company has filed a current prospectus with the Commission covering the shares
of Common Stock issuable upon exercise of such Redeemable Warrant and such
shares have been registered or qualified or deemed to be exempt under the
securities laws of the jurisdiction of residence of the holder of such
Redeemable Warrant. The Company will use its best efforts to have all such
shares so registered or qualified on or before the exercise date and to maintain
a current prospectus relating thereto until the expiration of the Redeemable
Warrants, subject to the terms of the Warrant Agreement. While it is the
Company's intention to do so, there is no assurance that it will be able to do
so. This Prospectus covers the shares initially issuable upon exercise of the
Redeemable Warrants.

No fractional shares will be issued upon exercise of the Redeemable
Warrants. However, if a warrantholder exercises all Redeemable Warrants then
owned of record by him, the Company will pay to such warrantholder, in lieu of
the issuance of any fractional share which is otherwise issuable, an amount in
cash based on the market value of the Common Stock on the last trading day prior
to the exercise date.

The Selling Security Holders' Redeemable Warrants include 4,700,000 Special
Warrants, which convert into Redeemable Warrants upon sale by the current
holders or their affiliates. By definition, these Special Warrants are governed
by the same terms as the Redeemable Warrants offered hereby with the exception
that subject to certain conditions, the Special Warrants are not subject to any
rights which the Company may have to call the Redeemable Warrants offered hereby
for redemption

66
<PAGE>
and these Special Warrants provide for certain additional demand and piggy-back
registration rights so long as owned by their current owners or affiliates, but
when sold by said owners convert into Redeemable Warrants. See "Certain
Transactions -- Pietro's Acquisition."

TRANSFER AGENT AND REDEEMABLE WARRANTS AGENT

U.S. Stock Transfer Corporation, Glendale, California is the transfer agent
and registrar for the shares of Common Stock and warrant agent for the
Redeemable Warrants.

SHARES ELIGIBLE FOR FUTURE SALE

All outstanding shares prior to this Offering are restricted securities
under Rule 144 under the Securities Act of 1933. However, of these restricted
securities the 1,766,864 shares held by the Selling Security Holders may be sold
at any time in the over the counter market and an additional 2,730,052 shares
will be eligible for resale in the near future under Rule 144. However,
1,317,714 of such 2,730,052 shares include shares held by officers and directors
who, including the Selling Director with respect to shares and warrants not
included in the Selling Security Holder Securities, have agreed not to sell
their shares for one year after the date hereof without the written consent of
the Representative. See "Underwriting." In general, under Rule 144, a person (or
persons whose shares are aggregated) holding restricted securities who has
satisfied a two-year holding period may, commencing 90 days after the date
hereof, under certain circumstances, sell within any three-month period that
number of shares which does not exceed the greater of 1% of the then outstanding
shares of Common Stock or the average weekly reported trading volume during the
four calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a person
who has satisfied a three-year holding period and who is not, and has not been
for the preceding three months, an affiliate of the Company. The Securities and
Exchange Commission has proposed to shorten the two year and three year holding
periods of Rule 144 to one year and two years, respectively. If such holding
periods are shortened, the holders of restricted securities could accelerate the
date that they could sell their shares. Future sales under Rule 144 or by the
Selling Security Holders (including sales of the Selling Security Holders'
Redeemable Warrants and the shares issuable upon exercise of the Selling
Security Holders' Redeemable Warrants) may have an adverse effect on the market
price of the shares of Common Stock or Redeemable Warrants should a public
market develop for such Securities.

67
<PAGE>
UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement
(the form of which has been filed as an exhibit to the registration statement of
which this Prospectus is a part), the Underwriters named below (the
"Underwriters"), represented by the Boston Group, L.P. (the "Representative")
have severally agreed to purchase from the Company, as applicable, the
respective number of Shares and the respective number of Redeemable Warrants set
forth opposite their name in the table below. The Underwriting Agreement
provides that the obligations of the Underwriters are subject to certain
conditions precedent, and that the Underwriters will be obligated, as set forth
in the Underwriting Agreement, to purchase all of the 1,500,000 Shares and
1,500,000 Redeemable Warrants being offered hereby, excluding shares and
warrants covered by the over-allotment options granted to the Underwriters, if
any are purchased.

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
UNDERWRITER SHARES REDEEMABLE WARRANTS
- ---------------------------------------------------------- ----------- --------------------
<S> <C> <C>
The Boston Group, L.P.....................................

----------- ----------
Total................................................... 1,500,000 1,500,000
----------- ----------
----------- ----------
</TABLE>

Through the Representative, the Underwriters have advised the Company that
the Underwriters propose to offer the Shares and the Redeemable Warrants to the
public initially at the public offering prices set forth on the cover page of
this Prospectus and may offer the Shares and Redeemable Warrants to selected
dealers at such prices less a concession of not more than $ per Share and
$ per Redeemable Warrant. The Underwriters may allow, and such dealers may
reallow, a concession of not more than $ per Share and $ per Redeemable
Warrant on sales to certain other dealers. After this Offering, the public
offering prices and concessions and reallowances to dealers may be changed by
the Underwriters.

The Company has granted the Underwriters an option, exercisable within 45
days after the date of this Prospectus, to purchase up to an aggregate of an
additional 225,000 Shares and 225,000 Redeemable Warrants from the Company, at
the same price per share and per Redeemable Warrant being paid by the
Underwriters for the other Shares and Redeemable Warrants offered hereby. To the
extent that the Underwriters exercise such option, each of the Underwriters will
have, subject to certain conditions, a firm commitment, as set forth in the
Underwriting Agreement, to purchase approximately the same percentage of the
additional Shares and Redeemable Warrants that the number of Shares of Stock and
Redeemable Warrants to be purchased by it shown in the above table bears to
1,500,000 and the Company will be obligated, pursuant to the option, to sell
such Shares to the Underwriters.

The Company has agreed to grant to the Representative, effective upon the
closing of the Offering, the right to nominate from time to time one individual
to be a director of the Company or to have an individual selected by the
Representative attend all meetings of the Board of Directors of the Company as a
non-voting advisor. The Company has agreed to indemnify and hold harmless such
director or advisor to the maximum extent permitted by law in connection with
such individual's service as a director or advisor. At this time, however, the
Representative has waived his right to nominate a director.

The Company has agreed to pay to the Representative a non-accountable
expense allowance equal to 3% of the gross proceeds from the sale of all Shares
and Redeemable Warrants offered hereby,

68
<PAGE>

including shares and warrants sold to cover over-allotments, if any. The Company
has agreed to sell to the Representative for an aggregate of $100 the
Representative's Warrants to purchase up to 150,000 shares of Common Stock at an
exercise price of 120% of the initial public offering price per share of Common
Stock and an additional 150,000 Redeemable Warrants to purchase up to an
additional 150,000 shares of Common Stock. The Representative's Warrants may not
be transferred for one year, except to officers or partners of the
Representative, and are exercisable during the four-year period commencing one
year from the date of this Prospectus. The Representative's Warrants grant to
the holder(s) thereof piggy-back and demand registration rights for a period of
seven years and five years, respectively after the date of this Prospectus with
respect to the Representative's Warrants and the securities issuable upon
exercise of the Representative's Warrants. The demand registration rights
require the Company to prepare and file two registration statements covering the
sale of the Representative's Warrants and the securities issuable upon exercise
of the Representative's Warrants, one of which is to be prepared at the expense
of the Company.

All of the Company's officers and directors, including the Selling Director
with respect to such shares and warrants which are not included in the Selling
Security Holders' Securities, have agreed not to directly or indirectly offer,
offer to sell, sell, grant an option to purchase or sell, transfer, assign,
pledge, hypothecate or otherwise encumber any shares of Common Stock owned by
them for a period of one year from the date of this Prospectus without the prior
written consent of the Representative.

The Company has agreed, in connection with the exercise of Redeemable
Warrants pursuant to solicitation by the Representative (commencing one year
from the date of this Prospectus), to pay to the Representative a fee of 5% of
the Redeemable Warrant exercise price for each Redeemable Warrant exercised,
provided, however, that the Representative will not be entitled to receive such
compensation in any Redeemable Warrant exercise transactions in which (i) the
market price of the Common Stock of the Company at the time of exercise is lower
than the exercise price of the Redeemable Warrants; (ii) the Redeemable Warrants
are held in any discretionary account; (iii) disclosure of compensation
arrangements is not made, in addition to the disclosure provided in this
Prospectus, in documents provided to holders of the Redeemable Warrant at the
time of exercise; (iv) the exercise of the Redeemable Warrants is unsolicited;
(v) after the Company has called the Redeemable Warrants for redemption; and
(vi) the solicitation of exercise of the Redeemable Warrants was in violation of
Rule 10b-6 promulgated under the Securities Exchange Act of 1934, as amended. In
addition, unless granted an exemption by the Commission from Rule 10b-6, the
Representative will be prohibited from engaging in any market-making activities
or solicited brokerage activities with regard to the Company's securities during
the period prescribed by Rule 10b-6 before the solicitation of the exercise of
any Redeemable Warrant until the later of (i) the termination of such
solicitation activity or (ii) the termination by waiver or otherwise of any
right the Representative may have to receive a fee for the exercise of the
Redeemable Warrants following such solicitations. The Company has agreed not to
solicit warrant exercises other than through the Representative.

The Representative has informed the Company that no sales to any accounts
over which it exercises discretionary authority will be made in this Offering.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.

Prior to this Offering, there has not been an established public market for
the Common Stock or Redeemable Warrants. The initial public offering price of
the Shares and Redeemable Warrants offered hereby and the exercise price and
other terms of the Representative's Warrants have been determined by
negotiations between the Company and the Representative. The major factors
considered in determining the public offering price of the Shares and the
Redeemable Warrants were the prevailing market conditions, the market prices
relative to earnings, cash flow and assets for publicly traded common stocks of
comparable companies, the sales and earnings of the Company and comparable
companies in recent periods, the Company's earning potential, the experience of
its management and the position of the Company in the industry.

69
<PAGE>
For certain transactions between the Company and the Representative, see
"Certain Transactions -- Pietro's and Other Proposed Acquisitions."

LEGAL MATTERS

The validity of the issuance of the Common Stock and Redeemable Warrants
offered hereby will be passed upon for the Company by Jeffer, Mangels, Butler &
Marmaro LLP, Los Angeles, California. Certain legal matters will be passed upon
for the Underwriters by Kaye, Scholer, Fierman, Hays & Handler, LLP, Los
Angeles, California.

EXPERTS

The consolidated balance sheet of Chicago Pizza & Brewery, Inc. as of
December 31, 1995, the combined statements of operations, shareholders' equity
and cash flows for the year ended December 31, 1994 and the consolidated
statements of operations, shareholders' equity and cash flows for the year ended
December 31, 1995, included in this Prospectus and Registration Statement, have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.

The combined balance sheet of Pietro's Corp.'s Business Related to Purchased
Assets as of December 25, 1995 and the combined statements of operations, equity
and cash flows for the year ended December 26, 1994 and the year ended December
25, 1995, included in this Prospectus and Registration Statement, have been
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a registration statement under the Securities
Act with respect to the Shares and Redeemable Warrants. This Prospectus omits
certain information contained in said registration statement as permitted by the
rules and regulations of the Commission. For further information with respect to
the Company and the Common Stock and Redeemable Warrants, reference is made to
such registration statement, including the exhibits thereto. Statements
contained herein concerning the contents of any contract or any other document
are not necessarily complete, and in each instance, reference is made to such
contract or other document filed with the Commission as an exhibit to the
registration statement, or otherwise, each such statement being qualified in all
respects by such reference. The registration statement, including exhibits and
schedules thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at the Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and at the New York Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such materials can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.

70
<PAGE>
CHICAGO PIZZA & BREWERY, INC.

INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

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

PAGE
----
Report Of Independent Accountants......................................... F-2
Consolidated Balance Sheets As Of December 31, 1995, June 30, 1996
(Unaudited) And June 30, 1996 (Unaudited Pro Forma)...................... F-3
Combined Statement Of Operations For The Year Ended December 31, 1994 And
Consolidated Statements Of Operations For The Year Ended December 31,
1995 And For The Six-Month Periods Ended June 30, 1995 (Unaudited) And
1996 (Unaudited)......................................................... F-4
Combined Statement Of Shareholders' Equity For The Year Ended December 31,
1994 And Consolidated Statements Of Shareholders' Equity For The Year
Ended December 31, 1995 And For The Six-Month Period Ended June 30, 1996
(Unaudited).............................................................. F-5
Combined Statement Of Cash Flows For The Year Ended December 31, 1994 And
Consolidated Statements Of Cash Flows For The Year Ended December 31,
1995 And For The Six-Month Periods Ended June 30, 1995 (Unaudited) And
1996 (Unaudited)......................................................... F-6
Notes To Combined And Consolidated Financial Statements................... F-7

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

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

To the Investors and Shareholders
Chicago Pizza & Brewery, Inc.

We have audited the accompanying consolidated balance sheet of Chicago Pizza
& Brewery, Inc., as identified in Note 1 of the Notes To Combined And
Consolidated Financial Statements (referred to as the "Company"), as of December
31, 1995, and the related combined and consolidated statements of operations,
shareholders' equity, and cash flows for the years ended December 31, 1994 and
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Chicago Pizza &
Brewery, Inc. as of December 31, 1995, and the combined and consolidated results
of their operations and their cash flows for the years ended December 31, 1994
and 1995, in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Los Angeles, California
June 14, 1996

F-2
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
CONSOLIDATED BALANCE SHEETS

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

ASSETS:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------ JUNE 30, JUNE 30,
1996 1996
----------- -----------
(UNAUDITED) (UNAUDITED
PRO FORMA)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................................... $ 1,791,769 $ 994,979 $ 994,979
Restricted cash..................................................... 200,000
Accounts receivable................................................. 11,100 101,124 101,124
Inventory........................................................... 62,525 215,542 215,542
Prepaids and other current assets................................... 285,432 1,170,027 877,527
------------ ----------- -----------
Total current assets............................................ 2,350,826 2,481,672 2,189,172
Property and equipment, net........................................... 1,870,531 5,507,150 5,507,150
Other assets.......................................................... 163,608 548,781 548,781
Restricted cash....................................................... 562,116 562,116
Intangible assets, net................................................ 5,558,244 5,790,349 5,790,349
------------ ----------- -----------
Total assets.................................................... $ 9,943,209 $14,890,068 $14,597,568
------------ ----------- -----------
------------ ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable.................................................... $ 446,597 $ 1,530,434 $ 1,530,434
Accrued expenses.................................................... 900,326 1,769,969 1,694,969
Notes payable to related parties.................................... 967,474 4,066,409 1,066,409
Notes payable, current.............................................. 268,235 268,235
Current portion of obligations under capital lease.................. 14,655 53,047 53,047
------------ ----------- -----------
Total current liabilities....................................... 2,329,052 7,688,094 4,613,094
Notes payable to related parties...................................... 3,122,761 2,726,938 2,726,938
Obligations under capital lease....................................... 22,239 113,707 113,707
Notes payable......................................................... 918,332 918,332
Minority interest in partnerships..................................... 252,541 253,984 253,984
Other liabilities..................................................... 193,167 190,308 190,308
------------ ----------- -----------
Total liabilities............................................... 5,919,760 11,891,363 8,816,363
------------ ----------- -----------
Commitments (Note 8)
Shareholders' equity:
Preferred stock, 5,000,000 shares authorized, none issued or
outstanding
Common stock, no par value, 20,000,000 and 30,000,000 shares
authorized as of December 31, 1995 and June 30, 1996, respectively,
3,788,878 shares issued and outstanding as of December 31, 1995 and
June 30, 1996 and 4,608,321 shares (unaudited pro forma) as of June
30, 1996........................................................... 5,568,467 5,568,467 8,412,842
Capital surplus..................................................... 278,750 328,750 559,375
Accumulated deficit................................................. (1,823,768) (2,898,512) (3,191,012)
------------ ----------- -----------
Total shareholders' equity...................................... 4,023,449 2,998,705 5,781,205
------------ ----------- -----------
Total liabilities and shareholders' equity...................... $ 9,943,209 $14,890,068 $14,597,568
------------ ----------- -----------
------------ ----------- -----------
</TABLE>

The accompanying notes are an integral part of these
combined and consolidated financial statements.

F-3
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS

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

<TABLE>
<CAPTION>
FOR THE YEARS ENDED SIX-MONTH PERIODS ENDED
DECEMBER 31, JUNE 30,
----------------------- -----------------------
1994 1995 1995 1996
---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues.............................................................. $6,452,582 $ 6,586,195 $3,207,366 $ 8,308,054
Cost of sales......................................................... 1,638,068 1,848,282 894,209 2,614,190
---------- ----------- ---------- -----------
Gross profit.................................................... 4,814,514 4,737,913 2,313,157 5,693,864
---------- ----------- ---------- -----------
Costs and expenses:
Labor and benefits.................................................. 2,706,463 2,647,089 1,269,058 3,088,130
Occupancy........................................................... 653,804 654,138 313,649 695,716
Operating expenses.................................................. 1,330,750 1,249,418 650,313 1,387,751
General and administrative.......................................... 473,699 878,681 330,753 832,926
Depreciation and amortization....................................... 173,449 359,282 181,516 377,243
---------- ----------- ---------- -----------
Total cost and expenses......................................... 5,338,165 5,788,608 2,745,289 6,381,766
---------- ----------- ---------- -----------
Loss from operations............................................ (523,651) (1,050,695) (432,132) (687,902)
Other income (expense):
Interest expense, net............................................... (118,841) (471,653) (381,167) (385,659)
Other............................................................... (33,741) (104,000) 7,342
---------- ----------- ---------- -----------
Total other expense............................................. (152,582) (575,653) (381,167) (378,317)
---------- ----------- ---------- -----------
Loss before minority interest and taxes......................... (676,233) (1,626,348) (813,299) (1,066,219)
Minority interest in partnerships..................................... 132,165 26,828 17,405 (1,444)
---------- ----------- ---------- -----------
Loss before taxes............................................... (544,068) (1,599,520) (795,894) (1,067,663)
Income tax expense.................................................... (6,400) (6,400) (2,400) (7,081)
---------- ----------- ---------- -----------
Net loss........................................................ $ (550,468) $(1,605,920) $ (798,294) $(1,074,744)
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
Net loss per common share........................................... $ (0.55) $ (0.32) $ (0.28)
----------- ---------- -----------
----------- ---------- -----------
Weighted average of common shares outstanding....................... 2,935,819 2,502,547 3,788,878
----------- ---------- -----------
----------- ---------- -----------
</TABLE>

The accompanying notes are an integral part of these
combined and consolidated financial statements.

F-4
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

<TABLE>
<CAPTION>
CHICAGO PIZZA &
BREWERY, INC. COMMON ROMAN SYSTEMS
STOCK COMMON STOCK PARTNER'S
--------------------- CAPITAL ----------------- CAPITAL ACCUMULATED
SHARES AMOUNT SURPLUS SHARES AMOUNT (DEFICIT) DEFICIT TOTAL
--------- ---------- -------- ------- -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993.............. 1,395,840 20,000 $ 10,000 $ 392,112 $ (462,793) $ (60,681)
Partner distributions................. (186,531) (186,531)
Net loss.............................. (166,726) (383,742) (550,468)
Common stock issued for purchase of
Limited Partnerships................. 226,824 $ 170,118 170,118
--------- ---------- -------- ------- -------- --------- ----------- -----------
Balance, December 31, 1994.............. 1,622,664 170,118 20,000 10,000 38,855 (846,535) (627,562)
Adjustment to consolidate previously
combined entities.................... (20,000) (10,000) (38,855) 628,687 579,832
Common stock issued for consulting
services............................. 69,792 52,344 52,344
Common stock issued for the purchase
of Roman Systems..................... 348,960 261,720 261,720
Common stock issued for private
placement offerings (net of issuance
costs of $953,812)................... 1,747,462 5,084,285 5,084,285
Warrants issued for financing......... $ 42,000 42,000
Warrants issued for private placement
offerings............................ 236,750 236,750
Net loss.............................. (1,605,920) (1,605,920)
--------- ---------- -------- ------- -------- --------- ----------- -----------
Balance, December 31, 1995.............. 3,788,878 5,568,467 278,750 (1,823,768) 4,023,449
Net loss (unaudited).................. (1,074,744) (1,074,744)
Warrants issued for consulting........ 50,000 50,000
--------- ---------- -------- ------- -------- --------- ----------- -----------
Balance, June 30, 1996 (unaudited)...... 3,788,878 $5,568,467 $328,750 $(2,898,512) $ 2,998,705
--------- ---------- -------- ------- -------- --------- ----------- -----------
--------- ---------- -------- ------- -------- --------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these combined and consolidated
financial statements.

F-5
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

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

<TABLE>
<CAPTION>
FOR THE YEARS ENDED SIX-MONTH PERIODS ENDED
DECEMBER 31, JUNE 30,
------------------------ ------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss.................................................. $ (550,468) $(1,605,920) $ (798,294) $(1,074,744)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization........................... 173,449 359,282 181,516 377,243
Minority interest in partnership........................ (132,165) (26,828) (17,405) 1,444
Noncash interest expense on private placement offering
notes.................................................. 166,847 166,847
Noncash payment of Director fees........................ 21,000
Noncash interest and consulting expense on private
placement offerings warrants........................... 8,000 8,000 50,000
Changes in assets and liabilities:
Accounts receivable................................... (15,913) 4,850 (5,494) (2,756)
Inventory............................................. (20,218) 4,313 2,850 27,932
Prepaids and other current assets..................... 41,140 (227,381) (23,140) (724,096)
Other assets.......................................... (556,054) 142,238 (33,481) (220,416)
Accounts payable...................................... 264,005 (31,713) (174,305) 856,057
Accrued expenses...................................... 539,251 212,040 (18,056) 311,581
Other liabilities..................................... 103,770 176,520
----------- ----------- ----------- -----------
Net cash used in operating activities............... (256,973) (973,272) (607,192) (221,235)
----------- ----------- ----------- -----------
Cash flows provided by (used in) investing activities:
Acquisition of Roman Systems and limited partnership
interests................................................ (4,421,142) (4,421,142)
Acquisition of Chicago Pizza Northwest.................... (2,591,208)
Acquisition of Brea, California micro-brewery leasehold
interest................................................. (930,400)
Purchases of equipment.................................... (1,000,944) (710,532) (496,333) (1,367,060)
Capitalized leases........................................ (145,249)
Receivable from related party............................. 4,372
Proceeds from Abby's sale, net of expenses................ 950,000
----------- ----------- ----------- -----------
Net cash used in investing activities............... (996,572) (5,131,674) (4,917,475) (4,083,917)
----------- ----------- ----------- -----------
Cash flows provided by (used in) financing activities:
Borrowings on related party debt.......................... 1,127,672 4,988,113 3,746,113 3,100,000
Borrowing on short-term debt.............................. 227,912
Borrowing on long-term debt............................... 750,771
Payments on related party debt............................ (135,918) (2,096,587) (495,149) (396,888)
Payments on debt.......................................... (303,293)
Increase in capital lease obligations..................... 145,249
Transfer to restricted cash............................... (200,000)
Capital lease payments.................................... (13,392) (11,888) (6,072) (15,389)
Financing costs for private placement offering............ (953,812)
Proceeds from stock issuance.............................. 5,871,250 2,133,445
Proceeds from warrants.................................... 249,750 123,688
Contributions from partners............................... 386,000
Distributions to partners................................. (82,991)
Debt issued for private placement offerings............... 1,250,000
----------- ----------- ----------- -----------
Net cash provided by financing activities........... 1,281,371 7,846,826 6,752,025 3,508,362
----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents........................................ 27,826 1,741,880 1,227,358 (796,790)
Cash and cash equivalents, beginning of period.............. 22,063 49,889 49,889 1,791,769
----------- ----------- ----------- -----------
Cash and cash equivalents, end of period.................... $ 49,889 $ 1,791,769 $ 1,277,247 $ 994,979
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these
combined and consolidated financial statements.

F-6
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS

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

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION:

Chicago Pizza & Brewery, Inc. (the "Company") was formed in 1991 by Mr.
Jeremiah Hennessy and Mr. Paul Motenko (the "Owners") to operate and manage five
existing "BJ's Chicago Pizzeria" restaurants in Southern California owned by
Roman Systems, Inc. ("Roman Systems") under a Management Agreement (the
"Management Agreement") with Roman Systems. Pursuant to the Management
Agreement, the Company had the right and obligation to open, operate and manage
BJ's Chicago Pizzeria restaurants. In 1992, the Owners formed CPA-BG, Inc.
("CPA-BG") and opened two restaurants with CPA-BG as the general partner of BJ's
Belmont Shore, L.P. and BJ's La Jolla, L.P. in 1992 and 1993, respectively. In
1994, the Company opened two BJ's Chicago Pizzeria restaurants in Huntington
Beach and Seal Beach. Additionally, in 1994, the Company opened a restaurant in
Lahaina, Hawaii as a limited partner of BJ's Lahaina, L.P. The general partners
of BJ's Lahaina, L.P. were CPA010, Inc. ("CPA010"), which was formed by the
Owners, and Blue Max, Inc. ("Blue Max").

Effective January 1, 1995, pursuant to the Asset Purchase Agreement between
the Company and Roman Systems (the "Asset Purchase Agreement"), the Company
purchased the three existing BJ's Chicago Pizzeria restaurants operated and
managed under the Management Agreement and terminated the Management Agreement.
As part of the Asset Purchase Agreement, the Company assumed responsibility for
closing two of Roman Systems' existing BJ's Chicago Pizzeria restaurants in
Santa Ana and San Juan Capistrano, California and assumed the net liabilities
related thereto. These restaurants were closed in 1995.

Effective January 1, 1995, the Company purchased the limited partnership
interests of BJ's Belmont Shore, L.P. and BJ's La Jolla, L.P. The general
partnership interests of CPA-BG were transferred to the Company for no
consideration prior to the acquisition of the limited partnership interests. The
general partnership interests in BJ's Lahaina, L.P. were also transferred to the
Company for no consideration. Additionally, the Company closed a BJ's Chicago
Pizzeria restaurant in 1995. As of December 31, 1995, the Company owned seven
BJ's Chicago Pizzeria restaurants, all in coastal locations in Southern
California and Hawaii.

As a result, the accompanying combined financial statements as of and for
the year ended December 31, 1994 have been presented on a combined basis due to
common ownership and management and for historical comparison purposes. The
combination of companies was accounted for in a manner similar to a pooling of
interests. The combined financial statements for the year ended December 31,
1994 include the accounts of the Company, Roman Systems, CPA-BG, BJ's Belmont
Shore, L.P., BJ's La Jolla, L.P., BJ's Lahaina, L.P., CPA010, and Blue Max. The
accompanying financial statements of the Company as of and for the year ended
December 31, 1995 are presented on a consolidated basis, and include the
accounts of the Company and BJ's Lahaina, L.P. All significant intercompany
transactions and balances have been eliminated.

On March 29, 1996, the Company acquired 26 restaurants located in Oregon and
Washington by providing the funding for the Debtor's (Pietro's Corp.) Plan of
Reorganization, Dated February 29, 1996, as modified (the "Debtor's Plan") and
thereby acquired all the stock in the reorganized entity known as Chicago Pizza
Northwest, Inc. ("CPNI"). The Debtor's Plan was confirmed by an order of the
Bankruptcy Court on March 18, 1996 and the Company funded the Debtor's Plan on
March 29, 1996. The June 30, 1996 unaudited financial statements include the
results of the 26 restaurants from the date they were acquired. However the
results for seven of the restaurants, which were sold during the second quarter
of 1996, as described below, are only included through the date of their sale.

F-7
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

On May 15, 1996 the Company agreed to sell seven of the restaurants
purchased from Pietro's Corp. Two of the restaurants were sold on May 31, 1996,
two additional restaurants were sold on June 24, 1996 and three additional
restaurants were sold on June 26, 1996. The operating results for the seven
restaurants sold were included in the Company's consolidated operating results
for the period they were owned by the Company. No gain or loss was recognized on
the sale of the restaurants.

CASH AND CASH EQUIVALENTS:

Cash and cash equivalents consist of highly liquid investments with an
original maturity of three months or less when purchased. Cash and cash
equivalents are stated at cost, which approximates market value.

RESTRICTED CASH:

During 1995, in connection with the Westwood property lease, the Company
deposited $200,000 into a restricted cash account, which could not be eliminated
without the written consent of the lessor. The landlord consent was obtained in
1996 and the restriction was eliminated.

In 1996, as part of the acquisition of the Brea restaurant location, the
Company assumed an existing bank loan with the condition that a $200,000
certificate of deposit be restricted as collateral. Additionally, a $362,116
restricted certificate of deposit for Washington State Workers' Compensation
insurance was acquired in the Pietro's acquisition.

INVENTORY:

Inventory is stated at the lower of cost (first-in, first-out) or market and
is comprised primarily of food and beverages for the restaurant operations.

PROPERTY AND EQUIPMENT:

Property and equipment are recorded at cost. Renewals and betterments that
materially extend the life of an asset are capitalized while maintenance and
repair costs are charged to operations as incurred. When property and equipment
are sold or otherwise disposed of, the asset account and related accumulated
depreciation and amortization accounts are relieved, and any gain or loss is
included in operations.

Depreciation and amortization is computed using the straight-line method
over the estimated useful lives of the related assets or, for leasehold
improvements, over the term of the lease, if less. The following are the
estimated useful lives:

<TABLE>
<S> <C>
Furniture and fixtures....................................... 7 years
Equipment.................................................... 7-10 years
Leasehold improvements....................................... 7 to 25 years
</TABLE>

Smallwares are capitalized upon the opening of a new restaurant. All
subsequent purchases of smallwares are expensed as incurred.

LEASES:

F-8
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
liabilities is recorded to effect constant rates over the terms of the leases.
Leases that do not meet the criteria for capitalization are classified as
operating leases and rentals are charged to expense as incurred.

PREPAIDS AND OTHER CURRENT ASSETS:

The Company capitalizes restaurant preopening costs which include the direct
and incremental costs associated with the opening of a new restaurant. These are
primarily costs incurred to develop new restaurant management teams, and the
food, beverage and supply costs incurred to perform testing of all equipment,
concept, systems and recipes. The capitalized costs are amortized on a
straight-line basis over a period of one year, beginning on the restaurant's
opening date. Preopening costs totaled $68,405 and $283,726 as of December 31,
1995 and June 30, 1996 (unaudited), respectively.

The costs related to a potential public offering are being deferred and will
be netted against offering proceeds, if successful. As of December 31, 1995 and
June 30, 1996 costs totaling $108,000 and $263,941, respectively, have been
deferred.

INTANGIBLE ASSETS:

Goodwill from the acquisition of the net assets of Roman Systems and the
acquisition of the limited partnership interests of BJ's Belmont Shore, L.P. and
BJ's La Jolla, L.P. as of January 1, 1995 as well as the acquisition of Pietro's
as of March 29, 1996 represents the excess of cost over fair value of net assets
acquired and is being amortized over 40 years using the straight-line method.
The cost of acquiring the trademark for BJ's Chicago Pizzeria from Roman Systems
is being amortized over 10 years.

During 1994, the Company obtained the lease rights to open a BJ's Chicago
Pizzeria restaurant in Lahaina. The original lessee of the property has a
sublease of the property to Blue Max. The Company purchased the stock of Blue
Max to acquire the sole assets of the Company, the liquor license for Lahaina.
The total amount paid was $100,000 which consisted of $25,000 for the liquor
license, $25,000 to obtain the lease and $50,000 for the covenant not to
compete. The lease right and the covenant not to compete are being amortized
over 8.5 years, using the straight-line method. The Company periodically
evaluates the carrying value of goodwill including the related amortization
periods. The Company determines whether there has been impairment by comparing
the anticipated undiscounted future operating income of the acquired restaurants
with the carrying value of the goodwill.

INCOME TAXES:

For the year ended December 31, 1994, the Company consisted of three "C"
corporations (Chicago Pizza & Brewery, CPA010 and Blue Max), two "S"
corporations (CPA-BG and Roman Systems), and three limited partnerships (BJ's
Lahaina, L.P., BJ's Belmont, L.P. and BJ's La Jolla, L.P.). The C corporations
are taxed on their taxable income by the state and federal governments. Under
the S corporation provisions, the companies do not pay federal corporate income
taxes on their taxable incomes. Instead, the shareholder is individually liable
for federal income taxes based on the individual company's taxable income. This
election is also valid for state income tax reporting. However, a provision for
state income taxes is required based on a 1.5% state tax rate on taxable income.
The limited partnerships are required to pay a District of Columbia
unincorporated business tax on its taxable income and a California minimum tax.
For the year ended December 31, 1995, the Company

F-9
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
operated on a consolidated basis as a "C" corporation (Chicago Pizza & Brewery).
BJ's Lahaina, L.P. operated as a limited partnership. In the first quarter of
1996, the Company acquired Chicago Pizza Northwest, Inc.

The Company utilizes Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under
this method, deferred income taxes are recognized for the tax consequences in
future years of differences between the tax bases of assets and liabilities and
their financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which differences are expected
to affect taxable income. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized. The
provision for income taxes represents the tax payable for the period and the
change during the period in deferred tax assets and liabilities.

MINORITY INTEREST:

For the combined and consolidated financial statements as of December 31,
1994, minority interest represents limited partners' interests totaling 46.32%
for BJ's Lahaina, L.P. and 50% for BJ's Belmont Shore, L.P. and BJ's La Jolla,
L.P.

For the consolidated financial statements as of December 31, 1995 and June
30, 1996, minority interest represents limited partners' interests totalling
46.32% for BJ's Lahaina, L.P.

USE OF ESTIMATES:

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions for the reporting period and as of the financial statement date.
These estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses. Actual results could differ from
those estimates.

PER SHARE INFORMATION:

Per share information is based on the weighted average number of common
shares outstanding and the dilutive effect of common share equivalents, if any.

STOCK SPLIT:

In December 1994 and May 1995, the Board of Directors declared a
19,000-for-1 stock split and a .34896-for-1 reverse stock split, respectively,
of the Company's common stock. All references to the number of shares and per
share amounts have been adjusted to give retroactive effect to the stock splits
for all periods presented.

RECENTLY ISSUED ACCOUNTING STANDARDS:

In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used, and for
long-lived assets and certain identifiable intangibles to be disposed of. The
Company is required to adopt the provisions of SFAS No. 121 for 1996, and the
Company believes that upon its adoption there should be no impact to results of
operations.

F-10
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In November 1995, the FASB also issued SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123 establishes new
accounting standards for the measurement and recognition of stock-based awards.
SFAS No. 123 permits entities to continue to use the traditional accounting for
stock-based awards prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees" however, under this option, the Company will be required to
disclose the pro forma effect of stock-based awards on net income and earnings
per share as if SFAS No. 123 had been adopted. SFAS No. 123 is effective for
1996. The Company intends to use the provisions of APB Opinion No. 25 in
accounting for stock-based awards. As such, this standard will have no impact on
the Company's results of operations upon adoption.

Other recently issued standards of the FASB are not expected to affect the
Company as conditions to which those standards apply are absent.

INTERIM RESULTS (UNAUDITED):

The accompanying consolidated balance sheet as of June 30, 1996 and the
consolidated statements of operations and cash flows for the six month periods
ended June 30, 1996 and 1995, and the statement of equity for the six month
period ended June 30, 1996 are unaudited. In the opinion of management, these
statements have been prepared on the same basis as the audited consolidated
financial statements and include all adjustments, consisting of only normal
recurring adjustments necessary for the fair presentation of results of the
interim periods. The data disclosed in these notes to the consolidated financial
statements for those interim periods are also unaudited.

BUSINESS OPERATIONS

The Company has incurred net losses during its organization and acquisition
of restaurants. While many of these costs were created by the ramping-up of the
organization and restaurant concept development, including a more expansive
menu, food testing, and micro-brewery concepts, management believes that such
costs will be reduced in the future. Management's plans for a return to
profitability include increasing sales through a more expansive menu and
refurbishing of restaurants in the Northwest, increasing micro-brew beer sales,
reducing the cost of sales through vendor volume purchases, reducing general and
administrative costs by consolidation of the Company's existing corporate
structure and CPNI's corporate structure and reduction of interest expense
through use of a portion of the proceeds of the potential initial public
offering to pay off debt.

While there can be no assurance that management plans, if executed, will
return the Company to profitability, management believes their plans provide the
Company with a strong base to accomplish their goals.

2. CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to a
concentration of credit risk, as defined by SFAS No. 105 "Disclosure of
Information about Financial Instruments with Off-Balance Sheet Risk and
Concentrations of Credit Risk," principally consist of cash and cash
equivalents. The Company maintains its cash accounts at various California and
Hawaii banking institutions. At times, cash balances may be in excess of the
FDIC insurance limit. Cash equivalents represent tax-exempt money market funds.

F-11
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of:

<TABLE>
<CAPTION>
JUNE 30,
1996
DECEMBER 31, --------------
1995
-------------- (UNAUDITED)
<S> <C> <C>
Furniture and fixtures................................................ $ 96,349 $ 236,190
Equipment............................................................. 618,101 2,148,455
Leasehold improvements................................................ 1,421,939 3,570,074
-------------- --------------
2,136,389 5,954,719
Less, accumulated depreciation and amortization....................... (265,858) (510,955)
Construction in progress.............................................. -- 63,386
-------------- --------------
$ 1,870,531 $ 5,507,150
-------------- --------------
-------------- --------------
</TABLE>

4. INTANGIBLE ASSETS
Intangible assets consisted of the following as of:

<TABLE>
<CAPTION>
JUNE 30,
1996
DECEMBER 31, --------------
1995
-------------- (UNAUDITED)
<S> <C> <C>
Goodwill.............................................................. $ 5,555,128 $ 5,798,251
Trademark............................................................. 38,000 48,000
Covenant not to compete............................................... 50,000 50,000
Lease right for Lahaina lease......................................... 25,000 25,000
Liquor licenses....................................................... 45,000 65,000
-------------- --------------
5,713,128 5,986,251
Less, accumulated amortization........................................ 154,884 195,902
-------------- --------------
$ 5,558,244 $ 5,790,349
-------------- --------------
-------------- --------------
</TABLE>

5. ACCRUED EXPENSES
Accrued expenses consisted of the following as of:

<TABLE>
<CAPTION>
JUNE 30,
1996
DECEMBER 31, --------------
1995
------------- (UNAUDITED)
<S> <C> <C>
Accrued professional fees............................................. $ 216,151 $ 84,932
Accrued rent.......................................................... 215,271 274,551
Payroll related liabilities........................................... 116,854 670,815
Accrued interest...................................................... 33,308 180,256
Other................................................................. 318,742 559,415
------------- --------------
$ 900,326 $ 1,769,969
------------- --------------
------------- --------------
</TABLE>

F-12
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

6. DEBT

RELATED PARTY DEBT:

Related party short-term debt consisted of the following as of:

<TABLE>
<CAPTION>
JUNE 30,
1996
DECEMBER 31, ---------------
1995
------------- (UNAUDITED)
<S> <C> <C>
Note payable to related party, with interest rate of 6%, due on
demand, collateralized by the property and equipment of BJ's
Huntington Beach restaurant.......................................... $ 350,000 $ 200,000
Note payable to Paul Motenko, with interest rate of 6%, due on
demand............................................................... 74,686 78,527
Notes payable to related parties which are convertible as to principal
and accrued interest thereon (automatically at the closing of an
initial public offering) to 750,000 shares of common stock and
warrants to purchase 4,500,000 shares of Common Stock, with an
interest rate of 10%, collateralized by the stock of CPNI. The terms
of the warrants provide that, if the Company consummates an initial
public offering which includes warrants, then the warrants are
automatically converted into warrants included in an initial public
offering, exercisable at 110% of the price per share of Common Stock
in the initial public offering....................................... 3,000,000
Note payable to related party, with interest rate of 19%, due on
September 5, 1996.................................................... 100,000
------------- ---------------
Total related party short-term debt................................... $ 424,686 $ 3,378,527
------------- ---------------
------------- ---------------
</TABLE>

Related party long-term debt consisted of the following as of:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
-------------- JUNE 30,
1996
------------
(UNAUDITED)
<S> <C> <C>
Note payable to related party, with interest rate of 12%, maturing on
March 22, 1998....................................................... $ 31,021 $ 24,691
Note payable to Roman Systems, with interest rate of 7%, maturing
April 1, 2004, collateralized by the BJ's Laguna, BJ's La Jolla and
BJ's Balboa restaurants.............................................. 3,487,528 3,269,573
Note payable to Roman Systems, with interest rate of 2.25% plus the
bank's reference rate (8.5% at December 31, 1995 and 8.25% at June
30, 1996), due in monthly installments of $3,500, maturing June 1,
1999................................................................. 147,000 120,556
-------------- ------------
Total long-term related party debt.................................... 3,665,549 3,414,820
Less, current portion................................................. 542,788 687,882
-------------- ------------
$ 3,122,761 $ 2,726,938
-------------- ------------
-------------- ------------
</TABLE>

F-13
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

6. DEBT (CONTINUED)

Total interest incurred during the years ended December 31, 1994 and 1995,
and the six-month period ended June 30, 1996 was approximately $120,000,
$532,000 and $416,000 (unaudited), respectively. Future maturities of related
party debt for each of the five years subsequent to December 31, 1995 and
thereafter are as follows:

<TABLE>
<S> <C>
1996........................................................ $ 967,474
1997........................................................ 598,084
1998........................................................ 462,497
1999........................................................ 343,227
2000........................................................ 350,147
Thereafter.................................................. 1,368,806
----------
$4,090,235
----------
----------
</TABLE>

OTHER LONG-TERM DEBT:

Other long-term debt consisted of the following as of June 30, 1996
(Unaudited):

<TABLE>
<S> <C>
Note payable with interest rate of 2% plus the bank's
reference rate (8.25% at June 30, 1996), due in monthly
installments of $12,513, maturing March 1, 2001,
collateralized by $200,000 certificate of deposit maturing
March 1, 1998.............................................. $ 713,231

Notes payable for Pietro's outstanding tax claims as part of
the Debtor's Plan of Reorganization, due in quarterly
installments of $32,670 from July 1, 1996 through April 1,
1997 and $20,071 from July 1, 1997 through June 30, 2001
and varying payments totaling an aggregate of $34,122 from
October 1, 2001 until April 1, 2002. Interest accrues at
8.25%...................................................... 473,336
-----------
1,186,567
Less, current portion....................................... 268,235
-----------
$ 918,332
-----------
-----------
</TABLE>

7. CAPITAL LEASES
The Company leases point of sale and phone equipment under capital lease
arrangements. The equipment related to the capital leases has an original cost
of $53,318 and accumulated amortization

F-14
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

7. CAPITAL LEASES (CONTINUED)
of $7,791 at December 31, 1995. The obligations under capital leases have
interest rates ranging from 6.9% to 13.9% and mature at various dates through
2000. Annual future minimum lease payments for the five years subsequent to
December 31, 1995 are as follows :

<TABLE>
<S> <C>
1996........................................................ $21,131
1997........................................................ 15,240
1998........................................................ 9,927
1999........................................................ 4,347
2000........................................................ 1,764
-------
Total minimum payments.................................. 52,409
Less, amount representing interest.......................... 15,515
-------
Obligations under capital leases........................ 36,894
Less, current portion....................................... 14,655
-------
Long-term portion....................................... $22,239
-------
-------
</TABLE>

8. COMMITMENTS

The Company leases its restaurant and office facilities under noncancelable
operating leases with terms ranging from approximately 7 to 25 years with
renewal options ranging from 5 to 15 years. Rent expense for the years ended
December 31, 1994 and 1995 and for the six-month period ended June 30, 1996 was
$609,531, $547,900 and $602,249 (unaudited), respectively.

The Company has certain operating leases which contain fixed escalation
clauses. Rent expense for these leases has been calculated on a straight-line
basis over the term of the leases. A deferred credit in the amount of $207,605
has been established and included in accrued expenses at December 31, 1995 for
the difference between the amount charged to expense and the amount paid. The
deferred credit will be amortized over the life of the leases.

A number of the leases also provide for contingent rentals based on a
percentage of sales above a specified minimum. Total contingent rentals for the
years ended December 31, 1994 and 1995 and the six-month period ended June 30,
1996 were $50,902, $45,763 and $15,748 (unaudited), respectively.

The following are the future minimum rental payments under noncancelable
operating leases for each of the five years subsequent to December 31, 1995 and
June 30, 1996 and in total thereafter:

<TABLE>
<CAPTION>
JUNE 30,
1996
DECEMBER 31, --------------
1995
------------- (UNAUDITED)

<S> <C> <C>
1996........................................................ $ 628,030 $ 1,644,690
1997........................................................ 699,961 2,063,581
1998........................................................ 715,686 1,803,843
1999........................................................ 700,808 1,561,139
2000........................................................ 651,794 1,181,333
Thereafter.................................................. 1,731,876 6,621,480
------------- --------------
$ 5,128,155 $ 14,876,066
------------- --------------
------------- --------------
</TABLE>

F-15
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

8. COMMITMENTS (CONTINUED)
LEGAL PROCEEDINGS:

The Company is not a party to any pending legal proceedings which it
believes will have a material adverse effect on its consolidated financial
position or consolidated results of operations.

EMPLOYMENT AGREEMENTS:

Effective March 26, 1996, the Company entered into employment agreements
with Paul Motenko and Jeremiah J. Hennessy. The agreements provide for a minimum
annual salary of $135,000 subject to escalation annually in accordance with the
Consumer Price Index and certain benefits through 2004 and may be terminated by
either party. The agreements also contain provisions for additional cash
compensation based on earnings or income of the Company. The agreements contain
provisions which grant the employees the right to receive salary and benefits,
as individually defined, if such employee is terminated by the Company without
cause.

CONSULTING AGREEMENT:

In February 1996 the Company entered into a consulting agreement
("Consulting Agreement") with ASSI, Inc. pursuant to which ASSI, Inc. agrees to
advise the Company with site selection and marketing and development strategy
for penetrating the Las Vegas, Nevada market. In consideration for such
services, the Company shall pay ASSI, Inc. an annual fee equal to 10% of the Net
Profits, as defined, of the acquired Las Vegas, Nevada restaurants. As
additional consideration for consulting services, the Company issued to ASSI,
Inc. an aggregate of 100,000 warrants to purchase shares of common stock of the
Company at an exercise price of $3.85 per share. The Consulting Agreement
expires on December 31, 2000. The terms of the warrants provide that if the
Company consummates an initial public offering which includes warrants, then the
warrants are automatically converted into warrants included in the initial
public offering.

The Company also entered into a consulting agreement ("Pietro's Consulting
Agreement") with ASSI, Inc. regarding the Pietro's Corp. Acquisition (see Note
13). Under this agreement, ASSI, Inc. agrees to advise the Company in connection
with the reconstruction, expansion, marketing and strategic development of the
restaurants acquired from Pietro's Corp. In consideration for such services, the
Company shall pay to ASSI, Inc. an annual fee equal to 5% of Net Profits, as
defined, of the 26 restaurants acquired, 19 of which the Company currently plans
to retain. As additional consideration for the consulting services, the Company
issued to ASSI, Inc. an additional aggregate of 100,000 warrants to purchase
shares of common stock of the Company at an exercise price of $3.85 per share.
The Pietro's Consulting Agreement expires on December 31, 2000. The terms of the
warrants provide that if the Company consummates an initial public offering
which includes warrants, then the warrants are automatically converted into
warrants included in the initial public offering.

9. SHAREHOLDERS' EQUITY

PREFERRED STOCK:

The Company is authorized to issue 5,000,000 shares in one or more series of
preferred stock and to determine the rights, preferences, privileges and
restrictions to be granted to, or imposed upon, any such series, including the
voting rights, redemption provisions (including sinking fund provisions),
dividend rights, dividend rates, liquidation rates, liquidation preferences,
conversion rights and the description and number of shares constituting any
wholly unissued series of preferred stock. The Company's Board of Directors,
without further shareholder approval, can issue preferred stock with rights that
could adversely affect the rights of holders of the Company's common stock. The
issuance

F-16
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

9. SHAREHOLDERS' EQUITY (CONTINUED)

of shares of preferred stock under certain circumstances could have the effect
of delaying or preventing a change of control of the Company or other corporate
action. No shares of preferred stock were outstanding at December 31, 1995 and
June 30, 1996. The Company currently has no plans to issue shares of preferred
stock.

COMMON STOCK:

Shareholders' of the Company's outstanding common stock are entitled to
receive dividends if and when declared by the Board of Directors. Upon
liquidation, dissolution or winding up of the Company, and subject to the
priority of any outstanding preferred stock, the Company's assets legally
available for distribution to shareholders are to be distributable ratably among
the holders of the common stock at the time outstanding. Shareholders are
entitled to one vote for each share of common stock held of record. Pursuant to
the requirements of California law, shareholders are entitled to cumulate votes
in connection with the election of directors.

CAPITAL SURPLUS:

In May 1995, the Company issued warrants to purchase up to 300,000 shares of
common stock at a price of $5.00 per share to each of Barry Grumman, a director
of the Company, and Lexington Ventures, Inc. Each of Mr. Grumman and Lexington
Ventures, Inc. were issued their respective warrants at a price of $0.07 per
warrant or a total price to each of $21,000. Mr. Grumman's liability for payment
of the warrants was extinguished in exchange for past services to the Company as
a Director which had not been compensated. The terms of the warrants provide
that if the Company consummates an initial public offering which includes
warrants to purchase shares of Common Stock, then the warrants issued are
automatically converted into warrants included in the initial public offering.
The proceeds were used for working capital purposes. Proceeds from the valuation
or sale of warrants issued in conjunction with the private placement offerings
totaled $236,750.

PRIVATE PLACEMENTS:

In January 1995, the Company completed a private placement of 17 Units at
$50,000 per Unit, consisting of (i) a Series A Promissory Note in the principal
amount of $50,000 and due December 31, 1995 and (ii) 13,086 shares of common
stock. The net proceeds to the Company of $496,000 (net of issuance costs of
$104,000) were used to finance acquisitions. The Series A Promissory Notes
beared interest, payable quarterly, at a rate of 10% until June 30, 1995 and
13.5% thereafter. The Promissory Notes were repaid in the third quarter of 1995
with proceeds from the June 1995 placement described below.

In March 1995, the Company completed a private placement of 4 Units at
$100,000 per Unit, consisting of (i) a $98,000 promissory note bearing interest
at a rate of 10% per annum with interest and principal due upon the earlier of
completion of an initial public offering of the Company's common stock, or 18
months from the date of issuance and (ii) warrants (valued at a price of $.0573)
to purchase 34,896 shares of common stock at a price of $2.87 per share. The
terms of this private placement provide that if the Company consummates an
initial public offering which includes warrants to purchase shares of Common
Stock, then the warrants issued in this placement are automatically converted
into warrants included in the initial public offering. The net proceeds to the
Company of $400,000 were used for working capital. The promissory notes were
repaid in the third quarter of 1995 with proceeds from the June 1995 private
placement described below.

F-17
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

9. SHAREHOLDERS' EQUITY (CONTINUED)

In September 1995, the Company completed a private placement of 61 Units at
$100,000 per Unit, consisting of (i) 25,000 shares of common stock at a price of
$3.85 per share and (ii) warrants to purchase 75,000 shares of common stock at
an initial exercise price of $3.85 per share for a price of $0.05 per warrant.
The terms of this private placement provide that if the Company consummates an
initial public offering which includes warrants to purchase shares of Common
Stock, then the warrants issued in this placement are automatically converted
into warrants included in the initial public offering. The net proceeds to the
Company of $4,917,438 (net of issuance costs of $953,812) were used (i) to pay a
portion of the acquisition or development expenses of the Northwest Restaurants,
the Westwood Village, Los Angeles, California restaurant and brew pub site, the
Brea, California restaurant and the Boulder Colorado restaurant totaling in the
aggregate $2,600,000, (ii) to repay debt related to previous offerings, which
debt totaled $1,400,000 and (iii) to remodel the La Jolla Village restaurant,
which costs totaled $225,000. The remaining $1,600,000 was utilized as working
capital.

10. INCOME TAXES
The following table presents the current and deferred provision for federal
and state income taxes for the years ended December 31,:

<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Current:
Federal................................................... -- --
State..................................................... $6,400 $6,400
------ ------
6,400 6,400
Deferred:
Federal................................................... -- --
State..................................................... -- --
------ ------
$6,400 $6,400
------ ------
------ ------
</TABLE>

The temporary differences which give rise to deferred tax provision
(benefit) for the years ended December 31, consist of:

<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Property and equipment...................................... $ (26,320) $ (2,547)
Goodwill.................................................... 106,511 --
Accrued liabilities......................................... (109,155) (54,397)
Investment in partnerships.................................. (35,366) 14,962
Net operating losses........................................ (651,142) (134,741)
Other....................................................... (548) --
Change in valuation allowance............................... 716,020 176,723
--------- ---------
$ -- $ --
--------- ---------
--------- ---------
</TABLE>

F-18
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

10. INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes differs from the amount that would
result from applying the federal statutory rate as follows:

<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER
31,
---------------
1995 1994
----- -----
<S> <C> <C>
Statutory regular federal income tax rate................... (34.0)% (34.0)%
State income taxes, net of federal benefit.................. -- 0.3
Change in valuation allowance............................... 33.8 27.5
Other....................................................... 0.3 6.6
----- -----
0.1% 0.4%
----- -----
----- -----
</TABLE>

The components of the deferred income tax asset and (liability) as of
December 31 are as follows:

<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Property and equipment...................................... $ 28,867 $ 2,547
Goodwill.................................................... (106,511) --
Accrued liabilities......................................... 163,552 54,397
Investment in partnerships.................................. 20,404 (14,962)
Net operating losses........................................ 785,883 134,741
Other....................................................... 548 --
--------- ---------
892,743 176,723
Valuation allowance......................................... (892,743) (176,723)
--------- ---------
Net deferred income taxes................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>

As of December 31, 1995, the Company had net operating loss carryforwards
for federal and state purposes of approximately $2,034,000 and $1,016,000,
respectively. The net operating loss carryforwards begin expiring in 2010 and
2000, respectively.

The utilization of net operating loss ("NOL") and credit carryforwards may
be limited under the provisions of Internal Revenue Code Section 382, NOL
carryforward limitations with respect to change in ownership, and Section 383,
limitation for credit carryforwards.

11. SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
FOR THE YEARS FOR THE SIX-MONTH
ENDED DECEMBER PERIODS ENDED
31, JUNE 30,
----------------- -----------------
1994 1995 1995 1996
------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash paid for:
Interest.................................................. $73,751 $379,676 $218,235 $269,279
Taxes..................................................... $ -- $ -- $ -- $ 7,081
</TABLE>

F-19
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

11. SUPPLEMENTAL CASH FLOW INFORMATION (CONTINUED)
Supplemental information on noncash investing and financing activities:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX-MONTH
DECEMBER 31, PERIODS ENDED JUNE 30,
---------------------- ----------------------
1994 1995 1995 1996
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Common stock issued for purchase of BJ's Belmont Shore, L.P.
and BJ's La Jolla, L.P..................................... $ 170,118
Equipment purchases under a capital lease................... $ 29,408 $ 20,968 $ 145,249
Common stock or warrants issued for consulting services..... $ 52,344 $ 50,000
Common stock issued for asset purchase of Roman Systems..... $ 261,720
Purchase of CPNI (assumed liabilities)...................... $ 1,411,595
</TABLE>

12. 1996 STOCK OPTION PLAN

The Company adopted the 1996 Stock Option Plan as of August 7, 1996 under
which options may be granted to purchase up to 600,000 shares of common stock.
The 1996 Stock Option Plan provides for the options issued to be either
incentive stock options or non-statutory stock options as defined under Section
422A of the Internal Revenue Code. The exercise price of the shares under the
option shall be equal to or exceed 100% of the fair market value of the shares
at the date of option grant. The 1996 Stock Option Plan expires on June 30, 2005
unless terminated earlier. The options generally vest over a three-year period.
As of June 30, 1996, no options had been issued under the 1996 Stock Option
Plan.

13. ACQUISITIONS AND TRANSFERS

ROMAN SYSTEMS:

Effective January 1, 1995, the Company purchased the net assets of Roman
Systems for $550,000 in cash, issued a note payable totaling $3,746,113, assumed
liabilities totaling $873,344 including loans, accrued salaries and certain
other expenses and paid $130,000 in acquisition costs. Additionally, 348,960
shares of common stock of the Company, valued at $261,720, were issued to the
sellers. The acquisition was accounted for as a purchase.

BELMONT SHORE, L.P. AND LA JOLLA, L.P.:

Effective January 1, 1995, the Company purchased the limited partnership
interests of BJ's Belmont Shore, L.P. and BJ's La Jolla, L.P. The general
partner interests of the above-mentioned Partnerships, held by CPA-BG, were
transferred to the Company for no consideration prior to the closing of the
acquisition of the limited partnership interests. An aggregate 226,824 shares of
common stock of the Company, valued at $170,118, were transferred to the sellers
for the right, title and interest in the limited partnerships in November 1994.
Additionally, the Company assumed liabilities of $207,068 and paid acquisition
costs of $70,000.

BJ'S LAHAINA, L.P.:

Effective January 1, 1995, the general partners of BJ's in Lahaina, L.P.,
CPA010 and Blue Max transferred their general partnership interests to the
Company for no consideration.

PIETRO'S CORP.:

On March 29, 1996, the Company acquired 26 restaurants located in Oregon and
Washington by providing the funding for the Debtor's Plan and thereby acquired
all the stock in the reorganized

F-20
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

13. ACQUISITIONS AND TRANSFERS (CONTINUED)

entity known as Chicago Pizza Northwest, Inc. The Debtor's Plan was confirmed by
an order of the Bankruptcy Court on March 18, 1996 and the Company funded the
Plan on March 29, 1996. The Company paid $2,350,000 to fund the Debtor's Plan
plus acquisition costs of $353,073. Additionally, the Company assumed a $506,006
liability for taxes plus interest which will be paid over six years.

BREA, CALIFORNIA:

On March 27, 1996, the Company completed the acquisition of a restaurant and
brew-pub site in Brea, California. The purchase price totaled $930,400 including
acquisition costs. The restaurant opened as BJ'S PIZZA, GRILL & BREWERY on April
1, 1996.

WESTWOOD, CALIFORNIA:

In 1995, the Company entered into a lease for its Westwood restaurant and
brew-pub location. The site was renovated and opened on March 15, 1996.

ABBY'S SALE:

On May 15, 1996, the Company agreed to sell seven newly acquired Chicago
Pizza Northwest, Inc. restaurants to Abby's Inc. Two of the restaurants were
sold on May 31, 1996 two more were sold on June 24, 1996, and three more were
sold on June 26, 1996. The remaining 19 restaurants will be converted into "BJ'S
PIZZA," "BJ'S PIZZA & GRILL" or "BJ'S PIZZA, GRILL & BREWERY" restaurants.

14. PRO FORMA DATA (UNAUDITED)

Under the terms of the $3,000,000 Convertible Notes (Note 6), conversion of
principal and accrued interest thereon to common stock is simultaneous with the
closing of an underwritten initial public offering of the Company's common stock
resulting in a price per share to the public of at least $5.00 per share. In
addition, the Company paid 13%, or $390,000, for related financing costs which
is recorded as an asset and amortized over the term of the Convertible Notes. As
of June 30, 1996 the unamortized balance totaled $292,500. Accordingly, the pro
forma information has been prepared so as to classify the aforementioned
$3,000,000 principal amount of Convertible Notes and $75,000 of accrued interest
thereon as common stock outstanding (750,000 additional shares outstanding) and
capital surplus, to give effect to the aforementioned expected closing of an
initial public offering of common stock and as a result the $292,500 remaining
unamortized amount of financing costs has been expensed and therefore increases
accumulated deficit.

15. SUBSEQUENT EVENTS

On June 28, 1996, the Company filed a Registration Statement on Form SB-2
relating to a proposed public offering of 1,500,000 shares of Common Stock and
1,500,000 redeemable warrants. The Company anticipates that, if successful, the
offering will be completed in the third quarter of 1996.

F-21
<PAGE>
PIETRO'S CORP.'S BUSINESS RELATED TO PURCHASED ASSETS

INDEX TO COMBINED FINANCIAL STATEMENTS

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

PAGE
----
Report of Independent Accountants......................................... F-23
Combined Balance Sheets As Of December 25, 1995 and March 29, 1996
(Unaudited).............................................................. F-24
Combined Statements Of Operations For The Years Ended December 26, 1994
And December 25, 1995 And For The Three-Month Periods Ended March 27,
1995 (Unaudited) And March 29, 1996 (Unaudited).......................... F-25
Combined Statements of Equity For The Years Ended December 26, 1994 And
December 25, 1995 And For The Three-Month Period Ended March 29, 1996
(Unaudited).............................................................. F-26
Combined Statements Of Cash Flows For The Years Ended December 26, 1994
And December 25, 1995 And For The Three-Month Periods Ended March 27,
1995 (Unaudited) And March 29, 1996 (Unaudited).......................... F-27
Notes To Combined Financial Statements.................................... F-28

F-22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

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

The Board of Directors
Pietro's Corp.

We have audited the accompanying combined balance sheet of Pietro's Corp.'s
Business Related to Purchased Assets as of December 25, 1995, and the related
combined statements of operations, equity and cash flows for the fiscal years
ended December 26, 1994 and December 25, 1995. These combined financial
statements are the responsibility of the management of Pietro's Corp. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Pietro's Corp.'s
Business Related to the Purchased Assets as of December 25, 1995, and the
results of their operations and their cash flows for the fiscal years ended
December 26, 1994 and December 25, 1995, in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.

Los Angeles, California
June 14, 1996

F-23
<PAGE>
PIETRO'S CORP.'S BUSINESS RELATED TO PURCHASED ASSETS

COMBINED BALANCE SHEETS

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

ASSETS:

<TABLE>
<CAPTION>
MARCH 29,
1996
-------------
DECEMBER 25, (UNAUDITED)
1995
-------------
<S> <C> <C>
Current assets:
Cash........................................................................... $ 34,625 $ 37,395
Inventory...................................................................... 152,009 169,584
Prepaids and other current assets.............................................. 16,780 25,680
------------- -------------
Total current assets......................................................... 203,414 232,659
Property, and equipment, net..................................................... 1,099,551 992,294
Other assets..................................................................... 238,321 238,321
------------- -------------
Total assets................................................................. $ 1,541,286 $ 1,463,274
------------- -------------
------------- -------------

LIABILITIES AND EQUITY:
Current liabilities:
Accrued expenses............................................................... $ 449,928 $ 337,936
------------- -------------
Total current liabilities.................................................... 449,928 337,936
Commitments (Note 5)
Equity........................................................................... 1,091,358 1,125,338
------------- -------------
Total liabilities and equity................................................. $ 1,541,286 $ 1,463,274
------------- -------------
------------- -------------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-24
<PAGE>
PIETRO'S CORP.'S BUSINESS RELATED TO PURCHASED ASSETS

COMBINED STATEMENTS OF OPERATIONS

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

<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE-MONTH PERIOD ENDED
------------------------------------ ------------------------------
DECEMBER 26, 1994 DECEMBER 25, 1995 MARCH 27, 1995 MARCH 29, 1996
----------------- ----------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues.................................. $ 14,609,395 $ 14,633,737 $ 3,670,609 $ 3,779,529
Cost of sales............................. 4,402,869 4,276,635 1,121,048 1,187,513
----------------- ----------------- -------------- --------------
Gross profit............................ 10,206,526 10,357,102 2,549,561 2,592,016
----------------- ----------------- -------------- --------------
Labor and benefits........................ 4,755,491 4,836,188 1,200,993 1,289,705
Occupancy................................. 1,401,658 1,433,616 350,382 351,508
Operating expenses........................ 2,276,493 2,360,887 644,112 620,065
Depreciation and amortization............. 661,828 581,490 139,807 114,291
Overhead allocation from Pietro's Corp.... 1,943,863 1,596,006 402,309 382,374
----------------- ----------------- -------------- --------------
Total expenses.......................... 11,039,333 10,808,187 2,737,603 2,757,943
----------------- ----------------- -------------- --------------
Net loss................................ $ (832,807) $ (451,085) $ (188,042) $ (165,927)
----------------- ----------------- -------------- --------------
----------------- ----------------- -------------- --------------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-25
<PAGE>
PIETRO'S CORP.'S BUSINESS RELATED TO PURCHASED ASSETS

COMBINED STATEMENTS OF EQUITY

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

<TABLE>
<S> <C>
Balance at December 20, 1993................................................... $2,055,835
Net loss....................................................................... (832,807)
Contributions from Pietro's Corp............................................... 303,560
----------
Balance at December 26, 1994................................................... 1,526,588
Net loss....................................................................... (451,085)
Contributions from Pietro's Corp............................................... 15,855
----------
Balance at December 25, 1995................................................... 1,091,358
Net loss (unaudited)........................................................... (165,927)
Contributions from Pietro's Corp. (unaudited).................................. 199,907
----------
Balance at March 29, 1996 (unaudited).......................................... $1,125,338
----------
----------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-26
<PAGE>
PIETRO'S CORP.'S BUSINESS RELATED TO PURCHASED ASSETS

COMBINED STATEMENTS OF CASH FLOWS

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

<TABLE>
<CAPTION>
FOR THE THREE-MONTH
FOR THE YEARS ENDED PERIODS ENDED
------------------------------------ ------------------------------
DECEMBER 26, 1994 DECEMBER 25, 1995 MARCH 27, 1995 MARCH 29, 1996
----------------- ----------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows provided by (used in) operating
activities:
Net loss................................ $ (832,807) $ (451,085) $ (188,042) $ (165,927)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization......... 661,828 581,490 139,807 114,291
Inventory............................. 1,694 (12,034) (23,428) (17,576)
Prepaids and other current assets..... (4,772) (546) (2,488) (8,900)
Other assets.......................... (69,000) (166,551) (41,638)
Accrued expenses...................... 14,726 108,206 27,052 (111,991)
----------------- ----------------- -------------- --------------
Net cash provided by (used in)
operating activities............... (228,331) 59,480 (88,737) (190,103)
----------------- ----------------- -------------- --------------
Cash flows used in investing activities:
Purchases of equipment.................. (74,629) (76,835) (6,115) (7,034)
----------------- ----------------- -------------- --------------
Net cash used in investing
activities......................... (74,629) (76,835) (6,115) (7,034)
----------------- ----------------- -------------- --------------
Cash flows provided by financing
activities:
Net contributions from parent........... 303,560 15,855 93,352 199,907
----------------- ----------------- -------------- --------------
Net cash provided by financing
activities......................... 303,560 15,855 93,352 199,907
----------------- ----------------- -------------- --------------
Net increase (decrease) in cash..... 600 (1,500) (1,500) 2,770
Cash, beginning of year................... 35,525 36,125 36,125 34,625
----------------- ----------------- -------------- --------------
Cash, end of year......................... $ 36,125 $ 34,625 $ 34,625 $ 37,395
----------------- ----------------- -------------- --------------
----------------- ----------------- -------------- --------------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-27
<PAGE>
PIETRO'S CORP.'S BUSINESS RELATED TO PURCHASED ASSETS
NOTES TO COMBINED FINANCIAL STATEMENTS

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

1. GENERAL
The Pietro's Corp.'s Business Related to the Purchased Assets consists of 26
pizza restaurants located throughout the States of Oregon and Washington.
Pietro's Corp. (the "Company" or "Parent"), a Washington State corporation, owns
and operates these and other restaurants. Revenues are derived from sales of
food and beverages at the restaurants. The Company's Purchased Assets as of
December 31, 1995 consist of 26 restaurants located in the State of Oregon in
Albany, Aloha, Bend, Eugene (three restaurants), Gresham, Hood River, Madras,
McMinnville, Milwaukie, North Bend, Portland (six restaurants), Redmond, Salem
(two restaurants), The Dalles and Woodstock, and the State of Washington in
Kennewick, Longview, Richland and Yakima.

On September 26, 1995, the Company (hereafter also described as the
"Debtor") filed a petition for reorganization in the United States Bankruptcy
Court for the Western District of Washington at Seattle under Chapter 11 of
Title 11 of the United States Code.

Chicago Pizza & Brewery, Inc. ("CPB"), a California corporation, provided
the funding for the "Debtor's Plan of Reorganization, Dated February 29, 1996"
as modified (the "Plan") and thereby acquired all of the stock in the
reorganized entity known as Chicago Pizza Northwest, Inc. and defined in the
Plan as the "Reorganized Debtor." The Plan was confirmed by an order of the
Bankruptcy Court entered by the Court on March 18, 1996 and CPB funded the Plan
on March 29, 1996 (the "Effective Date").

The Plan provided that CPB invest $2,850,000 to fund the Plan. The aggregate
funding amount consists of approximately $2,350,000 in cash to be deposited
immediately into a so-called "Reorganization Fund" and $506,006 plus interest to
be paid over six years with respect to certain pre-petition priority tax debts
of Debtor. The Reorganization Fund will be used to pay the debtor's
administrative (post-petition), priority and lease cure claims in full, and the
balance will be distributed to the Debtor's unsecured creditors on a pro rata
basis. Holders of common stock of the Debtor will receive nothing.

CPB funded the Plan as described above on March 29, 1996. On the Effective
Date, the outstanding common stock of the debtor was cancelled and common stock
in the Reorganized Debtor, Chicago Pizza Northwest, Inc., a Washington
corporation and wholly-owned subsidiary of the CPB was issued.

Due to the transaction described above, the accompanying financial
statements for the three-month period ended March 29, 1996 are presented for the
period December 26, 1995 through March 29, 1996.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND PRINCIPLES OF COMBINATION:

The accompanying combined financial statements include the accounts of the
Purchased Assets, including allocations of overhead from the Parent, for
accounting, legal, information processing, administrative, financing and
marketing services. Such allocation is computed based on the net sales related
to the Purchased Assets (i.e., the 26 restaurants) as a percentage of the
Company's total restaurant net sales. Management believes such allocation is
reasonable as each individual restaurant will incur a portion of cost relative
to its sales volume. The Purchased Assets, as a combined entity, has no separate
legal status. All significant intercompany transactions and balances have been
eliminated in combination.

F-28
<PAGE>
PIETRO'S CORP.'S BUSINESS RELATED TO PURCHASED ASSETS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FISCAL YEAR:

The Company utilized a 4-4-5 basis for the months included in its fiscal
year financial reports. The fiscal periods ended for the financial statements
included herein ended on December 20, 1993 (for Statement of Equity only),
December 26, 1994, December 25, 1995, March 27, 1995 and March 29, 1996.

INVENTORY:

Inventory consists of food products and supplies and are recorded at the
lower of cost (determined on a first-in, first-out basis) or market.

PROPERTY AND EQUIPMENT:

Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets as
follows:

<TABLE>
<S> <C>
Equipment....................................................... 5-10 years
Furniture and fixtures.......................................... 7 years
Automobiles..................................................... 3-5 years
</TABLE>

Leasehold improvements are amortized over the terms of the leases or their
estimated useful lives, if shorter.

When property and equipment are sold or otherwise disposed of, the asset
account and related accumulated depreciation and amortization account are
relieved, and any gain or loss is included in operations. Expenditures for
maintenance and repairs are charged against operations. Renewals and betterments
that materially extend the life of an asset are capitalized.

LEASES:

Leases that meet certain criteria are capitalized and included with property
and equipment. The resulting assets and liabilities are recorded at the lesser
of cost or amounts equal to the present value of the minimum lease payments at
the beginning of the lease term. Such assets are amortized evenly over the
related life of the lease or the useful lives of the assets. Interest expense
relating to these liabilities is recorded to effect constant rates over the
terms of the leases. Leases that do not meet such criteria are classified as
operating leases and rentals are charged to expense as incurred.

USE OF ESTIMATES:

The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions for the reporting period and as of the financial statement date.
These estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent liabilities and the reported amounts
of revenues and expenses. Actual results could differ from these estimates.

INCOME TAXES:

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Under SFAS No. 109, deferred tax liabilities and assets are determined
based on the difference between the financial statement and tax bases of assets
and liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse.

F-29
<PAGE>
PIETRO'S CORP.'S BUSINESS RELATED TO PURCHASED ASSETS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The results of operations of the Purchased Assets are included in the
Company's federal and state tax returns. No income tax benefit has been provided
in the accompanying combined financial statements as it is more likely than not
that the deferred tax assets originated in the net operating losses will not be
realized.

If the Purchased Assets had been profitable, or had available past or future
anticipated taxable income, for the years presented, an assumed effective rate
of 40% for provision or benefit of pretax income or loss would have been
reflected in these financial statements.

CONTRIBUTED CAPITAL:

All net charges from the Company for general and administrative expenses and
transfers of cash for cash management purposes are recorded as contributions
from the Company.

INTERIM RESULTS: (UNAUDITED)

The accompanying combined balance sheet as of March 29, 1996 and the
combined statements of operations and cash flows for the three-month periods
ended March 27, 1995 and March 29, 1996, and the combined statement of equity
for the three-month period ended March 29, 1996, are unaudited. In the opinion
of management, these combined statements have been prepared on the same basis as
the audited financial statements and include all adjustments, consisting of only
normal recurring adjustments, necessary for the fair presentation of results of
the interim periods. The data disclosed in these notes to the combined financial
statements for interim periods are also unaudited.

3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of:

<TABLE>
<CAPTION>
MARCH 29,
1996
DECEMBER 25, --------------
1995
--------------- (UNAUDITED)
<S> <C> <C>
Leasehold improvements...................................... $ 2,451,211 $ 2,451,211
Equipment................................................... 3,493,962 3,500,749
Furniture and fixtures...................................... 102,330 102,577
Automobiles................................................. 160,781 160,781
--------------- --------------
6,208,284 6,215,318
Less, accumulated depreciation and amortization........... (5,108,733) (5,223,024)
--------------- --------------
$ 1,099,551 $ 992,294
--------------- --------------
--------------- --------------
</TABLE>

4. ACCRUED EXPENSES
Accrued expenses consist of the following as of:

<TABLE>
<CAPTION>
MARCH 29,
1996
DECEMBER 25, ---------------
1995
--------------- (UNAUDITED)
<S> <C> <C>
Payroll related liabilities................................. $ 316,797 $ 276,572
Property taxes.............................................. 91,566 17,950
Other....................................................... 41,565 43,414
--------------- ---------------
$ 449,928 $ 337,936
--------------- ---------------
--------------- ---------------
</TABLE>

F-30
<PAGE>
PIETRO'S CORP.'S BUSINESS RELATED TO PURCHASED ASSETS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

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

5. COMMITMENTS

LEASES:

The Company leases equipment under noncancelable capital lease agreements
that expire in 1997 and 1999.

The Company also is obligated under long-term real estate operating leases
that expire at various dates through December 31, 2009 with options ranging from
3 to 15 years. The leases generally provide that the Company shall pay the
property taxes, insurance and utilities. A number of leases also provide for
contingent rentals based on a percentage of sales above a specified minimum.
Total contingent rentals for the years ended December 26, 1994 and December 25,
1995 and the three-month period ended March 31, 1996 were $42,218, $25,118 and
$3,752 (unaudited), respectively.

Rental payments on operating real estate leases charged to expense for the
years ended December 26, 1994 and December 25, 1995 were approximately
$1,059,000 and $1,152,000, respectively.

At December 25, 1995, minimum annual rental commitments under noncancelable
leases are as follows:

<TABLE>
<S> <C>
1996........................................................ $1,129,563
1997........................................................ 1,105,404
1998........................................................ 840,060
1999........................................................ 709,775
2000........................................................ 526,182
Thereafter.................................................. 2,350,319
----------
Total minimum lease payments........................ $6,661,303
----------
----------
</TABLE>

6. SUBSEQUENT EVENT
On May 15, 1996, CPB entered into an agreement to sell seven of the
restaurants included as part of the Purchased Assets. As part of the agreement,
CPB agreed to sell on May 31, 1996 ("First closing date"), the restaurants
located in Albany and Bend, and on June 30, 1996 ("Second closing date"), the
restaurants located in Richland, Kennewick, Yakima, Madras and Redmond. The
purchase price is equal to $1,000,000 less certain liabilities and other costs
assumed by the Buyer, as defined. This amount will be paid $400,000 on the First
closing date and $600,000 on the Second closing date. As part of the agreement,
CPB entered into covenant not to compete within the "Restrictive Territory," as
defined, for a period of 3 years.

The sales for the seven restaurants sold totaled approximately $3,700,000
and $3,500,000 for the years ended December 26, 1994 and December 25, 1995,
respectively. Operating profit excluding overhead allocation totaled
approximately $313,000 and $270,000 for the years ended December 26, 1994 and
December 25, 1995, respectively. Loss after overhead allocation relating to the
seven restaurants totaled approximately $454,000 and $327,000 for the years
ended December 26, 1994 and December 25, 1995, respectively.

F-31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALES REPRESENTATIVE OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO
BUY THE COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
The Offering................................... 5
Risk Factors................................... 11
Use of Proceeds................................ 20
Dividend Policy................................ 20
Dilution....................................... 21
Capitalization................................. 23
Selected Combined and Consolidated Financial
Data.......................................... 24
Pro Forma Combined Financial Data for the
Company....................................... 26
Pro Forma Combined Statement of Operations..... 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 27
Pietro's Corp. Management's Discussion and
Analysis of Financial Condition and Results of
Operations.................................... 36
The Company.................................... 39
Business....................................... 41
Management..................................... 48
Principal Shareholders......................... 57
Resale of Outstanding Securities............... 58
Certain Transactions........................... 59
Description of Securities...................... 65
Shares Eligible for Future Sale................ 67
Underwriting................................... 68
Legal Matters.................................. 70
Experts........................................ 70
Additional Information......................... 70
Index to Combined and Consolidated Financial
Statements.................................... F-1
</TABLE>

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

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

1,500,000 SHARES
OF COMMON STOCK
AND
1,500,000 REDEEMABLE WARRANTS

[LOGO]

CHICAGO PIZZA & BREWERY, INC.

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

PROSPECTUS

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

THE BOSTON GROUP, L.P.

, 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

PROSPECTUS

1,766,864 SHARES OF COMMON STOCK

10,014,584 REDEEMABLE WARRANTS

[LOGO]

CHICAGO PIZZA &
BREWERY, INC.

COMMON STOCK

This Prospectus relates to the registration by Chicago Pizza & Brewery, Inc.
(the "Company"), at its expense, for the account of certain non-affiliated
security holders (the "Non-Affiliated Selling Security Holders") and two
independent directors of the Company (the "Selling Directors") with respect to a
total of: 1,766,864 shares of Common Stock (the "Selling Security Holders'
Shares"); 10,014,584 selling security holders' Redeemable Warrants (as
hereinafter defined) (the "Selling Security Holders' Redeemable Warrants"); and
10,014,584 shares of Common Stock issuable by the Company upon exercise of such
Selling Security Holders' Redeemable Warrants. As used in this Prospectus, the
Non-Affiliated Selling Security Holders and the Selling Director are
collectively referred to as the "Selling Security Holders." The Selling Security
Holders' Shares, the Selling Security Holders' Redeemable Warrants and the
shares of Common Stock issuable upon exercise of the Selling Security Holders'
Redeemable Warrants (all of which are collectively referred to herein as the
"Selling Security Holders' Securities") are not being underwritten in this
offering. However, substantially all of the Selling Security Holders are clients
of, and are required to sell their Securities through, The Boston Group, L.P.,
the representative of the underwriters in a public offering conducted by the
Company ("the Representative") subject to the customary compensation practices
of the Representative. With the exception of the exercise price of the Selling
Security Holders' Redeemable Warrants, the Company will not receive any proceeds
from the sale of the Selling Security Holders' Securities. See "Selling Security
Holders". The Selling Security Holders' Securities may be sold by the Selling
Security Holders or their respective transferees commencing on the date of this
Prospectus. Sales of the Selling Security Holders' Securities may depress the
price of the Common Stock or Redeemable Warrants in any market that may develop
for the Common Stock or Redeemable Warrants. See "The Offering," "Risk Factors"
and "Certain Transactions -- Private Placements."

Concurrently with this offering, the Company is offering 1,500,000 shares of
Common Stock and 1,500,000 Redeemable Warrants (the "Offering"). See "The
Offering." This Prospectus, except for this cover page, the back cover page and
the information contained herein under the heading "Selling Security Holders,"
and "Plan of Distribution" is part of a Prospectus relating to the Offering by
the Company. This Prospectus includes certain information (including all
information relating to the proposed underwritten Offering and the underwriters
thereof) that may not be pertinent to the sale by the Selling Security Holders.

Prior to this offering, there has been no public market for the Common Stock
or the Redeemable Warrants and there is no assurance that such a market will
develop, or if a market develops, that it will be sustained. The Company has
applied for approval for listing of the Common Stock and Redeemable Warrants on
the Nasdaq Small-Cap Market under the symbols CHGO and CHGOW, respectively.

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION. SEE "RISK FACTORS" AND "DILUTION" COMMENCING ON PAGES 11 AND 21,
RESPECTIVELY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

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

The sale of the Selling Security Holders' Securities may be effected from
time to time in transactions (which may include block transactions by or for the
account of the Selling Security Holders) in the over-the-counter market or in
negotiated transactions, through the writing of options on the Selling Security
Holders' Securities, through a combination of such methods of sale or otherwise.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. If any Selling Security
Holder sells his, her or its Selling Security Holders' Securities or options
thereon, pursuant to this Prospectus at a fixed price or at a negotiated price
which is, in either case, other than the prevailing market price or in a block
transaction to a purchaser who resells, or if any Selling Security Holder pays
compensation to a broker-dealer that is other than the usual and customary
discounts, concessions or commissions, or if there are any arrangements either
individually or in the aggregate that would constitute a distribution of the
Selling Security Holders' Securities, a post-effective amendment to the
Registration Statement of which this Prospectus is a part would need to be filed
and declared effective by the Securities and Exchange Commission before such
Selling Security Holder could make such sale, pay such compensation or make such
a distribution. The Company is under no obligation to file a post-effective
amendment to the Registration Statement of which this Prospectus is a part under
such circumstances.

THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
SELLING SECURITY HOLDERS

An aggregate of 1,766,864 shares of Common Stock, 10,014,584 Redeemable
Warrants and 10,014,584 shares of Common Stock issuable upon exercise of the
Redeemable Warrants are being registered in this Offering for the account of the
Selling Security Holders. The Selling Security Holders' Securities may be sold
by the Selling Security Holders or their respective transferees commencing on
the date of this Prospectus. Sales of such shares of Common Stock or Redeemable
Warrants by the Selling Security Holders or their respective transferees may
depress the price of the Common Stock or Redeemable Warrants in any market that
may develop for such Selling Security Holders' Securities.

The following table sets forth certain information with respect to persons
for whom the Company is registering such shares of Common Stock for resale to
the public. With the exception of the exercise price of the Selling Security
Holders' Redeemable Warrants, the Company will not receive any of the proceeds
from the sale of such shares of Common Stock. Except as described in "Certain
Transactions," none of the Selling Security Holders other than the Selling
Directors, Barry Grumman and Stanley Schneider, has had any position, office or
material relationship with the Company or its affiliates since the Company's
inception in 1991. Neither the Seller Security Holders' Shares, the Selling
Security Holders' Redeemable Warrants nor the shares issuable upon exercise of
the Selling Security Holders' Redeemable Warrants are being underwritten by the
Underwriters in connection with the Offering. However, substantially all of the
Selling Security Holders are clients of and are required to sell their
Securities through the Representative, subject to the customary compensation
practices of the Representative.

AMOUNT OF
REDEEMABLE
WARRANTS OWNED
NAME OF SELLING SECURITY HOLDER (1) AFTER OFFERING
- ------------------------------------------- -----------------
<S> <C>
Robert & Antoinette Ahr.................... 0
Alico Limited Partnership.................. 0
Karim Amiryani............................. 0
Stanley S. Arkin........................... 0
Lester C. Aroh............................. 0
Ashden LLORCA Limited Director's Pension
Scheme.................................... 0
D.S. Asher................................. 0
Assi, Inc. (4)............................. 0
Jonathon Axelrod........................... 0
Robert L. & Kathleen F. Barnett as Joint
Tenants with Right of Survivorship........ 0
Morris Boladian & Peru Grigorian as Tenants
in Common................................. 0
Gregory John Branch........................ 0
Jeffery C. Brenner......................... 0
Charles R. Buckridge as Trustee of the
Charles R. Buckridge Revocable Trust...... 0
Dr. Robert Cano............................ 0
Anthony Ceracche........................... 0
Mark Jeffrey Chayet Revocable Trust........ 0
Joe & Sue Cogdell as Joint Tenants with
Right of Survivorship..................... 0
David Coward............................... 0
David B. Coward & Linda J. Coward as
Trustees of the Coward Family Trust....... 0
Cystic Fybrosis Foundation................. 0
Stan Dreyfus............................... 0
John Paul De Joria......................... 0
Laura M. Durso............................. 0
</TABLE>

SS-1
<PAGE>

<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF AMOUNT OF
SHARES AMOUNT OF AMOUNT OF REDEEMABLE REDEEMABLE
OWNED SHARES SHARES WARRANTS OWNED WARRANTS
(BEFORE BEING OWNED AFTER (BEFORE BEING
NAME OF SELLING SECURITY HOLDER (1) OFFERING) REGISTERED OFFERING (2) OFFERING) REGISTERED(3)
- ------------------------------------------- ----------- ----------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
L. Dean Echelbarger........................ 25,000 12,500 12,500 75,000 75,000
Laurie Fisher.............................. 6,250 3,125 3,125 18,750 18,750
Larry M. Follett........................... 12,500 6,250 6,250 37,500 37,500
Jack Friedman.............................. 18,750 9,375 9,375 56,250 56,250
Mark & Janelle Friedman as Community
Property.................................. 6,250 3,125 3,125 18,750 18,750
Robert & Thelma Gault as Joint Tenants with
Right of Survivorship..................... 25,000 12,500 12,500 75,000 75,000
Larry R. Gordon............................ 138,672 82,422 56,250 442,188 442,188
Donald B. Greenwood........................ 12,500 6,250 6,250 37,500 37,500
Dean O. & John Gregg as Tenants in
Common.................................... 13,086 13,086 0 0 0
Barry Jon Grumman.......................... 285,579 39,258 246,321 300,000 300,000
Louis Habash............................... 26,172 26,172 0 0 0
Norton Herrick (4)......................... 250,000 250,000 0 1,500,000 1,500,000
HiTek Inc. Melvin Gondelman................ 25,000 12,500 12,500 75,000 75,000
Richard Houlihan........................... 5,234 5,234 0 0 0
International Capital Investment Company... 12,500 6,250 6,250 37,500 37,500
J.M.J. Resources........................... 6,250 3,125 3,125 18,750 18,750
Robert & Ruth Jurgensmeyer as Joint Tenants
with Right of Survivorship................ 25,000 12,500 12,500 75,000 75,000
Gabriel Kaplan............................. 63,672 44,922 18,750 112,500 112,500
Gabriel Kaplan P/Adm City National Bank C/F
Rotunda Productions Inc. MPPP............. 37,500 18,750 18,750 112,500 112,500
Martin Katz................................ 6,250 3,125 3,125 18,750 18,750
P/ADM Larry Gordon as Trustee of the Keca
Music Profit Sharing Plan................. 25,000 12,500 12,500 75,000 75,000
Dr. Michael Kesselbrenner.................. 12,500 6,250 6,250 37,500 37,500
L. Rolls Nominee Ltd....................... 25,000 12,500 12,500 75,000 75,000
Donna Ann Leahy as Trustee of the Donna Ann
Leahy Revocable
Inter-vivos Trust......................... 50,000 25,000 25,000 150,000 150,000
Jeffrey R. Lemler.......................... 18,750 9,375 9,375 56,250 56,250
Marc Levin................................. 12,500 6,250 6,250 37,500 37,500
Lexington Ventures......................... 50,000 25,000 25,000 450,000 450,000
Ronald A. Litz............................. 12,500 6,250 6,250 37,500 37,500
Michael & Julie Loshin as Joint Tenant with
Right of Survivorship..................... 3,125 1,563 1,562 9,375 9,375
Fred & Barbara Martell as Joint Tenants
with Right of Survivorship................ 25,000 12,500 12,500 75,000 75,000
Walter Matthews............................ 12,500 6,250 6,250 37,500 37,500
Lon W. Mericle............................. 13,086 13,086 0 0 0
Ronald T. & Carol E. Michalski as Joint
Tenants with Right of Survivorship........ 12,500 6,250 6,250 37,500 37,500
L.A. Moore................................. 12,500 6,250 6,250 37,500 37,500
The Mulkey Limited Partnership............. 31,543 19,043 12,500 75,000 75,000
NFSC/FMTC JRA-FBO Dr. Carmen
Schuller-Lemler........................... 6,250 3,125 3,125 18,750 18,750
Stephano Natale............................ 38,086 25,586 12,500 75,000 75,000
Doyle L. Parker............................ 12,500 6,250 6,250 37,500 37,500
Liliana M. Partida......................... 13,086 13,086 0 0 0
Michael Pizitz............................. 6,250 3,125 3,125 18,750 18,750
Richard Pizitz............................. 6,250 3,125 3,125 18,750 18,750
John Post.................................. 12,500 6,250 6,250 37,500 37,500
Giovanni Purificato........................ 12,500 6,250 6,250 37,500 37,500
Gordon Rausser............................. 25,000 12,500 12,500 75,000 75,000

AMOUNT OF
REDEEMABLE
WARRANTS OWNED
NAME OF SELLING SECURITY HOLDER (1) AFTER OFFERING
- ------------------------------------------- -----------------
<S> <C>
L. Dean Echelbarger........................ 0
Laurie Fisher.............................. 0
Larry M. Follett........................... 0
Jack Friedman.............................. 0
Mark & Janelle Friedman as Community
Property.................................. 0
Robert & Thelma Gault as Joint Tenants with
Right of Survivorship..................... 0
Larry R. Gordon............................ 0
Donald B. Greenwood........................ 0
Dean O. & John Gregg as Tenants in
Common.................................... 0
Barry Jon Grumman.......................... 0
Louis Habash............................... 0
Norton Herrick (4)......................... 0
HiTek Inc. Melvin Gondelman................ 0
Richard Houlihan........................... 0
International Capital Investment Company... 0
J.M.J. Resources........................... 0
Robert & Ruth Jurgensmeyer as Joint Tenants
with Right of Survivorship................ 0
Gabriel Kaplan............................. 0
Gabriel Kaplan P/Adm City National Bank C/F
Rotunda Productions Inc. MPPP............. 0
Martin Katz................................ 0
P/ADM Larry Gordon as Trustee of the Keca
Music Profit Sharing Plan................. 0
Dr. Michael Kesselbrenner.................. 0
L. Rolls Nominee Ltd....................... 0
Donna Ann Leahy as Trustee of the Donna Ann
Leahy Revocable
Inter-vivos Trust......................... 0
Jeffrey R. Lemler.......................... 0
Marc Levin................................. 0
Lexington Ventures......................... 0
Ronald A. Litz............................. 0
Michael & Julie Loshin as Joint Tenant with
Right of Survivorship..................... 0
Fred & Barbara Martell as Joint Tenants
with Right of Survivorship................ 0
Walter Matthews............................ 0
Lon W. Mericle............................. 0
Ronald T. & Carol E. Michalski as Joint
Tenants with Right of Survivorship........ 0
L.A. Moore................................. 0
The Mulkey Limited Partnership............. 0
NFSC/FMTC JRA-FBO Dr. Carmen
Schuller-Lemler........................... 0
Stephano Natale............................ 0
Doyle L. Parker............................ 0
Liliana M. Partida......................... 0
Michael Pizitz............................. 0
Richard Pizitz............................. 0
John Post.................................. 0
Giovanni Purificato........................ 0
Gordon Rausser............................. 0
</TABLE>

SS-2
<PAGE>

AMOUNT OF
REDEEMABLE
WARRANTS OWNED
NAME OF SELLING SECURITY HOLDER (1) AFTER OFFERING
- ------------------------------------------- -----------------
<S> <C>
Clarke E. Reynolds......................... 0
Daniel & Laura Rosenbaum as Joint
Tenants................................... 0
William Russell-Shapiro.................... 0
Mark L. Saginor, MD........................ 0
Ronald M. Sanders.......................... 0
Stephen Schmidt............................ 0
Stanley B. Schneider....................... 0
Leonard Shaykin............................ 0
Michael S. & Nancy E. Sitrick, Trustees or
the Successor Trustee of the Michael and
Nancy Sitrick Trust....................... 0
Albert A. & Mary K Skwiertz, Jr. as Joint
Tenants with Right of Survivorship........ 0
Nicholas P. Smith.......................... 0
Michael & Lee Srednick Family Trust Dated
May 9, 1991............................... 0
Arthur Steinberg IRA Rollover.............. 0
NFSC/FMTC IRA Rollover FBO Carl F.
Steinfield................................ 0
Carl F. Steinfield......................... 0
Michael & Robin Stern, Community Property
as Tenants in Common...................... 0
Douglas F. Stuart.......................... 0
Tri Ventures............................... 0
Joseph & Susan Vasselli as Joint Tenants
with Right of Survivorship................ 0
Aldo & Melissa Verrelli as Joint Tenants
with Right of Survivorship................ 0
Claudia K. Walters......................... 0
Dr. Paul X. Welch.......................... 0
Nick Westland.............................. 0
James Widdoes.............................. 0
James Edward Willard....................... 0
Yesterday's Amusement Co................... 0
</TABLE>

- ------------------------------
(1) Information set forth in the table regarding the Selling Security Holders'
Shares and the Selling Security Holders' Redeemable Warrants is provided to
the best knowledge of the Company based on information furnished to the
Company by the respective Selling Security Holders and/or available to the
Company through its stock ledgers.

(2) Assumes that each Selling Security Holder sells all of the Securities which
the respective Selling Security Holder has the right to register pursuant to
the respective placement in which the Selling Security Holder obtained his
or her interest in the Company. See "Certain Transactions -- Private
Placements."

(3) Alternatively, the holders of the Selling Security Holders' Redeemable
Warrants may exercise their respective Redeemable Warrants and sell the
underlying Common Stock.

(4) Selling Security Holders of special warrants. Upon sale of such special
warrants by such Selling Security Holders or their respective affiliates,
such special warrants become Redeemable Warrants. Such holders are offering
the Redeemable Warrants for sale and are included in the Selling Security
Holders Redeemable Warrants. See "Description of Securities -- Redeemable
Warrants."

PLAN OF DISTRIBUTION

SS-3
<PAGE>

Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. If any Selling Security
Holder sells his, her or its Selling Security Holders' Securities, or options
thereon, pursuant to this Prospectus at a fixed price or at a negotiated price
which is, in either case, other than the prevailing market price or in a block
transaction to a purchaser who resells, or if any Selling Security Holder pays
compensation to a broker-dealer that is other than the usual and customary
discounts, concessions or commissions, or if there are any arrangements either
individually or in the aggregate that would constitute a distribution of the
Selling Security Holders' Securities, a post-effective amendment to the
Registration Statement of which this Prospectus is a part would need to be filed
and declared effective by the Securities and Exchange Commission before such
Selling Security Holder could make such sale, pay such compensation or make such
a distribution. The Company is under no obligation to file a post-effective
amendment to the Registration Statement of which this Prospectus is a part under
such circumstances.

The Selling Security Holders may effect transactions in their Selling
Security Holders' Securities by selling their securities directly to purchasers,
through broker-dealers acting as agents for the Selling Security Holders or to
broker-dealers who may purchase the Selling Security Holders' Securities as
principals and thereafter sell such securities from time to time in the
over-the-counter market, in negotiated transactions, or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Security Holders and/or the
purchasers for whom such broker-dealers may act as agents or to whom they may
sell as principals or both.

The Selling Security Holders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Act and any commission received by them and any
profit on the resale of such securities might be deemed to be underwriting
discounts and commissions under the Act.

SS-4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALES REPRESENTATIVE OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO
BUY THE COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
The Offering................................... 5
Risk Factors................................... 11
Use of Proceeds................................ 20
Dividend Policy................................ 20
Dilution....................................... 21
Capitalization................................. 23
Selected Combined and Consolidated Financial
Data.......................................... 24
Pro Forma Combined Financial Data for the
Company....................................... 26
Pro Forma Combined Statement of Operations..... 26
The Company Management's Discussion and
Analysis of Financial Condition and Results of
Operations.................................... 27
Pietro's Corp. Management's Discussion and
Analysis of Financial Condition and Results of
Operations.................................... 36
The Company.................................... 39
Business....................................... 41
Management..................................... 48
Principal Shareholders......................... 57
Resale of Outstanding Securities............... 58
Certain Transactions........................... 59
Description of Securities...................... 65
Shares Eligible for Future Sale................ 67
Underwriting................................... 68
Legal Matters.................................. 70
Experts........................................ 70
Additional Information......................... 70
Selling Security Holders....................... SS-1
Plan of Distribution........................... SS-3
Index to Combined and Consolidated Financial
Statements.................................... F-1
</TABLE>

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

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

1,766,864 SHARES
OF COMMON STOCK
AND
10,014,584 REDEEMABLE WARRANTS

[LOGO]

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

PROSPECTUS

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

, 1996

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following tables sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions and non-accountable expense allowance.
All of the amounts shown are estimates, except the Securities and Exchange
Commission registration and NASD filing fees.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................... $ 35,672.73
NASD fees............................................................. $ 10,848.23
Nasdaq listing fee.................................................... $ 10,000.00
Accounting fees and expenses.......................................... $260,000.00
Printing and engraving expenses....................................... $140,000.00
Transfer agent and registrar (fees and expenses)...................... $ 10,000.00
NASD expenses (including counsel fees)................................ $ 12,500.00
Blue sky fees and expenses (including counsel fees)................... $ 45,000.00
Other legal fees and legal expenses................................... $260,000.00
Miscellaneous expenses................................................ $ 15,979.04
-----------
Total............................................................... $800,000.00
-----------
-----------
</TABLE>

- ------------------------
* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Pursuant to provisions of the California General Corporation Law, the
Articles of Incorporation of the registrant (the "Company"), as amended, include
a provision which eliminates the personal liability of its directors to the
Company and its shareholders for monetary damage to the fullest extent
permissible under California law. This limitation has no effect on a director's
liability (i) for acts or omissions that involve intentional misconduct or a
knowing and culpable violation of law, (ii) for acts or omissions that a
director believes to be contrary to the best interests of the Company or its
shareholders or that involve the absence of good faith on the part of the
director, (iii) for any transaction from which a director derived an improper
personal benefit, (iv) for acts or omissions that show a reckless disregard for
the director's duty to the Company or its shareholders in circumstances in which
the director was aware, or should have been aware, in the ordinary course of
performing his or her duties, of a risk of a serious injury to the Company or
its shareholders, (v) for acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
Company or its shareholders, (vi) under Section 310 of the California General
Corporation Law (concerning contracts or transactions between the Company and a
director) or (vii) under Section 316 of the California General Corporation Law
(concerning directors' liability for improper dividends, loans and guarantees).
The provision does not eliminate or limit the liability of an officer for any
act or omission as an officer, notwithstanding that the officer is also a
director or that his actions, if negligent or improper, have been ratified by
the Board of Directors. Further, the provision has no effect on claims arising
under federal or state securities or blue sky laws and does not affect the
availability of injunctions and other equitable remedies available to the
Company's shareholders for any violation of a director's fiduciary duty to the
Company or its shareholders.

II-1
<PAGE>
Company will indemnify each such person (an "indemnitee") against certain claims
arising out of certain past, present or future acts, omissions or breaches of
duty committed by an indemnitee while serving in his employment capacity. Such
indemnification does not apply to acts or omissions which are knowingly
fraudulent, deliberately dishonest or arise from willful misconduct.
Indemnification will only be provided to the extent that the indemnitee has not
already received payments in respect of a claim from the Company or from an
insurance company. Under certain circumstances, such indemnification (including
reimbursement of expenses incurred) will be allowed for liability arising under
the Securities Act.

THE COMPANY INTENDS TO PURCHASE A DIRECTORS' AND OFFICERS' LIABILITY
INSURANCE POLICY INSURING DIRECTORS AND OFFICERS OF THE COMPANY.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

During the past three years, the Company issued securities pursuant to the
following transactions:

On November 1, 1994 the Company entered into an agreement with Woodbridge
Holdings, Inc. ("WHI"), a consulting firm in Newport Beach, California. The
agreement was for services related to selection of professional advisers and
general corporate development. WHI was to assist the Company in the selection of
legal counsel and accountants, in designing public relations materials and
printed materials, in formulating a description of the Company's business plan,
in designing a stock compensation plan and negotiating for printing services.
The contract expired on May 1, 1995 and was not renewed. Actual services
provided by WHI were limited to logo printing design, printing arrangements and
selection of professionals. For its services in that period, WHI received
$60,000, from which WHI was required to pay for printing expenses. In addition,
for services rendered during that period, WHI received 69,792 shares of Common
Stock which were earned and issuable on May 1, 1995 and the right to receive an
additional 69,443 shares of Common Stock ("Additional Shares") issuable after
completion of an initial public offering, such as this Offering, by the Company.
The value attributed to the 69,792 shares earned and issuable to WHI as of May
1, 1995 is $0.75 per share or $52,344 and the value attributed to the 69,443
shares to be issued is $6.00 or $416,658. On August , 1996, on the assumption
that this Offering would close, the Company issued WHI the Additional Shares.
WHI has the right to have its shares registered by the Company at WHI's cost.
The above transaction was exempt from registration under Section 4(2) of the
Securities Act of 1933 as a private placement to a single entity.

On November 7, 1994 as partial consideration for the purchase of the Roman
Systems restaurants pursuant to the Acquisition Agreement, the Company issued
500,000 shares of Common Stock of the Company to each of Mr. Cunningham and Mr.
Phillips, which as a result of the May 1995 stock split are currently equivalent
to 174,480 shares of Common Stock of the Company outstanding to each of Mr.
Phillips and Mr. Cunningham. On November 14, 1994 as partial consideration for
the purchase of the Belmont Shore and La Jolla-Prospect restaurants through the
acquisition of Mr. Grumman's limited partnership interests, the Company issued
to Mr. Grumman 226,824 shares of Common Stock of the Company. See "Certain
Transactions." The above transactions were exempt from registration under
Section 4(2) of the Securities Act of 1933 as private placements to a limited
number of individuals.

In January 1995, the Company raised $850,000 through a private placement of
17 Units to a total of 14 individuals or entities at $50,000 per Unit,
consisting of (i) a Series A Promissory Note in the principal amount of $50,000
and due December 31, 1995 and (ii) 13,086 shares of Common Stock. The Series A
Promissory Notes bear interest, payable quarterly, at a rate of 10% until June
30, 1995 and 13.5% thereafter. The proceeds of the January 1995 private
placement were used to close the Acquisition and for working capital. The Series
A Promissory Notes were repaid in the third quarter of 1995 with proceeds from
the September 1995 placement described below. The shares issued in this
placement are being registered concurrently with this Offering and are included
as Selling Security Holder Shares which may be sold by the holders or respective
transferees commencing on the date of this

II-2
<PAGE>
Prospectus. The principal underwriter of this placement was the Representative
who received 13% of the total gross proceeds raised in the placement. The
placement was to accredited investors only and was exempt from registration
pursuant to Regulation D promulgated by the Securities and Exchange Commission.

In March 1995, the Company raised $400,000 through a private placement of
four Units to a total of two individuals at $100,000 per Unit, consisting of (i)
a $98,000 promissory note bearing interest at a rate of 10% per annum (the
"Promissory Notes") with interest and principal due upon the earlier of
completion of an initial public offering of the Company's Common Stock, or 18
months from the date of issuance and (ii) warrants to purchase 34,896 shares of
Common Stock at a price of $2.87 per share. The proceeds of the private
placement were used for working capital. The Promissory Notes were repaid in the
third quarter of 1995 with proceeds from the September 1995 private placement
described below. Upon effectiveness of the Registration Statement of which this
Prospectus is a part, the warrants issued in this placement convert into a like
number of Redeemable Warrants which are being registered concurrently with this
Offering as Selling Security Holders' Redeemable Warrants. The Selling Security
Holders' Redeemable Warrants and all of the shares issuable upon exercise of
such Selling Security Holders' Redeemable Warrants may be sold by the holders or
respective transferees commencing on the date of this Prospectus. The principal
underwriter of this placement was the Representative who received 13% of the
total gross proceeds raised in the placement. The placement was to accredited
investors only and was exempt from registration pursuant to Regulation D
promulgated by the Securities and Exchange Commission.

In May 1995, the Company issued warrants to purchase up to 300,000 shares of
Common Stock at a price of $5.00 per share to each of Barry Grumman, a director
of the Company, and Lexington Ventures, Inc. The warrants were issued to each of
Mr. Grumman and Lexington Ventures, Inc. at a price of $0.07 per warrant or a
total price to each of $21,000. Mr. Grumman's liability for payment of the
warrants was extinguished in consideration for past services as a director of
the Company which had not been previously compensated. Upon effectiveness of the
Registration Statement of which this Prospectus is a part, the warrants issued
in this placement convert into a like number of Redeemable Warrants which are
being registered concurrently with this Offering as Selling Security Holders'
Redeemable Warrants. The Selling Security Holders' Redeemable Warrants and all
of the shares issuable upon exercise of such Selling Security Holders'
Redeemable Warrants may be sold by the holders or respective transferees
commencing on the date of this Prospectus. The above placements were to
accredited investors and were exempt from registration pursuant to Regulation D
promulgated by the Securities and Exchange Commission.

In September 1995, the Company completed an offering of $6,100,000 in Units
to a total of 81 individuals and entities, each Unit consisting of 25,000 shares
of Common Stock at a price of $3.85 per share and 75,000 warrants at a price of
$0.05 per warrant. Half of the shares issued in this placement are being
registered concurrently with this Offering and are included in the Selling
Security Holders' Shares. Upon effectiveness of the Registration Statement of
which this Prospectus is a part, all of the warrants issued in this placement
convert into a like number of Redeemable Warrants which are also being
registered concurrently with this Offering and are included in the Selling
Security Holders' Redeemable Warrants. As a result, half of the shares, all of
the warrants issued in this placement and the shares issuable upon exercise of
such warrants may be sold by the holders or respective transferees commencing on
the date of this Prospectus. The principal underwriter of this placement was the
Representative who received 13% of the total gross proceeds raised in the
placement. The placement was to accredited investors only and was exempt from
registration pursuant to Regulation D promulgated by the Securities and Exchange
Commission.

II-3
<PAGE>
$1,000,000, respectively, which Convertible Notes both convert simultaneously
with the closing of this Offering. The Convertible Note issued to ASSI, Inc.
converts into 500,000 shares of Common Stock and into Special Warrants to
purchase 3,000,000 shares of Common Stock. See "Description of Securities --
Redeemable Warrants." The Convertible Note issued to Mr. Herrick converts into
250,000 shares of Common Stock and into Special Warrants to purchase 1,500,000
shares of Common Stock. The 4,700,000 Redeemable Warrants into which the
4,700,000 Special Warrants convert upon sale of the Special Warrants by the
current holders or their affiliates are included in the Selling Security
Holders' Redeemable Warrants.

In connection with the aforementioned financing of the Pietro's Acquisition,
which was obtained through the Representative, the Company paid the
Representative 13% of the total $3,000,000 investment, or $390,000. Both ASSI,
Inc. and Mr. Herrick are accredited investors and are exempt from registration
pursuant to Regulation D promulgated by the Securities and Exchange Commission.

Also on February 20, 1996, the Company entered into a consulting agreement
with ASSI, Inc. regarding the Pietro's Acquisition (the "Pietro's Consulting
Agreement"). Under this Agreement, ASSI, Inc. agrees to advise the Company in
connection with the reconstruction, expansion, marketing and strategic
development of the restaurants acquired from Pietro's. In consideration for such
services, the Company shall pay to ASSI, Inc. an annual fee equal to 5% of Net
Profits of the restaurants acquired under the plan of reorganization and
retained by the Company. As additional consideration for the consulting
services, the Company has issued to ASSI, Inc. an additional aggregate of
100,000 Special Warrants to purchase shares of common stock of the Company.
These Special Warrants convert into Redeemable Warrants upon their sale by the
current holders or their affiliates and such Redeemable Warrants are also
included in the Selling Security Holders' Redeemable Warrants. See "Description
of Securities -- Redeemable Warrants." The Pietro's Consulting Agreement
terminates on December 31, 2000.

The Company also entered into a consulting agreement with ASSI, Inc. (the
"Vegas Consulting Agreement") pursuant to which ASSI, Inc. agrees to advise the
Company with site selection and marketing and development strategy for
penetrating the Las Vegas, Nevada market. In consideration for such services,
the Company shall pay to ASSI, Inc. an annual fee (the "Annual Fee") equal to
10% of Net Profits (as hereinafter defined) of the acquired Las Vegas
restaurants. As additional consideration for the consulting services, the
Company has issued to ASSI, Inc. an aggregate of 100,000 Special Warrants. The
Vegas Consulting Agreement terminates on December 31, 2000. These Special
Warrants convert into Redeemable Warrants upon their sale by the current holders
or their affiliates and such Redeemable Warrants are included in the Selling
Security Holders' Redeemable Warrants. See "Description of Securities --
Redeemable Warrants."

ASSI, Inc. is an accredited investor. As a result, the Company's issuance of
Special Warrants under both the Pietro's Consulting Agreement and the Vegas
Consulting Agreement is exempt from registration pursuant to Regulation D
promulgated by the Securities and Exchange Commission.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
2.1 Debtor's Plan of Reorganization**
2.2 Asset Purchase Agreement by and between the Company and Roman Systems, Inc.**
2.3 Secured Promissory Note by and between the Company and Roman Systems, Inc.**
3.1 Amended and Restated Articles of Incorporation of the Company, as amended**
3.2 Bylaws of the Company**
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.1 Specimen Stock Certificate of the Company
4.2 Warrant Agreement
4.3 Representative's Warrant Agreement
5.1 Opinion of Jeffer, Mangels, Butler & Marmaro LLP
10.1 Employment Agreement of Jeremiah J. Hennessy**
10.2 Employment Agreement of Paul Motenko**
10.6 Form of Indemnification Agreement with Officers and Directors**
10.7 Chicago Pizza & Brewery, Inc. 1996 Stock Option Plan
10.8 (Intentionally omitted)
10.9 Lease Agreement -- Corporate Headquarters, Mission Viejo**
10.10 Lease Agreement -- Corporate Headquarters, Chicago Pizza Northwest**
10.11 Consulting Agreement between the Company and Assi, Inc. -- Pietro's**
10.12 Consulting Agreement between the Company and Assi, Inc. -- Nevada**
10.13 Note Purchase Agreement by and between the Company and Assi, Inc.**
10.14 Note Purchase Agreement by and between the Company and Norton Herrick**
10.15 Asset Purchase Agreement by and between the Company and Abby's, Inc.**
10.16 BJ's Lahaina, L.P. Partnership Agreement**
10.17 Pepsi Supplier Agreement**
21.1 List of Subsidiaries**
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Jeffer, Mangels, Butler & Marmaro (included in Exhibit 5.1)
24 Power of Attorney (please see page II-7 of the Registration Statement on Form SB-2).
</TABLE>

- ------------------------
* To be filed by Amendment.

** Previously filed.

(b) Financial Statement Schedules

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) To include any Prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually, or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement; notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum Offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
(Section230.424(b) of this Chapter) if, in the

II-5
<PAGE>
aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate Offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.

(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein,
and the Offering of such securities at that time shall be deemed to be
the initial bona fide Offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the Offering.

Insofar as indemnification for liabilities arising from the Securities Act
of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes to provide to the Underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.

For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.

For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the Offering of such securities at that time shall be deemed to be
the initial bona fide Offering thereof.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 20th day of August, 1996.

CHICAGO PIZZA & BREWERY, INC.

By: /s/ PAUL MOTENKO

-----------------------------------
Paul Motenko,
CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Paul
Motenko his true and lawful attorney-in-fact and agent, acting alone, with full
powers of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, any Amendments
thereto and any Registration Statement for the same Offering which is effective
upon filing pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, each acting alone, full powers and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all said attorney-in-fact
and agent, acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Company in the capacities and on the dates indicated.

SIGNATURE CAPACITY DATE
- ----------------------------------- ------------------------- ----------------

Chief Executive Officer,
/s/ PAUL MOTENKO Chairman of the Board,
- ----------------------------------- Vice President and August 20, 1996
Paul Motenko Secretary

/S/ JEREMIAH J. HENNESSY President, Chief
- ----------------------------------- Operating Officer and August 20, 1996
Jeremiah J. Hennessy Director

Chief Financial Officer,
/S/ LAURA PARISI Chief Accounting
- ----------------------------------- Officer, August 20, 1996
Laura Parisi Assistant Secretary

[SIGNATURES CONTINUED ON PAGE II-8]

II-7
<PAGE>
[SIGNATURES CONTINUED FROM PAGE II-7]

SIGNATURE CAPACITY DATE
- ----------------------------------- ------------------------- ----------------

/S/ ALEXANDER M. PUCHNER
- ----------------------------------- Director of Brewing August 20, 1996
Alexander M. Puchner Operations and Director

/S/ BARRY J. GRUMMAN
- ----------------------------------- Director August 20, 1996
Barry J. Grumman

/S/ STANLEY B. SCHNEIDER
- ----------------------------------- Director August 20, 1996
Stanley B. Schneider

/S/ STEPHEN F. MONTICELLI
- ----------------------------------- Director August 20, 1996
Stephen F. Monticelli

/S/ STEVEN F. MAYER
- ----------------------------------- Director August 20, 1996
Steven F. Mayer

II-8
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER PAGE NUMBER
- --------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
2.1 Debtor's Plan of Reorganization**
2.2 Asset Purchase Agreement by and between the Company and Roman Systems, Inc.**
2.3 Secured Promissory Note by and between the Company and Roman Systems, Inc.**
3.1 Amended and Restated Articles of Incorporation of the Company, as amended**
3.2 Bylaws of the Company**
4.1 Specimen Stock Certificate of the Company
4.2 Warrant Agreement
4.3 Representative's Warrant Agreement
5.1 Opinion of Jeffer, Mangels, Butler & Marmaro LLP
10.1 Employment Agreement of Jeremiah J. Hennessy**
10.2 Employment Agreement of Paul Motenko**
10.6 Form of Indemnification Agreement with Officers and Directors**
10.7 Chicago Pizza & Brewery, Inc. 1996 Stock Option Plan
10.8 (Intentionally omitted)
10.9 Lease Agreement -- Corporate Headquarters, Mission Viejo**
10.10 Lease Agreement -- Corporate Headquarters, Chicago Pizza Northwest**
10.11 Consulting Agreement between the Company and Assi, Inc. -- Pietro's**
10.12 Consulting Agreement between the Company and Assi, Inc. -- Nevada**
10.13 Note Purchase Agreement by and between the Company and Assi, Inc.**
10.14 Note Purchase Agreement by and between the Company and Norton Herrick**
10.15 Asset Purchase Agreement by and between the Company and Abby's, Inc.**
10.16 BJ's Lahaina, L.P. Partnership Agreement**
10.17 Pepsi Supplier Agreement**
21.1 List of Subsidiaries**
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Jeffer, Mangels, Butler & Marmaro (included in Exhibit 5.1)
24 Power of Attorney (please see page II-7 of the Registration Statement on Form
SB-2).
</TABLE>

- ------------------------
* To be filed by Amendment.

** Previously filed.

<PAGE>

DRAFT OF
8/20/96

1,500,000 Shares of Common Stock

1,500,000 Redeemable Warrants

Chicago Pizza & Brewery, Inc.

UNDERWRITING AGREEMENT

Los Angeles, California
______________, 1996

THE BOSTON GROUP, L.P.
As Representative of the
Several Underwriters
Named in Schedule I Hereto
2049 Avenue of the Stars, 30th Floor
Los Angeles, California 90067

Ladies and Gentlemen:

Chicago Pizza & Brewery, Inc. , a California corporation (the "Company"),
confirms its agreement with the several Underwriters named in Schedule I
("Schedule I") attached hereto and incorporated herein by this reference (the
"Underwriters") with respect to the sale by the Company and the purchase by the
Underwriters, severally and not jointly, of an aggregate of one million five
hundred thousand (1,500,000) shares ("Shares") of the Company's common stock, no
par value (the "Common Stock") and one million five hundred thousand (1,500,000)
redeemable warrants (the "Redeemable Warrants"), each Redeemable Warrant
exercisable to purchase one (1) additional share of Common Stock. The public
offering price per share of Common Stock for the Shares is $_____ and the public
offering price per redeemable warrant for the Redeemable Warrants is $____.
Each Redeemable Warrant is exercisable commencing on ________, 1997 until
__________, 2002 unless previously redeemed by the Company, at an initial
exercise price equal to $______ per share, subject to adjustment. The
Redeemable Warrants may be exercised by the Company at a redemption price of
twenty five cents ($0.25) per Redeemable Warrant at any time commencing
_______________, 1997, provided that the average closing bid price of the Common
Stock equals or exceeds one hundred forty percent (140%) of the initial public

<PAGE>

offering price per share for any twenty (20) trading days within a period of
thirty (30) consecutive trading days ending on the fifth trading day prior to
the date of the notice of redemption. Such Shares and Redeemable Warrants are
hereinafter referred to collectively as the "Firm Securities." Upon notice by
the Representative (defined below), as provided in Section 4(b) hereof, the
Company shall also issue and sell to the Underwriters, severally and not
jointly, an aggregate of up to an additional two hundred twenty-five thousand
(225,000) shares of Common Stock and two hundred twenty-five thousand (225,000)
Redeemable Warrants for the purpose of covering over-allotments, if any. Such
225,000 additional shares and/or 225,000 additional Redeemable Warrants are
hereinafter referred to as the "Option Securities." The Company also proposes
to issue and sell to The Boston Group, L.P. (the "Representative"), individually
and not in its capacity as representative of the Underwriters, or its designees,
a warrant (the "Representative's Warrant") pursuant to a warrant agreement,
dated _____________, 1996 (the "Representative's Warrant Agreement"), for the
purchase of an additional one hundred fifty thousand (150,000) shares of Common
Stock and one hundred fifty thousand (150,000) Redeemable Warrants. Such
150,000 additional shares and/or 150,000 additional Redeemable Warrants are
hereinafter referred to as the "Representative's Securities." The shares of
Common Stock issuable upon exercise of the Redeemable Warrants (which Redeemable
Warrants include the Redeemable Warrants issuable upon exercise of the
Representative's Warrant) are hereinafter referred to as the "Warrant Shares."
Further, an aggregate of one million seven hundred sixty-six thousand eight
hundred sixty-four (1,766,864) shares of Common Stock held by certain non-
affiliated selling shareholders and one independent director of the Company (the
"Non-Affiliated Shares") and an aggregate of ten million fourteen thousand five
hundred eighty-four (10,014,584) Redeemable Warrants held by certain non-
affiliated selling shareholders of the Company (the "Non-Affiliated Redeemable
Warrants") and an aggregate of ten million fourteen thousand five hundred
eighty-four (10,014,584) shares of Common Stock issuable upon the exercise of
the Non-Affiliated Redeemable Warrants (the "Non-Affiliated Warrant Shares")
(the Non-Affiliated Shares, the Non-Affiliated Redeemable Warrants and the Non-
Affiliated Warrant Shares are sometimes collectively referred to herein as the
"Non-Affiliated Securities") are being registered for the account of such non-
affiliated selling shareholders and one independent director in connection with
this offering but are not being underwritten by the Underwriters. The Firm
Securities, Option Securities and Representative's Securities are hereinafter
referred to as the "Securities" and are more fully described in the Registration
Statement and the Prospectus each referred to below.

1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to, and covenants and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date and each Option Closing Date (as such
terms are defined below), if any, as follows:

(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and amendments
thereto, on Form SB-2 (Registration No. 333-5182-LA), including any related
preliminary prospectus (the "Preliminary Prospectus"), for the registration of
the Securities, the Warrant Shares and the Non-Affiliated Securities under the
Securities Act of 1933, as amended (the "Act"). After the date hereof, the
Company shall not file any other amendment to such registration statement which
the Representative shall have reasonably objected to after having been furnished
with a copy thereof

<PAGE>

unless the Company's outside counsel reasonably determines in a written opinion
that such amendment or supplement is required to be filed pursuant to applicable
law. Except as the context may otherwise require, such registration statement,
as amended, on file with the Commission at the time it becomes effective
(including the prospectus, financial statements, schedules, exhibits and all
other documents filed as a part thereof or incorporated therein (including, but
not limited to, those documents or that information incorporated by reference
therein) and all information deemed to be a part thereof as of such time
pursuant to Rule 430A promulgated under the Act and any information included in
a term sheet (the "Term Sheet") as described in Rule 434 promulgated under the
Act), is hereinafter called the "Registration Statement," and the form of
prospectus in the form first filed with the Representative's consent with the
Commission pursuant to Rule 424(b) promulgated under the Act and including any
information included in the Term Sheet, after the Registration Statement shall
have been declared effective by the Commission, is hereinafter called the
"Prospectus." For purposes hereof, "Rules and Regulations" means the rules and
regulations adopted by the Commission under the Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as applicable.

(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or the Prospectus or any part of any of the
foregoing, and no proceedings for a stop order suspending the effectiveness of
the Registration Statement or any part thereof have been initiated or are
pending, contemplated or threatened. Each Preliminary Prospectus and the
Registration Statement (including each amendment thereto), at the time of filing
thereof, complied with the requirements of the Act and the Rules and
Regulations, and neither any Preliminary Prospectus nor the Registration
Statement, at the time of filing thereof, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; PROVIDED, HOWEVER, that the foregoing
shall not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company by the
Representative with respect to any Underwriter expressly for use in any
Preliminary Prospectus or the Registration Statement.

(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to and including the Closing Date and each Option
Closing Date, if any, and during such other periods as a prospectus may be
required to be delivered in connection with sales by any Underwriter or a
dealer, the Registration Statement and the Prospectus will contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations, and will comply with the requirements of the Act
and the Rules and Regulations, and at and through such dates, neither the
Registration Statement, the Prospectus nor any amendment thereof or supplement
thereto will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, PROVIDED, HOWEVER, that the foregoing shall not apply to statements
made or statements omitted in reliance upon and in conformity with written
information furnished to the Company by the Representative with respect to any
Underwriter expressly for use in the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto.

<PAGE>

(d) Except for Chicago Pizza Northwest, Inc., Blue Max, Inc. and BJ's
Lahaina, L.P., the Company does not own an interest in any corporation,
partnership, trust, joint venture or other entity. Chicago Pizza Northwest,
Inc., Blue Max, Inc. and BJ's Lahaina, L.P. are sometimes referred to as the
"Subsidiaries." Each of the Company and the Subsidiaries has been duly
organized and is validly existing as a corporation in good standing under the
laws of the respective jurisdiction of its incorporation or formation, as
applicable, except that Lahaina, L.P. is validly existing as a limited
partnership in good standing under the laws of its jurisdiction of formation.
Each of the Company and the Subsidiaries is duly qualified and licensed and in
good standing as a foreign corporation in each jurisdiction in which it owns or
leases property or in which the conduct of its business, as currently being
conducted, requires such qualification or licensing. Each of the Company and
the Subsidiaries has all requisite power and authority (corporate, if
applicable, and other), and has obtained any and all authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials, agencies, authorities and bodies
(including, without limitation, those having jurisdiction over environmental,
health or similar matters) necessary to own or lease its properties and conduct
its business as described in the Prospectus other than those authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental or regulatory officials, agencies, authorities and bodies
(including, without limitation, those having jurisdiction over environmental,
health or similar matters) which, singularly or in the aggregate, the failure to
obtain would not materially and adversely affect the condition (financial or
otherwise), earnings, business affairs, position, prospects, shareholders'
equity, operations, properties, businesses or results of operations of the
Company and the Subsidiaries taken as a whole. Each of the Company and the
Subsidiaries is and has been doing business in substantial compliance with all
such authorizations, approvals, orders, licenses, certificates, franchises and
permits and all federal, state and local laws, rules, regulations and orders;
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
authorizations, approvals, orders, licenses, certificates, franchises or permits
which, singularly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the condition
(financial or otherwise), earnings, business affairs, position, prospects,
shareholders' equity, operations, properties, businesses or results of
operations of the Company, or the Subsidiaries. The disclosure in the
Registration Statement concerning the effects of federal, state and local laws,
rules, regulations and orders on the Company's and the Subsidiaries' businesses
as currently conducted and as contemplated are correct in all material respects
and do not omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.

(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or supplement
thereto, under "Capitalization" and "Description of Securities" and will have
the adjusted capitalization set forth therein on the Closing Date and each
Option Closing Date, if any, based upon the assumptions set forth therein.
Neither the Company nor any Subsidiary is a party to or bound by any instrument,
agreement or other arrangement or understanding providing for or requiring it to
issue any capital stock, rights, warrants, options or other securities, except
for this Agreement, the warrant agreement, dated ______, 1996, to be entered
into with respect to the Redeemable Warrants (the "Warrant

<PAGE>

Agreement"), the Representative's Warrant Agreement and the Company's 1996 Stock
Option Plan (the "1996 Plan"). The Securities and all other securities issued
or issuable by the Company conform or, when issued and paid for, will conform,
in all respects to the description thereof contained in the Registration
Statement and the Prospectus. All issued and outstanding securities (including,
without limitation, its ownership interest in the Subsidiaries) of the Company
and the Subsidiaries have been duly authorized and validly issued and are fully
paid and non-assessable; the holders thereof have no rights of rescission with
respect thereto, and the holders of ownership interests in the Company and the
Subsidiaries are not subject to personal liability by reason of being such
holders; and none of such securities was issued in violation of the preemptive
rights or other similar rights of any holders of any security of either the
Company or any Subsidiary, except as set forth in the Prospectus. The Company
has not entered into any agreements, arrangements or understandings pursuant to
which any third party has the right to acquire from the Company any securities
of any Subsidiary. The Securities are not and will not be subject to any
preemptive or other similar rights of any shareholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable; the holders thereof will
not be subject to any liability solely as such holders; all corporate action
required to be taken for the authorization, issuance and sale of the Securities
has been duly and validly taken; and the certificates representing the
Securities, when delivered by the Company, will be in due and proper form. Upon
the issuance and delivery pursuant to the terms hereof and the Representative's
Warrant Agreement of the Securities to be sold by the Company hereunder and
thereunder, respectively, the Underwriters and the Representative, respectively,
will acquire good and marketable title to such Securities, free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.

(f) All transactions necessary to complete the Pietro's Acquisition
(as defined below in the Prospectus) have been consummated. The Company and the
Subsidiaries had all requisite corporate power and authority to execute, deliver
and perform each agreement (each, an "Acquisition Agreement") entered into by
it in order to effectuate the Pietro's Acquisition. All necessary corporate
proceedings of the Company and the Subsidiaries had been duly taken to authorize
the execution, delivery and performance of each Acquisition Agreement entered
into by it. Each Acquisition Agreement had been duly authorized, executed and
delivered by the Company and the Subsidiaries, as the case may be, is the legal,
valid and binding obligation of the Company and the Subsidiaries, as the case
may be, and is enforceable (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable)
as to the Company and the Subsidiaries, as the case may be, in accordance with
its terms. No consent, authorization, approval, order, license, certificate or
permit of or from, or declaration or filing with, any federal, state, local or
other governmental authority or any court of other tribunal which is required by
the Company or the Subsidiaries for the execution, delivery, or performance of
any Acquisition Agreement has not been obtained. No consent, approval or
authorization of any party to any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
shareholders' agreement, purchase order, note, loan or credit agreement or any
other material agreement or instrument evidencing an obligation for borrowed
money, or any

<PAGE>

other material agreement or instrument to which the Company or the Subsidiaries
are parties or by which they are or may be bound or to which their properties or
assets (tangible or intangible) are or may be subject, was required for the
execution, delivery or performance by the Company or the Subsidiaries for any
Acquisition Agreement and was not obtained. The execution, delivery and
performance of each Acquisition Agreement entered into by the Company or the
Subsidiaries does not conflict or will not conflict with, or does not result or
will not result in any breach or violation of any of the terms, covenants,
conditions or provisions of, or does not constitute or will not constitute (with
notice, the lapse of time or both) a default under, or results or will result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon any property or assets (tangible or intangible) of the Company or the
Subsidiaries pursuant to the terms of, (i) the certificate of incorporation,
bylaws or other organizational documents of the Company or the Subsidiaries,
(ii) any license, contract, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, shareholders' agreement, purchase
order, note, loan or credit agreement or any other material agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company or the Subsidiaries are parties or
by which they are or may be bound or to which any of their properties or assets
(tangible or intangible) are or may be subject or (iii) any law, statute,
judgment, decree, order, rule or regulation applicable to the Company or the
Subsidiaries of any arbitrator, court, administrative agency or other
governmental or regulatory official, agency authority or body (including,
without limitation, those having jurisdiction over environmental, health or
similar matters) having jurisdiction over the Company, the Subsidiaries or any
of their activities or properties.

(g) The combined financial statements of the Company and the notes
thereto included in the Registration Statement, each Preliminary Prospectus and
the Prospectus fairly present the financial position, results of operations and
cash flow and changes in financial position and shareholders' equity of the
Company and its Subsidiaries at the respective dates and for the respective
periods to which they apply, and such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved. The as
adjusted and pro forma combined financial information included in each
Preliminary Prospectus, the Registration Statement and the Prospectus present
fairly the information shown therein, have been prepared in conformity with the
Rules and Regulations and have been properly compiled on the basis described
therein consistent with the historical financial statements included in the
Registration Statement, each Preliminary Prospectus and the Prospectus. The
assumptions underlying such as adjusted and/or pro forma financial information
are reasonable, and the adjustments made therein are appropriate to give effect
to the transactions or circumstances referred to therein. There has been no
material adverse change, or development involving a material prospective change,
in the condition (financial or otherwise), earnings, business affairs, position,
prospects, shareholders' equity, operations, obligations, properties, businesses
or results of operations of the Company and the Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement and the Prospectus.
The outstanding debt, the property and assets (both tangible and intangible) and
the businesses of the Company and the Subsidiaries conform in all material
respects to the descriptions thereof

<PAGE>

contained in the Registration Statement and the Prospectus. The financial
information set forth in the Prospectus under the headings "Prospectus Summary -
Summary Combined Financial and Restaurant Data," "Dilution," "Capitalization,"
"Selected Combined Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" fairly presents the information
set forth therein and such financial information has been derived from or
compiled on a basis consistent with that of the audited combined financial
statements included in the Registration Statement, each Preliminary Prospectus
and the Prospectus as described above.

(h) The Company and the Subsidiaries (i) have paid all federal, state
and local taxes for which they are liable, including, but not limited to,
withholding taxes and amounts payable under Chapters 21 through 24 of the
Internal Revenue Code of 1986, as amended (the "Code"), and any other
assessments, fines or penalties leveled against any of them and have furnished
all information returns any of them are required to furnish pursuant to the Code
or otherwise, (ii) have established adequate reserves for such taxes,
assessments, fines or penalties which are not due and payable and (iii) does not
have any tax deficiency or claims outstanding, proposed or assessed against any
of them.

(i) No transfer tax, stamp duty or other similar tax, fee or duty is
payable by or on behalf of the Underwriters or the Representative, as
applicable, in connection with (i) the issuance by the Company of the
Securities, (ii) the purchase by the Underwriters of the Securities or (iii) the
consummation of any of the transactions contemplated by this Agreement, the
Representative's Warrant Agreement, the Registration Statement or the
Prospectus.

(j) The Company and the Subsidiaries maintain insurance policies,
including, without limitation, general liability, property and personal
liability insurance, and surety bonds which insure such entities, their
employees and patrons and such other persons to whom such entities may become
liable against such losses and risks generally insured against by comparable
businesses. Neither the Company nor the Subsidiaries have (i) failed to give
notice or present any insurance claim with respect to any matter under the
appropriate insurance policy or surety bond in a due and timely manner, (ii) any
disputes or claims against any underwriter of such insurance policies, other
than as previously disclosed in writing to the Representative or to the
Underwriters' Counsel (as defined in Section 4(d) hereof), which matters are not
required to be disclosed in the Registration Statement, or surety bonds or has
failed to pay any premiums due and payable under such insurance policies and
surety bonds or (iii) failed to comply with any conditions contained in such
insurance policies and surety bonds. There are no facts or circumstances under
any such insurance policies or surety bonds which would relieve any insurer of
its obligations to satisfy in full any valid existing claim of the Company or
the Subsidiaries.

(k) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental or other proceeding (including,
without limitation, those pertaining to environmental, health or similar
matters) pending, contemplated or threatened (or circumstances that may give
rise to the same), to which the Company or any Subsidiary is subject or to which
any property or assets (tangible or intangible) of the Company or any Subsidiary
is subject (or circumstances that may give rise to the same) which (i) questions
the validity of the capital stock of the Company or the Subsidiaries, of this
Agreement, of the Warrant Agreement, of the

<PAGE>

Representative's Warrant Agreement or of any action or transaction contemplated
by this Agreement, the Warrant Agreement, the Representative's Warrant
Agreement, the Registration Statement or the Prospectus, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all respects) or (iii) might, if adversely determined, materially
and adversely affect the condition (financial or otherwise), earnings, business
affairs, position, prospects, shareholders' equity, operations, properties,
businesses or results of operations of the Company or the Subsidiaries taken as
a whole.

(l) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, to enter into this Agreement,
the Warrant Agreement and the Representative's Warrant Agreement and to
consummate the transactions contemplated in such agreements, the Registration
Statement and the Prospectus; and this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement have each been duly and properly authorized,
executed and delivered by the Company. Each of this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement constitutes or will
constitute a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law). Neither the issuance, delivery and sale of the
Securities, the execution, delivery or performance of this Agreement, the
Warrant Agreement and Representative's Warrant Agreement, the consummation of
the transactions contemplated herein, therein, in the Registration Statement and
in the Prospectus, or the conduct of the Company's business as described in the
Registration Statement, the Prospectus and any amendments thereof or supplements
thereto, conflicts or will conflict with, or results or will result in any
breach or violation of any of the terms, covenants, conditions or provisions of,
or constitutes or will constitute (with notice, the lapse of time or both) a
default under, or results or will result in the creation or imposition of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon any property or assets
(tangible or intangible) of the Company, any Subsidiary (except as described in
the Prospectus) pursuant to the terms of, (i) the certificate of incorporation,
bylaws or other organizational documents of the Company or the Subsidiaries,
(ii) any license, contract, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, shareholders' agreement, purchase
order, note, loan or credit agreement or any other material agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company or the Subsidiaries are parties or
by which they are or may be bound or to which any of their properties or assets
(tangible or intangible) are or may be subject or (iii) any law, statute,
judgment, decree, order, rule or regulation applicable to the Company or the
Subsidiaries of any arbitrator, court, administrative agency or other
governmental or regulatory official, agency authority or body (including,
without limitation, those having jurisdiction over environmental, health or
similar matters) having jurisdiction over the Company or the Subsidiaries or any
of their activities or properties.

<PAGE>

(m) No consent, approval, authorization, registration, qualification,
or order of, and no filing with, any court, administrative agency or other
government or regulatory official, agency, authority or body is required for the
issuance, delivery and sale of the Securities pursuant to this Agreement, the
Prospectus and the Registration Statement, the performance of this Agreement,
the Warrant Agreement and the Representative's Warrant Agreement and the
consummation of the transactions contemplated thereby, by the Registration
Statement and by the Prospectus, except such as have been or may be obtained
under the Act, state securities or "blue sky" laws and the rules of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with the
Underwriters' purchase and distribution of the Shares.

(n) All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed or required to be
filed as exhibits to the Registration Statement to which the Company or the
Subsidiaries are parties or by which they may be bound or to which their assets
(tangible or intangible), properties or businesses may be subject have been duly
and validly authorized, executed and delivered by the Company or the
Subsidiaries, as the case may be, and constitute the legal, valid and binding
agreements of the Company or the Subsidiaries, as the case may be, enforceable
against the Company or the Subsidiaries, as the case may be, in accordance with
their respective terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any actions, legal or equitable,
and except as rights to indemnify or contribution may be limited by applicable
law). The descriptions in the Registration Statement of such agreements,
contracts and other documents are accurate and fairly present the information
required to be shown with respect thereto by Form SB-2; there are no agreements,
contracts or other documents which are required by the Act to be described in
the Registration Statement or filed as exhibits to the Registration Statement
which are not described or filed as required; and the exhibits which have been
filed are complete and correct copies of the agreements, contracts or other
documents of which they purport to be copies.

(o) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, neither the Company
nor the Subsidiaries have done, or have agreed to do, any of the following, (i)
issued any securities or incurred any liability or obligation, direct, indirect
or contingent, for borrowed money, (ii) entered into any transaction other than
in the ordinary course of business or (iii) declared or paid any dividend or
made any other distribution on or in respect of any class of its capital stock;
and, subsequent to such dates, there has not been any change in the capital
stock or any change in the debt (long- or short-term) or liabilities or
obligations or any material change in the condition (financial or otherwise),
earnings, business affairs, position, prospects, shareholders' equity,
operations, properties, businesses or results of operations of the Company or
the Subsidiaries, on a conditional basis, except for debt, liabilities and
obligations incurred in the normal course of business consistent with past
practices.

(p) No material default exists, and no event has occurred which, with
notice, lapse of time or both, would constitute a default in the due performance
and observance of any

<PAGE>

term, covenant, condition or provision of any license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting trust
agreement, shareholders' agreement, purchase order, note, loan or credit
agreement or any other material agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to which the
Company or the Subsidiaries are parties or by which they are or may be bound or
to which their properties or assets (tangible or intangible) are or may be
subject.

(q) Except as disclosed in the Prospectus, the Company or the
Subsidiaries have generally enjoyed a satisfactory employer-employee
relationship with their employees and they are in substantial compliance with
all federal, state and local laws, rules, regulations and orders respecting
employment and employment practices, including, without limitation, terms and
conditions of employment and wages and hours. There are no pending
investigations involving the Company or the Subsidiaries by the U.S. Department
of Labor, the Department of Justice - Immigration and Naturalization Service or
any other governmental or regulatory official, agency, authority or body
responsible for the enforcement of such federal, state or local laws, rules,
regulations and orders except as previously disclosed in writing to the
Representative or the Underwriters' Counsel, which matters are not required to
be disclosed in the Registration Statement. Except as disclosed in the
Prospectus, there is no unfair labor practice charge or complaint pending,
threatened or contemplated against the Company or the Subsidiaries before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending, threatened or contemplated against or involving
the Company or the Subsidiaries, or any predecessor entities, and none has ever
occurred. There are no existing collective bargaining agreements with the
Company or the Subsidiaries. No representation question exists respecting the
employees of the Company or the Subsidiaries, and no collective bargaining
agreement or modification thereof is currently being negotiated by or on behalf
of the Company or the Subsidiaries. Except as disclosed in the Prospectus, no
grievance or arbitration proceeding is pending, threatened or contemplated under
any expired collective bargaining agreements of the Company or the Subsidiaries.
No labor dispute with the employees of the Company or the Subsidiaries is
pending, threatened or contemplated.

(r) Neither the Company nor any Subsidiary maintains, sponsors,
contributes, has any obligation to contribute or has any obligation with respect
to, or at any time previously maintained, sponsored, contributed, had any
obligation to contribute or had any obligation with respect to, any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan" or a "multiemployer plan" (each an "ERISA Plan"), as such terms
are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), other than as
previously disclosed in writing to the Representative or to the Underwriters'
Counsel. Neither the Company nor any Subsidiary maintains, sponsors,
contributes, has any obligation to contribute or has any obligation with respect
to or at any time previously has maintained, sponsored, contributed, had any
obligation to contribute or had any obligation with respect to, a "defined
benefit plan," as defined in Section 3(35) of ERISA. No ERISA Plan (or any
trust created thereunder) has engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code which could subject
the Company or the Subsidiaries to any tax penalty on prohibited transactions
and which has not adequately been corrected. Each ERISA Plan is in compliance
with all material

<PAGE>

reporting, disclosure and other requirements of the Code and ERISA as they
relate to any such ERISA Plan. Determination letters have been received from
the Internal Revenue Service with respect to each ERISA Plan which is intended
to comply with Code Section 401(a), stating that such ERISA Plan and the
attendant trust are qualified thereunder. Neither the Company nor any Subsidiary
is in any way liable in connection with a "multiemployer plan" from which it has
ever completely or partially withdrawn.

(s) Neither the Company nor the Subsidiaries, nor any of their
employees, directors, shareholders or affiliates (within the meaning of the
Rules and Regulations) of any of the foregoing, have taken or will take,
directly or indirectly, any action designed to or which has constituted or which
might be expected to cause or result in, under the Exchange Act or otherwise,
the illegal stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or otherwise.

(t) Neither the Company nor the Subsidiaries own, hold or use any
trademarks, trade names, service marks, service names, copyrights, patents and
patent applications or any licenses or rights to the foregoing, which,
individually or in the aggregate, are material to its condition (financial or
otherwise), earnings, business affairs, position, prospects, shareholders'
equity, operations, properties, businesses or results of operations, and, except
as disclosed in the Registration Statement, Prospectus, no such used trademarks,
trade names, service marks, service names, copyrights or patents are in dispute
or are in conflict with any right of any other person or entity.

(u) Each of the Company and the Subsidiaries has the unrestricted
right to use all trade secrets, know-how (including, without limitation, all
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, technology, designs, processes, works of authorship,
computer programs and technical data and information that are material to the
development, manufacture, operation and sale of all products and services sold
or proposed to be sold by the Company or any Subsidiary, free and clear of and
without violating any right, lien or claim of others, including, without
limitation, former employers of their employees.

(v) Except as disclosed in the Prospectus, the Company and the
Subsidiaries have good and marketable title to, or valid and enforceable
leasehold estates in, all items of real and personal property owned or leased,
or to be owned or leased, by them.

(w) Coopers & Lybrand whose report is filed with the Commission as a
part of the Registration Statement, each Preliminary Prospectus and the
Prospectus, is an accounting firm of independent certified public accountants as
required by the Act and the Rules and Regulations.

(x) The Company has caused to be executed agreements pursuant to
which the Company, each of its directors and officers, and its shareholders who
collectively own all of the issued and outstanding shares of Common Stock other
than the Non-Affiliated Shares, has agreed, for a period of twelve (12) months
following the effective date of the Registration

<PAGE>

Statement, not to, directly or indirectly, offer, offer to sell, sell, grant an
option for the purchase or sale of, transfer, assign, pledge, hypothecate or
otherwise encumber (whether pursuant to Rule 144 under the Act or otherwise) any
securities issued or issuable by the Company, whether or not owned by or
registered in the name of such person, or dispose of any interest therein,
without the prior written consent of the Representative (collectively, the
"Lock-Up Agreements"). The Company will cause its transfer agent to mark an
appropriate legend on the face of the stock certificates representing all of
such securities and to place "stop transfer" orders on the Company's stock
ledgers.

(y) There are no claims, payments, issuances, agreements,
arrangements or understandings, whether oral or written, for services in the
nature of a finder's fee, brokerage fee, origination fee or otherwise with
respect to the offerings contemplated by this Agreement, the Warrant Agreement,
the Representative's Warrant Agreement, the Registration Statement and the
Prospectus or any other arrangements, agreements, understandings, payments or
issuances that may affect the Underwriters' compensation as determined by the
NASD other than as disclosed in the Registration Statement and Prospectus and
other than as the Representative may itself have agreed to with third parties.

(z) The Shares and the Redeemable Warrants have been approved for
quotation on the NASDAQ SmallCap Market ("NASDAQ"), which has approved the
Company's right to delay the trading of the Shares for two days after the
Closing Date.

(aa) Neither the Company nor any Subsidiary, nor any officer,
shareholder, employee, agent nor any other person acting on behalf of the
Company or any Subsidiary has, directly or indirectly, given or agreed to give
any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or any official or employee of any
governmental agency or instrumentality of any government or any political party
or candidate for office or any other person who was, is or may be in a position
to help or hinder the business of the Company or the Subsidiaries (or assist
them in connection with any actual or proposed transactions) which might subject
the Company or the Subsidiaries, or any other such person to any damage or
penalty in any civil, criminal or governmental action, suit, inquiry,
investigation, litigation or proceeding.

(bb) Except as set forth in the Prospectus under "Certain
Transactions," no officer, director or shareholder of the Company or any
Subsidiary, and no affiliate or associate (as those terms are defined in the
Rules and Regulations) of any of the foregoing persons or entities, has or has
had, either directly or indirectly, (i) an interest in any person or entity
which (A) furnishes or sells services or products which are furnished or sold or
are proposed to be furnished or sold by the Company or any Subsidiary or (B)
purchases from or sells or furnishes to the Company or any Subsidiary any
products or services or (ii) a beneficiary interest in any contract,

arrangement, understanding or agreement to which the Company or the Subsidiaries
are parties or by which the Company or the Subsidiaries or any property or
assets (tangible or intangible) of the Company or the Subsidiaries may be bound
or affected. Except as set forth in the Prospectus under "Certain
Transactions," there are no existing agreements, arrangements,

<PAGE>

understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company or the Subsidiaries
and any officer or director of the Company or any Subsidiaries or any person
listed in the "Principal Shareholders" section of the Prospectus, or any
affiliate or associate of any of the foregoing persons or entities.

(cc) The minute books of the Company and the Subsidiaries have been
made available to the Representative, contain a complete summary of all meetings
and actions of the directors, including any committee thereof, shareholders
and/or the limited partners of the Company and the Subsidiaries since the time
of their incorporation or formation, as applicable, and reflect all transactions
referred to in such minutes accurately in all material respects.

(dd) Except with respect to the Non-Affiliated Securities, no person,
corporation, trust, partnership, association or other entity has the right to
include or register any securities of the Company in the Registration Statement
or to require that any registration statement be filed by the Company or, if
filed, to include any security in such registration statement. No person,
corporation, trust, partnership, association or other entity holds any
antidilution rights with respect to any securities of the Company.

(ee) Any certificate signed by any officer of the Company or any
Subsidiary, and delivered to the Representative or to the Underwriters' Counsel
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.

(ff) The Company has entered or will enter into the Representative's
Warrant Agreement, substantially in the form filed as Exhibit 4.4 to the
Registration Statement, with the Representative. The Representative's Warrant
Agreement has been duly and validly authorized by the Company and, assuming due
execution by the Representative constitutes or will constitute a valid and
legally binding agreement of the Company, enforceable against the Company in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law). The Company shall at all times following the Closing Date have reserved
and available for issuance a sufficient number of shares of Common Stock to be
issued upon exercise of the Representative's Warrant and upon exercise of the
Redeemable Warrants to be issued upon exercise of the Representative's Warrant.

(gg) The Company will apply the proceeds from the sale of the
Securities in the manner set forth in the Prospectus under the caption "Use of
Proceeds."

(hh) The Company is familiar with the Investment Company Act of 1940,
as amended (the "1940 Act"), and the rules and regulations thereunder, and has
in the past conducted, and intends in the future to conduct, its affairs in such
a manner as to ensure that it will not become an "investment company" within the
meaning of the 1940 Act and such rules and regulations.

<PAGE>

(ii) The books, records and accounts of the Company accurately and
fairly reflect, in reasonable detail, the transactions and dispositions of the
assets of the Company and the Subsidiaries. The system of internal accounting
controls maintained by the Company and the Subsidiaries is sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary (A) to permit preparation of financial statements and (B) to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
difference.

(jj) The Subsidiaries are not prohibited or restricted, directly or
indirectly, from paying dividends or other distributions on their capital stock
except as such is limited by California, Washington or Hawaii statutory law to
the Company, from repaying to the Company any loans or advances to the
Subsidiaries from the Company or from transferring any property or assets
(tangible or intangible) of the Subsidiaries to the Company.

2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES.

(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriters the Firm Securities, and
each of the Underwriters agrees, severally and not jointly, to purchase from the
Company that number of Firm Securities respectively set forth opposite such
Underwriter's name in Schedule I at a price equal to $___ per Share and $_____
per Redeemable Warrant.

(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase all or any part of the Option Securities at a price
equal to $____ per Share and $_____ per Redeemable Warrant. The Option
Securities shall be purchased, if the option is exercised as provided herein,
from the Company for the accounts of the several Underwriters, severally and not
jointly, in proportion to the aggregate number of Firm Securities set forth
opposite such Underwriter's name in Schedule I, except that the respective
purchase obligations of each Underwriter may be adjusted by the Representative
so that no Underwriter shall be obligated to purchase fractional Option
Securities. The option granted hereby will expire, to the extent unexercised,
forty-five (45) days from the date of the Prospectus, and may be exercised, in
the Representative's sole discretion, in whole or in part from time to time,
only for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Firm Securities, upon notice by the
Representative to the Company setting forth the number of Option Securities as
to which the Underwriters are then exercising the option and the time and date
of payment for and delivery of any such Option Securities. Any such time and
date of delivery (an "Option Closing Date") shall be determined by the
Representative, but shall not be later than five (5) full business days after
the exercise of said option, or in any event prior to the Closing Date (as
hereinafter defined), unless otherwise agreed upon by the Representative and the
Company. Nothing herein contained

<PAGE>

shall in any way obligate the Underwriters to exercise the option granted
hereby. No Option Securities shall be delivered unless the Firm Securities
shall be simultaneously delivered or shall theretofore have been delivered as
herein provided.

(c) Payment of the purchase price for, and delivery of certificates
evidencing, the Firm Securities shall be made at the offices of the
Representative at 2049 Avenue of the Stars, 30th Floor, Los Angeles, California,
or at such other place as shall be agreed upon by the Representative and the
Company. Such delivery and payment shall be made at 9:30 a.m. (Los Angeles
time) on _________, 1996 or at such other time and date as shall be agreed upon
by the Representative and the Company (such time and date of payment and
delivery being herein called the "Closing Date"). In addition, in the event
that any or all of the Option Securities are purchased by the Underwriters,
payment of the purchase price for, and delivery of certificates for, such Option
Securities shall be made at the above-mentioned office of the Representative or
at such other place as shall be agreed upon by the Representative and the
Company with respect to each applicable Option Closing Date as specified in the
relevant notice from the Representative to the Company. Delivery of the
certificates representing the Firm Securities and the Option Securities, if any,
shall be made to the Representative against payment by the Underwriters of the
purchase price for the Firm Securities and the Option Securities, if any,
respectively, to the order of the Company by certified or official bank checks
payable in Los Angeles Clearing House funds (next day funds). Certificates
representing the Firm Securities and the Option Securities, if any,
respectively, shall be in definitive, fully registered form, shall bear no
restrictive legends and shall be in such denominations and registered in such
names as the Representative may request in writing at least two (2) business
days prior to the Closing Date or the relevant Option Closing Date, as the case
may be. The certificates representing the Firm Securities and the Option
Securities, if any, shall be made available to the Representative at such
offices or such other place as the Representative may designate for inspection,
checking and packaging no later than 9:30 a.m. Los Angeles time on the last
business day prior to the Closing Date or the relevant Option Closing Date, as
the case may be.

(d) On the Closing Date, the Company shall issue and sell to the
Representative, individually and not in its capacity as representative of the
Underwriters, or its designees, the Representative's Warrant for an aggregate
purchase price of one hundred dollars ($100), which warrant shall entitle the
holders thereof to purchase an aggregate of an additional one hundred fifty
thousand (150,000) shares of Common Stock and one hundred fifty thousand
(150,000) Redeemable Warrants. The Representative's Warrant shall be issued
pursuant to the Representative's Warrant Agreement, substantially in the form
filed as Exhibit 4.4 to the Registration Statement. Payment for the
Representative's Warrant shall be made on the Closing Date. The
Representative's Warrant and the Representative's Securities underlying them
shall be registered in the Registration Statement and such Registration
Statement shall be kept effective as required by the Representative's Warrant
Agreement.

<PAGE>

3. PUBLIC OFFERING OF THE SECURITIES.

As soon after the Registration Statement becomes effective as the
Representative deems advisable, the Underwriters shall make a public offering of
the Firm Securities and such of the Option Securities as the Representative may
determine at the initial price and upon the other terms set forth in the
Prospectus. The Underwriters may from time to time increase or decrease the
public offering price of the Securities to such extent as the Representative, in
its sole discretion, deems advisable. The Underwriters may enter into one or
more agreements as they, in their sole discretion, deem advisable with one or
more broker-dealers who shall act as dealers in connection with such public
offering.

4. COVENANTS AND AGREEMENTS OF THE COMPANY.

The Company covenants and agrees with each of the Underwriters as follows:

(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or the
Exchange Act before termination of the offering of the Securities to the public
by the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy or to which the Representative shall have
reasonably objected (unless the Company's outside counsel reasonably determines
in a written opinion that such amendment or supplement is required to be filed
pursuant to applicable law) or which is not in compliance with the Act, the
Exchange Act or the Rules and Regulations. The Company shall use its best
efforts to maintain the effectiveness of the Registration Statement (by filing
supplements or post-effective amendments or as otherwise may be required under
the Act and the Rules and Regulations) until the earlier of (i) the date that
all Redeemable Warrants have either been exercised or redeemed and all of the
Non-Affiliated Securities have been sold; and (ii) the date which is six (6)
years after the date of the Prospectus.

(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Representative and confirm the same in writing (i)
when the Registration Statement, as amended, becomes effective, when any post-
effective amendment to the Registration Statement becomes effective and, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A, (ii) of the
issuance by the Commission or any State or other regulatory body of any stop
order or other order, or of the initiation or the threat or contemplation of any
proceeding, the outcome of which may result in the suspension of the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of any proceedings for that
purpose, (iii) of the issuance by the Commission or any State or other
regulatory body of any proceedings for the suspension of the qualification of
any of the Securities for offering or sale in any jurisdiction or of the
initiation or the threat or contemplation of any proceeding for that purpose,
(iv) of the receipt of any comments from the Commission and (v) of any request
by the Commission for any

<PAGE>

amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any State or
other regulatory body shall enter a stop order or other order suspending the
effectiveness of the Registration Statement or preventing or suspending the use
of the Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or suspend such qualification at any time, the Company will make every
effort to obtain promptly the lifting of such order or suspension.

(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) with the Commission, or transmit the
Prospectus by a means reasonably calculated to result in filing the same with
the Commission, pursuant to Rule 424(b)(1) under the Act (or, if applicable and
if consented to by the Representative, pursuant to Rule 424(b)(4)) within the
time period specified in Rule 424(b)(1) (or if applicable, Rule 424(b)(4)) or
shall deliver and shall file with the Commission a Term Sheet (in form and
substance satisfactory to the Representative) in accordance with Rule 434 under
the Act.

(d) The Company will give the Representative notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendments) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use in
connection with the offering of any of the Securities which differs from the
corresponding prospectus on file at the Commission at the time the Registration
Statement becomes effective, whether or not such revised prospectus is required
to be filed pursuant to Rule 424(b) under the Act), and will furnish the
Representative with copies of any such amendment or supplement a reasonable
amount of time prior to such proposed filing or use, as the case may be, and
will not file any such amendment or supplement to which the Representative or
Kaye, Scholer, Fierman, Hays & Handler, LLP, the Underwriters' counsel (the
"Underwriters' Counsel"), shall reasonably object unless the Company's outside
counsel reasonably determines in a written opinion that such amendment or
supplement is required to be filed pursuant to applicable law.

(e) The Company shall use its best efforts, at or prior to the time
the Registration Statement becomes effective, to qualify the Securities for
offering and sale under the securities or "blue sky" laws of such jurisdictions
as the Representative may reasonably designate to permit the continuance of
sales and dealings therein for as long as may be necessary to complete the
distribution, and shall make such applications, file such documents and furnish
such information as may be required for such purpose; PROVIDED, HOWEVER, the
Company shall not be required to qualify as a foreign corporation or to execute
a general consent to service of process in any such jurisdiction. In each
jurisdiction where such qualification shall be effected, the Company will use
its best efforts to file and make such statements or reports at such times as
are or may be required by the laws of such jurisdiction to continue such
qualification.

(f) During the time when a prospectus is required to be delivered
under the Act, the Company shall comply with all requirements imposed upon it by
the Act and the Exchange Act, as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and the Prospectus, or any amendments or

<PAGE>

supplements thereto. If at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event shall have
occurred as a result of which, in the opinion of the Company or counsel for the
Company or the Representative or the Underwriters' Counsel, the Prospectus, as
then amended or supplemented, would include an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, or if it is necessary at any time to amend
or supplement the Prospectus to comply with the Act, the Company will promptly
notify the Representative and prepare and file, at the Company's expense, with
the Commission an appropriate amendment or supplement to the Registration
Statement or an amendment or supplement to the Prospectus which will correct
such statement or omission, or effect such compliance, each such amendment or
supplement to be reasonably satisfactory to the Representative and the
Underwriters' Counsel, and the Company will furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.

(g) As soon as practicable, but in any event not later than forty-
five (45) days after the end of the twelve (12) month period beginning after the
effective date of the Registration Statement occurs, the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) under the Act, and to the Representative, an earnings statement which
will comply with the provisions of Section 11(a) of the Act and Rule 158(a)
promulgated under the Act.

(h) During the five (5) year period commencing on the date hereof, so
long as the Company has securities which are registered under the Act or the
Exchange Act or otherwise publicly tradeable and Common Stock continues to be
outstanding, the Company, at its expense, will furnish to its shareholders, as
soon as practicable, annual reports (including financial statements audited by
independent certified public accountants) and unaudited quarterly reports for
each of the first three (3) fiscal quarters of the Company (such reports,
whether or not the Company is then subject to the periodic reporting
requirements of the Exchange Act, are to be in conformity with the requirements
of the Exchange Act) and will deliver to the Representative:

(i) concurrently with furnishing such quarterly reports to its
shareholders; statements of income of the Company for such quarter in the form
furnished to the Company's shareholders and certified by the Company's principal
financial or accounting officer;

(ii) concurrently with furnishing such annual reports to its
shareholders, a balance sheet of the Company as at the end of the preceding
fiscal year, together with statements of operations, shareholders' equity and
cash flows of the Company for such fiscal year, accompanied by a copy of the
report thereon of independent certified public accountants;

(i) as soon as they are available, copies of all reports
(financial or other) mailed to shareholders;

<PAGE>

(ii)as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD, NASDAQ
or any securities exchange;

(iii)as soon as they are available, all press releases, material
news items or articles of interest to the financial community in respect of the
Company or the Subsidiaries or their affairs which are released or prepared by
or on behalf of the Company or the Subsidiaries; and

(iv)any additional information of a public nature concerning the
Company and the Subsidiaries or their businesses which the Representative may
reasonably request.

During such five (5) year period, if the Company has active Subsidiaries or
is a partner in any restaurant operation, the foregoing financial statements
will be on a consolidated basis to the extent that the accounts of the Company
and its Subsidiaries (including any partnership of which it is a partner) are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary (as defined in the Rules and Regulations) which is not so
consolidated.

(i) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for the Common Stock and will maintain
a Warrant Agent for the Redeemable Warrants.

(j) The Company will furnish to the Representative, without charge
and at such place as the Representative may designate, copies of each
Preliminary Prospectus, the Registration Statement and any pre-effective or
post-effective amendments thereto (two of which will be signed and will include
all financial statements and exhibits, one for the Representative and one for
the Underwriters' Counsel), the Prospectus, and all amendments and supplements
thereto, including any prospectus prepared after the effective date of the
Registration Statement and any Term Sheet, in each case as soon as available and
in such quantities as the Representative may request.

(k) On or before the effective date of the Registration Statement,
the Company shall provide the Representative with true copies of valid, duly
executed, legally binding and enforceable Lock-Up Agreements. On or before the
Closing Date, the Company shall deliver instructions to its transfer agent
authorizing such transfer agent to place appropriate legends on the certificates
representing the securities subject to the Lock-Up Agreements and to place
appropriate stop transfer orders on the Company's ledgers. The Company agrees
that, for a period of twelve (12) months commencing with the effective date of
the Registration Statement, except as contemplated hereby, it shall not, without
the prior written consent of the Representative, issue, sell, grant an option
for the sale of, assign, transfer, pledge, distribute or otherwise dispose of,
directly or indirectly, or agree or offer to do any of the foregoing, any shares
of Common Stock or any option, warrant or other contract right or security
convertible, directly or indirectly, into shares of Common Stock, other than
grants of options under the 1996 Plan as described (including, without
limitation, as to the maximum number of shares of

<PAGE>

Common Stock issuable thereunder) in the Registration Statement and the issuance
of shares of Common Stock upon the exercise of options granted under the 1996
Plan, and that, other than the Securities and the Warrant Shares, such options
represent the only options, warrants or other contract rights or securities
convertible, directly or indirectly, into shares of Common Stock which are
currently outstanding.

(l) Neither the Company nor any of its officers, directors,
shareholders or affiliates (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to illegally stabilize or
manipulate the price of any securities of the Company or which might be expected
to cause or result in, under the Exchange Act or otherwise, the illegal
stabilization or manipulation of the price of any security of the Company.

(m) The Company shall apply the net proceeds from the sale of the
Securities offered to the public in the manner set forth under the caption "Use
of Proceeds" in the Prospectus. No portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the Company.

(n) The Company shall timely file all registrations, reports, forms
or other documents as may be required (including, without limitation, any Form
SR required by Rule 463 under the Act) from time to time under the Act, the
Exchange Act and the Rules and Regulations, all such registrations, reports,
forms and other documents shall comply as to form and substance with the
applicable requirements under the Act, the Exchange Act and the Rules and
Regulations. The Company shall promptly provide to the Representative and, upon
request, the Underwriters copies of such registrations, regulations, reports,
forms or other documents.

(o) The Company shall furnish to the Representative as early as
practicable prior to the date hereof, the Closing Date and each Option Closing
Date, if any, but no later than two (2) full business days prior thereto, a copy
of the latest available unaudited combined interim financial statements of the
Company (which in no event shall be as of a date more than forty-five (45) days
prior to the date hereof, the Closing Date or the relevant Option Closing Date,
as the case may be) which have been read by the Company's independent certified
public accountants, as stated in their letters to be furnished pursuant to
Sections 7(i) and 7(k) hereof.

(p) The Company shall cause the Securities to be quoted on NASDAQ or
some other nationally recognized stock exchange and, for a period of five (5)
years from the date hereof, maintain NASDAQ or such stock exchange listing of
the Securities so long as the Company continues to have securities registered
under the Act or the Exchange Act or otherwise publicly tradeable and Common
Stock continues to be outstanding and shall comply with all registration,
filing, reporting and other requirements of NASDAQ or such stock exchange, which
may from time to time be applicable to the Company.

(q) For a period of five (5) years from the Closing Date, the Company
shall furnish or cause to be furnished to the Representative, upon any and all
reasonable requests of the Representative and at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Common Stock and (ii) a list
of holders of all of the Company's securities.

<PAGE>

(r) For a period of five (5) years from the Closing Date so long as
the Company continues to have securities registered under the Act or the
Exchange Act or otherwise publicly tradeable and Common Stock continues to be
outstanding, the Company shall, at the Company's sole expense, (i) provide the
Representative, upon any and all reasonable requests of the Representative, with
a "blue sky trading survey" for secondary sales of the Company's securities
prepared by counsel to the Company, and (ii) take all necessary and appropriate
actions to further qualify the Company's securities in all jurisdictions of the
United States in order to permit secondary sales of such securities pursuant to
the securities or "blue sky" laws of those jurisdictions, PROVIDED, HOWEVER,
that the Company shall not be required to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction. In the
event that the Company does not comply with the provisions of this Section 4(r),
the Company authorizes the Underwriters' Counsel to take all necessary and
appropriate actions to comply with the provisions of this Section 4(r), at the
Company's sole expense payable in advance, provided that in no event shall the
Company be obligated for expenses in excess of five thousand dollars ($5,000).

(s) As soon as practicable, (i) but in no event more than five (5)
business days before the effective date of the Registration Statement, the
Company shall file a Form 8-A with the Commission providing for the registration
under the Exchange Act of the Securities, which registration shall become
effective concurrently on such effective date, and (ii) but in no event more
than thirty (30) days after the effective date of the Registration Statement,
the Company shall take all necessary and appropriate actions to be included in
Standard & Poor's Corporation Manual and Moody's Investors Services, Inc. Manual
and to continue such inclusion for a period of not less than seven (7) years so
long as the Company has securities which are registered under the Act or the
Exchange Act or otherwise publicly tradeable and Common Stock continues to be
outstanding.

(t) The Company hereby agrees that it will not, for a period of
twenty-four (24) months commencing with the effective date of the Registration
Statement, without the Representative's written approval, (i) adopt, propose to
adopt or otherwise permit to exist any employee, officer, director, consultant
or compensation plan, agreement, understanding or arrangement permitting the
grant, issue, sale or entry into any agreement, understanding or arrangement to
grant, issue or sell any option, warrant or other contract right (x) at an
exercise price that is less than the greater of the initial public offering
price of the Securities as set forth herein and the fair market value per share
of Common Stock on the date of grant or sale or (y) to any of its executive
officers or directors or to any holder of five percent (5%) or more of the
Common Stock or any holder of five percent (5%) or more of the Common Stock as
the result of the exercise or conversion of equivalent securities, including,
without limitation, options, warrants or other contract rights or securities
convertible, directly or indirectly, into shares of Common Stock; (ii) permit
the maximum number of shares of Common Stock or other securities of the Company
purchasable at any time pursuant to options, warrants or other contract rights
or securities convertible, directly or indirectly, into shares of Common Stock
to exceed ten percent (10%) of the outstanding shares unless such action is
approved by at least two independent directors of the Company; (iii) permit the
payment for such securities, including, without limitation, upon the exercise of
any option, warrant or other contract right upon the conversion of

<PAGE>

any security convertible, directly or indirectly, into shares of Common Stock,
with any form of consideration other than cash (other than payments made
pursuant to, and in accordance with, the 1996 Plan); or (iv) permit the
existence of stock appreciation rights, phantom options or similar arrangements.
The provisions of this Section 4(t) shall not apply to grants, issuances or
sales to, or agreements with, the Underwriters or the Representative,
individually and not in its capacity as representative of the Underwriters, or
grants to members of the Company's Stock Option Committee pursuant to, and in
accordance with, the 1996 Plan.

(u) Until the completion of the distribution (as such term would be
applied under Rule 10b-6 promulgated under the Exchange Act) of the Firm
Securities and, if applicable, the Option Securities to the public, the Company
shall not, without the prior written consent of the Representative, issue,
directly or indirectly, any press release or other communication or hold any
press conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in the ordinary course of
the Company's business consistent with past practices with respect to the
Company's operations or except as required by law as advised to the Company by
its outside counsel.

(v) Prior to the earlier of (i) the date which is seven (7) years
from the date hereof and (ii) the date of the completion of the sale to the
public of all of the Representative's Securities, the Company will not take any
action or actions which may prevent or disqualify the Company's use of Form SB-2
(or other appropriate form) for the registration under the Act of the
Representative's Securities.

(w) For a period of five (5) years after the effective date of the
Registration Statement, the Company shall cause one (1) individual selected from
time-to-time by the Representative individually and not in its capacity as
representative of the Underwriters, to be nominated to be a director of the
Company, if requested by the Representative. The Company shall provide the
Representative with reasonable notification of any meeting of the Company's
board of directors held expressly for the purpose of nominating directors to the
Company's board of directors so as to allow the Representative adequate time to
select, if desired, an individual to be nominated as a director of the Company.
In the event that the Representative shall not have designated such individual
at the time of any meeting of the Company's board of directors held expressly
for the purpose of nominating directors to the Company's board of directors or
in the event that such individual has not been elected or is unavailable to
serve, the Company shall provide the Representative with reasonable notification
of each meeting of its board of directors and, in such event, an individual
selected by the Representative shall be permitted to attend all meetings of the
Company's board of directors as a non-voting advisor and to receive all notices
and other correspondence and communications sent by the Company to members of
its board of directors. Such director or advisor shall receive no more or less
compensation than is paid to other non-officer directors of the Company for
attendance at meetings of the Company's board of directors, and such director or
advisor shall be entitled to receive reimbursement for all reasonable costs
incurred in attending such meetings, including, without limitation, food,
lodging and transportation in accordance with the policy established by the
independent members of the Board of Directors. The Company hereby agrees to
indemnify and hold such director or advisor harmless, to the maximum extent
permitted by law, against any and all actions, suits,

<PAGE>

proceedings, inquiries, arbitrations, investigations, litigation, governmental
or other proceedings and awards and judgments arising out of such individual's
service as a director or advisor and, in the event the Company maintains a
liability insurance policy affording coverage for the acts of its officers or
directors, and/or in the event that the Company has entered into an
indemnification agreement with any of its officers or directors, the Company
agrees to include such director or advisor as an insured, if possible, under
such insurance policy and/or to enter into an indemnification agreement with
such director or advisor which is at least as favorable to such individual as
any indemnification agreement that the Company has entered into with any of its
officers or directors. The rights and benefits of such indemnification and the
benefits of such insurance, if possible, shall, to the maximum extent possible,
extend to the Representative insofar as the Representative may be or may be
alleged to have any obligation or liability in connection with an action or
inaction of such director or advisor.

(x) For a period of thirty-six (36) months after the effective date
of the Registration Statement, the Company shall not, without the written
consent of the Representative, restate, amend, modify or otherwise alter any
term of any written employment, consulting or similar agreement entered into
between the Company and any officer, director or key employee as of the
effective date of the Registration Statement in a manner which is more favorable
to such officer, director or key employee. For a period of thirty-six (36)
months from the effective date of the Registration Statement, neither the
Company or any Subsidiary shall enter into a written employment, consulting or
similar agreement with any officer, director or key employee with whom the
Company has entered into a written employment, consulting or similar agreement
as of the effective date of the Registration Statement other than the renewal of
such agreement on terms which are no more favorable to such officer, director or
key employee unless agreed upon in writing by the Representative.

(y) For a period of seven (7) years from the effective date of the
Registration Statement, the Company and the Subsidiaries shall obtain and
maintain insurance policies, including, without limitation, general liability,
property, and personal liability insurance, and surety bonds which insure such
entities, their employees and patrons and such other persons to whom such
entities may become liable against such losses and risks generally insured
against by comparable businesses.

(z) For a period of five (5) years from the date hereof, the Company
will retain Coopers & Lybrand (or such other nationally-recognized accounting
firm qualified to practice in front of the Commission as is reasonably
acceptable to the Representative) as its independent certified public
accountants and, during such period, the Company will promptly submit to the
Representative copies of all accountant's management reports, Company
representation letters and similar correspondence between the Company's
accountants and the Company.

5. PAYMENT OF EXPENSES.

(a) The Company hereby agrees to pay (such payment to be made on
the Closing Date as part of the closing on such date and on each Option
Closing Date as part of the

<PAGE>

closing on such date (to the extent not paid on the Closing Date or a
previous Option Closing Date)) all expenses and fees (other than fees of the
Underwriters' Counsel not specifically provided for in this Section 5)
incident to the issuance, offer, sale and delivery of the Securities and the
performance of the obligations of the Company under this Agreement, the
Warrant Agreement and the Representative's Warrant Agreement, including,
without limitation, (i) the fees and expenses of accountants and counsel for
the Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing (including mailing and handling charges),
filing, delivery and mailing (including the payment of postage with respect
thereto) of each Preliminary Prospectus, the Registration Statement and the
Prospectus and any amendments and supplements thereto and the printing,
mailing (including the payment of postage with respect thereto) and delivery
of this Agreement, the Warrant Agreement, all other underwriting documents,
the Representative's Warrant Agreement and agreements with selected dealers,
and related documents, including the cost of all copies thereof and of each
Preliminary Prospectus and of the Prospectus and any amendments thereof or
supplements thereto supplied to each of the Underwriters and such dealers as
the Underwriters may request, in such quantities as the Underwriters may
reasonably request, (iii) all costs and expenses (including issue and
transfer taxes) incurred in connection with the printing, engraving,
issuance, sale and delivery of the Securities, including (y) the consummation
by the Company of any of its obligations under this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement and (z) the resale of
the Securities by each of the Underwriters in connection with the
distribution contemplated hereby, (iv) all fees, costs and expenses (which
shall not exceed forty-five thousand dollars ($45,000)) incurred in
connection with the qualification of the Securities under state securities or
"blue sky" laws and the determination of the status of such securities under
legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and
the "Legal Investments Survey," if any, (v) the fees, costs and expenses
incurred in connection with any required filing with the NASD and obtaining a
determination from the NASD with respect to the fairness and reasonableness
of the underwriting terms and arrangements and disbursements and fees and
expenses of Kaye, Scholer, Fierman, Hays & Handler, LLP in connection with
such determinations, filings, documents and qualifications of the Securities,
(vi) all advertising costs and expenses, including costs and expenses in
connection with "road shows," information meetings and presentations, bound
volumes and prospectus memorabilia and "tombstone" advertisements, (vii) all
costs and expenses incurred in connection with any necessary due diligence
investigations by an independent third party, subject to the Company's prior
approval which approval shall not be unreasonably withheld, including the
fees of any independent counsel (other than Kaye, Scholer, Fierman, Hays &
Handler, LLP) or consultants, (viii) the fees and expenses of a transfer
agent and registrar for the Securities, (ix) the fees payable to the
Commission and (x) the fees and expenses incurred in connection with the
listing of the Securities on NASDAQ and any other exchange.

(b) If this Agreement is terminated by the Underwriters in accordance
with the provisions of Section 6 or 11 hereof, by the Underwriters in accordance
with a reasonable application of Section 10(a) hereof or the transactions
contemplated hereby are not consummated by the Company for any reason, the
Company shall reimburse and indemnify the Underwriters for all of their actual
out-of-pocket expenses, including, without limitation, all of the fees and

<PAGE>

disbursements of Underwriters' Counsel (including, without limitation, the fees
of the Underwriters' Counsel specifically provided for herein).

(c) The Company further agrees that, in addition to the expenses
payable pursuant to Section 5(a) hereof, they will pay to you, individually and
not in your capacity as the Representative, on the Closing Date by certified or
bank cashier's check, or, at your election, by deduction from the proceeds of
the offering of the Firm Securities, a non-accountable expense allowance equal
to three percent (3%) of the gross proceeds received by the Company from the
sale of the Firm Securities. In the event the Underwriters elect to exercise
all or any part of the over-allotment option described in Section 3(b) hereof,
the Company further agrees to pay to the Representative, individually and not in
its capacity as representative of the Underwriters, on each Option Closing Date,
by certified or bank cashier's check, or, at your election, by deduction from
the proceeds of the Option Securities purchased on such Option Closing Date, a
non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of such Option Securities.

6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of each
of the Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date and each Option Closing Date, if
any, of the statements of officers of the Company made and certificates of
officers of the Company delivered pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Option Closing
Date, if any, of all of its covenants and obligations hereunder and to the
following further conditions:

(a) The Registration Statement shall have become effective not later
than 5:00 p.m., New York time, on the date of this Agreement or such later date
and time as shall be consented to in writing by the Representative, and, at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceedings for that purpose shall have been initiated or shall be
pending, threatened or contemplated by the Commission or any State or other
regulatory body and any request on the part of the Commission or any State or
other regulatory body for additional information shall have been complied with
to the reasonable satisfaction of the Representative and the Underwriters'
Counsel. If the Company has elected to rely upon Rule 430A under the Act, the
price of the Securities and any price-related information previously omitted
from the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) under the
Act within the prescribed time period or shall have been delivered and shall
have been filed with the Commission as required by Rule 434 under the Act, as
applicable, and, prior to the Closing Date, the Company shall have provided
evidence satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A
under the Act. Neither the Registration Statement nor the Prospectus nor any
amendment thereto or supplement thereof (including a Term Sheet) shall have been
filed to which the Representative shall have reasonably

<PAGE>

objected after it shall have had the chance to review such amendment or
supplement unless the Company's outside counsel reasonably determines in a
written opinion that such amendment or supplement is required to be filed
pursuant to applicable law.

(b) No Underwriter shall have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or that the Prospectus,
or any amendment or supplement thereto, contains an untrue statement of fact
which, in the Representative's opinion, is material, or omits to state a fact
which, in the Representative's opinion, is material and is required to be stated
therein or is necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.

(c) On or prior to the Closing Date, the Representative shall have
received from the Underwriters' Counsel such opinion or opinions with respect to
the organization of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and such other related matters as the
Representative may request and the Underwriters' Counsel shall have received
such papers and information as it may request in order to enable it to pass upon
such matters.

(d) At the Closing Date, the Representative shall have received the
favorable opinion of Jeffer, Mangels, Butler & Marmaro LLP, counsel to the
Company, dated the Closing Date, addressed to the Representative, in form and
substance satisfactory to the Underwriters' Counsel and subject to customary
qualifications and conditions, to the effect that:

[TO CONFORM TO REVISED VERSION OF JEFFER, MANGELS OPINION (PREVIOUSLY
DISTRIBUTED)]

(i) each of the Company and the Subsidiary (A) has been
duly organized and is validly existing as a corporation, in good standing
under the laws of the respective jurisdiction of its incorporation, (B) is
duly qualified and licensed and in good standing as a foreign corporation in
each jurisdiction in which it owns or leases property or in which the conduct
of its business requires such qualification or licensing, and (C) has all
requisite power and authority to own or lease its properties and conduct its
business as described in the Prospectus; to such counsel's knowledge, the
Company and the Subsidiary are doing business in compliance with, all
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from all governmental or regulatory officials, agencies,
authorities and bodies necessary to own or lease its properties and conduct
its business as described in the Prospectus other than those authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental or regulatory officials, agencies, authorities and bodies
which, singularly or in the aggregate, the failure to obtain would not
materially and adversely affect the condition (financial or otherwise),
earnings, business affairs, position, prospects, shareholders' equity,
operations, properties, businesses or results of operations of the Company
and the Subsidiary taken as a whole; and are and have been operating their
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and

<PAGE>

all federal, state and local laws, rules, regulations and orders; and, to
such counsel's knowledge, neither the Company nor the Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
such authorization, approval, order, license, certificate, franchise or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
condition (financial or otherwise), earnings, business affairs, position,
prospects, shareholders' equity, operations, properties, businesses or
results of operation of the Company and the Subsidiary taken as a whole. To
such counsel's knowledge, the statements in the Registration Statement
concerning the effects of federal, state and local laws, rules,
regulations and orders on the Company's and the Subsidiary's businesses as
currently conducted and as contemplated are correct in all respects and do not
omit to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading;

(ii) the Company owns of record one hundred percent (100%)
of the outstanding capital stock of the Subsidiary; and neither the Company
nor any Subsidiary owns any other interest in any corporation, partnership,
joint venture, trust or other business entity other than;

(iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any amendment
or supplement thereto, under "Capitalization" and "Description of Securities"
and will have the adjusted capitalization set forth therein in the Closing
Date and the Option Closing Date, if any, based upon the assumptions set
forth therein; and, neither the Company nor the Subsidiary is a party to or
bound by any instrument, agreement or other arrangement or understanding
providing for or requiring it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement, the Representative's
Warrant Agreement and the 1996 Plan as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company conform
in all respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding
securities (including, without limitation, any ownership interest in any
Subsidiary) of the Company and the Subsidiary have been duly authorized and
validly issued and are fully paid and non-assessable; the holders thereof
have no rights of rescission with respect thereto and are not subject to
personal liability by reason of being such holders; and none of such
securities was issued in violation of the preemptive or other similar rights
of any holders of any security of either the Company or the Subsidiary. The
Company has not entered into any agreements or understandings pursuant to
which any third party has the right to acquire from the Company any
securities of the Subsidiary owned by the Company. The Shares are not and
will not be subject to any preemptive or other similar rights of any
shareholder, have been duly authorized and, when issued, paid for and
delivered, or when paid for and delivered, as applicable, in accordance with
the terms hereof or the Representative's Warrant Agreement, as applicable,
will be validly issued, fully paid and non-assessable and conform to the
description thereof contained in the Prospectus; the holders thereof will not
be subject to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue, sale and delivery of the
Shares has been duly and validly taken; and the certificates representing the
Shares are in due and proper form. The Representative's Warrant constitutes
valid and binding obligations of the Company to issue and sell, upon exercise
thereof and payment therefor, the

<PAGE>

number and type of securities of the Company called for thereby, which
obligations are enforceable against the Company in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law). Upon the issuance and delivery pursuant to the
terms hereof and of the Representative's Warrant Agreement of the Shares to be
sold by the Company hereunder and thereunder, the Underwriters and the
Representative, as applicable, will acquire good and marketable title to such
Shares, free and clear of any lien, charge, claim, encumbrance, pledge,
security, interest, defect or other restriction or equity of any kind
whatsoever. No transfer tax, stamp duty or other similar tax, fee or duty is
payable by or on behalf of any of the Underwriters or the Representative, as
applicable, in connection with (A) the issuance by the Company of the Shares,
(B) the purchase by the Underwriters of the Shares from the Company or (C) the
consummation of any of the transactions contemplated by this Agreement, the
Representative's Warrant Agreement, the Registration Statement or the
Prospectus;

(iv) the Registration Statement is effective under the Act,
and, if applicable, filing of all pricing information has been timely made in
the appropriate form under Rule 430A under the Act or under Rule 434 under
the Act, and no stop order suspending the use of the Preliminary Prospectus,
the Registration Statement or the Prospectus or any part of any thereof or
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act;

(v) each Preliminary Prospectus, the Registration Statement
and the Prospectus, and any amendments or supplements thereto (other than the
financial statements and schedules and other financial and statistical data
included therein or omitted therefrom, as to which no opinion need be
rendered), comply as to form in all material respects with the requirements
of the Act and the Rules and Regulations;

(vi) to such counsel's knowledge, (A) there are no
agreements, contracts or other documents required by the Act to be described
in the Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement (or required to be filed under the Exchange Act if
upon such filing they would be incorporated, in whole or in part, by
reference therein) other than those described in the Registration Statement
and the Prospectus and filed as exhibits to the Registration Statement; (B)
the descriptions in the Registration Statement and the Prospectus, and any
supplement or amendment thereto, of agreements, contracts and other documents
to which the Company or any Subsidiary is a party or by which any of them are
bound are accurate and fairly represent the information required to be shown
by Form SB-2; (C) there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental or other proceeding (including,
without limitation, those pertaining to environmental, health or similar
matters) pending, contemplated or threatened to which the Company or the
Subsidiary is subject or to which any property or assets (tangible or
intangible) of the Company or the Subsidiary is subject, which (x) is
required to be disclosed in the

<PAGE>

Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
respects) or (y) questions the validity of the capital stock of the Company or
the Subsidiary or of this Agreement or the Representative's Warrant Agreement or
of any actions or transactions contemplated by this Agreement, the
Representative's Warrant Agreement, the Registration Statement or the Prospectus
or (z) might materially and adversely effect the condition (financial or
otherwise), earnings, business affairs, position, property, shareholders'
equity, operations, properties, businesses or results of operations of the
Company or the Subsidiary or the ability of the Company to perform its
obligations under this Agreement and the Representative's Warrant Agreement; and
(D) no law, statute, judgment, decree, rule, regulation or order or legal or
governmental proceeding required to be described in the Prospectus is not
described as required;

(vii) the Company has full legal right, power and authority
under its articles of incorporation and bylaws, to authorize, issue, deliver
and sell the Shares, to enter into each of this Agreement and the
Representative's Warrant Agreement and to consummate the transactions
contemplated herein, therein, in the Registration Statement and in the
Prospectus; and each of this Agreement and the Representative's Warrant
Agreement has been duly authorized, executed and delivered by the Company.
Each of this Agreement and the Representative's Warrant Agreement, assuming
due authorization, execution and delivery by the Representative, as
Representative and individually, respectively, constitutes a legal, valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action, legal or
equitable, and except as rights to indemnity or contribution may be limited
by applicable law). Neither the issuance, delivery and sale of the Shares,
execution, delivery or performance of this Agreement and the Representative's
Warrant Agreement, the consummation of the transactions contemplated herein,
therein, in the Registration Statement and in the Prospectus, or the conduct
of the Company's businesses as described in the Registration Statement, the
Prospectus and any amendments or supplements thereto, conflicts or will
conflict with, or results or will result in any breach or violation of any of
the terms or provisions of, or constitutes or will constitute (with notice,
the lapse of time or both) a default under, or results in or will result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind
whatsoever upon any property or assets (tangible or intangible) of the
Company or the Subsidiary pursuant to the terms of (A) the certificate of
incorporation or bylaws of the Company or the Subsidiary, (B) any license,
contract, indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreement, shareholders' agreement, purchase order, note,
loan or credit agreement or any other material agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement
or instrument to which the Company or the Subsidiary is a party or by which
any of them are or may be bound or to which any of their properties or assets
(tangible or intangible) are or may be subject or (C) any law, statute,
judgment, decree, order, rule or regulation applicable to the Company or the
Subsidiary of any arbitrator, court, regulatory body or administrative agency
or other governmental agency or body having jurisdiction over the Company or
any Subsidiary or any of their respective activities or properties;

<PAGE>

(viii) no consent, approval, authorization, registration,
qualification or order of, and no filing with, any court, administrative agency
or other government or regulatory official, agency, authority or body is
required in connection with the issuance, delivery and sale of the Shares, the
performance of this Agreement and the Representative's Warrant Agreement or the
consummation of the transactions contemplated hereby, thereby, by the
Registration Statement and by the Prospectus, other than such as may be required
under the securities or "blue sky" laws of any State and the rules and
regulations of the NASD and the Commission, as to which no opinion need be
rendered;

(ix) the properties and businesses of the Company and the
Subsidiary conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus;

(x) to such counsel's knowledge, neither the Company nor
any Subsidiary is in breach of, or in default under, and no event has
occurred which, with notice, lapse of time or both, would constitute a
default of, any term, covenant, condition or provision of any license,
contract, indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreement, shareholders' agreement, purchase order, note,
loan or credit agreement or any other material agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement
or instrument to which the Company or the Subsidiary are parties or by which
they are or may be bound or to which their properties or assets (tangible or
intangible) are or may be subject; and neither the Company nor the Subsidiary
is in violation of any term, covenant, condition or provision of its
certificate of incorporation or bylaws or limited partnership agreement, as
applicable, or in violation of any franchise, license, permit, judgment,
decree, order, law, statute, rule or regulation to which it or any of its
properties or assets (tangible or intangible) are subject;

(xi) the statements in the Prospectus under "Prospectus
Summary," "Risk Factors," "Business," "Management," "Principal Shareholders,"
"Selling Security Holders," "Certain Transactions," "Description of Capital
Stock," "Shares Eligible for Future Sale" and "Underwriting" have been
reviewed by such counsel, and insofar as they refer to statements of law,
descriptions of statutes, licenses, rules, regulations or legal conclusions,
are correct in all material respects;

(xii) neither the Company nor the Subsidiary owns, holds or
uses any trademarks, trade names, service marks, service names, copyright or
patents which, individually or in the aggregate, are material to its
condition (financial or otherwise), earnings, business affairs, position,
prospects, shareholders' equity, operations, properties, businesses or
results of operations, and, except as disclosed in the Prospectus, no such
used trademarks, trade names, service marks, service names, copyrights or
patents are in dispute or are in conflict with any right of any other person
or entity.

(xiii) other than with respect to the Non- Affiliated Selling
Shareholder Shares, to such counsel's knowledge, no person, corporation,
trust, partnership, association or other entity has the right to include or
register any securities of the Company in the Registration

<PAGE>

Statement, require the Company to file any registration statement or, if filed,
to include any security in such registration statement; and no person,
corporation, trust, partnership, association or other entity holds any
antidilution rights with respect to any securities of the Company;

(xiv) to such counsel's knowledge, except as described in the
Registration Statement and the Prospectus, there are no claims, payments,
issuances, arrangements or understandings, whether oral or written, for
services in the nature of a finder's fee, brokerage fee, origination fee or
otherwise with respect to the offerings contemplated by the Agreement, the
Representative's Warrant Agreement, the Registration Statement and the
Prospectus or any other arrangements, agreements, understandings, payments or
issuances that may affect the Underwriters' compensation, as determined by
the NASD other than as the Representative itself may have agreed to with
third parties;

(xv) to such counsel's knowledge, except as set forth in the
Prospectus under "Certain Transactions," no officer, director or shareholder
of the Company or the Subsidiary, and no affiliate or associate (as those
terms are defined in the Rules and Regulations) of any of the foregoing
persons or entities, has or has had, either directly or indirectly, (A) an
interest in any person or entity which (x) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold
by the Company or the Subsidiary or (y) purchases from or sells or furnishes
to the Company or the Subsidiary any products or services or (B) a beneficial
interest in any contract or agreement to which the Company or the Subsidiary
is a party or by which the Company or the Subsidiary or any property or asset
(tangible or intangible) of the Company or any Subsidiary may be bound or
affected. To such counsel's knowledge, except as set forth in the
Prospectus, there are no existing agreements, arrangements, understandings or
transactions, or proposed agreements, arrangements, understandings or
transactions, between or among the Company or the Subsidiary and any officer,
director of the Company or the Subsidiary or any person listed in the
"Principal Shareholder" section of the
Prospectus, or any affiliate or associate of any of the foregoing persons or
entities;

(xvi) the minute books of the Company and the Subsidiary have
been made available to the Representative and, to such counsel's knowledge,
contain a complete summary of all meetings and actions of the directors,
including any committee thereof, and shareholders of the Company and the
Subsidiary since the time of their incorporation or formation and reflect all
transactions referred to in such minutes accurately in all respects.

Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and the
Subsidiary, representatives of the independent certified public accountants for
the Company, representatives of the Representative and representatives of the
Underwriters' Counsel, at which conferences such counsel made inquires of such
officers, such other representatives of the Company and the Subsidiary and
representatives of such accountants and discussed the contents of each
Preliminary Prospectus, the Registration Statement, the Prospectus and related
matters and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus (except as and to the extent stated in (xi) above), on the basis of
the foregoing and

<PAGE>

such counsel's participation in the preparation of each Preliminary Prospectus,
the Registration Statement and the Prospectus, no facts have come to the
attention of such counsel which leads it to believe that either the Registration
Statement or any amendment thereto, at the time such Registration Statement or
amendment became effective or as of the Closing Date (or the Option Closing
Date, as the case may be) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus or any
supplement thereto, at the date of each such Prospectus or supplement and at the
Closing Date (or the Option Closing Date, as the case may be) contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no opinion with respect to the financial
statements and schedules and other financial and statistical data included in or
omitted therefrom in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any supplements or amendments thereto).

In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which it is admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance satisfactory to the Underwriters'
Counsel) of other counsel, acceptable to the Underwriters' Counsel, familiar
with the applicable laws; and (B) as to matters of fact, to the extent it deems
proper, on certificates and written statements of responsible officers of the
Company and certificates or other written statement of officers of departments
of various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company or the Subsidiary, provided that
copies of any such opinions, statements or certificates shall be delivered to
the Representative and the Underwriters' Counsel. The opinion of such counsel
for the Company shall state that the opinion of any such other counsel is in
form satisfactory to such counsel and that the Underwriters and the
Underwriters' Counsel are justified in relying thereon.

At each Option Closing Date, if any, the Representative shall
have received the favorable opinion of Jeffer, Mangels, Butler & Marmaro LLP,
counsel to the Company, dated such Option Closing Date, addressed to the
Representative and in form and substance satisfactory to Underwriters' Counsel
confirming as of such Option Closing Date the statements made by Jeffer,
Mangels, Butler & Marmaro LLP in its opinion delivered on the Closing Date.

(e) On or prior to each of the Closing Date and each Option
Closing Date, if any, the Underwriters' Counsel shall have been furnished with
such documents, certificates and opinions as it may reasonably require for the
purpose of enabling it to review or pass upon the matters referred to in Section
6(c) hereof, or in order to evidence the accuracy, completeness or satisfaction
of any of the representations, warranties or conditions of the Company or the
Subsidiaries herein contained.

(f) Prior to the Closing Date and each Option Closing Date, if
any, (i) there shall have been no adverse change

<PAGE>

or development involving a prospective adverse change in the condition
(financial or otherwise), earnings, business affairs, position, prospects,
shareholders' equity, operations, properties, businesses or results of
operations of the Company or the Subsidiaries from the latest dates as of which
such matters are set forth in the Registration Statement and the Prospectus;
(ii) there shall have been no transaction, not in the ordinary course of
business and consistent with past practices, entered into by the Company or the
Subsidiaries, from the latest date as of which the financial condition of the
Company or the Subsidiaries is set forth in the Registration Statement and the
Prospectus, which may in any way be adverse to the Company or the Subsidiaries;
(iii) neither the Company nor the Subsidiaries shall be in default, and no event
shall have occurred which, with notice, lapse of time or both, would constitute
a default, under any provision of any agreement, instrument or other document
relating to any outstanding indebtedness; (iv) neither the Company nor the
Subsidiaries shall have issued any securities (other than the Securities) or
declared or paid any dividend or made any distribution in respect of its capital
stock of any class, and there shall not have been any change in the capital
stock, or any change in the debt (long- or short-term) or liabilities or
obligations (contingent or otherwise), of the Company or the Subsidiaries; (v)
no material amount of the property or assets (tangible or intangible) of the
Company or the Subsidiaries shall have been pledged, mortgaged or otherwise
encumbered; and (vi) no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental or other proceeding (including,
without limitation, those pertaining to environmental, health or similar
matters) shall be pending, contemplated or threatened (or circumstances giving
rise to same) to which the Company or the Subsidiaries is subject or to which
any property or assets (tangible or intangible) of the Company or the
Subsidiaries are subject wherein an unfavorable decision, ruling or finding may
materially adversely affect the condition (financial or otherwise), earnings,
business affairs, position, prospects, shareholders' equity, operations,
properties, businesses or results of operations of the Company or the
Subsidiaries taken as a whole, except as set forth in the Registration Statement
and Prospectus and except for debts, liabilities and obligations incurred in (A)
the normal course of business consistent with past practices.

(g) At the Closing Date and each Option Closing Date, if any,
the Representative shall have received a certificate of the Company signed by
the principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or such Option Closing Date, as
the case may be, to the effect that each of such persons has carefully examined
the Registration Statement, the Prospectus and this Agreement, and that:

(i) the representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the Closing
Date or such Option Closing Date, as the case may be, and the Company and the
Subsidiaries have complied with all agreements and covenants and satisfied
all conditions contained in this Agreement on their part to be performed or
satisfied at or prior to the Closing Date or such Option Closing Date, as the
case may be;

(ii) no stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been initiated or are pending, contemplated
or threatened;

<PAGE>

(iii) the Registration Statement, the Prospectus and each
amendment and supplement thereto, if any, contain all statements and
information required to be included therein, and neither the Registration
Statement nor any amendment thereto, at the time such Registration Statement
or amendment became effective and as of the date of such certificate included
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and neither any Prospectus nor any supplement thereto, at the date
of such Prospectus or supplement thereto and at the date of such certificate,
included any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; and

(iv) subsequent to the latest respective dates as of
which information is given in the Registration Statement and the Prospectus,
(A) neither the Company nor the Subsidiaries have incurred any liabilities or
obligations, direct, indirect or contingent, other than in the ordinary
course of business, (B) neither the Company or any Subsidiary paid or
declared any dividends or other distributions on its capital stock or other
ownership interests; (C) neither the Company or any Subsidiary has entered
into any transactions not in the ordinary course of business; (D) there has
not been any change in the capital stock, long-term debt or short-term debt
(other than any increase in short-term debt in the ordinary course of
business) of the Company or any Subsidiary; (E) other than ordinary wear and
tear, neither the Company nor any Subsidiary has sustained any material loss
or damage to its property or assets (tangible and intangible), whether or not
insured; (F) there is no litigation which is pending, threatened or
contemplated (or circumstances giving rise to same) against the Company or
any Subsidiary which is required to be set forth in an amended or
supplemented Prospectus which has not been so set forth; and (G) there has
occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth.

References to the Registration Statement and the Prospectus in this Section 6(g)
are to such documents as amended and supplemented at the date of such
certificate.

(h) By the Closing Date, the Representative shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, in the amount as described in the Registration Statement.

(i) At or prior to the time this Agreement is executed, the
Representative shall have received a letter, dated such date, addressed to the
Representative and in form and substance satisfactory in all respects to the
Representative from Coopers & Lybrand:

(i) confirming that it is an accounting firm of
independent certified public accountants with respect to the Company or the
Subsidiaries within the meaning of the Act and the Rules and Regulations;

(ii) stating its opinion that the combined financial
statements and schedules of the Company or the Subsidiaries included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the

<PAGE>

Rules and Regulations and that each of the Underwriters may rely upon the
opinion of Coopers & Lybrand with respect to such combined financial statements
and schedules included in the Registration Statement;

(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited combined interim
financial statements of the Company or the Subsidiaries (with an indication
of the date of the latest available unaudited combined interim financial
statements), a reading of the latest available minutes of the shareholders
and the board of directors, including any committees of the board of
directors, of the Company or the Subsidiaries ,consultations with officers
and other employees of the Company or the Subsidiaries responsible for
financial and accounting matters and other specified procedures and
inquiries, nothing has come to its attention which would lead it to believe
that (A) the unaudited combined financial statements and schedules of the
Company or the Subsidiaries included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting principles applied
on a basis substantially consistent with that of the audited combined
financial statements of the Company or the Subsidiaries included in the
Registration Statement or (B) at a specified date not more than five (5) days
prior to the effective date of the Registration Statement, there has been any
change in the capital stock, short-term debt or long-term debt of the Company
or the Subsidiaries, or any decrease in the shareholders' equity or net
current assets or net assets of the Company or the Subsidiaries as compared
with amounts shown in the June 30, 1996 balance sheet included in the
Registration Statement or, if there was any change or decrease, setting forth
the amount of such change or decrease, or (C) during the period from July 1,
1996 to a specified date not more than five (5) days prior to the effective
date of the Registration Statement, there was any decrease in revenues, net
income or net earnings per share of Common Stock, in each case as compared
with the corresponding period in the immediately preceding year, or, if there
was any such decrease, setting forth the amount of such decrease;

(iv) stating that it has compared specific dollar
amounts, numbers of shares, percentages, statements and other financial
information pertaining to the Company or the Subsidiaries set forth in the
Registration Statement, in each case to the extent that such amounts,
numbers, percentages, statements and information may be derived from the
general accounting records, including work sheets or analysis, of the Company
or the Subsidiaries, with the results obtained from the application of
specific readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement;

(v) stating it has reviewed the internal controls of
the Company or the Subsidiaries and that, it has not noted or brought to the
attention of any of the management of the Company or any Subsidiary any
"weakness," as defined in Statement of Auditing Standard No. 60 (entitled
"Communication of Internal Control Structure Related Matters Noted in an
Audit"), in any of the Company's, Subsidiaries' internal controls;

<PAGE>

(vi) stating it has read the unaudited combined financial
statements referred to in Section 4(o) hereof; and

(vii) statements as to such other matters as the
Representative may request.

(j) At the Closing Date and each Option Closing Date, if any,
the Representative shall have received from Coopers & Lybrand a letter, dated as
of the Closing Date or such Option Closing Date, as the case may be, to the
effect that (i) it reaffirms that statements made in the letter furnished
pursuant to Section 6(i) hereof, (ii) if the Company has elected to rely on Rule
430A under the Act, to the further effect that it has carried out procedures as
specified in clause (iv) of such Section 6(i) with respect to certain amounts,
numbers, percentages, statements and other financial information as specified by
the Representative and deemed to be a part of the Registration Statement
pursuant to Rule 430A(b) and has found such amounts, numbers, percentages,
statements and other financial information to be in agreement with the documents
specified in such clause (iv); and (iii) it has read the unaudited combined
financial statements referred to in Section 4(o) hereof.

(k) On the Closing Date and each Option Closing Date, if any,
there shall have been duly tendered to the Representative the appropriate number
of Securities.

(l) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to Section 4(e) hereof
shall have been issued on either the Closing Date or any Option Closing Date,
and no proceedings for that purpose shall have been initiated or shall be
pending, contemplated or threatened.

(m) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, individually and not in its
capacity as representative of the Underwriters, the Representative's Warrant
Agreement, substantially in the form filed as Exhibit 4.2 to the Registration
Statement. The executed versions of the Representative's Warrant Agreement
shall be satisfactory to the Representative.

(n) On or before the effective date of the Registration
Statement, the Securities shall have been duly approved for quotation on the
NASDAQ and a delay of trading of the Securities for two days after the Closing
Date shall have been approved by the NASDAQ.

(o) On or before the effective date of the Registration
Statement, there shall have been delivered to the Representative all of the
Lock-Up Agreements, in form and substance satisfactory to the Underwriters'
Counsel.

(p) The Company or the Subsidiaries shall provide the
Representative with such additional documents and certificates as the
Representative may reasonably request.

<PAGE>

If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or at any Option Closing Date, as the
case may be, is not so fulfilled, the Underwriters may terminate this Agreement,
without liability to any of the Underwriters, or, if the Representative so
elects in its sole discretion, it may waive any such conditions which have not
been fulfilled or extend the time for their fulfillment.

7. INDEMNIFICATION AND CONTRIBUTION.

(a) The Company agrees to indemnify and hold harmless each
Underwriter (for purposes of this Section 7, "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of each
Underwriter), and each person, if any, who controls any of the Underwriters,
as applicable ("controlling person"), within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, from and against any and all
losses, claims, damages, expenses (including, without limitation, reasonable
attorneys' fees and expenses) or liabilities and all actions, suits,
proceedings, inquiries, arbitrations, investigations, litigation or
governmental or other proceedings (in this Section 7, collectively,
"actions") in respect thereof, whatsoever (including, without limitation, any
and all expenses whatsoever reasonably incurred in investigating, preparing
or defending against any action, commenced or threatened, or any claim
whatsoever), as such are incurred, to which any Underwriter, or such
controlling person may become subject under the Act, the Exchange Act or any
other statute or at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained (i)
in any Preliminary Prospectus, the Registration Statement or the Prospectus
(as from time to time amended and supplemented); (ii) in any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included securities of the Company issued or issuable upon exercise
of the Securities; (iii) in any application or other document or written
communication (in this Section 7, collectively, "application") executed by
the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Securities under the securities or "blue
sky" laws thereof or filed with the Commission, any state securities
commission or agency, the NASD or NASDAQ or any other securities exchange; or
the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of the Prospectus, in light of the circumstances in which they were
made), unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by the
Representative with respect to an Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case
may be. In addition to its other obligations under this Section 7(a), the
Company agrees that, as an interim measure during the pendency of any action
arising out of or based upon any untrue statement or omission, or alleged
untrue statement or alleged omission as described in this Section 7(a), it
will reimburse each Underwriter (and, to the extent applicable, each
controlling person), on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such
action, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Company's obligations to reimburse each
Underwriter, as applicable (and, to the extent applicable, each controlling
person), for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent

<PAGE>

jurisdiction. To the extent that any such interim reimbursement is so held to
have been improper as to the Company, each Underwriter, as applicable (and, to
the extent applicable, each controlling person), shall promptly return it to the
Company together with interest compounded daily, based on the "reference rate"
announced from time to time by Bank of American NTSA (the "Prime Rate"). Any
such interim reimbursement payments which are not made to an Underwriter, or a
controlling person, as applicable, within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.

The indemnity agreement in this Section 7(a) shall be in addition to
any liability which the Company may have at common law or otherwise.

(b) Each Underwriter severally, but not jointly, agrees to
indemnify and hold harmless the Company (for purposes of this Section 7,
"Company" shall include the officers, directors, partners, employees, agents
and counsel of the Company), and each other person, if any, who control the
Company ("controlling person") within the meaning of the Act, to the same
extent as the foregoing indemnity from the Company to each Underwriter, but
only with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any amendment
thereof or supplement thereto or in any application made in reliance upon,
and in strict conformity with, written information furnished to the Company
by the Representative with respect to such Underwriter expressly for use in
any Preliminary Prospectus, the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto or in any application, provided
that such written information or omissions only pertain to disclosures in any
Preliminary Prospectus, the Registration Statement or the Prospectus directly
relating to the transactions effected by such Underwriter or the Underwriters
as a group in connection with the offering contemplated hereby. The Company
acknowledges that the statements with respect to the Underwriters and the
public offering of the Securities set forth under the heading "Underwriting"
(other than ______________), the Risk Factor titled "Recently Formed
Representative May be Unable to Complete Offering or Make a Market" and the
stabilization legend in the Prospectus have been furnished by the
Representative with respect to the Underwriters expressly for use therein and
constitute the only information furnished in writing by the Representative
with respect to the Underwriters for inclusion in any Preliminary Prospectus,
the Registration Statement or the Prospectus. In addition to its other
obligations under this Section 7(b), each Underwriter severally, but not
jointly, agrees that, as an interim measure during the pendency of any action
arising out of or based upon any untrue statement or omission, or alleged
untrue statement or alleged omission as described in this Section 7(b), it
will reimburse Company (and, to the extent applicable, each controlling
person) on a monthly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such action,
notwithstanding the absence of a judicial determination as to the propriety
and enforceability of such Underwriter's obligations to reimburse the Company
(and, to the extent applicable, each controlling person) for such expenses
and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement is so held to have been improper as to such Underwriter
and the Company (and, to the extent applicable, each controlling person)
shall promptly return it to such Underwriter, together with interest
compounded daily, based on the "prime rate" announced from time to time by
Bank of American NTSA (the "Prime Rate"). Any such interim

<PAGE>

reimbursement payments which are not made to the Company, as the case may be,
within thirty (30) days of a request for reimbursement shall bear interest at
the Prime Rate from the date of such request. Notwithstanding the provisions of
this Section 7(b), no Underwriter shall be required to indemnify or hold
harmless the Company or any controlling person for, in the aggregate, any
amounts in excess of the underwriting discount applicable to the Securities
purchased by such Underwriter hereunder.

The indemnity agreement in the Section 7(b) shall be in addition to any
liability which each Underwriter severally, but not jointly, may have at common
law or otherwise.

(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
shall notify each party against whom indemnification is to be sought in
writing of the commencement thereof (but the failure to so notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 8 except to the extent that it has been materially
prejudiced by such failure). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties shall be entitled to
participate therein, and to the extent it or they may elect by written notice
delivered to the indemnified party or parties promptly after receiving the
aforesaid notice from such indemnified party or parties, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified
party. Notwithstanding the foregoing, an indemnified party shall have the
right to employ its own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i)
the employment of such counsel shall have been authorized in writing by the
indemnifying party or parties in connection with the defense of such action
at the expense of the indemnifying party or parties, (ii) the indemnifying
party or parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action or (iii) such
indemnified party shall have reasonably concluded that there may be one or
more defenses available to it which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel (in addition to appropriate
local counsel) shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to appropriate local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances. Anything in this Section 7
to the contrary notwithstanding, an indemnifying party shall not be liable
for any settlement of any claim or action effected without its written
consent; PROVIDED, HOWEVER, that such consent may not be unreasonably
withheld.

(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes a claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express

<PAGE>

provisions of this Section 7 provide for indemnification in such case or (ii)
contribution under the Act may be required on the part of any indemnified
party, then each indemnifying party shall contribute to the amount paid as a
result of such losses, claims, damages, expenses or liabilities (or actions
in respect thereof) (A) in such proportion as is appropriate to reflect the
relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified, on the other hand, from the offering
of the Securities or (B) if the allocation provided by clause (A) above is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (A) above but
also the relative fault of each of the contributing parties, on the one hand,
and the party to be indemnified, on the other hand, in connection with the
statements or omissions that resulted in such losses, claims, damages,
expenses or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Underwriters, on the other hand, shall be
deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case
as set forth in the table on the cover page of the Prospectus. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or by the Representative with respect to an Underwriter, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to in the first sentence
of this Section 7(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), no Underwriter shall be required to
contribute any amount in excess of the underwriting discount applicable to
the Securities purchased by such Underwriter hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the Act
and the cases and promulgations thereunder) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 7(d), each person, if any, who controls the Company
or an Underwriter within the meaning of the Act, each officer of the Company
who has signed the Registration Statement and each director of the Company
shall have the same rights to contribution as the Underwriters or the
Company, as the case may be, subject in each case to the provisions of this
Section 7(d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action against such party in respect
to which a claim for contribution may be made against another party or
parties under this Section 7(d), notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or
parties shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have hereunder or otherwise than
under this Section 7(d) except to the extent it has been materially
prejudiced by such failure. The contribution agreement set forth above shall
be in addition to any liabilities which any indemnifying party may have at
common law or otherwise.

8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties, covenants and agreements contained in this
Agreement, or contained

<PAGE>

in certificates of officers of the Company delivered pursuant hereto, shall be
deemed to be representations, warranties, covenants and agreements at the
Closing Date and at each Option Closing Date, as the case may be, and such
representations, warranties, covenants and agreements of the Company, and the
respective indemnity and contribution agreements contained in Section 7 hereof,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Representative, any of the
Underwriters, or the Company and shall survive the termination of this Agreement
and the issuance, sale and delivery of the Securities to the Underwriters.

9. EFFECTIVE DATE. This Agreement shall become effective at 10:00
a.m., New York City time, on the date one (1) business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Representative, in its sole discretion, shall release the
Securities for sale to the public; PROVIDED, HOWEVER, that the provisions of
Sections 5, 7 and 10 hereof shall at all times be effective. For purposes of
this Section 9, the Securities to be purchased hereunder shall be deemed to have
been so released upon the earlier of dispatch by the Representative of telegrams
to securities dealers releasing such Securities for offering or the release by
the Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.

10. TERMINATION.

(a) The Representative shall have the right to terminate this
Agreement after it becomes effective, the exercise of which shall be
determined in the Representative's sole discretion, if: (i) any domestic or
international event or act or occurrence has, as determined in the
Representative's sole judgment, disrupted, or in the Representative's sole
judgment will in the immediate future materially disrupt, the financial
markets; or (ii) any material adverse change, as determined in the
Representative's sole judgment, in the financial markets shall have occurred;
or (iii) trading on the New York Stock Exchange, the American Stock Exchange,
NASDAQ or the over-the-counter market shall have been suspended, or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market
by the NASD or the Commission or any other governmental authority having
jurisdiction; or (iv) the United States shall have become involved in a war
or in hostilities, or there shall have been an escalation in an existing war
or hostilities or a national emergency shall have been declared in the United
States; or (v) a banking moratorium shall have been declared by any state or
federal authority or body; or (vi) a moratorium in foreign exchange trading
shall have been declared; or (vii) the Company or the Subsidiaries taken as a
whole shall have sustained a material or substantial loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which, whether or not such loss shall have been insured, will,
in the Representative's sole judgment, make it inadvisable to proceed with
the offering, sale or delivery of the Securities; or (viii) there shall have
been a material adverse change or development involving a material
prospective change, in the condition (financial or otherwise), earnings,
business affairs, position, prospects, shareholders' equity, operations,
obligations, properties, businesses or results of operations of the Company
or the Subsidiaries taken as a whole, whether or not arising in the ordinary
course of business, or if there shall have been a material adverse change in
the general market, political or economic conditions, whether

<PAGE>

in the United States or elsewhere, as in the Representative's sole judgment
would make it inadvisable to proceed with the offering, sale or delivery of the
Securities.

(b) Notwithstanding any contrary provision contained in this
Agreement, in the event of any termination of this Agreement (including, without
limitation, pursuant to Sections 6, 10(a) or 11 hereof), and whether or not this
Agreement is otherwise carried out, the provisions of Sections 5 and 7 hereof
shall remain effective and shall not in any way be affected by such termination
or failure to carry out the terms of this Agreement or any part hereof.

11. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to sell and deliver hereunder on such date,
then this Agreement shall terminate (or, if such default shall occur with
respect to any Option Securities to be purchased on an Option Closing Date, the
Underwriters may, in the Representative's sole discretion, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase such Option Securities from the Company on such date) with no liability
whatsoever on the part of any non-defaulting party other than pursuant to
Sections 5, 7 and 10 hereof. No action taken pursuant to this Section 11 shall
relieve the Company from liability, if any, in respect of such default.

12. SUBSTITUTION OF UNDERWRITERS. If any Underwriter defaults in
its obligation to purchase the number of Securities which it has agreed to
purchase under this Agreement, the non-defaulting Underwriters shall be
obligated to purchase (in the respective proportions which the number of
Securities set forth opposite the name of each non-defaulting Underwriter in
Schedule I bears to the total number of Securities set forth opposite the
names of all the non-defaulting Underwriters in Schedule I) the Securities
which the defaulting Underwriter agreed but failed to purchase; except that
the non-defaulting Underwriters shall not be obligated to purchase any of the
Securities if the total number of Securities which the defaulting Underwriter
or Underwriters agreed but failed to purchase exceeds 10% of the total number
of Securities, and any non-defaulting Underwriter shall not be obligated to
purchase more than 110% of the number of Securities set forth opposite its
name in Schedule I plus the total number of Option Securities purchasable by
it pursuant to the terms of Section 2(b) hereof. If the foregoing maximums
are exceeded, the non-defaulting Underwriters, and any other underwriters
satisfactory to you who so agree, shall have the right, but shall not be
obligated, to purchase (in such proportions as may be agreed upon among them)
all the Securities. If the non-defaulting Underwriters or the other
underwriters satisfactory to you do not elect to purchase the Securities
which the defaulting Underwriter or Underwriters agreed but failed to
purchase, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Company except for the payment of expenses to
be borne by the Company as provided in Section 5(a) hereof and the indemnity
and contribution agreements of the Company and the Underwriters contained in
Section 7 hereof; PROVIDED, HOWEVER, that this provision shall not affect any
Closing which at the time of such termination already shall have taken place.

Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If the other
underwriters satisfactory to you are obligated or agree to purchase the
Securities of a defaulting Underwriter, either you or the

<PAGE>

Company may postpone the Closing Date for up to seven full Business Days in
order to effect any changes that may be necessary in the Registration Statement,
the Prospectus or in any other document or agreement, and to file promptly any
amendments or any supplements to the Registration Statement or the Prospectus
which in your opinion may thereby be made necessary.

13. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed, delivered by hand or transmitted by any
standard form of telecommunication. Notices to the Underwriters shall be
directed to the Representative at 2049 Avenue of the Stars, 30th Floor, Los
Angeles, California 90067, Attention: Mr. Robert A. DiMinico, with a copy to
Kaye, Scholer, Fierman, Hays & Handler, LLP, 1999 Avenue of the Stars, Suite
1600, Los Angeles, California 90067, Attention: Channing D. Johnson, Esq.
Notices to the Company shall be directed to the Company at 26131 Marguerite
Parkway, Suite A, Mission Viejo, California 92692, Attention: Paul Motenko or
Jeremiah Hennessy, with a copy to Jeffer, Mangels, Butler & Marmaro LLP, Tenth
Floor, 2121 Avenue of the Stars, Los Angeles, California 90067, Attention:
Steven J. Insel, Esq.

14. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company, and the controlling
persons, officers, directors and others referred to in Section 7 hereof, and
their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained. No purchaser of Securities from an Underwriter shall be
deemed to be a successor merely by reason of such purchase.

15. CONSTRUCTION. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California, without
giving effect to conflict of laws principles thereof.

16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.

17. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Warrant
Agreement and the Representative's Warrant Agreement constitute the entire
agreement of the parties hereto concerning the subject matter hereof and
supersede all prior written or oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may
not be amended, modified or altered except in a writing signed by the
Representative and the Company.

<PAGE>

If the foregoing correctly sets forth the understanding among the
parties hereto, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.

Very truly yours,

CHICAGO PIZZA & BREWERY, INC.

By:-------------------------------------
Name:
Title:

Confirmed and accepted as of
the date first above written.

THE BOSTON GROUP, L.P.
As Representative for the
Several Underwriters Named
in Schedule I Attached Hereto

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

Name: Robert A. DiMinico
Title: Chairman

<PAGE>

SCHEDULE I

UNDERWRITER SHARES REDEEMABLE WARRANTS
- ----------- ------ -------------------

<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CERTIFICATE]
SEPTEMBER 13, 1991

Incorporated under the laws of the State of California

NUMBER SHARES
[ ] [ ]

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

CHICAGO PIZZA & BREWERY, INC.

Authorized Capital stock: 1,000 Common Shares
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

THIS CERTIFIES THAT _________________________________________________ is the
holder of _______________________________ SHARES OF THE CAPITAL STOCK
TRANSFERABLE ONLY ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON
OR BY ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.

IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE
SIGNED BY ITS DULY AUTHORIZED OFFICERS AND ITS CORPORATE SEAL TO BE HEREUNTO
AFFIXED
THIS ______________ DAY OF ________, A.D. 19___

________________________ [SEAL] ___________________________
SECRETARY PRESIDENT

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

<PAGE>

DRAFT OF
AUGUST 19, 1996

WARRANT AGREEMENT

This WARRANT AGREEMENT, dated this ___ day of ____, 1996, by and among
CHICAGO PIZZA & BREWERY, INC., a California corporation (the "Company"), THE
BOSTON GROUP, L.P. (the "Representative") and U.S. STOCK TRANSFER CORPORATION, a
California corporation.

WITNESSETH:

WHEREAS, in connection with (i) the offering to the public (the "Public
Offering") of One Million Five Hundred Thousand (1,500,000) shares (the
"Shares") of the Company's common stock, no par value (the "Common Stock") and
One Million Five Hundred Thousand (1,500,000) redeemable warrants (the
"Warrants"), each Warrant entitling the holder thereof to purchase one share of
Common Stock (the "Warrant Stock") pursuant to that certain Underwriting
Agreement (the "Underwriting Agreement") dated __________, 1996 between the
Company and the Representative, as representative of the several underwriters
named therein (the "Underwriters"); (ii) the over-allotment option (the "Over-
Allotment Option") granted to the Underwriters in connection with the Public
Offering to purchase up to an additional Two Hundred Twenty Five Thousand
(225,000) Shares and Two Hundred Twenty Five Thousand (225,000) Warrants; (iii)
the automatic conversion of Ten Million Fourteen Thousand Five Hundred Eighty
Four (10,014,584) outstanding warrants (which includes Four Million Seven
Hundred Thousand (4,700,000) special warrants (the "Special Warrants")) in
accordance with their terms, into Warrants; and (iv) the issuance of a warrant
to the Representative (the "Representative's Warrant") exercisable to purchase
One Hundred Fifty Thousand (150,000) shares of Common Stock and One Hundred
Fifty Thousand (150,000) Warrants, the Company will have outstanding a total of
Eleven Million Eight Hundred Eighty Nine Thousand Five Hundred Eighty Four
(11,889,584) Warrants, (subject to increase as provided herein (as such term is
defined in SECTION 1(u) hereof));

WHEREAS, the Company desires to provide for the issuance of certificates
representing the Warrants; and

WHEREAS, the Company desires U.S. Stock Transfer Corporation to act on
behalf of the Company, and U.S. Stock Transfer Corporation is willing to so act,
in connection with the issuance, registration, transfer and exchange of
certificates representing the Warrants and the exercise of the Warrants.

NOW, THEREFORE, in consideration of the premises and the mutual agreements

<PAGE>

hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the Underwriters,
the holders of certificates representing the Warrants and U.S. Stock Transfer
Corporation, the parties hereto agree as follows:

SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise requires:

(a) "Act" shall have the meaning assigned to such term in SECTION
5(b) of this Agreement.

(b) "Change of Shares" shall have the meaning assigned to such term
in SECTION 8(a)(i) of this Agreement.

(d) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
voting and in the distribution of earnings and assets of the Company without
limit as to amount or percentage.

(e) "Company" shall have the meaning assigned to such term in the
first (1st) paragraph of this Agreement.

(f) "Corporate Office" shall mean the office of the Warrant Agent (as
such term is defined in SECTION 1(y) hereof) at which at any particular time its
principal business shall be administered, which office is located on the date
hereof at 1745 Gardena Avenue, Glendale, California 91204-2991.

(g) "Exchange Act" shall have the meaning assigned to such term in
SECTION 4(b) of this Agreement.

(h) "Exercise Date" shall mean, subject to the provisions of Section
5(b) hereof, as to any Warrant, the date on which the Warrant Agent shall have
received both (i) the Warrant Certificate representing such Warrant, with the
exercise form thereon duly executed by the Registered Holder (as such term is
defined in SECTION 1(o) hereof) thereof or his attorney duly authorized in
writing, and (ii) payment in cash or by check made payable to the Warrant Agent
for the account of the Company of the amount in lawful money of the United
States of America equal to the applicable Purchase Price (as such term is
defined in SECTION 1(l) hereof).

(i) "Initial Warrant Exercise Date" shall mean _____________, 1997
[ONE YEAR AFTER EFFECTIVE DATE].

<PAGE>

(j) "Initial Warrant Redemption Date" shall mean _____________, 1997
[ONE YEAR AFTER EFFECTIVE DATE].

(k) "NASD" shall have the meaning assigned to such term in SECTION
4(b) hereof.

(l) "Over-Allotment Option" shall have the meaning assigned to such
term in the first (1st) WHEREAS clause of this Agreement.

(m) "Purchase Price" shall mean, subject to modification and
adjustment as provided in SECTION 8 hereof, ____ dollars and _____ cents ($____)
per share of Common Stock [110% OF IPO PRICE].

(n) "Redemption Date" shall have the meaning assigned to such term in
Section 9(c) hereof.

(o) "Registered Holder" shall mean the person in whose name any
certificate representing the Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to SECTION 6 hereof.

(p) "Representative" shall have the meaning assigned to such term in
the first (1st) WHEREAS clause of this Agreement.

(q) "Representative's Warrant" shall mean the warrant issued by the
Company to the Representative to purchase up to One Hundred Fifty Thousand
(150,000) shares of Common Stock and up to One Hundred Fifty Thousand (150,000)
Warrants pursuant to the Representative's Warrant Agreement.

(r) "Representative's Warrant Agreement" shall mean the agreement
dated as of ______, 1996 between the Company and the Representative relating to
and governing the terms and provisions of the Representative's Warrant.

(s) "Selling Security Holders" shall have the meaning assigned to
such term in the first (1st) WHEREAS clause of this Agreement.

(t) "Shares" shall have the meaning assigned to such term in the
first (1st) WHEREAS clause of this Agreement.

(u) "Subsidiary" or "Subsidiaries" shall mean any corporation or
corporations, as the case may be, of which stock having ordinary power to elect
a majority of the Board of Directors of such corporation or corporations
(regardless of whether or not at the time the stock of any other class or
classes of such corporation shall have or may have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by the
Company

<PAGE>

or by one or more Subsidiaries, or by the Company and one or more Subsidiaries.

(v) "Transfer Agent" shall mean U.S. Stock Transfer Corporation,
Glendale, California, or its authorized successor.

(w) "Underwriters" shall have the meaning assigned to such term in
the first (1st) WHEREAS clause of this Agreement.

(x) "Underwriting Agreement" shall have the meaning assigned to such
term in the first (1st) WHEREAS clause of this Agreement.

(y) "Warrant Agent" shall mean U.S. Stock Transfer Corporation,
Glendale, California, Colorado or its authorized successor.

(z) "Warrant Certificate" shall mean a certificate representing each
of the Warrants substantially in the form annexed hereto as EXHIBIT A.

(aa) "Warrant Expiration Date" shall mean, unless the Warrants are
redeemed as provided in Section 9 hereof prior to such date, 5:00 p.m.
(California time) on _________, 2002 [54 MONTHS AFTER THE ONE YEAR ANNIVERSARY
OF THE EFFECTIVE DATE], or, if such date shall in the State of California be a
holiday or a day on which banks are authorized to close, then 5:00 p.m.
(California time) on the next following day which in the State of California is
not a holiday or a day on which banks are authorized to close, subject to the
Company's right, prior to the Warrant Expiration Date, in its sole discretion,
to extend such Warrant Expiration Date on five (5) business days prior written
notice to the Registered Holders.

(bb) "Warrants" shall have the meaning assigned to such term in the
first (1st) WHEREAS clause of this Agreement.

(cc) "Warrant Stock" shall mean the shares of Common Stock issuable
upon exercise of the Warrants.

SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.

(a) Each Warrant shall initially entitle the Registered Holder of the
Warrant Certificate representing such Warrant to purchase at the Purchase Price
therefor from the Initial Warrant Exercise Date until the Warrant Expiration
Date one (1) share of Common Stock upon the exercise thereof, subject to
modification and adjustment as provided in SECTION 8 hereof.

(b) Upon execution of this Agreement, Warrant Certificates
representing up to Eleven Million Seven Hundred Thirty Four Thousand Five
Hundred Eighty Four (11,734,584) Warrants to purchase up to an aggregate of
Eleven Million Seven Hundred Thirty Four Thousand Five Hundred Eighty Four
(11,734,584) shares of Common Stock (subject to modification and

<PAGE>

adjustment as provided in SECTION 8 hereof), shall be executed by the Company
and delivered to the Warrant Agent.

(c) Upon exercise of the Over-Allotment Option, in whole or in part,
Warrant Certificates representing up to Two Hundred Twenty Five Thousand
(225,000) Warrants to purchase up to an aggregate of Two Hundred Twenty Five
Thousand (225,000) shares of Common Stock (subject to modification and
adjustment as provided in SECTION 8 hereof) shall be executed by the Company and
delivered to the Warrant Agent.

(d) From time to time, up to the Warrant Expiration Date, as the case
may be, the Warrant Agent shall countersign and deliver Warrant Certificates in
required denominations of one or whole number multiples thereof to the person
entitled thereto in connection with any transfer or exchange permitted under
this Agreement. No Warrant Certificates shall be issued except (i) Warrant
Certificates initially issued hereunder, (ii) Warrant Certificates issued upon
any transfer or exchange of Warrants, (iii) Warrant Certificates issued in
replacement of lost, stolen, destroyed or mutilated Warrant Certificates
pursuant to SECTION 7 hereof, and (iv) at the option of the Company, Warrant
Certificates in such form as may be approved by its Board of Directors, to
reflect any adjustment or change in the Purchase Price, the number of shares of
Common Stock purchasable upon the exercise of a Warrant or the redemption price
therefor.

SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES.

(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or securities association on which the Warrants
may be listed, or to conform to usage. The Warrant Certificates shall be dated
the date of issuance thereof (whether upon initial issuance, transfer, exchange
or in lieu of mutilated, lost, stolen or destroyed Warrant Certificates).

(b) Warrant Certificates shall be executed on behalf of the Company
by its Chairman of the Board, Chief Executive Officer, President or any Vice
President and by its Chief Operating Officer, its Treasurer or its Secretary, by
manual signatures or by facsimile signatures printed thereon, and shall have
imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall
be manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though the officer of

<PAGE>

the Company who signed such Warrant Certificates had not ceased to hold such
office.

SECTION 4. EXERCISE.

(a) Warrants in denominations of one or whole number multiples
thereof may be exercised commencing at any time on or after the Initial Warrant
Exercise Date, but not after the Warrant Expiration Date or the Redemption Date,
upon the terms and subject to the conditions set forth herein (including the
provisions set forth in SECTIONS 5 and 9 hereof) and in the applicable Warrant
Certificate. A Warrant shall be deemed to have been exercised immediately prior
to the close of business on the Exercise Date, provided that the Warrant
Certificate representing such Warrant, with the exercise form thereon duly
executed by the Registered Holder thereof or his attorney duly authorized in
writing, together with payment in cash or by check made payable to the Warrant
Agent for the account of the Company of an amount in lawful money of the United
States of America equal to the applicable Purchase Price, has been received by
the Warrant Agent. The person entitled to receive the securities deliverable
upon such exercise shall be treated for all purposes as the holder of such
securities as of the close of business on the Exercise Date. As soon as
practicable on or after the Exercise Date and in any event within five (5)
business days after such date, the Warrant Agent on behalf of the Company shall
cause to be issued to the person or persons entitled to receive the same a
certificate or certificates for the shares of Common Stock deliverable upon such
exercise, and the Warrant Agent shall deliver the same to the person or persons
entitled thereto. Upon the exercise of any Warrants, the Warrant Agent shall
promptly notify the Company in writing of such fact and of the number of
securities delivered upon such exercise and, subject to Section 4(b) hereof,
shall cause all payments in cash or by check made payable to the order of the
Company in respect of the Purchase Price to be deposited promptly in the
Company's bank account.

(b) The Company hereby appoints the Representative as the exclusive
solicitation agent for the Warrants, and agrees to pay the Representative a
commission equal to five percent (5%) of the exercise price of the Warrants of
which __% may be reallowed to any dealer who solicited the exercise (which may
also be the Representative) for each Warrant exercised, payable on the date of
the exercise thereof. The Company agrees that it will not solicit the exercise
of the Warrants other than through the Representative. Upon exercise of any
Warrants, the person or entity responsible for the solicitation of exercise of
such Warrants shall be identified by the holder of the Warrants, and the
commission payable for exercise of such Warrants shall be paid to the person or
entity so designated.

(c) At any time upon the exercise of any Warrants after the Initial
Warrant Exercise Date, the Warrant Agent shall, on a daily basis, within two (2)
business days after any such exercise, notify the Representative or its
successors or assigns of the exercise of any such Warrants and shall, on a
weekly basis (subject to collection of funds constituting the tendered Purchase
Price, but in no event later than five (5) business days after the last day of
the calendar week in which such funds were tendered), remit to the
Representative or its successors or assigns an amount equal to five percent (5%)
of the Purchase Price of such Warrants being then

<PAGE>

exercised unless the Representative or its successors or assigns shall have
notified the Warrant Agent that the payment of such amount with respect to any
such Warrant is violative of the rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD")
or applicable state securities or "blue sky" laws, in which event the Warrant
Agent shall have to pay such amount to the Company; PROVIDED, HOWEVER, that the
Warrant Agent shall not be obligated to pay any amounts pursuant to this SECTION
4(c) during any week that such amounts payable are less than one thousand
dollars ($1,000) and the Warrant Agent's obligation to make such payments shall
be suspended until the amount payable aggregates one thousand dollars ($1,000),
and provided further, that, in any event, any such payment (regardless of
amount) shall be made not less frequently than monthly. Under current rules of
the NASD, amounts can be paid to the Representative upon any exercise of a
Warrant under this Section 4(c) only if (i) the market price of the Company's
Common Stock is greater than the then Purchase Price of the Warrants, (ii) the
exercise of the Warrant was solicited by a member of the National Association of
Securities Dealers, Inc. ("NASD"), (iii) the Warrant was not held in a
discretionary account, (iv) disclosure of compensation arrangements has been
made in documents provided to customers both as part of the original offering
and at the time of exercise and (v) the solicitation of the exercise of the
Warrant was not in violation of Rule 10b-6 (as such rule or any successor rule
may be in effect as of such time of exercise) promulgated under the Exchange
Act. The provisions of this Section 4(b) may not be modified, amended or
deleted without the prior written consent of the Representative.

(d) The Company shall not be obligated to issue any fractional share
interests or fractional Warrant interests upon the exercise of any Warrant or
Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of
fractional interests. Any fraction equal to or greater than one-half shall be
rounded up to the next full share or Warrant, as the case may be. Any fraction
less than one-half shall be eliminated.

SECTION 5. RESERVATION OF SHARES; LISTING; PAYMENT OF TAXES; ETC.

(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon the exercise of Warrants (including the Warrants underlying the
Representative's Warrant), such number of shares of Common Stock as shall then
be issuable upon the exercise of all outstanding Warrants. The Company
covenants that, upon exercise of the Warrants and payment of the Purchase Price
for the shares of Common Stock underlying the Warrants, all shares of Common
Stock which shall be issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable, free from all preemptive or similar rights,
and free from all taxes, liens and charges with respect to the issuance thereof,
and that upon issuance such shares shall be listed or quoted on each securities
exchange or NASDAQ, if any, on which the other shares of outstanding Common
Stock of the Company are then listed.

(b) The Company covenants that if any securities reserved for the
purpose of

<PAGE>

exercise of Warrants hereunder require registration with, or approval of, any
governmental authority under any federal securities law before such securities
may be validly issued or delivered upon such exercise, then the Company will
file a registration statement under the federal securities laws or a post-
effective amendment to a registration statement, use its best efforts to cause
the same to become effective, keep such registration statement current while any
of the Warrants are outstanding and deliver a prospectus which complies with
Section 10(a)(3) of the Act, to the Registered Holder exercising the Warrant
(except, if in the opinion of counsel to the Company, such registration is not
required under the federal securities law or if the Company receives a letter
from the staff of the Securities and Exchange Commission (the "Commission")
stating that it would not take any enforcement action if such registration is
not effected). The Company will use its best efforts to obtain appropriate
approvals or registrations under the state "blue sky" securities laws of all
states in which Registered Holders reside. Warrants may not be exercised by,
nor may shares of Common Stock be issued to, any Registered Holder in any state
in which such exercise would be unlawful.

(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares of Common Stock upon
exercise of the Warrants; PROVIDED, HOWEVER, that if shares of Common Stock are
to be delivered in a name other than the name of the Registered Holder of the
Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.

(d) The Warrant Agent is hereby irrevocably authorized as the
Transfer Agent to requisition from time to time certificates representing shares
of Common Stock or other securities required upon exercise of the Warrants, and
the Company will comply with all such requisitions.

(e) Nothing contained in this Agreement shall be construed as
conferring upon any Registered Holder the right to vote or to consent or to
receive notice as a stockholder in respect of any meetings of stockholders for
the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, the Company shall adopt a
resolution for the liquidation, dissolution or winding up of the Company's
business, then the Company shall give written notice of the adoption of such
resolution to all Registered Holders. No such liquidation, dissolution or
winding-up of the Company's affairs shall commence until at least thirty (30)
days after such written notice is given, at which time the right of the
Registered Holders to participate in the liquidation, dissolution or winding-up
of the Company's affairs shall terminate unless the Warrants are exercised
within such thirty (30) day period.

<PAGE>

SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER.

(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or may be
transferred in whole or in part. Warrant Certificates to be so exchanged shall
be surrendered to the Warrant Agent at its Corporate Office, and the Company
shall execute and the Warrant Agent shall countersign, issue and deliver in
exchange therefor the Warrant Certificate or Certificates which the Registered
Holder making the exchange shall be entitled to receive.

(b) The Warrant Agent shall keep, at such office, books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof. Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants.

(c) With respect to any Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription or
assignment form, as the case may be, on the reverse thereof shall be duly
endorsed or be accompanied by a written instrument or instruments of
subscription or assignment, in form satisfactory to the Company and the Warrant
Agent, duly executed by the Registered Holder thereof or his attorney duly
authorized in writing.

(d) No service charge shall be made for any exchange or registration
of transfer of Warrant Certificates. However, the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.

(e) All Warrant Certificates surrendered for exercise or for exchange
shall be promptly canceled by the Warrant Agent.

(f) Prior to due presentment for registration or transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary.

SECTION 7. LOSS OR MUTILATION.

Upon receipt by the Company and the Warrant Agent of evidence satisfactory
to them of the ownership of and the loss, theft, destruction or mutilation of
any Warrant Certificate and (in the case of loss, theft or destruction) of
indemnity satisfactory to them, and (in case of mutilation) upon surrender and
cancellation thereof, the Company shall execute and the Warrant Agent shall
countersign and deliver in lieu thereof a new Warrant Certificate, representing
an

<PAGE>

equal number of Warrants. Applicants for a substitute Warrant Certificate shall
also comply with such other reasonable regulations and pay such other reasonable
charges as the Warrant Agent may prescribe.

SECTION 8. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF COMMON
STOCK DELIVERABLE.

(a) (i) Except as hereinafter provided, in the event the Company
shall, at any time or from time to time after the date hereof, sell any shares
of Common Stock, including shares held in the Company's treasury and shares of
Common Stock issued upon the exercise of any options, rights or warrants to
subscribe for shares of Common Stock and shares of Common Stock issued upon the
direct or indirect conversion or exchange of securities, for a consideration per
share less than the Purchase Price or issue any shares of Common Stock as a
stock dividend to the holders of Common Stock, or subdivide or combine the
outstanding shares of Common Stock into a greater or lesser number of shares
(any such sale, issuance, subdivision or combination being herein called a
"Change of Shares"), then, and thereafter upon each further Change of Shares,
the Purchase Price for the Warrants (whether or not the same shall be issued and
outstanding) in effect immediately prior to such Change of Shares shall be
changed to a price (including any applicable fraction of a cent to the nearest
cent) determined by dividing (A) the sum of (x) the total number of shares of
Common Stock outstanding immediately prior to such Change of Shares, multiplied
by the Purchase Price in effect immediately prior to such Change of Shares, and
(y) the consideration, if any, received by the Company upon such sale, issuance,
subdivision or combination by (B) the total number of sham of Common Stock
outstanding immediately after such Change of Shares; PROVIDED, HOWEVER, that in
no event shall the Purchase Price be adjusted pursuant to this computation to an
amount in excess of the Purchase Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Common
Stock.

For the purposes of any adjustment to be made in accordance with this
Section 8(a)(i) the following provisions shall be applicable:

(A) In case of the issuance or sale of shares of Common Stock (or of
other securities deemed hereunder to involve the issuance or sale of shares of
Common Stock) for a consideration part or all of which shall be cash, the amount
of the cash portion of the consideration therefor deemed to have been received
by the Company shall be (i) the subscription price, if shares of Common Stock
are offered by the Company for subscription, or (ii) the public offering price
(before deducting therefrom any compensation paid or discount allowed in the
sale, underwriting or purchase thereof by underwriters or dealers or others
performing similar services, or any expenses incurred in connection therewith),
if such securities are sold to underwriters or dealers for public offering
without a subscription offering, or (iii) the gross amount of cash actually
received by the Company for such securities, in any other case.

(B) In case of the issuance or sale (otherwise than as a dividend or
other

<PAGE>

distribution on any stock of the Company) of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of Common
Stock) for a consideration part or all of which shall be other than cash or as
part of a unit, the amount of the consideration therefor other than cash deemed
to have been received by the Company or the amount received per share as part of
a unit shall be the value of such consideration as determined in good faith by
the Board of Directors of the Company on the basis of a record of values of
similar property, services or securities.

(C) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of shareholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.

(D) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in Section 8(a)(i)(B) hereof.

(E) The number of shares of Common Stock at any one time outstanding
shall be deemed to include the aggregate maximum number of shares issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
options, rights or warrants and upon the conversion or exchange of convertible
or exchangeable securities.

(ii) Upon each adjustment of the Purchase Price pursuant to this
Section 8, the number of shares of Common Stock purchasable upon the exercise of
each Warrant shall be the number derived by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment by the Purchase
Price in effect prior to such adjustment and dividing the product so obtained by
the applicable adjusted Purchase Price.

(b) In case the Company shall at any time after the date hereof issue
options, rights or warrants to subscribe for shares of Common Stock, or issue
any securities convertible into or exchangeable for shares of Common Stock, for
a consideration per share (determined as provided in Section 8(a)(i) hereof and
as provided below) less than the Purchase Price in effect immediately prior to
the issuance of such options, rights or warrants, or such convertible or
exchangeable securities, or without consideration (including the issuance of any
such securities by way of dividend or other distribution), the Purchase Price
for the Warrants (whether or not the same shall be issued and outstanding) in
effect immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making the computation in accordance with the
provisions of Section 8(a)(i) hereof, provided that:

<PAGE>

(i) The aggregate maximum number of shares of Common Stock, as
the case may be, issuable or that may become issuable under such options, rights
or warrants (assuming exercise in full even if not then currently exercisable or
currently exercisable in full) shall be deemed to be issued and outstanding at
the time such options, rights or warrants were issued, for a consideration equal
to the minimum purchase price per share provided for in such options, rights or
warrants at the time of issuance, plus the consideration, if any, received by
the Company for such options, rights or warrants; PROVIDED, HOWEVER, that upon
the expiration or other termination of such options, rights or warrants, if any
thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this subsection (i) (and for the
purposes of Section 8(a)(i)(E) hereof) shall be reduced by the number of shares
as to which options, warrants and/or rights shall have expired, and such number
of shares shall no longer be deemed to be issued and outstanding, and the
Purchase Price then in effect shall forthwith be readjusted and thereafter be
the price that it would have been had adjustment been made on the basis of the
issuance only of the shares actually issued plus the shares remaining issuable
upon the exercise of those options, rights or warrants as to which the exercise
rights shall not have expired or terminated unexercised.

(ii) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; PROVIDED, HOWEVER, that upon the
termination of the right to convert or exchange such convertible or exchangeable
securities (whether by reason of redemption or otherwise), the number of shares
of Common Stock deemed to be issued and outstanding pursuant to this subsection
(ii) (and for the purposes of Section 8(a)(i)(E) hereof) shall be reduced by the
number of shares as to which the conversion or exchange rights shall have
expired or terminated unexercised, and such number of shares shall no longer be
deemed to be issued and outstanding, and the Purchase Price then in effect shall
forthwith be readjusted and thereafter be the price that it would have been had
adjustment been made on the basis of the issuance only of the shares actually
issued plus the shares remaining issuable upon conversion or exchange of those
convertible or exchangeable securities as to which the conversion or exchange
rights shall not have expired or terminated unexercised.

(iii) If any change shall occur in the price per share provided
for in any of the options, rights or warrants referred to in Section 8(b)(i)
hereof, or in the price per share or ratio at which the securities referred to
in Section 8(b)(ii) hereof are convertible or exchangeable, such options, rights
or warrants or conversion or exchange rights, as the case may be, to the extent
not theretofore exercised, shall be deemed to have expired or terminated on the
date when such price change became effective in respect of shares not
theretofore issued pursuant to the exercise or conversion or exchange thereof,
and the Company shall be deemed to have issued upon such date new options,
rights or warrants or convertible or exchangeable securities.

<PAGE>

(c) In case of any reclassification or change of outstanding shares
of Common Stock issuable upon exercise of the Warrants (other than a change in
par value, or from par value to no par value, or from no par value to par value
or as a result of a subdivision or combination), or in case of any consolidation
or merger of the Company with or into another corporation (other than a merger
with a Subsidiary in which merger the Company is the continuing corporation and
which does not result in any reclassification or change of the then outstanding
shares of Common Stock or other capital stock issuable upon exercise of
the Warrants), or in case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety,
then, as a condition of such reclassification, change, consolidation, merger,
sale or conveyance, the Company, or such successor or purchasing corporation, as
the case may be, shall make lawful and adequate provision whereby the Registered
Holder of each Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of securities and
property receivable upon such reclassification, change, consolidation, merger,
sale or conveyance by a holder of the number of securities issuable upon
exercise of such Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and shall forthwith file at the
Corporate Office of the Warrant Agent a statement signed by its Chairman of the
Board, President or a Vice President and by its Treasurer or an Assistant
Treasurer or its Secretary or an Assistant Secretary evidencing such provision.
Such provisions shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Sections
8(a) and 8(b) hereof. The above provisions of this Section 8(c) shall similarly
apply to successive reclassifications and changes of shares of Common Stock and
to successive consolidations, mergers, sales or conveyances.

(d) Irrespective of any adjustments or changes in the Purchase Price
or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(e) hereof, continue to express the Purchase Price per
share and the number of shares purchasable thereunder as the Purchase Price per
share and the number of shares purchasable thereunder were expressed in the
Warrant Certificates when the same were originally issued.

(e) After each adjustment of the Purchase Price pursuant to this
Section 8, the Company will promptly prepare a certificate signed by the
Chairman of the Board, President, or a Vice President and by the Treasurer or
the Secretary of the Company setting forth: (i) the Purchase Price, as so
adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of
each Warrant, after such adjustment, and (iii) a brief statement of the facts
accounting for such adjustment. The Company will promptly file such certificate
with the Warrant Agent and cause a brief summary thereof to be sent by ordinary
first class mail to each Registered Holder at his last address as it shall
appear on the registry books of the Warrant Agent. No failure to mail such
notice nor any defect therein or in the mailing thereof shall affect the
validity thereof except as to the holder to whom the Company failed to mail such
notice, or except as to the holder whose notice was defective. The affidavit of
an officer of the Warrant Agent or the Secretary or an Assistant Secretary of
the Company that such notice has been mailed shall, in the

<PAGE>

absence of fraud, be prima facie evidence of the facts stated therein.

(f) No adjustment of the Purchase Price shall be made as a result of
or in connection with (i) the issuance or sale of shares of Common Stock upon
the exercise of any "incentive stock options" (as such term is defined in the
Internal Revenue Code of 1986, as amended), or any non-qualified stock options
to non-employee directors of the Company pursuant to the Company's 1996 Stock
Option Plan, whether or not such options were outstanding on the date hereof, or
(ii) the issuance or sale of shares of Common Stock if the amount of said
adjustment shall be less than ten cents ($.10); PROVIDED, HOWEVER, that in such
case, any adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the next
subsequent adjustment that shall amount, together with any adjustment so carried
forward, to at least ten cents ($. 10). In addition, Registered Holders shall
not be entitled to cash dividends paid by the Company prior to the exercise of
any Warrant or Warrants held by them.

(g) In case of any consolidation of the Company with or merger of the
Company into another corporation or other entity or in case of any sale, lease,
conveyance or other transfer to another corporation, person or other entity of
the property, assets or business of the Company as an entirety or substantially
as an entirety, the Company or such successor or purchasing corporation, person
or other entity, as the case may be, shall execute with the Warrantholder, and
the agreements governing such consolidation, merger, sale, lease, conveyance or
other transfer shall require such execution of, an agreement that the
Warrantholder shall have the right thereafter upon payment of the Warrant Price
in effect immediately prior to such event, upon exercise of the Warrants, to
receive the kind and amount of shares and other securities and property which it
would have owned or have been entitled to receive after the happening of such
consolidation, merger, sale, lease, conveyance or other transfer had the
Warrants (and each underlying security) been exercised immediately prior to such
action. The Company shall promptly mail to each Warrantholder by first class
mail, postage prepaid, notice of the execution of any such agreement. In the
event of a merger described in Section 368(a)(2)(E) of the Internal Revenue Code
of 1986, in which the Company is the surviving corporation, the right to
purchase shares of Warrant Stock under the Warrants shall terminate on the date
of such merger and thereupon the Warrants shall become null and void, but only
if the controlling corporation shall agree to substitute for the Warrants its
warrant which entitles the holder thereof to purchase upon its exercise the kind
and amount of shares and other securities and property which it would have owned
or been entitled to receive had the Warrants been exercised immediately prior to
such merger. Any such agreements referred to in this Section 8(g) shall provide
for adjustments, which shall be as nearly equivalent as may be practicable to
the adjustments provided for in Section 8 hereof, and shall provide for terms
and provisions at least as favorable to the Warrantholder as those contained in
this Agreement. The provisions of this Section 8(g) shall similarly apply to
successive consolidations, mergers, sales, leases, conveyances or other
transfers.

(h) Before taking any action which would cause an adjustment
effectively

<PAGE>

reducing the portion of the Purchase Price allocable to each share of Warrant
Stock below the then par value per share, if any, of the Warrant Stock issuable
upon exercise of the Warrants, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Stock upon
exercise of the Warrants.

(i) The Company may retain Coopers & Lybrand L.L.P. (or such other
accounting firm qualified to practice in front of the Securities and Exchange
Commission (the "Commission") as is reasonably acceptable to the Representative)
to make any computation required under this Section 8, and a certificate signed
by such firm shall be conclusive evidence of the correctness of any computation
made under this Section 8.

SECTION 9. REDEMPTION.

(a) Commencing on the Initial Warrant Redemption Date, the Company
may, on thirty (30) days' prior written notice, redeem all of the Warrants at a
redemption price of twenty five cents ($.25) per Warrant; PROVIDED, HOWEVER,
that before any such call for redemption of Warrants can take place, (i) the
average closing bid price for the Common Stock in the over-the-counter market as
reported by the Nasdaq Stock Market or (ii) the average closing sale price on
the primary exchange on which the Common Stock is traded, if the Common Stock is
traded on a national securities exchange, shall have for any twenty (20) trading
days within a period of thirty (30) consecutive trading days ending on the fifth
(5th) trading day prior to the date on which the notice contemplated by SECTIONS
9(b) and 9(c) hereof is given, equaled or exceeded ____ Dollars and _____ Cents
($____) [140% OF IPO PRICE] per share (subject to adjustment in the event of any
stock splits or other similar events as provided in SECTION 8 hereof).

(b) In case the Company shall exercise its right to redeem all of the
Warrants, it shall give or cause to be given notice to the Registered Holders of
the Warrants, by mailing to such Registered Holders a notice of redemption,
first class, postage prepaid, at their last address as shall appear on the
records of the Warrant Agent. Any notice mailed in the manner provided herein
shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice. Not less than five (5) business days
prior to the mailing to the Registered Holders of the Warrants of the notice of
redemption, the Company shall deliver or cause to be delivered to the
Representative or its successors or assigns a similar notice telephonically and
confirmed in writing, together with a list of the Registered Holders (including
their respective addresses and number of Warrants beneficially owned by them) to
whom such notice of redemption has been or will be given.

(c) The notice of redemption shall specify (i) the redemption price,
(ii) the date fixed for redemption, which shall in no event be less than thirty
(30) days after the date of mailing of such notice, (iii) the place where the
Warrant Certificates shall be delivered and the redemption price that shall be
paid, (iv) that the Representative or its successors or assigns is the Company's
exclusive warrant solicitation agent and shall receive the commission
contemplated

<PAGE>

by SECTION 4(b) hereof, and (v) that the right to exercise the Warrant shall
terminate at 5:00 p.m. (California time) on the business day immediately
preceding the date fixed for redemption. The date fixed for the redemption of
the Warrants shall be the "Redemption Date" for purposes of this Agreement. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such redemption except as to a
holder (A) to whom notice was not mailed or (B) whose notice was defective. An
affidavit of the Warrant Agent or the Secretary or Assistant Secretary of the
Company that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.

(d) Any right to exercise a Warrant shall terminate at 5:00 p.m.
(California time) on the business day immediately preceding the Redemption Date.
The redemption price payable to the Registered Holders shall be mailed to such
persons at their addresses of record.

(e) The Company shall indemnify the Underwriters and each person, if
any, who controls either of the Underwriters within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise arising
out of the registration statement or prospectus referred to in Section 5(b)
hereof to the same extent and with the same effect (including the provisions
regarding contribution) as the provisions pursuant to which the Company has
agreed to indemnify the Underwriters contained in SECTION 7 of the Underwriting
Agreement.

(f) Five (5) business days prior to the Redemption Date, the Company
shall furnish to the Representative (i) an opinion of counsel to the Company,
dated such date and addressed to the Representative, and (ii) a "cold comfort"
letter dated such date addressed to the Representative, signed by the
independent public accountants who have issued a report on the Company's
financial statements included in the registration statement referred to in
SECTION 5(b) hereof, in each case covering substantially the same matters with
respect to such registration statement (and the prospectus included therein)
and, in the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities, including, without limitation,
those matters covered in SECTION 6(i) of the Underwriting Agreement.

(g) The Company shall as soon as practicable after the Redemption
Date, and in any event within fifteen (15) months thereafter, make "generally
available to its security holders" (within the meaning of Rule 158 under the
Act) an earnings statement (which need not be audited) complying with SECTION
11(a) of the Act and covering a period of at least twelve (12) consecutive
months beginning after the Redemption Date.

(h) The Company shall deliver to the Representative within five (5)
business days prior to the Redemption Date copies of all correspondence between
the Commission and the

<PAGE>

Company, its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to the registration statement referred
to in SECTION 5(b) hereof and permit the Representative to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or the rules of the NASD.
Such investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as the Representative shall reasonably request.

SECTION 10. REGISTRATION REQUIREMENT.

The Company shall be obligated to the registered holders of the
Warrants to continually maintain, at the Company's own expense, the currency and
effectiveness of a registration statement of the Company under the Act including
the filing of any and all applications and other notifications, filings and
post-effective amendments and supplements (collectively, the "Current
Registration Statement") and any necessary filings under applicable state blue
sky (securities) laws, as may be necessary, so as to permit the issuance of the
Common Stock underlying the Warrants to the holder of the Warrants and the
subsequent resale thereof to the public, until the earlier of the time that all
Warrants have been exercised pursuant to the Current Registration Statement or
the Warrant Expiration Date.

SECTION 11. CONCERNING THE WARRANT AGENT.

(a) The Warrant Agent acts hereunder as agent and in a ministerial
capacity for the Company and the Representative, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity or value or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and non-assessable.

(b) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price provided in this Agreement, or to determine
whether any fact exists which may require any such adjustment, or with respect
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (i) be liable for any
recital or statement of fact contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any failure on
the part of the Company to comply with any of its covenants and obligations
contained in this Agreement or in any Warrant Certificate, or (iii) be liable
for any act or omission in connection with this Agreement except for its own
gross negligence or willful misconduct.

<PAGE>

(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company or the Representative)
and shall incur no liability or responsibility for any action taken, suffered or
omitted by it in good faith in accordance with the opinion or advice of such
counsel.

(d) Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board of Directors, President or any Vice President (unless
other evidence in respect thereof is herein specifically prescribed). The
Warrant Agent shall not be liable for any action taken, suffered or omitted by
it in accordance with such notice, statement, instruction, request, direction,
order or demand.

(e) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; the Company further agrees to indemnify the Warrant Agent
and hold it harmless against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's gross
negligence or willful misconduct.

(f) The Warrant Agent may resign its duties and be discharged from
all further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own gross negligence or willful misconduct), after
giving thirty (30) days' prior written notice to the Company. At least fifteen
(15) days prior to the date such resignation is to become effective, the Warrant
Agent shall cause a copy of such notice of resignation to be mailed to the
Registered Holder of each Warrant Certificate at the Company's expense. Upon
such resignation the Company shall appoint in writing a new warrant agent. If
the Company shall fail to make such appointment within a period of thirty (30)
days after it has been notified in writing of such resignation by the resigning
Warrant Agent, then the Registered Holder of any Warrant Certificate may apply
to any court of competent jurisdiction for the appointment of a new warrant
agent. Any new warrant agent, whether appointed by the Company or by such a
court, shall be a bank or trust company having a capital and surplus, as shown
by its last published report to its stockholders, of not less than ten million
dollars ($10,000,000) or a stock transfer company reasonably acceptable to the
Representative. After acceptance in writing of such appointment by the new
warrant agent is received by the Company, such new warrant agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named herein as the warrant agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be necessary or
expedient to execute and deliver any further assurance, conveyance, act or deed,
the same shall be done at the expense of the Company and shall be legally and
validly executed and delivered by the resigning Warrant Agent. Not later than
the effective date of any such appointment, the Company shall file notice
thereof with the resigning Warrant Agent and shall forthwith cause a copy of
such notice to be mailed to the Registered Holder of each Warrant Certificate.

<PAGE>

(g) Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party, or any corporation succeeding to the corporate trust business of the
Warrant Agent or any new warrant agent shall be a successor warrant agent under
this Agreement without any further act, provided that such corporation is
eligible for appointment as successor to the Warrant Agent under the provisions
of the preceding paragraph. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed to the Company and
to the Registered Holders of each Warrant Certificate.

(h) The Warrant Agent, its subsidiaries and affiliates, and any of
its or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effect as though it were not Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.

(i) The Warrant Agent shall retain for a period of two (2) years from
the date of exercise any Warrant Certificate received by it upon such exercise.

SECTION 12. MODIFICATION OF AGREEMENT.

The Warrant Agent and the Company may by supplemental agreement make any
changes or corrections in this Agreement (a) that they shall deem appropriate to
cure any ambiguity or to correct any defective or inconsistent provision or
manifest mistake or error herein contained, or (b) that they may deem necessary
or desirable and which shall not be inconsistent with the Warrant Certificates
or adversely affect the interests of the holders of Warrant Certificates;
PROVIDED, HOWEVER, that this Agreement shall not otherwise be modified,
supplemented or altered in any respect except with the consent in writing of the
Registered Holders holding not less than sixty-six and two-thirds percent
(66-2/3%) of the Warrants then outstanding; provided, further, that no change in
the number or nature of the securities purchasable upon the exercise of any
Warrant, and no change that increases the Purchase Price of any Warrant, other
than such changes as are specifically set forth in this Agreement as originally
executed, shall be made without the consent in writing of each Registered Holder
affected by such change. In addition, this Agreement may not be modified,
amended or supplemented without the prior written consent of the Representative
or its successors or assigns, other than to cure any ambiguity or to correct any
defective or inconsistent provision or manifest mistake or error herein
contained or to make any such change that the Warrant Agent and the Company deem
necessary or desirable and which shall not adversely affect the interests of the
Representative or its successors or assigns.

<PAGE>

SECTION 13. NOTICES.

All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been made when delivered or mailed first-
class postage prepaid or delivered to a telegraph office for transmission, if to
the Registered Holder of a Warrant Certificate, at the address of such holder as
shown on the registry books maintained by the Warrant Agent; if to the Company,
at 26131 Marguerite Parkway, Suite A, Mission Viejo, California 92692,
Attention: Paul A. Motenko, Chief Executive Officer, or at such other address as
may have been furnished to the Warrant Agent in writing by the Company; if to
the Representative, at 2049 Avenue of the Stars, 30th Floor, Los Angeles,
California 90067, Attention: Mr. Robert A. DiMinico; and if to the Warrant
Agent, at its Corporate Office.

SECTION 14. GOVERNING LAW.

This Agreement shall be governed by and construed in accordance with the
laws of the State of California without giving effect to conflicts of laws.

SECTION 15. BINDING EFFECT.

This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent, the Representative and their respective successors
and assigns and the holders from time to time of Warrant Certificates or any of
them. Except as hereinafter stated, nothing in this Agreement is intended or
shall be construed to confer upon any other person any right, remedy or claim or
to impose upon any other person any duty, liability or obligation.

SECTION 16. COUNTERPARTS.

This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.

[Rest of page intentionally left blank]

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

CHICAGO PIZZA & BREWERY, INC.

By:_________________________
Name: Paul A. Motenko
Title: Chief Executive Officer

THE BOSTON GROUP, L.P.

By:_________________________
Name:
Title:

U.S. STOCK TRANSFER CORPORATION
As Warrant Agent

By:_________________________
Name:
Title:

<PAGE>

EXHIBIT A

No. W_____ VOID AFTER _________, 2001
[66 MONTHS AFTER EFFECTIVE DATE]

____ WARRANTS

REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE SHARES OF COMMON STOCK

CHICAGO PIZZA & BREWERY, INC.

CUSIP ___________

THIS CERTIFIES THAT, FOR VALUE RECEIVED

or registered assigns (the "Registered Holder") is the owner of the number of
redeemable warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and non-assessable share of Common Stock, no par value,
of Chicago Pizza & Brewery, Inc., a California corporation (the "Company"), at
any time from ______, 1997 [ONE YEAR AFTER EFFECTIVE DATE] and prior to the
Expiration Date (as hereinafter defined) upon the presentation and surrender of
this Warrant Certificate with the Subscription Form on the reverse hereof duly
executed, at the corporate office of U.S. Stock Transfer Corporation, 1745
Gardena Avenue, Glendale, California 91204-2991, as Warrant Agent, or its
successor (the "Warrant Agent"), accompanied by payment of $____ [110% OF IPO
PRICE], subject to adjustment (the "Purchase Price"), in lawful money of the
United States of America in cash or by check made payable to the Warrant Agent
for the account of the Company.

This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated ______, 1996, by
and among the Company, The Boston Group, L.P. and the Warrant Agent.

In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.

A-1

<PAGE>

Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.

The term "Expiration Date" shall mean 5:00 p.m. (California time) on
_________, 2002 [66 MONTHS AFTER EFFECTIVE DATE]. If such date shall in the
State of California be a holiday or a day on which banks are authorized to
close, then the Expiration Date shall mean 5:00 p.m. (California time) the next
following day which in the State of California is not a holiday or a day on
which banks are authorized to close.

The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has
covenanted and agreed that it will file a registration statement under the
Federal securities laws, use its best efforts to cause the same to become
effective, to keep such registration statement current, if required under the
Act, while any of the Warrants are outstanding, and deliver a prospectus which
complies with Section 10(a)(3) of the Act to the Registered Holder exercising
this Warrant. This Warrant shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.

This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.

Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.

Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.25 per
Warrant, at any time commencing ____ _, 1997 [ONE YEAR AFTER EFFECTIVE DATE],
provided that (i) the average closing bid price for the Company's Common Stock
in the over-the-counter market as reported by the Nasdaq Stock Market or (ii)
the average closing sale price on the primary exchange on which the Common Stock
is traded, if the Common Stock is traded on a national securities exchange,
shall

A-2

<PAGE>

have for any twenty (20) trading days within a period of thirty (30) consecutive
trading days ending on the fifth trading day prior to the Notice of Redemption,
as defined below, equaled or exceeded $____ [140% OF IPO PRICE] per share
(subject to adjustment in the event of any stock splits or other similar
events). Notice of redemption (the "Notice of Redemption") shall be given not
later than the thirtieth day before the date fixed for redemption, all as
provided in the Warrant Agreement. On and after the date fixed for redemption,
the Registered Holder shall have no rights with respect to this Warrant except
to receive the $.25 per Warrant upon surrender of this Certificate.

Under certain circumstances, The Boston Group, L.P. shall be entitled to
receive an aggregate of five percent of the Purchase Price of the Warrants
represented hereby.

Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.

This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of California without giving effect to conflicts of
laws.

This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.

A-3

<PAGE>

IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.

Dated: _________, 1996
CHICAGO PIZZA & BREWERY, INC.
[SEAL]

By:______________________________
` Name: Paul A. Motenko
Title: Chief Executive Officer

By:__________________________
Name: Jeremiah J. Hennessy
Title: Chief Operating Officer

COUNTERSIGNED:

U.S. STOCK TRANSFER CORPORATION,
as Warrant Agent

By:_____________________________
Authorized Officer

A-4

<PAGE>

SUBSCRIPTION FORM

To Be Executed by the Registered Holder
in Order to Exercise Warrant

The undersigned Registered Holder hereby irrevocably elects to exercise
Warrants represented by this Warrant Certificate, and to purchase the securities
issuable upon the exercise of such Warrants, and requests that certificates for
such securities be issued in the name of

PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER

_______________________

_______________________
(please print or type name and address)

and be delivered to

_______________________

please print or type name and address)

and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.

A-5

<PAGE>

The undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc.
If not solicited by an NASD member, please write "unsolicited" in the space
below. Unless otherwise indicated by listing the name of another NASD member
firm, it will be assumed that the exercise was solicited by The Boston Group,
L.P.

Check below to indicate the soliciting agent:

_____ The Boston Group, L.P.

_______________________
(Name of NASD member if other than The
Boston Group, L.P.)

Dated:_____________ X______________________

_______________________

_______________________
Address

_______________________
Social Security or Taxpayer
Identification Number

_______________________
Signature Guaranteed

_______________________

A-6

<PAGE>

ASSIGNMENT

To Be Executed by the Registered Holder
in Order to Assign Warrants

FOR VALUE RECEIVED, ______________________, hereby sells, assigns and
transfers unto

PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER

_______________________

_______________________
(please print or type name and address)

________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
________________________ Attorney to transfer this Warrant Certificate on the
books of the Company, with full power of substitution in the premises.

Dated:_____________ X______________________

_______________________
Signature Guaranteed

THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.

A-7

<PAGE>

Draft of August 19, 1996

CHICAGO PIZZA & BREWERY, INC.

THE BOSTON GROUP, L.P.

REPRESENTATIVE'S WARRANT AGREEMENT

Dated as of ____________, 1996

____________________

<PAGE>

REPRESENTATIVE'S WARRANT AGREEMENT

THIS REPRESENTATIVE'S WARRANT AGREEMENT (the "Agreement"), dated as of
_________ __, 1996, is made and entered into by and between CHICAGO PIZZA &
BREWERY, INC., a California corporation (the "Company") and THE BOSTON GROUP,
L.P. (the "Representative").

The Company agrees to issue and sell to the Representative and the
Representative agrees to purchase from the Company, for the price of $100, a
warrant, as hereinafter described (the "Warrant" and together with any warrants
subsequently issued hereunder, the "Warrants"), to purchase (a) up to 150,000
shares, as may be adjusted from time to time as set forth herein, of the
Company's common stock, no par value (the "Common Stock") and (b) up to 150,000
Redeemable Warrants (as defined below), as adjusted from time to time as set
forth herein or in the Warrant Agreement dated ____________, 1996 between the
Company and Corporate Stock Transfer Corporation (the "Redeemable Warrant
Agreement"). The Warrant is being issued in connection with a public offering
(the "Offering") by the Company of 1,500,000 shares of Common Stock and
1,500,000 warrants (the "Redeemable Warrants") to purchase Common Stock subject
to the terms of the Redeemable Warrant Agreement, pursuant to an underwriting
agreement (the "Underwriting Agreement"), dated as of ___________, 1996, by and
between the Company and the Representative. The shares of Common Stock issuable
upon exercise of the Warrants, and the shares of Common Stock issuable upon
exercise of the Redeemable Warrants that may be purchased upon exercise of this
Warrant are hereinafter referred to as the "Warrant Stock." The Redeemable
Warrants issuable upon exercise of the Warrants are identical to the Redeemable
Warrants issued pursuant to the Underwriting Agreement. The Warrants shall be
issued pursuant to this Agreement on the Closing Date, as such term is defined
in the Underwriting Agreement.

In consideration of the foregoing and for the purpose of defining the terms
and provisions of the Warrants, the Warrant Stock, the Redeemable Warrants
issuable upon exercise of the Warrants and the respective rights and obligations
thereunder, the Company and the Representative, for value received, hereby agree
as follows:

SECTION 1. TRANSFERABILITY AND FORM OF WARRANTS.

1.1 REGISTRATION. All Warrants shall be numbered and shall be
registered on the books of the Company when issued.

1.2 TRANSFER. The Warrants shall be transferable only on the books
of the Company maintained at its principal office, wherever its principal office
may then be located, upon delivery thereof duly endorsed by a Warrantholder (a
"Warrantholder") or by its duly authorized attorney or representative and with
the signatures properly guaranteed, accompanied by proper evidence
of succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new certificate evidencing
each such Warrant

<PAGE>

to each person entitled thereto.

1.3 LIMITATIONS ON TRANSFER OF THE WARRANTS. The Warrants,
Warrantstock, and Redeemable Warrants (collectively, the "Securities") shall not
be sold, transferred, assigned or hypothecated by the Representative until 9:00
a.m., Pacific time, on ______________, 1997 [ONE YEAR AFTER THE EFFECTIVE DATE]
and appropriate legends shall be placed on the Warrants, except that Warrants
may be transferred before such date: (i) to one or more officers or partners of
any Warrantholder, and the officers or partners of any such partner; (ii) to any
other member of the National Association of Securities Dealers, Inc. which
participated in the Offering and the officers or partners of any such member;
(iii) to successors to a Warrantholder or the officers or partners of any such
successor; (iv) to a purchaser of all or substantially all of the assets of a
Warrantholder; or (v) by will, pursuant to the laws of descent or distribution
or by operation of law. The Warrants may be divided or combined, upon request
to the Company by a Warrantholder, into a certificate or certificates
representing the right to purchase the same aggregate number of Warrant Stock.
Unless the context indicates otherwise, the term "Warrantholder" shall include
the Representative and any transferee or transferees of the Warrants pursuant to
this subsection 1.3 and as otherwise permitted by this Agreement, and the term
"Warrants" shall include any and all Warrants outstanding pursuant to this
Agreement, including those evidenced by a certificate or certificates issued
upon division, exchange, substitution or transfer pursuant to this Agreement.

1.4 FORM OF WARRANTS. The text of the Warrant certificates and of
the form of election to purchase Warrant Stock and/or Redeemable Warrants shall
be substantially as set forth in Exhibit A attached hereto. The aggregate
number of shares of Common Stock and Redeemable Warrants issuable upon exercise
of the Warrants is subject to adjustment upon the occurrence of certain events,
all as hereinafter or therein provided. The Warrants shall be executed on
behalf of the Company by its President or by a Vice President and attested to by
its Secretary or by an assistant Secretary. A Warrant certificate bearing the
signature of an individual who was at any time the proper officer of the Company
shall bind the Company, notwithstanding that such individual shall have ceased
to hold such office prior to the delivery of such Warrant certificate or did not
hold such office on the date of this Agreement or at any time thereafter.

The Warrant certificate shall be dated as of the date of
signature thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.

1.5 LEGENDS. Each certificate for any of the Securities and Warrant
Stock shall bear the following legend, unless, at the time of issuance such
Security is subject to a currently effective Registration Statement under the
Securities Act of 1933, as amended (the "Act"):

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933

<PAGE>

AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN
ANY MANNER EXCEPT IN COMPLIANCE WITH SECTION 11 OF THE
REPRESENTATIVE'S WARRANT AGREEMENT PURSUANT TO WHICH THEY WERE
ISSUED."

Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to an effective registration
statement under the Act, of the securities represented thereby) shall also bear
the above legend unless, in the opinion of the Company's counsel, the securities
represented thereby need no longer be subject to such restrictions.

SECTION 2. EXCHANGE OF WARRANT CERTIFICATE. Any Warrant certificate may
be exchanged for another certificate or certificates entitling the Warrantholder
to purchase a like aggregate number of shares of Warrant Stock or Redeemable
Warrants as the certificate or certificates surrendered then entitled such
Warrantholder to purchase. Any Warrantholder desiring to exchange a Warrant
certificate shall make such request in writing delivered to the Company, and
shall surrender, properly endorsed, the certificate evidencing the Warrant to be
so exchanged. Thereupon, the Company shall execute and deliver to the person
entitled thereto a new Warrant certificate or certificates as so requested.

SECTION 3. TERM OF WARRANTS; EXERCISE OF WARRANTS.

3.1 EXERCISE OF WARRANTS. Subject to the terms of this Agreement,
the Warrantholder shall have the right, at any time and from time to time until
5:00 p.m., Pacific Time, on _____________, 2002 [SIX YEARS AFTER THE EFFECTIVE
DATE] (the "Termination Date"), to purchase from the Company up to the number of
fully paid and nonassessable shares of Warrant Stock and Redeemable Warrants to
which the Warrantholder may at the time be entitled to purchase pursuant to this
Agreement, upon surrender to the Company, at its principal office, of the
certificate evidencing the Warrants to be exercised, together with the purchase
form on the reverse thereof duly completed and executed, and upon payment to the
Company of the respective Warrant Price (as defined in and determined in
accordance with the provisions of this Section 3 and Sections 7 and 8 hereof)
for the number of shares of Warrant Stock and/or Redeemable Warrants in respect
of which such Warrants are then exercised, but in no event for less than 100
shares of Warrant Stock or 100 Redeemable Warrants (unless less than an
aggregate of 100 shares of Warrant Stock or Redeemable Warrants, respectively,
are then purchasable under all outstanding Warrants held by such Warrantholder).
This Warrant may be exercised from time to time in whole or in part.

3.2 PAYMENT OF WARRANT PRICE. Payment of the Warrant Price shall be
made in cash, by certified or official bank check in Los Angeles Clearing House
funds (next day funds), or any combination thereof.

<PAGE>

3.3 CASHLESS EXERCISE. In addition to the method of payment set
forth in Section 3.2 above and in lieu of any cash payment required thereunder,
unless otherwise prohibited by law, the Warrantholders shall have the right at
any time and from time to time to exercise the Warrants in full or in part (i)
by receiving from the Company the number of shares of Warrant Stock or
Redeemable Warrants, as the case may be, equal to the number of shares of
Warrant Stock or Redeemable Warrants, respectively, otherwise issuable upon such
exercise less the number of shares of Warrant Stock or Redeemable Warrants,
respectively, having an aggregate value on the date of exercise equal to the
respective Warrant Price multiplied by the number of shares of Warrant Stock or
Redeemable Warrants, respectively, for which this Warrant is being exercised
and/or (ii) by delivering to the Company the number of shares of Common Stock or
Redeemable Warrants, respectively, having an aggregate value on the date of
exercise equal to the respective Warrant Price multiplied by the number of
shares of Warrant Stock or Redeemable Warrants, respectively, for which this
Warrant is being exercised.

Upon surrender of the Warrants and payment of the respective
Warrant Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the Warrantholder,
and in such name or names as the Warrantholder may designate, certificates for
the number of full shares of Warrant Stock or Redeemable Warrants so purchased
upon such exercise of the Warrant, together with cash, as provided in Section 9
hereof, in respect of any fractional shares or Redeemable Warrants otherwise
issuable upon such surrender. Such certificate or certificates, to the extent
permitted by law, shall be deemed to have been issued and any person so
designated to be named therein shall be defined to have become a holder of
record of such securities as of the date of surrender of the Warrants and
payment of the respective Warrant Price, as aforesaid, notwithstanding that the
certificate or certificates representing such securities shall not actually have
been delivered or that the stock transfer books or Redeemable Warrants books of
the Company shall then be closed. The Warrants shall be exercisable, at the
election of the Warrantholder, either in full or from time to time in part for
Common Stock or Redeemable Warrants, or both, and, in the event that a Warrant
is exercised in respect of less than all of the shares of Warrant Stock or
Redeemable Warrants specified therein at any time prior to the Termination Date,
a new Warrant evidencing the remaining shares of the Warrant Stock or Redeemable
Warrants purchasable by such Warrantholders hereunder shall be issued by the
Company to such Warrantholders.

3.4 SOLICITATION FEE. The Company hereby appoints the
Representative as the exclusive solicitation agent for the Warrants, and hereby
agrees to pay the Representative a commission equal to five percent (5%) of the
exercise price of the Warrants (other than Warrants exercised directly on behalf
of the Representative), payable on the date of the exercise thereof. The
Company will not solicit the exercise of the Warrants other than through the
Representative.

SECTION 4. VALIDITY; PAYMENT OF TAXES. All securities delivered upon
exercise of a Warrant shall be duly and validly issued and non-assessable. The
Company shall pay all documentary stamp taxes, if any, attributable to the
initial issuance of the Warrants and the shares of Warrant Stock and Redeemable
Warrants issuable upon the exercise of the Warrants;

<PAGE>

provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any secondary transfer of the Warrants, the Warrant
Stock or Redeemable Warrants.

SECTION 5. MUTILATED OR MISSING WARRANTS. In case the certificate or
certificates evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of such Warrant.

SECTION 6. RESERVATION OF SHARES. The Company represents and warrants to
the Warrantholder that there has been reserved, and the Company shall at all
times keep reserved so long as the Warrants and Redeemable Warrants remain
outstanding, out of its authorized Common Stock, such number of shares of Common
Stock as shall be subject to purchase under the Warrants and Redeemable
Warrants. Every transfer agent for the Common Stock and other securities of the
Company issuable upon the exercise of the Warrants shall be irrevocably
authorized and directed at all times to reserve such number of authorized shares
and other securities as shall be required for such purpose. The Company shall
keep a copy of this Agreement on file with every transfer agent for the Common
Stock and other securities of the Company issuable upon the exercise of the
Warrants. The Company shall supply every such transfer agent with duly executed
stock and other certificates, as appropriate, for such purpose and shall provide
or otherwise make available any cash which may be payable in lieu of the
issuance of fractional shares, as provided in Section 9 hereof.

SECTION 7. WARRANT PRICE. The price per share at which shares of Warrant
Stock shall be purchasable upon the exercise of the Warrants shall be 120% of
the initial public offering price of Common Stock in the Offering, subject to
adjustment pursuant to Section 8 hereof (as so adjusted from time to time, the
"Purchase Price"). The price per Redeemable Warrant at which Redeemable
Warrants shall be purchasable upon the exercise of the Warrants shall be 120% of
the initial public offering price of Redeemable Warrants sold in the Offering,
subject to adjustment pursuant to Section 8 hereof (as so adjusted from time to
time, the "Redeemable Warrant Price"). (The "Purchase Price" and "Redeemable
Warrant Price" are herein referred to as the respective "Warrant Price".)

SECTION 8. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF COMMON
STOCK DELIVERABLE.

8.1 ADJUSTMENT OF PURCHASE PRICE.

(a) Except as hereinafter provided, in the event the Company
shall, at any time or from time to time after the date hereof, sell any shares
of Common Stock, including shares held in the Company's treasury and shares of
Common Stock issued upon the exercise of

<PAGE>

any options, rights or warrants to subscribe for shares of Common Stock and
shares of Common Stock issued upon the direct or indirect conversion or exchange
of securities for a consideration per share less than the Purchase Price or
issue any shares of Common Stock as a stock dividend to the holders of Common
Stock, or subdivide or combine the outstanding shares of Common Stock into a
greater or lesser number of shares (any such sale, issuance, subdivision or
combination being herein called a "Change of Shares"), then, and thereafter upon
each further Change of Shares, the Purchase Price for the Warrants in effect
immediately prior to such Change of Shares shall be changed to a price
(including any applicable fraction of a cent to the nearest cent) determined by
dividing (A) the sum of (x) the total number of shares of Common Stock
outstanding immediately prior to such Change of Shares, multiplied by the
Purchase Price in effect immediately prior to such Change of Shares, and (y) the
consideration, if any, received by the Company upon such sale, issuance,
subdivision or combination by (B) the total number of shares of Common Stock
outstanding immediately after such Change of Shares; PROVIDED, HOWEVER, that in
no event shall the Purchase Price be adjusted pursuant to this computation to an
amount in excess of the Purchase Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Common
Stock.

For the purposes of any adjustment to be made in accordance with this
Section 8.1(a) the following provisions shall be applicable:

(i) In case of the issuance or sale of shares of Common Stock
(or of other securities deemed hereunder to involve the issuance or sale of
shares of Common Stock) for a consideration part or all of which shall be cash,
the amount of the cash portion of the consideration therefor deemed to have been
received by the Company shall be (i) the subscription price, if shares of Common
Stock are offered by the Company for subscription, or (ii) the public offering
price (before deducting therefrom any compensation paid or discount allowed in
the sale, underwriting or purchase thereof by underwriters or dealers or others
performing similar services, or any expenses incurred in connection therewith),
if such securities are sold to underwriters or dealers for public offering
without a subscription offering, or (iii) the gross amount of cash actually
received by the Company for such securities, in any other case.

(ii) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company of shares of Common
Stock (or of other securities deemed hereunder to involve the issuance or sale
of shares of Common Stock) for a consideration part or all of which shall be
other than cash or as part of a unit, the amount of the consideration therefor
other than cash deemed to have been received by the Company or the amount
received per share as part of a unit shall be the value of such consideration as
determined in good faith by the Board of Directors of the Company on the basis
of a record of values of similar property, services or securities.

(iii) Shares of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the record
date for the determination of

<PAGE>

shareholders entitled to receive such dividend or other distribution and shall
be deemed to have been issued without consideration.

(iv) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in Section 8.1(a)(ii) hereof.

(v) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.

(b) Upon each adjustment of the Purchase Price pursuant to this
Section 8, the number of shares of Common Stock purchasable upon the exercise of
each Warrant shall be the number derived by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment by the Purchase
Price in effect prior to such adjustment and dividing the product so obtained by
the applicable adjusted Purchase Price.

8.2 ADJUSTMENTS FOR OPTIONS, ETC. In case the Company shall at any
time after the date hereof issue options, rights or warrants to subscribe for
shares of Common Stock, or issue any securities convertible into or exchangeable
for shares of Common Stock, for a consideration per share (determined as
provided in Section 8.1(a) hereof and as provided below) less than the Purchase
Price in effect immediately prior to the issuance of such options, rights or
warrants, or such convertible or exchangeable securities, or without
consideration (including the issuance of any such securities by way of dividend
or other distribution), the Purchase Price in effect immediately prior to the
issuance of such options, rights or warrants, or such convertible or
exchangeable securities, as the case may be, shall be reduced to a price
determined by making the computation in accordance with the provisions of
Section 8.1(a) hereof, provided that:

(a) The aggregate maximum number of shares of Common Stock, as
the case may be, issuable or that may become issuable under such options, rights
or warrants (assuming exercise in full even if not then currently exercisable or
currently exercisable in full) shall be deemed to be issued and outstanding at
the time such options, rights or warrants were issued, for a consideration equal
to the minimum purchase price per share provided for in such options, rights or
warrants at the time of issuance, plus the consideration, if any, received by
the Company for such options, rights or warrants; PROVIDED, HOWEVER, that upon
the expiration or other termination of such options, rights or warrants, if any
thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this subsection (a) (and for the
purposes of Section 8.1(a)(v) hereof) shall be reduced by the number of shares
as to which options, warrants and/or rights shall have expired, and such number
of

<PAGE>

shares shall no longer be deemed to be issued and outstanding, and the Purchase
Price then in effect shall forthwith be readjusted and thereafter be the price
that it would have been had adjustment been made on the basis of the issuance
only of the shares actually issued plus the shares remaining issuable upon the
exercise of those options, rights or warrants as to which the exercise rights
shall not have expired or terminated unexercised.

(b) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; PROVIDED, HOWEVER, that upon the
termination of the right to convert or exchange such convertible or exchangeable
securities (whether by reason of redemption or otherwise), the number of shares
of Common Stock deemed to be issued and outstanding pursuant to this subsection
(b) (and for the purposes of Section 8.1(a)(v) hereof) shall be reduced by the
number of shares as to which the conversion or exchange rights shall have
expired or terminated unexercised, and such number of shares shall no longer be
deemed to be issued and outstanding, and the Purchase Price then in effect shall
forthwith be readjusted and thereafter be the price that it would have been had
adjustment been made on the basis of the issuance only of the shares actually
issued plus the shares remaining issuable upon conversion or exchange of those
convertible or exchangeable securities as to which the conversion or exchange
rights shall not have expired or terminated unexercised.

(c) If any change shall occur in the price per share provided
for in any of the options, rights or warrants referred to in Section 8.2(a)
hereof, or in the price per share or ratio at which the securities referred to
in Section 8.2(b) hereof are convertible or exchangeable, such options, rights
or warrants or conversion or exchange rights, as the case may be, to the extent
not theretofore exercised, shall be deemed to have expired or terminated on the
date when such price change became effective in respect of shares not
theretofore issued pursuant to the exercise or conversion or exchange thereof,
and the Company shall be deemed to have issued upon such date new options,
rights or warrants or convertible or exchangeable securities.

(d) In case of any reclassification or change of outstanding
shares of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a Subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other capital stock issuable upon
exercise of the Warrants), or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company, or such

<PAGE>

successor or purchasing corporation, as the case may be, shall make lawful and
adequate provision whereby the Registered Holder of each Warrant then
outstanding shall have the right thereafter to receive on exercise of such
Warrant the kind and amount of securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of securities issuable upon exercise of such Warrant immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance and shall forthwith file at the Corporate Office of the Warrant Agent
a statement signed by its Chairman of the Board, President or a Vice President
and by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant
Secretary evidencing such provision. Such provisions shall include provision
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Sections 8.1 and 8.2 hereof. The above provisions
of this Section 8.2(d) shall similarly apply to successive reclassifications and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.

(e) Irrespective of any adjustments or changes in the Warrant
Price or the number of shares of Common Stock or Redeemable Warrants purchasable
upon exercise of the Warrants, no changes shall be necessary to the face of the
Warrant Certificates theretofore and thereafter issued.

(f) After each adjustment of the Purchase Price and the Warrant
Exercise Price pursuant to this Section 8, the Company will promptly prepare a
certificate signed by the Chairman of the Board, President, or a Vice President
and by the Treasurer or the Secretary of the Company setting forth: (i) the
Purchase Price and Warrant Exercise Price, as so adjusted, (ii) the number of
shares of Common Stock purchasable upon exercise of each Warrant, after such
adjustment, and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly file such certificate with the Company's
Transfer Agent and cause a brief summary thereof to be sent by ordinary first
class mail to each Registered Holder at his last address as it shall appear on
the registry books of the Warrant Agent. No failure to mail such notice nor any
defect therein or in the mailing thereof shall affect the validity thereof
except as to the holder to whom the Company failed to mail such notice, or
except as to the holder whose notice was defective. The affidavit of an officer
of the Warrant Agent or the Secretary or an Assistant Secretary of the Company
that such notice has been mailed shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.

(g) No adjustment of the Purchase Price shall be made as a
result of or in connection with (i) the issuance or sale of shares of Common
Stock pursuant to options, warrants, stock purchase agreements and convertible
or exchangeable securities outstanding or in effect on the date hereof, (ii) the
issuance or sale of shares of Common Stock upon the exercise of any "incentive
stock options" (as such term is defined in the Internal Revenue Code of 1986, as
amended), or any non-qualified stock options to non-employee directors of the
Company pursuant to the Company's 1996 Stock Option Plan, whether or not such
options were outstanding on the date hereof, or (iii) the issuance or sale of
shares of Common Stock if the amount of said adjustment shall be less than ten
cents ($.10); PROVIDED, HOWEVER, that in such

<PAGE>

case, any adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the next
subsequent adjustment that shall amount, together with any adjustment so carried
forward, to at least ten cents ($.10). In addition, Registered Holders shall
not be entitled to cash dividends paid by the Company prior to the exercise of
any Warrant or Warrants held by them.

8.3 ADJUSTMENT OF REDEEMABLE WARRANT PRICE. Upon each adjustment of
the Purchase Price pursuant to this Section 8, the Redeemable Warrant Price
shall be adjusted by multiplying the number of Redeemable Warrants immediately
prior to such adjustment by the Purchase Price in effect prior to such
adjustment and dividing the product so obtained by the applicable adjusted
Purchase Price. Upon any exercise of this Warrant, the Redeemable Warrants
issued shall reflect all anti-dilution changes made in such Redeemable Warrants
since the Warrant Agreement for the Redeemable Warrants was entered into.

8.4 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation or other entity or in case of any sale,
lease, conveyance or other transfer to another corporation, person or other
entity of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, person or other entity, as the case may be, shall execute with the
Warrantholder, and the agreements governing such consolidation, merger, sale,
lease, conveyance or other transfer shall require such execution of, an
agreement that the Warrantholder shall have the right thereafter upon payment of
the Warrant Price in effect immediately prior to such event, upon exercise of
the Warrants, to receive the kind and amount of shares and other securities and
property which it would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, lease, conveyance or other
transfer had the Warrants (and each underlying security) been exercised
immediately prior to such action. The Company shall promptly mail to each
Warrantholder by first class mail, postage prepaid, notice of the execution of
any such agreement. In the event of a merger described in Section 368(a)(2)(E)
of the Internal Revenue Code of 1986, in which the Company is the surviving
corporation, the right to purchase shares of Warrant Stock under the Warrants
shall terminate on the date of such merger and thereupon the Warrants shall
become null and void, but only if the controlling corporation shall agree to
substitute for the Warrants its warrant which entitles the holder thereof to
purchase upon its exercise the kind and amount of shares and other securities
and property which it would have owned or been entitled to receive had the
Warrants been exercised immediately prior to such merger. Any such agreements
referred to in this Section 8.4 shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in
Section 8 hereof, and shall provide for terms and provisions at least as
favorable to the Warrantholder as those contained in this Agreement. The
provisions of this Section 8.4 shall similarly apply to successive
consolidations, mergers, sales, leases, conveyances or other transfers.

8.5 PAR VALUE OF SHARES OF COMMON STOCK. Before taking any action
which would cause an adjustment effectively reducing the portion of the Warrant
Price allocable to each

<PAGE>

share of Warrant Stock below the then par value per share, if any, of the
Warrant Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Stock upon exercise of the Warrants.

8.6 INDEPENDENT PUBLIC ACCOUNTANTS. The Company may retain Coopers &
Lybrand L.L.P. (or such other accounting firm qualified to practice in front of
the Securities and Exchange Commission (the "Commission") as is reasonably
acceptable to the Representative) to make any computation required under this
Section 8, and a certificate signed by such firm shall be conclusive evidence of
the correctness of any computation made under this Section 8.

8.7 REDEMPTION OF WARRANTS. Notwithstanding anything to the contrary
contained in this Agreement or elsewhere, the Warrants cannot be redeemed by the
Company under any circumstances.

SECTION 9. FRACTIONAL SHARES; CURRENT MARKET PRICE. The Company shall not
be required to issue fractional shares of Common Stock or Redeemable Warrants on
the exercise of a Warrant. If any fraction of a share of Common Stock or
Redeemable Warrants would, except for the provisions of this Section 9, be
issuable upon the exercise of a Warrant (or specified portion thereof), the
Company shall in lieu thereof pay an amount in cash equal to the then Current
Market Price multiplied by such fraction (less the applicable Redeemable Warrant
Price for a Redeemable Warrant). For purposes of this Agreement, the term
"Current Market Price" shall mean (i) if the Common Stock is traded on the
Nasdaq National Market ("NNM") or on a national securities exchange, the per
share closing price of the Common Stock in the NNM or on the principal stock
exchange on which it is listed, as the case may be, on the date of exercise of
the Warrant or, with respect to any adjustment pursuant to Section 8.1 hereof,
on the date immediately preceding the announcement of the event causing such
adjustment or (ii) if the Common Stock is traded in the over-the-counter market
and not in the NNM or on any national securities exchange, the average of the
per share closing bid prices of the Common Stock on the thirty (30) consecutive
trading days immediately preceding the date in question, as reported by The
Nasdaq Small Cap Market (or an equivalent generally accepted reporting service
if quotations are not reported on The Nasdaq Small Cap Market). The closing
price referred to in clause (i) above shall be the last reported sale price or,
in the case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices, in either case in the NNM or on the
principal stock exchange on which the Common Stock is then listed. For purposes
of clause (ii) above, if trading in the Common Stock is not reported by
The Nasdaq Small Cap Market, the bid price referred to in said clause shall be
the lowest bid price as reported in the Nasdaq Electronic Bulletin Board or, if
not reported thereon, as reported in the "pink sheets" published by National
Quotation Bureau, Incorporated, and, if such Common Stock is not so reported,
shall be the price of a share of Common Stock determined by the Company's Board
of Directors in good faith.

SECTION 10. NO RIGHTS AS STOCKHOLDER; NOTICES TO WARRANTHOLDER. Except as

<PAGE>

expressly provided herein, nothing contained in this Agreement or in the
Warrants shall be construed as conferring upon the Warrantholder or its
transferees any rights as a shareholder of the Company, including the right to
vote, receive dividends, consent or receive notices as a shareholder in respect
of any meeting of shareholders for the election of directors of the Company or
any other matter. If, however, at any time prior to the expiration of the
Warrants and prior to their exercise, any one or more of the following events
shall occur:

(a) any action which would require an adjustment pursuant to
Section 8 hereof;

(b) an issuance by the Company of rights, options, warrants or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, containing the right to subscribe for or
purchase Common Stock; or

(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger or sale of its property,
assets and business as an entirety or substantially as an entirety) shall be
proposed;

then the Company shall give notice in writing of such event to the
Warrantholder, as provided in Section 13 hereof, at least 20 days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to any relevant dividend,
distribution or other rights or for the determination of stockholders entitled
to vote on such proposed dissolution, liquidation or winding up. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be.

SECTION 11. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS; OBLIGATIONS IN
REGISTRATION.

11.1 NOTICE OF TRANSFER. The Warrantholder agrees that prior to
making any disposition of the Securities, other than to persons or entities
identified in the first sentence of Section 1.3, the Warrantholder shall give
written notice to the Company describing briefly the manner in which any such
proposed disposition is to be made; and no such disposition shall be made unless
the Warrantholder has notified, or currently with such disposition notifies, the
Company that in the opinion of counsel reasonably satisfactory to the Company a
registration statement, application or other notification, filing or post-
effective amendment or supplement thereto (hereinafter collectively a
"Registration Statement") under the Act or the state securities or "blue sky"
laws of any applicable jurisdiction is not required with respect to such
disposition and no such Registration Statement has been filed by the Company
with, and declared effective, if necessary, by, the Commission or state
securities commission or agency. The Warrantholder agrees that it shall use its
reasonable best efforts to obtain from any transferee who acquires any Warrants
in a private transaction with the Warrantholder an agreement by such transferee
that it agrees to be bound by any transfer restrictions set forth in this
subsection 11(a) then applicable to such transferees.

<PAGE>

11.2 REGISTRATION OF SECURITIES. The Company shall be obligated to
prepare and file a registration statement, and amendments thereto, with the
Commission for the registration of the Securities under the Act and shall be
obligated to cause such registration statement, and amendments thereto, to be
declared effective by the Commission on or prior to ______________, 199_ [ONE
YEAR AFTER WARRANT ISSUED]. The Company shall be obligated to the registered
holders of the Securities to continually maintain, at the Company's own expense,
the currency and effectiveness of such registration statement of the Company,
including the filing of any and all applications and other notifications,
filings and post-effective amendments and supplements (collectively, the
"Current Registration Statement"), as may be necessary, so as to permit the
resale of the Securities until the earlier of the time that all shares of
Securities have been sold pursuant to the Current Registration Statement or the
Termination Date.

11.3 FURTHER RIGHTS OF WARRANT HOLDERS. If at any time after the date
hereof the Current Registration Statement is no longer in effect other than
because all Securities have been sold pursuant to the Current Registration
Statement or because the Termination Date has already occurred, the Company
shall be obligated to the registered holders of the Securities as follows:

(a) Whenever during the period beginning on ____________, 1997
[ONE YEAR AFTER THE EFFECTIVE DATE] and ending on _____________, 2004 [SEVEN
YEARS AFTER THE EFFECTIVE DATE], the Company proposes to file with the
Commission a Registration Statement (other than as to securities issued pursuant
to an employee benefit plan or as to a transaction subject to Rule 145
promulgated under the Act), it shall, at least thirty (30) days prior to each
such filing, give written notice of such proposed filing to each holder of the
Securities at their respective addresses as they appear on the records of the
Company, and shall offer to include and shall include in such filing any
proposed disposition of the Securities upon receipt by the Company, not more
than twenty (20) days following the receipt of such notice, of a request
therefor setting forth the facts with respect to such proposed disposition and
all other information with respect to such person reasonably necessary to be
included in such Registration Statement. In the event that such registration
statement relates to an underwritten offering on a "firm commitment" basis and
the managing underwriter for said offering advises the Company in writing that
the inclusion of such Securities in the offering would be materially and
substantially detrimental to the completion of the offering, such Securities
shall nevertheless be included in the Registration Statement, provided that the
Warrantholder and each holder of Securities desiring to have such Securities
included in the Registration Statement agrees in writing for a period of ninety
(90) days following such offering not to sell or otherwise dispose of such
Securities pursuant to such Registration Statement, which Registration Statement
the Company shall keep effective for a period of at least nine (9) months
following the expiration of such ninety (90) day period.

(b) In addition to any Registration Statement pursuant to
subparagraph (i) above, during the four-year period beginning on _____________,
1997 [ONE YEAR AFTER THE EFFECTIVE DATE] and ending on the Termination Date, the
Company will, as promptly as practicable (but in any event within sixty (60)
days), after written request (the

<PAGE>

"Request") by the Representative, or by a person or persons holding (or having
the right to acquire by virtue of holding the Warrants) at least sixty percent
(60%) of the shares of Warrant Stock which have been (or may be) issued upon
exercise of the Warrants and Redeemable Warrants underlying the Warrants,
prepare and file at the Company's expense (for the first registration statement
prepared under this Section 11.3(b) only; the second registration statement
prepared under this Section 11.3(b) shall be at the requesting holder's expense)
a Registration Statement with the Commission and such applications or other
filings as required under applicable state securities or blue sky laws
sufficient to permit the public offering of the Securities, and shall use its
reasonable best efforts at its own expense through its officers, directors,
auditors and counsel, in all matters necessary or advisable, to cause such
Registration Statement to become effective as promptly as practicable and to
maintain such effectiveness so as to permit resale of the Securities covered
by the Request until the earlier of the time that all such Securities have been
sold or the expiration of one hundred eighty (180) days from the effective date
of the Registration Statement; provided, however, that the Company shall be
obligated to file only two such Registration Statements under this Section
11.3(b) only one of which shall be at the Company's expense. Notwithstanding
the foregoing, once and only once during the period the Company would have an
obligation to register the Securities pursuant to this Section 11.3(b), the
Company shall not be obligated to effect a registration pursuant to this Section
11.3(b) during the three (3) month period starting with the date thirty (30)
days prior to the Company's estimated date of filing of an underwritten public
offering of securities solely for the account of the Company; provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; provided
further, that the Company shall furnish to the Warrantholder and each holder of
Securities a certificate signed by the managing underwriter stating that it
would be seriously detrimental to the Company or its shareholders for the
registration statement to be filed in the near future.

(c) All fees, disbursements and out-of-pocket expenses (other
than the Warrantholder's brokerage fees and commissions and legal fees of
counsel to the Warrantholder, if any) in connection with the filing of any
Registration Statement or maintaining the currency and effectiveness of the
Current Registration Statement (or obtaining the opinion of counsel and any no-
action position of the commission with respect to sales under Rule 144) and in
complying with applicable federal securities and state securities and blue sky
laws shall be borne by the Company except for the second registration statement
filed under Section 11.3(b). The Company at its expense shall supply any holder
of the Securities with copies of such Registration Statement and the prospectus
included therein and other related documents and any opinions and no-action
letters in such quantities as may be reasonably requested by such holder of the
Securities.

(d) The Company shall not be required by this Section 11 to file
such Registration Statement if, in the opinion of counsel for the
Representative, which counsel shall be reasonably satisfactory to the Company,
or in the opinion of another counsel experienced in

<PAGE>

securities law matters acceptable to counsel for such holders, the proposed
public offering or other transfer as to which such Registration Statement is
requested is exempt from applicable federal securities and state securities and
blue sky laws and would result in all purchasers or transferees obtaining
securities which are not "restricted securities," as defined in Rule 144 under
the Act.

(e) The provisions of this Section 11 and of Section 12 hereof
shall apply to the extent provided herein if the Company chooses to file an
Offering Statement under Regulation A promulgated under the Act.

(f) Notwithstanding the other provisions of this Section 11, the
Company may, in full satisfaction of its obligations under this Section 11,
register the Securities with the Commission pursuant to the Act on any form then
available to it so as to allow the unrestricted sale of the Securities to the
public from time to time commencing at 9:00 a.m. Pacific time on _____________,
1997 [ONE YEAR AFTER THE EFFECTIVE DATE] and ending at 5:00 p.m. Pacific time on
____________, 2001 [SEVEN YEARS AFTER THE EFFECTIVE DATE] (the "Registration
Period"). If the Company elects to so satisfy its obligations under this
Section 11, the Company shall also file such applications and other documents
necessary to permit the sale of the Securities to the public during the
Registration Period in those states in which the Securities were qualified for
sale in the Offering or such other states as the holders of the Securities
reasonably request. In order to comply with the provisions of this Section
11.3(f), the Company may, but is not required to, file more than one
Registration Statement. The Company shall file such post-effective amendments
and supplements as may be necessary to maintain the currency of such
Registration Statement(s) during the period of its (their) use. In addition, if
the holders of the Securities participating in such registration are advised by
counsel that such Registration Statement, in their opinion, is deficient in any
material respect, the Company shall use its best efforts to cause such
Registration Statement to be amended to eliminate the concerns raised.

(g) The Company agrees that until all the Securities have been
sold under a Registration Statement or pursuant to Rule 144 under the Act, it
shall keep current in filing all materials required to be filed with the
Commission in order to permit the holders of such securities to sell the same
under Rule 144.

(h) In the event any holder of Securities timely elects to
participate in an offering by including Securities in a Registration Statement
pursuant to Section 11.3 hereof, the Company shall use its reasonable best
efforts to effect such registration to permit the sale of Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto, the Company shall, as expeditiously as possible:

(i) Prepare and file with the Commission a Registration
Statement or Registration Statements on a form available for the sale of the
Securities, and to cause any such Registration Statement filed under the Act
pursuant to Section 11.3 hereof to become effective at

<PAGE>

the earliest possible date after the filing thereof and remain effective as
provided herein and to comply with all applicable rules and regulations of the
Commission (the "Rules and Regulations") in connection therewith, provided,
however, that before filing a Registration Statement or prospectus or any
amendments or supplements thereto, including documents which would be
incorporated or deemed to be incorporated by reference in the Registration
Statement after the initial filing of any Registration Statement, the Company
will furnish to the Representative and the holders of the Securities, their
respective counsel, and the underwriters, if any, to be engaged in connection
with the offering and sale by the Company (for purposes of this Section 11.3(f),
the "Public Underwriter"), copies of all such documents proposed to be filed,
which documents will be subject to the review of the Representative and such
holders of the Securities, their respective counsel and the Public Underwriter,
if any, and the Company will not file any Registration Statement, amendment
thereto, any prospectus or any supplement thereto (including such documents
incorporated or deemed to be incorporated by reference) to which the
Representative or the Public Underwriter, if any, shall reasonably object;

(ii) Prepare and promptly file with the Commission such
amendments and post-effective amendments to a Registration Statement as may be
necessary to keep such Registration Statement continuously effective for a
period of twelve (12) months; cause the related prospectus to be supplemented,
by any required prospectus supplement, and as so supplemented, to be filed
pursuant to Rule 424 under the Act; and comply with the provisions of the Act
with respect to the disposition of all Securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition as set forth in such Registration Statement or supplement to such
prospectus; the Company shall not be deemed to have used its reasonable best
efforts to keep a Registration Statement effective during the applicable period
if it intentionally or voluntarily takes any action that would result in the
Representative or such Warrantholders not being able to sell their Securities;

(iii) As soon as the Company is advised or obtains knowledge
thereof, advise the Representative and confirm the same in writing (1) when the
Registration Statement, as amended, becomes effective and when any post-
effective amendment to the Registration Statement becomes effective, (2) of the
issuance by the Commission or any State or other regulatory body of any stop
order or other order, or of the initiation or the threat or contemplation of any
proceeding, the outcome of which may result in the suspension of the
effectiveness of the Registration Statement or the issuance of any order
preventing or suspending the use of any preliminary prospectus or the
prospectus, or any amendment or supplement thereto, or the institution of any
proceedings for that purpose, (3) of the issuance by the Commission or any State
or other regulatory body of any proceedings for the suspension of the
qualification of any of the Securities for offering or sale in any jurisdiction
or of the initiation or the threat or contemplation of any proceeding for that
purpose, (4) of the receipt of any comments from the Commission and (5) of any
request by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the prospectus related thereto or for additional
information; if the commission or any State or other regulatory body shall enter
a stop order or other order suspending the effectiveness of the Registration
Statement or

<PAGE>

preventing or suspending the use of any preliminary prospectus or the
prospectus, or any amendment or supplement thereto, or suspend such
qualification at any time, make every effort to obtain promptly the lifting of
such order or suspension;

(iv) If requested by the Public Underwriter, if any, or the
Representative, or any holder of Securities (1) immediately incorporate in a
prospectus supplement or post-effective amendment such information as the
Representative or such Warrantholder and the Public Underwriter, if any, agree
should be included therein relating to such sale and distribution of the
Securities, including, without limitation, information with respect to the
number of Securities being sold to such Public Underwriter, the purchase price
being paid therefor by such Public Underwriter and with respect to any other
terms of the underwritten offering of the Securities to be sold in such
offering; (2) make all required filings of such prospectus supplement or post-
effective amendment as soon as notified of the matters to be so incorporated in
such prospectus supplement or post-effective amendment; and (3) supplement or
amend any Registration Statement if requested by the Representative, the holders
of Securities or any underwriter of Securities;

(v) Furnish to the Representative, each of the holders of
Securities and their respective counsel, without charge and at such place as the
Representative may designate, copies of each preliminary prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (two of which will be signed and will include all financial statements
and exhibits, one for the Representative and one for the Representative's
Counsel), the Prospectus, and all amendments and supplements thereto, including
any prospectus prepared after the effective date of the Registration Statement
and any term sheet, in each case as soon as available and in such quantities as
the Representative and each holder of the Securities may request;

(vi) During the time when a prospectus is required to be
delivered under the Act, it shall comply with all requirements imposed upon it
by the Act and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and by the Rules and Regulations, as from time to time in force, so far
as necessary to permit the continuance of sales of or dealings in the Securities
in accordance with the provisions hereof and the prospectus, or any amendments
or supplements thereto; if at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event shall have
occurred as a result of which, in the opinion of the Company or counsel for the
Company or the Representative or counsel for the Representative , the
prospectus, as then amended or supplemented, would include an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, or if it is necessary at
any time to amend or supplement the Prospectus to comply with the Act, notify
the underwriter and prepare and file, at the Company's expense, with the
Commission an appropriate amendment or supplement to the Registration Statement
or an amendment or supplement to the prospectus which will correct such
statement or omission, or effect such compliance, each such amendment or
supplement to be reasonably

<PAGE>

satisfactory to the Representative and the counsel for the Representative; and
furnish to the Representative copies of such amendment or supplement as soon as
available and in such quantities as the Representative may request;

(vii) As soon as practicable, but in any event not later
than forty-five (45) days after the end of the twelve (12) month period
beginning after the effective date of the Registration Statement, make generally
available to its security holders, in the manner specified in Rule 158(b)
promulgated under the Act, and to the Representative, an earnings statement
which will comply with the provisions of Section 11(a) of the Act and Rule
158(a) promulgated under the Act;

(viii) Deliver to the Representative and each of the
holders of Securities, their respective counsel and the Public Underwriter, if
any, without charge, as many copies of the prospectus or prospectuses (including
each preliminary prospectus) and any amendment or supplement thereto as such
persons may reasonably request; the Company consents to the use of any such
prospectus or any amendment or supplement thereto by the Representative, the
holders of Securities and the Public Underwriter, if any, in connection with the
offering and sale of the Securities covered by such prospectus or any amendment
or supplement thereto;

(ix) Prior to any public offering of Securities, use its
best efforts, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
or "blue sky" laws of such jurisdictions as the Representative may reasonably
designate to permit the continuance of sales and dealings therein for as long as
may be necessary to complete the distribution, and make such applications, file
such documents and furnish such information as may be required for such purpose;
provided, however, the Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in any such
jurisdiction; in each jurisdiction where such qualification shall be effected,
use its best efforts to file and make such statements or reports at such times
as are or may be required by the laws of such jurisdiction to continue such
qualification;

(x) Cooperate with the Representative, the holders of the
Securities and the Public Underwriter, if any, to facilitate the timely
preparation and delivery of certificates representing Securities to be sold,
which certificates shall not bear any restrictive legends; and enable such
Securities to be in such denominations and registered in such names as the
Public Underwriter, if any, may request at least two (2) business days prior to
any sale of such Securities;

(xi) Use its reasonable best efforts to cause the Securities
covered by the Registration Statement to be registered with or approved by such
other governmental bodies, agencies or authorities as may be necessary to enable
the Representative, the holders of the Securities or the Public Underwriter, if
any, to consummate the disposition of

<PAGE>

such Securities;

(xii) Make every reasonable effort to cause all Securities
covered by such Registration Statement to be (1) listed on each securities
exchange, if any, in which equity securities issued by the Company are then
listed or (2) quoted on the NNM if the Company's Common Stock is then authorized
to be quoted on the NNM;

(xiii) Enter into such agreements (including, without
limitation, if applicable, an underwriting agreement, in form, scope and
substance as is customary in underwritten offerings) and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of such Securities and, in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration is an
underwritten registration, (1) make such representations and warranties to the
Representative and the holders of the Securities with respect to the business of
the Company and its subsidiaries and the Public Underwriter, if any, the
Registration Statement, the prospectus, the prospectus supplement (if any) and
documents, if any, incorporated or deemed to be incorporated by reference in the
Registration Statement, in each case in such form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested; (2) obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Representative and the
holders of the Securities), addressed to the Representative and the holders of
the Securities with respect to the matters referred to in the preceding clause
in such form, scope and substance as are customarily rendered to underwriters in
underwritten offerings and such other matters as may be reasonably requested by
counsel to the Representative, the holders of the Securities or the Public
Underwriter, if any; (3) obtain "cold comfort" letters and updates thereof from
the independent certified public accountants of the Company (and, if necessary,
any other independent certified public accountants of any subsidiary of
the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement) addressed to the Representative, the holders of the
Securities and each of the Public Underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters to underwriters in connection with underwritten offerings; (4)
if an underwriting agreement is entered into, the same shall set forth in full
the indemnification and contribution provisions and procedures of Section 12
hereof (or such other provisions and procedures as shall be acceptable to the
Representative, the holders of the Securities and to the Public Underwriter of
such underwritten offering) with respect to all parties to be indemnified
pursuant to said section; and (5) deliver such documents and certificates as may
be reasonably requested by the Representative , the holders of the Securities
and the Public Underwriter, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (1) above and to evidence
compliance with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company; the above shall be done at each
closing under such underwriting or similar agreement or as and to the extent
required thereunder;

<PAGE>

(xiv) Make available for inspection by a representative of
the Representative or the holders of the Securities or any Public Underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney or accountant retained by the Representative or the holders of the
Securities or such Public Underwriter, all financial and other records,
pertinent corporate documents and properties and assets of the Company and its
subsidiaries and cause the officers, directors, agents and employees of the
Company and its subsidiaries to supply all information reasonably requested by
any such representative, Public Underwriter, attorney or accountant in
connection with any registration of the Securities; provided, however, that any
records, information or documents that are designated by, the Company in writing
at the time of delivery of such records, information or documents as
confidential shall be kept confidential by such persons unless (1) disclosure of
such records, information or documents is required by court or administrative
order or is necessary to respond to inquiries of governmental or regulatory
bodies, agencies or authorities, (2) disclosure of such records, information or
documents is, in the opinion of counsel to the Representative or the holders of
the Securities or to any Public Underwriter, required by law, regulations or
legal process, (3) such records, information or documents are otherwise publicly
available or (4) such records, information or documents become available to such
person from a source other than the Company, and such source is not bound by a
confidentiality agreement;

(xv) If the Company, in the exercise of its reasonable
judgment, objects to any change reasonably requested by the Representative, the
holders of the Securities or the Public Underwriter, if any, to any Registration
Statement or prospectus or any amendments or supplements thereto (including
documents incorporated or deemed to be incorporated therein by reference) as
provided for in this Section 11.3(h), the Company shall not be obligated to make
any such change and the Representative or the holders of the Securities may
withdraw Securities from such registration, in which event the Company shall pay
all registration expenses (including, without limitations, attorneys' fees and
expenses) incurred by the Representative and the holders of the Securities in
connection with such Registration Statement or prospectus or any amendment
thereto or supplement thereof; provided, that if the Company provides the
Representative and the holders of the Securities, as applicable, with a written
opinion of independent counsel (which counsel may be the Company's regular
outside counsel), upon which the Representative and such holders of the
Securities may rely, that the change so requested is not required in order that
the Registration Statement comply with all applicable securities laws (including
any rules and regulations promulgated thereunder), the Representative and such
holders of the Securities may withdraw Securities from such registration but the
Company shall not be obligated to pay any registration expenses incurred by the
Representative and the holders of the Securities; and

(xvi) Pay all costs and expenses incident to the performance
of or compliance with the Company's obligations under Section 11.2 hereof and
under this Section 11.3 (collectively, "Registration Expenses") whether or not
any Registration Statement is filed or becomes effective, including, without
limitation, the fees and disbursements of the Company's auditors, legal counsel,
special legal counsel, legal counsel responsible for qualifying the

<PAGE>

Securities under blue sky laws, all filing fees and printing expenses, all
expenses in connection with the transfer and delivery of the Securities, and all
expenses in connection with the qualification of the Securities under applicable
blue sky laws; provided, however, that the Company shall not bear the Public
Underwriter's discount or commission with respect to, or any transfer taxes
imposed on, the Securities or the fees and expenses of counsel to the
Representative or the holders of the Securities; provided, further, however,
that the Representative shall not be responsible in any way for any fees or
expenses of the Company's counsel, except, in each case, as provided in this
Section 11.3.

(xvii) For purposes of this Section 11, a holder of
Securities shall include any holder of the Securities which have not been
offered in the public.

SECTION 12. INDEMNIFICATION AND CONTRIBUTION.

12.1 INDEMNIFICATION OF WARRANTHOLDERS. The Company agrees to
indemnify and hold harmless the Warrantholders and any Holder of Securities (for
purposes of this Section 12, "Holder" shall include such individuals and the
officers, directors, partners, employees, agents and counsel of a Warrantholder
or a holder of Securities), and each person, if any, who controls a Holder
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages,
expenses (including, without limitation, reasonable attorneys' fees and
expenses) or liabilities and all actions, suits, proceedings, injuries,
arbitrations, investigations, litigation or governmental or other proceedings
(in this Section 12, collectively, "actions") in respect thereof, whatsoever
(including, without limitation, any and all expenses whatsoever reasonably
incurred in investigating preparing or defending against any action, commenced
or threatened, or any claim whatsoever), as such are incurred, to which a Holder
or such controlling person may become subject under the Act, the Exchange Act or
any other statute or at common law or otherwise, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in any preliminary prospectus, the Current Registration Statement, the
Registration Statement or any prospectus (as from time to time amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included securities of the
Company issued or issuable upon exercise of the Warrants; or (iii) in any
application or other document or written communication (in this Section 12,
collectively, "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify
the Securities under the securities or blue sky laws thereof or filed with
the Commission, any state securities commission or agency, the National
Association of Securities Dealers, Inc. (the "NASD") or the NNM or any other
securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any prospectus, in light of
the circumstances in which they were made), unless such statement or omission
was made in reliance upon and in conformity with written information
furnished to the Company with respect to a Holder by or on behalf of such
Holder expressly for use in any preliminary prospectus, the Current
Registration Statement, the Registration Statement or any

<PAGE>

prospectus, or any amendment thereof or supplement thereto, or in any
application, as the case may be. In addition to its other obligations under
this Section 12.1, the Company agrees that, as an interim measure during the
pendency of any action arising out of or based upon any untrue statement or
omission, or alleged untrue statement or alleged omission as described in
this Section 12.1, it shall reimburse the Holders (and, to the extent
applicable, each controlling person) on a monthly basis for all reasonable
legal or other expenses incurred in connection with investigating or
defending any such action notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligations to reimburse the Holders (and, to the extent applicable, each
controlling person) for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement is so held to
have been improper as to the Company, the Holders (and, to the extent
applicable, each controlling person) shall promptly return it to the Company,
together with interest compounded daily, based on the "reference rate"
announced from time to time by Bank of America NTSA (the "Prime Rate"). Any
such interim reimbursement payments which are not made to the applicable
Holder within thirty (30) days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request.

The indemnity agreement in this subsection 12.1 shall be in
addition to any liability which the Company may have at common law or otherwise.

12.2 INDEMNIFICATION OF COMPANY. Each Holder severally agrees to
indemnify and hold harmless the Company (for purposes of this Section 12,
"Company" shall include the officers, directors, partners, employees, agents and
counsel of the Company) and each other person, if any, who controls the Company
("controlling person") within the meaning of the Act, to the same extent as the
foregoing indemnity from the Company to the Holders, but only with respect to
statements or omissions, if any, made in any preliminary prospectus, the Current
Registration Statement, the Registration Statement or any prospectus or any
amendment thereof or supplement thereto or in any application made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to such Holder by or on behalf of such Holder expressly for
use in any preliminary prospectus, the Current Registration Statement, the
Registration Statement or any prospectus or any amendment thereof or supplement
thereto or in any application, provided that such written information or
omissions only pertain to disclosures in any preliminary prospectus, the Current
Registration Statement, the Registration Statement or any prospectus directly
relating to the transactions in connection with the Offering contemplated
hereby. In addition to its other obligations under this Section 12.2, each
Holder severally agrees that, as an interim measure during the pendency of any
action arising out of or based upon any untrue statement or omission, or alleged
untrue statement or alleged omission as described in this Section 12.2, it shall
reimburse the Company (and, to the extent applicable, each

<PAGE>

controlling person) on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any action with
respect to such Holder notwithstanding the absence of a judicial determination
as to the propriety and enforceability of such Holder's obligations to reimburse
the Company (and, to the extent applicable, each controlling person) for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement is so held to have been improper as to such Holder, the
Company (and, to the extent applicable, each controlling person) shall promptly
return it to such Holder, together with interest compounded daily, based on the
Prime Rate. Any such interim reimbursement payments which are not made to the
Company within thirty (30) days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request. Notwithstanding the
provisions of this Section 12.2, in connection with a registration statement
that includes Securities pursuant to Section 11.3(a) hereof, no such Holder
shall be required to indemnify or hold harmless the Company or any controlling
person for any amounts in excess of the net proceeds (before deducting expenses)
applicable to the Securities sold by such Holder pursuant to the Registration
Statement. Notwithstanding the provisions of this Section 12.2, in connection
with a registration statement that includes that Holder's Securities pursuant to
Sections 11.2 or 11.3, no such Holder shall be required to indemnify and hold
harmless the Company or any controlling person for any amounts in excess of that
portion of all expenses as to which indemnification is properly claimed under
this Agreement equal to such Holder's relevant proportion of all net proceeds
(before deduction of expenses) applicable to all securities sold pursuant to the
Current Registration Statement or the Registration Statement, as applicable.

12.3 NOTICE OF CLAIM. Promptly after receipt by an indemnified party
under this Section 12 of notice of the commencement of any action, such
indemnified party shall notify each party against whom indemnification is to be
sought in writing of the commencement thereof (but the failure to so notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 12 except to the extent that such indemnifying party has been
materially prejudiced by such failure). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties shall be entitled
to participate therein, and to the extent it or they may elect by written notice
delivered to the indemnified party or parties promptly after receiving the
aforesaid notice from such indemnified party or parties, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, an indemnified party shall have the right to
employ its own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying party or parties in connection with the defense of such action at
the expense of the indemnifying party or parties, (ii) the indemnifying party or
parties shall not have employed counsel reasonably satisfactory to such
indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action or (iii) such
indemnified party shall have reasonably concluded that there may be one or more
defenses available to it which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel (in addition to appropriate
local counsel) shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees

<PAGE>

and expenses of more than one counsel (in addition to appropriate local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 12 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent may not be
unreasonably withheld.

12.4 CONTRIBUTION. In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes a claim for
indemnification pursuant to this Section 12, but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of this Section 12 provide for indemnification in
such case or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified, on the other hand, in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or liabilities
(or actions in respect thereof), as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages, expenses or liabilities (or actions in
respect thereof) referred to in the first sentence of this Section 12.4 shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 12.4, in a
registration statement that includes a Holder's Securities pursuant to Sections
11.2 or 11.3 hereof, no Holder shall be required to contribute any amount in
excess of the net proceeds (before deducting expenses) applicable to the
Securities sold by such Holder pursuant to such registration statement and
prospectus. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act and the cases and promulgations thereunder)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action against such party in
respect to which a claim for contribution may be made against another party or
parties under this Section 12.4, notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have hereunder or otherwise than under this
Section 12.4 except to the extent it has been materially prejudiced by such
failure. The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.

<PAGE>

SECTION 13. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed, delivered by hand or transmitted by any
standard form of telecommunication. Notices to the Warrantholders or a holder
of Securities shall be directed to The Boston Group, L.P. at 2049 Avenue of the
Stars, 30th Floor, Los Angeles, California 90067, Attention: Mr. Robert A.
DiMinico, with a copy to Kaye, Scholer, Fierman, Hays & Handler, LLP at 1999
Avenue of the Stars, Suite 1600, Los Angeles, California 90067, Attention:
Channing D. Johnson Esq. Notices to the Company shall be directed to the
Company at 26131 Marguerite Parkway, Suite A, Mission Viejo, California 92692,
Attention: ______________, with a copy to Jeffer, Mangels, Butler & Marmaro LLP,
2121 Avenue of the Stars, 10th Floor, Los Angeles, California 90067, Attention:
Steven J. Insel, Esq..

SECTION 14. PARTIES. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Representative, the Company and the
Warrantholders and the holders of Securities and the controlling persons,
officers, directors and others referred to in Section 12 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.

SECTION 15. MERGER OR CONSOLIDATION OF THE COMPANY. The Company shall not
merge or consolidate with or into any other corporation or sell all or
substantially all of its property to another corporation, unless the provisions
of Section 8.4 hereof are complied with.

SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements
contained in the Underwriting Agreement, any schedule, exhibit, certificate or
other instrument delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated by this Agreement, shall be deemed
to be representations and warranties hereunder. Notwithstanding any
investigations made by or on behalf of the parties to this Agreement, all
representations, warranties and agreements made by the parties to this Agreement
or pursuant hereto shall survive the termination of this Agreement and the
issuance, sale and delivery of the Warrant and the Securities.

SECTION 17. CONSTRUCTION. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California,
without giving effect to conflict of laws principles thereof.

SECTION 18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.

SECTION 19. ENTIRE AGREEMENT, AMENDMENTS. This Agreement and the
Underwriting Agreement constitute the entire agreement of the parties hereto
concerning the subject matter

<PAGE>

hereof and supersede all prior written or oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may not
be amended, modified or altered except in a writing signed by the Representative
and the Company.

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

CHICAGO PIZZA & BREWERY, INC.

By: ____________________________
Name:
Title:

THE BOSTON GROUP, L.P.

By: ____________________________
Name:
Title:

<PAGE>

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED,
HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH SECTION 1.3
OF THE REPRESENTATIVE'S WARRANT AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED.

WARRANT CERTIFICATE NO. __

WARRANT TO PURCHASE _______
SHARES OF COMMON STOCK AND
__________ REDEEMABLE WARRANTS

VOID AFTER 5:00 P.M.
PACIFIC TIME, ON _________________, 2002

CHICAGO PIZZA & BREWERY, INC.

INCORPORATED UNDER THE LAWS
OF THE STATE OF CALIFORNIA

This certifies that, for value received, THE BOSTON GROUP, L.P., the
registered holder hereof or assigns (the "Warrantholder"), is entitled to
purchase from CHICAGO PIZZA & BREWERY, INC. (the "Company"), at any time during
the period commencing at 9:00 am., Pacific time, on ________________, 199_, and
before 5:00 p.m., Pacific time, on ________________, 200_, at the purchase price
per share of Common Stock of $___________ (the "Purchase Price"), _______ shares
of Common Stock of the Company (the "Warrant Stock") and __________ Redeemable
Warrants. The number of shares of Common Stock of the Company purchasable upon
exercise of each Warrant or exercise price of such shares and Redeemable
Warrants evidenced hereby shall be subject to adjustment from time to time as
set forth in the Representative's Warrant Agreement, dated as of ___________,
1996, by and between the Company and the Representative (the "Representative's
Warrant Agreement").

The Warrants evidenced hereby are issued under and in accordance with the
Representative's Warrant Agreement and a Warrant Agreement dated ____________,
1996 between the Company, The Boston Group, L.P. [AND U.S. STOCK TRANSFER
CORPORATION], as warrant agent (the "Redeemable Warrant Agreement"), and are
subject to the terms and provisions contained in the Representative's Warrant
Agreement and the Redeemable Warrant Agreement, to all of which the
Warrantholder by acceptance hereof consents.

The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form attached hereto
duly executed (with a signature guarantee as provided hereon) and simultaneous
payment of the respective Warrant Price at the principal office of the Company.
Payment of such price shall be made at the option of the Warrantholder in any
manner allowed in the Representative's Warrant Agreement.

<PAGE>

Upon any partial exercise of the Warrants evidenced hereby, there shall be
signed and issued to the Warrantholder a new Warrant Certificate in respect of
the shares of Warrant Stock and Redeemable Warrants as to which the Warrants
evidenced hereby shall not have been exercised. These Warrants may be exchanged
at the office of the Company by surrender of this Warrant Certificate properly
endorsed for one or more new Warrants of the same aggregate number of shares of
Warrant Stock or Redeemable Warrants as evidenced by the Warrant or Warrants
exchanged. No fractional securities shall be issued upon the exercise of rights
to purchase hereunder, but the Company shall pay the cash value of any fraction
upon the exercise of one or more Warrants. These Warrants are transferable at
the office of the Company in the manner and subject to the limitations set forth
in the Representative's Warrant Agreement.

This Warrant Certificate does not entitle any Warrantholder to any of the
rights of a shareholder of the Company.

CHICAGO PIZZA & BREWERY, INC.

By: ____________________________
Name:
Title:
Dated: _____________, 1996

ATTEST: [Seal]

_____________________________
Name:
Title:

<PAGE>

CHICAGO PIZZA & BREWERY, INC.
PURCHASE FORM

CHICAGO PIZZA & BREWERY, INC. (the "Company")
26131 Marguerite Parkway, Suite A
Mission Viejo, California 92692
Attention: President

The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
_____ shares of common stock of the Company (the "Warrant Stock") and/or
________ Redeemable Warrants provided for therein, and requests that
certificates for the Warrant Stock and/or Redeemable Warrants be issued in the
name of:

_______________________________________________________________
(Please print or Type Name, Address and Social Security Number)

________________________________________________________________

and, if said number of shares of Warrant Stock and Redeemable Warrants shall not
be all the Warrant Stock and Redeemable Share purchasable hereunder, that a new
Warrant Certificate for the balance of the Warrant Stock and Redeemable Share
purchasable under the within Warrant Certificate be registered in the name of
the undersigned Warrantholder or his Assignee as below indicated and delivered
to the address stated below.

Dated:_________________

Name of Warrantholder
or Assignee: _________________________
(Please Print)
Address: _________________________

_________________________

Signature: _________________________

Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, unless these Warrants have been assigned.

<PAGE>

Signature Guaranteed:_____________________________

(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange of the National Association of Securities Dealers, Inc.)

<PAGE>

ASSIGNMENT
(To be signed only upon assignment of Warrants)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers the
right to purchase _____ shares of Warrant Stock represented by the within
Warrant Certificate unto, and requests that a certificate for such Warrant be
issued in the name of:

____________________________________________________________
(Name and Address of Assignee Must be Printed or Typewritten)

____________________________________________________________

hereby irrevocably constituting and appointing _______________ Attorney to
transfer said Warrants on the books of the Company, with full power of
substitution in the premises and, if said number of warrant Stock shall not be
all of the Securities purchasable under the within Warrant Certificate, that a
new Warrant Certificate for the balance of the Securities purchasable under the
within Warrant Certificate be registered in the name of the undersigned
Warrantholder and delivered to such Warrantholder's address as then set forth on
the Company's books.

Dated:_______________ ____________________________
Signature of Registered Holder

Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.

Signature Guaranteed:_____________________________

(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.

<PAGE>

August 21, 1996 56751-0005

Chicago Pizza & Brewery, Inc.
26131 Marguerite Parkway, Suite A
Mission Viejo, California 92692

Ladies and Gentlemen:

We have acted as special counsel to Chicago Pizza & Brewery, Inc., a
California corporation (the "Corporation"), in connection with a public offering
(the "Public Offering") of 1,500,000 shares (the "Shares") of the common stock,
no par value, of the Corporation (the "Common Stock") and 1,500,000 redeemable
warrants (the "Redeemable Warrants") of the Corporation, each Warrant
exercisable for one share of Common Stock. In connection with the Public
Offering, the Corporation will also issue warrants (the "Representative's
Warrants") to The Boston Group, L.P., as representative of the several
underwriters of the Public Offering (the "Representative"), exercisable for
150,000 shares of Common Stock and 150,000 Redeemable Warrants. The Redeemable
Warrants and the Representative's Warrants are sometimes collectively referred
to herein as the "Warrants."

The Public Offering will be conducted in accordance with the terms of a
Registration Statement on Form SB-2 (the "Registration Statement"), as filed on
June 28, 1996 with the Securities and Exchange Commission (the "Commission"),
Registration No. 333-5182-LA, as amended at the time such Registration Statement
is declared effective by the Commission, and pursuant to the terms of a
Prospectus (the "Prospectus") filed as a part of such Registration Statement, in
the form in which it is filed with the Commission pursuant to Rule 424(b) of the
Commission, as promulgated under the Securities Act of 1933, as amended (the
"Act").

We have examined (i) the Corporation's Articles of Incorporation, as
amended and currently in effect; (ii) the form of Underwriting Agreement to be
entered into between the Corporation and the Representative attached as an
exhibit to the Registration Statement; (iii) the corporate minutes of the
Corporation relating to the issuance of the Shares and the Warrants and other
factual matters; and (iv) such other documents and records as we have deemed
necessary in order to render this

<PAGE>

Chicago Pizza & Brewery, Inc.
August 21, 1996
Page 2

opinion. In addition, we are familiar with the actions taken and proposed to be
taken by you in connection with the authorization and proposed issuance and sale
of the Shares and Warrants pursuant to the Registration Statement and the
Prospectus.

On the basis of the foregoing, it is our opinion that, when the
Registration Statement has become effective under the Act, subject to the
appropriate qualification of the Shares and Warrants by the appropriate
authorities of various states in which such securities will be issued and sold,
and further subject to the payment for the Shares and Warrants to be issued and
sold in connection with the Public Offering:

(1) the Shares have been duly authorized and will, upon the issuance and
sale thereof in the manner referred to in the Registration Statement, be
legally issued, fully paid and nonassessable; and

(2) the Warrants have been duly authorized and will, upon the issuance and
sale thereof in the manner referred to in the Registration Statement, be
validly issued and enforceable against the Corporation in accordance with
their terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or other laws of general applicability relating
to or affecting the enforcement of creditor's rights and by general equity
principles.

We express no opinion as to compliance with the securities or "blue sky"
laws of any state in which the Shares or Warrants are proposed to be offered and
sold or as to the effect, if any, which non-compliance with such laws might have
on the validity of issuance of such securities.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement; to the filing of this opinion in connection with such
filings of applications by the Corporation as may be necessary to register,
qualify or establish eligibility for an exemption from registration or
qualification of the securities under the blue sky laws of any state or other
jurisdiction; and to the reference, if any, to this firm in the Prospectus under
the heading "Legal Matters." In giving this consent, we do not admit that we
are in the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Commission promulgated thereunder.

The opinions set forth herein are based upon the federal laws of the United
States of America and the laws of the

<PAGE>

Chicago Pizza & Brewery, Inc.
August 21, 1996
Page 3

State of California, all as now in effect. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than California are applicable to the subject
matter hereof.

The information set forth herein is as of the date of this letter. We
disclaim any undertaking to advise you of changes which may be brought to our
attention after the effective date of the Registration Statement.

Respectfully submitted,

/s/Jeffer, Mangels, Butler & Marmaro
JEFFER, MANGELS, BUTLER & MARMARO

<PAGE>

CHICAGO PIZZA, INC.

1996 STOCK OPTION PLAN

<PAGE>

TABLE OF CONTENTS
Page
- ----

1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Incentive and Non-Qualified Stock Options . . . . . . . . . . . . . 1

3. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.1 Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.2 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.3 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.4 Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.5 Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.6 Disabled or Disability . . . . . . . . . . . . . . . . . . . . 1
3.7 Fair Market Value. . . . . . . . . . . . . . . . . . . . . . . 2
3.8 Incentive Stock Option . . . . . . . . . . . . . . . . . . . . 2
3.9 Non-Qualified Stock Option . . . . . . . . . . . . . . . . . . 2
3.10 Optionee . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.11 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.12 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . 2
3.13 Stock Option or Option . . . . . . . . . . . . . . . . . . . . 2

4. Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1 Administration by Board. . . . . . . . . . . . . . . . . . . . 2
4.2 Administration by Committee. . . . . . . . . . . . . . . . . . 3

5. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

6. Shares Subject to Options . . . . . . . . . . . . . . . . . . . . . 4

7. Terms and Conditions of Options . . . . . . . . . . . . . . . . . . 4
7.1 Number of Shares Subject to Option . . . . . . . . . . . . . . 5
7.2 Option Price . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.3 Notice and Payment . . . . . . . . . . . . . . . . . . . . . . 5
7.4 Term of Option . . . . . . . . . . . . . . . . . . . . . . . . 6
7.5 Exercise of Option . . . . . . . . . . . . . . . . . . . . . . 6
7.6 No Transfer of Option. . . . . . . . . . . . . . . . . . . . . 7
7.7 Limit on Incentive Stock Options . . . . . . . . . . . . . . . 7
7.8 Restriction on Issuance of Shares. . . . . . . . . . . . . . . 7
7.9 Investment Representation. . . . . . . . . . . . . . . . . . . 7
7.10 Rights as a Shareholder or Employee. . . . . . . . . . . . . . 8
7.11 No Fractional Shares . . . . . . . . . . . . . . . . . . . . . 8
7.12 Exercisability in the Event of Death . . . . . . . . . . . . . 8
7.13 Recapitalization or Reorganization of Company. . . . . . . . . 8
7.14 Modification, Extension, and Renewal of Options. . . . . . . . 9
7.15 Other Provisions . . . . . . . . . . . . . . . . . . . . . . . 9
7.16 Non-Employee Directors . . . . . . . . . . . . . . . . . . . .10

8. Termination or Amendment of the Plan. . . . . . . . . . . . . . . .11

9. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . .12

<PAGE>

Page
----

10. Effective Date and Term of Plan . . . . . . . . . . . . . . . . . .12

-ii-
<PAGE>

CHICAGO PIZZA, INC.

1996 STOCK OPTION PLAN

1. PURPOSE. The purpose of this Chicago Pizza, Inc. 1996 Stock Option
Plan ("Plan") is to further the growth and development of Chicago Pizza, Inc.
("Company") by providing, through ownership of stock of the Company, an
incentive to directors, officers, outside consultants and other key employees
who are in a position to contribute materially to the prosperity of the Company,
to increase such persons' interests in the Company's welfare, to encourage them
to continue their services to the Company or its subsidiaries, and to attract
individuals of outstanding ability to render services to and enter the
employment of the Company or its subsidiaries. This Plan replaces the Chicago
Pizza Stock Option Plan originally adopted October 30, 1995. This Plan shall be
effective on the Effective Date (as provided in Section 10) and shall apply to
options granted on or after the Effective Date.

2. INCENTIVE AND NON-QUALIFIED STOCK OPTIONS. Two types of Stock Options
(referred to herein as "Options" without distinction between such two types) may
be granted under the Plan: Options intended to qualify as Incentive Stock
Options under Section 422 of the Code and Non-Qualified Stock Options not
specifically authorized or qualified for favorable income tax treatment by the
Code.

3. DEFINITIONS. The following definitions are applicable to the Plan:

3.1 BOARD. The Board of Directors of the Company.

3.2 CODE. The Internal Revenue Code of 1986, as amended from time to
time.

3.3 COMMON STOCK. The shares of Common Stock of the Company.

3.4 COMPANY. Chicago Pizza, Inc., a California corporation.

3.5 CONSULTANT. An individual or entity that renders professional
services to the Company as an independent contractor and is not an employee or
under the direct supervision and control of the Company.

3.6 DISABLED OR DISABILITY. For the purposes of Section 7.4, a
disability of the type defined in Section 22(e)(3) of the Code. The
determination of whether an individual is

<PAGE>

Disabled or has a Disability is determined under procedures established by the
Plan Administrator for purposes of the Plan.

3.7 FAIR MARKET VALUE. For purposes of the Plan, the "fair market
value" per share of Common Stock of the Company at any date shall be (a) if the
Common Stock is listed on an established stock exchange or exchanges or the
Nasdaq National Market, the closing price per share on the last trading day
immediately preceding such date on the principal exchange on which it is traded
or as reported by Nasdaq, or (b) if the Common Stock is not then listed on an
exchange or the Nasdaq National Market, but is quoted on the Nasdaq Small Cap
Market, the Nasdaq electronic bulletin board or the National Quotation Bureau
pink sheets, the average of the closing bid and asked prices per share for the
Common Stock as quoted by Nasdaq or the National Quotation Bureau, as the case
may be, on last trading day immediately preceding such date, or (c) if the
Common Stock is not then listed on an exchange or the Nasdaq National Market, or
quoted by Nasdaq or the National Quotation Bureau, an amount determined in good
faith by the Plan Administrator. Notwithstanding the foregoing, the "fair
market value" per share of common stock subject to any Option that is granted
under this Plan on the date the Company's initial public offering is declared
effective by the Securities and Exchange Commission shall be the "Price to
Public" specified in the final Prospectus distributed in connection with the
public offering of the Company Common Stock.

3.8 INCENTIVE STOCK OPTION. Any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.

3.9 NON-QUALIFIED STOCK OPTION. Any Stock Option that is not an
Incentive Stock Option.

3.10 OPTIONEE. The recipient of a Stock Option.

3.11 PLAN. The Chicago Pizza, Inc. 1996 Stock Option Plan, as amended
from time to time.

3.12 PLAN ADMINISTRATOR. The Board or the Committee designated
pursuant to Section 4 to administer, construe and interpret the terms of the
Plan.

3.13 STOCK OPTION OR OPTION. Any option to purchase shares of Common
Stock granted pursuant to Section 7.

4. ADMINISTRATION.

4.1 ADMINISTRATION BY BOARD. Subject to Section 4.2 hereof, the Plan
Administrator shall be the Board of Directors of the Company (the "Board")
during such periods of time as all members of the Board are both "disinterested
persons" as defined in Rule 16b-3(c)(2)(i) promulgated by the Securities

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and Exchange Commission (a "disinterested person") and "outside directors" as
defined in Prop. Treas. Regs. Section 1.162-27(e)(3) ("outside directors").
Anything to the contrary notwithstanding, the requirement that all members of
the Board be disinterested persons and outside directors shall not apply for any
period of time prior to the date the Company's Common Stock becomes registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended and,
effective on and after August 15, 1996, the requirement that all members of the
Board be disinterested persons shall not apply. Subject to the provisions of
the Plan, the Plan Administrator shall have authority to construe and interpret
the Plan, to promulgate, amend, and rescind rules and regulations relating to
its administration, from time to time to select from among the eligible
employees and non-employee consultants (as determined pursuant to Section 5) of
the Company and its subsidiaries those employees and consultants to whom Stock
Options will be granted, to determine the timing and manner of the grant of the
Options, to determine the exercise price, the number of shares covered by and
all of the terms of the Stock Options, to determine the duration and purpose of
leaves of absence which may be granted to Stock Option holders without
constituting termination of their employment for purposes of the Plan, and to
make all of the determinations necessary or advisable for administration of the
Plan. Prior to August 15, 1996, the Board shall have no discretion with respect
to the selection of non-employee directors to receive options under the Plan,
the number of shares of stock subject to any such options, or the purchase price
thereof. The interpretation and construction by the Plan Administrator of any
provision of the Plan, or of any agreement issued and executed under the Plan,
shall be final and binding upon all parties. No member of the Board shall be
liable for any action or determination undertaken or made in good faith with
respect to the Plan or any agreement executed pursuant to the Plan.

4.2 ADMINISTRATION BY COMMITTEE. The Board may, in its sole
discretion, delegate any or all of its duties as Plan Administrator and, subject
to the provisions of Section 4.1 of the Plan, at any time the Board includes any
person who is not a disinterested person and an outside director, the Board
shall delegate all of its duties as Plan Administrator during such period of
time to the Stock Option and Retirement Plans Committee (the "Committee") of not
fewer than two (2) members of the Board, all of the members of which Committee
shall be persons who, in the opinion of counsel to the Company, are
disinterested persons and outside directors, to be appointed by and serve at the
pleasure of the Board. Effective on and after August 15, 1996, the requirement
that Committee members be disinterested persons shall not apply and all of the
members of the Committee shall be persons who, in the opinion of counsel to the
Company, are outside directors and "non-employee directors" within the meaning
of Rule 16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission.
From time to time, the Board may increase or decrease (to not less than two
members) the size of the

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<PAGE>

Committee, and add additional members to, or remove members from, the Committee.
The Committee shall act pursuant to a majority vote, or the written consent of a
majority of its members, and minutes shall be kept of all of its meetings and
copies thereof shall be provided to the Board. Subject to the provisions of the
Plan and the directions of the Board, the Committee may establish and follow
such rules and regulations for the conduct of its business as it may deem
advisable. No member of the Committee shall be liable for any action or
determination undertaken or made in good faith with respect to the Plan or any
agreement executed pursuant to the Plan.

5. ELIGIBILITY. Any employee or director (including any officer or
director who is an employee) of the Company or any of its subsidiaries shall be
eligible to receive an Option under the Plan; provided, however, that no person
who owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any of its parent or subsidiary
corporations shall be eligible to receive an Incentive Stock Option under the
Plan unless at the time such Incentive Stock Option is granted the Option price
(determined in the manner provided in Section 7.2) is at least 110% of the fair
market value of the shares subject to the Option and such Option by its terms is
not exercisable after the expiration of five years from the date such Option is
granted. An employee may receive more than one Option under the Plan.
Non-Employee Directors shall be eligible to receive Non-Qualified Stock Options
pursuant to the terms and conditions of Section 7.16. In addition,
Non-Qualified Stock Options may be granted to Consultants who are selected by
the Plan Administrator.

6. SHARES SUBJECT TO OPTIONS. The stock available for grant of Options
under the Plan shall be shares of the Company's authorized but unissued, or
reacquired, Common Stock. The aggregate number of shares which may be issued
pursuant to exercise of Options granted under the Plan, as amended, shall not
exceed 600,000 shares of Common Stock (subject to adjustment as provided in
Section 7.13), including shares previously issued under the Plan. The maximum
number of shares for which an Option may be granted to any Optionee during any
calendar year shall not exceed 250,000 shares. In the event that any
outstanding Option under the Plan for any reason expires or is terminated, the
shares of Common Stock allocable to the unexercised portion of the Option shall
again be available for Options under the Plan as if no Option had been granted
with respect to such shares.

7. TERMS AND CONDITIONS OF OPTIONS. Options granted under the Plan shall
be evidenced by agreements (which need not be identical) in such form and
containing such provisions which are consistent with the Plan as the Plan
Administrator shall from time to time approve. Such agreements may incorporate
all or any of the terms hereof by reference and shall comply with and be subject
to the following terms and conditions:

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<PAGE>

7.1 NUMBER OF SHARES SUBJECT TO OPTION. Each Option agreement shall
specify the number of shares subject to the Option.

7.2 OPTION PRICE. The purchase price for the shares subject to any
Option shall be determined by the Plan Administrator at the time of grant, but
shall not be less than 85% of Fair Market Value per share. Anything to the
contrary notwithstanding, the purchase price for the shares subject to any
Incentive Stock Option shall not be less than 100% of the Fair Market Value of
the shares of Common Stock of the Company on the date the Stock Option is
granted. In the case of any Option granted to an employee who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its parent or subsidiary corporations, the Option
price shall not be less than 110% of the fair market value per share of the
Common Stock of the Company on the date the Option is granted. For purposes of
determining the stock ownership of an employee, the attribution rules of Code
Section 424(d) shall apply.

7.3 NOTICE AND PAYMENT. Any exercisable portion of a Stock Option
may be exercised only by:

(a) delivery of a written notice to the Company, prior to the
time when such Stock Option becomes unexercisable under Section 7.4, stating the
number of shares being purchased and complying with all applicable rules
established by the Plan Administrator;

(b) payment in full of the exercise price of such Option by, as
applicable, delivery of (i) cash or check for an amount equal to the aggregate
Stock Option exercise price for the number of shares being purchased, (ii) in
the discretion of the Plan Administrator, upon such terms as the Plan
Administrator shall approve, a copy of instructions to a broker directing such
broker to sell the Common Stock for which such Option is exercised, and to remit
to the Company the aggregate exercise price of such Stock Option (a "cashless
exercise"), or (iii) in the discretion of the Plan Administrator, upon such
terms as the Plan Administrator shall approve, shares of the Company's Common
Stock owned by the Optionee, duly endorsed for transfer to the Company, with a
Fair Market Value on the date of delivery equal to the aggregate purchase price
of the shares with respect to which such Stock Option or portion is thereby
exercised (a "stock-for-stock exercise");

(c) payment of the amount of tax required to be withheld (if
any) by the Company or any parent or subsidiary corporation as a result of the
exercise of a Stock Option. At the discretion of the Plan Administrator, upon
such terms as the Plan Administrator shall approve, the Optionee may pay all or
a portion of the tax withholding by (i) cash or check payable to the Company,
(ii) cashless exercise, (iii) stock-for-stock

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<PAGE>

exercise, or (iv) a combination of one or more of the foregoing payment methods;
and

(d) delivery of a written notice to the Company requesting that
the Company direct the transfer agent to issue to the Optionee (or to his
designee) a certificate for the number of shares of Common Stock for which the
Option was exercised or, in the case of a cashless exercise, for any shares that
were not sold in the cashless exercise.

Notwithstanding the foregoing, the Company, in its sole discretion, may extend
and maintain, or arrange for the extension and maintenance of, credit to any
Optionee to finance the Optionee's purchase of shares pursuant to exercise of
any Stock Option, on such terms as may be approved by the Plan Administrator,
subject to applicable regulations of the Federal Reserve Board and any other
laws or regulations in effect at the time such credit is extended.

7.4 TERM OF OPTION. No Option shall be exercisable after the
expiration of the earliest of (a) ten years after the date the Option is
granted, (b) three months after the date the Optionee's employment with the
Company and its subsidiaries terminates, or a Non-Employee Director or
Consultant ceases to provide services to the Company, if such termination or
cessation is for any reason other than Disability or death, (c) one year after
the date the Optionee's employment with the Company and its subsidiaries
terminates, or a Non-Employee Director or Consultant ceases to provide services
to the Company, if such termination or cessation is a result of death or
Disability; provided, however, that the Option agreement for any Option may
provide for shorter periods in each of the foregoing instances. In the case of
an Incentive Stock Option granted to an employee who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any of its parent or subsidiary corporations, the term set forth in
(a), above, shall not be more than five years after the date the Option is
granted.

7.5 EXERCISE OF OPTION. No Option shall be exercisable during the
lifetime of an Optionee by any person other than the Optionee or (for periods
prior to August 15, 1996) in the event the Company's Common Stock becomes
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, at any time prior to six months from the date the Option is granted.
Subject to the foregoing, the Plan Administrator shall have the power to set the
time or times within which each Option shall be exercisable and to accelerate
the time or times of exercise; provided, however, the Option shall provide the
right to exercise at the rate of at least 20% per year over five years from the
date the Option is granted. Unless otherwise provided by the Plan
Administrator, each Option granted under the Plan shall become exercisable on a
cumulative basis as to one-third (1/3) of the total number of shares covered
thereby at any time after one year from the date the Option is granted and an

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<PAGE>

additional one-third (1/3) of such total number of shares at any time after the
end of each consecutive one-year period thereafter until the Option has become
exercisable as to all of such total number of shares. To the extent that an
Optionee has the right to exercise an Option and purchase shares pursuant
thereto, the Option may be exercised from time to time by written notice to the
Company, stating the number of shares being purchased and accompanied by payment
in full of the exercise price for such shares.

7.6 NO TRANSFER OF OPTION. No Option shall be transferable by an
Optionee otherwise than by will or the laws of descent and distribution.

7.7 LIMIT ON INCENTIVE STOCK OPTIONS. The aggregate fair market
value (determined at the time the Option is granted) of the stock with respect
to which Incentive Stock Options granted after 1986 are exercisable for the
first time by an Optionee during any calendar year (under all Incentive Stock
Option plans of the Company and its subsidiaries) shall not exceed $100,000. To
the extent that the aggregate Fair Market Value (determined at the time of the
Stock Option is granted) of the Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by an Optionee during any
calendar year (under all Incentive Stock Option plans of the Company and any
parent or subsidiary corporations) exceeds $100,000, such Stock Options shall be
treated as Non-Qualified Stock Options. The determination of which Stock
Options shall be treated as Non-Qualified Stock Options shall be made by taking
Stock Options into account in the order in which they were granted.

7.8 RESTRICTION ON ISSUANCE OF SHARES. The issuance of Options and
shares shall be subject to compliance with all of the applicable requirements of
law with respect to the issuance and sale of securities, including, without
limitation, any required qualification under the California Corporate Securities
Law of 1968, as amended, or other state securities laws. If an Optionee
acquires shares of Common Stock pursuant to the exercise of an Option, the Plan
Administrator, in its sole discretion, may require as a condition of issuance of
shares covered by the Option that the shares of Common Stock shall be subject to
restrictions on transfer. The Company may place a legend on the certificates
evidencing the shares, reflecting the fact that they are subject to restrictions
on transfer pursuant to the terms of this Section. In addition, the Optionee
may be required to execute a buy-sell agreement in favor of the Company or its
designee with respect to all or any of the shares so acquired. In such event,
the terms of such agreement shall apply to such shares.

7.9 INVESTMENT REPRESENTATION. Any Optionee may be required, as a
condition of issuance of shares covered by his or her Option, to represent that
the shares to be acquired

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<PAGE>

pursuant to exercise of the Option will be acquired for investment and without a
view to distribution thereof; and in such case, the Company may place a legend
on the certificate evidencing the shares reflecting the fact that they were
acquired for investment and cannot be sold or transferred unless registered
under the Securities Act of 1933, as amended, or unless counsel for the Company
is satisfied that the circumstances of the proposed transfer do not require such
registration.

7.10 RIGHTS AS A SHAREHOLDER OR EMPLOYEE. An Optionee or transferee
of an Option shall have no right as a stockholder of the Company with respect to
any shares covered by any Option until the date of the issuance of a share
certificate for such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether cash, securities, or other property) or
distributions or other rights for which the record date is prior to the date
such share certificate is issued, except as provided in Section 7.13. Nothing
in the Plan or in any Option agreement shall confer upon any employee any right
to continue in the employ of the Company or any of its subsidiaries or interfere
in any way with any right of the Company or any subsidiary to terminate the
Optionee's employment at any time.

7.11 NO FRACTIONAL SHARES. In no event shall the Company be required
to issue fractional shares upon the exercise of an Option.

7.12 EXERCISABILITY IN THE EVENT OF DEATH. In the event of the death
of the Optionee, any Option or unexercised portion thereof granted to the
Optionee, to the extent exercisable by him or her on the date of death, may be
exercised by the Optionee's personal representatives, heirs, or legatees subject
to the provisions of Section 7.4 hereof.

7.13 RECAPITALIZATION OR REORGANIZATION OF COMPANY. Except as
otherwise provided herein, appropriate and proportionate adjustments shall be
made in the number and class of shares subject to the Plan and to the Option
rights granted under the Plan, and the exercise price of such Option rights, in
the event that the number of shares of Common Stock of the Company are increased
or decreased as a result of a stock dividend (but only on Common Stock), stock
split, reverse stock split, recapitalization, reorganization, merger,
consolidation, separation, or like change in the corporate or capital structure
of the Company. In the event there shall be any other change in the number or
kind of the outstanding shares of Common Stock of the Company, or any stock or
other securities into which such common stock shall have been changed, or for
which it shall have been exchanged, whether by reason of a complete liquidation
of the Company or a merger, reorganization, or consolidation of the Company with
any other corporation in which the Company is not the surviving corporation or
the Company becomes a wholly-owned subsidiary of another corporation, then if
the Plan Administrator

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<PAGE>

shall, in its sole discretion, determine that such change equitably requires an
adjustment to shares of Common Stock currently subject to Options under the
Plan, or to prices or terms of outstanding Options, such adjustment shall be
made in accordance with such determination.

To the extent that the foregoing adjustments relate to stock or securities
of the Company, such adjustments shall be made by the Plan Administrator, the
determination of which in that respect shall be final, binding, and conclusive.
No right to purchase fractional shares shall result from any adjustment of
Options pursuant to this Section. In case of any such adjustment, the shares
subject to the option shall be rounded down to the nearest whole share. Notice
of any adjustment shall be given by the Company to each Optionee whose Options
shall have been so adjusted and such adjustment (whether or not notice is given)
shall be effective and binding for all purposes of the Plan.

In the event of a complete liquidation of the Company or a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, any unexercised Options
theretofore granted under the Plan shall be deemed cancelled unless the
surviving corporation in any such merger, reorganization, or consolidation
elects to assume the Options under the Plan or to issue substitute Options in
place thereof; provided, however, that, notwithstanding the foregoing, if such
Options would be cancelled in accordance with the foregoing, the Optionee shall
have the right, exercisable during a ten-day period ending on the fifth day
prior to such liquidation, merger, or consolidation, to exercise such Option in
whole or in part without regard to any installment exercise provisions in the
Option agreement.

7.14 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Plan
Administrator may modify, extend, or renew outstanding Options granted under the
Plan and accept the surrender of outstanding Options (to the extent not
theretofore exercised). The Plan Administrator shall not, however, without the
approval of the Board, modify any outstanding Incentive Stock Option in any
manner which would cause the Option not to qualify as an Incentive Stock Option
within the meaning of Section 422 of the Code. Notwithstanding the foregoing,
no modification of an Option shall, without the consent of the Optionee, alter
or impair any rights of the Optionee under the Option.

7.15 OTHER PROVISIONS. Each Option may contain such other terms,
provisions, and conditions not inconsistent with the Plan as may be determined
by the Plan Administrator.

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<PAGE>

7.16 NON-EMPLOYEE DIRECTORS. Notwithstanding anything to the contrary
contained herein, each Eligible Director of the Company shall receive Stock
Options as set forth in this Section 7.16 without the requirement of any action
by the Plan Administrator, and Eligible Directors shall only participate in the
Plan to the extent specified in this Section 7.16.

(a) Each Director of the Company shall be an Eligible Director
who automatically receives Options under this Plan, only if such Director (i) is
not then an employee of the Company or any of its subsidiaries (a "Non-Employee
Director"), (ii) has not, within two (2) years immediately preceding such time,
received any stock option, stock bonus, stock appreciation right, or other
similar stock award from the Company or any of its subsidiaries, other than
Options granted to such Director under this Plan, and (iii) does not then,
directly or indirectly, beneficially own more than one percent (1%) of any class
of the outstanding stock of the Company. Only Eligible Directors may receive
Options under this Section 7.16 of the Plan. A Director of the Company shall
not be deemed to be an employee of the Company or any of its subsidiaries solely
by reason of the existence of an agreement between such Director and the Company
or any subsidiary thereof pursuant to which the Director provides services as a
consultant to the Company or its subsidiaries on a regular or occasional basis
for compensation.

(b) A person who becomes an Eligible Director shall
automatically receive as an initial grant, on the date that the person becomes
an Eligible Director, a Non-Qualified Stock Option to acquire 25,000 shares of
Common Stock. Each reelected Eligible Director shall automatically receive an
annual grant of 10,000 shares on the date of the commencement of the regular
annual meeting of the Company's shareholders. If an Eligible Director is
elected by the Board to begin serving as a Director on a date not coincident
with an annual meeting date, that Director will be granted the initial 25,000
share Option on the date that the person becomes an Eligible Director. However,
he or she will not receive an additional annual grant on the first annual
meeting at which occurs his or her election to the Board by the shareholders,
unless such meeting is at least 270 days after the date of the initial grant.
The Plan Administrator will have no discretion to select which Directors will be
Eligible Directors who will be granted Options or to determine the number of
Option shares, price, vesting schedule or any other term of the options granted
to Eligible Directors.

(c) Each Non-Qualified Stock Option granted under Section
7.16(a) and (b) above shall become exercisable as to 50% of the shares of Common
Stock subject to the Option on the first anniversary date of the grant and the
remaining 50% of the shares of Common Stock subject to the Option on the second
anniversary date of the grant. Notwithstanding anything to the contrary in
Section 7.13 hereof, in the event of a Change in Control of the Company, as
defined below, any unexercised Option

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<PAGE>

granted under the Plan which is not then already exercisable as to all of the
shares subject to the Option shall become immediately exercisable. A "Change in
Control" shall be deemed to have occurred if (a) any person, or any two or more
persons acting as a group, and all affiliates of such person or persons,
acquires, by contract or otherwise, the power to vote 50% or more of the voting
stock of the Company, (b) if following (i) a tender or exchange offer for voting
securities of the Company (other than any such offer made by the Company), or
(ii) a proxy contest for election of Directors of the Company, the persons who
were directors of the Company immediately before the initiation of such event
(or directors who were appointed by such directors) cease to constitute a
majority of the Board of the Company upon the completion of such tender or
exchange offer or proxy contest or within one year after such completion, or (c)
the stockholders of the Company approve an agreement in which the Company ceases
to be an independent publicly owned entity or for a sale of substantially all of
the assets of the Company.

(d) Each Non-Qualified Stock Option granted under this Section
7.16 shall expire upon the earliest of the following events:

(1) Ten (10) years from the date the Option was granted;

(2) The termination of the Plan;

(3) Three (3) months after the date on which the person
ceases to be any of a Director, Consultant or employee of the Company and its
subsidiaries, except that if the cessation of services was caused by the
person's death or Disability, the expiration of one (1) year after the cessation
of such services.

(e) The exercise price of the Non-Qualified Stock Options
granted under this Section 7.16 shall be one hundred percent (100%) of the Fair
Market Value of the Common Stock on the date of the grant.

8. TERMINATION OR AMENDMENT OF THE PLAN. The Board may at any time
terminate or amend the Plan; provided that, without approval of the holders of a
majority of the shares of Common Stock of the Company represented and voting at
a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the required quorum) or by the
written consent of a majority of the outstanding shares of Common Stock, there
shall be, except by operation of the provisions of Section 7.13, no increase in
the total number of shares covered by the Plan, no change in the class of
persons eligible to receive Options granted under the Plan, no reduction in the
exercise price of Options granted under the Plan, and no extension of the latest
date upon which Options may be exercised; and provided further that, without the
consent of the Optionee,

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<PAGE>

no amendment may adversely affect any then outstanding Option or any unexercised
portion thereof.

9. INDEMNIFICATION. In addition to such other rights of indemnification
as they may have as members of the Plan Administrator, the members of the Plan
Administrator administering the Plan shall be indemnified by the Company against
reasonable expense, including attorney's fees, actually and necessarily incurred
in connection with the defense of any action, suit, or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any action, suit, or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit, or proceeding that such member is liable
for negligence or misconduct in the performance of his duties, provided that
within 60 days after institution of any such action, suit, or proceeding, the
member shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.

10. EFFECTIVE DATE AND TERM OF PLAN. This ameended and restated Plan
shall become effective (the "Effective Date") on the date of adoption designated
below. No options granted under the Plan will be effective unless the Plan is
approved by shareholders of the Company within 12 months of the date of
adoption. Unless sooner terminated by the Board in its sole discretion, the
Plan will expire on May 31, 2006.

IN WITNESS WHEREOF, the Company by its duly authorized officer, has caused
this Plan to be executed at _________, California, this ____ day of
_____________, 1996.

CHICAGO PIZZA, INC.

By:
--------------------------------
Paul Motenko
Chief Executive Officer

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EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Prospectus and Amendment No. 2 to the
Registration Statement on Form SB-2 (File No. 333-5182-LA) of our report dated
June 14, 1996, on our audits of the combined and consolidated financial
statements of Chicago Pizza & Brewery, Inc. and of our report dated June 14,
1996 on our audits of the combined financial statements of Pietro's Corp.'s
Business Related to Purchased Assets. We also consent to the reference to our
firm under the caption "Experts."

COOPERS & LYBRAND L.L.P.

Los Angeles, California

August 21, 1996