**Exhibit
        10.27**
  
  **PERFORMANCE
        UNIT AGREEMENT**
  This
        AGREEMENT made as of August 16, 2005, by and between Mexican Restaurants,
        Inc.
        (the "Corporation"), and **Louis P. Neeb (** the
        "Recipient") **.**
  WHEREAS,
        the Compensation Committee (the “Committee”) of the Board of Directors of the
        Corporation has awarded Performance Units to the Recipient, the terms of
        which
        are set forth in this Agreement, in consideration of Recipient’s continued
        service to the Corporation.
  NOW,
        THEREFORE, the Corporation and the Recipient hereby agree as
        follows:
  1.  Grant
        of Award .
        The
        Recipient is hereby granted as of August 16, 2005, subject to shareholder
        approval (the "Grant Date") a Performance Unit Award (the "Award"), subject
        to
        the terms and conditions hereinafter set forth, with respect to Twenty-Five
        Thousand (25,000) performance units ("Units”). This award is subject to the
        approval by the shareholders of the Mexican Restaurants, Inc. 2005 Long Term
        Incentive Plan. The Units covered by the Award shall vest, if at all, in
        accordance with Section 2. On the date the Award vests (if at all), Recipient
        will receive, net of applicable withholding for federal and state income
        and
        applicable employment taxes, a cash payment representing the product of (i)
        the
        number of Units vested and (ii) the average of the high and low price of
        the
        Common Stock, $1.00 par value per share (the “Fair Market Value Per Share”), of
        the Corporation on the last business day immediately preceding the Business
        Combination.
  2.  Vesting .
  (a)  The
        Award
        will vest, if at all, only if, on or before August 16, 2010, there is a Business
        Combination, and then the percentage of the Award which becomes vested will
        be
        determined based upon the Fair Market Value Per Share of the Corporation
        on the
        last business day immediately preceding the Business Combination, as
        follows:
  Fair
                  Market Value Per Share
              Percentage
                  of Units VestedLess
                  than $20
              0%$20
                  or greater
              100%
 (b)  In
        the
        event of the termination of Recipient's employment with the Corporation prior
        to
        a Business Combination, the Award shall be forfeited in its
        entirety.
  3.  Transfer
        Restrictions .
        This
        Award is non-transferable otherwise than by will or by the laws of descent
        and
        distribution, and may not otherwise be assigned, pledged or hypothecated
        and
        shall not be subject to execution, attachment or similar process. Upon any
        attempt by the Recipient (or the Recipient's successor in interest after
        the
        Recipient's death) to effect any such disposition, or upon the levy of any
        such
        process, the Award may immediately become null and void, at the discretion
        of
        the Board.
  4.  Arbitration . Any
        dispute or controversy arising under or in connection with this Agreement
        shall
        be settled exclusively by arbitration conducted before a panel of three
        arbitrators in Texas in accordance with the rules of the American Arbitration
        Association then in effect. Judgment may be entered on the arbitrator’s award in
        any court having jurisdiction. The Corporation shall pay directly or reimburse
        the Recipient for any legal fees incurred by the Recipient in connection
        with
        any arbitration in which he prevails.
  5.  Miscellaneous .
        This
        Agreement (a) shall be binding upon and inure to the benefit of any successor
        of
        the Corporation, (b) shall be governed by the laws of the State of Texas
        and any
        applicable laws of the United States, and (c) may not be amended without
        the
        written consent of both the Corporation and the Recipient. No contract or
        right
        of employment shall be implied by this Agreement.
  6.  Incorporation
        of 2005 Plan Provisions .
        Capitalized terms not otherwise defined herein shall have the meanings set
        forth
        in the Corporation's Mexican Restaurants, Inc. 2005 Long Term Incentive Plan,
        as
        amended from time to time.
  IN
        WITNESS HEREOF, the Recipient and the Corporation have executed this Performance
        Unit Award as of the day and year first above written.
   RECIPIENT:
              MEXICAN
                  RESTAURANTS, INC.BY:LOUIS
                  P. NEEB
              DAVID
                  NIERENBERG, Chairman of
                the
                  Compensation Committee