Document:

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                              AMENDED AND RESTATED
                            REVOLVING CREDIT AND TERM
                                 LOAN AGREEMENT

                           Dated as of January 7, 2004

                                     BETWEEN

                            MEXICAN RESTAURANTS, INC.

                                       AND

                               FLEET NATIONAL BANK

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                                TABLE OF CONTENTS

<Table>
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ARTICLE 1. DEFINITIONS................................................................................  1

ARTICLE 2. THE CREDIT FACILITIES...................................................................... 12
2.1   Revolving Loans................................................................................. 12
2.2   Term Loan....................................................................................... 13
2.3   Payment and Prepayment of Loans................................................................. 13
2.4   Lender's Records of Loan Activity............................................................... 15
2.5   Interest........................................................................................ 15
2.6   Applicable Interest Rate Margins................................................................ 17
2.7   Default Interest................................................................................ 18
2.8   Letters of Credit............................................................................... 18
2.9   Changed Circumstances........................................................................... 19
2.10  Fees and Charges................................................................................ 20

ARTICLE 3. REPRESENTATIONS AND WARRANTIES............................................................. 21
3.1   Organization and Qualification.................................................................. 21
3.2   Corporate Authority; Non-Contravention.......................................................... 22
3.3   Valid Obligations; Approvals and Consents....................................................... 22
3.4   Title to Properties; Absence of Liens........................................................... 22
3.5   Compliance...................................................................................... 23
3.6   Financial Statements............................................................................ 23
3.7   Events of Default; Solvency..................................................................... 24
3.8   Taxes........................................................................................... 24
3.9   Labor Relations; Litigation..................................................................... 24
3.10  Dormant Subsidiaries............................................................................ 24
3.11  Contracts with Affiliates, Etc.................................................................. 24
3.12  Disclosure...................................................................................... 25
3.13  Collateral...................................................................................... 25
3.14  Subsidiaries.................................................................................... 25

ARTICLE 4. CONDITIONS OF LOANS........................................................................ 25
4.1   Conditions to Initial Revolving Loan, the Term Loan and the Initial Letter(s) of Credit......... 25
4.2   Conditions to all Loans......................................................................... 26

ARTICLE 5. COVENANTS.................................................................................. 26
5.1   Financial Statements and Other Reporting Requirements........................................... 26
5.2   Conduct of Business............................................................................. 29
5.3   Maintenance and Insurance....................................................................... 29
5.4   Taxes........................................................................................... 30
5.5   Limitation of Indebtedness...................................................................... 30
</Table>

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<Table>
<S>                                                                                                    <C>
5.6   Restrictions on Liens........................................................................... 30
5.7   Mergers, Acquisitions and Purchases and Sales of Assets......................................... 31
5.8   Investments and Loans........................................................................... 31
5.9   Restricted Payments............................................................................. 32
5.10  ERISA Compliance................................................................................ 32
5.11  Inspection by Lender; Books and Records; Accounts............................................... 32
5.12  Use of Proceeds................................................................................. 33
5.13  Transactions with Affiliates.................................................................... 33
5.14  No Amendments to Certain Documents.............................................................. 34
5.15  Subsidiaries.................................................................................... 34
5.16  Financial Covenants............................................................................. 34
5.17  Limitation on Commitments to Develop New Restaurant Units....................................... 35
5.18  Environmental Indemnification................................................................... 35
5.19  Leases.......................................................................................... 36
5.20  Further Assurances.............................................................................. 36

ARTICLE 6. EVENTS OF DEFAULT; LENDER'S RIGHTS......................................................... 36
6.1   Events of Default............................................................................... 36
6.2   Lender's Rights................................................................................. 40

ARTICLE 7. SET OFF; PARTICIPATIONS.................................................................... 40
7.1.  Right of Set Off................................................................................ 40
7.2   Rights of Participants.......................................................................... 40

ARTICLE 8. MISCELLANEOUS PROVISIONS................................................................... 41
8.1   Written Notices................................................................................. 41
8.2   No Waivers...................................................................................... 41
8.3   GOVERNING LAW................................................................................... 41
8.4   Expenses, Taxes and Indemnification............................................................. 42
8.5   Amendments, Waivers, Etc........................................................................ 43
8.6   Binding Effect of Agreement..................................................................... 43
8.7   Computation of Interest and Fees, Etc........................................................... 44
8.8   Entire Agreement................................................................................ 44
8.9   Headings........................................................................................ 44
8.10  Multiple Counterparts........................................................................... 44
8.11  Severability.................................................................................... 44
8.12  WAIVER OF JURY TRIAL............................................................................ 44
8.13  WAIVER OF SPECIAL DAMAGES....................................................................... 45
8.14  Usury........................................................................................... 45
8.15  Replacement of Notes and Other Loan Documents................................................... 46
</Table>

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Exhibits

Exhibit A-1 Form of Revolving Credit Note
Exhibit A-2 Form of Term Note
Exhibit B Disclosure
Exhibit C Existing Indebtedness
Exhibit D Form of Notice of Borrowing
Exhibit E Form of CFO Report
Exhibit F Form of Legal Opinion
Exhibit G Closing Agenda
Exhibit H Purchase Documents (Harken)
Exhibit I Sale Leaseback Documents (CNL)

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                              AMENDED AND RESTATED
                              REVOLVING CREDIT AND
                               TERM LOAN AGREEMENT

         THIS AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT is
made as of January 7, 2004, between MEXICAN RESTAURANTS, INC. (the "BORROWER"),
having its chief executive office at 1135 Edgebrook, Houston, Texas 77034-1899
and FLEET NATIONAL BANK (the "LENDER"), a national bank having its head office
at 100 Federal Street, Boston, Massachusetts 02110, and amends and restates in
its entirety that certain Revolving Credit and Term Loan Agreement between
Borrower and Lender dated as of June 29, 2001 (the "ORIGINAL LOAN AGREEMENT"),
as amended by that certain Amendment No. 1 to Loan Agreement and Waiver dated as
of March 20, 2002, as further amended by that certain Amendment No. 2 to Loan
Agreement dated as of August 28, 2002, and as further amended by that certain
Amendment No. 3 to Loan Agreement dated as of August 18, 2003.

ARTICLE 1. DEFINITIONS. As used herein, the following terms shall have the
following meanings:

1.1 "ACCOUNT" or "ACCOUNT RECEIVABLE" include, without limitation, "accounts" as
defined in the UCC, and also all: accounts, accounts receivable, receivables,
and rights to payment (whether or not earned by performance): for property that
has been or is to be sold, leased, licensed, assigned, or otherwise disposed of;
for services rendered or to be rendered; for a policy of insurance issued or to
be issued; for a secondary obligation incurred or to be incurred; arising out of
the use of a credit or charge card or information contained on or used with that
card; and also all reclaimed, returned, rejected or repossessed Inventory (if
any) the sale of which gave rise to any Account.

1.2 "AFFILIATE" means, with reference to any Person, (i) any director or officer
of that person, (ii) any other person controlling, controlled by or under direct
or indirect common control of that person, (iii) any other person directly or
indirectly holding 5% or more of any class of the capital stock or other equity
interests (including options, warrants, convertible securities and similar
rights) of that person, (iv) any other person holding 5% or more of any class of
whose capital stock or other equity interests (including options, warrants,
convertible securities and similar rights) is held directly or indirectly by
that person, and (v) any other person that possesses, directly or indirectly,
power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise) of that person. For purposes of Section 5.1(g) and 5.10
hereof, "Affiliate" means, within the meaning of Section 414 of the Code, (i)
any member of a controlled group of corporations which includes the Borrower,
(ii) any trade or business, whether or not incorporated, under common control
with the Borrower, (iii) any member of an affiliated

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service group which includes the Borrower, and (iv) any member of a group
treated as a single employer by regulation.

1.3 "AGREEMENT" means this Amended and Restated Loan Agreement, including the
exhibits hereto, as originally executed, or if this Agreement is amended, varied
or supplemented from time to time, as so amended, varied or supplemented.

1.3.1 "AMENDED AND RESTATED ENVIRONMENTAL COMPLIANCE AND INDEMNITY AGREEMENT"
means that certain Amended and Restated Environmental Compliance and Indemnity
Agreement executed and delivered by each member of the Borrower Affiliated Group
to Lender on the Closing Date.

1.3.2 "AMENDED AND RESTATED GUARANTEE" means that certain Amended and Restated
Guarantee executed and delivered by each member of the Borrower Affiliated Group
to Lender on the Closing Date.

1.3.3 "AMENDED AND RESTATED SECURITY AGREEMENT" means that certain Amended and
Restated Security Agreement executed and delivered by each member of the
Borrower Affiliated Group to Lender on the Closing Date.

1.4 "APPLICABLE LIBOR MARGIN" means, for any day, with respect to any Loan
payable hereunder, the applicable rate per annum as provided in Section 2.6.

1.5 "APPLICABLE PRIME RATE MARGIN" means, for any day, with respect to any Loan
payable hereunder, the applicable rate per annum as provided in Section 2.6.

1.6 "ASSIGNEE" shall have the meaning set forth in Section 8.6.

1.7 "AVERAGE UNUSED COMMITMENT" for any period of time means the daily average
difference between the Revolving Credit Maximum Amount applicable to such period
and the sum of the principal amount of the Revolving Loans (including the Stated
Amount of, and all unreimbursed draws under, all Letters of Credit) actually
outstanding hereunder.

1.8 "BORROWER" shall have the meaning set forth in the Preamble.

1.9 "BORROWER AFFILIATED GROUP" means, collectively, the Borrower and each of
the Subsidiaries of the Borrower.

1.10 "BRING-DOWN CERTIFICATES" means, collectively, the separate Bring-down
Certificates executed and delivered to the Lender on the Closing Date by each
member of the Borrower Affiliated Group that was a member of the Borrower
Affiliated Group under the Original Loan Agreement.

1.11 "BUSINESS DAY" means (i) for all purposes other than as covered by clause
(ii) below, any day other than a Saturday, Sunday or legal holiday on which
banks in Boston,

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Massachusetts are open for the conduct of a substantial part of their commercial
banking business; and (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Loans bearing
interest by reference to LIBOR, any day that is a Business Day described in
clause (i) and that is also a day for trading by and between banks in United
States dollar deposits in the London interbank market.

1.12 "CFO REPORT" shall have the meaning set forth in Section 5.1(e).

1.12.1 "CLOSING CERTIFICATES" means that certain Closing Certificate evidencing
the closing of the Harken Acquisition, the Sale-Leaseback and the issuance of
the subordinated notes which are the subject of the Subordination Agreement.

1.13 "CLOSING DATE" means January 7, 2004.

1.14 "CODE" means the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder, as amended.

1.15 "COLLATERAL" means any and all real and personal property of the Borrower
Affiliated Group, whether tangible or intangible, in which the Lender now has,
is granted by any Security Document or otherwise, or hereafter acquires a
security interest or any other lien, including, without limitation, by way of
mortgage or assignment, to secure the Obligations.

1.15.1 "COLLATERAL ASSIGNMENT OF PURCHASE DOCUMENTS" means that certain
Collateral Assignment of Purchase Documents executed and delivered by the
Borrower, Casa Ole' East, Ltd. and the Lender on the Closing Date.

1.16 "CONSOLIDATED and CONSOLIDATING" shall have the respective meanings
ascribed to such terms under GAAP.

1.17 "CONSOLIDATED CAPITAL EXPENDITURE" means on a Consolidated basis, to the
extent capitalized in accordance with GAAP, any expenditure for fixed assets
(both tangible and intangible) including assets being constructed (whether or
not completed), leasehold improvements, capital leases under GAAP, installment
purchases of machinery and equipment, acquisitions of real estate and other
similar expenditures including (i) in the case of a purchase, the entire
purchase price, whether or not paid during the fiscal period in question, (ii)
in the case of a capital lease, the capitalized amount thereof (determined in
accordance with GAAP), (iii) without duplication, expenditures in or from any
construction-in-progress account of any member of the Borrower Affiliated Group,
and (iv) pre-opening expenses for the applicable period.

1.18 "CONSOLIDATED CASH FLOW" means, in relation to the Borrower Affiliated
Group on a Consolidated basis for any period, Consolidated EBITDA for such
period minus (a) cash Taxes paid during such period, minus (b) Consolidated
Capital Expenditures during such period, and minus (c) the aggregate amount of
any Restricted Payments made pursuant to Section 5.9 in connection with share
repurchases during such period.

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1.19 "CONSOLIDATED EBITDA" means, in relation to the Borrower Affiliated Group
on a Consolidated basis for any period, an amount equal to the Consolidated net
income (or net loss), determined in accordance with GAAP, of the Borrower
Affiliated Group for such period (without giving effect to any extraordinary
gains or losses), after deduction of all Taxes for such period, minus any
non-cash credits for such period, plus the following to the extent deducted in
computing such Consolidated net income for such period: (i) Interest Charges for
such period, (ii) Taxes on income for such period, (iii) depreciation for such
period, (iv) amortization for such period, (v) other non-cash charges for such
period, (vi) pre-opening expenses for such period, and (vii) for the fiscal
quarters ending December 31, 2003, March 31, 2004, June 30, 2004 and September
30, 2004, pro forma EBITDA for the Harken Acquisition, as approved by the
Lender.

1.20 "CONSOLIDATED EBITDAR" means, in relation to the Borrower Affiliated Group
on a Consolidated basis for any period, an amount equal to the Consolidated
EBITDA of the Borrower Affiliated Group for such period, plus the aggregate
rental expense of the Borrower Affiliated Group for such period (including all,
if any, percentage rent and other monetary obligations under each real property
Lease to which any member of the Borrower Affiliated Group is a party).

1.21 "CONSOLIDATED FINANCIAL OBLIGATIONS" means, in relation to the Borrower
Affiliated Group on a Consolidated basis, for any period, without duplication,
(i) Interest Charges paid or required to be paid by the Borrower Affiliated
Group in such period, plus (ii) the aggregate amount of scheduled principal
payments required to be made by the Borrower Affiliated Group during such period
with respect to any Indebtedness for borrowed money or capital lease
obligations, plus (iii) any fees, including letter of credit fees and commitment
fees, required to be paid by the Borrower Affiliated Group in connection with
any Indebtedness for borrowed money or capital lease obligations, plus (iv) all
Restricted Payments made pursuant to Section 5.9 in connection with share
repurchases during such period, if any, minus (v) fees and other transaction
expenses paid by any member of the Borrower Affiliated Group on the Closing Date
in respect of the credit facilities that are the subject of this Agreement.

1.22 "CONSOLIDATED FUNDED INDEBTEDNESS" means at any date of determination, on a
Consolidated basis for the Borrower Affiliated Group, the sum of, without
duplication, (i) the aggregate principal amount of the Loans outstanding on such
date, plus (ii) the Stated Amount of Letters of Credit outstanding on such date
plus, (iii) the aggregate principal amount of unreimbursed draws under the
outstanding Letters of Credit, plus, (iv) all principal obligations arising
under capital leases in effect on such date required to capitalized in
accordance with GAAP, plus (v) the aggregate principal amount of all other
guarantees and Indebtedness for borrowed money of the Borrower Affiliated Group
outstanding on such date, plus (vi) the aggregate principal amount of all
Indebtedness of the Borrower Affiliated Group evidenced by a bond, debenture,
note or other similar obligation to pay, plus (vii) the aggregate amount of any
stock repurchases permitted pursuant to Section 5.9 hereof made after December
31, 2004.

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1.23 "DEFAULT" means an event or condition that, but for the requirement that
time elapse or notice be given, or both, would constitute an Event of Default.

1.24 "DEPOSIT ACCOUNT CONTROL AGREEMENT" means the Deposit Account Control
Agreement entered into by and among one or more members of the Borrower
Affiliated Group, the Lender and Bank of America on or after the Closing Date.

1.25 "DORMANT SUBSIDIARIES" means, collectively, each of Casa Ole Private Club
#1, Casa Ole Private Club #2, Casa Ole Private Club #29, Casa Ole Private Club
#51, 649 Dixie Drive Club (#516), 2828 East Southmore Club (#507), 410 Gordon
Street Club (#555), 1712 Dodgen Loop Club (#557), Casa Ole Club #37, Casa Ole
Private Club #56, La Senorita Development Co., La Senorita-Sault Ste. Marie
General (MC-P) and La Senorita-Sault Ste. Marie Limited Partnership (MLP).

1.26 "ENCUMBRANCES" shall have the meaning set forth in Section 5.6.

1.27 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.

1.28 "FEDERAL FUNDS RATE" means for any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the
Lender from 3 federal funds brokers of recognized standing selected by the
Lender.

1.29 "FEE AND LEASEHOLD MORTGAGES" means collectively, the separate Mortgage and
Security Agreements (i) executed and delivered by each of Casa Ole' East, Ltd.,
and Casa Ole' of Sulphur, L.L.C., to the Lender on the Closing Date and (ii)
executed and delivered by one or more members of the Borrower Affiliated Group
to the Lender in connection with the Original Loan Agreement.

1.30 "GAAP" means generally accepted accounting principles consistently applied.

1.31 "GOODS" has the meaning given that term in the UCC, and also includes all
things movable when a security interest therein attaches and also all computer
programs embedded in goods and any supporting information provided in connection
with a transaction relating to the program if (i) the program is associated with
the goods in such manner that it customarily is considered part of the goods or
(ii) by becoming the owner of the goods, a Person acquires a right to use the
program in connection with the goods.

1.32 "HARKEN ACQUISITION" shall mean the transactions contemplated pursuant to
that certain Asset Purchase Agreement by and among Casa Ole' East, Ltd, a Texas
limited

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partnership, as buyer, Borrower, as guarantor, and the sellers named therein
dated September 25, 2003.

1.33 "INDEBTEDNESS" with respect to any person means and includes, without
duplication, (i) all items which, in accordance with GAAP, would be included as
a liability on the balance sheet of such person, (ii) the face amount of all
letters of credit issued by any bank for the account of such person and all
drafts drawn thereunder, (iii) the total amount of all indebtedness secured by
any Encumbrance to which any property or asset of such person is subject,
whether or not the indebtedness secured thereby shall have been assumed, and
(iv) the total amount of all indebtedness and obligations of others which such
person has directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), discounted with
recourse or agreed (contingently or otherwise) to purchase or repurchase or
otherwise acquire, including, without limitation, any agreement (a) to advance
or supply funds to such other person to maintain working capital, equity
capital, net worth or solvency, or (b) otherwise to assure or hold harmless such
other person against loss in respect of its obligations.

1.34 "INITIAL FINANCIAL STATEMENT" shall have the meaning set forth in Section
3.6.

1.35 "INSOLVENT" or "INSOLVENCY" means that there shall have occurred one or
more of the following events with respect to a Person: death; dissolution
(except the dissolution of La Buena Agency Inc. so long as any and all assets of
La Buena Agency Inc. have been transferred to a member of the Borrower
Affiliated Group prior to such dissolution); liquidation; termination of
existence; "insolvent" or "insolvency" within the meaning of the United States
Bankruptcy Code or other applicable statute; such Person's inability to pay its
debts as they come due or failure to have adequate capital to conduct its
business; such Person's failure to have assets having a fair saleable value net
of any cost to dispose of such assets in excess of the amount required to pay
the probable liability on its then existing debts (including unmatured,
unliquidated and contingent debts); appointment of a receiver of any part of the
property of, execution of a trust mortgage or an assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy or the commencement of
any proceedings under any bankruptcy or insolvency laws or any laws relating to
the relief of debtors, readjustment of indebtedness or reorganization of debtors
by or against such person, or the offering of a plan to creditors or such Person
for composition or extension, except for an involuntary proceeding commenced
against such Person which is dismissed within 45 days after the commencement
thereof without the entry of an order for relief or the appointment of a
trustee.

1.36 "INTEREST CHARGES" means, for any period, without duplication, all interest
and all amortization of debt discount and expense (including commitment fees and
similar expenses, but excluding fees and other transaction expenses paid by any
member of the Borrower Affiliated Group on the Closing Date in respect of the
credit facilities that are the subject of this Agreement) on any particular
Indebtedness for which such calculations are being made, all as determined in
accordance with GAAP. Computations of Interest Charges on a pro forma basis for
Indebtedness having a variable interest rate shall be calculated at the rate in
effect on the date of any determination.

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1.37 "INTEREST PERIOD" means, as to any LIBOR Amount, the period, the
commencement and duration of which shall be determined in accordance with
Subsection 2.5.2, provided that if any such Interest Period would otherwise end
on a day which is not a Business Day, such Interest Period shall end on the
Business Day next preceding or next succeeding such day as determined by the
Lender in accordance with its usual practices and notified to the Borrower at
the beginning of such Interest Period.

1.38 "INVENTORY" includes, without limitation, "inventory" as defined in the UCC
and also all: (a) Goods which are leased by a Person as lessor; are held by a
Person for sale or lease or to be furnished under a contract of service; are
furnished by a Person under a contract of service; or consist of raw materials,
work in process, or materials used or consumed in a business.

1.39 "LANDLORD WAIVERS" means one or more Landlord Waivers from time to time
delivered to the Lender, each in form and substance satisfactory to the Lender,
by the landlord under any Lease with respect to the Real Properties leased by
any member of the Borrower Affiliated Group.

1.40 "LEASE or LEASES" means any agreement, whether written or oral, granting a
person the right to occupy space in a structure or real estate for any period of
time or any capital lease or other lease of or agreement to use personal
property.

1.41 "LETTERS OF CREDIT" means letters of credit in the form customarily issued
by the Lender as standby letters of credit, issued by the Lender at the request
and for the account of the Borrower.

1.42 "LIBOR" means, with respect to any Interest Period, as applicable to any
LIBOR Amount, the rate per annum (rounded upward, if necessary, to the nearest
1/32 of one percent) as determined on the basis of the offered rates for
deposits in U.S. dollars, for a period of time comparable to such Interest
Period which appears on the Telerate page 3750 as of 11:00 a.m. (London time) on
the day that is two London Banking Days preceding the first day of such Interest
Period; provided, however, if the rate described above does not appear on the
Telerate System on any applicable interest determination date, LIBOR shall be
the rate (rounded upwards as described above, if necessary) for deposits in
dollars for a period substantially equal to the Interest Period on the Reuters
Page "LIBO" (or such other page as may replace the LIBO Page on that service for
the purpose of displaying such rates), as of 11:00 a.m. (London time), on the
day that is two London Banking Days prior to the beginning of such Interest
Period. "BANKING DAY" shall mean, in respect of any city, any date on which
commercial banks are open for business in that city.

         If both the Telerate and Reuters systems are unavailable, then LIBOR
for that date will be determined on the basis of the offered rates for deposits
in U.S. dollars for a period of time comparable to such Interest Period which
are offered by 4 major banks in the London interbank market (chosen by the
Lender in its sole discretion) at

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approximately 11:00 a.m. (London time), on the day that is two London Banking
Days preceding that first day of such Interest Period as selected by the Lender.
The principal London office of each of the four major London banks will be
requested to provide a quotation of its U.S. dollar deposit offered rate. If at
least two such quotations are provided, LIBOR for that date will be the
arithmetic mean of the quotations. If fewer than two quotations are provided,
LIBOR for that date will be determined on the basis of the rates quoted for
loans in U.S. dollars to leading European banks for a period of time comparable
to such Interest Period offered by major banks in New York City (chosen by the
Lender in its sole discretion) at approximately 11:00 a.m. (New York City time),
on the day that is two London Banking Days preceding the first day of such
Interest Period. In the event that the Lender is unable to obtain any such
quotation as provided above, it will be deemed that LIBOR for the requested
Interest Period cannot be determined.

1.43 "LIBOR AMOUNT" means, in relation to any Interest Period, any portions of
the principal amount of any Loans as to which the Borrower elects pursuant to
Subsection 2.5.2 to pay interest at a rate determined by reference to LIBOR.

1.44 "LOAN" means a loan made to the Borrower by the Lender pursuant to Article
2 hereof, and "LOANS" means all of such loans, collectively.

1.45 "LOAN ACCOUNT" means the account on the books of the Lender in which will
be recorded Loans made by the Lender to the Borrower pursuant to this Agreement,
payments made on such Loans and other appropriate debits and credits as provided
by this Agreement.

1.46 "LOAN COMMITMENT" means either the Revolving Loan Commitment or the Term
Loan Commitment, as the context may require.

1.47 "LOAN DOCUMENTS" means, collectively, this Agreement (including, without
limitation, the agreements and other instruments listed or described in the
Closing Agenda attached hereto as Exhibit G), the Notes, the Amended and
Restated Guarantee, the Amended and Restated Security Agreement, the Amended and
Restated Environmental Compliance and Indemnity Agreement, the Subordination
Agreement, the Collateral Assignment of Purchase Documents, the Omnibus
Amendment, the Stock Pledge Agreements, the Deposit Account Control Agreement,
the Fee and Leasehold Mortgages, the Solvency Certificates, the Bring-down
Certificates, the Closing Certificate, the Patent and Trademark Security
Agreements, the Landlord Waivers, the Perfection Certificate, the Letters of
Credit and all applications relating thereto, and any other agreements,
instruments or documents referred to herein or therein and/or delivered in
connection herewith or therewith, and all schedules, exhibits and annexes
thereto.

1.48 "MONTEREY" means Monterey's Acquisition Corp., a Delaware corporation.

1.49 "MP1" means Casa Ole MP1, Inc., a Delaware corporation.

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1.50 "NOTES" means, collectively, the Amended and Restated Revolving Credit Note
and the Amended and Restated Term Note.

1.51 "NOTE SCHEDULES" shall have the meaning set forth in Subsection 2.4.2.

1.52 "OBLIGATIONS" means any and all obligations of any member of the Borrower
Affiliated Group to the Lender of every kind and description, direct or
indirect, absolute or contingent, primary or secondary, due or to become due,
now existing or hereafter arising, regardless of how they arise or by what
agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, and includes obligations to perform acts and to refrain
from acting as well as obligations to pay money.

1.53 "OMNIBUS AMENDMENT" means the Letter Amendment to the Loan Documents
executed and delivered by each member of the Borrower Affiliated Group to the
Lender on the Closing Date.

1.54 "ORIGINAL LOAN AGREEMENT" shall have the meaning set forth in the Preamble.

1.55 "PARTICIPANT" shall have the meaning set forth in Section 7.2.

1.56 "PATENT AND TRADEMARK SECURITY AGREEMENT" means, collectively, the Patent
and Trademark Security Agreements (i) executed and delivered by one or more
members of the Borrower Affiliated Group to the Lender on the Closing Date and
(ii) executed and delivered by one or more members of the Borrower Affiliated
Group to the Lender in connection with the Original Loan Agreement.

1.57 "PERSON" or "person" means any natural person, corporation, limited
liability company, partnership, limited liability partnership, trust, joint
venture association, unincorporated association, trade, business and
governmental agency and instrumentality, or other form of legal entity.

1.58 "PLANS" means, collectively, each "employee pension benefit plan" and each
"employee welfare benefit Plan" (each as defined in ERISA) maintained by any
member of the Borrower Affiliated Group.

1.59 "PRIME RATE" means the greater of (i) variable per annum rate of interest
so designated from time to time by the Lender as its prime rate and (ii) the
Federal Funds Rate plus 0.5%. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate being charged to any customer.

1.60 "PURCHASE DOCUMENTS" means all agreement, instruments, contracts and
documents executed and delivered by the Borrower, Casa Ole' East, Ltd. or any
other member of the Borrower Affiliated Group in connection with the Harken
Acquisition, as in effect and delivered to the Lender on the Closing Date, and
as set forth on Exhibit H attached hereto.

                                      -9-
<PAGE>

1.61 "REAL PROPERTY" or "REAL PROPERTIES" means, collectively, (i) all parcels
of land together with the improvements now or hereafter located thereon, which
are now or hereafter owned by any member of the Borrower Affiliated Group, as
more fully set forth, in the case of those owned as of the Closing Date, on
Exhibit B hereto, and (ii) all parcels of land together with the improvements
now or hereafter located thereon, which are now or hereafter leased by any
member of the Borrower Affiliated Group pursuant to a Real Property Lease, as
more fully set forth, in the case of those leased as of the Closing Date, on
Exhibit B hereto.

1.62 "RESERVE CHARGE" means, for each day on which any LIBOR Amount is
outstanding, a reserve charge in an amount equal to the product of:

         (i)      the outstanding principal amount of the LIBOR Amount,

                                  multiplied by

         (ii)     (a) LIBOR (expressed as a decimal) divided by one minus the
                  Reserve Rate, minus (b) LIBOR (expressed as a decimal),

                                  multiplied by

         (iii)    1/360.

1.63 "RESERVE RATE" means the rate in effect from time to time, expressed as a
decimal, at which the Lender would be required to maintain reserves under
Regulation D of the Board of Governors of the Federal Reserve System (or any
successor or similar regulation relating to such reserve requirements) against
"Eurocurrency Liabilities" (as such term is used in such Regulation D) if such
liabilities were outstanding.

1.64 "RESTRICTED PAYMENTS" means (i) any cash or property dividend,
distribution, or other payment, direct or indirect, to any Person who now or in
the future holds an equity interest in any member of the Borrower Affiliated
Group, whether evidenced by a security or not, except any dividend by any member
of the Borrower Affiliated Group paid in its own stock; and (ii) any payment on
account of the purchase, redemption, retirement or other acquisition of any
capital stock of any member of the Borrower Affiliated Group, or any other
payment or distribution made in respect thereof, either directly or indirectly.

1.65 "REVOLVING CREDIT MATURITY DATE" means January 7, 2007; provided, however,
that the Revolving Credit Maturity Date may be extended by the mutual agreement
of the Borrower and Lender, in writing and executed by an authorized
representative of both the Borrower and the Lender.

1.66 "REVOLVING CREDIT MAXIMUM AMOUNT" means Five Million Dollars
($5,000,000.00).

                                      -10-
<PAGE>

1.67 "REVOLVING CREDIT NOTE" shall have the meaning set forth in Subsection
2.1.1.

1.68 "REVOLVING LOAN COMMITMENT" means, subject to the limitations set forth in
this Agreement, Five Million Dollars ($5,000,000.00).

1.69 "REVOLVING LOANS" shall have the meaning set forth in Subsection 2.1.1.

1.70 "SALE LEASEBACK" shall mean the transactions contemplated pursuant to each
separate Purchase Agreement by and between Casa Ole' East, Ltd., as seller, and
CNL Funding 2001-A LP, as buyer, dated January 7, 2004.

1.71 "SALE LEASEBACK DOCUMENTS" shall mean all agreements, instruments,
contracts and documents executed and delivered by the Borrower, Casa Ole' East,
Ltd. or any other member of the Borrower Affiliated Group in connection with the
Sale Leaseback, as in effect and delivered to the Lender on the Closing Date,
and as set forth on Exhibit I attached hereto.

1.72 "SECURITY DOCUMENTS" means, collectively, (i) the Loan Documents and (ii)
all other agreements, instruments or contracts (a) to which, at the relevant
time of reference to the term "Security Documents", any member of the Borrower
Affiliated Group or any property or assets of any such member shall be bound or
affected thereby, and (b) by which any of the Obligations shall be evidenced or
under or in respect of which the Lender or any of its agents or representatives
shall have, at such time, any rights or interests as security for the payment or
performance of all or any part of the Obligations.

1.73 "SOLVENCY CERTIFICATES" means, collectively, the separate Solvency
Certificates executed and delivered by each member of the Borrower Affiliated
Group to the Lender on the Closing Date.

1.74 "STATED AMOUNT" means, with respect to each Letter of Credit outstanding at
any given time, the maximum amount then available to be drawn thereunder
(without regard to whether any conditions to drawing could then be met).

1.75 "STOCK PLEDGE AGREEMENT" means, collectively, the Stock Pledge Agreements
(i) executed and delivered to the Lender by one or more members of the Borrower
Affiliated Group having a Subsidiary on the Closing Date and (ii) executed and
delivered by one or more members of the Borrower Affiliated Group having a
Subsidiary on the closing date of the Original Loan Agreement.

1.76 "SUBORDINATION AGREEMENT" means, collectively, the separate Subordination
Agreements executed and delivered by and among (a) Fleet National Bank, (b)
Mexican Restaurants, Inc., and (c) each of (i) Casa Ole' of Beaumont, Inc. (with
respect to $1,000,000 subordinated note); (ii) Casa Ole' of Beaumont, Inc. (with
respect to $250,000 subordinated note); (iii) Casa Ole' of Lake Charles, Inc.,
(iv) Victor M. Gonzalez; (v) Thomas L. Harken et ux., and Melba J. Harken, dated
as of the date hereof.

                                      -11-
<PAGE>

1.77 "SUBSIDIARY" means, as to any member of the Borrower Affiliated Group, any
Person of which 50% or more of the ordinary voting power for the election of a
majority of the members of the board of directors or other governing body of
such entity is held or controlled by such member of the Borrower Affiliated
Group; or any other such Person the management of which is directly or
indirectly controlled by such member of the Borrower Affiliated Group through
the exercise of voting power or otherwise; or any joint venture, whether
incorporated or not, in which such member of the Borrower Affiliated Group has a
50% ownership interest or any other Person which would be consolidated with any
member of the Borrower Affiliated Group in presenting financial statements in
accordance with GAAP.

1.78 "TAXES" means, on a Consolidated basis, any and all taxes (including,
without limitation, income, receipts, franchise, ad valorem or excise taxes,
transfer or gains taxes or fees, use taxes, withholding, payroll or minimum
taxes, and any interest, penalties or additions to tax with respect to any such
taxes) paid or payable to any governmental authority, federal, state or
otherwise and imposed on, or otherwise payable by, or for which responsibility
for payment, withholding or collection lies with, any member of the Borrower
Affiliated Group, including any taxes imposed on any Affiliate for which any
member of the Borrower Affiliated Group may be liable under applicable law or
under any agreement to which any member of the Borrower Affiliated Group is a
party or by which it is bound, and including, but not limited to, any interest,
penalties or additions to tax with respect thereto.

1.79 "TERM LOAN" shall have the meaning set forth in Section 2.2.

1.80 "TERM LOAN COMMITMENT" means, subject to the limitations set forth in this
Agreement, Five Million Dollars ($5,000,000.00).

1.81 "TERM LOAN MATURITY DATE" means January 7, 2009.

1.82 "TERM NOTE" shall have the meaning set forth in Section 2.2.

1.83 "UCC" shall mean the Uniform Commercial Code as in effect from time to time
in the Commonwealth of Massachusetts.

ARTICLE 2.  THE CREDIT FACILITIES.

2.1 Revolving Loans.

         2.1.1 Advances. Upon the terms and subject to the conditions of this
Agreement, and in reliance upon the representations, warranties and covenants of
the Borrower made herein, the Lender agrees to make loans (each, a "REVOLVING
LOAN" and collectively, the "REVOLVING LOANS") to the Borrower at the Borrower's
request from time to time, from and after the date hereof and prior to the
Revolving Credit Maturity Date, provided that the aggregate principal amount of
Revolving Loans outstanding at any time (after giving

                                      -12-
<PAGE>

effect to all amounts requested), plus the aggregate principal Stated Amount of
Letters of Credit outstanding at such time, plus the aggregate amount of any
unreimbursed draws under outstanding Letters of Credit at such time, shall not
exceed the Revolving Credit Maximum Amount, and provided, further, that at the
time the Borrower requests a Revolving Loan, and after giving effect to the
making thereof, no Default or Event of Default has occurred and is continuing.
The Revolving Credit Loans shall be evidenced by a promissory note of the
Borrower in favor of the Lender in or substantially in the form of Exhibit A-1
hereto (the "REVOLVING CREDIT NOTE"), with appropriate insertions. All requests
for Revolving Loans shall be in the form attached hereto as Exhibit D and shall
be made in such manner as shall be agreed between the Borrower and the Lender,
except that each Revolving Loan shall be in a minimum amount of $100,000 and
shall be in an integral multiple of $100,000, or, if less, the remaining unused
Revolving Credit Maximum Amount.

         2.1.2 Overadvances. The Borrower agrees that it shall be an Event of
Default hereunder if at any time the aggregate amount of Revolving Loans
outstanding (after giving effect to all amounts requested), plus the aggregate
Stated Amount of Letters of Credit outstanding at such time, plus the aggregate
amount of any unreimbursed draws under outstanding Letters of Credit at such
time, shall exceed the Revolving Credit Maximum Amount then in effect, unless
the Borrower, upon notice of such excess from the Lender, immediately, and in
any event within one (1) Business Day, pays cash to the Lender to be credited to
the Loan Account in such amount as shall be necessary to eliminate the excess.

2.2 Term Loan. Subject to the terms and conditions set forth in this Agreement,
the Lender agrees to lend to the Borrower on the Closing Date, and the Borrower
agrees to borrow on such date and repay in accordance with Section 2.3, an
amount equal to the Term Loan Commitment (the "TERM LOAN"). No amounts prepaid
on the Term Loan may be reborrowed. The Term Loan shall be evidenced by separate
promissory note of the Borrower in favor of the Lender in or substantially in
the form of Exhibit A-2 hereto (the "TERM NOTE"), with appropriate insertions.

2.3  Payment and Prepayment of Loans.

         2.3.1 Payment of Revolving Loans. Interest on the Revolving Loans shall
be payable as provided in Section 2.5. On the Revolving Credit Maturity Date,
all outstanding principal of the Revolving Loans, together with all accrued and
unpaid interest thereon, and all fees, charges and expenses relating thereto,
shall be absolutely and unconditionally due and payable in full by the Borrower
to the Lender.

         2.3.2 Payment of Term Loan. Interest on the Term Loan shall be payable
as provided in Section 2.5. The outstanding principal of the Term Loan shall be
amortized in 20 equal installments of $250,000.00 payable on the last day of
each consecutive fiscal quarter of the Borrower commencing with the fiscal
quarter of the Borrower ending nearest to March 31, 2004. If not sooner paid, on
the Term Loan Maturity Date all outstanding principal of the Term Loan, together
with all accrued and unpaid interest

                                      -13-
<PAGE>

thereon, and all fees, charges and expenses relating thereto, shall be
absolutely and unconditionally due and payable in full by the Borrower to the
Lender.

         2.3.3 Method of Payment. All payments and prepayments of principal and
all payments of interest and other amounts shall be made by the Borrower to the
Lender at 100 Federal Street, Boston, Massachusetts 02110, in immediately
available funds, on or before 11:00 a.m. (Boston, Massachusetts time) on the due
date thereof, free and clear of, and without any deduction or withholding for,
any Taxes (excluding any taxes imposed on the net income of the Lender) or other
payments.

         2.3.4 Voluntary Prepayment. Subject to the provisions of Subsection
2.5.2(d), the Borrower may prepay outstanding Loans, or reduce the amount of any
Loan Commitment, in whole or in part at any time without premium or penalty upon
five Business Days' prior written notice to the Lender, provided, however, that
prepayments of the Revolving Loan that do not involve a permanent reduction of
the Revolving Loan Commitment shall not require prior written notice. Amounts so
paid in respect of Revolving Loans (without a reduction in the Revolving Loan
Commitment) may be borrowed and re-borrowed from time to time as provided in
Subsection 2.1.1. Any prepayment of the Term Loan shall constitute a permanent
reduction of the Term Loan and may not be re-borrowed. With respect to the Term
Loan, provided that the Borrower's Maximum Consolidated Leverage Ratio (see
Subsection 5.16(a)) is greater than 1.25 to 1.0 as of the end of the Borrower's
fiscal quarter immediately preceding such prepayment, such voluntary prepayments
of principal shall be applied to installments of principal due in inverse order
of maturity. In all other cases, prepayments will be applied pro rata to reduce
all remaining principal installments of the Term Loan. All reductions of Loan
Commitments, and all prepayments of any Loan, shall be in a minimum amount equal
to $50,000 and in additional increments of $50,000.

         2.3.5 Mandatory Prepayment. To the extent that they exceed the sum of
$400,000 in the aggregate during the term of this Agreement, all proceeds from
(w) the sale of assets by any member of the Borrower Affiliated Group, (x) the
sale of equity interests by any member of the Borrower Affiliated Group (except
to an Affiliate of the Borrower or to another member of the Borrower Affiliated
Group), (y) the issuance of any Indebtedness by any member of the Borrower
Affiliated Group (any such Indebtedness only to be issued in compliance with
Section 5.5), and (z) any insurance proceeds due to any member of the Borrower
Affiliated Group shall be paid to the Lender as permanent reductions of the
principal of the Term Loan. Notwithstanding the foregoing, at any time during
which an Event of Default has occurred and is continuing, all such proceeds
shall be so paid to the Lender as permanent reductions of the principal of the
Term Loan whether or not the aggregate amount of all such proceeds received
during the term of this Agreement exceeds $400,000. Provided that the Borrower's
Maximum Consolidated Leverage Ratio (see Subsection 5.16(a)) is greater than
1.25 to 1.0 as of the end of the Borrower's fiscal quarter immediately preceding
such prepayment, such mandatory prepayments of principal shall be applied to
installments of principal due in inverse order of maturity. In all other cases,
such mandatory prepayments of principal will be applied pro rata to reduce all
remaining principal installments of the Term Loan. Notwithstanding anything

                                      -14-
<PAGE>

to the contrary stated herein, the Borrower shall not be required to pay to the
Lender under this Subsection 2.3.5 any proceeds resulting from (i) insurance
settlements resulting from damage or destruction to restaurant units, provided
that the Borrower provides to the Lender evidence (in form and substance
satisfactory to the Lender in its sole discretion) that such proceeds have been
reinvested in the same or replacement restaurant units within 270 days of the
receipt thereof by the applicable member of the Borrower Affiliated Group, and
(ii) the issuance of equity interests in members of the Borrower Affiliated
Group as part of customary employee option transactions or similar
compensation-related transactions, provided that such issuances are made in the
ordinary course of business and consistent with prior practice.

2.4      Lender's Records of Loan Activity.

         2.4.1 Loan Account. The Lender shall, in its discretion, enter Loans
and advances made by the Lender to the Borrower pursuant to this Agreement
(including, without limitation, on account of Letters of Credit) as debits in
the Loan Account. The Lender shall also record in the Loan Account all payments
made by the Borrower on account of the Loans and may also record therein, in
accordance with customary accounting practices, other debits and credits,
including customary banking charges and all interest, fees, charges and expenses
chargeable to the Borrower under this Agreement. The debit balance of the Loan
Account shall reflect the amount of the Borrower's Obligations hereunder and
shall be considered correct absent manifest error. The Borrower authorizes the
Lender to charge to the Loan Account or to any deposit account which the
Borrower may maintain with the Lender the principal, interest, fees, charges,
taxes and expenses provided for in this Agreement or any other document executed
or delivered in connection herewith.

         2.4.2 Note Schedules. The Lender may, instead of or in addition to
maintaining a Loan Account, and is hereby irrevocably authorized by the Borrower
to, enter on the schedule forming a part of its Notes or otherwise in its
records, appropriate notations (collectively, the "NOTE SCHEDULES") evidencing
the date and the amount of each Loan, as applicable, the interest rate
applicable thereto and the date and amount of each payment of principal made by
the Borrower with respect thereto; and such notations shall be considered
correct absent manifest error. The Lender is hereby irrevocably authorized by
the Borrower to attach to and make a part of its Notes a continuation of any
such schedule as and when required. No failure on the part of the Lender to make
any notation as provided in this Subsection 2.4.2 shall in any way affect any
Loan or the rights of the Lender or the Obligations of the Borrower with respect
thereto.

2.5      Interest.

         2.5.1 Prime Rate Plus Applicable Prime Rate Margin. Subject to the
provisions of Subsection 2.5.2 and Section 2.7, Revolving Loans and the Term
Loan shall each bear interest at a rate per annum equal to the Prime Rate in
effect from time to time, plus the Applicable Prime Rate Margin in effect at
such time. Interest on Revolving Loans and the Term Loan (not at the time
overdue) bearing interest with reference to the Prime Rate

                                      -15-
<PAGE>

shall be payable monthly in arrears on the last Business Day of each month. Any
change in the Prime Rate shall result in a change on the same day in the rate of
interest to accrue from and after such day on the unpaid balance of principal of
Revolving Loans and Term Loan.

         2.5.2 LIBOR Plus Applicable LIBOR Margin.

         (a) At the option of the Borrower, so long as no Default or Event of
Default has occurred and is then continuing, the Borrower may elect from time to
time prior to the Revolving Credit Maturity Date or the Term Loan Maturity Date,
as applicable, to have all or a portion of the unpaid principal amount of any
Loan bear interest during any particular Interest Period by reference to LIBOR;
provided, that any such portion of any Loan shall be in an amount not less than
$250,000 or some greater integral multiple of $250,000 with respect to any
single Interest Period, and provided further, that there shall not be more than
five (5) Loans (or portions thereof) outstanding at any time the interest on
which is determined by reference to LIBOR. Any election by the Borrower to have
interest calculated by reference to LIBOR shall be made by notice (which shall
be irrevocable) to Lender at least three Business Days prior to the first day of
the proposed Interest Period, specifying the LIBOR Amount and the duration of
the proposed Interest Period (which must be for one, two or three months). Any
such election of a LIBOR shall lapse at the end of the expiring Interest Period
unless extended by a further election notice as hereinbefore provided and, in
the event of such lapse, the applicable Loans shall bear interest with reference
to the Prime Rate in accordance with Section 2.5.1. Except as otherwise provided
herein, each LIBOR Amount shall bear interest during each Interest Period
relating thereto at a per annum rate equal to LIBOR plus the Applicable LIBOR
Margin then in effect. Interest on each LIBOR Amount shall be payable on the
last day of each Interest Period relating thereto. Notwithstanding the
foregoing, Borrower may not select an Interest Period which extends beyond the
Revolving Credit Maturity Date for Revolving Loans or the Term Loan Maturity
Date for the Term Loan.

         (b) The Lender shall forthwith upon determining LIBOR provide notice
thereof to the Borrower. Each such notice shall be conclusive and binding upon
the Borrower. If, with respect to any Interest Period, the Lender is unable to
determine LIBOR relating thereto, or adverse or unusual conditions in or changes
in applicable law relating to the applicable London interbank market make it
illegal or, in the reasonable judgment of the Lender, impracticable, to fund
therein the LIBOR Amount or make the projected LIBOR unreflective of the actual
costs of funds therefor to the Lender, or if it shall become unlawful for the
Lender to charge interest on the Loans on a LIBOR basis, then in any of the
foregoing events the Lender shall so notify the Borrower and interest will be
calculated and payable in respect of such projected Interest Period (and
thereafter for so long as the conditions referred to in this sentence shall
continue) by reference to the Prime Rate in accordance with Subsection 2.5.1.

         (c) If any Interest Period would otherwise end on a day which is not a
Business Day for LIBOR purposes, that Interest Period shall end on the Business
Day next

                                      -16-
<PAGE>

preceding or next succeeding such day as determined by the Lender in accordance
with its usual practices and notified to the Borrower at the beginning of such
Interest Period.

         (d) If for any reason any payment or prepayment of principal of a LIBOR
Amount is made on any day other than the last day of an Interest Period, then
the Borrower shall reimburse the Lender for the loss, if any, computed pursuant
to the following formula:

                        L =  (R-T) x P x D + RC
                             -------------
                              360

                        L =  amount of loss to be reimbursed to Lender.

                        R =  LIBOR plus the Applicable LIBOR Margin at the time
                             of the payment.

                        T =  effective interest rate in which United States
                             Treasury bills maturing on the last day of the then
                             current Interest Period and in the same amount as
                             the unpaid principal amount of the Loan can be
                             purchased by Lender on the day of such payment of
                             principal.

                        D =  the number of days remaining in the Interest Period
                             as of the date of such payment.

                        P =  the amount of principal paid.

                        RC = the Reserve Charge due through the date of such
                             payment.

The Borrower shall pay to the Lender the amount of loss, computed in accordance
with the foregoing formula, upon presentation by the Lender of a statement
setting forth the Lender's calculation of the amount of such loss, which notice
shall be conclusive and binding upon the Borrower in the absence of manifest
error.

2.6 Applicable Interest Rate Margins. The "APPLICABLE PRIME RATE MARGIN" and the
"APPLICABLE LIBOR MARGIN" shall, at any given point in time, be determined in
accordance with Table 1 below; provided, however, that from the Closing Date
through the date upon which the Lender first receives the Consolidated balance
sheet and statement of income, retained earnings and cash flow of the Borrower
Affiliated Group for the fiscal quarter ending nearest to June 30, 2004,
together with the CFO Report relating thereto, the level used to determine the
Applicable Prime Rate Margin and the Applicable LIBOR Margin shall be Level II.

                                      -17-
<PAGE>

                                 TABLE 1
                    APPLICABLE INTEREST RATE MARGINS
<Table>
<Caption>
                                           Level I            Level II
                                           -------            --------
<S>                                        <C>                <C>
Maximum Consolidated Leverage Ratio:         <1.25               >1.25
                                                                 -
Applicable Prime Rate Margin                  2.00%               2.50%
Applicable LIBOR Margin                       4.00%               4.50%
</Table>

         For purposes of determining the Applicable Prime Rate Margin and the
Applicable LIBOR Margin, the Maximum Consolidated Leverage Ratio will be tested
quarterly, commencing with the fiscal quarter of the Borrower ending nearest to
June 30, 2004 based on the annual or quarterly financial statements required to
be delivered pursuant to Section 5.1(a) or 5.1(b), respectively. For purposes of
determining the interest rate for any Interest Rate Period hereunder, any
interest rate change shall be effective three Business Days after the date on
which the financial statements required to be delivered pursuant to Section
5.1(a) or Section 5.1(b) are delivered to the Lender, together with the
applicable CFO Report and a notice to the Lender specifying any change in the
Applicable Prime Rate Margin and the Applicable LIBOR Margin. If the Borrower
has failed to deliver the financial statements required to be delivered by it
pursuant to Section 5.1(a) or Section 5.1(b), the Applicable Prime Rate Margin
and the Applicable LIBOR Margin that are then in effect shall automatically be
increased to Level II until such financial statements are delivered.

2.7 Default Interest. Notwithstanding anything to the contrary stated herein,
upon the occurrence and during the continuance of an Event of Default, at the
option of the Lender, to the extent permitted by applicable law, the unpaid
balance of all Loans shall bear interest at a rate equal to (i) in the case of a
non-monetary Event of Default, a rate equal to the Prime Rate plus 2% and (ii)
in the case of a monetary Event of Default, a rate equal to the Prime Rate plus
3%, in either case compounded monthly until such Event of Default is cured or
waived.

2.8 Letters of Credit. Issuance. Upon the terms and subject to the conditions of
this Agreement, and in reliance upon the representations, warranties and
covenants of the Borrower made herein, the Lender agrees to issue upon the
application of the Borrower, to the extent permitted by law and the Uniform
Customs and Practice of the International Chamber of Commerce governing Letters
of Credit (Publication No. 500 or any successor thereto), Letters of Credit
during the period from the date hereof to the 30th day prior to the Revolving
Credit Maturity Date; provided that (i) the aggregate Stated Amount of Letters
of Credit outstanding at any time, plus the aggregate amount of all unreimbursed
draws under such outstanding Letters of Credit shall not at any time exceed
$2,000,000, and (ii) the aggregate principal amount of Revolving Loans
outstanding at such time plus the aggregate principal amount of all Letters of
Credit outstanding at such time, plus the aggregate principal amount of all
unreimbursed draws under outstanding Letters of Credit, shall not exceed the
Revolving Credit Maximum Amount at any time;

                                      -18-
<PAGE>

and provided, further, that at the time Borrower requests the issuance of a
Letter of Credit, and after giving effect to the issuance thereof, no Default or
Event of Default shall have occurred or be continuing. All Letters of Credit
shall have a stated expiration date not to exceed one (1) year and shall, in any
event, expire not later than the 15th day prior to the Revolving Credit Maturity
Date. Amounts drawn under the Letters of Credit shall become immediately due and
payable by the Borrower to the Lender and, if there is availability under the
Revolving Credit Maximum Amount and no Default or Event of Default exists or
would be caused thereby, upon the request of the Borrower, the Lender shall add
the amounts drawn to the Loan Account as Revolving Loans. In order to evidence
such Letters of Credit, the Borrower shall enter into with the Lender such
agreements and execute such instruments and documents as the Lender customarily
requires in like transactions.

2.9 Changed Circumstances.

         2.9.1 Changed Capital Requirements. If, after the date hereof, the
Lender shall have determined that the adoption of any applicable law, rule,
regulation, guideline, directive or request (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
of the foregoing imposes or increases a requirement by the Lender to allocate
capital resources to the Lender's commitment to make Loans which has or would
have the effect of reducing the return on the Lender's capital to a level below
that which the Lender could have achieved (taking into consideration the
Lender's then existing policies with respect to capital adequacy and assuming
full utilization of the Lender's capital) but for such adoption, change or
compliance by any amount deemed by the Lender to be material, then: (i) the
Lender shall promptly after its determination of such occurrence give notice
thereof to the Borrower; and (ii) to the extent that the costs of such increased
capital requirements are not reflected in the then interest rate applicable to
the Loans, the Borrower and the Lender shall thereafter attempt to negotiate in
good faith, within 30 days following the date the Borrower receives such notice,
an adjustment payable hereunder that will adequately compensate the Lender in
light of the circumstances. If the Lender and the Borrower are unable to agree
to such adjustment within 30 days following the date upon which the Borrower
receives such notice, then commencing on the date of such notice (but no earlier
than the effective date of any such increased capital requirement), the fees
payable hereunder shall increase by an amount that will, in the Lender's
reasonable determination, provide adequate compensation. The provisions of this
Section 2.9.1 shall be applied to the Borrower so as not to discriminate against
Borrower vis-a-vis other similarly situated customers of the Lender.

         2.9.2 Other Changes Adverse to Lender. Notwithstanding anything to the
contrary stated herein, if any present or future applicable law (which
expression, as used in this Agreement, includes statutes and rules and
regulations thereunder and interpretations thereof by any competent court or by
any governmental or other

                                      -19-
<PAGE>

regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time heretofore or hereafter made upon or otherwise issued
to the Lender by any central bank or other fiscal, monetary or other authority,
whether or not having the force of law) shall (i) subject the Lender to any tax,
levy, impost, duty, charge, fee, deduction or withholding of any nature with
respect to this Agreement, the maximum amount of the Loans or the payment to the
Lender of any amounts due to it hereunder, or (ii) materially change the basis
of taxation of payments to the Lender of the principal or the interest on or any
other amounts payable to the Lender hereunder, or (iii) impose or increase or
render applicable any special or supplemental special deposit or reserve or
similar requirements or assessment against assets held by, or deposits in or for
the account of, or any liabilities of, or loans by an office of the Lender in
respect of the transactions contemplated herein, or (iv) impose on the Lender
any other conditions or requirements with respect to this Agreement, the
Revolving Credit Maximum Amount, any Revolving Loan, the Term Loan Maximum
Amount or the Term Loan and the result of any of the foregoing is (A) to
increase the cost to the Lender of making, funding or maintaining all or any
part of the Loans, or (B) to reduce the amount of principal, interest or other
amount payable to the Lender hereunder, or (C) to require the Lender to make any
payment or to forego any interest or other sum payable hereunder, the amount of
which payment or foregoing interest or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by the Lender from the
Borrower hereunder, then, and in each such case not otherwise provided for
hereunder, the Borrower will, upon demand made by the Lender accompanied by
calculations thereof in reasonable detail, pay to the Lender such additional
amounts as will be sufficient to compensate the Lender for such additional cost,
reduction, payment or foregoing interest or other sum, provided that the
foregoing provisions of this sentence shall not apply in the case of any
additional cost, reduction, payment or foregoing interest or other sum resulting
from any taxes charged upon or by reference to the overall net income, profits
or gains of the Lender.

2.10 Fees and Charges.

         2.10.1 Unused Commitment Fee. The Borrower shall pay to the Lender a
commitment fee, payable quarterly in arrears on the last Business Day of each
fiscal quarter (or portion thereof) of the Borrower, equal to three-quarters of
one percent (0.75%) per annum of the Average Unused Commitment during such
quarter. In addition, for any quarterly period during which the Averaged Unused
Commitment exceeds 75% of the total available facility, a surcharge equal to an
additional one-quarter of one percent (.25%) per annum of the Average Unused
Commitment shall be payable by the Borrower to the Lender.

         2.10.2 Reserve Charge. The Borrower shall pay to the Lender the Reserve
Charge, if any, with respect to LIBOR Amounts of the Loans outstanding from time
to time on the dates interest is payable on such LIBOR Amounts.

         2.10.3 Letter of Credit Fee. A Letter of Credit fee shall be payable
quarterly on each outstanding standby Letter of Credit at a rate per annum equal
to the Applicable

                                      -20-
<PAGE>

LIBOR Margin applicable to Revolving Loans then in effect multiplied by the
Stated Amount of such Letter of Credit, along with such issuance, documentary
processing and other fees as are customarily charged by Lender on standby
letters of credit. In the event that additional lenders are added to the credit
facility, the Borrower shall, in addition to and not in lieu of any other fees
payable hereunder, pay to the Lender, as the issuing bank, a fronting fee equal
to one-quarter of one percent (0.25%) multiplied by the Stated Amount of each
standby Letter of Credit. Fees assessed under this Subsection 2.10.3 shall be
payable by the Borrower on the last Business Day of each fiscal quarter of the
Borrower during which any Letter of Credit is outstanding.

         2.10.4 Closing Fee. The Borrower shall pay to the Lender a closing fee
equal to one and one-quarter percent (1.25%) multiplied by the sum of (i) the
Revolving Loan Commitment and (ii) the Term Loan Commitment. The closing fee
shall be earned and payable in full to the Lender on the Closing Date.

         2.10.5 Agent's Fee. From and after the date, if any, on which an
additional lender is first added to the credit facilities made available
hereunder, the Borrower shall pay to the Lender, for the Lender's account in its
capacity as agent hereunder, an Agent's Fee of $7,500 per annum for each
additional lender. The Agent's Fee shall be payable quarterly in advance on the
last Business Day of each fiscal quarter of the Borrower.

         2.10.6 Other Customary Charges. The Borrower shall pay to the Lender
any and all reasonable charges customarily made by the Lender against borrowers
generally.

ARTICLE 3. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter
into this Agreement and the other Loan Documents to which it is a party, and
make the Loans hereunder and issue the Letters of Credit, the Borrower hereby
represents, warrants and covenants to the Lender as follows:

3.1 Organization and Qualification. The Borrower and each other member of the
Borrower Affiliated Group (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation as
indicated on Exhibit B hereto; (ii) has all requisite corporate power and
authority to own its property and conduct its business as now conducted and as
presently contemplated; and (iii) is duly qualified and in good standing in the
jurisdictions indicated on Exhibit B hereto and each other jurisdiction where
the nature of its properties or its business (present or proposed) requires such
qualification, except where the failure to so qualify could not reasonably be
expected to have a material adverse effect on the assets, liabilities,
properties, income, financial condition, business or prospects of the Borrower
Affiliated Group taken as a whole. Since the date of the Initial Financial
Statement, the Borrower and each other member of the Borrower Affiliated Group
has continued to engage in substantially the same business as that in which it
was then engaged and is engaged in no unrelated business.

                                      -21-
<PAGE>

3.2 Corporate Authority; Non-Contravention. The execution, delivery and
performance of the Loan Documents and the transactions and other documents
contemplated hereby and thereby are within the corporate power and authority of
the Borrower and each other member of the Borrower Affiliated Group, and have
been authorized by all necessary corporate proceedings. Said execution, delivery
and performance do not and will not (a) contravene any provision of the
organizational or charter documents or by-laws of the Borrower or any other
member of the Borrower Affiliated Group, or any law, rule or regulation
applicable to the Borrower or any other member of the Borrower Affiliated Group,
or (b) contravene any provisions of or a default or event of default under any
other agreement, instrument, judgment, order, decree, permit, license or
undertaking binding upon or applicable to the Borrower or such other member of
the Borrower Affiliated Group (except to the extent that a waiver, consent or
approval has been obtained and remains in effect with respect to such terms and
provisions and has been delivered to the Lender), or constitute a Default or
Event of Default hereunder or (c) result in the creation, other than in favor of
the Lender, of any mortgage, pledge, security interest, lien, encumbrance or
charge upon any of the properties or assets of the Borrower or any other member
of the Borrower Affiliated Group. The only material contracts of any member of
the Borrower Affiliated Group are the Leases, the Purchase Documents and the
Sale Leaseback Documents, and the execution, delivery and performance of the
Loan Documents do not require any consent under or contravene any provision of
any of such Leases, Purchase Documents or Sale Leaseback Documents.

3.3 Valid Obligations; Approvals and Consents. This Agreement has been duly
executed and delivered to the Lender by the Borrower. Each of the Loan Documents
to which the Borrower or any other member of the Borrower Affiliated Group is or
is to become a party, when executed and delivered by the Borrower or such other
member of the Borrower Affiliated Group shall constitute a legal, valid and
binding obligation of the Borrower and such other members of the Borrower
Affiliated Group enforceable in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency or
similar laws of general application relating to enforcement of creditors' rights
generally, and (ii) general principles of equity, whether applied in a
proceeding in equity or at law. The execution, delivery and performance of the
Loan Documents and other documents contemplated hereby and thereby, and the
consummation of the transactions contemplated by such Loan Documents and such
other documents, do not require any approval or consent of, or filing or
registration with, any person or entity except the recordation of the Fee and
Leasehold Mortgages, and filings under the Uniform Commercial Code and with the
Patent and Trademark Office, in connection with the Collateral.

3.4 Title to Properties; Absence of Liens. The Borrower and each other member of
the Borrower Affiliated Group has good and marketable title to all of its
properties, assets and rights of every name and nature now purported to be owned
by it, which properties, assets and rights include all those necessary to permit
the Borrower and each other member of the Borrower Affiliated Group to conduct
its business as such business was conducted on the date of the Initial Financial
Statement, free from all liens, charges and

                                      -22-
<PAGE>

encumbrances whatsoever except for insubstantial and immaterial defects in title
in connection with any owned Real Property and except for liens, charges or
encumbrances permitted under Section 5.6.

3.5 Compliance. The Borrower and each other member of the Borrower Affiliated
Group (i) has all necessary permits, approvals, authorizations, consents,
licenses, franchises, registrations and other rights and privileges (including
without limitation patents, trademarks, trade names and copyrights) to allow it
to own its properties material to its business and operate its business without
any material violation of law or the rights of others, (ii) is duly authorized,
qualified and licensed under and in compliance with all applicable laws,
regulations, authorizations and orders of public authorities which are material
to its business (including, without limitation, such laws relating to hazardous
materials, hazardous waste, oil, and protection of the environment and laws
relating to ERISA or to employee benefit plans generally), and (iii) has
performed all obligations required to be performed by it under, and is not in
default under or in violation of, its charter or by-laws, or any material
agreement, lease, mortgage, note, bond, indenture, license or other instrument
or undertaking to which it is a party or by which any of it or any of its
properties are bound. Neither the Borrower nor any other member of the Borrower
Affiliated Group has received any notice by any governmental authority or third
party with respect to the generation, storage, or disposal or release or threat
of release of hazardous substances, hazardous materials, or oil, or with respect
to any violation of any federal, state or local environmental, health or safety
statute or regulation.

3.6 Financial Statements. The Borrower has furnished to the Lender the
Consolidated and Consolidating balance sheet of the Borrower Affiliated Group as
of December 31, 2002 and the related Consolidated and Consolidating statements
of earnings and retained earnings and cash flows for the fiscal year then ended
(the "Annual Financials"), which were prepared in accordance with GAAP, and
audited and certified by KPMG, LLP and such financial statements fairly present
the Consolidated and Consolidating financial position of the Borrower Affiliated
Group as at the close of business on such date and the results of its operations
for the fiscal year then ended. The Borrower has also furnished to the Lender
the Consolidated and Consolidating unaudited balance sheet and statement of
income for the Borrower Affiliated Group as at September 30, 2003 and for the
fiscal quarter then ended (together with the Annual Financials, the "INITIAL
FINANCIAL STATEMENT"), which was prepared in accordance with GAAP and certified
by the chief financial officer of the Borrower and such financial statements
fairly present the financial position of the Borrower Affiliated Group as at the
close of business on such date and the results of its operations for the fiscal
quarter then ended, subject only to normal year-end audit adjustments, none of
which will be materially adverse. The Borrower has also furnished to the Lender
the most recent management letter provided to the Borrower by its accountants.
In addition, the Borrower has furnished to the Lender pro forma projections for
the Borrower Affiliated Group (after giving effect to the Harken Acquisition and
the Sale Leaseback) for each calendar year ending December, 2003 through and
including December, 2007, all prepared in accordance with GAAP on a basis
consistent with the financial statements required by Section 5.1. Such
projections were

                                      -23-
<PAGE>

made in good faith and based on assumptions which the Borrower and each member
of the Borrower Affiliated Group believes were reasonable when made. On the date
hereof, neither the Borrower nor any member of the Borrower Affiliated Group has
any Indebtedness or other liabilities (other than trade indebtedness incurred in
the ordinary course of business consistent with past practices), whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
that are not set forth on Exhibit B hereto. Since the date of the Initial
Financial Statement, there have been no material adverse changes, individually
or in the aggregate, in the assets, liabilities, properties, income, financial
condition, business or prospects of any member of the Borrower Affiliated Group,
except as set forth on Exhibit B hereto.

3.7 Events of Default; Solvency. As of the date of this Agreement, no Default or
Event of Default exists and neither the Borrower nor any other member of the
Borrower Affiliated Group is, or immediately after giving effect to the
consummation of the Loans will be, Insolvent.

3.8 Taxes. The Borrower and each other member of the Borrower Affiliated Group
has filed all federal, state and other tax returns required to be filed for all
Taxes, and has paid (or has established adequate reserves in accordance with
GAAP for the payment of) all Taxes, assessments and other such governmental
charges due from Borrower or such other member of the Borrower Affiliated Group.
Neither Borrower nor any other member of the Borrower Affiliated Group has
executed any waiver that would have the effect of extending the applicable
statute of limitations in respect of any Tax.

3.9 Labor Relations; Litigation. Neither Borrower nor any other member of the
Borrower Affiliated Group is engaged in any unfair labor practice and, except as
set forth on Exhibit B attached hereto, there is no litigation, proceeding,
governmental investigation (administrative or judicial) or labor dispute,
pending or, to the best knowledge of Borrower and each other member of the
Borrower Affiliated Group, threatened against Borrower or any other member of
the Borrower Group, which, if adversely determined, could have a material
adverse effect on the assets, liabilities, properties, income, financial
condition, business or prospects of the Borrower Affiliated Group taken as a
whole, or on the ability of the Borrower Affiliated Group taken as a whole to
perform its obligations under the Security Documents or under any other
agreement or document contemplated hereby or thereby, nor is any substantial
basis for any such litigation or labor dispute known to exist.

3.10 Dormant Subsidiaries. Each of the Dormant Subsidiaries conducts no business
operations and has no assets or liabilities, except as are specifically
disclosed on Exhibit B attached hereto.

3.11 Contracts with Affiliates, Etc. Except as disclosed on Exhibit B attached
hereto, and except for agreements or transactions (in each case) in the ordinary
course of business and on an arm's-length basis, no member of the Borrower
Affiliated Group is a party to or otherwise bound by any agreements, instruments
or contracts (whether written or oral) with any Affiliate, except for any such
agreement, instrument or contract (other

                                      -24-
<PAGE>

than an agreement, instrument or contract with respect to Indebtedness for
borrowed money) as would not materially and adversely affect the assets,
liabilities, properties, income, financial condition, business or prospects of
such member of the Borrower Affiliated Group.

3.12 Disclosure. No representation or warranty made by the Borrower in this
Agreement, any other Loan Document or in any other agreement, instrument,
document, certificate, statement or letter furnished to the Lender by or on
behalf of the Borrower or any other member of the Borrower Affiliated Group, and
no other factual information heretofore or contemporaneously furnished by or on
behalf of the Borrower or any other member of the Borrower Affiliated Group to
the Lender in connection with any of the transactions contemplated by any of the
Loan Documents contains (as of the date given) any materially untrue statement
of fact or omits to state a fact necessary in order to make the statements
contained therein not misleading in any material respect in light of the
circumstances in which they are made. Except as disclosed herein or in the other
Loan Documents, there is no fact known to any member of the Borrower Affiliated
Group which materially and adversely affects, or which would in the future could
materially adversely affect, the assets, liabilities, properties, income,
financial condition, business or prospects of such member of the Borrower
Affiliated Group.

3.13 Collateral. All of the Obligations of the Borrower and each member of the
Borrower Affiliated Group to the Lender under or in respect of the Loan
Documents will, at all times from and after the execution and delivery of each
of the Security Documents, be entitled to the benefits of and be secured by each
of such Security Documents to the extent provided therein.

3.14 Subsidiaries. As of the date hereof, no member of the Borrower Affiliated
Group has any Subsidiaries or business divisions except as set forth on Exhibit
B hereto with respect to each such member of the Borrower Affiliated Group.

ARTICLE 4. CONDITIONS OF LOANS.

4.1 Conditions to Initial Revolving Loan, the Term Loan and the Initial
Letter(s) of Credit. The obligation of the Lender to make the initial Revolving
Loan and the Term Loan, and to issue the initial Letter of Credit, is subject to
the fulfillment to the satisfaction of the Lender on the date hereof of the
following conditions precedent:

         4.1.1 The Lender shall have received all of the agreements, documents,
instruments, certificates and opinions listed or described on the Closing Agenda
attached hereto as Exhibit G, in form and substance satisfactory to the Lender,
and duly executed and delivered by the parties thereto, along with such
additional instruments, certificates, opinions and other documents as the Lender
shall reasonably request, and all necessary actions shall have been taken by the
Borrower and each other member of the Borrower Affiliated Group to grant the
Lender a perfected, first-priority security interest in the

                                      -25-
<PAGE>

Collateral, including, without limitation, the filing of UCC-1 financing
statements in the appropriate jurisdictions.

         4.1.2 Each of the representations and warranties made by or on behalf
of the Borrower and each other member of the Borrower Affiliated Group herein
shall be true and accurate on and as of the date made and as of the date that
any such Loan or Letter of Credit is to be made or issued (except for those
representations and warranties that expressly relate only to a particular point
in time, in which case such representations and warranties shall have been
accurate at such time), the Borrower shall have performed and complied with all
covenants and conditions required herein to be performed or complied with by it
prior to the making of the Initial Revolving Loan or the Term Loan, or the
issuance of the Initial Letter(s) of Credit, and no Default or Event of Default
shall have occurred and be continuing, or would result from the making of the
Initial Revolving Loan or the Term Loan, or the issuance of the Initial
Letter(s) of Credit, or the transactions contemplated hereby.

4.2 Conditions to all Loans. The obligation of the Lender to make any Revolving
Loan or the Term Loan, or issue any Letter of Credit, is subject to the
fulfillment to the satisfaction of the Lender immediately prior to or
contemporaneously with each such Loan of each of the following conditions: (i)
the representations and warranties contained herein or otherwise made in writing
by or on behalf of the Borrower and each member of the Borrower Affiliated Group
pursuant hereto or in connection with the transactions contemplated hereby shall
be true and correct in all material respects at the time of each such Loan
(except for those representations and warranties that expressly relate only to a
particular point, in which case such representations and warranties shall have
been accurate at such time) with and without giving effect to the Loan to be
made, or the Letter of Credit to be issued, at such time and the application of
the proceeds thereof, (ii) no Default or Event of Default shall be continuing or
result from the making of such Loan or the issuance of such Letter of Credit,
(iii) no material adverse change in the assets, liabilities, properties, income,
financial condition, business or prospects of any member of the Borrower
Affiliated Group shall have occurred since the date of the Initial Financial
Statement, and (iv) no change in applicable law or regulation shall have
occurred as a consequence of which it shall have become and continue to be
unlawful for the Lender or the Borrower or any other member of the Borrower
Affiliated Group to perform any of its respective agreements or obligations
under any Security Document to which it is a party or otherwise adversely
affecting the Lender or the Borrower.

ARTICLE 5. COVENANTS. Until the later of (i) termination of this Agreement and
(ii) such time as there is no Obligation of the Borrower or the other members of
the Borrower Affiliated Group that remains outstanding, the Borrower, and to the
extent referred to therein (including to the extent the Borrower has agreed to
cause the members of the Borrower Affiliated Group to comply) each other member
of the Borrower Affiliated Group, hereby jointly and severally covenants to the
Lender that:

5.1 Financial Statements and Other Reporting Requirements. The Borrower shall
furnish to Lender:

                                      -26-
<PAGE>

         (a) as soon as available, but in any event within 90 days after the end
of each fiscal year of the Borrower Affiliated Group, a Consolidated and
Consolidating balance sheet of the Borrower Affiliated Group as at the end of,
and related Consolidated and Consolidating statement of income, retained
earnings and cash flow for, such fiscal year prepared in accordance with GAAP
and, in the case of such Consolidated financial statements only, certified by
independent certified public accountants satisfactory to Lender that such
statements present fairly the financial position of the members of the Borrower
Affiliated Group prepared in accordance with GAAP applied in a manner consistent
with past practices; and concurrently with such financial statements, a written
statement by such independent certified public accountants that, in the making
of the audit necessary for their report and opinion upon such Consolidated and
Consolidating financial statements, they have obtained no knowledge of any
Default or Event of Default under Sections 5.9, 5.10 or 5.16 hereof, or, if in
the opinion of such accountant such Default or Event of Default exists, they
shall disclose in such written statement the nature and status thereof;

         (b) a soon as available, but in any event within 45 days after the end
of each fiscal quarter of each fiscal year of the Borrower Affiliated Group, the
Consolidated and Consolidating balance sheet of the Borrower Affiliated Group as
at the end of, and related Consolidated and Consolidating statements of income,
retained earnings and cash flow for, the portion of the year then ended and for
the fiscal quarter then ended, prepared in accordance with GAAP applied in a
manner consistent with the audited financial statements required by Section
5.1(a) above (subject to normal year-end audit adjustments, none of which shall
be materially adverse) and certified pursuant to the report to be delivered to
Lender under Section 5.1(e) below;

         (c) a soon as available, but in any event within 30 days after the end
of each fiscal month of each fiscal year of the Borrower Affiliated Group, the
Consolidated and Consolidating balance sheet of the Borrower Affiliated Group as
at the end of, and related Consolidated and Consolidating statements of income,
retained earnings and cash flow for, the portion of the year then ended and for
the fiscal month then ended, prepared in accordance with GAAP applied in a
manner consistent with the audited financial statements required by Section
5.1(a) above (subject to normal year-end audit adjustments, none of which shall
be materially adverse);

         (d) promptly as they become available, a copy of each report (including
any so-called management letters) submitted to any member of the Borrower
Affiliated Group by independent certified public accountants in connection with
each Consolidated and Consolidating annual audit of the books of any member of
the Borrower Affiliated Group, or to all or any combination of such members of
the Borrower Affiliated Group, by such accountants or in connection with any
interim audit thereof pertaining to any phase of the business of all or any
members of the Borrower Affiliated Group;

         (e) concurrently with each delivery of each Consolidated and
Consolidating financial statements pursuant to Subsection 5.1(a) and Subsection
5.1(b) of this Section

                                      -27-
<PAGE>

5.1, a report signed on behalf of the chief financial officer of the Borrower in
substantially the form of Exhibit E hereto (each, a "CFO REPORT"), and
including, without limitation, computations in reasonable detail evidencing
compliance with the covenants contained in Subsections 5.16(a) through 5.16(e),
inclusive;

         (f) on or before the 30th day prior to the commencement of each fiscal
year of the Borrower Affiliated Group, a Consolidated and Consolidating pro
forma forecast and business plan for the Borrower Affiliated Group for such
fiscal year (including, without limitation, a Consolidated and Consolidating pro
forma balance sheet and related Consolidated and Consolidating statements of
income, retained earnings and cash flow, along with any material reforecasts or
amended business plan prepared at any time during such fiscal year);

         (g) promptly after obtaining knowledge of the existence thereof, notice
of (i) the occurrence of any event which constitutes a Default or Event of
Default, together with the nature and duration thereof and the action proposed
to be taken with respect thereto, (ii) the occurrence of any condition or event
with respect to the Borrower or any member of the Borrower Affiliated Group or
any Affiliate which could be expected to constitute a material adverse change in
or to have a material adverse effect on the business, properties or condition
(financial or otherwise) of the Borrower Affiliated Group taken as a whole,
together with a description of the nature and duration thereof and the action
proposed to be taken with respect thereto, (iii) any litigation or any
investigative proceedings of a governmental agency or authority commenced or
threatened against the Borrower or any member of the Borrower Affiliated Group,
any Affiliate or any Plan which could be expected to have a material adverse
effect on the business, properties or condition (financial or otherwise) of the
Borrower Affiliated Group taken as a whole, or the issuance of any judgment,
award, decree, order or other determination in or relating to any such
litigation or proceedings, (iv) the occurrence of a reportable event (as defined
in ERISA) or any communications to, or receipt of communications from, the PBGC,
the United States Department of Labor or the IRS by the Borrower or any member
of the Borrower Affiliated Group or any Affiliate relating to any Plan, along
with copies of all such communications relating to any matter which, if
adversely determined, could reasonably be expected to have a material adverse
effect on the business, properties or condition (financial or otherwise) of the
Borrower Affiliated Group taken as a whole, (v) the adoption by the Borrower or
any member of the Borrower Affiliated Group of any stock option or executive
compensation plan, whether or not subject to ERISA, and any Plan subject to
ERISA, or the substantial modification of any such plan, along with the vesting
and funding schedules and other principal provisions thereof, and (vi) any
communications given or received by the Borrower or any member of the Borrower
Affiliated Group in any way relating to compliance with, any violation or
potential violation of, or any potential liability under, any environmental law
or regulation (including those relating to pollution control, hazardous
materials and hazardous wastes), along with copies of all such communications to
the extent such communication relates to any matter which, if adversely
determined, could reasonably be expected to have a material adverse effect on
the business, properties or condition (financial or otherwise) of the Borrower
Affiliated Group taken as a whole; and

                                      -28-
<PAGE>

         (h) from time to time, such other financial data and other information
or documents (financial or non-financial) relating to the Borrower Affiliated
Group as the Lender may reasonably request.

5.2 Conduct of Business. The Borrower will, and will cause each other member of
the Borrower Affiliated Group to, maintain its corporate existence, continue to
have a fiscal year ending December 31 of each year (unless otherwise agreed to
by the Lender) and remain or engage in substantially the same business as that
in which it is now engaged, and will, and will cause each member of the Borrower
Affiliated Group to, duly observe and comply in all material respects with all
applicable laws and all requirements of any governmental authorities relative to
it, its assets or to the conduct of its business, including laws relating to the
environment, pollution control, hazardous materials and hazardous waste and
will, and will cause each member of the Borrower Affiliated Group to, maintain
and keep in full force and effect all licenses and permits necessary in any
material respect to the proper conduct of its business. Notwithstanding any
other provision of this Agreement or any other Loan Document, the Borrower will
not permit, and will not permit any member of the Borrower Affiliated Group to
permit, any of the Dormant Subsidiaries to conduct any business operations or to
won, lease or hold any assets or properties, and the Borrower will not, and will
not permit any other member of the Borrower Affiliated Group to, make any
investments in, loan to or Restricted Payment to any Dormant Subsidiary.

5.3 Maintenance and Insurance. The Borrower will, and will cause each member of
the Borrower Affiliated Group to, maintain and keep its properties in good
repair, working order and condition (normal wear and tear excepted) so that its
business may be properly and advantageously conducted at all times, and will
comply with the provisions of all material Leases to which it is a party or
under which it occupies property so as to prevent any material loss or
forfeiture thereof or thereunder. The Borrower at all times will maintain, and
will cause each member of the Borrower Affiliated Group to maintain, insurance
with such insurance companies, in such amounts against such hazards and
liabilities and for such purposes as is customary in the industry for companies
of established reputation engaged in the same or similar businesses and owning
or operating similar properties. The Lender shall be named as loss payee,
additional insured and mortgagee under each member of the Borrower Affiliated
Group's insurance and shall be given 30 days' advance written notice of any
cancellation thereof. If the Borrower or any other member of the Borrower
Affiliated Group fails to provide such insurance, the Lender, in its sole
discretion, may provide such insurance and charge the cost (plus applicable
interest) to the Loan Account or to the deposit accounts of the Borrower
Affiliated Group with Lender, it being agreed that so long as no Default or
Event of Default has occurred and is continuing, the Lender will provide one (1)
Business Day's prior notice (orally or in writing) thereof to the Borrower. Upon
request of Lender from time to time, the Borrower shall furnish, and shall cause
each member of the Borrower Affiliated Group to furnish, to the Lender
certificates or other evidence satisfactory to Lender of compliance with the
foregoing insurance provisions.

                                      -29-
<PAGE>

5.4 Taxes. The Borrower will pay or cause to be paid, and will cause each member
of the Borrower Affiliated Group to pay or cause to be paid, all Taxes,
assessments or governmental charges on or against it or its properties prior to
such taxes becoming delinquent, except for any tax, assessment or charge which
is being contested in good faith by proper legal proceedings and with respect to
which adequate reserves have been established and are being maintained, provided
that no enforcement action to enforce a lien has been commenced against the
Borrower or any other member of the Borrower Affiliated Group with respect to
any such tax, assessment or charge.

5.5 Limitation of Indebtedness. The Borrower will not create, incur, assume or
suffer to exist, or in any manner become or be liable directly or indirectly,
and will not permit any member of the Borrower Affiliated Group to create,
incur, assume, suffer to exist, or in any manner become or be liable directly or
indirectly with respect to, any Indebtedness except: (i) the Obligations; (ii)
Indebtedness for borrowed money existing on the date of this Agreement and
described on Exhibit C hereto; (iii) Indebtedness for the purchase price of
capital assets (including Indebtedness under operating leases for machinery and
equipment) incurred in the ordinary course of business in an aggregate amount
not to exceed $100,000 in any fiscal year, or for Taxes or other charges, in
each case subject to the limitations set forth in Sections 5.4 and 5.6,
respectively; (iv) Indebtedness incurred under any capital lease, as determined
by GAAP, in an aggregate amount not to exceed $500,000, and in any event subject
to the limitations set forth in Section 5.6, and (v) Indebtedness on open
account for the purchase price of services, materials and supplies incurred by
the Borrower or any other member of the Borrower Affiliated Group in the
ordinary course of business (not as a result of borrowing), so long as all of
such open account Indebtedness shall be promptly paid and discharged when due or
in conformity with customary trade terms and practices, except for any such open
account Indebtedness which is being contested in good faith by the Borrower or
by such other member of the Borrower Affiliated Group, and as to which adequate
reserves as required by GAAP have been established and are being maintained.

5.6 Restrictions on Liens. The Borrower will not, and will not permit any member
of the Borrower Affiliated Group to, create, incur, assume or suffer to exist
any mortgage, pledge, security interest, lien or other charge or encumbrance,
including the lien or retained security title of a conditional vendor,
("ENCUMBRANCES") upon or with respect to its property or assets, real or
personal, or assign or otherwise convey any right to receive income, except: (i)
Encumbrances existing on the date of this Agreement and set forth on Exhibit C
hereto; (ii) Encumbrances in favor of the Lender; (iii) Encumbrances securing
Indebtedness for the purchase price of capital assets to the extent such
Indebtedness is permitted by Section 5.5 (iii) or (iv), provided that (a) each
Encumbrance is given solely to secure the purchase price of such property, does
not extend to any other property and is given at the time of acquisition of the
property, and (b) the Indebtedness secured thereby does not exceed the lesser of
the cost of such property or its fair market value at the time of acquisition;
(iv) liens for Taxes, fees, assessments and other governmental charges to the
extent that payment of the same is not required in accordance with the
provisions of Section 5.4; (v) liens incurred or deposits made by a member of
the Borrower Affiliated Group in the ordinary course of the business of such

                                      -30-
<PAGE>

member in connection with workers' compensation, unemployment insurance, social
security and other similar laws, or liens of mechanics, laborers, materialmen,
carriers and warehousemen arising by operation of law to secure payment for
labor, materials, supplies or services incurred in the ordinary course of its
business, but only if the payment thereof is not at the time required and such
liens do not, individually or in the aggregate, materially detract from the
value or limit the use of any property subject thereto; (vi) encumbrances
consisting of minor easements, zoning restrictions or other similar restrictions
on the use of real property that do not and could not reasonably be expected to
(individually or in the aggregate) materially affect the value of the assets
encumbered thereby or materially impair the ability of the respective members of
the Borrower Affiliated Group to use such assets in their respective businesses,
and none of which is violated in any material respect by existing or proposed
structures or land use; and (vii) statutory liens of any landlord under the
Leases to the extent such liens have not been waived by such landlord.

5.7 Mergers, Acquisitions and Purchases and Sales of Assets. The Borrower will
not, and will not permit any member of the Borrower Affiliated Group to,
consolidate or merge with or into any other Person, acquire the assets or stock,
or a division, of any Person or sell, lease, transfer or otherwise dispose of or
discount any portion of its assets (including any note, instrument or account),
other than (i) the sale of finished goods, (ii) the disposition of scrap, waste
and obsolete items in the ordinary course of business, (iii) the Harken
Acquisition, upon terms and conditions satisfactory to the Lender, (iv) the Sale
Leaseback, upon terms and conditions satisfactory to the Lender, and (v) the
merger of a member of the Borrower Affiliated Group into (x) the Borrower if no
Default or Event of Default has occurred and is continuing or would result from
such merger and if the Borrower is the surviving entity, or (y) any other member
of the Borrower Affiliated Group.

5.8 Investments and Loans. The Borrower will not, and will not permit any other
member of the Borrower Affiliated Group to, make or have outstanding at any time
any investments in or loans to any other Person (other than the existing
ownership of equity interests in other members of the Borrower Affiliated
Group), whether by way of advance, guaranty, extension of credit, capital
contribution, purchase of stocks, notes, bonds or other securities or evidences
of Indebtedness, or acquisition of limited or general partnership interests or
interests in any limited liability company, or any similar matter, other than:
(i) in direct obligations of the United States of America, maturing within one
year of their issuance; (ii) in time certificates of deposit or repurchase
agreements, maturing within one year of their issuance, from banks or other
financial institutions in the United States having capital, surplus and
undivided profits in excess of $200,000,000; (iii) in short-term commercial
paper carrying the highest rating by Moody's or Standard and Poor's rating
services and issued by corporations headquartered in the United States, in
currency of the United States; (iv) in shares of money-market mutual funds
having assets in excess of $100,000,000 and substantially all of the assets of
which consist of investments referred to in clauses (i) through (iii),
inclusive, above; and (v) advances to employees for business related expenses to
be incurred in the ordinary course of business and consistent with past
practices in an amount not to exceed

                                      -31-
<PAGE>

$250,000 in the aggregate outstanding at any one time, provided that no such
advances to any single employee shall exceed $50,000 in the aggregate. The
Borrower will not, and will not permit any other member of the Borrower
Affiliated Group to, make any investment in or loan any Dormant Subsidiary.

5.9 Restricted Payments. The Borrower will not, and will not permit any other
member of the Borrower Affiliated Group to, directly or indirectly (through any
Affiliate or otherwise), declare, pay or make any Restricted Payment other than
(i) regular compensation (including reasonable bonuses) paid to its employees in
the ordinary course of business and consistent with past practices, (ii)
distribution by any member of the Borrower Affiliated Group (other than the
Borrower) to the Borrower or to any other member of the Borrower Affiliated
Group, and (iii) commencing with the fiscal year of the Borrower ending December
31, 2003, the Borrower may from time to time make repurchases of its common
stock in an aggregate amount not to exceed $750,000 in any fiscal year, provided
that at the time any such repurchase is proposed to be made, and after giving
effect thereto, (i) no Default or Event of Default shall be continuing on or as
of such date or shall occur by reason of the making of such repurchase on such
date, (ii) the Lender has received from the Borrower a certificate, certified by
its chief financial officer, showing in reasonable detail that the Consolidated
Leverage Ratio at the end of the fiscal quarter immediately preceding the date
of any proposed share repurchase is less than 1.25 to 1.0, based on the annual
or quarterly financial statements required to be delivered pursuant to Section
5.1(a) or 5.1(b), as applicable (and after giving effect to such repurchase)
and, if Revolving Loan proceeds will be used in connection with such share
repurchase, certifying that the Borrower will be solvent after giving effect to
the share repurchase (and providing such evidence thereof as the Lender may
require), and (iii) the aggregate amount of any such share repurchases during
each of the first six (6) fiscal quarters following the Closing Date shall not
exceed $300,000 in each such fiscal quarter.

5.10 ERISA Compliance. None of the Borrower, any other member of the Borrower
Affiliated Group, any of their respective Affiliates, any Plan and any fiduciary
thereof shall (i) engage in any "prohibited transaction" or incur, whether or
not waived, any "accumulated funding deficiency" (both as defined in ERISA and
the Code, (ii) fail to satisfy any additional funding requirements set forth in
Section 412 of the Code and Section 302 of ERISA, or (iii) terminate or withdraw
from participation in any Plan in a manner which could result in the imposition
of a lien on any property of, or impose a substantial withdrawal liability on,
the Borrower. The Borrower and each Plan shall comply in all material respects
with ERISA.

5.11 Inspection by Lender; Books and Records; Accounts. The Borrower will
permit, and will cause each other member of the Borrower Affiliated Group to
permit, the Lender or its designees, at any reasonable time and from time to
time, to visit and inspect the properties of the Borrower and such other members
of the Borrower Affiliated Group, and to (i) conduct field audits, provided that
prior to the occurrence of a Default or Event of Default, the Lender will not
conduct more than two (2) such audits in any year, (ii) examine and make copies
of the books and records of the Borrower and such other

                                      -32-
<PAGE>

members of the Borrower Affiliated Group and (iii) discuss the affairs, finances
and accounts of the Borrower and such other members of the Borrower Affiliated
Group with appropriate officers. The Borrower will keep and shall cause other
members of the Borrower Affiliated Group to keep, adequate books and records of
account in which true and complete entries will be made reflecting all of its
business and financial transactions, and such entries will be made in accordance
with GAAP and applicable law. The Borrower will maintain an operating account
with the Lender.

5.12 Use of Proceeds. The proceeds of the Term Loan will be used by the Borrower
solely for the purpose of (i) refinancing the Borrower's existing Indebtedness
to the Lender in the amount of approximately $2,775,000, (ii) to fund a portion
of the Harken Acquisition and (iii) to pay fees and closing costs relating
thereto. The proceeds of Revolving Loans will be used by Borrower solely for (i)
ongoing working capital, (ii) issuance of Letters of Credit (subject to the
limitations set forth in Section 2.8), and (iii) maintenance of existing
restaurant units, (iv) development and conversion of new restaurant units, (v)
share repurchases (subject to the limitations set forth in Section 5.9), (vi)
funding a portion of the Harken Acquisition and (vii) other general corporate
purposes. Notwithstanding the foregoing, the amount of proceeds drawn under both
the Term Loan and the Revolving Loans used to fund a portion of the Harken
Acquisition shall not exceed $3,000,000 in the aggregate. The Borrower is not
engaged in the business of extending credit for the purpose of purchasing or
carrying any margin stock (within the meaning of Regulations U, T, and X of the
Board of Governors of the Federal Reserve System of the United States). Except
as set forth in the following sentence, no part of the proceeds of any borrowing
hereunder will be used at any time to purchase or carry any such margin stock or
to extend credit to others for the purpose of purchasing or carrying any such
margin stock. The Borrower will be permitted to use proceeds from the Revolving
Loans to purchase "margin security" or "margin stock" as such term is used in
Regulations U, T or X of the Board of Governors of the Federal Reserve System
("Regulations U, T or X") in connection solely with the repurchase by the
Borrower of its common stock pursuant to the terms of Section 5.9, so long as
(i) immediately upon giving effect to the purchase of such "margin security" or
"margin stock", there are no violations of any of the so-called margin stock
regulations set forth in Regulations U, T or X, and (ii) the Borrower shall
complete in all respects any required forms (including, without limitation, Form
FR U-1 and amendments thereto), with all attachments thereto (including a then
current list of collateral which adequately supports all credit extended
hereunder) pursuant to Regulations U, T, or X and deliver such forms in a timely
manner to the Lender.

5.13 Transactions with Affiliates. The Borrower will not, and will not permit
any other member of the Borrower Affiliated Group to, directly or indirectly,
enter into any transaction with any Affiliate except in the ordinary course of
business on terms that are no less favorable to the Borrower or such member of
the Borrower Affiliated Group than those which might be obtained at the time in
a comparable arm's-length transaction with any person who is not an Affiliate.

                                      -33-
<PAGE>

5.14 No Amendments to Certain Documents. The Borrower will not, and will not
permit any other member of the Borrower Affiliated Group to, at any time cause
or permit any of the charter documents or other organizational documents of the
Borrower or any other member of the Borrower Affiliated Group to be modified,
amended or supplemented in any respect whatever without the express prior
written agreement, consent or approval of the Lender, except for immaterial
changes which could not reasonably be expected to adversely affect the Lender or
its rights hereunder.

5.15 Subsidiaries. The Borrower will, and will cause each other member of the
Borrowed Affiliated Group to, provide the Lender 30 days' prior written notice
of the formation after the date hereof of any Subsidiary. The Borrower will, and
will cause each other member of the Borrowed Affiliated Group to, cause any such
Subsidiary to engage in the business of conducting branches or divisions of the
business now conducted by the member of the Borrower Affiliated Group that is
its parent. The Borrower will and shall cause each other member of the Borrower
Affiliated Group to, at the direction of the Lender, cause each such Subsidiary
to become a party to this Agreement and to such of the Security Documents as the
Lender shall require.

5.16 Financial Covenants.

         5.16(a) Maximum Consolidated Leverage Ratio. The Borrower shall not
permit the ratio of Consolidated Funded Indebtedness to Consolidated EBITDA to
exceed: (i) 2.0 to 1.00 as of the last day of each of the fiscal quarters ending
on December 31, 2003, March 31, 2004, June 30, 2004 and September 30, 2004 (as
determined at the end of each such fiscal quarter for the four consecutive
quarters then ending); and (ii) 1.5 to 1.00 as of the last day of each fiscal
quarter ending on or after December 31, 2004 (as determined at the end of each
such fiscal quarter for the four quarters then ending).

         5.16(b) Minimum Trailing Four Quarters EBITDA. The Borrower shall not
permit Consolidated EBITDA (i) to be less than $6,000,000 as of the last day of
each of the fiscal quarters ending on December 31, 2003, March 31, 2004, June
30, 2004 and September 30, 2004 (as determined at the end of each such fiscal
quarter for the four consecutive quarters then ending); (ii) to be less than
$6,250,000 as of the last day of the fiscal quarter ending on December 31, 2004
(as determined at the end of each such fiscal quarter for the four consecutive
quarters then ending); and (iii) to be less than $6,500,000 as at the end of any
fiscal quarter thereafter (as determined at the end of each such fiscal quarter
for the four consecutive quarters then ending).

         5.16(c) Minimum Consolidated Cash Flow Coverage. The Borrower shall not
permit the ratio of Consolidated Cash Flow to Consolidated Financial Obligations
to be less than: (i) 1.20 to 1.0 as at the last day of each of the fiscal
quarters ending on December 31, 2003, March 31, 2004, June 30, 2004 and
September 30, 2004 (as determined at the end of each such fiscal quarter for the
four consecutive fiscal quarters then ending); and (ii) 1.40 to 1.0 as at the
end of any fiscal quarter thereafter (as determined at the end of each such
fiscal quarter for the four consecutive fiscal quarters then ending).

                                      -34-
<PAGE>

         5.16(d) Consolidated EBITDAR/Consolidated Financial Obligations Plus
Rental Expense. Commencing with the fiscal quarter of the Borrower Affiliated
Group ending on December 31, 2003, the Borrower shall not permit the ratio of
(a) Consolidated EBITDAR for any period of four consecutive fiscal quarters to
(b) Consolidated Financial Obligations plus rental expense (including all, if
any, percentage rent and other monetary obligations under each real property
Lease to which any member of the Borrower Affiliated Group is a party) for such
four-quarter period to be less than 1.50 to 1.00.

         5.16(e) Maximum Consolidated Capital Expenditures. The Borrower shall
not permit the amount of Consolidated Capital Expenditures in any period to
exceed the lesser of (a) the amount specified opposite such period in the table
set forth below and (b) an amount, to be recalculated by the Borrower quarterly,
which, when added to current Consolidated Funded Indebtedness, would result in a
Consolidated Leverage Ratio less than or equal to the maximum ratio permitted
under Subsection 5.16(a); provided, however, that with respect to the maximum
amounts reflected in the table set forth below, in any given fiscal year up to
25% of the unused portion of such amount may be carried over to the next fiscal
year, subject in all cases to the restriction set forth in clause (b) above.

<Table>
<Caption>
             PERIOD                          MAXIMUM AMOUNT
-------------------------------              --------------
<S>                                          <C>
Fiscal Year 2003 and Thereafter              $    2,600,000
</Table>

5.17 Limitation on Commitments to Develop New Restaurant Units. Notwithstanding
anything to the contrary stated in this Agreement, the Borrower shall refrain,
and shall cause each other member of the Borrower Affiliated Group to refrain,
from making capital expenditures for, or from any entering into any legal
commitment to, develop any new restaurant unit at any time when either or both
of the following conditions shall exist: (a) more than 10% of the operating
restaurant units then open for a period of 120 days or more have trailing
four-quarter negative cash flow (or, with respect to any such unit open for at
least 120 days but less than four complete fiscal quarters, has negative cash
flow as measured from the date of opening), or (b) the Consolidated Leverage
Ratio calculated most recently pursuant to Subsection 5.16(a) above is equal to
or greater than 1.25 to 1.0.

5.18 Environmental Indemnification. The Borrower covenants and agrees that it
will, and will cause each other member of the Borrower Affiliated Group to,
indemnify and hold the Lender harmless from and against any and all claims,
expense, damage, loss or liability incurred by the Lender in connection with
environmental matters with respect to the Real Properties, except those arising
from the gross negligence or willful misconduct of Lender. It is expressly
acknowledged by the Borrower that the foregoing indemnification shall survive
any foreclosure or any modification, release or discharge of any or all of the
Security Documents or the payment of the Loans or the Letters of Credit, and
shall inure to the benefit of the Lender and its respective successors and
assigns. The obligations under this Section 5.18 shall constitute "Obligations"
for all purposes of the Security Documents.

                                      -35-
<PAGE>

5.19. Leases. The Borrower shall, and shall cause each other member of the
Borrower Affiliated Group to, use its best efforts to cause the landlord of any
Real Property leased by the Borrower or such other member of the Borrower
Affiliated Group which contains books and records of the Borrower or any other
member of the Borrower Affiliated Group, or any Collateral having an aggregate
value in excess of $50,000, to deliver to the Lender, at the option of the
Lender, a Landlord Waiver simultaneously with the execution of any Lease of such
Real Property.

5.20 Further Assurances. The Borrower shall, and shall cause each other member
of the Borrower Affiliated Group to, do, make, execute and deliver all such
additional and further acts, things, assurances, and instruments as the Lender
may reasonably require more completely to vest in and assure to the Lender its
rights hereunder and under the other Security Documents, in the Collateral and
to carry into effect the provisions and intent of this Agreement and the other
Security Documents.

5.21 Mortgages. The Borrower shall, and shall cause each other member of the
Borrower Affiliated Group, to grant, make, execute and deliver first priority
Leasehold Mortgages on the following properties at any time after the Closing
Date at the Lender's sole discretion and shall, and shall cause each other
member of the Borrower Affiliated Group, to do all things and deliver all
documents, instruments and certificates requested by the Lender in its sole
discretion in connection therewith: (a) 915 Highway 96 South, Silsbee, TX; (b)
3100 Highway 365-172, Port Arthur, TX; (c) 4058 Ryan Street, Lake Charles, LA;
(d) 5898 Eastex Frwy., Beaumont, TX; and (e) 6420 Phelan, Beaumont, TX.

ARTICLE 6. EVENTS OF DEFAULT; LENDER'S RIGHTS.

6.1 Events of Default. The following shall constitute events of default
(individually, an "EVENT OF DEFAULT"):

         (a) the Borrower shall fail to pay (i) any amount of principal of any
Loans when due or (ii) any amount of interest thereon or any fees or expenses
payable hereunder or under any Note or any other Security Document within 3 days
after the due date therefor; or

         (b) the Borrower or any other member of the Borrower Affiliated Group
shall fail to perform, comply with or observe or shall otherwise breach any one
or more of the terms, obligations, covenants or agreements contained in Sections
5.1, 5.2, 5.3 (with respect to maintenance of insurance only), 5.5 through 5.9,
inclusive, 5.11 through 5.20, inclusive or Section 8.4; or

         (c) the Borrower or any other member of the Borrower Affiliated Group
shall fail to perform, comply with or observe or shall otherwise breach any one
or more of the terms, covenants, obligations or agreements (other than in
respect of subsections 6.1(a) and

                                      -36-
<PAGE>

(b) hereof) contained in this Agreement or in any other Security Document and
such failure shall continue for 30 days; or

         (d) any representation or warranty of the Borrower or any other member
of the Borrower Affiliated Group made in any Security Document or any other
documents or agreements executed in connection with the transactions
contemplated by this Agreement or in any certificate delivered hereunder shall
prove to have been false in any material respect upon the date when made or
deemed to have been made; or

         (e) the Borrower or any other member of the Borrower Affiliated Group
shall fail to pay at maturity, or within any applicable period of grace (not to
exceed 30 days), any obligations for borrowed monies or advances (other than
advances deemed to be made from trade creditors in the ordinary course of
business) in excess of $100,000, or fail to observe or perform any term,
covenant or agreement evidencing or securing such obligations for borrowed
monies or advances (other than advances deemed to be made from trade creditors
in the ordinary course of business) in excess of $100,000, the result of which
failure is to permit the holder or holders of such Indebtedness to cause such
Indebtedness to become due prior to its stated maturity upon delivery of
required notice, if any, or to permit any party to any agreement evidencing such
obligations to terminate or cancel such agreement; or

         (f) the Borrower or any other member of the Borrower Affiliated Group
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or similar official of
itself or of all or a substantial part of its property, (ii) be generally not
paying its debts as such debts become due or be deemed unable to pay its debts
as they fall due or admit its inability to pay its debts as they fall due or a
moratorium shall be declared in respect of its indebtedness, (iii) make a
general assignment for the benefit of its creditors or composition or
arrangement with its creditors generally, (iv) commence a voluntary case under
the Federal Bankruptcy Code (as now or hereafter in effect), (v) take any action
or commence any case or proceeding under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts, or
any other law providing for the relief of debtors, (vi) fail to contest in a
timely or appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code (as now or
hereafter in effect) or other law, (vii) take any action under the laws of its
jurisdiction of incorporation or organization similar to any of the foregoing,
(viii) be Insolvent, or (ix) pass any board resolution or take any corporate
action for the purpose of effecting any of the foregoing; or

         (g) a proceeding or case shall be commenced, without the application or
consent of the Borrower or other member of the Borrower Affiliated Group in any
court of competent jurisdiction, or a petition shall be presented or meeting
convened or application or order made or meeting convened to pass a resolution
or a resolution is passed seeking or regarding (i) the liquidation,
reorganization, dissolution, winding up, or composition or readjustment of its
debts, (ii) the appointment of a trustee, receiver, custodian, liquidator,
administrator, administrative receiver or the like of it or of all or any
substantial part of its assets or the making of an administration order, or
(iii) similar relief in respect of it, under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or

                                      -37-
<PAGE>

adjustment of debts or any other law providing for the relief of debtors, and
shall continue undismissed, or unstayed and in effect, for a period of 60 days;
or an order for relief shall be entered in an involuntary case under the Federal
Bankruptcy Code (as now or hereafter in effect), against the Borrower or any
other member of the Borrower Affiliated Group; or action under the laws of the
jurisdiction of incorporation or organization of the Borrower or any other
member of the Borrower Affiliated Group similar to any of the foregoing shall be
taken with respect to the Borrower or any such member of the Borrower Affiliated
Group and shall continue unstayed and in effect for any period of 60 days; or

         (h) judgments or orders for the payment of money shall be entered
against the Borrower or any other member of the Borrower Affiliated Group by any
court, or a warrant of attachment or execution or similar process shall be
issued or levied against property of the Borrower or any other member of the
Borrower Affiliated Group, that in the aggregate exceed $100,000 in value
(except to the extent fully covered by insurance and the insurance carrier has
not reserved the right to disallow such claim) and such judgments, orders,
warrants or process shall continue undischarged or unstayed for 30 days; or

         (i) the Borrower, any other member of the Borrower Affiliated Group
shall fail to pay when due an aggregate amount in excess of $100,000 which it
shall have become liable to pay to the PBGC or to a Plan under Title IV of
ERISA; or notice of intent to terminate a Plan or Plans shall be filed under
Title IV of ERISA by the Borrower or any other member of the Borrower Affiliated
Group, any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer any such Plan or Plans or a proceeding
shall be instituted by a fiduciary of any such Plan or Plans against the
Borrower or any other member of the Borrower Affiliated Group and such
proceedings shall not have been dismissed within 30 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any such Plan or Plans must be terminated; or

         (j) the Borrower or any other member of the Borrower Affiliated Group
shall be enjoined, restrained or in any way prevented by the order of any court
or any administrative or regulatory agency from conducting any material part of
its business and such order shall continue in effect for more than 30 days, or
the Borrower or any other member of the Borrower Affiliated Group shall be
indicted for a state or federal crime, or any criminal action shall otherwise
have been brought against the Borrower or any other member of the Borrower
Affiliated Group, a punishment for which in any such case could reasonably be
expected to include forfeiture of any assets of the Borrower Affiliated Group
having a fair market value in excess of $100,000; or

         (k) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral which is not insured, or any strike, lockout,
labor dispute, embargo, condemnation, act of God or public enemy, or other
casualty, which in any such case causes, for more than 45 consecutive days, the
cessation or substantial curtailment of revenue producing activities at any
facility of the Borrower or any other member of the Borrower Affiliated Group if
such event or circumstance is not covered by business interruption

                                      -38-
<PAGE>

insurance and could reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), assets, operations or
prospects of the Borrower Affiliated Group taken as a whole; or

         (l) there shall occur the loss, suspension or revocation of, or failure
to renew, any license or permit now held or hereafter acquired if such loss,
suspension, revocation or failure to renew could reasonably be expected to have
a material adverse effect on the business, financial condition, assets,
operations or prospects of the Borrower Affiliated Group taken as a whole; or

         (m) any covenant, agreement or obligation of the Borrower or any other
member of the Borrower Affiliated Group contained in or evidenced by any
Security Document to which the Borrower or such member of the Borrower
Affiliated Group is a party shall, prior to the date on which such document
shall terminate with the express prior written agreement, consent or approval of
the Lender, cease in any material respect to be legal, valid, binding or
enforceable in accordance with the terms thereof; or

         (n) any Security Document shall be canceled, terminated, revoked or
rescinded (or any notice of such cancellation, termination, revocation or
rescission given) otherwise than with the express prior written agreement,
consent or approval of the Lender; or any action at law, suit in equity or other
legal proceeding to cancel, revoke, or rescind any Security Document shall be
commenced by or on behalf of the Borrower or any other member of the Borrower
Affiliated Group, or by any court or any other governmental or regulatory
authority or agency of competent jurisdiction; or any court or any other
governmental or regulatory authority or agency of competent jurisdiction shall
make a determination that, or shall issue a judgment, order, decree or ruling to
the effect that, any one or more of the Security Documents or any one or more of
the obligations of the Borrower or any other member of the Borrower Affiliated
Group under any one or more of the Security Documents are illegal, invalid or
unenforceable in accordance with the terms thereof; or

         (o) (i) any Person or "group" (within the meaning of Section 13(d) of
the Securities Exchange Act of 1934, as amended) of Persons acting in concert as
a partnership or other group shall, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or otherwise, have become,
after the date hereof, the "beneficial owner" (within the meaning of such term
under Rule 13d-3 under the Exchange Act) of securities of the Borrower
representing 30% or more of the combined voting power of the then outstanding
securities of the Borrower ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the election of directors;
provided, however, that if a "group" referred to in this clause (i) includes
David Neirenberg, in such case an Event of Default shall occur if such "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended) of Persons acting in concert as a partnership or other group shall, as
a result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, have become, after the date hereof, the
"beneficial owner" (within the meaning of such term under Rule 13d-3 under the
Exchange Act) of securities of the Borrower representing 35% or more of the
combined

                                      -39-
<PAGE>

voting power of the then outstanding securities of the Borrower ordinarily (and
apart from rights accruing under special circumstances) having the right to vote
in the election of directors; (ii) the board of directors of the Borrower shall
cease to consist of a majority of the individuals who constituted the board of
directors as of the date hereof or who shall have become a member thereof
subsequent to the date hereof after having been nominated, or otherwise approved
in writing, by at least a majority of individuals who constituted the board of
directors of the Borrower as of the date hereof; or (iii) any change in equity
ownership of any member of the Borrower Affiliated Group other than the
Borrower, except as may be expressly permitted by Section 5.7; or

         (p) any default or event of default shall occur under any of the Sale
Leaseback Documents.

6.2 Lender's Rights. If an Event of Default shall occur and be continuing, the
Lender may, at its option, (i) declare any or all of the Obligations of the
Borrower to the Lender to be immediately due and payable without further notice
or demand, whereupon the same shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower, (ii) limit, suspend or terminate the Borrower's
right to borrow hereunder, and (iii) exercise any rights and remedies under the
Security Documents and law; provided that in the event of any Event of Default
specified in Subsections 6.1(f) or 6.1(g), all Obligations shall become
immediately due and payable automatically and without any requirement of notice
from the Lender or action by the Lender.

ARTICLE 7. SET OFF; PARTICIPATIONS.

7.1. Right of Set Off. If an Event of Default shall have occurred, and while it
is continuing, any deposits or other sums at any time credited by or due from
the Lender or any entity under the control of Fleet Financial Group, Inc. to the
Borrower may, without demand or notice (any such demand or notice being
expressly waived hereby) and to the fullest extent permitted by law and without
regard to any source of payment whatsoever, at any time be applied to or set off
against Obligations on which the Borrower is primarily liable and may at or
after the maturity thereof be applied to or set off against Obligations on which
the Borrower is secondarily liable, and advice thereof shall thereafter be given
to the Borrower's chief financial officer.

7.2 Rights of Participants. For so long as any Obligation remains outstanding,
the Borrower offers to any financing institution which may consider investing or
participating in the Loans (each such financing institution being referred to in
this subsection as a "PARTICIPANT") the right to rely upon all of the
representations, warranties, covenants and other provisions of this Agreement,
the Notes and the other agreements, instruments and documents referred to herein
or contemplated hereby in making such investment or participation. The Borrower
agrees the decision of any Participant to invest or participate in the Loans
shall constitute an acceptance of such offer and shall make the Participant a
creditor of the Borrower and each other member of

                                      -40-
<PAGE>

the Borrower Affiliated Group. Any Participant may exercise the rights of
set-off granted to the Lender in this Article 7 with respect to any outstanding
indebtedness of the Borrower or any other member of the Borrower Affiliated
Group to such Participant hereunder in accordance with Lender's customary
practice.

ARTICLE 8. MISCELLANEOUS PROVISIONS.

8.1 Written Notices. Except as otherwise provided herein or in any other Loan
Document with respect to oral notice, any notices to any party hereto shall be
deemed to have been given when delivered by hand, when sent by telecopier, when
delivered to any overnight delivery service freight pre-paid or when sent by
certified or registered mail and receipt thereof has been acknowledged (or
rejected), and addressed to such party at its address set forth below.

If to the Borrower, to                              with a copy to:

Mexican Restaurants, Inc.                           DiCecco, Fant & Burman
1135 Edgebrook                                      1900 West Loop, Suite 1100
Houston, TX 77034-1899                              Houston, TX  77027
Attn:  Andrew Dennard                               Attn: Arthur Fant, Esq.

If to the Lender, to                                with a copy to:

Fleet National Bank                                 Goulston & Storrs, P.C.
100 Federal Street                                  400 Atlantic Avenue
Mail Stop:  MA DE 10008H                            Boston, MA 02110-3333
Boston, MA 02110                                    Attn: Philip A. Herman, Esq.
Attn:  Alexandra A. Burke

Any notice, unless otherwise specified, must be given in writing. Any party may
change its address for such notices to such other address in the United States
as the addressee shall have specified by written notice given as set forth
above. All periods of notice shall be measured from the deemed date of delivery.

8.2 No Waivers. No failure or delay by the Lender in exercising any right, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided are cumulative and not exclusive of any rights or remedies
otherwise provided by law.

8.3 GOVERNING LAW. THIS AGREEMENT AND THE OTHER SECURITY DOCUMENTS SHALL BE
DEEMED TO BE CONTRACTS MADE UNDER SEAL AND SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY

                                      -41-
<PAGE>

THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REGARD TO CONFLICTS OF
LAWS RULES). ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OBLIGATION MAY BE INSTITUTED IN THE COURTS OF THE COMMONWEALTH
OF MASSACHUSETTS OR OF THE UNITED STATES OF AMERICA FOR THE DISTRICT OF
MASSACHUSETTS, AND THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF EACH SUCH COURT IN ANY SUCH ACTION OR PROCEEDING; PROVIDED, HOWEVER, THAT THE
FOREGOING SHALL NOT LIMIT THE LENDER'S RIGHTS TO BRING ANY LEGAL ACTION OR
PROCEEDING IN ANY OTHER APPROPRIATE JURISDICTION.

8.4 EXPENSES, TAXES AND INDEMNIFICATION.

         8.4.1 THE BORROWER SHALL PAY ON DEMAND AND INDEMNIFY AND HOLD THE
LENDER HARMLESS AGAINST ALL TAXES (OTHER THAN TAXES ON THE INCOME OF THE
LENDER), CHARGES AND EXPENSES OF EVERY KIND OR DESCRIPTION, INCLUDING WITHOUT
LIMITATION REASONABLE ATTORNEYS' FEES AND EXPENSES AND THE COSTS AND EXPENSES OF
FIELD AUDITS AND COMMERCIAL FINANCE EXAMS (WHICH SUCH AUDITS AND COMMERCIAL
FINANCE EXAMS SHALL, PRIOR TO THE OCCURRENCE OF A DEFAULT OR EVENT OF DEFAULT,
BE LIMITED TO TWICE A YEAR), REASONABLY INCURRED OR EXPENDED BY THE LENDER IN
CONNECTION WITH OR IN ANY WAY RELATED TO THE LENDER'S RELATIONSHIP WITH THE
BORROWER OR ANY OTHER MEMBER OF THE BORROWER AFFILIATED GROUP, WHETHER HEREUNDER
OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, THOSE INCURRED OR EXPENDED IN
CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, INTERPRETATION OR
AMENDMENT OF THIS AGREEMENT, THE SECURITY DOCUMENTS AND ANY RELATED AGREEMENT,
INSTRUMENT OR DOCUMENT, THE MAKING OF THE LOANS, THE SUPERVISION, PROTECTION AND
COLLECTION OF AND REALIZATION UPON ANY COLLATERAL, AND THE PROTECTION OR
ENFORCEMENT OF THE LENDER'S RIGHTS HEREUNDER AND UNDER THE OTHER SECURITY
DOCUMENTS.

         8.4.2 THE BORROWER SHALL ABSOLUTELY AND UNCONDITIONALLY INDEMNIFY AND
HOLD THE LENDER HARMLESS AGAINST ANY AND ALL CLAIMS, DEMANDS, SUITS, ACTIONS,
CAUSES OF ACTION, DAMAGES, LOSSES, SETTLEMENT PAYMENTS, OBLIGATIONS, COSTS,
EXPENSES AND ALL OTHER LIABILITIES WHATSOEVER WHICH SHALL AT ANY TIME OR TIMES
BE INCURRED OR SUSTAINED BY THE LENDER OR BY ANY OF ITS SHAREHOLDERS, DIRECTORS,
OFFICERS, EMPLOYEES, SUBSIDIARIES, AFFILIATES OR AGENTS (EXCEPT ANY OF THE
FOREGOING INCURRED OR SUSTAINED AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE LENDER) ON ACCOUNT OF, OR IN RELATION TO, OR IN ANY WAY IN
CONNECTION WITH, ASSOCIATED WITH OR ANCILLARY TO

                                      -42-
<PAGE>

THIS AGREEMENT, THE SECURITY DOCUMENTS AND THE OTHER DOCUMENTS EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, AND THE ARRANGEMENTS OR TRANSACTIONS
CONTEMPLATED THEREIN, WHETHER OR NOT ALL OR ANY OF THE TRANSACTIONS CONTEMPLATED
BY, ASSOCIATED WITH OR ANCILLARY TO THIS AGREEMENT OR ANY OF SUCH DOCUMENTS ARE
ULTIMATELY CONSUMMATED. WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER COVENANT
OF THE BORROWER HEREUNDER, THE COVENANTS OF THIS SUBSECTION 8.4.2 SHALL SURVIVE
THE TERMINATION OF THIS AGREEMENT AND THE PAYMENT OR SATISFACTION OF PAYMENT OF
AMOUNTS OWING WITH RESPECT TO THE NOTES OR ANY OTHER SECURITY DOCUMENT.

8.5 Amendments, Waivers, Etc. This Agreement, the Notes and the Security
Documents, and any provision hereof or thereof may be waived, discharged or
terminated only by an instrument in writing signed by the Lender and may be
amended only by an instrument in writing signed by both the Borrower and the
Lender.

8.6 Binding Effect of Agreement. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Lender and their respective successors
and assigns. The Lender shall have the unrestricted right at any time or from
time to time, and without the Borrower's consent, to assign (or participate) all
or any portion of its rights and obligations hereunder to one or more banks or
other financial institutions (each, an "ASSIGNEE"), and the Borrower agrees that
it shall execute, or cause to be executed, such documents, including without
limitation, amendments to this Agreement and to any other documents, instruments
and agreements executed in connection herewith as the Lender shall deem
necessary to effect the foregoing, provided that (i) so long as no Default or
Event of Default has occurred and is continuing, the Lender will make any such
assignment or participation in a minimum amount of $1,000,000 and will get the
Borrower's consent thereto, such consent not to be unreasonably withheld or
delayed (it being agreed that no such consent shall be required in connection
with a pledge of all or any portion of its rights under the Loan Documents to
any of the 12 Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341, no such pledge or the enforcement thereof to
release the Lender from its obligations under any of the Loan Documents), and
(ii) with respect to any such participation, the Borrower shall be permitted to
make payments to and otherwise deal solely with the Lender (it being
acknowledged that the participant may have certain voting rights pursuant to the
particular participation arrangement). In addition, at the request of the Lender
and any such Assignee, the Borrower shall issue one or more new promissory
notes, as applicable, to any such Assignee and, if the Lender has retained any
of its rights and obligations hereunder following such assignment, to the
Lender, which new promissory notices shall be issued in replacement of, but not
in discharge of, the liability evidenced by the promissory note held by the
Lender prior to such assignment and shall reflect the amount of the respective
commitments and loans held by such Assignee and the Lender after giving effect
to such assignment. Upon the execution and delivery of appropriate assignment
documentation, amendments and any other documentation required by the Lender in
connection with such assignment, and the payment by the Assignee of the

                                      -43-
<PAGE>

purchase price agreed to by the Lender and such Assignee, such Assignee shall be
a party to this Agreement and shall have all of the rights and obligations of a
Lender hereunder (and under any and all other documents, instruments and
agreements executed in connection herewith) to the extent that such rights and
obligations have been assigned by the Lender pursuant to the assignment
documentation between the Lender and such Assignee, and the Lender shall be
released from its obligations hereunder and thereunder to a corresponding
extent. Without limitation of the foregoing, the Lender may at any time pledge
all or any portion of its rights under the Security Documents including any
portion of either Note to any of the 12 Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or
enforcement thereof shall release the Lender from its obligations under any of
the Security Documents. The Borrower may not assign or transfer its rights or
obligations hereunder.

8.7 Computation of Interest and Fees, Etc. Interest, fees and charges shall be
computed daily on the basis of a year of 360 days and paid for the actual number
of days for which due. If the due date for any payment of principal is extended
by operation of law, interest shall be payable for such extended time. If any
payment required by this Agreement becomes due on a day on which banks in
Boston, Massachusetts are required or permitted by law or an appropriate
authority to remain closed, such payment may be made on the next succeeding day
on which such banks are open, and such extension shall be included in computing
interest in connection with such payment. All payments required of the Borrower
hereunder or under the Notes shall be made in lawful money of the United States
of America in federal or other funds immediately available to the recipient
thereof at the prescribed place of payment.

8.8 Entire Agreement. This Agreement, including the exhibits hereto, sets forth
the entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein, and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations, warranties, whether
oral or written, by any officer, employee or representative of any party hereto.

8.9 Headings. The headings for the sections of this Agreement are for ease of
reference only and are not an integral part of this Agreement. Accordingly, such
headings shall have no relevance to the interpretation of this Agreement.

8.10 Multiple Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument. All such counterparts shall together constitute one
and the same agreement.

8.11 Severability. The provisions of this Agreement are severable, and if any of
these provisions shall be held by any court of competent jurisdiction to be
unenforceable, such holdings shall not affect or impair any other provision
hereof.

8.12 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY

                                      -44-
<PAGE>

WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY HERETO. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDER TO
EXECUTE THIS AGREEMENT AND MAKE THE LOANS.

8.13. WAIVER OF SPECIAL DAMAGES. EXCEPT AS PROHIBITED BY LAW, THE BORROWER
HEREBY WAIVES ANY RIGHTS WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THE SECURITY DOCUMENTS, INCLUDING WITHOUT LIMITATION THIS AGREEMENT, THE
NOTE AND THE OTHER SECURITY DOCUMENTS AND ANY AMENDMENTS THEREOF, ANY SPECIAL
EXEMPLARY OR PUNITIVE DAMAGES. THE BORROWER (A) CERTIFIES THAT NEITHER THE
LENDER NOR ANY REPRESENTATIVE, AGENT OR ATTORNEY THEREOF HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT, IN ENTERING
INTO THIS AGREEMENT, THE LENDER IS RELYING UPON, AMONG OTHER THINGS, THE WAIVERS
AND CERTIFICATIONS CONTAINED IN THIS SECTION 8.13.

8.14. Usury. All agreements between the Borrower and the Lender are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to the Lender for the use
or the forbearance of the indebtedness evidenced hereby exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof provided, however, that in
the event there is a change in the law which results in a higher permissible
rate of interest then the Revolving Credit Note and the Term Note shall be
governed by such new law as of its effective date. In this regard, it is
expressly agreed that it is the intent of the Borrower and the Lender in the
execution, delivery and acceptance of the Revolving Credit Note and the Term
Note to contract in strict compliance with the laws of the Commonwealth of
Massachusetts from time to time in effect. If, under or from any circumstances
whatsoever, fulfillment of any provision hereof or of any of the Loan Documents
at the time of performance of such provision shall be due, shall involve
transcending the limit of such validity prescribed by applicable law, then the
obligation to be fulfilled shall automatically be reduced to the limits of such
validity, and if under or from circumstances whatsoever the Lender should ever
receive as interest an amount which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between the
Borrower and the Lender.

                                      -45-
<PAGE>

8.15 Replacement of Notes and Other Loan Documents. Upon receipt of an affidavit
of an officer of the Lender as to the loss, theft, destruction or mutilation of
the Revolving Credit Note, the Term Note, or any other Security Document which
is not of public record, and, in the case of any such loss, theft, destruction
or mutilation, upon cancellation of such Revolving Credit Note, Term Note or
other Security Document, and execution and delivery of an appropriate
indemnification agreement by the Bank in favor of the Borrower relating thereto,
the Borrower will issue, in lieu thereof, a replacement Revolving Credit Note,
Term Note or other Security Document in the same principal amount thereof and
otherwise of like tenor.

                  [Remainder of Page Intentionally Left Blank]

                                      -46-
<PAGE>

         WITNESS the execution hereof under seal on the day and year first above
written.

BORROWER:                                         LENDER:

MEXICAN RESTAURANTS, INC.                         FLEET NATIONAL BANK

By:                                               By:
    --------------------------                        --------------------------
    Name:                                             Name:
    Title:                                            Title:

                                      -47-
<PAGE>

                                                                     EXHIBIT A-1

                          FORM OF AMENDED AND RESTATED
                              REVOLVING CREDIT NOTE

$5,000,000.00                                              Date: January 7, 2004

         FOR VALUE RECEIVED, the undersigned (hereinafter, together with its
successors in title and assigns, called the "Borrower"), by this promissory note
(hereinafter, together with the Schedule annexed hereto, called "this Note"),
absolutely and unconditionally promises to pay to the order of FLEET NATIONAL
BANK, a national bank (hereinafter, together with its successors in title and
assigns, called the "Bank"), the principal sum of FIVE MILLION and 00/100
Dollars ($5,000,000.00), or so much thereof as shall have been advanced by the
Bank to the Borrower by way of revolving loans under the Loan Agreement (as
hereinafter defined) and shall remain outstanding, such payment to be made as
hereinafter provided, and to pay interest on the principal sum outstanding
hereunder from time to time from the date hereof until the said principal sum or
the unpaid portion thereof shall have become due and payable as hereinafter
provided.

         This Note amends and restates in its entirety, and is a replacement
note for, that certain Revolving Credit Note, dated June 29, 2001, executed by
Borrower and payable to the Bank (the "Old Note"). This Note evidences the same
indebtedness as was evidenced by the Old Note.

         Capitalized terms used herein without definition shall have the meaning
set forth in the Loan Agreement.

         The unpaid principal (not at the time overdue) under this Note shall
bear interest at the rate or rates from time to time in effect under the Loan
Agreement. Accrued interest on the unpaid principal under this Note shall be
payable on the dates specified in the Loan Agreement.

         On January 7, 2007, the date of the final maturity of this Note, there
shall become absolutely due and payable by the Borrower hereunder, and the
Borrower hereby promises to pay to the Bank, the balance (if any) of the
principal hereof then remaining unpaid, all of the unpaid interest accrued
hereon and all (if any) other amounts payable on or in respect of this Note or
the indebtedness evidenced hereby.

         Each overdue amount (whether of principal, interest or otherwise)
payable on or in respect of this Note or the indebtedness evidenced hereby shall
(to the extent permitted by applicable law) bear interest at the rates and on
the terms provided by the Loan

                                      A-1
<PAGE>

Agreement. The unpaid interest accrued on each overdue amount in accordance with
the foregoing terms of this paragraph shall become and be absolutely due and
payable by the Borrower to the Bank on demand. Interest on each overdue amount
will continue to accrue as provided by the foregoing terms of this paragraph,
and will (to the extent permitted by applicable law) be compounded monthly until
the obligations of the Borrower in respect of the payment of such overdue amount
shall be discharged (whether before or after judgment).

         Each payment of principal, interest or other sum payable on or in
respect of this Note or the indebtedness evidenced hereby shall be made by the
Borrower directly to the Bank, at the address of the Bank set forth in the Loan
Agreement, on the due date of such payment, and in immediately available and
freely transferable funds. All payments on or in respect of this Note or the
indebtedness evidenced hereby shall be made without set-off or counterclaim and
free and clear of and without any deductions, withholdings, restrictions or
conditions of any nature.

         This Note is made and delivered by the Borrower to the Bank pursuant to
the Amended and Restated Revolving Credit and Term Loan Agreement, dated as of
January 7, 2004 between the Borrower and the Bank (hereinafter, as originally
executed, and as now or hereafter varied or supplemented or amended and
restated, called the "Loan Agreement"), to which reference is hereby made for a
statement of the terms and conditions (to the extent not set forth herein) under
which the Loans evidenced by this Note were made and are to be repaid. This Note
evidences the obligation of the Borrower (a) to repay the principal amount of
the Revolving Loans made by the Bank to the Borrower pursuant to the Loan
Agreement; (b) to pay interest, as herein and therein provided, on the principal
amount hereof remaining unpaid from time to time; and (c) to pay other amounts
which may become due and payable hereunder or thereunder as herein and therein
provided. The payment of the principal of and the interest on this Note and the
payment of all (if any) other amounts as may become due and payable on or in
respect of this Note have been guaranteed and are secured by certain collateral,
as evidenced by the Security Documents. Reference is hereby made to the Loan
Agreement (including the Exhibits and Schedules annexed thereto) and to the
other Security Documents for a complete statement of the terms thereof and for a
description of such collateral.

         The Borrower will have the right to prepay the unpaid principal of this
Note in full or in part upon the terms contained in the Loan Agreement. The
Borrower will have an obligation to prepay principal of this Note from time to
time if and to the extent required under, and upon the terms contained in, the
Loan Agreement. Any partial payment of the indebtedness evidenced by this Note
shall be applied in accordance with the terms of the Loan Agreement.

         Pursuant to and upon the terms contained in Section 6 of the Loan
Agreement, the entire unpaid principal of this Note, all of the interest accrued
on the unpaid principal of this Note and all (if any) other amounts payable on
or in respect of this Note or the indebtedness evidenced hereby may be declared
to be immediately due and payable,

                                      A-2
<PAGE>

whereupon the entire unpaid principal of this Note, all of the interest accrued
on the unpaid principal of this Note and all (if any) other amounts payable on
or in respect of this Note or the indebtedness evidenced hereby shall (if not
already due and payable) forthwith become and be due and payable to the Bank
without presentment, demand, protest or any other formalities of any kind, all
of which are hereby expressly and irrevocably waived by the Borrower, excepting
only for notice expressly provided for in the Loan Agreement.

         All computations of interest payable as provided in this Note shall be
made by the Bank in accordance with the terms of the Loan Agreement. The
interest rate in effect from time to time shall be determined in accordance with
the terms of the Loan Agreement.

         Should all or any part of the indebtedness represented by this Note be
collected by action at law, or in bankruptcy, insolvency, receivership or other
court proceedings, or should this Note be placed in the hands of attorneys for
collection after default, the BORROWER HEREBY PROMISES TO PAY TO THE HOLDER OF
THIS NOTE, UPON DEMAND BY THE HOLDER HEREOF AT ANY TIME, IN ADDITION TO
PRINCIPAL, INTEREST AND ALL (IF ANY) OTHER AMOUNTS PAYABLE ON OR IN RESPECT OF
THIS NOTE OR THE INDEBTEDNESS EVIDENCED HEREBY, ALL COURT COSTS AND REASONABLE
ATTORNEY'S FEES AND ALL OTHER COLLECTION CHARGES AND EXPENSES REASONABLY
INCURRED OR SUSTAINED BY THE HOLDER OF THIS NOTE.

         No delay or omission on the part of the Bank or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Bank or such holder, nor shall any delay, omission or waiver
on any one occasion be deemed a bar or waiver of the same or any other right on
any further occasion.

         The Borrower and every endorser and guarantor of this Note hereby
irrevocably waives notice of acceptance, presentment, demand, notice of
nonpayment, protest, notice of protest, suit and all other demands, notices and
other conditions precedent in connection with the delivery, acceptance,
performance, default, collection and/or enforcement of this Note or any
collateral or security therefor, except for notices expressly provided for in
the Loan Agreement or any other Loan Document, and assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.

         The Borrower hereby absolutely and irrevocably consents and submits,
for itself and its property, to the non-exclusive jurisdiction of the courts of
the Commonwealth of Massachusetts or of the United States of America for the
District of Massachusetts in connection with any actions or proceedings brought
against the Borrower by the holder hereof arising out of or relating to this
Note.

         THE BORROWER AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY

                                      A-3
<PAGE>

JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS NOTE AND THE MAKE
THE LOAN.

         This Note is intended to take effect as a sealed instrument. This Note
and the obligations of the Borrower hereunder shall be governed by and
interpreted and determined in accordance with the laws of the Commonwealth of
Massachusetts.

                          [Signature Page on Next Page]

                                      A-4
<PAGE>

         [Signature Page to Amended and Restated Revolving Credit Note]

         IN WITNESS WHEREOF, this AMENDED AND RESTATED REVOLVING CREDIT NOTE has
been duly executed under seal by the undersigned on the day and in the year
first above written in Boston, Massachusetts.

WITNESS:                                        MEXICAN RESTAURANTS, INC.

                                                By:
--------------------------------                    ----------------------------
                                                    Name:
                                                    Title:

                                      A-5
<PAGE>

             SCHEDULE TO AMENDED AND RESTATED REVOLVING CREDIT NOTE

<Table>
<Caption>
                                          APPLICABLE PRIME
                           TYPE OF LOAN    RATE MARGIN OR
              AMOUNT OF    (PRIME RATE    APPLICABLE LIBOR      INTEREST      INTEREST                       NOTATION
   DATE         LOAN        OR LIBOR)          MARGIN             RATE*       PERIOD**      AMOUNT PAID      MADE BY
-----------  -----------  --------------  -----------------   ------------   ----------     ------------   -------------
<S>          <C>          <C>             <C>                 <C>            <C>            <C>            <C>

</Table>

                                      A-6
<PAGE>

                                                                     EXHIBIT A-2

                                     FORM OF
                         AMENDED AND RESTATED TERM NOTE

$5,000,000.00                                              Date: January 7, 2004

         FOR VALUE RECEIVED, the undersigned (hereinafter, together with its
successors in title and assigns, called the "Borrower"), by this promissory note
(hereinafter called "this Note"), absolutely and unconditionally promises to pay
to the order of FLEET NATIONAL BANK, a national bank (hereinafter, together with
its successors in title and assigns, called the "Bank"), the principal sum of
FIVE MILLION and 00/100 Dollars ($5,000,000.00), and to pay interest on the
principal sum outstanding hereunder from time to time from the date hereof until
the said principal sum or the unpaid portion thereof shall have become due and
payable as hereinafter provided.

         This Note amends and restates in its entirety, and is a replacement
note for, that certain Term Note, dated June 29, 2001, executed by the Borrower
and payable to the Bank (the "Old Note"). This Note evidences the same
indebtedness as was evidenced by the Old Note.

         Capitalized terms used herein without definition shall have the meaning
set forth in the Loan Agreement (as hereinafter defined).

         The unpaid principal (not at the time overdue) under this Note shall
bear interest at the rate or rates from time to time in effect under the Loan
Agreement. Accrued interest on the unpaid principal under this Note shall be
payable on the dates specified in the Loan Agreement.

         The entire principal of this Note shall be payable by the Borrower to
the holder hereof in twenty (20) consecutive quarter-annual installments of
principal, with such installments to be payable on the last day of each of the
Borrower's fiscal quarters in each year, beginning March 31, 2004, and with the
last of such twenty (20) installments to be payable on December 31, 2008. While
any principal hereof remains unpaid, there shall become absolutely due and
payable by the Borrower hereunder in succession, and the Borrower hereby
promises to pay to the holder hereof, the twenty (20) such quarter-annual
installments of the principal of this Note. The amount of each installment of
principal payable by the Borrower is set forth in the table below opposite the
date on which such installment shall become due and payable hereunder:

                                      A-7
<PAGE>

<Table>
<Caption>

   Installment             Aggregate Amount
   Payment Date              of Payment
------------------         ----------------
<S>                        <C>
  March 31, 2004           $        250,000
   June 30, 2004           $        250,000
September 30, 2004         $        250,000
 December 31, 2004         $        250,000
  March 31, 2005           $        250,000
   June 30, 2005           $        250,000
September 30, 2005         $        250,000
 December 31, 2005         $        250,000
  March 31, 2006           $        250,000
   June 30, 2006           $        250,000
September 30, 2006         $        250,000
 December 31, 2006         $        250,000
  March 30, 2007           $        250,000
   June 30, 2007           $        250,000
September 30, 2007         $        250,000
 December 31, 2007         $        250,000
  March 31, 2008           $        250,000
   June 30, 2008           $        250,000
September 30, 2008         $        250,000
 December 31, 2008         $        250,000
</Table>

         On January 7, 2009, the date of the final maturity of this Note, there
shall become absolutely due and payable by the Borrower hereunder, and the
Borrower hereby promises to pay to the Bank, the balance (if any) of the
principal hereof then remaining unpaid, all of the unpaid interest accrued
hereon and all (if any) other amounts payable on or in respect of this Note or
the indebtedness evidenced hereby.

         Each overdue amount (whether of principal, interest or otherwise)
payable on or in respect of this Note or the indebtedness evidenced hereby shall
(to the extent permitted by applicable law) bear interest at the rates and on
the terms provided by the Loan Agreement. The unpaid interest accrued on each
overdue amount in accordance with the foregoing terms of this paragraph shall
become and be absolutely due and payable by the Borrower to the Bank on demand
by the Bank. Interest on each overdue amount will continue to accrue as provided
by the foregoing terms of this paragraph, and will (to the extent permitted by
applicable law) be compounded monthly until the obligations of the Borrower in
respect of the payment of such overdue amount shall be discharged (whether
before or after judgment).

         Each payment of principal, interest or other sum payable on or in
respect of this Note or the indebtedness evidenced hereby shall be made by the
Borrower directly to the Bank in dollars at the address of the Bank set forth in
the Loan Agreement, on the due date of such payment, and in immediately
available and freely transferable funds. All payments on or in respect of this
Note or the indebtedness evidenced hereby shall be made without set-off or
counterclaim and free and clear of and without any deductions, withholdings,
restrictions or conditions of any nature.

                                      A-8
<PAGE>

         This Note is pursuant to the Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of January 7, 2004, by and between the Borrower
and the Bank (hereinafter, as originally executed, and as hereafter varied or
supplemented or amended and restated, called the "Loan Agreement"). This Note
evidences the obligation of the Borrower (a) to repay the principal amount of
the Term Loan made by the Bank to the Borrower pursuant to the Loan Agreement;
(b) to pay interest, as herein and therein provided, on the principal amount
hereof remaining unpaid from time to time; and (c) to pay other amounts which
may become due and payable hereunder or thereunder as herein and therein
provided. The payment of the principal of and the interest on this Note and the
payment of all (if any) other amounts as may become due and payable on or in
respect of this Note are secured by certain collateral and have been guaranteed,
as evidenced by the Security Documents. Reference is hereby made to the Loan
Agreement (including the Exhibits and Schedules annexed thereto) and to the
other Security Documents for a complete statement of the terms thereof and for a
description of such collateral and such guarantees.

         The Borrower will have the right to prepay the unpaid principal of this
Note in full or in part upon the terms contained in the Loan Agreement. The
Borrower will have an obligation to prepay principal of this Note from time to
time if and to the extent required under, and upon the terms contained in, the
Loan Agreement. Any partial payment of the indebtedness evidenced by this Note
shall be applied in accordance with the terms of the Loan Agreement. Any prepaid
principal of this Note may not be reborrowed.

         Pursuant to and upon the terms contained in Section 6 of the Loan
Agreement, the entire unpaid principal of this Note, all of the interest accrued
on the unpaid principal of this Note and all (if any) other amounts payable on
or in respect of this Note or the indebtedness evidenced hereby may be declared
to be immediately due and payable, whereupon the entire unpaid principal of this
Note, all of the interest accrued on the unpaid principal of this Note and all
(if any) other amounts payable on or in respect of this Note or the indebtedness
evidenced hereby shall (if not already due and payable) forthwith become and be
due and payable to the Bank without presentment, demand, protest or any other
formalities of any kind, all of which are hereby expressly and irrevocably
waived by the Borrower, excepting only for notice expressly provided for in the
Loan Agreement.

         All computations of interest payable as provided in this Note shall be
made by the Bank in accordance with the terms of the Loan Agreement. The
interest rate in effect from time to time shall be determined in accordance with
the terms of the Loan Agreement.

         Should all or any part of the indebtedness represented by this Note be
collected by action at law, or in bankruptcy, insolvency, receivership or other
court proceedings, or should this Note be placed in the hands of attorneys for
collection after default, the BORROWER HEREBY PROMISES TO PAY TO THE HOLDER OF
THIS NOTE,

                                      A-9
<PAGE>

UPON DEMAND BY THE HOLDER HEREOF AT ANY TIME, IN ADDITION TO PRINCIPAL, INTEREST
AND ALL (IF ANY) OTHER AMOUNTS PAYABLE ON OR IN RESPECT OF THIS NOTE OR THE
INDEBTEDNESS EVIDENCED HEREBY, ALL COURT COSTS AND REASONABLE ATTORNEYS' FEES
AND ALL OTHER COLLECTION CHARGES AND EXPENSES REASONABLY INCURRED OR SUSTAINED
BY THE HOLDER OF THIS NOTE.

         The Borrower hereby irrevocably waives notice of acceptance,
presentment, notice of nonpayment, protest, notice of protest, suit and all
other conditions precedent in connection with the delivery, acceptance,
collection and/or enforcement of this Note or any collateral or security
therefor, except for notices expressly provided for in the Loan Agreement or any
other Loan Document. The Borrower hereby absolutely and irrevocably consents and
submits to the jurisdiction of the courts of the Commonwealth of Massachusetts
and of any federal court located in Suffolk County in the said Commonwealth in
connection with any actions or proceedings brought against the Borrower by the
holder hereof arising out of or relating to this Note.

         This Note is intended to take effect as a sealed instrument. This Note
and the obligations of the Borrower hereunder shall be governed by and
interpreted and determined in accordance with the laws of the Commonwealth of
Massachusetts without regard to its laws relating to choice of law.

                          [Signature Page on Next Page]

                                      A-10
<PAGE>

               [Signature Page to Amended and Restated Term Note]

         IN WITNESS WHEREOF, this AMENDED AND RESTATED TERM NOTE has been duly
executed by the undersigned on the day and in the year first above written in
Boston, Massachusetts.

WITNESS:                                    MEXICAN RESTAURANTS, INC.

                                            By:
---------------------------------               --------------------------------
                                                Name:
                                                Title:

                                      A-11<PAGE>

                                                                     EXHIBIT 4.1

                                                                  EXECUTION COPY

================================================================================

                              AMENDED AND RESTATED
                                 TRUST AGREEMENT

                                     between

                         WFS RECEIVABLES CORPORATION 3,

                                       and

                 CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION,
                                as Owner Trustee

                            Dated as of May 27, 2004

================================================================================
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                     Page
                                                                                                                     ----
<S>                                                                                                                  <C>
                                                ARTICLE ONE

                                                DEFINITIONS

Section 1.01.  Capitalized Terms............................................................................           1
Section 1.02.  Other Definitional Provisions................................................................           4
Section 1.03.  Usage of Terms...............................................................................           4

                                                ARTICLE TWO

                                                ORGANIZATION

Section 2.01.  Name.........................................................................................           6
Section 2.02.  Office.......................................................................................           6
Section 2.03.  Purposes and Powers..........................................................................           6
Section 2.04.  Appointment of Owner Trustee.................................................................           7
Section 2.05.  Initial Capital Contribution of Owner Trust Estate...........................................           7
Section 2.06.  Declaration of Trust.........................................................................           7
Section 2.07.  Title to Trust Property......................................................................           7
Section 2.08.  Situs of Trust...............................................................................           8
Section 2.09.  Representations and Warranties of the Depositor..............................................           8
Section 2.10.  Federal Income Tax Allocations...............................................................           9

                                               ARTICLE THREE

                                TRUST CERTIFICATES AND TRANSFER OF INTERESTS

Section 3.01.  Initial Ownership............................................................................          10
Section 3.02.  The Trust Certificates.......................................................................          10
Section 3.03.  Authentication and Delivery of Trust Certificates............................................          10
Section 3.04.  Registration of Transfer and Exchange of Trust Certificates..................................          10
Section 3.05.  Mutilated, Destroyed, Lost or Stolen Trust Certificates......................................          12
Section 3.06.  Persons Deemed Owners........................................................................          13
Section 3.07.  Access to List of Certificateholders' Names and Addresses....................................          13
Section 3.08.  Maintenance of Office or Agency..............................................................          13
Section 3.09.  Appointment of Paying Agent..................................................................          13
Section 3.10.  Ownership by WFSRC3 of Trust Certificates....................................................          14
Section 3.11.  Certificates Nonassessable and Fully Paid....................................................          14
</TABLE>

                                       i

<PAGE>

<TABLE>
<CAPTION>
                                                                                                                     Page
<S>                                                                                                                  <C>
                                                ARTICLE FOUR

                                          ACTIONS BY OWNER TRUSTEE

Section 4.01.  Prior Notice to Owners with Respect to Certain Matters.......................................          15
Section 4.02.  Action by Owners with Respect to Certain Matters.............................................          15
Section 4.03.  Action by Owners with Respect to Bankruptcy..................................................          16
Section 4.04.  Restrictions on Owners' Power................................................................          16
Section 4.05.  Majority Control.............................................................................          16

                                                ARTICLE FIVE

                                 APPLICATION OF TRUST FUNDS; CERTAIN DUTIES

Section 5.01.  Establishment of Trust Account...............................................................          17
Section 5.02.  Application of Trust Funds...................................................................          17
Section 5.03.  Method of Payment............................................................................          18
Section 5.04.  No Segregation of Monies; No Interest........................................................          18
Section 5.05.  Accounting and Reports to the Noteholders, Owners, the Internal Revenue Service and Others...          18
Section 5.06.  Signature on Returns; Tax Matters............................................................          18

                                                ARTICLE SIX

                                   AUTHORITY AND DUTIES OF OWNER TRUSTEE

Section 6.01.  General Authority............................................................................          19
Section 6.02.  General Duties...............................................................................          19
Section 6.03.  Action Upon Instruction......................................................................          19
Section 6.04.  No Duties Except as Specified in this Agreement or in Instructions...........................          20
Section 6.05.  No Action Except Under Specified Documents or Instructions...................................          20
Section 6.06.  Restrictions.................................................................................          20

                                               ARTICLE SEVEN

                                        CONCERNING THE OWNER TRUSTEE

Section 7.01.  Acceptance of Trusts and Duties..............................................................          22
Section 7.02.  Furnishing of Documents......................................................................          23
Section 7.03.  Representations and Warranties...............................................................          23
Section 7.04.  Reliance; Advice of Counsel..................................................................          24
Section 7.05.  Not Acting in Individual Capacity............................................................          24
Section 7.06.  Owner Trustee Not Liable for Trust Certificates, Notes or Contracts..........................          24
</TABLE>

                                       ii

<PAGE>

<TABLE>
<CAPTION>
                                                                                                                     Page
<S>                                                                                                                  <C>
Section 7.07.  Owner Trustee May Own Trust Certificates and Notes...........................................          25
Section 7.08.  Sales Finance Licenses.......................................................................          25

                                               ARTICLE EIGHT

                                       COMPENSATION OF OWNER TRUSTEE

Section 8.01.  Owner Trustee's Fees and Expenses............................................................          26
Section 8.02.  Indemnification..............................................................................          26
Section 8.03.  Payments to the Owner Trustee................................................................          26

                                                ARTICLE NINE

                                       TERMINATION OF TRUST AGREEMENT

Section 9.01.  Termination of Trust Agreement...............................................................          27

                                                ARTICLE TEN

                           SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES

Section 10.01.  Eligibility Requirements for Owner Trustee..................................................          29
Section 10.02.  Resignation or Removal of Owner Trustee.....................................................          29
Section 10.03.  Successor Owner Trustee.....................................................................          29
Section 10.04.  Merger or Consolidation of Owner Trustee....................................................          30
Section 10.05.  Appointment of Co-Trustee or Separate Trustee...............................................          30

                                               ARTICLE ELEVEN

                                               MISCELLANEOUS

Section 11.01.  Supplements and Amendments..................................................................          32
Section 11.02.  No Legal Title to Trust Estate in Owners....................................................          33
Section 11.03.  Limitations on Rights of Others.............................................................          33
Section 11.04.  Notices.....................................................................................          33
Section 11.05.  Severability of Provisions..................................................................          34
Section 11.06.  Counterparts................................................................................          34
Section 11.07.  Successors and Assigns......................................................................          34
Section 11.08.  No Petition.................................................................................          34
Section 11.09.  No Recourse.................................................................................          35
Section 11.10.  Headings....................................................................................          35
Section 11.11.  Governing Law...............................................................................          35
Section 11.12.  Depositor Payment Obligation................................................................          35
</TABLE>

                                      iii

<PAGE>

<TABLE>
<CAPTION>
                                                                                                                     Page
<S>                                                                                                                  <C>
Section 11.13.  Limited Recourse............................................................................          35

                                                  EXHIBITS

Exhibit A - Form of Certificate of Trust....................................................................         A-1
Exhibit B - Form of Trust Certificate.......................................................................         B-1
</TABLE>

                                       iv

<PAGE>

      This AMENDED AND RESTATED TRUST AGREEMENT, dated as of May 27, 2004, is
between WFS RECEIVABLES CORPORATION 3, a California corporation (the
"Depositor"), and CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION, a national
banking association, as trustee (the "Owner Trustee").

      WHEREAS, in connection herewith, the Depositor is willing to create a
trust and assume certain obligations pursuant hereto.

      NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:

                                  ARTICLE ONE

                                   DEFINITIONS

      Section 1.01. Capitalized Terms. Except as otherwise provided in this
Agreement, whenever used in this Agreement the following words and phrases,
unless the context otherwise requires, shall have the following meanings:

      "Administration Agreement" means the administration agreement, dated as of
May 27, 2004, among the Trust, the Depositor, the Indenture Trustee and the
Administrator.

      "Administrator" means WFS, in its capacity as Administrator under the
Administration Agreement.

      "Affiliate" has the meaning specified in the Sale and Servicing Agreement.

      "Agreement" means this Amended and Restated Trust Agreement.

      "Applicants" shall have the meaning assigned to such term in Section 3.07.

      "Bankruptcy Code" means Title 11 of the United States Code.

      "Basic Documents" has the meaning specified in the Indenture.

      "Benefit Plan" means (i) an employee benefit plan (as such term is defined
in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA,
(ii) a plan described in Section 4975(e)(1) of the Code or (iii) any entity
whose underlying assets include plan assets by reason of a plan's investment in
the entity.

      "Business Day" has the meaning specified in the Sale and Servicing
Agreement.

      "Certificate Distribution Account" means the account established and
maintained as such pursuant to Section 5.01.

      "Certificate of Trust" means the Certificate of Trust filed for the Trust
pursuant to Section 3810(a) of the Statutory Trust Act, substantially in the
form of Exhibit A.

<PAGE>

      "Certificate Percentage Interest" has the meaning specified in the Sale
and Servicing Agreement.

      "Certificate Register" and "Certificate Registrar" mean the register
maintained and the registrar (or any successor thereto) appointed pursuant to
Section 3.04.

      "Certificateholder" or "Holder" means the Person in whose name a Trust
Certificate is registered in the Certificate Register, except that, solely for
the purposes of giving any consent, waiver, request or demand pursuant to this
Agreement or the other Basic Documents, the interest evidenced by any Trust
Certificate registered in the name of the Depositor, WFS or any of their
respective Affiliates shall not be taken into account in determining whether the
requisite percentage necessary to effect such consent, waiver, request or demand
in respect of the Trust Certificates shall have been obtained.

      "Closing Date" means May 27, 2004.

      "Code" means the Internal Revenue Code of 1986 and Treasury Regulations
promulgated thereunder.

      "Commission" means the United States Securities and Exchange Commission.

      "Contract" has the meaning specified in the Sale and Servicing Agreement.

      "Contract Files" has the meaning specified in the Sale and Servicing
Agreement.

      "Depositor" means WFSRC3 in its capacity as a depositor hereunder.

      "Distribution Date" has the meaning specified in the Sale and Servicing
Agreement.

      "Eligible Account" has the meaning specified in the Sale and Servicing
Agreement.

      "ERISA" means the Employment Retirement Income Security Act of 1974.

      "Expenses" shall have the meaning assigned to such term in Section 8.02.

      "Financed Vehicle" has the meaning specified in the Sale and Servicing
Agreement.

      "Fitch" has the meaning specified in the Sale and Servicing Agreement.

      "Grant" has the meaning specified in the Indenture.

      "Indemnified Parties" has the meaning specified in Section 8.02.

      "Indenture" means the indenture, dated as of May 1, 2004, between the
Trust and Deutsche Bank Trust Company Americas, as Indenture Trustee.

      "Indenture Trustee" has the meaning specified in the Sale and Servicing
Agreement.

      "Lien" has the meaning specified in the Sale and Servicing Agreement.

                                       2
<PAGE>

      "Master Servicer" has the meaning specified in the Sale and Servicing
Agreement.

      "Noteholder" has the meaning specified in the Indenture.

      "Notes" has the meaning specified in the Indenture.

      "Opinion of Counsel" has the meaning specified in the Sale and Servicing
Agreement.

      "Outstanding Amount" has the meaning specified in the Sale and Servicing
Agreement.

      "Owner" means each Holder of a Trust Certificate.

      "Owner Trustee" means Chase Manhattan Bank USA, National Association, not
in its individual capacity but solely as owner trustee under this Agreement.

      "Owner Trustee Corporate Trust Office" means the office of the Owner
Trustee at which its corporate trust business shall be administered, which
initially shall be Chase Manhattan Bank USA, National Association, c/o JPMorgan
Chase Bank, 500 Stanton Christiana Road, OPS4/3rd Floor, Newark, Delaware 19713,
Attention: Institutional Trust Services, or such other office at such other
address as the Owner Trustee may designate from time to time by notice to the
Certificateholders, the Master Servicer and the Depositor. The address of
JPMorgan Chase Bank at 4 New York Plaza, 6th Floor, New York, New York
10004-2477, shall be its address for purposes of its acting as Certificate
Registrar and as agent of the Owner Trustee pursuant to Sections 3.04 and 3.08,
or such other office at such other address as the Owner Trustee may designate
from time to time by notice to the Certificateholders, the Master Servicer and
the Depositor.

      "Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 3.09.

      "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

      "Rating Agency" has the meaning specified in the Sale and Servicing
Agreement.

      "Record Date" means, with respect to any Distribution Date, the day
immediately preceding such Distribution Date.

      "Responsible Officer" means, with respect to the Owner Trustee, any
officer with direct responsibility for the administration of the Trust,
including any vice president, assistant secretary or other officer or assistant
officer of the Owner Trustee, to whom any corporate trust matter is referred at
the Owner Trustee Corporate Trust Office because of his or her knowledge of and
familiarity with the particular subject.

      "Retained Trust Certificate Percentage" has the meaning specified in
Section 3.10.

                                       3
<PAGE>

      "Sale and Servicing Agreement" means the sale and servicing agreement,
dated as of May 1, 2004, among the Trust, as Issuer, the Depositor, as Seller,
and WFS, as Master Servicer.

      "Secretary of State" means the Secretary of State of the State of
Delaware.

      "Seller" means WFSRC3, in its capacity as seller under the Sale and
Servicing Agreement.

      "Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code Section 3801 et seq.

      "Treasury Regulations" means regulations, including proposed or temporary
regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.

      "Trust" means the trust established by this Agreement.

      "Trust Accounts" has the meaning specified in the Sale and Servicing
Agreement.

      "Trust Certificates" means the trust certificates evidencing the
beneficial interest of an Owner in the Trust, substantially in the form of
Exhibit B.

      "Trust Estate" means all right, title and interest of the Trust in and to
the property and rights assigned to the Trust pursuant to Article Two of the
Sale and Servicing Agreement, all funds on deposit from time to time in the
Trust Accounts and all other property of the Trust from time to time, including
any rights of the Owner Trustee and the Trust pursuant to the Sale and Servicing
Agreement and the Administration Agreement; provided, however, that any amount
contributed to the Trust for the purposes of investing in accordance with
Section 2.03(b) and any proceeds thereof shall not constitute part of the Trust
Estate and shall not be subject to the lien of the Indenture.

      "United States" has the meaning specified in the Sale and Servicing
Agreement.

      "WFS" means WFS Financial Inc.

      "WFSRC3" means WFS Receivables Corporation 3.

      Section 1.02. Other Definitional Provisions. Capitalized terms used that
are not otherwise defined herein shall have the meanings ascribed thereto in the
Sale and Servicing Agreement or, if not defined therein, in the Indenture.

      Section 1.03. Usage of Terms. With respect to all terms in this Agreement,
unless the context otherwise requires, (i) a term has the meaning assigned to
it; (ii) an accounting term not otherwise defined has the meaning assigned to it
in accordance with generally accepted accounting principles as in effect from
time to time in the United States; (iii) "or" is not exclusive; (iv) "including"
means including without limitation; (v) words in the singular include the plural
and words in the plural include the singular; (vi) any agreement, instrument or
statute

                                       4
<PAGE>

defined or referred to herein or in any instrument or certificate delivered in
connection herewith means such agreement, instrument or statute as from time to
time amended, modified or supplemented and includes (in the case of agreements
or instruments) references to all attachments thereto and instruments
incorporated therein; (vii) references to a Person are also to its successors
and permitted assigns; (viii) the words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement; (ix)
Section, subsection, Schedule and Exhibit, as applicable, references contained
in this Agreement are references to Sections, subsections, Schedules and
Exhibits in or to this Agreement unless otherwise specified; and (x) references
to "writing" include printing, typing, lithography and other means of
reproducing words in a visible form.

                                       5
<PAGE>

                                   ARTICLE TWO

                                  ORGANIZATION

      Section 2.01. Name. The Trust created hereby shall be known as "WFS
Financial 2004-2 Owner Trust", in which name the Owner Trustee may conduct the
activities of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.

      Section 2.02. Office. The office of the Trust shall be in care of the
Owner Trustee at the Owner Trustee Corporate Trust Office or at such other
address in the State of Delaware as the Owner Trustee may designate by written
notice to the Owners and the Depositor.

      Section 2.03. Purposes and Powers.

      (a)   The sole purpose of the Trust is to conserve the Trust Estate and
collect and disburse the periodic income therefrom for the use and benefit of
the Owners, and in furtherance of such purpose to engage in the following
ministerial activities:

            (i)   to issue the Notes pursuant to the Indenture and the Trust
      Certificates pursuant to this Agreement and to sell the Notes;

            (ii)  with the proceeds of the sale of the Notes, to purchase the
      Contracts, to fund the Spread Account, to pay the organizational, start-up
      and transactional expenses of the Trust and to pay the balance to the
      Depositor pursuant to the Sale and Servicing Agreement;

            (iii) to Grant the Trust Estate pursuant to the Indenture and to
      hold, manage and distribute to the Owners pursuant to the Sale and
      Servicing Agreement any portion of the Trust Estate released from the lien
      of, and remitted to the Trust pursuant to, the Indenture;

            (iv)  to enter into and perform its obligations under the Basic
      Documents to which it is to be a party;

            (v)   to engage in those activities, including entering into
      agreements, that are necessary to accomplish the foregoing or are
      incidental thereto or connected therewith; and

            (vi)  subject to compliance with the Basic Documents, to engage in
      such other activities as may be required in connection with conservation
      of the Trust Estate and the making of distributions to the Owners and the
      Noteholders.

      (b)   The Trust shall also have the power to actively invest, at its
discretion, in United States Treasury securities for the purposes of realizing a
gain; provided, however, that (i) the Trust must not invest more than $100,000
in such securities and (ii) the funds used to purchase such securities must not
be subject to the lien of the Indenture.

                                       6
<PAGE>

      (c)   The Trust shall not engage in any activities other than in
connection with the foregoing. Nothing contained herein shall be deemed to
authorize the Owner Trustee, on behalf of the Trust, to engage in any business
operations or any activities other than those set forth in Sections 2.03(a) and
2.03(b). Specifically, the Owner Trustee, on behalf of the Trust, shall have no
authority to engage in any business operations, acquire any assets other than
those specifically included in the Trust Estate under Section 1.01 or otherwise
vary the assets held by the Trust, except as set forth in this Section.
Similarly, the Owner Trustee shall have no discretionary duties other than
performing those ministerial acts set forth above necessary to accomplish the
purpose of the Trust as set forth in Sections 2.03(a) and 2.03(b).

      Section 2.04. Appointment of Owner Trustee. The Depositor hereby appoints
the Owner Trustee as trustee of the Trust effective as of the date hereof, to
have all the rights, powers and duties set forth herein, and the Owner Trustee
hereby accepts such appointment.

      Section 2.05. Initial Capital Contribution of Owner Trust Estate. As of
April 21, 2004, the Depositor sold, assigned, transferred, conveyed and set over
to the Owner Trustee the sum of $1.00. The Owner Trustee hereby acknowledges
receipt in trust from the Depositor, as of the date hereof, of the foregoing
contribution, which shall constitute the initial Trust Estate and shall be
deposited in the Certificate Distribution Account. The Depositor shall pay the
organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee.

      Section 2.06. Declaration of Trust. The Owner Trustee hereby declares that
it will hold the Trust Estate in trust upon and subject to the conditions set
forth herein for the sole purpose of conserving the Trust Estate and collecting
and disbursing the periodic income therefrom for the use and benefit of the
Owners, subject to the obligations of the Trust under the Basic Documents. It is
the intention of the parties hereto that the Trust constitute a statutory trust
under the Statutory Trust Act and that this Agreement constitute the governing
instrument of such statutory trust. It is the intention of the parties hereto
that, solely for income and franchise tax purposes, the Trust shall be treated
as a disregarded entity or a partnership, with equity holders of such entity
being the Certificateholders. It is also the intention of the parties hereto
that the Notes be treated as debt of the Trust. The parties agree that, unless
otherwise required by appropriate tax authorities, the Trust will file or cause
to be filed annual or other necessary returns, reports and other forms
consistent with the foregoing characterization of the Trust for such tax
purposes. Effective as of the date hereof, the Owner Trustee shall have all
rights, powers and duties set forth herein and in the Statutory Trust Act for
the sole purpose and to the extent necessary to accomplish the purpose of the
Trust as set forth in the introductory sentence of Section 2.03. This Agreement
amends and restates in full the trust agreement executed by the parties to this
Agreement, dated as of April 21, 2004.

      Section 2.07. Title to Trust Property. Legal title to the Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Trust
Estate to be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee, a co-trustee or a separate trustee, as
the case may be.

                                       7
<PAGE>

      Section 2.08. Situs of Trust. The Trust will be located and administered
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of California, the State of
Delaware or the State of New York. The Trust shall not have any employees in any
state other than Delaware; provided, however, that nothing herein shall restrict
or prohibit the Owner Trustee from having employees within or without the State
of Delaware. Payments will be received by the Trust only in Delaware or New York
and payments will be made by the Trust only from Delaware or New York. The only
office of the Trust will be at the Owner Trustee Corporate Trust Office.

      Section 2.09. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee that:

            (i) the Depositor is duly organized and validly existing as a
      corporation organized and existing and in good standing under the laws of
      the State of California, with power and authority to own its properties
      and to conduct its business and had at all relevant times, and has, power,
      authority and legal right to acquire and own the Contracts;

            (ii) the Depositor is duly qualified to do business as a foreign
      corporation in good standing and has obtained all necessary licenses and
      approvals in all jurisdictions in which the ownership or lease of property
      or the conduct of its business requires such qualifications;

            (iii) the Depositor has the power and authority to execute and
      deliver this Agreement and to carry out its terms; the Depositor has full
      power and authority to sell and assign the property to be sold and
      assigned by such Depositor to and deposited with the Owner Trustee on
      behalf of the Trust as part of the Trust Estate and has duly authorized
      such sale and assignment and deposit with the Owner Trustee on behalf of
      the Trust by all necessary corporate action; and the execution, delivery
      and performance of this Agreement have been duly authorized by the
      Depositor by all necessary corporate action;

            (iv) the consummation of the transactions contemplated by this
      Agreement and the fulfillment of the terms hereof do not conflict with,
      result in the breach of any of the terms and provisions of, nor constitute
      (with or without notice or lapse of time) a default under, the articles of
      incorporation or bylaws of the Depositor, or any indenture, agreement or
      other instrument to which the Depositor is a party or by which it is
      bound; nor result in the creation or imposition of any Lien upon any of
      the properties of the Depositor pursuant to the terms of any such
      indenture, agreement or other instrument (other than pursuant to the Basic
      Documents); nor violate any law or any order, rule or regulation
      applicable to the Depositor of any court or of any federal or state
      regulatory body, administrative agency or other governmental
      instrumentality having jurisdiction over the Depositor or its properties;
      and

            (v) there are no proceedings or investigations pending, or to the
      Depositor's best knowledge threatened, before any court, regulatory body,
      administrative agency or other governmental instrumentality having
      jurisdiction over the Depositor or its

                                        8
<PAGE>

      properties (A) asserting the invalidity of this Agreement, any of the
      other Basic Documents, the Notes or the Trust Certificates, (B) seeking to
      prevent the issuance of the Notes or the Trust Certificates or the
      consummation of any of the transactions contemplated by this Agreement or
      any of the other Basic Documents, (C) seeking any determination or ruling
      that might materially and adversely affect the performance by the
      Depositor of its obligations under, or the validity or enforceability of,
      this Agreement, any of the other Basic Documents, the Notes or the Trust
      Certificates or (D) involving the Depositor and which might adversely
      affect the federal income tax or other federal, state or local tax
      attributes of the Notes or the Trust Certificates.

      Section 2.10. Federal Income Tax Allocations.

      (a) Net income of the Trust for any calendar quarter as determined for
federal income tax purposes (and each item of income, gain, loss and deduction
entering into the computation thereof) shall be allocated among the
Certificateholders as of the first day following the end of such quarter, in
proportion to their Certificate Percentage Interest on such date, net income in
an amount up to the sum any other amounts of income payable to the
Certificateholders for such quarter.

      (b) Net losses of the Trust, if any, for any calendar quarter as
determined for federal income tax purposes (and each item of income, gain, loss
and deduction entering into the computation thereof) shall be allocated to the
Certificateholders in proportion to their Certificate Percentage Interest as of
the first day following the end of such quarter in proportion to their
Certificate Percentage Interest on such day. The Certificateholders are
authorized to modify the allocations in this paragraph if necessary or
appropriate, in their sole discretion, for the allocations to fairly reflect the
income, gain, loss and deduction to the Certificateholders, or as otherwise
required by the Code.

                                       9
<PAGE>

                                 ARTICLE THREE

                  TRUST CERTIFICATES AND TRANSFER OF INTERESTS

      Section 3.01. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.05 and until the issuance of
the Trust Certificates, the Depositor shall be the sole beneficiary of the
Trust.

      Section 3.02. The Trust Certificates. The Trust Certificates shall be
substantially in the form of Exhibit B. The Trust Certificates shall be executed
by the Owner Trustee on behalf of the Trust by manual or facsimile signature of
an authorized officer of the Owner Trustee and attested on behalf of the Owner
Trustee by the manual or facsimile signature of an authorized officer of the
Owner Trustee and shall be deemed to have been validly issued when so executed.
Trust Certificates bearing the manual or facsimile signatures of individuals who
were, at the time when such signatures were affixed, authorized to sign on
behalf of the Owner Trustee shall be valid and binding obligations of the Trust,
notwithstanding that such individuals or any of them have ceased to be so
authorized prior to the authentication and delivery of such Trust Certificates
or did not hold such offices at the date of such Trust Certificates. All Trust
Certificates shall be dated the date of their authentication.

      Section 3.03. Authentication and Delivery of Trust Certificates. The Owner
Trustee shall cause to be authenticated and delivered upon the order of the
Depositor, in exchange for the Contracts and the other assets of the Trust,
simultaneously with the sale, assignment and transfer to the Trust of the
Contracts, and the constructive delivery to the Owner Trustee of the Contract
Files and the other assets of the Trust, Trust Certificates duly authenticated
by the Owner Trustee, evidencing the entire ownership of the Trust and Notes
issued by the Owner Trustee and authenticated by the Indenture Trustee in the
aggregate principal amount of, in the case of the (i) Class A-1 Notes,
$240,000,000, (ii) Class A-2 Notes, $515,000,000, (iii) Class A-3 Notes,
$210,000,000, (iv) Class A-4 Notes, $343,750,000, (v) Class B Notes,
$56,250,000, (vi) Class C Notes, $63,750,000 and (vii) Class D Notes,
$48,750,000. No Trust Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless there appears on such Trust
Certificate a certificate of authentication substantially in the form set forth
in the form of Trust Certificate attached as Exhibit B, executed by the Owner
Trustee or its authenticating agent, by manual signature, and such certificate
upon any Trust Certificate shall be conclusive evidence, and the only evidence,
that such Trust Certificate has been duly authenticated and delivered hereunder.
Upon issuance, authentication and delivery pursuant to the terms hereof, the
Trust Certificates will be entitled to the benefits of this Agreement.

      Section 3.04. Registration of Transfer and Exchange of Trust Certificates.

      (a) The Certificate Registrar shall keep or cause to be kept, a
Certificate Register, subject to such reasonable regulations as it may
prescribe. The Certificate Register shall provide for the registration of Trust
Certificates and transfers and exchanges of Trust Certificates as provided
herein. JPMorgan Chase Bank at 4 New York Plaza, 6th Floor, New York, New York,
10004-2477, Attention: Structured Finance Services (ABS), as agent for the Owner
Trustee, is hereby initially appointed Certificate Registrar for the purpose of
registering Trust Certificates and transfers and exchanges of Trust Certificates
as herein provided. In the event that,

                                       10
<PAGE>

subsequent to the Closing Date, the Owner Trustee notifies the Master Servicer
that JPMorgan Chase Bank is unable to act as Certificate Registrar, the Master
Servicer shall appoint another bank or trust company, having an office or agency
located in The City of New York, agreeing to act in accordance with the
provisions of this Agreement applicable to it, and otherwise acceptable to the
Owner Trustee, to act as successor Certificate Registrar hereunder. The
provisions of Sections 7.01, 7.03, 7.04 and 8.01 shall apply to any Certificate
Registrar hereunder, as though named therein.

      (b) Upon surrender for registration of transfer of any Trust Certificate
at the office of the Certificate Registrar, the Owner Trustee shall execute,
authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Trust Certificates of a like Certificate Percentage
Interest.

      (c) At the option of a Certificateholder, Trust Certificates may be
exchanged for other Trust Certificates of a like Certificate Percentage
Interest, upon surrender of the Trust Certificates to be exchanged at the office
of the Certificate Registrar. Whenever any Trust Certificates are so surrendered
for exchange, the Owner Trustee on behalf of the Trust shall execute,
authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver) the Trust Certificates that the Certificateholder
making the exchange is entitled to receive. Every Trust Certificate presented or
surrendered for registration of transfer or exchange shall be accompanied by a
written instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the Holder thereof or his attorney duly
authorized in writing.

      (d) No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Trust Certificates.

      (e) The Trust Certificates may not be acquired by or for the account of a
Benefit Plan. By accepting and holding a Trust Certificate or a beneficial
interest therein, the Certificateholder thereof shall be deemed to have
represented and warranted that it is not a Benefit Plan nor will it hold such
Trust Certificate or a beneficial interest therein for the account of a Benefit
Plan.

      Any Person who is not an affiliate of the Seller and acquires more than
[49.9%]of the Trust Certificates will be deemed to represent that it is not a
party in interest (within the meaning of ERISA) or a disqualified person (within
the meaning of Section 4975(e)(2) of the Code) with respect to any Benefit Plan,
other than a Benefit Plan that it sponsors for the benefit of its employees, and
that no plan with respect to which it is a party in interest has or will acquire
any interest in the Notes.

      (f) All Trust Certificates surrendered for registration of transfer or
exchange, if surrendered any agent of the Owner Trustee under this Agreement,
shall be delivered to the Owner Trustee and promptly cancelled by it, or, if
surrendered to the Owner Trustee, shall be promptly cancelled by it, and no
Trust Certificates shall be issued in lieu thereof except as

                                       11
<PAGE>

expressly permitted by any of the provisions of this Agreement. The Owner
Trustee shall dispose of cancelled Trust Certificates in accordance with the
normal industry practice.

      (g) As a condition to the registration of any transfer of a Trust
Certificate, the prospective transferee shall be required to represent in
writing to the Owner Trustee, the Seller and the Certificate Registrar the
following:

            (i) It has neither acquired nor will it transfer any Trust
      Certificate it purchases (or any interest therein) or cause any such Trust
      Certificates (or any interest therein) to be marketed on or through an
      "established securities market" within the meaning of Section 7704(b)(1)
      of the Code, including an over-the-counter-market or an interdealer
      quotation system that regularly disseminates firm buy or sell quotations.

            (ii) It either (A) is not, and will not become, a partnership,
      Subchapter S corporation or grantor trust for United States federal income
      tax purposes or (B) is such an entity, but none of the direct or indirect
      beneficial owners of any of the interests in such transferee have allowed
      or caused, or will allow or cause, [50%] or more (or such other percentage
      as the transferor may establish prior to the time of such proposed
      transfer) of the value of such interests to be attributable to such
      transferee's ownership of Trust Certificates.

            (iii) It is not a Benefit Plan nor will it hold the Trust
      Certificates being transferred for the account of a Benefit Plan.

      The provisions of this Section generally are intended, among other things,
to prevent the Trust from being characterized as a "publicly traded partnership"
within the meaning of Section 7704 of the Code, in reliance on Treasury
Regulations Sections 1.7704-1(e) and (h), and the Seller shall take such intent
into account in determining whether or not to consent to any proposed transfer
of any Trust Certificate.

      Section 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates. If
(i) any mutilated Trust Certificate is surrendered to the Certificate Registrar,
or the Certificate Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Trust Certificate and (ii) there is delivered
to the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of
notice that such Trust Certificate has been acquired by a protected purchaser,
the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee or
its authenticating agent shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Trust Certificate, a new
Trust Certificate of like tenor and Certificate Percentage Interest. In
connection with the issuance of any new Trust Certificate under this Section,
the Owner Trustee may require the payment by the Holder of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto. Any duplicate Trust Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Trust
Certificate shall be found at any time.

                                       12
<PAGE>

      Section 3.06. Persons Deemed Owners. Prior to due presentation of a Trust
Certificate for registration of transfer, the Owner Trustee, the Certificate
Registrar, any Paying Agent and any of their respective agents may treat the
Person in whose name any Trust Certificate is registered as the owner of such
Trust Certificate for the purpose of receiving distributions pursuant to Section
5.02 and for all other purposes whatsoever, and none of the Owner Trustee, the
Certificate Registrar, any Paying Agent or any of their respective agents shall
be affected by any notice to the contrary.

      Section 3.07. Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Master Servicer
and the Depositor, within 15 days after receipt by the Certificate Registrar of
a written request therefor from the Master Servicer, the Certificateholders or
the Depositor, a list, in such form as the Master Servicer or the Depositor may
reasonably require, of the names and addresses of the Certificateholders as of
the most recent Record Date. If three or more Certificateholders, or one or more
Holders of Trust Certificates evidencing not less than 25% of the percentage
interests of the Trust Certificates (hereinafter referred to as "Applicants"),
apply in writing to the Owner Trustee, and such application states that the
Applicants desire to communicate with other Certificateholders with respect to
their rights hereunder or under the Trust Certificates and such application is
accompanied by a copy of the communication that such Applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such Applicants access, during normal
business hours, to the current list of Certificateholders. Every
Certificateholder, by receiving and holding a Trust Certificate, agrees with the
Master Servicer, the Depositor and the Owner Trustee that none of the Master
Servicer, the Depositor or the Owner Trustee shall be held accountable by reason
of the disclosure of any such information as to the names and addresses of the
Certificateholders hereunder, regardless of the source from which such
information was derived.

      Section 3.08. Maintenance of Office or Agency. JPMorgan Chase Bank, as
agent for the Owner Trustee, shall maintain in the Borough of Manhattan, The
City of New York, an office or offices or agency or agencies where Trust
Certificates may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Owner Trustee in respect of the Trust
Certificates and the Basic Documents may be served. The Owner Trustee hereby
designates the office of JPMorgan Chase Bank at the address provided under the
definition of the term "Owner Trustee Corporate Trust Office" as its office for
such purposes. The Owner Trustee shall give prompt written notice to the
Depositor, the Master Servicer and to Certificateholders of any change in the
location of the Certificate Register or any such office or agency.

      Section 3.09. Appointment of Paying Agent. The Paying Agent shall make
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02(a) and shall report the amounts of such distributions
to the Owner Trustee. Any Paying Agent shall have the revocable power to
withdraw funds from the Certificate Distribution Account for the purpose of
making the distributions referred to above. The Owner Trustee may revoke such
power and remove the Paying Agent if the Owner Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Agreement in any material respect. The Paying Agent initially shall
be Western Financial Bank and any co-paying agent chosen by the Paying Agent
that is acceptable to the Owner Trustee. Each Paying Agent

                                       13
<PAGE>

shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Owner Trustee. In the event that Western Financial Bank shall no longer be the
Paying Agent, the Owner Trustee shall appoint a successor to act as Paying Agent
(which shall be a bank or trust company). The Owner Trustee shall cause such
successor Paying Agent or any additional Paying Agent appointed by the Owner
Trustee to execute and deliver to the Owner Trustee an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the Owner
Trustee that, as Paying Agent, such successor Paying Agent or additional Paying
Agent will hold all sums, if any, held by it for payment to the
Certificateholders in trust for the benefit of the Certificateholders entitled
thereto until such sums shall be paid to such Certificateholders. The Paying
Agent shall return all unclaimed funds to the Owner Trustee and upon removal of
a Paying Agent such Paying Agent shall also return all funds in its possession
to the Owner Trustee. The provisions of Sections 7.01, 7.03, 7.04 and 8.01 shall
apply to the Owner Trustee also in its role as Paying Agent, for so long as the
Owner Trustee shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise. If the long term debt rating of the Paying Agent shall not be at
least "Baa3" from Moody's and "BBB-" from Standard & Poor's, the Rating Agencies
shall be given notice of such lower long term debt rating.

      Section 3.10. Ownership by WFSRC3 of Trust Certificates. WFSRC3 shall on
the Closing Date retain Trust Certificates representing at least 100% of the
Certificate Percentage Interest and shall thereafter retain beneficial and
record ownership of Trust Certificates representing at least 1% of the
Certificate Percentage Interest (the "Retained Trust Certificate Percentage").
Any attempted transfer of any Trust Certificate that would reduce the interest
of WFSRC3 in the Trust below the Retained Trust Certificate Percentage shall be
void. The Owner Trustee shall cause any Trust Certificate issued to WFSRC3 on
the Closing Date (and any Trust Certificate issued in exchange therefor) to
contain a legend stating "THIS TRUST CERTIFICATE IS NON-TRANSFERABLE EXCEPT AS
PROVIDED IN SECTION 3.10 OF THE TRUST AGREEMENT".

      Section 3.11. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and, upon
authentication thereof pursuant to Section 3.03, the Certificates shall be
deemed fully paid.

                                       14
<PAGE>

                                  ARTICLE FOUR

                            ACTIONS BY OWNER TRUSTEE

      Section 4.01. Prior Notice to Owners with Respect to Certain Matters.
Subject to Section 4.04, the Owner Trustee shall not take action, with respect
to the following matters, unless the Owner Trustee shall have notified the
Certificateholders in writing, at least 30 days before the taking of such
action, of the proposed action and the Holders of Trust Certificates evidencing
at least a majority of the aggregate Certificate Percentage Interest shall not
have notified the Owner Trustee in writing prior to the 30th day after such
notice is given that such Holders have withheld consent or provided alternative
direction:

            (i) the initiation of any claim or lawsuit by the Trust (except
      claims or lawsuits brought in connection with the collection of the
      Contracts) and the compromise of any action, claim or lawsuit brought by
      or against the Trust (except with respect to the aforementioned claims or
      lawsuits for collection of the Contracts);

            (ii) the election by the Trust to file an amendment to the
      Certificate of Trust (unless such amendment is required to be filed under
      the Statutory Trust Act);

            (iii) the amendment of the Indenture by a supplemental indenture in
      circumstances where the consent of any Noteholder is required;

            (iv) the amendment of the Indenture by a supplemental indenture in
      circumstances where the consent of any Noteholder is not required and such
      amendment materially adversely affects the interest of the Owners;

            (v) the amendment, change or modification of the Administration
      Agreement, except to cure any ambiguity or to amend or supplement any
      provision in a manner or add any provision that would not materially
      adversely affect the interests of the Owners; or

            (vi) the appointment pursuant to the Indenture of a successor Note
      Registrar, paying agent for the Notes or Indenture Trustee or pursuant to
      this Agreement of a successor Certificate Registrar, or the consent to the
      assignment by the Note Registrar, Paying Agent, Indenture Trustee or
      Certificate Registrar of its obligations under the Indenture or this
      Agreement, as applicable.

      Section 4.02. Action by Owners with Respect to Certain Matters. Subject to
the provisions and limitations of Section 4.04, the Owner Trustee shall not have
the power, except upon the direction of the majority of the Owners, to (i)
remove the Administrator pursuant to Section 8 of the Administration Agreement,
(ii) appoint a successor Administrator pursuant to Section 8 of the
Administration Agreement, (iii) remove the Master Servicer pursuant to Section
8.01 of the Sale and Servicing Agreement, (iv) except as expressly provided in
the Basic Documents, sell the Contracts after the termination of the Indenture,
(v) initiate any claim, suit or proceeding by the Trust or compromise any claim,
suit or proceeding brought by or against the Trust, (vi) authorize the merger,
consolidation or conversion of the Trust with or into any other statutory trust
or entity (other than in accordance with Section 3.10 of the Indenture) or

                                       15
<PAGE>

(vii) amend the Certificate of Trust. The Owner Trustee shall take the actions
referred to in the preceding sentence only upon written instructions signed by
the Owners.

      Section 4.03. Action by Owners with Respect to Bankruptcy. The Owner
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust unless (i) all of the Notes have been paid in
full and (ii) each Owner approves of such commencement in writing in advance and
delivers to the Owner Trustee a certificate certifying that such Owner
reasonably believes that the Trust is insolvent.

      Section 4.04. Restrictions on Owners' Power. The Owners shall not direct
the Owner Trustee to take or to refrain from taking any action if such action or
inaction would be contrary to any obligation of the Trust or the Owner Trustee
under this Agreement or any of the other Basic Documents or would be contrary to
the purpose of the Trust as set forth in Section 2.03, nor shall the Owner
Trustee be obligated to follow any such direction, if given.

      Section 4.05. Majority Control. Except as expressly provided herein, any
action that may be taken by the Owners under this Agreement may be taken by the
Holders of Trust Certificates evidencing not less than a majority of the
aggregate Certificate Percentage Interest. Except as expressly provided herein,
any written notice of the Owners delivered pursuant to this Agreement shall be
effective if signed by Holders of Trust Certificates evidencing not less than a
majority of the aggregate Certificate Percentage Interest at the time of the
delivery of such notice.

                                       16
<PAGE>

                                  ARTICLE FIVE

                   APPLICATION OF TRUST FUNDS; CERTAIN DUTIES

      Section 5.01. Establishment of Trust Account. The Owner Trustee, for the
benefit of the Certificateholders, shall establish and maintain in the name of
the Trust an Eligible Account (the "Certificate Distribution Account"), bearing
a designation clearly indicating that the funds deposited therein are held for
the benefit of the Certificateholders. The Certificate Distribution Account
initially shall be established with Western Financial Bank in the State of
California.

      The Owner Trustee shall possess all right, title and interest in funds on
deposit from time to time in the Certificate Distribution Account and in the
proceeds thereof. Except as otherwise expressly provided herein or in Section
5.01 of the Sale and Servicing Agreement, the Certificate Distribution Account
shall be under the sole dominion and control of the Owner Trustee for the
benefit of the Certificateholders. If, at any time, the Certificate Distribution
Account ceases to be an Eligible Account, the Owner Trustee (or the Depositor on
behalf of the Owner Trustee, if the Certificate Distribution Account is not then
held by the Owner Trustee or an Affiliate thereof) shall within ten Business
Days (or such longer period, not to exceed 30 days, as to which each Rating
Agency) establish a new Certificate Distribution Account as an Eligible Account
and shall transfer any cash or any investments to such new Certificate
Distribution Account.

      Section 5.02. Application of Trust Funds.

      (a) On each Distribution Date, the Owner Trustee, at the direction of the
Master Servicer, will distribute to Certificateholders, in proportion to each
Certificateholder's Certificate Percentage Interest, amounts deposited into the
Certificate Distribution Account pursuant to Sections 5.06 and 9.01 of the Sale
and Servicing Agreement and Sections 2.07(c) and 5.06(a) of the Indenture with
respect to such Distribution Date.

      (b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Master Servicer pursuant to Section 5.07 of the Sale and Servicing Agreement
with respect to such Distribution Date.

      (c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to an Owner, such tax shall reduce the amount
otherwise distributable to the Owner in accordance with this Section. The Owner
Trustee is hereby authorized and directed to retain, or cause the Paying Agent
to retain, from amounts otherwise distributable to the Owners sufficient funds
for the payment of any tax that is legally owed by the Trust (but such
authorization shall not prevent the Owner Trustee from contesting any such tax
in appropriate proceedings, and withholding payment of such tax, if permitted by
law, pending the outcome of such proceedings). The amount of any withholding tax
imposed with respect to an Owner shall be treated as cash distributed to such
Owner at the time it is withheld by the Trust and remitted to the appropriate
taxing authority. If there is a possibility that withholding tax is payable with
respect to a distribution, the Owner Trustee may in its sole discretion withhold
such amounts in accordance with this subsection.

                                       17
<PAGE>

      Section 5.03. Method of Payment. Subject to Section 9.01(c) respecting the
final payment upon retirement of each Trust Certificate, distributions required
to be made to each Certificateholder of record on the related Record Date shall
be made by check mailed to such Certificateholder at the address of such Holder
appearing in the Certificate Register or by wire transfer of immediately
available funds.

      Section 5.04. No Segregation of Monies; No Interest. Subject to Sections
5.01 and 5.02, monies received by the Owner Trustee hereunder need not be
segregated in any manner except to the extent required by law or the Sale and
Servicing Agreement and may be deposited under such general conditions as may be
prescribed by law, and the Owner Trustee shall not be liable for any interest
thereon.

      Section 5.05. Accounting and Reports to the Noteholders, Owners, the
Internal Revenue Service and Others. The Owner Trustee shall (i) maintain (or
cause to be maintained) the books of the Trust on a calendar year basis and the
accrual method of accounting, (ii) deliver to each Owner, as may be required by
the Code and applicable Treasury Regulations, such information as may be
required (including Schedule K-1) to enable each Owner to prepare its federal
and state income tax returns, (iii) file such tax returns relating to the Trust
(including a partnership information return, United States Internal Revenue
Service Form 1065) and make such elections as from time to time may be required
or appropriate under any applicable state or federal statute or any rule or
regulation thereunder so as to maintain the Trust's characterization as a
partnership or a disregarded entity for federal income tax purposes, (iv) cause
such tax returns to be signed in the manner required by law and (v) collect or
cause to be collected any withholding tax as described in and in accordance with
Section 5.02(c) with respect to income or distributions to Owners. The Owner
Trustee shall elect under Section 1278 of the Code to include in income
currently any market discount that accrues with respect to the Contracts. The
Owner Trustee shall not make the election provided under Section 754 of the
Code.

      Section 5.06. Signature on Returns; Tax Matters. WFSRC3 shall sign on
behalf of the Trust, the tax returns, if any are required, of the Trust and
shall ensure that any taxes incurred by the Trust, if any, are duly paid by the
Persons owing such taxes.

                                       18
<PAGE>

                                  ARTICLE SIX

                      AUTHORITY AND DUTIES OF OWNER TRUSTEE

      Section 6.01. General Authority. Subject to the provisions and limitations
of Sections 2.03 and 2.06, the Owner Trustee is authorized and directed to
execute and deliver the Basic Documents to which the Trust is to be a party and
each certificate or other document attached as an exhibit to or contemplated by
the Basic Documents to which the Trust is to be a party and any amendment,
certificate or other agreement, as evidenced conclusively by the Owner Trustee's
execution thereof. In addition to the foregoing, the Owner Trustee is
authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Basic Documents. The Owner Trustee is further authorized
from time to time to take such action as the Administrator recommends with
respect to the Basic Documents.

      Section 6.02. General Duties. Subject to the provisions and limitations of
Sections 2.03 and 2.06, it shall be the duty of the Owner Trustee to discharge
(or cause to be discharged through the Administrator or such agents as shall be
appointed by it) all of its responsibilities pursuant to the terms of this
Agreement and the other Basic Documents to which the Trust is a party and to
administer the Trust in the interest of the Owners, subject to the Basic
Documents and in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the other Basic
Documents to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any Basic Document, regardless of whether the Administration
Agreement is subsequently terminated or rejected by the Administrator, and the
Owner Trustee shall not be held liable for the default or failure of the
Administrator to carry out its obligations under the Administration Agreement.

      Section 6.03. Action Upon Instruction.

      (a) Subject to Article Four, in accordance with the terms of the Basic
Documents, the Owners may by written instruction direct the Owner Trustee in the
management of the Trust. Such direction may be exercised at any time by written
instruction of the Owners pursuant to Article Four.

      (b) The Owner Trustee shall not be required to take any action hereunder
or under any other Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any other Basic Document or is otherwise contrary to law.

      (c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any other Basic Document, the Owner Trustee shall promptly give notice (in such
form as shall be appropriate under the circumstances) to the Owners requesting
instruction as to the course of action to be adopted, and to the extent the
Owner Trustee acts in good faith in accordance with any written instruction of
the Owners received, the Owner Trustee shall not be liable on account of such
action to any

                                       19
<PAGE>

Person. If the Owner Trustee shall not have received appropriate instruction
within ten days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Agreement and the other Basic
Documents, as it shall deem to be in the best interests of the Owners, and shall
have no liability to any Person for such action or inaction.

      (d) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any other Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Owners
requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within ten days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action not inconsistent with this Agreement or the other Basic
Documents, as it shall deem to be in the best interests of the Owners, and shall
have no liability to any Person for such action or inaction.

      Section 6.04. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of or
otherwise deal with the Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.03 and no implied duties or obligations
shall be read into this Agreement or any other Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any other Basic Document. The Owner Trustee
nevertheless agrees that it will, at its own cost and expense, promptly take all
action as may be necessary to discharge any liens (other than the lien of the
Indenture) on any part of the Trust Estate that result from actions by, or
claims against, the Owner Trustee that are not related to the ownership or the
administration of the Trust Estate.

      Section 6.05. No Action Except Under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Trust Estate except in accordance with (i) the powers
granted to and the authority conferred upon the Owner Trustee pursuant to this
Agreement, (ii) the other Basic Documents and (iii) any document or instruction
delivered to the Owner Trustee pursuant to Section 6.03.

      Section 6.06. Restrictions. The Owner Trustee shall not take any action
(i) that is inconsistent with the purposes of the Trust set forth in Section
2.03 or (ii) that, to the actual

                                       20
<PAGE>

knowledge of a Responsible Officer of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for federal or state income tax
purposes. The Owners shall not direct the Owner Trustee to take action that
would violate the provisions of this Section.

                                       21
<PAGE>

                                 ARTICLE SEVEN

                          CONCERNING THE OWNER TRUSTEE

      Section 7.01. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all monies actually received by it constituting
part of the Trust Estate upon the terms of this Agreement and the other Basic
Documents. The Owner Trustee shall not be answerable or accountable hereunder or
under any other Basic Document under any circumstances, except (i) for its own
willful misconduct or negligence or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.03 expressly made by the Owner
Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):

            (i) the Owner Trustee shall not be liable for any error of judgment
      made by a Responsible Officer of the Owner Trustee;

            (ii) the Owner Trustee shall not be liable with respect to any
      action taken or omitted to be taken by it in accordance with the
      instructions of the Administrator or any Owner;

            (iii) no provision of this Agreement or any other Basic Document
      shall require the Owner Trustee to expend or risk funds or otherwise incur
      any financial liability in the performance of any of its rights or powers
      hereunder or under any other Basic Document if the Owner Trustee shall
      have reasonable grounds for believing that repayment of such funds or
      adequate indemnity against such risk or liability is not reasonably
      assured or provided to it;

            (iv) under no circumstances shall the Owner Trustee be liable for
      indebtedness evidenced by or arising under any of the Basic Documents,
      including the principal of and interest on the Notes or the Trust
      Certificates;

            (v) the Owner Trustee shall not be responsible for or in respect of
      the validity or sufficiency of this Agreement or for the due execution
      hereof by the Depositor or for the form, character, genuineness,
      sufficiency, value or validity of any of the Trust Estate, or for or in
      respect of the validity or sufficiency of the Basic Documents, other than
      the certificate of authentication on the Trust Certificates, and the Owner
      Trustee shall in no event assume or incur any liability, duty or
      obligation to any Noteholder or to any Owner, other than as expressly
      provided for herein or expressly agreed to in the other Basic Documents;

            (vi) the Owner Trustee shall not be liable for the default or
      misconduct of the Administrator, WFSRC3, as Seller or Depositor, the
      Indenture Trustee or the Master Servicer under any of the Basic Documents
      or otherwise, and the Owner Trustee shall have no obligation or liability
      to perform the obligations of the Owner Trustee or the Trust under this
      Agreement or the other Basic Documents that are required to be performed
      by the Administrator under the Administration Agreement, the Indenture

                                       22
<PAGE>

      Trustee under the Indenture or the Master Servicer or WFSRC3, as Seller or
      Depositor, under the Sale and Servicing Agreement;

            (vii) the Owner Trustee shall be under no obligation to exercise any
      of the rights or powers vested in it by this Agreement, or to institute,
      conduct or defend any litigation under this Agreement or otherwise or in
      relation to this Agreement or any other Basic Document, at the request,
      order or direction of the Owners, unless such Owners have offered to the
      Owner Trustee security or indemnity satisfactory to it against the costs,
      expenses and liabilities that may be incurred by the Owner Trustee therein
      or thereby; the right of the Owner Trustee to perform any discretionary
      act enumerated in this Agreement or in any other Basic Document shall not
      be construed as a duty, and the Owner Trustee shall not be answerable for
      other than its negligence or willful misconduct in the performance of any
      such act;

            (viii) notwithstanding anything to the contrary herein or in any
      other document, the Owner Trustee shall not be required to execute,
      deliver or certify on behalf of the Trust or any other Person any filings,
      certificates, affidavits or other instruments required under the
      Sarbanes-Oxley Act of 2002; and

            (ix) notwithstanding any Person's right to instruct the Owner
      Trustee, neither the Owner Trustee nor any agent, employee, director or
      officer of the Owner Trustee shall have any obligation to execute any
      certificates or other documents required pursuant to the Sarbanes-Oxley
      Act of 2002 or the rules and regulations promulgated thereunder and the
      refusal to comply with any such instructions shall not constitute a
      default or breach under any Basic Document.

      Section 7.02. Furnishing of Documents. The Owner Trustee shall furnish to
the Owners promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents.

      Section 7.03. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Depositor and the Owners that:

            (i) it is a banking association duly organized and validly existing
      under the laws of the United States; it has all requisite corporate power
      and authority to execute, deliver and perform its obligations under this
      Agreement;

            (ii) it has taken all corporate action necessary to authorize the
      execution and delivery by it of this Agreement, and this Agreement will be
      executed and delivered by one of its officers who is duly authorized to
      execute and deliver this Agreement on its behalf; and

            (iii) neither the execution nor the delivery by it of this
      Agreement, nor the consummation by it of the transactions contemplated
      hereby nor compliance by it with any of the terms or provisions hereof
      will contravene any federal or State of Delaware law, governmental rule or
      regulation governing the banking or trust powers of the Owner Trustee or
      any judgment or order binding on it, or constitute any default under its
      charter

                                       23
<PAGE>

      documents or bylaws or any indenture, mortgage, contract, agreement or
      instrument to which it is a party or by which any of its properties may be
      bound or result in the creation or imposition of any lien, charge or
      encumbrance on the Trust Estate resulting from actions by or claims
      against the Owner Trustee individually which are unrelated to this
      Agreement or the other Basic Documents.

      Section 7.04. Reliance; Advice of Counsel.

      (a) The Owner Trustee shall incur no liability to anyone in acting upon
any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of determination of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.

      (b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the other
Basic Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any other Basic Document.

      Section 7.05. Not Acting in Individual Capacity. Except as otherwise
provided in this Article Seven, in accepting the trusts hereby created, Chase
Manhattan Bank USA, National Association acts solely as Owner Trustee hereunder
and not in its individual capacity, and all Persons having any claim against the
Owner Trustee by reason of the transactions contemplated by this Agreement or
any other Basic Document shall look only to the Trust Estate for payment or
satisfaction thereof.

      Section 7.06. Owner Trustee Not Liable for Trust Certificates, Notes or
Contracts. The recitals contained herein and in the Trust Certificates (other
than the signature of the Owner Trustee and the certificate of authentication on
the Trust Certificates) shall be taken as the statements of the Depositor, and
the Owner Trustee assumes no responsibility for the correctness thereof. The
Owner Trustee makes no representations as to the validity or sufficiency of this
Agreement, any other Basic Document or the Trust Certificates (other than the
signature of the Owner Trustee and the certificate of authentication on the
Trust Certificates and the representations and warranties in Section 7.03) or
the Notes, or of any Contract or related documents. The Owner Trustee shall at
no time have any responsibility or liability for or with respect to the

                                       24
<PAGE>

legality, validity and enforceability of any Contract, or the perfection and
priority of any security interest created by any Contract in any Financed
Vehicle or the maintenance of any such perfection and priority, or for or with
respect to the sufficiency of the Trust Estate or its ability to generate the
payments to be distributed to Certificateholders under this Agreement or the
Noteholders under the Indenture, including the existence, condition and
ownership of any Financed Vehicle; the existence and enforceability of any
insurance thereon; the existence and contents of any Contract on any computer or
other record thereof; the validity of the assignment of any Contract to the
Trust or of any intervening assignment; the completeness of any Contract; the
performance or enforcement of any Contract; the compliance by the Depositor or
the Master Servicer with any warranty or representation made under any Basic
Document or in any related document or the accuracy of any such warranty or
representation; or any action of the Administrator, the Indenture Trustee or the
Master Servicer or any subservicer taken in the name of the Owner Trustee.

      Section 7.07. Owner Trustee May Own Trust Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Administrator, the Indenture Trustee and the Master Servicer in banking
transactions with the same rights as it would have if it were not Owner Trustee.

      Section 7.08. Sales Finance Licenses. The Owner Trustee, in its individual
capacity, shall use its best efforts to maintain, and the Owner Trustee shall
cooperate with the Administrator in order to cause the Trust to maintain, the
effectiveness of all sales finance company licenses required under the Maryland
Code Annotated, Financial Institutions Section 11-401 et seq., and all licenses
required under the Pennsylvania Motor Vehicle Sales Finance Act (including
signing any license applications required to be signed by the Trust) in
connection with this Agreement and the other Basic Documents and the
transactions contemplated hereby and thereby until such time as the Trust shall
terminate in accordance with the terms hereof.

                                       25
<PAGE>

                                 ARTICLE EIGHT

                          COMPENSATION OF OWNER TRUSTEE

      Section 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Seller and the Owner
Trustee, and the Owner Trustee shall be entitled to be reimbursed by the Seller
for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection with the
exercise and performance of its rights and its duties hereunder.

      Section 8.02. Indemnification. The Seller shall be liable as primary
obligor for, and shall indemnify the Owner Trustee and its successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Agreement, the other Basic Documents, the Trust
Estate, the administration of the Trust Estate or the action or inaction of the
Owner Trustee hereunder, except only that the Seller shall not be liable for or
required to indemnify an Indemnified Party from and against Expenses arising or
resulting from any of the matters described in the third sentence of Section
7.01. The indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In the
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Depositor, which approval shall not be
unreasonably withheld.

      Section 8.03. Payments to the Owner Trustee. Any amounts paid to the Owner
Trustee pursuant to this Article shall be deemed not to be a part of the Trust
Estate immediately after such payment.

                                       26
<PAGE>

                                  ARTICLE NINE

                         TERMINATION OF TRUST AGREEMENT

      Section 9.01. Termination of Trust Agreement.

      (a) The Trust shall dissolve upon the final distribution by the Owner
Trustee of all monies or other property or proceeds of the Trust Estate in
accordance with the terms of the Indenture, the Sale and Servicing Agreement and
Article Five. The bankruptcy, liquidation, dissolution, death or incapacity of
any Owner shall not (i) operate to terminate this Agreement or the Trust, (ii)
entitle such Owner's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or Trust Estate or (iii) otherwise affect the rights,
obligations and liabilities of the parties hereto.

      (b) Except as provided in Section 9.01(a), neither of the Depositor nor
any Owner shall be entitled to dissolve, revoke or terminate the Trust.

      (c) Notice of any dissolution of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates to
the Paying Agent for payment of the final distribution and cancellation, shall
be given by the Owner Trustee by letter to Certificateholders mailed within five
Business Days of receipt of a termination notice from the Master Servicer given
pursuant to Section 9.01(c) of the Sale and Servicing Agreement and no later
than 20 days prior to such dissolution, stating (i) the Distribution Date upon
or with respect to which final payment of the Trust Certificates shall be made
upon presentation and surrender of the Trust Certificates at the office of the
Paying Agent in The City of New York therein designated, (ii) the amount of any
such final payment and (iii) that the Record Date otherwise applicable to such
Distribution Date is not applicable, payments being made only upon presentation
and surrender of the Trust Certificates at the office of the Paying Agent
therein specified. The Owner Trustee shall give such notice to the Certificate
Registrar (if other than the Owner Trustee) and the Paying Agent at the time
such notice is given to Certificateholders. Upon presentation and surrender of
the Trust Certificates, the Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant to
Section 5.02. In addition, the Owner Trustee shall notify the Rating Agencies
upon the final payment of the Trust Certificates.

      (d) In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above-mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Trust Certificates for cancellation and receive the final distribution with
respect thereto. If within one year after the second notice all the Trust
Certificates shall not have been surrendered for cancellation, the Owner Trustee
may take appropriate steps, or may appoint an agent to take appropriate steps,
to contact the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies at least 18 months after the date of
dissolution shall be distributed by the Owner Trustee to a charity designated by
the Master Servicer.

                                       27
<PAGE>

      (e) Upon the winding up of the Trust and payment of its liabilities or
reasonable provision therefore in accordance with Section 3808 of the Statutory
Trust Act, the Owner Trustee shall cause the Certificate of Trust to be
cancelled by filing a certificate of cancellation with the Secretary of State in
accordance with the provisions of Section 3810 of the Statutory Trust Act and
this Agreement (other than Article Eight) and the Trust shall terminate.

                                       28
<PAGE>

                                  ARTICLE TEN

             SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES

      Section 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Statutory Trust Act; authorized to exercise corporate trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities; and
having (or having a parent that has) a rating of at least "Baa3" by Moody's,
"A-1" by Standard & Poor's and "F1" from Fitch. If such corporation shall
publish reports of condition at least annually pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purpose of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Owner Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 10.02.

      Section 10.02. Resignation or Removal of Owner Trustee. The Owner Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Administrator. Upon receiving such notice
of resignation, the Administrator shall promptly appoint a successor Owner
Trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the resigning Owner Trustee and one copy to the successor Owner
Trustee. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.

      If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.01 and shall fail to resign after written
request therefor by the Administrator, or if at any time the Owner Trustee shall
be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Administrator may remove the Owner Trustee. If the
Administrator shall remove the Owner Trustee under the authority of the
immediately preceding sentence, the Administrator shall promptly appoint a
successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed and one
copy to the successor Owner Trustee, and shall pay all fees owed to the outgoing
Owner Trustee.

      Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each Rating Agency.

      Section 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator and to its

                                       29
<PAGE>

predecessor Owner Trustee an instrument accepting such appointment under this
Agreement, and thereupon the resignation or removal of the predecessor Owner
Trustee shall become effective, and such successor Owner Trustee, without any
further act, deed or conveyance, shall become fully vested with all the rights,
powers, duties and obligations of its predecessor under this Agreement, with
like effect as if originally named as Owner Trustee. The predecessor Owner
Trustee shall, upon payment of its fees and expenses, deliver to the successor
Owner Trustee all documents and statements and monies held by it under this
Agreement; and the Administrator and the predecessor Owner Trustee shall execute
and deliver such instruments and do such other things as may reasonably be
required for fully and certainly vesting and confirming in the successor Owner
Trustee all such rights, powers, duties and obligations.

      No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.01.

      Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and each Rating
Agency. If the Administrator shall fail to mail such notice within ten days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.

      Section 10.04. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding;
provided, that such corporation shall be eligible pursuant to Section 10.01 and,
provided, further, that the Owner Trustee shall mail notice of such merger or
consolidation to each Rating Agency.

      Section 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or any Financed Vehicle may at the time be located, the
Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Administrator and Owner Trustee to act as co-trustee, jointly
with the Owner Trustee, or as separate trustee or separate trustees, of all or
any part of the Trust Estate, and to vest in such Person, in such capacity, such
title to the Trust or any part thereof and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Owner Trustee may consider necessary or desirable. If the
Administrator shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, the Owner Trustee alone shall have the
power to make such appointment. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
Owner Trustee pursuant to Section 10.01, except that such co-trustee or
successor trustee shall have (or have a parent that has) a rating of at least
"Baa3" by Moody's and "A-1" by Standard & Poor's,

                                       30
<PAGE>

and no notice of the appointment of any co-trustee or separate trustee shall be
required pursuant to Section 10.03.

      Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

            (i) all rights, powers, duties and obligations conferred or imposed
      upon the Owner Trustee shall be conferred upon and exercised or performed
      by the Owner Trustee and such separate trustee or co-trustee jointly (it
      being understood that such separate trustee or co-trustee is not
      authorized to act separately without the Owner Trustee joining in such
      act), except to the extent that under any law of any jurisdiction in which
      any particular act or acts are to be performed, the Owner Trustee shall be
      incompetent or unqualified to perform such act or acts, in which event
      such rights, powers, duties and obligations (including the holding of
      title to the Trust Estate or any portion thereof in any such jurisdiction)
      shall be exercised and performed singly by such separate trustee or
      co-trustee, but solely at the direction of the Owner Trustee;

            (ii) no trustee under this Agreement shall be personally liable by
      reason of any act or omission of any other trustee under this Agreement;
      and

            (iii) the Administrator and the Owner Trustee acting jointly may at
      any time accept the resignation of or remove any separate trustee or
      co-trustee.

      Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Owner Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of or affording protection to, the Owner
Trustee. Each such instrument shall be filed with the Owner Trustee and a copy
thereof given to the Administrator.

      Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor co-trustee or separate trustee.

                                       31
<PAGE>

                                 ARTICLE ELEVEN

                                  MISCELLANEOUS

      Section 11.01. Amendments.

      (a) This Agreement may be amended by the Depositor and the Owner Trustee,
without the consent of any of the Noteholders or the Certificateholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement or to
add any other provisions with respect to matters or questions arising under this
Agreement that shall not be inconsistent with the provisions of this Agreement;
provided, however, that any such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.

      (b) This Agreement may also be amended from time to time by the Depositor
and the Owner Trustee, with the consent of the Holders of Trust Certificates
evidencing not less than a majority of the aggregate Certificate Percentage
Interest (which consent of any Holder of a Note or Trust Certificate given
pursuant to this Section or pursuant to any other provision of this Agreement
shall be conclusive and binding on such Holder and on all future Holders of such
Note or Trust Certificate, as the case may be, issued upon the transfer thereof
or in exchange thereof or in lieu thereof whether or not notation of such
consent is made thereon) and, if such amendment materially and adversely affects
the interests of the Noteholders, with the consent of Holders (as such term is
defined in the Indenture) of Notes evidencing not less than 66 2/3% of the
Outstanding Amount of the Notes for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall increase or
reduce in any manner the amount of, or accelerate or delay the timing of, (i)
collections of payments on Contracts or distributions that shall be required to
be made for the benefit of the Noteholders or the Certificateholders or any
Interest Rate or (ii) reduce the aforesaid percentage of the Outstanding Amount
of the Notes and the Certificate Percentage Interest required to consent to any
such amendment, without the consent of the Holders of all outstanding Notes and
Trust Certificates.

      (c) Prior to the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent, together with a copy thereof, to the Indenture Trustee, the
Administrator and each Rating Agency.

      (d) Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder. It shall not be necessary for
the consent of Certificateholders, Noteholders or the Indenture Trustee pursuant
to this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Certificateholders provided for in this Agreement or in any other Basic
Document) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.

                                       32
<PAGE>

      (e) Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.

      (f) In connection with the execution of any amendment to this Agreement or
any other Basic Document to which the Issuer is a party and for which amendment
the Owner Trustee's consent is sought, the Owner Trustee shall be entitled to
receive and conclusively rely upon an Opinion of Counsel to the effect that such
amendment is authorized or permitted by the Basic Documents and that all
conditions precedent in the Basic Documents for the execution and delivery
thereof by the Issuer or the Owner Trustee, as the case may be, have been
satisfied. The Owner Trustee may, but shall not be obligated to, enter into any
such amendment that affects the Owner Trustee's own rights, duties or immunities
under this Agreement or otherwise.

      Section 11.02. No Legal Title to Trust Estate in Owners. The Owners shall
not have legal title to any part of the Trust Estate. The Owners shall be
entitled to receive distributions with respect to their undivided ownership
interest therein only in accordance with Articles Five and Nine. No transfer, by
operation of law or otherwise, of any right, title or interest of the Owners to
and in their ownership interest in the Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Trust
Estate.

      Section 11.03. Limitations on Rights of Others. Except for Section 2.07,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Owners, the Administrator and, to the extent
expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement (other than Section 2.07), whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Trust Estate or under or in respect of this Agreement or
any covenants, conditions or provisions contained herein.

      Section 11.04. Notices. All demands, notices and communications under this
Agreement shall be in writing personally delivered or mailed by certified mail,
return receipt requested, and shall be deemed to have been duly given upon
receipt in the case of:

      (a) if to the Owner Trustee, to:

             Chase Manhattan Bank USA, National Association
             c/o JPMorgan Chase Bank
             500 Stanton Christiana Road, OPS4/3rd Floor
             Newark, Delaware  19713
             Attention: Institutional Trust Services

      (b) if to WFSRC3, to:

             WFS Receivables Corporation 3
             444 East Warm Springs Road #116,
             Las Vegas, Nevada  89119
             Attention: Keith Ford

                                       33
<PAGE>

      (c) if to the Certificate Registrar or the agent for the Owner Trustee,
to:

             JPMorgan Chase Bank
             500 Stanton Christiana Road, OPS4/3rd Floor
             Newark, Delaware  19713
             Attention: Institutional Trust Services

             with a copy to:

             JPMorgan Chase Bank
             4 New York Plaza, 6th Floor
             New York, New York  10004-2477

or to such other address as any party shall have provided to the other party in
writing. Any notice required or permitted to be mailed to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.

      Section 11.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Trust
Certificates or the rights of the Holders thereof.

      Section 11.06. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

      Section 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Depositor, the Owner Trustee and their respective successors and permitted
assigns and each Owner and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by an Owner shall bind the successors and assigns of such Owner.

      Section 11.08. No Petition.

      (a) The Depositor will not at any time institute against the Trust any
bankruptcy proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Trust
Certificates, the Notes, this Agreement or any of the other Basic Documents.

      (b) The Owner Trustee, by entering into this Agreement, each
Certificateholder, by accepting a Trust Certificate, and the Indenture Trustee
and each Noteholder, by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the Seller,
the Depositor or the Trust, or join in any institution against the Seller, the
Depositor or the Trust of, any bankruptcy proceedings under any United States
federal or state

                                       34
<PAGE>

bankruptcy or similar law in connection with any obligations relating to the
Trust Certificates, the Notes, this Agreement or any of the other Basic
Documents.

      Section 11.09. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Depositor, the Master Servicer, the Seller, the
Administrator, the Owner Trustee, the Indenture Trustee or any of their
respective Affiliates and no recourse may be had against such parties or their
assets, except as may be expressly set forth or contemplated in this Agreement,
the Trust Certificates or the other Basic Documents.

      Section 11.10. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.

      Section 11.11. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

      Section 11.12. Depositor Payment Obligation. The Depositor shall be
responsible for payment of the Administrator's compensation pursuant to Section
3 of the Administration Agreement and shall reimburse the Administrator for all
expenses and liabilities of the Administrator incurred thereunder.

      Section 11.13. Limited Recourse. Notwithstanding anything to the contrary
contained in this Agreement, the obligations of the Seller under Sections 8.01
and 8.02 are solely the corporate obligations of the Seller and shall be payable
by the Seller, solely as provided in Sections 8.01 and 8.02. The Seller shall
only be required to pay any fees, expenses, indemnities or other liabilities
that it may incur under Section 8.01 or 8.02, as applicable, (i) from funds
available pursuant to, and in accordance with, the payment priorities set forth
in Section 5.05 of the Sale and Servicing Agreement and (ii) only to the extent
it receives additional funds designated for such purposes or to the extent the
Seller has additional funds available (other than funds described in the
preceding clause (i)) that would be in excess of amounts that would be necessary
to pay the debt and other obligations as they become due of such entity incurred
in accordance with its certificate of incorporation and all financing documents
to which it is a party. The agreement set forth in the preceding sentence shall
constitute a subordination agreement for purposes of Section 510(a) of the
Bankruptcy Code. In addition, no amount owing by the Seller hereunder in excess
of the liabilities that it is required to pay in accordance with the preceding
sentence shall constitute a "claim" (as defined in Section 101(5) of the
Bankruptcy Code) against it.

                                       35
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers hereunto duly authorized, as of the
day and year first above written.

                                        WFS RECEIVABLES CORPORATION 3

                                        By: ____________________________________
                                            Name:
                                            Title:

                                        CHASE MANHATTAN BANK USA, NATIONAL
                                           ASSOCIATION,
                                           as Owner Trustee

                                        By: ____________________________________
                                            Name:
                                            Title:

                                            Amended and Restated Trust Agreement

<PAGE>

                                                                       EXHIBIT A

                             CERTIFICATE OF TRUST OF
                        WFS FINANCIAL 2004-2 OWNER TRUST

      This Certificate of Trust of WFS Financial 2004-2 Owner Trust (the
"Trust"), dated as of April 21, 2004, is being duly executed and filed by Chase
Manhattan Bank USA, National Association, a national association, as trustee, to
form a statutory trust under the Delaware Statutory Trust Act (12 Del. Code,
Section 3801 et seq.).

      1. Name. The name of the statutory trust formed hereby is WFS Financial
2004-2 Owner Trust.

      2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is Chase Manhattan Bank USA, National
Association, c/o JPMorgan Chase, Attn: Institutional Trust Services, 500 Stanton
Christiana Rd., OPS4 /3rd Floor, Newark, Delaware 19713.

      IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first above written.

                                        CHASE MANHATTAN BANK USA, NATIONAL
                                        ASSOCIATION,
                                        not in its individual capacity but
                                        solely as Owner Trustee

                                        By: ____________________________________
                                            Name:
                                            Title:

                                      A-1
<PAGE>

                                                                       EXHIBIT B

      THIS TRUST CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE NOTES TO
THE EXTENT DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.

                 [TO BE INSERTED ON THE RETAINED CERTIFICATE --
        THIS TRUST CERTIFICATE IS NON-TRANSFERABLE EXCEPT AS PROVIDED IN
                      SECTION 3.10 OF THE TRUST AGREEMENT]

                        WFS FINANCIAL 2004-2 OWNER TRUST

                       AUTO RECEIVABLE BACKED CERTIFICATE

evidencing a fractional undivided interest in the Trust, as defined below, the
property of which includes, among other things, a pool of retail installment
sale contracts secured by new and used automobiles and light duty trucks
transferred to the Trust by WFS Receivables Corporation 3, a California
corporation (the "Depositor").

      (This Trust Certificate does not represent an interest in or obligation of
WFS Financial Inc, the Depositor or any of their respective affiliates, and is
not a deposit and is not insured by the Federal Deposit Insurance Corporation).

NUMBER [C-1] [C-2]

      THIS CERTIFIES THAT WFS Receivables Corporation 3 is the registered owner
of [99%][1%] Certificate Percentage Interest nonassessable, fully-paid,
fractional undivided interest in the WFS Financial 2004-2 Owner Trust (the
"Trust") formed by the Depositor.

      The Trust was created pursuant to a Trust Agreement, dated as of April 21,
2004, as amended and restated as of May 27, 2004 (as amended and supplemented
from time to time, the "Trust Agreement"), between the Depositor and Chase
Manhattan Bank USA, National Association, as owner trustee (the "Owner
Trustee"), a summary of certain of the pertinent provisions of which is set
forth below. Capitalized terms used herein that are not otherwise defined shall
have the meanings ascribed thereto in the Trust Agreement.

      This Trust Certificate is one of the duly authorized Trust Certificates
designated as "Auto Receivable Backed Certificates" (the "Trust Certificates").
Issued under the Indenture, dated as of May 1, 2004 (the "Indenture"), between
the Trust and Deutsche Bank Trust Company Americas, as Indenture Trustee, are
seven classes of Auto Receivable Backed Notes designated as "1.1668% Class A-1
Notes", "2.03% Class A-2 Notes", "2.85% Class A-3 Notes", "3.54% Class A-4
Notes", "3.07% Class B Notes", "3.20% Class C Notes" and "3.77% Class D Notes"
(collectively, the "Notes"). This Trust Certificate is issued under and is
subject to the terms, provisions and conditions of the Trust Agreement, to which
Trust Agreement the Holder of this Trust Certificate by virtue of its acceptance
hereof assents and by which such Holder is bound.

                                       B-1
<PAGE>

The property of the Trust includes, among other things, a pool of retail
installment sale contracts (the "Contracts") for new and used automobiles and
light duty trucks (the "Financed Vehicles").

      Under the Trust Agreement, there will be distributed on the 20th of each
month or, if any such day is not a Business Day, the next succeeding Business
Day (each, a "Distribution Date"), commencing on July 20, 2004 and ending no
later than November 21, 2011 to the person in whose name this Trust Certificate
is registered at the close of business on the last calendar day immediately
preceding the related Distribution Date (the "Record Date"), such
Certificateholder's Certificate Percentage Interest in the amount to be
distributed to Certificateholders on such Distribution Date.

      The holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders to the extent described in the
Sale and Servicing Agreement and the Indenture.

      It is the intent of the Seller, the Master Servicer and the
Certificateholders that, for purposes of federal income, state and local income
and single business tax and any other income taxes, the Trust will be
disregarded for tax purposes or treated as a partnership and the
Certificateholders (including the Depositor) will be taxable individually or as
partners in a partnership. The Depositor and the other Certificateholders, by
acceptance of a Trust Certificate, agree to treat, and to take no action
inconsistent with the treatment of, the Trust Certificates for such tax purposes
as partnership interests in the Trust.

      Each Certificateholder, by its acceptance of a Trust Certificate covenants
and agrees that such Certificateholder will not at any time institute against
the Trust, the Seller or the Depositor, or join in any institution against the
Trust, the Seller or the Depositor of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Trust Certificates, the Notes, the Trust
Agreement or any of the other Basic Documents.

      Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Trust Certificate or the making of any notation hereon.
Except as otherwise provided in the Trust Agreement and notwithstanding the
above, the final distribution on this Trust Certificate will be made after due
notice by the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Trust Certificate at the office of the Paying
Agent or the office or agency maintained for that purpose by the Owner Trustee
in The City of New York.

      Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.

      Unless the certificate of authentication hereon shall have been executed
by an authorized officer of the Owner Trustee, by manual signature, this Trust
Certificate shall not entitle the

                                      B-2
<PAGE>

holder hereof to any benefit under the Trust Agreement or any other Basic
Document or be valid for any purpose.

      THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                      B-3
<PAGE>

                            [REVERSE OF CERTIFICATE]

      The Trust Certificates do not represent an obligation of, or an interest
in, the Seller, the Depositor, the Master Servicer, the Owner Trustee or any of
their respective Affiliates and no recourse may be had against such parties or
their assets, except as expressly set forth or contemplated herein or in the
Trust Agreement or the other Basic Documents. In addition, this Trust
Certificate is not guaranteed by any governmental agency or instrumentality and
is limited in right of payment to certain collections and recoveries with
respect to the Contracts (and certain other amounts), in each case as more
specifically set forth herein and in the Sale and Servicing Agreement. Copies of
the Sale and Servicing Agreement and the Trust Agreement may be examined by any
Certificateholder upon written request during normal business hours at the
principal office of the Depositor and at such other places, if any, designated
by the Depositor.

      The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
parties thereto and the rights of the Certificateholders under the Trust
Agreement at any time by the parties thereto with the consent of Holders of
Trust Certificates evidencing not less than a majority of the aggregate
Certificate Percentage Interest and, if such amendment materially and adversely
affects the interests of the Noteholders, with the consent of Holders of Notes
evidencing not less than 66 2/3% of the Outstanding Amount of the Notes. Any
such consent by the Holder of this Trust Certificate shall be conclusive and
binding on such Holder and on all future Holders of this Trust Certificate and
of any Trust Certificate issued upon the transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent is made upon this
Trust Certificate. The Trust Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Trust Certificates or the Notes.

      As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Trust Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
in The City of New York, accompanied by a written instrument of transfer in form
satisfactory to the Owner Trustee and the Certificate Registrar duly executed by
the Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Trust Certificates evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is JPMorgan Chase
Bank.

      As provided in the Trust Agreement and subject to certain limitations
therein set forth, Trust Certificates are exchangeable for new Trust
Certificates evidencing the same Certificate Percentage Interest, as requested
by the Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.

      The Owner Trustee, the Certificate Registrar, the Paying Agent and any of
their respective agents may treat the Person in whose name this Trust
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Certificate Registrar, the Paying Agent or any such agent
shall be affected by any notice to the contrary.

                                      B-4
<PAGE>

      The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement and
the Sale and Servicing Agreement and the disposition of all property held as
part of the Trust Estate.

      The Seller may at the Seller's option purchase the Trust Estate at a price
specified in the Sale and Servicing Agreement, and such purchase of the
Contracts and other property of the Trust will effect early retirement of the
Trust Certificates; however, such right of purchase is exercisable only as of
any Distribution Date following the last day of a Collection Period as of which
the Aggregate Principal Balance is less than or equal to $150,000,000.

      The Trust Certificates may not be acquired by a Benefit Plan. By accepting
and holding this Trust Certificate, the Holder hereof shall be deemed to have
represented and warranted that it is not a Benefit Plan and is not acquiring
this Trust Certificate or an interest therein for the account of a Benefit Plan.

      Any Person who is not an affiliate of the Seller and acquires more than
49.9% of the Trust Certificates will be deemed to represent that it is not a
party in interest (within the meaning of ERISA) or a disqualified person (within
the meaning of Section 4975(e)(2) of the Code) with respect to any Benefit Plan,
other than a Benefit Plan that it sponsors for the benefit of its employees, and
that no plan with respect to which it is a party in interest has or will acquire
any interest in the Notes.

                                      B-5
<PAGE>

      IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Trust Certificate to be duly executed.

Dated: May 27, 2004                     WFS FINANCIAL 2004-2 OWNER TRUST

                                        By: CHASE MANHATTAN BANK USA, NATIONAL
                                            ASSOCIATION, not in its individual
                                            capacity but solely as Owner Trustee

                                        By:_____________________________________
                                                Authorized Signatory

                  OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION

      This is one of the Trust Certificates referred to in the within-mentioned
Trust Agreement.

JPMORGAN CHASE BANK,                    CHASE MANHATTAN BANK USA,
as Authenticating Agent                 NATIONAL ASSOCIATION, not in its
                                        individual capacity but solely as Owner
                                        Trustee

                                       OR

By:________________________________     By:_____________________________________
        Authorized Signatory                    Authorized Signatory

                                   ASSIGNMENT

      FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto

PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE

________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)

________________________________________________________________________________
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing

                                      B-6
<PAGE>

________________________________________________________________________________
to transfer said Trust Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.

Dated: _______________

Signature Guaranteed:

________________________________________   _____________________________________
NOTICE:  Signature(s) must be guaranteed   NOTICE: The signature to this
by an eligible guarantor institution.      assignment must correspond with the
                                           name of the registered owner as it
                                           appears on the face of the within
                                           Trust Certificate in every
                                           particular, without alteration or
                                           enlargement or any change whatever.

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