Document:

exv10w1

 

Exhibit 10.1

FOURTH AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

          This fourth Amendment to Second Amended and Restated Credit Agreement (this
"Amendment”), dated and effective as of March 31, 2005 (the “Amendment Effective Date”), is by and
among KCS Energy, Inc., a Delaware corporation (the “Borrower”), and each of the Lenders party to
that certain Second Amended and Restated Credit Agreement dated as of November 18, 2003, among the
Borrower, the Lenders party thereto, Bank of Montreal, a Canadian chartered bank acting through
certain of its U.S. branches or agencies, as Agent and Collateral Agent, BNP Paribas, as
Documentation Agent and JPMorgan Chase Bank, N.A. (successor by merger to Bank One, NA), as
Syndication Agent (as amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement”);

          Whereas, the Borrower has requested that the Credit Agreement be amended to allow
each of KeyBank National Association, Mizuho Corporate Bank, Ltd., SunTrust Bank and The Royal Bank
of Scotland plc (the “New Lenders”) to become “Lenders” party to the Credit Agreement, as set forth
herein;

          Whereas, the Borrower has requested that the Credit Agreement be amended to allow The
Royal Bank of Scotland plc to become a Co-Documentation Agent under the Credit Agreement, as set
forth herein;

          Whereas, giving effect to the foregoing transactions, the Borrower has requested that
the Lenders amend the Credit Agreement to (i) increase the Maximum Commitment Amount, (ii) extend
the Commitment Termination Date and Stated Maturity Date and (iii) permit the Borrower to issue and
incur up to $125.0 million in aggregate principal amount of new funded Indebtedness; and

          Whereas, all of the Lenders (including the New Lenders) have agreed to such
amendments subject to the terms and conditions set forth herein.

          Now Therefore, in consideration of the premises and the mutual covenants,
representations and warranties contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows. As used herein, the term “Current Lenders” means the
Lenders identified as the Current Lenders on Schedule I hereto. Capitalized terms used but
not otherwise defined herein shall have the meanings assigned such terms in the Credit Agreement.

     Section 1. Lender Transactions.

          (a) Each Current Lender hereby sells, transfers and assigns to the other Current Lenders and
the New Lenders, and each other Current Lender and each New Lender hereby purchases, assumes and
undertakes from such Current Lender, without recourse and without representation or warranty
(except as provided in this Section 1) a percentage equal to the percentage set forth opposite such
Lender’s name on Schedule I hereto under the column “Commitment Percentages Purchased on
the Amendment Effective Date” of (i) the Commitments, the Loans and rights in respect of
Reimbursement Obligations of such Current Lender and (ii) all related rights, benefits,
obligations, liabilities and indemnities of such Current Lender under and in connection with the
Credit Agreement, each Guaranty, the Mortgages, each other Security Instrument and the other Loan
Documents and all Collateral and other security for the Obligations.

          (b) Upon the effectiveness of this Amendment and by its execution and delivery hereof, each of
the New Lenders shall be a party to the Credit Agreement, shall have all the rights and obligations
of a “Lender” under the Credit Agreement and the other Loan Documents as if each were a signatory
thereto, and shall agree, and does hereby agree, to be bound by the terms and conditions set forth
in the Credit Agreement and the other Loan Documents to which the Lenders are a party, in each
case, as if each were a signatory thereto.

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          (c) Each of the New Lenders hereby represents and warrants as follows: (i) such New Lender
has fully reviewed the terms of the Credit Agreement and the other Loan Documents, copies of which,
together with copies of the documents which were required to be delivered as a condition to the
making of the initial Loans thereunder, have been delivered to such New Lender by the Agent, and
such New Lender has independently and without reliance upon any other Lender, the Agent or the
Collateral Agent, and based on such information as such New Lender has deemed appropriate, made its
own credit analysis and decision to enter into this Amendment and (ii) if such New Lender is not
incorporated, formed or organized under the laws of the United Sates of America or a state thereof,
such New Lender has contemporaneously herewith delivered to the Agent and the Borrower such
documents as are required by Section 4.6 of the Credit Agreement. Each of the New Lenders hereby
(x) appoints and authorizes the Agent and the Collateral Agent to take such action as agent on its
behalf and to exercise such powers and discretion under the Loan Documents as are delegated to the
Agent and the Collateral Agent by the terms thereof, together with such powers and discretion as
are reasonably incidental thereto; and (y) agrees that it will perform in accordance with their
terms all of the obligations that by the terms of the Credit Agreement or any other Loan Document
are required to be performed by it as a Lender.

          (d) Each of the New Lenders and each of the Current Lenders hereby advise each other party
hereto that its respective address for notices, its respective Applicable Lending Office for Base
Rate Loans and its respective Applicable Lending Office LIBO for Rate Loans shall be as set forth
below its name on its respective signature page hereto.

          (e) Upon the effectiveness of this Amendment and by its execution and delivery hereof, Royal
Bank of Scotland shall become a Co-Documentation Agent under the Credit Agreement as if it were a
signatory thereto.

          (f) Renewal Notes. In furtherance of the foregoing transactions, the Borrower shall
execute and deliver to each of the Lenders its replacement promissory notes dated the Amendment
Effective Date in the form of Annexes “A-1” through “A-8” attached hereto (“Renewal Notes”). The
principal amount of each Renewal Note delivered to each Lender shall equal such Lender’s Percentage
Share of the Maximum Commitment Amount. The Renewal Notes shall, upon acceptance by the Lenders,
and as of the Amendment Effective Date constitute replacements and substitutions for the Notes
delivered pursuant to the Credit Agreement. All references in the Credit Agreement and the other
Loan Documents to the Notes shall, from and after the Amendment Effective Date, be deemed to refer
to the Renewal Notes, the same as if such Renewal Notes were the Notes defined, described and
referred to in the Credit Agreement. Upon acceptance of the Renewal Notes, each Current Lender
agrees to return to Borrower its November 18, 2003 Note marked “Renewed and Extended” or to provide
other evidence reasonably satisfactory to the Borrower that the Loans have been renewed (and not
repaid) pursuant to this Amendment and that its existing November 18, 2003 Note has been replaced
in its entirety by its Renewal Note.

          (g) As a result of the transactions effected by this Section 1 and after giving effect to the
other agreements set forth in this Amendment, upon effectiveness of this Amendment, for purposes of
Section 2.1(a) of the Credit Agreement, as amended hereby and for all other purposes of the Credit
Agreement, as amended hereby (including, without limitation, for the purpose of amending the
definition of “Percentage Share”), the Lenders’ respective Percentage Shares and their respective
Revolving Loan Commitments shall be as set forth in Schedule I hereto.

     Section 2. Amendments. The Credit Agreement is hereby amended as follows:

          (a) The definition of “Maximum Commitment Amount” is amended by replacing “$100.0 million”
with “$250.0 million”.

          (b) The definition of “Net Cash Proceeds” is amended by deleting the word “equity”, which
appears in the fourth line thereof in the phrase “such issuance of equity securities”, so that such
phrase shall read “such issuance of securities”.

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          (c) The definition of “Permitted Liens” is amended by replacing clause (f) of such definition
in its entirety with the following:

     (f) (i) the terms of the instruments evidencing the Oil and Gas
Properties of the Borrower or any of its Subsidiaries as in effect
immediately prior to the execution of any Mortgage applicable to such
Property, (ii) existing or future assignments of any Geologist ORRI, (iii)
the terms of the employment or other agreements under which the Borrower or
any Subsidiary is required to assign a Geologist ORRI, (iv) the Star
Production Payments, (v) the Production Payment 2001 Lien and (vi) documents
listed and matters described under the heading “Permitted Encumbrances” or
“Permitted Liens” in an exhibit to any of the Security Instruments;

          (d) The definition of “Stated Maturity Date” is amended by replacing “November 20, 2006” with
“March 31, 2009”.

          (e) The definition of “Permitted Public Debt Refinancing” is amended and restated to read in
its entirety as follows:

     ”Permitted Public Debt Refinancing” shall mean any new
capital markets issuance of equity securities (excluding
common stock but including Preferred Stock) and/or
Indebtedness with respect to which the Net Cash Proceeds of
which are used (a) to pay fees incurred in connection with
such refinancing and (b) to repay (i) any of the Borrower’s
then outstanding Senior Notes (including any Additional
Securities) and any other obligations under the Senior
Indenture and/or (ii) any other Permitted Additional Funded
Indebtedness and which, if issued as Indebtedness, (x) has a
stated or scheduled maturity date no earlier than the later
of (1) the current maturity date of the Indebtedness being
refinanced and (2) September 30, 2009, and (y) is issued
under terms which either are substantially similar to the
terms of the Senior Indenture or are otherwise in a form
approved by the Agent.

          (f) The definition of “Preferred Stock” is amended by replacing “November 30, 2007” with
“September 30, 2009”.

          (g) The definition of “Senior Subordinated Indenture” is hereby deleted from the Credit
Agreement. The Credit Agreement is hereby amended, mutatis mutandis, to delete therefrom all
references to the Senior Subordinated Indenture and the Borrower’s 8? % Senior Subordinated Notes
due 2006.

          (h) The following new definitions of “Additional Securities”, “Geologist ORRI”, “Original
Securities”, “Permitted Additional Funded Indebtedness”, “Senior Indenture”, “Senior Notes” and
“Subordinated Indebtedness” are hereby inserted into the Credit Agreement in the appropriate
alphabetical order:

     ”Additional Securities” has the meaning assigned
thereto in the Senior Indenture.

     ”Geologist ORRI” means an overriding royalty interest
in any Oil and Gas Property that is payable to one or more
geologists employed or retained by the Borrower or any
Subsidiary pursuant to any prior, existing or future
employment agreement, insofar and only insofar as (a) such
overriding royalty interest does not exceed two percent (2%)
of 8/8ths, proportionately reduced to the granting party’s
working or leasehold interest in the Oil and Gas Property in
question and (b) giving effect to such overriding royalty
interest does not cause

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the granting parties’ Net Revenue Interest (as such term is
defined in the applicable Mortgage executed by the Borrower
or the Subsidiary in question) in such Oil and Gas Property
to be less than the scheduled Net Revenue Interest set forth
in the applicable Mortgage.

     ”Original Securities” means the Initial Securities,
together with the Exchange Securities, as each such term is
defined in the Senior Indenture.

     ”Permitted Additional Funded Indebtedness” shall mean
any new issuance or incurrence after March 31, 2005 of
Indebtedness for money borrowed (including any such
Indebtedness which may be issued as senior Indebtedness or
senior Subordinated Indebtedness or Indebtedness convertible
into any equity interests) which either (a)(1) has a stated
or scheduled maturity date no earlier than September 30,
2009, and (2) is issued under terms which either are
substantially similar to the terms of the Senior Indenture
or are otherwise in a form approved by the Agent, or (b) is
issued as Additional Securities.

     ”Senior Indenture” shall mean the Indenture dated as of
April 1, 2004, by and among the Borrower, the Guarantors (as
such term is defined therein) and U.S. Bank National
Association, as Trustee, relating to the Senior Notes, as
hereafter amended or otherwise modified from time to time in
a manner not prohibited hereby.

     ”Senior
Notes” means the Borrower’s 7 1/8 % Senior Notes
due 2012 issued under the Senior Indenture in the original
aggregate principal amount of $175,000,000, together with
any Exchange Securities (within the meaning of the Senior
Indenture) issued thereunder and any Additional Securities.

     ”Subordinated Indebtedness” shall mean Indebtedness for
money borrowed which is subordinated, upon terms approved by
the Agent, in right of payment to the payment of all
Obligations.

          (i) Section 2.7(e) of the Credit Agreement is amended to read in it entirety as follows:

     ”(e) In the event of the issuance by the Borrower or
any of its Subsidiaries of any Indebtedness permitted
pursuant to Section 8.1(d), the then current Borrowing Base
shall be reduced automatically and immediately, on the date
of issuance of such Indebtedness, as follows: (i) until such
time as both (A) the Production Payment 2001 Lien shall have
been released in the manner described in the definition of
“Applicable Margin”, and (B) the Borrowing Base shall have
been redetermined to reflect the first priority of the
Collateral Agent’s Liens (subject to Permitted Liens and
Lien permitted under Section 8.3) under the Mortgages on the
Star Properties, by an amount equal to 20% of the Net Cash
Proceeds (if any), from the aggregate stated principal
amount of such issuance, which are not applied (as evidenced
by a certificate delivered by the Borrower to the Agent,
which certificate the Borrower agrees to deliver promptly
upon such issuance) to refinance any of the Senior Notes or
any outstanding Permitted Additional Funded Indebtedness or
any outstanding Permitted Public Debt Refinancing, and (ii)
thereafter, by an amount equal to 50% of such Net Cash

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Proceeds (if any) which are not so applied (as so evidenced
by a Borrower certificate).”

          (j) Section 5.2(f)(ii) is amended and restated to read in its entirety as follows:

"(ii) the Senior Indenture, or any other indenture governing
any Indebtedness permitted by Section 8.1(d), and such Loan
and all Liens created by any of the Security Instruments
shall not be prohibited thereunder;”

          (k) Section 8.1(c) is amended and restated to read in its entirety as follows:

     ”(c) up to $175.0 million in aggregate principal amount
of Original Securities plus accrued interest thereon;”

          (l) Section 8.1(d) is amended and restated to read in its entirety as follows:

     ”(d) any (i) Permitted Additional Funded Indebtedness;
provided, however, the aggregate outstanding principal
amount thereof shall not exceed $125.0 million and (ii)
Indebtedness issued in a Permitted Public Debt Refinancing;
provided further, however, that the issuance or incurrence
of Permitted Additional Funded Indebtedness, or any portion
of Indebtedness issued in a Permitted Public Debt
Refinancing, the Net Cash Proceeds of which are not applied
to refinance any of the Senior Notes or any outstanding
Permitted Additional Funded Indebtedness or any outstanding
Permitted Public Debt Refinancing, shall automatically and
immediately upon the issuance thereof reduce the then
current Borrowing Base in accordance with Section 2.7(e).”

          (m) Section 8.2(c) is hereby amended and restated to read in its entirety as follows:

     ”(c) obligations under guaranties by and contribution
obligations by and among any Subsidiaries that are
guarantors of Indebtedness under the Senior Indenture, or
any indenture, agreement or other instrument governing or
evidencing Permitted Additional Funded Indebtedness or
Permitted Public Debt Refinancing that constitutes
Indebtedness;”

          (n) Section 8.3(b) is hereby amended and restated to read in its entirety as follows:

     ”(b) Liens on the Net Cash Proceeds of any Permitted
Public Debt Refinancing or any Permitted Additional Funded
Indebtedness pending application to the Indebtedness being
refinanced with such proceeds;”

          (o) Section 8.4(d) is amended and restated to read in its entirety as follows:

”, or (d) the holders of the Senior Notes (including any
Additional Securities) as evidenced by Section 4.5 of the
Senior Indenture, or the holders of any Permitted Additional
Funded Indebtedness or Indebtedness issued in a Permitted
Public Debt Refinancing, as evidenced by an “equal and
ratable negative pledge” provision of the type set forth in
such Section 4.5 or as evidenced by any provision(s)
otherwise approved by the Agent.”

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          (p) Section 8.5 is amended by replacing clause (d) in its entirety with the following:

"(d) (i) sales, transfers or other dispositions by the
Borrower to a Subsidiary Guarantor or by a Subsidiary
Guarantor to the Borrower or another Subsidiary Guarantor,
and (ii) assignments or transfers of any Geologist ORRI.”

          (q) Section 8.12 is amended and restated to read in its entirety as follows:

     “8.12. Other Funded Indebtedness; Production
Payments. With respect to the Senior Indenture or the
Senior Notes (including any Additional Securities) (a)
materially amend or modify any of the terms or provisions
thereof, or (b) otherwise amend or modify any such terms if
such amendment or modifications would have the effect of (i)
accelerating the stated maturity date of the principal
amount thereof, or any scheduled interest payment thereon,
(ii) increasing the principal amount thereof if such
increase would cause the aggregate principal amount
outstanding of all of the Senior Notes, together with
(without duplication) all then outstanding Permitted
Additional Funded Indebtedness and Permitted Public Debt
Refinancing constituting Indebtedness, to exceed $300.0
million in the aggregate, (iii) causing, or purporting to
cause, the Liens securing the Obligations no longer to be
“Permitted Liens” (as defined in the Senior Indenture), or
(iv) providing any Lien for the benefit of the holders
thereof, except to the extent permitted by Section 4.5 or
Article VIII of the Senior Indenture as in effect at March
31, 2005 (it being understood in all events that no Lien
which would cause the Borrower to be required to grant a
Lien under such Section 4.5 may be granted if prohibited by
any term of this Agreement). With respect to any Permitted
Additional Funded Indebtedness and any Permitted Public Debt
Refinancing that constitutes Indebtedness, the Borrower
shall not amend or modify any of the terms or provisions
thereof in a manner that would cause such Indebtedness no
longer to comply with the definition herein of “Permitted
Additional Funded Indebtedness” and “Permitted Public Debt
Refinancing”, respectively. The Borrower shall not make,
and shall not permit any Subsidiary to make, any payments,
whether in cash, evidences of Indebtedness or other
Property, on or with respect to any Subordinated
Indebtedness, unless, but only to the extent, such payment
would be permitted to be made pursuant to and not result in
any violation of the subordination provisions applicable
thereto. The Borrower shall not, and shall not permit any
Subsidiary to, (a) prepay, redeem, purchase or defease (1)
any Subordinated Indebtedness (except with proceeds of a
Permitted Public Debt Refinancing or Permitted Additional
Funded Indebtedness or with the Net Cash Proceeds from the
issuance of equity securities, which, if Preferred Stock, is
issued in compliance with Section 2.7(f)), or (2)
any of the Senior Notes, or any Permitted Additional Funded
Indebtedness or any Indebtedness issued in a Permitted
Public Debt Refinancing which in either case is not
Subordinated Indebtedness, other than, in each such case in
this clause 2, (x) with the Net Cash Proceeds of any
Permitted Additional Funded Indebtedness and/or any
Permitted Public Debt Refinancing, (y) with the Net Cash
Proceeds from the issuance of equity securities, which, if
Preferred Stock, is issued in compliance with Section
2.7(f) or (z) pursuant to a purchase offer required
under the terms of the

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indenture or other agreement governing such Indebtedness, or
(b) renew, rearrange or amend or modify the Production
Payment 2001 Facility other than (i) as required or
contemplated under the express terms of the contracts and
agreements constituting such facility, and (ii) as required
to effect a purchase (in whole or in part) by either the
Borrower or one or more of its Subsidiary Guarantors of one
or both of the Star Production Payments and the termination
or amendment of contracts and agreements relating to the
Star Properties and required by any such purchase.”

          (r) Section 11.1 is amended by inserting the following phrase in clause (b) of the proviso
after the reference to “Article III”:

”, release the Liens created by the Security Instruments
with respect to all or substantially all of the Collateral
or release the Subsidiary Guaranty of any Subsidiary
Guarantor that is a Material Subsidiary”

     Section 3. Borrowing Base. The Agent hereby notifies the Borrower that the Applicable
Lenders have approved a Borrowing Base of $185.0 million as of the Amendment Effective Date, which
shall be the Borrowing Base until the scheduled Borrowing Base redetermination in connection with
the Reserve Report dated as of July 1, 2005 delivered pursuant to Section 7.5(b) of the Credit
Agreement.

     Section 4. Amendment and Ratification. Upon the effectiveness hereof as provided in
Section 5, this Amendment shall be deemed to be an amendment to the Credit Agreement, and the
Credit Agreement, as modified hereby, is hereby ratified, approved and confirmed to be in full
force and effect in each and every respect. Except as expressly provided by the amendments set
forth in Section 2 and the notice provided in Section 3 hereof, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any
Lender, the Agent, the Collateral Agent, any Co-Documentation Agent or the Syndication Agent, nor
constitute a waiver of any provision of any of the Loan Documents. All references to the Credit
Agreement in any other document, instrument, agreement or writing shall hereafter be deemed to
refer to the Credit Agreement as amended hereby.

     Section 5. Conditions to Effectiveness.

          (a) This Amendment shall become effective as of the Amendment Effective Date when the Agent
has confirmed (and has so notified the Borrower) that (i) all conditions precedent set forth in
Section 5(b) have been satisfied and (ii) counterparts hereof have been duly executed by the
Borrower and all of the Lenders and delivered to the Agent. The Agent agrees to give the Borrower
prompt written confirmation of the effectiveness hereof.

          (b) The Borrower shall have delivered, or cause to have been delivered, the instruments
described below duly executed and where applicable, acknowledged by the Borrower or Subsidiary
Guarantor(s) party thereto prior to effectiveness of this Amendment:

     (i) multiple original counterparts of this Amendment, in such number as
may be requested by the Agent;

     (ii) the eight (8) Renewal Notes;

     (iii) amendments to each of the Mortgages, in form reasonably
acceptable to the Agent, to reflect the transactions and agreements
contemplated by this Amendment, in such numbers as may be requested by the
Agent;

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     (iv) certificates of the relevant secretary or assistant secretary of
each of the Borrower and each Subsidiary Guarantor certifying as to the
absence of any change in their respective Articles or Certificates of
Incorporation and bylaws since November 18, 2003 or, in the case of any
which have been amended since November 18, 2003, certifying as to the
correctness and completeness of the copies thereof attached to such
certificate;

     (v) certificates of incumbency and specimen signatures of all officers
of the Borrower and each Subsidiary Guarantor who are authorized to execute
this Amendment and the other Loan Documents contemplated by this Section 5
on behalf of such Persons, each such certificate being executed by the
secretary or an assistant secretary of the Borrower or such Subsidiary
Guarantor, as the case may be;

     (vi) copies of corporate resolutions approving this Amendment and the
other Loan Documents contemplated by this Section 5 and authorizing the
transactions contemplated herein and therein, duly adopted by the respective
boards of directors of the Borrower and each Subsidiary Guarantor,
accompanied by certificates of the secretary or an assistant secretary of
the Borrower or such Subsidiary Guarantor, as the case may be, to the effect
that such copies are true and correct copies of resolutions duly adopted at
a meeting or by unanimous consent of the board of directors of the Borrower
or such Subsidiary Guarantor, as the case may be, and that such resolutions
constitute all the resolutions adopted with respect to such transactions,
have not been amended, modified, or revoked in any respect, and are in full
force and effect as of the date of such certificate;

     (vii) results of searches of the UCC records for the Borrower and each
Subsidiary Guarantor of the State where such Person is located (within the
meaning of the UCC) from a source acceptable to the Agent and reflecting no
Liens against any of the Collateral other than Liens in favor of the Agent
or the Collateral Agent (or their predecessors in interest), other than
Permitted Liens and Liens permitted under Section 8.3 of the Credit
Agreement;

     (viii) the opinion of counsel to the Borrower and the Subsidiary
Guarantors, in the form attached hereto as Annex B, with such changes
thereto as may be approved by the Agent;

     (ix) opinions of special counsel in the states of California,
Louisiana, Michigan, Mississippi, New Mexico, Oklahoma, Texas and Wyoming,
concerning the sufficiency of the Mortgages in each such state, giving
effect to the execution and delivery of the amendments thereto referred to
in clause (iii) of this Section 5(b), in form and substance reasonably
acceptable to the Agent;

     (x) payment of all fees due and payable by the Borrower hereunder and
under the other Loan Documents and reimbursement from the Borrower, or legal
counsel for the Agent shall have received payment from the Borrower, for (i)
all reasonable fees and expenses of counsel to the Agent for which the
Borrower is responsible pursuant to applicable provisions of this Amendment
and for which invoices have been presented as of or prior to the Amendment
Effective Date, and (ii) unless filing and recordation is agreed to be the
responsibility of the Borrower, estimated fees charged by filing officers
and other public officials incurred or to be incurred in connection with the
filing and recordation of the amendments to the Mortgages referred to in
clause (iii) of this Section 5(b), for which invoices have been presented as
of or prior to the Amendment Effective Date;

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     (xi) a letter by an Executive Officer of the Borrower updating the
Supplemental Disclosure Letter, in form and substance acceptable to the
Agent; and

     (xii) a certificate of the Chief Financial Officer of the Borrower
attaching a copy of the Senior Indenture, and certifying that (A) the
incurrence of Indebtedness hereunder up to the Revolving Period Commitment
Amount (after giving effect to the notice in Section 3 hereof) is permitted
as of the date hereof by the Senior Indenture and (B) the Liens created
under the Security Instruments constitute “Permitted Liens” thereunder (as
such term is defined therein), showing all relevant calculations.

     Section 6. Representations and Warranties. The Borrower hereby represents and
warrants that, as of the Amendment Effective Date, after giving effect to this Amendment:

          (a) Due Authorization; Valid Execution and Delivery. The execution and delivery by
the Borrower of this Amendment, the execution and delivery of the consent and agreement hereto by
the Subsidiary Guarantors, the borrowings under the Credit Agreement, as amended hereby, the
execution and delivery by the Borrower of the Renewal Notes and by the Borrower and each of the
Subsidiary Guarantors of the other Loan Documents required under Section 5 hereof to be executed
and delivered in connection herewith, the repayment of the Renewal Notes and interest and fees
provided for in the Renewal Notes and the Credit Agreement, as amended hereby, and the granting,
ratification, confirmation and affirmation of the Liens and the performance of all obligations of
the Borrower and each of the Subsidiary Guarantors under the Loan Documents are within the power of
the Borrower or such Subsidiary Guarantor, as the case may be, have been duly authorized by all
necessary corporate action by the Borrower or such Subsidiary Guarantor, as the case may be, and
this Amendment, the Renewal Notes and the other Loan Documents required under Section 5 hereof to
be executed and delivered in connection herewith have been duly and validly executed and delivered
by the Borrower and each Subsidiary Guarantor, as applicable, and do not (a) require the consent of
any Governmental Authority to be obtained by the Borrower or such Subsidiary Guarantor, as
applicable, (b) contravene or conflict with any Requirement of Law applicable to the Borrower or
such Subsidiary Guarantor, as the case may be, or the articles or certificate of incorporation,
bylaws, or other organizational or governing documents of the Borrower or such Subsidiary
Guarantor, as the case may be, (c) contravene or conflict with any indenture, instrument, or other
agreement, including, without limitation, the Senior Indenture, to which the Borrower or any
Subsidiary Guarantor, as the case may be, is a party or by which any Property of the Borrower or
any Subsidiary Guarantor, as the case may be, may be bound or encumbered, except as could not
reasonably be expected to have a Material Adverse Effect, (d) contravene or conflict with any
indenture, instrument, or other agreement by which any item of Collateral is bound or to which any
such item of Collateral is subject, except as could not reasonably be expected to have a Material
Adverse Effect, or (e) result in or require the creation or imposition of any Lien in, upon or of
any Property of the Borrower or any Subsidiary Guarantor, as the case may be, under any such
indenture, instrument, or other agreement, other than the Loan Documents.

          (b) Valid and Binding Obligations. Upon the execution and delivery of this Amendment,
the Credit Agreement, as amended hereby is, and each other Loan Document to which the Borrower or
any Subsidiary Guarantor, as the case may be, is a party, is the legal, valid, and binding
obligation of the Borrower or such Subsidiary Guarantor which is a party thereto, enforceable
against the Borrower or such Subsidiary Guarantor, as the case may be, in accordance with its
respective terms except as limited by bankruptcy, insolvency or similar laws affecting generally
the rights of creditors and general principles of equity, whether applied by a court of law or
equity.

          (c) Authorizations; Consents. Except for the filings contemplated by the opinions
described in Section 5(b)(ix) above, no authorization, consent, approval, exemption, franchise,
permit, or license of, or filing with, any Governmental Authority or any other Person is required
to be obtained by the Borrower or any Subsidiary of the Borrower to authorize, or is otherwise
required in connection with, the valid execution and delivery by the Borrower or any Subsidiary
Guarantor of this Amendment or any Loan Documents required under Section 5 hereof, the repayment by
the Borrower of the Renewal Notes and interest and fees provided in the Renewal Notes and the
Credit Agreement, as amended hereby, or the performance by the Borrower and the Subsidiary
Guarantors of the Obligations.

9

 

          (d) Existing Indebtedness. As of the Amendment Effective Date, except for
Indebtedness reflected in the most recent annual audited consolidated Financial Statements of the
Borrower and its Subsidiaries delivered to the Agent pursuant to Section 7.3 of the Credit
Agreement, the Borrower and its Subsidiaries have no Indebtedness other than Indebtedness set forth
in Schedule II under the heading “Existing Indebtedness” (which schedule shows the
aggregate principal amounts of the Indebtedness disclosed thereon, other than intercompany
Indebtedness, as of February 28, 2005).

          (e) Gas Contracts. Except (i) as set forth in Schedule II under the heading
“Gas Contracts,” as of the Amendment Effective Date, the Borrower is not obligated, and no
Subsidiary of the Borrower is obligated, in any material respect, by virtue of any prepayment made
under any contract containing a “take-or-pay” or “prepayment” provision or under any similar
agreement to deliver hydrocarbons produced from or allocated to any of the Mortgaged Property at
some future date without receiving full payment therefor within 90 days of delivery, and (ii) as
set forth in Schedule II under the heading “Gas Imbalances”, as of February 28, 2005, none
of the Borrower or any Subsidiary of the Borrower has produced gas, in any material amount, subject
to, and none of the Borrower, any Subsidiary of the Borrower or any of the Mortgaged Properties is
subject to, balancing rights of third parties or subject to balancing duties under governmental
requirements.

          (f) Contingent Obligations. As of the Amendment Effective Date, except for Contingent
Obligations reflected in the most recent annual audited consolidated Financial Statements of the
Borrower and its Subsidiaries delivered to the Agent pursuant to Section 7.3 of the Credit
Agreement, the Borrower has no Contingent Obligations other than those set forth in Schedule
II under the heading “Contingent Obligations”.

          (g) Subsidiaries. As of the Amendment Effective Date, the Borrower has no
Subsidiaries other than those set forth in Exhibit X to the Credit Agreement under the heading
“Subsidiaries”. As of the Amendment Effective Date, none of the Borrower or any Subsidiary of the
Borrower is a general partner or joint venturer or has partnership or joint venture interests in
any Person other than those set forth in such Exhibit X. All of the Subsidiaries listed on such
Exhibit X are wholly-owned (directly or indirectly) by the Borrower.

          (h) Security Instruments. Upon the execution and delivery of the instruments
described in Section 5(b)(iii), the Security Instruments executed and delivered by the Borrower or
any Subsidiary Guarantor as of the Amendment Effective Date create in favor of the Collateral Agent
legal, valid and enforceable Liens in all right, title and interest of such Person in the
Collateral described therein, securing all Obligations under the Credit Agreement, as amended
hereby, and under the Renewal Notes and the other Loan Documents. No filing or other action is
required under the UCC or the Uniform Commercial Code as in effect at the Amendment Effective Date
in the States of Texas and Delaware in order to continue the perfection and priority of the Liens
in favor of the Collateral Agent granted under the Security Instruments described in clauses (ii),
(iii) and (vi) of Section 5.1(a) of the Credit Agreement and heretofore perfected by the filing of
UCC financing statements. Except for the filing and recordation of the instruments described in
Section 5(b)(iii) and except as disclosed in the opinions described in Section 5(b)(ix) above, no
filing or other action is required in order to continue the perfection and priority of the Liens in
favor of the Collateral Agent granted under the Mortgages.

          (i) Bring-Down of Representations and Warranties. The representations and warranties
of the Borrower and each Subsidiary Guarantor contained in the Loan Documents are correct in all
material respects on and as of the Amendment Effective Date (other than those representations and
warranties that expressly relate solely to a specific earlier date, which shall remain correct as
of such earlier date), as though made on and as of such date.

          (j) No Default or Event of Default. No event has occurred and is continuing which
constitutes a Default, an Event of Default or both.

     Section 7. Governing Law. This Amendment and the rights and obligations of the
parties hereunder shall be construed and enforced in accordance with and be governed by the laws of
the State of Illinois.

10

 

     Section 8. Costs and Expenses. The Borrower shall pay all reasonable costs and
expenses incurred by the Agent in connection with the preparation, negotiation and execution of
this Amendment, including, without limitation, the reasonable costs and fees of the Agent’s legal
counsel.

     Section 9. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one and the same
agreement.

     Section 10. Facsimile Transmission of Signature. Any party to this Amendment may
indicate its intention to be bound by its execution and delivery of this Amendment by its signature
to the signature page hereof and the delivery of the signature page hereof to the other parties or
their respective representatives by facsimile transmission or telecopy. The delivery of a party’s
signature on the signature page by facsimile transmission or telecopy shall have the same force and
effect as if such party signed and delivered this Amendment in person.

[Signature Pages Follow]

11

 

          In Witness Whereof, the parties hereto have caused this Amendment to be duly executed
and delivered by their respective duly authorized officers as of the date first set forth above, to
be effective as of the Amendment Effective Date.

	 	 	 	 	 	 	 
	 	 	BORROWER:
	 
	 	 	 	 	 	 
	 	 	KCS ENERGY, INC.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ J.T. Leary
	 	 	 	 	 
	

	 	 	 	Name:
	 	J.T. Leary
	

	 	 	 	 	 	 
	

	 	 	 	Title:
	 	Vice President & CFO
	

	 	 	 	 	 	 

Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	LENDERS:
	 
	 	 	 	 	 	 
	 	 	BANK OF MONTREAL, acting through its U.S.
branches and agencies, including its
Chicago, Illinois branch, as a Lender,
the Agent and Collateral Agent

	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Joseph A. Bliss
	 	 	 	 	 
	

	 	 	 	Name:
	 	Joseph A. Bliss
	

	 	 	 	Title:
	 	Director
	 
	 	 	 	 	 	 
	 	 	Address:	 	115 South LaSalle Street
	

	 	 	 	 	 	11th Floor West
	

	 	 	 	 	 	Chicago, Illinois 60603
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(312) 750-3456
	 
	 	 	 	 	 	 
	 	 	Attention: Terri Perez-Ford, Specialist
	 
	 	 	 	 	 	 
	 	 	with copy to:
	 
	 	 	 	 	 	 
	 	 	Bank of Montreal
	 	 	Houston Agency
	 	 	700 Louisiana Street
	 	 	4400 Bank of America Center
	 	 	Houston, Texas 77002
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(713) 223-4007
	 
	 	 	 	 	 	 
	 	 	Attention: Joseph A. Bliss
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	115 South LaSalle Street,
	

	 	 	 	 	 	11th Floor West
	

	 	 	 	 	 	Chicago, Illinois 60603
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (312) 750-3456
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Terri Perez-Ford, Specialist

Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	BNP PARIBAS, as a Lender and Co-Documentation
Agent
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Douglas R. Liftman
	 	 	 	 	 
	

	 	 	 	Name:
	 	Douglas R. Liftman
	

	 	 	 	 	 	 
	

	 	 	 	Title:
	 	Managing Director
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Polly Schott
	 	 	 	 	 
	

	 	 	 	Name:
	 	Polly Schott
	

	 	 	 	 	 	 
	

	 	 	 	Title:
	 	Vice President
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	919 Third Avenue
	

	 	 	 	 	 	New York, New York 10022
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(212) 841-2683
	 
	 	 	 	 	 	 
	 	 	Attention: Cory Lantin
	 
	 	 	 	 	 	 
	 	 	with a copy to:
	 
	 	 	 	 	 	 
	 	 	BNP Paribas
	 	 	1200 Smith Street, Suite 3100
	 	 	Houston, Texas 77002
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (713) 659-6915
	 	 	Attention: Doug Liftman
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	919 Third Avenue
	

	 	 	 	 	 	New York, New York 10022
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (212) 841-2683
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Cory Lantin

Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A. (successor by merger
to Bank One, NA), as a Lender and Syndication
Agent
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Jo Linda Papadakis
	 	 	 	 	 
	

	 	 	 	Name:
	 	Jo Linda Papadakis
	

	 	 	 	 	 	 
	

	 	 	 	Title:
	 	Associate Director
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	1 Bank One Plaza
	

	 	 	 	 	 	IL1-0634
	

	 	 	 	 	 	Chicago, IL 60670
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (312) 385-7095
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Susan Dugan
	 
	 	 	 	 	 	 
	 	 	with copy to:
	 
	 	 	 	 	 	 
	 	 	Address:	 	600 Travis, 20th Floor
	

	 	 	 	 	 	Houston, Texas 77002
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (713) 216-7770
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Jo Linda Papadakis
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	1 Bank One Plaza
	

	 	 	 	 	 	IL1-0634
	

	 	 	 	 	 	Chicago, IL 60670
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (312) 385-7095
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Susan Dugan

Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	STERLING BANK
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ C. Scott Wilson
	 	 	 	 	 
	

	 	 	 	Name:
	 	C. Scott Wilson
	

	 	 	 	Title:
	 	Senior Vice President
	 
	 	 	 	 	 	 
	 	 	Address:	 	2500 N. Loop West, Suite 100
	

	 	 	 	 	 	Houston, Texas 77092
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(713) 507-7948
	 
	 	 	 	 	 	 
	 	 	Attention:	 	C. Scott Wilson
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	2550 N. Loop West, Suite 100
	

	 	 	 	 	 	Houston, Texas 77092
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (713) 507-7908
	 
	 	 	 	 	 	 
	 	 	Attention: Cheri Allen

Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	THE ROYAL BANK OF SCOTLAND PLC, as a Lender
and Co-Documentation Agent
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ James R. McBride
	 	 	 	 	 
	

	 	 	 	Name:
	 	James R. McBride
	

	 	 	 	Title:
	 	Managing Director
	 
	 	 	 	 	 	 
	 	 	Address:	 	600 Travis, Suite 6500
	

	 	 	 	 	 	Houston, Texas 77002
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(713) 221-2428
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Bobby Poirrier
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	101 Park Avenue, 12th Floor
	

	 	 	 	 	 	New York, New York 10178
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (212) 401-1336
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Mariana Spiridon

Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	KEY BANK NATIONAL ASSOCIATION
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Thomas Rajan
	 	 	 	 	 
	

	 	 	 	Name:
	 	Thomas Rajan
	

	 	 	 	Title:
	 	Vice President
	 
	 	 	 	 	 	 
	 	 	Address:	 	8117 Preston Rd #440
	

	 	 	 	 	 	MailCode — TX-07-14-0600
	

	 	 	 	 	 	Dallas, TX 75225
	 
	 	 	 	 	 	 
	 	 	Facsimile No.:(214) 414-2580
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Thomas Rajan or Jason T. Meek
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	127 Public Square
	

	 	 	 	 	 	Cleveland, OH 44114
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (216) 689-5962
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Yvette Dyson-Owens

Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	MIZUHO CORPORATE BANK, LTD.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Takahiko Ueda
	 	 	 	 	 
	

	 	 	 	Name:
	 	Takahiko Ueda
	 

	 	 	 	Title:
	 	Deputy General Manager
	 
	 	 	Address:	 	1251 Avenue of the Americas
	

	 	 	 	 	 	New York, New York 10020
	 
	 	 	Facsimile No.: (212) 282-4488
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Leon Mo
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	1800 Plaza Ten,
	

	 	 	 	 	 	Harborside Financial Center
	

	 	 	 	 	 	Jersey City, New Jersey 07311
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (201) 626-9141/ 9942
	 
	 	 	 	 	 	 
	 	 	Attention: Hema Divatia

Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	SUNTRUST BANK
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Sean Roche
	 	 	 	 	 
	

	 	 	 	Name:
	 	Sean Roche
	

	 	 	 	Title:
	 	Vice President
	 
	 	 	 	 	 	 
	 	 	Address:	 	303 Peachtree Street
	

	 	 	 	 	 	10th Floor, MC 1929
	

	 	 	 	 	 	Atlanta, GA 30308
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (404) 827-6270
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Jim Warren
	 
	 	 	 	 	 	 
	 	 	Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
	 
	 	 	 	 	 	 
	 	 	Address:	 	303 Peachtree Street
	

	 	 	 	 	 	10th Floor
	

	 	 	 	 	 	Atlanta, GA 30308
	 
	 	 	 	 	 	 
	 	 	Facsimile No.: (404) 230-1940
	 
	 	 	 	 	 	 
	 	 	Attention:	 	Tina Marie Edwards

Fourth Amendment to Second Amended and Restated Credit Agreement

Signature Page

 

 

Consent and Agreement as of the Amendment Effective Date

Each Subsidiary Guarantor executes this Consent and
Agreement to the Fourth Amendment to the Second Amended and
Restated Credit Agreement (the “Fourth Amendment”) in the
space provided below to evidence its consent to the Fourth
Amendment, and each of the undersigned Subsidiary Guarantors
hereby renews and affirms its Subsidiary Guaranty of the
Obligations, giving effect to the Fourth Amendment, and the
Liens created and granted by it in each Security Instrument,
and agrees that the Fourth Amendment shall in no manner
affect or impair such Subsidiary Guaranty or Liens, all of
which continue to be valid and subsisting as the enforceable
obligations of such Subsidiary Guarantor.

	 	 	 	 	 
	SUBSIDIARY GUARANTORS:	 	 
	 
	 	 	 	 
	KCS RESOURCES, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ J.T. Leary

	 	 
	Name:

	 	J.T. Leary

	 	 
	Title:

	 	Vice President & CFO

	 	 
	 
	 	 	 	 
	KCS ENERGY SERVICES, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ J.T. Leary

	 	 
	Name:

	 	J.T. Leary

	 	 
	Title:

	 	Vice President & CFO

	 	 
	 
	 	 	 	 
	MEDALLION CALIFORNIA PROPERTIES COMPANY	 	 
	 
	 	 	 	 
	By:

	 	/s/ J.T. Leary

	 	 
	Name:

	 	J.T. Leary

	 	 
	Title:

	 	Vice President & CFO

	 	 
	 
	 	 	 	 
	PROLIQ, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Frederick Dwyer

	 	 
	Name:

	 	Frederick Dwyer

	 	 
	Title:

	 	Vice President & Secretary

	 	 

Consent and Agreement to the Fourth Amendment to

Second Amended and Restated Credit Agreement

Signature Page

 

 

SCHEDULE I

	 	 	 	 	 	 	 	 	 
	 	 	Commitment	 	 	 
	 	 	Percentages	 	 	 
	 	 	Purchased on the	 	 	 
	 	 	Amendment Effective	 	 	 
	 	 	Date and Percentage	 	Revolving Loan	 
	Lender	 	Shares	 	Commitments	 
	 
	CURRENT LENDERS:
	 	 	 	 	 	 	 	 
	Bank of Montreal
	 	 	17.20	%	 	$	43,000,000	 
	BNP Paribas
	 	 	15.20	%	 	$	38,000,000	 
	JPMorgan Chase Bank, N.A.
(successor by merger to Bank
One, NA)
	 	 	15.20	%	 	$	38,000,000	 
	Sterling Bank
	 	 	9.30	%	 	$	23,250,000	 
	NEW LENDERS:
	 	 	 	 	 	 	 	 
	The Royal Bank of Scotland plc
	 	 	15.20	%	 	$	38,000,000	 
	KeyBank National Association
	 	 	9.30	%	 	$	23,250,000	 
	Mizuho Corporate Bank, Ltd.
	 	 	9.30	%	 	$	23,250,000	 
	SunTrust Bank
	 	 	9.30	%	 	$	23,250,000	 
	 
	 	 	100.000000	%	 	$	250,000,000	 

 

 

Schedule II

Existing Indebtedness

(Section 6(d))

As of February 28, 2005

	 	 	 	 	 
	Production Payment 2001 Obligations
	 	$	14,224,138	 
	($3,101,627 less than reflected in the most
recent annual audited consolidated Financial
Statements of the Borrower and its Subsidiaries
delivered to the Agent).

Intercompany Indebtedness.

 

 

Schedule II

Gas Contracts

(Section 6(e))

None

 

 

ANNEX “A-1”

PROMISSORY NOTE

			
	$43,000,000
	 	March 31, 2005

     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of Bank of
Montreal, a Canadian chartered bank acting through certain of its U.S. branches or subsidiaries
(“Payee”), at the banking quarters in Chicago, Illinois specified in the Credit Agreement (as
hereinafter defined) of Payee, the sum of FORTY THREE MILLION AND NO/100 DOLLARS ($43,000,000), or
so much thereof as may be advanced and outstanding against this Note pursuant to the Second Amended
and Restated Credit Agreement dated as of November 18, 2003 by and among Maker, the Lenders party
thereto, Bank of Montreal, a Canadian chartered bank acting through certain of its U.S. branches
and agencies, as Agent and Collateral Agent (in such capacities, the “Agent”), BNP Paribas, as
Documentation Agent, and JPMorgan Chase Bank, N.A. (successor by merger to Bank One, NA), as
Syndication Agent (in such capacity, the “Syndication Agent”) (the “Original Credit Agreement”; and
as amended, restated, or supplemented through the Fourth Amendment thereto referred to below and as
hereafter amended, restated or supplemented from time to time, the “Credit Agreement”; defined
terms from which are used herein with the meaning assigned thereto in the Credit Agreement, unless
expressly provided to the contrary herein), together with interest at the rates, and subject to the
limitations and calculated as provided in the Credit Agreement. The principal and interest
hereunder shall be due and payable on the dates and in the amounts as are specified in the Credit
Agreement.

     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.

     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.

     Without being limited thereto or thereby, this Note is secured by the Security Instruments.

[SIGNATURES ON NEXT PAGE]

 

 

     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.

	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 

 

 

	 	 	 	 	 

ANNEX “A-2”

PROMISSORY NOTE

			
	$38,000,000
	 	March 31, 2005

     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of BNP Paribas
(“Payee”), at the banking quarters in Chicago, Illinois specified in the Credit Agreement (as
hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting through certain of its
U.S. branches or subsidiaries, the sum of THIRTY EIGHT MILLION AND NO/100 DOLLARS ($38,000,000), or
so much thereof as may be advanced and outstanding against this Note pursuant to the Second Amended
and Restated Credit Agreement dated as of November 18, 2003 by and among Maker, the Lenders party
thereto, Bank of Montreal, a Canadian chartered bank acting through certain of its U.S. branches or
subsidiaries, as Agent and Collateral Agent (in such capacities, the “Agent”), BNP Paribas, as
Documentation Agent, and JPMorgan Chase Bank, N.A. (successor by merger to Bank One, NA), as
Syndication Agent (in such capacity, the “Syndication Agent”) (the “Original Credit Agreement”; and
as amended, restated, or supplemented through the Fourth Amendment thereto referred to below and as
hereafter amended, restated or supplemented from time to time, the “Credit Agreement,” defined
terms from which are used herein with the meaning assigned thereto in the Credit Agreement, unless
expressly provided to the contrary herein), together with interest at the rates, and subject to the
limitations and calculated as provided in the Credit Agreement. The principal and interest
hereunder shall be due and payable on the dates and in the amounts as are specified in the Credit
Agreement.

     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.

     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.

     Without being limited thereto or thereby, this Note is secured by the Security Instruments.

[SIGNATURES ON NEXT PAGE]

 

 

     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.

	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 

 

 

	 	 	 	 	 

ANNEX “A-3”

PROMISSORY NOTE

			
	$38,000,000
	 	March 31, 2005

     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of JPMorgan Chase
Bank, N.A. (successor by merger to Bank One, NA) (“Payee”), at the banking quarters in Chicago,
Illinois specified in the Credit Agreement (as hereinafter defined) of Bank of Montreal, a Canadian
chartered bank acting through certain of its U.S. branches or subsidiaries, the sum of THIRTY EIGHT
MILLION AND NO/100 DOLLARS ($38,000,000), or so much thereof as may be advanced and outstanding
against this Note pursuant to the Second Amended and Restated Credit Agreement dated as of November
18, 2003 by and among Maker, the Lenders party thereto, Bank of Montreal, a Canadian chartered bank
acting through certain of its U.S. branches or subsidiaries, as Agent and Collateral Agent (in such
capacities, the “Agent”), BNP Paribas, as Documentation Agent, and JPMorgan Chase Bank, N.A., as
Syndication Agent (in such capacity, the “Syndication Agent”) (the “Original Credit Agreement”; and
as amended, restated, or supplemented through the Fourth Amendment thereto referred to below and as
hereafter amended, restated or supplemented from time to time, the “Credit Agreement,” defined
terms from which are used herein with the meaning assigned thereto in the Credit Agreement, unless
expressly provided to the contrary herein), together with interest at the rates, and subject to the
limitations and calculated as provided in the Credit Agreement. The principal and interest
hereunder shall be due and payable on the dates and in the amounts as are specified in the Credit
Agreement.

     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.

     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.

     Without being limited thereto or thereby, this Note is secured by the Security Instruments.

[SIGNATURES ON NEXT PAGE]

 

 

     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.

	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 

 

 

	 	 	 	 	 

ANNEX “A-4”

PROMISSORY NOTE

			
	$23,250,000
	 	March 31, 2005

     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of Sterling Bank
(“Payee”), at the banking quarters in Chicago, Illinois specified in the Credit Agreement (as
hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting through certain of its
U.S. branches or subsidiaries, the sum of TWENTY THREE MILLION TWO HUNDRED AND FIFTY THOUSAND AND
NO/100 DOLLARS ($23,250,000), or so much thereof as may be advanced and outstanding against this
Note pursuant to the Second Amended and Restated Credit Agreement dated as of November 18, 2003 by
and among Maker, the Lenders party thereto, Bank of Montreal, a Canadian chartered bank acting
through certain of its U.S. branches or subsidiaries, as Agent and Collateral Agent (in such
capacities, the “Agent”), BNP Paribas, as Documentation Agent, and JPMorgan Chase Bank, N.A.
(successor by merger to Bank One, NA), as Syndication Agent (in such capacity, the “Syndication
Agent”) (the “Original Credit Agreement”; and as amended, restated, or supplemented through the
Fourth Amendment thereto referred to below and as hereafter amended, restated or supplemented from
time to time, the “Credit Agreement,” defined terms from which are used herein with the meaning
assigned thereto in the Credit Agreement, unless expressly provided to the contrary herein),
together with interest at the rates, and subject to the limitations and calculated as provided in
the Credit Agreement. The principal and interest hereunder shall be due and payable on the dates
and in the amounts as are specified in the Credit Agreement.

     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.

     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.

     Without being limited thereto or thereby, this Note is secured by the Security Instruments.

[SIGNATURES ON NEXT PAGE]

 

 

     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.

	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 

 

 

	 	 	 	 	 

ANNEX “A-5”

PROMISSORY NOTE

			
	$38,000,000
	 	March 31, 2005

     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of The Royal Bank
of Scotland plc (“Payee”), at the banking quarters in Chicago, Illinois specified in the Credit
Agreement (as hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting through
certain of its U.S. branches or subsidiaries, the sum of THIRTY EIGHT MILLION AND NO/100 DOLLARS
($38,000,000), or so much thereof as may be advanced and outstanding against this Note pursuant to
the Second Amended and Restated Credit Agreement dated as of November 18, 2003 by and among Maker,
the Lenders party thereto, Bank of Montreal, a Canadian chartered bank acting through certain of
its U.S. branches or subsidiaries, as Agent and Collateral Agent (in such capacities, the “Agent”),
BNP Paribas, as Documentation Agent, and JPMorgan Chase Bank, N.A. (successor by merger to Bank
One, NA), as Syndication Agent (in such capacity, the “Syndication Agent”) (the “Original Credit
Agreement”; and as amended, restated, or supplemented through the Fourth Amendment thereto referred
to below and as hereafter amended, restated or supplemented from time to time, the “Credit
Agreement,” defined terms from which are used herein with the meaning assigned thereto in the
Credit Agreement, unless expressly provided to the contrary herein), together with interest at the
rates, and subject to the limitations and calculated as provided in the Credit Agreement. The
principal and interest hereunder shall be due and payable on the dates and in the amounts as are
specified in the Credit Agreement.

     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.

     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.

     Without being limited thereto or thereby, this Note is secured by the Security Instruments.

[SIGNATURES ON NEXT PAGE]

 

 

     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.

	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 

 

 

	 	 	 	 	 

ANNEX “A-6”

PROMISSORY NOTE

			
	$23,250,000
	 	March 31, 2005

     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of KeyBank
National Association (“Payee”), at the banking quarters in Chicago, Illinois specified in the
Credit Agreement (as hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting
through certain of its U.S. branches or subsidiaries, the sum of TWENTY THREE MILLION TWO HUNDRED
AND FIFTY THOUSAND AND NO/100 DOLLARS ($23,250,000), or so much thereof as may be advanced and
outstanding against this Note pursuant to the Second Amended and Restated Credit Agreement dated as
of November 18, 2003 by and among Maker, the Lenders party thereto, Bank of Montreal, a Canadian
chartered bank acting through certain of its U.S. branches or subsidiaries, as Agent and Collateral
Agent (in such capacities, the “Agent”), BNP Paribas, as Documentation Agent, and JPMorgan Chase
Bank, N.A. (successor by merger to Bank One, NA), as Syndication Agent (in such capacity, the
“Syndication Agent”) (the “Original Credit Agreement”; and as amended, restated, or supplemented
through the Fourth Amendment thereto referred to below and as hereafter amended, restated or
supplemented from time to time, the “Credit Agreement,” defined terms from which are used herein
with the meaning assigned thereto in the Credit Agreement, unless expressly provided to the
contrary herein), together with interest at the rates, and subject to the limitations and
calculated as provided in the Credit Agreement. The principal and interest hereunder shall be due
and payable on the dates and in the amounts as are specified in the Credit Agreement.

     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.

     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.

     Without being limited thereto or thereby, this Note is secured by the Security Instruments.

[SIGNATURES ON NEXT PAGE]

 

 

     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.

	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 

 

 

	 	 	 	 	 

ANNEX “A-7”

PROMISSORY NOTE

			
	$23,250,000
	 	March 31, 2005

     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of Mizuho
Corporate Bank, Ltd. (“Payee”), at the banking quarters in Chicago, Illinois specified in the
Credit Agreement (as hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting
through certain of its U.S. branches or subsidiaries, the sum of TWENTY THREE MILLION TWO HUNDRED
AND FIFTY THOUSAND AND NO/100 DOLLARS ($23,250,000), or so much thereof as may be advanced and
outstanding against this Note pursuant to the Second Amended and Restated Credit Agreement dated as
of November 18, 2003 by and among Maker, the Lenders party thereto, Bank of Montreal, a Canadian
chartered bank acting through certain of its U.S. branches or subsidiaries, as Agent and Collateral
Agent (in such capacities, the “Agent”), BNP Paribas, as Documentation Agent, and JPMorgan Chase
Bank, N.A. (successor by merger to Bank One, NA), as Syndication Agent (in such capacity, the
“Syndication Agent”) (the “Original Credit Agreement”; and as amended, restated, or supplemented
through the Fourth Amendment thereto referred to below and as hereafter amended, restated or
supplemented from time to time, the “Credit Agreement,” defined terms from which are used herein
with the meaning assigned thereto in the Credit Agreement, unless expressly provided to the
contrary herein), together with interest at the rates, and subject to the limitations and
calculated as provided in the Credit Agreement. The principal and interest hereunder shall be due
and payable on the dates and in the amounts as are specified in the Credit Agreement.

     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.

     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.

     Without being limited thereto or thereby, this Note is secured by the Security Instruments.

[SIGNATURES ON NEXT PAGE]

 

 

     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.

	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 

 

 

	 	 	 	 	 

ANNEX “A-8”

PROMISSORY NOTE

			
	$23,250,000
	 	March 31, 2005

     FOR VALUE RECEIVED, the undersigned (“Maker,”) promises to pay to the order of SunTrust Bank
(“Payee”), at the banking quarters in Chicago, Illinois specified in the Credit Agreement (as
hereinafter defined) of Bank of Montreal, a Canadian chartered bank acting through certain of its
U.S. branches or subsidiaries, the sum of TWENTY THREE MILLION TWO HUNDRED AND FIFTY THOUSAND AND
NO/100 DOLLARS ($23,250,000), or so much thereof as may be advanced and outstanding against this
Note pursuant to the Second Amended and Restated Credit Agreement dated as of November 18, 2003 by
and among Maker, the Lenders party thereto, Bank of Montreal, a Canadian chartered bank acting
through certain of its U.S. branches or subsidiaries, as Agent and Collateral Agent (in such
capacities, the “Agent”), BNP Paribas, as Documentation Agent, and JPMorgan Chase Bank, N.A.
(successor by merger to Bank One, NA), as Syndication Agent (in such capacity, the “Syndication
Agent”) (the “Original Credit Agreement”; and as amended, restated, or supplemented through the
Fourth Amendment thereto referred to below and as hereafter amended, restated or supplemented from
time to time, the “Credit Agreement,” defined terms from which are used herein with the meaning
assigned thereto in the Credit Agreement, unless expressly provided to the contrary herein),
together with interest at the rates, and subject to the limitations and calculated as provided in
the Credit Agreement. The principal and interest hereunder shall be due and payable on the dates
and in the amounts as are specified in the Credit Agreement.

     Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder.

     This Note is issued and delivered under the Fourth Amendment to Second Amended and Restated
Credit Agreement of even date herewith among Maker, the Lenders party thereto, the Agent, BNP
Paribas and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the Syndication Agent
and represents a renewal, replacement and extension of the Indebtedness heretofore represented by
the Notes issued by Maker under the Original Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any
part of this Note without the payment of any premium or fee, but such payment shall not, until this
Note is fully paid and satisfied, excuse the payment as it becomes due of any other payment on this
Note.

     Without being limited thereto or thereby, this Note is secured by the Security Instruments.

[SIGNATURES ON NEXT PAGE]

 

 

     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.

	 	 	 	 	 
	 	KCS ENERGY, INC.

 	 
	 	By:<PAGE>

                                                                   EXHIBIT 10.22

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

                              AMENDED AND RESTATED
                            REVOLVING CREDIT AND TERM
                                 LOAN AGREEMENT

                           Dated as of January 7, 2004

                                     BETWEEN

                            MEXICAN RESTAURANTS, INC.

                                       AND

                               FLEET NATIONAL BANK

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

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                 <C>
ARTICLE 1. DEFINITIONS................................................................................1

ARTICLE 2. THE CREDIT FACILITIES.....................................................................13
2.1   Revolving Loans................................................................................13
2.2   Term Loan......................................................................................13
2.3   Payment and Prepayment of Loans................................................................14
2.4   Lender's Records of Loan Activity..............................................................15
2.5   Interest.......................................................................................16
2.6   Applicable Interest Rate Margins...............................................................18
2.7   Default Interest...............................................................................18
2.8   Letters of Credit..............................................................................19
2.9   Changed Circumstances..........................................................................19
2.10  Fees and Charges...............................................................................21

ARTICLE 3. REPRESENTATIONS AND WARRANTIES............................................................21
3.1   Organization and Qualification.................................................................22
3.2   Corporate Authority; Non-Contravention.........................................................22
3.3   Valid Obligations; Approvals and Consents......................................................22
3.4   Title to Properties; Absence of Liens..........................................................23
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...........................................................................25
3.11  Contracts with Affiliates, Etc.................................................................25
3.12  Disclosure.....................................................................................25
3.13  Collateral.....................................................................................25
3.14  Subsidiaries...................................................................................26

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

ARTICLE 5. COVENANTS.................................................................................27
5.1   Financial Statements and Other Reporting Requirements..........................................27
5.2   Conduct of Business............................................................................29
5.3   Maintenance and Insurance......................................................................30
5.4   Taxes..........................................................................................30
</TABLE>

<PAGE>

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

ARTICLE 6. EVENTS OF DEFAULT; LENDER'S RIGHTS........................................................37
6.1   Events of Default..............................................................................37
6.2   Lender's Rights................................................................................41

ARTICLE 7. SET OFF; PARTICIPATIONS...................................................................41
7.1.  Right of Set Off...............................................................................41
7.2   Rights of Participants.........................................................................41

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

<PAGE>

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)

<PAGE>

                              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 service group which

                                      -1-
<PAGE>

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.

                                      -2-
<PAGE>

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, 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

                                      -3-
<PAGE>

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.

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

                                      -4-
<PAGE>

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.

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

                                      -5-
<PAGE>

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 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

                                      -6-
<PAGE>

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.

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"

                                      -7-
<PAGE>

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 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

                                      -8-
<PAGE>

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.

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

                                      -9-
<PAGE>

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.

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.

                                      -10-
<PAGE>

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).

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

                                      -11-
<PAGE>

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.

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.

                                      -12-

<PAGE>

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 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.

                                      -13-
<PAGE>

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 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

                                      -14-
<PAGE>

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 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

                                      -15-
<PAGE>

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 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.

                                      -16-
<PAGE>

         (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 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

                                      -17-
<PAGE>

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.

--------------------------------------------------------------------------------
                                     TABLE 1
                        APPLICABLE INTEREST RATE MARGINS
--------------------------------------------------------------------------------
                                          Level I               Level II
--------------------------------------------------------------------------------
                                                              greater than
Maximum Consolidated                     less than             or equal to
Leverage Ratio:                            1.25                   1.25
--------------------------------------------------------------------------------
Applicable Prime Rate Margin               2.00%                  2.50%
--------------------------------------------------------------------------------
Applicable LIBOR Margin                    4.00%                  4.50%
--------------------------------------------------------------------------------

         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.

                                      -18-

<PAGE>

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; 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

                                      -19-
<PAGE>

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 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.

                                      -20-
<PAGE>

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 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:

                                      -21-
<PAGE>

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.

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

                                      -22-
<PAGE>

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 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

                                      -23-
<PAGE>

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 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,

                                      -24-
<PAGE>

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 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.

                                      -25-
<PAGE>

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 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

                                      -26-
<PAGE>

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:

         (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

                                      -27-
<PAGE>

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 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

                                      -28-
<PAGE>

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

         (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.

                                      -29-
<PAGE>

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.

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

                                      -30-
<PAGE>

(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
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

                                      -31-
<PAGE>

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 $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

                                      -32-
<PAGE>

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 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

                                      -33-
<PAGE>

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.

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.

                                      -34-
<PAGE>
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).

         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

                                      -35-
<PAGE>
be carried over to the next fiscal year, subject in all cases to the restriction
set forth in clause (b) above.

---------------------------------------------- ---------------------------
                  PERIOD                               MAXIMUM AMOUNT
---------------------------------------------- ---------------------------
    Fiscal Year 2003 and Thereafter                     $2,600,000
---------------------------------------------- ---------------------------

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.

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.

                                      -36-
<PAGE>
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 (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

                                      -37-
<PAGE>
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 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

                                      -38-
<PAGE>
         (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 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

                                      -39-
<PAGE>
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 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.

                                      -40-
<PAGE>
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 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

                                      -41-
<PAGE>
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 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.

                                      -42-
<PAGE>
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 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

                                      -43-
<PAGE>
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 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

                                      -44-
<PAGE>
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 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

                                      -45-
<PAGE>
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.

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

                                      -46-
<PAGE>
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]

                                      -47-
<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:

                                      -48-

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