FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

Exhibit 10.1

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
among

STERLING CONSTRUCTION COMPANY, INC.,
STERLING GENERAL, INC.,
STERLING HOUSTON HOLDINGS, INC.
and
TEXAS STERLING CONSTRUCTION, L.P.
as the Borrowers,

COMERICA BANK,
as Agent

and
The Lenders Party Hereto

$35,000,000
SENIOR CREDIT FACILITY

INDEX OF CLOSING DOCUMENTS

PARTIES

Sterling Construction Company, Inc., a Delaware corporation (“SCC”)
Sterling General, Inc., a Delaware corporation (“SGI”)
Sterling Houston Holdings, Inc., a Delaware corporation (“SHH”)
Texas Sterling Construction, L.P., a Texas limited partnership (“TSC”)

Comerica Bank, as administrative agent (“Administrative Agent”)
Comerica Bank as Lender and L/C Issuer (“Comerica”)

COUNSEL

Thompson & Knight LLP, Administrative Agent’s counsel

CLOSING DOCUMENTS

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT CLOSED MAY 10, 2006. PREVIOUSLY EXECUTED GUARANTIES, SECURITY AGREEMENTS AND MORTGAGES CONTINUE IN EFFECT TO SECURE OBLIGATION UNDER FOURTH AMENDED AND RESTATED CREDIT AGREEMENT.

CREDIT AGREEMENT

1. Fourth Amended and Restated Credit Agreement

Addenda

Defined Terms Addendum
Financial Covenants Addendum
Loan Terms, Conditions and Procedures Addendum

Exhibits

Exhibit A Form of Borrowing Base Certificate
Exhibit B Form of Compliance Certificate
Exhibit C Form of Request for Advance (Revolving Loan)
Exhibit D Form of Request for Advance (Third Lien Real Estate Loan)

Schedules
3.14 — Employee Benefit Plans
3.17 — Environmental Disclosures
3.19 — Equity Ownership
3.20 — Intellectual Property
 5.2 — Names
 5.4 — Debt
 5.5 — Liens

CORPORATE DOCUMENTS

   Corporate Resolutions and Incumbency Certification

2. Corporate Resolutions and Incumbency Certification — SCC
3. Corporate Resolutions and Incumbency Certification — SGI
4. Corporate Resolutions and Incumbency Certification — SHH
5. Partnership Authority to Procure Loans — TSC

State Certified Organizational Documents

6. Certificate of Incorporation from Delaware — SCC
7. Certificate of Incorporation from Delaware — SGI
8. Certificate of Incorporation from Delaware — SHH
9. Partnership Authority to Procure Loans — TSC

   Certificates of Existence and Good Standing

10. SCC — Delaware
11. SGI — Delaware
12. SHH — Delaware
13. TSC — Texas

Certificates of Foreign Qualification

14. SGI—Texas

   NOTES

15. $35,000,000.00 Revolving Note payable to Comerica Bank

16. $1,500,000.00 Third Lien Real Estate Note payable to Comerica Bank

MORTGAGES

17. Second Modification Agreement — TSC

SECURITY AGREEMENTS

18. Security Agreement — SCC
19. Security Agreement — SGI
20. Security Agreement — SHH
21. Supplemental Security Agreement — TSC
22. Amended and Restated Supplemental Security Agreement (Pledge) — SCC
23. Security Agreement (Pledge) — SGI

24. Security Agreement (Pledge) — SHH
25. Stock Certificate No. ______ for ______ shares of SGI common stock
26. Stock Power for SGI stock — SCC

CLOSING CERTIFICATES AND OTHER CLOSING DOCUMENTS

27. No Oral Agreements
28. Business Purpose Statement
29. Borrowers’ Authorization
30. Patriot Act Notice

LIEN SEARCHES

31. Lien Search — SCC from Delaware
32. Lien Search — SGI from Delaware
33. Lien Search — SHH from Delaware

34. Lien Search — TSC from Texas

UCC FILINGS

35. SCC Amendment filed with the Delaware Secretary of State 5/23/06, file no. 61735901
36. SGI filed with the Delaware Secretary of State 6/1/06, file no. 61855543
37. SHH Amendment filed with the Delaware Secretary of State 5/23/06, file no. 61735950

MISCELLANEOUS

38. Attorney Closing Letter
39. Certificates of Insurance and Endorsements
40. Closing Checklist

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

BY AND BETWEEN

COMERICA BANK (“Agent”),

CERTAIN FINANCIAL INSTITUTIONS NAMED HEREIN,

(the “Banks”),

AND

STERLING CONSTRUCTION COMPANY, INC.

STERLING GENERAL, INC.

STERLING HOUSTON HOLDINGS, INC.

AND

TEXAS STERLING CONSTRUCTION L.P.

(collectively, “Borrowers”)

$35,000,000 Revolving Facility
$1,500,000 Third Lien Real Estate Loan Facility

Dated May 10, 2006

INDEX

ADDENDA:

Defined Terms Addendum
Financial Covenants Addendum
Loan Terms, Conditions and Procedures Addendum

EXHIBITS:

Exhibit A — Form of Borrowing Base Certificate
Exhibit B — Form of Compliance Certificate
Exhibit C — Form of Request for Advance (Revolving Loan)
Exhibit D — Form of Request for Advance (Third Lien Real Estate Loan)

SCHEDULES:

Schedule 3.14 Employee Benefit Plans
Schedule 3.17 Environmental Disclosures
Schedule 3.19 Equity Ownership
Schedule 3.20 Intellectual Property
Schedule 5.2 Names
Schedule 5.4 Debt
Schedule 5.5 Liens

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

     THIS FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”) is made and delivered effective as of the 10th day of May, 2006, by and among STERLING CONSTRUCTION COMPANY, INC., a Delaware corporation (“Parent”), STERLING GENERAL, INC., a Delaware corporation ( “Sterling General”), STERLING HOUSTON HOLDINGS, INC., a Delaware corporation (“SHH”), TEXAS STERLING CONSTRUCTION L.P., a Texas limited partnership (“Texas Sterling”) (Parent, Sterling General, SHH and Texas Sterling being collectively called the “Borrowers” and individually called “Borrower”), and COMERICA BANK (“Comerica”), individually as a Bank and as agent (in such capacity, “Agent”) for all Banks hereafter a party hereto (individually, together with Comerica, a “Bank” and collectively, together with Comerica, the “Banks”).

RECITALS

     A. This Agreement is entered into for purposes of renewing, extending and modifying the credit facilities and extensions of credit made pursuant to that certain Third Amended and Restated Revolving Credit Loan Agreement dated effective as of December 23, 2004 entered into by Comerica and Texas Sterling, as borrower, as the same has heretofore been amended, restated and modified from time to time (the “Original Credit Agreement”) and amending and restating the Original Credit Agreement in its entirety.

     B. Such credit facilities and extensions of credit are made available to Borrowers by Banks subject to the terms and conditions set forth herein and in every other Loan Document.

AGREEMENT

     NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, Borrowers, Agent and Banks agree as follows:

SECTION 1. DEFINITIONS

     1.1 Defined Terms. The terms as used in this Agreement shall have the meanings assigned to such terms herein and in the Defined Terms Addendum.

     1.2 Accounting Terms. All accounting terms not specifically defined in this Agreement shall be determined and construed in accordance with GAAP.

     1.3 Singular and Plural. Where the context herein requires, the singular number shall be deemed to include the plural, the masculine gender shall include the feminine and neuter genders, and vice versa.

SECTION 2. TERMS, CONDITIONS AND PROCEDURES FOR BORROWING

     Subject to the terms, conditions and procedures of this Agreement and each other Loan Document including, but not limited to, the terms, conditions and procedures set forth in the Defined Terms Addendum and Loan Terms, Conditions and Procedures Addendum, Banks agree to make credit available to the Borrowers or any individual Borrower on such dates and in such

amounts as the Borrowers or any individual Borrower shall request from time to time or as may otherwise be agreed to by Borrowers, Agent and Banks.

SECTION 3. REPRESENTATIONS AND WARRANTIES

     Borrowers represent and warrant, and such representations and warranties shall be deemed to be continuing representations and warranties during the entire life of this Agreement, and so long as any Bank shall have any commitment or obligation to make any Loans or issue any Letters of Credit hereunder, and so long as any Indebtedness remains unpaid and outstanding under any Loan Document, as follows:

     3.1 Authority. Parent and SHH are each a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and each is duly qualified and authorized to do business in each other jurisdiction in which the character of its assets or the nature of its business makes such qualification necessary. Texas Sterling is a limited partnership and its general partner, Sterling General, is a corporation, each of which is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and each is duly qualified and authorized to do business in each other jurisdiction in which the character of its assets or the nature of its business makes such qualification necessary.

     3.2 Due Authorization. Each Loan Party has all requisite power and authority to execute, deliver and perform its obligations under each Loan Document to which it is a party or is otherwise bound, all of which have been duly authorized by all necessary action, and are not in contravention of law or the terms of any Loan Party’s organizational or other governing documents.

     3.3 Title to Property. Each Loan Party has good title to all property and assets purported to be owned by it, including those assets identified on the Financial Statements most recently delivered by Borrowers to Bank.

     3.4 Encumbrances. There are no security interests or other Liens or encumbrances on, and no financing statements on file with respect to, any of the property or assets of any Loan Party, except for Permitted Encumbrances.

     3.5 Subsidiaries. Borrowers have no Subsidiaries, except as set forth in Schedule 3.19 which Schedule sets forth the percentage of ownership of Borrowers in each such Subsidiary as of the date of this Agreement.

     3.6 Taxes. Each Loan Party has filed, on or before their respective due dates, all federal, state, local and foreign tax returns which are required to be filed, or has obtained extensions for filing such tax returns, and is not delinquent in filing such returns in accordance with such extensions, and has paid all taxes which have become due pursuant to those returns or pursuant to any assessments received by any such party, as the case may be, to the extent such taxes have become due, except to the extent such tax payments are being actively and diligently contested in good faith by appropriate proceedings, and if requested by Bank, have been bonded or reserved in an amount and manner satisfactory to Bank.

     3.7 No-Defaults. There exists no default (or event which, with the giving of notice or passage of time, or both, would result in a default) under the provisions of any instrument or

agreement evidencing, governing, securing or otherwise relating to any Debt of any Loan Party or pertaining to any of the Permitted Encumbrances.

     3.8 Enforceability of Agreement and Loan Documents. Each Loan Document has been duly executed and delivered by duly authorized officer(s) or other representative(s) of each Loan Party, and constitutes the valid and binding obligations of each Loan Party, enforceable in accordance with its terms, except to the extent that enforcement thereof may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors’ rights generally at the time in effect.

     3.9 Non-contravention. The execution, delivery and performance by each Loan Party of the Loan Documents to which such Loan Party is a party or otherwise bound, are not in contravention of the terms of any indenture, agreement or undertaking to which any such Loan Party is a party or by which it is bound, except to the extent that such terms have been waived or that failure to comply with any such terms would not have a Material Adverse Effect.

     3.10 Actions, Suits, Litigation or Proceedings. There are no actions, suits, litigation or proceedings, at law or in equity, and no proceedings before any arbitrator or by or before any Governmental Authority, pending, or, to the actual knowledge of Borrowers, threatened against or affecting any Loan Party, which, if adversely determined, could materially impair the right of any Loan Party to carry on its business substantially as now conducted or would have a Material Adverse Effect. No Loan Party is under investigation by, or is operating under any restrictions imposed by, any Governmental Authority.

     3.11 Compliance with Laws. Each Loan Party has complied with all Governmental Requirements, including, without limitation, Environmental Laws, to the extent that failure to so comply could have a Material Adverse Effect.

     3.12 Consents, Approvals and Filings, Etc. Except as have been previously obtained or as otherwise expressly provided in this Agreement, no authorization, consent, approval, license, qualification or formal exemption from, nor any filing, declaration or registration with, any Governmental Authority and no material authorization, consent or approval from any other Person, is required in connection with the execution, delivery and performance by each Loan Party of any Loan Document to which it is a party. All such authorizations, consents, approvals, licenses, qualifications, exemptions, filings, declarations and registrations which have previously been obtained or made, as the case may be, are in full force and effect and are not the subject of any attack, or to the knowledge of Borrowers, any threatened attack, in any material respect, by appeal, direct proceeding or otherwise.

     3.13 Contracts, Agreements and Leases. To Borrowers’ knowledge, no Loan Party is in default (beyond any applicable period of grace or cure) in complying with any provision of any material contract, agreement, indenture, lease or instrument to which it is a party or by which it or any of its properties or assets are bound, where such default would have a Material Adverse Effect. To each Borrower’s knowledge, each such contract, commitment, undertaking, agreement, indenture and instrument is in full force and effect and is valid and legally binding.

     3.14 ERISA. Except as shown on Schedule 3.14, no Loan Party maintains or contributes to any employee benefit plan subject to Title IV of ERISA. Furthermore, no Loan Party has incurred any accumulated funding deficiency within the meaning of ERISA or incurred

any liability to the PBGC in connection with any employee benefit plan established or maintained by such Loan Party, and no reportable event or prohibited transaction, as defined in ERISA, has occurred with respect to such plans.

     3.15 No Investment Company. No Loan Party is an “investment company” within the meaning of the Investment Company Act of 1940, as amended, nor is any Loan Party “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

     3.16 No Margin Stock. No Loan Party is engaged principally, or as one of its important activities, directly or indirectly, in the business of extending credit for the purpose of purchasing or carrying margin stock, and none of the proceeds of any of the Loans will be used, directly or indirectly, to purchase or carry any margin stock or made available by any Loan Party in any manner to any other Person to enable or assist such Person in purchasing or carrying margin stock, or otherwise used or made available for any other purpose which might violate the provisions of Regulations T, U, or X of the Board of Governors of the Federal Reserve System. Terms for which meanings are provided in Regulation U of said Board of Governors or any regulations substituted therefor, as are from time to time in effect, are used in this Section with such meanings, and these representations and warranties shall be immediately effective.

     3.17 Environmental Representations.

	(a)		No Loan Party has received any notice of any violation of any Environmental Law(s); and no Loan Party is a party to any litigation or administrative proceeding, nor, so far as is known by Borrowers, is any litigation or administrative proceeding threatened against any Loan Party which, in any case, (i) asserts or alleges that any Loan Party violated any Environmental Law(s), (ii) asserts or alleges that any Loan Party is required to clean up, remove or take any other remedial or response action due to the disposal, depositing, discharge, leaking or other release of any Hazardous Materials, or (iii) asserts or alleges that any Loan Party is required to pay all or a portion of any past, present or future clean-up, removal or other remedial or response action which arises out of or is related to the disposal, depositing, discharge, leaking or other release of any Hazardous Materials by any Loan Party, and which, either singularly or in the aggregate, could have a Material Adverse Effect.
	(b)		To Borrowers’ knowledge, there are no conditions existing currently which could subject any Loan Party to damages, penalties, injunctive relief or clean-up costs under any applicable Environmental Law(s), or which require, or are likely to require, clean-up, removal, remedial action or other response pursuant to any applicable Environmental Law(s) by any Loan Party, and which, in any case, either singularly or in aggregate, could have a Material Adverse Effect.
	(c)		No Loan Party is subject to any judgment, decree, order or citation related to or arising out of any applicable Environmental Law(s), which, either singularly or in the aggregate, could have a Material Adverse Effect; and, to Borrowers’ knowledge, no Loan Party has been named or listed as a

			potentially responsible party by any Governmental Authority in any matter arising under any applicable Environmental Law(s), except as disclosed in Schedule 3.17, and, in the event that any such matters are disclosed in said Schedule 3.17 they will not, either singularly or in the aggregate, have a Material Adverse Effect.
	(d)		Each Loan Party has all permits, licenses and approvals required under applicable Environmental Laws, where the failure to so obtain or maintain any such permits, licenses or approvals could have a Material Adverse Effect.

     3.18 Accuracy of Information. The Financial Statements previously furnished to Bank have been prepared in accordance with GAAP and fairly present the financial condition of Borrowers and, as applicable, the consolidated financial condition of Borrowers and such other Person(s) as such Financial Statements purport to present, and the results of their respective operations as of the dates and for the periods covered thereby; and since the date(s) of said Financial Statements, there has been no material adverse change in the financial condition of Borrowers or any other Person covered by such Financial Statements. No Loan Party, nor any such other Person has any material contingent obligations, liabilities for taxes, long-term leases or long-term commitments not disclosed by, or reserved against in, such Financial Statements. Each Loan Party is solvent, able to pay its respective debts as they mature, has capital sufficient to carry on its business and has assets the fair market value of which exceed its liabilities, and no Loan Party will be rendered insolvent, under-capitalized or unable to pay debts generally as they become due by the execution or performance of any Loan Document to which it is a party or by which it is otherwise bound.

     3.19 Equity Ownership. Schedule 3.19 sets forth the equity ownership of all Subsidiaries of Parent. There are no outstanding options, warrants or rights to purchase, nor any agreement for the subscription, purchase or acquisition of, any equity ownership interests of any Loan Party, except described in Schedule 3.19.

     3.20 Intellectual Property. Borrowers and each Loan Party own or have rights to use all intellectual property necessary to continue to conduct their businesses as now or heretofore conducted or proposed to be conducted, and each patent, trademark, copyright and license for any thereof held by any Borrower or such other Loan Party is listed, together with application or registration, numbers, as applicable, on Schedule 3.20, other than off-the-shelf software licenses. Borrowers and each Loan Party conduct their respective businesses and affairs without infringement upon or interference with any intellectual property of any other Person.

SECTION 4. AFFIRMATIVE COVENANTS

     Each Borrower covenants and agrees that, so long as any Bank is committed to make any Loan or issue any Letter of Credit under this Agreement, and until all instruments and agreements evidencing any Loan which is payable on demand or which conditions advances upon the Banks’ discretion are fully discharged and terminated, and thereafter, so long as any Indebtedness remains outstanding, it will, and, as applicable, it will cause each Loan Party within its control or under common control to:

     4.1 Preservation of Existence, Etc. Preserve and maintain its existence and preserve and maintain such of its rights, licenses, and privileges as are material to the business and operations conducted by it; qualify and remain qualified to do business in each jurisdiction in which such qualification is material to its business and operations or ownership of its properties, continue to conduct and operate its business substantially as conducted and operated during the present and preceding calendar year; at all times maintain, preserve and protect all of its franchises and trade names and preserve all the remainder of its property and keep the same in good repair, working order and condition; and from time to time make, or cause to be made, all needed and proper repairs, renewals, replacements, betterments and improvements thereto.

     4.2 Keeping of Books. Keep proper books of record and account in which full and correct entries shall be made of all of its financial transactions and its assets and businesses so as to permit the presentation of financial statements (including, without limitation, those Financial Statements to be delivered to Agent pursuant Section 4.3 hereof) prepared in accordance with GAAP; and permit Agent, or its representatives, at reasonable times and intervals, at Borrowers’ cost and expense, to visit any office of any Loan Party, discuss its financial matters with its officers, employees and independent certified public accountants, and by this provision, each Borrower authorizes such officers, employees and accountants to discuss the finances and affairs of any Loan Party and to examine any of its books and other corporate records.

     4.3 Reporting Requirements. Furnish to Agent and each Bank, or cause to be furnished to Agent and each Bank, the following:

	(a)		as soon as possible, and in any event within three (3) calendar days after becoming aware of the occurrence or existence of each Default or Event of Default hereunder or any material adverse change in the financial condition of any Loan Party, a written statement of the chief financial officer of Parent (or in his or her absence, a responsible senior officer of Parent), setting forth details of such Default, Event of Default or change, and the action which Parent has taken, or has caused to be taken, or proposes to take, or to cause to be taken, with respect thereto;
	(b)		as soon as available, and in any event within one hundred twenty (120) days after and as of the end of each fiscal year of Parent, audited Financial Statements of Parent and such other of the Loan Parties as may be required by the Bank, consolidated, as applicable, including a balance sheet, income statement, statement of profit and loss and statement of cash flows, for and as of such fiscal year then ending, with comparative numbers for the preceding fiscal year, in each case, prepared by the Parent or such other Person, as applicable, and completed in such detail as Bank shall require, and certified by the chief financial officer of Parent or of such other Person, as applicable, as to consistency with prior financial reports and accounting periods, accuracy and fairness of presentation; and such other comments and financial details as are usually included in similar reports. Such audited Financial Statements shall be prepared in accordance with GAAP and shall be audited by independent certified public accountants of recognized standing selected by Parent and

			approved by Bank and shall contain unqualified opinions as to the fairness of the statements therein contained;
	(c)		as soon as available, and in any event within forty-five (45) days after and as of the end of each calendar quarter, including the last such reporting period of each of Parent’s fiscal years, Financial Statements of Parent and such of the other Loan Parties as may be required by the Bank, consolidated, as applicable, for and as of such reporting period, including a balance sheet, income statement, statement of profit and loss, surplus reconciliation statement and statement of cash flows for and as of such reporting period then ending and for and as of that portion of the fiscal year then ending, with comparative numbers for the same period of the preceding fiscal year, in each case, certified by the chief financial officer of Parent and, as applicable, each other Loan Party as to consistency with prior financial reports and accounting periods, accuracy and fairness of presentation;
	(d)		as soon as available, and in any event within forty-five (45) days after and as of the end of each calendar quarter, agings and reports of accounts receivable of Borrowers and such of the Loan Parties as may be required by the Bank, in form and detail satisfactory to Bank;
	(e)		as soon as available, and in any event within forty-five (45) days after and as of the end of each calendar quarter, agings and reports of accounts payable of Borrowers and such of the other Loan Parties as may be required by the Bank, in form and detail satisfactory to Bank;
	(f)		as soon as available, upon the Bank’s request, an appraisal of each Borrower’s Equipment to determine the Forced Sale Value, to be performed by the Bank or such other party as the Bank shall designate, and to be performed in such form and detail as the Bank shall reasonably require, such request to be made no more than once per year and as of such dates as the Bank shall designate, and at the Borrowers’ expense;
	(g)		simultaneously with the Financial Statements to be delivered to Bank pursuant to Sections (b) and (c) above, a Compliance Certificate and a Borrowing Base Certificate, each dated as of the end of such quarter or year, as the case may be;
	(h)		promptly upon receipt thereof, copies of all management letters and other substantive reports submitted to any Loan Party by independent certified public accountants in connection with any annual audit of any such party;
	(i)		as soon as available and in any event within forty-five (45) days after and as of the end of each calendar quarter, a report concerning each Borrower’s quarterly progress billings (without allocations of general and administrative expenses or overhead) and backlog reports in a form satisfactory to the Bank;

	(j)		promptly upon the filing thereof, and in any event, within ten (10) days after filing, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent), reports on Forms 10-K, 10-Q and 8-K (or their equivalents) and all other periodic reports, if any, which Parent shall file with the Securities and Exchange Commission (or any Governmental Authority substituted therefor) or any national securities exchange; and
	(k)		promptly, and in form and detail satisfactory to Bank, such other information as Bank may request from time to time.

     4.4 Financial Covenants. On a consolidated basis, the Borrowers will maintain all financial covenants set forth in the Financial Covenants Addendum.

     4.5 Inspections. Permit Agent, through its authorized attorneys, accountants and representatives, at Borrowers’ cost and expense, to examine each Loan Party’s books, accounts, records, ledgers, assets and properties of every kind and description, wherever located, at all reasonable times during normal business hours, upon reasonable prior oral or written notice of Agent.

     4.6 Further Assurances; Financing Statements. Furnish Agent, at Borrowers’ expense, upon Agent’s request and in form satisfactory to Agent (and execute and deliver or cause to be executed and delivered), such additional pledges, assignments, mortgages, lien instruments or other security instruments, consents, acknowledgments, subordinations and financing statements covering any or all of the Collateral pledged, assigned, mortgaged or encumbered pursuant to any Loan Document, of every nature and description, whether now owned or hereafter acquired by any Borrower or any other Person providing such Collateral, together with such other documents or instruments as Agent may require to effectuate more fully the purposes of any Loan Document.

     4.7 Compliance with Leases. Comply with all terms and conditions of any leases covering any premises or property (real or personal) wherein any of the Collateral is or may be located, or covering any of the other material personal or real property now or hereafter owned, leased or otherwise used by any Loan Party in the conduct of its business, and any Governmental Requirement, except where the failure to so comply could not cause a Material Adverse Effect.

     4.8 Indemnification. Indemnify, defend and save Agent and each Bank harmless from any and all claims, losses, costs, damages, liabilities, obligations and expenses, including, without limitation, reasonable attorneys’ fees (whether inside or outside counsel is used), incurred by Agent or any Bank by reason of any Default or Event of Default, in defending or protecting the Liens which secure or purport to secure all or any portion of the Indebtedness, whether existing under any Loan Document or otherwise or the priority thereof, or in enforcing the obligations of Borrowers or any other Person under or pursuant to any Loan Document, or in the prosecution or defense of any action or proceeding concerning any matter growing out of or connected with the Collateral or any Loan Document, INCLUDING ANY CLAIMS, LOSSES, COSTS, DAMAGES, LIABILITIES, OBLIGATIONS, AND EXPENSES RESULTING FROM BANK’S OWN NEGLIGENCE, except and to the extent but only to the extent caused by Agent’s or such Bank’s gross negligence or willful misconduct.

     4.9 Governmental and Other Approvals. Apply for, obtain and/or maintain in effect, as applicable, all authorizations, consents, approvals, licenses, qualifications, exemptions, filings, declarations and registrations (whether with any court, governmental agency, regulatory authority, securities exchange or otherwise) which are necessary in connection with the execution, delivery and/or performance by any Loan Party of any Loan Document to which it is a party.

     4.10 Insurance. Maintain insurance coverage on its physical assets and against other business risks in such amounts and of such types as are customarily carried by companies similar in size and nature (including, without limitation, loss of rent and/or business interruption insurance and boiler and machinery insurance), and in the event of acquisition of additional property, real or personal, or of the incurrence of additional risks of any nature, increase such insurance coverage in such manner and to such extent as prudent business judgment and present practice would dictate; and in the case of all policies covering property subject to any Loan Document or property in which the Agent shall have a Lien of any kind whatsoever, other than those policies protecting against casualty liabilities to strangers, all such insurance policies shall provide that the loss payable thereunder shall be payable to Borrowers (or other Person providing Collateral) and Agent, with mortgagee’s clauses in favor of and satisfactory to Agent for all such policies, and such policies shall also provide that they may not be canceled or changed without thirty (30) days’ prior written notice to Agent. Upon the request of Agent, all of said policies, or copies thereof, including all endorsements thereon and those required hereunder, shall be deposited with Agent.

     4.11 Compliance with ERISA. In the event that any Loan Party or any of its Subsidiaries maintain(s) or establish(es) a Pension Plan subject to ERISA, (a) comply in all material respects with all requirements imposed by ERISA as presently in effect or hereafter promulgated, including, but not limited to, the minimum funding requirements thereof; (b) promptly notify Bank upon the occurrence of a “reportable event” or “prohibited transaction” within the meaning of ERISA, or that the PBGC or any Loan Party has instituted or will institute proceedings to terminate any Pension Plan, together with a copy of any proposed notice of such event which may be required to be filed with the PBGC; and (c) furnish to Bank (or cause the plan administrator to furnish Bank) a copy of the annual return (including all schedules and attachments) for each Pension Plan covered by ERISA, and filed with the Internal Revenue Service by any Loan Party not later than thirty (30) days after such report has been so filed.

     4.12 Environmental Covenants.

	(a)		Comply with all applicable Environmental Laws, and maintain all permits, licenses and approvals required under applicable Environmental Laws, where the failure to do so could have a Material Adverse Effect.
	(b)		Promptly notify Agent, in writing, as soon as any Borrower becomes aware of any condition or circumstance which makes any of the environmental representations or warranties set forth in this Agreement incomplete, incorrect or inaccurate in any material respect as of any date; and promptly provide to Agent, immediately upon receipt thereof, copies of any material correspondence, notice, pleading, citation, indictment, complaint, order, decree, or other document from any source asserting or alleging a violation of any Environmental Laws by any Loan Party, or of

			any circumstance or condition which requires or may require, a financial contribution by any Loan Party, or a clean-up, removal, remedial action or other response by or on behalf of any Loan Party, under applicable Environmental Law(s), or which seeks damages or civil, criminal or punitive penalties from any Loan Party or any violation or alleged violation of Environmental Law(s).
	(c)		Each Borrower hereby agrees to indemnify, defend and hold Agent and each Bank, and any of Agent’s or such Bank’s past, present and future officers, directors, shareholders, employees, representatives and consultants, harmless from any and all claims, losses, damages, suits, penalties, costs, liabilities, obligations and expenses (including, without limitation, reasonable legal expenses and attorneys’ fees, whether inside or outside counsel is used) incurred or arising out of any claim, loss or damage of any property, injuries to or death of any persons, contamination of or adverse effects on the environment, or other violation of any applicable Environmental Law(s), in any case, caused by any Loan Party or in any way related to any property owned or operated by any Loan Party or due to any acts of any Loan Party or any of its officers, directors, shareholders, employees, consultants and/or representatives INCLUDING ANY CLAIMS, LOSSES, DAMAGES, SUITS, PENALTIES, COSTS, LIABILITIES, OBLIGATIONS OR EXPENSES, RESULTING FROM BANK’S OWN NEGLIGENCE; provided however, that the foregoing indemnification shall not be applicable, and Borrowers shall not be liable for any such claims, losses, damages, suits, penalties, costs, liabilities, obligations or expenses, to the extent (but only to the extent) the same arise or result from any gross negligence or willful misconduct of Agent or any Bank or any of their agents or employees.

     4.13 Intellectual Property. Borrowers and each Loan Party will conduct their businesses and affairs without infringement of or interference with any intellectual property of any other Person.

SECTION 5. NEGATIVE COVENANTS

     Borrowers covenant and agree that, so long as any Bank is committed to make any Loan or issue any Letter of Credit under this Agreement and until all instruments and agreements evidencing any Loan which is payable on demand or which conditions advances upon the Banks’ discretion are fully discharged and terminated, and thereafter, so long as any Indebtedness remains outstanding, it will not, and it will not allow any Loan Party within its control or under common control to, without the prior written consent of the Agent and Banks:

     5.1 Capital Structure, Business Objects or Purpose. Purchase, acquire or redeem any of its equity ownership interests, or enter into any reorganization or recapitalization or reclassify its equity ownership interests, or make any material change in its capital structure or general business objects or purpose other than the sale of the assets, business and/or membership interest in Steel City.

     5.2 Mergers or Dispositions. Change its name unless thirty (30) days prior written notice shall have been given by Borrowers to Bank, change the name under which it is doing business if such name shall be a name other than those set forth on Schedule 5.2, enter into any merger or consolidation, whether or not the surviving entity thereunder, or sell, lease, transfer, relocate or dispose of all, substantially all, or any material part of its assets (whether in a single transaction or in a series of transactions); provided however, the foregoing shall not apply to Steel City or Oakhurst.

     5.3 Guaranties. Guarantee, endorse, or otherwise become secondarily liable for or upon the obligations or Debt of others (whether directly or indirectly), except:

	(a)		guaranties in favor of and satisfactory to Agent;
	(b)		endorsements for deposit or collection in the ordinary course of business; and
	(c)		any guarantee of Steel City or Oakhurst.

     5.4 Debt. Become or remain obligated for any Debt, except:

	(a)		Indebtedness and other Debt from time to time outstanding and owing to Bank;
	(b)		current unsecured trade, utility or non-extraordinary accounts payable arising in the ordinary course of business;
	(c)		Debt subordinated to the prior payment in full of the Indebtedness upon terms and conditions approved in writing by Bank;
	(d)		Debt secured by Permitted Encumbrances;
	(e)		Debt (including, without limitation, Capitalized Lease Obligations) outstanding as of the date hereof more particularly described in Schedule 5.4 attached hereto;
	(f)		contingent Debt to the extent permitted by Section 5.3 of this Agreement; and
	(g)		Debt owing by Steel City and/or Oakhurst.

     5.5 Encumbrances. Create, incur, assume or suffer to exist any Lien upon, or create, suffer or permit to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired, except for Permitted Encumbrances; provided however, the foregoing shall not apply to Steel City or Oakhurst.

     5.6 Acquisitions. Purchase or otherwise acquire or become obligated for the purchase of all or substantially all of the assets or business interests of any Person or any shares of stock or other ownership interests of any Person or in any other manner effectuate or attempt to effectuate an expansion of present business by acquisition, in any such instance in an amount greater than five million dollars ($5,000,000) without the prior written consent of the Bank.

     5.7 Dividends. Declare or pay dividends on, or make any other Distribution (whether by reduction of capital or otherwise) in respect of any shares of Parent’s capital stock or other ownership interests, except (a) dividends payable solely in stock; and (b) the redemption, repurchase or acquisition of any shares of Parent’s capital stock payable upon an employee’s termination pursuant to its employee stock option, repurchase, or similar plan; provided, however, that after giving effect to such redemption, repurchase or acquisition, Borrowers shall be in full compliance with the terms of this Agreement.

     5.8 Investments. Make or allow to remain outstanding any investment (whether such investment shall be of the character of investment in shares of stock, evidences of indebtedness or other securities or otherwise) in, or any loans, advances or extensions of credit to, any Person, other than:

	(a)		each Borrower’s current ownership interests in those Subsidiaries of such Borrower identified on Schedule 3.19 attached hereto;
	(b)		any investment in direct obligations of the United States of America or any agency thereof, or in direct obligations of any state of the United States of America or any political subdivision thereof or any investment in any securities that are exempt from federal taxation or in certificates of deposit issued by commercial banks with capital, surplus and undivided profits in excess of one hundred million ($100,000,000), maintained consistent with Borrower’s or such Subsidiary’s business practices prior to the date hereof; provided, that no such investment shall mature more than one year after the date when made or the issuance thereof;
	(c)		the purchase of assets in an aggregate amount not to exceed one hundred thousand dollars ($100,000) after the date hereof; and
	(d)		loans advances or extensions of credit to any Person in an amount in excess of $250,000; provided no Borrower shall make any loans, advances or extensions of credit to either Steel City or Oakhurst.

     5.9 Transactions with Affiliates. Enter into any transaction with any of their stockholders, officers, employees, partners or any of their Affiliates, except subject to the terms hereof, transactions in the ordinary course of business and on terms not less favorable than would be usual and customary in similar transactions between Persons dealing at arm’s length.

     5.10 Defaults on Other Obligations. Fail to perform, observe or comply duly with any covenant, agreement or other obligation to be performed, observed or complied with by any Loan Party, subject to any grace periods provided therein, which failure could have a Material Adverse Effect.

     5.11 Prepayment of Debt. Prepay any Debt (or take any actions which impose an obligation to prepay), except, subject to the terms hereof or thereof, Indebtedness.

     5.12 Pension Plans. Except in compliance with this Agreement, enter into, maintain, or make contribution to, directly or indirectly, any Pension Plan that is subject to ERISA.

     5.13 Subordinate Indebtedness. Subordinate any indebtedness due to it from any Person to indebtedness of other creditors of such Person.

     5.14 No Further Negative Pledges. Enter into or become subject to any agreement (other than this Agreement or the Loan Documents) (a) prohibiting the guaranteeing by any Loan Party of any obligations, (b) prohibiting the creation or assumption of any Lien upon the properties or assets of any Loan Party, whether now owned or hereafter acquired or (c) requiring an obligation to become secured (or further secured) if another obligation is secured or further secured; provided however, the foregoing shall not apply to Steel City or Oakhurst.

     5.15 No License Restrictions. Permit any restriction in any license or other agreement that restricts any Borrower or any other Loan Party from granting a Lien to Agent upon any of such Borrower’s or such other Loan Party’s rights under such license or agreement; provided however, the foregoing shall not apply to Steel City or Oakhurst.

     5.16 Subordinated Debt. Make any direct or indirect payment of all or any part of any Subordinated Debt or take any other action or omit to take any other action in respect of any Subordinated Debt. Neither Borrowers nor any Loan Party shall repurchase, redeem or retire in any way any instrument evidencing Subordinated Debt prior to maturity or enter into any agreement (oral or written) which could in any way be construed to amend, modify, alter or terminate any one or more instruments or agreements evidencing, governing, guaranteeing or otherwise relating to Subordinated Debt.

SECTION 6. EVENTS OF DEFAULT

     6.1 Events of Default. The occurrence or existence of any of the following conditions or events shall constitute an “Event of Default” hereunder:

	(a)		upon non-payment of any principal, interest or other sums due under the terms of this Agreement or under any Note(s), or under any other instrument or evidence of Indebtedness, whether under this Agreement, any Note(s), or otherwise, in any case, when due in accordance with the terms hereof or thereof;
	(b)		default in the observance or performance of any of the other conditions, covenants or agreements of Borrowers set forth in this Agreement;
	(c)		any representation or warranty made by any Loan Party in any Loan Document shall be untrue or incorrect in any material respect;
	(d)		any default or event of default, as the case may be, in the observance or performance of any of the conditions, covenants or agreements of any Loan Party set forth in any Loan Document and continuation thereof beyond any applicable period of grace or cure provided with respect thereto;
	(e)		any default by any Loan Party, in the payment of any Debt (other than the Indebtedness), or in the observance or performance of any conditions, covenants or agreements related or given with respect thereto and, in each

			such case, continuation thereof beyond any applicable grace or cure period;
	(f)		the rendering of one or more judgments or decrees for the payment of money in an aggregate amount in excess of one hundred thousand ($100,000), against any Loan Party, and such judgment(s) or decree(s) shall remain unvacated, unbonded or unstayed, by appeal or otherwise, for a period of twenty (20) consecutive days after the date of entry;
	(g)		if there shall be any change in the management, ownership or control of Parent, which, in Agent’s sole judgment, shall have a material adverse effect upon the future prospects for the successful operation by Borrowers, of their businesses as conducted before such change, or their ability to pay and perform their liabilities and obligations under this Agreement, the Indebtedness, or the Loan Documents;
	(h)		the failure by any Loan Party, to meet the minimum funding requirements under ERISA with respect to any Pension Plan established or maintained by it; the occurrence of any “reportable event”, as defined in ERISA, which could constitute grounds for termination by the PBGC of any Pension Plan or for the appointment by the appropriate United States District Court of a trustee to administer such Pension Plan, and such reportable event is not corrected and such determination is not revoked within thirty (30) days after notice thereof has been given to the plan administrator or any Loan Party, as the case may be; or the institution of any proceedings by the PBGC to terminate any such Pension Plan or to appoint a trustee by the appropriate United States District Court to administer any such Pension Plan;
	(i)		if any Loan Party, becomes insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they mature, or applies for, consents to, or acquiesces in the appointment of a trustee, receiver, liquidator, conservator or other custodian for any Loan Party, or a substantial part of its property, or makes a general assignment for the benefit of creditors; or in the absence of such application, consent or acquiescence, a trustee, receiver, liquidator, conservator or other custodian is appointed for any Loan Party, or for a substantial part of its property, and the same is not discharged within thirty (30) days; or any bankruptcy, reorganization, debt arrangement, or other proceedings under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is instituted by or against any Loan Party, and, if instituted against any Loan Party, the same is consented to or acquiesced in by any such Loan Party or otherwise remains undismissed for thirty (30) days; or any warrant of attachment is issued against any substantial part of the property of any Loan Party, which is not released within thirty (30) days of service thereof;
	(j)		if any Loan Document shall be terminated, revoked, or otherwise rendered void or unenforceable, in any case, without Agent’s prior written consent;

	(k)		Borrowers shall fail to allow the Agent to conduct an appraisal of the Equipment as required herein by Section 4.3(f);
	(1)		Texas Sterling, as borrower, or Parent, Sterling General or SHH, as guarantor, defaults in making timely payment of any amount owing in connection with the First Lien Real Estate Loan and/or Second Lien Real Estate Loan; or
	(m)		if Agent deems itself insecure, believing in good faith that the prospect of payment or performance of any of the Indebtedness is impaired.

     6.2 Remedies Upon Event of Default. Upon the occurrence and at any time during the existence or continuance of any Event of Default, but without impairing or otherwise limiting the Agent’s right to demand payment of all or any portion of the Indebtedness which is payable on demand, at Agent’s option, Agent may give notice to Borrowers declaring all or any portion of the Indebtedness remaining unpaid and outstanding, whether under the Notes or otherwise, to be due and payable in full without presentation, demand, protest, notice of dishonor, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby expressly waived, whereupon all such Indebtedness shall immediately become due and payable. Furthermore, upon the occurrence of a Default or Event of Default and at any time during the existence or continuance of any Default or Event of Default, but without impairing or otherwise limiting the right of Banks, if reserved under any Loan Document, to make or withhold financial accommodations at its discretion, to the extent not yet disbursed, any commitment by Banks to make any further loans to Borrowers or issue any further Letters of Credit for Borrowers’ account under this Agreement shall automatically terminate; provided, should such Default or Event of Default be cured to Agent and Banks’ satisfaction, Banks may, but shall be under no obligation to, reinstate any such commitment by written notice to Borrowers. Notwithstanding the foregoing, in the case of an Event of Default under Section 6.1(i), and notwithstanding the lack of any notice, demand or declaration by Agent, the entire Indebtedness remaining unpaid and outstanding shall become automatically due and payable in full, and any commitment by Banks to make any further loans to Borrowers or issue any further Letters of Credit for Borrowers’ account shall be automatically and immediately terminated, without any requirement of notice or demand by Agent or any Bank upon Borrowers, each of which are hereby expressly waived by Borrowers. The foregoing rights and remedies are in addition to any other rights, remedies and privileges Agent and/or Banks may otherwise have or which may be available to it, whether under this Agreement, any other Loan Document, by law, or otherwise.

     6.3 Setoff. In addition to any other rights or remedies of Agent under any Loan Document, by law or otherwise, upon the occurrence and during the continuance or existence of any Event of Default, Agent may, at any time and from time to time, without notice to Borrowers (any requirements for such notice being expressly waived by Borrowers), setoff and apply against any or all of the Indebtedness (whether or not then due), any or all deposits (general or special, time or demand, provisional or final) at any time held by any Borrower and other indebtedness at any time owing by Agent or any Bank to or for the credit or for the account of any Borrower, and any property of any Borrower, from time to time in possession or control of Agent or any Bank, irrespective of whether or not Agent shall have made any demand hereunder or for payment of the Indebtedness and although such obligations may be contingent or unmatured, and regardless of whether any Collateral then held by Agent or any Bank is

adequate to cover the Indebtedness. The rights of Agent and Banks under this Section are in addition to any other rights and remedies (including, without limitation, other rights of setoff) which Agent and Banks may otherwise have. Each Borrower hereby grants Agent and Banks a Lien on and security interest in all such deposits, indebtedness and other property as additional collateral for the payment and performance of the Indebtedness.

     6.4 Waiver of Certain Laws. To the extent permitted by applicable law, each Borrower hereby agrees to waive, and does hereby absolutely and irrevocably waive and relinquish, the benefit and advantage of any valuation, stay, appraisement, extension or redemption laws now existing or which may hereafter exist, which, but for this provision, might be applicable to any sale made under the judgment, order or decree of any court, on any claim for interest on the Notes, or to any security interest or other Lien contemplated by or granted under or in connection with this Agreement or the Indebtedness.

     6.5 Waiver of Defaults. No Default or Event of Default shall be waived by Agent except in a written instrument specifying the scope and terms of such waiver and signed by an authorized officer of Agent, and such waiver shall be effective only for the specific time(s) and purpose(s) given. No single or partial exercise of any right, power or privilege hereunder, nor any delay in the exercise thereof, shall preclude other or further exercise of Agent’s or any Bank’s rights. No waiver of any Default or Event of Default shall extend to any other or further Default or Event of Default. No forbearance on the part of Agent or any Bank in enforcing any of Agent or Bank’s rights or remedies under any Loan Document shall constitute a waiver of any of its rights or remedies. Each Borrower expressly agrees that this Section may not be waived or modified by Agent or any Bank by course of performance, estoppel or otherwise.

     6.6 Receiver. Agent, in any action or suit to foreclose upon any of the Collateral, shall be entitled, without notice or consent, and completely without regard to the adequacy of any security for the Indebtedness, to the appointment of a receiver of the business and premises in question, and of the rents and profits derived therefrom. This appointment shall be in addition to any other rights, relief or remedies afforded Agent. Such receiver, in addition to any other rights to which he shall be entitled, shall be authorized to sell, foreclose or complete foreclosure on Collateral for the benefit of Agent, pursuant to provisions of applicable law.

     6.7 Discretionary Credit and Credit Payable Upon Demand. To the extent that any of the Indebtedness shall, at anytime, be payable upon demand, nothing contained in this Agreement, or any other Loan Document, shall be construed to prevent Agent from making demand, without notice and with or without reason, for immediate payment of all or any part of such Indebtedness at any time or times, whether or not a Default or Event of Default has occurred or exists. In the event that such demand is made upon any portion of the Indebtedness, the Agent, at its election, may terminate any commitment by Banks to make any further loans to Borrowers or issue any further Letters of Credit for Borrower’s account under this Agreement or otherwise. Furthermore, to the extent any Loan Document authorizes the Agent, at its discretion, to make or to decline to make financial accommodations to the Borrowers, nothing contained in this Agreement or any other Loan Document shall be construed to limit or impair such discretion or to commit or otherwise obligate the Agent to make any such financial accommodation.

     6.8 Application of Proceeds of Collateral. Notwithstanding anything to the contrary set forth in any Loan Document, after an Event of Default, the proceeds of any of the Collateral, together with any offsets, voluntary payments, and any other sums received or collected in

respect of the Indebtedness, may be applied in such order and manner as determined by Agent in its sole and absolute discretion.

SECTION 7. ADMINISTRATIVE AGENT

     Section 7.1 Appointment, Powers, and Immunities. Each Bank hereby irrevocably appoints and authorizes Agent to act as its agent under this Agreement and the other Loan Documents with such powers and discretion as are specifically delegated to Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Agent (which term as used in this sentence and in Section 7.5 and the first sentence of Section 7.6 hereof shall include its Affiliates and its own and its Affiliates’ officers, directors, employees, and agents): shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not be a trustee or fiduciary for any Bank; shall not be responsible to the Banks for any recital, statement, representation, or warranty (whether written or oral) made in or in connection with any Loan Document or any certificate or other document referred to or provided for in, or received by any of them under, any Loan Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Loan Document, or any other document referred to or provided for therein or for any failure by any Loan Party or any other Person to perform any of its obligations thereunder; shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by any Loan Party or the satisfaction of any condition or to inspect the property (including the books and records) of any Loan Party or any of its Subsidiaries or Affiliates; shall not be required to initiate or conduct any litigation or collection proceedings under any Loan Document; and shall not be responsible for any action taken or omitted to be taken by it under or in connection with any Loan Document, except for its own gross negligence or willful misconduct. Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care.

     Section 7.2 Reliance by Agent. Agent shall be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telecopy) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for any Loan Party), independent accountants, and other experts selected by Agent. Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until Agent receives and accepts an Assignment and Acceptance executed in accordance with Section 8.8 hereof. As to any matters not expressly provided for by this Agreement, Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Banks, and such instructions shall be binding on all of the Banks; provided, however, that Agent shall not be required to take any action that exposes Agent to personal liability or that is contrary to any Loan Document or applicable Law or unless it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking any such action.

     Section 7.3 Defaults. Agent shall not be deemed to have knowledge or notice of the occurrence of an Event of Default unless Agent has received written notice from a Bank or Borrowers specifying such Default or Event of Default and stating that such notice is a “Notice

of Default.” In the event that Agent receives such a notice of the occurrence of an Event of Default, Agent shall give prompt notice thereof to the Banks. Agent shall (subject to Section 7.11 hereof) take such action with respect to such Event of Default as shall reasonably be directed by the Majority Banks, provided that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable in the best interest of the Banks.

     Section 7.4 Rights as Bank. With respect to its Percentage Share of the Revolving Credit Maximum Amount and the Loans made by it, Agent (and any successor acting as Agent) in its capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as Agent, and the term “Bank” or “Banks” shall, unless the context otherwise indicates, include Agent in its individual capacity. Agent (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to, make investments in, provide services to, and generally engage in any kind of lending, trust, or other business with any Loan Party or any of its Subsidiaries or Affiliates as if it were not acting as Agent, and Agent (and any successor acting as Agent) and its Affiliates may accept fees and other consideration from any Loan Party or any of its Subsidiaries or Affiliates for services in connection with this Agreement or otherwise without having to account for the same to the Banks.

     Section 7.5 Indemnification. The Banks agree to indemnify Agent (to the extent not reimbursed under Section 8.5 hereof, but without limiting the obligations of Borrowers under such section) ratably in accordance with their respective Percentage Shares, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys’ fees), or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent (including by any Bank) in any way relating to or arising out of any Loan Document or the transactions contemplated thereby or any action taken or omitted by Agent under any Loan Document (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF AGENT); provided that no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Bank agrees to reimburse Agent promptly upon demand for its ratable share of any costs or expenses payable by Borrowers under Section 8.5, to the extent that Agent is not promptly reimbursed for such costs and expenses by Borrowers. The agreements contained in this section shall survive payment in full of the Loans and all other amounts payable under this Agreement.

     Section 7.6 Non-Reliance on Agent and Other Banks. Each Bank agrees that it has, independently and without reliance on Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrowers and its Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Loan Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Banks by Agent hereunder, Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition, or business of any Loan Party or any of its Subsidiaries or Affiliates that may come into the possession of Agent or any of its Affiliates.

     Section 7.7 Rights as Bank. In its capacity as a Bank, Agent shall have the same rights and obligations as any Bank and may exercise such rights as though it were not Agent. Agent may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with any Loan Party or their Affiliates, all as if it were not Agent hereunder and without any duty to account therefor to any other Bank.

     Section 7.8 Sharing of Set-Offs and Other Payments. Each Bank Party agrees that if it shall, whether through the exercise of rights under Security Documents or rights of banker’s lien, set off, or counterclaim against Borrowers or otherwise, obtain payment of a portion of the aggregate Indebtedness owed to it which, taking into account all distributions made by Agent under Section 3.1, causes such Bank Party to have received more than it would have received had such payment been received by Agent and distributed pursuant to the Loan Terms, Conditions and Procedures Addendum, then it shall be deemed to have simultaneously purchased and shall be obligated to purchase interests in the Indebtedness as necessary to cause all Bank Parties to share all payments as provided for in the Loan Terms, Conditions and Procedures Addendum, and such other adjustments shall be made from time to time as shall be equitable to ensure that Agent and all Bank Parties share all payments of Indebtedness as provided in the Loan Terms, Conditions and Procedures Addendum; provided, however, that nothing herein contained shall in any way affect the right of any Bank Party to obtain payment (whether by exercise of rights of banker’s lien, set-off or counterclaim or otherwise) of indebtedness other than the Indebtedness. Each Borrower expressly consents to the foregoing arrangements and agrees that any holder of any such interest or other participation in the Indebtedness, whether or not acquired pursuant to the foregoing arrangements, may to the fullest extent permitted by law exercise any and all rights of banker’s lien, set-off, or counterclaim as fully as if such holder were a holder of the Indebtedness in the amount of such interest or other participation. If all or any part of any funds transferred pursuant to this section is thereafter recovered from the seller under this section which received the same, the purchase provided for in this section shall be deemed to have been rescinded to the extent of such recovery, together with interest, if any, if interest is required pursuant to the order of a tribunal order to be paid on account of the possession of such funds prior to such recovery.

     Section 7.9 Investments. Whenever Agent in good faith determines that it is uncertain about how to distribute to Bank Parties any funds which it has received, or whenever Agent in good faith determines that there is any dispute among Bank Parties about how such funds should be distributed, Agent may choose to defer distribution of the funds which are the subject of such uncertainty or dispute. If Agent in good faith believes that the uncertainty or dispute will not be promptly resolved, or if Agent is otherwise required to invest funds pending distribution to Bank Parties, Agent shall invest such funds pending distribution; all interest on any such investment shall be distributed upon the distribution of such Investment and in the same proportion and to the same Persons as such investment. All moneys received by Agent for distribution to Bank Parties (other than to the Person who is Agent in its separate capacity as a Bank Party) shall be held by Agent pending such distribution solely as Agent for such Bank Parties, and Agent shall have no equitable title to any portion thereof.

     Section 7.10 Benefit of Article 7. The provisions of this Article are intended solely for the benefit of Bank Parties, and no Loan Party shall be entitled to rely on any such provision or assert any such provision in a claim or defense against any Bank. Bank Parties may waive or

amend such provisions as they desire without any notice to or consent of Borrowers or any Loan Party.

     Section 7.11 Resignation. Agent may resign at any time by giving written notice thereof to Banks and Borrowers. Each such notice shall set forth the date of such resignation. Upon any such resignation, Majority Banks shall have the right to appoint a successor Agent. A successor must be appointed for any retiring Agent, and such Agent’s resignation shall become effective when such successor accepts such appointment. If, within thirty days after the date of the retiring Agent’s resignation, no successor Agent has been appointed and has accepted such appointment, then the retiring Agent may appoint a successor Agent, which shall be a commercial bank organized or licensed to conduct a banking or trust business under the laws of the United States of America or of any state thereof. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, the retiring Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Agent’s resignation hereunder the provisions of this Article 7 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under the Loan Documents.

SECTION 8. MISCELLANEOUS

     8.1 Accounting Principles. Except to the extent expressly stated to the contrary herein, where the character or amount of any asset or liability or item of income or expense is required to be determined, or any consolidation or other accounting computation is required to be made for purposes of this Agreement, it shall be done in accordance with GAAP.

     8.2 Taxes and Fees. Unless otherwise prohibited by applicable law, should any tax (other than a tax based upon the net income of Bank) or recording or filing fee become payable in respect of any Loan Document, any of the Collateral, any of the Indebtedness or any amendment, modification or supplement hereof or thereof, Borrowers agree to pay such taxes (or reimburse Bank therefor upon demand for reimbursement), together with any interest or penalties thereon, and agrees to hold Bank harmless with respect thereto.

     8.3 Governing Law. Each Loan Document shall be deemed to have been delivered in the State of Texas, and shall be governed by and construed and enforced in accordance with the laws of the State of Texas, except to the extent that the Uniform Commercial Code, other personal property law or real property law of another jurisdiction where Collateral is located is applicable, and except to the extent expressed to the contrary in any Loan Document. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

     8.4 Intentionally Omitted.

     8.5 Costs and Expenses. Borrowers shall pay Bank, on demand, all costs and expenses, including, without limitation, reasonable attorneys’ fees and legal expenses (whether inside or outside counsel is used), incurred by Bank in perfecting, revising, protecting or enforcing any of its rights or remedies against any Loan Party or any Collateral, or otherwise incurred by Bank in connection with any Default or Event of Default or the enforcement of the

Loan Documents or the Indebtedness. Following Bank’s demand upon Borrowers for the payment of any such costs and expenses, and until the same are paid in full, the unpaid amount of such costs and expenses shall constitute Indebtedness and shall bear interest at the Default Rate.

     8.6 Notices. All notices and other communications provided for in any Loan Document (unless otherwise expressly stipulated therein) or contemplated thereby, given thereunder or required by law to be given, shall be in writing (unless expressly provided to the contrary). If personally delivered, such notices shall be effective when delivered, and in the case of mailing or delivery by overnight courier, such notices shall be effective when placed in an envelope and deposited at a post office or official depository under the exclusive care and custody of the United States Postal Service or delivered to an overnight courier, postage prepaid, in each case addressed to the parties as set forth on the signature page of this Agreement, or to such other address as a party shall have designated to the other in writing in accordance with this Section. In the case of mailing, the mailing shall be by certified or first class mail. The giving of at least five (5) days’ notice before Bank shall take any action described in any notice shall conclusively be deemed reasonable for all purposes; provided, that this shall not be deemed to require Bank to give such five (5) days’ notice, or any notice, if not specifically required to do so in this Agreement.

     8.7 Further Action. Borrowers, from time to time, upon written request of Bank, will promptly make, execute, acknowledge and deliver, or cause to be made, executed, acknowledged and delivered, all such further and additional instruments, and promptly take all such further action as may be reasonably required to carry out the intent and purpose of the Loan Documents, and to provide for the Loans thereunder and payment of the Notes, according to the intent and purpose therein expressed.

     8.8 Assignments and Participations.

     (a) Each Bank may assign to one or more Eligible Transferees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans, its Notes, and its Percentage Share of the Revolving Credit Maximum Amount); provided, however, that

     (i) each such assignment shall be to an Eligible Transferee;

     (ii) except in the case of an assignment to another Bank or an assignment of all of a Bank’s rights and obligations under this Agreement, any such partial assignment shall be in an amount at least equal to $1,000,000 or an integral multiple of $1,000,000 in excess thereof;

     (iii) each such assignment by a Bank shall be of a constant, and not varying, percentage of all of its rights and obligations under the Loan Documents; and

     (iv) the parties to such assignment shall execute and deliver to Agent for its acceptance an Assignment and Acceptance, together with any Note subject to such assignment and a processing fee of $3,500.