form10q.htm

EXHIBIT A

FORM OF REQUEST FOR REVOLVING CREDIT ADVANCE

No.________________ Dated: ____________, 2007

TO: Comerica Bank (“Agent”)

RE:

Credit Agreement made as of October 31, 2007, (as amended, restated or otherwise modified from time to time, the “Credit Agreement”) by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank as Administrative Agent for the Lenders (in such capacity, the “Agent”), Arranger, Syndication Agent and Documentation Agent, Sterling Construction Company, Inc. (“Sterling”) and certain Subsidiaries of Sterling (together with Sterling, the “Borrowers” and each of them a “Borrower”).

Pursuant to the terms and conditions of the Credit Agreement, Borrowers hereby request an Advance from the Lenders, as described herein:

(A)	Date of Advance: _____________________________

(B)	0 (check if applicable)

This Advance is or includes a whole or partial refunding/conversion of:

Advance No(s).

(C)	Type of Advance (check only one):

0 Prime-based Advance

0 Eurodollar-based Advance

(D)	Amount of Advance:

$_____________________________

(E)	Interest Period (applicable to Eurodollar-based Advances)

________ months (insert 1,2,3 or 6)

(F)	Disbursement Instructions

0 Comerica Bank Account No.

0 Other:

Borrowers certify to the matters specified in Section 2.3(f) of the Credit Agreement.

Capitalized terms used herein, except as defined to the contrary, have the meanings given them in the Credit Agreement.

The undersigned by execution of this document agrees that any copy of this document signed by it and transmitted by facsimile or email, or any other method for delivery shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence.

STERLING CONSTRUCTION COMPANY,

INC., as Borrower Representative

By:

Its:

Agent Approval:

108

EXHIBIT B

FORM OF REVOLVING CREDIT NOTE

$ ______________,2007

On or before the Revolving Credit Maturity Date, FOR VALUE RECEIVED, Sterling Construction Company, Inc. (“Sterling”), Texas Sterling Construction Co. (“TSC”), Oakhurst Management Corporation (“OMC”), Road and Highway Builders, LLC (“RHBL”) and Road and Highway Builders Inc. (“RHBI”) (together the “Borrowers” and each of them a “Borrower”) jointly and severally promise to pay to the order of [insert name of applicable financial institution] (“Payee”) at Detroit, Michigan, care of the Agent, in lawful money of the United States of America, so much of the sum of ____________ Million Dollars ($ ,000,000), as may from time to time have been advanced by Payee and then be outstanding hereunder pursuant to the Credit Agreement dated as of October 31, 2007, by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank as Administrative Agent for the Lenders (in such capacity, the “Agent”), Arranger, Syndication Agent and Documentation Agent, and Borrowers, as amended, restated or otherwise modified from time to time (the “Credit Agreement”). Each of the Revolving Credit Advances made hereunder shall bear interest at the Applicable Interest Rate from time to time applicable thereto under the Credit Agreement or as otherwise determined thereunder, and interest shall be computed, assessed and payable on the unpaid principal amount of each Revolving Credit Advance made by the Payee from the date of such Revolving Credit Advance until paid at the rate and at the times set forth in the Credit Agreement.

This Note is a Revolving Credit Note under which Revolving Credit Advances (including refundings and conversions), repayments and readvances may be made from time to time, but only in accordance with the terms and conditions of the Credit Agreement. This Note evidences borrowings under, is subject to, is secured in accordance with, and may be accelerated or matured under, the terms of the Credit Agreement, to which reference is hereby made. Capitalized terms used herein, except as defined to the contrary, shall have the meanings given them in the Credit Agreement.

This Note shall be interpreted and the rights of the parties hereunder shall be determined under the laws of, and enforceable in, the State of Texas.

Borrowers hereby waive, to the extent permitted by applicable law, presentment for payment, demand, protest and notice of dishonor and nonpayment of this Note and agree that no obligation hereunder shall be discharged by reason of any extension, indulgence, release, or forbearance granted by any holder of this Note to any party now or hereafter liable hereon or any present or subsequent owner of any property, real or personal, which is now or hereafter security for this Note.

Nothing herein shall limit any right granted Payee by any other instrument or by law.

109

STERLING CONSTRUCTION COMPANY, INC.

By:

Its:

TEXAS STERLING CONSTRUCTION CO.

By:

Its:

OAKHURST MANAGEMENT CORPORATION

By:

Its:

ROAD AND HIGHWAY BUILDERS, LLC

By:

Its:

ROAD AND HIGHWAY BUILDERS INC.

FORM OF SWING LINE NOTE

$7,500,000 __________, 2007

On or before the Revolving Credit Maturity Date, FOR VALUE RECEIVED, Sterling Construction Company, Inc. (“Sterling”), Texas Sterling Construction Co. (“TSC”), Oakhurst Management Corporation (“OMC”), Road and Highway Builders, LLC (“RHBL”) and Road and Highway Builders Inc. (“RHBI”) (together the “Borrowers” and each of them a “Borrower”), jointly and severally promise to pay to the order of Comerica Bank (“Swing Line Lender”) at Detroit, Michigan in lawful money of the United States of America, so much of the sum of Seven Million Five Hundred Thousand Dollars ($7,500,000), as may from time to time have been advanced to the Borrowers by the Swing Line Lender and then be outstanding hereunder pursuant to the Credit Agreement dated as of October 31, 2007, by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank as Administrative Agent for the Lenders (in such capacity, the “Agent”), Arranger, Syndication Agent and Documentation Agent, and Borrowers, as amended, restated or otherwise modified from time to time (the “Credit Agreement”), together with interest thereon as hereinafter set forth.

Each of the Swing Line Advances made hereunder shall bear interest at the Applicable Interest Rate from time to time applicable thereto under the Credit Agreement or as otherwise determined thereunder, and interest shall be computed, assessed and payable on the unpaid principal amount of each Swing Line Advance made by the Swing Line Lender from the date of such Swing Line Advance until paid at the rates and at the times set forth in the Credit Agreement.

This Note is a Swing Line Note under which Swing Line Advances (including refundings and conversions), repayments and readvances may be made from time to time by the Swing Line Lender, but only in accordance with the terms and conditions of the Credit Agreement (including any applicable sublimits). This Note evidences borrowings under, is subject to, is secured in accordance with, and may be accelerated or matured under, the terms of the Credit Agreement to which reference is hereby made. Capitalized terms used herein, except as defined to the contrary, shall have the meanings given them in the Credit Agreement.

This Note shall be interpreted and the rights of the parties hereunder shall be determined under the laws of, and enforceable in, the State of Texas.

Nothing herein shall limit any right granted Swing Line Lender by any other instrument or by law.

STERLING CONSTRUCTION COMPANY, INC.

By:

Its:

TEXAS STERLING CONSTRUCTION CO.

By:

Its:

OAKHURST MANAGEMENT CORPORATION

By:

Its:

ROAD AND HIGHWAY BUILDERS, LLC

By:

Its:

ROAD AND HIGHWAY BUILDERS INC.

FORM OF REQUEST FOR SWING LINE ADVANCE

No. ______________ Dated: ___________, 2007

TO: Comerica Bank (“Swing Line Lender”)

RE:

Pursuant to the terms and conditions of the Credit Agreement, Borrowers hereby request an Advance from the Swing Line Lender, as described herein:

(A) Date of Advance: _____________________________

(B) 0 (check if applicable)

This Advance is or includes a whole or partial refunding/conversion of:

Advance No(s). __________________________________

0 Prime-based Advance

0 Quoted Rate Advance

(D) Amount of Advance:

$_______________________________

(E) Interest Period (applicable to Quoted Rate Advances)

months

(F) Disbursement Instructions

0 Comerica Bank Account No.

0 Other:

Borrowers certify to the matters specified in Section 2.5(c)(vi) of the Credit Agreement.

Capitalized terms used herein, except as defined to the contrary, have the meanings given them in the Credit Agreement.

STERLING CONSTRUCTION COMPANY,

INC., as Borrower Representative

FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT

TO: Revolving Credit Lenders

RE:

Issuance of Letter of Credit pursuant to Article 3 of the Credit Agreement made as of October 31, 2007, (as amended, restated or otherwise modified from time to time, the “Credit Agreement”) by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank as Administrative Agent for the Lenders (in such capacity, the “Agent”), Arranger, Syndication Agent and Documentation Agent, Sterling Construction Company, Inc. (“Sterling”) and certain Subsidiaries of Sterling (together with Sterling, the “Borrowers” and each of them a “Borrower”).

On ________________, 2007,1 the Agent, in accordance with Article 3 of the Credit Agreement, issued its Letter of Credit number ______________, in favor of __________ ____________2 for the account of ________________________________.3 The face amount of such Letter of Credit is __________. The amount of each Revolving Credit Lender’s participation in such Letter of Credit is as follows:4

[Lender] $

This notification is delivered this _____ day of _____________, 2007, pursuant to Section 3.3 of the Credit Agreement. Except as otherwise defined, capitalized terms used herein have the meanings given them in the Credit Agreement.

* * *

[SIGNATURES FOLLOW ON SUCCEEDING PAGE]

1 Date of Issuance

2 Beneficiary

3 Name of applicable Borrower

4 Amounts based on Percentages

[This form of Letter of Credit Notice (including footnotes) is subject in all respects to the terms and conditions of the Credit Agreement which shall govern in the event of any inconsistencies or omissions.]

113

Signed:

COMERICA BANK, as Agent

By:

Its:

114

EXHIBIT F

FORM OF SECURITY AGREEMENT

(see attached)

115

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (the “Agreement”) dated as of October 31, 2007, is entered into by and among the Borrowers (as defined below) and such other entities which from time to time become parties hereto (collectively, the “Debtors” and each individually a “Debtor”) and Comerica Bank (“Comerica”), as Administrative Agent for and on behalf of the Lenders (as defined below) (in such capacity, the “Agent”). The addresses for the Debtors and the Agent, as of the date hereof, are set forth on the signature pages attached hereto.

R E C I T A L S:

A. Sterling Construction Company, Inc., Texas Sterling Construction Co., and Oakhurst Management Corporation (collectively, the “Borrowers” and each a “Borrower”) have entered into that certain Credit Agreement dated as of October 31, 2007 (as amended, supplemented, amended and restated or otherwise modified from time to time the “Credit Agreement”) with each of the financial institutions party thereto (collectively, including their respective successors and permitted assigns, the “Lenders”) and the Agent pursuant to which the Lenders have agreed, subject to the satisfaction of certain terms and conditions, to extend or to continue to extend financial accommodations to the Borrowers, as provided therein. Upon consummation of the Acquisition (as defined in the Credit Agreement), Road and Highway Builders, LLC and Road and Highway Builders Inc. (collectively, the “Target”) shall, by execution and delivery of that certain Joinder Agreement dated as of the date hereof, join into the Credit Agreement as a Borrower thereunder, and join into this Agreement as a Debtor hereunder.

B. Pursuant to the Credit Agreement, the Lenders have required that each of the Debtors grant (or cause to be granted) certain Liens to the Agent, for the benefit of the Lenders, all to secure the obligations of the Borrowers or any Debtor under the Credit Agreement or any related Loan Document (including any Guaranty).

C. The Debtors have directly and indirectly benefited and will directly and indirectly benefit from the transactions evidenced by and contemplated in the Credit Agreement and the other Loan Documents.

D. The Agent is acting as Agent for the Lenders pursuant to the terms and conditions of Section 12 of the Credit Agreement.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

116

ARTICLE 1

Definitions

Section 1.1 Definitions. As used in this Agreement, capitalized terms not otherwise defined herein have the meanings provided for such terms in the Credit Agreement. References to “Sections,” “subsections,” “Exhibits” and “Schedules” shall be to Sections, subsections, Exhibits and Schedules, respectively, of this Agreement unless otherwise specifically provided. All references to statutes and regulations shall include any amendments of the same and any successor statutes and regulations. References to particular sections of the UCC should be read to refer also to parallel sections of the Uniform Commercial Code as enacted in each state or other jurisdiction which may be applicable to the grant and perfection of the Liens held by the Agent for the benefit of the Lenders pursuant to this Agreement.

The following terms have the meanings indicated below, all such definitions to be equally applicable to the singular and plural forms of the terms defined:

“Chattel Paper” means any “chattel paper,” as such term is defined in Article or Chapter 9 of the UCC, now owned or hereafter acquired by a Debtor, and shall include both electronic Chattel Paper and tangible Chattel Paper.

“Collateral” has the meaning specified in Section 2.1 of this Agreement.

“Computer Records” means any computer records now owned or hereafter acquired by any Debtor.

“Copyright Collateral” shall mean all Copyrights and Copyright Licenses of the Debtors.

“Copyright Licenses” shall mean all license agreements with any other Person in connection with any of the Copyrights or such other Person’s copyrights, whether a Debtor is a licensor or a licensee under any such license agreement, including, without limitation, the license agreements listed on Schedule 1.1 hereto and made a part hereof, subject, in each case, to the terms of such license agreements and the right to prepare for sale, sell and advertise for sale, all inventory now or hereafter covered by such licenses.

“Copyrights” shall mean all copyrights and mask works, whether or not registered, and all applications for registration of all copyrights and mask works, including, but not limited to all copyrights and mask works, and all applications for registration of all copyrights and mask works identified on Schedule 1.1 attached hereto and made a part hereof, and including without limitation (a) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof; (b) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all Copyright Licenses entered into in connection therewith, and damages and payments for past or future infringements thereof); and (c) all rights corresponding thereto and all modifications, adaptations, translations, enhancements and derivative works, renewals thereof, and all other rights of any kind whatsoever of a Debtor accruing thereunder or pertaining thereto.

“Deposit Account” shall mean a demand, time, savings, passbook, or similar account maintained with a bank. The term does not include investment property, investment accounts or accounts evidenced by an instrument.

“Document” means any “document,” as such term is defined in Article or Chapter 9 of the UCC, now owned or hereafter acquired by any Debtor, including, without limitation, all documents of title and all receipts covering, evidencing or representing goods now owned or hereafter acquired by a Debtor.

“Equipment” means any “equipment,” as such term is defined in Article or Chapter 9 of the UCC, now owned or hereafter acquired by a Debtor and, in any event, shall include, without limitation, all machinery, manufacturing equipment, office furniture, trade fixtures, tractors, trailers, rolling stock, vessels, aircraft and Vehicles now owned or hereafter acquired by such Debtor and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto.

“General Intangibles” means any “general intangibles,” as such term is defined in Article or Chapter 9 of the UCC, now owned or hereafter acquired by a Debtor and, in any event, shall include, without limitation, each of the following, whether now owned or hereafter acquired by such Debtor: (a) all of such Debtor’s Intellectual Property Collateral; (b) all of such Debtor’s books, records, data, plans, manuals, computer software, computer tapes, computer disks, computer programs, source codes, object codes and all rights of such Debtor to retrieve data and other information from third parties; (c) all of such Debtor’s contract rights, commercial tort claims, partnership interests, membership interests, joint venture interests, securities, deposit accounts, investment accounts and certificates of deposit; (d) all rights of such Debtor to payment under chattel paper, documents, instruments and similar agreements; (e) letters of credit, letters of credit rights supporting obligations and rights to payment for money or funds advanced or sold of such Debtor; (f) all tax refunds and tax refund claims of such Debtor; (g) all choses in action and causes of action of such Debtor (whether arising in contract, tort or otherwise and whether or not currently in litigation) and all judgments in favor of such Debtor; (h) all rights and claims of such Debtor under warranties and indemnities, (i) all health care receivables; and (j) all rights of such Debtor under any insurance, surety or similar contract or arrangement.

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“Governmental Authority” shall mean any nation or government, any state, province or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

“Instrument” shall mean any “instrument,” as such term is defined in Article or Chapter 9 of the UCC, now owned or hereafter acquired by any Debtor, and, in any event, shall include all promissory notes (including without limitation, any Intercompany Notes held by such Debtor), drafts, bills of exchange and trade acceptances, whether now owned or hereafter acquired.

“Intellectual Property Collateral” shall mean Patents, Patent Licenses, Copyrights, Copyright Licenses, Trademarks, Trademark Licenses, trade secrets, registrations, goodwill, franchises, permits, proprietary information, customer lists, designs, inventions and all other intellectual property and proprietary rights, including without limitation those described on Schedule 1.1 attached hereto and incorporated herein by reference.

“Inventory” means any “inventory,” as such term is defined in Article or Chapter 9 of the UCC, now owned or hereafter acquired by a Debtor, and, in any event, shall include, without limitation, each of the following, whether now owned or hereafter acquired by such Debtor: (a) all goods and other Personal property of such Debtor that are held for sale or lease or to be furnished under any contract of service; (b) all raw materials, work-in-process, finished goods, supplies and materials of such Debtor; (c) all wrapping, packaging, advertising and shipping materials of such Debtor; (d) all goods that have been returned to, repossessed by or stopped in transit by such Debtor; (e) rental equipment inventory and (f) all Documents evidencing any of the foregoing.

“Investment Property” means any “investment property” as such term is defined in Article or Chapter 9 of the UCC, now owned or hereafter acquired by a Debtor, and in any event, shall include without limitation all shares of stock and other equity, partnership or membership interests constituting securities, of the Domestic Subsidiaries of such Debtor from time to time owned or acquired by such Debtor in any manner (including, without limitation, the Pledged Shares), and the certificates and all dividends, cash, instruments, rights and other property from time to time received, receivable or otherwise distributed or distributable in respect of or in exchange for any or all of such shares, but excluding any shares of stock or other equity, partnership or membership interests in any Foreign Subsidiaries of such Debtor.

“Patent Collateral” shall mean all Patents and Patent Licenses of the Debtors.

“Patent Licenses” shall mean all license agreements with any other Person in connection with any of the Patents or such other Person’s patents, whether a Debtor is a licensor or a licensee under any such license agreement, including, without limitation, the license agreements listed on Schedule 1.1 hereto and made a part hereof, subject, in each case, to the terms of such license agreements and the right to prepare for sale, sell and advertise for sale, all inventory now or hereafter covered by such licenses.

“Patents” shall mean all letters patent, patent applications and patentable inventions, including, without limitation, all patents and patent applications identified on Schedule 1.1 attached hereto and made a part hereof, and including without limitation, (a) all inventions and improvements described and claimed therein, and patentable inventions, (b) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (c) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all Patent Licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (d) all rights corresponding thereto and all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of a Debtor accruing thereunder or pertaining thereto.

“Permitted Liens” means any Liens permitted under the terms of the Credit Agreement.

“Pledged Shares” means the shares of capital stock or other equity, partnership or membership interests described on Schedule 1.2 attached hereto and incorporated herein by reference, and all other shares of capital stock or other equity, partnership or membership interests (other than in an entity which is a Foreign Subsidiary) acquired by any Debtor after the date hereof.

“Proceeds” means any “proceeds,” as such term is defined in Article or Chapter 9 of the UCC and, in any event, shall include, but not be limited to, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to a Debtor from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to a Debtor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting, or purporting to act, for or on behalf of any Governmental Authority), and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

“Records” are defined in Section 3.2 of this Agreement.

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“Software” means all (i) computer programs and supporting information provided in connection with a transaction relating to the program, and (ii) computer programs embedded in goods and any supporting information provided in connection with a transaction relating to the program whether or not the program is associated with the goods in such a manner that it customarily is considered part of the goods, and whether or not, by becoming the owner of the goods, a Person acquires a right to use the program in connection with the goods, and whether or not the program is embedded in goods that consist solely of the medium in which the program is embedded.

“Trademark Collateral” shall mean all Trademarks and Trademark Licenses of the Debtors.

“Trademark Licenses” shall mean all license agreements with any other Person in connection with any of the Trademarks or such other Person’s names or trademarks, whether a Debtor is a licensor or a licensee under any such license agreement, including, without limitation, the license agreements listed on Schedule 1.1 hereto and made a part hereof, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, and to sell and advertise for sale, all inventory now or hereafter covered by such licenses.

“Trademarks” shall mean all trademarks, service marks, trade names, trade dress or other indicia of trade origin, trademark and service mark registrations, and applications for trademark or service mark registrations (except for “intent to use” applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has been filed), and any renewals thereof, including, without limitation, each registration and application identified on Schedule 1.1 attached hereto and made a part hereof, and including without limitation (a) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (b) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all Trademark Licenses entered into in connection therewith, and damages and payments for past or future infringements thereof and (c) all rights corresponding thereto and all other rights of any kind whatsoever of a Debtor accruing thereunder or pertaining thereto, together in each case with the goodwill of the business connected with the use of, and symbolized by, each such trademark, service mark, trade name, trade dress or other indicia of trade origin.

“UCC” means the Uniform Commercial Code as in effect in the State of Michigan; provided, that if, by applicable law, the perfection or effect of perfection or non-perfection of the security interest created hereunder in any Collateral is governed by the Uniform Commercial Code as in effect on or after the date hereof in any other jurisdiction, “UCC” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or the effect of perfection or non-perfection.

“Vehicles” means all cars, trucks, trailers, construction and earth moving equipment and other vehicles covered by a certificate of title law of any state and all tires and other appurtenances to any of the foregoing.

ARTICLE 2

Security Interest

Section 2.1 Grant of Security Interest. As collateral security for the prompt payment and performance in full when due of the Indebtedness (whether at stated maturity, by acceleration or otherwise), each Debtor hereby pledges, collaterally assigns, transfers and conveys to the Agent as collateral, and grants the Agent a continuing Lien on and security interest in, all of such Debtor’s right, title and interest in and to the following, whether now owned or hereafter arising or acquired and wherever located (collectively, the “Collateral”):

(a) all Chattel Paper;

(b) all General Intangibles;

(d) all Inventory;

(e) all Documents;

(f) all Instruments;

(g)

all Deposit Accounts and any other cash collateral, deposit or investment accounts including all cash collateral, deposit or investment accounts established or maintained pursuant to the terms of this Agreement or the other Loan Documents and all interest, cash and proceeds thereof;

(h)

all Computer Records and Software, whether relating to the foregoing Collateral or otherwise, but in the case of such Software, subject to the rights of any nonaffiliated licensee of software;

(i)

all Investment Property; and

(j)

the Proceeds, in cash or otherwise (including insurance proceeds), of any of the property described in the foregoing clauses (a) through (i), and all Liens, security, rights, remedies and claims of such Debtor with respect thereto (provided that the grant of a security interest in Proceeds set forth is in this subsection (j) shall not be deemed to give the applicable Debtor any right to dispose of any of the Collateral, except as may otherwise be permitted pursuant to the terms of the Credit Agreement).

119

Section 2.2 Debtors Remain Liable. Notwithstanding anything to the contrary contained herein, (a) the Debtors shall remain liable under the contracts, agreements, documents and instruments included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Agent or any Lender of any of their respective rights or remedies hereunder shall not release the Debtors from any of their duties or obligations under the contracts, agreements, documents and instruments included in the Collateral, and (c) neither the Agent nor any of the Lenders shall have any indebtedness, liability or obligation (by assumption or otherwise) under any of the contracts, agreements, documents and instruments included in the Collateral by reason of this Agreement, and none of them shall be obligated to perform any of the obligations or duties of the Debtors thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

ARTICLE 3

Representations and Warranties

To induce the Agent to enter into this Agreement and the Agent and the Lenders to enter into the Credit Agreement, each Debtor represents and warrants to the Agent and to each Lender as of the Effective Date and while the Credit Agreement remains in effect:

Section 3.1 Title. Such Debtor is, and with respect to the Collateral acquired after the date hereof such Debtor will be, the legal and beneficial owner of or otherwise has the rights it purports to have in the Collateral free and clear of any Lien or other encumbrance, except for the Permitted Liens, provided that, other than the Lien established under this Agreement, no Lien on any Pledged Shares shall constitute a Permitted Lien.

Section 3.2 Change in Form or Jurisdiction; Successor by Merger; Location of Books and Records. As of the date hereof, each Debtor (a) is duly organized and validly existing as a corporation or limited liability company (or other business organization) under the laws of its jurisdiction of organization; (b) is formed in the jurisdiction of organization and has the registration number and tax identification number set forth on Schedule 3.2 attached hereto; (c) has not changed its respective corporate form or its jurisdiction of organization at any time during the five years immediately prior to the date hereof, except as set forth on such Schedule 3.2; (d) except as set forth on such Schedule 3.2 attached hereto, no Debtor has, at any time during the five years immediately prior to the date hereof, become the successor by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization or otherwise of any other Person, and (e) keeps true and accurate books and records regarding the Collateral (the “Records”) in the office indicated on such Schedule 3.2

Section 3.3 Representations and Warranties Regarding Certain Types of Collateral.

(a)

Intentionally Omitted.

(b)

Account Information. As of the date hereof, all Deposit Accounts, cash collateral accounts or investment accounts of each Debtor (except for those Deposit Accounts located with the Agent) are located at the banks specified on Schedule 3.3(b) attached hereto which Schedule sets forth the true and correct name of each bank where such accounts are located, such bank’s address, the type of account and the account number.

(c)

Documents. As of the date hereof, except as set forth on Schedule 3.3(c), none of the material Inventory or Equipment of such Debtor (other than trailers, rolling stock, vessels, aircraft and Vehicles) is evidenced by a Document (including, without limitation, a negotiable document of title).

(d)

Intellectual Property. Set forth on Schedule 1.1 (as the same may be amended from time to time) is a true and correct list of the registered Patents, Patent Licenses, registered Trademarks, Trademark Licenses, registered Copyrights and Copyright Licenses owned by the Debtors (including, in the case of the Patents, Trademarks and Copyrights, the applicable name, date of registration (or of application if registration not completed) and application or registration number), excluding any Patent Licenses, Trademark Licenses or Copyright Licenses relating to shrink-wrapped software and similar items.

Section 3.4 Pledged Shares.

(a)

Duly Authorized and Validly Issued. The Pledged Shares that are shares of a corporation have been duly authorized and validly issued and are fully paid and nonassessable, and the Pledged Shares that are membership interests or partnership units (if any) have been validly granted, under the laws of the jurisdiction of organization of the issuers thereof, and, to the extent applicable, are fully paid and nonassessable.

(b)

Valid Title; No Liens; No Restrictions. Each Debtor is the legal and beneficial owner of the Pledged Shares, free and clear of any Lien (other than the Liens created by this Agreement), and such Debtor has not sold, granted any option with respect to, assigned, transferred or otherwise disposed of any of its rights or interest in or to the Pledged Shares. None of the Pledged Shares are subject to any contractual or other restrictions upon the pledge or other transfer of such Pledged Shares, other than those imposed by securities laws generally. No issuer of Pledged Shares is party to any agreement granting “control” (as defined in Section 8-106 of the UCC) of such Debtor’s Pledged Shares to any third party. All such Pledged Shares are held by each Debtor directly and not through any securities intermediary.

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(c)

Description of Pledged Shares; Ownership. The Pledged Shares constitute the percentage of the issued and outstanding shares of stock, partnership units or membership interests of the issuers thereof indicated on Schedule 1.2 (as the same may be amended from time to time) and such Schedule contains a description of all shares of capital stock, membership interests and other equity interests of or in any Subsidiaries owned by such Debtor.

Section 3.5 Intellectual Property.

(a)

Filings and Recordation. Except to the extent not reasonably expected to have a Material Adverse Effect, each Debtor has made all reasonably necessary filings and recordations to protect and maintain its interest in the Trademarks, Patents and Copyrights set forth on Schedule 1.1 (as the same may be amended from time to time), including, without limitation, all necessary filings and recordings, and payments of all maintenance fees, in the United States Patent and Trademark Office and United States Copyright Office to the extent such Trademarks, Patents and Copyrights are material to such Debtor’s business.

(b)

Intellectual Property Collateral Valid. Except to the extent not reasonably expected to have a Material Adverse Effect, (i) each Trademark of the Debtors set forth on Schedule 1.1 (as the same may be amended from time to time) is subsisting and has not been adjudged invalid, unregisterable or unenforceable, in whole or in part, and, to the Debtors’ knowledge, is valid, registrable and enforceable, (ii) each Patent of the Debtors set forth on Schedule 1.1 (as the same may be amended from time to time) is subsisting and has not been adjudged invalid, unpatentable or unenforceable, in whole or in part, and, to the Debtors’ knowledge, is valid, patentable and enforceable except as otherwise set forth on Schedule 1.1 (as the same may be amended from time to time) and (iii) each Copyright of the Debtors set forth on Schedule 1.1 (as the same may be amended from time to time) is subsisting and has not been adjudged invalid, uncopyrightable or unenforceable, in whole or in part, and, to the Debtors’ knowledge, is valid, copyrightable and enforceable.

(c)

Other Rights. Except for the Trademark Licenses, Patent Licenses and Copyright Licenses listed on Schedule 1.1 hereto under which a Debtor is a licensee, no Debtor has knowledge of the existence of any right or any claim (other than as provided by this Agreement) that is likely to be made under or against any item of Intellectual Property Collateral contained on Schedule 1.1 to the extent such claim could reasonably be expected to have a Material Adverse Effect.

(d)

No Claims. Except as set forth on Schedule 1.1 or as otherwise disclosed to the Agent in writing, no material claim has been made and is continuing or, to any Debtor’s knowledge, threatened that the use by any Debtor of any material item of Intellectual Property Collateral is invalid or unenforceable or that the use by any Debtor of any Intellectual Property Collateral does or may violate the rights of any Person. To the Debtors’ knowledge, there is no infringement or unauthorized use of any item of Intellectual Property Collateral contained on Schedule 1.1 or as otherwise disclosed to the Agent in writing.

(e)

No Consent. Except as disclosed in writing to the Agent, no consent of any party (other than such Debtor) to any Patent License, Copyright License or Trademark License constituting Intellectual Property Collateral is required, or purports to be required, to be obtained by or on behalf of such Debtor in connection with the execution, delivery and performance of this Agreement that has not been obtained. Each Patent License, Copyright License and Trademark License constituting Intellectual Property Collateral is in full force and effect and constitutes a valid and legally enforceable obligation of the applicable Debtor and (to the knowledge of the Debtors) each other party thereto except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditor’s rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

Section 3.6 Priority. No financing statement, security agreement or other Lien instrument covering all or any part of the Collateral is on file in any public office with respect to any outstanding obligation of such Debtor except (i) as may have been filed in favor of the Agent pursuant to this Agreement and the other Loan Documents and (ii) financing statements filed to perfect Permitted Liens (which shall not, in any event, grant a Lien over the Pledged Shares).

Section 3.7 Perfection. Upon (a) the filing of Uniform Commercial Code financing statements in the jurisdictions listed on Schedule 3.7 attached hereto, and (b) if any Intellectual Property Collateral is owned by any Debtor, the recording of this Agreement in the United States Patent and Trademark Office and the United States Copyright Office, the security interest in favor of the Agent created herein will constitute a valid and perfected Lien upon and security interest in the Collateral which may be created and perfected either under the UCC by filing financing statements or by a filing with the United States Patent and Trademark Office and the United States Copyright Office.

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ARTICLE 4

Covenants

Each Debtor covenants and agrees with the Agent, until termination of this Agreement in accordance with the provisions of Section 7.12 hereof, as follows:

Section 4.1 Covenants Regarding Certain Kinds of Collateral.

(a) Promissory Notes and Tangible Chattel Paper. If Debtors, now or at any time hereafter, collectively hold or acquire any promissory notes or tangible Chattel Paper for which the principal amount thereof or the obligations evidenced thereunder are, in the aggregate, in excess of $500,000, the applicable Debtors shall promptly notify the Agent in writing thereof and forthwith endorse, collaterally assign and deliver the same to the Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Agent may from time to time reasonably specify, and cause all such Chattel Paper to bear a legend reasonably acceptable to the Agent indicating that the Agent has a security interest in such Chattel Paper.

(b) Electronic Chattel Paper and Transferable Records. If Debtors, now or at any time hereafter, collectively hold or acquire an interest in any electronic Chattel Paper or any “transferable record,” as that term is defined in the federal Electronic Signatures in Global and National Commerce Act, or in the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, worth, in the aggregate, in excess of $500,000, the applicable Debtors shall promptly notify the Agent thereof and, at the reasonable request and option of the Agent, shall take such action as the Agent may reasonably request to vest in the Agent control, under Section 9-105 of the UCC, of such electronic chattel paper or control under the federal Electronic Signatures in Global and National Commerce Act, or the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record.

(c) Letter-of-Credit Rights. If Debtors, now or at any time hereafter, collectively are or become beneficiaries under letters of credit, with an aggregate face amount in excess of $500,000, the applicable Debtors shall promptly notify the Agent thereof and, at the request of the Agent, the applicable Debtors shall, pursuant to an agreement in form and substance reasonably satisfactory to the Agent either arrange (i) for the issuer and any confirmer of such letters of credit to consent to an assignment to the Agent of the proceeds of the letters of credit or (ii) for the Agent to become the transferee beneficiary of the letters of credit, together with, in each case, any such other actions as reasonably requested by the Agent to perfect its first priority Lien in such letter of credit rights. The applicable Debtor shall retain the proceeds of the applicable letters of credit until an Event of Default has occurred and is continuing whereupon the proceeds are to be delivered to the Agent and applied as set forth in the Credit Agreement.

(d) Commercial Tort Claims. If Debtors, now or at any time hereafter, collectively hold or acquire any commercial tort claims, which, the reasonably estimated value of which are in aggregate excess of $500,000, the applicable Debtors shall immediately notify the Agent in a writing signed by such Debtors of the particulars thereof and grant to the Agent in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Agent.

(e) Pledged Shares. All certificates or instruments representing or evidencing the Pledged Shares or any Debtor’s rights therein shall be delivered to the Agent promptly upon Debtor gaining any rights therein, in suitable form for transfer by delivery or accompanied by duly executed stock powers or instruments of transfer or assignments in blank, all in form and substance reasonably acceptable to the Agent.

(f) Intentionally Omitted.

(g) Intellectual Property.

(i)

Trademarks. Each Debtor agrees to take all reasonably necessary steps, including, without limitation, in the United States Patent and Trademark Office or in any court, to (x) defend, enforce, preserve the validity and ownership of, and maintain each Trademark registration and each Trademark License identified on Schedule 1.1 hereto, and (y) pursue each trademark application now or hereafter identified on Schedule 1.1 hereto, including, without limitation, the filing of responses to office actions issued by the United States Patent and Trademark Office, the filing of applications for renewal, the filing of affidavits under Sections 8 and 15 of the United States Trademark Act, and the participation in opposition, cancellation, infringement and misappropriation proceedings, except, in each case in which the Debtors have determined, using their commercially reasonable judgment, that any of the foregoing is not of material economic value to them. Each Debtor agrees to take corresponding steps with respect to each new or acquired Trademark registration, Trademark application or any rights obtained under any Trademark License, in each case, which it is now or later becomes entitled, except in each case in which such Debtor has determined, using its commercially reasonable judgment, that any of the foregoing is not of material economic value to it. Any expenses incurred in connection with such activities shall be borne by the Debtors.

(ii)

Patents. Each Debtor to take all reasonably necessary steps, including, without limitation, in the United States Patent and Trademark Office or in any court, to (x) defend, enforce, preserve the validity and ownership of, and maintain each Patent and each Patent License identified on Schedule

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1.1 hereto, and (y) pursue each patent application, now or hereafter identified on Schedule 1.1 hereto, including, without limitation, the filing of divisional, continuation, continuation-in-part and substitute applications, the filing of applications for reissue, renewal or extensions, the payment of maintenance fees, and the participation in interference, reexamination, opposition, infringement and misappropriation proceedings, except in each case in which the Debtors have determined, using their commercially reasonable judgment, that any of the foregoing is not of material economic value to them. Each Debtor agrees to take corresponding steps with respect to each new or acquired Patent, patent application, or any rights obtained under any Patent License, in each case, which it is now or later becomes entitled, except in each case in which the Debtors have determined, using their commercially reasonable judgment, that any of the foregoing is not of material economic value to them. Any expenses incurred in connection with such activities shall be borne by the Debtors.

(iii)

Copyrights. Each Debtor agrees to take all reasonably necessary steps, including, without limitation, in the United States Copyright Office or in any court, to (x) defend, enforce, and preserve the validity and ownership of each Copyright and each Copyright License identified on Schedule 1.1 hereto, and (y) pursue each Copyright and mask work application, now or hereafter identified on Schedule 1.1 hereto, including, without limitation, the payment of applicable fees, and the participation in infringement and misappropriation proceedings, except in each case in which the Debtors have determined, using their commercially reasonable judgment, that any of the foregoing is not of material economic value to them. Each Debtor agrees to take corresponding steps with respect to each new or acquired Copyright, Copyright and mask work application, or any rights obtained under any Copyright License, in each case, which it is now or later becomes entitled, except in each case in which the Debtors have determined, using their commercially reasonable judgment, that any of the foregoing is not of material economic value to them. Any expenses incurred in connection with such activities shall be borne by the Debtors.

(iv)

No Abandonment. The Debtors shall not abandon any Intellectual Property Collateral, without the written consent of the Agent, unless the Debtors shall have previously determined, using their commercially reasonable judgment, that such use or the pursuit or maintenance of such Trademark registration, Patent, Copyright registration or pending Trademark, Copyright, mask work or Patent application is not of material economic value to it.

(v)

No Infringement. In the event that a Debtor becomes aware that any item of the Intellectual Property Collateral which such Debtor has determined, using its commercially reasonable judgment, to be material to its business is infringed or misappropriated by a third party, such Debtor shall promptly notify the Agent promptly and in writing, in reasonable detail, and shall take such actions as such Debtor or the Agent deems reasonably appropriate under the circumstances to protect such Intellectual Property Collateral, including, without limitation, suing for infringement or misappropriation and for an injunction against such infringement or misappropriation. Any expense incurred in connection with such activities shall be borne by the Debtors. Each Debtor will advise the Agent promptly and in writing, in reasonable detail, of any adverse determination or the institution of any proceeding (including, without limitation, the institution of any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court) regarding any material item of the Intellectual Property Collateral.

(h)

Vehicles. Concurrently with the delivery of each Covenant Compliance Report as required under the Credit Agreement, deliver to the Agent the Vehicle titles for all Vehicles acquired during the previous quarter; and execute and deliver, or take such other actions as may be reasonably required by Agent for the Agent to record its Lien on such Vehicle titles.

(i)

Aircraft and Vessels. Notwithstanding any other provision of this Agreement, no Debtor shall be required to make any filings as may be reasonably necessary to perfect the Agent’s Lien on its aircraft and vessels, unless (i) a Default or an Event of Default has occurred and is continuing, whereupon the Agent may require such filings be made or (ii) such Debtor, either singly, or together with the other Debtors, owns aircraft and vessels which have a fair market value of at least $________, in aggregate amount, whereupon the applicable Debtors shall provide prompt notice to the Agent, and the Agent, at its option and request, may require the applicable Debtors to execute such agreements and make such filings as may be reasonably necessary to perfect the Agent’s Lien for the benefit of the Lenders and ensure the priority thereof on the applicable aircraft and vessels.

Section 4.2 Encumbrances. Each Debtor shall not create, permit or suffer to exist, and shall defend the Collateral against any Lien (other than the Permitted Liens, provided that no Lien, other than the Lien created hereunder, shall exist over the Pledged Shares) or any restriction upon the pledge or other transfer thereof (other than as specifically permitted in the Credit Agreement), and shall defend such Debtor’s title to and other rights in the Collateral and the Agent’s pledge and collateral assignment of and security interest in the Collateral against the claims and demands of all Persons. Except to the extent permitted by the Credit Agreement or in connection with any release of the Collateral or any portion thereof under Section 7.13 hereof (but only to the extent of any Collateral so released), such Debtor shall do nothing to impair the rights of the Agent in the Collateral.

Section 4.3 Disposition of Collateral. Except as otherwise permitted under the Credit Agreement, no Debtor shall enter into or consummate any transfer or other disposition of Collateral.

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Section 4.4 Intentionally Omitted.

Section 4.5 Corporate Changes; Books and Records; Inspection Rights. (a) Each Debtor shall not change its respective name, identity, corporate structure or jurisdiction of organization, or identification number in any manner that might make any financing statement filed in connection with this Agreement seriously misleading within the meaning of Section 9-506 of the UCC unless such Debtor shall have given the Agent fifteen (15) days prior written notice with respect to any change in such Debtor’s corporate structure, jurisdiction of organization, name or identity and shall have taken all action deemed reasonably necessary by the Agent under the circumstances to protect its Liens and the perfection and priority thereof, (b) each Debtor shall keep the Records at the location specified on Schedule 3.2 as the location of such books and records or as otherwise specified in writing to the Agent and (c) the Debtors shall permit the Agent, the Lenders, and their respective agents and representatives to conduct inspections, discussion and audits of the Collateral in accordance with the terms of the Credit Agreement.

Section 4.6 Notification of Lien; Continuing Disclosure. Each Debtor shall promptly notify the Agent in writing of any Lien (other than a Permitted Lien, to the extent not otherwise subject to any notice requirements under the Credit Agreement) that has attached to or been made or asserted against any of the Collateral upon becoming aware of the existence of such Lien.

Section 4.7 Covenants Regarding Pledged Shares

(a) Voting Rights and Distributions.

(i)

So long as no Event of Default shall have occurred and be continuing (both before and after giving effect to any of the actions or other matters described in clauses (A) or (B) of this subparagraph):

(A)

Each Debtor shall be entitled to exercise any and all voting and other consensual rights (including, without limitation, the right to give consents, waivers and ratifications) pertaining to any of the Pledged Shares or any part thereof; provided, however, that no vote shall be cast or consent, waiver or ratification given or action taken without the prior written consent of the Agent which would violate any provision of this Agreement or the Credit Agreement; and

(B)

Except as otherwise provided by the Credit Agreement, such Debtor shall be entitled to receive and retain any and all dividends, distributions and interest paid in respect to any of the Pledged Shares.

(C)

No provision of this Agreement shall prohibit distributions to pay accrued taxes of limited liability company members attributable to any Equity Interests held by such Persons provided that such distributions are permitted under the Credit Agreement.

(ii)

Upon the occurrence and during the continuance of an Event of Default:

(A)

The Agent may, without notice to such Debtor, transfer or register in the name of the Agent or any of its nominees, for the equal and ratable benefit of the Lenders, any or all of the Pledged Shares and the Proceeds thereof (in cash or otherwise) held by the Agent hereunder, and the Agent or its nominee may thereafter, after delivery of notice to such Debtor, exercise all voting and corporate rights at any meeting of any corporation issuing any of the Pledged Shares and any and all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any of the Pledged Shares as if the Agent were the absolute owner thereof, including, without limitation, the right to exchange, at its discretion, any and all of the Pledged Shares upon the merger, consolidation, reorganization, recapitalization or other readjustment of any corporation issuing any of such Pledged Shares or upon the exercise by any such issuer or the Agent of any right, privilege or option pertaining to any of the Pledged Shares, and in connection therewith, to deposit and deliver any and all of the Pledged Shares with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Agent may determine, all without liability except to account for property actually received by it, but the Agent shall have no duty to exercise any of the aforesaid rights, privileges or options, and the Agent shall not be responsible for any failure to do so or delay in so doing.

(B)

All rights of such Debtor to (i) exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 4.7(a)(i)(A) and (ii) to receive the dividends, interest and other distributions which it would otherwise be authorized to receive and retain pursuant to Section 4.7(a)(i)(B) shall be suspended until such Event of Default shall no longer exist (and in the case of the rights described in clause (i) herein, upon notice from the Agent of a suspension of such rights), and all such rights shall, until such Event of Default shall no longer exist, thereupon become vested in the Agent which shall thereupon have the sole right to exercise such voting and other consensual rights and to receive, hold and dispose of as Pledged Shares such dividends, interest and other distributions.

(C)

All dividends, interest and other distributions which are received by such Debtor contrary to the provisions of this Section 4.7(a)(ii) shall be received in trust for the benefit of the Agent, shall be segregated from other funds of such Debtor and shall be forthwith paid over to the Agent as Collateral in the same form as so received (with any necessary endorsement).

(D)

Each Debtor shall execute and deliver (or cause to be executed and delivered) to the Agent all such proxies and other instruments as the Agent may reasonably request for the purpose of enabling the Agent to exercise the voting and other rights which it is entitled to exercise pursuant to this Section 4.7(a)(ii) and to receive the dividends, interest and other distributions which it is entitled to receive and retain pursuant to this Section 4.7(a)(ii). The foregoing shall not in any way limit the Agent’s power and authority granted pursuant to the other provisions of this Agreement.

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(b) Possession; Reasonable Care. Regardless of whether a Default or an Event of Default has occurred or is continuing, the Agent shall have the right to hold in its possession all Pledged Shares pledged, collaterally assigned or transferred hereunder and from time to time constituting a portion of the Collateral. The Agent may appoint one or more agents (which in no case shall be a Debtor or an affiliate of a Debtor) to hold physical custody, for the account of the Agent, of any or all of the Collateral. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Agent accords its own property, it being understood that the Agent shall not have any responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Agent has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any parties with respect to any Collateral, except, subject to the terms hereof, upon the written instructions of the Lenders. Following the occurrence and continuance of an Event of Default, the Agent shall be entitled to take ownership of the Collateral in accordance with the UCC.

Section 4.8 New Subsidiaries; Additional Collateral

(a)

With respect to each Person which becomes a Subsidiary of a Debtor subsequent to the date hereof, execute and deliver such joinders or security agreements or other pledge documents as are required by the Credit Agreement, within the time periods set forth therein.

(b)

Each Debtor agrees that, (i) except with the written consent of the Agent, it will not permit any Domestic Subsidiary (whether now existing or formed after the date hereof) to issue to such Debtor or any of such Debtor’s other Subsidiaries any shares of stock, membership interests, partnership units, notes or other securities or instruments (including without limitation the Pledged Shares) in addition to or in substitution for any of the Collateral, unless, concurrently with each issuance thereof, any and all such shares of stock, membership interests, partnership units, notes or instruments are encumbered in favor of the Agent under this Agreement or otherwise (it being understood and agreed that all such shares of stock, membership interests, partnership units, notes or instruments issued to such Debtor shall, without further action by such Debtor or the Agent, be automatically encumbered by this Agreement as Pledged Shares) and (ii) it will promptly following the issuance thereof deliver to the Agent (A) an amendment, duly executed by such Debtor, in substantially the form of Exhibit A hereto in respect of such shares of stock, membership interests, partnership units, notes or instruments issued to Debtor or (B) if reasonably required by the Lenders, a new stock pledge, duly executed by the applicable Debtor, in substantially the form of this Agreement (a “New Pledge”), in respect of such shares of stock, membership interests, partnership units, notes or instruments issued to any Debtor granting to the Agent, for the benefit of the Lenders, a first priority security interest, pledge and Lien thereon, together in each case with all certificates, notes or other instruments representing or evidencing the same, together with such other documentation as the Agent may reasonably request. Such Debtor hereby (x) authorizes the Agent to attach each such amendment to this Agreement, (y) agrees that all such shares of stock, membership interests, partnership units, notes or instruments listed in any such amendment delivered to the Agent shall for all purposes hereunder constitute Pledged Shares, and (z) is deemed to have made, upon the delivery of each such amendment, the representations and warranties contained in Section 3.4 of this Agreement with respect to the Collateral covered thereby.

(c)

With respect to any Intellectual Property Collateral owned, licensed or otherwise acquired by any Debtor after the date hereof, and with respect to any Patent, Trademark or Copyright which is not registered or filed with the U.S. Patent and Trademark Office and/or the U.S. Copyright Office at the time such Collateral is pledged by a Debtor to the Agent pursuant to this Security Agreement, and which is subsequently registered or filed by such Debtor in the appropriate office and which is material to such Debtor’s business, such Debtor shall promptly after the acquisition or registration thereof execute or cause to be executed and delivered to the Agent, (i) an amendment, duly executed by such Debtor, in substantially the form of Exhibit A hereto, in respect of such additional or newly registered collateral or (ii) at the Agent’s option, a new security agreement, duly executed by the applicable Debtor, in substantially the form of this Agreement, in respect of such additional or newly registered collateral, granting to the Agent, for the benefit of the Lenders, a first priority security interest, pledge and Lien thereon (subject only to the Permitted Liens), together in each case with all certificates, notes or other instruments representing or evidencing the same, and shall, upon the Agent’s reasonable request, execute or cause to be executed any financing statement or other document (including without limitation, filings required by the U.S. Patent and Trademark Office and/or the U.S. Copyright Office in connection with any such additional or newly registered collateral) granting or otherwise evidencing a Lien over such new Intellectual Property Collateral. Each Debtor hereby (x) authorizes the Agent to attach each amendment to this Agreement, (y) agrees that all such additional collateral listed in any amendment delivered to the Agent shall for all purposes hereunder constitute Collateral, and (z) is deemed to have made, upon the delivery of each such Amendment, the representations and warranties contained in Section 3.3(d) and Section 3.5 of this Agreement with respect to the Collateral covered thereby.

Section 4.9 Further Assurances (a) At any time and from time to time, upon the reasonable request of the Agent, and at the sole expense of the Debtors, each Debtor shall promptly execute and deliver all such further agreements, documents and instruments and take such further action as the Agent may reasonably deem necessary or appropriate to (i) preserve, ensure the priority, effectiveness and validity of and perfect the Agent’s security interest in and pledge and collateral assignment of the Collateral (including causing the Agent’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition of the Agent’s ability to enforce its security interest in such Collateral), unless such actions are specifically waived under the terms of this Agreement and the other Loan Documents, (ii) carry out the provisions and purposes of this Agreement and (iii) to enable the Agent to exercise and enforce its rights and remedies hereunder with respect to any of the Collateral. Except as otherwise expressly permitted by the terms of the Credit Agreement relating to disposition of assets and except for Permitted Liens (except for Pledged Shares, over which the only Lien shall be that Lien established under this Agreement), each Debtor agrees to maintain and preserve the Agent’s security interest in and pledge and collateral assignment of the Collateral hereunder and the priority thereof. Notwithstanding anything contained herein to the contrary, the Agent need not require the creation or perfection of pledges of or security interests in particular assets if and for so long as, in the reasonable judgment of the Agent, the cost of creating or perfecting such pledges or security interests in such assets shall be excessive in view of the benefits to be obtained by the Agent therefrom. The Agent may, in its sole discretion, grant extensions of time for the perfection of security interests in particular assets (including extensions beyond the Effective Date for the perfection of security interests in the assets of the Debtors on such date) where it reasonably determines, in consultation with the Debtors, that perfection cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required by this Agreement or the other Loan Documents.

(b) Each Debtor hereby irrevocably authorizes the Agent (until the termination of this Agreement in accordance with the provisions of this Agreement) at any time and from time to time to file in any filing office in any jurisdiction any initial financing statements and amendments thereto that (i) indicate any or all of the Collateral upon which the Debtors have granted a Lien (including, without limitation, the filing of a financing statement describing the Collateral as “all assets in which Debtor now owns or hereafter acquires rights”, “all assets”, “all personal property” or words of similar import), and (ii) provide any other information required by Part 5 of Article 9 of the UCC, including organizational information and in the case of a fixture filing or a filing for Collateral consisting of as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Each Debtor agrees to furnish any such information required by the preceding paragraph to the Agent promptly upon request.

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ARTICLE 5

Rights of the Agent

Section 5.1 Power of Attorney. Each Debtor hereby irrevocably constitutes and appoints the Agent and any officer or agent thereof (until the termination of this Agreement in accordance with the provisions of Section 7.12 of this Agreement), with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the name of such Debtor or in its own name, to take, after the occurrence and during the continuance of an Event of Default, any and all actions, and to execute any and all documents and instruments which the Agent at any time and from time to time deems necessary, to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, such Debtor hereby gives the Agent the power and right on behalf of such Debtor and in its own name to do any of the following after the occurrence and during the continuance of an Event of Default, without notice to or the consent of such Debtor:

(a)

to demand, sue for, collect or receive, in the name of such Debtor or in its own name, any money or property at any time payable or receivable on account of or in exchange for any of the Collateral and, in connection therewith, endorse checks, notes, drafts, acceptances, money orders, documents of title or any other instruments for the payment of money under the Collateral or any policy of insurance;

(b)

to pay or discharge taxes, Liens (other than Permitted Liens) or other encumbrances levied or placed on or threatened against the Collateral;

(c)

(i) to direct account debtors and any other parties liable for any payment under any of the Collateral to make payment of any and all monies due and to become due thereunder directly to the Agent or as the Agent shall reasonably direct; (ii) to receive payment of and receipt for any and all monies, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (iii) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, proxies, stock powers, verifications and notices in connection with accounts and other documents relating to the Collateral; (iv) to commence and prosecute any suit, action or proceeding at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other right in respect of any Collateral; (v) to defend any suit, action or proceeding brought against such Debtor with respect to any Collateral; (vi) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Agent may reasonably deem appropriate; (vii) to exchange any of the Collateral for other property upon any merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof and, in connection therewith, deposit any of the Collateral with any committee, depositary, transfer agent, registrar or other designated agency upon such terms as the Agent may reasonably determine; (viii) to add or release any guarantor, indorser, surety or other party to any of the Collateral; (ix) to renew, extend or otherwise change the terms and conditions of any of the Collateral; (x) to make, settle, compromise or adjust any claim under or pertaining to any of the Collateral (including claims under any policy of insurance); (xi) subject to any pre-existing rights or licenses, to assign any Patent, Copyright or Trademark constituting Intellectual Property Collateral (along with the goodwill of the business to which any such Patent, Copyright or Trademark pertains), for such term or terms, on such conditions and in such manner, as the Agent shall in its sole discretion reasonably determine, and (xii) to sell, transfer, pledge, convey, make any agreement with respect to, or otherwise deal with, any of the Collateral as fully and completely as though the Agent were the absolute owner thereof for all purposes, and to do, at the Agent’s option and such Debtor’s expense, at any time, or from time to time, all acts and things which the Agent reasonably deems necessary to protect, preserve, maintain, or realize upon the Collateral and the Agent’s security interest therein.

This power of attorney is a power coupled with an interest and shall be irrevocable. The Agent shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Agent in this Agreement, and shall not be liable for any failure to do so or any delay in doing so. This power of attorney is conferred on the Agent solely to protect, preserve, maintain and realize upon its security interest in the Collateral. The Agent shall not be responsible for any decline in the value of the Collateral and shall not be required to take any steps to preserve rights against prior parties or to protect, preserve or maintain any Lien given to secure the Collateral.

Section 5.2 Setoff. In addition to and not in limitation of any rights of any Lenders under applicable law, the Agent and each Lender shall, upon the occurrence and continuance of an Event of Default, without notice or demand of any kind, have the right to appropriate and apply to the payment of the Indebtedness owing to it (whether or not then due) any and all balances, credits, deposits, accounts or moneys of Debtors then or thereafter on deposit with such Lenders; provided, however, that any such amount so applied by any Lender on any of the Indebtedness owing to it shall be subject to the provisions of the Credit Agreement.

Section 5.3 Assignment by the Agent. The Agent may at any time assign or otherwise transfer all or any portion of its rights and obligations as the Agent under this Agreement and the other Loan Documents (including, without limitation, the Indebtedness) to any other Person, to the extent permitted by, and upon the conditions contained in, the Credit Agreement and such Person shall thereupon become vested with all the benefits and obligations thereof granted to the Agent herein or otherwise.

Section 5.4 Performance by the Agent. If any Debtor shall fail to perform any covenant or agreement contained in this Agreement after demand from Agent to so perform, the Agent may (but shall not be obligated to) perform or attempt to perform such covenant or agreement on behalf of the Debtors, in which case Agent shall exercise good faith and make diligent efforts to give Debtors prompt prior written notice of such performance or attempted performance. In such event, the Debtors shall, at the request of the Agent, promptly pay any reasonable amount expended by the Agent in connection with such performance or attempted performance to the Agent, together with interest thereon at the interest rate set forth in the Credit Agreement, from and including the date of such expenditure to but excluding the date such expenditure is paid in full. Notwithstanding the foregoing, it is expressly agreed that the Agent shall not have any liability or responsibility for the performance (or non-performance) of any obligation of the Debtors under this Agreement.

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Section 5.5 Certain Costs and Expenses. The Debtors shall pay or reimburse the Agent within five (5) Business Days after demand for all reasonable costs and expenses (including reasonable attorney’s and paralegal fees) incurred by it in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of any of the Indebtedness (including in connection with any “workout” or restructuring regarding the Indebtedness, and including in any insolvency proceeding or appellate proceeding). The agreements in this Section 5.5 shall survive the payment in full of the Indebtedness. Notwithstanding the foregoing, the reimbursement of any fees and expenses incurred by the Lenders shall be governed by the terms and conditions of the applicable Credit Agreement.

Section 5.6 Indemnification. Each of the Debtors agrees to indemnify and hold Agent and each of the Lenders (and their respective Affiliates) and their respective employees, agents, officers, directors, counsel, and attorneys-in-fact harmless from all loss, cost, damage, liability or expenses, including reasonable house and outside attorneys’ and paralegals’ fees and disbursements (but without duplication of such fees and disbursements for the same services), incurred by Agent and each of the Lenders by reason of a Default or an Event of Default, or enforcing the obligations of any Debtor under this Agreement or any of the other Loan Documents, or as a result of any actual or claimed violation of law, as applicable, or in the prosecution or defense of any action or proceeding concerning any matter growing out of or connected with this Agreement or any of the Loan Documents, INCLUDING CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR CAUSES OF ACTION OF WHATEVER KIND RESULTING FROM THE AGENT’S OR ANY LENDER’S OWN NEGLIGENCE except to the extent (but only to the extent) caused by Agent’s or any Lender’s gross negligence or willful misconduct. The agreements in this Section 5.6 shall survive payment of all other Indebtedness.

ARTICLE 6

Default

Section 6.1 Rights and Remedies. If an Event of Default shall have occurred and be continuing, the Agent shall have the following rights and remedies subject to the direction and/or consent of the Lenders as required under the Credit Agreement:

(a)

The Agent may exercise any of the rights and remedies set forth in this Agreement (including, without limitation, Article 5 hereof), in the Credit Agreement, or in any other Loan Document, or as provided by applicable law.

(b)

In addition to all other rights and remedies granted to the Agent in this Agreement, the Credit Agreement or by applicable law, the Agent shall have all of the rights and remedies of a secured party under the UCC (whether or not the UCC applies to the affected Collateral) and the Agent may also, without previous demand or notice except as specified below or in the Credit Agreement, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker’s board or at any of the Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Agent may, in its reasonable discretion, deem commercially reasonable or otherwise as may be permitted by law. Without limiting the generality of the foregoing, the Agent may (i) without demand or notice to the Debtors (except as required under the Credit Agreement or applicable law), collect, receive or take possession of the Collateral or any part thereof, and for that purpose the Agent (and/or its Agents, servicers or other independent contractors) may enter upon any premises on which the Collateral is located and remove the Collateral therefrom or render it inoperable, and/or (ii) sell, lease or otherwise dispose of the Collateral, or any part thereof, in one or more parcels at public or private sale or sales, at the Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Agent may, in its reasonable discretion, deem commercially reasonable or otherwise as may be permitted by law. The Agent and, subject to the terms of the Credit Agreement, each of the Lenders shall have the right at any public sale or sales, and, to the extent permitted by applicable law, at any private sale or sales, to bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness) and become a purchaser of the Collateral or any part thereof free of any right of redemption on the part of the Debtors, which right of redemption is hereby expressly waived and released by the Debtors to the extent permitted by applicable law. The Agent may require the Debtors to assemble the Collateral and make it available to the Agent at any place designated by the Agent to allow the Agent to take possession or dispose of such Collateral. The Debtors agree that the Agent shall not be obligated to give more than five (5) days prior written notice of the time and place of any public sale or of the time after which any private sale may take place and that such notice shall constitute reasonable notice of such matters. The foregoing shall not require notice if none is required by applicable law. The Agent shall not be obligated to make any sale of Collateral if, in the exercise of its reasonable discretion, it shall determine not to do so, regardless of the fact that notice of sale of Collateral may have been given. The Agent may, without notice or publication (except as required by applicable law), adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. The Debtors shall be liable for all reasonable expenses of retaking, holding, preparing for sale or the like, and all reasonable attorneys’ fees, legal expenses and other costs and expenses incurred by the Agent in connection with the collection of the Indebtedness and the enforcement of the Agent’s rights under this Agreement and the Credit Agreement. The Debtors shall, to the extent permitted by applicable law, remain liable for any deficiency if the proceeds of any such sale or other disposition of the Collateral (conducted in conformity with this clause (ii) and applicable law) applied to the Indebtedness are insufficient to pay the Indebtedness in full (other than contingent liabilities pursuant to any indemnity, including without limitation Section 5.5 and Section 5.6 hereof, for claims which have not been asserted, or which have not yet accrued). The Agent shall apply the proceeds from the sale of the Collateral hereunder against the Indebtedness in such order and manner as provided in the Credit Agreement.

(c)

The Agent may cause any or all of the Collateral held by it to be transferred into the name of the Agent or the name or names of the Agent’s nominee or nominees.

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(d)

The Agent may exercise any and all rights and remedies of the Debtors under or in respect of the Collateral, including, without limitation, any and all rights of the Debtors to demand or otherwise require payment of any amount under, or performance of any provision of any of the Collateral and any and all voting rights and corporate powers in respect of the Collateral.

(e)

On any sale of the Collateral, the Agent is hereby authorized to comply with any limitation or restriction with which compliance is necessary (based on a reasoned opinion of the Agent’s counsel) in order to avoid any violation of applicable law or in order to obtain any required approval of the purchaser or purchasers by any applicable Governmental Authority.

(f)

The Agent may direct account debtors and any other parties liable for any payment under any of the Collateral to make payment of any and all monies due and to become due thereunder directly to the Agent or as the Agent shall direct.

(g)

In the event of any sale, assignment or other disposition of the Intellectual Property Collateral, the goodwill of the business connected with and symbolized by any Collateral subject to such disposition shall be included, and the Debtors shall supply to the Agent or its designee the Debtors’ know-how and expertise related to the Intellectual Property Collateral subject to such disposition, and the Debtors’ notebooks, studies, reports, records, documents and things embodying the same or relating to the inventions, processes or ideas covered by and to the manufacture of any products under or in connection with the Intellectual Property Collateral subject to such disposition.

(h)

For purposes of enabling the Agent to exercise its rights and remedies under this Section 6.1 and enabling the Agent and its successors and permitted assigns to enjoy the full benefits of the Collateral, the Debtors hereby grant (until the termination of this Agreement in accordance with the provisions of Section 7.12 of this Agreement) to the Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Debtors) to use, assign, license or sublicense any of the Intellectual Property Collateral, Computer Records or Software (including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and all computer programs used for the completion or printout thereof), exercisable upon the occurrence and during the continuance of an Event of Default (and thereafter if Agent succeeds to any of the Collateral pursuant to an enforcement proceeding or voluntary arrangement with Debtor), except as may be prohibited by any licensing agreement relating to such Computer Records or Software. This license shall also inure to the benefit of all successors, permitted assigns, transferees of and purchasers from the Agent.

Section 6.2 Private Sales.

(a)

In view of the fact that applicable securities laws may impose certain restrictions on the method by which a sale of the Pledged Shares may be effected after an Event of Default, Debtors agree that upon the occurrence and during the continuance of an Event of Default, the Agent may from time to time attempt to sell all or any part of the Pledged Shares by a private sale in the nature of a private placement, restricting the bidders and prospective purchasers to those who will represent and agree that they are “accredited investors” within the meaning of Regulation D promulgated pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and are purchasing for investment only and not for distribution. In so doing, the Agent may solicit offers for the Pledged Shares, or any part thereof, from a limited number of investors who might be interested in purchasing the Pledged Shares. Without limiting the methods or manner of disposition which could be determined to be commercially reasonable, if the Agent hires a firm of regional or national reputation that is engaged in the business of rendering investment banking and brokerage services to solicit such offers and facilitate the sale of the Pledged Shares, then the Agent’s acceptance of the highest offer (including its own offer, or the offer of any of the Lenders at any such sale) obtained through such efforts of such firm shall be deemed to be a commercially reasonable method of disposition of such Pledged Shares. The Agent shall not be under any obligation to delay a sale of any of the Pledged Shares for the period of time necessary to permit the issuer of such securities to register such securities under the laws of any jurisdiction outside the United States, under the Securities Act or under any applicable state securities laws, even if such issuer would agree to do so.

(b)

The Debtors further agree to do or cause to be done, to the extent that the Debtors may do so under applicable law, all such other reasonable acts and things as may be reasonably necessary to make such sales or resales of any portion or all of the Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Debtors’ expense.

Section 6.3 Intentionally Omitted.

Section 6.4 Default Under Credit Agreement. Subject to any applicable notice and cure provisions contained in the Credit Agreement, the occurrence of any Event of Default (as defined in the Credit Agreement), including without limit a breach of any of the provisions of this Agreement, shall be deemed to be an Event of Default under this Agreement. This Section 6.4 shall not limit the Events of Default set forth in the Credit Agreement.

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ARTICLE 7

Miscellaneous

Section 7.1 No Waiver; Cumulative Remedies. No failure on the part of the Agent to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. The rights and remedies provided for in this Agreement are cumulative and not exclusive of any rights and remedies provided by law.

Section 7.2 Successors and Assigns. Subject to the terms and conditions of the Credit Agreement, this Agreement shall be binding upon and inure to the benefit of the Debtors and the Agent and their respective heirs, successors and permitted assigns, except that the Debtors may not assign any of their rights or obligations under this Agreement without the prior written consent of the Agent.

Section 7.3 AMENDMENT; ENTIRE AGREEMENT. THIS WRITTEN LOAN AGREEMENT (AS DEFINED BY SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE) REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Agreement may be amended or waived only by an instrument in writing signed by the parties hereto.

Section 7.4 Notices. All notices, requests, consents, approvals, waivers and other communications hereunder shall be in writing (including, by facsimile transmission) and mailed, faxed or delivered to the address or facsimile number specified for notices on signature pages hereto; or, as directed to the Debtors or the Agent, to such other address or number as shall be designated by such party in a written notice to the other. All such notices, requests and communications shall, when sent by overnight delivery, or faxed, be effective when delivered for overnight (next business day) delivery, or transmitted in legible form by facsimile machine (with electronic confirmation of receipt), respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if otherwise delivered, upon delivery; except that notices to the Agent shall not be effective until actually received by the Agent.

Section 7.5 GOVERNING LAW; SUBMISSION TO JURISDICTION;

SERVICE OF PROCESS.

(a)

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS.

(b)

ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF TEXAS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE DEBTOR AND THE AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE DEBTOR AND THE AGENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY LOAN DOCUMENT.

Section 7.6 Headings. The headings, captions, and arrangements used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

Section 7.7 Survival of Representations and Warranties. All representations and warranties made in this Agreement or in any certificate delivered pursuant hereto shall survive the execution and delivery of this Agreement, and no investigation by the Agent shall affect the representations and warranties or the right of the Agent or the Lenders to rely upon them.

Section 7.8 Counterparts; Execution. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each of the undersigned by execution of this Agreement agrees that any copy of this document signed by it and transmitted by facsimile or email, or any other method for delivery shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence.

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Section 7.9 Waiver of Bond. In the event the Agent seeks to take possession of any or all of the Collateral by judicial process, the Debtors hereby irrevocably waive (to the extent permitted by applicable law) any bonds and any surety or security relating thereto that may be required by applicable law as an incident to such possession, and waives (to the extent permitted by applicable law) any demand for possession prior to the commencement of any such suit or action.

Section 7.10 Severability. Any provision of this Agreement which is determined by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 7.11 Construction. Each Debtor and the Agent acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement with its legal counsel and that this Agreement shall be construed as if jointly drafted by the Debtors and the Agent.

Section 7.12 Termination. If all of the Indebtedness (other than contingent liabilities pursuant to any indemnity, including without limitation Section 5.5 and Section 5.6 hereof, for claims which have not been asserted, or which have not yet accrued) shall have been paid in full (in cash) and all commitments to extend credit or other credit accommodations under the Credit Agreement have been terminated, the Agent shall, upon the written request of the Debtors, execute and deliver to the Debtors a proper instrument or instruments acknowledging the release and termination of the security interests created by this Agreement, and shall duly assign and deliver to the Debtors (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Agent and has not previously been sold or otherwise applied pursuant to this Agreement.

Section 7.13 Release of Collateral. The Agent shall, upon the written request of the Debtors, execute and deliver to the Debtors a proper instrument or instruments acknowledging the release of the security interest and Liens established hereby on any Collateral (other than the Pledged Shares): (a) if the sale or other disposition of such Collateral is permitted under the terms of the Credit Agreement and, at the time of such proposed release, both before and after giving effect thereto, no Default or Event of Default has occurred and is continuing, (b) if the sale or other disposition of such Collateral is not permitted under the terms of the Credit Agreement, provided that the requisite Lenders under such Credit Agreement shall have consented to such sale or disposition in accordance with the terms thereof, or (c) if such release has been approved by the requisite Lenders in accordance with Section 12.11 of the Credit Agreement.

Section 7.14 WAIVER OF JURY TRIAL. EACH DEBTOR AND THE AGENT ACKNOWLEDGES ITS RIGHT TO A TRIAL BY JURY IS A CONSTITUTIONAL ONE, AND WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY EITHER SUCH PARTY AGAINST THE OTHER, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH DEBTOR AND THE AGENT AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH SUCH PARTY FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

Section 7.15 Consistent Application. The rights and duties created by this Agreement shall, in all cases, be interpreted consistently with, and shall be in addition to (and not in lieu of), the rights and duties created by the Credit Agreement or the other Loan Documents. In the event that any provision of this Agreement shall be inconsistent with any provision of the Credit Agreement, such provision of the Credit Agreement shall govern.

Section 7.16 Continuing Lien. The security interest granted under this Security Agreement shall be a continuing security interest in every respect (whether or not the outstanding balance of the Indebtedness is from time to time temporarily reduced to zero) and the Agent’s security interest in the Collateral as granted herein shall continue in full force and effect for the entire duration that the Credit Agreement remains in effect and until all of the Indebtedness are repaid and discharged in full (other than contingent liabilities pursuant to any indemnity, including without limitation Section 5.5 and Section 5.6 hereof, for claims which have not been asserted, or which have not yet accrued), and no commitment (whether optional or obligatory) to extend any credit under the Credit Agreement remain outstanding.

Section 7.17 Determination of Value of Collateral.

The following shall be the basis of any finder of fact’s determination of the value of any Collateral which is the subject matter of a disposition giving rise to a calculation of any surplus or deficiency under Section 9.615(f) of the UCC: (a) the Collateral which is the subject matter of the disposition shall be valued in an “as is” condition as of the date of the disposition, without nay assumption or expectation that such Collateral will be repaired or improved in any matter; (b) the valuation shall be based upon an assumption that the transferee of such Collateral desires a resale of the Collateral for cash promptly (but no later than 30 days) following the disposition; (c) all reasonable closing costs customarily borne by the seller in commercial sales transactions relating to property similar to such Collateral shall be deducted, including, without limitation, brokerage commissions, tax prorations, attorneys’ fees, whether in-house or outside counsel is used, and marketing costs, (d) the value of the collateral which is the subject matter of the disposition shall be further discounted to account for any estimated holding costs associated with maintaining such Collateral pending sale (to the extent not accounted for in (c) above) and other maintenance, operational and ownership expenses and (e) any expert opinion testimony given or considered in connection with a determination of the value of such Collateral must be given by persons having at least 5 years experience in appraising property similar to the Collateral and who have conducted and prepared a complete written appraisal of such Collateral taking into consideration the factors set forth above. The “value” of any such Collateral shall be a factor in determining the amount of proceeds which would have been realized in a disposition to a transferee other than the Agent or a Lender, a Person related to the Agent or a Lender, or a secondary obligor under Section 9-615(f) of the UCC.

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first written above.

DEBTORS:

STERLING CONSTRUCTION COMPANY,

INC.

By:

Name:

Title

Address for Notices:

Fax No.:

Telephone No.:

Attention:

TEXAS STERLING CONSTRUCTION CO.

By:

Name:

Title

Address for Notices:

Fax No.:

Telephone No.:

Attention:

OAKHURST MANAGEMENT

CORPORATION

By:

Name:

Title

Address for Notices:

Fax No.:

Telephone No.:

Attention:

131

AGENT:

COMERICA BANK, as Agent

By:

Name:

Title

Address for Notices:

Fax No.:

Telephone No.:

Attention:

132

EXHIBIT A

SECURITY AGREEMENT

FORM OF AMENDMENT

This Amendment to Security Agreement (“Amendment”), dated__________________, 20___, is delivered pursuant to Section 4.8[(b)/(c)] of the Security Agreement referred to below. The undersigned hereby agrees that this Amendment may be attached to the Security Agreement dated as of October 31, 2007, between the undersigned and Comerica Bank, a Michigan banking corporation, as the Agent for the benefit of the Lenders referred to therein (the “Security Agreement”), and (a) [that the intellectual property listed on Schedule A]/[that the shares of stock, membership interests, partnership units, notes or other instruments listed on Schedule A] annexed hereto shall be and become part of the Collateral referred to in the Security Agreement and shall secure payment and performance of all Indebtedness as provided in the Security Agreement and (b) that Schedule A shall be deemed to amend [Schedule 1.1 /Schedule 1.2] by supplementing the information provided on such Schedule with the information set forth on Schedule A.

This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each of the undersigned by execution of this Amendment agrees that any copy of this Amendment signed by it and transmitted by facsimile or email, or any other method for delivery shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence.

Capitalized terms used herein but not defined herein shall have the meanings therefor provided in the Security Agreement.

STERLING CONSTRUCTION COMPANY, INC.

By:

Its:

TEXAS STERLING CONSTRUCTION CO.

By:

Its:

OAKHURST MANAGEMENT

CORPORATION

By:

Its:

ROAD AND HIGHWAY BUILDERS, LLC

By:

Its:

ROAD AND HIGHWAY BUILDERS INC.

By:

Its:

COMERICA BANK, as Agent

By:

Its:

133

EXHIBIT B

JOINDER AGREEMENT

(Security Agreement)

THIS JOINDER AGREEMENT (the “Joinder Agreement”) is dated as of _______________, ____ by _______________, a __________ (“New Debtor”).

WHEREAS, pursuant to Section 7.13 of that certain Credit Agreement dated as of October 31, 2007 (as amended or otherwise modified from time to time, the “Credit Agreement”) by and among Sterling Construction Company, Inc., a Delaware corporation (“Ster1ing”), and certain of its Subsidiaries (collectively, with Sterling, the “Borrowers”), the financial institutions signatory thereto from time to time (the “Lenders”) and Comerica Bank, a Michigan banking corporation, as Agent for the Lenders (in such capacity, “Agent”), the New Debtor is required to execute and deliver a joinder agreement to the Security Agreement.

WHEREAS, in order to comply with the Credit Agreement, New Debtor executes and delivers this Joinder Agreement in accordance therewith.

NOW THEREFORE, as a further inducement to Lenders to continue to provide credit accommodations to the Borrowers, New Debtor hereby covenants and agrees as follows:

A. All capitalized terms used herein shall have the meanings assigned to them in the Credit Agreement unless expressly defined to the contrary.

B. New Debtor hereby enters into this Joinder Agreement in order to comply with Section 7.13 of the Credit Agreement and does so in consideration of the Advances made or to be made from time to time under the Credit Agreement and the other Loan Documents.

C. Schedule [insert appropriate Schedule] attached to this Joinder Agreement is intended to supplement Schedule [insert appropriate Schedule] of the Security Agreement with the respective information applicable to New Debtor.

D. New Debtor shall be considered, and deemed to be, for all purposes of the Credit Agreement, the Security Agreement and the other Loan Documents, a Debtor under the Security Agreement as fully as though New Debtor had executed and delivered the Security Agreement at the time originally executed and delivered under the Credit Agreement and hereby ratifies and confirms its obligations under the Security Agreement, all in accordance with the terms thereof and shall be deemed to have made each representation and warranty set forth in the Security Agreement.

E. No Default or Event of Default (each such term being defined in the Credit Agreement) has occurred and is continuing under the Credit Agreement.

F. This Joinder Agreement shall be governed by the laws of the State of Texas and shall be binding upon New Debtor and its successors and assigns.

G. This Joinder Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each of the undersigned by execution of this Joinder Agreement agrees that any copy of this Joinder Agreement signed by it and transmitted by facsimile or email, or any other method for delivery shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence.

IN WITNESS WHEREOF, the undersigned New Debtor has executed and delivered this Joinder Agreement as of ___________________, _____.

[NEW DEBTOR]

By:

Its:

Accepted:

COMERICA BANK, as Agent

By:

Its:

134

EXHIBIT G

JOINDER AGREEMENT

This Joinder Agreement (this “Joinder Agreement”) is executed and delivered as of the 31st day of October, 2007 by each of the undersigned

WHEREAS, Sterling Construction Company, Inc., Texas Sterling Construction Co. and Oakhurst Management Corporation and Comerica Bank as Administrative Agent (“Agent”) and the other financial institutions party thereto from time to time (the “Lenders”) have executed and delivered that certain Sterling Construction Company, Inc. Credit Agreement dated as of October 31, 2007 (as the same may be amended, restated or otherwise modified from time to time, the “Credit Agreement”; capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), pursuant to which the Lenders have made and has agreed to make certain Advances pursuant to the terms and conditions set forth therein; and

WHEREAS, each of the undersigned have requested that they also be able to request Advances and receive extensions of credit under the Credit Agreement, and the Lenders have agreed to such request;

NOW, THEREFORE, in consideration of the provisions contained herein and in the Credit Agreement, each of the undersigned hereby agrees as follows:

1. By execution and delivery of this Joinder Agreement, each of the undersigned shall, and does hereby, become a Borrower under the Credit Agreement and a Debtor under the Security Agreement, in each case as if an original signatory thereto, and agrees to execute and deliver any such additional agreements, documents and instruments in connection therewith as Agent shall reasonably request.

2. Each of the undersigned (a) acknowledges and agrees that the undersigned has completely read and understands the Credit Agreement, the Security Agreement and any other Loan Documents; (b) consents to and agrees to be bound by all of the provisions of the Credit Agreement, the Security Agreement and any other Loan Documents executed in connection therewith relating to undersigned; (c) represents and warrants that (i) all of the representations and warranties set forth in the Credit Agreement, the Security Agreement and any other Loan Documents are, as to the undersigned, true and correct in all material respects as of the date hereof and (ii) the Acquisition has been consummated on the terms set forth in the Credit Agreement, and (d) acknowledges and agrees that this Agreement, the Credit Agreement, the Security Agreement and the other Loan Documents to which such undersigned is a party have been freely executed without duress and after an opportunity was provided to the undersigned for review by competent legal counsel of the undersigned’s choice.

3. Each of the undersigned acknowledges and agrees that it shall be jointly and severally liable with the other Borrowers for all of the loans and advances made by Agent and any of the Lenders and all of the indebtedness, obligations and liabilities to Agent and the Lenders under and pursuant to the terms of the Credit Agreement, the Security Agreement or any of the other Loan Documents, together with all of the Borrowers’ other indebtedness, obligations and liabilities whatsoever to Agent or any other Lender arising under or in connection with the Credit Agreement, the Security Agreement or any other Loan Documents, whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, joint or several, due or to become due, now existing or hereafter arising.

4. This Joinder Agreement may be executed in counterparts which, taken together, shall constitute an original. This Joinder Agreement may be delivered by facsimile or electronic (e.g., .pdf or .tif file) transmission with the same effect as if an originally executed version of this Fee Letter had been personally delivered to each of the parties hereto, whether or not an original remains in existence.

135

ROAD AND HIGHWAY BUILDERS, INC.

By:

Its:

ROAD AND HIGHWAY BUILDERS, LLC

By: Sterling Construction Company, Inc., its sole

manager

By:

Its:

136

EXHIBIT H

FORM OF ASSIGNMENT AGREEMENT

Date: _____________,2007

To: Borrowers

and

Comerica Bank, as the Agent

Re:

Ladies and Gentlemen:

Reference is made to Section 13.8 of the Credit Agreement. Unless otherwise defined herein or the context otherwise requires, all initially capitalized terms used herein without definition shall have the meanings specified in the Credit Agreement.

This Assignment Agreement (“Agreement”) constitutes notice to each of you of the proposed assignment and delegation by [insert name of assignor] (the “Assignor”) to [insert name of assignee] (the “Assignee”), and, subject to the terms and conditions of the Credit Agreement, the Assignor hereby sells, assigns and transfers to the Assignee, and the Assignee hereby purchases, assumes and accepts from the Assignor, effective on the “Effective Date” (as hereafter defined) that undivided interest in each of Assignor’s rights and obligations under the Credit Agreement and the other Loan Documents in the amounts as set forth on the attached Schedule 1, such that, after giving effect to the foregoing assignment and assumption, and the concurrent assignment by Assignor to Assignee on the date hereof, the Assignee’s interest in the Revolving Credit (and participations in any outstanding Letters of Credit and Swing Line Advances) shall be as set forth in the attached Schedule 2 with respect to the Assignee.

The Assignor hereby instructs the Agent to make all payments from and including the Effective Date hereof in respect of the interest assigned hereby, directly to the Assignee. The Assignor and the Assignee agree that all interest and fees accrued up to, but not including, the Effective Date of the assignment and delegation being made hereby are the property of the Assignor, and not the Assignee. The Assignee agrees that, upon receipt of any such interest or fees accrued up to the Effective Date, the Assignee will promptly remit the same to the Assignor.

The Assignee hereby confirms that it has received a copy of the Credit Agreement and the exhibits and schedules referred to therein, and all other Loan Documents which it considers necessary, together with copies of the other documents which were required to be delivered under the Credit Agreement as a condition to the making of the loans thereunder. The Assignee acknowledges and agrees that it: (a) has made and will continue to make such inquiries and has taken and will take such care on its own behalf as would have been the case had its Percentage been granted and its loans been made directly by such Assignee to Borrowers without the intervention of the Agent, the Assignor or any other Lender; and (b) has made and will continue to make, independently and without reliance upon the Agent, the Assignor or any other Lender, and based on such documents and information as it has deemed appropriate, its own credit analysis and decisions relating to the Credit Agreement. The Assignee further acknowledges and agrees that neither the Agent, nor the Assignor has made any representations or warranties about the creditworthiness of Borrowers or any other party to the Credit Agreement or any other of the Loan Documents, or with respect to the legality, validity, sufficiency or enforceability of the Credit Agreement, or any other of the Loan Documents. This assignment shall be made without recourse to or warranty by the Assignor, except as set forth herein.

Assignee represents and warrants that (i) it is a Person to which assignments are permitted pursuant to Section 13.8 of the Credit Agreement; (ii) it has full power and authority and has taken all action necessary to execute and deliver this Agreement and any and all other documents required or permitted to be executed or delivered by it in connection with this Agreement and to fulfill its obligations under and to consummate the transactions contemplated by this Agreement and no governmental authorizations or other authorizations are required in connection therewith; and (iii) this Agreement constitutes the legal, valid and binding obligation of the Assignee.

Except as otherwise provided in the Credit Agreement, effective as of the Effective Date:

(a)

the Assignee: (i) shall be deemed automatically to have become a party to the Credit Agreement and the other Loan Documents, to have assumed all of the Assignor’s obligations thereunder to the extent of the Assignee’s percentage referred to in the second paragraph of this Agreement, and to have all the rights and obligations of a party to the Credit Agreement and the other Loan Documents, as if it were an original signatory thereto to the extent specified in the second paragraph hereof; and (ii) agrees to be bound by the terms and conditions set forth in the Credit Agreement and the other Loan Documents as if it were an original signatory thereto; and

(b)

the Assignor’s obligations under the Credit Agreement and the other Loan Documents shall be reduced by the Percentage referred to in the second paragraph of this Agreement.

As used herein, the term “Effective Date” means the date on which all of the following have occurred or have been completed or waived by Agent, as reasonably determined by the Agent:

(1)

the delivery to the Agent of this Agreement executed by the Assignor and the Assignee;

(2)

the payment to the Agent, of all accrued fees, expenses and other items for which reimbursement is then owing under the Credit Agreement;

(3)

the payment to the Agent of the $5,000 processing fee referred to in Section 13.8(d)(ii) of the Credit Agreement; and

(4)

all other restrictions and items noted in Section 13.8 of the Credit Agreement have been completed.

The Agent shall notify the Assignor and the Assignee, along with Borrowers, of the Effective Date.

The Assignee hereby advises each of you of the following administrative details with respect to the assigned loans:

(A)

Address for Notices:

Institution Name:

Address:

Attention:

Telephone:

Facsimile:

(B)

Payment Instructions:

(C)

Proposed effective date of assignment.

The Assignee has delivered to the Agent (or is delivering to the Agent concurrently herewith) the tax forms referred to in Section 13.13 of the Credit Agreement to the extent required thereunder, and other forms reasonably requested by the Agent. The Assignor has delivered to the Agent (or shall promptly deliver to Agent following the execution hereof), the original of each Note held by the Assignor under the Credit Agreement.

The laws of the State of Texas shall govern the validity, interpretation and enforcement of this Agreement (without giving effect to internal principles of conflict of law).

This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts of this Agreement, when taken together, shall constitute but one and the same instrument. The undersigned by execution of this Agreement agrees that any copy of this document signed by it and transmitted by facsimile or email, or any other method for delivery shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence.

* * *

[SIGNATURES FOLLOW ON SUCCEEDING PAGE]

137

Please evidence your consent to and acceptance of the proposed assignment and delegation set forth herein by signing and returning counterparts hereof to the Assignor and the Assignee.

[ASSIGNOR]

By:

Its:

[ASSIGNEE]

By:

Its:

ASSIGNMENT AGREEMENT ACCEPTED AND CONSENTED TO

this ____ day of __________, 20___ BY:

COMERICA BANK, as Agent

By:

Its:

STERLING CONSTRUCTION COMPANY, INC.,

as Borrower Representative

By:

Its:

[*Borrower Representative consent will be required except as specified in the Credit Agreement.]

[This form of Assignment Agreement (including footnotes) is subject in all respects to the terms and conditions of the Credit Agreement which shall govern in the event of any inconsistencies or omissions.]

138

EXHIBIT I

Intentionally Omitted

139

EXHIBIT J

FORM OF COVENANT COMPLIANCE REPORT

TO: Comerica Bank, as Agent

RE: Credit Agreement made as of October 31, 2007, (as amended, restated or otherwise modified from time to time, the “Credit Agreement”) by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank as Administrative Agent for the Lenders (in such capacity, the “Agent”), Arranger, Syndication Agent and Documentation Agent, Sterling Construction Company, Inc. (“Sterling”), and certain Subsidiaries of Sterling (together with Sterling, the “Borrowers” and each of them a “Borrower”).

This Covenant Compliance Report (“Report”) is furnished pursuant to Section 7.2(a) of the Credit Agreement and sets forth various information as of ________________, ______ (the “Computation Date”).

1.	Fixed Charge Coverage Ratio (Section 7.9(a)). On the Computation Date, the Fixed Charge Coverage Ratio, which is required to be not less than 1.25 to 1.00 was ____ to 1.00, as computed in the supporting documents attached hereto as Schedule 1.

2.	Leverage Ratio (Section 7.9(b)). On the Computation Date, the Leverage Ratio, which is required to be not more than _____ to 1.00 was _____ to 1.00, as computed in the supporting documents attached hereto as Schedule 2.

3.	Minimum Tangible Net Worth (Section 7.9(c)). On the Computation Date, the Minimum Tangible Net Worth, which is required to be not less than $___________ was $_________, as computed in the supporting documents attached hereto as Schedule 3.

4.	Asset Coverage Ratio (7.9(d)). On the Computation Date, the Asset Coverage Ratio, which is required to be not less than 1.25 to 1.00 was ______ to 1.00, as computed in the supporting documents attached hereto as Schedule 4.

5.	Losses (7.9(e)). On the Computation Date, Sterling and its Consolidated Subsidiaries have Net Income for the prior two consecutive fiscal quarters then ending of $________.

6.	Pricing Leverage Ratio. On the Computation Date, the Pricing Leverage Ratio was _____ to 1.00, as computed in the supporting documents attached hereto as Schedule 6.

The undersigned Responsible Officer of the Borrower Representative hereby certifies, solely in the capacity as a Responsible Officer of Borrower Representative and not in an individual capacity, that:

A. To the best of my knowledge, all of the information set forth in this Report (and in any Schedule attached hereto) is true and correct in all material respects.

B. To the best of my knowledge, the representations and warranties of the Credit Parties contained in the Credit Agreement and in the Loan Documents are true and correct in all material respects with the same effect as though such representations and warranties had been made on and at the date hereof except to the extent that such representations and warranties expressly relate to an earlier specific date, in which case such representations and warranties were true and correct in all material respects as of the date when made.

C. I have reviewed the Credit Agreement and this Report is based on an examination sufficient to assure that this Report is accurate.

D. To the best of my knowledge, except as stated in Schedule 7 hereto (which shall describe any existing Default or Event of Default and the notice and period of existence thereof and any action taken with respect thereto or contemplated to be taken by Borrowers or any other Credit Party), no Default or Event of Default has occurred and is continuing on the date of this Report.

Capitalized terms used in this Report and in the Schedules hereto, unless specifically defined to the contrary, have the meanings given to them in the Credit Agreement.

IN WITNESS WHEREOF, the Borrower Representative has caused this Report to be executed and delivered by a Responsible Officer of the Borrower Representative this ______ day of ________________, ______.

STERLING CONSTRUCTION COMPANY,

INC., as Borrower Representative

By:

Its:

140

EXHIBIT K

Intentionally Omitted

141

EXHIBIT L

Intentionally Omitted

142

EXHIBIT M

FORM OF SWING LINE PARTICIPATION CERTIFICATE

___________________,2007

[Name of Lender]

Re:

Ladies and Gentlemen:

Pursuant to Section 2.5(e)(ii) of the Credit Agreement, the undersigned hereby acknowledges receipt from you of $_____________________ as payment for a participating interest in the following Swing Line Loan:

Date of Swing Line Loan:_______________________________

Principal Amount of Swing Line Loan:________________________

The participation evidenced by this certificate shall be subject to the terms and conditions of the

Credit Agreement including without limitation Section 2.5(e) thereof. Capitalized terms used

herein, except as defined to the contrary, shall have the meanings given them in the Credit

Agreement.

* * *

[SIGNATURES FOLLOW ON SUCCEEDING PAGE]

143

Very truly yours,

COMERICA BANK, as Agent

By:

Its:

161

Sterling Construction Company, Inc.			OUTSTANDING AND EXERCISABLE BY PRICE AS OF 9/30/2007							Page: 1 File: Osprice Date: 10/26/2007 Time: 5:35:52 PM
Name	ID Number		Option Date	Expiration Date	Remaining Life in Years			Option Price		Shares Outstanding	Shares Exercisable
Abernathy, John D.	008 000517		5/7/2007	5/7/2008		0.60			$0.000	1,598	0
Abernathy, John D.	008 000395		5/19/2005	5/19/2015		7.63			$6.870	5,000	5,000
Abernathy, John D.	008 000258		7/23/2001	7/23/2011		3.81			$1.500	12,000	12,000
Abernathy, John D.	008 000225		5/1/2001	5/1/2011		3.58			$0.750	1,166	1,166
Abernathy, John D.	008 000217		5/1/2000	5/1/2010		2.58			$1.063	3,000	3,000
Abernathy, John D.	008 000194		5/1/1999	5/1/2009		1.58			$0.938	3,000	3,000
Abernathy, John D.	008 000189		5/1/1998	5/1/2008		0.58			$0.844	3,000	3,000
					Avg. Life	3.59	Avg. Out.		$2.147	28,764	27,166
	Account: Abernathy, John D.						Avg. Exer.		$2.273
Allen, James H	181 000521		8/7/2007	8/7/2017		9.85			$18.990	13,707	0
					Avg. Life	9.85	Avg. Out.		$18.990	13,707	0
	Account: Allen, James H						Avg. Exer.		$0.000
Barefield, Stephen	163 000476		8/8/2006	9/8/2011		3.94			$25.210	500	100
Barefield, Stephen	163 000440		8/12/2005	9/12/2010		2.95			$16.780	900	360
Barefield, Stephen	163 000332		8/12/2004	8/12/2014		6.87			$3.100	2,000	1,000
					Avg. Life	5.40	Avg. Out.		$9.973	3,400	1,460
	Account: Barefield, Stephen						Avg. Exer.		$7.988
Barzun, Roger M.	002 000477		8/8/2006	9/8/2011		3.94			$25.210	600	120
Barzun, Roger M.	002 000436		8/12/2005	9/12/2010		2.95			$16.780	1,000	400
Barzun, Roger M.	002 000383		8/12/2004	8/12/2014		6.87			$3.100	2,000	2,000
Barzun, Roger M.	002 000187		2/4/1998	2/4/2008		0.35			$0.875	3,980	3,980
					Avg. Life	2.69	Avg. Out.		$5.487	7,580	6,500
	Account: Barzun, Roger M.						Avg. Exer.		$2.988
Binford, Matthew	165	000478	8/8/2006	9/8/2011		3.94			$25.210	500	100
Binford, Matthew	165	000447	8/12/2005	9/12/2010		2.95			$16.780	600	240
Binford, Matthew	165	000333	8/12/2004	8/12/2014		6.87			$3.100	1,000	600
					Avg. Life	5.05	Avg. Out.		$12.273	2,100	940
	Account: Binford, Matthew						Avg. Exer.		$8.945
Callahan, Joseph	170 000335		8/12/2004	8/12/2014		6.87			$3.100	500	300
					Avg. Life	6.87	Avg. Out.		$3.100	500	300
	Account: Callahan, Joseph						Avg. Exer.		$3.100
Castro, Salvador	152 000336		8/12/2004	8/12/2014		6.87			$3.100	300	100
Castro, Salvador	152 000327		8/20/2003	8/20/2013		5.89			$3.050	320	160

162

Sterling Construction Company, Inc. OUTSTANDING AND EXERCISABLE BY PRICE Page: 2

AS OF 9/30/2007 File: Osprice

Date: 10/26/2007

Time: 5:35:52 PM

Name	ID Number		Option Date	Expiration Date	Remaining Life in Years		Option Price		Shares Outstanding	Shares Exercisable
					Avg. Life	6.36	Avg. Out.	$3.074
					Avg. Life	6.36	Avg. Out.	$3.074	620	260
	Account: Castro, Salvador						Avg. Exer.	$3.069
Chapa, Juan D.	144 000480		8/8/2006	9/8/2011		3.94		$25.210	400	80
Chapa, Juan D.	144 000441		8/12/2005	9/12/2010		2.95		$16.780	700	280
Chapa, Juan D.	144 000337		8/12/2004	8/12/2014		6.87		$3.100	2,000	1,200
Chapa, Juan D.	144 000321		8/20/2003	8/20/2013		5.89		$3.050	2,000	1,600
Chapa, Juan D.	144 000266		7/24/2002	7/24/2012		4.81		$1.725	2,000	2,000
					Avg. Life	5.46	Avg. Out.	$5.293	7,100	5,160
	Account: Chapa, Juan D						Avg. Exer.	$3.637
Clark, Samuel	136	000481	8/8/2006	9/8/2011		3.94		$25.210	600	120
Clark, Samuel	136	000451	8/12/2005	9/12/2010		2.95		$16.780	1,200	480
Clark, Samuel	136	000338	8/12/2004	8/12/2014		6.87		$3.100	2,500	1,500
Clark, Samuel	136	000313	8/20/2003	8/20/2013		5.89		$3.050	2,000	1,600
Clark, Samuel	136	000267	7/24/2002	7/24/2012		4.81		$1.725	2,000	2,000
Clark, Samuel	136	000232	7/23/2001	7/23/2011		3.81		$1.500	2,400	2,400
					Avg. Life	5.01	Avg. Out.	$5.249	10,700	8,100
	Account: Clark, Samuel						Avg. Exer.	$3.415
Coates, Garland P.	141	000339	8/12/2004	8/12/2014		6.87		$3.100	800	480
Coates, Garland P.	141	000318	8/20/2003	8/20/2013		5.89		$3.050	800	640
Coates, Garland P.	141	000268	7/24/2002	7/24/2012		4.81		$1.725	200	200
					Avg. Life	6.20	Avg. Out.	$2.925	1,800	1,320
	Account: Coates, Garland P.						Avg. Exer.	$2.867
Cohlmeyer, Roger	154	000340	8/12/2004	8/12/2014		6.87		$3.100	800	480
Cohlmeyer, Roger	154	000325	8/20/2003	8/20/2013		5.89		$3.050	800	640
Cohlmeyer, Roger	154	000270	7/24/2002	7/24/2012		4.81		$1.725	500	500
					Avg. Life	6.00	Avg. Out.	$2.754	2,100	1,620
	Account: Cohlmeyer, Roger						Avg. Exer.	$2.656
Colombo, Anthony F.	129	000482	8/8/2006	9/8/2011		3.94		$25.210	600	0
Colombo, Anthony F.	129	000483	8/8/2006	9/8/2011		3.94		$25.210	400	200
Colombo, Anthony F.	129	000465	7/18/2006	7/18/2011		3.80		$24.960	3,633	3,633
Colombo, Anthony F.	129	000466	7/18/2006	7/18/2011		3.80		$24.960	3,867	3,867
Colombo, Anthony F.	129	000416	8/12/2005	9/12/2010		2.95		$16.780	300	300
Colombo, Anthony F.	129	000438	8/12/2005	9/12/2010		2.95		$16.780	1,200	300
Colombo, Anthony F.	129	000406	7/18/2005	7/18/2010		2.80		$9.690	7,380	7,380
Colombo, Anthony F.	129	000407	7/18/2005	7/18/2010		2.80		$9.690	120	120

163

Sterling Construction Company, Inc.		OUTSTANDING AND EXERCISABLE BY PRICE AS OF 9/30/2007							Page: 3 File: Osprice Date: 10/26/2007 Time: 5:35:52 PM
Name	ID Number	Option Date	Expiration Date	Remaining Life in Years			Option Price		Shares Outstanding	Shares Exercisable
Colombo, Anthony F.	129 000341	8/12/2004	8/12/2014		6.87			$3.100	3,500	2,100
Colombo, Anthony F.	129 000381	8/12/2004	8/12/2009		1.87			$3.100	7,500	7,500
Colombo, Anthony F.	129 000305	8/20/2003	8/20/2013		5.89			$3.050	3,000	2,400
Colombo, Anthony F.	129 000271	7/24/2002	7/24/2012		4.81			$1.725	2,800	2,800
Colombo, Anthony F.	129 000234	7/23/2001	7/23/2011		3.81			$1.500	2,500	2,500
				Avg. Life	3.71	Avg. Out.		$9.839	36,800	33,100
	Account: Colombo, Anthony F.					Avg. Exer.		$9.687
Dolan, Timothy	142 000342	8/12/2004	8/12/2014		6.87			$3.100	800	480
Dolan, Timothy	142 000319	8/20/2003	8/20/2013		5.89			$3.050	800	640
Dolan, Timothy	142 000272	7/24/2002	7/24/2012		4.81			$1.725	1,000	1,000
				Avg. Life	5.78	Avg. Out.		$2.556	2,600	2,120
	Account: Dolan, Timothy					Avg. Exer.		$2.436
Flores, Pete	133 000484	8/8/2006	9/8/2011		3.94			$25.210	200	40
Flores, Pete	133 000417	8/12/2005	9/12/2010		2.95			$16.780	180	0
Flores, Pete	133 000343	8/12/2004	8/12/2014		6.87			$3.100	320	0
Flores, Pete	133 000311	8/20/2003	8/20/2013		5.89			$3.050	160	0
				Avg. Life	5.18	Avg. Out.		$11.096	860	40
	Account: Flores, Pete					Avg. Exer.		$25.210
Frickel, Robert W.	151 000513	5/7/2007	5/7/2008		0.60			$0.000	1,598	0
Frickel, Robert W.	151 000398	5/19/2005	5/19/2015		7.63			$6.870	5,000	5,000
Frickel, Robert W.	151 000260	7/23/2001	7/23/2011		3.81			$1.500	12,000	12,000
				Avg. Life	4.56	Avg. Out.		$2.815	18,598	17,000
	Account: Frickel, Robert W.					Avg. Exer.		$3.079
Fusilli, Jr., Donald P.	180 000511	5/7/2007	5/7/2008		0.60			$0.000	1,598	0
				Avg. Life	0.60	Avg. Out.		$0.000	1,598	0
	Account: Fusilli, Jr., Donald P.					Avg. Exer.		$0.000
Garnett, Corey	164 000344	8/12/2004	8/12/2014		6.87			$3.100	300	100
				Avg. Life	6.87	Avg. Out.		$3.100	300	100
	Account: Garnett, Corey					Avg. Exer.		$3.100
Garrison, Greg	155 000485	8/8/2006	9/8/2011		3.94			$25.210	700	140
Garrison, Greg	155 000418	8/12/2005	9/12/2010		2.95			$16.780	1,400	560
Garrison, Greg	155 000345	8/12/2004	8/12/2014		6.87			$3.100	3,000	1,800
Garrison, Greg	155 000307	8/20/2003	8/20/2013		5.89			$3.050	2,000	1,600

164

Sterling Construction Company, Inc.			OUTSTANDING AND EXERCISABLE BY PRICE AS OF 9/30/2007							Page: 4 File: Osprice Date: 10/26/2007 Time: 5:35:52 PM
			Option	Expiration	Remaining			Option		Shares	Shares
Name	ID	Number	Date	Date	Life in Years			Price		Outstanding	Exercisable
Garrison, Greg	155	000274	7/24/2002	7/24/2012		4.81			$1.725	1,500	1,500
					Avg. Life	5.40	Avg. Out.		$6.875	8,600	5,600
	Account: Garrison, Greg						Avg. Exer.		$4.638
Goldsmith, Dusty	143	000486	8/8/2006	9/8/2011		3.94			$25.210	400	80
Goldsmith, Dusty	143	000419	8/12/2005	9/12/2010		2.95			$16.780	560	140
Goldsmith, Dusty	143	000347	8/12/2004	8/12/2014		6.87			$3.100	1,000	0
Goldsmith, Dusty	143	000320	8/20/2003	8/20/2013		5.89			$3.050	400	0
					Avg. Life	5.28	Avg. Out.		$10.085	2,360	220
	Account: Goldsmith, Dusty						Avg. Exer.		$19.845
Gonzales, Rafael	145	000348	8/12/2004	8/12/2014		6.87			$3.100	500	300
Gonzales, Rafael	145	000322	8/20/2003	8/20/2013		5.89			$3.050	800	640
Gonzales, Rafael	145	000277	7/24/2002	7/24/2012		4.81			$1.725	500	500
Gonzales, Rafael	145	000239	7/23/2001	7/23/2011		3.81			$1.500	500	500
					Avg. Life	5.42	Avg. Out.		$2.436	2,300	1,940
	Account: Gonzales, Rafael						Avg. Exer.		$2.317
Green, Raymond	146	000349	8/12/2004	8/12/2014		6.87			$3.100	500	300
Green, Raymond	146	000323	8/20/2003	8/20/2013		5.89			$3.050	800	640
Green, Raymond	146	000278	7/24/2002	7/24/2012		4.81			$1.725	1,000	1,000
Green, Raymond	146	000240	7/23/2001	7/23/2011		3.81			$1.500	1,000	1,000
					Avg. Life	5.08	Avg. Out.		$2.186	3,300	2,940
	Account: Green, Raymond						Avg. Exer.		$2.077
Harper, Brien P.	138	000487	8/8/2006	9/8/2011		3.94			$25.210	500	100
Harper, Brien P.	138	000420	8/12/2005	9/12/2010		2.95			$16.780	1,000	400
Harper, Brien P.	138	000350	8/12/2004	8/12/2014		6.87			$3.100	1,500	500
Harper, Brien P.	138	000316	8/20/2003	8/20/2013		5.89			$3.050	800	400
Harper, Brien P.	138	000279	7/24/2002	7/24/2012		4.81			$1.725	400	400
					Avg. Life	5.20	Avg. Out.		$8.849	4,200	1,800
	Account: Harper, Brien P.						Avg. Exer.		$7.052
Harper, Jr., Joseph P.	130	000488	8/8/2006	9/8/2011		3.94			$25.210	600	0
Harper, Jr., Joseph P.	130	000489	8/8/2006	9/8/2011		3.94			$25.210	400	200
Harper, Jr., Joseph P.	130	000467	7/18/2006	7/18/2011		3.80			$24.960	3,633	3,633
Harper, Jr., Joseph P.	130	000468	7/18/2006	7/18/2011		3.80			$24.960	3,867	3,867
Harper, Jr., Joseph P.	130	000422	8/12/2005	9/12/2010		2.95			$16.780	300	300
Harper, Jr., Joseph P.	130	000421	8/12/2005	9/12/2010		2.95			$16.780	1,200	300
Harper, Jr., Joseph P.	130	000408	7/18/2005	7/18/2010		2.80			$9.690	7,390	7,390

165

Sterling Construction Company, Inc.			OUTSTANDING AND EXERCISABLE BY PRICE AS OF 9/30/2007							Page: 5 File: Osprice Date: 10/26/2007 Time: 5:35:52 PM
Name	ID	Number	Option Date	Expiration Date	Remaining Life in Years			Option Price		Shares Outstanding	Shares Exercisable
Harper, Jr., Joseph P.	130	000409	7/18/2005	7/18/2010		2.80			$9.690	110	110
Harper, Jr., Joseph P.	130	000351	8/12/2004	8/12/2014		6.87			$3.100	3,500	2,100
Harper, Jr., Joseph P.	130	000380	8/12/2004	8/12/2009		1.87			$3.100	7,500	7,500
Harper, Jr., Joseph P.	130	000306	8/20/2003	8/20/2013		5.89			$3.050	3,000	2,400
Harper, Jr., Joseph P.	130	000280	7/24/2002	7/24/2012		4.81			$1.725	2,500	2,500
Harper, Jr., Joseph P.	130	000244	7/23/2001	7/23/2011		3.81			$1.500	2,000	2,000
					Avg. Life	3.70	Avg. Out.		$10.023	36,000	32,300
	Account: Harper, Jr., Joseph P.						Avg. Exer.		$9.888
Harper, Sr., Joseph P.	125	000490	8/8/2006	9/8/2011		3.94			$25.210	600	0
Harper, Sr., Joseph P.	125	000491	8/8/2006	9/8/2011		3.94			$25.210	400	200
Harper, Sr., Joseph P.	125	000462	7/18/2006	7/18/2011		3.80			$24.960	3,804	3,804
Harper, Sr., Joseph P.	125	000463	7/18/2006	7/18/2011		3.80			$24.960	6,196	6,196
Harper, Sr., Joseph P.	125	000423	8/12/2005	9/12/2010		2.95			$16.780	1,200	300
Harper, Sr., Joseph P.	125	000424	8/12/2005	9/12/2010		2.95			$16.780	300	300
Harper, Sr., Joseph P.	125	000402	7/18/2005	7/18/2010		2.80			$9.690	6,747	6,747
Harper, Sr., Joseph P.	125	000403	7/18/2005	7/18/2010		2.80			$9.690	3,253	3,253
Harper, Sr., Joseph P.	125	000352	8/12/2004	8/12/2014		6.87			$3.100	3,500	3,500
Harper, Sr., Joseph P.	125	000379	8/12/2004	8/12/2009		1.87			$3.100	10,000	10,000
Harper, Sr., Joseph P.	125	000298	8/20/2003	8/20/2013		5.89			$3.050	3,500	3,500
Harper, Sr., Joseph P.	125	000281	7/24/2002	7/24/2012		4.81			$1.725	3,500	3,500
Harper, Sr., Joseph P.	125	000243	7/23/2001	7/23/2011		3.81			$1.500	3,700	3,700
					Avg. Life	3.61	Avg. Out.		$9.871	46,700	45,000
	Account: Harper, Sr., Joseph P.						Avg. Exer.		$9.461
Hemsley, Maarten D.	001	000522	7/18/2007	7/18/2012		4.80			$21.600	2,800	2,800
Hemsley, Maarten D.	001	000473	7/18/2006	7/18/2011		3.80			$24.960	2,800	2,800
Hemsley, Maarten D.	001	000452	7/18/2005	7/18/2010		2.80			$9.690	2,800	2,800
Hemsley, Maarten D.	001	000384	8/12/2004	8/12/2014		6.87			$3.100	5,000	5,000
Hemsley, Maarten D.	001	000176	1/13/1998	10/27/2013		6.07			$0.875	75,000	75,000
Hemsley, Maarten D.	001	000005	4/29/1994	2/11/2010		2.37			$2.750	100,000	100,000
					Avg. Life	4.03	Avg. Out.		$2.726	188,400	188,400
	Account: Hemsley, Maarten D.						Avg. Exer.		$2.726
Jones, William	156	000492	8/8/2006	9/8/2011		3.94			$25.210	500	100
Jones, William	156	000425	8/12/2005	9/12/2010		2.95			$16.780	900	360
Jones, William	156	000353	8/12/2004	8/12/2014		6.87			$3.100	2,000	1,200
Jones, William	156	000308	8/20/2003	8/20/2013		5.89			$3.050	1,800	1,440
Jones, William	156	000282	7/24/2002	7/24/2012		4.81			$1.725	1,500	1,500

166

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AS OF 9/30/2007 File: Osprice

Date: 10/26/2007

Time: 5:35:52 PM

Name	ID Number		Option Date	Expiration Date	Remaining Life in Years		Option Price		Shares Outstanding	Shares Exercisable
					Avg. Life	5.40	Avg. Out.	$6.266	6,700	4,600
	Account: Jones, William						Avg. Exer.	$4.187
Kelly, William	172 000493		8/8/2006	9/8/2011		3.94		$25.210	300	60
Kelly, William	172 000426		8/12/2005	9/12/2010		2.95		$16.780	600	240
Kelly, William	172 000354		8/12/2004	8/12/2014		6.87		$3.100	1,200	400
					Avg. Life	5.33	Avg. Out.	$10.167	2,100	700
	Account: Kelly, William						Avg. Exer.	$9.685
Leal, Richard Troy	147	000355	8/12/2004	8/12/2014		6.87		$3.100	500	300
Leal, Richard Troy	147	000324	8/20/2003	8/20/2013		5.89		$3.050	800	640
Leal, Richard Troy	147	000284	7/24/2002	7/24/2012		4.81		$1.725	1,000	1,000
					Avg. Life	5.63	Avg. Out.	$2.485	2,300	1,940
	Account: Leal, Richard Troy						Avg. Exer.	$2.375
Littlefield, Joel	161	000494	8/8/2006	9/8/2011		3.94		$25.210	1,000	200
Littlefield, Joel	161	000427	8/12/2005	9/12/2010		2.95		$16.780	1,400	560
Littlefield, Joel	161	000356	8/12/2004	8/12/2014		6.87		$3.100	3,000	1,800
Littlefield, Joel	161	000330	8/20/2003	8/20/2013		5.89		$3.050	1,500	1,200
					Avg. Life	5.43	Avg. Out.	$9.069	6,900	3,760
	Account: Littlefield, Joel						Avg. Exer.	$6.298
Lively, Richard	134	000495	8/8/2006	9/8/2011		3.94		$25.210	600	120
Lively, Richard	134	000428	8/12/2005	9/12/2010		2.95		$16.780	720	180
Lively, Richard	134	000357	8/12/2004	8/12/2014		6.87		$3.100	1,500	500
Lively, Richard	134	000312	8/20/2003	8/20/2013		5.89		$3.050	800	400
Lively, Richard	134	000285	7/24/2002	7/24/2012		4.81		$1.725	400	400
					Avg. Life	5.33	Avg. Out.	$8.703	4,020	1,600
	Account: Lively, Richard						Avg. Exer.	$5.941
Machada, Santos	169 000358		8/12/2004	8/12/2014		6.87		$3.100	500	300
					Avg. Life	6.87	Avg. Out.	$3.100	500	300
	Account: Machada, Santos						Avg. Exer.	$3.100
Manning, Brian R.	128 000496		8/8/2006	9/8/2011		3.94		$25.210	600	0
Manning, Brian R.	128 000497		8/8/2006	9/8/2011		3.94		$25.210	400	200
Manning, Brian R.	128 000469		7/18/2006	7/18/2011		3.80		$24.960	3,633	3,633
Manning, Brian R.	128 000470		7/18/2006	7/18/2011		3.80		$24.960	3,867	3,867
Manning, Brian R.	128 000432		8/12/2005	9/12/2010		2.95		$16.780	1,200	300
Manning, Brian R.	128 000433		8/12/2005	9/12/2010		2.95		$16.780	300	300

167

Sterling Construction Company, Inc.			OUTSTANDING AND EXERCISABLE BY PRICE AS OF 9/30/2007							Page: 7 File: Osprice Date: 10/26/2007 Time: 5:35:52 PM
Name	ID Number		Option Date	Expiration Date	Remaining Life in Years			Option Price		Shares Outstanding	Shares Exercisable
Manning, Brian R.	128 000411		7/18/2005	7/18/2010		2.80			$9.690	110	110
Manning, Brian R.	128 000410		7/18/2005	7/18/2010		2.80			$9.690	7,390	7,390
Manning, Brian R.	128 000361		8/12/2004	8/12/2014		6.87			$3.100	3,500	2,100
Manning, Brian R.	128 000377		8/12/2004	8/12/2009		1.87			$3.100	7,500	7,500
Manning, Brian R.	128 000302		8/20/2003	8/20/2013		5.89			$3.050	3,000	2,400
Manning, Brian R.	128 000288		7/24/2002	7/24/2012		4.81			$1.725	2,500	2,500
Manning, Brian R.	128 000249		7/23/2001	7/23/2011		3.81			$1.500	2,000	2,000
					Avg. Life	3.70	Avg. Out.		$10.023	36,000	32,300
	Account: Manning, Brian R.						Avg. Exer.		$9.888
Manning, James D.	123 000363		8/12/2004	8/12/2014		6.87			$3.100	833	833
					Avg. Life	6.87	Avg. Out.		$3.100	833	833
	Account: Manning, James D.						Avg. Exer.		$3.100
Manning, Jeffrey	127 000498		8/8/2006	9/8/2011		3.94			$25.210	600	0
Manning, Jeffrey	127 000499		8/8/2006	9/8/2011		3.94			$25.210	400	200
Manning, Jeffrey	127 000471		7/18/2006	7/18/2011		3.80			$24.960	3,647	3,647
Manning, Jeffrey	127 000472		7/18/2006	7/18/2011		3.80			$24.960	3,853	3,853
Manning, Jeffrey	127 000429		8/12/2005	9/12/2010		2.95			$16.780	1,200	300
Manning, Jeffrey	127 000430		8/12/2005	9/12/2010		2.95			$16.780	300	300
Manning, Jeffrey	127 000412		7/18/2005	7/18/2010		2.80			$9.690	7,437	7,437
Manning, Jeffrey	127 000413		7/18/2005	7/18/2010		2.80			$9.690	63	63
Manning, Jeffrey	127 000359		8/12/2004	8/12/2014		6.87			$3.100	3,500	2,100
Manning, Jeffrey	127 000378		8/12/2004	8/12/2009		1.87			$3.100	7,500	7,500
Manning, Jeffrey	127 000301		8/20/2003	8/20/2013		5.89			$3.050	2,500	2,000
Manning, Jeffrey	127 000287		7/24/2002	7/24/2012		4.81			$1.725	2,200	2,200
Manning, Jeffrey	127 000250		7/23/2001	7/23/2011		3.81			$1.500	2,000	2,000
					Avg. Life	3.66	Avg. Out.		$10.192	35,200	31,600
	Account: Manning, Jeffrey						Avg. Exer.		$10.052
Manning, Kevin	131 000502		8/8/2006	9/8/2011		3.94			$25.210	300	60
Manning, Kevin	131 000431		8/12/2005	9/12/2010		2.95			$16.780	500	200
Manning, Kevin	131 000360		8/12/2004	8/12/2014		6.87			$3.100	1,000	600
Manning, Kevin	131 000303		8/20/2003	8/20/2013		5.89			$3.050	1,000	800
Manning, Kevin	131 000289		7/24/2002	7/24/2012		4.81			$1.725	1,000	1,000
Manning, Kevin	131 000251		7/23/2001	7/23/2011		3.81			$1.500	1,000	1,000
					Avg. Life	5.01	Avg. Out.		$5.277	4,800	3,660
	Account: Manning, Kevin						Avg. Exer.		$3.386
Manning, Patrick T.	124	000500	8/8/2006	9/8/2011		3.94			$25.210	600	0
Manning, Patrick T.	124	000501	8/8/2006	9/8/2011		3.94			$25.210	400	200

168

Sterling Construction Company, Inc.		OUTSTANDING AND EXERCISABLE BY PRICE AS OF 9/30/2007							Page: 8 File: Osprice Date: 10/26/2007 Time: 5:35:52 PM
Name	ID Number	Option Date	Expiration Date	Remaining Life in Years			Option Price		Shares Outstanding	Shares Exercisable
Manning, Patrick T.	124 000460	7/18/2006	7/18/2011		3.80			$24.960	3,619	3,619
Manning, Patrick T.	124 000461	7/18/2006	7/18/2011		3.80			$24.960	6,381	6,381
Manning, Patrick T.	124 000434	8/12/2005	9/12/2010		2.95			$16.780	1,200	300
Manning, Patrick T.	124 000435	8/12/2005	9/12/2010		2.95			$16.780	300	300
Manning, Patrick T.	124 000400	7/18/2005	7/18/2010		2.80			$9.690	6,519	6,519
Manning, Patrick T.	124 000401	7/18/2005	7/18/2010		2.80			$9.690	3,481	3,481
Manning, Patrick T.	124 000362	8/12/2004	8/12/2014		6.87			$3.100	3,500	2,100
Manning, Patrick T.	124 000376	8/12/2004	8/12/2009		1.87			$3.100	10,000	10,000
Manning, Patrick T.	124 000300	8/20/2003	8/20/2013		5.89			$3.050	3,500	2,800
Manning, Patrick T.	124 000286	7/24/2002	7/24/2012		4.81			$1.725	3,500	3,500
Manning, Patrick T.	124 000252	7/23/2001	7/23/2011		3.81			$1.500	3,700	3,700
				Avg. Life	3.61	Avg. Out.		$9.871	46,700	42,900
	Account: Manning, Patrick T.					Avg. Exer.		$9.773
McCall, Jeff	166 000364	8/12/2004	8/12/2014		6.87			$3.100	480	160
				Avg. Life	6.87	Avg. Out.		$3.100	480	160
	Account: McCall, Jeff					Avg. Exer.		$3.100
Mills, Christopher H. B.	150 000514	5/7/2007	5/7/2008		0.60			$0.000	1,598	0
Mills, Christopher H. B.	150 000397	5/19/2005	5/19/2015		7.63			$6.870	5,000	5,000
				Avg. Life	5.93	Avg. Out.		$5.206	6,598	5,000
	Account: Mills, Christopher H. B.					Avg. Exer.		$6.870
Mitchell, William	178 000503	8/8/2006	9/8/2011		3.94			$25.210	1,000	200
Mitchell, William	178 000453	8/12/2005	9/12/2010		2.95			$16.780	1,000	400
				Avg. Life	3.45	Avg. Out.		$20.995	2,000	600
	Account: Mitchell, William					Avg. Exer.		$19.590
Scott, Milton L.	179 000515	5/7/2007	5/7/2008		0.60			$0.000	1,598	0
				Avg. Life	0.60	Avg. Out.		$0.000	1,598	0
	Account: Scott, Milton L.					Avg. Exer.		$0.000
Smith, Christine A.	137 000504	8/8/2006	9/8/2011		3.94			$25.210	800	160
Smith, Christine A.	137 000450	8/12/2005	9/12/2010		2.95			$16.780	1,200	480
Smith, Christine A.	137 000365	8/12/2004	8/12/2014		6.87			$3.100	2,500	1,500
Smith, Christine A.	137 000314	8/20/2003	8/20/2013		5.89			$3.050	2,000	1,600
Smith, Christine A.	137 000292	7/24/2002	7/24/2012		4.81			$1.725	2,000	2,000
				Avg. Life	5.32	Avg. Out.		$6.777	8,500	5,740
	Account: Smith, Christine A.					Avg. Exer.		$4.367

169

Sterling Construction Company, Inc.			OUTSTANDING AND EXERCISABLE BY PRICE AS OF 9/30/2007							Page: 9 File: Osprice Date: 10/26/2007 Time: 5:35:52 PM
			Option	Expiration	Remaining			Option		Shares	Shares
Name	ID	Number	Date	Date	Life in Years			Price		Outstanding	Exercisable
Steadman, David R. A.	177	000516	5/7/2007	5/7/2008		0.60			$0.000	1,598	0
Steadman, David R. A.	177	000399	5/19/2005	5/19/2015		7.63			$6.870	5,000	5,000
					Avg. Life	5.93	Avg. Out.		$5.206	6,598	5,000
	Account: Steadman, David R. A.						Avg. Exer.		$6.870
Stempinski, Karen A.	004	000510	8/8/2006	9/8/2011		3.94			$25.210	800	160
Stempinski, Karen A.	004	000437	8/12/2005	9/12/2010		2.95			$16.780	720	0
					Avg. Life	3.47	Avg. Out.		$21.217	1,520	160
	Account: Stempinski, Karen A.						Avg. Exer.		$25.210
Stevens, Robert L.	139	000505	8/8/2006	9/8/2011		3.94			$25.210	1,000	200
Stevens, Robert L.	139	000443	8/12/2005	9/12/2010		2.95			$16.780	1,400	560
Stevens, Robert L.	139	000366	8/12/2004	8/12/2014		6.87			$3.100	1,800	600
Stevens, Robert L.	139	000315	8/20/2003	8/20/2013		5.89			$3.050	800	400
Stevens, Robert L.	139	000293	7/24/2002	7/24/2012		4.81			$1.725	400	400
					Avg. Life	5.01	Avg. Out.		$10.632	5,400	2,160
	Account: Stevens, Robert L.						Avg. Exer.		$8.430
Surface, Jeffrey	148	000506	8/8/2006	9/8/2011		3.94			$25.210	600	120
Surface, Jeffrey	148	000442	8/12/2005	9/12/2010		2.95			$16.780	900	360
Surface, Jeffrey	148	000367	8/12/2004	8/12/2014		6.87			$3.100	1,500	500
Surface, Jeffrey	148	000326	8/20/2003	8/20/2013		5.89			$3.050	800	400
Surface, Jeffrey	148	000294	7/24/2002	7/24/2012		4.81			$1.725	400	400
					Avg. Life	5.23	Avg. Out.		$9.050	4,200	1,780
	Account: Surface, Jeffrey						Avg. Exer.		$7.037
Wall, Carl	159	000507	8/8/2006	9/8/2011		3.94			$25.210	200	40
Wall, Carl	159	000448	8/12/2005	9/12/2010		2.95			$16.780	300	120
Wall, Carl	159	000369	8/12/2004	8/12/2014		6.87			$3.100	2,000	1,200
Wall, Carl	159	000310	8/20/2003	8/20/2013		5.89			$3.050	400	0
					Avg. Life	6.12	Avg. Out.		$6.033	2,900	1,360
	Account: Wall, Carl						Avg. Exer.		$4.957
Warren, Clint	168 000370		8/12/2004	8/12/2014		6.87			$3.100	500	300
					Avg. Life	6.87	Avg. Out.		$3.100	500	300
	Account: Warren, Clint						Avg. Exer.		$3.100
Weir, James	167 000371		8/12/2004	8/12/2014		6.87			$3.100	500	300

170

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OUTSTANDING AND EXERCISABLE BY PRICE AS OF 9/30/2007

Page: 10

File: Osprice Date: 10/26/2007 Time: 5:35:52 PM

Name	ID Number	Option Date	Expiration Date	Remaining Life in Years		Option Price		Shares Outstanding	Shares Exercisable
				Avg. Life	6.87	Avg. Out.	$3.100	500	300
	Account: Weir, James					Avg. Exer.	$3.100
Williamson, Terry D.	126 000509	8/8/2006	9/8/2011		3.94		$25.210	400	200
Williamson, Terry D.	126 000508	8/8/2006	9/8/2011		3.94		$25.210	600	0
Williamson, Terry D.	126 000474	7/18/2006	7/18/2011		3.80		$24.960	3,619	3,619
Williamson, Terry D.	126 000475	7/18/2006	7/18/2011		3.80		$24.960	6,381	6,381
Williamson, Terry D.	126 000444	8/12/2005	9/12/2010		2.95		$16.780	1,200	300
Williamson, Terry D.	126 000445	8/12/2005	9/12/2010		2.95		$16.780	300	300
Williamson, Terry D.	126 000404	7/18/2005	7/18/2010		2.80		$9.690	6,519	6,519
Williamson, Terry D.	126 000405	7/18/2005	7/18/2010		2.80		$9.690	3,481	3,481
Williamson, Terry D.	126 000372	8/12/2004	8/12/2014		6.87		$3.100	3,500	2,100
Williamson, Terry D.	126 000375	8/12/2004	8/12/2009		1.87		$3.100	10,000	10,000
Williamson, Terry D.	126 000304	8/20/2003	8/20/2013		5.89		$3.050	3,500	2,800
Williamson, Terry D.	126 000296	7/24/2002	7/24/2012		4.81		$1.725	3,500	3,500
Williamson, Terry D.	126 000256	7/23/2001	7/23/2011		3.81		$1.500	3,500	3,500
				Avg. Life	3.61	Avg. Out.	$9.907	46,500	42,700
	Account: Williamson, Terry D.					Avg. Exer.	$9.811
Withrow, Forest	171 000373	8/12/2004	8/12/2014		6.87		$3.100	500	300
				Avg. Life	6.87	Avg. Out.	$3.100	500	300
	Account: Withrow, Forest					Avg. Exer.	$3.100
Wood, William A.	149 000374	8/12/2004	8/12/2014		6.87		$3.100	640	320
Wood, William A.	149 000328	8/20/2003	8/20/2013		5.89		$3.050	480	320
Wood, William A.	149 000297	7/24/2002	7/24/2012		4.81		$1.725	400	400
Wood, William A.	149 000257	7/23/2001	7/23/2011		3.81		$1.500	100	100
				Avg. Life	5.88	Avg. Out.	$2.647	1,620	1,140
	Account: Wood, William A.					Avg. Exer.	$2.463
	TOTALS			Avg. Life	4.21	Avg. Out.	$6.891	666,454	574,279
						Avg. Exer.	$6.195

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2009 Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from___ to ___
Commission file number 1-31993
STERLING CONSTRUCTION COMPANY, INC. (Exact name of registrant as specified in its charter)
DELAWARE	25-1655321
State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)

20810 Fernbush Lane Houston, Texas	77073
(Address of principal executive office)	(Zip Code)

Registrant’s telephone number, including area code (281) 821-9091

(Former name, former address and former fiscal year, if changed from last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. [√] Yes [ ] No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [√] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [√] No
At November 1, 2009, there were 13,288,244 shares outstanding of the issuer’s common stock, par value $0.01 per share

PART I. FINANCIAL INFORMATION		3

ITEM 1. CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS		3

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS		8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		13

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK		20

ITEM 4. CONTROLS AND PROCEDURES		20

PART II – OTHER INFORMATION		21

ITEM 6. EXHIBITS		21

SIGNATURES		22


	September 30, 2009		December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	62,239	$	55,305
Short-term investments		41,231		24,379
Contracts receivable, including retainage		66,387		60,582
Costs and estimated earnings in excess of billings on uncompleted contracts		6,196		7,508
Inventories		1,224		1,041
Deposits and other current assets		1,257		3,907
Total current assets		178,534		152,722
Property and equipment, net		71,681		77,993
Goodwill		57,232		57,232
Other assets, net		1,424		1,668
Total assets	$	308,871	$	289,615
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	27,475	$	26,111
Billings in excess of costs and estimated earnings on uncompleted contracts		25,693		23,127
Current maturities of long-term obligations		73		73
Income taxes payable		23		547
Other accrued expenses		9,492		7,741
Total current liabilities		62,756		57,599
Long-term liabilities:
Long-term debt, net of current maturities		40,428		55,483
Deferred tax liability, net		15,051		11,117
Put liability related to and noncontrolling owner's interest in subsidiary		7,568		6,300
Total long-term liabilities		63,047		72,900
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.01 per share; authorized 1,000,000 shares, none issued		--		--
Common stock, par value $0.01 per share; authorized 19,000,000 shares, 13,285,244 and 13,184,638 shares issued and outstanding		132		131
Additional paid-in capital		150,902		150,223
Retained earnings		32,034		8,762
Total Sterling common stockholders’ equity		183,068		159,116
Total liabilities and stockholders’ equity	$	308,871	$	289,615

	Three months ended September 30,						Nine months ended September 30,
	2009			2008			2009			2008

Revenues	$	103,929		$	114,148		$	319,170		$	305,802
Cost of revenues		87,387			101,576			272,238			273,389
Gross profit		16,542			12,572			46,932			32,413
General and administrative expenses		(3,508	)		(3,201	)		(10,536	)		(10,090	)
Other income (expense)		(70	)		61			(30	)		(41	)
Operating income		12,964			9,432			36,366			22,282
Interest income		129			303			406			813
Interest expense		(52	)		(144	)		(154	)		(426	)
Income before income taxes and earnings attributable to the noncontrolling interest		13,041			9,591			36,618			22,669
Income tax expense		(4,214	)		(3,245	)		(12,154	)		(7,616	)
Net income		8,827			6,346			24,464			15,053
Less: Net income attributable to the noncontrolling interest in earnings of subsidiary		(735	)		(368	)		(1,521	)		(819	)
Net income attributable to Sterling common stockholders	$	8,092		$	5,978		$	22,943		$	14,234

Net income per share attributable to Sterling common stockholders:
Basic	$	0.61		$	0.46		$	1.73		$	1.09
Diluted	$	0.59		$	0.44		$	1.67		$	1.04

Weighted average number of common shares outstanding used in computing per share amounts:
Basic		13,275,416			13,125,671			13,229,268			13,101,766
Diluted		13,740,464			13,705,477			13,732,834			13,702,800

	Common Stock				Additional
	Shares		Amount		Paid-in Capital		Retained Earnings		Total
Balance at January 1, 2009		13,185	$	131	$	150,223	$	8,762	$	159,116

Net income attributable to Sterling common stockholders		--		--		--		22,943		22,943

Unrealized holding gain on available-for-sale securities, net of tax		--		--		--		329		329

Stock issued upon option and warrant exercises		72		1		235		--		236

Issuance and amortization of restricted stock		28		--		306		--		306

Stock-based compensation expense		--		--		138		--		138

Balance at September 30, 2009		13,285	$	132	$	150,902	$	32,034	$	183,068

●	revenue recognition
●	contracts and retainage receivables
●	inventories
●	impairment of long-term assets
●	income taxes
●	self-insurance; and
●	stock-based compensation

	Total		Level 1		Level 2		Level 3
Fixed income mutual funds	$	29,376	$	29,376	$	--	$	--
Exchange traded funds		2,309		2,309		--		--
Variable-rate municipal bonds		4,775		--		4,775		--

Total securities available-for-sale		36,460	$	31,685	$	4,775	$	--

Certificates of deposit with original maturities between 90 and 365 days		4,771

Total short-term investments	$	41,231

	September 30, 2009			December 31, 2008
Construction equipment	$	95,126		$	96,002
Transportation equipment		11,690			12,358
Buildings		4,700			3,926
Office equipment		492			547
Construction in progress		435			792
Land		2,916			2,916
Water rights		200			200
		115,559			116,741
Less accumulated depreciation		(43,878	)		(38,748	)
	$	71,681		$	77,993

Basic net income per share attributable to Sterling common stockholders	$	0.61	$	0.46

Diluted net income per share attributable to Sterling common stockholders	$	0.59	$	0.44

	2009			2008
Balance, beginning of period	$	6,300		$	6,362
Noncontrolling interest in earnings of subsidiary		1,521			819
Accretion of interest on noncontrolling interest liability		155			376
Distributions to noncontrolling interest		(408	)		--
Balance, end of period	$	7,568		$	7,557

	Three months ended September 30,									Nine months ended September 30,
(dollar amounts in thousands) (unaudited):	2009			2008			% change			2009			2008			% change

Revenues	$	103,929		$	114,148			(9.0	%)	$	319,170		$	305,802			4.4	%
Gross profit		16,542			12,572			31.6	%		46,932			32,413			44.8	%
Gross margin		15.9	%		11.0	%		44.5	%		14.7	%		10.6	%		38.7	%
General, administrative and other expenses		(3,578	)		(3,140	)		13.9	%		(10,566	)		(10,131	)		4.3	%
Operating income		12,964			9,432			37.4	%		36,366			22,282			63.2	%
Operating margin		12.5	%		8.3	%		50.6	%		11.4	%		7.3	%		56.2	%
Interest income, net		77			159			(51.6	%)		252			387			(34.9	%)
Income before taxes and earnings attributable to the noncontrolling interest		13,041			9,591			36.0	%		36,618			22,669			61.5	%
Income taxes		(4,214	)		(3,245	)		29.9	%		(12,154	)		(7,616	)		59.6	%
Net income attributable to the noncontrolling interest in earnings of subsidiary		(735	)		(368	)		99.7	%		(1,521	)		(819	)		85.7	%
Net income attributable to Sterling common stockholders	$	8,092		$	5,978			35.4	%	$	22,943		$	14,234			61.2	%

	Nine months ended September 30
	2009			2008
Cash and cash equivalents at end of period	$	62,239		$	62,094
Net cash provided by (used in):
Operating activities		43,032			18,929
Investing activities		(20,870	)		(32,946	)
Financing activities		(15,228	)		(4,538	)
Increase (decrease) in cash and cash equivalents	$	6,934		$	(18,555	)

Capital expenditures	$	4,392		$	16,972
Working capital at end of period	$	115,778		$	93,561

	10.4	Credit Agreement by and among Sterling Construction Company, Inc., Texas Sterling Construction Co., Oakhurst Management Corporation and Comerica Bank and the other lenders from time to time party thereto, and Comerica Bank as administrative agent for the lenders, dated as of October 31, 2007.
	31.1	Certification of Patrick T. Manning, Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)
	31.2	Certification of James H. Allen, Jr., Chief Financial Officer, pursuant to Exchange Act Rule 13a-14(a)
	32.0	Certification of Patrick T. Manning, Chief Executive Officer and James H. Allen, Jr., Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

Basis for Pricing	Level I	Level II	Level III
Pricing Leverage Ratio*	<1.00	>1.00 but <1.75	>1.75
Revolving Credit Eurodollar Margin	125.00	175.00	225.00
Revolving Credit Prime-Based Rate Margin	0.00	25.00	50.00
Revolving Credit Facility Fee	25.00	25.00	25.00
Letter of Credit Fees (exclusive of facing fees)	125.00	175.00	225.00

LENDERS	REVOLVING CREDIT PERCENTAGE	REVOLVING CREDIT ALLOCATIONS
Comerica Bank	100%	$75,000,000
TOTALS	100%	$75,000,000

Correct Legal Name	Address	Type of Organization	Jurisdiction of Organization	Tax identification number and other identification numbers

Credit Party	Jurisdiction
Sterling Construction Company, Inc. 2751 Centerville Road — Suite 3131 Wilmington, Delaware 19803	Delaware
Oakhurst Management Corporation 20810 Fernbush Lane Houston Texas 77073	Texas & Massachusetts
Texas Sterling Construction Co. 20810 Fernbush Lane Houston Texas 77073	Delaware & Texas & Arizona (sub nom. Texas Sterling Construction, L.P.)
Road and Highway Builders, LLC 96 Glen Carran Circle — Suite # 106 Sparks, Nevada 89431	Nevada
Road and Highway Builders Inc. 96 Glen Carran Circle — Suite # 106 Sparks, Nevada 89431	Nevada & California

Credit Party	Description of Real Estate
Sterling Construction Company, Inc.	None
Oakhurst Management Corporation	None
Texas Sterling Construction Co.	20810 Fernbush Lane, Houston, Harris County, Texas — 6.359 acres Includes 14,400 sq. ft. office (tilt wall const.) and two maintenance facility buildings (steel) of 8,000 square feet and 7,500 square feet
	20810 Fernbush Lane, Houston, Harris County, Texas — 10.24 acres (under contract) For expansion to the main facility (closing mid December 2007)
	Loop 21050 Loop 494, New Caney, Montgomery County, Texas — 4.33 acres Project yard with temporary buildings.
	Bauer Road, Cypress, Harris County, Texas — 64.839 acres Batch plant location and materials yard
	St. Hedwig Street, San Antonio, Bexar County, Texas — 50.7 acres Vacant lot
	5001 West Rock Island Road, Grand Prairie, Dallas County, Texas — 4.466 acres Vacant lot
	20505 Essman, Houston, Harris County, Texas — 5.0 acres Vacant storage lot
Road and Highway Builders, LLC	500 Nevada Blvd., Lovelock, Pershing County, Nevada — 4.56 acres 7,200 square-foot combined office and maintenance shop (steel)
	Nevada Blvd., Lovelock, Pershing County, Nevada — 39.99 acres Storage and materials yard with Quonset hut.
Road and Highway Builders Inc.	None

Credit Party	Plan
Sterling Construction Company, Inc.	None
Oakhurst Management Corporation	None
Texas Sterling Construction Co.	Health Insurance — Group & Pension Administrators
	Company-Paid Basic Life & AD&D — Guardian Life Insurance Company
	Dental & Voluntary Life Insurance — Guardian Life Insurance Company
	Vision – Group & Pension Administrators & Guardian Life Insurance Company
	Short–Term & Long-Term Disability — Guardian Life Insurance Company
	Employee Assistance Program – Guardian Life Insurance Company
	Credit Union – Smart Financial
	401K Plan — Fidelity Management Trust Company The Company matches employee contributions at a rate of 50% of the first 6% of employee contributions.
Oakhurst Management Corporation	None
Road and Highway Builders, LLC	None (Employees participated in the benefit plans of RHB LLC's 50% Member, Fisher Sand & Gravel Co.)
Road and Highway Builders Inc.	None

Credit Party	Subsidiaries
Sterling Construction Company, Inc. 2751 Centerville Road — Suite 3131 Wilmington, Delaware 19803	Oakhurst Management Corporation Texas Sterling Construction Co. Road and Highway Builders, LLC Road and Highway Builders Inc.
Oakhurst Management Corporation 20810 Fernbush Lane Houston Texas 77073	None
Texas Sterling Construction Co. 20810 Fernbush Lane Houston Texas 77073	None
Road and Highway Builders, LLC 96 Glen Carran Circle — Suite # 106 Sparks, Nevada 89431	None
Road and Highway Builders Inc. 96 Glen Carran Circle — Suite # 106 Sparks, Nevada 89431	None

Credit Party	Trade Names
Sterling Construction Company, Inc.	Sterling Construction Company
Oakhurst Management Corporation	None
Texas Sterling Construction Co.	Texas Sterling Construction RDI Foundation Drilling
Road and Highway Builders, LLC	Road and Highway Builders
Road and Highway Builders Inc.	None

Authorized Equity	Issued & Outstanding	Par Value	Holder	Outstanding Rights
Sterling Construction Company, Inc.
14,000 Common 1,000,000 Preferred	11,017,890 (1) None	$0.01 per share $0.01 per share	Not required None	See footnote (2)
Oakhurst Management Corporation
1,000 Common	1,000	$1.00 per share	Sterling Construction Company, Inc.	None
Texas Sterling Construction Co.
1,000 Common	100	$0.01 per share	Sterling Construction Company, Inc.	None
Road and Highway Builders, LLC
N/A	N/A	N/A	Sterling Construction Company, Inc.	None
Road and Highway Builders Inc.
1,000	1,000	$10.00	Sterling Construction Company, Inc.	None

Agreement	Parties (1)
Master Agreement for Northern Nevada 2003—2008	Nevada Chapter, Associated General Contractors of America, Inc. Operating Engineers Local Union No. 3
Master Agreement July 1, 2003 through June 30, 2007	Southern California Contractors Association, Inc. The International Union of Operating Engineers Local 12
Master Agreement 2004 — 2010	Nevada Chapter, Associated General Contractors of America, Inc. Laborers' International Union of North America – A.F.L. – C.I.O. Local #169

Owner	Job Number	Amount	Percent Complete
Nevada DOT	#3206	$9,500,000	100%
Nevada DOT	#3267	$16,540,000	98%
Nevada DOT	#3271	$6,056,000	100%
Elko Airport	N/A	$6,062,000	100%
Nevada DOT	#3296	$7,925,000	98%
Nevada DOT	#3303	$6,472,000	100%
Nevada DOT	#3312	$23,500,000	98%
Nevada DOT	#3323	$31,500,000	60%
Nevada State Licensing Board	N/A	$50,000	N/A

Secured Party	Filing Information	Collateral
Comerica Bank-Texas	Filed: 07/27/2001 Number: 10737614	All of the debtor’s rights, titles, and interests in and to the equipment, inventory, accounts, general intangibles and any and all other personal property of any kind or character described in and covered by Security Agreement between the Debtor and Secured Party, a copy of which is attached hereto as Exhibit “A” and made a part hereof for all purposes , and the proceeds and products of such personal property.
	amendment filed 10/09/2001 to restate collateral;	Security Agreement attached as Exhibit “A” hereby replaces the Exhibit “A” attached to original Financing Statement filed under File Number 1073761 4 – 0000000.
	amendment filed 03/12/2002 to change debtor name from “Oakhurst Company, Inc.” to “Sterling Construction Company, Inc;”
	amendment filed 09/24/2002 to add collateral;	All of debtor’s rights, titles, and interests in and to the capital stock of Sterling Construction Company, a Delaware corporation (now known as Sterling Houston Holdings, Inc., a Delaware corporation) as described in that certain Security Agreement (Third Party Pledge) attached hereto as Exhibit “A,” as supplemented by that certain Supplemental Security Agreement (Third Party Pledge) attached hereto as Exhibit “B” (the “Collateral”). Proceeds and products of Collateral are also covered.
	amendment filed 10/30/2002 to add collateral;	All of debtor’s rights, titles, and interests in and to the capital stock of Sterling Houston Holdings, Inc., a Delaware corporation (formerly known as Sterling Construction Company, a Delaware corporation) as described in that certain Security Agreement (Third Party Pledge) attached hereto as Exhibit “A,” as supplemented by that certain Supplemental Security Agreement (Third Party Pledge) attached hereto as Exhibit “B” (the “Collateral”). Proceeds and products of Collateral are also covered.
	amendment filed 02/22/2005 to add collateral;	All of debtor’s rights, titles, and interests in and to the capital stock of Sterling Construction Company, a Delaware corporation (now known as Sterling Houston Holdings, Inc., a Delaware corporation) as described in that certain Security Agreement (Third Party Pledge) dated as of July 18, 2001, attached hereto as Exhibit “A,” as supplemented by that certain Supplemental Security Agreement (Third Party Pledge), dated as of September 23, 2002, attached hereto as Exhibit “B,” and as further supplemented by that certain Supplemental Security Agreement (Third Party Pledge), dated as of December 23, 2004, attached hereto as Exhibit “C” (the “Collateral”). Proceeds and products of Collateral are also covered.
	amendment filed 05/23/2006 to add collateral;	All of the Debtor’s right, title and interest in and to all equipment, fixtures, software, goods, instruments (including, without limitation, promissory notes), documents (including, without limitation, negotiable documents), policies and certificates of insurance, deposit accounts, money and investment property, motor vehicles, mobile goods and rolling stock together with all of Debtor’s right, title and interest in and to the capital stock of (i) Sterling Houston Holdings, Inc., a Delaware corporation, and (ii) Sterling General, Inc., a Delaware corporation, and all proceeds, interest, profits and other payments or rights to payment related thereto and all proceeds and products of the foregoing.
	continuation filed 07/07/2006.

Debtor	Secured Party	Filing Information	Collateral
Road and Highway Builders, LLC	Volvo Commercial Finance LLC The Americas	Filed: 01/03/2000 Number: 0000157 continuation filed 12/06/2004; amendment filed 12/06/2004 to change debtor name from “Road & Highway Builders” to “Road and Highway Builders.”	Specific equipment, as more particularly described in the financing statement.
Road and Highway Builders LLC	Caterpillar Financial Services Corporation	Filed: 07/22/2002 Number: 2002019248-1 Termination filed 07/31/2002.	Specific equipment. Terminated.
Road and Highway Builders LLC	Arnold Machinery Company	Filed: 08/07/2002 Number: 2002021078-4 Termination filed 04/06/2004.	Specific equipment. Terminated.
Road and Highway Builders, LLC	Caterpillar Financial Services Corporation	Filed: 09/12/2002 Number: 2002024217-3 Termination filed 09/17/2002.	Specific equipment. Terminated.
Road and Highway Builders, LLC	Caterpillar Financial Services	Filed: 05/30/2003 Number: 2003014768-0 Termination filed 06/22/2004.	Specific equipment. Terminated.
Road and Highway Builders, LLC	Caterpillar Financial Services Corporation	Filed: 06/02/2003 Number: 2003014961-0	Specific equipment, as more particularly described in the financing statement.
Road and Highway Builders, LLC	Caterpillar Financial Services	Filed: 03/25/2004 Number: 2004009699-8 Termination filed 06/07/2006.	Specific equipment. Terminated.
Road and Highway Builders, LLC	Herc Exchange, LLC	Filed: 05/24/2004 Number: 2004016336-9	Specific equipment, as more particularly described in the financing statement.
Road and Highway Builders, LLC	CitiCapital Commercial Corporation	Filed: 06/17/2004 Number: 2004019063-3	Specific equipment, as more particularly described in the financing statement.
Road and Highway Builders, LLC	Caterpillar Financial Services	Filed: 09/13/2004 Number: 2004028029-2 Termination filed 08/31/2006.	Specific equipment. Terminated.
Road and Highway Builders, LLC	Herc Exchange, LLC	Filed: 11/16/2004 Number: 2004035055-6	Specific equipment, as more particularly described in the financing statement.
Road and Highway Builders Inc.	Caterpillar Financial Services Corporation	Filed: 12/10/2004 Number: 2004037392-2 Termination filed 11/09/2006.	Specific equipment. Terminated.
Road and Highway Builders, LLC	Herc Exchange, LLC	Filed: 06/21/2005 Number: 2005019052-2	Specific equipment, as more particularly described in the financing statement.
Road and Highway Builders, LLC	General Electric Capital Corporation	Filed: 06/28/2005 Number: 2005020003-2 amendment filed 01/26/2007 to restate collateral description; amendment filed 01/30/2007 to change debtor address.	Specific equipment, as more particularly described in the financing statement.
Road and Highway Builders, LLC	Caterpillar Financial Services Corporation	Filed: 12/21/2005 Number: 2005040137-9	Specific equipment, as more particularly described in the financing statement.
Road and Highway Builders, LLC	Herc Exchange, LLC	Filed: 03/06/2006 Number: 2006007082-3	Specific equipment, as more particularly described in the financing statement.
Road and Highway Builders, LLC	The CIT Group / Equipment Financing, Inc.	Filed: 12/29/2006 Number: 2006042626-0	Specific equipment, as more particularly described in the financing statement.