EXHIBIT 10

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated as of December 30,
2005 (the “Agreement”), is executed by and among SMITHWAY MOTOR XPRESS, INC., an
Iowa corporation (“Smithway”), which has its chief executive office located at
2031 Quail Avenue, Fort Dodge, Iowa 50501, EAST WEST MOTOR EXPRESS, INC., a
South Dakota corporation (“East West”; Smithway and East West each being
referred to herein as a “Borrower”, and collectively referred to herein as the
“Borrowers”), which has its chief executive office located at 1170 JB Drive,
Black Hawk, South Dakota 57718, and LASALLE BANK NATIONAL ASSOCIATION, a
national banking association (the “Bank”), whose address is 135 South La Salle
Street, Chicago, Illinois 60603.

R E C I T A L S:

A. The Borrowers and the Bank previously entered into that certain Amended and
Restated Loan and Security Agreement dated as of December 28, 2001, as modified
and amended from time to time (collectively, the “Original Loan Agreement”),
pursuant to which Original Loan Agreement, the Bank has made (i) a revolving
loan to the Borrowers evidenced by that certain Second Amended and Restated
Revolving Note dated as of December 28, 2001 in the maximum original principal
amount of Thirty Two Million Five Hundred Thousand and 00/100 Dollars
($32,500,000.00), jointly and severally executed by the Borrowers and made
payable to the order of the Bank (the “Existing Revolving Note”), (ii) a term
loan to the Borrowers evidenced by that certain Term Note dated as of December
28, 2001 in the maximum original principal amount of Eighteen Million Five
Hundred Thousand and 00/100 Dollars ($18,500,000.00), jointly and severally
executed by the Borrowers and made payable to the order of the Bank, and (iii) a
capital expenditure loan to the Borrowers evidenced by that certain Capital
Expenditure Note dated as of December 28, 2001 in the maximum original principal
amount of Four Million and 00/100 Dollars ($4,000,00.00), executed by the
Borrowers and made payable to the order of the Bank.

B. Pursuant to the Borrowers’ request, the Borrowers and the Bank now desire to
amend and restate the Original Loan Agreement, by entering into this Agreement
to set forth the terms and conditions governing the Loans (as hereinafter
defined).

NOW THEREFORE, in consideration of the premises, and the mutual covenants and
agreements set forth herein, the Borrowers agree to borrow from the Bank, and
the Bank agrees to lend to the Borrowers, subject to and upon the following
terms and conditions:

A G R E E M E N T S:

Section 1. DEFINITIONS.

1.1. Defined Terms. For the purposes of this Agreement, the following
capitalized words and phrases shall have the meanings set forth below.

“Acquired Debt shall mean Debt of a Person existing at the time such Person
became a Subsidiary or assumed by any Borrower pursuant to an Acquisition
permitted hereunder (and not created or incurred in connection with or in
anticipation of such Acquisition).

“Acquisition” shall mean any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of all or substantially
all of any business or division of a Person, (b) the acquisition of in excess of
fifty percent (50.00%) of the Capital Securities of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger or consolidation or
any other combination with another Person (other than a Person that is already a
Subsidiary).

“Affiliate” of any Person shall mean (a) any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person, (b) any officer or director of such Person, and (c) with respect to the
Bank, any entity administered or managed by the Bank, or an Affiliate or
investment advisor thereof and which is engaged in making, purchasing, holding
or otherwise investing in commercial loans. A Person shall be deemed to be
“controlled by” any other Person if such Person possesses, directly or
indirectly, power to direct or cause the direction of the management and
policies of such Person whether by contract, ownership of voting securities,
membership interests or otherwise.

“Applicable Margin” shall mean, as the case may be, (a) the rate per annum
subtracted from the Prime Rate or added to LIBOR to determine the Revolving
Interest Rate, (b) the per annum Letter of Credit Fee as provided in Section 5.3
hereof, and (c) the per annum Non-Utilization Fee as set forth in Section 8.22
hereof, all as determined by the ratio of Total Indebtedness as of the last day
of each fiscal quarter of the Borrowers to EBITDAR of the Borrowers for the four
prior fiscal quarters ending on the last day of such fiscal quarter, effective
as of any Interest Rate Change Date, as set forth below:

                                  Total Debt to           LIBOR         EBITDAR
Ratio   Prime Rate Margin   Margin   Letter of Credit Fee   Non-Utilization Fee
Less than 2.00 to 1.00
    0.75 %     1.50 %     1.25 %     0.20 %
 
                               
 
                               
Greater than or equal
to 2.00 to 1.00, but
less than 2.50 to
1.00
 

0.50%  

1.75%  

1.25%  

0.25%
 
                               
 
                               
Greater than or equal
to 2.50 to 1.00
 
0.25%  
2.00%  
1.50%  
0.35%
 
                               

The Applicable Margin as of the date hereof until the first Interest Rate Change
Date is (i) 0.50% for Prime Loans, (ii) 1.75% for LIBOR Loans, (iii) 1.25% for
the Letter of Credit Fee, and (iv) 0.25% for the Non-Utilization Fee.

“Asset Disposition” shall mean the sale, lease, assignment or other transfer for
value (each a “Disposition”) by the Borrower or any Subsidiary to any Person
(other than the Borrower or any Subsidiary) of any asset or right of the
Borrower or any Subsidiary (including, the loss, destruction or damage of any
thereof or any condemnation, confiscation, requisition, seizure or taking
thereof).

“Bank Product Agreements” shall mean those certain agreements entered into from
time to time by any Borrower or any Affiliate of any Borrower with the Bank or
any Affiliate of the Bank concerning Bank Products.

“Bank Product Obligations” shall mean all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by any Borrower or any
Affiliate of any Borrower to the Bank or any Affiliate of the Bank pursuant to
or evidenced by the Bank Product Agreements and irrespective of whether for the
payment of money, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising.

“Bank Products” shall mean any service or facility extended to any Borrower or
any Affiliate of any Borrower by the Bank or any Affiliate of the Bank,
including: (a) credit cards, (b) credit card processing services, (c) debit
cards, (d) purchase cards, (e) ACH transactions, (f) cash management, including
controlled disbursement, accounts or services, or (g) Hedging Agreements.

“Bankruptcy Code” shall mean the United States Bankruptcy Code, as now existing
or hereafter amended.

“Borrowing Base Amount” shall mean the aggregate of the Smithway Borrowing Base
Amount and the East West Borrowing Base Amount.

“Borrowing Base Certificate” shall mean a certificate to be signed by each of
the Borrowers certifying to the accuracy of the Borrowing Base Amount in form
and substance satisfactory to the Bank.

“Business Day” shall mean any day other than a Saturday, Sunday or a legal
holiday on which banks are authorized or required to be closed for the conduct
of commercial banking business in Chicago, Illinois.

“Capital Expenditures” shall mean all expenditures (including Capitalized Lease
Obligations) which, in accordance with GAAP, would be required to be capitalized
and shown on the consolidated balance sheet of the Borrowers, but excluding
expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (i) from insurance proceeds (or
other similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored or (ii) with awards of compensation arising from the
taking by eminent domain or condemnation of the assets being replaced.

“Capital Lease” shall mean, as to any Person, a lease of any interest in any
kind of property or asset, whether real, personal or mixed, or tangible or
intangible, by such Person, as lessee, that is, or should be, in accordance with
Financial Accounting Standards Board Statement No. 13, as amended from time to
time, or, if such statement is not then in effect, such statement of GAAP as may
be applicable, recorded as a “capital lease” on the financial statements of such
Person prepared in accordance with GAAP.

“Capital Securities” shall mean, with respect to any Person, all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person’s capital, whether now outstanding or
issued or acquired after the date hereof, including common shares, preferred
shares, membership interests in a limited liability company, limited or general
partnership interests in a partnership or any other equivalent of such ownership
interest.

“Capitalized Lease Obligations” shall mean, as to any Person, all rental
obligations of such Person, as lessee under a Capital Lease which are or will be
required to be capitalized on the books of such Person.

“Cash Equivalent Investment” shall mean, at any time, (a) any evidence of Debt,
maturing not more than one year after such time, issued or guaranteed by the
United States government or any agency thereof, (b) commercial paper, maturing
not more than one year from the date of issue, or corporate demand notes, in
each case (unless issued by the Bank or its holding company) rated at least A-l
by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies,
Inc. or P-l by Moody’s Investors Service, Inc., (c) any certificate of deposit,
time deposit or banker’s acceptance, maturing not more than one year after such
time, or any overnight Federal Funds transaction that is issued or sold by the
Bank or its holding company (or by a commercial banking institution that is a
member of the Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000), (d) any repurchase agreement
entered into with the Bank, or other commercial banking institution of the
nature referred to in clause (c), which (i) is secured by a fully perfected
security interest in any obligation of the type described in any of clauses (a)
through (c) above, and (ii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the repurchase obligation of
the Bank, or other commercial banking institution, thereunder, (e) money market
accounts or mutual funds which invest exclusively in assets satisfying the
foregoing requirements, and (f) other short term liquid investments approved in
writing by the Bank.

“Change in Control” shall mean the occurrence of any of the following events:
(a) Smithway Corp. shall cease to own and control one hundred percent (100%) of
the outstanding Capital Securities of each of the Borrowers and SMSD; (b) Marlys
L. Smith shall cease to own and control, directly or indirectly, at least twenty
percent (20.00%) of the outstanding Capital Securities of Smithway Corp.; or
(c) a majority of the Board of Directors of Smithway Corp. shall cease to be
Continuing Directors (as hereinafter defined). As used herein, a “Continuing
Director” means a member of the Board of Directors of Smithway Corp., who
either: (i) was a Director as of the date hereof and has been a Director
continuously thereafter, or (ii) became a Director after the date hereof and
whose election or nomination for election was approved by vote of the majority
of the Continuing Directors then members of the Board of Directors of Smithway
Corp. For the purpose hereof, the terms “control” or “controlling” shall mean
the possession of the power to direct, or cause the direction of, the management
and policies of such corporation by contract or voting of securities or
ownership interests.

“Collateral” shall have the meaning set forth in Section 6.1 hereof.

“Collateral Access Agreement” shall mean an agreement in form and substance
reasonably satisfactory to the Bank pursuant to which a mortgagee or lessor of
real property on which Collateral is stored or otherwise located, or a
warehouseman, processor or other bailee of Inventory or other property owned by
the Borrower or any Subsidiary, acknowledges the Liens of the Bank and waives
any Liens held by such Person on such property, and, in the case of any such
agreement with a mortgagee or lessor, permits the Bank reasonable access to and
use of such real property following the occurrence and during the continuance of
an Event of Default to assemble, complete and sell any collateral stored or
otherwise located thereon.

“Contingent Liability” and “Contingent Liabilities” shall mean, respectively,
each obligation and liability of the Borrowers and all such obligations and
liabilities of the Borrowers incurred pursuant to any agreement, undertaking or
arrangement by which any Borrower: (a) guarantees, endorses or otherwise becomes
or is contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, dividend, obligation or other liability of any other Person in any
manner (other than by endorsement of instruments in the course of collection),
including any indebtedness, dividend or other obligation which may be issued or
incurred at some future time; (b) guarantees the payment of dividends or other
distributions upon the shares or ownership interest of any other Person;
(c) undertakes or agrees (whether contingently or otherwise): (i) to purchase,
repurchase, or otherwise acquire any indebtedness, obligation or liability of
any other Person or any property or assets constituting security therefor,
(ii) to advance or provide funds for the payment or discharge of any
indebtedness, obligation or liability of any other Person (whether in the form
of loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, working capital or other financial
condition of any other Person, or (iii) to make payment to any other Person
other than for value received; (d) agrees to lease property or to purchase
securities, property or services from such other Person with the purpose or
intent of assuring the owner of such indebtedness or obligation of the ability
of such other Person to make payment of the indebtedness or obligation; (e) to
induce the issuance of, or in connection with the issuance of, any letter of
credit for the benefit of such other Person; or (f) undertakes or agrees
otherwise to assure a creditor against loss. The amount of any Contingent
Liability shall (subject to any limitation set forth herein) be deemed to be the
outstanding principal amount (or maximum permitted principal amount, if larger)
of the indebtedness, obligation or other liability guaranteed or supported
thereby.

“Debt” shall mean, as to any Person, without duplication, all indebtedness of
such Person for (a) all borrowed money of such Person (including principal,
interest, fees and charges), whether or not evidenced by bonds, debentures,
notes or similar instruments; (b) all obligations to pay the deferred purchase
price of property or services; (c) all obligations, contingent or otherwise,
with respect to the maximum face amount of all letters of credit (whether or not
drawn), bankers’ acceptances and similar obligations issued for the account of
such Person (including the Letters of Credit), and all unpaid drawings in
respect of such letters of credit, bankers’ acceptances and similar obligations;
(d) all indebtedness secured by any Lien on any property owned by such Person,
whether or not such indebtedness has been assumed by such Person (provided,
however, if such Person has not assumed or otherwise become liable in respect of
such indebtedness, such indebtedness shall be deemed to be in an amount equal to
the fair market value of the property subject to such Lien at the time of
determination); (e) the aggregate amount of all Capitalized Lease Obligations of
such Person; (f) the aggregate amount of all Operating Lease Obligations of such
Person; (g) all Contingent Liabilities of such Person, whether or not reflected
on its balance sheet; (h) all Hedging Obligations of such Person; (i) all Debt
of any partnership of which such Person is a general partner; and (j) all
monetary obligations of such Person under (i) a so-called synthetic, off-balance
sheet or tax retention lease, or (ii) an agreement for the use or possession of
property creating obligations that do not appear on the balance sheet of such
Person but which, upon the insolvency or bankruptcy of such Person, would be
characterized as the indebtedness of such Person (without regard to accounting
treatment). Notwithstanding the foregoing, Debt shall not include trade payables
and accrued expenses incurred by such Person in accordance with customary
practices and in the ordinary course of business of such Person.

“Default Rate” shall mean a per annum rate of interest equal to the Prime Rate
plus two percent (2.00%).

“Depreciation” shall mean the total amounts added to depreciation, amortization,
obsolescence, valuation and other proper reserves, as reflected on the
Borrowers’ financial statements and determined in accordance with GAAP.

“East West Borrowing Base Amount” shall mean an amount equal to eighty five
percent (85.00%) of the net amount (after deduction of such reserves and
allowances as the Bank deems proper and necessary) of all Eligible Accounts of
East West.

“East West Letter of Credit Obligations” shall mean, at any time, an amount
equal to the aggregate of the original face amounts of all Letters of Credit
issued at the application of East West minus the sum of (i) the amount of any
reductions in the original face amount of any Letter of Credit which did not
result from a draw thereunder, (ii) the amount of any payments made by the Bank
with respect to any draws made under a Letter of Credit for which East West or
any Obligor has reimbursed the Bank, (iii) the amount of any payments made by
the Bank with respect to any draws made under a Letter of Credit which have been
converted to a Revolving Loan as set forth in Section 2.4, and (iv) the portion
of any issued but expired Letter of Credit which has not been drawn by the
beneficiary thereunder. For purposes of determining the outstanding East West
Letter of Credit Obligations at any time, the Bank’s acceptance of a draft drawn
on the Bank pursuant to a Letter of Credit shall constitute a draw on the
applicable Letter of Credit at the time of such acceptance.

“East West Revolving Loan Availability” shall mean, at any time, an amount equal
to the lesser of (a) the Revolving Loan Commitment minus the Revolving Loans
outstanding to Smithway, minus the Smithway Letter of Credit Obligations, minus
the East West Letter of Credit Obligations, or (b) the East West Borrowing Base
Amount minus the East West Letter of Credit Obligations.

“EBITDAR” shall mean, for any period, (a) the sum for such period of, but
without duplication: (i) Net Income, plus (ii) Interest Charges, plus
(iii) federal and state income taxes, plus (iv) Depreciation, plus (v) Rent
Expense, plus (vi) non-cash management compensation expense, plus or minus
(vii) all other non-cash charges or gains which have been subtracted or added in
calculating Net Income for such period.

“Eligible Account” and “Eligible Accounts” shall mean each Account and all such
Accounts (exclusive of sales, excise or other similar taxes) owing to any
Borrower which meets each of the following requirements:

(a) it is genuine in all respects and has arisen in the ordinary course of such
Borrower’s business from the performance of services by such Borrower, which
services have been fully performed, acknowledged and accepted by the Account
Debtor;

(b) it is subject to a perfected, first priority Lien in favor of the Bank and
is not subject to any other assignment, claim or Lien;

(c) it is the valid, legally enforceable and unconditional obligation of the
Account Debtor with respect thereto, and is not subject to the fulfillment of
any condition whatsoever or any counterclaim, credit (except as provided in
subsection (h) of this definition), trade or volume discount, allowance,
discount, rebate or adjustment by the Account Debtor with respect thereto, or to
any claim by such Account Debtor denying liability thereunder in whole or in
part and the Account Debtor has not refused to accept and/or has not returned or
offered to return any of the Goods or services which are the subject of such
Account;

(d) the Account Debtor with respect thereto is a resident or citizen of, and is
located within, the United States, unless the sale of goods or services giving
rise to such Account is on letter of credit, banker’s acceptance or other credit
support terms reasonably satisfactory to the Bank;

(e) it is not an Account arising from a “sale on approval”, “sale or return”,
“consignment”, “guaranteed sale” or “bill and hold”, or are subject to any other
repurchase or return agreement;

(f) it is not an Account with respect to which possession and/or control of the
goods sold giving rise thereto is held, maintained or retained by such Borrower
(or by any agent or custodian of such Borrower) for the account of, or subject
to, further and/or future direction from the Account Debtor with respect
thereto;

(g) it has not arisen out of contracts with the United States or any department,
agency or instrumentality thereof, unless such Borrower has assigned its right
to payment of such Account to the Bank pursuant to the Assignment of Claims Act
of 1940, and evidence (satisfactory to the Bank) of such assignment has been
delivered to the Bank, or any state, county, city or other governmental body, or
any department, agency or instrumentality thereof;

(h) if such Borrower maintains a credit limit for an Account Debtor, the
aggregate dollar amount of Accounts due from such Account Debtor, including such
Account, does not exceed such credit limit;

(i) if the Account is evidenced by chattel paper or an instrument, the originals
of such chattel paper or instrument shall have been endorsed and/or assigned and
delivered to the Bank or, in the case of electronic chattel paper, shall be in
the control of the Bank, in each case in a manner satisfactory to the Bank;

(j) such Account is evidenced by an invoice delivered to the related Account
Debtor and is not more than (i) sixty (60) days past the due date thereof, or
(ii) ninety (90) days past the original invoice date thereof, in each case
according to the original terms of sale;

(k) it is not an Account with respect to an Account Debtor that is located in
any jurisdiction which has adopted a statute or other requirement with respect
to which any Person that obtains business from within such jurisdiction must
file a notice of business activities report or make any other required filings
in a timely manner in order to enforce its claims in such jurisdiction’s courts
unless (i) such notice of business activities report has been duly and timely
filed or such Borrower is exempt from filing such report and has provided the
Bank with satisfactory evidence of such exemption or (ii) the failure to make
such filings may be cured retroactively by such Borrower for a nominal fee;

(l) the Account Debtor with respect thereto is not a Borrower or any Affiliate
of any Borrower;

(m) such Account does not arise out of a contract or order which, by its terms,
forbids or makes void or unenforceable the assignment thereof by such Borrower
to the Bank and is not unassignable to the Bank for any other reason;

(n) there is no bankruptcy, insolvency or liquidation proceeding pending by or
against the Account Debtor with respect thereto, nor has the Account Debtor
suspended business, made a general assignment for the benefit of creditors or
failed to pay its debts generally as they come due, and/or no condition or event
has occurred having a Material Adverse Effect on the Account Debtor which would
require the Accounts of such Account Debtor to be deemed uncollectible in
accordance with GAAP;

(o) it is not owed by an Account Debtor with respect to which twenty five
percent (25.00%) or more of the aggregate amount of outstanding Accounts owed at
such time by such Account Debtor is classified as ineligible under clause (j) of
this definition;

(p) if the aggregate amount of all Accounts owed by the Account Debtor thereon
exceeds twenty five percent (25.00%) of the aggregate amount of all Accounts at
such time, then all Accounts owed by such Account Debtor in excess of such
amount shall be deemed ineligible; and

(q) it does not violate the negative covenants and does satisfy the affirmative
covenants of the Borrowers contained in this Agreement, and it is otherwise not
unacceptable to the Bank for any other reason.

An Account which is at any time an Eligible Account, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account. Further, with respect to any Account, if the Bank at any time
hereafter determine in its discretion that the prospect of payment or
performance by the Account Debtor with respect thereto is materially impaired
for any reason whatsoever, such Account shall cease to be an Eligible Account
after notice of such determination is given to such Borrower.

“Employee Plan” includes any pension, stock bonus, employee stock ownership
plan, retirement, profit sharing, deferred compensation, stock option, bonus or
other incentive plan, whether qualified or nonqualified, or any disability,
medical, dental or other health plan, life insurance or other death benefit
plan, vacation benefit plan, severance plan or other employee benefit plan or
arrangement, including those pension, profit-sharing and retirement plans of the
Borrowers described from time to time in the financial statements of the
Borrowers and any pension plan, welfare plan, Defined Benefit Pension Plans (as
defined in ERISA) or any multi-employer plan, maintained or administered by the
Borrowers or to which any Borrower is a party or may have any liability or by
which any Borrower is bound.

“Environmental Laws” shall mean all present or future federal, state or local
laws, statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative or judicial orders, consent agreements,
directed duties, requests, licenses, authorizations and permits of, and
agreements with, any governmental authority, in each case relating to any matter
arising out of or relating to public health and safety, or pollution or
protection of the environment or workplace, including any of the foregoing
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, discharge, emission, release,
threatened release, control or cleanup of any Hazardous Substance.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

“Event of Default” shall mean any of the events or conditions which are set
forth in Section 11 hereof.

“GAAP” shall mean generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination, provided, however, that interim financial statements or reports
shall be deemed in compliance with GAAP despite the absence of footnotes and
fiscal year-end adjustments as required by GAAP.

“Guarantor” and “Guarantors” shall mean, respectively, each of and collectively:
Smithway Corp. and SMSD.

“Guaranty” shall have the meaning set forth in Section 3.1 hereof.

“Hazardous Substances” shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, dielectric fluid containing levels of
polychlorinated biphenyls, radon gas and mold; (b) any chemicals, materials,
pollutant or substances defined as or included in the definition of “hazardous
substances”, “hazardous waste”, “hazardous materials”, “extremely hazardous
substances”, “restricted hazardous waste”, “toxic substances”, “toxic
pollutants”, “contaminants”, “pollutants” or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or substance,
the exposure to, or release of which is prohibited, limited or regulated by any
governmental authority or for which any duty or standard of care is imposed
pursuant to, any Environmental Law.

“Hedging Agreement” shall mean any interest rate, currency or commodity swap
agreement, cap agreement or collar agreement, and any other agreement or
arrangement designed to protect a Person against fluctuations in interest rates,
currency exchange rates or commodity prices.

“Hedging Obligation” shall mean, with respect to any Person, any liability of
such Person under any Hedging Agreement.

“Indemnified Party” and “Indemnified Parties” shall mean, respectively, each of
the Bank and any parent corporation, Affiliate or Subsidiary of the Bank, and
each of their respective officers, directors, employees, attorneys and agents,
and all of such parties and entities.

“Intellectual Property” shall mean the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, patents, service marks and trademarks, and all registrations and
applications for registration therefor and all licensees thereof, trade names,
domain names, technology, know-how and processes, and all rights to sue at law
or in equity for any infringement or other impairment thereof, including the
right to receive all proceeds and damages therefrom.

“Interest Charges” shall mean, for any period, the sum of: (a) all interest,
charges and related expenses payable on a consolidated basis with respect to
that fiscal period to a lender in connection with borrowed money or the deferred
purchase price of assets that are treated as interest in accordance with GAAP,
plus (b) the portion of Capitalized Lease Obligations with respect to that
fiscal period that should be treated as interest in accordance with GAAP, plus
(c) all charges paid or payable (without duplication) during that period with
respect to any interest rate Hedging Agreements.

“Interest Period” shall mean successive one, two or three month periods,
beginning and ending as provided in this Agreement.

“Interest Rate Change Date” shall mean the date two (2) Business Days after the
delivery to the Bank of the quarterly or year-end financial statements of the
Borrowers, which initial Interest Rate Change Date shall occur after the
delivery to the Bank of the financial statements of the Borrowers for the fiscal
quarter ending March 31, 2006.

“Investment” shall mean, with respect to any Person, any investment in another
Person, whether by acquisition of any debt or equity security, by making any
loan or advance, by becoming obligated with respect to a Contingent Liability in
respect of obligations of such other Person (other than travel and similar
advances to employees in the ordinary course of business) or by making an
Acquisition.

“Letter of Credit” and “Letters of Credit” shall mean, respectively, a letter of
credit and all such letters of credit issued by the Bank, in its sole
discretion, upon the execution and delivery by any of the Borrowers and the
acceptance by the Bank of a Master Letter of Credit Agreement and a Letter of
Credit Application, as set forth in Section 2.4 of this Agreement.

“Letter of Credit Application” shall mean, with respect to any request for the
issuance of a Letter of Credit, a letter of credit application in the form being
used by the Bank at the time of such request for the type of Letter of Credit
requested.

“Letter of Credit Commitment” shall mean, at any time, an amount equal to the
least of (a) the Revolving Loan Commitment minus the aggregate amount of all
Revolving Loans outstanding, (b) the Borrowing Base Amount minus the aggregate
amount of all Revolving Loans outstanding, and (c) Ten Million and 00/100
Dollars ($10,000,000.00).

“Letter of Credit Maturity Date” shall mean the Revolving Loan Maturity Date.

“Letter of Credit Obligations” shall mean, at any time, the aggregate of the
Smithway Letter of Credit Obligations and the East West Letter of Credit
Obligations.

“Liabilities” shall mean at all times all liabilities of the Borrowers that
would be shown as such on a balance sheet of the Borrowers prepared in
accordance with GAAP.

“LIBOR” shall mean a rate of interest equal to (a) the per annum rate of
interest at which United States dollar deposits for a period equal to the
relevant Interest Period are offered in the London Interbank Eurodollar market
at 11:00 a.m. (London time) two Business Days prior to the commencement of such
Interest Period (or three Business Days prior to the commencement of such
Interest Period if banks in London, England were not open and dealing in
offshore United States dollars on such second preceding Business Day), as
displayed in the Bloomberg Financial Markets system (or other authoritative
source selected by the Bank in its sole discretion), divided by (b) a number
determined by subtracting from 1.00 the then stated maximum reserve percentage
for determining reserves to be maintained by member banks of the Federal Reserve
System for Eurocurrency funding or liabilities as defined in Regulation D (or
any successor category of liabilities under Regulation D), or as LIBOR is
otherwise determined by the Bank in its sole and absolute discretion. The Bank’s
determination of LIBOR shall be conclusive, absent manifest error.

“LIBOR Loan” or “LIBOR Loans” shall mean that portion, and collectively those
portions, of the aggregate outstanding principal balance of the Loans that bear
interest at the LIBOR Rate, of which at any time, the Borrowers may identify no
more than four (4) advances of the Revolving Loans which bear interest at the
LIBOR Rate.

“LIBOR Rate” shall mean a per annum rate of interest equal to LIBOR for the
relevant Interest Period, plus the Applicable Margin, which LIBOR Rate shall
remain fixed during such Interest Period.

“Lien” shall mean, with respect to any Person, any interest granted by such
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person (including an interest in respect of a
Capital Lease) which secures payment or performance of any obligation and shall
include any mortgage, lien, encumbrance, title retention lien, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.

“Loans” shall mean, collectively, all Revolving Loans made by the Bank to any of
the Borrowers and all Letter of Credit Obligations, under and pursuant to this
Agreement.

“Loan Documents” shall mean each of the agreements, documents, instruments and
certificates set forth in Section 3.1 hereof, and any and all such other
instruments, documents, certificates and agreements from time to time executed
and delivered by any of the Borrowers, the Guarantors or any of their
Subsidiaries for the benefit of the Bank pursuant to any of the foregoing, and
all amendments, restatements, supplements and other modifications thereto.

“Master Letter of Credit Agreement” shall mean, at any time, with respect to the
issuance of Letters of Credit, a Master Letter of Credit Agreement in the form
being used by the Bank at such time.

“Material Adverse Effect” shall mean (a) a material adverse change in, or a
material adverse effect upon, the assets, business, properties, prospects,
condition (financial or otherwise) or results of operations of the Borrowers
taken as a whole, (b) a material impairment of the ability of the Borrowers to
perform any of the Obligations under any of the Loan Documents, or (c) a
material adverse effect on (i) any substantial portion of the Collateral,
(ii) the legality, validity, binding effect or enforceability against the
Borrowers of any of the Loan Documents, (iii) the perfection or priority of any
Lien granted to the Bank under any Loan Document, or (iv) the rights or remedies
of the Bank under any Loan Document.

“Net Income” shall mean, with respect to the Borrowers for any period, the
consolidated after tax net income (or loss) of the Borrowers for such period as
determined in accordance with GAAP, excluding any gains from Asset Dispositions,
any extraordinary gains and any gains from discontinued operations.

“Non-Excluded Taxes” shall have the meaning set forth in Section 2.7(a) hereof.

“Note” shall mean the Revolving Note.

“Obligations” shall mean the Loans, as evidenced by any Note, all interest
accrued thereon (including interest which would be payable as post-petition in
connection with any bankruptcy or similar proceeding, whether or not permitted
as a claim thereunder), any fees due the Bank hereunder, any expenses incurred
by the Bank hereunder, including without limitation, all liabilities and
obligations under this Agreement, under any other Loan Document, any
reimbursement obligations of any of the Borrowers in respect of Letters of
Credit and surety bonds, all Hedging Obligations of any of the Borrowers or any
Affiliate of any Borrower which are owed to the Bank or any Affiliate of the
Bank, and all Bank Product Obligations of any of the Borrowers or any Affiliate
of any Borrower, and any and all other liabilities and obligations owed by the
Borrowers to the Bank from time to time, howsoever created, arising or
evidenced, whether direct or indirect, joint or several, absolute or contingent,
now or hereafter existing, or due or to become due, together with any and all
renewals, extensions, restatements or replacements of any of the foregoing.

“Obligor” shall mean the Borrowers, any of the Guarantors, any accommodation
endorser, third party pledgor, or any other party liable with respect to the
Obligations.

“Operating Lease” shall mean any lease of (or other agreement conveying the
right to use) any real or personal property by the Borrowers, as lessee, other
than any Capital Lease.

“Operating Lease Obligations” shall mean, as at any date of determination, the
amount obtained by aggregating the present values, determined in the case of
each particular Operating Lease by applying a discount rate of ten percent
(10.00%) from the date on which each fixed lease payment is due under such
Operating Lease to such date of determination, of all fixed lease payments due
under each Operating Lease of the Borrowers and any Affiliates of any of the
Borrowers.

“Organizational Identification Number” means, with respect to the Borrowers, the
organizational identification number assigned to such Borrower by the applicable
governmental unit or agency of the jurisdiction of organization of such
Borrower.

“Other Taxes” shall mean any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from the
execution, delivery, enforcement or registration of, or otherwise with respect
to, this Agreement or any of the other Loan Documents.

“Permitted Liens” shall mean (a) Liens for Taxes, assessments or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and, in each
case, for which it maintains adequate reserves in accordance with GAAP and in
respect of which no Lien has been filed; (b) Liens arising in the ordinary
course of business (such as (i) Liens of carriers, warehousemen, mechanics and
materialmen and other similar Liens imposed by law, and (ii) Liens in the form
of deposits or pledges incurred in connection with worker’s compensation,
unemployment compensation and other types of social security (excluding Liens
arising under ERISA) or in connection with surety bonds, bids, performance bonds
and similar obligations) for sums not overdue or being contested in good faith
by appropriate proceedings and not involving any advances or borrowed money or
the deferred purchase price of property or services, which do not in the
aggregate materially detract from the value of the property or assets of any
Borrower or materially impair the use thereof in the operation of such
Borrower’s business and, in each case, for which it maintains adequate reserves
in accordance with GAAP and in respect of which no Lien has been filed;
(c) Liens described on Schedule 9.2 as of the Closing Date and the replacement,
extension or renewal of any such Lien upon or in the same property subject
thereto arising out of the extension, renewal or replacement of the Debt secured
thereby (without increase in the amount thereof); (d) attachments, appeal bonds,
judgments and other similar Liens, for sums not exceeding One Million and 00/100
Dollars ($1,000,000.00) arising in connection with court proceedings, provided
the execution or other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good faith and by
appropriate proceedings and to the extent such judgments or awards do not
constitute an Event of Default under Section 11.8 hereof; (e) easements, rights
of way, restrictions, minor defects or irregularities in title and other similar
Liens not interfering in any material respect with the ordinary conduct of the
business of any Borrower; (f) subject to the limitation set forth in
Section 9.1(g), Liens arising in connection with Capitalized Lease Obligations
(and attaching only to the property being leased); (g) subject to the limitation
set forth in Section 9.1(h), Liens that constitute security interests on any
property securing Debt incurred for the purpose of financing all or any part of
the cost of acquiring such property, provided that any such Lien attaches solely
to the property so acquired; and (h) Liens granted to the Bank hereunder and
under the Loan Documents.

“Person” shall mean any natural person, partnership, limited liability company,
corporation, trust, joint venture, joint stock company, association,
unincorporated organization, government or agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.

“Prime Loan” or “Prime Loans” shall mean that portion, and collectively, those
portions of the aggregate outstanding principal balance of the Loans that bear a
per annum rate of interest equal to the Prime Rate minus the Applicable Margin.

“Prime Rate” shall mean the floating per annum rate of interest which at any
time, and from time to time, shall be most recently announced by the Bank as its
Prime Rate, which is not intended to be the Bank’s lowest or most favorable rate
of interest at any one time. The effective date of any change in the Prime Rate
shall for purposes hereof be the date the Prime Rate is changed by the Bank. The
Bank shall not be obligated to give notice of any change in the Prime Rate.

“Regulatory Change” shall mean the introduction of, or any change in any
applicable law, treaty, rule, regulation or guideline or in the interpretation
or administration thereof by any governmental authority or any central bank or
other fiscal, monetary or other authority having jurisdiction over the Bank or
its lending office.

“Rent Expense” shall mean, for any period, the sum of all base rent, percentage
rent, additional rent or any other amounts payable with respect to that fiscal
period under leases of real property that should be treated as an expense in
accordance with GAAP by any of the Borrowers on a consolidated basis, in each
case to the extent included in determining Net Income of such Person for such
period.

“Revolving Interest Rate” shall mean the Borrowers’ from time to time option of
(i) a floating per annum rate of interest equal to the Prime Rate minus the
Applicable Margin, or (ii) the LIBOR Rate.

“Revolving Loan” and “Revolving Loans” shall mean, respectively, each direct
advance and the aggregate of all such direct advances made by the Bank to any of
the Borrowers under and pursuant to this Agreement, as set forth in Section 2.1
of this Agreement.

“Revolving Loan Availability” shall mean, at any time, an amount equal to the
aggregate of the Smithway Revolving Loan Availability plus the East West
Revolving Loan Availability.

“Revolving Loan Commitment” shall mean Fifteen Million and 00/100 Dollars
($15,000,000.00).

“Revolving Loan Mandatory Prepayment” shall have the meaning set forth in
Section 2.1(c)(ii) hereof.

“Revolving Loan Maturity Date” shall mean October 31, 2010, unless extended by
the Bank pursuant to any modification, extension or renewal note jointly and
severally executed by the Borrowers and accepted by the Bank in its sole and
absolute discretion in substitution for the Revolving Note.

“Revolving Note” shall mean a revolving note in the form prepared by and
acceptable to the Bank, dated as of the date hereof, in the amount of the
Revolving Loan Commitment and maturing on the Revolving Loan Maturity Date, duly
executed, jointly and severally, by the Borrowers and payable to the order of
the Bank, together with any and all renewal, extension, modification or
replacement notes jointly and severally executed by the Borrowers and delivered
to the Bank and given in substitution therefor.

“Senior Debt” shall mean all Debt of the Borrowers other than Subordinated Debt.

“Smithway Borrowing Base Amount” shall mean an amount equal to eighty five
percent (85.00%) of the net amount (after deduction of such reserves and
allowances as the Bank deems proper and necessary) of all Eligible Accounts of
Smithway.

“Smithway Corp.” shall mean Smithway Motor Xpress Corp., a Nevada corporation.

“Smithway Letter of Credit Obligations” shall mean, at any time, an amount equal
to the aggregate of the original face amounts of all Letters of Credit issued at
the application of Smithway minus the sum of (i) the amount of any reductions in
the original face amount of any Letter of Credit which did not result from a
draw thereunder, (ii) the amount of any payments made by the Bank with respect
to any draws made under a Letter of Credit for which East West or any Obligor
has reimbursed the Bank, (iii) the amount of any payments made by the Bank with
respect to any draws made under a Letter of Credit which have been converted to
a Revolving Loan as set forth in Section 2.4, and (iv) the portion of any issued
but expired Letter of Credit which has not been drawn by the beneficiary
thereunder. For purposes of determining the outstanding East West Letter of
Credit Obligations at any time, the Bank’s acceptance of a draft drawn on the
Bank pursuant to a Letter of Credit shall constitute a draw on the applicable
Letter of Credit at the time of such acceptance.

“Smithway Revolving Loan Availability” shall mean, at any time, an amount equal
to the lesser of (a) the Revolving Loan Commitment minus the Revolving Loans
outstanding to East West, minus the East West Letter of Credit Obligations,
minus the Smithway Letter of Credit Obligations, or (b) the Smithway Borrowing
Base Amount minus the Smithway Letter of Credit Obligations.

“SMSD” shall mean SMSD Acquisition Corp., a South Dakota corporation.

“Subordinated Debt” shall mean that portion of the Debt of any of the Borrowers
which is subordinated to the Obligations in a manner satisfactory to the Bank,
including right and time of payment of principal and interest.

“Subsidiary” and “Subsidiaries” shall mean, respectively, with respect to any
Person, each and all such corporations, partnerships, limited partnerships,
limited liability companies, limited liability partnerships, joint ventures or
other entities of which or in which such Person owns, directly or indirectly,
such number of outstanding Capital Securities as have more than fifty percent
(50.00%) of the ordinary voting power for the election of directors or other
managers of such corporation, partnership, limited liability company or other
entity. Unless the context otherwise requires, each reference to Subsidiaries
herein shall be a reference to Subsidiaries of a Borrower.

“Tangible Net Worth” shall mean at any an amount equal to “Net Worth” as shown
on the consolidated balance sheet of Smithway Corp., minus (i) the sum of
goodwill, patents and trademarks, minus (ii) any amounts due from shareholders,
Affiliates, officers or employees of the Borrowers, plus (iii) Subordinated
Debt.

“Taxes” shall mean any and all present and future taxes, duties, levies,
imposts, deductions, assessments, charges or withholdings, and any and all
liabilities (including interest and penalties and other additions to taxes) with
respect to the foregoing.

“Total Debt” shall mean all Debt of the Borrowers, determined on a consolidated
basis, excluding (a) Contingent Liabilities (except to the extent constituting
Contingent Liabilities in respect of (i) Letter of Credit Obligations and
(ii) the Debt of a Person other than any Borrower or any Affiliate of any of the
Borrowers), and (b) Debt of any Borrower to another Debt of any Borrower to
another Borrower or to any Affiliate of any of the Borrowers, and Debt of any
Affiliate of any of the Borrowers to any Borrower.

“Total Debt to EBITDAR Ratio” shall mean, as of the last day of any fiscal
quarter of the Borrowers, the ratio of (a) Total Debt as of the last day of such
fiscal quarter to (b) EBITDAR of the Borrowers for the four prior fiscal
quarters ending on the last day of such fiscal quarter.

“UCC” shall mean the Uniform Commercial Code in effect in the state of Illinois
from time to time.

“Unmatured Event of Default” shall mean any event which, with the giving of
notice, the passage of time or both, would constitute an Event of Default.

“Voidable Transfer” shall have the meaning set forth in Section 13.21 hereof.

“Wholly-Owned Subsidiary” shall mean any Subsidiary of which or in which any
Borrower owns, directly or indirectly, one hundred percent (100%) of the Capital
Securities of such Subsidiary.

1.2. Accounting Terms. Any accounting terms used in this Agreement which are not
specifically defined herein shall have the meanings customarily given them in
accordance with GAAP. Calculations and determinations of financial and
accounting terms used and not otherwise specifically defined hereunder and the
preparation of financial statements to be furnished to the Bank pursuant hereto
shall be made and prepared, both as to classification of items and as to amount,
in accordance with sound accounting practices and GAAP as used in the
preparation of the financial statements of the Borrowers on the date of this
Agreement. If any changes in accounting principles or practices from those used
in the preparation of the financial statements are hereafter occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or any successor thereto or agencies with similar
functions), which results in a material change in the method of accounting in
the financial statements required to be furnished to the Bank hereunder or in
the calculation of financial covenants, standards or terms contained in this
Agreement, the parties hereto agree to enter into good faith negotiations to
amend such provisions so as equitably to reflect such changes to the end that
the criteria for evaluating the financial condition and performance of the
Borrowers will be the same after such changes as they were before such changes;
and if the parties fail to agree on the amendment of such provisions, the
Borrowers will furnish financial statements in accordance with such changes, but
shall provide calculations for all financial covenants, perform all financial
covenants and otherwise observe all financial standards and terms in accordance
with applicable accounting principles and practices in effect immediately prior
to such changes. Calculations with respect to financial covenants required to be
stated in accordance with applicable accounting principles and practices in
effect immediately prior to such changes shall be reviewed and certified by the
Borrowers’ accountants.

1.3. Other Terms Defined in UCC. All other capitalized words and phrases used
herein and not otherwise specifically defined herein shall have the respective
meanings assigned to such terms in the UCC, to the extent the same are used or
defined therein.

1.4. Other Interpretive Provisions.

(a) The meanings of defined terms are equally applicable to the singular and
plural forms of the defined terms. Whenever the context so requires, the neuter
gender includes the masculine and feminine, the single number includes the
plural, and vice versa, and in particular the words “Borrower” and “Borrowers”
shall be so construed.

(b) Section and Schedule references are to this Agreement unless otherwise
specified. The words “hereof”, “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.

(c) The term “including” is not limiting, and means “including, without
limitation”.

(d) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including”; the words “to” and
“until” each mean “to but excluding”, and the word “through” means “to and
including”.

(e) Unless otherwise expressly provided herein, (i) references to agreements
(including this Agreement and the other Loan Documents) and other contractual
instruments shall be deemed to include all subsequent amendments, restatements,
supplements and other modifications thereto, but only to the extent such
amendments, restatements, supplements and other modifications are not prohibited
by the terms of any Loan Document, and (ii) references to any statute or
regulation shall be construed as including all statutory and regulatory
provisions amending, replacing, supplementing or interpreting such statute or
regulation.

(f) To the extent any of the provisions of the other Loan Documents are
inconsistent with the terms of this Agreement, the provisions of this Agreement
shall govern.

(g) This Agreement and the other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and each shall be
performed in accordance with its terms.

     
Section 2.
  COMMITMENT OF THE BANK.
 
   
 
   
2.1.
  Revolving Loans.
 
   

(a) Revolving Loan Commitment. Subject to the terms and conditions of this
Agreement and the other Loan Documents, and in reliance upon the representations
and warranties of the Borrowers set forth herein and in the other Loan
Documents, the Bank agrees to make such Revolving Loans at such times as any
Borrower may from time to time request until, but not including, the Revolving
Loan Maturity Date, and in such amounts as any Borrower may from time to time
request, provided, however, that (i) the aggregate principal balance of all
Revolving Loans outstanding at any time shall not exceed the Revolving Loan
Availability, (ii) the aggregate principal amount of all Revolving Loans
outstanding to East West at any time shall not exceed the East West Revolving
Loan Availability, and (iii) the aggregate principal amount of all Revolving
Loans outstanding to Smithway at any time shall not exceed the Smithway
Revolving Loan Availability. Revolving Loans made by the Bank may be repaid and,
subject to the terms and conditions hereof, borrowed again up to, but not
including the Revolving Loan Maturity Date unless the Revolving Loans are
otherwise accelerated, terminated or extended as provided in this Agreement.

(b) Revolving Loan Interest and Payments. Except as otherwise provided in this
Section 2.1(b), the principal amount of the Revolving Loans outstanding from
time to time shall bear interest at the applicable Revolving Interest Rate.
Accrued and unpaid interest on the unpaid principal balance of all Revolving
Loans outstanding from time to time which are Prime Loans, shall be due and
payable monthly, in arrears, commencing on February 1, 2006 and continuing on
the first day of each calendar month thereafter, and on the Revolving Loan
Maturity Date. Accrued and unpaid interest on the unpaid principal balance of
all Revolving Loans outstanding from time to time which are LIBOR Loans shall be
payable on the last Business Day of each Interest Period, commencing on the
first such date to occur after the date hereof, on the date of any principal
repayment of a LIBOR Loan and on the Revolving Loan Maturity Date. From and
after maturity, or after the occurrence and during the continuation of an Event
of Default, interest on the outstanding principal balance of the Revolving
Loans, at the option of the Bank, may accrue at the Default Rate and shall be
payable upon demand from the Bank.

(c) Revolving Loan Principal Payments.

(i) Revolving Loan Mandatory Payments. All Revolving Loans hereunder shall be
repaid by the Borrowers on the Revolving Loan Maturity Date, unless payable
sooner pursuant to the provisions of this Agreement. In the event that (A) the
aggregate outstanding principal balance of all Revolving Loans exceeds the
Revolving Loan Availability, (B) the aggregate principal amount of all Revolving
Loans outstanding to East West exceeds the East West Revolving Loan
Availability, or (iii) the aggregate principal amount of all Revolving Loans
outstanding to Smithway exceeds the Smithway Revolving Loan Availability, the
Borrowers shall, without notice or demand of any kind, immediately make such
repayments of the Revolving Loans or take such other actions as are satisfactory
to the Bank as shall be necessary to eliminate such excess. Also, if the
Borrowers chooses not to convert any Revolving Loan which is a LIBOR Loan to a
Prime Loan as provided in Section 2.2(b) and Section 2.2(c), then such Revolving
Loan shall immediately be due and payable on the last Business Day of the then
existing Interest Period or on such earlier date as required by law, all without
further demand, presentment, protest or notice of any kind, all of which are
hereby waived by the Borrowers.

(ii) Optional Prepayments. The Borrowers may from time to time prepay the
Revolving Loans which are Prime Loans, in whole or in part, without any
prepayment penalty whatsoever, provided that any prepayment of the entire
principal balance of the Prime Loans shall include accrued interest on such
Prime Loans to the date of such prepayment.

2.2. Additional LIBOR Loan Provisions.

(a) LIBOR Loan Prepayments. Notwithstanding anything to the contrary contained
herein, the principal balance of any LIBOR Loan may not be prepaid in whole or
in part at any time. If, for any reason, a LIBOR Loan is paid prior to the last
Business Day of any Interest Period, whether voluntary, involuntary, by reason
of acceleration or otherwise, each such prepayment of a LIBOR Loan will be
accompanied by the amount of accrued interest on the amount prepaid and any and
all costs, expenses, penalties and charges incurred by the Bank as a result of
the early termination or breakage of a LIBOR Loan, plus the amount, if any, by
which (i) the additional interest which would have been payable during the
Interest Period on the LIBOR Loan prepaid had it not been prepaid, exceeds
(ii) the interest which would have been recoverable by the Bank by placing the
amount prepaid on deposit in the domestic certificate of deposit market, the
eurodollar deposit market, or other appropriate money market selected by the
Bank, for a period starting on the date on which it was prepaid and ending on
the last day of the Interest Period for such LIBOR Loan. The amount of any such
loss or expense payable by the Borrowers to the Bank under this section shall be
determined in the Bank’s sole discretion based upon the assumption that the Bank
funded its loan commitment for LIBOR Loans in the London Interbank Eurodollar
market and using any reasonable attribution or averaging methods which the Bank
deems appropriate and practical, provided, however, that the Bank is not
obligated to accept a deposit in the London Interbank Eurodollar market in order
to charge interest on a LIBOR Loan at the LIBOR Rate.

(b) LIBOR Unavailability. If the Bank determines in good faith (which
determination shall be conclusive, absent manifest error) prior to the
commencement of any Interest Period that (i) the making or maintenance of any
LIBOR Loan would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, (ii) United States dollar deposits in
the principal amount, and for periods equal to the Interest Period for funding
any LIBOR Loan are not available in the London Interbank Eurodollar market in
the ordinary course of business, (iii) by reason of circumstances affecting the
London Interbank Eurodollar market, adequate and fair means do not exist for
ascertaining the LIBOR Rate to be applicable to the relevant LIBOR Loan, or
(iv) the LIBOR Rate does not accurately reflect the cost to the Bank of a LIBOR
Loan, the Bank shall promptly notify the Borrowers thereof and, so long as the
foregoing conditions continue, none of the Loans may be advanced as a LIBOR Loan
thereafter. In addition, at the Borrowers’ option, each existing LIBOR Loan
shall be immediately (i) converted to a Prime Loan on the last Business Day of
the then existing Interest Period, or (ii) due and payable on the last Business
Day of the then existing Interest Period, without further demand, presentment,
protest or notice of any kind, all of which are hereby waived by the Borrowers.

(c) Regulatory Change. In addition, if, after the date hereof, a Regulatory
Change shall, in the reasonable determination of the Bank, make it unlawful for
the Bank to make or maintain the LIBOR Loans, then the Bank shall promptly
notify the Borrowers and none of the Loans may be advanced as a LIBOR Loan
thereafter. In addition, at the Borrowers’ option, each existing LIBOR Loan
shall be immediately (i) converted to a Prime Loan on the last Business Day of
the then existing Interest Period or on such earlier date as required by law, or
(ii) due and payable on the last Business Day of the then existing Interest
Period or on such earlier date as required by law, all without further demand,
presentment, protest or notice of any kind, all of which are hereby waived by
the Borrowers.

(d) LIBOR Indemnity. If any Regulatory Change, or compliance by the Bank or any
Person controlling the Bank with any request or directive of any governmental
authority, central bank or comparable agency (whether or not having the force of
law) shall (a) impose, modify or deem applicable any assessment, reserve,
special deposit or similar requirement against assets held by, or deposits in or
for the account of or loans by, or any other acquisition of funds or
disbursements by, the Bank; (b) subject the Bank or any LIBOR Loan to any tax,
duty, charge, stamp tax or fee or change the basis of taxation of payments to
the Bank of principal or interest due from the Borrowers to the Bank hereunder
(other than a change in the taxation of the overall net income of the Bank); or
(c) impose on the Bank any other condition regarding such LIBOR Loan or the
Bank’s funding thereof, and the Bank shall determine (which determination shall
be conclusive, absent manifest error) that the result of the foregoing is to
increase the cost to, or to impose a cost on, the Bank or such controlling
Person of making or maintaining such LIBOR Loan or to reduce the amount of
principal or interest received by the Bank hereunder, then the Borrowers shall
pay to the Bank or such controlling Person, on demand, such additional amounts
as the Bank shall, from time to time, determine are sufficient to compensate and
indemnify the Bank for such increased cost or reduced amount.

2.3. Interest and Fee Computation; Collection of Funds. Except as otherwise set
forth herein, all interest and fees shall be calculated on the basis of a year
consisting of 365 days and shall be paid for the actual number of days elapsed.
Principal payments submitted in funds not immediately available shall continue
to bear interest until collected. If any payment to be made by the Borrowers
hereunder or under any Note shall become due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in computing any interest in respect of such
payment. Notwithstanding anything to the contrary contained herein, the final
payment due under any of the Loans must be made by wire transfer or other
immediately available funds. All payments made by the Borrowers hereunder or
under any of the Loan Documents shall be made without setoff, counterclaim, or
other defense. To the extent permitted by applicable law, all payments hereunder
or under any of the Loan Documents (including any payment of principal,
interest, or fees) to, or for the benefit, of any Person shall be made by the
Borrowers free and clear of, and without deduction or withholding for, or
account of, any taxes now or hereinafter imposed by any taxing authority.

2.4. Letters of Credit. Subject to the terms and conditions of this Agreement
and upon (i) the execution by the Borrowers and the Bank of a Master Letter of
Credit Agreement in form and substance acceptable to the Bank (together with all
amendments, modifications and restatements thereof, the “Master Letter of Credit
Agreement”), and (ii) the execution and delivery by any Borrower, and the
acceptance by the Bank, in its sole and absolute discretion, of a Letter of
Credit Application, the Bank agrees to issue for the account of any Borrower
such Letters of Credit in the standard form of the Bank and otherwise in form
and substance acceptable to the Bank, from time to time during the term of this
Agreement, provided that the Letter of Credit Obligations may not at any time
exceed the Letter of Credit Commitment and provided further, that no Letter of
Credit shall have an expiration date later than the Letter of Credit Maturity
Date. The amount of any payments made by the Bank with respect to draws made by
a beneficiary under a Letter of Credit for which such Borrower has failed to
reimburse the Bank upon the earlier of (i) the Bank’s demand for repayment, or
(ii) five (5) days from the date of such payment to such beneficiary by the
Bank, shall be deemed to have been converted to a Revolving Loan as of the date
such payment was made by the Bank to such beneficiary. Upon the occurrence of an
Event of a Default and at the option of the Bank, all Letter of Credit
Obligations shall be converted to Revolving Loans consisting of Prime Loans, all
without demand, presentment, protest or notice of any kind, all of which are
hereby waived by the Borrowers. To the extent the provisions of the Master
Letter of Credit Agreement differ from, or are inconsistent with, the terms of
this Agreement, the provisions of this Agreement shall govern.

2.5. Non-Utilization Fee. The Borrowers agrees to pay to the Bank a
Non-Utilization Fee equal to the percentage specified as the Applicable Margin
for Non-Utilization Fee of the total of (a) the Revolving Loan Commitment, minus
(b) the sum of (i) the daily average of the aggregate principal amount of all
Revolving Loans outstanding, plus (ii) the daily average of the aggregate amount
of the Letter of Credit Obligations, which non- utilization fee shall be
(A) calculated on the basis of a year consisting of 365 days, (B) paid for the
actual number of days elapsed, and (C) payable quarterly in arrears on the last
day of each March, June, September and December, commencing on March 31, 2006,
and on the Revolving Loan Maturity Date.

2.6. Taxes.

(a) All payments made by the Borrowers under this Agreement shall be made free
and clear of, and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any governmental authority, excluding net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed
on the Bank as a result of a present or former connection between the Bank and
the jurisdiction of the governmental authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Bank having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Agreement or any other Loan Document). If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings (collectively,
“Non-Excluded Taxes”) or Other Taxes are required to be withheld from any
amounts payable to the Bank hereunder, the amounts so payable to the Bank shall
be increased to the extent necessary to yield to the Bank (after payment of all
Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement, provided,
however, that the Borrowers shall not be required to increase any such amounts
payable to the Bank with respect to any Non-Excluded Taxes that are attributable
to the Bank’s failure to comply with the requirements of subsection 2.6(c).

(b) The Borrowers shall pay any Other Taxes to the relevant governmental
authority in accordance with applicable law.

(c) At the request of the Borrowers and at the Borrowers’ sole cost, the Bank
shall take reasonable steps to (i) contest its liability for any Non-Excluded
Taxes or Other Taxes that have not been paid, or (ii) seek a refund of any
Non-Excluded Taxes or Other Taxes that have been paid.

(d) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrowers,
as promptly as possible thereafter the Borrowers shall send to the Bank a
certified copy of an original official receipt received by the Borrowers showing
payment thereof. If the Borrowers fail to pay any Non-Excluded Taxes or Other
Taxes when due to the appropriate taxing authority or fails to remit to the Bank
the required receipts or other required documentary evidence or if any
governmental authority seeks to collect a Non-Excluded Tax or Other Tax directly
from the Bank for any other reason, the Borrowers shall indemnify the Bank on an
after-tax basis for any incremental taxes, interest or penalties that may become
payable by the Bank.

(e) The agreements in this Section shall survive the satisfaction and payment of
the Obligations and the termination of this Agreement.

2.7. All Loans to Constitute Single Obligation. The Loans shall constitute one
general obligation of the Borrowers, and shall be secured by Bank’s priority
security interest in and Lien upon all of the Collateral and by all other
security interests, Liens, claims and encumbrances heretofore, now or at any
time or times hereafter granted by the Borrowers and/or any Guarantor to the
Bank.

Section 3. CONDITIONS OF BORROWING.

Notwithstanding any other provision of this Agreement, the Bank shall not be
required to disburse, make or continue all or any portion of the Loans, if any
of the following conditions shall have occurred.

3.1. Loan Documents. The Borrowers shall have failed to execute and deliver to
the Bank any of the following Loan Documents, all of which must be satisfactory
to the Bank and the Bank’s counsel in form, substance and execution:

(a) Loan Agreement. Two copies of this Agreement duly executed by the Borrowers.

(b) Revolving Note. A Revolving Note duly executed by the Borrowers, jointly and
severally, in the form prepared by and acceptable to the Bank.

(c) Master Letter of Credit Agreement. A Master Letter of Credit Agreement
prepared by and acceptable to the Bank, duly executed by the Borrowers, jointly
and severally, in favor of the Bank.

(d) Guaranties. Separate Continuing Unconditional Guaranties each dated as of
the date of this Agreement, executed by each of the Guarantors to and for the
benefit of the Bank, in the form prepared by and acceptable to the Bank (each, a
“Guaranty”, and collectively, the “Guaranties”).

(e) Subordination Agreement. Separate Subordination Agreements each dated as of
the date of this Agreement, from each holder of Subordinated Debt, in the form
prepared by and acceptable to the Bank.

(f) Borrowing Base Certificate. A Borrowing Base Certificate in the form
prepared by the Bank, certified as accurate by the Borrowers and acceptable to
the Bank in its sole discretion.

(g) Search Results; Lien Terminations. Copies of UCC search reports dated such a
date as is reasonably acceptable to the Bank, listing all effective financing
statements which name the Borrowers, under their present names and any previous
names, as debtors, together with (i) copies of such financing statements,
(ii) payoff letters evidencing repayment in full of all existing Debt to be
repaid with the Loans, the termination of all agreements relating thereto and
the release of all Liens granted in connection therewith, with UCC or other
appropriate termination statements and documents effective to evidence the
foregoing (other than Permitted Liens), and (iii) such other UCC termination
statements as the Bank may reasonably request.

(h) Organizational and Authorization Document. Copies of (i) the Articles of
Incorporation and Bylaws of the Borrowers and each Guarantor; (ii) resolutions
of the shareholders or board of directors of the Borrowers and each Guarantor
approving and authorizing such Person’s execution, delivery and performance of
the Loan Documents to which it is party and the transactions contemplated
thereby; (iii) signature and incumbency certificates of the officers of the
Borrowers and each Guarantor, executing any of the Loan Documents, each of which
the Borrowers, on behalf of itself and each Guarantor, hereby certify to be true
and complete, and in full force and effect without modification, it being
understood that the Bank may conclusively rely on each such document and
certificate until formally advised by the Borrowers or such Guarantor of any
changes therein; and (iv) good standing certificates in the state of
incorporation of the Borrowers and each Guarantor and in each other state
requested by the Bank.

(i) Insurance. Evidence satisfactory to the Bank of the existence of insurance
required to be maintained pursuant to Section 8.6.

(j) Additional Documents. Such other certificates, financial statements,
schedules, resolutions, opinions of counsel, notes and other documents which are
provided for hereunder or which the Bank shall require.

3.2. Event of Default. Any Event of Default, or Unmatured Event of Default shall
have occurred and be continuing.

3.3. Material Adverse Effect. The occurrence of any event having a Material
Adverse Effect upon the Borrowers or any Guarantor.

3.4. Litigation. Any litigation or governmental proceeding shall have been
instituted against the Borrowers, any Guarantor or any of their officers or
shareholders having a Materially Adverse Effect upon the Borrowers or such
Guarantor.

3.5. Representations and Warranties. Any representation or warranty of the
Borrowers contained herein or in any Loan Document shall be untrue or incorrect
in any material respect as of the date of any Loan as though made on such date,
except to the extent such representation or warranty expressly relates to an
earlier date.

Section 4. NOTES EVIDENCING LOANS.

4.1. Revolving Note. The Revolving Loans and the Letter of Credit Obligations
shall be evidenced by the Revolving Note. At the time of the initial
disbursement of a Revolving Loan and at each time any additional Revolving Loan
shall be requested hereunder or a repayment made in whole or in part thereon, a
notation thereof shall be made on the books and records of the Bank. All amounts
recorded shall be, absent manifest error, conclusive and binding evidence of
(i) the principal amount of the Revolving Loans advanced hereunder and the
amount of all Letter of Credit Obligations, (ii) any accrued and unpaid interest
owing on the Revolving Loans, and (iii) all amounts repaid on the Revolving
Loans or the Letter of Credit Obligations. The failure to record any such amount
or any error in recording such amounts shall not, however, limit or otherwise
affect the obligations of the Borrowers under the Revolving Note to repay the
principal amount of the Revolving Loans, together with all interest accruing
thereon.

Section 5. MANNER OF BORROWING.

5.1. Borrowing Procedures. Each Revolving Loan may be advanced either as a Prime
Loan or a LIBOR Loan, provided, however, that at any time, the Borrowers may
identify no more than four (4) Revolving Loans which may be LIBOR Loans. Each
Loan shall be made available to any Borrower upon any written, verbal,
electronic, telephonic or telecopy loan request which the Bank in good faith
believes to emanate from a properly authorized representative of such Borrower,
whether or not that is in fact the case. Each such request shall be effective
upon receipt by the Bank, shall be irrevocable, and shall specify the date,
amount and type of borrowing and, in the case of a LIBOR Loan, the initial
Interest Period therefor. The Borrowers shall select Interest Periods so as not
to require a payment or prepayment of any LIBOR Loan during an Interest Period
for such LIBOR Loan. The final Interest Period for any LIBOR Loan must be such
that its expiration occurs on or before the Revolving Loan Maturity Date. A
request for a Prime Loan must be received by the Bank no later than 11:00 a.m.
Chicago, Illinois time, on the day it is to be funded. A request for a LIBOR
Loan must be (i) received by the Bank no later than 11:00 a.m. Chicago, Illinois
time, three days before the day it is to be funded, and (ii) in an amount equal
to One Million and 00/100 Dollars ($1,000,000.00) or a higher integral multiple
of Five Hundred Thousand and 00/100 Dollars ($500,000.00). The proceeds of each
Loan shall be made available at the office of the Bank by credit to the account
of such Borrower or by other means requested by such Borrower and acceptable to
the Bank. The Borrowers do hereby irrevocably confirm, ratify and approve all
such advances by the Bank and does hereby indemnify the Bank against losses and
expenses (including court costs, attorneys’ and paralegals’ fees) and shall hold
the Bank harmless with respect thereto.

5.2. LIBOR Conversion and Continuation Procedures. Following receipt of the
notice described in Section 5.1 and the funding by the Bank of any LIBOR Loan
for the initial Interest Period, such LIBOR Loan shall thereafter automatically
renew for the Interest Period specified in such initial request received by the
Bank pursuant to Section 5.1, at the then current LIBOR Rate unless the
Borrowers, pursuant to a subsequent written notice received by the Bank, shall
elect a different Interest Period or the conversion of all or a portion of such
LIBOR Loan to a Prime Loan. Each Interest Period occurring after the initial
Interest Period with respect to any LIBOR Loan shall commence on the same day of
each applicable month as the first day of the initial Interest Period. Whenever
the last day of any Interest Period with respect to any LIBOR Loan would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day.
Whenever an Interest Period with respect to any LIBOR Loan would otherwise end
on a day of a month for which there is no numerically corresponding day in the
calendar month, such Interest Period shall end on the last day of such calendar
month, unless such day is not a Business Day, in which event such Interest
Period shall be extended to end on the next Business Day. Upon receipt by the
Bank of such subsequent notice, the Borrowers may, subject to the terms and
conditions of this Agreement, elect, as of the last day of the applicable
Interest Period, to continue any LIBOR Loan having an Interest Period expiring
on such day for a different Interest Period, or to convert any such LIBOR Loan
to a Prime Loan. Such notice shall, in the case of a conversion to a Prime Loan,
be given before 11:00 a.m., Chicago time, on the proposed date of such
conversion, and in the case of conversion to a LIBOR Loan having a different
Interest Period, be given before 11:00 a.m., Chicago time, at least three
Business Days prior to the proposed date of such conversion, specifying: (i) the
proposed date of conversion; (ii) the aggregate amount of Loans to be converted;
(iii) the type of Loans resulting from the proposed conversion; and (iv) the
duration of the requested Interest Period. The Borrowers may not elect a LIBOR
Rate, and an Interest Period for a LIBOR Loan shall not automatically renew,
with respect to any principal amount which is scheduled to be repaid before the
last day of the applicable Interest Period, and any such amounts shall bear
interest at the Prime Rate minus the Applicable Margin, until repaid.

5.3. Letters of Credit. All Letters of Credit shall bear such application,
issuance, renewal, negotiation and other fees and charges, and bear such
interest as charged by the Bank or otherwise payable pursuant to the Master
Letter of Credit Agreement. In addition to the foregoing, each standby Letters
of Credit issued under and pursuant to this Agreement shall bear an annual
issuance fee equal to the percentage of the face amount of such standby Letter
of Credit specified as the Applicable Margin for Letter of Credit Fee, and which
shall be payable by the Borrowers quarterly in arrears on each March 31,
June 30, November 30 and December 31, until (i) such Letter of Credit has
expired or has been returned to the Bank, or (ii) the Bank has paid the
beneficiary thereunder the full face amount of such Letter of Credit.

5.4. Discretionary Disbursements. The Bank, in its sole and absolute discretion,
may immediately upon notice to the Borrowers, disburse any or all proceeds of
the Loans made or available to the Borrowers pursuant to this Agreement to pay
any fees, costs, expenses or other amounts required to be paid by the Borrowers
hereunder and not so paid. All monies so disbursed shall be a part of the
Obligations, payable by the Borrowers on demand from the Bank.

Section 6. SECURITY FOR THE OBLIGATIONS.

6.1. Security for Obligations. As security for the payment and performance of
the Obligations, each of the Borrowers does hereby pledge, assign, transfer,
deliver and grant to the Bank, for its own benefit and as agent for its
Affiliates, a continuing and unconditional first priority security interest in
the property of any of the Borrowers, of any kind or description, tangible or
intangible, wheresoever located and whether now existing or hereafter arising or
acquired, and described as follows (all of which property, along with the
products and proceeds therefrom, are individually and collectively referred to
as the “Collateral”):

(a) all property of, or for the account of, any of the Borrowers now or
hereafter coming into the possession, control or custody of, or in transit to,
the Bank or any agent or bailee for the Bank or any parent, Affiliate or
Subsidiary of the Bank or any participant with the Bank in the Loans (whether
for safekeeping, deposit, collection, custody, pledge, transmission or
otherwise), including all earnings, dividends, interest, or other rights in
connection therewith and the products and proceeds therefrom, including the
proceeds of insurance thereon; and

(b) the additional property of the Borrowers, whether now existing or hereafter
arising or acquired, and wherever now or hereafter located, together with all
additions and accessions thereto, substitutions, betterments and replacements
therefor, products and Proceeds therefrom, and all of the Borrowers’ books and
records and recorded data relating thereto (regardless of the medium of
recording or storage), together with all of the Borrowers’ right, title and
interest in and to all computer software required to utilize, create, maintain
and process any such records or data on electronic media, identified and set
forth as follows:

  (i)   All Accounts and all Inventory or other assets whose sale, lease or
other disposition by any of the Borrowers has given rise to Accounts and have
been returned to, or repossessed or stopped in transit by, any of the Borrowers,
or rejected or refused by an Account Debtor;

  (ii)   All Software and computer programs relating to subsection 6.1(b)(i);

  (iii)   All Chattel Paper, Electronic Chattel Paper, Instruments, Documents
and General Intangibles, including Payment Intangibles, relating to subsection
6.1(b)(i) above; and

  (iv)   All Proceeds (whether Cash Proceeds or Noncash Proceeds) of the
foregoing property.

6.2. Possession and Transfer of Collateral. Unless an Event of Default exists
hereunder, the Borrowers shall be entitled to possession or use of the
Collateral. The cancellation or surrender of any Note, upon payment or
otherwise, shall not affect the right of the Bank to retain the Collateral for
any other of the Obligations. The Borrowers shall not sell, assign (by operation
of law or otherwise), license, lease or otherwise dispose of, or grant any
option with respect to any of the Collateral, except that the Borrowers may sell
Inventory in the ordinary course of business.

6.3. Financing Statements. The Borrowers shall, at the Bank’s request, at any
time and from time to time, execute and deliver to the Bank such financing
statements, amendments and other documents and do such acts as the Bank deems
necessary in order to establish and maintain valid, attached and perfected first
priority security interests in the Collateral in favor of the Bank, free and
clear of all Liens and claims and rights of third parties whatsoever, except
Permitted Liens. The Borrowers hereby irrevocably authorize the Bank at any
time, and from time to time, to file in any jurisdiction any initial financing
statements and amendments thereto without the signature of the Borrowers that
(a) indicate the Collateral as being of an equal or lesser scope or within
greater detail as the grant of the security interest set forth herein, and (b)
contain any other information required by Section 5 of Article 9 of the Uniform
Commercial Code of the jurisdiction wherein such financing statement or
amendment is filed regarding the sufficiency or filing office acceptance of any
financing statement or amendment, including whether any of the Borrowers is an
organization, the type of organization and any Organizational Identification
Number issued to the Borrowers. The Borrowers hereby agree that a photocopy or
other reproduction of this Agreement is sufficient for filing as a financing
statement and the Borrowers authorize the Bank to file this Agreement as a
financing statement in any jurisdiction. The Borrowers agree to furnish any such
information to the Bank promptly upon request. The Borrowers further ratify and
affirm their authorization for any financing statements and/or amendments
thereto, executed and filed by the Bank in any jurisdiction prior to the date of
this Agreement. In addition, the Borrowers shall make appropriate entries on
their books and records disclosing the Bank’s security interests in the
Collateral.

6.4. Preservation of the Collateral. The Bank may, but is not required, to take
such actions from time to time as the Bank deems appropriate to maintain or
protect the Collateral. The Bank shall have exercised reasonable care in the
custody and preservation of the Collateral if the Bank takes such action as the
Borrowers shall reasonably request in writing which is not inconsistent with the
Bank’s status as a secured party, but the failure of the Bank to comply with any
such request shall not be deemed a failure to exercise reasonable care;
provided, however, the Bank’s responsibility for the safekeeping of the
Collateral shall (i) be deemed reasonable if such Collateral is accorded
treatment substantially equal to that which the Bank accords its own property,
and (ii) not extend to matters beyond the control of the Bank, including acts of
God, war, insurrection, riot or governmental actions. In addition, any failure
of the Bank to preserve or protect any rights with respect to the Collateral
against prior or third parties, or to do any act with respect to preservation of
the Collateral, not so requested by the Borrowers, shall not be deemed a failure
to exercise reasonable care in the custody or preservation of the Collateral.
The Borrowers shall have the sole responsibility for taking such action as may
be necessary, from time to time, to preserve all rights of the Borrowers and the
Bank in the Collateral against prior or third parties. Without limiting the
generality of the foregoing, where Collateral consists in whole or in part of
securities, the Borrowers represent to, and covenant with, the Bank that the
Borrowers have made arrangements for keeping informed of changes or potential
changes affecting the securities (including rights to convert or subscribe,
payment of dividends, reorganization or other exchanges, tender offers and
voting rights), and the Borrowers agree that the Bank shall have no
responsibility or liability for informing the Borrowers of any such or other
changes or potential changes or for taking any action or omitting to take any
action with respect thereto.

6.5. Other Actions as to any and all Collateral. The Borrowers further agree to
take any other action reasonably requested by the Bank to ensure the attachment,
perfection and first priority of, and the ability of the Bank to enforce, the
Bank’s security interest in any and all of the Collateral, including (a) causing
the Bank’s name to be noted as secured party on any certificate of title for a
titled good if such notation is a condition to attachment, perfection or
priority of, or ability of the bank to enforce, the Bank’s security interest in
such Collateral, (b) complying with any provision of any statute, regulation or
treaty of the United States as to any Collateral if compliance with such
provision is a condition to attachment, perfection or priority of, or ability of
the Bank to enforce, the Bank’s security interest in such Collateral,
(c) obtaining governmental and other third party consents and approvals,
including any consent of any licensor, lessor or other Person obligated on
Collateral, (d) obtaining waivers from mortgagees and landlords in form and
substance satisfactory to the Bank, and (e) taking all actions required by the
UCC in effect from time to time or by other law, as applicable in any relevant
UCC jurisdiction, or by other law as applicable in any foreign jurisdiction. The
Borrowers further agree to jointly and severally indemnify and hold the Bank
harmless against claims of any Persons not a party to this Agreement concerning
disputes arising over the Collateral.

6.6. Collateral in the Possession of a Warehouseman or Bailee. If any of the
Collateral at any time is in the possession of a warehouseman or bailee, the
Borrowers shall promptly notify the Bank thereof, and shall promptly obtain a
Collateral Access Agreement. The Bank agrees with the Borrowers that the Bank
shall not give any instructions to such warehouseman or bailee pursuant to such
Collateral Access Agreement unless an Event of Default has occurred and is
continuing, or would occur after taking into account any action by the Borrowers
with respect to the warehouseman or bailee.

Section 7. REPRESENTATIONS AND WARRANTIES.

To induce the Bank to make the Loans, the Borrowers make the following
representations and warranties to the Bank, each of which shall survive the
execution and delivery of this Agreement:

7.1. Borrowers Organization and Name. Smithway is a corporation duly organized,
validly existing and in good standing under the laws of the State of Iowa, with
full and adequate power to carry on and conduct its business as presently
conducted, East West is a corporation duly organized, validly existing and in
good standing under the laws of the State of South Dakota, with full and
adequate power to carry on and conduct its business as presently conducted,
Smithway Corp. is a corporation duly organized, validly existing and in good
standing under the laws of the State of Iowa, with full and adequate power to
carry on and conduct its business as presently conducted, and SMSD is a
corporation duly organized, validly existing and in good standing under the laws
of the State of South Dakota, with full and adequate power to carry on and
conduct its business as presently conducted. Each of the Borrowers and each
Guarantor is duly licensed or qualified in all foreign jurisdictions wherein the
nature of its activities require such qualification or licensing, except for
such jurisdictions where the failure to so qualify would not have a Material
Adverse Effect. The Organizational Identification Number of Smithway is 37891,
and the Organizational Identification Number of East West is DB039720. The exact
legal name of each of the Borrowers is as set forth in the preamble of this
Agreement, and the Borrowers currently do not conduct, nor has either during the
last five (5) years conducted, business under any other name or trade name.

7.2. Authorization. The Borrowers have full right, power and authority to enter
into this Agreement, to make the borrowings and execute and deliver the Loan
Documents as provided herein and to perform all of their duties and obligations
under this Agreement and the other Loan Documents. The execution and delivery of
this Agreement and the other Loan Documents will not, nor will the observance or
performance of any of the matters and things herein or therein set forth,
violate or contravene any provision of law or of the articles of incorporation
or bylaws of the Borrowers. All necessary and appropriate action has been taken
on the part of the Borrowers to authorize the execution and delivery of this
Agreement and the Loan Documents.

7.3. Validity and Binding Nature. This Agreement and the other Loan Documents
are the legal, valid and binding obligations of the Borrowers, enforceable
against the Borrowers in accordance with their terms, subject to bankruptcy,
insolvency and similar laws affecting the enforceability of creditors’ rights
generally and to general principles of equity.

7.4. Consent; Absence of Breach. The execution, delivery and performance of this
Agreement, the other Loan Documents and any other documents or instruments to be
executed and delivered by the Borrowers in connection with the Loans, and the
borrowings by the Borrowers hereunder, do not and will not (a) require any
consent, approval, authorization of, or filings with, notice to or other act by
or in respect of, any governmental authority or any other Person (other than any
consent or approval which has been obtained and is in full force and effect);
(b) conflict with (i) any provision of law or any applicable regulation, order,
writ, injunction or decree of any court or governmental authority, (ii) the
articles of incorporation or bylaws of the Borrowers or any Guarantor, or
(iii) any material agreement, indenture, instrument or other document, or any
judgment, order or decree, which is binding upon the Borrowers or any Guarantor
or any of their respective properties or assets; or (c) require, or result in,
the creation or imposition of any Lien on any asset of the Borrowers or any
Guarantor, other than Liens in favor of the Bank created pursuant to this
Agreement.

7.5. Ownership of Properties; Liens. Each of the Borrowers is the sole owner of
all of its properties and assets, real and personal, tangible and intangible, of
any nature whatsoever (including patents, trademarks, trade names, service marks
and copyrights), free and clear of all Liens, charges and claims (including
infringement claims with respect to patents, trademarks, service marks,
copyrights and the like), other than Permitted Liens.

7.6. Equity Ownership. All issued and outstanding Capital Securities of the
Borrowers and each Guarantor are duly authorized and validly issued, fully paid,
non-assessable, and free and clear of all Liens other than those in favor of the
Bank, if any, and such securities were issued in compliance with all applicable
state and federal laws concerning the issuance of securities. As of the date
hereof, there are no pre-emptive or other outstanding rights, options, warrants,
conversion rights or other similar agreements or understandings for the purchase
or acquisition of any Capital Securities of the Borrowers and each Guarantor.

7.7. Intellectual Property. Each of the Borrowers owns and possesses or has a
license or other right to use all Intellectual Property, as are necessary for
the conduct of the businesses of such Borrowers, without any infringement upon
the known rights of others which could reasonably be expected to have a Material
Adverse Effect upon such Borrower, and no material claim has been asserted and
is pending by any Person challenging or questioning the use of any Intellectual
Property or the validity or effectiveness of any Intellectual Property nor do
the Borrowers know of any valid basis for any such claim.

7.8. Financial Statements. All financial statements submitted to the Bank have
been prepared in accordance with sound accounting practices and GAAP on a basis,
except as otherwise noted therein, consistent with the previous fiscal year and
present fairly the financial condition of the Borrowers and the results of the
operations for the Borrowers as of such date and for the periods indicated,
subject in the case of the quarterly financial statements, to normal year end
adjustments and such other disclosures as would typically be shown only on the
annual financial statements. Since the date of the most recent financial
statement submitted by the Borrowers to the Bank, there has been no change in
the financial condition or in the assets or liabilities of the Borrowers having
a Material Adverse Effect on the Borrowers.

7.9. Litigation and Contingent Liabilities. There is no litigation, arbitration
proceeding, demand, charge, claim, petition or governmental investigation or
proceeding pending, or to the knowledge of the Borrowers, threatened, against
the Borrowers, which, if adversely determined, which might reasonably be
expected to have a Material Adverse Effect upon the Borrowers, except as set
forth in Schedule 7.9. Other than any liability incident to such litigation or
proceedings, the Borrowers have no material guarantee obligations, contingent
liabilities, liabilities for taxes, or any long-term leases or unusual forward
or long-term commitments, including any interest rate or foreign currency swap
or exchange transaction or other obligation in respect of derivatives, that are
not fully-reflected or fully reserved for in the most recent audited financial
statements delivered pursuant to subsection 8.8(a) or fully-reflected or fully
reserved for in the most recent quarterly financial statements delivered
pursuant to subsection 8.8(b) and not permitted by Section 9.1.

7.10. Event of Default. No Event of Default or Unmatured Event of Default exists
or would result from the incurrence by the Borrowers of any of the Obligations
hereunder or under any of the other Loan Document, and the Borrowers are not in
default (without regard to grace or cure periods) under any other contract or
agreement to which it is a party, the effect of which would have a Material
Adverse Effect upon the Borrowers.

7.11. Adverse Circumstances. No condition, circumstance, event, agreement,
document, instrument, restriction, litigation or proceeding (or threatened
litigation or proceeding or basis therefor) exists which (a) would have a
Material Adverse Effect upon the Borrowers, or (b) would constitute an Event of
Default or an Unmatured Event of Default.

7.12. Environmental Laws and Hazardous Substances. The Borrowers have not
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Substances, on or off any of the premises of the
Borrowers (whether or not owned by it) in any manner which at any time violates
any Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder. The Borrowers will comply in all material respects
with all Environmental Laws and will obtain all licenses, permits certificates,
approvals and similar authorizations thereunder. There has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other Person, nor is any pending or,
to the best of the Borrowers’ knowledge, threatened, and the Borrowers shall
immediately notify the Bank upon becoming aware of any such investigation,
proceeding, complaint, order, directive, claim, citation or notice, and shall
take prompt and appropriate actions to respond thereto, with respect to any
non-compliance with, or violation of, the requirements of any Environmental Law
by the Borrowers or the release, spill or discharge, threatened or actual, of
any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material or any other environmental, health or safety matter, which affects the
Borrowers or their business, operations or assets or any properties at which the
Borrowers have transported, stored or disposed of any Hazardous Substances. The
Borrowers have no material liability, contingent or otherwise, in connection
with a release, spill or discharge, threatened or actual, of any Hazardous
Substances or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Material. The
Borrowers further agree to allow the Bank or its agent access to the properties
of the Borrowers to confirm compliance with all Environmental Laws, and the
Borrowers shall, following determination by the Bank that there is
non-compliance, or any condition which requires any action by or on behalf of
the Borrowers in order to avoid any non-compliance, with any Environmental Law,
at the Borrowers’ sole expense, cause an independent environmental engineer
acceptable to the Bank to conduct such tests of the relevant site as are
appropriate, and prepare and deliver a report setting forth the result of such
tests, a proposed plan for remediation and an estimate of the costs thereof.

7.13. Solvency, etc. As of the date hereof, and immediately prior to and after
giving effect to the issuance of each Letter of Credit and each Loan hereunder
and the use of the proceeds thereof, (a) the fair value of the assets of each of
the Borrowers is greater than the amount of the liabilities (including disputed,
contingent and unliquidated liabilities) of such Borrower as such value is
established and liabilities evaluated as required under the Section 548 of the
Bankruptcy Code, (b) the present fair saleable value of the assets of each of
the Borrowers is not less than the amount that will be required to pay the
probable liability on the debts of such Borrower as they become absolute and
matured, (c) each of the Borrowers is able to realize upon its assets and pay
its debts and other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business, (d) neither of the
Borrowers intends to, and does not believe that it will, incur debts or
liabilities beyond its ability to pay as such debts and liabilities mature, and
(e) neither of the Borrowers is engaged in business or a transaction, and is not
about to engage in business or a transaction, for which its property would
constitute unreasonably small capital.

7.14. ERISA Obligations. All Employee Plans of the Borrowers meet the minimum
funding standards of Section 302 of ERISA and 412 of the Internal Revenue Code
where applicable, and each such Employee Plan that is intended to be qualified
within the meaning of Section 401 of the Internal Revenue Code of 1986 is
qualified. No withdrawal liability has been incurred under any such Employee
Plans and no “Reportable Event” or “Prohibited Transaction” (as such terms are
defined in ERISA), has occurred with respect to any such Employee Plans, unless
approved by the appropriate governmental agencies. The Borrowers have promptly
paid and discharged all obligations and liabilities arising under the Employee
Retirement Income Security Act of 1974 (“ERISA”) of a character which if unpaid
or unperformed might result in the imposition of a Lien against any of its
properties or assets.

7.15. Labor Relations. Except as could not reasonably be expected to have a
Material Adverse Effect, (i) there are no strikes, lockouts or other labor
disputes against the Borrowers or, to the best knowledge of the Borrowers,
threatened, (ii) hours worked by and payment made to employees of the Borrowers
have not been in violation of the Fair Labor Standards Act or any other
applicable law, and (ii) no unfair labor practice complaint is pending against
the Borrowers or, to the best knowledge of the Borrowers, threatened before any
governmental authority.

7.16. Security Interest. This Agreement creates a valid security interest in
favor of the Bank in the Collateral and, when properly perfected by filing in
the appropriate jurisdictions, or by possession or Control of such Collateral by
the Bank or delivery of such Collateral to the Bank, shall constitute a valid,
perfected, first-priority security interest in such Collateral.

7.17. Lending Relationship. The relationship hereby created between the
Borrowers and the Bank is and has been conducted on an open and arm’s length
basis in which no fiduciary relationship exists, and the Borrowers have not
relied and are not relying on any such fiduciary relationship in executing this
Agreement and in consummating the Loans. The Bank represents that it will
receive any Note payable to its order as evidence of a bank loan.

7.18. Business Loan. The Loans, including interest rate, fees and charges as
contemplated hereby, (i) are business loans within the purview of 815 ILCS
205/4(1)(c), as amended from time to time, (ii) are an exempted transaction
under the Truth In Lending Act, 12 U.S.C. 1601 et seq., as amended from time to
time, and (iii) do not, and when disbursed shall not, violate the provisions of
the Illinois usury laws, any consumer credit laws or the usury laws of any state
which may have jurisdiction over this transaction, the Borrowers or any property
securing the Loans.

7.19. Taxes. The Borrowers and each Guarantor have timely filed all tax returns
and reports required by law to have been filed by such party and have paid all
taxes, governmental charges and assessments due and payable with respect to such
returns, except any such taxes or charges which are being diligently contested
in good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books, are insured against
or bonded over to the satisfaction of the Bank and the contesting of such
payment does not create a Lien on the Collateral which is not a Permitted Lien.
There is no controversy or objection pending, or to the knowledge of the
Borrowers, threatened in respect of any tax returns of the Borrowers. The
Borrowers have made adequate reserves on their books and records in accordance
with GAAP for all taxes that have accrued but which are not yet due and payable.

7.20. Compliance with Regulation U. No portion of the proceeds of the Loans
shall be used by the Borrowers, or any Affiliate of the Borrowers, either
directly or indirectly, for the purpose of purchasing or carrying any “margin
stock”, within the meaning of Regulation U as adopted by the Board of Governors
of the Federal Reserve System or any successor thereto.

7.21. Governmental Regulation. The Borrowers, any of the Guarantors or any
Affiliate of the Borrower are not, or after giving effect to any loan, will not
be, subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the ICC Termination Act of 1995 or the Investment Company
Act of 1940 or to any federal or state statute or regulation limiting its
ability to incur indebtedness for borrowed money.

7.22. Bank Accounts. All Deposit Accounts and operating bank accounts of the
Borrowers are located at the Bank except those listed on Schedule 7.22 attached
hereto.

7.23. Place of Business. The principal place of business and books and records
of the Borrowers is set forth in the preamble to this Agreement, and the
location of all Collateral, if other than at such principal place of business,
is as set forth on Schedule 7.23 attached hereto and made a part hereof, and the
Borrowers shall promptly notify the Bank of any change in such locations. The
Borrowers will not remove or permit the Collateral to be removed from such
locations without the prior written consent of the Bank, except for Inventory
sold in the usual and ordinary course of the Borrowers’ business.

7.24. Complete Information. This Agreement and all financial statements,
schedules, certificates, confirmations, agreements, contracts, and other
materials and information heretofore or contemporaneously herewith furnished in
writing by the Borrowers to the Bank for purposes of, or in connection with,
this Agreement and the transactions contemplated hereby is, and all written
information hereafter furnished by or on behalf of the Borrowers to the Bank
pursuant hereto or in connection herewith will be, true and accurate in every
material respect on the date as of which such information is dated or certified,
and none of such information is or will be incomplete by omitting to state any
material fact necessary to make such information not misleading in light of the
circumstances under which made (it being recognized by the Bank that any
projections and forecasts provided by the Borrowers are based on good faith
estimates and assumptions believed by the Borrowers to be reasonable as of the
date of the applicable projections or assumptions and that actual results during
the period or periods covered by any such projections and forecasts may differ
from projected or forecasted results).

7.25. Subordinated Debt. The subordination provisions of the Subordinated Debt
are enforceable against the holders of the Subordinated Debt by the Bank. The
Obligations constitute Senior Debt entitled to the benefits of the subordination
provisions contained in the Subordinated Debt. The Borrowers acknowledges that
the Bank is entering into this Agreement and is making the Loans in reliance
upon the subordination provisions of the Subordinated Debt and this Section
7.25.

7.26. Internal Controls. Each of the Borrowers and the Guarantors have:

(a) Established and maintain disclosure controls and procedures (as such term is
defined in Rule 13a-14 under the U.S. Securities Exchange Act or 1934, as
amended (the “Exchange Act”)), which (i) are designed to ensure that material
information relating to any Borrower or any Guarantor is made known to its
principal executive officer and the principal financial offer or persons
performing similar functions by others within those entities, particularly
during the periods in which the periodic reports required under the Exchange Act
are being prepared; (ii) have been evaluated for effectiveness as of a date
within ninety (90) days prior to the filing of the Borrowers’ most recent annual
or quarterly report filed with the Securities Exchange Commission; and (iii) are
effective in all material respects to perform the functions for which they were
established;

(b) Based on the evaluation of its disclosure controls and procedures, the
Borrowers are not aware of (i) any significant deficiency in the design or
operation of internal controls which could adversely affect the Borrowers’
ability to record, process, summarize and report financial data or any material
weaknesses in internal controls or (ii) any fraud, whether or not material, that
involves management or other employees who have a significant role in the
Borrowers’ internal controls; and

(c) Since the date of the most recent evaluation of such disclosure controls and
procedures, there have been no significant changes in internal controls or in
other factors that could significantly affect internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Section 8. AFFIRMATIVE COVENANTS.

8.1. Compliance with Bank Regulatory Requirements; Increased Costs. If the Bank
shall reasonably determine that any Regulatory Change, or compliance by the Bank
or any Person controlling the Bank with any request or directive (whether or not
having the force of law) of any governmental authority, central bank or
comparable agency has or would have the effect of reducing the rate of return on
the Bank’s or such controlling Person’s capital as a consequence of the Bank’s
obligations hereunder or under any Letter of Credit to a level below that which
the Bank or such controlling Person could have achieved but for such Regulatory
Change or compliance (taking into consideration the Bank’s or such controlling
Person’s policies with respect to capital adequacy) by an amount deemed by the
Bank or such controlling Person to be material or would otherwise reduce the
amount of any sum received or receivable by the Bank under this Agreement or
under any Note with respect thereto, then from time to time, upon demand by the
Bank (which demand shall be accompanied by a statement setting forth the basis
for such demand and a calculation of the amount thereof in reasonable detail),
the Borrowers shall pay directly to the Bank or such controlling Person such
additional amount as will compensate the Bank for such increased cost or such
reduction, so long as such amounts have accrued on or after the day which is one
hundred eighty days (180) days prior to the date on which the Bank first made
demand therefor.

8.2. Borrowers’ Existence. Each of the Borrowers shall at all times (a) preserve
and maintain its existence and good standing in the jurisdiction of its
organization, (b) preserve and maintain its qualification to do business and
good standing in each jurisdiction where the nature of its business makes such
qualification necessary (other than such jurisdictions in which the failure to
be qualified or in good standing could not reasonably be expected to have a
Material Adverse Effect), and (c) continue as a going concern in the business
which such Borrower is presently conducting. If any Borrower does not have an
Organizational Identification Number and later obtains one, the Borrowers shall
promptly notify the Bank of such Organizational Identification Number.

8.3. Compliance With Laws. The Borrowers shall use the proceeds of the Loans for
working capital and other general corporate or business purposes not in
contravention of any requirements of law and not in violation of this Agreement,
and shall comply, and cause each Guarantor to comply, in all respects, including
the conduct of its business and operations and the use of its properties and
assets, with all applicable laws, rules, regulations, decrees, orders,
judgments, licenses and permits, except where failure to comply could not
reasonably be expected to have a Material Adverse Effect. In addition, and
without limiting the foregoing sentence, the Borrowers shall (a) ensure, and
cause each Affiliate to ensure, that no person who owns a controlling interest
in or otherwise controls the Borrowers or any Affiliate of any of the Borrowers
is or shall be listed on the Specially Designated Nationals and Blocked Person
List or other similar lists maintained by the Office of Foreign Assets Control
(“OFAC”), the Department of the Treasury or included in any Executive Orders,
(b) not use or permit the use of the proceeds of the Loans to violate any of the
foreign asset control regulations of OFAC or any enabling statute or Executive
Order relating thereto, and (c) comply, and cause each Subsidiary to comply,
with all applicable Bank Secrecy Act (“BSA”) laws and regulations, as amended.

8.4. Payment of Taxes and Liabilities. The Borrowers shall pay, and cause each
Guarantor to pay, and discharge, prior to delinquency and before penalties
accrue thereon, all property and other taxes, and all governmental charges or
levies against it or any of the Collateral, as well as claims of any kind which,
if unpaid, could become a Lien on any of its property; provided that the
foregoing shall not require the Borrowers or any Guarantor to pay any such tax
or charge so long as it shall contest the validity thereof in good faith by
appropriate proceedings and shall set aside on its books adequate reserves with
respect thereto in accordance with GAAP and, in the case of a claim which could
become a Lien on any of the Collateral, such contest proceedings stay the
foreclosure of such Lien or the sale of any portion of the Collateral to satisfy
such claim.

8.5. Maintain Property. Each of the Borrowers shall at all times maintain,
preserve and keep its plant, properties and Equipment, including any Collateral,
in good repair, working order and condition, normal wear and tear excepted, and
shall from time to time make all needful and proper repairs, renewals,
replacements, and additions thereto so that at all times the efficiency thereof
shall be fully preserved and maintained. The Borrowers shall permit the Bank to
examine and inspect such plant, properties and Equipment, including any
Collateral, at all reasonable times.

8.6. Maintain Insurance. The Borrowers shall at all times maintain with
insurance companies reasonably acceptable to the Bank, such insurance coverage
as may be required by any law or governmental regulation or court decree or
order applicable to it and such other insurance, to such extent and against such
hazards and liabilities, including employers’, public and professional liability
risks, as is customarily maintained by companies similarly situated, and shall
have insured amounts no less than, and deductibles no higher than, are
reasonably acceptable to the Bank. The Borrowers shall furnish to the Bank a
certificate setting forth in reasonable detail the nature and extent of all
insurance maintained by the Borrowers, which shall be reasonably acceptable in
all respects to the Bank. The Borrowers shall cause each issuer of an insurance
policy to provide the Bank with an endorsement providing that thirty (30) days
notice will be given to the Bank prior to any cancellation of, material
reduction or change in coverage provided by or other material modification to
such policy.

In the event any Borrower either fails to provide the Bank with evidence of the
insurance coverage required by this Section or at any time hereafter shall fail
to obtain or maintain any of the policies of insurance required above, or to pay
any premium in whole or in part relating thereto, then the Bank, without waiving
or releasing any obligation or default by the Borrowers hereunder, may at any
time (but shall be under no obligation to so act), obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect thereto, which the Bank deems advisable. This insurance coverage
(a) may, but need not, protect such Borrower’s interests in such property,
including the Collateral, and (b) may not pay any claim made by, or against, any
Borrower in connection with such property, including the Collateral. The
Borrowers may later cancel any such insurance purchased by the Bank, but only
after providing the Bank with evidence that the Borrowers have obtained the
insurance coverage required by this Section. If the Bank purchases insurance for
the Collateral, the Borrowers will be responsible for the costs of that
insurance, including interest and any other charges that may be imposed with the
placement of the insurance, until the effective date of the cancellation or
expiration of the insurance. The costs of the insurance may be added to the
principal amount of the Loans owing hereunder. The costs of the insurance may be
more than the cost of the insurance the Borrowers may be able to obtain on their
own.

8.7. ERISA Liabilities; Employee Plans. The Borrowers shall (i) keep in full
force and effect any and all Employee Plans which are presently in existence or
may, from time to time, come into existence under ERISA, and not withdraw from
any such Employee Plans, unless such withdrawal can be effected or such Employee
Plans can be terminated without liability to the Borrowers; (ii) make
contributions to all of such Employee Plans in a timely manner and in a
sufficient amount to comply with the standards of ERISA; including the minimum
funding standards of ERISA; (iii) comply with all material requirements of ERISA
which relate to such Employee Plans; (iv) notify the Bank immediately upon
receipt by any of the Borrowers of any notice concerning the imposition of any
withdrawal liability or of the institution of any proceeding or other action
which may result in the termination of any such Employee Plans or the
appointment of a trustee to administer such Employee Plans; (v) promptly advise
the Bank of the occurrence of any “Reportable Event” or “Prohibited Transaction”
(as such terms are defined in ERISA), with respect to any such Employee Plans;
and (vi) amend any Employee Plan that is intended to be qualified within the
meaning of Section 401 of the Internal Revenue Code of 1986 to the extent
necessary to keep the Employee Plan qualified, and to cause the Employee Plan to
be administered and operated in a manner that does not cause the Employee Plan
to lose its qualified status.

8.8. Financial Statements. The Borrowers shall at all times maintain a standard
and modern system of accounting, on the accrual basis of accounting and in all
respects in accordance with GAAP, and shall furnish to the Bank or its
authorized representatives such information regarding the business affairs,
operations and financial condition of the Borrowers, including:

(a) promptly when available, and in any event, no later than the filing date of
Smithway Corp.’s Annual Report on form 10-K, a copy of the annual audited
consolidated financial statements of Smithway Corp. and its Subsidiaries,
including audited consolidated and unaudited consolidating balance sheet,
statements of income and retained earnings, statements of cash flows for the
fiscal year then ended and such other information (including nonfinancial
information) as the Bank may reasonably request, in reasonable detail, prepared
and certified without adverse reference to going concern value and without
qualification by an independent auditor of recognized standing, selected by
Smithway Corp. and reasonably acceptable to the Bank and certified as true and
correct by the treasurer or chief financial officer of Smithway Corp., and which
financial statements shall be accompanied by (i) a letter from such accounting
firm acknowledging that it is aware that the Bank is relying upon such financial
statements in connection with the exercise of the Bank’s rights hereunder,
provided, however, that Smithway Corp. shall only be required to use its
reasonable efforts exercised in good faith to obtain such letter; and
(ii) copies of any management letters sent to Smithway Corp. or any Borrower by
such accountants;

(b) promptly when available, and in any event, within forty five (45) days
following the end of each fiscal quarter, a copy of the financial statements of
Smithway Corp. regarding such fiscal quarter, including balance sheet, statement
of income and retained earnings, statement of cash flows for the fiscal quarter
then ended and such other information (including nonfinancial information) as
the Bank may request, in reasonable detail, prepared and certified as true and
correct by the treasurer or chief financial officer of Smithway Corp.; and

(c) as soon as practicable and in any event prior to the beginning of each
fiscal year of Smithway Corp., projected balance sheets, statements of income
and cash flow, on a consolidated and consolidating basis for Smithway Corp., for
each of the twelve (12) months during such fiscal year, and projected balance
sheet at the end of each quarter in such fiscal year, which shall include
(i) the assumptions used therein, together with appropriate supporting details
as reasonably requested by the Bank, and (ii) a letter signed by the President
or a Vice President of Smithway Corp. and by the Treasurer or Chief Financial
Officer of Smithway Corp., describing, comparing and analyzing, in detail, all
changes and developments between the anticipated financial results included in
such projections or budges and the historical financial statements of Smithway
Corp. and the Borrowers.

No change with respect to such accounting principles shall be made by the
Borrowers without giving notification to the Bank. The Borrowers represent and
warrant to the Bank that the financial statements delivered to the Bank at or
prior to the execution and delivery of this Agreement and to be delivered at all
times thereafter accurately reflect and will accurately reflect the financial
condition of the Borrowers.

8.9. Public Reporting. The Borrowers shall deliver to the Bank, promptly upon
the filing thereof, copies of all registration statements and annual, quarterly,
monthly or other regular reports which Smithway Corp., any of the Borrowers or
SMSD files with the Securities and Exchange Commission, as well as promptly
providing to the Bank copies of any reports and proxy statements delivered to
its shareholders.

8.10. Supplemental Financial Statements. The Borrowers shall immediately upon
receipt thereof, provide to the Bank copies of interim and supplemental reports
if any, submitted to the Borrowers by independent accountants in connection with
any interim audit or review of the books of the Borrowers.

8.11. Borrowing Base Certificate. The Borrowers shall, (a) within twenty
(20) days after the end of each month, deliver to the Bank a Borrowing Base
Certificate dated as of the date of delivery of such Borrowing Base Certificate
to the Bank stating the amount of all Eligible Accounts from work performed as
of the last Business Day of such prior month and invoiced by the Borrowers prior
to the date of such Borrowing Base Certificate, certified as true and correct by
an authorized representative of the Borrowers and acceptable to the Bank in its
sole and absolute discretion, provided, however, at any time an Event of Default
or Unmatured Event of Default exists, the Bank may require the Borrowers to
deliver Borrowing Base Certificates more frequently.

8.12. Aged Accounts Schedule. The Borrowers shall, within twenty (20) days after
the end of each month, deliver to the Bank an aged schedule of the Accounts of
each of the Borrowers, listing the name and amount due from each Account Debtor
and showing the aggregate amounts due from (a) 0-30 days, (b) 31-60 days,
(c) 61-90 days and (d) more than 90 days, and certified as accurate by the
Borrowers’ treasurer or chief financial officer.

8.13. Covenant Compliance Certificate. The Borrowers shall, contemporaneously
with the furnishing of the financial statements pursuant to Section 8.8, deliver
to the Bank a duly completed compliance certificate, dated the date of such
financial statements and certified as true and correct by an appropriate officer
of the Borrowers, containing a computation of each of the financial covenants
set forth in Section 10 and stating that the Borrowers have not become aware of
any Event of Default or Unmatured Event of Default that has occurred and is
continuing or, if there is any such Event of Default or Unmatured Event of
Default describing it and the steps, if any, being taken to cure it.

8.14. Field Audits. The Borrowers shall permit the Bank to inspect the Accounts,
other tangible assets and/or other business operations of the Borrowers and to
inspect, audit, check and make copies of, and extracts from, the books, records,
computer data, computer programs, journals, orders, receipts, correspondence and
other data relating to Accounts, Inventory and any other Collateral, the results
of which must be satisfactory to the Bank in the Bank’s sole and absolute
discretion. All such inspections or audits by the Bank shall be at the Bank’s
sole expense, provided, however, that so long as (a) the Borrowing Base Amount
fails to exceed (b) the total of (i) all Revolving Loans, plus (ii) all Letter
of Credit Obligations, by at least Two Millions and 00/100 Dollars
($2,000,000.00) for a period of at least ninety (90) consecutive days, or (b) an
Event of Default or Unmatured Event of Default exists, the Borrowers shall be
required to reimburse the Bank for such inspections or audits as the Bank may
reasonably require.

8.15. Federal Highway Administration. Each Borrower shall provide the Bank with
its safety rating within two (2) Business Days after receipt of any safety
rating notification from the Federal Highway Administration pursuant to 49
C.F.R. §385.

8.16. Other Reports. The Borrowers shall, within such period of time as the Bank
may specify, deliver to the Bank such other schedules and reports as the Bank
may reasonably require.

8.17. Collateral Records. The Borrowers shall keep full and accurate books and
records relating to the Collateral and shall mark such books and records to
indicate the Bank’s Lien in the Collateral, including placing a legend, in form
and content acceptable to the Bank, on all Chattel Paper created by the
Borrowers indicating that the Bank has a Lien in such Chattel Paper, if and to
the extent such Chattel Paper relates to the Collateral.

8.18. Intellectual Property. The Borrowers shall maintain, preserve and renew
all Intellectual Property necessary for the conduct of its business as and where
the same is currently located as heretofore or as hereafter conducted by it.

8.19. Notice of Proceedings. The Borrowers, promptly upon becoming aware, shall
give written notice to the Bank of any litigation, arbitration or governmental
investigation or proceeding not previously disclosed by the Borrowers to the
Bank which has been instituted or, to the knowledge of the Borrowers, is
threatened against the Borrowers or any Guarantor or to which any of their
respective properties is subject which might reasonably be expected to have a
Material Adverse Effect.

8.20. Notice of Event of Default or Material Adverse Effect. The Borrowers
shall, immediately after the commencement thereof, give notice to the Bank in
writing of the occurrence of any Event of Default or any Unmatured Event of
Default, or the occurrence of any condition or event having a Material Adverse
Effect.

8.21. Environmental Matters. If any release or threatened release or other
disposal of Hazardous Substances shall occur or shall have occurred on any real
property or any other assets of the Borrowers, the Borrowers shall cause the
prompt containment and removal of such Hazardous Substances and the remediation
of such real property or other assets as necessary to comply with all
Environmental Laws and to preserve the value of such real property or other
assets. Without limiting the generality of the foregoing, the Borrowers shall
comply with any Federal or state judicial or administrative order requiring the
performance at any real property of the Borrowers of activities in response to
the release or threatened release of a Hazardous Substance. To the extent that
the transportation of Hazardous Substances is permitted by this Agreement, the
Borrowers shall dispose of such Hazardous Substances, or of any other wastes,
only at licensed disposal facilities operating in compliance with Environmental
Laws.

8.22. Further Assurances. The Borrowers shall take, and cause each Guarantor to
take, such actions as are necessary or as the Bank may reasonably request from
time to time to ensure that the Obligations under the Loan Documents are secured
by the Collateral, in each case as the Bank may determine, including (a) the
execution and delivery of security agreements, pledge agreements, mortgages,
deeds of trust, financing statements and other documents, and the filing or
recording of any of the foregoing, and (b) the delivery of certificated
securities and other collateral with respect to which perfection is obtained by
possession.

8.23. Banking Relationship. The Borrowers covenant and agree, at all times
during the term of this Agreement, to utilize the Bank as their primary bank of
account and depository for financial services, including all receipts,
disbursements, cash management and related services, except those services
provided by the banks listed on Schedule 7.22 attached hereto or permitted
pursuant to Section 9.12.

Section 9. NEGATIVE COVENANTS.

9.1. Debt. The Borrowers shall not, either directly or indirectly, create,
assume, incur or have outstanding any Debt (including purchase money
indebtedness), or become liable, whether as endorser, guarantor, surety or
otherwise, for any debt or obligation of any other Person, except:

(a) the Obligations under this Agreement and the other Loan Documents;

(b) obligations of the Borrowers for Taxes, assessments, municipal or other
governmental charges;

(c) obligations of the Borrowers for accounts payable, other than for money
borrowed, incurred in the ordinary course of business;

(d) Debt of the Borrowers to SMSD not to exceed Forty Million and 00/100 Dollars
($40,000,000.00) in the aggregate; provided that such Debt shall be evidenced by
a note in form and substance reasonably satisfactory to the Bank, and the
obligations under such note shall be Subordinated Debt;

(e) Subordinated Debt;

(f) Hedging Obligations for bona fide hedging purposes and not for speculation;

(g) Capitalized Lease Obligations and Operating Lease Obligations;

(h) Debt incurred in connection with purchase money security interests for the
purpose of financing all or any part of the cost of acquiring tractors and/or
trailers, or other Debt incurred for Capital Expenditures;

(i) Acquired Debt assumed in Acquisitions permitted under Section 9.4 in an
aggregate amount outstanding at any time not to exceed Ten Million and 00/100
Dollars ($10,000,000.00);

(j) Debt described on Schedule 9.1 and any extension, renewal or refinancing
thereof so long as the principal amount thereof is not increased; and

(k) other unsecured Debt, in addition to the Debt listed above, in an aggregate
amount outstanding at any time not to exceed Five Million and 00/100 Dollars
($5,000,000.00).

9.2. Encumbrances. The Borrowers shall not, either directly or indirectly,
create, assume, incur or suffer or permit to exist any Lien or charge of any
kind or character upon any asset of the Borrowers, whether owned at the date
hereof or hereafter acquired, except for Permitted Liens.

9.3. Investments. The Borrowers shall not, either directly or indirectly, make
or have outstanding any Investment, except:

(a) Investments constituting Debt permitted by Section 9.1;

(b) Contingent Liabilities constituting Debt permitted by Section 9.1 or Liens
permitted by Section 9.2;

(c) Cash Equivalent Investments;

(d) Bank deposits in the ordinary course of business;

(e) Investments in securities of Account Debtors received pursuant to any plan
of reorganization or similar arrangement upon the bankruptcy or insolvency of
such account debtors;

(f) Investments listed on Schedule 9.3 as of the Closing Date; and

(g) other Investments, in addition to the Investments listed above, in an
aggregate amount outstanding at any time not to exceed Five Hundred Thousand and
00/100 Dollars ($500,000.00).

provided, however, that (i) any Investment which when made complies with the
requirements of the definition of the term “Cash Equivalent Investment” may
continue to be held notwithstanding that such Investment if made thereafter
would not comply with such requirements; and (ii) no Investment otherwise
permitted by subsections (a) or (b) shall be permitted to be made if,
immediately before or after giving effect thereto, any Event of Default or
Unmatured Event of Default exists.

9.4. Transfer; Merger; Sales. Each of the Borrowers shall not, and shall not
permit any Guarantor, whether in one transaction or a series of related
transactions, to (a) sell, transfer, convey or lease all or any substantial part
of its assets, except for sales of Inventory or Equipment in the ordinary course
of business; (b) sell or assign, with or without recourse, any receivables; or
(c) be a party to any merger or consolidation with any other Person, unless such
Borrower or Guarantor is the surviving entity, except for (i) any such merger,
consolidation, sale, transfer, conveyance, lease or assignment of or by any
Wholly-Owned Subsidiary into any Borrower or into any other domestic
Wholly-Owned Subsidiary; (ii) any such purchase or other acquisition by any
Borrower or any domestic Wholly-Owned Subsidiary of the assets or equity
interests of any Wholly-Owned Subsidiary; and (iii) any Acquisition by any
Borrower or Smithway Corp., where:

(A) the business or division acquired are for use, or the Person acquired is
engaged, in the businesses engaged in by any the Company;

(B) immediately before and after giving effect to such Acquisition, no Event of
Default or Unmatured Event of Default shall exist;

(C) immediately after giving effect to such Acquisition, the Company is in pro
forma compliance with all the financial ratios and restrictions set forth in
Section 9 and Section 10;

(D) in the case of the Acquisition of any Person, the Board of Directors,
general partner, managers and/or members, as the case may be, of such Person has
approved such Acquisition; and

(F) not less than ten (10) Business Days prior to such Acquisition, the Bank
shall have received an acquisition summary with respect to the Person and/or
business or division to be acquired, such summary to include a reasonably
detailed description thereof (including financial information) and operating
results (including financial statements for the most recent 12 month period for
which they are available and as otherwise available), the terms and conditions,
including economic terms, of the proposed Acquisition, and such Borrower’s
calculation of pro forma EBITDAR relating thereto.

9.5. Issuance of Capital Securities. The Borrowers shall not issue any Capital
Securities.

9.6. Distributions. None of the Borrowers or any of the Guarantors shall,
(a) make any distribution or dividend (other than stock dividends), whether in
cash or otherwise, to any of its equityholders, (b) purchase or redeem any of
its equity interests or any warrants, options or other rights in respect
thereof, (c) pay any management fees or similar fees to any of its equityholders
or any Affiliate thereof, (d) pay or prepay interest on, principal of, premium,
if any, redemption, conversion, exchange, purchase, retirement, defeasance,
sinking fund or any other payment in respect of any Subordinated Debt, or
(e) set aside funds for any of the foregoing if, after giving effect to such
distribution or dividend, an Event of Default or Unmatured Event of Default
exists or would result therefrom.

9.7. Transactions with Affiliates. The Borrowers shall not, directly or
indirectly, enter into or permit to exist any transaction with any of their
Affiliates or with any director, officer or employee of any Borrower other than
transactions in the ordinary course of, and pursuant to the reasonable
requirements of, the business of such Borrower and upon fair and reasonable
terms which are fully disclosed to the Bank and are no less favorable to such
Borrower than would be obtained in a comparable arm’s length transaction with a
Person that is not an Affiliate of such Borrower.

9.8. Unconditional Purchase Obligations. The Borrowers shall not enter into or
be a party to any contract for the purchase of materials, supplies or other
property or services if such contract requires that payment be made by it
regardless of whether delivery is ever made of such materials, supplies or other
property or services.

9.9. Cancellation of Debt. None of the Borrowers shall not cancel any material
claim or debt owing to it, except for reasonable consideration or in the
ordinary course of business.

9.10. Inconsistent Agreements. The Borrowers shall not enter into any agreement
containing any provision which would (a) be violated or breached by any
borrowing by the Borrowers hereunder or by the performance by the Borrowers or
any Guarantor of any of its Obligations hereunder or under any other Loan
Document, (b) prohibit the Borrowers or any Guarantor from granting to the Bank
a Lien on any of the Collateral, or (c) create or permit to exist or become
effective any encumbrance or restriction on the ability of any Affiliate of any
of the Borrowers to (i) pay any Debt owed to the Borrowers, (ii) make loans or
advances to the Borrowers, or (iii) transfer any of its assets or properties to
the Borrowers, other than (A) customary restrictions and conditions contained in
agreements relating to the sale of all or a substantial part of the assets of
any Subsidiary pending such sale, provided that such restrictions and conditions
apply only to the Subsidiary to be sold and such sale is permitted hereunder,
(B) restrictions or conditions imposed by any agreement relating to purchase
money Debt, Capital Leases and other secured Debt permitted by this Agreement if
such restrictions or conditions apply only to the property or assets securing
such Debt, and (C) customary provisions in leases and other contracts
restricting the assignment thereof.

9.11. Use of Proceeds. None of the Borrowers nor any of their Affiliates shall
use any portion of the proceeds of the Loans for any purpose other than for
working capital purposes, for Acquisitions permitted by Section 9.4, for Capital
Expenditures and for other general business purposes. In addition, none of the
Borrowers nor any of their Affiliates shall use any portion of the proceeds of
the Loans, either directly or indirectly, for the purpose of purchasing any
securities underwritten by ABN AMRO Incorporated, LaSalle Bank Financial
Services, Inc., or any other Affiliate of the Bank.

9.12. Bank Accounts. The Borrowers shall not establish any new Deposit Accounts
or other bank accounts, other than Deposit Accounts or other bank accounts
established at or with the Bank, without providing written notice to the Bank.

9.13. Business Activities; Change of Legal Status and Organizational Documents.
None of the Borrowers shall (a) engage in any line of business other than the
businesses engaged in on the date hereof and businesses reasonably related
thereto, (b) change its name, its Organizational Identification Number, if it
has one, its type of organization, its jurisdiction of organization or other
legal structure, or (c) permit its charter, bylaws or other organizational
documents to be amended or modified in any way which could reasonably be
expected to materially adversely affect the interests of the Bank.

Section 10. FINANCIAL COVENANTS.

10.1. Tangible Net Worth. As of the end of each of its fiscal quarters
commencing with the fiscal quarter ending December 31, 2005, the Borrowers shall
maintain consolidated Tangible Net Worth in an amount not less than Sixteen
Million and 00/100 Dollars ($16,000,000.00), provided, however, that for all
fiscal quarters ending on or after March 31, 2007, the Borrowers shall maintain
consolidated Tangible Net Worth in an amount not less than Sixteen Million and
00/100 Dollars ($16,000,000.00), plus fifty percent (50.00%) of the aggregate
consolidated Net Income earned by the Borrowers and its Subsidiaries during each
of the previous fiscal years, commencing with the fiscal year ending
December 31, 2006, provided, however, that net losses incurred in any fiscal
year of the Borrowers shall not be subtracted in the determination of the
Tangible Net Worth requirement.

10.2. Total Debt to EBITDAR. As of the end of each of its fiscal quarters, the
Borrowers shall maintain the Total Debt to EBITDAR Ratio, of not greater than
3.00 to 1.00.

10.3. Fixed Charge Coverage. As of the end of each of its fiscal quarters, the
Borrowers shall maintain a ratio of (a) the total of (i) EBITDAR, minus
(ii) federal and state income taxes paid in cash by any Borrower or any
Guarantor, each for the preceding twelve month period ending on such date, to
(b) the total of (i) Interest Charges, plus (ii) regularly scheduled payments of
principal on all Debt of any Borrower (but excluding final balloon payments of
Debt relating to the purchase of tractors and trailers), plus (iii) all rent
payment due in connection with any Operating Lease of any Borrower, plus
(iv) any dividends or distributions paid in cash or Cash Equivalent Investments
by any Borrower to Smithway Corp., each for the preceding twelve month period
ending on such date, of not less than 1.10 to 1.00.

Section 11. EVENTS OF DEFAULT.

The Borrowers, without notice or demand of any kind, shall be in default under
this Agreement upon the occurrence of any of the following events (each an
“Event of Default”).

11.1. Nonpayment of Obligations. Any amount due and owing on any Note or any of
the Obligations, whether by its terms or as otherwise provided herein, is not
paid within five (5) days after notice from the Bank that such amount was not
paid when due.

11.2. Misrepresentation. Any warranty, representation, certificate or statement
of any Obligor in this Agreement, the other Loan Documents or any other
agreement with the Bank shall be false in any material respect when made or at
any time thereafter, or if any financial data or any other information now or
hereafter furnished to the Bank by or on behalf of any Obligor shall prove to be
false, inaccurate or misleading in any material respect.

11.3. Nonperformance. Any failure to perform or default in the performance of
any covenant, condition or agreement contained in this Agreement and, if capable
of being cured, such failure to perform or default in performance continues for
a period of thirty (30) days after the Borrowers receives notice or knowledge
from any source of such failure to perform or default in performance, or in any
other agreement with the Bank and such failure to perform or default in
performance continues beyond any applicable grace or cure period.

11.4. Default under Loan Documents. A default under any of the other Loan
Documents which continues beyond any applicable grace or cure period, all of
which covenants, conditions and agreements contained therein are hereby
incorporated in this Agreement by express reference, shall be and constitute an
Event of Default under this Agreement and any other of the Obligations.

11.5. Default under Other Debt. Any default by any Obligor in the payment of any
Debt for any other obligation beyond any period of grace provided with respect
thereto or in the performance of any other term, condition or covenant contained
in any agreement (including any capital or operating lease or any agreement in
connection with the deferred purchase price of property) under which any such
obligation is created, which default results in such obligation becoming due
prior to its stated maturity, or the termination of such other agreement.

11.6. Other Material Obligations. Any default in the payment when due, or in the
performance or observance of, any material obligation of, or condition agreed to
by, any Obligor with respect to any material purchase or lease of goods or
services where such default, singly or in the aggregate with all other such
defaults, might reasonably be expected to have a Material Adverse Effect.

11.7. Bankruptcy, Insolvency, etc. Any Obligor becomes insolvent or generally
fails to pay, or admits in writing its inability or refusal to pay, debts as
they become due; or any Obligor applies for, consents to, or acquiesces in the
appointment of a trustee, receiver or other custodian for such Obligor or any
property thereof, or makes a general assignment for the benefit of creditors;
or, in the absence of such application, consent or acquiescence, a trustee,
receiver or other custodian is appointed for any Obligor or for a substantial
part of the property of any thereof and is not discharged within sixty
(60) days; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of any Obligor, and if such case
or proceeding is not commenced by such Obligor, it is consented to or acquiesced
in by such Obligor, or remains undismissed for sixty (60) days; or any Obligor
takes any action to authorize, or in furtherance of, any of the foregoing.

11.8. Judgments. The entry of any final judgment, decree, levy, attachment,
garnishment or other process, or the filing of any Lien against any Obligor in
excess of Five Hundred Thousand and 00/100 Dollars ($500,000.00) which is not
fully covered by insurance, and such judgment or other process shall not have
been, within thirty (30) days from the entry thereof, (i) bonded over to the
satisfaction of the Bank and appealed, (ii) vacated, or (iii) discharged.

11.9. Change in Control. The occurrence of any Change in Control.

11.10. Collateral Impairment. The entry of any judgment, decree, levy,
attachment, garnishment or other process, or the filing of any Lien against, any
of the Collateral or any collateral under a separate security agreement securing
any of the Obligations and such judgment or other process shall not have been,
within thirty (30) days from the entry thereof, (i) bonded over to the
satisfaction of the Bank and appealed, (ii) vacated, or (iii) discharged, or the
loss, theft, destruction, seizure or forfeiture, or the occurrence of any
material deterioration or impairment of any of the Collateral or any of the
collateral under any security agreement securing any of the Obligations, or any
material decline or depreciation in the value or market price thereof (whether
actual or reasonably anticipated), which causes the Collateral, in the sole
opinion of the Bank acting in good faith, to become unsatisfactory as to value
or character, or which causes the Bank to reasonably believe that it is insecure
and that the likelihood for repayment of the Obligations is or will soon be
impaired, time being of the essence. The cause of such deterioration,
impairment, decline or depreciation shall include, but is not limited to, the
failure by the Borrowers to do any act deemed reasonably necessary by the Bank
to preserve and maintain the value and collectability of the Collateral.

11.11. Material Adverse Effect. The occurrence of any development, condition or
event which has a Material Adverse Effect on the Borrowers.

11.12. Guaranty. There is a discontinuance by any of the Guarantors of any of
the Guaranties, or any of the Guarantors shall contest the validity of its
Guaranty.

11.13. Subordinated Debt. The subordination provisions of any Subordinated Debt
shall for any reason be revoked or invalid or otherwise cease to be in full
force and effect. The Borrowers shall contest in any manner, or any other holder
thereof shall contest in any judicial proceeding, the validity or enforceability
of the Subordinated Debt or deny that it has any further liability or obligation
thereunder, or the Obligations shall for any reason not have the priority
contemplated by the subordination provisions of the Subordinated Debt.

11.14. Federal Highway Administration Matters. The receipt by any Borrower of
notification from the Federal Highway Administration that such Borrower’s motor
carrier operations have been rated “Unsatisfactory” as provided under 49 C.F.R.
§385, and such rating is not changed to “Satisfactory” with thirty (30) days.

Section 12. REMEDIES.

Upon the occurrence of an Event of Default, the Bank shall have all rights,
powers and remedies set forth in the Loan Documents, in any written agreement or
instrument (other than this Agreement or the Loan Documents) relating to any of
the Obligations or any security therefor, as a secured party under the UCC or as
otherwise provided at law or in equity. Without limiting the generality of the
foregoing, the Bank may, at its option upon the occurrence of an Event of
Default, declare its commitments to the Borrowers to be terminated and all
Obligations to be immediately due and payable, provided, however, that upon the
occurrence of an Event of Default under Section 11.7, all commitments of the
Bank to the Borrowers shall immediately terminate and all Obligations shall be
automatically due and payable, all without demand, notice or further action of
any kind required on the part of the Bank. The Borrowers hereby waive any and
all presentment, demand, notice of dishonor, protest, and all other notices and
demands in connection with the enforcement of Bank’s rights under the Loan
Documents, and hereby consents to, and waives notice of release, with or without
consideration, of any of the Borrowers, any of the Guarantors or of any
Collateral, notwithstanding anything contained herein or in the Loan Documents
to the contrary. In addition to the foregoing:

12.1. Possession and Assembly of Collateral. The Bank may, without notice,
demand or legal process of any kind, take possession of any or all of the
Collateral (in addition to Collateral of which the Bank already has possession),
wherever it may be found, and for that purpose may pursue the same wherever it
may be found, and may at any time enter into any of the Borrowers’ premises
where any of the Collateral may be or is supposed to be, and search for, take
possession of, remove, keep and store any of the Collateral until the same shall
be sold or otherwise disposed of and the Bank shall have the right to store and
conduct a sale of the same in any of the Borrowers’ premises without cost to the
Bank. At the Bank’s request, the Borrowers will, at the Borrowers’ sole expense,
assemble the Collateral and make it available to the Bank at a place or places
to be designated by the Bank which is reasonably convenient to the Bank and the
Borrowers.

12.2. Sale of Collateral. The Bank may sell any or all of the Collateral at
public or private sale, upon such terms and conditions as the Bank may deem
proper, and the Bank may purchase any or all of the Collateral at any such sale.
The Borrowers acknowledge that the Bank may be unable to effect a public sale of
all or any portion of the Collateral because of certain legal and/or practical
restrictions and provisions which may be applicable to the Collateral and,
therefore, may be compelled to resort to one or more private sales to a
restricted group of offerees and purchasers. The Borrowers consent to any such
private sale so made even though at places and upon terms less favorable than if
the Collateral were sold at public sale. The Bank shall have no obligation to
clean-up or otherwise prepare the Collateral for sale. The Bank may apply the
net proceeds, after deducting all costs, expenses, attorneys’ and paralegals’
fees incurred or paid at any time in the collection, protection and sale of the
Collateral and the Obligations, to the payment of any Note and/or any of the
other Obligations, returning the excess proceeds, if any, to the Borrowers. The
Borrowers shall remain liable for any amount remaining unpaid after such
application, with interest at the Default Rate. Any notification of intended
disposition of the Collateral required by law shall be conclusively deemed
reasonably and properly given if given by the Bank at least ten (10) calendar
days before the date of such disposition. The Borrowers hereby confirm, approve
and ratify all acts and deeds of the Bank relating to the foregoing, and each
part thereof, and expressly waives any and all claims of any nature, kind or
description which it has or may hereafter have against the Bank or its
representatives, by reason of taking, selling or collecting any portion of the
Collateral. The Borrowers consent to releases of the Collateral at any time
(including prior to default) and to sales of the Collateral in groups, parcels
or portions, or as an entirety, as the Bank shall deem appropriate. The
Borrowers expressly absolve the Bank from any loss or decline in market value of
any Collateral by reason of delay in the enforcement or assertion or
nonenforcement of any rights or remedies under this Agreement.

12.3. Standards for Exercising Remedies. To the extent that applicable law
imposes duties on the Bank to exercise remedies in a commercially reasonable
manner, the Borrowers acknowledge and agree that it is not commercially
unreasonable for the Bank (a) to fail to incur expenses reasonably deemed
significant by the Bank to prepare Collateral for disposition or otherwise to
complete raw material or work-in-process into finished goods or other finished
products for disposition, (b) to fail to obtain third party consents for access
to Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (c) to fail to
exercise collection remedies against Account Debtors or other Persons obligated
on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (d) to exercise collection remedies against Account Debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (f) to contact other
Persons, whether or not in the same business as the Borrowers, for expressions
of interest in acquiring all or any portion of the Collateral, (g) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (h) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (i) to dispose of assets
in wholesale rather than retail markets, (j) to disclaim disposition warranties,
including any warranties of title, (k) to purchase insurance or credit
enhancements to insure the Bank against risks of loss, collection or disposition
of Collateral or to provide to the Bank a guaranteed return from the collection
or disposition of Collateral, or (l) to the extent deemed appropriate by the
Bank, to obtain the services of other brokers, investment bankers, consultants
and other professionals to assist the Bank in the collection or disposition of
any of the Collateral. The Borrowers acknowledge that the purpose of this
section is to provide non-exhaustive indications of what actions or omissions by
the Bank would not be commercially unreasonable in the Bank’s exercise of
remedies against the Collateral and that other actions or omissions by the Bank
shall not be deemed commercially unreasonable solely on account of not being
indicated in this section. Without limitation upon the foregoing, nothing
contained in this section shall be construed to grant any rights to the
Borrowers or to impose any duties on the Bank that would not have been granted
or imposed by this Agreement or by applicable law in the absence of this
section.

12.4. UCC and Offset Rights. The Bank may exercise, from time to time, any and
all rights and remedies available to it under the UCC or under any other
applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any other agreements between any
Obligor and the Bank, and may, without demand or notice of any kind, appropriate
and apply toward the payment of such of the Obligations, whether matured or
unmatured, including costs of collection and attorneys’ and paralegals’ fees,
and in such order of application as the Bank may, from time to time, elect, any
indebtedness of the Bank to any Obligor, however created or arising, including
balances, credits, deposits, accounts or moneys of such Obligor in the
possession, control or custody of, or in transit to the Bank. The Borrowers, on
behalf of themselves and each Obligor, hereby waive the benefit of any law that
would otherwise restrict or limit the Bank in the exercise of its right, which
is hereby acknowledged, to appropriate at any time hereafter any such
indebtedness owing from the Bank to any Obligor.

12.5. Additional Remedies. The Bank shall have the right and power to:

(a) instruct the Borrowers, at their own expense, to notify any parties
obligated on any of the Collateral, including any Account Debtors, to make
payment directly to the Bank of any amounts due or to become due thereunder, or
the Bank may directly notify such obligors of the security interest of the Bank,
and/or of the assignment to the Bank of the Collateral and direct such obligors
to make payment to the Bank of any amounts due or to become due with respect
thereto, and thereafter, collect any such amounts due on the Collateral directly
from such Persons obligated thereon;

(b) enforce collection of any of the Collateral, including any Accounts, by suit
or otherwise, or make any compromise or settlement with respect to any of the
Collateral, or surrender, release or exchange all or any part thereof, or
compromise, extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder;

(c) take possession or control of any proceeds and products of any of the
Collateral, including the proceeds of insurance thereon;

(d) modify any obligation of any nature of any other Obligor with respect to any
Note or any of the Obligations;

(e) grant releases, compromises or indulgences with respect to any Note, any of
the Obligations, any extension or renewal of any of the Obligations, any
security therefor, or to any other Obligor with respect to any Note or any of
the Obligations;

(f) transfer the whole or any part of securities which may constitute Collateral
into the name of the Bank or the Bank’s nominee without disclosing, if the Bank
so desires, that such securities so transferred are subject to the security
interest of the Bank, and any corporation, association, or any of the managers
or trustees of any trust issuing any of such securities, or any transfer agent,
shall not be bound to inquire, in the event that the Bank or such nominee makes
any further transfer of such securities, or any portion thereof, as to whether
the Bank or such nominee has the right to make such further transfer, and shall
not be liable for transferring the same;

(g) vote the Collateral;

(h) make an election with respect to the Collateral under Section 1111 of the
Bankruptcy Code or take action under Section 364 or any other section of the
Bankruptcy Code; provided, however, that any such action of the Bank as set
forth herein shall not, in any manner whatsoever, impair or affect the liability
of the Borrowers hereunder, nor prejudice, waive, nor be construed to impair,
affect, prejudice or waive the Bank’s rights and remedies at law, in equity or
by statute, nor release, discharge, nor be construed to release or discharge,
the Borrowers, any of the Guarantors or any other Obligor liable to the Bank for
the Obligations; and

(i) at any time, and from time to time, accept additions to, releases,
reductions, exchanges or substitution of the Collateral, without in any way
altering, impairing, diminishing or affecting the provisions of this Agreement,
the Loan Documents, or any of the other Obligations, or the Bank’s rights
hereunder, under any Note or under any of the other Obligations.

The Borrowers hereby ratify and confirm whatever the Bank may do with respect to
the Collateral and agrees that the Bank shall not be liable for any error of
judgment or mistakes of fact or law with respect to actions taken in connection
with the Collateral.

12.6. Attorney-in-Fact. The Borrowers hereby irrevocably make, constitute and
appoint the Bank (and any officer of the Bank or any Person designated by the
Bank for that purpose) as the Borrowers’ true and lawful proxy and
attorney-in-fact (and agent-in-fact) in the Borrowers’ name, place and stead,
with full power of substitution, to (i) take such actions as are permitted in
this Agreement, (ii) execute such financing statements and other documents and
to do such other acts as the Bank may require to perfect and preserve the Bank’s
security interest in, and to enforce such interests in the Collateral, and
(iii) carry out any remedy provided for in this Agreement, including endorsing
the Borrowers’ names to checks, drafts, instruments and other items of payment,
and proceeds of the Collateral, executing change of address forms with the
postmaster of the United States Post Office serving the addresses of the
Borrowers, changing the addresses of the Borrowers to that of the Bank, opening
all envelopes addressed to the Borrowers and applying any payments contained
therein to the Obligations. The Borrowers hereby acknowledge that the
constitution and appointment of such proxy and attorney-in-fact are coupled with
an interest and are irrevocable. The Borrowers hereby ratify and confirm all
that such attorney-in-fact may do or cause to be done by virtue of any provision
of this Agreement.

12.7. No Marshaling. The Bank shall not be required to marshal any present or
future collateral security (including this Agreement and the Collateral) for, or
other assurances of payment of, the Obligations or any of them or to resort to
such collateral security or other assurances of payment in any particular order.
To the extent that it lawfully may, the Borrowers hereby agree that they will
not invoke any law relating to the marshaling of collateral which might cause
delay in or impede the enforcement of the Bank’s rights under this Agreement or
under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, the Borrowers hereby irrevocably waive the benefits
of all such laws.

12.8. Application of Proceeds. The Bank will within three (3) Business Days
after receipt of cash or solvent credits from collection of items of payment,
proceeds of Collateral or any other source, apply the whole or any part thereof
against the Obligations secured hereby. The Bank shall further have the
exclusive right to determine how, when and what application of such payments and
such credits shall be made on the Obligations, and such determination shall be
conclusive upon the Borrowers. Any proceeds of any disposition by the Bank of
all or any part of the Collateral may be first applied by the Bank to the
payment of expenses incurred by the Bank in connection with the Collateral,
including reasonable attorneys’ fees and legal expenses as provided for in
Section 13 hereof.

12.9. No Waiver. No Event of Default shall be waived by the Bank except in
writing. No failure or delay on the part of the Bank in exercising any right,
power or remedy hereunder shall operate as a waiver of the exercise of the same
or any other right at any other time; nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy hereunder. There
shall be no obligation on the part of the Bank to exercise any remedy available
to the Bank in any order. The remedies provided for herein are cumulative and
not exclusive of any remedies provided at law or in equity. The Borrowers agree
that in the event that the Borrowers fail to perform, observe or discharge any
of their Obligations or liabilities under this Agreement or any other agreements
with the Bank, no remedy of law will provide adequate relief to the Bank, and
further agrees that the Bank shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.

12.10. Letters of Credit. With respect to all Letters of Credit for which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to this Section 12, the Borrowers shall at such time deposit in a cash
collateral account opened by the Bank an amount equal to the Letter of Credit
Obligations then outstanding. Amounts held in such cash collateral account shall
be applied by the Bank to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay the
Obligations, in such order of application as the Bank may, in its sole
discretion, from time to time elect. After all such Letters of Credit shall have
expired or been fully drawn upon, all commitments to make Loans hereunder have
terminated and all other Obligations have been indefeasibly satisfied and paid
in full in cash, the balance, if any, in such cash collateral account shall be
returned to the Borrowers or such other Person as may be lawfully entitled
thereto.

Section 13. MISCELLANEOUS.

13.1. Obligations Absolute. None of the following shall affect the Obligations
of any of the Borrowers to the Bank under this Agreement or the Bank’s rights
with respect to the Collateral:

(a) acceptance or retention by the Bank of other property or any interest in
property as security for the Obligations;

(b) release by the Bank of any Borrower, any of the Guarantors or of all or any
part of the Collateral or of any party liable with respect to the Obligations;

(c) extension, renewal, modification or substitution by the Bank of any Note, or
any note evidencing any of the Obligations, or the compromise of the liability
of any of the Guarantors of the Obligations; or

(d) failure of the Bank to resort to any other security or to pursue the
Borrowers or any other obligor liable for any of the Obligations before
resorting to remedies against the Collateral.

13.2. Entire Agreement. This Agreement and the other Loan Documents (i) are
valid, binding and enforceable against the Borrowers and the Bank in accordance
with their respective provisions and no conditions exist as to their legal
effectiveness; (ii) constitute the entire agreement between the parties with
respect to the subject matter hereof and thereof; and (iii) are the final
expression of the intentions of the Borrowers and the Bank. No promises, either
expressed or implied, exist between the Borrowers and the Bank, unless contained
herein or therein. This Agreement, together with the other Loan Documents,
supersedes all negotiations, representations, warranties, commitments, term
sheets, discussions, negotiations, offers or contracts (of any kind or nature,
whether oral or written) prior to or contemporaneous with the execution hereof
with respect to any matter, directly or indirectly related to the terms of this
Agreement and the other Loan Documents. This Agreement and the other Loan
Documents are the result of negotiations among the Bank, the Borrowers and the
other parties thereto, and have been reviewed (or have had the opportunity to be
reviewed) by counsel to all such parties, and are the products of all parties.
Accordingly, this Agreement and the other Loan Documents shall not be construed
more strictly against the Bank merely because of the Bank’s involvement in their
preparation.

13.3. Amendments; Waivers. No delay on the part of the Bank in the exercise of
any right, power or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise by the Bank of any right, power or remedy preclude
other or further exercise thereof, or the exercise of any other right, power or
remedy. No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or the other Loan Documents shall in any event be
effective unless the same shall be in writing and acknowledged by the Bank, and
then any such amendment, modification, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.

13.4. WAIVER OF DEFENSES. THE BORROWERS, ON BEHALF OF THEMSELVES AND ANY
GUARANTORS OF THE OBLIGATIONS, WAIVE EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF
ACTION, COUNTERCLAIM OR SETOFF WHICH ANY OF THE BORROWERS OR ANY GUARANTOR MAY
NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY THE BANK IN ENFORCING THIS
AGREEMENT. PROVIDED THE BANK ACTS IN GOOD FAITH, THE BORROWERS RATIFY AND
CONFIRM WHATEVER THE BANK MAY DO PURSUANT TO THE TERMS OF THIS AGREEMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL
ACCOMMODATION TO THE BORROWERS.

13.5. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE THE BANK FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION. THE BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE. THE BORROWERS FURTHER IRREVOCABLY CONSENT TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE BORROWERS HEREBY EXPRESSLY AND
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

13.6. WAIVER OF JURY TRIAL. THE BANK AND THE BORROWERS, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE,
ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY
COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BANK AND ANY OF THE
BORROWERS ARE ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO
THE BORROWERS.

13.7. Assignability. The Bank may at any time assign the Bank’s rights in this
Agreement, the other Loan Documents, the Obligations, or any part thereof and
transfer the Bank’s rights in any or all of the Collateral, and the Bank
thereafter shall be relieved from all liability with respect to such Collateral.
In addition, the Bank may at any time sell one or more participations in the
Loans. The Borrowers may not sell or assign this Agreement, or any other
agreement with the Bank or any portion thereof, either voluntarily or by
operation of law, without the prior written consent of the Bank. This Agreement
shall be binding upon the Bank and the Borrowers and their respective legal
representatives and successors. All references herein to the Borrowers shall be
deemed to include any successors, whether immediate or remote.

13.8. Confirmations. The Borrowers and the Bank agree from time to time, upon
written request received by it from the other, to confirm to the other in
writing the aggregate unpaid principal amount of the Loans then outstanding
under such Note.

13.9. Confidentiality. The Bank agrees to use commercially reasonable efforts
(equivalent to the efforts the Bank applies to maintain the confidentiality of
its own confidential information) to maintain as confidential all information
provided to it by the Borrowers, including all information designated as
confidential, except that the Bank may disclose such information (a) to Persons
employed or engaged by the Bank in evaluating, approving, structuring or
administering the Loans who agree to comply with the covenant set forth in this
Section 13.9; (b) to any assignee or participant or potential assignee or
participant that has agreed to comply with the covenant contained in this
Section 13.9 (and any such assignee or participant or potential assignee or
participant may disclose such information to Persons employed or engaged by them
as described in clause (a) above); (c) as required or requested by any federal
or state regulatory authority or examiner, or any insurance industry
association, or as reasonably believed by the Bank to be compelled by any court
decree, subpoena or legal or administrative order or process; (d) as, on the
advice of the Bank’s counsel, is required by law; (e) in connection with the
exercise of any right or remedy under the Loan Documents or in connection with
any litigation to which the Bank is a party; (f) to any nationally recognized
rating agency that requires access to information about the Bank’s investment
portfolio in connection with ratings issued with respect to the Bank; (g) to any
Affiliate of the Bank who may provide Bank Products to the Borrowers or any
Affiliate of any of the Borrowers, or (h) that ceases to be confidential through
no fault of the Bank.

13.10. Binding Effect. This Agreement shall become effective upon execution by
the Borrowers and the Bank. If this Agreement is not dated or contains any
blanks when executed by the Borrowers, the Bank is hereby authorized, without
notice to the Borrowers, to date this Agreement as of the date when it was
executed by the Borrowers, and to complete any such blanks according to the
terms upon which this Agreement is executed.

13.11. Governing Law. This Agreement, the Loan Documents and any Note shall be
delivered and accepted in and shall be deemed to be contracts made under and
governed by the internal laws of the State of Illinois (but giving effect to
federal laws applicable to national banks) applicable to contracts made and to
be performed entirely within such state, without regard to conflict of laws
principles.

13.12. Enforceability. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by, unenforceable or
invalid under any jurisdiction, such provision shall as to such jurisdiction, be
severable and be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.

13.13. Survival of Borrowers’ Representations. All covenants, agreements,
representations and warranties made by the Borrowers herein shall,
notwithstanding any investigation by the Bank, be deemed material and relied
upon by the Bank and shall survive the making and execution of this Agreement
and the Loan Documents and the issuance of any Note, and shall be deemed to be
continuing representations and warranties until such time as the Borrowers have
fulfilled all of its Obligations to the Bank, and the Bank has been indefeasibly
paid in full in cash. The Bank, in extending financial accommodations to the
Borrowers, is expressly acting and relying on the aforesaid representations and
warranties.

13.14. Extensions of Bank’s Commitment. This Agreement shall secure and govern
the terms of (i) any extensions or renewals of the Bank’s commitment hereunder,
and (ii) any replacement note executed by the Borrowers and accepted by the Bank
in its sole and absolute discretion in substitution for any Note.

13.15. Time of Essence. Time is of the essence in making payments of all amounts
due the Bank under this Agreement and in the performance and observance by the
Borrowers of each covenant, agreement, provision and term of this Agreement.

13.16. Counterparts; Facsimile Signatures. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Agreement.
Receipt of an executed signature page to this Agreement by facsimile or other
electronic transmission shall constitute effective delivery thereof. Electronic
records of executed Loan Documents maintained by the Bank shall deemed to be
originals thereof.

13.17. Notices. Except as otherwise provided herein, the Borrowers waive all
notices and demands in connection with the enforcement of the Bank’s rights
hereunder. All notices, requests, demands and other communications provided for
hereunder shall be in writing and addressed as follows:

To the Borrowers:
Smithway Motor Xpress, Inc.
2031 Quail Avenue
Fort Dodge, Iowa 50501
Attention: Mr. G. Larry Owens

East West Motor Express, Inc.
1170 JB Drive
Black Hawk, South Dakota 57718
Attention: Mr. G. Larry Owens

With a copy to:
Faegre & Benson, LLP
2200 Wells Fargo Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Bruce M. Engler, Esq.

To the Lender:
LaSalle Bank National Association
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Surface Transportation

or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this subsection. All notices addressed as above shall be deemed to have been
properly given (i) if served in person, upon acceptance or refusal of delivery;
(ii) if mailed by certified or registered mail, return receipt requested,
postage prepaid, on the third (3rd) day following the day such notice is
deposited in any post office station or letter box; or (iii) if sent by
recognized overnight courier, on the first (1st) day following the day such
notice is delivered to such carrier. No notice to or demand on the Borrowers in
any case shall entitle the Borrowers to any other or further notice or demand in
similar or other circumstances.

13.18. Release of Claims Against Bank. In consideration of the Bank making the
Loans, the Borrowers, on behalf of themselves and all other Obligors do each
hereby release and discharge the Bank of and from any and all claims, harm,
injury, and damage of any and every kind, known or unknown, legal or equitable,
which any Obligor may have against the Bank from the date of their respective
first contact with the Bank until the date of this Loan Agreement, including any
claim arising from any reports (environmental reports, surveys, appraisals,
etc.) prepared by any parties hired or recommended by the Bank. The Borrowers
and all other Obligors confirm to Bank that they have reviewed the effect of
this release with competent legal counsel of their choice, or have been afforded
the opportunity to do so, prior to execution of this Agreement and the Loan
Documents and do each acknowledge and agree that the Bank is relying upon this
release in extending the Loans to the Borrowers.

13.19. Costs, Fees and Expenses. The Borrowers shall jointly and severally pay
or reimburse the Bank for all reasonable costs, fees and expenses incurred by
the Bank or for which the Bank becomes obligated in connection with the
negotiation, preparation, consummation, collection of the Obligations or
enforcement of this Agreement, the other Loan Documents and all other documents
provided for herein or delivered or to be delivered hereunder or in connection
herewith (including any amendment, supplement or waiver to any Loan Document),
or during any workout, restructuring or negotiations in respect thereof,
including reasonable consultants’ fees and attorneys’ fees and time charges of
counsel to the Bank, which shall also include attorneys’ fees and time charges
of attorneys who may be employees of the Bank or any Affiliate of the Bank, plus
costs and expenses of such attorneys or of the Bank; search fees, costs and
expenses; and all taxes payable in connection with this Agreement or the other
Loan Documents, whether or not the transaction contemplated hereby shall be
consummated. In furtherance of the foregoing, the Borrowers shall jointly and
severally pay any and all stamp and other taxes, UCC search fees, filing fees
and other costs and expenses in connection with the execution and delivery of
this Agreement, any Note and the other Loan Documents to be delivered hereunder,
and agrees to save and hold the Bank harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such costs and expenses. That portion of the Obligations consisting of
costs, expenses or advances to be reimbursed by the Borrowers to the Bank
pursuant to this Agreement or the other Loan Documents which are not paid on or
prior to the date hereof shall be jointly and severally payable by the Borrowers
to the Bank on demand. If at any time or times hereafter the Bank: (a) employs
counsel for advice or other representation (i) with respect to this Agreement or
the other Loan Documents, (ii) to represent the Bank in any litigation, contest,
dispute, suit or proceeding or to commence, defend, or intervene or to take any
other action in or with respect to any litigation, contest, dispute, suit, or
proceeding (whether instituted by the Bank, the Borrowers, or any other Person)
in any way or respect relating to this Agreement, the other Loan Documents or
the Borrowers’ business or affairs, or (iii) to enforce any rights of the Bank
against the Borrowers or any other Person that may be obligated to the Bank by
virtue of this Agreement or the other Loan Documents; (b) takes any action to
protect, collect, sell, liquidate, or otherwise dispose of any of the
Collateral; and/or (c) attempts to or enforces any of the Bank’s rights or
remedies under the Agreement or the other Loan Documents, the costs and expenses
incurred by the Bank in any manner or way with respect to the foregoing, shall
be part of the Obligations, jointly and severally payable by the Borrowers to
the Bank on demand.

13.20. Indemnification. The Borrowers agree to jointly and severally defend
(with counsel satisfactory to the Bank), protect, indemnify, exonerate and hold
harmless each Indemnified Party from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and distributions of any kind or nature (including the
disbursements and the reasonable fees of counsel for each Indemnified Party
thereto, which shall also include, without limitation, reasonable attorneys’
fees and time charges of attorneys who may be employees of any Indemnified
Party), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws or regulations, including securities laws,
Environmental Laws, commercial laws and regulations, under common law or in
equity, or based on contract or otherwise) in any manner relating to or arising
out of this Agreement or any of the Loan Documents, or any act, event or
transaction related or attendant thereto, the preparation, execution and
delivery of this Agreement and the Loan Documents, including the making or
issuance and management of the Loans, the use or intended use of the proceeds of
the Loans, the enforcement of the Bank’s rights and remedies under this
Agreement, the Loan Documents, any Note, any other instruments and documents
delivered hereunder, or under any other agreement between any of the Borrowers
and the Bank; provided, however, that the Borrowers shall not have any
obligations hereunder to any Indemnified Party with respect to matters
determined by a court of competent jurisdiction by final and nonappealable
judgment to have been caused by or resulting from the willful misconduct or
gross negligence of such Indemnified Party. To the extent that the undertaking
to indemnify set forth in the preceding sentence may be unenforceable because it
violates any law or public policy, the Borrowers shall satisfy such undertaking
to the maximum extent permitted by applicable law. Any liability, obligation,
loss, damage, penalty, cost or expense covered by this indemnity shall be paid
to each Indemnified Party on demand, and failing prompt payment, together with
interest thereon at the Default Rate from the date incurred by each Indemnified
Party until paid by the Borrowers, shall be added to the Obligations of the
Borrowers and be secured by the Collateral. The provisions of this Section shall
survive the satisfaction and payment of the other Obligations and the
termination of this Agreement.

13.21. Revival and Reinstatement of Obligations. If the incurrence or payment of
the Obligations by any Obligor or the transfer to the Bank of any property
should for any reason subsequently be declared to be void or voidable under any
state or federal law relating to creditors’ rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, or other
voidable or recoverable payments of money or transfers of property
(collectively, a “Voidable Transfer”), and if the Bank is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Bank is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of the
Bank, the Obligations shall automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.

13.22. Customer Identification — USA Patriot Act Notice. The Bank hereby
notifies the Borrowers that pursuant to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Act”), and
the Bank’s policies and practices, the Bank is required to obtain, verify and
record certain information and documentation that identifies the Borrowers,
which information includes the names and addresses of the Borrowers and such
other information that will allow the Bank to identify the Borrowers in
accordance with the Act.

13.23. Continuing Indebtedness. This Agreement amends and restates the Original
Loan Agreement, and the Revolving Note constitutes a renewal and restatement of,
and a replacement and substitution for, the Existing Revolving Note. The
indebtedness evidenced by the Existing Revolving Note is continuing indebtedness
evidenced by the Revolving Note, and nothing herein shall be deemed to
constitute a payment, settlement or novation of the Existing Revolving Note, or
to release or otherwise adversely affect any lien, mortgage or security interest
securing such indebtedness or any rights of the Bank against any collateral
therefor or any guarantor, surety or other party primarily or secondarily liable
for such indebtedness.

1

IN WITNESS WHEREOF, the Borrowers and the Bank have executed this Loan and
Security Agreement as of the date first above written.

SMITHWAY MOTOR XPRESS, INC.,
an Iowa corporation

     
By:
  /s/ G. Larry Owens
 
   
Name:
Title:
  G. Larry Owens
President

EAST WEST MOTOR EXPRESS, INC.,
a South Dakota corporation

     
By:
  /s/ G. Larry Owens
 
   
Name:
Title:
  G. Larry Owens
President

Agreed and accepted:

LASALLE BANK NATIONAL ASSOCIATION,
a national banking association

     
By:
  /s/ Hollis Griffin
 
   
Name:
Title:
  Hollis Griffin
First Vice President
 
   

2