Exhibit 10.85
Execution Version
EXCHANGE AGREEMENT
     EXCHANGE AGREEMENT (the “Agreement”), dated as of January 14, 2011, by and
among Smith & Wesson Holding Corporation, a Nevada corporation with headquarters
located at 2100 Roosevelt Avenue, Springfield, Massachusetts 01104 (the
“Company”), and the investor listed on the Schedule of Holders attached hereto
(the “Holder”).
     WHEREAS:
     A. The Company and the Holder are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”),
and Rule 506 of Regulation D (“Regulation D”) as promulgated by the Securities
and Exchange Commission (the “SEC”) under the Securities Act.
     B. The Holder is, as of the date hereof, the Person (as defined in
Section 2(b)) in whose name the Company’s 4% Convertible Senior Notes Due 2026
(as amended or modified from time to time, collectively, the “Convertible
Notes”), issued pursuant to and by the provisions of an indenture dated as of
December 15, 2006 (the “Indenture”), between the Company and The Bank of New
York Trust Company, N.A., as trustee (the “Trustee”), are registered in the
Security Register (as defined in the Indenture).
     C. The Company has authorized the issuance of 9.5% Senior Notes Due 2016
(as amended or modified from time to time, collectively, the “New Notes”), which
shall be issued pursuant to and by the provisions of an indenture dated on or
about January 14, 2011 (the “New Indenture”), between the Company and The Bank
of New York Mellon Trust Company, N.A., as Trustee (the “Trustee”), in
substantially the form attached hereto as Exhibit A.
     D. The Company and the Holder wish to exchange, upon the terms and
conditions stated in this Agreement, that aggregate principal amount of the
Convertible Notes set forth opposite the Holder’s name in column (3) on the
Schedule of Holders for that aggregate principal amount of the New Notes, in
substantially the form attached hereto as Exhibit B, set forth opposite the
Holder’s name in column (4) on the Schedule of Holders.
     NOW, THEREFORE, in consideration of the promises and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
     1. Exchange of the Convertible Notes for the New Notes.
          (a) Exchange of the Convertible Notes.
          (i) Subject to the satisfaction (or waiver) of the conditions set
forth in Sections 5 and 6 below, on the Closing Date (as defined below), the
Company shall issue

 

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

 

to the Holder a principal amount of the New Notes as is set forth opposite the
Holder’s name in column (4) on the Schedule of Holders in exchange for a
principal amount of the Convertible Notes as is set forth opposite the Holder’s
name in column (3) on the Schedule of Holders, and the Holder agrees to exchange
and deliver to the Company such Convertible Notes in exchange for the New Notes
(the “Closing”).
          (ii) Closing. The date and time of the Closing (the “Closing Date”)
shall be 10:00 a.m., New York City Time, on the date hereof (or such later date
or time as is mutually agreed to by the Company and each Buyer) after
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 5 and 6 below at the offices of Greenberg Traurig, LLP,
MetLife Building, 200 Park Avenue, New York, New York 10166.
          (b) Closing Deliverables. On the Closing Date, (i) the Holder shall
deliver or cause to be delivered to the Company all right, title, and interest
in and to the Convertible Notes to be exchanged by the Holder free and clear of
any mortgage, lien, pledge, charge, security interest, encumbrance, title
retention agreement, option, equity, or other adverse claim thereto
(collectively, “Liens”), together with any documents of conveyance or transfer
that the Company may deem necessary or desirable to transfer to and confirm in
the Company all right, title, and interest in and to such Convertible Notes free
and clear of any Liens, and (ii) the Company shall issue and deliver or cause to
be delivered to the Holder such Holder’s New Notes (for the account of the
Holder as such Holder shall instruct), duly executed on behalf of the Company
and registered in the name of the Holder or its designee; provided, however,
that the parties acknowledge that the issuance of the Holder’s New Notes to the
Holder may be delayed due to procedures and mechanics within the system of the
Depository Trust Company and that such delay will not be a default under this
Agreement so long as (A) the Company is using reasonable best efforts to effect
the issuance of one or more global notes representing the New Notes, (B) such
delay is no longer than three business days, and (C) interest shall accrue on
such New Notes from the date of the New Indenture. Simultaneously with or after
the Closing, the Company may issue New Notes to one or more other holders of
outstanding Convertible Notes or to other investors, subject to the terms of the
New Indenture.
     2. Holder’s Representations and Warranties.
          The Holder represents and warrants with respect to only itself as
follows:
          (a) Organization. To the extent the Holder is not an individual or
natural person, the Holder is duly and validly existing under the jurisdiction
of its organization and is qualified to do business in the jurisdiction
specified below its address on the Schedule of Holders.
          (b) No Public Sale or Distribution. The Holder is acquiring the New
Notes and for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, the Holder does not agree to hold any of
the New Notes for any minimum or other specific term and reserves the right to
dispose of the New Notes at any time in accordance with or pursuant to a
registration statement

2

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

 

or an exemption under the Securities Act. The Holder is acquiring the New Notes
hereunder in the ordinary course of its business. The Holder does not presently
have any agreement or understanding, directly or indirectly, with any Person to
distribute any of the New Notes. The Holder understands that no public market
exists for the New Notes, and that there is no assurance that a public market
will ever develop for the New Notes. As used in this Agreement, “Person” means
an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, and a government or any
department or agency thereof.
          (c) Accredited Investor Status. The Holder is an “accredited investor”
as that term is defined in Rule 501(a) of Regulation D and a “qualified
institutional buyer” within the meaning of Rule 144A under the Securities Act.
          (d) Acquisition Entirely for Own Account. The Holder is acquiring the
New Notes for its own account and not with a view to, or for sale in connection
with any distribution of the New Notes, but subject, nevertheless, to any
requirement of law that the disposition of the Holder’s property shall at all
times be within the Holder’s control. The Holder has no present agreement,
undertaking, arrangement, obligation or commitment providing for the disposition
of the New Notes.
          (e) Investment Experience. The Holder understands that the acquisition
of the New Notes involves substantial risk. The Holder has experience as an
investor in this type of securities and acknowledges that the Holder is able to
fend for itself, can bear the economic risk of its investment in the New Notes
and has such knowledge and experience in financial or business matters that the
Holder is capable of evaluating the merits and risks of this investment in the
New Notes and protecting its own interests in connection with this investment.
          (f) Reliance on Exemptions. The Holder understands that the New Notes
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Holder’s compliance with, the representations, warranties, agreements,
acknowledgments, and understandings of the Holder set forth herein in order to
determine the availability of such exemptions and the eligibility of the Holder
to acquire the New Notes.
          (g) Information. The Holder and its advisors, if any, have been
furnished with all materials relating to the business, finances, and operations
of the Company and materials relating to the offer and exchange of the
Convertible Notes for the New Notes that the Holder considers necessary or
appropriate to make an informed investment decision with respect to the exchange
of the Convertible Notes for the New Notes to be acquired by it under this
Agreement and that have been requested by the Holder, and has had the
opportunity to review the Company’s filings with the SEC, including, without
limitation, all filings made pursuant to the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). The Holder and its advisors, if any, have been
afforded the opportunity to ask questions of the Company. Neither such inquiries
nor any other due diligence investigations conducted by the Holder or its
advisors, if any, or its representatives shall modify, amend, or affect the
Holder’s right to rely on the Company’s representations and warranties contained
herein. The Holder understands that its investment in the New Notes involves a
high degree of risk. The Holder has sought such

3

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

 

accounting, legal, and tax advice that it has considered necessary to make an
informed investment decision with respect to its exchange of the Convertible
Notes for the New Notes.
          (h) Non-Reliance. No offering circular or prospectus will be provided
to the Holder or prepared in connection with the offer and exchange of the
Convertible Notes for the New Notes and the Company and Cowen and Company, LLC
will not be providing the Holder with any other material regarding the
Convertible Notes, the New Notes or the Company prepared by the Company or any
other person. The Holder has not relied, and may not rely, on any investigation
that the Company or Cowen and Company, LLC or any person acting on their behalf
may conduct or have conducted with respect to the Convertible Notes, the New
Notes or the Company, neither the Company nor Cowen and Company, LLC or any
person acting on their behalf has made any representations to the Holder,
express or implied, with respect thereto and the Holder will make its own
investment decision regarding the offer and exchange of the Convertible Notes
for the New Notes based on its own knowledge (and information it may have or
that is publicly available) with respect to the Company, the Convertible Notes
and the New Notes.
          (i) No Governmental Review. The Holder understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the New Notes or the
fairness or suitability of the investment in the New Notes nor have such
authorities passed upon or endorsed the merits of the offering of the New Notes.
          (j) Validity; Enforcement. This Agreement has been duly and validly
authorized, executed, and delivered on behalf of the Holder and shall constitute
the legal, valid, and binding obligations of the Holder enforceable against the
Holder in accordance with its respective terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.
          (k) No Conflicts. The execution, delivery, and performance by the
Holder of this Agreement and the consummation by the Holder of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of the Holder or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration, or
cancellation of, any agreement, indenture, or instrument to which the Holder is
a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment, or decree (including federal and state securities laws) applicable to
the Holder, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights, or violations which would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of the Holder to perform its obligations hereunder.
          (l) Consents. All consents, approvals, orders and authorizations
required on the part of the Holder in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated herein have been obtained and will be effective as of the Closing
Date.

4

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

 

          (m) Residency. The Holder is a resident of that jurisdiction specified
below its address on the Schedule of Holders.
          (n) Certain Trading Activities. The Holder has not directly or
indirectly engaged in any purchase, sale, or Short Sales (as defined below)
involving the Company’s securities since the time that the Holder was first
contacted by Cowen and Company, LLC with respect to the transactions
contemplated hereby. “Short Sales” means all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act and all types
of direct and indirect stock pledges, forward sales contracts, puts, options,
calls, short sales, swaps and similar arrangements (including on a total return
basis), and sales and other transactions through non-U.S. broker dealers or
foreign brokers. Notwithstanding the foregoing, in the case of a Holder that is
a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of the Holder’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of the Holder’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that had or has knowledge of the transactions contemplated
herein.
          (o) Title. The Holder is the sole legal and beneficial owner of the
Convertible Notes. The Holder has sole investment discretion and dispositive
power with respect to the Convertible Notes and full authority to transfer such
Convertible Notes. The Holder has good and marketable title to the Convertible
Notes, free and clear of any Liens. The Holder has not, in whole or in part, (i)
assigned, transferred, hypothecated, pledged, exchanged, or otherwise disposed
of any of the Convertible Notes or its rights in the Convertible Notes, or
(ii) given any person or entity any transfer order, power of attorney, or other
authority of any nature whatsoever with respect to the Convertible Notes. Upon
the Holder’s delivery of the Convertible Notes to the Company at the Closing,
the Convertible Notes shall be free and clear of all Liens created by the
Holder.
     3. Representations and Warranties of the Company.
          The Company hereby represents and warrants to each of the Holders as
follows:
          (a) Incorporation. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
is qualified to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification, except
where the failure to so qualify would not reasonably be expected to have a
material adverse effect. The Company has all requisite corporate power and
authority to carry on its business as now conducted.
          (b) Subsidiaries. Each Subsidiary (as defined below) that is a
corporation has been duly incorporated, is validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its properties and to conduct its business
and is duly registered, qualified and authorized to transact business and is in
good standing in each jurisdiction in which the conduct of its business or the
nature of its properties requires such registration, qualification or
authorization, except where such failure

5

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

 

to so qualify or register would not be reasonably be expected to have a material
adverse effect on the Company.
          (c) Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the New Indenture, the New Notes, and each of
the other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the “Transaction
Documents”), and to issue the New Notes, and to consummate the exchange of the
Convertible Notes for the New Notes, in accordance with the terms hereof and
thereof. The execution and delivery of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby,
including, without limitation, the issuance of the New Notes, have been duly
authorized by the Company’s Board of Directors and (other than the filing with
the SEC of a Form D) no further filing, consent, or authorization is required by
the Company, its Board of Directors, or its stockholders. This Agreement and the
other Transaction Documents of even date herewith have been duly executed and
delivered by the Company, and constitute the legal, valid, and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, or similar laws relating to, or affecting generally,
the enforcement of applicable creditors’ rights and remedies.
          (d) Valid Issuance. The New Notes have been duly authorized and, when
executed by the Company and authenticated by the Trustee in accordance with the
terms of the New Indenture and delivered to and acquired by the Holder in
accordance with the terms of this Agreement, will constitute the valid and
legally binding obligations of the Company entitled to the benefits provided by
the New Indenture under which such New Notes are to be issued.
          (e) SEC Documents; Financial Statements. During the two years up to
and including the date hereof, the Company has filed all reports, schedules,
forms, statements, and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act (all of the foregoing
filed prior to the date hereof and all exhibits included therein and financial
statements, notes, and schedules thereto and documents incorporated by reference
therein being hereinafter referred to as the “SEC Documents”). The Company has
delivered to the Holder or its respective representatives true, correct, and
complete copies of each of the SEC Documents not available on the EDGAR system.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the SEC, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or

6

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

 

summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Holder which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.
          (f) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided the Holder or its agents or counsel
with any information that constitutes or could reasonably be expected to
constitute material, nonpublic information, other than the information to be
included in the 8-K Filing (as defined in Section 4(b)) or covered by a
non-disclosure agreement. The Company understands and confirms that the Holder
will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Holder regarding the
Company and its “Subsidiaries” (which for purposes of this Agreement means any
joint venture or entity in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest of 50% or more), their
business, and the transactions contemplated hereby furnished by or on behalf of
the Company is true and correct in all material respects and does not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred with respect to the Company or any of its Subsidiaries
or either of their respective businesses, properties, prospects, operations, or
financial conditions, which, under applicable law, rule, or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.
          (g) No Conflict. The execution and delivery of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
conflict with or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under (i) any provision of the Certificate of Incorporation or By-laws
of the Company or (ii) any agreement or instrument, permit, franchise, license,
judgment, order, statute, law, ordinance, rule or regulations, applicable to the
Company or its properties or assets, except, in the case of clause (ii), as
would not, individually or in the aggregate, be reasonably expected to have a
material adverse effect.
     4. Covenants.
          (a) Best Efforts. Each party shall use its best efforts to satisfy
each of the conditions to be satisfied by it as provided in Sections 5 and 6 of
this Agreement.
          (b) Further Assurances. Each party agrees to cooperate with each other
and their respective officers, employees, attorneys, accountants and other
agents, and, generally, do such other acts and things in good faith as may be
reasonable or appropriate to timely effectuate the intents and purposes of this
Agreement and the consummation of the transactions contemplated hereby,
including, but not limited to, taking any action to facilitate the filing any

7

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

 

document or the taking of any action to assist the other parties hereto in
complying with the terms of Section 4 hereof.
          (c) Disclosure of Transactions and Other Material Information. On or
before 8:30 a.m., New York City Time, on the first business day following the
date of this Agreement, the Company shall file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents and attaching the material Transaction Documents (including, without
limitation, this Agreement, the New Indenture, and the form of the New Notes) as
exhibits to such filing (including all exhibits, the “8-K Filing”). From and
after the filing of the 8-K Filing with the SEC, no Holder shall be in
possession of any material, nonpublic information received from the Company, any
of its Subsidiaries, or any of its respective officers, directors, employees, or
agents, that is not disclosed in the 8-K Filing or covered by a non-disclosure
agreement. The Company shall not, and shall cause each of its Subsidiaries and
its and each of their respective officers, directors, employees, and agents, not
to, provide the Holder with any material, nonpublic information regarding the
Company or any of its Subsidiaries from and after the filing of the 8-K Filing
with the SEC without the express written consent of the Holder. In the event of
a breach of the foregoing covenant by the Company, any of its Subsidiaries, or
any of its or their respective officers, directors, employees, and agents, in
addition to any other remedy provided herein or in the Transaction Documents,
the Holder shall have the right to make a public disclosure, in the form of a
press release, public advertisement, or otherwise, of such material, nonpublic
information without the prior approval by the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees, or agents. No Holder
shall have any liability to the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees, stockholders, or agents for any
such disclosure. Subject to the foregoing, neither the Company nor the Holder
shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby; provided, however, that the Company shall
be entitled, without the prior approval of the Holder, to make any press release
or other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) the Holder shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Without the
prior written consent of the Holder, neither the Company nor any of its
Subsidiaries or affiliates shall disclose the name of the Holder in any filing,
announcement, release, or otherwise, unless such disclosure is required by law,
regulation, or The NASDAQ Global Select Market.
     5. Conditions to the Company’s Obligation to Exchange.
          The obligation of the Company hereunder to issue the New Notes to the
Holder and exchange such New Notes for the Convertible Notes at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion by
providing the Holder with prior written notice thereof:
          (a) The Holder shall have executed each of the Transaction Documents
to which it is a party and delivered the same to the Company.

8

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

 

          (b) The Holder shall have delivered to the Company the Convertible
Notes that the Holder wishes to exchange for the New Notes.
          (c) The representations and warranties of the Holder shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the Holder shall have performed, satisfied,
and complied in all material respects with the covenants, agreements, and
conditions required by this Agreement to be performed, satisfied, or complied
with by the Holder at or prior to the Closing Date.
     6. Conditions to the Buyer’s Obligation to Exchange.
          The obligation of the Holder hereunder to exchange the Convertible
Notes for the New Notes at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Holder’s sole benefit and may be waived by the
Holder at any time in its sole discretion by providing the Company with prior
written notice thereof:
          (a) The Company shall have executed and delivered to the Holder
(i) each of the Transaction Documents and (ii) the New Notes (for the account of
the Holder as such Holder shall instruct) being exchanged for the Convertible
Notes of the Holder at the Closing pursuant to this Agreement.
          (b) The representations and warranties of the Company shall be true
and correct in all material respects (except for those representations and
warranties that are qualified by materiality, which shall be true and correct in
all respects) as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which shall be true and correct as of such specified date) and
the Company shall have performed, satisfied, and complied in all respects with
the covenants, agreements, and conditions required by the Transaction Documents
to be performed, satisfied, or complied with by the Company at or prior to the
Closing Date.
          (c) The Company shall have delivered to the Holder such other
documents relating to the transactions contemplated by this Agreement as the
Holder or its counsel may reasonably request.
     7. Termination.
          In the event that the Closing shall not have occurred with respect to
the Holder on or before five business days from the date hereof due to the
Company’s or the Holder’s failure to satisfy the conditions set forth in
Sections 5 and 6 above (and the nonbreaching party’s failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party.

9

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

 

     8. Miscellaneous.
          (a) Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement, and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action, or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action, or proceeding is brought in an inconvenient forum or that the
venue of such suit, action, or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action, or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
          (b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
          (c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
          (d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
          (e) Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Holder, the Company, their
affiliates, and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Holder makes any representation, warranty,
covenant, or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least a majority of the

10

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

 

aggregate principal amount of the New Notes issued and issuable hereunder, and
any amendment to this Agreement made in conformity with the provisions of this
Section 8(e) shall be binding on the Holder and holders of the New Notes, as
applicable. No provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the New Notes. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration also is offered to
all of the parties to the Transaction Documents or holders of the New Notes, as
the case may be. The Company has not, directly or indirectly, made any
agreements with the Holder relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
          (f) Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Smith & Wesson Holding Corporation
2100 Roosevelt Avenue
Springfield, Massachusetts 01104
Telephone: (413) 747-3305
Facsimile: (413) 739-8528
Attention: Michael F. Golden
Copy to:
Greenberg Traurig, LLP
2375 East Camelback Rd., Ste. 700
Phoenix, AZ 85016
Telephone: (602) 445-8302
Facsimile: (602) 445-8100
Attention: Robert S. Kant, Esq.
If to the Transfer Agent:
Interwest Transfer Co., Inc.
1981 East Murray Holladay Road
Suite 100
P.O. Box 17136
Salt Lake City, Utah 84117
Telephone: (801) 272-9294 x15
Facsimile: (801) 277-3147

11

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

 

If to the Holder, to its address and facsimile number set forth on the Schedule
of Holders, with copies to the Holder’s representatives as set forth on the
Schedule of Holders, or to such other address and/or facsimile number and/or to
the attention of such other Person as the recipient party has specified by
written notice given to each other party five days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver, or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number, and an image of the first page of such
transmission, or (C) provided by an overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from an
overnight courier service in accordance with clause (i), (ii), or (iii) above,
respectively.
          (g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that no party may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other parties
hereto; provided, however, that the Company may assign this Agreement or any
rights or obligations hereunder with the prior written consent of the holders of
at least a majority of the aggregate principal amount of the New Notes issued
and issuable hereunder.
          (h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
          (i) Survival. Unless this Agreement is terminated under Section 7, the
representations and warranties of the Company and the Holder contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4 and 8
shall survive the Closing and delivery and exercise of the New Notes, as
applicable. The Holder shall be responsible only for its own representations,
warranties, agreements, and covenants hereunder.
          (j) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments, and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
          (k) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
          (l) Remedies. The Holder shall have all rights and remedies set forth
in the Transaction Documents and all rights and remedies which the Holder has
been granted at any time under any other agreement or contract and all of the
rights which the Holder has under any law. Any Person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under the Transaction Documents, any remedy at law

12

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

 

may prove to be inadequate relief to the Holder. The Company therefore agrees
that the Holder shall be entitled to seek temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages and
without posting a bond or other security.
[Signature Page Follows]

13

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

 

     IN WITNESS WHEREOF, the Holder and the Company have caused their respective
signature page to this Exchange Agreement to be duly executed as of the date
first written above.

            COMPANY:

SMITH & WESSON HOLDING CORPORATION
      By:   /s/ Michael F. Golden         Name:   Michael F. Golden       
Title:   President & CEO   

[Signature Page to Exchange Agreement]

 

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

 

     IN WITNESS WHEREOF, the Holder and the Company have caused their respective
signature page to this Exchange Agreement to be duly executed as of the date
first written above.

                      HOLDER:   The Osterweis Strategic Income Fund    
 
          The Osterweis Strategic Investment Fund    
 
                    By:   /s/ Carl Kaufman              
 
      Name:   Carl Kaufman    
 
      Title:   VP, Portfolio Manager    

[Signature Page to Exchange Agreement]