EXHIBIT 10.18
EXECUTION VERSION
CREDIT AGREEMENT
dated as of December 14, 2007
between
STURM, RUGER & COMPANY, INC.
as Borrower
and
BANK OF AMERICA, N.A.
as Lender

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Table of Contents

         
ARTICLE 1 DEFINITIONS; ACCOUNTING TERMS
       
 
       
Section 1.1 Definitions
       
Section 1.2 Accounting Terms
       
Section 1.3 Rules of Interpretation
       
 
       
ARTICLE 2 THE CREDIT
       
 
       
Section 2.1 Revolving Loans
       
Section 2.2 Purpose
       
Section 2.3 Prepayments
       
Section 2.4 Interest Periods
       
Section 2.5 Conversions and Continuations
       
Section 2.6 Minimum Amounts and Maximum Number of Tranches
       
Section 2.7 Interest
       
Section 2.8 Payments Generally
       
Section 2.9 Late Charge
       
Section 2/10 Unused Fee
       
 
       
ARTICLE 3 YIELD PROTECTION; ILLEGALITY; ETC
       
 
       
Section 3.1 Additional Payments
       
Section 3.2 Basis for Determining Interest Rate Inadequate or Unfair
       
Section 3.3 Make Whole; Indemnification for Prepayment
       
 
       
ARTICLE 4 CONDITIONS PRECEDENT
       
 
       
Section 4.1 Conditions Precedent to Initial Loans
       
Section 4.2 Conditions Precedent to All Loans
       
Section 4.3 Deemed Representations
       
 
       
ARTICLE 5 REPRESENTATIONS AND WARRANTIES
       
 
       
Section 5.1 Organization
       
Section 5.2 Power and Authority; No Conflicts
       
Section 5.3 Legally Enforceable Agreements
       
Section 5.4 Litigation
       
Section 5.5 Financial Statements
       
Section 5.6 No Default on Outstanding Judgments or Orders
       
Section 5.7 No Defaults on Other Agreements
       
Section 5.8 Solvency
       
Section 5.9 Insider
       
Section 5.10 Permits; Franchises
       

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Section 5.11 Hazardous Substances
       
Section 5.12 Chief Executive Office
       
Section 5.13 Taxes
       
Section 5.14 ERISA
       
Section 5.15 Subsidiaries and Ownership of Stock
       
Section 5.16 No Omissions
       
 
       
ARTICLE 6 COVENANTS
       
 
       
Section 6.1 Debt
       
Section 6.2 Guaranties
       
Section 6.3 Liens
       
Section 6.4 Compliance with Laws
       
Section 6.5 Sale of Assets
       
Section 6.6 Maintenance of Insurance
       
Section 6.7 Transactions with Affiliates
       
Section 6.8 Mergers, Etc.
       
Section 6.9 No Activities Leading to Forfeiture
       
Section 6.10 Reporting Requirements
       
Section 6.11 Rights of Inspection
       
Section 6.12 Dividends
       
Section 6.13 Operating Accounts
       
Section 6.14 Change in Management
       
Section 6.15 Conduct of Business
       
Section 6.16 Maintenance of Existence
       
Section 6.17 Books and Records
       
Section 6.18 Cooperation
       
 
       
ARTICLE 7 FINANCIAL COVENANTS
       
 
       
Section 7.1 Net Worth
       
 
       
ARTICLE 8 EVENTS OF DEFAULT
       
 
       
Section 8.1 Events of Default
       
Section 8.2 Remedies
       
 
       
ARTICLE 9 ANTI-MONEY LAUNDERING; PATRIOT ACT
       
 
       
Section 9.1 Compliance with International Trade Control Laws and OFAC
Regulations
       
Section 9.2 Borrower’s Funds
       
Section 9.3 Borrower’s Compliance with Patriot Act
       
Section 9.4 Cooperation with Lender
       
Section 9.5 Actions Taken Pursuant to Anti-Money Laundering Laws
       

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ARTICLE 10 MISCELLANEOUS
       
 
       
Section 10.1 Amendments and Waivers
       
Section 10.2 Usury
       
Section 10.3 Expenses
       
Section 10.4 Survival
       
Section 10.5 Successors and Assigns
       
Section 10.6 Notices
       
Section 10.7 Setoff
       
Section 10.8 Arbitration; Waiver of Jury Trial
       
Section 10.9 Severability
       
Section 10.10 Counterparts; Facsimile Signatures
       
Section 10.11 Integration
       
Section 10.12 Governing Law
       
Section 10.13 Confidentiality
       
Section 10.14 Treatment of Certain Information
       
Section 10.15 Independence of Covenants
       
Section 10.16 Time of the Essence
       
Section 10.17 Representation
       
Section 10.18 Commercial Waiver
       
Section 10.19 Banking Days
       

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          EXHIBITS AND SCHEDULES
 
       
 
  Exhibit A   Revolving Credit Promissory Note
 
  Exhibit B   Authorization Letter
 
  Exhibit C   Notice of Borrowing
 
  Exhibit D   Notice of Interest Rate Conversion/Continuation
 
  Exhibit E   Covenant Compliance Report
 
       
 
  Schedule 5.4   Litigation
 
  Schedule 5.14   ERISA
 
  Schedule 5.15   Subsidiaries of Borrower

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CREDIT AGREEMENT
     This is a CREDIT AGREEMENT, dated as of December 14, 2007, between Sturm,
Ruger & Company, Inc. a Delaware corporation (the “Borrower”) and Bank of
America, N.A. (the “Lender”).
     The Borrower desires that the Lender extend credit as provided herein and
the Lender is prepared to extend such credit. Accordingly, the Borrower and the
Lender agree as follows:
ARTICLE 1. DEFINITIONS; RULES OF CONSTRUCTION.
     Section 1.1. Definitions. As used in this Agreement the following terms
have the following meanings:
     “Adjusted Net Worth” means (a) the net worth of the Borrower calculated in
accordance with GAAP, plus (b) amounts paid in cash to shareholders of the
Borrower by the Borrower for the repurchase or redemption of shares of stock of
the Borrower, up to but not in excess of Twenty Million ($20,000,000) Dollars in
the aggregate during the period commencing on July 1, 2007 and ending upon the
termination of this Agreement.
     “Affiliate” means any Person: (a) which directly or indirectly controls, or
is controlled by, or is under common control with, the Borrower or any of its
Subsidiaries; (b) which directly or indirectly beneficially owns or holds 5% or
more of any class of voting stock of the Borrower or any such Subsidiary; (c) 5%
or more of the voting stock of which is directly or indirectly beneficially
owned or held by the Borrower or such Subsidiary; or (d) which is a partnership
in which the Borrower or any of its Subsidiaries is a general partner. The term
“control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
     “Agreement” means this Credit Agreement.
     “Applicable Margin” means, with (a) respect to LIBOR Loans, one hundred
(100) basis points, and (b) with respect to Variable Rate Loans, minus fifty
(-50) basis points.
     “Availability” means, at any time, (a) the Maximum Revolving Credit Amount
less (b) all outstanding Revolving Loans.

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     “Banking Day” means any day on which commercial banks are not authorized or
required to close in Hartford, Connecticut and whenever such day relates to a
LIBOR Loan or notice with respect to any LIBOR Loan, a day which is also a LIBOR
Business Day.
     “Closing Date” means the date this Agreement has been executed by the
Borrower and the Lender.
     “Debt” or “Indebtedness” means, with respect to any Person, without
duplication: (a) indebtedness of such Person for borrowed money;
(b) indebtedness for the deferred purchase price of property or services (except
any trade payable in the ordinary course of business that is treated (in its
entirety) as a current account payable under GAAP); (c) unfunded benefit
liabilities of such Person (if such Person is not the Borrower, determined in a
manner analogous to that of determining unfunded benefit liabilities of the
Borrower); (d) the face amount of any outstanding letters of credit issued for
the account of such Person (other than documentary letters of credit issued in
the ordinary course of business); (e) obligations arising under acceptance
facilities; (f) guaranties, endorsements (other than for collection in the
ordinary course of business) and other contingent obligations to purchase, to
provide funds for payment, to supply funds to invest in any Person, or otherwise
to assure a creditor against loss; (g) obligations under any interest rate
protection, foreign currency exchange, or other interest or exchange rate swap
or hedging agreement or arrangement, or other derivative product;
(h) obligations secured by any Lien on property of such Person; and
(i) obligations of such Person as lessee under capital leases.
     “Default” means any event which with the giving of notice or lapse of time,
or both, would become an Event of Default.
     “Default Rate” means, with respect to the principal of any Loan and, to the
extent permitted by law, any other amount payable by the Borrower under this
Agreement or the Note that is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum during the period from and
including the due date, to, but excluding the date on which such amount is paid
in full equal to three (3%) percent in excess of the interest rate otherwise
applicable with respect to such Loan or Obligation.
     “Dollars” and the sign “$” mean lawful money of the United States of
America.
     “Effective Date” means the date that the conditions precedent contained in
Section 4.1 have been satisfied.
     “Event of Default” has the meaning given such term in Section 8.1.

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     “Facility Documents” means this Agreement, the Note and each of the
documents, certificates or other instruments referred to in Article 4 hereof as
well as any other documents, instrument or certificate to be delivered by the
Borrower in connection with this Agreement or in connection with the documents,
certificates or instruments referred to in Article 4, including documents
delivered in connection with any borrowing.
     “Forfeiture Proceeding” means any action, proceeding or investigation
affecting the Borrower or any of its Subsidiaries or Affiliates before any
Governmental Authority, or the receipt of notice by any such party that any of
them is a suspect in or a target of any governmental inquiry or investigation,
which may result in an indictment of any of them or the seizure or forfeiture of
any of their property.
     “GAAP” means generally accepted accounting principles in the United States
of America as in effect from time to time, applied on a basis consistent with
those used in the preparation of the financial statements submitted to the
Lender in connection with the Closing.
     “Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including without limitation any court, agency, department, commission, board,
bureau, or instrumentality of any of the foregoing.
     Interest Period” means, with respect to any LIBOR Loan, the period
commencing on the date such Loan is made, converted to another Type of Loan or
renewed, as the case may be, and (subject to the terms and conditions of this
Agreement) ending one (1), two (2) or three (3) months thereafter as the
Borrower may select so long as no Event of Default has occurred, provided that:
     (A) all payment dates herein shall be subject to and adjusted in accordance
with the “Following Business Day Convention”. The Following Business Day
Convention shall mean the convention for adjusting any relevant date if it would
otherwise fall on a day that is not a LIBOR Banking Day and provides that, in
such event, such date shall be adjusted to the first following day that is a
LIBOR Banking Day, except that if such following day shall be a day in the
following month, such date shall be adjusted to the immediately preceding LIBOR
Banking Day; and
     (B) any Interest Period which begins on a day for which there is no
numerically corresponding day in the calendar month during which such Interest
Period is to end, shall (subject to clause (A) above) end on the last day of
such calendar month; and

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     (C) any interest period which would end after the Termination Date shall
end on the Termination Date;
     (D) the first day of the interest period must be a LIBOR Banking Day;
     (E) the last day of the Interest Period and the actual number of days
during the Interest Period will be determined by the Lender using the practices
of the London inter-bank market.
     “Lending Office” means, for each Type of Loan, the lending office of the
Lender (or of an affiliate of the Lender) designated as such for such Type of
Loan on its signature page hereof or such other office of the Lender (or of an
affiliate of the Lender) as the Lender may from time to time specify to the
Borrower as the office by which its Loans of such Type are to be made and
maintained.
     “LIBOR Banking Day” means any day other than a Saturday or a Sunday on
which banks are open for business in New York and London and dealing in offshore
dollars.
     “LIBOR Loan” means any Loan when and to the extent the interest for such
Loan is determined in relation to the “LIBOR Rate.”
     “LIBOR Rate” means, the interest rate determined by the following formula.
(All amounts in the calculation will be determined by the Lender as of the first
day of the interest period.)

             
 
  LIBOR Rate =   London Inter-Bank Offered Rate
 
(1.00 - Reserve Percentage)    

     “Lien” means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, negative pledge, charge, conditional
sale, title retention agreement, financing lease or other encumbrance or similar
right of others, or any agreement to give or refrain from giving any of the
foregoing.
     “London Interbank Offered Rate” means for any applicable interest period,
the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA
LIBOR”), as published by Reuters (or other commercially available source
providing quotations of BBA LIBOR as selected by the Lender from time to time)
at approximately 11:00 a.m. London time two (2) London Banking Days before the
commencement of the applicable Interest Period, for U.S. Dollar deposits (for
delivery on the first day of such interest period) with a term equivalent to
such Interest Period. If such rate is not available at such time for any reason,
then the rate for that interest period will be determined by such alternate
method as reasonably selected by the Lender.

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     “Loans” means the Revolving Loans.
     “Make-Whole Amount” has the meaning specified in Section 3.3.
     “Material Adverse Effect” means a material adverse effect on (a)  the
condition (financial or otherwise), business, operations, or properties of the
Borrower, (b)  the ability of the Borrower to perform its monetary obligations
or perform or comply with any of the material terms and conditions of this
Agreement or any other Facility Document, or (c)  the legality, validity,
binding effect, enforceability or admissibility into evidence of this Agreement
or any other Facility Document, or the ability of the Lender to enforce its
rights or remedies under or in connection with this Agreement or any other
Facility Document.
     “Maximum Revolving Credit Amount” means Twenty Five Million ($25,000,000)
Dollars.
     “Note” means the Revolving Note.
     “Notice of Borrowing” means the notice of borrowing in the form of
Exhibit C.
     “Notice of Interest Rate Conversion/Continuation” means the notice of
interest rate conversion/continuation in the form of Exhibit D.
     “Obligations” means all obligations (monetary or otherwise, whether
absolute, contingent, matured or unmatured) of the Borrower and each other
obligor arising under or in connection with any Facility Document (including
interest accruing during the pendency of a proceeding of the type described in
Section 8.1(f), whether or not allowed in such proceeding) on the Loans.
     “OFAC” means the Office of Foreign Assets Control, Department of the
Treasury.
     “Patriot Act” means the USA PATRIOT Act of 2001, Pub. L. No. 107-56, as
amended from time to time, together with all rules and regulations promulgated
thereunder, and any corresponding provisions of succeeding law.
     “Person” means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
     “Prime Rate” means the rate of interest publicly announced from time to
time by the Lender as its Prime Rate. The Prime Rate is set by the Lender based
on

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various factors, including the Lender’s costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans. The Lender may price loans to its customers at, above, or
below the Prime Rate. Any change in the Prime Rate shall take effect at the
opening of business on the day specified in the public announcement of a change
in the Lender’s Prime Rate.
     “Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System as the same may be amended or supplemented from time to time.
     “Regulation U” means Regulation U of the Board of Governors of the Federal
Reserve System as the same may be amended or supplemented from time to time.
     “Regulatory Change” means, with respect to the Lender, any change after the
date of this Agreement in United States federal, state, municipal or foreign
laws or regulations (including without limitation Regulation D) or the adoption
or making after such date of any interpretations, directives or requests
applying to a class of banks including Lender of or under any United States,
federal, state, municipal or foreign laws or regulations (whether or not having
the force of law) by any Governmental Authority or monetary authority charged
with the interpretation or administration thereof.
     “Revolving Loan” means any loan made by the Lender pursuant to Section 2.1.
     “Revolving Note” means the Revolving Credit Promissory Note in the form of
Exhibit A which evidences the Revolving Loans.
     “Subsidiary” means, with respect to any Person, any corporation or other
entity of which at least a majority of the securities or other ownership
interests having ordinary voting power, for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by such Person.
     “Taxes” means all income, stamp or other taxes, duties, levies, imposts,
charges, assessments, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority,
and all interest penalties or similar liabilities with respect thereto.
     “Termination Date” means December 14, 2008; provided that if such date is
not a Banking Day, the Termination Date shall be the immediately succeeding
Banking Day (or, if such next succeeding Banking Day falls in the next calendar
month, the next preceding Banking Day).
     “Tranche” means, at any time, collectively, all LIBOR Loans having then
current Interest Periods that begin on the same date and end on the same date.

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     “Type” means a Loan’s status as a LIBOR Loan or Variable Rate Loan.
     “Variable Rate” means, for any day, the Prime Rate for such day.
     “Variable Rate Loan” means any Loan when and to the extent the interest
rate for such Loan is determined in relation to the Variable Rate.
     Section 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP.
     Section 1.3. Rules of Interpretation.
          (a) A reference to any document or agreement shall include such
document or agreement as amended, modified, restated or supplemented from time
to time (provided that nothing contained in this subsection (a) shall be deemed
to permit or authorize any such amendment, modification, restatement or
supplement that is not in accordance with the terms of such document or
agreement or the terms of this Agreement).
          (b) The singular includes the plural and the plural includes the
singular.
          (c) A reference to any law includes any amendment or modification to
such law.
          (d) A reference to any Person includes its permitted successors and
permitted assigns.
          (e) The words “include”, “includes” and “including” are not limiting.
          (f) All terms not specifically defined herein or by GAAP, which terms
are defined in the Uniform Commercial Code as in effect from time to time in the
State of Connecticut, have the meanings assigned to them therein.
          (g) Reference to a particular “Article”, “Section”, “subsection”,
“Exhibit”, “Schedule” or the like refers to that article, section, subsection,
exhibit, schedule or the like of this Agreement unless otherwise indicated.
          (h) The words “herein”, “hereof”, “hereunder” and words of like import
shall refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.

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          (i) Unless specifically provided to the contrary, any reference to a
time refers to such time in Hartford, Connecticut.
          (j) The table of contents and the headings and captions are for
convenience only and shall not affect the interpretation or construction of the
provisions hereof.
ARTICLE 2. THE CREDIT.
     Section 2.1. Revolving Loans.
          (a) Revolving Loans. Subject to the terms and conditions of this
Agreement, the Lender shall make revolving credit loans (the “Revolving Loans”)
to the Borrower from time to time from the Effective Date to and including the
Termination Date, up to but not exceeding the Maximum Revolving Credit Amount
(except in the Lender’s sole and absolute discretion) in the aggregate principal
amount at any one time. Subject to the terms and conditions of this Agreement,
Revolving Loans may be borrowed, repaid and reborrowed. The Lender shall record
the making and repayment of Revolving Loans on its books and records, together
with interest and all other appropriate credits and debits (provided failure to
so record shall not affect Borrower’s obligation to repay such Loans or impose
any liability on Lender) and such books and records shall be conclusive absent
manifest error.
          (b) Types of Revolving Loans. Subject to Section 3.2, the Revolving
Loans may be outstanding as Variable Rate Loans or LIBOR Loans as determined by
Borrower and notified to Lender pursuant to, and in compliance with,
Sections 2.1(d) and 2.6. Each Type of Loan shall be made and maintained at the
Lender’s Lending Office for such Type of Loan.
          (c) Interest Rate. Interest shall accrue on the time to time
outstanding principal balance of the Revolving Loans (a) that are Variable Rate
Loans, at a variable rate per annum equal to the Variable Rate plus the
Applicable Margin, and (b) that are LIBOR Loans, at the LIBOR Rate plus the
Applicable Margin.
          (d) Request for Borrowing. The Borrower shall give the Lender
irrevocable notice (which notice must be received by the Lender (i) in the case
of LIBOR Loans, prior to 12:00 Noon, two (2) Banking Days prior to the requested
Borrowing Date, and (ii) in the case of Variable Rate Loans, prior to 12:00 Noon
on the date of the requested borrowing, by a Notice of Borrowing in the form of
Exhibit C (which may be sent via facsimile). Each request for a Revolving Loan
must be in an amount equal to $100,000 for Variable Rate Loans and $200,000 in
the case of LIBOR Loans, or a whole

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multiple of $50,000 in excess thereof (or, if the then available Availability is
less than $100,000, such lesser amount). Upon receipt of any such notice from
the Borrower, such borrowing will be made available to the Borrower promptly, by
the Lender crediting the account of the Borrower designated by Borrower and
maintained by the Lender.
          (e) Payments. The Borrower shall pay interest on the from time to time
aggregate outstanding principal balance of the Revolving Loans that are
outstanding as Variable Rate Loans, monthly, on the first day of each calendar
month commencing January 1, 2008. The Borrower shall pay interest on the from
time to time aggregate outstanding principal balance of the Revolving Loans that
are outstanding as LIBOR Loans on the last day of each applicable Interest
Period, but in no event less than every 90 days. All interest shall be payable
in arrears, at the rate set forth in Section 2.1(c). On the Termination Date,
the entire unpaid principal balance of the Revolving Loans, together with all
accrued and unpaid interest, shall be due and payable, without notice or demand.
     Section 2.2. Purpose. The Borrower shall use the proceeds of the Loans for
general commercial purposes. In no event shall the proceeds of any Loan be used
for the purpose, whether immediate, incidental or ultimate, of buying or
carrying “margin stock” within the meaning of Regulation U.
     Section 2.3. Prepayments.
          (a) Optional Prepayments. The Borrower shall have the right to make
prepayments of principal in whole or in part on any Loans at any time or from
time to time without premium or penalty; provided that: (a) the Borrower shall
give the Lender at least five (5) Banking Days advanced notice of each such
prepayment with respect to a LIBOR Loan; and (b) prepayments made on any LIBOR
Loan shall be accompanied by the Make-Whole Amount.
          (b) Mandatory Prepayments. If, at any time the sum of the aggregate
principal amount of outstanding Revolving Loans exceeds the Maximum Revolving
Credit Amount, the Borrower shall, upon demand, immediately prepay an amount
equal to such excess, together with accrued interest to the date of such
prepayment on the principal amount prepaid.
          (c) Application of Payments.
               (i) Application of Payments Generally. All payments made
hereunder shall be applied (i) first to fees, expenses and indemnification
obligations, (ii) second to accrued and unpaid interest on the Loans, and
(iii) thereafter to outstanding principal of such Loans as Borrower shall
specify in writing to the Lender at the time of the making of such payments.
Notwithstanding the foregoing, in the event that the

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Borrower fails to so specify (with respect to principal repayments), the Lender
may apply such prepayment to such Loans as it may elect in its sole direction.
               (ii) Application upon Default. Notwithstanding anything to the
contrary contained herein or in the other Facility Documents, if a Default or
Event of Default has occurred and is continuing, the Lender may apply any
payments to such Loans, and in such order and priority and manner as it may
elect in its sole discretion.
     Section 2.4. Interest Periods. In the case of each LIBOR Loan, the Borrower
shall select an Interest Period of any duration in accordance with the
definition of Interest Period in Section 1.1, subject to the following
limitations: (i) no Interest Period may extend beyond the Termination Date; and
(ii) notwithstanding clause (i) above, no Interest Period shall have a duration
less than one month, and if any such proposed Interest Period would otherwise be
for a shorter period, such Interest Period shall not be available.
     Section 2.5. Conversion and Continuation Options.
          (a) Conversions. The Borrower may, subject to the terms of this
Agreement, elect from time to time to convert Loans of one Type to Loans of
another Type by giving the Lender irrevocable notice of such election prior to
12:00 Noon, three (3) Banking Days prior to the date of conversion, which notice
may be given by telephone, to be promptly confirmed in writing, including by
facsimile, by a Notice of Interest Rate Conversion/Continuation in the form of
Exhibit D, provided, however,
               (i) that any such conversion of LIBOR Loans may only be made on
the last day of an Interest Period with respect thereto;
               (ii) no Loan may be converted when the Lender has notified the
Borrower that it has determined that such a conversion is not appropriate
pursuant to Article 3;
               (iii) no Variable Rate Loan may be converted into a LIBOR Loan
when any Default or Event of Default has occurred and is continuing; and
               (iv) no Variable Rate Loan may be converted into a LIBOR Loan
after the date that is one (1) month prior to the Termination Date.
          (b) Continuations. The Borrower may, subject to the terms of this
Agreement, elect from time to time to continue LIBOR Loans as such upon the
expiration of the then current Interest Period in accordance with the applicable
provisions of the term “Interest Period” set forth in subsection 1.1, by the
Borrower giving the Lender irrevocable notice of such election prior to 12:00
Noon, two (2) Banking Days prior to the date of continuation, which notice may
be given by telephone, to be promptly confirmed in

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writing, including by facsimile, by a Notice of Interest Rate
Conversion/Continuation in the form of Exhibit D, provided, however,
          that no LIBOR Loan may be continued as such:
               (i) when any Default or Event of Default has occurred and is
continuing;
               (ii) when the Lender has notified the Borrower that it has
determined that such a continuation is not appropriate pursuant to
Article 3; or
               (iii) after the date that is one (1) month prior to the
Termination Date; and
     provided further, that if the Borrower shall fail to give such notice in
the case of Revolving Loans, or if such continuation is not permitted in the
case of any Loan, such LIBOR Loans shall be automatically converted to Variable
Rate Loans on the last day of such then expiring Interest Period.
     Section 2.6. Minimum Amounts and Maximum Number of Tranches. Except for
borrowings which exhaust the Availability, prepayments or conversions which
result in the prepayment or conversion of all Loans of a particular Type or
conversions made pursuant to Section 2.5, each borrowing of, prepayment of,
conversion to and renewal of, principal of LIBOR Loans, as permitted herein,
shall be in an amount equal to $200,000 or whole multiples of $50,000 in excess
thereof in the aggregate and each borrowing of, prepayment of, and conversion
to, principal of Variable Rate Loans shall be in an amount equal to $100,000 or
whole multiples of $50,000 in excess thereof in the aggregate (borrowings,
prepayments, conversions or renewals of or into Loans of different Types or, in
the case of LIBOR Loans, different Tranches, shall be deemed separate
borrowings, prepayments, conversions and renewals for the purposes of the
foregoing). Anything in this Agreement to the contrary notwithstanding, in no
event shall there be more than four (4) Tranches outstanding at any time.
     Section 2.7. Interest.
          (a) Changes in Interest. The interest rate on each Variable Rate Loan
shall change immediately upon the date when a change in the Variable Rate is
adopted by the Lender.
          (b) Interest Calculations. Interest of each Loan shall be calculated
on the basis of a year of 360 days for the actual number of days elapsed.

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          (c) Default Interest. If any Event of Default shall exist (or if the
Termination Date shall have occurred), at Lender’s sole option, all amounts
outstanding under this Agreement, including any interest, fees, or costs which
are not paid when due to the fullest extent permitted by law from and including
such due date to but excluding the date such amount is paid in full, shall
accrue interest at the Default Rate (whether before or after judgment has been
rendered with respect hereto) which amounts shall each become an additional part
of the unpaid balance. Interest accruing at the Default Rate shall be due and
payable from time to time on demand of the Lender. The Borrower understands that
this may result in compounding of interest. The charging of the Default Rate
shall not constitute a waiver of any default.
     Section 2.8. Payments Generally. All payments under this Agreement or the
Note shall be made in Dollars in immediately available funds (without offset,
deduction, or reduction of any kind) not later than 1:00 p.m. on the relevant
dates specified above (each such payment made after such time on such due date
to be deemed to have been made on the next succeeding Banking Day) to the
Lender’s account number 0001757697 maintained at the Lending Office of the
Lender. The Lender may (but shall not be obligated to) debit the amount of any
such payment which is not made by such time to any ordinary deposit account of
the Borrower with the Lender. If the due date of any payment under this
Agreement or the Note would otherwise fall on a day which is not a Banking Day,
such date shall be extended to the next succeeding Banking Day and interest
shall be payable for any principal so extended for the period of such extension.
     Section 2.9. Late Charge. To the extent permitted by law, the Borrower
agrees to pay a late fee in an amount not to exceed five percent (5%) of any
payment that is more than fifteen (15) days late. The imposition and payment of
a late fee shall not constitute a waiver of the Lender’s rights with respect to
the default.
     Section 2.10. Unused Fee. As additional compensation, the Borrower shall
pay to the Lender, quarterly, in arrears, on the first Banking Day immediately
following each calendar quarter, a fee for the Borrower’s non-use of available
funds during such calendar quarter in an amount equal to one quarter of one
percent (.25%) per annum (calculated on the basis of a 360 day year for actual
days elapsed) multiplied by the difference between (i) the Maximum Revolving
Credit Amount and (ii) the average for the quarter of the daily closing balances
of the aggregate amount of Revolving Loan outstanding. A prorated unused fee
shall also be payable on the Termination Date.
ARTICLE 3. YIELD PROTECTION; ILLEGALITY; ETC.
     Section 3.1. Additional Payments. If the Lender shall deem applicable to
the Loans or any other sums due from the Borrower to Lender hereunder, any
requirement of any law of the United States of America, any regulation, order,
interpretation, ruling, official directive or guideline (whether or not having
the force of law) of the Board of

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Governors of the Federal Reserve System, the Comptroller of the Currency, the
Federal Deposit Insurance Corporation or any other board or governmental or
administrative agency of the United States of America or any Regulatory Change
which shall impose, increase, modify or make applicable thereto or cause to be
included in, any reserve, special deposit, calculation used in the computation
of regulatory capital standards, assessment or other requirement which imposes
on the Lender any cost that is attributable to the maintenance hereof, then, and
in each such event, the Lender shall notify the Borrower thereof and the
Borrower shall pay the Lender such amount as will compensate the Lender for any
such cost, which determination may be based upon the Lender’s reasonable
allocation of the aggregate of such costs resulting from such events. In the
event any such cost is a continuing cost, a fee payable to the Lender may be
imposed upon the Borrower periodically for so long as any such cost is deemed
applicable to the Lender, in an amount determined by the Lender to be necessary
to compensate the Lender for any such cost. The determination by the Lender of
the existence and amount of any such cost shall, in the absence of manifest
error, be conclusive.
     Section 3.2. Basis For Determining Interest Rate Inadequate or Unfair. In
the event that the Lender shall have determined that by reason of circumstances
affecting the interbank LIBOR market, adequate and reasonable means do not exist
for determining the LIBOR Rate or deposits in the relevant amount and for the
relevant maturity are not available to the Lender in the interbank Eurodollar
market, with respect to a proposed LIBOR Loan or a proposed conversion of any
Variable Rate Loan to a LIBOR Loan, the Lender shall give the Borrower notice of
such determination within one (1) Banking Day. If such notice is given, then
(i) any requested LIBOR Loan shall be made at the Variable Rate unless the
Borrower gives the Lender one Banking Day’s prior written notice that its
request for such borrowing is canceled; (ii) any Loan that was to have been
converted into a LIBOR Loan shall be continued as a Variable Rate Loan; and
(iii) any outstanding LIBOR Loan shall be converted to a Variable Rate Loan.
Until such notice has been withdrawn, the Lender shall have no obligation to
make LIBOR Loans or maintain LIBOR Loans and the Borrower shall not have the
right to borrow or convert Loans to the Loans bearing interest in relation to
the LIBOR Rate.
     Section 3.3. Make Whole; Indemnification for Prepayment. In the event
Borrower prepays all or any portion of the principal balance of any LIBOR Loan
prior to the end of an Interest Period (whether voluntarily, as a result of
acceleration, mandatory prepayment or otherwise), the Borrower shall pay to the
Lender a prepayment fee (the “Make Whole Amount”) in an amount sufficient to
compensate the Lender for any loss, cost or expense incurred by it as a result
of the prepayment, including any loss of anticipated profits and any loss or
expense arising from the liquidation or reemployment of funds obtained by it to
maintain such prepayment or from fees payable to terminate the deposits from
which such funds were obtained. The Borrower shall also pay any customary
administrative fees charged by the Lender in connection with the foregoing. For
purposes of this paragraph, the Lender shall be deemed to have funded the amount
prepaid by a

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matching deposit or other borrowing in the applicable interbank market, whether
or not such amount was in fact so funded.
ARTICLE 4. CONDITIONS PRECEDENT.
     Section 4.1. Conditions Precedent to Initial Loans. The obligation of the
Lender to make the Loan(s) constituting the initial borrowing is subject to the
condition precedent that the Lender must have received on or before the date of
such Loan(s) each of the following, in form and substance satisfactory to the
Lender and its counsel, or that the Lender shall otherwise be satisfied that the
following conditions have been met:
          (a) this Agreement duly executed by the Borrower;
          (b) the Revolving Credit Promissory Note duly executed by the
Borrower;
          (c) the Authorization Letter duly executed by the Borrower;
          (d) a favorable opinion of counsel for the Borrower, dated the Closing
Date, as to such matters as the Lender may reasonably request;
          (e) a certificate of the Secretary or Assistant Secretary of the
Borrower, dated the Closing Date, attesting to all company action taken by the
Borrower, including resolutions of its governing board authorizing the
execution, delivery and performance of the Facility Documents to which it is a
party and each other document to be delivered pursuant to this Agreement and
certifying true copies of the articles of incorporation, by-laws and other
organizational documents of the Borrower;
          (f) a certificate of the Secretary or Assistant Secretary of the
Borrower, dated the Closing Date, certifying the names and true signatures of
the officers of the Borrower authorized to sign the Facility Documents to which
it is a party and the other documents to be delivered by the Borrower under this
Agreement;
          (g) evidence of insurance as required by the Facility Documents;
          (h) a certificate of good standing for the Borrower from the Secretary
of State of each jurisdiction in which the Borrower is qualified to do business;
and
          (i) payment by the Borrower to the Lender of all expenses and fees
(including reasonable attorney’s fees) incurred by the Lender;

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     Section 4.2. Conditions Precedent to All Loans. The obligation of the
Lender to make any Loan(s) shall be subject to the further conditions precedent
that on the date of such Loan:
          (a) the following statements must be true:
               (i) the representations and warranties made by Borrower herein
and in each other Facility Document, are true and correct on and as of the date
of such Loan as though made on and as of such date; and
               (ii) no Default or Event of Default has occurred and is
continuing, or would result from such Loan; and
               (iii) since the Closing Date, there has been no event or
circumstance which has caused or is reasonably anticipated to cause a Material
Adverse Effect;
          (b) with respect to any Loan, the Borrower must have delivered to the
Lender a Notice of Borrowing in substantially the form of Exhibit C; and
          (c) the Lender must have received such approvals, opinions or
documents as the Lender may reasonably request.
     Section 4.3. Deemed Representations. Each Notice of Borrowing hereunder and
acceptance by the Borrower of the proceeds of such borrowing shall constitute a
representation and warranty that the statements contained in Section 4.2(a) are
true and correct both on the date of such notice and, unless the Borrower
otherwise notifies the Lender prior to such borrowing, as of the date of such
borrowing.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES.
     The Borrower hereby represents and warrants that:
     Section 5.1. Organization. The Borrower is duly formed, validly existing
and in good standing under the laws of the jurisdiction of its formation, has
the company power and authority to own its assets and to transact the business
in which it is now engaged or proposed to be engaged, and is duly qualified as a
foreign company and in good standing under the laws of each other jurisdiction
in which the nature of the business conducted by it or the property owned or
held under lease by it makes such qualification necessary to avoid any
limitation, penalty, forfeiture or restriction under the laws of such
jurisdiction, except where failure to be so qualified and in good standing could
not reasonably be anticipated to cause a Material Adverse Effect.

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     Section 5.2. Power and Authority; No Conflicts. The execution, delivery and
performance by the Borrower of the Facility Documents to which it is a party
have been duly authorized by all necessary company action and do not and will
not: (a) require any consent or approval of its shareholders; (b) contravene its
governing documents; (c) violate any provision of, or require any filing
registration, consent or approval under, any law, rule, regulation (including,
without limitation, Regulation U), order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the Borrower
, the violation of which could reasonably be anticipated to cause a Material
Adverse Effect; (d) result in a breach of or constitute a default or require any
consent under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected and which could reasonably be anticipated to
cause a Material Adverse Effect; or (e) result in, or require, the creation or
imposition of any Lien, upon or with respect to any of the properties now owned
or hereafter acquired by the Borrower.
     Section 5.3. Legally Enforceable Agreements. Each Facility Document to
which the Borrower is a party is, or when such is delivered under this Agreement
will be, a legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms, except to the extent that
such enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors’ rights generally.
     Section 5.4. Litigation. Except as set forth in Schedule 5.4, there are no
equitable, legal, arbitration, administrative actions, suits, proceedings or
investigations pending or, to the knowledge of the Borrower, threatened, against
or affecting in any manner the Borrower or any of its Subsidiaries or any of
Borrower’s (or its Subsidiaries’) properties before any Governmental Authority
or arbitrator, which may, in any one case or in the aggregate, has had, or could
be reasonably anticipated to have a Material Adverse Effect.
     Section 5.5. Financial Statements. All financial information and other
reports furnished to the Lender are true and correct in all material respects,
and with respect to financial information, fairly present the financial
condition of the relevant person or entity as of the dates stated therein. There
has been no material adverse change in the condition (financial or otherwise),
business, operations or prospects of the Borrower since the date of the most
recent financial information relating thereto provided to the Lender.
     Section 5.6. No Default on Outstanding Judgments or Orders. The Borrower
has satisfied all final non-appealable judgments. The Borrower is not in default
with respect to any judgment, writ, injunction, decree, rule or regulation of
any arbitrator or Governmental Authority, except where (i) such default could
not reasonably be anticipated to have a Material Adverse Effect and (ii) where
the applicable default (or

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judgment, writ, injunction, decree, rule or regulation) is being contested or
appealed in good faith with appropriate reserves made on the Borrower’s books if
applicable.
     Section 5.7. No Defaults on Other Agreements. The Borrower is not in
default in any respect in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any material agreement or
instrument to which it is a party, which default could reasonably be anticipated
to have a Material Adverse Effect.
     Section 5.8. Solvency.
          (a) The present fair saleable value of the assets of the Borrower
after giving effect to all the transactions contemplated by the Facility
Documents and the funding of Loans hereunder (including the funding of the
Maximum Revolving Credit Amount) exceeds the amount that will be required to be
paid on or in respect of the existing debts and other liabilities (including
contingent liabilities) of the Borrower as they mature.
          (b) The property of the Borrower does not constitute unreasonably
small capital for the Borrower to carry out its business as now conducted and as
proposed to be conducted including the capital needs of the Borrower.
          (c) The Borrower does not intend to, nor does it believe that it will,
incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be received by the Borrower, and of
amounts to be payable on or in respect of debt of the Borrower). The cash
available to the Borrower after taking into account all other anticipated uses
of the cash of the Borrower, is anticipated to be sufficient to pay all such
amounts on or in respect of debt of the Borrower when such amounts are required
to be paid.
          (d) The Borrower does not believe that final judgments against it in
actions for money damages will be rendered at a time when, or in an amount such
that, the Borrower will be unable to satisfy any such judgments promptly in
accordance with their terms (taking into account the maximum reasonable amount
of such judgments in any such actions and the earliest reasonable time at which
such judgments might be rendered). The cash available to the Borrower after
taking into account all other anticipated uses of the cash of the Borrower
(including the payments on or in respect of debt referred to in paragraph (c) of
this Section), is anticipated to be sufficient to pay all such judgments
promptly in accordance with their terms.
     Section 5.9. Insider. The Borrower is not, and no Person having “control”
(as defined in 12 U.S.C. 375(b)(5) or in regulations promulgated thereto) of
Borrower is an “executive officer,” “director” or “principal shareholder” (as
those terms

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are defined in 12 U.S.C. 375(b)(5) or in regulations promulgated thereto) of the
Lender, or of a bank holding company (or subsidiary thereof) of which the Lender
is a subsidiary.
     Section 5.10. Permits, Franchises. The Borrower possesses all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade name rights, patent rights, copyrights, and fictitious name rights
necessary to enable it to conduct the business in which it is now engaged.
     Section 5.11. Hazardous Substances. The Borrower has complied with all
laws, regulations and ordinances or other requirements of any Governmental
Authority relating to or imposing liability or standards of conduct concerning
protection of health or the environment or hazardous substances, except where
the failure to do so could not reasonably be anticipated to have a Material
Adverse Effect.
     Section 5.12. Chief Executive Office. The chief executive office of the
Borrower is located at the address listed on the signature page of this
Agreement.
     Section 5.13. Taxes. As of the Closing Date, each of the Borrower and its
Subsidiaries has filed all tax returns (federal, state and local) required to be
filed and has paid all Taxes, assessments and governmental charges and levies
thereon to be due, including interest and penalties.
     Section 5.14. ERISA. Each Plan, and, to the best knowledge of the Borrower,
each Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other applicable Federal or state law. As
of the most recent valuation date for each Plan, each Plan was “fully funded,”
which for purposes of this Section shall mean that the fair market value of the
assets of the Plan is not less than the present value of the accrued benefits of
all participants in the Plan, computed on a Plan termination basis, except as
specified in Schedule 5.14.
     Section 5.15. Subsidiaries and Ownership of Stock. Schedule 5.15 is a
complete and accurate list of the Subsidiaries of the Borrower, showing the
jurisdiction of incorporation or organization of each Subsidiary and showing the
percentage of the Borrower’s ownership of the outstanding stock or other
interest of each such Subsidiary. All of the outstanding capital stock of each
such Subsidiary has been validly issued, is fully paid and nonassessable and is
owned by the Borrower free and clear of all Liens.
     Section 5.16. No Omissions.  All reports, financial information and other
written information relating to the Borrower, the Loan (including any loan
application submitted by or on behalf of the Borrower) or any other matters
contemplated by this Agreement, which have been supplied by or on behalf of the
Borrower to the Lender, are true and correct in all respects and do not contain
any material misstatement of fact or omit

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to state any material fact or any fact necessary to make the statements
contained therein not misleading.
ARTICLE 6. COVENANTS.
     So long as any Loans or any other sums owing hereunder shall remain unpaid
and until this Agreement is terminated, the Borrower shall comply with the
provisions of this Article:
     Section 6.1. Debt. The Borrower shall not incur, assume or suffer to exist,
any Debt, except:
          (a) Debt of the Borrower under this Agreement and the Note;
          (b) Accounts payable to trade creditors for goods or services incurred
in the ordinary course of business and paid within the specified time and
accrued salary, wages and taxes incurred in the ordinary course of business and
paid within the specified time; and
          (c) other Debt not in excess of $5,000,000 in the aggregate
outstanding at any time.
     Section 6.2. Guaranties, Etc. The Borrower shall not assume, guarantee,
endorse or otherwise be or become directly or contingently responsible or liable
for the obligations of any Person, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and Debt permitted by Section 6.1.
     Section 6.3. Liens. The Borrower shall not create, incur, assume or suffer
to exist, or permit any of its Subsidiaries to create, incur, assume or suffer
to exist, any Lien, upon or with respect to any of its properties, now owned or
hereafter acquired, except
          (a) liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, otherwise permitted
under the terms of the Facility Documents;
          (b) liens imposed by law, such as mechanic’s and materialmen’s liens,
and other similar liens, securing obligations incurred in the ordinary course of
business which are not past due for more than 30 days, or which are being
contested in good faith by appropriate proceedings and for which appropriate
reserves have been established, or choate liens to the extent contested in good
faith in compliance with the Facility Documents;

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          (c) easements, rights-of-way, restrictions and other similar
encumbrances on real property which are not incurred in connection with the
borrowing of money and which, in the aggregate, do not materially interfere with
the occupation, use and enjoyment by the Borrower of the property or assets
encumbered thereby in the normal course of its business or materially impair the
value of the property subject thereto; and
          (d) purchase money security interests and liens under capital lease
obligations, provided such security interests or liens do not extend to any
assets other than those being acquired or leased and the maximum amount secured
by such liens does not exceed the amount of debt permitted pursuant to section
6.1(c) hereof.
     Section 6.4. Compliance with Laws. The Borrower shall comply with all
applicable laws, rules, regulations and orders, except where failure to do so
could not reasonably be anticipated to have a Material Adverse Effect.
     Section 6.5. Sale of Assets. The Borrower shall not sell, lease, assign,
transfer, abandon or otherwise dispose any of its now owned or hereafter
acquired assets; except: (a) the sale of inventory in the ordinary course of
business and (b) the sale or other disposition of assets no longer used or
useful in the conduct of its business, (c) the sale of the following three
parcels of real property and improvements thereupon: Lacey Place (Southport CT)
, Station Street (Southport, CT) and the former Dorr Plant (Newport NH); and
(d) other asset sales not in excess of $10,000,000 in the aggregate in any
calendar year.
     Section 6.6. Maintenance of Insurance. The Borrower shall maintain
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated,
which insurance may provide for reasonable deductibility from coverage thereof.
Without limiting the foregoing, such insurance shall include (a) public
liability insurance in such amounts and covering such risks, as the Lender may
reasonably require, (b) all worker’s compensation and other employees’ liability
insurance as may be required by law, (c) insurance with respect to its
properties both real and personal, to the full extent of the insurable value
thereof, and including All Risk coverage (so-called) covering such other risks,
as the Lender may reasonably require, and (d) business interruption insurance in
amounts sufficient to cover the reasonable needs of the Borrower’s or its
Subsidiaries’ business during periods of partial or complete interruption of the
Borrower’s or its Subsidiaries’ business. The Borrower shall provide the Lender
with certificates of insurance naming Lender as an additional insured in form
and substance satisfactory to the Lender.
     Section 6.7. Transactions with Affiliates. The Borrower shall not enter
into any transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any Affiliate, except
in the ordinary course of and pursuant to the reasonable requirements of the
Borrower’s business and upon fair

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and reasonable terms no less favorable to the Borrower than would it obtain in a
comparable arm’s length transaction with a Person not an Affiliate.
     Section 6.8. Mergers, Etc. Borrower shall not (a) merge or consolidate
into, or sell, assign, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to, any Person, or (b) acquire all or any
material portion of the assets or the business of any Person (or enter into any
agreement to do any of the foregoing), provided however, that notwithstanding
the foregoing, so long as no Event of Default exists or would result therefrom,
the Borrower may acquire all of any material portion of the assets or business
of any other Person and may merge or consolidate with, any other Person,
provided (i) the amount payable by the Borrower in connection with any such
acquisition, merger or consolidation shall not exceed $5,000,000 in the
aggregate in any calendar year, (ii) in the case of a merger or consolidation,
the Borrower shall be the surviving entity in such merger and consolidation, and
(iii) the Borrower shall notify the Lender of such transaction prior to or
promptly after the consummation thereof and provide any information relating
thereto that the Lender may reasonably request.
     Section 6.9. No Activities Leading to Forfeiture. The Borrower shall not
engage in or propose to be engaged in the conduct of any business or activity
which could result in a Forfeiture Proceeding.
     Section 6.10. Reporting Requirements. The Borrower shall furnish directly
to the Lender:
          (a) as soon as available and in any event within one hundred and
twenty (120) days after the end of each calendar year, the Borrower’s Form 10k;
          (b) as soon as available and in any event within forty-five (45) days
after the end of each calendar quarter, the Borrower’s Form 10Q, including
interim financial statements;
          (c) in the event the Borrower is at any time, not a public company,
such financial information with such audits and certifications and at such time
periods as the Lender may require;
          (d) simultaneously with the delivery of the forms required under
Sections 6.10(a) and (b), a certificate substantially in the form of Exhibit E
of the Borrower (i) certifying that no Default or Event of Default has occurred
and is continuing or, if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which is
proposed to be taken with respect thereto, and (ii) with computations
demonstrating compliance with the covenants contained in Article 7;

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          (e) as soon as possible and in any event within 10 days after the
occurrence of each Default or Event of Default a written notice setting forth
the details of such Default or Event of Default and the action which is proposed
to be taken by the Borrower with respect thereto; and
          (f) as soon as possible after the commencement thereof, notice of all
actions, suits, and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Borrower or any of its Subsidiaries which, if determined adversely
to the Borrower or such Subsidiary, could have a Material Adverse Effect, or any
other event or condition which could reasonably be anticipated to have a
Material Adverse Effect;
          (g) prompt notice of any threatened or pending investigation of the
Borrower or its operations by any governmental agency under any current or
future law, regulation or ordinance pertaining to any hazardous substance which
relates to any matter which could reasonably be anticipated to have a Material
Adverse Effect; and
          (h) such other information respecting the condition or operations,
financial or otherwise, of the Borrower as the Lender may from time to time
reasonably request.
     Section 6.11. Right of Inspection. At any reasonable time and from time to
time upon reasonable notice, permit the Lender or any agent or representative
thereof, to examine and make copies and abstracts from the records and books of
account of, and visit the properties of, the Borrower and any of its
Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower
and any such Subsidiary with any of their respective officers and directors and
the Borrower’s independent accountants, and to conduct an audit of the Borrower
and its properties. If any of the Borrower’s properties, books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Lender or its agents to have access to perform inspections or audits
and to respond to the Lender’s requests for information concerning such
properties, books and records.
     Section 6.12. Dividends. The Borrower shall not declare or pay any
dividends, or redeem any stock or equity interests, or make any distributions or
withdrawals to its equityholders if an Event of Default has occurred or would
result therefrom.
     Section 6.13. Operating Accounts. The Borrower shall maintain all primary
operating accounts with the Lender.
     Section 6.14. Change of Management. The Borrower shall not to make any
substantial change in the present executive or management personnel of the
Borrower.

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     Section 6.15. Conduct of Business. The Borrower shall continue, and cause
each of its Subsidiaries to continue, to engage in a business of the same
general type as conducted by it on the date of this Agreement and the Borrower
shall not engage in any business activities substantially different from the
Borrower’s present business.
     Section 6.16 Maintenance of Existence. The Borrower shall preserve and
maintain, its corporate existence and good standing in the jurisdiction of its
incorporation, and qualify and remain qualified to do business, in each
jurisdiction in which the nature of the business conducted by it or the property
owned or held under a lease by it makes such qualification necessary to avoid
any limitation, penalty, forfeiture or restriction under the laws of such
jurisdiction except where the failure to be so qualified could not reasonably be
anticipated to have a Material Adverse Effect.
     Section 6.16. Books and Records. The Borrower shall maintain adequate books
and records.
     Section 6.17. Cooperation. The Borrower shall take any action reasonably
requested by the Lender to carry out the intent of this Agreement.
ARTICLE 7. FINANCIAL COVENANTS.
     So long as any Loans or any other sums owing hereunder shall remain unpaid
and until this Agreement is terminated.
     Section 7.1. Adjusted Net Worth. The Borrower shall at all times maintain a
minimum Adjusted Net Worth of $94,000,0000.
ARTICLE 8. EVENTS OF DEFAULT.
     Section 8.1. Events of Default. Any of the following events shall be an
“Event of Default”:
          (a) the Borrower shall: (i) fail to pay the principal of any Loan as
and when due and payable; or (ii) fail to pay interest on any Loan or any fee or
other amount due hereunder as and when due and payable;
          (b) any representation or warranty made or deemed made by the Borrower
in this Agreement or in any other Facility Document to which it is a party or
which is contained in any certificate, document, opinion, financial or other
statement furnished at any time under or in connection with any Facility
Document shall prove to have been incorrect in any material respect on or as of
the date made or deemed made;

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          (c) the Borrower shall: (i) fail to perform or observe any term,
covenant or agreement contained in Article 6 or Article 7, or (ii) fail to
perform or observe any other term covenant or agreement herein or in any other
Facility Document and such failure, if reasonably capable of cure, shall remain
uncured for at least ten (10) days following notice thereof given by the Lender;
          (d) There shall occur any default which continues beyond any
applicable grace or cure period under any other agreement between the Borrower
or any of the Borrower’s related entities or Affiliates with the Lender or any
affiliate of the Lender.
          (e) the Borrower shall: (i) fail to pay any indebtedness owing to any
Person, in the aggregate principal amount of $250,000 or more, including but not
limited to indebtedness for borrowed money (other than the payment obligations
described in (a) above), of the Borrower or any interest or premium thereon,
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) owing to any Person, in the aggregate principal amount of
$250,000 or more; or (ii) fail to perform or observe any term, covenant or
condition on its part to be performed or observed under any agreement or
instrument relating to any such indebtedness, when required to be performed or
observed, if the effect of such failure to perform or observe is to accelerate
the maturity of such indebtedness; or any such indebtedness shall be declared to
be due and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof;
          (f) the Borrower: (i) shall generally not, or be unable to, or shall
admit in writing its inability to, pay its debts as such debts become due; or
(ii) shall make an assignment for the benefit of creditors, petition or apply to
any tribunal for the appointment of a custodian, receiver or trustee for it or a
substantial part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (iv) shall have had any such petition or application filed or any
such proceeding shall have been commenced, against it, in which an adjudication
or appointment is made or order for relief is entered, or which petition,
application or proceeding remains undismissed for a period of 90 days or more;
or shall be the subject of any proceeding under which its assets may be subject
to seizure, forfeiture or divestiture; or (v) by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or trustee for all or any substantial part of its property; or
(vi) shall suffer any such custodianship, receivership or trusteeship to
continue undischarged for a period of 90 days or more;
          (g) one or more judgments, decrees or orders for the payment of money
in excess of $500,000 in the aggregate shall be rendered against the Borrower
and such judgments, decrees or orders shall continue unsatisfied and in effect
for a period of 30

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consecutive days without being vacated, discharged, satisfied or stayed or
bonded pending appeal;
          (h) if any of the Facility Documents shall be cancelled, terminated,
revoked or rescinded, or any action at law, suit or in equity or other legal
proceeding to cancel, revoke or rescind any of the Facility Documents shall be
commenced by or on behalf of any party (other than Lender), or any court or any
other governmental or regulatory authority or agency of competent jurisdiction
shall make a determination that, or issue a judgment, order, decree or ruling to
the effect that one or more of the Facility Documents is illegal, invalid or
unenforceable in accordance with the terms thereof;
          (i) the Borrower shall dissolve or otherwise cease to be in existence
(or take any action with respect thereto); and
          (j) there shall, in the commercially reasonable judgment of Lender, be
any material adverse change in the condition (financial or otherwise), business,
management, operations, or properties of the Borrower since the Closing Date.
     Section 8.2. Remedies. If any Event of Default shall occur and be
continuing, in addition to all other rights and remedies available to the
Lender, the Lender may by notice to the Borrower declare the outstanding
principal of the Loans, all interest thereon and all other amounts payable under
this Agreement and the Note to be forthwith due and payable, whereupon the
Loans, all such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower; provided that, in the
case of an Event of Default referred to in Section 8.1(f) above, the Loans, all
interest thereon and all other amounts payable under this Agreement shall be
immediately due and payable without notice, presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by the
Borrower.
ARTICLE 9. ANTI-MONEY LAUNDERING; PATRIOT ACT
     Section 9.1. Compliance with International Trade Control Laws and OFAC
Regulations. Borrower represents, warrants and covenants to Lender that:
          (a) It is not now nor shall it be at any time until after this
Agreement is terminated a Person with whom a U.S. Person, including a financial
institution, is prohibited from transacting business of the type contemplated by
this Agreement, whether such prohibition arises under U.S. law, regulation,
executive orders and lists published by the OFAC (including those executive
orders and lists published by OFAC with respect to Specially Designated
Nationals and Blocked Persons) or otherwise.

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          (b) The Borrower is not, and no Person who owns a direct interest of
five percent (5%) or more in Borrower is, now nor shall be at any time, a Person
with whom a U.S. Person, including a financial institution, is prohibited from
transacting business of the type contemplated by this Agreement, whether such
prohibition arises under U.S. law, regulation, executive orders and lists
published by the OFAC (including those executive orders and lists published by
OFAC with respect to Specially Designated Nationals and Blocked Persons) or
otherwise.
     Section 9.2. Borrower’s Funds. Borrower represents, warrants and covenants
to Lender that it has taken, and shall continue to take, such measures as are
required by law to assure that the funds invested in the Borrower and/or used to
make payments on the Loans are derived (a) from transactions that do not violate
U.S. law nor, to the extent such funds originate outside the United States, do
not violate the laws of the jurisdiction in which they originated; and (b) from
permissible sources under U.S. law and to the extent such funds originate
outside the United States, under the laws of the jurisdiction in which they
originated. Borrower further represents, warrants and covenants to Lender that,
to the best of its knowledge after making due inquiry, neither the Borrower, nor
any holder of a direct or indirect interest of five percent (5%) or more in
Borrower, nor any Person providing funds to Borrower (a) is under investigation
by any governmental authority for, or has been charged with, or convicted of,
money laundering, drug trafficking, terrorist-related activities, any crimes
which in the United State would be predicate crimes to money laundering, or any
violation of any Anti-Money Laundering Laws; (b) has been assessed civil or
criminal penalties under any Anti-Money Laundering Laws; and (c) has had any of
its funds seized or forfeited in any action under any Anti-Money Laundering
Laws.
     Section 9.3. Borrower’s Compliance with Patriot Act. Borrower represents
and warrants that it is in compliance with any and all applicable provisions of
the Patriot Act except where the failure to do so could not reasonably be
anticipated to have a Material Adverse Effect.
     Section 9.4. Cooperation with Lender. After the Closing Date, Borrower
agree to cooperate with Lender, in providing such additional information and
documentation on Borrower’s legal or beneficial ownership, policies, procedures
and sources of funds as Lender deems necessary or prudent to enable Lender to
comply with Anti-Money Laundering Laws as now in existence or hereafter amended.
From time to time upon the written request of Lender, Borrower shall deliver to
Lender a schedule of the name, legal domicile address and jurisdiction of
organization, if applicable, for Borrower and each holder of a legal interest of
five percent (5%) or more in Borrower.
     Section 9.5. Actions Taken Pursuant to Anti-Money Laundering Laws. If
Lender reasonably believes that Borrower may have breached any of its
representations, warranties or covenants set forth in this Article 10, Lender
has the right (and may have the

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obligation under applicable law), with or without notice to Borrower, to
(1) notify the appropriate governmental authority (or authorities) and to take
such action as such governmental authority (or authorities) may direct;
(2) withhold Loan advances and segregate the assets constituting the Loan or any
of Borrower’s funds or assets deposited with or otherwise controlled by Lender
pursuant to the Facility Documents; (3) decline any payment (or deposit such
payment with an appropriate United States governmental authority or court) or
decline any prepayment or consent request, and/or declare an Event of Default
and immediately accelerate the Loan. Borrower agrees that it shall not assert
any claim (and hereby waives any claim that it may now or hereafter have)
against Lender or any of its affiliates or agents for any form of damages as a
result of any of the foregoing actions, regardless of whether Lender’s
reasonable belief is ultimately demonstrated to be accurate.
ARTICLE 10. MISCELLANEOUS.
     Section 10.1. Amendments and Waivers. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by the Borrower and the Lender,
and any provision of this Agreement may be waived by the Lender. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
     Section 10.2. Usury. If, at any time, the rate of interest, together with
all amounts which constitute interest and which are reserved, charged or taken
by the Lender as compensation for fees, services or expenses incidental to the
making, negotiating or collection of the loan evidenced hereby, shall be deemed
by any competent court of law, governmental agency or tribunal to exceed the
maximum rate of interest permitted to be charged by the Lender to the Borrower
under applicable law, then, during such time as such rate of interest would be
deemed excessive, that portion of each sum paid attributable to that portion of
such interest rate that exceeds the maximum rate of interest so permitted shall
be deemed a voluntary prepayment of principal. As used herein, the term
“applicable law” shall mean the law in effect as of the date hereof; provided,
however, that in the event there is a change in the law which results in a
higher permissible rate of interest, then this Agreement shall be governed by
such new law as of its effective date.
     Section 10.3. Expenses; Indemnity.
          (a) Borrower promises to pay to the Lender, as incurred, and as an
additional part of the unpaid principal balance, all reasonable costs, expenses
and reasonable attorneys’ fees (including any allocated costs of the Lender’s
in-house counsel to the extent permitted by applicable law) incurred (i) in the
preparation, protection, modification, collection, defense or enforcement of all
or part of this Agreement and the other Facility Documents, or (ii) in the
foreclosure or enforcement of any mortgage or

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security interest which may now or hereafter secure either the debt hereunder or
any guaranty thereof, or (iii) with respect to any action taken to protect,
defend, modify or sustain the lien of any such mortgage or security agreement,
or (iv) with respect to any litigation or controversy arising from or connected
with this Agreement or any other Facility Document or any collateral which may
now or hereafter secure the Loans or the other obligations of Borrower to
Lender, or (v) with respect to any act to protect, defend, modify, enforce or
release any of its rights or remedies with regard to, or otherwise effect
collection of, any collateral which may now or in the future secure the Loans or
any other obligation of Borrower to Lender or with regard to or against Borrower
or any endorser, guarantor or surety of with respect to any such obligation. The
Borrower also agrees to reimburse the Lender for the cost of periodic field
examinations of the Borrower’s books, records and any assets of the Borrower,
and appraisals of any assets of the Borrower, at intervals of no more than once
each year as long as no Event of Default exists or is discovered in connection
therewith or if an Event of Default does exist and is continuing, at such
intervals as the Lender may require. The actions described in this paragraph may
be performed by employees of the Lender or by independent appraisers.
          (b) The Borrower will indemnify and hold the Lender and its directors,
officers, employees and agents from any loss, liability, damages, judgments, and
costs of any kind relating to or arising directly or indirectly out of (i) this
Agreement or any document required hereunder, (ii) any credit extended or
committed by the Lender to the Borrower hereunder, and (iii) any litigation or
proceeding related to or arising out of this Agreement, any such document, or
any such credit. This indemnity includes but is not limited to attorneys’ fees
(including the allocated cost of in-house counsel). This indemnity extends to
the Lender, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys, and assigns. This indemnity will
survive repayment of the Borrower’s obligations to the Lender. All sums due to
the Lender hereunder shall be obligations of the Borrower, due and payable
within two (2) days of demand therefor and delivery of documentation evidencing
such loss, liability, damages, judgments and costs. Without limiting the
generality of the preceding sentence or any other obligations of Borrower,
hereunder, the Borrower will indemnify and hold harmless the Lender from any
loss or liability the Lender incurs in connection with or as a result of this
Agreement, which directly or indirectly arises out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply whether
the hazardous substance is on, under or about the Borrower’s property or
operations or property leased to the Borrower. The indemnity includes but is not
limited to attorneys’ fees (including the reasonable estimate of the allocated
cost of in-house counsel and staff). These indemnification obligations extend to
the Lender, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys and assigns.
     Section 10.4. Survival. The obligations of the Borrower under Section 2.2
and 10.3 shall survive the repayment of the Loans and the termination of this
Agreement.

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     Section 10.5. Successors and Assigns. This Agreement is binding on the
Borrower’s and the Lender’s successors and assignees. The Borrower agrees that
it may not assign this Agreement without the Lender’s prior consent. The Lender
may sell participations in or assign this loan, and may exchange information
about the Borrower (including, without limitation, any information regarding any
hazardous substances) with actual or potential participants or assignees. If a
participation is sold or the loan is assigned, the purchaser will have the right
of set-off against the Borrower.
     Section 10.6. Notices. Unless otherwise provided in this Agreement or in
another agreement between the Lender and the Borrower, all notices required
under this Agreement shall be personally delivered or sent by first class mail,
postage prepaid, or by overnight courier, to the addresses on the signature page
of this Agreement, or sent by facsimile to the fax numbers listed on the
signature page, or to such other addresses as the Lender and the Borrower may
specify from time to time in writing. Notices and other communications shall be
effective (i) if mailed, upon the earlier of receipt or five (5) days after
deposit in the U.S. mail, first class, postage prepaid, (ii) if telecopied, when
transmitted, or (iii) if hand-delivered, by courier or otherwise (including
telegram, lettergram or mailgram), when delivered.
     Section 10.7. Setoff. The Borrower agrees that, in addition to (and without
limitation of) any right of setoff, banker’s lien or counterclaim the Lender may
otherwise have, the Lender shall be entitled, at its option during the
continuance of an Event of Default, to offset balances (general or special, time
or demand, provisional or final) held by it for the account of the Borrower at
the Lender’s offices, in Dollars or in any other currency, against any amount
payable by the Borrower to the Lender under this Agreement or the Note which is
not paid when due (regardless of whether such balances are then due to the
Borrower), in which case it shall promptly notify the Borrower; provided that
the Lender’s failure to give such notice shall not affect the validity thereof.
Payments by the Borrower hereunder shall be made without setoff or counterclaim.

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SECTION 10.8. Arbitration and Waiver of Jury Trial.
     (a) This section concerns the resolution of any controversies or claims
between the parties, whether arising in contract, tort or by statute, including
but not limited to controversies or claims that arise out of or relate to:
(i) this agreement (including any renewals, extensions or modifications); or
(ii) any document related to this agreement (collectively a “Claim”). For the
purposes of this arbitration provision only, the term “parties” shall include
any parent corporation, subsidiary or affiliate of the Lender involved in the
servicing, management or administration of any obligation described or evidenced
by this agreement.
     (b) At the request of any party to this agreement, any Claim shall be
resolved by binding arbitration in accordance with the Federal Arbitration Act
(Title 9, U.S. Code) (the “Act”). The Act will apply even though this agreement
provides that it is governed by the law of a specified state. The arbitration
will take place on an individual basis without resort to any form of class
action.
     (c) Arbitration proceedings will be determined in accordance with the Act,
the then-current rules and procedures for the arbitration of financial services
disputes of the American Arbitration Association or any successor thereof
(“AAA”), and the terms of this paragraph. In the event of any inconsistency, the
terms of this paragraph shall control. If AAA is unwilling or unable to
(i) serve as the provider of arbitration or (ii) enforce any provision of this
arbitration clause, the Lender may designate another arbitration organization
with similar procedures to serve as the provider of arbitration.
     (d) The arbitration shall be administered by AAA and conducted, unless
otherwise required by law, in any U.S. state where real or tangible personal
property collateral for this credit is located or if there is no such
collateral, in the state specified in the governing law section of this
agreement. All Claims shall be determined by one arbitrator; however, if Claims
exceed Five Million Dollars ($5,000,000), upon the request of any party, the
Claims shall be decided by three arbitrators. All arbitration hearings shall
commence within ninety (90) days of the demand for arbitration and close within
ninety (90) days of commencement and the award of the arbitrator(s) shall be
issued within thirty (30) days of the close of the hearing. However, the
arbitrator(s), upon a showing of good cause, may extend the commencement of the
hearing for up to an additional sixty (60) days. The arbitrator(s) shall provide
a concise written statement of reasons for the award. The arbitration award may
be submitted to any court having jurisdiction to be confirmed, judgment entered
and enforced.

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     (e) The arbitrator(s) will give effect to statutes of limitation in
determining any Claim and may dismiss the arbitration on the basis that the
Claim is barred. For purposes of the application of the statute of limitations,
the service on AAA under applicable AAA rules of a notice of Claim is the
equivalent of the filing of a lawsuit. Any dispute concerning this arbitration
provision or whether a Claim is arbitrable shall be determined by the
arbitrator(s). The arbitrator(s) shall have the power to award legal fees
pursuant to the terms of this agreement.
     (f) This paragraph does not limit the right of any party to: (i) exercise
self-help remedies, such as but not limited to, setoff; (ii) initiate judicial
or non-judicial foreclosure against any real or personal property collateral;
(iii) exercise any judicial or power of sale rights, or (iv) act in a court of
law to obtain an interim remedy, such as but not limited to, injunctive relief,
writ of possession or appointment of a receiver, or additional or supplementary
remedies.
     (g) The filing of a court action is not intended to constitute a waiver of
the right of any party, including the suing party, thereafter to require
submittal of the Claim to arbitration.
               Section 10.9. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

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          (a) THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
CONNECTICUT STATE OR UNITED STATES FEDERAL COURT SITTING IN CONNECTICUT OVER ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTE,
AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CONNECTICUT STATE OR
FEDERAL COURT. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL
PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH
PROCESS TO THE BORROWER AT ITS ADDRESS SPECIFIED ON THE SIGNATURE PAGE OF THIS
AGREEMENT. THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE BORROWER
FURTHER WAIVES ANY OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO AN
ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF FORUM NON CONVENIENS. THE
BORROWER FURTHER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST THE LENDER
SHALL BE BROUGHT ONLY IN CONNECTICUT STATE OR UNITED STATES FEDERAL COURT
SITTING IN CONNECTICUT.
          (b) THE PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM. FURTHERMORE, WITHOUT INTENDING
IN ANY WAY TO LIMIT THE AGREEMENT TO ARBITRATE SET FORTY HEREIN, TO THE EXTENT
ANY CLAIM IS NOT ARBITRATED, THE PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY
RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF SUCH CLAIM. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
          (c) Nothing in this Section shall affect the right of the Lender to
serve legal process in any other manner permitted by law or affect the right of
the Lender to bring any action or proceeding against the Borrower or its
property in the courts of any other jurisdictions.
          (d) To the extent that the Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether from
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, the Borrower
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement and the Note.

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     Section 10.10. Severability. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Lender retains all
rights, even if it makes a loan after default. If the Lender waives a default,
it may enforce a later default. Any consent or waiver under this Agreement must
be in writing.
     Section 10.11. Counterparts; Facsimile Signatures. This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any party hereto may execute this
Agreement by signing any such counterpart. A facsimile signature of any party
shall be sufficient to constitute the original execution of this Agreement by
such party for all purposes.
     Section 10.12. Integration. This Agreement and any related security or
other agreements required by this Agreement, collectively:
          (a) represent the sum of the understandings and agreements between the
Lender and the Borrower concerning this credit;
          (b) replace any prior oral or written agreements between the Lender
and the Borrower concerning this credit; and
          (c) are intended by the Lender and the Borrower as the final, complete
and exclusive statement of the terms agreed to by them.
     In the event of any conflict between this Agreement and any other
agreements required by this Agreement, this Agreement will prevail.
     SECTION 10.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CONNECTICUT.
     Section 10.14. Confidentiality. The Lender agrees (on behalf of itself and
each of its affiliates, directors, officers, employees and representatives) to
use reasonable precautions to keep confidential, in accordance with safe and
sound banking practices, any non-public information supplied to it by the
Borrower pursuant to this Agreement, provided however, that nothing herein shall
limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for the Lender,
(iii) to bank examiners, auditors or accountants, or (iv) in connection with any
litigation to which the Lender is a party.
     Section 10.15. Treatment of Certain Information. The Borrower
(a) acknowledges that services may be offered or provided to it (in connection
with this Agreement or otherwise) by the Lender or by one or more of its
subsidiaries or affiliates

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and (b) acknowledges that information delivered to the Lender by the Borrower
may be provided to each such subsidiary and affiliate.
     Section 10.16. Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default or Event of Default if such action is
taken or condition exists.
     Section 10.17. Time of the Essence. Time and punctuality shall be of the
essence with respect to this instrument, but no delay or failure of the Lender
to enforce any of the provisions herein contained, and no conduct or oral
statement of the Lender shall waive or affect any of the Lender’s rights
hereunder.
     SECTION 10.18. Representation. Borrower hereby acknowledges that it has
been represented by competent counsel in connection with this transaction and
have been fully advised by such counsel of the full range of rights and
obligations possessed by them and undertaken or received pursuant to the terms
of this Agreement. Borrower hereby knowingly and, after consultation with
counsel, freely acknowledges and agrees that it does not now have nor know of
any basis for any claim in tort, contract or otherwise against the Lender or any
party related thereto for breach of any of the terms of the documents evidencing
or securing the Loans or otherwise. Borrower acknowledges and agrees that this
Agreement was negotiated, executed and delivered freely and with full and
informed knowledge of the consequences of this Agreement and that they have
executed this Agreement without duress.
     SECTION 10.19. COMMERCIAL WAIVER. THE BORROWER EXPRESSLY ACKNOWLEDGES THAT
THIS AGREEMENT AND EACH TRANSACTION RELATED TO IT IS A “COMMERCIAL TRANSACTION”
WITHIN THE MEANING OF CHAPTER 903A OF THE CONNECTICUT GENERAL STATUTES, AS
AMENDED. THE BORROWER HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ANY AND ALL RIGHTS
WHICH ARE OR MAY BE CONFERRED UPON IT UNDER CHAPTER 903a OF SAID STATUTES (OR
ANY OTHER FEDERAL OR STATE LAW AFFECTING PREJUDGMENT REMEDIES) TO ANY NOTICE OR
HEARING OR PRIOR COURT ORDER OR THE POSTING OF A BOND PRIOR TO THE BANK’S
OBTAINING A PREJUDGMENT REMEDY. THE BORROWER ACKNOWLEDGES THAT IT HAS BEEN
ADVISED BY COUNSEL OF ITS CHOICE OR HAS HAD THE OPPORTUNITY TO RETAIN COUNSEL OF
ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS AGREEMENT.

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     SECTION 10.20. Banking Days. Unless otherwise provided in this Agreement, a
banking day is a day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close, or are in fact closed, in the state
where the Bank’s lending office is located, and, if such day relates to amounts
bearing interest at an offshore rate (if any), means any such day on which
dealings in dollar deposits are conducted among banks in the offshore dollar
interbank market. All payments and disbursements which would be due on a day
which is not a banking day will be due on the next banking day. All payments
received on a day which is not a banking day will be applied to the credit on
the next banking day.
[Signature Page Follows]

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

                  Sturm, Ruger & Company, Inc.
 
           
 
  By:   /s/ Thomas A. Dineen    
 
           
 
      Thomas A. Dineen    
 
           
 
  Its:   Vice President, Treasurer    
 
      and Chief Financial Officer    
 
                Address for Notices:
 
                Lacey Place     Southport, CT 06890     Facsimile No.:
203.254.2195
 
                Bank of America, N.A.
 
           
 
  By:   /s/  Christopher T. Phelan    
 
           
 
      Name:  Christopher T. Phelan    
 
      Title:    Senior Vice President    
 
           
 
  Address   for Notices:    
 
                Bank of America, N.A.     Mail Code: CT2-102-24-02     777 Main
Street     Hartford, CT 06115     Facsimile No: 860.952.7515

[Signature Page to Credit Agreement between Sturm, Ruger & Company, Inc. and
Bank of America, N.A. dated as of December 14, 2007]

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EXHIBIT A
REVOLVING CREDIT PROMISSORY NOTE

      $25,000,000                       , 2007

     Sturm, Ruger & Company, a                      corporation with an address
of Lacey Place, Southport, Connecticut 06890(the “Borrower”), for value
received, hereby promises to pay to the order of Bank of America, N.A. (the
“Lender”) at the principal office of the Lender at Mail Code: CT2-102-24-02, 777
Main Street, Hartford, CT 06115, or such other place as Lender or the holder
hereof may request, for the account of the appropriate lending office of the
Lender, the principal sum of Twenty-Five Million ($25,000,000) Dollars or, if
less, the amount loaned by the Lender to the Borrower pursuant to the Credit
Agreement referred to below, in lawful money of the United States of America and
in immediately available funds, on the date(s) and in the manner provided in
said Credit Agreement. The Borrower also promises to pay interest on the unpaid
principal balance hereof, for the period such balance is outstanding, at said
principal office for the account of said lending office, in like money, at the
rates of interest as provided in the Credit Agreement described below, on the
date(s) and in the manner provided in said Credit Agreement.
     The date and amount of each type of Revolving Loan made by the Lender to
the Borrower under the Credit Agreement referred below, and each payment of
principal thereof, may be recorded by the Lender on its books and, prior to any
transfer of this Revolving Note (or, at the discretion of the Lender, at any
other time), endorsed by the Lender on the schedule attached hereto or any
continuation thereof.
     This is the Revolving Note referred to in, and is entitled to the benefits
of, that certain Credit Agreement (as amended from time to time the “Credit
Agreement”) dated as of even date herewith between the Borrower and the Lender
and evidences the Revolving Loans made by the Lender thereunder. All terms not
defined herein shall have the meanings given to them in the Credit Agreement.
     The Credit Agreement provides for the acceleration of the maturity of
principal upon the occurrence of certain Events of Default and for prepayments
on the terms and conditions specified therein.
     Except as may be otherwise specifically provided in the Credit Agreement,
the Borrower waives presentment, notice of dishonor, protest and any other
notice or formality with respect to this Revolving Note.

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     This Revolving Note shall be governed by, and interpreted and construed in
accordance with, the laws of the State of Connecticut.
     This Revolving Note was executed and delivered in the State of Connecticut.

                  Sturm, Ruger & Company, Inc.
 
           
 
  By:        
 
           
 
      Thomas A. Dineen    
 
           
 
  Its:   Vice President, Treasurer    
 
      and Chief Financial Officer    

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                      Amount of   Amount of   Balance     Date   Loan   Payment
  Outstanding   Notation By                                    

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EXHIBIT B
AUTHORIZATION LETTER
December __, 2007
Bank of America, N.A.
Mail Code: CT2-102-24-02
777 Main Street
Hartford, CT 06115

     
Re:
  Credit Agreement dated as of December ___, 2007 (the “Credit Agreement”)
between Sturm Ruger & Company, Inc. and Bank of America, N.A.

Ladies and Gentlemen:
     In connection with the captioned Credit Agreement, we hereby designate any
one of the following persons to give to you instructions, including notices
required pursuant to the Agreement, orally or by telephone or teleprocess:
     NAME (Typewritten)
                                             
                                             
                                             
     Instructions may be honored on the oral, telephonic or electronic
instructions of anyone purporting to be any one of the above designated persons
even if the instructions are for the benefit of the person delivering them. We
will furnish you with confirmation of each such instruction in writing signed by
any person designated above (including any facsimile which appears to bear the
signature of any person designated above) on the same day that the instruction
is provided to you but your responsibility with respect to any instruction shall
not be affected by your failure to receive such confirmation or by its contents.
     You shall be fully protected in, and shall incur no liability to us for,
acting upon any instructions which you in good faith believe to have been given
by any person designated above, and in no event shall you be liable for special,
consequential or punitive damages. In addition, we agree to hold you and your
agents harmless from any and all liability, loss and expense arising directly or
indirectly out of instructions that we provide

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Page 41

to you in connection with the Credit Agreement except for liability, loss or
expense occasioned by the gross negligence or willful misconduct of you or your
agents.
     Upon notice to us, you may, at your option, refuse to execute any
instruction, or part thereof, without incurring any responsibility for any loss,
liability or expense arising out of such refusal if you in good faith believe
that the person delivering the instruction is not one of the persons designated
above or if the instruction is not accompanied by an authentication method that
we have agreed to in writing.
     We will promptly notify you in writing of any change in the persons
designated above and, until you have actually received such written notice and
have had a reasonable opportunity to act upon it, you are authorized to act upon
instructions, even though the person delivering them may no longer be
authorized.

                  Very truly yours,
 
                Sturm Ruger & Company, Inc.
 
           
 
                     
 
  By:        
 
  Its:        

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EXHIBIT C
NOTICE OF BORROWING
                    , 2007
Bank of America, N.A.
777 Main Street
CT2-102-24-02
Hartford, CT 06115
Attn: Chris Phelan
Ladies and Gentlemen:
     The undersigned, a duly authorized officers of Sturm, Ruger & Company, Inc.
(the “Borrower”), refers to the Credit Agreement, dated as of December 14, 2007
(the “Credit Agreement,” the terms defined therein being used herein as therein
defined), between the Borrower and Bank of America, N.A. (the “Bank”), and
hereby gives you notice that the undersigned hereby requests a Revolving Loan,
and in connection therewith sets forth below the information relating to such
Revolving Loan (the “Proposed Borrowing”) as required by the Credit Agreement:
     (i) The Business Day of the Proposed Borrowing is                     ,
200_.
     (ii) The aggregate amount of the Proposed Borrowing is
$                                        .
     (iii) The interest rate for the Proposed Borrowing is (check one):
            Variable Rate
           LIBOR Rate
           (Complete Section iv)
     (iv) (LIBOR Rate Loans Only) The Interest Period for the Proposed Borrowing
is (check one):
           one (1) month
           two (2) months
           three (3) months

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     In The undersigned hereby certifies that all of the conditions of
Section 4.2 of the Credit Agreement are satisfied as of the date hereof.
     The undersigned further certifies that at least two of the individuals
named in the Aurhorization Letter between the Borrower and the Bank have
inteernally approved this borrowing.

            Very truly yours,

Sturm, Ruger & Company, Inc.
      By:           Name:           Title:        

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EXHIBIT D
NOTICE OF CONVERSION/EXTENSION
Date:                                         
Bank of America, N.A.
777 Main Street
CT2-102-24-02
Hartford, CT 06115
Attn: Chris Phelan
Ladies and Gentlemen:
     The undersigned, a duly authorized officer of Sturm, Ruger & Company, Inc.
refers to the Credit Agreement dated as of December 14, 2007 (as amended,
supplemented and/or modified from time to time, the “Credit Agreement,” the
capitalized terms defined therein being used herein as therein defined), by and
between Sturm Ruger & Company, Inc. and Bank of America, N.A., and hereby gives
you notice pursuant the Credit Agreement that the undersigned hereby requests a
conversion of one type of Revolving Loan into another type of Revolving Loan, or
the continuation of a Revolving Loan as the same type of Revolving Loan with an
Interest Period of the same or different duration, and in that connection sets
forth below the information relating to such conversion or extension (the
“Proposed Conversion/Extension”) as required by the Credit Agreement:
               (i) The Business Day of the Proposed Conversion/Extension is
                    .
               (ii) The aggregate amount of the Proposed Conversion/Extension is
$                                        .
               (iii) The Revolving Loan or Revolving Loans to which the Proposed
Conversion/Extension is to apply are the following:
          $                                         Variable Rate
          $                                         LIBOR Rate

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               (iv) The interest rate for the Proposed Conversion/Extension is
(check one):
                     Variable Rate
                     LIBOR Rate (Complete Section v)
               (v) (LIBOR Loans Only) The Interest Period for the Proposed
Conversion/Extension is (check one):
           one (1) month
           two (2) months
           three (3) months
     The undersigned hereby certifies that no Default or Event of Default has
occurred and is continuing. Unless we otherwise notify you in writing, you may
rely on the fact that such statements are true and correct on the day of the
Proposed Conversion/Extension before and after giving effect to such Proposed
Conversion/Extension, as though made on and as of such date.
     The undersigned acknowledges and agrees that if a LIBOR Rate Loan is being
converted or extended other than on the last day of the Interest Period
therefor, the Borrower will pay any amounts due under Section 3.3 of the Credit
Agreement.

                  Very truly yours,
 
                Sturm, Ruger & Company, Inc.
 
           
 
  By        
 
           
 
      Name:    
 
      Title:    

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Page 46

[Date]
Bank of America, N.A.
Mail Code: CT2-102-24-02
777 Main Street
Hartford, CT 06115
     Pursuant to the terms and conditions of the Credit Agreement, dated as of
December 14, 2007, between Bank of America, N.A. and Sturm, Ruger & Company,
Inc. (the “Borrower”) (the “Credit Agreement”; capitalized terms used herein but
not defined herein having the meanings specified in the Credit Agreement) please
be advised that:
     The undersigned certifies that, to the best of the undersigned officer’s
knowledge, as of [date of end of quarter or year], the following information is
true:

              Section       Permitted/Required   Actual
7.1
  Adjusted Net Worth   Not less than $94,000,000    

     Upon request will furnish you with a detailed breakdown of the foregoing
calculations (or if requested, such an analysis is attached).
     The undersigned hereby certifies that (i) the representation and warranties
contained in the Credit Agreement and in each other Facility Document, are true
and correct in all material respects on and as of the date hereof as though made
on and as of such date (unless stated to relate to a specific date, in which
case the same shall be true and correct in all material respects as of such
specific earlier date), (ii) no Default or Event of Default has occurred and is
continuing, and (iii) since the Closing Date (or the last affirmation hereof
delivered in writing to the Bank, if later), there has been no materially
adverse change in the assets, business, operations, properties, prospects or
condition (financial or otherwise).

                  Sturm, Ruger & Company, Inc.
 
           
 
  By        
 
           
 
      Name:    

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Schedule 5.4
There are no equitable, legal, arbitration, administrative actions, suits,
proceedings or investigations pending or, to the knowledge of the Borrower,
threatened, against or affecting in any manner the Borrower that individually,
or in the aggregate, has had or is reasonably anticipated to have a material
adverse effect on the Company.
The Borrower reports all cases instituted against it, and the results of those
cases, where terminated, to the Securities and Exchange Commission in its
quarterly and annual reports on Forms 10-Q and 10-K.

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Schedule 5.14
Potential underfunding of the following Plans in amounts not substantially in
excess of those separately disclosed to the Bank in connection with this
Agreement:
     1. Sturm, Ruger & Company, Inc. Salaried Employees Retirement Income Plan
     2. Sturm, Ruger & Company, Inc. Hourly Employees Pension Plan

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Schedule 5.15
There are no subsidiaries of the Borrower.