Exhibit 10.43

LOAN AND SECURITY AGREEMENT

     AGREEMENT made as of this 11th day of January, 2005, by and between Smith &
Wesson Corp., a Delaware corporation having a chief executive principal place of
business at 2100 Roosevelt Avenue, Springfield, Massachusetts, (hereinafter
referred to as the “Borrower”), Smith & Wesson Holding Corporation, a Nevada
corporation with a usual place of business at 2100 Roosevelt Avenue,
Springfield, Massachusetts (the “Guarantor”) and Banknorth, N.A., a national
banking association organized under the laws of the United States of America,
having a usual place of business at 1441 Main Street, Springfield, Massachusetts
(hereinafter referred to as the “Lender”).

     1.00 DEFINITIONS AND ACCOUNTING TERMS

     As used in this Agreement, the following terms have the following meanings
(terms defined in the singular to have the same meaning when used in the plural
and vice versa):

     “Advance” means an Advance by Lender to Borrower in accordance with the
terms and conditions of the Notes, this Agreement, the Mortgage or any other
Loan Documents.

     “Affiliate” means any person controlling, controlled by, or under common
control with Borrower. For purposes of this definition “Control” means the
possession, directly or indirectly of the power to direct or cause direction of
the management and policies of the Borrower, whether through ownership of common
or preferred stock or other equity interests, by contract or otherwise. Without
limiting the generality of the forgoing, each of the following shall be an
Affiliate: Any officer, director, employee or other agent of Borrower, any
shareholder or subsidiary of Borrower and any other Person with whom for which
Borrower has common shareholders, officers and directors.

     “Agreement” means this Loan and Security Agreement as amended,
supplemented, or modified from time to time.

     “Available Amount” means (a) up to an aggregate outstanding principal
amount not to exceed the lesser of: (i) Seventeen Million and 00/100 Dollars
($17,000,000) (the “Maximum Amount of Revolving Line of Credit Loans”) or
(ii) the sum of (x) an amount equal to eighty-five percent (85%) of the net
amount of the Eligible Receivables; plus the lesser of Six Million and 00/100
Dollars ($6,000,000.00) or (y) seventy percent (70%) of Eligible Raw Materials
Inventory; plus sixty percent (60%) of Eligible Finished Goods Inventory; and
(z) forty percent (40%) of Eligible Finished Parts Inventory; (b) Twelve Million
One Hundred Four Thousand and 00/100 Dollar ($12,104,000) Commercial Term Loan;
(c) Five Million Eight Hundred Ninety Six Thousand and 00/100 Dollar
($5,896,000) Commercial Real Estate Term Loan; and (d) Five Million and 00/100
Dollar ($5,000,000) Equipment Line of Credit. Notwithstanding the foregoing, the
Available Amount of the Revolving Line of Credit Loan shall be reduced by the
sum of the Lender’s exposure of (1) foreign exchange transactions, (2) ACH, and
(3) outstanding Letters of Credit issued on behalf of the Borrower from
time-to-time.

     “Blocked Account” shall have the meaning set forth in Section 4.03.

     “Borrowing Base Certificate”, means a borrowing base certificate having
substantially the same form and substance as the certificate attached hereto as
Exhibit “A”.

     “Borrower’s Loan Account” with respect to the Revolving Line of Credit
means:

     A. Insofar as the Borrower may request and the Lender may be willing, in
the Lender’s reasonable discretion, to make such loans to the Borrower, pursuant
to the Revolving Line of Credit, the Lender shall enter such loans as debits in
the Borrower’s Loan Account. The Lender shall also record as a debit to the
Borrower’s Loan Account, in accordance with customary accounting practice, all
other obligations, debts, charges, expenses, and other items properly chargeable
to the Borrower; and shall credit all payments made by the Borrower on account
of indebtedness evidenced by the

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Borrower’s Loan Account and other appropriate debits and credits. The principal
balance of the Borrower’s Loan Account shall reflect the amount of the
Borrower’s indebtedness to the Lender from time-to-time by reason of loans and
other appropriate charges hereunder. At least once each month the Lender shall
render a statement of account for the Borrower’s Loan Account which statement
shall be considered correct and accepted by the Borrower and conclusively and
judicially binding upon the Borrower, unless the subject of written objection
received by Lender within thirty (30) days from its mailing to Borrower.

     B. The Borrower agrees that the debit balance of the Borrower’s Loan
Account shall at no time exceed the Available Amount and that if at any time
such excess does arise, the Borrower shall pledge, assign, and transfer to the
Lender additional Collateral or shall pay cash to the Lender to be credited to
the Borrower’s Loan Account, in such amount as may be necessary to eliminate
such excess.

     C. However, nothing herein shall be construed to restrict the Lender, in
its sole and exclusive discretion, from making Advances in excess of the stated
Available Amount or waiving other requirements herein, without executing any
additional promissory note, Loan and Security Agreement, or other evidence of
debt, and its so doing at any time, or times, shall not waive its rights to
insist upon strict compliance with the terms thereof at any other time.

     “Business Day” means any day other than a Saturday, Sunday, or other day on
which commercial banks in Massachusetts are authorized or required to close
under the laws of the Commonwealth of Massachusetts.

     “Code” means the Internal Revenue Code of 1986, as amended from
time-to-time and the regulations and published interpretations thereof.

     “Collateral” means any and all personal property or chose in action, of the
Borrower and in which the Lender now has, by this Agreement acquires or
hereafter acquires, a security interest as more fully described in Section 11.00
of this Agreement.

     “Commercial Real Estate Term Loan” shall have the meaning assigned to such
term in Section 7.01.

     “Commercial Real Estate Term Promissory Note” shall have the meaning
assigned to such term in Section 7.03.

     “Commercial Term Loan” shall have the meaning assigned to such term in
Section 6.01.

     “Commercial Term Promissory Note” shall have the meaning assigned to such
term in Section 6.03.

     “Covenant Compliance Certificate” shall have the meaning assigned to such
term in Section 13.09A.

     “Debt” means, as applied to any Person, as of any date of determination
(without duplication):

  (a)   all obligations of such Person for borrowed money (whether or not
represented by bonds, debentures, notes, drafts or other similar instruments) or
evidenced by bonds, debentures, notes, drafts or similar instruments;     (b)  
all obligations of such Person for all, or any part of, the deferred purchase
price of property or services, or for the cost of property constructed or of
improvements thereon, including trade accounts payable incurred, in respect of
property purchased, in the ordinary course of business, which are overdue or
which are being contested in good faith by appropriate proceedings and are
required to be classified on such Person’s balance sheet, in accordance with
GAAP, as debt;     (c)   all obligations secured by any Lien on or payable out
of the proceeds of production from property owned or held by such Person even
though such Person has not assumed or become liable for the payment of such
obligation;

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  (d)   all capital lease obligations of such Person;     (e)   all obligations
of such Person, contingent or otherwise, in respect of any letter of credit
facilities, bankers’ acceptance facilities or other similar credit facilities
other than any such obligation which relate to an underlying obligation which
otherwise constitutes Debt of such Person hereunder or a current account payable
of such Person incurred in the ordinary course of business;     (f)   all
obligations of such Person upon which interest payments are customarily made;
and     (g)   all guaranties by such Person of or with respect to obligations of
the character referred to in the foregoing clauses (a) through (f) of another
Person;

provided, however, that in determining the Debt of any Person, (i) all
liabilities for which such Person is jointly and severally liable with one or
more other Persons (including, without limitation, all liabilities of any
partnership or joint venture of which such Person is a general partner or
co-venturer) shall be included at the full amount thereof without regard to any
right such Person may have against any such other Persons for contribution or
indemnity, and (ii) no effect shall be given to deposits, trust arrangements or
similar arrangements which, in accordance with GAAP, extinguish Debt for which
such Person remains legally liable.

     “Default” means any of the events specified in Section 18.00, whether or
not any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.

     “Default Rate” means with respect to any and all of the principal due to
Lender, to the extent that any principal amount not paid when due (at maturity,
by acceleration or otherwise) shall bear interest thereafter until paid in full,
payable on demand, at a rate per annum equal to the aggregate of the interest
rate currently in effect on such Loan, as determined herein, plus five percent
(5.00%).

     “Designated Collateral Impairment Events” has the meaning set forth in
Section 4.02 hereof.

     “Eligible Finished Goods Inventory” means finished goods Inventory which
Lender, in its reasonable judgment deems Eligible Finished Goods Inventory,
based on such considerations as Lender may from time-to-time deem appropriate.
Without limiting the generality of the foregoing, no Inventory shall be Eligible
Finished Goods Inventory unless, in Lender’s reasonable judgment, such Inventory
(i) consists of finished goods, in a good, new and salable condition which are
not obsolete or unmerchantable, and are not comprised of packaging, materials or
supplies, reels, skids, spools, tin pots, scrap or tolling inventory, perishable
tooling or inventory held at outside processors, and are not slow-moving or held
on consignment; (ii) meets all standards imposed by any governmental agency or
authority; (iii) conforms in all respects to the warranties and representations
set forth herein; (iv) is at all times subject to Lender’s duly perfected, first
priority security interest; and (v) is situated at a location in compliance with
Section 12.01 hereof.

     “Eligible Finished Parts Inventory” means finished parts Inventory which
Lender, in its reasonable judgment deems Eligible Finished Parts Inventory,
based on such considerations as Lender may from time-to-time deem appropriate.
Without limiting the generality of the foregoing, no Inventory shall be Eligible
Finished Parts Inventory unless, in Lender’s reasonable judgment, such Inventory
(i) consists of finished parts, in a good, new and salable condition which are
not obsolete or unmerchantable, and are not comprised of packaging, materials or
supplies, reels, skids, spools, tin pots, scrap or tolling inventory, perishable
tooling or inventory held at outside processors, and are not slow-moving or held
on consignment; (ii) meets all standards imposed by any governmental agency or
authority; (iii) conforms in all respects to the warranties and representations
set forth herein; (iv) is at all times subject to Lender’s duly perfected, first
priority security interest; and (v) is situated at a location in compliance with
Section 12.01 hereof.

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     “Eligible Raw Materials Inventory” means raw materials Inventory which
Lender, in its reasonable judgment deems Eligible Raw Materials Inventory, based
on such considerations as Lender may from time-to-time deem appropriate. Without
limiting the generality of the foregoing, no Inventory shall be Eligible Raw
Materials Inventory unless, in Lender’s reasonable judgment, such Inventory
(i) consists of raw materials or work-in-process, in a good, new and salable
condition which are not obsolete or unmerchantable, and are not comprised of
packaging, materials or supplies, reels, skids, spools, tin pots, scrap or
tolling inventory, perishable tooling or inventory held at outside processors,
and are not slow-moving or held on consignment; (ii) meets all standards imposed
by any governmental agency or authority; (iii) conforms in all respects to the
warranties and representations set forth herein; (iv) is at all times subject to
Lender’s duly perfected, first priority security interest; and (v) is situated
at a location in compliance with Section 12.01 hereof.

     “Eligible Receivables” means Receivables which Lender, in its reasonable
judgment shall deem eligible based on such considerations as Lender may from
time-to-time deem appropriate. Without limiting the foregoing, a Receivable
shall not be deemed to be an Eligible Receivable if (i) the account debtor has
failed to pay the receivable within a period of ninety (90) days after due date;
(ii) the account debtor has failed to pay more than thirty percent (30%) of all
outstanding receivables owed by it to Borrower within ninety (90) days after due
date; (iii) the account debtor is an Affiliate of Borrower; (iv) the goods
relating thereto are placed on consignment, guaranteed sale, “bill and hold” or
other terms pursuant to which payment by the account debtor may be conditional,
including, without limitation, loaner receivables; (v) the account debtor is not
located in the United States or Canada, unless the receivable is supported by a
letter of credit in form and substance satisfactory to Lender; (vi) the account
debtor is the United States or any department, agency or instrumentality thereof
or any state, city or municipality of the United States, unless Borrower has
complied with all applicable federal, state and other Assignment of Claims Act
and Lender holds a perfected security interest in such Receivable ;
(vii) Borrower is or may become liable to the account debtor for goods sold or
services rendered by the account debtor to Borrower, or for tolling inventory
held by Borrower and owned by such account debtor (up to the amount of such
liability); (viii) with respect to Receivables as to which the total obligations
of such account debtor to Borrower exceed fifteen percent (15%) of Eligible
Receivables; (ix) the account debtor disputes liability or makes any claim with
respect thereto (up to the amount of such liability or claim), or is subject to
any insolvency or bankruptcy proceeding, or becomes insolvent, fails or goes out
of a material portion of its business; (x) the amount thereof consists of late
charges or finance charges; (xi) the invoice constitutes a progress billing on a
project not yet completed, except that the final billing at such time as the
matter has been completed and delivered to the customer may be deemed an
Eligible Receivable; (xii) credit balances over ninety (90) days past issue date
(with the result that the total amount of Receivables which shall be considered
ineligible as a result of the operation of clause (i) hereof shall be determined
without giving effect to any credit balances included in the “over ninety
(90) days”); (xiii) sales for cash or on other terms requiring cash on delivery
(C.O.D.); (xiv) the face amount thereof exceeds Ten Thousand and 00/100 Dollars
($10,000.00), unless accompanied by evidence of shipment of goods relating
thereto satisfactory to Lender in its sole discretion; (xv) unapplied cash
receipts; or (xvi) invoices with respect to amounts owed for spool/or pallet
deposits.

     “Environmental Law” means any past, present or future Federal, state, local
or foreign statutory or common law, or any regulation, ordinance, code, plan,
order, permit, grant, franchise, concession, restriction or agreement issued,
entered, promulgated or approved thereunder, relating to (a) the environment,
human health or safety, including, without limitation, emissions, discharges,
releases or threatened releases of oil and/or Hazardous Substances into the
environment (including, without limitation, air, surface water, groundwater or
land), or (b) the manufacture, generation, refining, processing, distribution,
use, sale, treatment, receipt, storage, disposal, transport, arranging for
transport, or handling of Hazardous Substances.

     “Environmental Permits” means collectively, any and all permits, consents,
licenses, approvals and registrations of any nature at any time required
pursuant to or in order to comply with any Environmental Law.

     “Equipment Line of Credit Loan” shall have the meaning assigned to such
term in Section 8.00.

     “Equipment Line of Credit Note” shall have the meaning assigned to such
term in Section 8.01.

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     “ERISA” means the Employment Retirement Income Security Act of 1974, as
amended from time-to-time, and the regulations and published interpretations
thereof.

     “Eurocurrency Reserve Requirement” means, for any LIBOR Loan for any
Interest Period therefor, the daily average of the stated maximum rate
(expressed as a decimal) at which reserves (including any marginal,
supplemental, or emergency reserves), if any, are required to be maintained
during such Interest Period under Regulation D by the Lender against
“Eurocurrency Liabilities” (as such term is used in Regulation D) but without
benefit or credit of proration, exemptions, or offsets that might otherwise be
available to the Lender from time-to-time under Regulation D. Without limiting
the effect of the foregoing, the Eurocurrency Reserve Requirement shall reflect
any other reserves required to be maintained by the Lender against (a) any
category of liabilities that includes deposits by reference to which the LIBOR
Interest Rate for LIBOR Loans is to be determined; or (b) any category of
extension of credit or other assets that includes LIBOR Loans.

     “Event of Default” means any of the events specified in Section 18.00,
provided that any requirement (if any) for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.

     “Following Business Day Convention” means the convention for adjusting any
relevant date that would otherwise fall on a day that is not a Business Day so
that the date will be the first following day that is a Business Day.

     “GAAP” means generally accepted accounting principles consistently applied,
in accordance with financial reporting standards from time-to-time in effect
among nationally recognized certified public accounting firms in the United
States.

     “Guarantor” means Smith & Wesson Holding Corporation, a Nevada corporation,
with a usual place of business at 2100 Roosevelt Avenue, Springfield,
Massachusetts.

     “Hazardous Substances” means collectively, contaminants; pollutants; toxic
or hazardous chemicals, substances, materials, wastes and constituents;
petroleum products; polychlorinated biphenyls; medical wastes; infectious
wastes; oil; asbestos; paint containing lead; and urea formaldehyde.

     “Impositions” means with respect to Borrower relating to the Mortgaged
Premises, all taxes of every kind and nature, all charges, filing, registration
and recording fees, excises and sewer rents, charges for water, for setting or
repairing meters and for all other utilities serving the Mortgaged Premises, and
assessments, levies, inspection and license fees and all other charges imposed
or assessed against the Mortgaged Premises or any portion thereof, including the
income derived from the Mortgaged Premises or imposed upon Lender by virtue of
its interest in, or measured by amounts payable under the Note, this Agreement,
the Mortgage or any other Loan Document and any stamp or other taxes which might
be required to be paid with respect to the Loan Documents, any of which might,
if unpaid, result in a lien on the Mortgaged Premises or any portion thereof,
regardless of whom assessed.

     “Incipient Default” means any event or condition which, with the giving of
notice or the lapse of time, or both, would become an Event of Default.

     “Insolvency” of the Borrower or any other person means that there shall
have occurred with respect to that person one or more of the following events:
dissolution, termination of existence, insolvency, business failure, appointment
of a custodian, interim trustee, or trustee, of any part of the property of the
Borrower, assignment or trust mortgage for the benefit of creditors by, or the
voluntary or involuntary filing of a petition in bankruptcy or the commencement
of any proceedings under any bankruptcy or insolvency laws, or any laws relating
to the relief of debts, readjustment of indebtedness, reorganization,
composition or extension, by or against Borrower.

     “Intangible Assets” means as of any date of determination, the aggregate
book value of all assets of the following character appearing in a balance sheet
of the Borrower prepared in accordance with GAAP as at such date: goodwill,
franchises, trademarks, trade names, licenses, permits, copyrights, organization
expense, and all other assets which under GAAP are deemed intangible.

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     “Interest Period” means (i) with respect to any LIBOR Loan, the period
commencing on the date such loan is made and ending, as the Borrower may select,
pursuant to Section 2.02, on the corresponding day which is one (1) month, two
(2) months or three (3) months thereafter, except that each such Interest Period
that commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate subsequent
calendar month; provided that all of the foregoing provisions relating to
Interest Periods are subject to the following:

  (a)   no Interest Period may extend beyond the Termination Date, in the case
of a Revolving Line of Credit Loan without prior written approval of the Lender;
    (b)   if an Interest Period would end on a day that is not a Business Day,
such Interest Period shall be extended to the next Business Day unless such
Business Day would fall in the next calendar month, in which event such Interest
Period shall end on the immediately preceding Business Day.

     “Inventory” means all of Borrower’s now owned and hereafter acquired goods,
merchandise and other personal property, wherever located, to be furnished under
any contract of service, or held for sale or lease, all raw materials,
work-in-process, finished parts, finished goods (as the case may be and
duplicative) and materials and supplies of any kind, nature or description which
are or might be used or consumed in Borrower’s business or used in connection
with the manufacture, packing, shipping, advertising, selling or finishing of
such goods, merchandise and other personal property, and all documents of title
or other documents representing them. Inventory shall not include any goods,
merchandise or other personal property which may be in the possession of
Borrower which is not owned by Borrower.

     “Lender” as used in this Agreement shall include the stated Lender herein
and, except as the context may indicate a contrary intent, any successor in
interest of the Lender.

     “Lending Office” means the Lender’s office at 1441 Main Street,
Springfield, Massachusetts 01103.

     “Liabilities” of any Person shall mean and include all obligations of such
Person which in accordance with GAAP shall be classified on a balance sheet of
such Person as liabilities of such Person, and in any event shall include all
(i) obligations of such Person for borrowed money or which has been incurred in
connection with the acquisition of property or assets, (ii) obligations secured
by any Lien or other charge upon property or assets owned by such Person, even
though such Person has not assumed or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender, or lessor under such agreement in the event of default are limited to
repossession or sale of property, (iv) obligations under guaranties, and
(v) obligations under any capitalized lease.

     “LIBOR Interest Rate” means, for each LIBOR Loan, the rate per annum
(rounded upward, if necessary, to the nearest 1/16 of 1%) determined by the
Lender to be equal to the quotient of (a) the London Interbank Offered Rate for
such LIBOR Loan for such Interest Period divided by (b) one minus the
Eurocurrency Reserve Requirement, if any, for such Interest Period.

     “LIBOR Loan” means any Loan when and to the extent that the interest rate
therefor is determined by reference to the LIBOR Interest Rate.

     “Lien” means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).

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     “Loan(s)” means (i) a LIBOR or Prime Rate Revolving Line of Credit Loan or
Loans; (ii) Commercial Term Loan; (iii) Commercial Real Estate Term Loan; and
(iv) Equipment Line of Credit Loan.

     “Loan Documents” means this Agreement, any Note or other documents related
to the transactions discussed in this Agreement.

     “London Interbank Offered Rate” means the rate for deposits in U.S. Dollars
for a period equal to one (1) month, two (2) months or three (3) months (as the
case may be) as such rate appears on Telerate Page 3750 as of 11:00 a.m. London
time, on the day that is two (2) business days prior to the adjustment date. If
such rate does not appear on Telerate Page 3750, the rate for that adjustment
date will be the arithmetic mean of the rates quoted by major banks in London,
selected by Banknorth, N.A., for a period equal to one (1) month, two (2) months
or three (3) months, as the case may be, as of 11:00 a.m. London time, on the
day that is two (2) business days prior to the adjustment date.

     “Long Term Lease” means any lease of property (real, personal or mixed),
other than a capital lease, having a term (including terms of renewal or
extension at the option of the lessee, whether or not such option has been
exercised) expiring more than one year after the commencement of the initial
term.

     “Mortgage” means a certain Mortgage and Security Agreement between the
Lender and Borrower in which the Mortgaged Premises are mortgaged to Lender.

     “Mortgaged Premises” means the parcels of land with improvements thereon
located at 2100 Roosevelt Avenue, Springfield, Massachusetts 01104 (the
“Roosevelt Premises”); 299 Page Boulevard, Springfield, Massachusetts 01104 (the
“Page Premises”); and 19 Aviation Drive, Houlton, Maine 04730 (the “Aviation
Premises”).

     “Multiemployer Plan” means a Plan described in Section 4001(a)(3) of ERISA.

     “Net Cash Available for Debt Service” shall be defined as earnings before
taxes, plus depreciation and amortization expense, plus interest expense, plus
extraordinary expenses, less all unfinanced capital expenditures (including
capital leases), less income taxes actually paid, less dividends, less
extraordinary income.

     “Note” means: (i) the Revolving Line of Credit Note; (ii) the Commercial
Term Promissory Note; (iii) the Commercial Real Estate Term Promissory Note; and
(iv) the Equipment Line of Credit Note (collectively, the “Note” or “Notes”).

     “Obligation” and “Obligations” shall mean any and all liabilities and
obligations of the Borrower to the Lender of every kind and description, direct
or indirect, absolute or contingent, primary or secondary, due or to become due,
now existing or hereafter arising, regardless of how they arise or by what
agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, and includes a LIBOR or Prime Rate Revolving Line of
Credit Loan or Loans; (ii) Commercial Term Loan; (iii) Commercial Real Estate
Term Loan; and (iv) Equipment Line of Credit Loan; (v) obligations to perform
acts and refrain from taking action, as well as obligations to pay money,
(vi) reimbursement obligations of the Borrower, pursuant to any documentation
executed in conjunction with or related to the issuance by the Lender of any
letters of credit; (vii) guaranty obligations; and/or (viii) all obligations
arising under any SWAP Agreement.

     “PBGC” means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

     “Permitted Encumbrance” means any of the liens, claims, assessments,
encumbrances, and rights of others encumbering title to the Mortgaged Premises
which are set forth on Exhibit “B”.

     “Person” means an individual, partnership, corporation, liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other entity of whatever nature.

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     “Prime Rate” means that rate established and announced as such, from
time-to-time by the Wall Street Journal as the Prime Rate.

     “Prime Loan” means any Loan when and to the extent that the interest rate
therefore is determined by reference to the Prime Rate.

     “Prohibited Transaction” means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code.

     “Receivables” means all of Borrower’s now owned and hereafter acquired
accounts as defined under Article 9 of the Uniform Commercial Code in effect
from time-to-time in the Commonwealth of Massachusetts (whether or not earned by
performance), proceeds of any letters of credit naming Borrower as beneficiary,
contract rights, chattel paper, instruments, documents and all other forms of
obligations at any time owing to Borrower, all guaranties and other security
therefore, whether secured or unsecured, all merchandise returned to or
repossessed by Borrower and all rights of stoppage in transit and all other
rights or remedies of an unpaid vendor, lienor or secured party.

     “Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System as amended or supplemented from time-to-time.

     “Rentals” shall mean and include all fixed rents (including as such all
payments which the lessee is obligated to make to the lessor on termination of
the lease or surrender the property) payable by the Borrower, as lessee or
sublessee under lease of real or personal property, but shall be exclusive of
any amounts required to be paid by the Borrower (whether or not designated as
rents or additional rents) on account of maintenance, repairs, insurance, taxes
and similar charges. Fixed rents under any so-called “percentage lease” shall be
computed solely on the basis of the minimum rents, if any, required to be paid
by the lessee regardless of sales volume or gross revenues.

     “Reportable Event” means any of the events set forth in Section 4043 of
ERISA.

     “Revolving Line of Credit Loan(s)” or “Revolving Credit Loan(s)” shall have
the meaning assigned to such terms in Section 2.01.

     “Revolving Line of Credit Note” shall have the meaning assigned to such
term in Section 2.05.

     “Tangible Net Worth” means as of any date of determination, the net value
of the Borrower’s stockholder’s equity, as defined according to GAAP less the
book value as of such date of Intangible Assets.

     “Telerate Page 3750” means the display designated as “Page 3750” on the Dow
Jones Telerate Service ( or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the British Bankers’
Association as the information vendor for the purpose of displaying British
Bankers’ Association Interest Settlement Rates for U.S. Dollar Deposits).

     “Termination Date” means September 30, 2007, but if the Revolving Line of
Credit Loan is extended or renewed, the Termination Date shall be September 30th
next following the date of extension or renewal unless otherwise determined by
the Lender.

     “Total Debt Service” shall be defined as the total of interest payments of
indebtedness due and principal repayments of long-term debt, including any
capital leases.

     “Total Liabilities” means as of any date of determination, the total of all
Liabilities of the Borrower which would be properly classified as liabilities,
whether current or long-term, in accordance with GAAP.

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     “Yield Maintenance Fee” means the resulting sum computed by subtracting the
Federal Home Loan Bank Rate with a Maturity Date closest to the remaining term
of the Note being prepaid from the applicable interest rate in effect at the
time of prepayment, including, without limitation, the Default Rate. If the
result is zero or a negative number, there shall be no Yield Maintenance Fee due
and payable. If the result is a positive number, than the resulting percentage
shall be multiplied by the amount of the principal balance being prepaid. The
resulting amount shall be divided by 360 and multiplied by the number of days
remaining in the term of the Note being prepaid. Said amount shall be reduced to
present value, calculated by using the above-stated interest rate and the number
of days remaining in the term of the applicable Note. The resulting amount shall
be the Yield Maintenance Fee due to the Lender upon prepayment of a Note
requiring the payment of a Yield Maintenance Fee.

     1.01 ACCOUNTING TERMS

     All accounting terms not specifically defined herein shall be construed in
accordance with GAAP consistent with those applied in the preparation of the
financial statements and all financial data submitted pursuant to this Agreement
shall be prepared in accordance with such principles.

     2.00 THE REVOLVING LINE OF CREDIT

     2.01 REVOLVING LINE OF CREDIT FACILITY (the “Revolving Line of Credit”)

     To a maximum amount of Seventeen Million and 00/100 Dollars ($17,000,000) a
committed Revolving Line of Credit (the “Revolving Line of Credit Loan”) will be
made available, subject to the Available Amount, repayable in accordance with
the terms hereof, with Loans made from time-to-time during the period from the
date of this Agreement up to, but not including, the date when demand is made
for repayment of the Revolving Line of Credit on or after an the occurrence of
an Event of Default or the Termination Date, if earlier. Loans may be in any
amount within the limits of the Available Amount and within such limits, the
Borrower may borrow and repay pursuant to Section 10.02, and re-borrow under
this Section 2.01 on such terms and conditions as are contained herein,
provided, however, at a time prior to the first request for borrowing under the
Revolving Line of Credit, and at monthly intervals thereafter within thirty
(30) days of month end, Borrower shall submit a Borrowing Base Certificate to
Lender.

     Request for borrowings thereafter may be made from time-to-time by Borrower
in the manner set forth immediately herein to the Available Amount in the
previously tendered Borrowing Base Certificate. At such time as the full amount
of such availability is borrowed, no further borrowings shall be requested
without the filing of a subsequent Borrowing Base Certificate.

     Each Loan shall be made and maintained at the Lender’s Lending Office for
such Loan. The Borrower shall pay interest to the Lender, which shall be
calculated daily and payable monthly, in arrears, on the outstanding and unpaid
principal amount of the Revolving Line of Credit Loans made under this Agreement
during the preceding month at a rate per annum as follows:

          A. For a Prime Loan at a rate equal to Prime Rate; or

          B. For a LIBOR Loan at a rate equal to the adjusted LIBOR Interest
Rate, plus two and one-half percent (2.50%) based upon the Interest Period
selected by the Borrower and confirmed in writing to the Borrower following
Borrower’s request for a LIBOR Loan or a conversion to a LIBOR Loan, as set
forth in Section 2.02 below. Notwithstanding the forgoing, the LIBOR Interest
Rate for a LIBOR Loan shall be reduced to LIBOR, plus two and one-quarter
percent (2.25%) when Maximum Leverage is less than or equal to 2.00:1.00 and
shall be further reduced to LIBOR, plus two percent (2.00%) at such time when
Maximum Leverage is equal to or less than 1.25:1.00.

     2.02 NOTICE AND MANNER OF BORROWING

     The Borrower shall give the Lender written, telefax or telegraphic notice
(effective upon receipt) of any Revolving Line of Credit Loans under this
Agreement, on the Business Day of each Prime Loan, or at least two (2) Business
Days before each LIBOR Loan, specifying in each case: (1) the date of such Loan;
(2) the amount of such Loan;

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(3) the type of such Loan; and (4) in the case of a LIBOR Loan, the duration of
the Interest Period applicable thereto. Not later than 3:00 p.m. (EST) on the
date of such Loan and upon fulfillment of the applicable conditions set forth in
Section 10.08.1 – 10.08.22, the Lender will make such Loan available to the
Borrower in immediately available funds by crediting the amount thereof to the
Borrower’s Loan Account with the Lender.

     All notices given under this Section 2.02 shall be irrevocable and shall be
given not later than 2:00 p.m. (EST) on the day which is not less than the
number of Business Days specified above for such notice.

     2.03 CONVERSION AND RENEWALS

     The Borrower may elect from time-to-time to convert all, or a part of, one
type of Revolving Line of Credit Loan into another type of Revolving Line of
Credit Loan permitted under the Revolving Line of Credit facility, or to renew
all or part of a Revolving Line of Credit Loan by giving the Lender notice at
least one (1) Business Day before the conversion into a Prime Loan and at least
two (2) Business Days before the conversion into or renewal of a LIBOR Loan;
specifying in each case (1) the renewal or conversion date; (2) the amount of
the Loan to be converted or renewed; (3) in the case of conversions, a
specification that the Loan is to be converted from a Prime Loan to a LIBOR Loan
or vice versa, as the case may be; and (4) in the case of renewals of, or a
conversion into LIBOR Loans, the duration of the Interest Period applicable
thereto; provided that:

  (a)   the minimum principal amount of each Loan outstanding after a renewal or
conversion shall be Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)
or one Hundred Thousand and 00/100 Dollars ($100,000.00) multiples there above
in the case of LIBOR Loans; and     (b)   LIBOR Loans can be converted only as
of the last day of the Interest Period for such Loan. All notices given under
this Section 2.03 shall be irrevocable and shall be given not later than 2:00
p.m. (EST) on the day which is not less than the number of Business Days
specified above for such notice.

     If the Borrower shall fail to give the Lender the notice as specified above
for the renewal or conversion of a LIBOR Loan prior to the end of the Interest
Period with respect thereto, such LIBOR Loan shall automatically be converted
into a Prime Loan on the last day of the Interest Period for such Loan.

     2.04 CALCULATION AND PAYMENT OF INTEREST

     Any change in the interest rate based on the Prime Rate resulting from a
change in the Prime Rate shall be effective as of the opening of business on the
day on which such change in the Prime Rate becomes effective.

     Interest on each Prime Loan shall be calculated on the basis of a year of
360 days for the actual number of days elapsed for any payment period. Interest
on each LIBOR Loan shall be calculated on the basis of a year of 360 days for
the actual number of days elapsed for the Interest Period.

     Interest on the Revolving Line of Credit Loan shall be paid in immediately
available funds at the Principal Office of the Lender. Interest shall be
calculated daily and payable monthly in accordance with the terms of the Note,
in arrears on the average daily unpaid principal sum during the preceding month.

     2.05 THE REVOLVING LINE OF CREDIT NOTE

     All Revolving Line of Credit Loans made by the Lender under this Agreement
shall be evidenced by, and repaid with interest in accordance with, a single
Revolving Line of Credit Note of the Borrower payable in accordance with the
terms of this Agreement and in substantially the form of Exhibit “C”, duly
completed, dated the date of this Agreement, and payable to the Lender, such
Note to represent the obligation of the Borrower to repay the Revolving Line of
Credit Loans. The Lender is hereby authorized by the Borrower to endorse on the
schedule attached to the Note the amount and type of each Revolving Line of
Credit Loan and each renewal, conversion, and payment of principal amount
received by

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the Lender for the account of the applicable Lending Office on account of the
Revolving Line of Credit Loans, which endorsement shall, in the absence of
error, be conclusive as to the outstanding balance of the Revolving Line of
Credit Loans made by the Lender; provided, however, that the failure to make
such notation with respect to any Revolving Line of Credit Loan or renewal,
conversion, or payment shall not limit or otherwise affect the obligations of
the Borrower under this Agreement or the Revolving Line of Credit Note.

     2.06 BORROWER PROMISES TO PAY

     The Borrower promises to pay to the Lender, or order, in accordance with
the terms of this Agreement:

     A. The current amount of the debit balance of the Borrower’s Loan Account.

     B. Interest on the Loans at the rates and charges described in
Sections 2.01, computed monthly on the average daily unpaid principal balance of
all of Borrower’s Loan Account.

     C. Any and all reasonable charges, and expenses of every kind or
description paid or incurred by the Lender under or with respect to Loans
hereunder or any Collateral therefor or the collection of or realization upon
the same including reasonable costs of collection, attorneys’ fees, expenses of
litigation and otherwise. The Borrower hereby authorizes the Lender to charge
interest, charges, and other expenses and fees provided for in this Agreement to
any deposit account of the Borrower, with the Lender, or to the Borrower’s Loan
Account.

     2.07 USE OF PROCEEDS

     The proceeds of the Revolving Line of Credit may be used by the Borrower
only for to support working capital, letters of credit, foreign exchange, cash
management exposure and deposits for equipment purchases.

     The Borrower will not, directly or indirectly, use any part of such
proceeds for the purpose of purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or to extend credit to any Person for the purpose of purchasing or carrying any
such margin stock, or for any purpose which violates, or is inconsistent with,
Regulation X of such Board of Governors.

     2.08 UNUSED BALANCE FEE

     The Borrower shall pay Lender an unused balance fee equal to one-quarter
percent (.25%) of the average unused balance of the Revolving Line of Credit
during the preceding quarter. Such fee shall be charged quarterly and paid upon
billing.

     2.09 LETTER OF CREDIT FEE

     The Borrower agrees to pay Lender, an annual fee for all monies borrowed to
support standby letters of credit equal to three-quarters percent (.75%) of the
aggregate monies borrowed. Such fee shall be charged annually and payable upon
billing.

     3.00 COLLATERAL REPORTING; INVENTORY

     3.01 INVOICES

     Borrower will not re-date any invoice or sale from the original date
thereof or make sales on extended terms beyond those customary in Borrower’s
Inventory, or otherwise extend or modify the term of any Receivable, except as
otherwise provided in Section 5.02. If Borrower becomes aware of any matter
affecting any Receivable, in excess of One Hundred Thousand and 00/100 Dollars
($100,000.00), including information affecting the credit of the account debtor,
Borrower will promptly notify Lender in writing.

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     3.02 INSTRUMENTS

     In the event that any Receivable is or becomes evidenced by a promissory
note, trade acceptance or other instrument for the payment of money, Borrower
will immediately deliver such instrument to Lender appropriately endorsed to
Lender and, regardless of the form of any presentment, demand, notice of
dishonor, protest, and notice of protest with respect thereto, Borrower will
remain liable thereon until such instrument is paid in full. Upon receipt by
Lender of payment in respect of any instrument which has been delivered to
Lender, the proceeds of such instrument or instruments shall be applied to
reduction of the outstanding Obligations.

     3.03 PHYSICAL INVENTORY

     Borrower shall conduct a physical count of the Inventory at such intervals
as Lender reasonably requests and promptly supply Lender with a copy of such
accounts accompanied by a report of the value (calculated on the lower of cost
or market basis) of the Inventory and such additional information with respect
to the Inventory as Lender may reasonably request from time-to-time. The
foregoing notwithstanding, at such time as Borrower has implemented a perpetual
Inventory accounting system acceptable to and approved by Lender, Lender and
Borrower shall reevaluate the frequency with which physical Inventory must be
conducted by Borrower; provided, however, that any agreement changing the
frequency with which physical inventories are to be conducted shall be without
restriction upon Lender’s right to require Borrower to perform physical
inventories more frequently upon the subsequent occurrence of any Event of
Default, Incipient Default or if at any time Lender shall reasonably be
concerned with the accuracy, integrity, or other proper operation of Borrower’s
perpetual Inventory accounting system.

     3.04 RETURNS

     For so long as no Event of Default has occurred and is continuing, if any
account debtor returns any Inventory to Borrower in the ordinary course of its
business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the account debtor (sending a copy to
Lender of all such credit memorandum in excess of Fifty Thousand and 00/100
Dollars ($50,000.00)) in the appropriate amount. In the event any attempted
return occurs after and during the continuance of the occurrence of an Event of
Default, but only as to those Events of Default with respect to which Lender has
given written notice to Borrower, Borrower shall (i) hold the return Inventory
in trust for Lender; (ii) segregate all returned Inventory in trust for Lender;
(iii) segregate all returned Inventory from all of its other property;
(iv) conspicuously label the returned Inventory as Lender’s property; and
(v) immediately notify Lender of the return of any Inventory, specifying the
reason for such return, the location and condition of the returned Inventory,
and on Lender’s request deliver such returned Inventory to Lender. Borrower
shall not consign any Inventory.

     4.00 PRINCIPAL PAYMENTS; PROCEEDS OF COLLATERAL

     4.01 PRINCIPAL PAYMENTS

     That portion of the Obligations consisting of principal payable on account
of the Revolving Line of Credit Loans shall be payable by Borrower to Lender
immediately upon the earliest of (i) the receipt by Lender or Borrower of any
proceeds of any of the Collateral from the sale or disposition of the Collateral
(not otherwise permitted by this Agreement or any of the other Loan Documents)
to the extent of said proceeds; (ii) the occurrence of an Event of Default in
consequence of which Lender elects to accelerate the maturity and payment of
such Revolving Line of Credit Loan; or (iii) any termination of this Agreement;
provided, however, that any over advance shall be payable on demand. Upon any
acceleration of the maturity of the Loans or upon the earlier termination of the
Revolving Line of Credit Loan, the full amount of any and all Loans shall
simultaneously be due and payable in full.

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     4.02 COLLECTIONS

     Until the occurrence of an Event of Default, Borrower may make collection
of all Receivables. Upon the occurrence of an Event of Default (subject to grace
and cure periods) Borrower shall collect all Receivables for Lender and shall
receive all payments as trustee of Lender and immediately deliver all payments
to Lender in their original form as set forth below, duly endorsed in blank
unless otherwise notified to the contrary by Lender. Lender or its designee may,
in the circumstances described below, notify account debtors that the
Receivables have been assigned to Lender and of Lender’s security interest
therein. Lender may only give the foregoing notification to account debtors at
any time when there exists and Event of Default or Incipient Default, or absent
the existence of an Event of Default or Incipient Default, if in Lender’s good
faith judgment, based upon credible evidence, Lender believes that (a) the
proceeds of Lender’s Collateral resulting from the sale or other disposition
(not otherwise permitted by this Agreement or any of the Loan Documents) are
being diverted from it, or (b) the Borrower’s properties or assets are otherwise
being misappropriated (the foregoing events being referred to herein as
“Designated Collateral Impairment Events”). After the occurrence of and Event of
Default or any Designated Collateral Impairment Event, Lender may collect the
Receivables directly if elected by Lender, and charge the collection costs and
expenses to Borrower’s Loan Account. Borrower agrees that, in computing the
charges under this Agreement, all items of payment shall be deemed applied by
Lender on account of the Obligations one (1) Business Day after receipt by
Lender of good funds which have been finally credited to Lender’s account.
Lender is not, however, required to credit Borrower’s Loan Account for any
amount of any item of payment which is unsatisfactory to Lender in its
reasonable discretion and Lender may charge Borrower’s Loan Account for the
amount of any item of payment which is returned to Lender unpaid. In the event
that Lender determines not to credit Borrower’s Loan Account for any item which
is unsatisfactory to Lender, Lender shall give prompt notice thereof to
Borrower, designating the reason such item was determined to be unsatisfactory,
and shall reasonably cooperate with Borrower in obtaining a replacement
satisfactory item or otherwise correcting the reason such item was
unsatisfactory.

     4.03 ESTABLISHMENT OF A BLOCKED ACCOUNT

     Upon the occurrence of an Event of Default, all proceeds of Collateral
shall, at the direction of Lender, be deposited by Borrower into a lock box
account, or such other “Blocked Account” as Lender may require (the “Blocked
Account”) with Lender. All funds deposited in the Blocked Account shall
immediately become the sole property of Lender.

     4.04 PAYMENTS WITHOUT DEDUCTION

     Borrower shall pay principal, interest and all other amounts payable
hereunder, or under any related agreement, without any deduction whatsoever,
including, but not limited to, any deduction for any set off or counterclaim.

     4.05 COLLECTION DAYS UPON REPAYMENT

     In the event Borrower repays the Obligations in full, at any time
hereafter, such payment in full will be credited (conditioned upon final
collection) to Borrower’s Loan Account, one (1) Business Day after Lender’s
receipt thereof.

     5.00 RECEIVABLES

     5.01 ELIGIBILITY

     Borrower represents and warrants that each Receivable covers and will cover
a bona fide sale or lease and delivery by it of goods or the rendition by it of
services in the ordinary course of its business, and will be for a liquidated
amount and Lender’s security interest will not be subject to any offset,
deduction, counterclaim, rights of return or cancellation, lien or other
condition. If any representation of warranty is breached as to any Receivable,
or any Receivable ceases to be an Eligible Receivable for any reason other than
payment thereof, than Lender may, in addition to its other rights hereunder,
designate any and all Receivables owing by that account debtor as not Eligible
Receivables; provided, that Lender shall in any such event retain its security
interest in all Receivables, whether or not Eligible Receivables, until the
Obligations have been fully satisfied and Lender’s obligation to provide Loans
hereunder is terminated.

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     5.02 DISPUTES

     Borrower shall notify Lender promptly of all disputes and claims in excess
of One Hundred Thousand and 00/100 Dollars ($100,000.00) and settle or adjust
such disputes or claims at no expense to Lender, but no discount, credit or
allowance shall be granted any account debtor and no returns of merchandise
shall be accepted by Borrower without Lender’s consent, except for discounts,
credits and allowances made or given in the ordinary course of Borrower’s
business or where such amount is less than One Hundred Thousand and 00/100
Dollars ($100,000.00). Lender may, at any time after the occurrence of an Event
of Default as to which Event of Default Lender has given written notice to
Borrower, settle or adjust disputes and claims directly with account debtors for
amounts and upon terms which Lender considers advisable in its reasonable credit
judgment and, in all cases, Lender will credit Borrower’s Loan Account with only
the net amounts received by Lender and payment of any Receivables.

     6.00 THE COMMERCIAL TERM LOAN FACILITY

     6.01 THE COMMERCIAL TERM LOAN

     A Twelve Million One Hundred Four Thousand and 00/100 Dollars ($12,104,000)
Commercial Term Loan (the “Commercial Term Loan”) will be made available to the
Borrower. The Commercial Term Loan shall be repaid over a seven (7) year
amortization schedule with fixed monthly principal and interest payments.

     6.02 CALCULATION AND PAYMENT OF INTEREST

     The Borrower shall pay interest to the Lender, on the outstanding and
unpaid principal amount of the Loan made under this Agreement at a rate per
annum equal to six and twenty-three one hundredth percent (6.23%).

     Interest on the Commercial Term Loan shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed for any payment period.

     6.03 THE TERM LOAN PROMISSORY NOTE

     The Commercial Term Loan made by the Lender under this Agreement shall be
evidenced by, and repaid with interest in accordance with a Commercial Term
Promissory Note substantially in the form of Exhibit “D”.

     6.04 USE OF PROCEEDS

     The Term Loan shall be used only to refinance certain indebtedness due the
Lender and to fully pay outstanding indebtedness due Tomkins Corporation.

     7.00 THE COMMERCIAL REAL ESTATE TERM LOAN FACILITY

     7.01 THE COMMERCIAL REAL ESTATE TERM LOAN

     A Five Million Eight Hundred Ninety Six Thousand and 00/100 Dollar
($5,896,000) Commercial Real Estate Loan (the “Commercial Real Estate Term
Loan”) will be made available to the Borrower. The Commercial Real Estate Loan
shall be repaid over a twenty (20) year amortization schedule with a ten
(10) year maturity, fixed monthly principal and interest payments.

     7.02 CALCULATION AND PAYMENT OF INTEREST

     The Borrower shall pay interest to the Lender, on the outstanding and
unpaid principal amount of the Loan made under this Agreement at a rate per
annum equal to six and eighty-five one hundredths percent (6.85%).

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     Interest on the Commercial Real Estate Term Loan shall be calculated on the
basis of a year of 360 days for the actual number of days elapsed for any
payment period.

     7.03 THE COMMERCIAL REAL ESTATE TERM LOAN PROMISSORY NOTE

     The Commercial Real Estate Loan made by the Lender under this Agreement
shall be evidenced by, and repaid with interest in accordance with a Commercial
Real Estate Term Promissory Note substantially in the form of Exhibit “E”.

     7.04 USE OF PROCEEDS

     The Commercial Real Estate Loan shall be used only to refinance certain
indebtedness due the Lender and to fully pay outstanding indebtedness due
Tomkins Corporation.

     8.00 THE EQUIPMENT LINE OF CREDIT FACILITY (“EQUIPMENT LINE OF CREDIT”)

     8.01 THE EQUIPMENT LINE OF CREDIT AGREEMENT

     Lender agrees to make available on or after May 1, 2005, an Equipment Line
of Credit referred to as the “Equipment Loans” or “Equipment Line of Credit
Loan” to Borrower to a maximum aggregate principal sum of Five Million and
00/100 Dollars ($5,000,000) until April 30, 2006, in accordance with an
Equipment Line of Credit Note annexed hereto as Exhibit “F”. Advances shall only
be made if, in the reasonable opinion of the Lender, there has been no material
adverse change in the Borrower’s financial condition and no Event of Default has
occurred and is continuing under this Agreement. No Equipment Loan shall exceed
eighty percent (80%) of the cost of any equipment being financed in connection
herewith. Loans subject to the Available Amount, shall be repayable in
accordance with the terms hereof, with Loans made from time-to-time during the
period from the date of this Agreement, up to, but not including, the date of
the earlier of (i) the date when demand is made for repayment of the Equipment
Line of Credit on or after the occurrence of an Event of Default or (ii) the
Conversion Date. Loans may be in any amount within the limits of the Available
Amount and within such limits, the Borrower may borrow and repay pursuant to
Section 10.02 and re-borrow under this Section 8.01 on such terms and conditions
as are contained herein.

     The Borrower shall pay interest to Lender, which shall be calculated daily
and payable monthly, in arrears on the outstanding and unpaid principal amount
of the Equipment Line of Credit Loan made under this Agreement during the
preceding month prior to the Conversion Date at a rate per annum as follows:

     A. For a Prime Loan at a rate equal to Prime Rate; or

     B. For LIBOR Loan at a rate equal to the adjusted LIBOR Interest Rate, plus
two and one-half percent (2.50%) based upon the Interest Period selected by the
Borrower and confirmed in writing to the Borrower following Borrower’s request
for a LIBOR Loan or a conversion to a LIBOR Loan, as set forth in Section 8.05,
below. Notwithstanding the forgoing, the LIBOR Interest Rate for a LIBOR Loan
shall be reduced to LIBOR, plus two and one-quarter percent (2.25%) when Maximum
Leverage is less than or equal to 2.00:1.00 and shall be further reduced to
LIBOR, plus two percent (2.00%) at such time when Maximum Leverage is equal to
or less than 1.25:1.00.

     All Equipment Loans shall be secured, inter alia, by first purchase money
security interest(s) in the specific items of personal property to be purchased
by Borrower from time-to-time, as well as the security interest granted in
Section 11.00, 11.01 and 11.02 herein, which said purchases are to be the
subject of prior presentment to Lender for approval in each instance, utilizing
the Collateral Rider form annexed hereto as Exhibit “G”.

     At such time as Lender approves each Collateral Rider and each Equipment
Loan is made to Borrower; Lender then shall receive, inter alia, a first
purchase money security interest in and to said Collateral as security for
payment and performance of the Obligations.

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     The aggregate availability of all Equipment Loans shall cease on April 30,
2006 (the “Conversion Date”) at which time the (then) unpaid outstanding
principal balance shall convert and be repaid over and up to the seven (7) year
amortization schedule, as more fully described in the Equipment Line of Credit
Note.

     Borrower shall, in each instance in which a Collateral Rider is presented
to Lender for approval, have evidence of ability to receive good and marketable
title(s) in and to said Collateral from seller thereof, and availability of
title(s) or Certificate(s) of Origin (if applicable), for tender to Lender at
the time the loan is granted; all satisfactory to Lender in its sole, but
reasonable discretion in each instance.

     8.02 ELIGIBILITY FOR BORROWING UNDER THE EQUIPMENT LINE

     At all times, it will be within the continuing, reasonable discretion of
the Lender whether to make, or continue to make further Equipment Loans of any
amount under this Agreement, without the requirement of any prior notice to
Borrower, and even if the said Available Amount has not (then) been loaned at
the time of any such request.

     Nothing herein shall be construed to restrict the Lender, in it sole and
exclusive discretion, from making Loans in excess of the stated Available
Amount, or waiving other requirements upon Collateral herein, without executing
any additional notes, security agreement(s) and its so doing in any instance,
shall not waive its rights to insist upon strict compliance with the terms
hereof at any other time, and to further rely upon all Collateral secured to it
for satisfaction of all Equipment Loans, without exception.

     8.03 REPAYMENT OF PRINCIPAL AND INTEREST, RATES AND CHARGES

     The next day following the Conversion Date, principal and interest shall be
payable monthly, based upon an up to a seven (7) year amortization schedule
pursuant to the Equipment Term Note to be executed by the Borrower.

     8.04 NOTICE AND MANNER OF BORROWING

     The Borrower shall give the Lender written, telefax or telegraphic notice
(effective upon receipt) of any Equipment Loans under this Agreement, on the
Business Day of each Prime Loan, or at least two (2) Business Days before each
LIBOR Loan, specifying in each case: (1) the date of such Loan; (2) the amount
of such Loan; (3) the type of such Loan; and (4) in the case of a LIBOR Loan,
the duration of the Interest Period applicable thereto. Not later than 3:00 p.m.
(EST) on the date of such Loan and upon fulfillment of the applicable conditions
set forth in Section 10.08.01 – 10.08.22, the Lender will make such Loan
available to the Borrower in immediately available funds by crediting the amount
thereof to the Borrower’s Loan Account with the Lender.

     All notices given under this Section 8.04 shall be irrevocable and shall be
given not later than 2:00 p.m. (EST) on the day which is not less than the
number of Business Days specified above for such notice.

     8.05 CONVERSION AND RENEWALS

     Prior to the Conversion Date, the Borrower may elect from time-to-time to
convert all, or a part of, one type of Equipment Loan into another type of Loan
permitted under the Revolving Line of Credit facility, or to renew all or part
of an Equipment Loan by giving the Lender notice at least one (1) Business Day
before the conversion into a Prime Loan and at least two (2) Business Days
before the conversion into or renewal of a LIBOR Loan; specifying in each case
(1) the renewal or conversion date; (2) the amount of the Loan to be converted
or renewed; (3) in the case of conversions, a specification that the Loan is to
be converted from a Prime Loan to a LIBOR Loan or vice versa, as the case may
be; and (4) in the case of renewals of, or a conversion into LIBOR Loans, the
duration of the Interest Period applicable thereto; provided that:

  (a)   the minimum principal amount of each Loan outstanding after a renewal or
conversion shall be Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)
or one Hundred

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      Thousand and 00/100 Dollars ($100,000.00) multiples there above in the
case of LIBOR Loans; and     (b)   LIBOR Loans can be converted only as of the
last day of the Interest Period for such Loan. All notices given under this
Section 8.05 shall be irrevocable and shall be given not later than 2:00 p.m.
(EST) on the day which is not less than the number of Business Days specified
above for such notice.

     If the Borrower shall fail to give the Lender the notice as specified above
for the renewal or conversion of a LIBOR Loan prior to the end of the Interest
Period with respect thereto, such LIBOR Loan shall automatically be converted
into a Prime Loan on the last day of the Interest Period for such Loan.

     8.06 INSPECTIONS

     The Lender, upon reasonable notice to the Borrower, and at the sole expense
of Borrower may, from time-to-time require Borrower to provide access to its
books and records and to inspect all Collateral, or undertake such additional or
alternative actions as it deems appropriate in connection with the maintenance
of any Loan contemplated hereby. Borrower shall, at all times, provide its full,
prompt, and unlimited assistance to the Lender upon each such request, time
being of the essence.

     9.00 THE GUARANTOR

     9.01 GUARANTOR’S AGREEMENT

     Payment and performance of Borrower’s Obligations shall be unconditionally
guaranteed by the Guarantor, all as more fully described in Exhibit “H” attached
hereto and incorporated by reference.

     10.00 GENERALLY

     As to all Loan(s) made pursuant to this Agreement:

     10.01 CROSS DEFAULT

     A default beyond any applicable notice, grace or cure period, of any of the
terms and conditions of any Obligation of the Borrower to the Lender (including,
without limitation any reimbursement obligations arising out of any Letter(s) of
Credit which the Lender may later issue on behalf of the Borrower) or any
document or instrument evidencing such an obligation shall constitute a default
of the Notes, this Agreement, and any other Obligations of the Borrower to the
Lender whether evidenced by notes or otherwise.

     10.02 METHOD OF PAYMENT

     All payments and prepayments of principal and all payments of interest,
fees and other amounts payable hereunder shall be made by the Borrower to the
Lender at its Lending Office OR SUCH OTHER PLACE AS THE LENDER MAY FROM
TIME-TO-TIME SPECIFY IN WRITING in immediately available UNITED STATES DOLLARS
[LAWFUL CURRENCY OF THE UNITED STATES OF AMERICA], on or before 11:00 a.m.
(Boston, Massachusetts time) on the due date thereof, WITHOUT COUNTERCLAIM OR
SETOFF AND FREE AND CLEAR OF, AND WITHOUT ANY DEDUCTION OR WITHHOLDING FOR, ANY
TAXES OR OTHER PAYMENTS. The Borrower hereby authorizes the Lender, if and to
the extent payment is not made when due under this Agreement or under any Note,
to charge from time-to-time against any account of the Borrower with the Lender
any amount so due. Whenever any payment to be made under this Agreement or under
any Note shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of the payment of
interest except, in the case of a LIBOR Loan, if the result of such extension
would be to extend such payment into another calendar month, such payment shall
be made on the immediately preceding Business Day.

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     10.03 PREPAYMENT

     The Borrower may, with respect to any Prime Loan only, upon at least one
(1) Business Day’s notice to the Lender, prepay any Note in whole or in part,
with accrued interest to the date of such prepayment on the amount prepaid
without any penalty or premium. LIBOR Loans where a fixed rate of interest has
been selected may not be prepaid without Borrower incurring and paying the
Lender, pursuant to the Funding Loss Indemnification, as provided in
Section 10.11. If the Commercial Real Estate Term Promissory, Commercial Term
Promissory Note or the Equipment Line of Credit Note (where a fixed rate of
interest is applicable) are otherwise prepaid, there shall be a prepayment
penalty, equal to the greater of two percent (2.00%) of the principal balance
being prepaid or the Yield Maintenance Fee. Notwithstanding anything to the
contrary contained herein, there shall be no prepayment penalty if any Note is
prepaid in whole or in part from excess cash flow from the Borrower’s business
operations.

     Notwithstanding anything to the contrary contained in the above prepayment
clause, the Lender agrees that in the event that (i) the Borrower seeks to
consummate an acquisition whereby Borrower shall be the surviving entity (the
“Acquisition”), (ii) and Lender declines to finance such Acquisition and does
not agree to match a bona fide commitment from another lender (the “Third Party
Lender”) which agrees to finance such Acquisition (the “Acquisition Financing”),
that in the event that such Third Party Lender consummates such Acquisition
Financing, the forgoing prepayment penalty shall not apply if the Lender is
fully paid off in connection with such Acquisition Financing; provided, however,
any outstanding LIBOR Loans shall still be subject to funding loss
indemnification if they are paid on or before the required LIBOR payment date.

     10.04 LATE PAYMENT

     Any payment on the Loans received more than ten (10) days after its due
date shall be subject to an additional charge of six percent (6.00%) of the
amount due.

     10.05 [INTENTIONALLY DELETED]

     10.06 ADDITIONAL PAYMENTS

     If after the date of this Agreement the Lender determines that (i) the
adoption of or change in any law, rule, regulation or guideline regarding
capital requirements for banks or bank holding companies, or any change in the
interpretation or application thereof by any governmental authority charged with
the administration thereof, or (ii) compliance by the Lender or any parent bank
holding company with any guideline, request or directive of any such entity
regarding capital adequacy (whether or not having the force of law), has the
effect of reducing the return on the Lender’s or such holding company’s capital
as a consequence of the Lender’s agreement to make Loans hereunder to a level
below that which the Lender or such holding company could have achieved but for
such adoption, change or compliance (taking into consideration the Lender’s or
such holding company’s then existing policies with respect to capital adequacy
and assuming the full utilization of such entity’s capital) by any amount deemed
by the Lender to be material, or (iii) as a result from any change after the
date of this Agreement in United States, Federal, State, Municipal or Foreign
Laws or Regulations (including Regulation D), or the adoption or making after
the date of any interpretations, directives or requirements applying to a class
of banks, including the 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 court or governmental or monetary authority charged with the
interpretation or administration thereof which changes the basis of taxation of
any amounts payable to the Lender under this Agreement, including, without
limitation, the LIBOR or Prime Rate Revolving Line of Credit Loan or Loans,
Commercial Term Loan, Commercial Real Estate Term Loan and Equipment Line of
Credit Loan, other than taxes imposed on the overall net income of the bank for
any of such loans by the jurisdiction where the Lending Office of the Lender is
located), then the Lender shall notify the Borrower thereof. The Borrower agrees
to pay to the Lender the amount of such reduction in the return on capital as
and when such reduction is determined, upon presentation by the Lender of a
statement in the amount and setting forth the Lender’s calculation thereof,
which statement shall be deemed true and correct absent manifest error. In
determining such amount, the Lender may use reasonable averaging and attribution
methods.

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     10.07 TENURE OF THE LOAN AND SECURITY AGREEMENT

     This Agreement shall become effective upon the execution by the parties
hereto. When so executed, this Agreement shall be binding on, and inure to, the
benefit of the respective successors and permitted assigns of the Borrower (if
authorized by the Lender, in writing, in the Lender’s reasonable discretion),
and of the Lender, and shall continue in full force and effect and unchanged
except by agreement in writing between the Borrower and the Lender until
terminated as hereinafter provided.

     Termination of the Revolving Line of Credit under any circumstances, shall
not terminate any of the Borrower’s obligations hereunder of affect any of the
Lender’s rights or remedies, under this Agreement, or otherwise, with respect to
any obligations or with respect to any of the Borrower’s Collateral or other
surety, or Collateral security provided to Lender by any of them, it being
understood and agreed that all rights, remedies, and privileges granted to the
Lender pursuant to this Agreement, the Notes, or any other document and
instrument, shall continue in full force and effect until payment in full of all
Obligations.

     10.08 CONDITIONS PRECEDENT

     The obligation of the Lender to make a LIBOR or Prime Rate Revolving Line
of Credit Loan or Loans, the Commercial Term Loan, the Commercial Real Estate
Term Loan and any Equipment Line of Credit Loan shall be subject to the
condition precedent that the Lender shall have received on or before the day of
such transaction each of the following, in form and substance satisfactory to
the Lender and its counsel in their reasonable discretion:

          10.08.1 EXECUTION OF NOTES

     The applicable Note duly executed by the Borrower.

          10.08.2  EVIDENCE OF BORROWER’S AUTHORITY AND INCUMBENCY OF
REPRESENTATIVES.

          Certified (as of the date of this Agreement) copies of all corporate
action taken by the Borrower, including resolutions of its Board of Directors,
authorizing the execution, delivery, and performance of the Loan Documents to
which it is a party and each other document to be delivered pursuant to this
Agreement together with a certificate (dated as of the date of this Agreement)
of the Secretary of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign the Loan Documents to which it is a
party and the other documents to be delivered by the Borrower under this
Agreement.

          10.08.3  EVIDENCE OF GUARANTOR’S AUTHORITY AND INCUMBENCY OF
REPRESENTATIVES.

          Certified (as of the date of this Agreement) copies of all corporate
action taken by the Guarantor, including resolutions of its Board of Directors,
authorizing the execution, delivery, and performance of the Loan Documents to
which it is a party and each other document to be delivered pursuant to this
Agreement together with a certificate (dated as of the date of this Agreement)
of the Secretary of the Guarantor certifying the names and true signatures of
the officers of the Guarantor authorized to sign the Loan Documents to which it
is a party and the other documents to be delivered by the Guarantor under this
Agreement.

          10.08.4 OPINION

          A favorable opinion of counsel for the Borrower and Guarantor, dated
the date of the Loan, in such form as is acceptable to the Lender and as to such
other matters as the Lender may reasonably request.

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          10.08.5 OFFICER’S CERTIFICATE, ETC.

          The following statements shall be true and the Lender shall have
received a certificate signed by a duly authorized officer of the Borrower dated
the date of the Loan stating that:

     a) The representations and warranties contained in Section 12.00 of this
Agreement are correct on and as of the date of the Loan as though made on and as
of such date; and

     b) No Incipient Default or Event of Default has occurred and is continuing,
or would result from the making of the Loan.

          10.08.6 FLOOD CERTIFICATES

          Lender shall have received and approved Flood Certificates concerning
the Mortgaged Premises.

          10.08.7 APPRAISALS

          Appraisals of the machinery and equipment of Borrower, satisfactory to
the Lender in scope and as to the values reported therein.

          10.08.8 SOLVENCY CERTIFICATE

          Lender shall have received an executed Solvency Certificate as more
fully described in Exhibit “I”.

          10.08.9 TITLE INSURANCE

          A mortgagee’s policy of title insurance issued on the 1970 ALTA form
by a nationally recognized title company, approved by Lender, in the aggregate
face amount of Five Million Eight Hundred Ninety Six Thousand and 00/100 Dollars
($5,896,000), together with such reinsurance and direct access agreements as
Lender may request, guarantying as of the date of closing, the mortgage to be a
valid first and prior lien on Borrower’s ownership interest in the Mortgaged
Premises (including any easements appurtenant thereto), subject only to
Permitted Encumbrances. The title policy shall contain such endorsements as
Lender may require.

          10.08.10 SURVEY

          A survey of the Mortgaged Premises, the building and other
improvements, certified to the Lender and the title company by a surveyor
satisfactory to the Lender, which survey shall contain the minimum detail for
land surveys as most recently adopted by ALTA/ASCM, and which survey shall
comply with Lender’s survey requirements and shall contain Lender’s standard
form certification. Said survey shall show no state of facts or conditions
objectionable to Lender.

          10.08.11 HAZARD INSURANCE

          Insurance policies acceptable to Lender which name Lender as
mortgagee, loss payee and additional insured with coverages acceptable to Lender
or Evidence of Insurance evidencing same.

          10.08.12 UCC AND TAX LIEN SEARCHES

          Uniform Commercial Code and tax lien searches made in the Commonwealth
of Massachusetts, the City of Springfield, Massachusetts, the State of Delaware
and the State of Maine, showing no filings relative to any Collateral other than
those made pursuant to this Agreement, and no federal or state tax liens against
Borrower or any Guarantor.

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          10.08.13 CORPORATE DOCUMENTATION

          Certified copies of the Borrower’s Articles of Incorporation, By-Laws,
Certificates of Good Standing from the Secretary of State’s Office and
Department of Revenue Office and original Corporate Resolutions, Certificates of
Incumbency with specimen signatures.

          10.08.14 APPRAISAL

          An independent appraisal of the Mortgaged Premises in compliance with
FIRREA standards from a state certified appraiser engaged by Lender which
indicates the fair market value of the Mortgaged Premises and is satisfactory to
Lender in all respects.

          10.08.15 ENVIRONMENTAL ASSESSMENT

          An environmental site assessment with respect to the Mortgaged
Premises prepared by an environmental consultant satisfactory to Lender showing
no matters unsatisfactory to Lender, a letter from the consultant preparing the
environmental site assessment stating that the Lender is authorized to rely on
the information contained therein and evidence satisfactory to the Lender of
said environmental consultants errors and omissions insurance coverage.

          10.08.16 [INTENTIONALLY DELETED]

          10.08.17 [INTENTIONALLY DELETED]

          10.08.18 ZONING

          Evidence satisfactory to Lender as to zoning compliance of the
Mortgaged Premises.

          10.08.19 [INTENTIONALLY DELETED]

          10.08.20 PERFECTION CERTIFICATE

          A perfection certificate completed with respect to the Borrower and
which is satisfactory to Lender in all respects. A copy of such perfection
certificate is annexed hereto as Exhibit “J”.

          10.08.21 OPERATING AND FINANCIAL STATEMENTS

          Current financial statements satisfactory to Lender for Borrower and
any Guarantor, together with operating and cash flow statements for the
Mortgaged Premises.

          10.08.22 OTHER ITEMS

          Such other approvals, opinions, certificates, documents and/or
instruments as Lender may require in its reasonable discretion.

     10.09 POWER OF ATTORNEY

     Borrower appoints Lender and its designees as Borrower’s attorney, with the
power after the occurrence of any Event of Default or of any Designated
Collateral Impairment Event, to endorse Borrower’s name on any checks, notes,
acceptances, money orders or other forms of payment or security that come into
Lender’s possession; to sign Borrower’s name on any invoice or bill of lading
relating to any Receivable, on drafts against customers, on assignments of
receivables, on notices of assignment, financing statements and other public
records, and on verifications of accounts sent to account debtors; to send
requests for verification of Receivables to customers or account debtors; to
sign Borrower’s name on notices to customers or account debtors, to notify
account debtors that the Receivables have been assigned to

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Lender and of Lender’s security interest therein, and to notify the post office
authorities to change the address for delivery of Borrower’s mail to an address
designated by Lender and to open and dispose of all mail addressed to Borrower;
and to do all other things Lender deems necessary and desirable to carry out the
terms of this Agreement. Borrower hereby ratifies and approves all acts of such
attorney. Neither Lender nor any of its designees will be liable for any acts or
omissions nor for any error of judgment or mistake of fact or law acting as
Borrower’s attorney, unless caused by Lender’s or its designees gross negligence
or willful misconduct. This power, being coupled with an interest, is
irrevocable until the Obligations have been fully satisfied and Lender’s
obligation to provide Loans hereunder shall have terminated.

     10.10 FEDERAL RESERVE BANK

     Notwithstanding anything to the contrary contained herein, Lender may at
any time pledge or assign all or any portion of Lender’s rights under this
Agreement and the other Loan Documents to a Federal Reserve bank; provided,
however, that no such pledge or assignment shall release the Lender from
Lender’s obligations hereunder or any other Loan Documents.

     10.11 FUNDING LOSS INDEMNIFICATION

     The Borrower shall pay to the Lender, upon the request of the Lender, such
amount or amounts as shall be sufficient (in the reasonable opinion of the
Lender) to compensate it for any loss, cost, or expense (including the then
present value of any lost interest earnings as a result of any re-deployment of
prepaid funds) incurred as a result of:

  (1)   Any payment of a LIBOR Loan on a date other than a scheduled principal
payment day or the last day of the Interest Period for such Loan including, but
not limited to, acceleration of the Loans by the Lender pursuant to
Section 19.00; or     (2)   Any failure by the Borrower to borrow or convert, as
the case may be, a LIBOR Loan on the date for borrowing or conversion, as the
case may be, specified in the relevant notice provision under Sections 2.02 and
2.03 or 8.04 and 8.05; or

     10.12 ILLEGALITY

     Notwithstanding any other provision in this Agreement, if the Lender
determines that any applicable law, rule, or regulation, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender (or its
Lending Office) with any request or directive (whether or not having the force
of law) of any such authority, central bank, or comparable agency, shall make it
unlawful or impossible for the Lender (or its Lending Office) to maintain its
commitment, then upon notice to the Borrower by Lender, the rate of interest
being charged to Borrower shall convert and float at the Prime Rate.

     10.13 DISASTER

     Notwithstanding anything to the contrary contained herein, if the Lender
determines (which determination shall be conclusive) that:

     (1) Quotations of interest rates for the relevant deposits referred to in
the definition of LIBOR as the case may be, are not being provided in the
relevant amounts or for the relative maturities for purposes of determining the
rate of interest on a LIBOR Loan as provided in this Agreement; or

     (2) the relevant rates of interest referred to in the definition of LIBOR,
upon the basis of which the rate of interest for any such type of loan is to be
determined do not accurately cover the cost to the Lender of making or
maintaining such type of loan; then the Lender shall forthwith give notice
thereof to the Borrower, whereupon the rate of interest being charged to
Borrower shall convert and float at the Prime Rate.

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     10.14 SWAP

     Borrower may enter into a SWAP agreement or other similar agreement or
arrangement with Lender or its affiliates with respect to any or all LIBOR Loans
(any such agreement or arrangement shall be in form and substance reasonably
satisfactory to Lender) in order to hedge or minimize risk with respect to the
fluctuation of interest rates (the “SWAP Agreement”). The SWAP Agreement shall
be for a stipulated term, and shall, at all times, be in a notional amount
sufficient to cover all principal amounts outstanding from time to time under
the respective Loan. If the SWAP Agreement shall expire and leave any principal
of the Loan uncovered thereby, or if for any other reason any principal portion
of the Loan shall be uncovered by the SWAP Agreement, such uncovered amount
shall be immediately due and payable. Interest rate SWAP’s are subject to a make
whole provision in the event of a prepayment. In the event that interest rates
have moved downward, the Borrower will be responsible to the Lender for such
payment.

     11.00 SECURITY INTEREST

     Borrower, for valuable consideration received, hereby pledges, assigns,
transfers and grants to Lender, a continuing lien and security interest in all
of Borrower’s tangible and intangible personal property and chose-in-action,
including, without limitation, all materials, equipment, goods, inventory,
accounts, including health care insurance receivables, accounts receivable,
contracts rights, chattel paper, general intangibles, including payment
intangibles and amounts owed by other than customers regardless of whether or
not they constitute proceeds of other Collateral; all chose-in-action, cash,
cash deposits, securities, documents, rebates, documents of title, instruments,
deposit accounts, debts, refunds, letter of credit rights, supporting
obligations, new and used motor vehicles, policies and certificates of
insurance, obligations and liabilities in whatever form owing from any person,
corporation or other legal entity, including all replacements and substitutions
therefore or accessions thereto; all books, records, evidence of title, good
will, and all papers relating to the operation of the Borrower’s business; all
federal, state and local tax refunds and/or abatements and any loss forward and
carry back tax refunds; computer programs; all fixtures, leases, any and all
equipment leases, rentals and other sums payable thereunder, other chattel
paper, purchase option payments, lessor’s interest in leased equipment and
insurance proceeds; licenses or interests in real estate; all liens, guarantees,
investment property, including without limitation, securities, stocks, bonds,
warrants, options, rights, remedies and privileges pertaining to all of the
foregoing. Also including, without limitation, all equipment or inventory
described in Collateral Riders, so-called, executed by Borrower from
time-to-time and incorporated by reference herein as restated together with
products and proceeds thereof and all accessions and additions thereto and all
replacements and substitutions therefore, and all proceeds of credit, fire,
casualty, or other insurance upon said property, or any of the above which are
acquired with any cash proceeds, or other collateral, (all hereinafter called
the “Collateral”). The term “proceeds” shall include, without limitation, all
types or classifications of non-cash proceeds acquired with cash proceeds.
Notwithstanding anything in this Agreement or the other Loan Documents to the
contrary, the Collateral described in this Agreement or in the other Loan
Documents shall not include: (a) any intangible which constitutes intellectual
property of the Borrower (including, without limitation, the “Smith & Wesson”
trade name and any trade secrets, know-how, licenses, trade names, logos,
registrations, patents, patent applications, copyrights, copyright applications,
trademarks or trademark applications); or (b) any licenses leases or other
contracts to the extent that the granting of a security interest therein would
constitute a breach thereof or is prohibited thereby and such prohibition is not
ineffective under Sections 9-406(d), 9-407, 9-408 or 9-409 of the Uniform
Commercial Code; provided, further (x) all accounts arising under such licenses,
leases or other contracts shall be included in the definition of Collateral and
shall constitute Collateral and (y) the Collateral shall include all payments
and other property received or Receivable in connection with any sale or other
disposition of such licenses, leases or other contracts.

     11.01 The security interest granted hereby is to secure payment and
performance of all Obligations from Borrower to Lender, together with all
interest, and all reasonable fees, charges and expenses including expenses of
the Lender’s counsel in the maintaining, foreclosing and selling of any of the
Collateral.

     11.02 IT IS THE TRUE, CLEAR, AND EXPRESS INTENTION OF THE Borrower that the
continuing grant of this security interest remain as security for payment and
performance of all Obligations, whether now existing, or which may hereinafter
be incurred by future advances, or otherwise; and whether, or not, such
obligation is related to the

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transaction described in this Agreement, by class, or kind, or whether or not
contemplated by the parties at the time of the granting of this security
interest. The notice of the continuing grant of this security interest therefore
shall not be required to be stated on the face of any document representing any
such obligation, nor otherwise identified it as being secured hereby.

     12.00 REPRESENTATIONS AND WARRANTIES, GENERALLY

     Borrower also represents, warrants and agrees that:

     12.01 CHIEF EXECUTIVE OFFICE

     It has no chief executive office, or principal place of business, or
principal mailing address, other than that shown above and that Borrower also
keeps its records concerning accounts, contract rights and other property, as
well as all Collateral, at said location, unless otherwise specified in Exhibit
“K”, attached to this Agreement. Borrower will immediately notify Lender in
writing of any change in the location of any place of business or intention to
change the location of any Collateral or the establishment of any new chief
executive office, principal place of business, or location of inventory, or
office where its aforesaid records are kept.

     12.02 GOOD STANDING

     Borrower is duly organized and existing in good standing under the laws of
the State of Delaware and is duly qualified to do business under the laws of
each state where the nature of the business done or property owned requires such
qualification, except where the failure to be so qualified could not reasonably
be expected to have a material adverse effect on the Borrower.

     12.03 CORPORATE AUTHORITY

     Borrower’s delivery and performance hereof are within Borrower’s corporate
powers, have been duly authorized by vote of the Board of Directors, and are not
in contravention of the terms of, and will not result in any event of default
under Borrower’s Articles of Organization, by-laws, or other incorporation
papers, or of any material indenture, promissory note, agreement or undertaking
to which Borrower is a party or by which it is bound or affected. All of
Borrower’s issued and outstanding capital stock has been properly issued and all
Borrower’s books and records, in particular its minute books, by-laws, and books
of account, are accurate and up-to-date and will be so maintained.

     12.04 PERFECTION

     Borrower agrees that any failure of perfection or other bar to lawful
enforcement of said security agreements, liens, pledges of assets of any kind or
nature, wholly or in part, shall not constitute an impairment of said Collateral
by the Lender and the undersigned specifically agrees that any such happening
shall not cause, or give rise to, a waiver, or other defense by it, upon its
Obligations hereunder or upon all obligations incurred by it upon any guaranty,
pledge, endorsement, or other agreement executed by it in connection with this
financial transaction, which shall remain at all times due and owing, in their
original tenor.

     12.05 LEGALLY ENFORCEABLE AGREEMENT

     This Agreement is, and each of the other Loan Documents when delivered
under this Agreement will be, legal, valid, and binding obligations of the
Borrower in accordance with their respective terms, except to the extent that
such enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors’ rights generally.

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     12.06 FINANCIAL STATEMENTS

     The balance sheet of the Borrower and the related statements of income and
retained earnings and cash flow of the Borrower for the fiscal year then ended,
and the accompanying footnotes, together with any interim financial statements
of the Borrower, copies of which have been furnished to the Lender, are complete
and correct and fairly present the financial condition of the Borrower, in all
material respects, as at such dates and the results of the operations of the
Borrower for the periods covered by such statements, all in accordance with GAAP
consistently applied (subject to year-end adjustments in the case of the interim
financial statements), and there has been no material adverse change in the
condition (financial or otherwise), business, or operations of the Borrower
since the presentation to the Lender of the most recently dated financial
statements, nor are there any liabilities of the Borrower, fixed or contingent,
which are material but are not reflected in such financial statements or in the
notes thereto, other than liabilities arising in the ordinary course of
business. No information, exhibit or report furnished by the Borrower to the
Lender in connection with the negotiation of this Agreement contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statement contained therein not materially misleading.

     12.07 PRO FORMAS The consolidated and consolidating pro forma financial
statements of the Borrower as of the date of this Agreement being delivered
herewith to the Lender are (and all financial statements hereafter delivered
pursuant to this Agreement) will be complete and accurate, fairly presenting the
financial condition of the Borrower in all material respects as of the date
thereof and for the periods covered thereby, all being prepared in accordance
with GAAP consistently applied throughout the relevant periods. Borrower has no
liability, contingent or otherwise, not disclosed in the aforesaid financial
statements or in any notes thereto that could materially adversely affect the
financial condition of the Borrower. The Borrower has delivered to the Lender
projected balance sheets and statements of income for each of the fiscal years
ending April 30, 2005 through April 30, 2007. The projected financial statements
referred to in the preceding sentence (including the material assumptions and
adjustments made in their preparation) were reasonable when made and continue to
be reasonable, subject to the reasonable uncertainty in any projections. The
following representations are true at the date hereof and shall be true at the
date of each Advance, in each case since the date of the most recently delivered
financial statements: (i) there has been no material adverse change in the
business, assets or condition, financial or otherwise of the Borrower;
(ii) neither the business, condition or operations of the Borrower nor any of
its respective properties or assets had materially adversely affected as the
result of any legislative or regulatory change, any revocation or change in any
franchise, license or right to do business, or any other event or occurrence,
whether or not insured against; (iii) Borrower has experienced no material
controversy or problem with its employees or with any labor organizations; and
(iv) Borrower has not entered into any material transaction not disclosed to
Lender other than in the ordinary course of business.

     12.08 LABOR DISPUTES AND ACTS OF GOD

     Neither the business nor the properties of the Borrower are affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy, or other
casualty (whether or not covered by insurance), materially and adversely
affecting such business or properties or the operation of the Borrower.

     12.09 OTHER AGREEMENTS

     The Borrower is not a party to any indenture, loan or credit agreement, or
to any lease or other agreement or instrument, or subject to any charter or
corporate restriction which could have a material adverse effect on the
business, properties, assets, operations, or conditions, financial or otherwise,
of the Borrower, or the ability of the Borrower to carry out its obligations
under the Loan Documents to which it is a party. The Borrower is not in default
in any material respect in the performance, observance, or fulfillment of any of
the obligations, covenants, or conditions contained in any agreement or
instrument material to its business to which it is a party. Notwithstanding the
foregoing, the Lender acknowledges that it is aware of the issues with respect
to the HUD settlement described in the excerpt from the Form 10-K of the
Guarantor, which is attached hereto as Schedule 12.09.

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     12.10 LITIGATION

     There is no pending or threatened action or proceeding against or affecting
the Borrower before any court, governmental agency, or arbitrator, which may, in
any one case or in the aggregate, materially adversely affect the financial
condition, operations, properties, or business of the Borrower or the ability of
the Borrower to perform its obligations under the Loan Documents to which it is
a party. Notwithstanding the foregoing, the Lender acknowledges that it is aware
of the SEC investigation and lawsuits referred to in the Forms 10-K and 10-Q of
the Guarantor, including without limitation, those referenced to the excerpts of
the Forms 10-K and 10-Q, which are attached hereto as Schedule 12.10.

     12.11 NO JUDGMENTS

     The Borrower has satisfied all judgments, and the Borrower is not in
default with respect to any judgment, writ, injunction, decree, rule or
regulation of any court, arbitrator, or Federal, state, municipal, or other
governmental authority, commission, board, bureau, agency, or instrumentality,
domestic or foreign.

     12.12 ERISA

     The Borrower is to the best of its knowledge in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable Event nor
a Prohibited Transaction has occurred and is continuing with respect to any
Plan; no notice of intent to terminate a Plan has been filed, nor has any Plan
been terminated; no circumstances exist which constitute grounds entitling the
PBGC to institute proceedings to terminate, or appoint a trustee to administer,
a Plan, nor has the PBGC instituted any such proceedings; neither the Borrower
nor any Commonly Controlled Entity has completely or partially withdrawn from a
Multiemployer Plan; the Borrower and each Commonly Controlled Entity have met
their minimum funding requirements under ERISA with respect to all of their
Plans and the present value of all vested benefits under each Plan does not
exceed the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA; and neither the Borrower nor any Commonly Controlled
Entity has incurred any liability to the PBGC under ERISA.

     12.13 OPERATION OF BUSINESS

     The Borrower possesses all licenses, permits (including Environmental
Permits), franchises, patents, copyrights, trademarks, and trade names, or
rights thereto, to conduct its businesses substantially as now conducted and as
presently proposed to be conducted, and the Borrower is not in violation of any
valid rights of others with respect to any of the foregoing.

     12.14 TAXES

     The Borrower 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 unless such taxes are
being contested in good faith by appropriate action with adequate reserves
established on Borrower’s financial statements.

     12.15 DEBT

     Set forth in the financial statements referred to in this Agreement, to the
extent required by GAAP, is a complete and correct list of all credit
agreements, indentures, purchase agreements, guaranties, capital leases, and
other investments, agreements, and arrangements presently in effect providing
for or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in respect of
which the Borrower is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, which are
outstanding and which can be outstanding, are correctly stated, and all Liens of
any nature given or agreed to be given as security therefor are correctly
described or indicated in such financial statements. Exhibit “L” correctly lists
all secured and unsecured Debt of the Borrower outstanding as of the date of
this Agreement, and shows,

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as to each item of Debt listed thereon, the obligor and obligee, the aggregate
principal amount outstanding on the date hereof.

     12.16 ENVIRONMENT

     The Borrower has duly complied with, and their businesses, operations,
assets, equipment, property, leaseholds, or other facilities are in compliance
with, the provisions of all Environmental Laws. The Borrower has been issued and
will maintain all required Federal, state, and local permits, licenses,
certificates, and approvals relating to (1) air emissions; (2) discharges to
surface water or groundwater; (3) noise emissions; (4) solid or liquid waste
disposal; (5) the use, generation, storage, transportation, or disposal of
Hazardous Substances (intended hereby and hereafter to include any and all such
materials listed in any Federal, state, or local law, code or ordinance, and all
rules and regulations promulgated thereunder as hazardous or potentially
hazardous); or (6) other environmental, health, or safety matters. The Borrower
has not received notice of, nor knows of, or suspects, facts which might
constitute any violations of any Environmental Laws with respect to its
businesses, operations, assets, equipment, property, leaseholds, or other
facilities. Except in accordance with a valid governmental permit, license,
certificate, or approval, to the best of Borrower’s knowledge there has been no
emission, spill, release, or discharge into or upon (1) the air; (2) soils, or
any improvements located thereon; (3) surface water or groundwater; or (4) the
sewer, septic system or waste treatment, storage or disposal system servicing
the Mortgaged Premises, of any Hazardous Substances at or from the Mortgaged
Premises; and accordingly the Mortgaged Premises of the Borrower is to the best
of Borrower’s knowledge free of all such Hazardous Substances. There has been no
complaint, order, directive, claim, citation, or notice by any governmental
authority or any person or entity with respect to (1) air emissions; (2) spills
releases or discharges to soils or improvements located thereon, surface water,
groundwater or the sewer, septic system or waste treatment, storage or disposal
systems servicing the Mortgaged Premises; (3) noise emissions; (4) solid or
liquid waste disposal; (5) the use, generation, storage, transportation, or
disposal of Hazardous Substances; or (6) other environmental, health, or safety
matters affecting the Borrower or its business, operations, assets, equipment,
property, leaseholds, or other facilities. The Borrower has no indebtedness,
obligation, or liability, absolute or contingent, matured or not matured, with
respect to the storage, treatment, cleanup, or disposal of any Hazardous
Substances (including without limitation any such indebtedness, obligation, or
liability with respect to any current regulation, law, or statute regarding such
storage, treatment, cleanup, or disposal). Notwithstanding the foregoing or
anything in the other Loan Documents, the Lender acknowledges that it is aware
of the environmental issues with respect to the Springfield, Massachusetts
property as described in the excerpt from the Form 10-K of the Guarantor
attached hereto as Schedule 12.16.

     12.17 TITLE TO PROPERTIES; LEASES

     The Borrower has good and marketable title in fee simple (or its equivalent
under applicable law) to its respective properties and good title to the other
properties and assets it purports to own, including those reflected in the most
recent audited balance sheet provided to the Lender (other than properties and
assets disposed of in the ordinary course of business). The Borrower enjoys
peaceful and undisturbed possession under all leases of all personal and all
real property under which they operate, and all such leases are valid and
subsisting and in full force and effect and the Borrower is not in default in
any material respect in the performance or observance of its obligations under
any provisions thereof. Exhibit “M” includes a general description of all
presently existing Long Term Leases and capital leases under which the Borrower
is a lessee.

     12.18 INTELLECTUAL PROPERTY

     Borrower owns or has a valid right to use all patents, copyrights,
trademarks, licenses, trade names or franchises that are material and necessary
to conduct its business and the conduct of its business as now operated does not
conflict with valid patents, copyrights, trademarks, licenses, trade names or
franchises of others in any manner that could materially adversely affect in any
manner the business or assets or condition, financial or otherwise, of Borrower.

     12.19 EXECUTIVE AGREEMENTS

     None of the executive officers of the Borrower is subject to any agreement
in favor of anyone, other than Borrower or the Guarantor, which limits or
restricts that person’s right to engage in the type of business activity

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conducted or proposed to be conducted by such Borrower or to use therein any
property or confidential information or which grants to anyone other than the
Borrower or the Guarantor any rights in any inventions or other ideas
susceptible to legal protection developed or conceived by any such officer.

     12.20 FOREIGN ASSET CONTROL REGULATIONS

     Neither the execution of this Agreement nor the use of the proceeds thereof
violates the Trading With the Enemy Act of 1917, as amended, nor any of the
Foreign Assets Control Regulations promulgated thereunder or under the
International Emergency Economic Powers Act or the U.N. Participation Act of
1945.

     12.21 INVESTMENT COMPANY ACT OF 1940

     It is not an “investment company” within the meaning of, or is exempt from,
the provisions of the Investment Company Act of 1940, as amended.

     13.00 FURTHER AGREEMENTS OF BORROWER

     13.01 INSURANCE

     Borrower agrees at all times to keep all of its property, insured by
financially sound and reputable insurers satisfactory to the Lender, against
loss or damage by fire, water, theft, explosion or other hazards insured against
by extended coverage. With respect to the Collateral, Lender shall be listed as
additional insured, with loss payable to it, and after an Event of Default,
hereby irrevocably appointing Lender as attorney for Borrower in obtaining,
adjusting, settling and canceling such insurance and endorsing any payments or
other drafts, with respect to the Collateral only. All insurance policies with
respect to the Collateral shall be non-cancelable with not less than thirty
(30) days written notice to Lender. Original certificates of insurance shall be
tendered directly to the Lender upon issuance by insurer, at such times as
Lender requests.

     13.02 INSPECTION

     The Borrower shall at all reasonable times and with reasonable notice
(unless an Event of Default has occurred hereunder, after which no prior notice
must be provided), and from time-to-time, allow the Lender, by or through any of
its officers, agents, attorneys, or accountants, to physically inspect all
Collateral, inspect, copy or make extracts from Borrower’s books and records;
all at Borrower’s expense.

     13.03 NO SALE OF COLLATERAL

     Excluding (i) sales of inventory in the ordinary course of business,
(ii) dispositions of obsolete assets, and (iii) the disposition of ineligible
accounts receivable without recourse in connection with the compromise of
collection thereof, Borrower, during the tenure of this Agreement will not sell,
assign, or dispose of any Collateral to any other party. Borrower, during the
tenure of this Agreement, will not create or permit to be created any lien,
encumbrance or security interest of any kind on any Collateral other than
Permitted Liens (as defined in Section 13.32), and if any such lien or
encumbrance is created or permitted, Borrower will effect a discharge of same
within ten (10) days thereafter.

     13.04 COMPLIANCE WITH LAW

     Borrower will comply with all laws and regulations of the United States or
of any state or states thereof or of any political subdivision thereof, or of
any governmental authority which may be applicable to it or to its business.

     13.05 MERGER OR ACQUISITION

     Borrower will not wind up, liquidate, or dissolve itself, reorganize,
merger or consolidate with, or into, or convey, sell, assign, transfer, lease,
or otherwise dispose of (whether in one transaction or a series of transactions)
all or

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substantially all of its assets (whether now owned or hereafter acquired) to any
Person or acquire all or substantially all of the assets or the business of any
Person or permit any subsidiary to do so without (i) providing notice of such
event to Lender within thirty (30) days of such occurrence, together with
financial information necessary for Lender to evaluate the capital structure and
debt service ability of Borrower after giving effect to such occurrence, and
(ii) obtaining Lender’s written consent which will not be unreasonably withheld
or delayed, provided that after giving effect to such transaction, Borrower will
be in compliance with all of the financial covenants contained in this Agreement
and no Event of Default has occurred and is continuing.

     13.06 NO SUBSTITUTION

     This Agreement may but need not be supplemented by separate assignments and
pledges and, if such assignments and pledges are given, the rights and security
interests given thereby shall be in addition to and not in limitation of the
rights and security interests given by this Agreement. This Agreement shall not
act to terminate, cancel, revoke, nor otherwise cause a novation, estoppel, or
waiver of any or all prior security interests granted by Borrower to Lender in
and to any collateral contemplated by these presents, or other, wholly or in
part, and without exception; and any and all such security interests shall
continue to remain properly perfected by Borrower to Lender in their terms and
without interruption.

     13.07 PROTECTION OF COLLATERAL

     Borrower will maintain all Collateral in a condition which is comparable to
that which exists on the date hereof, and make any necessary repairs thereto, or
replacements thereof; ordinary wear and tear and obsolescence excepted.

     Borrower will at the request of Lender, promptly furnish Lender the
receipted bills for all payments required by this Agreement. At its option, but
without liability so to do, Lender may discharge taxes, assessments, liens or
security interests or other encumbrances not otherwise permitted by this
Agreement or any of the other Loan Documents, at any time levied or placed on
the Collateral, may pay for insurance on the Collateral and may pay for the
maintenance and preservation of the Collateral (if such payments are not made by
Borrower within the time period required under this Agreement). Borrower agrees
to reimburse Lender on demand for such payments made by Lender, or any
reasonable expenses including attorneys’ fees incurred by Lender pursuant to the
foregoing authorization, and upon failure of Borrower so to reimburse Lender,
any such sums paid or advanced by Lender shall be deemed secured by the
Collateral and constitute part of the Loans.

     13.08 COMPLIANCE WITH ERISA

     The Borrower will not:

(A) engage in any Prohibited Transaction or commit any other breach of its
fiduciary responsibility under Part 4 of Title I of ERISA, which could subject
the Borrower or any Borrower Group Member to any material liability under
Section 406, 409, 502(i) or 502(d) of ERISA or Section 4975 of the Code, or
under any agreement or other instrument pursuant to which the Borrower or such
Borrower Group Member could be required to indemnify any Person against any such
liability or which could otherwise have a Material Adverse Effect on the
Borrower or any Plan; or

(B) fail to make any contribution required to be made by it to any Plan or
Multiemployer Plan or permit to exist with respect to any Plan any “accumulated
funding deficiency” (as such term is defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; or

(C) (i) commence proceedings to terminate any Plan, other than in a “standard
termination” within the meaning of Section 4041 of ERISA, or (ii) permit to
exist any proceedings instituted by the PBGC to terminate or to have a trustee
appointed to administer any Plan, or (iii) withdraw from any Multiemployer Plan
in a manner which could result in the imposition of a withdrawal liability under
Part 1 of Subtitle E of Title IV of ERISA.

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     13.09 FINANCIAL STATEMENTS

     The Borrower and Guarantor will deliver, at its sole expense, to the
Lender, the following:

A. Within one hundred twenty (120) days after the close of each fiscal year,
their consolidated financial statements, audited by certified public accountants
servicing the Borrower and Guarantor, and satisfactory to the Lender, along with
the accountant’s management letter and a Covenant Compliance Certificate, a copy
of which is annexed hereto as Exhibit “N”.

B. Within forty-five (45) days after the close of each fiscal quarter, Borrower
and Guarantor will provide to Lender, its internally prepared financial
statements, including, without limitation, income statement, balance sheet,
statement of cash flow prepared according to GAAP consistently applied, together
with a Covenant Compliance Certificate.

C. On or before the end of the first quarter ending July 31st in each fiscal
year, management prepared updated annual projections for each fiscal year ending
April 30th.

D. The Borrower shall furnish to the Lender, monthly management prepared
accounts receivable agings, accounts payable agings and borrowing base
certificates within thirty (30) days of each month end.

E. From time-to-time, such additional information regarding the financial
condition or business of the Borrower as the Lender may reasonably request.

All, or any portion of the financial information provided to the Lender by the
undersigned from time-to-time may be provided intact, or synopsized and
thereafter transmitted to other banking or financial institutions or other
parties requesting credit information as to the undersigned as is customarily
provided by the Lender.

     13.10 FINANCING STATEMENTS

     Prior to any Loan being made from Lender to Borrower, the Borrower hereby
agrees to execute, deliver, and pay the cost of filing any financing statement,
or other notices appropriate under applicable law, in respect of any security
interest created pursuant to this Agreement or at any other time which may at
any time be required by the Lender. The Borrower authorizes the Lender to file
any and all financing statements on behalf of the Borrower describing the
Collateral, as well as any agricultural liens or other statutory liens held by
Lender. In the event that any re-recording or re-filing thereof (or the filing
of any statements of continuation or assignment of any financing statement) is
required to protect and preserve such lien or security interest, the Borrower
shall, at its cost and expense, cause the same to be re-recorded and/or re-filed
at the time and in the manner requested by the Lender. The Borrower hereby
irrevocably designates the Lender, its agents, representatives and designees as
agents and attorneys-in-fact for the Borrower to sign such financing statements,
or other instruments in connection herewith, on behalf of the Borrower and file
the same, as required.

     13.11 TAXES AND IMPOSITIONS

     (A) Borrower shall (i) pay and discharge all Impositions prior to
delinquency, and (ii) if requested by Lender, provide Lender validated receipts
or such other evidence satisfactory to Lender showing the payment of such
Impositions within thirty (30) days after the same would have otherwise become
delinquent. Borrower’s obligation to pay the Impositions pursuant to this
Agreement shall include, to the extent permitted by applicable law, taxes
resulting from future changes in law which impose upon Lender an obligation to
pay any property taxes or other Impositions. Should Borrower default any payment
of any Impositions, Lender may (but shall not be obligated to) pay such
Impositions or any portion thereof and Borrower shall reimburse Lender on demand
for all such Advances.

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     (B) Borrower shall not be required to pay, discharge or remove any
Imposition so long as Borrower contests in good faith such Impositions or the
validity, applicability or amount thereof by an appropriate legal proceeding
which operates to prevent the collection of such amounts and the sale of the
Mortgaged Premises, or any portion thereof; provided, however, that prior to the
date on which such Imposition would otherwise have become delinquent, Borrower
shall have (i) given Lender prior written notice of such contest and
(ii) deposited with Lender, and shall deposit such additional amounts as are
necessary to keep on deposit at all times, in an amount equal to at least one
hundred ten percent (110%) of the total of (A) the balance of such Imposition
then remaining unpaid, and (B) all interest, penalties, costs and charges
accrued or accumulated thereon. Any such contest shall be prosecuted with due
diligence, and Borrower shall promptly pay the amount of such Imposition as
finally determined, together with all interest and penalties payable in
connection therewith. Lender shall have full power and authority to apply any
amount deposited with Lender pursuant to this clause to the payment of any
unpaid Imposition to prevent the sale or forfeiture of the Mortgaged Premises or
any portion thereof for non-payment thereof. Lender shall have no liability,
however, for failure to so apply any amount deposited. Any surplus retained by
Lender after payment of the Imposition for which a deposit was made, shall be
repaid to Borrower unless an Event of Default shall have occurred, in which case
said surplus may be retained by Lender to be applied to the obligations in the
sole discretion of the Lender. Notwithstanding any provisions of this clause to
the contrary, Borrower shall pay any Imposition which it might otherwise be
entitled to contest if, in the sole and absolute discretion of Lender, the
Mortgaged Premises, or any portion thereof or any Collateral, is in jeopardy or
in danger of being forfeited or foreclosed. If Borrower refuses to pay any such
Imposition, Lender may (but shall not be obligated to) make such payment and
Borrower shall reimburse Lender on demand for all such Advances.

     13.12 MAINTENANCE OF RECORDS

     Keep adequate records and books of account, in which complete entries will
be made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Borrower.

     13.13 MAINTENANCE OF PROPERTIES

     Maintain, preserve and keep, its properties which are used or useful in the
conduct of its business (whether owned in fee or a leasehold interest) in good
repair and working order (ordinary wear and tear and obsolescence excepted) and
from time-to-time will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be maintained.
Borrower agrees that it will maintain and repair the Collateral and the
Mortgaged Premises and keep all of the same in good and serviceable condition
and in at least as good condition and repair as same were on the date hereof or
in such better condition and repair as same may have been put thereafter
(ordinary wear and tear and obsolescence excepted). Borrower will not waste or
destroy or suffer the waste or destruction of the Collateral or the Mortgaged
Premises or any part thereof. Borrower will not use any of the Collateral or the
Mortgaged Premises in violation of any insurance thereon. In the event of damage
to or destruction of all or any part of the Collateral or the Mortgaged Premises
from any cause, the Borrower shall repair, replace, restore and reconstruct the
Collateral and the Mortgaged Premises to the extent necessary to restore each
portion of same to its condition immediately prior to such damage or destruction
and this obligation shall not be limited by the amount of any insurance proceeds
available.

     13.14 CONDUCT OF BUSINESS

     Except as otherwise permitted herein, continue to engage in an efficient
and economical manner, in a business of the same general type as conducted by it
on the date of this Agreement; and Borrower will not, without the prior written
consent of the Lender, directly or indirectly enter into any other lines of
business, businesses or ventures.

     13.15 COMPLIANCE WITH LAWS

     Promptly pay and discharge all lawful taxes, assessments and governmental
charges or levies imposed upon the Borrower, or upon, or in respect of, all or
any part of the property or business of the Borrower, all trade accounts payable
in accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a lien or charge upon any
property of the Borrower; provided the Borrower shall not be required to pay any
such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being

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contested in good faith by appropriate actions or proceedings which will prevent
the forfeiture or sale of any property of the Borrower or any material
interference with the use thereof by the Borrower, and (ii) the Borrower shall
set aside on its books, reserves deemed by it to be adequate with respect
thereto. The Borrower will promptly comply with all laws, ordinances or
governmental rules and regulations to which it is subject, including without
limitation, the Occupational Safety and Heath Act of 1970, ERISA, the Americans
with Disabilities Act and all Environmental Laws in all applicable
jurisdictions, the violation of which would materially and adversely affect the
properties, business, prospects, profits or condition of the Borrower or would
result in any lien or charge upon any property of the Borrower.

     13.16 ENVIRONMENT

     Notify the Lender immediately of any notice of a hazardous discharge or
environmental complaint received from any governmental agency or any other
party; notify the Lender immediately of any hazardous discharge from or
affecting its Mortgaged Premises; immediately contain and remove the same, in
compliance with all applicable laws; promptly pay any fine or penalty assessed
in connection therewith, except such assessments as are being contested in good
faith, against which adequate reserves have been established; upon receipt of
such notification, permit the Lender to inspect the Mortgaged Premises, and to
inspect all books, correspondence, and records pertaining thereto; and at the
Lender’s request, and at the Borrower’s expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to the Lender,
and such other and further assurances reasonably satisfactory to the Lender that
the condition has been corrected.

     13.17 PAYMENT OF LOANS

     The Borrower will duly and punctually pay the principal of, and interest on
the Loans in accordance with the terms of the Loans and this Agreement.

     13.18 PRINCIPAL DEPOSITORY

     The Borrower further agrees that it shall conduct all of its banking
business with the Lender, including, without limitation, retaining the Lender as
its principal depository savings accounts, checking accounts, general demand
depository accounts, and such other accounts as are utilized by the Borrower
from time-to-time.

     13.19 CHANGE IN MANAGEMENT

     The Borrower represents and warrants that there shall be no change in its
present senior management until all Obligations are fully paid and while any
availability remains under the Revolving Line of Credit, without prior written
notice to the Lender.

     13.20 NO GUARANTEES

     Borrower will not assume, guaranty, endorse or otherwise become directly or
contingently liable, or permit any of its subsidiaries to assume, guaranty,
endorse, or otherwise become directly or contingently liable (including, without
limitation, liable by way of agreement, contingent or otherwise, to purchase, to
provide funds for payment, to supply funds to or otherwise invest in any debtor
or otherwise to assure any creditor against loss) in connection with any Debt of
any other Person, except (i) guaranties by endorsement or similar transaction in
the ordinary course of business and (ii) liability of the Borrower to the Lender
under this Agreement.

     13.21 CORPORATE LOANS

     The Borrower agrees that it shall neither make any loans nor investments in
other corporations and business entities or to any other Persons until all
Obligations are fully paid and while any availability remains under the
Revolving Line of Credit.

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     13.22 ADVERSE TRANSACTIONS

     The Borrower shall not enter into any transaction which materially and
adversely affects the Collateral or their ability to repay the Obligations in
full as and when due.

     13.23 REPURCHASE

     The Borrower shall not make a sale to any customer on a bill-and-hold
guaranteed sale, sale and return, sale on approval, consignment or any other
repurchase or return basis.

     13.24 NAME

     The Borrower shall not use any corporate or fictitious name other than its
corporate name as set forth in its Articles of Organization on the date hereof,
or any trade name or fictitious name certified or registered in favor of
Borrower, all of which names shall be set forth on page 1 of this Agreement.

     13.25 PREPAYMENT

     The Borrower shall not prepay any Debt other than the Obligations, except
in the ordinary course of business and to the extent that it does not have a
material adverse effect on the financial condition of the Borrower.

     13.26 AFFILIATE TRANSACTIONS

     On or after an Event of Default, the Borrower shall not, sell, transfer,
distribute or pay any money or property to any Affiliate or invest in (by
capital contribution or otherwise) or purchase or repurchase any stock or debt,
or any property, of any Affiliate, or become liable on any guaranty of the
indebtedness, dividends or other obligation of any Affiliate.

     13.27 NO LIENS

     Except for Permitted Encumbrances, the Mortgaged Premises shall be kept
free and clear of all liens, security interests and encumbrances of every nature
or description (whether for taxes or assessments, or charges for labor,
materials, supplies or services or any other thing). Other than the Permitted
Encumbrances, Borrower will not cause or permit any instrument or document
affecting the Mortgaged Premises to be recorded without Lender’s prior written
consent thereto.

     13.28 NO DEBT

     Until all Obligations have been fully paid, the Borrower shall not create,
incur, assume or suffer to exist any Debt, except (i) Debt of the Borrower
pursuant to this Loan Agreement, (ii) Debt that is subordinated to the
Obligations arising under this Agreement and unsecured (excluding intellectual
property, which does not constitute Collateral), (iii) capital leases and
purchase money indebtedness, and (iv) accounts payable to trade creditors for
goods or services which are not more than thirty (30) days from the billing date
and current operating liabilities (other than for borrowed money) which are not
more than thirty (30) days past due, in each case in this clause (iv) incurred
in the ordinary course of business, as presently conducted and paid within the
specified time, unless contested in good faith and by appropriate proceedings.

     13.29 LENDER’S EXPENSES

     Borrower shall pay, on demand by Lender, all reasonable expenses, charges,
costs and fees in connection with the negotiation, documentation and closing of
the Loan, including all registration and recording fees, insurance consultant
fees, if any, environmental consultant fees, costs of appraisals, costs of
engineering reports, fees and disbursements of all counsel (both local and
special) of Lender, escrow fees, cost of surveys, fees and expenses of Lender’s
consultant or

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others employed by Lender to inspect the Collateral from time to time, and
reasonable out-of-pocket travel expenses incurred by Lender and Lender’s agents
and employees in connection with the Loan. At closing, Lender may pay directly
from the proceeds of the Loan each of the forgoing expenses.

     13.30 AUDIT AND INSPECTION BY LENDER

     Lender shall have the right, and Borrower shall permit and shall cooperate
with Lender in arranging for, at any reasonable time and from time to time,
Lender and its representatives to review and audit all books, records and
financial statements. Borrower shall make or cause its applicable Affiliates to
make all such books of account and records available for such examination at the
office where the same are regularly maintained. Lender shall have the right to
copy, duplicate and make abstracts from such books and records as Lender may
require. Borrower shall pay Lender’s costs and expenses incurred in connection
with no more than one (1) such audit per year, unless there has occurred an
Event of Default in which case Borrower shall pay the costs and expenses of all
such audits conducted by Lender. Borrower acknowledges and agrees that (A) all
of such audits, inspections and reports shall be made for the sole benefit of
Lender, and not for the benefit of Borrower or any third party, and neither
Lender nor Lender’s auditors or inspectors or any of Lender’s representatives,
agents or contractors assumes any responsibility or liability (except to Lender)
by reason of such audits, inspections or reports, (B) Borrower will not rely
upon any of such audits, inspections or reports for any purpose whatsoever, and
(C) the performance of such audits, inspections or reports will not constitute a
waiver of any of the provisions of this Agreement or any other Loan Document or
any of the obligations of Borrower hereunder or thereunder. Borrower further
acknowledges and agrees that neither Lender nor Lender’s inspector,
representatives, agents or contractors shall be deemed to be in any way
responsible for any matters related to design or construction of any
improvements.

     13.31 APPRAISAL

     At any time during the term of the Commercial Real Estate Term Loan,
Borrower shall cooperate with Lender and use reasonable efforts to assist Lender
in obtaining an appraisal of the Mortgaged Premises. Such cooperation and
assistance from Borrower shall include but not be limited to the obligation to
provide Lender or Lender’s appraiser with the following: (i) reasonable access
to the Mortgaged Premises, (ii) a current certified rent roll for the Mortgaged
Premises in form and substance satisfactory to Lender, including current asking
rents and a history of change in asking rents and historical vacancy for the
past three years, (iii) current and budgeted income and expense statements for
the prior three years, (iv) a site plan and survey of Mortgaged Premises and the
related improvements, (v) the building plans and specifications, including
typical elevation and floor plans, (vi) a photocopy of the transfer documents
conveying the beneficial interest in the Mortgaged Premises to Borrower,
together with the legal description of the Mortgaged Premises, (vii) the current
and prior year real estate tax bills, (viii) a detailed list of past and
scheduled capital improvements and the costs thereof, (ix) a summary of the then
current ownership entity, (x) all environmental reports and other applicable
information relating to the Mortgaged Premises and the related improvements, and
(xi) copies of all recent appraisals/Mortgaged Premises description information
or brochures, including descriptions of amenities and services relating to the
Mortgaged Premises and the related improvements. The appraiser performing any
such appraisal shall be engaged by Lender, and Borrower shall be responsible for
any fees payable to said appraiser in connection with an appraisal of the
Mortgaged Premises; provided, however, so long as no Event of Default exists,
Borrower shall not be required to pay for more than one appraisal every year.

     13.32 NON PLEDGE

     Borrower will not create, 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 property or assets now owned or hereinafter acquired,
except that the foregoing restrictions shall not apply to: (i) Liens for taxes,
assessments or governmental charges or levies on property of Borrower or any of
its subsidiaries if the same shall not at the time be delinquent or thereafter
can be paid without interest or penalty; (ii) carriers, warehouseman’s and
mechanic’s liens and other similar Liens, arising in the ordinary course of
business for sums not yet due or which are being contested in good faith and by
appropriate proceedings which serve as a matter of law to stay the enforcement
thereof and as to which adequate reserves had been made; (iii) pledges or
deposits under workman’s compensation laws, unemployment insurance, social
security, retirement

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benefits or similar legislation; (iv) liens related to capital leases or
purchase money indebtedness permitted hereby; and (v) Liens in favor of the
Lender (collectively the “Permitted Liens”).

     14.00 REPRESENTATIONS REMADE

     Borrower warrants and covenants that the foregoing representations and
warranties will be true and shall be deemed remade as of the date of the closing
and as of the date of each other Advance. All representations and warranties
made herein or in any other Loan Documents or in any certificate or other
document delivered to Lender by or on behalf of Borrower pursuant to or in
connection with this Agreement or any other Loan Document shall be deemed to
have been relied upon by Lender, notwithstanding any investigation heretofore or
hereafter made by, or on behalf of Lender. All such representations and
warranties shall survive the making of the Loans and any or all of the Advances
contemplated hereby and shall continue in full force and effect until such time
as the Loans have been paid in full.

     15.00 FINANCIAL COVENANTS

     The Borrower further agrees that from the date of this Agreement until all
Obligations are fully paid and while any availability remains under the
Revolving Line of Credit, that it will maintain the following financial ratios,
the default of which shall constitute an Event of Default of this Agreement. All
financial covenants will be measured based upon the consolidated financial
statements of the Borrower and Guarantor.

A. Maximum Leverage. For fiscal ending April 30, 2005, and each quarter
thereafter, the ratio of Total Liabilities to Tangible Net Worth (such ratio
being defined as “Maximum Leverage”), shall not exceed the following:

          Test Period Requirement  
April 30, 2005
3.50:1.00
July 31, 2005
3.50:1.00
October 31, 2005
3.50:1.00
January 31, 2006
3.50:1.00
April 30, 2006
3.00:1.00
July 31, 2006
3.00:1.00
October 31, 2006
3.00:1.00
January 31, 2007
3.00:1.00
April 30, 2007
2.00:1.00 and each quarter thereafter

B. Minimum EBITDA. For fiscal year ending April 30, 2005 and each quarter
thereafter (measured on a rolling four quarter basis), a minimum earnings before
interest, taxes, depreciation and amortization shall be as follows:

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          Test Period Requirement
April 30, 2005
$12,000,000
July 31, 2005
$12,000,000
October 31, 2005
$12,000,000
January 31, 2006
$12,000,000
April 30, 2006
$13,000,000
July 31, 2006
$13,000,000
October 31, 2006
$13,000,000
January 31, 2007
$13,000,000
April 30, 2007
$13,000,000 and each quarter thereafter

C. Minimum Debt Service Coverage. For fiscal year ending April 30, 2005, and
each quarter thereafter, the ratio of (i) Net Cash Available for Debt Service to
(ii) Total Debt Service will be equal to or greater than 1.25:1.00. This
covenant will be tested quarterly on a rolling four-quarter basis.
Notwithstanding the foregoing, (x) for the fiscal year ending April 30, 2005 and
the quarter ending July 31, 2005, unfinanced capital expenditures will be
excluded from the foregoing definition and (y) for the second quarter ending
October 31, 2005 only, the ratio of (i) Net Cash Available for Debt Service to
(ii) Total Debt Service will be equal to or greater than 1.10:1.00.

D. Maximum Capital Expenditures. Borrower shall make no capital expenditures in
excess of the following amounts during the following fiscal years:

          Fiscal Year End   Amount  
April 30, 2005
  $ 10,000,000  
April 30, 2006
  $ 14,000,000  
April 30, 2007
  $ 14,000,000  

     16.00 BORROWER’S RIGHTS IN COLLATERAL UNTIL DEFAULT

     Except where the Lender chooses to perfect its security interest by
possession, in addition to the filing of a financing statement, in the absence
of any Event of Default hereunder, Borrower shall have the right, in the regular
course of business, to possess and manage the Collateral, and in the ordinary
course of business; provided, however, said right shall not include the right to
transfer Collateral in total or partial satisfaction of any Debt.

     17.00 CONTROL

     Borrower will cooperate with Lender, and execute agreements required by
Lender, in obtaining control with respect to Collateral consisting of:

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(i) deposit accounts;

(ii) investment property;

(iii) letter of credit rights; and

(iv) electronic and chattel paper.

     The Borrower grants Lender a limited power of attorney to enter into the
control agreements on behalf of the Borrower to effectuate the forgoing.

     Borrower will not create any chattel paper without placing a legend on the
chattel paper acceptable to Lender, indicating that Lender has a security
interest in the chattel paper.

     18.00 DEFAULT

     Borrower shall be in default under this Agreement upon the happening of any
of the following events or conditions (which shall individually and/or
collectively be referenced as an “Event of Default”) without notice or demand:

     18.01 Failure to observe or perform any of its agreements, warranties or
representations in this Agreement, including, without limitation, financial
covenants, or in any other Loan Document and to the extent such non-monetary
(which term excludes without limitation, payment and/or financial covenants)
failure is curable, Borrower has not cured such non-monetary failure within
thirty (30) days after written notice from Lender to Borrower with respect to a
non-monetary failure provided, however, if such failure cannot reasonably be
cured within such thirty (30) days, then Borrower shall have up to ninety
(90) days after written notice from Lender as long as Borrower is diligently
pursuing such cure within such ninety (90) day period.

     18.02 Material loss or theft, substantial damage or destruction,
unauthorized sale to or encumbrance of any material amount of the Collateral in
excess of reasonably expected recoveries under insurance policies, or the making
of any levy, seizure or attachment thereof or thereon;

     18.03 Failure of Borrower to pay within ten (10) days of when due any
amount payable by it to the Lender under any of its Obligations to the Lender
when and as the same shall become due, whether upon demand, at maturity, by
acceleration, or otherwise.

     18.04 Insolvency as defined in this Agreement, or the recording or
existence of any lien for unpaid taxes that are not being contested as permitted
by this Agreement.

     18.05 Default in any material agreement or undertaking to which the
Borrower is a party or by which Borrower is bound or affected; whether in
connection with this financial transaction or other, and such default has not
been cured within any applicable notice, grace or cure period.

     18.06 NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, BORROWER
HAS NO RIGHT TO CURE ANY MONETARY DEFAULT FOR ANY AMOUNTS DUE AND PAYABLE TO
LENDER UNDER ANY OF THE LOAN DOCUMENTS. The term “Monetary Default” shall mean
without limitation, payment, financial covenant or any other term, condition or
covenant contained in this Agreement whereby Borrower is required to pay money.

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     18.07 The making by the Borrower of any material misrepresentation to the
Lender for the purpose of obtaining credit or an extension of credit.

     19.00 LENDER’S RIGHTS

     Upon and during the continuance of any Event of Default, Lender may:

     19.01 Notify account debtors at Borrower’s expense, that the Collateral has
been assigned to Lender and that payments shall be made directly to Lender and
upon request of Lender, Borrower will so notify such account debtor that their
accounts must be paid to Lender. This right may be exercised by the Lender at
any time, on or after the occurrence of an Event of Default. Borrower will
immediately upon receipt of all checks, drafts, cash and other remittances
deliver the same in kind to the Lender. Lender shall have full power to collect,
compromise, endorse, sell or otherwise deal with the Collateral or proceeds
thereof in its own name or in the name of Borrower and Borrower hereby, for
consideration paid, irrevocably appoints the Lender its attorney-in-fact for
this purpose.

     19.02 Without notice to Borrower, enter and take possession of all
equipment, Inventory, and other Collateral and the premises on which they are
now or hereafter located, including without limitation, breaking the close and
changing and replacing locks as may be required without the same being
considered as a trespass, as Borrower hereby expressly provides authority for
the same. The Lender, at its sole discretion, may operate and use Borrower’s
equipment, complete work in process and sell inventory without being liable to
the Borrower on account of any losses, damage or depreciation that may occur as
a result thereof so long as Lender shall act reasonably and in good faith and
may lease or license the Collateral to third persons or entities for such
purposes; and in any event, Lender may at its option and without notice to
Borrower, except as specifically herein provided, sell, lease, assign and
deliver, the whole or any part of the Collateral, or any substitute therefor, or
any addition thereto, at public or private sale, for cash, upon credit, or for
future delivery, at such prices and upon such terms as Lender deems advisable,
including without limitation the right to sell or lease in conjunction with
other property, real or personal, and allocate the sale proceeds or leases among
the items of property sold without the necessity of the Collateral being present
at any such sale, or in view of prospective purchasers thereof. Lender shall
give Borrower timely notice by hand delivery to Borrower or by United States
mail, postage prepaid (in which event notice shall be deemed to have been given
when so deposited in the mail), at the address specified herein, of the time and
place of any public or private sale or other disposition unless the Collateral
is perishable, threatens to decline speedily in value, or is the type
customarily sold in a recognized market. Upon such sale, Lender may become the
purchaser of the whole or any part of the Collateral sold, discharged from all
claims and free from any right of redemption. In case of any such sale by Lender
of all or any of said Collateral on credit, or for future delivery, such
property so sold may be retained by Lender until the selling price is paid by
the purchaser. The Lender shall incur no liability in case of the failure of the
purchaser to take up and pay for the Collateral so sold. In case of any such
failure, the said Collateral may be again, from time-to-time, sold.

     19.03 Continue to occupy and use all premises which the Borrower now
occupies or may hereafter have or occupy, to the extent Borrower could legally
do so, and may use all trademarks, service marks, trade names, trade styles,
logos, goodwill, trade secrets, franchises, licenses and patents which the
Borrower now has or may hereafter acquire, including the following rights:

(i) the rights in said marks, name, styles, logos and goodwill acquired by the
common law of the United States or of any state thereof or under the law of any
foreign nation, organization, or subdivision thereof;

(ii) the rights acquired by registrations of said marks, names, styles, and
logos under the statute of any foreign country, or the United States, or any
state or subdivision thereof;

(iii) the rights acquired in each and every form of said mark, name, style and
logo as used by the Borrower notwithstanding that less than all of such forms
would be registered and notwithstanding the form of said mark, name and style;

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(iv) the right to use or license any party to the use of all or any of said
marks, names, styles, logos and goodwill in connection with the sale of goods
and/or the rendering of services in the conduct of services advertising,
promotion and the like anywhere in the world;

(v) the right to use said marks, names, styles, logos and goodwill either in
connection with or entirely independent from the Collateral;

(vi) the right to assign, transfer and convey a partial interest or the entire
interest in any one or more of said marks, names, styles or logos;

(vii) the right to seek registration, foreign or domestic, of any of said marks,
names, styles or logos which was not registered as of the date hereof or
registered subsequently;

(viii) the right to prosecute pending trademark applications for foreign or
domestic registration (federal or state) of any of said marks, names, styles or
logos.

Notwithstanding the foregoing, the Lender acknowledges and agrees that: (a) the
Lender has no security interest in any intangibles which constitutes
intellectual property of the Borrower (including, without limitation, the “Smith
& Wesson” trade name and any trade secrets, know-how, licenses, trade names,
logos, registrations, patents, patent applications copyrights, copyright
applications, trademarks or trademark applications (collectively the
“Intangibles”)); and (b) the Lender will exercise the rights set forth in 19.03
in a manner that will not be inconsistent with any security interest granted to
any other party in such intellectual property assets; provided, however, Lender
shall be free to use the “Smith & Wesson” trade name and other Intangibles in
connection with the sale of Collateral in the event of foreclosure and/or the
exercise of Lender’s cumulative rights and remedies.

     19.04 Act as attorney-in-fact for Borrower for the purposes herein
described, and Borrower does hereby make, constitute and appoint any officer or
agent of Lender as Borrower’s true and lawful attorney-in-fact, with full power:
to endorse the name of Borrower or any of Borrower’s officers or agents upon any
assignments, notes, checks, drafts, money orders, or other instruments of
payment or Collateral that may come into possession of Lender for purposes of
such recovery of accounts receivable monies; to sign and endorse the name of
Borrower or any of Borrower’s officers or agents upon any negotiable instrument,
invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts, assignments, verifications and notices in connection with accounts, and
any instruments or documents relating thereto or to Borrower’s rights therein;
to give notice to the United States Post Office to effect changes of address so
that mail addressed to the Borrower may be permanently delivered directly to the
Lender for purposes of accepting same, and obtaining access to contents, in
order to take possession of such accounts receivable monies, and all other
collateral, with full power to do any and all things necessary to be done in and
about the premises as fully and effectually as Borrower might or could do; and
Borrower does hereby ratify all that Lender shall lawfully do, or cause to be
done by virtue hereof.

     19.05 Make all Obligations immediately due and payable, without
presentment, demand, protest, hearing or notice of any kind and exercise the
remedies of a Lender afforded by the Uniform Commercial Code and other
applicable law or by the terms of any agreement between Borrower and Lender.

     19.06 In the case of any sale or disposition of the Collateral, or the
realization of funds therefrom, the proceeds thereof shall first be applied to
the payment of the expenses of re-taking, maintaining, and foreclosure of
Collateral, and costs, fees and expenses of such sale, commissions, reasonable
attorney’s fees and all charges paid or incurred by Lender pertaining to said
sale, including any taxes or other charges imposed by law upon the Collateral
and/or the owning, holding or transferring thereof; secondly, to pay, satisfy,
and discharge the Obligations secured hereby pro rata in accordance with the
unpaid amount thereof; and thirdly, to pay the surplus, if any, to Borrower,
provided that the time of any application of the proceeds shall be at the sole
and absolute discretion of the Lender. To the extent such proceeds do not
satisfy the foregoing items, Borrower hereby promises and agrees to pay the
deficiency.

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     19.07 The Lender and the holders of the Obligations may take or release
other security, may release any party primarily or secondarily liable for any of
the Obligations, may grant extensions, renewals or indulgences with respect to
the Obligations, or may apply to the Obligations the proceeds of the Collateral
or any amount received on account of the Collateral by the exercise of any right
permitted hereunder, without resorting or regard to other security or sources of
reimbursement.

     19.08 Require the Borrower to assemble the Collateral in a single location
at a place to be designated by Lender and make the Collateral at all times
secure and available to the Lender.

     19.09 The Lender shall hereby also be granted a security interest in, and
right of set off against any balance on any deposit, deposit account, agency,
reserve, holdback, or other account maintained by, or on behalf of, the Borrower
with the Lender and the Lender shall have the right to apply the proceeds of
such foreclosure or set off against such items of Borrower’ Obligations as
Lender may select.

     19.10 All rights and remedies of Lender whether provided for herein or in
other agreements, instruments, or documents, or conferred by law, are cumulative
and not alternative and may be enforced successively.

     19.11 The parties agree that in the event that a determination of Adequate
Protection of Lender is required under Section 362 or 363 of the Bankruptcy
Reform Act of 1978 (the “Bankruptcy Code”), its successor, or Bankruptcy Rules
in connection therewith, that:

A. The bargain of the parties at the time of lien creation hereunder in order to
provide the Lender with adequate protection to induce it to make the loan(s),
included stated ratios herein.

B. That in the event of any proceeding under the Bankruptcy Code, that the said
ratio of the value (as determined by the Lender in its sole discretion)
Collateral secured to Lender to the amount of the Obligation
(“Collateral-To-Obligation Ratio”), must be increased by an additional One
Hundred Ten Percent (110%), in order to continue to provide minimum levels of
Adequate Protection to Lender due to the reduced expectation for present and
future prospects of lien enforcement resulting from the existence of proceedings
under the Bankruptcy Code. This agreed minimum increase in said ratio shall not
act to bar Lender from presenting evidence that even such increase is
insufficient and leaves the Lender without Adequate Protection, based upon the
deteriorating nature or kind of Collateral, wholly or in part, in any instance.

C. That the parties agree that the costs of liquidating and collecting of
Collateral, as well as the potential for rapid Collateral deterioration if
Borrower is, at any time, subject to the Bankruptcy Code, all require that the
original Collateral-To-Obligation Ratio be increased, as aforesaid, as a
requirement of minimum Adequate Protection, in addition to such other additional
Adequate Protection as may be required by the Lender.

D. The parties agree that these covenants shall be conclusive evidence in any
proceeding to determine minimum Adequate Protection under the Bankruptcy Code,
as to the intention and agreement of the parties at both this time, and at all
times hereinafter, until the Obligations to the Lender, are paid in full.

E. That these agreements may be submitted to the Court in any such proceeding,
by the Lender, in its sole and exclusive discretion, as conclusive evidence as
to the agreement of the parties at the time of such hearing, concerning minimum
Adequate Protection to be provided to the Lender at the time of presentment.
PROVIDED, HOWEVER, that such submission shall not constitute a waiver of any
default or breach hereunder, or of any other agreement by the Borrower to the
Lender, but shall remain only as evidence for the limited purposes stated
herein.

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F. PROVIDED, FURTHER that at all times the Lender reserves, and does not waive
Borrower’s obligation to provide Adequate Protection prior to the Borrower’s use
of “cash collateral” as defined in Section 363 of the Bankruptcy Code.

     19.12 The Lender has no obligation to attempt to satisfy the Obligations by
collecting from any other Person liable for them and Lender may release, modify
or waive any Collateral provided by any other Person to secure any of the
Obligations, all without affecting Lender’s rights against Borrower. Borrower
waives any right it may have to require Lender to pursue any third Person for
any of the Obligations.

     19.13 Lender may comply with any applicable state or federal law
requirements in connection with a disposition of the Collateral and compliance
will not be considered adversely to affect the commercial reasonableness of any
sale of the Collateral.

     19.14 Lender may sell the Collateral without giving any warranties as to
the Collateral. The Lender may specifically disclaim any warranties of title or
the like. This procedure will not be considered adversely to affect, the
commercial reasonableness of the sale of the Collateral.

     19.15 If Lender sells any of the Collateral upon credit, Borrower will be
credited only with payments actually made by the purchaser, received by Lender
and applied to the indebtedness of the purchaser. In the event that purchaser
fails to pay for the Collateral, Lender may resell the Collateral and Borrower
shall be credited with the proceeds of the sale.

     19.16 In the event Lender purchases any of the Collateral being sold,
Lender may pay for the Collateral by crediting some or all of the Obligations of
the Borrower.

     19.17 Lender has no obligation to marshall any assets in favor of Borrower
or in payment of any of the Obligations or any other obligations owed to Lender
by Borrower or any other person.

     20.00 BORROWER’S ACKNOWLEDGMENTS

     20.01 Borrower acknowledges that Lender has not, by the terms hereof, acted
to intrude into any of its management decisions, or prerogatives, nor has it
entered into control or management of Borrower’s affairs. Any reference herein
to limitation on action(s) or conduct on the part of the Borrower represents
only undertakings, or forbearance(s) necessary to preserve the management, cash
flow, and asset and financial status quo promised by the Borrower upon which the
loan(s) were originally contemplated, and which the Lender relied as a
condition-precedent thereto, and which are necessary to the protection of
Lender, in its sole status as secured lender, and not otherwise.

     20.02 The Borrower acknowledges and represents that it is a sophisticated
borrower and has experience in financial matters generally and in Borrower
obligations, specifically. Borrower acknowledges that it has been represented by
counsel, and that a draft of this Agreement has been available for review and
negotiation. Therefore, Borrower hereby agrees that all Lender’s rights were the
result of negotiations between the Lender and the Borrower and were induced in a
material respect by the benefits granted to the Borrower hereunder.

     21.00 BORROWER’S OBLIGATION TO PAY EXPENSES OF LENDER

     Excluding expenses in connection with the preparation of this Agreement,
related loan documents and the closing, the Borrower agrees to pay all
reasonable expenses, including counsel fees and other expenses which may be paid
or incurred by Lender for itself or as agent for any other Lender, in connection
with the subject matter of this Agreement, the Obligations, the Collateral or
any rights or interest therein in the Event of a Default hereunder, including
without limiting the generality of the foregoing, the enforcement of any
security interest granted hereby, and representation in any litigation including
any bankruptcy or insolvency proceedings. All such expenses may be added to

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the principal amount of any indebtedness owed by the Borrower to Lender and
shall constitute part of the Obligations secured hereby.

     22.00 TENURE

     Borrower’s liability under this Agreement shall commence with the date
hereof and continue in full force and effect and be binding upon Borrower, and
until all Loans whether now in existence, or created hereinafter, shall have
been fully paid and satisfied, and until so paid and satisfied, Lender shall be
entitled to retain the security interest granted hereby in all Collateral. At
any time, either party may advise the other that no further loans or advances
are to be made, but such notice shall in no way cause any and all Obligations of
the Borrower to Lender to be waived.

     23.00 NO WAIVERS BY THE LENDER

     No delay or omission on the part of Lender in exercising any rights shall
operate as a waiver of such right or any other right. Waiver on any one occasion
shall not be construed as a bar to or waiver of any right or remedy on any
future occasion. All of Lender’s rights and remedies, whether evidenced hereby
or by any other agreement, instrument, or paper, shall be cumulative and may be
exercised singularly or concurrently.

     24.00 AMENDMENT

     This Agreement constitutes the entire agreement between the parties. The
Agreement or any part thereof cannot be changed, waived, or amended, except by
an instrument in writing, signed by both the Lender and Borrower herein.

     25.00 RIGHTS AND LIABILITIES OF ASSIGNS

     Borrower shall not be permitted to assign this Agreement, unless expressly
authorized by the Lender, in writing. Lender may assign its interests under this
Agreement. The assignment of this Agreement shall bind all persons to become
bound as a borrower to this Agreement. In the event Lender may assign its rights
and interest under this Agreement, the Borrower shall render performance under
this Agreement to the assignee. Borrower waives and will not assert against any
assignee, any claims, defenses or set-off, which Borrower could assert against
Lender except defenses which cannot be waived.

     26.00 CONSTRUCTION

     This Agreement shall be deemed to have been entered into in the
Commonwealth of Massachusetts, and the laws of the Commonwealth of Massachusetts
shall govern the construction of this Agreement and the rights and duties of the
parties hereto. It is agreed and understood that, as this form of agreement may
be used by persons of either sex, and for one or more corporations, and also
where there are several parties, in such cases, the masculine and plural, as
herein used, shall be instead of and shall stand for, the feminine or neuter
gender or the single number, as the context may require. Any ambiguity,
contradiction, or inconsistency between this Agreement and any other documents
relied upon by Lender shall, at all times, be resolved in the sole and exclusive
discretion of Lender.

     27.00 NOTICE

     Any notice required or permitted hereunder shall be in writing, and shall
be duly given to any party or if mailed first class, postage prepaid, certified
mail, return receipt requested, to the Borrower at the address set forth on page
1 hereof, to the Lender at its principal banking house, or to such other address
as may be specified by notice in writing to the other parties by the party
changing such address.

     28.00 CONSENT TO JURISDICTION

     THE BORROWER AND GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY
(A) SUBMITS TO PERSONAL JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS OVER
ANY

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SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS, AND (B) WAIVES ANY AND ALL PERSONAL RIGHTS UNDER
THE LAWS OF ANY STATE (I) TO THE RIGHT, IF ANY, TO TRIAL BY JURY, (II) TO OBJECT
TO JURISDICTION WITHIN THE COMMONWEALTH OF MASSACHUSETTS OR VENUE IN ANY
PARTICULAR FORUM WITHIN THE COMMONWEALTH OF MASSACHUSETTS, AND (III) TO THE
RIGHT, IF ANY, TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN ACTUAL DAMAGES. THE BORROWER
AGREES THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER
APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING
MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED DIRECTED
TO THE BORROWER AT THE ADDRESS SET FORTH ON PAGE ONE HEREOF, AND SERVICE SO MADE
SHALL BE COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL BE SO MAILED. NOTHING
CONTAINED HEREIN, HOWEVER, SHALL PREVENT THE LENDER FROM BRINGING ANY SUIT,
ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST ANY COLLATERAL AND AGAINST
THE BORROWER, AND AGAINST ANY PROPERTY OF THE BORROWER, IN ANY OTHER STATE.
INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY STATE
SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS SHALL GOVERN THE RIGHTS AND
OBLIGATIONS OF THE BORROWER AND THE LENDER HEREUNDER OR THE SUBMISSION HEREIN BY
THE BORROWER TO PERSONAL JURISDICTION WITHIN THE COMMONWEALTH OF MASSACHUSETTS.

     EXECUTED UNDER SEAL this 11th day of January, 2005, by the parties set
forth below, or by their duly authorized officers.

         
BORROWER:
      SMITH & WESSON CORP.
 
     

/s/ Peter Marcil   BY:   /s/ John A. Kelly
 
       
Witness
      Its duly authorized (seal)
 
       
GUARANTOR:
      SMITH & WESSON HOLDING CORPORATION
 
       
/s/ Peter Marcil
  BY:   /s/ John A. Kelly
 
       
Witness
       
 
       
LENDER:
      BANKNORTH, N.A.
 
       
/s/ Peter W. Shrair
  BY:   /s/ Maria P. Goncalves
 
       
Witness
      Its duly authorized (seal)

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