Document:

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”)
is entered into as of September 27, 2018, by and among STURM, RUGER & COMPANY, INC., a Delaware corporation (“SRC”
or the “Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

 

RECITALS

 

WHEREAS, Borrower shall benefit from the extension
of credit under this Agreement;

 

WHEREAS, by virtue of the foregoing and after
giving effect to the probable liability of Borrower hereunder and under the other Loan Documents (as defined below), Borrower considers
that it is receiving at least fair consideration and reasonably equivalent value from Bank for the obligations under the Loan Documents;

 

WHEREAS, Borrower has requested that Bank extend
credit to Borrower as described below, and Bank has agreed to provide such credit to Borrower on the terms and conditions contained
herein.

 

NOW, THEREFORE, for valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as follows:

 

ARTICLE I

CREDIT TERMS

 

SECTION 1.1.          LINE OF CREDIT.

 

(a)       Line
of Credit. Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time
to time up to August 31, 2019, not to exceed at any time the aggregate principal amount of Forty Million Dollars ($40,000,000.00)
(“Line of Credit”), the proceeds of which shall be used for general corporate purposes. Borrower obligation
to repay advances under the Line of Credit shall be evidenced by a promissory note dated as of the date hereof (“Line
of Credit Note”), all terms of which are incorporated herein by this reference.

 

(b)       Borrowing
and Repayment. Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay the outstanding
borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note;
provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal
amount available thereunder, as set forth herein.

 

(c)       Subfeature
Letter of Credit Subfeature. As a subfeature under the Line of Credit, Bank agrees from time to time during the term thereof
to issue or cause an affiliate to issue letters of credit for the account of Borrower (“Subfeature Letters of Credit”);
provided however, that the aggregate undrawn amount of all outstanding Subfeature Letters of Credit shall not at any time exceed
Ten Million Dollars ($10,000,000.00). The form and substance of each Subfeature Letter of Credit shall be subject to approval by
Bank, in its sole discretion. Each Subfeature Letter of Credit shall be issued for a term not to exceed three hundred sixty five
(365) days, as designated by Borrower; provided however, that no Subfeature Letter of Credit shall have an expiration date subsequent
to the maturity date of the Line of Credit. The undrawn amount of all Subfeature Letters of Credit shall be reserved under the
Line of Credit 

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and shall not be available for borrowings thereunder. Each Subfeature Letter of Credit shall be subject to the additional
terms and conditions of Bank’s standard commercial letter of credit agreement and all applications and related documents
required by Bank in connection with the issuance thereof. Each drawing paid under a Subfeature Letter of Credit shall be deemed
an advance under the Line of Credit and shall be repaid by Borrower in accordance with the terms and conditions of this Agreement
applicable to such advances; provided however, that if advances under the Line of Credit are not available, for any reason, at
the time any drawing is paid, then Borrower shall immediately pay to Bank the full amount drawn, together with interest thereon
from the date such drawing is paid to the date such amount is fully repaid by Borrower, at the rate of interest applicable to advances
under the Line of Credit.

 

SECTION 1.2.          INTEREST/FEES.

 

(a)       Interest.
The outstanding principal balance of the Line of Credit shall bear interest at the rate of interest set forth in the Line of Credit
Note.

 

(b)       Computation
and Payment. Interest shall be computed on the basis of a 360-day year, actual days elapsed. Interest shall be payable at the
times and place set forth in the Line of Credit Note and each other instrument or document required hereby.

 

(c)       Commitment
Fee. Borrower shall pay to Bank a non-refundable commitment fee for the Line of Credit equal to Forty Thousand Dollars ($40,000.00),
which fee shall be due and payable in full on the date hereof.

 

(d)       Unused
Commitment Fee. Borrower shall pay to Bank a fee equal to one quarter of one percent (0.25%) per annum (computed on the basis
of a 360-day year, actual days elapsed) on the daily unused amount of the Line of Credit, which fee shall be calculated on a quarterly
basis by Bank and shall be due and payable by Borrower in arrears on the first day of each fiscal quarter, commencing on the first
of such date following the date hereof.

(e)       Letter
of Credit Fees and Commissions.  Borrower shall pay to Bank (i) fees upon the issuance and extension (including any auto-extension)
of each Subfeature Letter of Credit in an amount equal to three quarters of one percent (0.75%) of the face amount of such Subfeature
Letter of Credit and (ii) fees upon the drawing, payment, or negotiation of each drawing under any such Subfeature Letter of Credit
and upon the occurrence of any other activity with respect to any such Subfeature Letter of Credit (including without limitation,
the transfer, assignment, amendment, cancellation or non-extension of any such Subfeature Letter of Credit) determined in accordance
with Bank’s standard fees and charges then in effect for such activity.  For any commercial letters of credit, additional
fees for document examination, discrepancies, acceptances, document delivery, special handling and other trade services will be
determined in accordance with Bank’s standard fees and charges then in effect for such activity.

 

SECTION 1.3.     COLLECTION OF
PAYMENTS.  Except to the extent expressly specified otherwise in any Loan Document (as defined below) other than this Agreement,
Borrower authorizes Bank to collect all amounts due to Bank from Borrower under this Agreement or any other Loan Document (whether
for principal, interest or fees, or as reimbursement of drafts paid or other payments made by Bank under any credit subject to
this Agreement) by debiting any deposit account maintained by Borrower with Bank for the full amount thereof.  Should there
be insufficient funds in Borrower’ deposit accounts with Bank to 

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pay all such sums when due, the full amount of such deficiency
shall be immediately due and payable by Borrower.

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES

 

Borrower makes the following representations
and warranties to Bank, which representations and warranties shall survive the execution of this Agreement and shall continue in
full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement and the other Loan Documents.

 

SECTION 2.1.          LEGAL STATUS. Borrower is (a) a corporation,
duly organized and existing and in good standing under the laws of Delaware and is qualified or licensed to do business (and is
in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required
or in which the failure to so qualify or to be so licensed could have a material adverse effect on such Borrower and (b) not the
target of any trade or economic sanctions promulgated by the United Nations or the governments of the United States, the United
Kingdom, the European Union, or any other jurisdiction in which such Borrower is located or operates (collectively, “Sanctions”).

 

SECTION 2.2.          AUTHORIZATION AND VALIDITY. This Agreement and
each promissory note, contract, instrument and other document required hereby or at any time hereafter delivered to Bank in connection
herewith, including but not limited to any agreement with Bank related to any swap, derivative, foreign exchange, hedge, deposit,
treasury management, or other similar transaction or arrangement (collectively, the “Loan Documents”), have
been duly authorized, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective
terms.

 

SECTION 2.3.          NO VIOLATION. The execution, delivery and performance
by Borrower of each of the Loan Documents do not violate any provision of any law or regulation, or contravene any provision of
the certificate of incorporation, bylaws or other organizational or governing document of such Borrower, or result in any breach
of or default under any contract, obligation, indenture or other instrument to which such Borrower is a party or by which such
Borrower may be bound.

 

SECTION 2.4.          LITIGATION. There are no pending, or to the
best of Borrower’s knowledge, threatened, actions, claims, investigations, suits or proceedings by or before any governmental
authority, arbitrator, court or administrative agency which could have a material adverse effect on the financial condition or
operation of Borrower [except as disclosed on Schedule 2.4 attached hereto].

 

SECTION 2.5.          CORRECTNESS
OF FINANCIAL STATEMENTS1. The audited annual financial statements of SRC dated as of December 31, 2017, and all interim
financial statements of SRC delivered to Bank since said date, true copies of which have been delivered by SRC to Bank prior to
the date hereof, (a) are complete and correct and present fairly the financial condition of SRC, (b) disclose all liabilities
of SRC that are required to be reflected or reserved against under generally accepted accounting principles consistently applied
(“GAAP”), whether

 

 

1 NTD: To be confirmed.

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liquidated
or unliquidated, fixed or contingent, and (c) have been prepared in accordance with GAAP. Since the dates of such financial statements
there has been no material adverse change in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted
a security interest in or otherwise encumbered any of its assets or properties [except as disclosed on Schedule 2.5 attached
hereto].

 

SECTION 2.6.          INCOME TAX RETURNS. Borrower has no knowledge
of any pending assessments or adjustments of its income tax payable with respect to any year.

 

SECTION 2.7.          NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be bound that requires the subordination in right
of payment of any of Borrower’s obligations subject to this Agreement to any other obligation of Borrower.

 

SECTION 2.8.          PERMITS, FRANCHISES. Borrower possesses, and
will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade
names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance
with applicable law.

 

SECTION 2.9.          ERISA. Borrower is in compliance in all material
respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time
to time (“ERISA”); Borrower has not violated any provision of any defined employee pension benefit plan (as
defined in ERISA) maintained or contributed to by Borrower (each, a “Plan”); no Reportable Event (as defined
in ERISA) has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements
under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance
with the Plan documents and under GAAP.

 

SECTION 2.10.          OTHER OBLIGATIONS. Borrower is not in default
on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument
or obligation.

 

SECTION 2.11.          ENVIRONMENTAL MATTERS. [Except as disclosed
on Schedule 2.11 attached hereto,] Borrower is in compliance in all material respects with all applicable federal or state
environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern
or affect any of such Borrower’s operations and/or properties, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource
Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified
or supplemented from time to time. None of the operations of Borrower is the subject of any federal or state investigation evaluating
whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste
or substance into the environment. Borrower does not have a material contingent liability in connection with any release of any
toxic or hazardous waste or substance into the environment.

 

SECTION 2.12.          BUSINESS PURPOSE. Each credit subject hereto
is made for (a) a business, commercial, investment or other similar purpose, (b) the purpose of acquiring or carrying on a business,
professional or commercial activity, or (c) the purpose of acquiring any real or personal property as an investment and not primarily
for a personal, family or household use.

 

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ARTICLE III

CONDITIONS

 

SECTION 3.1.          CONDITIONS OF INITIAL EXTENSION OF CREDIT. The
obligation of Bank to extend any credit contemplated by this Agreement is subject to the fulfillment to Bank’s satisfaction
of all of the following conditions:

 

(a)       Approval
of Bank Counsel. All legal matters incidental to the extension of credit by Bank shall be satisfactory to Bank’s counsel.

 

(b)       Documentation.
Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed by each Borrower as
applicable:

 

		(i)	This Agreement, the Line of Credit Note and each other instrument or document required hereby.

 

		(ii)	Certificate of Incumbency with respect to Borrower.

  

		(iii)	Corporate Resolution: Borrowing with respect to Borrower.

 

		(iv)	Insurance Information Request form.

 

		(v)	Billing Invoice.

 

		(vi)	Disbursement Orders.

 

		(vii)	Such other documents as Bank may require under any Loan Document.

 

(c)       Financial
Condition. There shall have been no material adverse change, as determined by Bank, in the financial condition or business
of Borrower, nor any material decline, as determined by Bank, in the market value of a substantial or material portion of the assets
of Borrower.

 

(d)       Insurance.
Borrower shall have delivered to Bank evidence of insurance coverage on all such Borrower’s property, in form, substance,
amounts, covering risks and issued by companies satisfactory to Bank, and where required by Bank, with lender loss payable endorsements
in favor of Bank.

 

SECTION 3.2.          CONDITIONS OF EACH EXTENSION OF CREDIT. The
obligation of Bank to make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Bank’s
satisfaction of each of the following conditions:

 

(a)       Compliance.
The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date
of the signing of this Agreement and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though
such representations and warranties had been made on and as of each such date, and on each such date, no Event of Default (as defined
below), and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.

 

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(b)       Documentation.
Bank shall have received all additional documents which may be required in connection with such extension of credit including without
limitation, the following:

 

		(i)	For the issuance of a commercial letter of credit under any credit subject to this Agreement, Bank’s standard Application
for Commercial Letter of Credit.

 

		(ii)	For the issuance of a standby letter of credit under any credit subject to this Agreement, Bank’s standard Application
for Standby Letter of Credit.

 

(c)       Letter
of Credit Documentation. Prior to the issuance of any letter of credit, Bank shall have received a Letter of Credit Agreement
and any other letter of credit documentation required by Bank, in each case completed and duly executed by Borrower.

 

(d)       Payment
of Fees. Bank shall have received payment in full of any fee required by any of the Loan Documents to be paid at the time such
credit extension is made.

 

SECTION 3.3.          CORPORATE RESOLUTIONS. Notwithstanding anything
herein to the contrary, prior to any obligation of Bank to extend any initial credit hereunder, Borrower shall have delivered to
Bank evidence satisfactory to Bank that this Agreement and the transactions contemplated hereby have been duly authorized by borrower.

 

ARTICLE IV

AFFIRMATIVE COVENANTS

 

Borrower covenant that so long as Bank remains
committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated)
of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

 

SECTION 4.1.          PUNCTUAL PAYMENTS. Punctually pay all principal,
interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein,
and immediately upon demand by Bank, the amount by which the outstanding principal balance of any credit subject hereto at any
time exceeds any limitation on borrowings applicable thereto.

 

SECTION 4.2.          ACCOUNTING RECORDS. Maintain adequate books
and records in accordance with GAAP, and permit any representative of Bank, at any reasonable time, to inspect, audit and examine
such books and records, to make copies of the same, and to inspect the properties of Borrower. If at any time any change in GAAP
would affect the computation of any covenant, including the computation of any financial covenant set forth in this Agreement or
any other Loan Document, Borrower and Bank shall negotiate in good faith to amend such covenant to preserve the original intent
in light of such change; provided, that, until so amended, (i) such covenant shall continue to be computed in accordance with the
application of GAAP prior to such change and (ii) Borrower shall provide to Bank a written reconciliation in form and substance
reasonably satisfactory to Bank, between calculations of such covenant made before and after giving effect to such change in GAAP.

 

SECTION 4.3.          FINANCIAL STATEMENTS. Provide to Bank all of
the following, in form and detail satisfactory to Bank:

 

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(a)        not
later than one hundred twenty (120) days after and as of the end of each fiscal year, (i) annual audited and unqualified financial
statements of Borrower and (ii) unaudited financial statements of Borrower prepared in accordance with GAAP by a certified public
accountant acceptable to Bank, to include balance sheet, income statement, statement of cash flow, auditor’s report, and
all supporting schedules and footnotes, certified without qualification by such certified public accountant (in the case of each
individual audited statement), and by the chief financial officer of Borrower;

 

(b)       not
later than forty-five (45) days after and as of the end of each fiscal quarter, financial statements of Borrower prepared by Borrower,
to include balance sheet, income statement and statement of cash flow;

 

(c)        contemporaneously
with each annual and quarterly financial statement of Borrower required hereby, a certificate of the president or chief financial
officer of Borrower that said financial statements are accurate and were prepared in accordance with GAAP and that there exists
no Event of Default nor any condition, act or event which with the giving of notice or the passage of time or both would constitute
an Event of Default;

 

(d)        not
later than ninety (90) days after and as of the end of each fiscal year, an annual projection report for Borrower prepared by Borrower,
to include balance sheet, income statement, and statement of cash flow; and

 

(e)       from
time to time such other information as Bank may reasonably request.

 

SECTION 4.4.          COMPLIANCE. Preserve and maintain all licenses,
permits, governmental approvals, rights, privileges and franchises necessary for the conduct of Borrower’s business; comply
with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower’s continued existence;
comply with the requirements of all laws, rules, regulations and orders of any jurisdiction in which Borrower is located or doing
business, or otherwise is applicable to such Borrower, including, without limitation, (a) all Sanctions, (b) all laws and regulations
that relate to money laundering, any predicate crime to money laundering, or any financial record keeping and reporting requirements
related thereto, (c) the U.S. Foreign Corrupt Practices Act of 1977, as amended, (d) the U.K. Bribery Act of 2010, as amended,
and (e) any other applicable anti-bribery or anti-corruption laws and regulations.

 

SECTION 4.5.          INSURANCE. Maintain and keep in force, for each
business in which Borrower is engaged, insurance of the types and in amounts customarily carried in similar lines of business,
including but not limited to fire, extended coverage, commercial general liability, flood, and, if required, hurricane, windstorm,
seismic property damage and workers’ compensation, with all such insurance carried in amounts satisfactory to Bank, and deliver
to Bank from time to time at Bank’s request schedules setting forth all insurance then in effect, together with a lender’s
loss payee endorsement for all such insurance naming Bank as a lender loss payee. Such insurance may be obtained from an insurer
or through an insurance agent of Borrower’s choice, provided that any insurer chosen by Borrower is acceptable to Bank on
such reasonable grounds as may be permitted under applicable law.

 

SECTION 4.6.          FACILITIES. Keep all properties useful or necessary
to Borrower’s business in good repair and condition, and from time to time make necessary repairs, renewals 

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and replacements
thereto so that such properties shall be fully and efficiently preserved and maintained.

 

SECTION 4.7.          TAXES AND OTHER LIABILITIES. Pay and discharge
when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without limitation federal
and state income taxes and state and local property taxes and assessments, except (a) such as Borrower may in good faith contest
or as to which a bona fide dispute may arise, and (b) for which Borrower has made provision, to Bank’s satisfaction, for
eventual payment thereof in the event Borrower is obligated to make such payment.

 

SECTION 4.8.          LITIGATION. Promptly give notice in writing
to Bank of any litigation pending or threatened against Borrower in excess of One Million Dollars ($5,000,000.00).

 

SECTION 4.9.          FINANCIAL CONDITION. In any fiscal quarter in
which Borrower draws on the Line of Credit, maintain SRC’s financial condition as follows using GAAP and used consistently
with prior practices (except to the extent modified by the definitions herein): EBITDA of not less than Seventy-Five Million Dollars
($75,000,000.00) for the period of the four fiscal quarters most recently ended, with “EBITDA” defined as net profit
before tax plus interest expense (net of capitalized interest expense), depreciation expense and amortization expense.

 

SECTION 4.10.          NOTICE TO BANK. Promptly (but in no event more
than five (5) days after the occurrence of each such event or matter) give written notice to Bank in reasonable detail of: (a)
the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or
both would constitute an Event of Default; (b) any change in the name or the organizational structure of Borrower; (c) the
occurrence and nature of any Reportable Event or Prohibited Transaction (each as defined in ERISA), or any funding deficiency with
respect to any Plan; or (d) any termination or cancellation of any insurance policy which Borrower is required to maintain,
or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting
Borrower’s property.

 

SECTION 4.11.          DEPOSIT ACCOUNTS. Maintain Borrower’s
principal deposit accounts and other traditional banking relationships with Bank.

 

ARTICLE V

NEGATIVE COVENANTS

 

Borrower further covenant that so long as Bank
remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank’s prior written consent:

 

SECTION 5.1.          USE OF FUNDS.  Use any of the proceeds
of any credit extended hereunder except for the purposes stated in Article I hereof, or directly or indirectly use any such proceeds
for the purpose of (a) providing financing to, or otherwise funding, any targets of Sanctions; or (b) providing financing for,
or otherwise funding, any transaction which would be prohibited by Sanctions or would otherwise cause Bank or any of Bank’s
affiliates to be in breach of any Sanctions.

 

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SECTION 5.2.          CAPITAL EXPENDITURES. Make any additional investment
in fixed assets in any fiscal year in excess of an aggregate of Forty Million Dollars ($50,000,000.00).

 

SECTION 5.3.          OTHER INDEBTEDNESS. Create, incur, assume or
permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or unsecured, matured
or unmatured, liquidated or unliquidated, joint or several (collectively, “Indebtedness”), except (a) the liabilities
of Borrower to Bank, [and] (b) Indebtedness not to exceed an aggregate of Five Million Dollars ($5,000,000.00) at any time
outstanding, and (c) Indebtedness disclosed on Schedule 5.3 attached hereto.

 

SECTION 5.4.          MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge
into or consolidate with any other entity; make any substantial change in the nature of Borrower’s business as conducted
as of the date hereof; acquire all or substantially all of the assets of any other entity, except for a Permitted Acquisition (as
defined below); nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of Borrower’s
assets except for a Permitted Disposition (as defined below) or in the ordinary course of such Borrower’s business.

 

(a)       For
purposes of this Section 5.4, “Permitted Acquisition” means any acquisition by Borrower of all or substantially
all of the operating assets of any person or entity so long as all of the following conditions are satisfied: (a) the acquisition
is consummated in compliance with applicable law, (b) there exists no Event of Default, nor any act, condition or event which with
the giving of notice or the passage of time or both would constitute an Event of Default, and no such Event of Default or potential
Event of Default results after giving effect to the acquisition, and (c) the aggregate consideration (valuing any non-cash consideration
at its fair market value, and including without limitation the amount of all liabilities assumed or acquired) does not exceed Five
Million Dollars ($5,000,000.00) in the aggregate for all such acquisitions hereafter.

 

(b)       For
purposes of this Section 5.4, “Permitted Disposition” means any sale, lease, transfer or other disposition by
Borrower of all or substantially all of the assets of such Borrower so long as all of the following conditions are satisfied: (a)
the disposition is consummated in compliance with applicable law, (b) there exists no Event of Default, nor any act, condition
or event which with the giving of notice or the passage of time or both would constitute an Event of Default, and no such Event
of Default or potential Event of Default results after giving effect to the disposition, and (c) the aggregate consideration (valuing
any non-cash consideration at its fair market value) does not exceed Ten Million Dollars ($10,000,000.00) in the aggregate for
all such dispositions hereafter.

 

SECTION 5.5.          GUARANTIES. Guarantee or become liable in any
way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business),
accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations
of any other person or entity, except any of the foregoing in favor of Bank.

 

SECTION 5.6.          LOANS, ADVANCES, INVESTMENTS. Make any loans
or advances to or investments in any person or entity in excess of $200,000 in any calendar year. [except as disclosed on Schedule
5.6 attached hereto].

 

SECTION 5.7.          DIVIDENDS, DISTRIBUTIONS.  Declare or pay
any dividend or distribution either in cash, stock or any other property on Borrower’s stock or other ownership interest
now or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire any 

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shares of any class of Borrower’s stock
or other ownership interest now or hereafter outstanding if an Event of Default has occurred or would result therefrom.

 

SECTION 5.8.          PLEDGE OF ASSETS. Mortgage, pledge, grant or
permit to exist a security interest in, or lien upon, all or any portion of Borrower’s assets now owned or hereafter acquired,
except any of the foregoing in favor of Bank [or as disclosed on Schedule 5.8 attached hereto].

 

ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.1.          The occurrence of any of the following shall
constitute an “Event of Default” under this Agreement:

 

(a)       Borrower
shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents.

 

(b)       Any
financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by Borrower or
any other party under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material
respect when furnished or made.

 

(c)       Any
default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other
Loan Document (other than those specifically described as an “Event of Default”), and with respect to any such default
that by its nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence.

 

(d)       Any
default in the payment or performance of any obligation, or any defined event of default, under the terms of any contract, instrument
or document (other than any of the Loan Documents) pursuant to which Borrower has incurred any debt or other liability to any person
or entity, including Bank.

 

(e)       Borrower
shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator
of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment
for the benefit of creditors; Borrower shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code,
as amended or recodified from time to time (“Bankruptcy Code”), or under any state or federal law granting relief
to debtors, whether now or hereafter in effect; or Borrower shall file an answer admitting the jurisdiction of the court and the
material allegations of any involuntary petition; or Borrower shall be adjudicated bankrupt, or an order for relief shall be entered
against Borrower by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for debtors.

 

(f)       The
filing of a notice of judgment lien against Borrower; or the recording of any abstract or transcript of judgment against Borrower
in any county or recording district in which Borrower has an interest in real property; or the service of a notice of levy and/or
of a writ of attachment or execution, or other like process, against the assets of Borrower; or the entry of a judgment against
Borrower; or any involuntary petition or proceeding pursuant to the Bankruptcy 

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Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower.

 

(g)       There
shall exist or occur any event or condition that Bank in good faith believes impairs, or is substantially likely to impair, the
prospect of payment or performance by Borrower of its obligations under any of the Loan Documents.

 

(h)       The
dissolution or liquidation of Borrower; or Borrower or any of its directors or stockholders shall take action seeking to effect
the dissolution or liquidation of such Borrower.

 

(i)       Any
change in control of Borrower or any entity or combination of entities that directly or indirectly control such Borrower, with
“control” defined as ownership of an aggregate of twenty-five percent (25%) or more of the common stock or other ownership
interest.

 

 

SECTION 6.2.          REMEDIES. Upon the occurrence of any Event of
Default: (a) all principal, unpaid interest outstanding and other indebtedness of Borrower under each of the Loan Documents,
any term thereof to the contrary notwithstanding, shall at Bank’s option and with notice to the Borrower, become immediately
due and payable without presentment, demand, protest or any notices of any kind, including without limitation, notice of nonperformance,
notice of protest, notice of dishonor, notice of intention to accelerate or notice of acceleration, all of which are hereby expressly
waived by Borrower; (b) the obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall
immediately cease and terminate; and (c) Bank shall have all rights, powers and remedies available under each of the Loan
Documents, or accorded by law. All rights, powers and remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers
or remedies provided by law or equity.

 

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1.           NO WAIVER. No delay, failure or discontinuance
of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right,
power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect
any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval
of any kind by Bank of any breach of or default under any of the Loan Documents must be in writing and shall be effective only
to the extent set forth in such writing.

 

SECTION 7.2.          NOTICES. All notices, requests and demands which
any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered
to each party at the following address:

 

BORROWER:

 

STURM, RUGER & COMPANY, INC.

Lacey Place

Southport, CT 06890

Attention: Thomas Dineen

Facsimile: 203-256-3367

    11 

     

    

E-mail: tdineen@ruger.com

 

BANK:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

125 High Street, 15th
Floor

Boston, MA 02110

Attention: Michael W. Sweeney

Facsimile: 617-723-0647

E-mail: michael.w.sweeney@wellsfargo.com

 

or to such other address as any party may designate
by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent
by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt. Notices sent by electronic mail or by
facsimile shall be effective when transmitted provided such transmission takes place between 9:00 AM and 5:00 PM (Eastern Time)
on a Business Day (as defined below) (or effective at 9:00 AM on the next Business Day if sent at other times). “Business
Day” any day that is not a Saturday, Sunday or other day that is a legal holiday under the laws of the Commonwealth of
Massachusetts or is a day on which banking institutions in the Commonwealth of Massachusetts are authorized or required by law
to close.

SECTION 7.3.          COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower
shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable
attorneys’ fees (to include outside counsel fees), expended or incurred by Bank in connection with (a) the negotiation and
preparation of this Agreement and the other Loan Documents, fees customarily charged by lenders in Bank’s continued administration
hereof and thereof, and the preparation of any amendments and waivers hereto and thereto, (b) the enforcement of Bank’s rights
and/or the collection of any amounts which become due to Bank under any of the Loan Documents, whether or not suit is brought,
and (c) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation,
any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise,
and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary
proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.
Whenever in this Agreement and the other Loan Documents Borrower is obligated to pay for the attorneys’ fees of Bank, or
the phrase “reasonable attorneys’ fees” or a similar phrase is used, it shall be Borrower’s obligation
to pay the attorneys’ fees actually incurred or allocated, at standard hourly rates, without regard to any statutory interpretation,
which shall not apply, Borrower hereby waiving the application of any such statute. Notwithstanding anything in this Agreement
to the contrary, reasonable attorneys’ fees shall not exceed the amount permitted by law.

 

SECTION 7.4.          SUCCESSORS, ASSIGNMENT. This Agreement shall
be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns
of the parties; provided however, Borrower may not assign or transfer its interests or rights hereunder without Bank’s prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or
any interest in, Bank’s rights and benefits under each of the Loan Documents and will notify Borrower in each case. In 

    12 

     

    

connection
therewith, Bank may disclose all documents and information which Bank now has or may hereafter acquire relating to any credit subject
hereto, Borrower or its business.

 

SECTION 7.5.          ENTIRE AGREEMENT; AMENDMENT. To the fullest
extent permitted by law, this Agreement and the other Loan Documents (including the exhibits and schedules hereto or thereto) constitute
the entire agreement among Borrower and Bank with respect to each credit subject hereto and supersede all prior negotiations, communications,
discussions and correspondence concerning the subject matter hereof. This Agreement may be amended or modified only in writing
signed by each party hereto.

 

SECTION 7.6.          NO THIRD PARTY BENEFICIARIES. This Agreement
is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and
assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party.

 

SECTION 7.7.          TIME. Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.

 

SECTION 7.8.          SEVERABILITY OF PROVISIONS. If any provision
of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent
of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.

 

SECTION 7.9.          COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when
taken together shall constitute one and the same Agreement.

 

SECTION 7.10.          GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of Massachusetts, but giving effect to federal laws applicable
to national banks, without reference to the conflicts of law or choice of law principles thereof.

 

SECTION 7.11.          RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and
after the occurrence of an Event of Default, (a) Borrower hereby authorizes Bank, at any time and from time to time, without notice,
which is hereby expressly waived by Borrower, and whether or not Bank shall have declared any credit subject hereto to be due and
payable in accordance with the terms hereof, to set off against, and to appropriate and apply to the payment of, Borrower’s
obligations and liabilities under the Loan Documents (whether matured or unmatured, fixed or contingent, liquidated or unliquidated),
any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars or any other currency, whether matured or unmatured,
and in the case of deposits, whether general or special (except trust and escrow accounts), time or demand and however evidenced),
and (b) pending any such action, to the extent necessary, to hold such amounts as collateral to secure such obligations and liabilities
and to return as unpaid for insufficient funds any and all checks and other items drawn against any deposits so held as Bank, in
its sole discretion, may elect. Bank may exercise this remedy regardless of the adequacy of any collateral for the obligations
of Borrower to Bank and whether or not Bank is otherwise fully secured. Borrower hereby grants to Bank a security interest in all
deposits and accounts maintained with Bank to secure the payment of all obligations and liabilities of Borrower to Bank under the
Loan Documents.

 

    13 

     

    

SECTION 7.12.          ARBITRATION.

 

(a)       Arbitration.
The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between
or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or
otherwise in any way arising out of or relating to (i) any credit subject hereto, or any of the Loan Documents, and their negotiation,
execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional credit. In the event of a court ordered arbitration, the party requesting
arbitration shall be responsible for timely filing the demand for arbitration and paying the appropriate filing fee within thirty
(30) days of the abatement order or the time specified by the court. Failure to timely file the demand for arbitration as ordered
by the court will result in that party’s right to demand arbitration being automatically terminated.

 

(b)       Governing
Rules. Any arbitration proceeding will (i) proceed in a location in the Commonwealth of Massachusetts selected by the American
Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted
by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s commercial
dispute resolution procedures, unless the claim or counterclaim is at least One Million Dollars ($1,000,000.00) exclusive of claimed
interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional
procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for
large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”). If there is any
inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails
or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other
party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a
bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

 

(c)       No
Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to
(i) exercise self-help remedies such as setoff or (ii) obtain provisional or ancillary remedies such as replevin, injunctive relief,
attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion
does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder,
including those arising from the exercise of the actions detailed in sections (i) and (ii) of this paragraph.

 

(d)       Arbitrator
Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is Five Million Dollars ($5,000,000.00)
or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than
Five Million Dollars ($5,000,000.00). Any dispute in which the amount in controversy exceeds Five Million Dollars ($5,000,000.00)
shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate
in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the Commonwealth of Massachusetts or a
neutral retired judge of the state or federal judiciary of the Commonwealth of Massachusetts, in either case with a minimum of
ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will
determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim.
In any arbitration proceeding the arbitrator will decide (by documents 

    14 

     

    

only or with a hearing at the arbitrator’s discretion)
any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication.
The arbitrator shall resolve all disputes in accordance with the substantive law of the Commonwealth of Massachusetts and may grant
any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary
to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions
and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the corresponding rules of civil practice and procedure applicable in the Commonwealth of Massachusetts or
other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution
and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver
of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests
such action for judicial relief.

 

(e)       Discovery.
In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited
to matters directly relevant to the dispute being arbitrated and must be completed no later than twenty (20) days before the hearing
date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination
by the arbitrator upon a showing that the request for discovery is essential for the party’s presentation and that no alternative
means for obtaining information is available.

 

(f)       Class
Proceedings and Consolidations. No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration,
except parties who have executed any Loan Document, or to include in any arbitration any dispute as a representative or member
of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.

 

(g)       Payment
Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.

 

(h)       Miscellaneous.
To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration
proceeding within one hundred eighty (180) days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration
proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in
the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between
the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject
matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the
Loan Documents or any relationship between the parties.

 

(i)       Small
Claims Court. Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any
dispute within that court’s jurisdiction. Further, this arbitration provision shall apply only to disputes in which either
party seeks to recover an amount of money (excluding attorneys’ fees and costs) that exceeds the jurisdictional limit of
the Small Claims Court.

 

SECTION 7.13.          JOINT AND SEVERAL LIABILITY.

 

    15 

     

    

(a)        Each
Borrower has determined and represents to Bank that it is a legitimate business purpose and in its best interests to induce Bank
to extend credit pursuant to this Agreement. Each Borrower acknowledges and represents that its business is related to the business
of every other Borrower hereunder, and all commitments, advances and other credit extensions under this Agreement will individually
and collectively benefit each Borrower hereunder.

 

(b)       Each
Borrower has determined and represents to Bank that it has, and after giving effect to the transactions contemplated by this Agreement
will have, assets having a fair market value in excess of its liabilities, after giving effect to any available rights of contribution
or subrogation, and each Borrower has, and will have, access to adequate capital for the conduct of its business and the ability
to pay its debts as they mature.

 

(c)       Each
Borrower agrees that it is jointly and severally and unconditionally liable to Bank for, and will pay to Bank when due, the full
amount of all existing and future indebtedness arising in connection with any facility extended under this Agreement, and all modifications,
extensions and renewals thereto, including without limitation all principal and interest, and all fees, costs and expenses chargeable
to each Borrower individually or collectively in connection with any facility hereunder. These obligations shall be in addition
to any other obligations of either Borrower under any other agreement with Bank entered into before or after the date of this Agreement,
unless such other agreement is expressly modified or revoked in writing, and this Agreement shall not affect or invalidate the
terms of any such other agreement, unless otherwise expressly provided herein.

 

(d)       The
liability of either Borrower for indebtedness hereunder shall be reinstated and revived and the rights of Bank shall continue if
and to the extent that for any reason any amount at any time paid on account of any facility under this Agreement by either Borrower
or any other person or entity is rescinded or must otherwise be restored by Bank, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, all as though such amount had not been paid.

 

(e)       Each
Borrower authorizes Bank, without notice to or demand on such Borrower, and without affecting such Borrower’s liability for
indebtedness incurred under any facility extended under this Agreement, from time to time to: (i) alter, compromise, extend, accelerate
or otherwise change the time for payment of, or otherwise change the terms of, the indebtedness of the other Borrower to Bank on
account of any such facilities; and (ii) apply payments received by Bank from the other Borrower to indebtedness of such other
Borrower to Bank other than to any facility extended under this Agreement.

 

(f)       Each
Borrower represents and warrants to Bank that it has established adequate means of obtaining from each other Borrower on a continuing
basis financial and other information relating to the financial condition of each other Borrower, and each Borrower agrees to keep
adequately informed by such means of any facts, events or circumstances which might in any way affect its risks hereunder. Each
Borrower further agrees that Bank shall have no obligation to disclose to it any information or material about the other Borrower
which is acquired by Bank in any manner.

 

(g)       Each
Borrower waives any right to require Bank to: (i) proceed against the other Borrower or any other person; (ii) proceed against
the other Borrower or any other person; (iii) pursue any other remedy in Bank’s power; (iv) apply payments received by Bank
from the other Borrower to any facility extended under this Agreement; (v) make any presentments or 

    16 

     

    

demands for performance, or
give any notices of nonperformance, protests, notices of protest or notices of any kind, including without limitation, any notice
of nonperformance, protest, notice of protest, notice of dishonor, notice of intention to accelerate or notice of acceleration;
or (vi) set off against the indebtedness. In addition to the foregoing, each Borrower specifically waives any statutory right it
might have to require Bank to proceed against the other Borrower.

 

(h)       Each
Borrower waives to the extent permitted by applicable law any defense to its liability for repaying any facility extended under
this Agreement based upon or arising by reason of: (i) any disability or other defense of the other Borrower or any other person;
(ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the liability of the other Borrower
for the facility extended under this Agreement; (iii) any lack of authority of any officer, director, agent or other person acting
or purporting to act on behalf of the other Borrower or any defect in the formation of the other Borrower; (iv) the application
by the other Borrower of the proceeds of any facility extended under this Agreement for purposes other than the purposes intended
or understood by Bank or the other Borrower; (v) any act or omission by Bank which directly or indirectly results in or aids the
discharge of the other Borrower by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies
of Bank against the other Borrower; or (vi) any modification of the indebtedness of the other Borrower for any facility extended
under this Agreement, including without limitation the renewal, extension, acceleration or other change in time for payment of,
or other change in the terms of, the indebtedness of either Borrower for any facility extended under this Agreement, including
increase or decrease of the rate of interest thereon.

 

(i)       Until
each facility extended under this Agreement and all indebtedness arising under or in connection with this Agreement shall have
been paid in full, no Borrower shall have any right of subrogation. Each Borrower waives all rights and defenses it may have arising
out of (i) any election of remedies by Bank, even though that election of remedies destroys its rights of subrogation or its rights
to proceed against the other Borrower for reimbursement, or (ii) any loss of rights it may suffer by reason of any rights, powers
or remedies of the other Borrower in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging
either Borrower’s indebtedness for each facility extended under this Agreement, whether by operation of law, or otherwise,
and Borrower waive any rights Borrower may have under any “one-action” rule. Borrower further waive the benefit of
any homestead, exemption or other similar laws.

 

Until all indebtedness of each Borrower to Bank
arising under or in connection with this Agreement shall have been paid in full, each Borrower waives any right to enforce any
remedy which Bank now has or may hereafter have against the other Borrower or any other person, and waives any benefit of, or any
right to participate in, any security now or hereafter held by Bank. To the fullest extent permitted by applicable law, Borrower
waive all rights of a surety and the benefits of any applicable suretyship law, statute or regulation, and without limiting any
of the waivers set forth herein, Borrower further waive any other fact or event that, in the absence of this provision, would or
might constitute or afford a legal or equitable discharge or release of or defense to Borrower.

 

 

[Remainder of page intentionally left
blank; signature page follows]

    17 

     

    

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

 

	BORROWER:
	STURM, RUGER & COMPANY, INC.
	 	 
	By:	/s/ Thomas A. Dineen 
	 	Thomas A. Dineen
	 	Senior Vice President, Treasurer and
	 	Chief Financial Officer
	 	 
	 	 
	BANK:
	WELLS FARGO BANK,
	NATIONAL ASSOCIATION
	 	 
	By:	/s/ Michael Sweeney 
	 	Michael Sweeney
	 	Senior Vice President

 

 

[Signature Page – Credit Agreement]Exhibit 10.1

 

 

 

 

 

 

 

Shanghai
TCH Energy Technology Co., Ltd.

 

And

 

Jihua
Wang

 

 

 

 

Equity
Purchase Agreement 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Date:
September 30, 2018

 

     

     

    

 

This
Agreement is signed on September 30, 2018 in Xi’an by two parties below.

 

Party
A: Shanghai TCH Energy Technology Co., Ltd. (“Party A”)

 

Legal
Representative: Geyun Wang

 

Address:
No. 88 Century Avenue, Pudong New District, Shanghai

 

Party
B: Jihua Wang

 

Address: Yanta
District, Xi’an

 

Whereas:

 

(1)
Party A is a legally established and validly existing domestic limited liability company. Party A is a wholly-owned
subsidiary of China Recycling Energy Corporation, a Nasdaq listed company (trading symbol: CREG). Party A has the authority
to sign this agreement and perform its obligations hereunder. 

 

(2)
Party B is an Chinese citizen and resident who holds 20% equity ownership of the target company as of the date of the
Agreement. 

 

(3)
The target company is Xi ‘an Xinhuan Energy co., Ltd. It has been engaged in the research and development, production and
manufacturing, engineering design and general project contracting of complete sets of engineering equipment for new energy
power generation for many years. Its controlling shareholder is a legally existing NEEQ listed company in China. 

 

According
to the “Company Law of the People’s Republic of China”, the “Contract Law of the People’s Republic of China”,
the “Regulations of Administration Measures for Material Assets Reorganization of Non-listed Public Company”, after
friendly negotiation, the two parties reached the following agreement to confirm both parties’ rights and obligations:

 

    	 	1	 

     

    

 

1.
Definition 

 

Unless
otherwise provided in this Agreement, the following words and expressions shall have the following definite meanings:

 

	the
    Agreement 	Refers	The
    (Equity Purchase Agreement of Shanghai TCH Energy Technology Co., Ltd. and Jihua Wang), including the
    appendix and supplemental agreement (if any)
	Transferred
    Asset	Refers	20%
    equity ownership of Xi’an Xinhuan Energy Co., Ltd. owned by Party B 
	Target
    Company 	Refers	Xi’an
    Xinhuan Energy Co., Ltd. 
	the
    Issuance	Refers	The
    issuance of new shares by CREG for the purchase of Transferred Asset by Party A 
	Completion
    Date of Share Issuance	Refers	The
    completion date for the payment of consideration for the Transferred Asset, i.e. the completion of the Issuance to Party B.  
	the
    Transaction 	Refers	Party
    A pays cash and CREG issues shares to Party B to acquire 20% ownership of the target company according to the Agreement. 
	Transaction
    Price	Refers	Price
    for purchasing Transferred Asset by Party A
	Share
    Payment	Refers	Shares
    issued by CREG to Party B for Party A’s acquisition of the Transferred Asset
	Appraisal
Base Day	Refers	The
    date based on which the Base Date is evaluated, which is June 30, 2018
	CREG	Refers	Party
    A’s parent company which owns 100% of Party A, China Recycling Energy Corporation, a U.S. NASDAQ listed company with
    trading symbol: CREG
	Common
    Stock 	Refers	Common
    stock of CREG listed on NASDAQ Capital Market
	Preferred
    Shares	Refers	Preferred
    stock of CREG  
	Closing
    Date 	Refers	The
    date of the completion of the change registration procedures with the industrial and commercial administrative department
    in connection with the transfer of Transferred Asset to Party A’s name.  
	Transition
    Period 	Refers	Period
    from Appraisal Base Day to the Completion Date of Share Issuance
	Incorporation
    Documents	Refers	The
    articles of association, business license, approval certificate, shareholder agreement, or equivalent management or organizational
    documents of each party.  
	Applicable
    Laws	Refers	Applicable
laws, regulations, decisions, orders, local regulations, autonomous regulations and separate regulations, the state council administrative
rules and local government rules and regulations, and other forms of legally effective normative documents which are enforceable
upon the either party for the purpose of the agreement.
	SEC	Refers	Securities
    and Exchange Commission of the United States
	Securities
    Regulations 	Refers	U.S.
    securities laws and related laws and regulations 
	Business
    Day 	Refers	The
    days other than holidays and Saturdays & Sundays  
	Yuan
    	Refers	RMB
	Exchage
    Rate 	Refers	Exchange
    Rate between U.S. dollars and Yuan at: 1: 6.85

 

    	 	2	 

     

    

 

2.
Transferred Asset, Transaction Price and Payment Method 

 

2.1.
The Transferred Asset of the transaction is the 20% equity ownership of the target company owned by Party B.

 

2.2.
According to the Appraisal Report of Shareholders’ Equity Interest of Xi’an Xinhuan Energy Co., Ltd. issued by Tongzhi
Xinde (Beijing) Assets Appraisal Co., Ltd., taking June 30, 2018 as the base date, the total value of shareholders’ equity
interest of the Target Company is RMB 1,636,920,600. Reference to the above assessment results, both parties eventually determined
the total value of the target company is RMB 1.6 billion and accordingly determined the Transaction Price of Transferred Asset
is RMB 320 million.

 

2.3.
Payment Method

 

2.3.1
Party A purchases the Transferred Asset by paying in cash and issuance of CREG shares to Party B. The cash payment is RMB 60 million.
The shares payment is for RMB 260 million. CREG will issue 2,600,000 shares of common stock and 17,376,950 preferred shares of
CREG using a value of $1.90 per share for both common stock and preferred shares.

 

2.3.2
The issuance of CREG shares as provided in section 2.3.1 shall be subject to the approval by CREG Shareholders Meeting for increase
of authorized common shares, establishment of preferred shares and issuance of these shares pursuant to the Agreement. The shares
of CREG stipulated in section 2.3.1 shall be issued within 15 business days after the approval by CREG Shareholders Meeting. If
the CREG Shareholders Meeting fails to approve the issuance of the above shares, the parties hereto shall negotiate other payment
methods to pay the consideration of RMB 260 million.

 

2.4
Payment Schedule

 

2.4.1
Party A will pay RMB 60 million to Party B within ten business days after Party B completes the change of registration of Xinhua
at Xi’an Industrial and Commercial Administrative Department.

 

2.4.2.
CREG shall issue the shares according to the section 2.3.1 of the Agreement within 15 business days after the Agreement is approved
at the Shareholder Meeting of CREG.

 

3.
Shares Issuance and Subscription 

 

3.1
Shares Issuance and Receiving Party

 

CREG
shall issue shares to Party B in a non-public offering.

 

3.2
The Type of Shares, Par Value and Issuance Price of the Shares

 

CREG
common stock, par value of $0.001, issuance price of $1.9 per share

 

CREG
preferred shares, par value of $0.001, issuance price of $1.9 per share

 

3.3.
Number of Shares to Be Issued

 

The
total shares to be issued to Party B is 19,976,950 shares including 2,600,000 shares of common stock and 17,376,950 preferred
shares.

 

    	 	3	 

     

    

 

3.4
Arrangement for the Preferred Shares

 

3.4.1.
Preferred shares shall receive a 15% premium on a per share basis for any dividends declared and paid by CREG on its common stock
if CREG has distributable profits and the Board of Directors of CREG (the “Board”) approves the dividend distribution.
The Board of Directors of CREG has the sole discretion to decide whether CREG will pay any dividends or reserve its profits for
the company’s future development. The specific dividend distribution plan and related matters shall be determined by the
Board.

 

3.4.2.
Preferred shares have no voting rights;

 

3.4.3.
The issuing price of preferred share is the same as common stock;

 

3.4.4.
Preferred shares have convertible right and can be converted to common stock on an 1:1 basis after the 6 month anniversary of
the issuance of the preferred shares. However, the conversion rights can only be exercised to the extent that, after giving effect
to the issuance of common stock after such conversion, the Party B would beneficially own less than 20% of the Company’s
issued and outstanding common stock.

 

3.4.5.
In event of liquidation or dissolution/cancellation of CREG, the preferred shares shall have the priority over common stock.  

 

4.
Lock-up of the Shares 

 

4.1.
Upon completion of the Insurance pursuant to the Agreement, the shares acquired by Party B should in compliance with following
lock-up requirements:

 

4.2
Lock-ups required by the laws, regulations, rules related to share lock-ups and related requirements by the U.S. Securities Regulations.

 

 4.3
The shares may not be transferred before the lock-up period expires. Any transfers after the lock-up period shall be conducted
according to valid laws and regulations and rules of NASDAQ Stock Exchange.

 

 4.4
Party A and Party B shall timely cooperate to handle relevant legal procedures for share lock up and unlock according to laws
and regulations.

 

5.
Implementation and Completion of the Transaction 

 

5.1.
Party A and Party B shall complete the transaction within 60 working days after the Agreement comes into effect or upon the approval
by the shareholders of CREG in section 2.3.2, which ever come later. The specific effective conditions shall be subject to provisions
of section 13 hereof.

 

5.2.
Party B shall cooperate with Party A to complete the relevant procedures for the registration changes with the industrial and
commercial administrative department after the closing of the Transferred Asset.

 

5.3.
After this Agreement is signed, Party B shall cooperate with Party A and CREG’s auditors to complete the relevant auditing and
reporting procedures and assist Party A and CREG to fulfill the disclosure requirements of the U.S. listed company.

 

5.4.
Party A and CREG shall be responsible for completing all the relevant listing procedures of the shares issued to Party B on the
NASDAQ stock exchange. The shares shall be registered under Party B’s name. Party B shall cooperate with Party A to complete the
listing procedures at the stock exchanges and provide necessary documents.

 

    	 	4	 

     

    

 

6.
Arrangement of Profit and Loss During Transition Period 

 

 6.1.
During the Transition Period, Party B shall urge the Target Company to conduct its business and operation as usual.

 

 6.2.
During the Transition Period, within his shareholder’s rights, Party B shall object to the decision of the Target Company which
will have material adverse effect on its continuous operation.

 

 6.3.
During the Transition Period, if the Target Company intends to carry out major asset disposal, Party B shall solicit written opinions
from Party A before exercising its rights of shareholders. If Party A does not agree, Party B shall object to such matters within
his shareholder’s rights that he may exercise.

 

6.4.
During the Transition Period, if the Target Company intends to make profit distribution, Party B shall solicit written opinions
from Party A before exercising his rights of shareholders. If Party A does not agree, Party B shall object to such matters within
his shareholder’s rights that it may exercise. If the Target Company makes profit distribution in cash during the Transition Period,
both parties agree to adjust the Transaction Price accordingly.

 

 6.5.
Party A may request an audit of the Target Company in suitable time to determine the profit and loss of the Transferred Asset
for the period between the Base Date of Appraisal and the Closing Date. From Base Date of Appraisal to the Closing Date, if the
Target Company generates profits or its net assets increase due to other reasons, such profits/increases shall belong to Party
A; If the Target Company suffers a loss or reduces its net assets due to other reasons, Party B shall pay Party A in cash to make
up for such loss or reduces of net assets in proportion to the percentage of equity ownership of Party B in the Target Company
before the Closing Date, within 10 working days after the issuance of the audit report.  

 

7.
Credit and Debt and Personnel 

 

7.1.
This transaction is to acquire equity interest of the Target Company owned by Party B, which does not involve the settlement of
debt and credit. The debt and credit that are owned and assumed by the Target Company shall still be owned and assumed by the
Target Company after the Closing Date.

 

 7.2.
The transaction is to acquire equity interest of the Target Company owned by Party B, and therefore it does not involve any employee
placement issues.

 

    	 	5	 

     

    

 

8.
Representations and Warranties of the Parties 

 

 8.1.
Representation and Warranties of Party A.

 

 8.1.1.
Party A is a legally established and valid existing enterprise, has the legal qualification to sign and perform the obligations
under this Agreement, and has obtained the authorization or approval required at this stage. The shares of CREG, a NASDAQ-listed
company will be issued only after approval by the shareholders of CREG. This Agreement reflects the true intent and desires of
Party A.

 

 8.1.2.
The execution and performance of this Agreement by Party A will not result in Party A’s violation of relevant laws, regulations,
rules and Party A’s organizational documents, nor will it conflict to Party A’s previously signed agreements or any representations,
statements, promises or guarantees made by Party A to any third parties.

 

 8.1.3.
Party A has not committed any major illegal acts in the past three years, nor it has any major litigation, arbitration or administrative
penalty and contingent liabilities, which may hinder or affect the transaction.

 

 8.1.4.
Party A shall properly handle with Party B any matters not covered in this Agreement in accordance with relevant laws, regulations
and rules during the execution and performance of this Agreement.

 

 8.1.5.
After the Agreement takes effect, Party A shall pay the Transaction Price to Party B pursuant to the section 3 of this Agreement.

 

8.2.
Representation and Warranties of Party B

 

 8.2.1.
Party B is a natural person, has the legal qualification to sign and perform the obligations under this Agreement, and has obtained
the necessary authorization or approval at this stage. This Agreement reflects the true intent and desires of Party B.

 

 8.2.2.
The execution and performance of this Agreement by Party B will not result in Party B’s violation of relevant laws, regulations,
rules and Party B’s organizational documents, nor will it conflict to Party B’s previously signed agreements or any representations,
statements, promises or guarantees made by Party B to any third parties.

 

 8.2.3.
Party B has made his capital contribution to the Target Company according to the organizational documents of the Target Company.
Party B warrants that it has lawful and complete ownership of the Transferred Asset, which does not have any pledge, guarantee,
trust or other third party interests.

 

 8.2.4.
Party B does not have any major illegal act, lawsuit, arbitration, administrative penalty or liabilities which may impede or affect
the transaction.

 

 8.2.5.
If any third party raises any objection or claim on the ownership or right of disposal of the Transferred Asset due to the facts
before the Closing Date, Party B shall assume and be responsible for the claims. If Party A suffers any loss due to any objection
or claim, Party B shall compensate Party A in full amount after determination of such losses according to law.

 

 8.2.6.
The Target Company is a company legally established and validly existing in accordance with the laws of China, which has the qualification
to engage in the business as described in its business license and articles of incorporation, and is now in the normal operation.

 

    	 	6	 

     

    

 

 8.2.7.
The financial statements of the Target Company objectively, impartially and truthfully reflect its operating performance and assets
and liabilities. In addition to the liabilities disclosed to Party A before signing this agreement, Target Company does not have
any other major unknown liabilities, contingent liabilities, undisclosed lawsuit or litigation or other issues which may injure
shareholders interests of the Target Company. If there is any such contingent liabilities, Party B shall assume the joint liabilities
to Party A in proportion to his ownership of the Target Company and Transaction Price.

 

 8.2.8
The Target Company has paid social security for its employees according to national regulations. If any employee claims to the
Target Company due to existing labor disputes before the Closing Date, Party B shall assume the joint liabilities to Party A in
proportion to his ownership of the Target Company.

 

8.2.9.
During the Transition Period, Party B guarantees that in normal business activities, the Target Company will operate and manage
in accordance with the usual and legal methods.

 

8.2.10.
Party B has provided Party A with true written documents or materials required for signing this Agreement, which are free from
any form of false and misleading statements and material omissions.

 

8.2.11.
Party B shall, in accordance with relevant laws, regulations and rules, properly handle with Party A any matters not covered in
this Agreement during the execution and performance of this Agreement.

 

8.2.12.
Party B confirms he is a Chinese citizen and resident of China and he understands and confirms that the CREG shares that he acquires
are not registered with the SEC but are issued under the relevant exemption as a foreign investor under the securities law, and
Party B undertakes to hold and transfer CREG shares in accordance with the Securities Regulations. Party B confirms that he invests
in CREG shares for himself, not for or on behalf of any third party.

 

8.2.13.
Party B confirms that he has reviewed the report and filings of CREG to the SEC and has the opportunity to review other relevant
information and materials of CREG. Party B confirms that it has voluntarily invested in the shares of CREG and bears the risk
of all relevant investment into such stock.

 

9.
Confidentiality 

 

Any
party shall not disclose the content of this Agreement to any third party without the consent of the other party and each party
should keep the business information of the other party confidential, unless required for disclosure to comply with Chinese or
U.S. laws and regulations, or disclosed to the respective consultants of each party (such party shall ensure that its consultants
will perform the same confidentiality obligations to the confidential information) or the contents of which have been public knowledge
not due to violation of this Agreement.

 

    	 	7	 

     

    

 

10.
Assumption of Taxes and Fees 

 

All
costs and expenses incurred as a result of this Agreement and the transaction (including but not limited to services and expenses
of counsel and financial advisors) shall be borne by the party that incurred them, whether or not the transaction is completed.

 

All
taxes arising from the transaction shall be dealt with in accordance with laws and regulations. In cases that regulation is not
clear, the parties shall assume the tax equally.

 

11.
Responsibility for Breach of the Agreement 

 

 11.1.
The parties shall voluntarily perform this Agreement in good faith.

 

 11.2.
Either party shall indemnify the other party for all losses, claims and expenses incurred by the other party as a result of its
breach of this Agreement or any representations or warranties hereunder.

 

12.
Applicable Law and Dispute Resolution

 

12.1.
This Agreement shall be governed by and construed in accordance with the relevant laws and regulations of the People’s Republic
of China.

 

12.2.
All disputes between the parties in the performance of this Agreement shall be settled through friendly negotiation. If no agreement
can be reached through negotiation, each party has the right to file a lawsuit with the people’s court in the place where the
defendant is located.

 

13.
Effectiveness and Termination of the Agreement

 

 13.1.
This Agreement shall come into force upon meeting all of the following conditions:

 

 13.1.1
The board of directors of Party A and the Board and Shareholders of CREG approve the transaction in accordance with law;

 

 13.1.2.
NASDAQ Stock Exchange has approved the issuance of CREG shares;

 

 13.2.
This Agreement shall terminate or be terminated for the following reasons:

 

13.2.1.
If any force majeure, such as government expropriation, requisition, strike, riot, earthquake and other natural disasters, the
unforeseeable, unavoidable and insurmountable objective circumstance, caused the failure of the performance of this Agreement,
this agreement shall be terminated upon written confirmation by the parties.

 

    	 	8	 

     

    

 

 13.2.2.
The parties terminate this Agreement by consensus.

 

 13.3
The termination of this Agreement shall not affect the non-breaching party’s rights to pursue breaching party’s liabilities
for breach of contract.

 

14.
Others 

 

14.1.
The parties hereto shall, in strict accordance with the relevant Chinese laws, regulations and rules, perform the relevant information
disclosure obligations hereunder.

 

14.2.
Neither party shall assign this Agreement or any of its rights and obligations hereunder without the prior written consent of
the other party.

 

14.3.
If any provision or part of the provisions of this Agreement is deemed to be invalid by the court or arbitration institution or
any institution with jurisdiction, the other provisions and contents of this Agreement are still valid. The parties should still
fulfill the Agreement according to the general principles of this Agreement. Any invalid or without effect terms of the Agreement
may be replaced by effective alternatives which can most reflect the parties’ intentions when the Agreement is signed by
the parties or the parties can sign supplement agreement.

 

14.4.
This Agreement may be amended or modified in a signed document by the parties.

 

14.5.
The term “this Agreement” shall mean the whole of this Agreement and not any particular clause, annex or other part
of this Agreement. The headings of the terms and annexes are for convenience of reference only and shall not affect or limit the
meaning or interpretation of the terms of this Agreement.

 

14.6.
Any reference to “party” shall mean either party hereto; when referring to “parties”, means the each party
of this Agreement.

 

14.7.
This Agreement is made in fourteen counterparts, each party shall hold two counterparts, and the remaining copies shall be reserved
for the purpose of reporting the approval and registration authorities related to this transaction, each of which shall have the
same legal effect.

 

(No
Text Below)

 

Party
A: Shanghai TCH Energy Technology Co., Ltd.

 

Legal
Representative/Authorized Representative: /s/ Geyun Wang

 

Party
B: Jihua Wang

 

Authorized
Representative: /s/ Jihua Wang

 

    	 	9

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