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                                                                   EXHIBIT 10.20

                               SECURITY AGREEMENT



                  THIS SECURITY AGREEMENT (this "Agreement") is effective as of
the 15th day of May, 2001, by Saf-T-Hammer Corporation, a Nevada corporation
("Debtor"), whose corporate headquarters' address is 14500 N. Northsight
Boulevard, Suite 221, Scottsdale, Arizona 85260, in favor of Smith & Wesson
Corporation, a Delaware corporation ("Secured Party"), whose corporate
headquarters' address is 2100 Roosevelt Avenue, Springfield, Massachusetts
01102.

                  1. Security Interest. Debtor hereby grants to Secured Party a
security interest (hereinafter called the "Security Interest") in all of
Debtor's right, title and interest in the property and property rights more
fully described on Exhibit A attached hereto and incorporated herein by
reference (collectively, the "Collateral").

                  2. Obligation Secured. The Security Interest shall secure, in
such order of priority as Secured Party may elect:

                           (a) Payment in cash of all principal, interest and
         any other fees, late charges and attorneys' fees related to the
         Promissory Note & Loan Agreement of even date herewith executed by
         Debtor in the original principal amount of One Million Six Hundred
         Thousand Dollars ($1,600,000.00) (the "Note"), and all addenda,
         modifications and amendments thereto, if any; and

                           (b) Payment, performance and observance by Debtor of
         each covenant, condition, provision and agreement contained herein and
         of all monies expended or advanced by Secured Party pursuant to the
         terms hereof, or to preserve any right of Secured Party hereunder, or
         to protect or preserve the Collateral or any part thereof; and

                           (c) Any and all other obligations of Debtor to
         Secured Party arising in any manner in connection with the issuance of
         and performance under the Note.

 (collectively, the "Obligation").

                  3. Use; Location.

                           (a) The Collateral is and will be primarily used for
         business of Debtor.

                           (b) Debtor's records concerning the Collateral will
         be kept at Debtor's address set forth at the beginning of this
         Agreement.

                  4. Representations and Warranties of Debtor. Debtor hereby
represents and warrants that:

                           (a) Debtor: (i) is duly organized, validly existing
         and in good standing under the laws of the State of Nevada; (ii) is
         qualified to do business and is in good standing under the laws of the
         state in which the Collateral is located and in each state in which it
         is doing business; (iii) has full power and authority to own its
         properties and assets and to carry on its business as now conducted;
         and (iv) is fully authorized and permitted to execute and deliver this
         Agreement and to enter into any transactions
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         evidenced by any portion of the Collateral. The execution, delivery and
         performance by Debtor of this Agreement and all other documents and
         instruments relating to the Obligation will not result in any breach of
         the terms and conditions or constitute a default under any agreement or
         instrument under which Debtor is a party or is obligated. Debtor is not
         in default in the performance or observance of any covenants,
         conditions or provisions of any such agreement or instrument.

                           (b) Debtor is the owner of the Collateral.

                           (c) The Collateral is, and is intended to be, used,
         produced or acquired by Debtor for use primarily for the purpose set
         forth in Section 3 above.

                           (d) To the knowledge of Debtor, each account included
         in the Collateral is genuine and enforceable in accordance with its
         terms against the party named therein which is obligated to pay the
         same ("Obligor").

                  5. Covenants of Debtor.

                           (a) Except in the normal course of business, Debtor
         shall not sell, transfer, assign, or otherwise dispose of any
         Collateral or any interest therein without obtaining the prior written
         consent of Secured Party. Although proceeds of Collateral are covered
         by this Agreement, this shall not be construed to mean that Secured
         Party consents to any sale of the Collateral.

                           (b) Debtor shall pay when due all taxes, assessments
         and other charges that may be levied or assessed against the
         Collateral.

                           (c) Debtor shall give Secured Party immediate written
         notice of any change in the location of: (i) Debtor's chief office; or
         (ii) Debtor's records concerning the Collateral.

                           (d) Debtor shall keep records concerning the
         Collateral in accordance with generally accepted accounting principles.
         Secured Party shall have reasonable access to Debtor's records and
         shall have the right to make extracts therefrom or copies thereof.

                           (e) Debtor, at its sole cost and expense, shall
         protect and defend this Agreement, all of the rights of Secured Party
         hereunder, and the Collateral against all claims and demands of other
         parties other than Permitted Liens. Debtor shall promptly notify
         Secured Party of any levy, distraint or other seizure by legal process
         or otherwise of any part of the Collateral and of any threatened or
         filed claims or proceedings that might in any way affect or impair the
         terms of this Agreement.

                           (f) The Security Interest, at all times, shall be
         perfected, and shall be prior to any other interests in the Collateral
         other than Permitted Liens (as defined below). Debtor shall act and
         perform as necessary and shall execute, file and record all security
         agreements, financing statements, deeds of trust, mortgages,
         continuation statements and other documents reasonably requested by
         Secured Party to establish, maintain and continue the perfected
         Security Interest. Debtor, on demand, shall promptly pay all costs and
         expenses of filing and recording, including the costs of any searches,
         deemed

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         necessary by Secured Party from time to time to establish and determine
         the validity and the continuing priority of the Security Interest.

                           (g) If Debtor shall fail to pay any taxes,
         assessments, expenses or charges, to keep all of the Collateral free
         from other security interests, encumbrances or claims, or to perform
         otherwise as required herein, Secured Party may advance the monies
         necessary to pay the same, or to so perform; Secured Party is hereby
         authorized to enter upon any property in the possession or control of
         Debtor for such purposes.

                           (h) All rights, powers and remedies granted Secured
         Party herein, or otherwise available to Secured Party, are for the sole
         benefit and protection of Secured Party, and Secured Party may exercise
         any such right, power or remedy at its option and in its sole and
         absolute discretion without any obligation to do so. In addition, if
         under the terms hereof, Secured Party is given two or more alternative
         courses of action, Secured Party may elect any alternative or
         combination of alternatives at its option and in its sole and absolute
         discretion. All monies advanced by Secured Party under the terms hereof
         and all amounts paid, suffered or incurred by Secured Party in
         exercising, any authority granted herein, including reasonable
         attorneys' fees, shall be added to the Obligation, shall be secured by
         the Security Interest, shall bear interest at the highest rate payable
         on any of the Obligation until paid, and shall be due and payable by
         Debtor to Secured Party immediately without demand.

                           (i) Debtor, upon reasonable demand, shall promptly
         deliver to Secured Party all invoices, shipping or delivery records,
         purchase orders, contracts, endorsements or other items related to the
         Collateral. Debtor shall notify Secured Party immediately of any
         default by any Obligor in the payment or performance of its Obligations
         with respect to any collateral.

                  6. Notification and Payments; Collection of Collateral; Use of
Collateral by Debtor.

                           (a) Secured Party, after the occurrence of any Event
         of Default (as hereinafter defined) with notice to Debtor, may notify
         any or all Obligors of the existence of the Security Interest and may
         direct the Obligors to make all payments on the Collateral to Secured
         Party. All agents used in such collections shall be agents of Debtor
         and not agents of Secured Party. Unless Secured Party notifies Debtor
         in writing that it waives one or more of the requirements set forth in
         this sentence, any payments or other proceeds of Collateral received by
         Debtor, before or after notification to Obligors, shall be held by
         Debtor in trust for Secured Party in the same form in which received,
         shall not be commingled with any assets of Debtor and shall be turned
         over to Secured Party not later than the next business day following
         the day of receipt. In addition, Debtor shall promptly notify Secured
         Party of the return to or possession by Debtor of goods underlying any
         Collateral; Debtor shall hold the same in trust for Secured Party and
         shall dispose of the same as Secured Party directs.

                           (b) Secured Party, after the occurrence of an Event
         of Default and without notice to Debtor, may demand, collect and sue on
         the Collateral (either in Debtor's or Secured Party's name), enforce,
         compromise, settle or discharge the Collateral and endorse Debtor's
         names on any instruments, documents, or chattel paper pertaining to


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         the Collateral; Debtor hereby irrevocably appoints Secured Party its
         attorney-in-fact for all such purposes.

                  7. Preservation of Rights. Debtor shall be solely responsible
for taking any and all actions to preserve rights against all Obligors; Secured
Party shall not be obligated to take any such actions whether or not the
Collateral is in Secured Party's possession.

                  8. Events of Default; Remedies.

                           (a) The occurrence of any of the following events or
         conditions shall constitute and is hereby defined to be an "Event of
         Default":

                                    (i) The occurrence of a breach or default
                  under the Note.

                                    (ii) Any levy or execution upon, or judicial
                  seizure of, any portion of the Collateral which is not cured
                  within ninety (90) days.

                                    (iii) Any attachment or garnishment of, or
                  the existence or filing of any lien or encumbrance against,
                  any portion of the Collateral which is not released within
                  ninety (90) days.

                                    (iv) The institution of any legal action or
                  proceedings to enforce any lien or encumbrance upon any
                  portion of the Collateral that is not dismissed within ninety
                  (90) days after its institution.

                                    (v) Any failure or neglect to perform or
                  observe any of the terms, provisions or covenants of this
                  Agreement, after notice of and a reasonable period to cure the
                  same.

                           (b) Upon the occurrence of any Event of Default and
         at any time while such Event of Default is continuing, Secured Party
         shall have the following rights and remedies and may do one or more of
         the following:

                                    (i) Declare all or any part of the
                  Obligation to be immediately due and payable, and the same,
                  with all costs and charges, shall be collectible thereupon by
                  action at law.

                                    (ii) Without further notice or demand and
                  without legal process, take possession of the Collateral
                  wherever found and, for this purpose, enter upon any property
                  occupied by or in the control of Debtor. Debtor, upon demand
                  by Secured Party, shall assemble the Collateral and deliver it
                  to Secured Party or to a place designated by Secured Party
                  that is reasonably convenient to both parties.

                                    (iii) Pursue any legal or equitable remedy
                  available to collect the Obligation, to enforce its title in
                  and right to possession of the Collateral and to enforce any
                  and all other rights or remedies available to it.

                                    (iv) Upon obtaining possession of the
                  Collateral or any part thereof, after notice to Debtor, sell
                  such Collateral at public or private sale either with or
                  without having such Collateral at the place of sale. The
                  proceeds of such sale, after deducting therefrom all expenses
                  of Secured Party in taking, storing, repairing and selling the
                  Collateral (including reasonable attorneys' fees) shall be

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                  applied to the payment of the Obligation, and any surplus
                  thereafter remaining shall be paid to Debtor or any other
                  person that may be legally entitled thereto. In the event of a
                  deficiency between such net proceeds from the sale of the
                  Collateral and the total amount of the Obligation, Debtor,
                  upon demand, shall promptly pay the amount of such deficiency
                  to Secured Party.

                           (c) Secured Party, so far as may be lawful, may
         purchase all or any part of the Collateral offered at any public or
         private sale made in the enforcement of Secured Party's rights and
         remedies hereunder.

                           (d) Any demand or notice of sale, disposition or
         other intended action hereunder or in connection herewith, whether
         required by the Uniform Commercial Code or otherwise, shall be deemed
         to be commercially reasonable and effective if such demand or notice is
         given to Debtor at least fifteen (15) days prior to such sale,
         disposition or other intended action, in the manner provided herein for
         the giving of notices.

                           (e) Debtor shall pay all costs and expenses,
         including without limitation costs of Uniform Commercial Code searches,
         court costs and reasonable attorneys' fees, incurred by Secured Party
         in enforcing payment and performance of the Obligation or in exercising
         the rights and remedies of Secured Party hereunder. All such costs and
         expenses shall be secured by this Agreement and by all deeds of trust
         and other lien and security documents securing the Obligation. In the
         event of any court proceedings, court costs and attorneys' fees shall
         be set by the court and not by jury and shall be included in any
         judgment obtained by Secured Party.

                           (f) In addition to any remedies provided herein for
         an Event of Default, Secured Party shall have all the rights and
         remedies afforded a secured party under the Uniform Commercial Code and
         all other legal and equitable remedies allowed under applicable law. No
         failure on the part of Secured Party to exercise any of its rights
         hereunder arising upon any Event of Default shall be construed to
         prejudice its rights upon the occurrence of any other or subsequent
         Event of Default. No delay on the part of Secured Party in exercising
         any such rights shall be construed to preclude it from the exercise
         thereof at any time while that Event of Default is continuing. Secured
         Party may enforce any one or more rights or remedies hereunder
         successively or concurrently. By accepting payment or performance of
         any of the Obligation after its due date, Secured Party shall not
         thereby waive the agreement contained herein that time is of the
         essence, nor shall Secured Party waive either its right to require
         prompt payment or performance when due of the remainder of the
         Obligation or its right to consider the failure to so pay or perform an
         Event of Default.

                           (g) In the event of the commencement of a bankruptcy
         case by or against Debtor or involving any of the Collateral, Secured
         Party, to the extent not already provided for herein, shall be entitled
         to recover, and Debtor shall be obligated to pay, Secured Party's
         reasonable attorneys' fees and costs incurred in connection with: (a)
         any determination of the applicability of the bankruptcy laws to the
         terms of this Agreement or Secured Party's rights hereunder; (b) any
         attempt by Secured Party to enforce or preserve its rights under the
         bankruptcy laws, or to prevent Debtor or any other person

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         from seeking to deny Secured Party its rights thereunder; (c) any
         effort by Secured Party to protect, preserve, or enforce its rights
         against the Collateral, or seeking authority to modify the automatic
         stay of 11 U.S.C. Section 362 or otherwise seeking to engage in such
         protection, preservation, or enforcement; of (d) any civil
         proceeding(s) arising under the bankruptcy laws, or arising in or
         related to a case under the bankruptcy laws.

                  9. Miscellaneous Provisions.

                           (a) The acceptance of this Agreement by Secured Party
         shall not be considered a waiver of or in any way to affect or impair
         any other security that Secured Party may have, acquire simultaneously
         herewith, or hereafter acquire for the payment or performance of the
         Obligation, nor shall the taking by Secured Party at any time of any
         such additional security be construed as a waiver of or in any way to
         affect or impair the Security Interest; Secured Party may resort, for
         the payment or performance of the Obligation, to its several securities
         therefor in such order and manner as it may determine.

                           (b) Without notice or demand, without affecting the
         obligations of Debtor hereunder or the personal liability of any person
         for payment or performance of the Obligation, and without affecting the
         Security Interest or the priority thereof, Secured Party, from time to
         time, may: (i) extend the time for payment of all or any part of the
         Obligation or otherwise change the terms of all or any part of the
         Obligation; (ii) take and hold other security for the payment or
         performance of the Obligation and enforce, exchange, substitute,
         subordinate, waive or release any such security; (iii) join in any
         extension or subordination agreement; or (iv) release any part of the
         Collateral from the Security Interest. Debtor hereby agrees to
         cooperate and assist Secured Party in achieving all of the
         aforementioned purposes.

                           (c) Debtor waives and agrees not to assert: (i) any
         right to require Secured Party to proceed against any guarantor, to
         proceed against or exhaust any other security for the Obligation, to
         pursue any other remedy in any particular order or manner; (ii) the
         benefits of any legal or equitable doctrine or principle of marshaling;
         (iii) the benefits of any statute of limitations affecting the
         enforcement hereof; (iv) demand, diligence, presentment for payment,
         protest and demand, and notice of extension, dishonor, protest, demand
         and nonpayment, relating to the Obligation; and (v) any benefit of, and
         any right to participate in, any other security now or hereafter held
         by Secured Party.

                           (d) The terms herein shall have the meanings in and
         be construed under the Uniform Commercial Code as enacted in the State
         of Arizona. This Agreement shall be governed by and construed according
         to the laws of the State of Arizona without regard to conflicts of law
         principles. Each provision of this Agreement shall be interpreted in
         such manner as to be effective and valid under applicable law, but if
         any provision of this Agreement is held to be void or invalid, the same
         shall not affect the remainder hereof which shall be effective as
         though the void or invalid provision had not been contained herein.

                           (e) No modification, rescission, waiver, release or
         amendment of any provision of this Agreement shall be made except by a
         written agreement executed by a duly authorized officer of Debtor and
         Secured Party.

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                           (f) No setoff or claim that Debtor now has or may in
         the future have against Secured Party shall relieve Debtor from paying
         or performing the Obligation.

                           (g) All notices required or permitted to be given
         hereunder shall be in writing and may be given in person or by United
         States mail, by delivery service or by electronic transmission. Any
         notice directed to a party to this Agreement shall become effective
         upon the earliest of the following: (i) actual receipt by that party;
         (ii) delivery to the designated address of that party, addressed to
         that party; or (iii) if given by certified or registered United States
         mail, three days after deposit with the United States Postal Service,
         postage prepaid, addressed to that party at its designated address. The
         designated addresses of the parties shall be as follows:

                  DEBTOR:           Saf-T-Hammer Corporation
                                    14500 N. Northsight Boulevard, Suite 221
                                    Scottsdale, Arizona  85260
                                    Attn:  Mitch Saltz, CEO

                  SECURED PARTY:    Smith & Wesson Corporation
                                    2100 Roosevelt Avenue
                                    Springfield, MA  01102-2208
                                    Attn:  John Kelly, CFO

                           (h) An executed copy of this Agreement or any
         financing statement relating hereto shall be sufficient for filing or
         recording as financing statement.

                           (i) Time is of the essence hereof. This Agreement
         shall be binding upon, and shall inure to the benefit of, the parties
         hereto and their heirs, personal representatives, successors and
         assigns. The provisions hereof shall apply to the parties according to
         the context thereof and without regard to the number or gender of words
         or expressions used.

                           (j) "Permitted Liens" shall mean the Security
         Interest granted hereunder.

                  In Witness Whereof, these presents are executed as of the date
indicated above.



SECURED PARTY:                                   DEBTOR:
SMITH & WESSON CORP., a Delaware                 SAF-T-HAMMER CORPORATION, a
corporation                                      Nevada corporation


By: /s/ John A. Kelly                            By: /s/ Mitchell A. Saltz
    ---------------------------------               ---------------------------

    Its: Chief Financial Officer                    Its: CEO
         ----------------------------                    ----------------------

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                                    EXHIBIT A



                                   COLLATERAL



                  A. All equipment of Debtor, whether now owned or hereafter
acquired and wherever located, including, but not limited to, all present and
future machinery, vehicles, furniture, fixtures, manufacturing equipment, farm
machinery and equipment, shop equipment, office and record keeping equipment,
parts, and tools;

                  B. All general intangibles of Debtor, whether now owned or
hereafter acquired, including, but not limited to, applications for patents,
patents, copyrights, trademarks, trade secrets, good will, trade names, customer
lists, permits and franchises, and the right to use Debtor's name;

                  C. All inventory of Debtor, whether now owned or hereafter
acquired and wherever located, including, without limitation, all inventory
wherever located in which Debtor now has or hereafter may acquire any right,
title or interest, including, without limitation, all goods and other personal
property now or hereafter owned by Debtor which are held for sale or lease or
are furnished or are to be furnished under a contract of service or which
constitute raw materials, stock-in-trade, work in process or materials used or
consumed or to be used or consumed in Debtor's business, or in the processing,
packaging or shipping of the same, and all finished goods;

                  D. Each and every right of Debtor to the payment of money,
including, but not limited to, all present and future debt instruments, chattel
paper, accounts, loans and obligations receivable, and tax refunds, whether such
right to payment now exists or hereafter arises, whether such right to payment
arises out of a sale, lease or other disposition of goods or other property by
Debtor, out of a rendering of services by Debtor, out of a loan by Debtor, out
of the overpayment of taxes or other liabilities of Debtor, or otherwise arises
under any contract or agreement, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens and
security interests) which Debtor may at any time have by law or agreement
against any account debtor or other obligor obligated to make any such payment
or against any of the property of such account debtor or other obligor;

                  E. All of Debtor's right, title and interest in and to any
fixtures;

                  Together with all substitutions and replacements for and
products of any of the foregoing property and together with all proceeds of the
sale, lease or other disposition of any and all of the foregoing property, any
and all proceeds of insurance thereon and, in the case of all Tangible
Collateral, together with all accessions and, together with (i) all accessories,
attachments, additions, parts, equipment and repairs now or hereafter attached
or affixed to or used in connection with any such collateral, and (ii) all
warehouse receipts, bills of lading and other documents of title now or
hereafter covering such collateral.

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