Document:

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                                                                   EXHIBIT 10.23

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is entered into on April 6, 2001, by and between DYKE
HENSEN (the "Employee"), an individual residing at the address set forth on the
signature page hereof, and HYPERION SOLUTIONS CORPORATION, a Delaware
corporation (the "Company").

         1.       DUTIES AND SCOPE OF EMPLOYMENT.

                  (a)      POSITION. For the term of his employment under this
Agreement ("Employment"), the Company agrees to employ the Employee in the
position of Chief Products Officer or in such other position as the Company
subsequently may assign to the Employee. The Employee shall report to the
Company's President and Chief Operating Officer or to such other person as the
Company subsequently may determine.

                  (b)      OBLIGATIONS TO THE COMPANY. During the term of his
Employment, the Employee shall devote his full business efforts and time to the
Company. During the term of his Employment, without the prior written approval
of the Company (which shall not be unreasonably withheld), the Employee shall
not render services in any capacity to any other person or entity and shall not
act as a sole proprietor, partner or managing member of any other person or
entity or as a shareholder owning more than one percent of the stock of any
other corporation. The foregoing, however, shall not preclude the Employee from
engaging in reasonable community, school or charitable activities. The Employee
shall comply with the Company's policies and rules, as they may be in effect
from time to time during the term of his Employment.

                  (c)      NO CONFLICTING OBLIGATIONS. The Employee represents
and warrants to the Company that he is under no obligations or commitments,
whether contractual or otherwise, that are inconsistent with his obligations
under this Agreement. The Employee represents and warrants that he will not use
or disclose, in connection with his employment by the Company, any trade secrets
or other proprietary information or intellectual property in which he or any
other person has any right, title or interest and that his employment by the
Company as contemplated by this Agreement will not infringe or violate the
rights of any other person. The Employee represents and warrants to the Company
that he has returned all property and confidential information belonging to any
prior employer.

         2.       CASH AND INCENTIVE COMPENSATION.

                  (a)      SALARY. The Company shall pay the Employee as
compensation for his services a base salary at a gross annual rate of not less
than $280,000. Such salary shall be payable in accordance with the Company's
standard payroll procedures. (The annual compensation specified in this
Subsection (a), together with any increases in such compensation that the
Company may grant from time to time, is referred to in this Agreement as "Base
Compensation.").

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                  (b)      INCENTIVE BONUSES. The Employee shall be eligible to
be considered for an annual incentive bonus with a target amount equal to 60.4%
of his Base Compensation. Such bonus (if any) shall be awarded based on
objective or subjective criteria established in advance by the Company's Board
of Directors (the "Board") or its Compensation Committee. The determinations of
the Board or such Committee with respect to such bonus shall be final and
binding.

         3.       EMPLOYEE BENEFITS. During the term of his Employment, the
Employee shall be eligible to participate in any employee benefit plans
maintained by the Company for similarly situated employees, subject in each case
to the generally applicable terms and conditions of the plan in question and to
the determinations of any person or committee administering such plan.

         In addition to providing the foregoing benefits to Employee, the
Company shall:

                  (i)      reimburse the Employee for the reasonable and
         customary cost of an annual physical examination.

                  (ii)     provide to the Employee certain income tax services.
         PricewaterhouseCoopers will prepare and sign the Employee's individual
         income tax returns and provide the Employee with estimated tax
         calculations. In addition, the tax professionals at
         PricewaterhouseCoopers will provide the Employee with income tax
         projections to help Employee develop his or her personal financial
         goals and strategies, including planning for the exercise and/or sale
         of option stock.

         4.       BUSINESS EXPENSES. During the term of his Employment, the
Employee shall be authorized to incur necessary and reasonable travel,
entertainment and other business expenses in connection with his duties
hereunder. The Company shall reimburse the Employee for such expenses upon
presentation of an itemized account and appropriate supporting documentation,
all in accordance with the Company's generally applicable policies. Any single
expenditure in excess of $10,000 shall require the prior approval of the
Company's Chief Executive Officer, President or Chief Financial Officer.

         5.       TERM OF EMPLOYMENT.

                  (a)      BASIC RULE. The Company agrees to continue the
Employee's Employment, and the Employee agrees to remain in Employment with the
Company, from the Effective Time until the earlier of:

                           (i)      The close of the applicable Initial Term or
         Renewal Period, as determined under Subsection (b) below; or

                           (ii)     The date when the Employee's Employment
         terminates pursuant to Subsection (c) below.

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                  (b)      INITIAL TERM AND RENEWAL PERIODS. The initial term of
this Agreement shall end on June 30, 2002 (the "Initial Term"). Thereafter this
Agreement shall automatically be renewed for successive 12-month periods (the
"Renewal Periods"), unless either party has given the other party written notice
of non-renewal not less than 90 days prior to the close of the Initial Term or
Renewal Period then in effect.

                  (c)      EARLY TERMINATION. The Employee may terminate his
Employment at any time and for any reason (or no reason) by giving the Company
30 days' advance notice in writing. The Company may terminate the Employee's
Employment at any time and for any reason (or no reason), and with or without
Cause, by giving the Employee 30 days' advance notice in writing. The Company
may also terminate the Employee's active Employment due to Permanent Disability
by giving the Employee notice in writing. For all purposes under this Agreement,
"Permanent Disability" shall mean that the Employee, at the time notice is
given, has failed to perform his duties under this Agreement for 60 or more
consecutive days or for 90 or more days during any 12-month period as the result
of his incapacity due to physical or mental injury, disability or illness and
which the Company is unable to accommodate reasonably without undue hardship.
The Employee's Employment shall terminate automatically in the event of his
death.

                  (d)      RIGHTS AND OBLIGATIONS UPON TERMINATION. Except as
expressly provided in Section 6, upon the termination of the Employee's
Employment pursuant to this Section 5, the Employee shall only be entitled to
the compensation, benefits and reimbursements described in Sections 2, 3 and 4
for the period preceding the effective date of the termination. No incentive
bonus under Section 2(b) shall be payable for the year in which the Employee's
Employment terminates, unless the applicable bonus program expressly provides
for the payment of a prorated bonus for such year. The payments under this
Agreement shall fully discharge all responsibilities of the Company to the
Employee. The termination of this Agreement shall not limit or otherwise affect
the Employee's obligations under Section 7.

         6.       TERMINATION BENEFITS.

                  (a)      GENERAL RELEASE. Any other provision of this
Agreement notwithstanding, Subsections (b) and (c) below shall not apply unless
the Employee has executed a general release (in a form prescribed by the
Company) of all known and unknown claims that he may then have against the
Company or persons affiliated with the Company. Such release shall include,
among other things, an agreement not to prosecute any legal action or other
proceeding based upon any of such claims. The Employee acknowledges that such
release may provide that in the event of a breach by the Employee of the terms
of the release or of Employee's obligations under Section 7 hereof, the Company
shall be entitled to recover from the Employee all amounts paid under
subsections (b) and (c) of this Section 6, as well as all litigation costs
(including attorneys' fees and expenses) incurred by the Company in connection
with such breach.

                  (b)      SEVERANCE PAY. The Company shall pay the Employee his
Base Compensation for a 12-month period following the effective date of the
termination of his Employment (the "Continuation Period") if:

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                           (i)      The Company terminates the Employee's
         Employment under Section 5(c) for any reason other than Cause or
         Permanent Disability; or

                           (ii)     The Company was subject to a Corporate
         Transaction/Change in Control during the term of this Agreement and,
         within 12 months thereafter, the Employee resigns for Good Reason.

                           (iii)    During the term of this Agreement, the
         current Chief Executive Officer ("CEO") ceases to serve as the senior
         executive officer of the Company, the Company's Board of Directors
         appoints a new CEO and within six months of the first day of such new
         CEO's employment with the Company, the Employee resigns because the
         Company has significantly diminished the nature or scope of the
         Employee's authority, duties or responsibilities in effect immediately
         prior to the appointment of the new CEO.

Base Compensation under this Subsection (b) shall be paid at the rate in effect
at the time of the termination of Employment and in accordance with the
Company's standard payroll procedures.

                  (c)      EMPLOYEE BENEFITS. If Subsection (b) above applies,
the Company shall continue the coverage of the Employee and his dependents (if
applicable) under the employee benefit plans described in Section 3 during the
Continuation Period. To the extent that such plans or the insurance contracts or
provider agreements associated with such plans do not permit the extension of
the Employee's coverage following the termination of his active employment, the
Company shall pay the Employee cash in an amount equal to the cost to the
Company of the coverage that cannot be provided. The cash payments shall be made
in accordance with Subsection (b) above.

                  (d)      COBRA. If Subsection (b) above applies, and if the
Employee elects to continue his health insurance coverage under the Consolidated
Omnibus Budget Reconciliation Act ("COBRA") following the termination of his
Employment, then the date of the "qualifying event" for purposes of COBRA shall
be the Employee's last day of active employment.

                  (e)      DEFINITION OF "CAUSE." For all purposes under this
Agreement, "Cause" shall mean:

                           (i)      The Employee's failure to perform in a
         satisfactory fashion one or more reasonable and lawful duties assigned
         to the Employee by the Company under this Agreement, if such failure
         continues for seven days or more after the Company has given the
         Employee written notice describing such failure and advising him of the
         consequences of such failure under this Agreement; provided that such
         notice shall be required only with respect to the first such failure;

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                           (ii)     The Employee's misconduct relating to the
         Company's affairs, if such misconduct continues for seven days or more
         after the Company has given the Employee written notice describing such
         misconduct and advising him of the consequences of such misconduct
         under this Agreement; provided that such notice shall be required only
         with respect to the first occurrence of such misconduct; provided
         further there shall be no requirement that the misconduct continue for
         seven days or more with respect to acts for which an employee's
         employment is specifically terminable under the Company's policies and
         procedures applicable to all employees;

                           (iii)    The Employee's conviction of, or a plea of
         "guilty" or "no contest" to, a felony, or a misdemeanor which calls
         into question the Employee's honesty, under the laws of the United
         States or any state thereof;

                           (iv)     Any breach of this Agreement, the Employee
         Nondisclosure Agreement and Proprietary Rights Assignment between the
         Employee and the Company, or any other agreement between the Employee
         and the Company;

                           (v)      Threats or acts of violence or harassment
         directed at any present, former or prospective employee, independent
         contractor, vendor, customer or business partner of the Company; or

                           (vi)     Fraud or embezzlement involving the assets
         of the Company or its affiliates, customers or suppliers.

The foregoing shall not be deemed an exclusive list of all acts or omissions
that the Company may consider as grounds for the termination of the Employee's
Employment with Cause. Termination for Cause hereunder shall be deemed to be
termination for "Misconduct" under the Company's stock option plans and related
agreements.

                  (f)      DEFINITION OF "CORPORATE TRANSACTION/CHANGE IN
CONTROL." For all purposes under this Agreement, "Corporate Transaction/Change
in Control" shall mean any transaction under clauses (i) or (ii) below:

                           (i)      a change in ownership or control of the
         Company effected through either of the following transactions:

                                    (A)      the acquisition, directly or
                  indirectly, by any person or related group of persons (other
                  than the Company or a person that directly or indirectly
                  controls, is controlled by, or is under common control with,
                  the Company), of beneficial ownership (within the meaning of
                  Rule 13d-3 of the 1934 Act) of securities possessing more than
                  fifty percent (50%) of the total combined voting power of the
                  Company's outstanding securities pursuant to a tender or
                  exchange offer made directly to the Company's stockholders
                  which the Board does not recommend such stockholders to
                  accept, or

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                                    (B)      a change in the composition of the
                  Board over a period of thirty-six (36) consecutive months or
                  less such that a majority of the Board members ceases, by
                  reason of one or more contested elections for Board
                  membership, to be comprised of individuals who either (A) have
                  been Board members continuously since the beginning of such
                  period or (B) have been elected or nominated for election as
                  Board members during such period by at least a majority of the
                  Board members described in clause (A) who were still in office
                  at the time the Board approved such election or nomination,

                           (ii)     either of the following stockholder-approved
         transactions to which the Company is a party:

                                    (A)      a merger or consolidation in which
                  securities possessing more than fifty percent (50%) of the
                  total combined voting power of the Company's outstanding
                  securities are transferred to a person or persons different
                  from the persons holding those securities immediately prior to
                  such transaction; or

                                    (B)      the sale, transfer or other
                  disposition of all or substantially all of the Company's
                  assets in complete liquidation or dissolution of the Company.

                  (g)      DEFINITION OF "GOOD REASON." For all purposes under
this Agreement, "Good Reason" shall mean:

                           (i)      A significant diminution in the nature or
         scope of the Employee's authority, duties or responsibilities in effect
         immediately prior to the Corporate Transaction/Change in Control;

                           (ii)     Any reduction in the rate of the Employee's
         Base Compensation in effect immediately prior to the Corporate
         Transaction/Change in Control or a reduction of 25% or more in the
         value of the Employee's aggregate compensation and benefits in effect
         immediately prior to the Corporate Transaction/Change in Control;

                           (iii)    The relocation of the Employee's principal
         place of employment to a site more than 25 miles removed from his
         principal place of employment immediately prior to the Corporate
         Transaction/Change in Control; or

                           (iv)     An increase of 25% or more in the average
         amount of time per month that the Employee is required to be away from
         his principal place of employment, relative to the average amount of
         time per month that the Employee was required to be away from his
         principal place of employment immediately prior to the Corporate
         Transaction/Change in Control.

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         7.       EMPLOYEE'S COVENANTS.

                  (a)      NON-SOLICITATION OF EMPLOYEES. During the period
commencing on the date of this Agreement and continuing until the second
anniversary of the date when the Employee's Employment terminated for any
reason, the Employee shall not interfere with the business of the Company by,
directly or indirectly, personally or through others, soliciting or attempting
to solicit (on the Employee's own behalf or on behalf of any other person or
entity) the employment of any employee of the Company or any of the Company's
affiliates. During such period, the Employee shall not encourage or induce, or
take any action that has the effect of encouraging or inducing, any employee of
the Company or any of the Company's affiliates to terminate his or her
employment.

                  (b)      LIMITATION ON HIRING OF EMPLOYEES. For a period of
120 days following the date when the Employee's Employment terminated for any
reason, the Employee shall not hire, or assist any other person in hiring, any
person who was an employee of the Company on the date when the Employee's
Employment terminated to work at the Employee's new place of employment in a
position that reports either directly to the Employee or to any other person who
reports directly to the Employee.

                  (c)      NON-SOLICITATION OF CUSTOMERS. The parties agree that
information relating to the identities, key contact personnel, preferences,
needs and circumstances of the Company's customers are trade secrets belonging
to the Company that are, and necessarily will be, used by the Employee in the
solicitation of business from the Company's customers. As a result, during the
period commencing on the date of this Agreement and continuing until the second
anniversary of the date when the Employee's Employment terminated for any
reason, the Employee shall not, directly or indirectly, personally or through
others, solicit or attempt to solicit (on the Employee's own behalf or on behalf
of any other person or entity) the business of any customer of the Company, or
of any of the Company's affiliates, for services or products similar to those
sold by the Company.

                  (d)      NON-DISCLOSURE. The Employee has entered into an
Employee Nondisclosure Agreement and Proprietary Rights Assignment with the
Company, which is incorporated herein by reference and survives the termination
or expiration of this Agreement. Given the nature of the Employee's position as
Chief Products Officer of the Company, the parties agree that it would be
practically impossible for the Employee to work as a products executive for
certain companies, including their subsidiaries and affiliates, that provide
services or products that are similar to those of the Company without disclosing
the Company's trade secrets. A list of such companies, which may be amended from
time to time by written notice of the Company, is attached hereto as Schedule A.

                  (e)      NON-COMPETITION. During the period commencing on the
date of this Agreement and continuing until the second anniversary of the date
when the Employee's Employment terminated for any reason, the Employee shall
not, directly or indirectly (other than on behalf of the Company or with the
Company's prior written consent), engage in a Competitive Business Activity in
any of the locations listed in Schedule B attached hereto. If Section 6(b)

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applies, the foregoing two year period shall be reduced to one year. The term
"Competitive Business Activity" shall mean:

                           (i)      Engaging in, or managing or directing
         persons engaged in, any business in which the Company or any of the
         Company's affiliates is engaged at the time of the termination of the
         Employee's Employment, whether independently or as an employee, agent,
         consultant, advisor, independent contractor, proprietor, partner,
         officer, director or otherwise;

                           (ii)     Acquiring or having an ownership interest in
         any entity that derives more than 15% of its gross revenues from any
         business in which the Company or any of the Company's affiliates is
         engaged at the time of the termination of the Employee's Employment,
         except for ownership of 1% or less of any entity whose securities are
         freely tradable on an established market; or

                           (iii)    Participating in the financing, operation,
         management or control of any firm, partnership, corporation, entity or
         business described in Paragraph (ii) above.

                  (f)      NON-DISPARAGEMENT. Commencing on the date when the
Employee's Employment terminated for any reason and continuing thereafter, the
Employee shall not directly or indirectly, personally or through others,
disparage the Company or any of its predecessors, including each of their past,
current, or future board of directors or senior management or any of their
products or services.

                  (g)      INJUNCTIVE RELIEF. The Employee acknowledges and
agrees that his failure to perform any of his covenants in this Section 7 would
cause irreparable injury to the Company and cause damages to the Company that
would be difficult or impossible to ascertain or quantify. Accordingly, without
limiting any other remedies that may be available with respect to any breach of
this Agreement, the Employee consents to the entry of an injunction to restrain
any breach of this Section 7.

                  (h)      SURVIVAL. The covenants in this Section 7 shall
survive any termination or expiration of this Agreement and the termination of
the Employee's Employment with the Company for any reason.

         8.       SUCCESSORS.

                  (a)      COMPANY'S SUCCESSORS. This Agreement shall be binding
upon any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.

                  (b)      EMPLOYEE'S SUCCESSORS. This Agreement and all rights
of the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal

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or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

         9.       MISCELLANEOUS PROVISIONS.

                  (a)      NOTICE. Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when (i) personally delivered, (ii) delivered to the U.S. Postal
Service for delivery by registered or certified mail or (iii) delivered to a
comparable private service offering guaranteed deliveries in the ordinary course
of its business. Notice under clauses (ii) and (iii) shall be valid only if
delivery charges have been prepaid and a return receipt will be furnished. In
the case of the Employee, notice under clauses (ii) and (iii) shall be addressed
to him at the home address which he most recently communicated to the Company in
writing. In the case of the Company, notice under clauses (ii) and (iii) shall
be addressed to its corporate headquarters and directed to the attention of its
Secretary.

                  (b)      MODIFICATIONS AND WAIVERS. No provision of this
Agreement shall be modified, waived or discharged unless the modification,
waiver or discharge is agreed to in writing and signed by the Employee and by an
authorized officer of the Company (other than the Employee). No waiver by either
party of any breach of, or of compliance with, any condition or provision of
this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.

                  (c)      WHOLE AGREEMENT. This Agreement supersedes any prior
employment agreement between the Employee and the Company. No other agreements,
representations or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement have been made
or entered into by either party with respect to the subject matter hereof. This
Agreement and the Employee Nondisclosure Agreement and Proprietary Rights
Assignment between the Employee and the Company contain the entire understanding
of the parties with respect to the subject matter hereof.

                  (d)      WITHHOLDING TAXES. All payments made under this
Agreement shall be subject to reduction to reflect taxes or other charges
required to be withheld by law.

                  (e)      CHOICE OF LAW. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Connecticut without regard to its choice of law principles.

                  (f)      SEVERABILITY. The invalidity or unenforceability of
any provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.

                  (g)      ARBITRATION. Subject to Section 7(g), any controversy
or claim arising out of or relating to this Agreement or the breach thereof, or
the Employee's Employment or the termination thereof, shall be settled in
Fairfield County, Connecticut, by arbitration in accordance with the National
Rules for the Resolution of Employment Disputes of the American

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Arbitration Association. The decision of the arbitrator shall be final and
binding on the parties, and judgment on the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. The parties hereby agree
that the arbitrator shall be empowered to enter an equitable decree mandating
specific enforcement of the terms of this Agreement. The Company and the
Employee shall share equally all fees and expenses of the arbitrator; provided,
however, that the Company or the Employee, as the case may be, shall bear all
fees and expenses of the arbitrator and all of the legal fees and out-of-pocket
expenses of the other party if the arbitrator determines that the claim or
position of the Company or the Employee, as the case may be, was without
reasonable foundation. The Employee hereby consents to personal jurisdiction of
the state and federal courts located in the State of Connecticut for any action
or proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.

                  (h)      NO ASSIGNMENT. This Agreement and all rights and
obligations of the Employee hereunder are personal to the Employee and may not
be transferred or assigned by the Employee at any time. The Company may assign
its rights under this Agreement to any entity that assumes the Company's
obligations hereunder in connection with any sale or transfer of all or a
substantial portion of the Company's assets to such entity.

                  (i)      COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

                  (j)      GENDER. The masculine, feminine and neuter gender,
and the singular or plural number, shall be deemed to include the others
whenever the context so indicates.

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         IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.

                                     /s/ Dyke Hensen
                                     -------------------------------------------
                                     Dyke Hensen

                                     HYPERION SOLUTIONS CORPORATION

                                     By: /s/ Jeffrey Rodek
                                         ---------------------------------------

                                     Name: Jeffrey Rodek
                                           -------------------------------------

                                     Title: Chairman and Chief Executive Officer
                                            ------------------------------------

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                                   SCHEDULE A

Adaytum Software
Applix, Inc
Broadbase Software, Inc.
Business Objects
Cognos, Inc.
Computer Associates International, Inc.
Corporate Planning
Comshare Incorporated
E.piphany, Inc.
Frango AB
Gentia Software
Great Plains Software, Inc.
Information Builders, Inc.
Lawson Software
Kenan Systems Corporation
Kopcke and Associates
MicroStrategy Inc.
Microsoft Corporation
MIK
MIS AG
Oracle Corporation
PeopleSoft, Inc.
SAP AG
SAS Institute, Inc.
Showcase Corporation
United Information Technologies, Inc.

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                                   SCHEDULE B

Alabama                                 North Carolina
Alaska                                  North Dakota
Arizona                                 Ohio
Arkansas                                Oklahoma
California                              Oregon
Colorado                                Pennsylvania
Connecticut                             Rhode Island
Delaware                                South Carolina
Florida                                 South Dakota
Georgia                                 Tennessee
Hawaii                                  Texas
Idaho                                   Utah
Illinois                                Vermont
Indiana                                 Virginia
Iowa                                    Washington
Kansas                                  West Virginia
Kentucky                                Wisconsin
Louisiana                               Wyoming
Maine                                   District of Columbia
Maryland                                Australia
Massachusetts                           Brazil
Michigan                                Canada
Minnesota                               France
Mississippi                             Germany
Missouri                                Hong Kong
Montana                                 Israel
Nebraska                                Japan
Nevada                                  Mexico
New Hampshire                           Netherlands
New Jersey                              Singapore
New Mexico                              United Kingdom
New York

                                       13<PAGE>   1

                                                                   EXHIBIT 10.19

                        PROMISSORY NOTE & LOAN AGREEMENT

                                                                     Dated As Of
$1,600,000                                                          May 15, 2001
                                                             Scottsdale, Arizona

                  1. LOAN; ADVANCEMENT OF FUNDS. Subject to receipt of the funds
to be advanced to it hereunder, SAF-T-HAMMER CORPORATION, a Nevada corporation
(the "Company"), hereby promises to pay to the order of SMITH & WESSON
CORPORATION, at 2100 Roosevelt Avenue, Springfield, Massachusetts 01102-2208,
("Registered Holder"), or at such other place as it shall designate to the
Company in writing, in lawful money of the United States of America, the
principal amount of One Million Six Hundred Thousand Dollars ($1,600,000) and to
pay interest (computed on the basis of a 365-day year and the actual number of
days elapsed) on the unpaid principal amount hereof at the Interest Rate (as
defined below). The Company promises to pay the said principal sum and interest
in accordance with the terms of this Note (the "Note"). The Registered Holder
agrees to advance to the Company One Million Six Hundred Thousand Dollars
($1,600,000) (the "Funds") on May 15, 2001. The date of receipt by the Company
or pursuant to its direction of the Funds shall be the "Advancement Date."

                  2. ISSUANCE OF NOTE. This Note and the related documents have
been issued by the Company pursuant to the authorization of the Board of
Directors of the Company. The Note, together with any notes from time to time
issued in replacement thereof, whether pursuant to transfer and assignment or
otherwise, are collectively referred to herein as the "Note."

                  3. PAYMENT. Interest shall be payable on or before the 15th
day of each month beginning June 15th and be computed at the rate of the Prime
Rate (as defined below) plus one (1) percent per annum (the "Interest Rate") on
the outstanding principal balance of this Note for the period from the
Advancement Date until the date of such principal is fully repaid (the
"Repayment Date"). Unless earlier repaid, on May 15, 2002 (the "Termination
Date"), the Company shall pay the Registered Holder all unpaid principal and
interest on this Note. The Company may prepay this Note, in whole or in part, at
any time. "Actual Interest Amount" shall mean the amount of interest computed at
the Interest Rate on the outstanding balance of the Note, from time to time, for
the period from the Advancement Date through the Repayment Date. The "Repayment
Date" shall mean the date the outstanding balance of this Note is fully repaid.
The Interest Rate shall automatically increase to fifteen percent (15%) per
annum without notice or act by any party upon an Event of Default (as defined
below). The "Prime Rate" shall be the prime rate of interest announced in
Phoenix, Arizona, by Citibank N.A., or its successor.

                  4. SECURITY AGREEMENT. This Note is secured pursuant to the
terms of that certain Security Agreement between the Registered Holder and the
Company, dated concurrently with this Note (the "Security Agreement"). The
collateral pursuant to the Security Agreement shall be referred to as the
"Collateral."

                  5. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company
represents, warrants and covenants the following:
<PAGE>   2
                  (a) As of the date of this Note, the Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Nevada and the Company has all requisite corporate power and authority
to carry on its business as presently conducted, and to carry out the
transactions contemplated in this Note and the other agreements contemplated
herein. The Company has duly authorized and executed this Note and shall duly
authorize and execute any related documents required to be delivered by the
Company hereafter.

                  (b) The Company shall not make any material change in the
business of the Company nor any change in the principal place of business of the
Company.

                  (c) Except for any security interests held by the Registered
Holder, the Company has fee simple title to the Collateral free from any lien,
security interest, encumbrance or claim ("Lien").

                  (d) The Company will, at the Company's expense, keep the
Collateral free from any other Liens and defend and hold the Registered Holder
harmless from any action, which may adversely affect the Registered Holder's
security interest or the Company's title to the Collateral.

                  (e) The Company will execute and/or deliver to the Registered
Holder all documents the Registered Holder reasonably considers necessary or
convenient to perfect and maintain Registered Holder's security interest in the
Collateral and its proceeds, including, but not limited to, uniform commercial
code financing statements. The Registered Holder may file or record in the
appropriate public offices in all jurisdictions in which the Collateral may be
located and all such documents required or permitted by law to be filed or
recorded.

                  (f) Without the prior written consent of Smith & Wesson, the
Company agrees that the Company shall not cause itself, nor permit itself to:

                           (i) convey, sell, lease or sub-lease (as lessor or
sublessor), transfer or otherwise dispose of, or grant a Lien over, in one
transaction or a series of transactions, all or any part of its business, assets
or property of any kind whatsoever, whether real, personal or mixed and whether
tangible, intangible or contingent, whether now owned or hereafter acquired
until the Note has been repaid;

                           (ii) liquidate, wind-up or dissolve itself, or suffer
any liquidation or dissolution of, in one transaction or a series of
transactions, all or any part of its business, assets or property of any kind
whatsoever, whether real, personal or mixed and whether tangible, intangible or
contingent, whether now owned or hereafter acquired, until the Note has been
repaid; and

                  (g) The Company will pay before delinquency all taxes,
governmental charges, assessments or liens now or hereafter imposed on the
Collateral;

                  6. NEGATIVE COVENANTS OF THE COMPANY. The Company shall not,
without the prior written consent of Smith & Wesson:

                                       2
<PAGE>   3
                  (a) Sell, lease or transfer any portion of the Collateral;

                  (b) Guaranty the Indebtedness of any third party;

                  (c) Make any capital expenditure in excess of $500,000;

                  7. EVENTS OF DEFAULT. The following shall each constitute an
"Event of Default" by the Company under this Note:

                  (a) default in the due and punctual payment of interest upon
or principal of the Note as and when the same becomes due and payable either at
maturity or otherwise; or

                  (b) with respect to any other covenant or agreement contained
in the Note, failure on the part of the Company to duly observe or perform
covenants or agreements; which failure then remains uncured for a period of
fifteen (15) days after notice from the party claiming the default; or

                  (c) a decree or order by a court having jurisdiction has been
entered adjudging the Company as bankrupt or insolvent, or approving a petition
seeking reorganization of the Company under any applicable bankruptcy law and
such decree or order has continued undischarged or unstayed for a period of
sixty (60) days; or a decree or order of a court having jurisdiction for the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company or of all or substantially all of its property, or for
the winding-up or liquidation of its affairs, has been entered, and has remained
in force undischarged or unstayed for a period of thirty (30) days; or

                  (d) the Company institutes proceedings to be adjudicated a
voluntary bankrupt, or consents to the filing of a bankruptcy proceeding against
it, or files a petition or answer or consent seeking reorganization under
applicable law, or consents to the filing of any such petition or to the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of it or of all or substantially all of its property, or makes an
assignment for the benefit of creditors, or admits in writing its inability to
pay its debts generally as they become due; or if the Company shall suffer any
writ of attachment or execution or any similar process to be issued or levied
against it or any significant part of its property which is not released,
stayed, bonded or vacated within sixty (60) days after its issue or levy; or if
the Company takes corporate action in furtherance of any of the aforesaid
purposes or conditions; or

                  (e) any declared default of the Company under any Indebtedness
that gives the holder the right to accelerate such Indebtedness, which
Indebtedness is not cured within fifteen (15) days after any applicable grace or
cure periods and which is in excess of $200,000; or

                  (f) any material adverse change in the business, operations,
assets, liabilities or financial condition of the Company which is not cured
within fifteen (15) days after the Registered Holder has provided the Company
with written notice thereof; or

                  (g) the adoption of any plan of liquidation, dissolution or
winding up of the Company, or the involuntary occurrence thereof.

                                       3
<PAGE>   4
Unless the principal of the Note has already become due and payable, upon an
Event of Default, unless such Event of Default has already been remedied, the
Registered Holder by notice in writing to the Company, may declare the principal
of the Note then outstanding and the interest accrued thereof, if not already
due and payable and if not already paid, to be due and payable immediately, and
upon any such declaration the same shall become and shall be immediately due and
payable.

                  8. TRANSFERABILITY. This Note is not transferable, in whole or
in part without the prior written consent of the Company (in its reasonable
discretion), except that the Registered Holder may, upon thirty (30) days prior
written notice to the Company but without the prior written consent of the
Company, assign all but not less than all of this Note to an entity as to which
the Registered Holder is the beneficial owner of a least a majority of the
equity therein and the Registered Holder has voting control thereover (a
"Permitted Transferee").

                  9. REMEDIES CUMULATIVE. The rights, powers and remedies given
to the payee under this Note shall be in addition to all rights, powers and
remedies given to it by virtue of any document or instrument executed in
connection herewith, or any statute or rule of law.

                  10. NON-WAIVER. Any forbearance, failure or delay by the payee
in exercising any right, power or remedy under this Note, any documents or
instruments executed in connection therewith or otherwise available to the payee
shall not be deemed to be a waiver of such right, power or remedy, nor shall any
single or partial exercise of any right, power or remedy preclude the further
exercise thereof.

                  11. MODIFICATIONS AND WAIVERS. No modification or waiver of
any provision of this Note or any documents or instruments executed in
connection therewith is effective unless it is in writing and signed by the
payee, and any such modification or waiver shall apply only in the specific
instance for which given.

                  12. ATTORNEY'S FEES. If this Note shall not be paid when due
and shall be placed by the Registered Holder hereof in the hands of an attorney
for collection, through legal proceedings or otherwise, or in the event the
Registered Holder fails to perform as required hereby and an action is brought
by the non-breaching party with respect thereto, the breaching party shall pay
attorney's fees to the non-breaching party hereof, together with reasonable
costs and expenses of collection or enforcement incurred in connection with any
such action.

                  13. ENFORCEMENT; SPECIFIC PERFORMANCE.

                  (a) In case any one or more Events of Default of the Company
or in the event of a breach or default by the Registered Holder hereunder shall
occur and be continuing, in addition to the Registered Holder's rights and
remedies under the Security Agreement, the non-breaching party may proceed to
protect and enforce the rights of such non-breaching party by an action at law,
suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein or for an injunction against a
violation of any of the terms hereof or thereof, or in aid of the exercise of
any power granted hereby or thereby or by law.

                  (b) The parties hereto expressly agree that they may not have
adequate remedies at law if the parties do not perform their obligations under
this Note. Upon a breach of the terms or covenants of this Note by either party,
the other party shall, each in addition to all

                                       4
<PAGE>   5
other remedies, be entitled to obtain injunctive relief, and an order for
specific performance of the obligations hereunder.

                  14. CHOICE OF LAW. This Note and the rights and obligations of
the parties hereto, shall be governed, construed and interpreted according to
the laws of the State of Massachusetts. The Company agrees that any final
judgment after exhaustion of all appeals or the expiration of time to appeal in
any such action or proceeding shall be conclusive and binding, and may be
enforced in any federal or state court in the United States by suit on the
judgment or in any other manner provided by law. Nothing contained in this Note
shall affect or limit the right of the Registered Holder to serve any process or
notice or motion or other application in any other manner permitted by law, or
limit or affect the right of the Registered Holder to bring any action or
proceeding against the Company or any of its property in the courts of any other
jurisdiction. The Company hereby consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of Springfield,
Massachusetts or the state courts of the State of Massachusetts sitting in the
City of Springfield in connection with any dispute arising under this Note, and
hereby waives, to the maximum extent permitted by law, any objection, including
any objections based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.

                  15. WRITTEN CONSENT OF SMITH & WESSON NOT NECESSARY UNDER
CERTAIN CIRCUMSTANCES. Notwithstanding anything else contained herein to the
contrary, the prior written consent of Smith & Wesson shall not be required with
respect to the matters described in Sections 5 and 6 of this Note if, after the
Company gives Smith & Wesson written notice of the proposed matter (which notice
shall summarize the proposed transaction), ten (10) business days elapse without
the Company receiving a written notice from Smith & Wesson stating that it is
withholding such consent.

                  16. PAYEE DEFINED. The term "payee" as used herein shall be
deemed to include the payee and its successors, endorsees and assigns.

                  17. WAIVER OF PRESENTMENT, ETC. The Company hereby waives
presentment, demand for payment, protest, notice of protest and notice of
non-payment hereof.

                  18. CONSTRUCTION. The terms of this Note constitute the
written expression of the mutual agreement of the parties and shall be construed
neutrally and not for or against either party. Whenever a noun or pronoun is
used in this Note in the singular and when required by the context, the same
shall include the plural, and the masculine gender shall include the feminine
and neuter genders and vice versa. The term "person" shall include any
individual, entity, trust or association. The headings in this Note are inserted
for convenience; the provisions of this Note shall control in determining the
intent hereof.

                  19. HOLIDAYS. If this Note or any installment hereof becomes
due and payable on a Saturday, Sunday or public holiday under the laws of the
State of Arizona, the due date hereof shall be extended to the next succeeding
business day and interest shall be payable at the Interest Rate during such
extension. All payments received by the Registered Holder shall be applied first
to the payment of all accrued interest payable hereunder.

                  20. NOTICES. Except as otherwise expressly provided for
herein, all notices, requests and other communications to any party hereunder
shall be in writing (including

                                       5
<PAGE>   6
facsimile or similar writing) and shall be given to such party at its address or
facsimile number set forth below, or such other address or facsimile number as
such party may hereinafter specify for the purpose (in the case of the Company,
by notice in accordance herewith to the Registered Holder or, in the case of the
Registered Holder, by notice in accordance herewith to the Company). Each such
notice, request or other communication shall be effective (i) if given by
facsimile, when such facsimile is transmitted to the facsimile number specified
in this SECTION 20 or, (ii) if given by mail, 48 hours after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid or, (iii) if given by any other means, when delivered at the address
specified in this SECTION 20. Notices shall be addressed as follows:

                  If to the Company:
                  Saf-T-Hammer Corporation
                  14500 N. Northsight Boulevard, Suite 221
                  Scottsdale, AZ 85260
                  Attn:  Mitch Saltz, CEO
                  Facsimile No.: (480) 949-9747

                  If to the Registered Holder:
                  Smith & Wesson
                  2100 Roosevelt Avenue
                  Attn:  John Kelly, CFO

                  If a notice or communication is delivered in the manner
provided above, it is duly given, whether or not the addressee receives it.

                  IN WITNESS WHEREOF, the parties have caused this Promissory
Note & Loan Agreement to be effective as of the date first written above.

                                         SAF-T-HAMMER CORPORATION, a Nevada
                                         corporation

                                         By:   /s/ Mitchell A. Saltz
                                             ----------------------------------
                                         Name:   Mitchell A. Saltz
                                               --------------------------------
                                         Title:   CEO
                                                -------------------------------

Agreed to and accepted by:

By:   /s/ John A. Kelly
    -------------------------------
     Smith & Wesson Corporation,
     a Delaware corporation

                                       6

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