Document:

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                                                                    EXHIBIT 10.4

                               OPERATING AGREEMENT

                                       OF

                                WALTHER USA, LLC
                      A DELAWARE LIMITED LIABILITY COMPANY

                          DATED AS OF JANUARY 21, 2000
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                                TABLE OF CONTENTS
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                                                                                                       PAGE
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ARTICLE I DEFINITIONS...................................................................................1

ARTICLE II FORMATION OF THE COMPANY.....................................................................5
   Section 2.1. Formation...............................................................................5
   Section 2.2. Name....................................................................................5
   Section 2.3. Principal Place of Business.............................................................5
   Section 2.4. Registered Office and Registered Agent..................................................5
   Section 2.5. Duration ...............................................................................5
   Section 2.6. Intention of the Parties................................................................5

ARTICLE III PURPOSES....................................................................................6

ARTICLE IV CAPITAL CONTRIBUTIONS AND RELATED MATTERS....................................................6
   Section 4.1. Members' Initial Capital Contributions..................................................6
   Section 4.2 Capital Accounts.........................................................................6
   Section 4.3. Return of Members' Contributions to Capital.............................................6
   Section 4.4. Additional Capital Contributions .......................................................6
   Section 4.5. Loans by Members........................................................................7

ARTICLE V ACCOUNTING....................................................................................7
   Section 5.1 Fiscal Year; Company Books...............................................................7
   Section 5.2. Engagement of Accountants...............................................................7

ARTICLE VI EXPENSES AND DISTRIBUTIONS...................................................................8
   Section 6.1. Organizational Expenses.................................................................8
   Section 6.2. Ongoing Expenses; Fees..................................................................8
   Section 6.3. Timing, Amounts and Sources of Distributions............................................8
   Section 6.4. Distributions of Operating Receipts and Capital Proceeds ...............................8
   Section 6.5. Creation of Reserves ...................................................................8
   Section 6.6. Other Provisions Regarding Distributions................................................8
   Section 6.7. Tax Distributions.......................................................................9

ARTICLE VII ALLOCATION OF PROFIT AND LOSS; TAX MATTERS..................................................10
   Section 7.1. Allocations of Profit and Loss..........................................................10
   Section 7.2. Section 704(c) Allocations..............................................................11
   Section 7.3. Members' Intention......................................................................11
   Section 7.4. Tax Matters Officer.....................................................................12

ARTICLE VIII MANAGEMENT.................................................................................12
   Section 8.1 Management; Responsibility...............................................................12
   Section 8.2. Board of Managers.......................................................................12
   Section 5.3. Matters Reserved to the Members.........................................................12
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<TABLE>
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   Section 8.4. Officers................................................................................13
   Section 8.5. Meetings of Members.....................................................................13
   Section 8.6. Records of LLC Interests................................................................14
   Section 8.7. Bank Accounts...........................................................................14

ARTICLE IX LIABILITIES AND RESTRICTIVE COVENANTS........................................................14
   Section 9.1. Liability Board of Managers' Representatives............................................14
   Section 9.2. Indemnification of the Members..........................................................15
   Section 9.3. Cooperation Covenant....................................................................16
   Section 9.4. Non-Solicitation Covenant...............................................................17
   Section 9.5. Confidential Information Covenant.......................................................17
   Section 9.6. Scope of Restriction....................................................................17
   Section 9.7. Remedies................................................................................18

ARTICLE X TRANSFERS; ADMISSIONS; ADDITIONAL MEMBERS.....................................................18
   Section 10.1. Transfer Generally.....................................................................18
   Section 10.2. Additional Members.....................................................................18

ARTICLE XI DISSOLUTION, TERMINATION AND SALE RIGHTS.....................................................18
   Section 11.1. Dissolution............................................................................18
   Section 11.2. Winding Up, Liquidation and Distribution of Assets.....................................19
   Section 11.3. Certificate of Dissolution.............................................................20
   Section 11.4. Effect of Filing of Certificate of Dissolution.........................................20
   Section 11.5. Carl Walther and S&W Right of First Refusal............................................20
   Section 11.6. Sale and Purchase Rights...............................................................20

ARTICLE XII MISCELLANEOUS PROVISIONS....................................................................20
   Section 12.1. Notices................................................................................20
   Section 12.2. Law Governing..........................................................................21
   Section 12.3. Amendments.............................................................................21
   Section 12.4. Successors and Assigns.................................................................21
   Section 12.5. Counterparts...........................................................................21
   Section 12.6. Severability...........................................................................21
   Section 12.7. No Third Party Beneficiaries...........................................................21
   Section 12.8. Construction...........................................................................21
</TABLE>

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                               OPERATING AGREEMENT

                                       OF

                                WALTHER USA, LLC

                      A DELAWARE LIMITED LIABILITY COMPANY

                  This Operating Agreement dated as of January 21, 2000, is made
and entered into by and between Carl Walther USA, LLC, a Delaware limited
liability company ("Carl Walther") and Smith & Wesson Corp., a Delaware
corporation ("S&W"). Individually, Carl Walther and S&W are each a "Member," and
collectively they are the "Members".

                                   BACKGROUND

                                    ARTICLE I

                                   DEFINITIONS

                  The terms set forth below shall have the following meanings:

                  "ACT" means the Delaware Limited Liability Company Act, as
amended, or any successor statute.

                  "ADDITIONAL CAPITAL" shall have the meaning ascribed to such
term in SECTION 4.4.

                  "ADJUSTED BOOK VALUE PER UNIT" means the most recently
attainable book value of the Company divided by the aggregate outstanding Units.

                  "AFFILIATE", means, with respect to any person, any individual
related by birth or marriage to such person, or any person controlling,
controlled by or under common control with such person; "control" and forms of
the word means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a person, whether through
the ownership of voting securities, by contract or otherwise.

                  "AGREEMENT" means this Operating Agreement, as amended from
time to time. References to "Articles," "Sections" and subdivisions refer to
this Agreement, unless otherwise specified.

                  "BANKRUPTCY" means, with respect to any Member or the Company,
the occurrence of any one or more of the following: (i) the making by the Member
or the Company of an assignment for the benefit of creditors; (ii) the filing of
an involuntary petition seeking an adjudication of bankruptcy against such
Member or the Company under the United States Bankruptcy Code, which filing is
not dismissed within 60 days of the filing; (iii) the filing of a voluntary
petition by the Member or

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the Company under the United States Bankruptcy Code; or (iv) the entry of an
order, judgment or decree by a court of competent jurisdiction providing for the
liquidation of the assets of the Member or the Company or appointing a receiver,
trustee or other administrator of the Member's or the Company's assets which
continues in effect and unstayed for a period of 60 days.

                  "BOARD OF MANAGERS" shall be the Board of Managers described
in SECTION 8.2 and shall be the same as the "Board of Directors" defined in the
Joint Venture Agreement and shall initially be each of Wulf-H Pflaumer, Martin
Wonisch, Christopher Killoy, John A. Kelly and an independent director to be
named or any person or entity who succeeds each of them in that capacity
pursuant to the terms of the Joint Venture Agreement.

                  "BUSINESS" means to recognize the potential for increasing
sales complimentary products lines relative to the design, production, marketing
and sales of various firearms and related products and to engage in and do any
lawful act concerning any and all lawful business for which limited liability
companies may be organized according to the Delaware Limited Liability Company
Act, including all powers and purposes now and hereafter permitted by law to a
limited liability company.

                  "CAPITAL ACCOUNT" of a Member means the sum of such Member's
Capital Contributions, increased by the items of Company income and gain, and
decreased by the items of Company loss and expense, allocable to such Member and
by distributions to such Member under this Agreement, provided, however, that
reimbursement of expenses and payments of fees pursuant to SECTION 6.2, the
payment of interest on and principal of loans from Members shall not be treated
as distributions for the purposes of this definition. For purposes of
maintaining book Capital Accounts under this Agreement, the fair market value of
the property contributed by a Member shall be used for all purposes, including
calculating gains or losses on sale of Company assets, notwithstanding that
Section 704(c) of the Code may require different allocations of such items of
gain or loss for purposes of allocating taxable income and loss to the Members
for federal income tax purposes.

                  "CAPITAL CONTRIBUTION" of a Member means the amount
contributed in cash and the fair market value of any assets contributed to the
capital of the Company by the Member or by the Member's predecessor in interest,
but excluding proceeds of loans from the Member.

                  "CAPITAL PROCEEDS" means all cash received by the Company from
a Capital Transaction, plus any amount released from Reserves created out of
Capital Proceeds, less the sum of (i) all expenses paid or incurred by the
Company in connection with such Capital Transaction, (ii) amounts applied to
repayment of indebtedness, (iii) capital expenditures made from the proceeds of
such Capital

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Transaction and (iv) such additions to Reserves as the Board of Managers, may
determine to be necessary or appropriate.

                  "CAPITAL TRANSACTION" means a sale, exchange or other
disposition of Company assets for value, other than in the ordinary course of
business; or the borrowing of money by the Company, including a refinancing of
indebtedness of the Company.

                  "CERTIFICATE OF FORMATION" means the Certificate of Formation
of the Company as filed with the Delaware Department of State, Division of
Corporations, as the same has and may be amended from time to time.

                  "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.

                  "COMPANY" means WALTHER USA, LLC, a Delaware limited liability
company, formed pursuant to the Certificate of Formation and this Agreement and
referred to as "New Company" in Section 2 of the Joint Venture Agreement.

                  "COMPANY ASSETS" means all property, real or personal,
tangible or intangible, owned of record or beneficially, by the Company.

                  "CONFIDENTIAL INFORMATION" shall have the meaning ascribed to
such term in the Joint Venture Agreement.

                  "COOPERATION PERIOD" shall have the meaning ascribed to such
term in SECTION 9.3.

                  "ELIGIBLE PERSON" shall have the meaning ascribed to such term
in SECTION 9.2(A).

                  "INTEREST" means a Member's membership interests in the
Company, including, without limitation, a Member's right to vote such percentage
interest as provided for in SECTION 4. An Interest may be represented by a
percentage. An Interest may be divided into an interest in proceeds. The initial
percentage allocations of Interests are shown in SECTION 4 and are subject to
change from time to time under the terms of this Agreement.

                  "JOINT VENTURE AGREEMENT" shall mean the Agreement between
Smith & Wesson Corp., Carl Walther USA, LLC and Umarex Sportwaffen, GmbH., dated
October 26, 1999.

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                  "MEMBER" or "MEMBERS" means each of the parties whose names
appear in the first paragraph of this Agreement and each of the parties who may
hereafter become admitted as a Member under SECTION 10.2.

                  "MEMBERSHIP INTEREST" means a Member's entire interest in the
Company, and in the property, assets, capital and Business thereof, along with
such Member's right to participate in the affairs of the Company.

                  "OFFICERS" means, initially, each of the persons so designated
in the Joint Operating Agreement, and such successors as may be elected or
nominated pursuant thereto.

                  "OPERATING RECEIPTS" means all cash received by the Company in
the ordinary course of its business (exclusive of Capital Contributions and
proceeds of loans), plus any amount released from Reserves created out of
Operating Receipts, less the sum of (i) all expenses paid or incurred by the
Company (exclusive of depreciation and other non-cash expenses), (ii) repayment
of principal of loans, (iii) capital expenditures made in the ordinary course of
business (except to the extent paid with proceeds of Capital Contributions or
loans or from Reserves) and (iv) such additions to Reserves as the Board of
Managers, may deem to be necessary or appropriate. Operating Receipts shall not
include Capital Proceeds nor be reduced by expenses incurred in connection with
Capital Transactions.

                  "PERCENTAGE INTEREST" means, as to each Member, such Member's
percentage ownership of all Units outstanding at that time.

                  "RESERVES" means, for any fiscal period, amounts set aside or
allocated during such period as reserves for working capital, taxes, insurance,
debt service, or other costs or current or projected expenses incident to the
ownership or operation of the Company's business, which amounts shall be
reasonably determined by the Board of Managers.

                  "TRANSFER" means, with respect to an Interest, any sale, gift,
assignment, distribution, conveyance, pledge, hypothecation, encumbrance or
other transfer of title or beneficial interest therein, voluntary or
involuntary, whether by operation of law or otherwise, and whether or not for
value.

                  "UNITS" means a unit representing a portion of the aggregate
Membership Interests of all Members. As of the date hereof, the aggregate
outstanding Units of the Company are 50% with Carl Walther and 50% with S&W.
Each Member's Units shall be recorded on the books of the Company.

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                                   ARTICLE II
                            FORMATION OF THE COMPANY

                  Section 2.1 FORMATION.

                  The parties hereto shall continue the Company which was formed
pursuant to the Act. The Board of Managers shall promptly prepare and see to the
execution, filing and recording in the appropriate public offices of any
amendment to the Certificate of Formation required under the Act and shall do
all other things required for the perfection of the Company as a limited
liability company and the qualification of the Company to do business as a
foreign limited liability company in any jurisdiction as may be necessary or
appropriate.

                  Section 2.2. NAME.

                  The business of the Company shall be conducted under the name
Walther USA, LLC or under such other name as the Members may determine upon
advice of counsel or under such assumed name as the Members may select in
accordance with the Act.

                  Section 2.3. PRINCIPAL PLACE OF BUSINESS.

                  The principal place of business of the Company is 2100
Roosevelt Avenue, 01102 Springfield Massachusetts. The Company may change the
principal office or have offices at such other place or places as the Board of
Managers may decide with the approval of the Board of Managers.

                  Section 2.4. REGISTERED OFFICE AND REGISTERED AGENT.

                  The registered agent and registered office of the Company in
the State of Delaware are the Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801. The Board of Managers may, within its sole and
unrestricted discretion, change any registered office or registered agent of the
Company.

                  Section 2.5. DURATION.

                  The Company shall continue perpetually, unless the Company is
earlier dissolved in accordance with the provisions of this Agreement or the
Act.

                  Section 2.6. INTENTION OF THE PARTIES.

                  It is understood that this Agreement is intended to implement
and be interpreted consistent with the terms and conditions of the Joint Venture
Agreement. The Company is and shall be a limited liability company and governed
by the limited liability statutes of the State of Delaware instead of having the
corporate form as set

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forth in the Joint Venture Agreement. It was and continues to be the intent of
the Parties that issues such as taxes, distributions, profits, losses, capital
accounts or contributions are intended to be shared on a 50/50 basis between S&W
and Carl Walther.

                                   ARTICLE III
                                    PURPOSES

                  The Company is organized for the purpose of engaging in the
Business, and the Company shall not engage in any activities unrelated to the
Business.

                                   ARTICLE IV
                    CAPITAL CONTRIBUTIONS AND RELATED MATTERS

                  Section 4.1. MEMBERS' INITIAL CAPITAL CONTRIBUTIONS.

                  MEMBERS' INITIAL CAPITAL CONTRIBUTIONS. The Members hereby
agree to and do make the Capital Contributions to the Company in amounts and to
the extent provided below. Each Member will have an opening Capital Account
equal to the amount set forth below. In consideration of the foregoing Capital
Contributions, the Members shall receive Interests as provided below and the
voting percentage attached thereto, shall be as indicated in the column marked
"Interests".
<TABLE>
<CAPTION>
         Member                     Contribution     Interest      Units
         ------                     ------------     --------      -----
         <S>                        <C>              <C>           <C>
         Carl Walther......         $50,000          50%           25,000
         S&W...............         $50,000          50%           25,000
</TABLE>

                  Section 4.2. CAPITAL ACCOUNTS.

                  A separate Capital Account shall be maintained for each Member
by the Company. Except as otherwise required in this Agreement or the Act.

                  Section 4.3. RETURN OF MEMBERS' CONTRIBUTIONS TO CAPITAL.

                  No Member shall be entitled to demand or receive assets of the
Company or an apportionment thereof. A Member only has the right to receive cash
from the Company strictly in accordance with the terms of this Agreement or the
Joint Venture Agreement. No Member shall be entitled to interest on its Capital
Contribution or to demand return or withdrawal of such Member's Capital
Contribution.

                  Section 4.4. ADDITIONAL CAPITAL CONTRIBUTIONS.

                  In addition to the Members' initial Capital Contributions, if
at any time Walther and S&W unanimously agree that the Company requires
additional capital,

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the Board of Managers shall call for such additional capital by written notice
to all holders of Interests, informing them of the total amount of additional
capital ("ADDITIONAL CAPITAL") being raised. Each holder of an Interest shall be
required to deliver his Percentage Interest of the Additional Capital to the
Company within 15 days after such notice is given or made to such holder. If any
such holder fails to contribute all or any part of such holder's Percentage
Interest within the 15 day period described above, any or all of the other
holders of Interests may advance all or part of such defaulting holder's
Percentage Interest, in proportion to such contributing holder's Units in the
event of an oversubscription for the defaulted amount. Upon completion of the
capital raise, if any such holder failed to contribute its Percentage Interest
thereof and another holder or holders did so, then the Units of the
non-contributing holder shall be reduced by an amount equal to the dollar
deficiency of Capital Contribution of the non-contributing holder divided by the
Adjusted Book Value Per Unit (taking into account in the computation thereof the
aggregate Capital Contributions then being made by all holders of Interests).
Each such holder contributing in place of such non-contributing holder shall
have its Units increased by an amount equal to the make-up funds so contributed,
divided by the Adjusted Book Value Per Unit (similarly taking into account for
this purpose the aggregate Capital Contributions then being made by all holders
of Interests).

                  Section 4.5. LOANS BY MEMBERS.

                  Separate and apart from contributions to the capital of the
Company, a Member may make loans to the Company at any time and from time to
time as and on the terms determined by such Member and other Members holding a
majority of Units not held by the lending Member; provided that if any such loan
is agreed to, the Company shall allow all Members to participate in such loan in
proportion to their Units using any procedure which the Members determine is
fair to all Members.

                                    ARTICLE V
                                   ACCOUNTING

                  Section 5.1. FISCAL YEAR; COMPANY BOOKS.

                  The fiscal year of the Company shall end each December 31. The
books of the Company shall be kept on the basis of accounting selected by the
Board of Managers and consistent with the basis of accounting used by S&W and
Walther.

                  Section 5.2. ENGAGEMENT OF ACCOUNTANTS.

                  The Company shall engage, at the Company's expense, such
accountants as the Board of Managers shall designate to assist in the
preparation of the Company's financial statements and to prepare the Company's
income tax returns.

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                                   ARTICLE VI
                           EXPENSES AND DISTRIBUTIONS

                  Section 6.1. ORGANIZATIONAL EXPENSES.

                  Each Member shall pay all expenses incurred by such Member in
connection with the organization of the Company, without reimbursement by the
Company.

                  Section 6.2. ONGOING EXPENSES; FEES.

                  The Company shall pay all of its own expenses, including
legal, accounting and other outside fees and expenses.

                  Section 6.3. TIMING, AMOUNTS AND SOURCES OF DISTRIBUTIONS.

                  Subject to the provisions of this ARTICLE VI and ARTICLE VIII,
the Company may make cash distributions of Operating Receipts and Capital
Proceeds to the Members in such aggregate amounts and at such time or times as
the Board of Managers may propose, subject to its discretion to establish and
administer Reserves.

                  Section 6.4. DISTRIBUTIONS OF OPERATING RECEIPTS AND CAPITAL
PROCEEDS.

                  Subject to Sections 6.5 and 6.6, cash distributions from
Operating Receipts and Capital Proceeds shall be made to the holders of
Interests in proportion to their respective Percentage Interests.

                  Section 6.5. CREATION OF RESERVES.

                  The Board of Managers, shall have discretion to establish
Reserves out of Operating Receipts and Capital Proceeds as it may determine to
be necessary or appropriate for the working capital needs of the Company,
anticipated capital expenditures, Company liabilities or otherwise, and to
determine the appropriate levels of such Reserves and the timing of additions to
and disbursements from such Reserves.

                  Section 6.6. OTHER PROVISIONS REGARDING DISTRIBUTIONS.

                  No cash shall be distributed to any Member if such
distribution (i) is not permitted under the Act or otherwise, or would
constitute or result in a default, under any agreement to which the Company is a
party or to which Company assets are subject, (ii) would constitute a fraudulent
conveyance as against creditors of the Company or (iii) if the Board of
Managers, in their discretion, determine in good faith that such distribution
would not be in the best interests of the Company.

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                  Section 6.7. TAX DISTRIBUTIONS. Subject to the provisions of
SECTIONS 6.7 and 6.8, the Company shall make distributions of (other than
Proceeds resulting from a transaction which results in the dissolution of the
Company) in the Tax Distribution Amount to each Interest holder in the following
manner:

                           (i) At least five (5) days before each date
                  prescribed by the Code for individuals to pay quarterly income
                  tax, the Company shall distribute to the Interest holders an
                  amount of cash equal to the Company's Estimated Permitted Tax
                  Amount for the taxable year with respect to which such
                  distribution is made. On or before April 15 of each year, the
                  Company shall distribute to the Interest holders an amount of
                  cash equal to the difference between the Actual Permitted Tax
                  Amount for the year and the sum of all Estimated Permitted Tax
                  Amounts distributed for such year.

                           (ii) The "TAX DISTRIBUTION AMOUNT" of each Interest
                  holder is such Interest holder's share of the Permitted Tax
                  Amount, and shall be based on the manner in which taxable
                  income and loss is allocated to the Interest holders for the
                  relevant periods. Such allocations shall be determined by the
                  Board of Managers, taking into account any adjustments under
                  Code Section 704(c) and Code Section 754, to the extent
                  applicable, and other relevant facts and circumstances as in
                  the reasonable business judgment of the Board of Managers are
                  necessary or appropriate to reflect the net taxable income and
                  loss of the Company and each Interest holder therein.

                           (iii) For purposes of this SECTION 6.6:

                           (A) The Company's "PERMITTED TAX AMOUNT" for a
                  taxable period shall be the excess, if any, of the aggregate
                  federal, state, local and foreign income taxes which would be
                  payable by the Company for the period beginning on the date
                  hereof and ending at the end of such taxable period if the
                  Company were taxed as an individual at the highest marginal
                  income tax rates, federal, state, local and foreign, for such
                  period (assuming that the applicable state tax rate is the
                  rate applicable in Massachusetts and that such state tax is
                  fully deductible for federal tax purposes), over the sum of
                  the amount of any federal, state, local and foreign income
                  taxes which the Company itself is required to pay with respect
                  to such period which would be credited against the applicable
                  federal, state, local and foreign income taxes of the Interest
                  holders (it being understood that certain jurisdictions may
                  tax either or both the Company and/or the Interest holders
                  with respect to such income), and the aggregate distributions
                  previously made to the Interest holders pursuant to this
                  SECTION 6.6.

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                           (B) The Permitted Tax Amount shall be determined as
                  if an election under Section 172(b)(3) of the Code to
                  relinquish the entire carryback period with respect to a net
                  operating loss was not in effect. If the Board of Managers so
                  determines, the Permitted Tax Amount shall be determined by
                  taking into account the federal alternative minimum tax, the
                  federal environmental tax and similar taxes under federal,
                  state, local and foreign income tax laws. At the discretion of
                  the Board of Managers, penalty taxes, interest and similar
                  additions to taxes under federal, state, local or foreign
                  income tax laws, shall not be taken into account under this
                  SECTION 6.6. The Permitted Tax Amount shall be determined
                  initially by the Members on the basis of figures set forth on
                  Internal Revenue Service Form 1065 and similar state, local or
                  foreign forms filed by the Company but shall be subject to
                  subsequent adjustment pursuant to audit, litigation,
                  settlement, amended return, or the like.

                           (C) The "ESTIMATED PERMITTED TAX AMOUNT" for a
                  taxable period shall be an amount equal to the Permitted Tax
                  Amount based on the best available estimate of taxable income
                  at the time of determination.

                           (iv) Any distributions made pursuant to this SECTION
                  6.6 shall be treated as advances against distributions which
                  are otherwise payable under SECTION 6.4 and shall be taken
                  into account when subsequent distributions are made under
                  SECTION 6.4.

                                   ARTICLE VII
                   ALLOCATION OF PROFIT AND LOSS; TAX MATTERS

                  Section 7.1. ALLOCATIONS OF PROFIT AND LOSS.

                  Subject to the requirements of Section 704(c) of the Code and
SECTION 7.2, each item of income, gain, loss, deduction or credit shall be
allocated among the Members as follows:

                           (a) Losses shall be allocated in the following order
         of priority:

                           (i) If the Capital Account of any of the Members is
                  positive, then in such amounts as will reduce such positive
                  balances to zero, or if the amount of losses to be so
                  allocated is less than the sum of such positive balances, then
                  in such amounts as to cause the positive balances to be in the
                  respective amounts (or as near thereto as possible) which the
                  Members would receive pursuant to ARTICLE VI if all of the

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                  Company assets were sold for a net amount equal to the sum of
                  the Members' Capital Accounts; and

                           (ii) If the Capital Account of each of the Members is
                  either negative or zero, then all losses shall be allocated as
                  to cause the Capital Accounts of the Members to be in
                  proportion (or as near thereto as possible) to their
                  Percentage Interests.

                           (b) Income or gain of the Company shall be allocated
         in the following order of priority:

                           (i) First, if the Capital Accounts of any or all of
                  the Members are negative, then first in such amounts as will
                  increase the negative balances of the Members to zero, or if
                  the amount of income to be so allocated is less than the sum
                  of such negative balances, then in such amounts as to cause
                  the negative balances to be in the ratio (or as near thereto
                  as possible) of their respective Percentage Interests; and

                           (ii) Then, if the Capital Account of each of the
                  Members is either positive or zero, then in such amounts as
                  will cause the resulting positive balances to be in the
                  respective amounts (or as near thereto as possible) which the
                  Members would receive pursuant to ARTICLE VI if all of the
                  Company assets were sold for a net amount equal to the sum of
                  the Members' Capital Accounts.

Any portion of gain so allocated which is treated as gain from the sale of the
assets of the Company which are not capital assets by virtue of the application
of Section 1245 or 1250 of the Code, or any recapture of investment tax credits
or other tax credits previously earned by the Company, will be allocated to the
Members to whom or to whose predecessor in interest the deductions giving rise
to such ordinary income were allocated, and such recaptured tax credits shall be
allocated to the Members to whose or to whose predecessor in interest such
credits were originally allocated. The allocations in the preceding sentence
will be applied separately to each fiscal year for which the Company has
deducted depreciation to which Section 1245 or 1250 applies or has earned tax
credits.

                  Section 7.2. SECTION 704(c) ALLOCATIONS.

                  All allocations made pursuant to Section 704(c) of the Code
will be made in accordance with the traditional method with curative
allocations.

                  Section 7.3. MEMBERS' INTENTION.

                  Questions of interpretation or application of the foregoing
provisions shall be resolved by reference to the intention of the Members that
insofar as possible,

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each Member shall be allocated an amount of gain which corresponds to the amount
of losses and other tax and cash benefits flowing to such Member from the
Company.

                  Section 7.4. TAX MATTERS OFFICER.

                  _____________________________ is designated the "TAX MATTERS
OFFICER" of the Company, as defined in the Code, with all necessary authority to
act as such on behalf of the Company, subject to the prior approval of the Board
of Managers.

                                  ARTICLE VIII
                                   MANAGEMENT

                  Section 8.1. MANAGEMENT; RESPONSIBILITY.

                  The Company and its Business shall be managed and controlled
by the Board of Managers and the Officers of the Company, both, as set forth in
the Joint Venture Agreement, subject nevertheless to the reserved powers of the
Members as set forth in SECTION 8.3 and elsewhere in this Agreement. The
Officers shall be responsible for the day-to-day conduct of the Business, in
accordance with the business plan approved from time to time by the Board of
Managers, and subject to the direction and control of the Board of Managers, and
shall have such authority, power and discretion as may be delegated to it from
time to time by the Board of Managers to manage and control the Company and its
Business and to make all day-to-day decisions incidental thereto.

                  Section 8.2. BOARD OF MANAGERS.

                  The Board of Managers shall consist of representatives as
designated as the Board of Directors in the Joint Venture Agreement. Meetings of
the Board of Managers shall be conducted as specified in the Joint Venture
Agreement, and additional meetings may be called by the Board of Managers or by
any representative then serving on the Board of Managers upon notice to all
representatives and may be held in person or by conference telephone call in
which all participants in such call are able to speak to and hear each other,
provided that at least two representatives appointed by Carl Walther and two
representatives appointed by S&W participate in such meeting.

                  Section 8.3. MATTERS RESERVED TO THE MEMBERS.

                  The unanimous written agreement of the Members shall be
required to approve any of the following matters:

                  (a) Admission of additional Members;

                                       12
<PAGE>   16
                  (b) Raising capital;

                  (c) Any change in the Company's Business;

                  (d) Amendment of this Operating Agreement;

                  (e) Any merger, consolidation or dissolution of the Company;

                  (f) Any sale or other disposition of assets of the Company,
         outside the ordinary course;

                  (g) Any acquisition of assets by the Company outside the
         ordinary course; or

                  (h) Any contract or agreement by the Company with a Member or
         any Affiliate of a Member;

                  (i) Any loans made by the Company to any person or entity.

                  Section 8.4. OFFICERS.

                  The Officers of the Company shall be as designated in the
Joint Venture Agreement.

                  Section 8.5. MEETINGS OF MEMBERS.

                  (a) Regular meetings of the Members shall be held at least
annually and may be held on such dates and at such times and at such location as
shall be determined by the Board of Managers with at least ten (10) days advance
written notice thereof being provided to all Members.

                  (b) Special meetings of the Members may be called by the Board
of Managers or by Members who in the aggregate hold at least fifty percent (50%)
of the Interests. Any such meeting shall be held on such date and at such place
within 50 miles of the principal office of the Company as person(s) calling such
meeting shall specify in the notice of a meeting, which shall be delivered to
all Members at least five (5) days prior to such meeting; provided, Members may
attend by teleconferencing. Neither the business to be transacted at, nor the
purpose of, such special meeting need be specified in the notice (or waiver of
notice) of such meeting. All Members receiving notice of a meeting shall use
their best efforts to attend the meeting.

                  (c) Holders of a majority of all Units held by Members
(represented either in person, by conference telephone or by written proxy)
shall constitute a quorum for the transaction of business at any meeting of the
Members.

                                       13
<PAGE>   17
                  (d) Each Member, with respect to any vote, consent, or
approval that such Member is entitled to cast or grant pursuant to this
Agreement, may cast, grant or withhold such vote, consent or approval in its
sole and absolute discretion, with or without cause, and subject to such
conditions as it shall deem appropriate.

                  (e) Whenever the vote of Members is required or permitted
to be taken in connection with any action, in lieu of such vote at a meeting,
the action to be authorized or adopted may be authorized or adopted by the
written consent of Members having not less than the percentage of Interests
required to approve such action if a meeting were held, so long as prompt notice
of the adoption of an action or measure by written consent shall be transmitted
to all Members not a party to such consent.

                  Section 8.6. RECORDS OF LLC INTERESTS.

                  The Company shall maintain at its office referred to in
SECTION 2.4, a record of all holders of Interests and transfers thereof. No
transfer of Membership Interests or other Interests shall be made unless such
transfer is made in accordance with ARTICLE X.

                  Section 8.7. BANK ACCOUNTS.

                  The Board of Managers may from time to time open bank accounts
in the name of the Company, and the Board of Managers, subject to the Board of
Managers, shall approve who shall be signatories thereon.

                                   ARTICLE IX
                      LIABILITIES AND RESTRICTIVE COVENANTS

                  Section 9.1. Liability Board of Managers' Representatives.

                  The representatives of the Members serving on the Board of
Managers shall be liable to the Members for their gross negligence or willful
misconduct, but such persons shall not be liable for errors in judgment or for
any acts or omissions that do not constitute gross negligence or willful
misconduct if done in good faith and otherwise in accordance with the terms of
this Operating Agreement. The Members shall look solely to the Company for the
return of their Capital Contributions, and if the assets of the Company
remaining after payment or discharge of the debts and liabilities of the Company
are Insufficient to return such Capital Contributions, the Members shall have no
recourse against the representatives of the Members serving on the Board of
Managers for such purpose except as herein provided. The doing of any act or the
failure to do any act by the representatives of the Members serving on the Board
of Managers, the effect of which may cause or result in loss or damage to the
Company, if done pursuant to the professional opinion of independent advisors

                                       14
<PAGE>   18
employed by Board of Managers on behalf of the Company, shall be presumed not to
constitute gross negligence or willful misconduct on the part of the Board of
Managers.

                  Section 9.2. INDEMNIFICATION OF THE MEMBERS.

                  The Company shall:

                           (a) indemnify, to the fullest extent permitted by the
         Act, any Member, any member of the Board of Managers ("ELIGIBLE
         PERSON") who was or is a party or is threatened to be made a party to
         any threatened, pending or completed claim, action, suit or proceeding,
         whether civil, criminal, administrative or investigative (other than an
         action by or in the right of the Company) by reason of the fact that
         such person is or was a Member, member of the Board of Managers of the
         Company, or is or was serving at the request of the Company as a
         director or officer of another corporation against expenses (including
         attorney's fees), judgments, fines and amounts paid in settlement
         actually and reasonably incurred by such person in connection with such
         claim, action, suit or proceeding if such person acted in good faith
         and in a manner such person reasonably believed to be in or not opposed
         to the best interests of the Company, and, with respect to any criminal
         action or proceeding, had no reasonable cause to believe such person's
         conduct was unlawful. The termination of any action, suit or proceeding
         by judgment, order, settlement, conviction, or upon a plea of nolo
         contendere or its equivalent, shall not, of itself, create a
         presumption that the person did not act in good faith and in a manner
         which such person reasonably believed to be in or not opposed to the
         best interests of the Company, and, with respect to any criminal action
         or proceeding, had reasonable cause to believe that such person's
         conduct was unlawful; and

                           (b) indemnify any Eligible Person who was or is a
         party or is threatened to be made a party to any threatened, pending or
         completed action or suit by or in the right of the Company to procure a
         judgment in its favor by reason of the fact that such person is or was
         a Member, member of the Board of Managers of the Company, or is or was
         serving at the request of the Company as a director or officer of
         another corporation against expenses (including attorney's fees)
         actually and reasonably incurred by such person in connection with the
         defense or settlement of such action or suit if such person acted in
         good faith and in a manner such person reasonably believed to be in or
         not opposed to the best interests of the Company and except that no
         indemnification shall be made in respect of any claim, issue or matter
         as to which such person shall have been adjudged to be liable to the
         Company unless and only to the extent that the court in which such
         action or suit was brought shall determine upon application that
         despite the adjudication of

                                       15
<PAGE>   19
         liability such person is fairly and reasonably entitled to indemnity
         for such expenses as the court shall deem proper; and

                           (c) indemnify any Eligible Person against expenses
         (including attorneys' fees) actually and reasonably incurred by such
         Eligible Person, to the extent that such Eligible Person is his or its
         capacity as Member, member of the Board of Managers of the Company has
         been successful on the merits or otherwise in defense of any action,
         suit or proceeding referred to in this SECTION 9.2 in defense of any
         claim, issue or matter therein; and

                           (d) pay in advance expenses incurred by any Eligible
         Person in defending a civil or criminal action, suit or proceeding in
         advance of the final disposition of such action, suit or proceeding
         upon receipt of an undertaking by or on behalf of such Eligible Person
         to repay such amount if it shall ultimately be determined that such
         Eligible Person is not entitled to be indemnified by the Company as
         authorized in this SECTION 9.2; and

                           (e) not deem the indemnification and advancement of
         expenses provided by, or granted pursuant to, the foregoing to be
         exclusive of any other rights to which the Eligible Person(s) seeking
         indemnification or advancement of expenses may be entitled under any
         agreement, vote of the Members or otherwise, both as to action in such
         Eligible Person's official capacity and as to action in another
         capacity while holding such position; and

                           (f) have power to purchase and maintain insurance on
         behalf of any person who is or was a Member, member of the Board of
         Managers of the Company, or is or was serving at the request of the
         Company as a director or officer of another corporation against any
         liability asserted against such person and incurred by such person in
         any such capacity, or arising out of such person's status as such,
         whether or not the Company would have the power to indemnify such
         person against such liability under the provisions of this SECTION 9.2;
         and

                           (g) deem the provisions of this SECTION 9.2 to be a
         contract between the Company and each Eligible Person, at any time
         while this SECTION 9.2 is in effect and any repeal or modification of
         this SECTION 9.2 shall not affect any rights or obligations then
         existing with respect to any state of facts then or theretofore
         existing or any action, suit or proceeding theretofore or thereafter
         brought or threatened based in whole or in part upon such state of
         facts.

                  Section 9.3 COOPERATION COVENANT.

                  Each Member agrees that for the period during which it is a
Member (the "COOPERATION PERIOD"), it shall duly and actively pursue, on behalf
of the

                                       16
<PAGE>   20
Company, opportunities and activities on behalf of and related to the Business
of the Company, as detailed in the Joint Venture Agreement to enable all parties
to that Joint Venture Agreement to benefit from the intentions thereof. Nothing
herein shall prevent any Member from continuing, its own business activities as
previously conducted.

                  Section 9.4. NON-SOLICITATION COVENANT.

                  Other than activities related to the Business, during the
Cooperation Period, neither a Member nor its Affiliates shall, directly or
indirectly, individually or on behalf of any person (a) solicit, aid or induce
any employee of any other Member to leave in order to accept employment with or
render services for the Member, its Affiliates or any other person or (b) aid or
induce any current, previous or prospective customer, client, vendor, lender,
supplier or sales representative not to establish a relationship with the
Company or to discontinue such relationship or reduce the amount of business
done with the Company.

                  Section 9.5. CONFIDENTIAL INFORMATION COVENANT.

                  Each Member acknowledges and agrees that it may be in
possession of Confidential Information (as defined in the Joint Venture
Agreement) relating to the Business. During the Cooperation Period and at all
times thereafter, each Member will hold the Confidential Information in the
strictest confidence and will not disclose to any person or make use of
(directly or indirectly) the Confidential Information or any portion thereof on
behalf of themselves or any third party, except as required by the order of any
court or similar tribunal or any other governmental body or agency of
appropriate jurisdiction; provided, that such Member shall, to the extent
practicable, give the Company prior notice of any such disclosure and shall
cooperate with the Company in obtaining a protective order or such similar
protection as the Company may deem appropriate to preserve the confidential
nature of such information. The foregoing obligations to maintain the
Confidential Information shall not apply to any Confidential Information which
(i) is or, without any action by a Member, becomes generally available to the
public or (ii) was known by such Member on a nonconfidential basis prior to its
disclosure by the Company.

                  Section 9.6. SCOPE OF RESTRICTION.

                  The parities have attempted to limit to scope of the
restrictive covenants set forth in SECTIONS 9.3, 9.4 and 9.5 to the extent
necessary to assure the Company the benefit of its ownership of the Business.
The parties recognize, however, that reasonable people may differ in making such
determination. Consequently, the parties hereby agree that if the scope or
duration of such covenants would, but for this provision, be deemed by a court
of competent authority to be unreasonable or otherwise unenforceable, such court
may modify such covenants to

                                       17
<PAGE>   21
the extent that such court determines to be necessary in order to grant
enforcement thereof as so modified.

                  Section 9.7. REMEDIES.

                  The Members recognize that the Company will suffer irreparable
injury in the event of a breach of the terms of SECTIONS 9.3 through 9.5 by the
Members. In the event of a breach of the terms of SECTIONS 9.3 through 9.5, the
Company shall be entitled, in addition to any other remedies and damages
available and without proof of monetary or immediate damage, to a temporary
and/or permanent injunction, without bond, to restrain the violation of SECTIONS
9.3 through 9.5 by the Members, and any persons acting for or in concert with a
Member.

                                    ARTICLE X
                    TRANSFERS; ADMISSIONS; ADDITIONAL MEMBERS

                  Section 10.1. TRANSFER GENERALLY.

                  Transfer of units, is controlled by the provisions in the
Joint Venture Agreement, provided however, no Member shall sell, dispose or
otherwise transfer its Membership Interest in a manner which violates any
federal or state securities laws. Each Member shall indemnify and hold the
Company harmless from and against all liability, costs and expenses, including,
reasonable attorneys' fees incurred by the Company, as a result of a breach of
the covenants made in this SECTION 10.1 by such Member.

                  Section 10.2. ADDITIONAL MEMBERS.

                  Subject to the unanimous written approval by Carl Walther and
S&W, the Members shall have the right and authority to admit new Members and
issue or sell Membership Interests in amounts and on such terms as the Members
deem advisable. If the Company contemplates issuing Membership Interests to a
Member of to an Affiliate of a Member, then such Membership Interests first
shall be offered to all of the Members in accordance with their respective
Interest percentages.

                                   ARTICLE XI
                    DISSOLUTION, TERMINATION AND SALE RIGHTS

                  Section 11.1. DISSOLUTION.

                  The Company shall be dissolved upon the occurrence of any of
the following events:

                           (i) The expiration of the period fixed for the
         duration of the Company in ARTICLE II above, if any;

                                       18
<PAGE>   22
                           (ii) By the unanimous written agreement of the
         Members;

                           (iii) The sale or other disposition of all or
         substantially all of the Company assets; or

                           (iv) Upon the occurrence of the death or Bankruptcy
         of any Member or any other event which terminates the continued
         membership of a Member in the Company, unless (x) there is at least one
         continuing Member and (y) all continuing Members elect to continue the
         Company.

                  Section 11.2. WINDING UP, LIQUIDATION AND DISTRIBUTION OF
ASSETS.

                  (a) Upon dissolution, an examination shall be made by the
Company's accountants of the accounts of the Company and of the Company's
assets, liabilities and operations, from the date of the last accounting through
the date of dissolution. The Members shall immediately proceed to wind up the
affairs of the Company.

                  (b) If the Company is dissolved and its affairs are to be
wound up, the Members shall:

                  (i) Sell or otherwise liquidate all of the Company's assets
         (except to the extent the Members may determine to distribute any
         assets to the Members in kind) in a reasonable manner and time designed
         to maximize the value of such assets and avoid lower prices because of
         a forced sale;

                  (ii) Allocate any profit or loss resulting from such sales to
         the Members' Capital Accounts in accordance with Article VII hereof;

                  (iii) Discharge all liabilities of the Company, including
         liabilities to the Members who are creditors, to the extent otherwise
         permitted by law, and establish such reserves as may be reasonably
         necessary to provide for contingent liabilities of the Company; and

                  (iv) Distribute the remaining assets to the Members in
         accordance with ARTICLE VI.

                  (c) Upon completion of the winding up, liquidation and
distribution of the assets, the Company shall be deemed terminated. Within a
reasonable time after complete liquidation, each of the Members shall be
furnished with a statement prepared by the Company's accountants, which shall
set forth the assets and liabilities of the Company as at the date of
dissolution and the proceeds and expenses of the disposition thereof.

                                       19
<PAGE>   23
                  (d) The Members shall comply with all requirements of
applicable law pertaining to the winding up of the affairs of the Company and
the final distribution of its assets.

                  Section 11.3. CERTIFICATE OF DISSOLUTION.

                  When all debts, liabilities and obligations of the Company
have been paid and discharged or adequate provisions have been made therefor and
all of the remaining property and assets of the Company have been distributed, a
certificate of dissolution as required by the Act, shall be executed in
duplicate by the Members and filed with the Delaware Secretary of State.

                  Section 11.4. EFFECT OF FILING OF CERTIFICATE OF DISSOLUTION.

                  Upon the filing of certificate of dissolution with the
Delaware Secretary of State, the existence of the Company shall cease, except
for purposes of suits, other proceedings and appropriate action as provided in
the Act. The Members shall have authority to distribute any Company assets
discovered after dissolution and take such other action as may be necessary on
behalf of and in the name of the Company.

                  Section 11.5. CARL WALTHER AND S&W RIGHT OF FIRST REFUSAL.

                  Prior to the sale or other disposition of any assets of the
Company pursuant to this ARTICLE XI, each member must notify the other and
conduct such sale consistent with the provisions in the Joint Venture Agreement
with respect to the options to purchase the Company.

                  Section 11.6. SALE AND PURCHASE RIGHTS.

                           (i) In the event a Member desires to terminate its
                  relationship, such member shall conduct the sale or purchase
                  of such interests consistent with the provisions in the Joint
                  Venture Agreement.

                                   ARTICLE XII
                            MISCELLANEOUS PROVISIONS

                  Section 12.1. NOTICES.

                  Any notice, demand, or communication required or permitted to
be given by any provision of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered personally or if sent
by reputable courier or by registered or certified mail to such party at his,
her or its address of record maintained in the records of the Company. Any such
notice shall be deemed to be given when delivered or when delivery is refused.

                                       20
<PAGE>   24
                  Section 12.2. LAW GOVERNING.

                  This Agreement and its interpretation shall be governed
exclusively by the laws of the State of Delaware, without giving effect to the
laws of such state regarding conflicts of laws. Further, to the extent permitted
by law, in the event of any conflict between the provisions herein contained and
those included in the Joint Venture Agreement, the terms of the Joint Venture
Agreement shall control.

                  Section 12.3. AMENDMENTS.

                  This Agreement may only be amended in writing with the
unanimous written consent of the Members.

                  Section 12.4. SUCCESSORS AND ASSIGNS.

                  This Agreement and all the terms and provisions hereof, shall
be binding upon and inure to the benefit of the Members and, subject to the
terms of this Agreement, their legal representatives, heirs, successors and
assigns.

                  Section 12.5. COUNTERPARTS.

                  This Agreement may be executed in multiple counterparts, each
of which shall be an original, but all of which shall constitute one instrument.

                  Section 12.6. SEVERABILITY.

                  If any provision of this Agreement or the application thereof
to any person or circumstance shall be invalid, illegal or unenforceable to any
extent, the remainder of this Agreement and the application thereof shall not be
affected and shall be enforceable to the fullest extent permitted by law.

                  Section 12.7. NO THIRD PARTY BENEFICIARIES.

                  The provisions set forth herein are solely for the benefit of
the signatories hereto. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of the Company or any other
persons not signatories hereto, subject to SECTION 11.4.

                  Section 12.8. CONSTRUCTION.

                  The parties agree that this Operating Agreement shall be
construed equally against each party and shall not be more harshly construed
against a party by reason of the fact that a particular party's counsel may have
prepared this Operating Agreement.

                                       21
<PAGE>   25
                  IN WITNESS WHEREOF, the parties hereto have caused their
signatures to be set forth below on the day and year first above written.

                                        CARL WALTER, USA LLC

                                          /s/ [signature not legible]
                                        ----------------------------------------

                                        SMITH & WESSON CORPORATION

                                          /s/ John A. Kelly
                                        ----------------------------------------<PAGE>   1
                                                                    EXHIBIT 10.5

                          UMAREX SPORTWAFFEN GmbH K.G.

                           TRADEMARK LICENSE AGREEMENT

This Agreement, effective as of July 1, 2000, by and between UMAREX SPORTWAFFEN,
GmbH K.G., a corporation having its principal office at Donnerfeld 2, 59757,
Arnsberg, Germany (hereinafter called "Licensor") and GUTMANN CUTLERY, INC., a
corporation having its principal office at 1821 Valencia Street, Bellingham,
Washington 98226 (hereinafter called "Licensee"). In consideration of the mutual
promises herein contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by Licensor and Licensee, the
parties agree as follows:

1.       Definitions

         As used in this Agreement, the following terms shall have the following
         meanings:

         a.       "Marks" shall mean those trademark(s) identified in Exhibit A
                  attached hereto, and also any trade dress of Licensor's
                  products and all of the Licensor's rights in such Marks
                  including, without limitation, common law rights, and
                  registrations and applications for registration of any such
                  Marks in any state, federal or other jurisdiction.

         b.       "Licensed Articles" shall mean the articles of merchandise
                  listed in Exhibit B, attached hereto and marked with one or
                  more of the Marks.

         c.       "Net Sales Price" shall be the invoiced price at which
                  Licensed Articles are sold or provided by Licensee, less any
                  sales tax, and less any credits for returns actually made or
                  allowances in lieu of returns, provided that such returns
                  and/or allowances relate to sales which were previously
                  included in royalty calculations under this Agreement and less
                  trade discounts and/or retailer promotional programs. The Net
                  Sales Price on account of sales, giveaways, or other
                  transactions, without charge or at discounted prices, and
                  sales to any person directly or indirectly related to or
                  affiliated with Licensee shall be computed based on regular
                  selling prices to the trade. There shall be no deduction from
                  the Net Sale Price on which royalties are due hereunder for
                  uncollectable accounts, advertising expenses or other expenses
                  of any kind except those specifically identified in this
                  Section.

         d.       "Licensed Territory" is the geographic area identified in
                  Section 2(a) of this Agreement.
<PAGE>   2
         e.       "Minimum Guaranteed Royalty" shall have the meaning set forth
                  in Section 3(a) of this Agreement.

         f.       "Contract Year" and "First Contract Year" shall have the
                  meanings given those respective terms set forth in Section
                  2(c) of this Agreement.

         g.       "Dollars" and all references to "royalties", "taxes",
                  "credits", as well as any and all other monetary values set
                  forth herein shall refer to or be computed in U.S. Dollars.

2.       Grant of License, Term, Licensee's Duties

         a.       Licensor hereby grants to Licensee an exclusive, indivisible,
                  license, without the right to sublicense, to use the Marks in
                  connection with the manufacture and sale of Licensed Articles
                  only in Canada and the United States and its possessions.
                  Licensee shall not use, or permit the use of, the Marks with
                  any other product or territory, except as specifically
                  provided in this Agreement. Other than the specific license
                  grants set forth in this Agreement, the intellectual property
                  of the Parties shall remain the property of its respective
                  owners.

         b.       An annual marketing plan must be submitted by Licensee to
                  Licensor for its approval, along with brand statement and
                  strategy. A minimum of two percent (2%) of gross annual sales
                  revenue from the Licensed Articles is to be spent per year by
                  Licensee for promotional activities including marketing, trade
                  advertising and other advertising and public relations
                  expenditures.

         c.       The term of this Agreement shall be for the period beginning
                  July 1, 2000 through December 31, 2005, unless sooner
                  terminated. A new Agreement may be negotiated during the last
                  Contract Year by the parties. A party's determination not to
                  renew this Agreement may be effected without cause. Each
                  period set forth below is referred to as a "Contract Year":
<TABLE>
                  <S>                        <C>
                  First Contract Year        July 1, 2000 through December 31, 2001

                  Second Contract Year       January 1, 2002 through December 31, 2002

                  Third Contract Year        January 1, 2003 through December 31, 2003

                  Fourth Contract Year       January 1, 2004 through December 31, 2004

                  Fifth Contract Year        January 1, 2005 through December 31, 2005
</TABLE>

                                       2
<PAGE>   3
         d.       Licensee shall use its best efforts to promote the sale of
                  Licensed Articles in the Territory and shall maintain
                  resources and a sales force sufficient and adequate to
                  accomplish Licensee's obligations hereunder.

         e.       Licensee shall make available to Licensor or its designated
                  agent(s) any Licensed Article on the most favorable terms and
                  conditions offered by Licensee for that Licensed Article.

3.       Royalties and Payment, Minimum Guaranteed Royalty, Reporting

         a.       Licensee shall pay Licensor a One Thousand Dollar ($1,000.00)
                  non-refundable fee on signature. In addition, Licensee shall
                  pay to Licensor a minimum royalty ("Minimum Guaranteed
                  Royalty") for each Contract Year, or portion thereof, until
                  changed by mutual written agreement of the parties. For the
                  First Contract Year, the Minimum Guaranteed Royalty shall be
                  Six Thousand Dollars ($6,000) payable quarterly in four (4)
                  equal quarterly installments commencing April 15, 2001. For
                  each Contract Year thereafter, the Minimum Guaranteed Royalty
                  shall be Six Thousand Dollars ($6,000) and shall be paid in
                  four equal quarterly installments on the dates on which each
                  royalty payment is due in accordance with the terms set forth
                  herein.

         b.       Licensee shall pay Licensor a royalty equal to the greater of
                  the Minimum Guaranteed Royalty or five (5%) percent of the Net
                  Sales Price at wholesale of all Licensed Articles sold,
                  distributed or otherwise provided by Licensee during or after
                  the term of this Agreement. Payments and schedules shall be
                  made in accordance with the terms set forth hereinafter.

         c.       On or before the fifteenth day of the first month of each
                  calendar quarter beginning October 1, 2000, Licensee shall
                  furnish to Licensor full and accurate statements, certified by
                  the Chief Financial Officer of Licensee, showing the number,
                  description, total Net Sales Prices and gross revenue of the
                  Licensed Articles sold, distributed or otherwise provided by
                  the Licensee during the preceding calendar quarter. Licensee
                  shall, simultaneously with such statements, pay to Licensor
                  the royalty due thereon. Licensee may credit against any such
                  royalty payment any Minimum Guaranteed Royalty payment made by
                  Licensee contemporaneously with such quarterly statement. Any
                  Minimum Guaranteed Royalty paid for any Contract Year shall
                  not be refunded to Licensee. On or before the first day of the
                  fourth month following the end of each Contract Year, Licensee
                  shall furnish to Licensor a statement certified by the Chief
                  Financial Officer of Licensee showing total sales of Licensed
                  Articles, gross revenues

                                       3
<PAGE>   4
                  therefrom as well as royalties and royalties paid for the
                  preceding Contract Year. If such statement discloses that the
                  amount of royalties paid during any period to which such
                  statement relates were less than the amount required to be
                  paid, Licensee shall pay such deficiency concurrently with the
                  delivery of the statement. The quarterly and yearly statements
                  shall each show in detail all calculations used in the
                  computation of royalties. All payments and statements made
                  hereunder shall be made exclusively to Licensor's agent, Smith
                  & Wesson Corp. at

                           Smith & Wesson Corp.
                           2100 Roosevelt Avenue
                           Springfield, MA 01102
                           Attn.: J. Steele, Director of Licensing

         d.       For purposes of this Agreement, a Licensed Article shall be
                  considered sold or provided when such Article has been
                  shipped, distributed, paid for, billed or invoiced, whichever
                  first occurs.

         e.       Any delinquent amounts under this Agreement shall bear simple
                  interest at the rate of 1.5 percent per month, or if lower,
                  the highest rate permitted by Massachusetts law, from the due
                  date thereof until paid.

4.       Protection of Marks

         a.       Licensee acknowledges Licensor's exclusive right, title and
                  interest in and to the Marks, both at common law and under
                  applicable laws in the United States and all other
                  jurisdictions, and will not, either directly or indirectly, at
                  any time, do anything to discredit, encumber or diminish any
                  part of such right, title or interest or challenge the
                  validity of this License. Licensee agrees that its use of the
                  Marks will inure entirely to the benefit of Licensor. Licensee
                  shall assist Licensor, to the extent necessary or appropriate,
                  upon request by Licensor, in the procurement of any protection
                  of Licensor's rights in the Marks. Upon Licensor's request
                  from time-to-time, Licensee shall provide Licensor with six
                  (6) specimens of any Mark used on Licensed Articles and
                  whatever other documentation or information may be requested
                  by Licensor for the registration of any Mark in any category
                  into which the Licensed Articles fall.

         b.       Licensee shall use the Marks only in the form and manner and
                  with appropriate legends as prescribed from time-to-time by
                  Licensor, and shall not use any other trademark or service
                  mark in combination with any Mark without prior written
                  approval of Licensor. In any written material, including the
                  packaging, advertising materials, catalogs,

                                       4
<PAGE>   5
                  brochures and the like associated with the Licensed Articles,
                  in addition to the "(R)" symbol displayed adjacent to the
                  Mark, as appropriate, Licensee shall use the following legend
                  at least once in each such document: "Licensed Trademark of
                  UMAREX SPORTWAFFEN, GmbH K.G."

         c.       Licensee recognizes that the Walther name, all trade dress and
                  associated marks are world famous and that, even if not
                  registered in any country, the unauthorized use thereof would
                  seriously dilute the distinctiveness of such name, trade dress
                  and the associated marks and would irreparably harm the
                  Licensor.

         d.       Licensee shall immediately notify Licensor, in writing, of any
                  infringements or third party imitations of any Mark or other
                  act of a third party which may concern the Mark(s), of which
                  Licensee becomes aware. Licensor shall have the sole right to
                  determine whether or not any action shall be taken on account
                  of such infringements or imitations. Licensee shall not
                  institute any suit or take any action on account of any such
                  infringements or imitations without first obtaining the
                  written consent of Licensor.

         e.       Licensor shall undertake to apply for and obtain registration,
                  in its name and at its own expense, of any of the Marks in
                  association with the Licensed Articles in any country in which
                  Licensee may request and as deemed by Licensor to be necessary
                  or appropriate to protect the Marks and the goodwill
                  associated therewith.

5.       Assignment of Marks

         If Licensee shall acquire by act or operation of law by deed or
         operation of law any rights in the marks in any country, Licensee shall
         notify Licensor and immediately assign such rights to Licensor,
         together with any goodwill that may have inured to the benefit of the
         Licensee. Licensee shall not permit any other person to use any of the
         Marks without Licensor's prior written consent, and shall cause any
         manufacturer or other person involved in the production, promotion,
         sale or provision of Licensed Articles to agree to assign to Licensor
         any rights in any Mark acquired by such manufacturer or other person.

6.       Indemnification

         a.       Licensee shall at all times during and after the term of this
                  Agreement, and to the fullest extent permitted by law,
                  indemnify, defend and hold harmless Licensor and Licensor's
                  parents, successors, assigns, franchisees, subsidiaries,
                  affiliates, licensing agents and distributors,

                                       5
<PAGE>   6
                  and the present and former directors, officers, agents and
                  employees of each of the foregoing entities, from and against
                  any and all damages, demands, claims, suits, actions,
                  investigations, administrative proceedings, charges, costs and
                  expenses, including, without limitation, attorneys fees and
                  court costs, settlement amounts, judgments, compensation for
                  damages to Licensor's reputation and any losses of any nature
                  which arise out of or are based on the following:

                  (1)      Any actual or alleged design defect, manufacturing
                           defect, failure to warn or instruct, breach of
                           contract, breach of express or implied warranty,
                           unfair or deceptive trade practices, failure to pay
                           rightful claims, negligence, strict liability in
                           tort, or under any other legal theory associated in
                           any way with the Licensed Articles;

                  (2)      The infringement, alleged infringement or any other
                           violation or alleged violation of any patent,
                           trademark, trade dress or copyright rights or other
                           proprietary rights owned or controlled by third
                           parties by reason of the manufacture, use,
                           advertising, sale, service, distribution or provision
                           of the Licensed Articles;

                  (3)      The violation, or alleged violation of any federal,
                           state or local law or law of any jurisdiction, or of
                           any regulation, ruling, standard or directive, or of
                           any industry standard with respect to or applicable
                           to the Licensed Articles;

                  (4)      Any insolvency or bankruptcy on the part of the
                           Licensee any act of government or nature which causes
                           any discontinuation of the business of Licensee or
                           any forfeiture, change or discontinuation of full or
                           partial control of Licensee or a Sublicensee;

                  (5)      Licensee's breach of any warranty, covenant,
                           representation, agreement or obligation hereunder;

                  (6)      Any sets of omissions of Licensee or its agents,
                           servants or contractors with respect to the
                           manufacture, promotion, provision, sale, or servicing
                           of Licensed Articles or use of the Marks by Licensee;
                           or

                  (7)      Any other acts or omissions of Licensee or agents,
                           servants or contractors thereof.

         b.       Licensee shall promptly give Licensor notice of any action,
                  suit, proceeding, claim, demand, inquiry or investigation
                  relating to the

                                       6
<PAGE>   7
                  Marks or Licensed Articles. Licensor may, at its sole option,
                  elect to undertake the defense of any such action, suit,
                  proceeding, claim, demand, inquiry or investigation, provided
                  that such an undertaking by Licensor shall not diminish
                  Licensee's obligation hereunder to indemnify Licensor and to
                  hold it harmless. All losses and expenses incurred under this
                  Section shall be chargeable to Licensee pursuant to its
                  obligations to indemnify under this Section, regardless of any
                  actions, activity or defense undertaken by Licensor or the
                  subsequent success or failure of such actions, activity or
                  defense.

         c.       Licensor assumes no liability whatsoever for the acts or
                  omissions of Licensee or any of those with whom Licensee may
                  contract for the promotion, manufacture, distribution, sale or
                  provision, or servicing of Licensed Articles notwithstanding
                  any prior consent by Licensor to such contract.

7.       Insurance

         Licensee shall maintain, throughout the term of this Agreement, at its
         own expense, liability insurance from a U.S. insurance company with a
         Moody's rating of "Baa" or higher, with such liability coverages and
         limits as are acceptable to Licensor, including insurance against
         claims from bodily injury, property damage and with a limit of
         insurance of at least one million U.S. dollars ($1,000,000) per
         occurrence. Such policies shall name Licensor as an additional insured
         and shall provide that Licensor shall receive at least thirty (30) days
         prior written notice of intent to cancel, alter or amend such policy.
         The "other insurance" clause, if any, shall be deleted from such policy
         with respect to the coverage furnished to Licensor under such policy
         and shall have no application to any insurance maintained by Licensor.
         The insurance coverage secured by Licensee shall be primary with
         respect to Licensor, and other insurance in force with respect to
         Licensor shall be neither primary nor contributing. Licensee shall
         provide Licensor, within thirty (30) days after the execution of this
         Agreement and upon Licensor's request from time-to-time thereafter,
         with certificates or other evidence of insurance required by this
         Section. Licensee shall keep all insurance coverages required by this
         Agreement in full force and effect for a period of three (3) years
         after the termination of this Agreement.

8.       Quality of Licensed Articles

         a.       Licensee agrees, represents and warrants to Licensor, that all
                  Licensed Articles shall be state-of-the-art, of high safety
                  and structural standards, of such style, appearance, quality
                  and consistency as shall be suitable for distribution and
                  satisfactory for consumer usage, and otherwise merchantable
                  and fit for the purposes for which they are intended to be

                                       7
<PAGE>   8
                  used. At least thirty (30) days before manufacturing or
                  promoting, and again before distributing, selling or providing
                  any Licensed Article, and upon Licensor's request from
                  time-to-time, Licensee shall submit to Licensor, for its
                  written approval, not to be unreasonably withheld, samples of
                  Mark usage or description of each Licensed Article together
                  with any labeling, packaging, or promotion material and
                  literature in respect of which such Licensed Article is to be
                  marketed, distributed or sold. The number of samples to be
                  furnished by Licensee shall be such reasonable number as
                  Licensor may from time-to-time request. All samples shall be
                  provided without charge to Licensor. No Licensed Article shall
                  be distributed, sold or provided pursuant to this Agreement
                  until Licensee has obtained Licensor's written approval of the
                  samples submitted. It is understood, however, that failure of
                  the Licensor to provide Licensee with written approval or
                  rejection of the samples submitted within twenty (20) business
                  days of the Licensor's receipt of such samples shall be deemed
                  to constitute approval on the part of the Licensor of such
                  samples.

         b.       All Licensed Articles shall be of the same quality and
                  workmanship as the approved sample, and in the manufacture and
                  provision thereof, Licensee shall cause to be used
                  state-of-the-art manufacturing processes, techniques and
                  quality control procedures in order to ensure that the
                  Licensed Articles will consistently comply with the highest
                  product quality standards. Under no circumstances shall
                  Licensee sell, distribute, give away or otherwise deal or
                  cause to have sold, distributed, given away or otherwise dealt
                  Licensed Articles that are seconds or sub-standard, that bear
                  a distortion of the Marks or that otherwise do not comply with
                  this Agreement.

         c.       Licensee shall consistently distinguish the Licensed Articles
                  from other products and services manufactured, distributed or
                  sold by Licensee and shall avoid any confusing similarity
                  between such other products and services and the Licensed
                  Articles. Licensee shall take such actions as are necessary to
                  maintain the Licensed Articles as separate and distinct lines
                  of styling, design and merchandising from any other product
                  and service manufactured, sold or provided by Licensee.

         d.       Licensee shall, no later than ninety (90) days before the
                  expiration of any Contract Year, furnish Licensor a statement
                  showing the number and description of Licensed Articles in
                  inventory and in process.

9.       Compliance with Government, Regulations, Industry Standards and Product
         Testing

                                       8
<PAGE>   9
         Licensee agrees that the manufacture, distribution and sale of the
         Licensed Articles will conform at all times to all applicable federal,
         state and local laws, regulations, industry standards, ordinances and
         other enactments, including, without limitation, those relating to
         product safety in all countries into which the Licensed Articles are
         shipped.

10.      Promotional Material

         Licensee shall not use the Marks or any reproduction thereof in any
         advertising, promotional or display material without Licensor's prior
         written approval. Under no circumstances will promotional materials or
         programs be used by Licensee that reflect unfavorably on the Marks or
         disparage marks of third parties. All advertising, display or
         promotional copy utilizing or in any way connected with the Marks,
         shall carry a notice that the Marks are the property of Licensor, and
         at least six (6) copies of such advertising, display or promotional
         copy shall be submitted to Licensor for prior written approval, not to
         be unreasonably withheld, at least thirty (30) days in advance of
         production and upon Licensor's request from time-to-time thereafter.
         Any approval granted by Licensor under this Section will extend only to
         Licensee's use of the Marks. It is understood, however, that failure of
         the Licensor to provide Licensee with written approval or rejection of
         the copies submitted within twenty (20) business days of the Licensor's
         receipt of such copies shall be deemed to constitute approval on the
         part of the Licensor of such copies. Licensor shall not be liable for
         content or accuracy of such advertising, promotional or display
         material nor for infringement of patents, copyrights, trademarks, or
         any other proprietary rights owned, used, or controlled by third
         parties, by reason of Licensee's promotional activities.

11.      Records

         a.       Licensee shall keep accurate books of account and records
                  covering all transactions relating to the license herein
                  granted. Licensor and its duly authorized independent
                  accountants or other representatives shall, from time-to-time,
                  have the right at reasonable times upon Licensor's prior
                  written request of at least thirty (30) business days to
                  examine such books of account and records and other documents
                  and material in Licensee's possession or under its control
                  with respect to Licensee's activities in connection with this
                  Agreement, and such persons shall have free and full access
                  for such purposes and may make copies thereof or extracts
                  therefrom. Licensee shall keep all such records available to
                  Licensor for at least three (3) years after expiration or
                  termination of this Agreement. Licensee will designate a
                  symbol or number which will be used exclusively in connection
                  with the Licensed Articles and with no other articles or
                  services which Licensee may manufacture, sell or distribute,
                  and that duplicates of all billings by

                                       9
<PAGE>   10
                  Licensee to its customers with respect to Licensed Articles
                  shall be kept by Licensee for inspection as is herein
                  provided. Information on Licensee's sources of supply shall be
                  exempt from examination of records.

         b.       If any audit by Licensor shall reveal a shortfall of royalties
                  paid by Licensee against royalties actually due in accordance
                  with this Agreement, Licensee shall within fifteen (15) days
                  make payment to Licensor of such shortfall, plus simple
                  interest at the rate of 1.5 percent per month or if lower, the
                  highest rate permitted by Massachusetts law, for the period of
                  such shortfall. In addition, if such audit shall reveal a
                  shortfall of more than five percent (5%) of royalties due,
                  Licensee shall reimburse Licensor for the services of its
                  accountant and for any other expenses of Licensor incident
                  thereto including, without limitation, any attorneys' fees and
                  costs of collection.

12.      Termination

Licensee may terminate this Agreement without cause by written notice to the
Licensor 90 days prior to the conclusion of the First Contract Year. In addition
to any other rights which Licensor may otherwise have, Licensor may terminate
this Agreement at any time, immediately upon written notice;

         a.       If within six (6) months from the date of this Agreement,
                  Licensee shall not have begun the bona fide design,
                  specification and/or concluded contracts for production,
                  distribution or sale of the Licensed Articles; or

         b.       If Licensee shall, after said written notice, fail for a
                  period in excess of three (3) consecutive months to continue
                  the bona fide design, specification, distribution or sale of
                  the Licensed Articles; or

         c.       If Licensee shall fail to make any payment due hereunder or to
                  deliver any of the statements required hereunder, and if such
                  default shall continue for a period of fifteen (15) days after
                  notice of such default by Licensor to Licensee or if such a
                  failure shall occur twice in any consecutive 12-month period
                  even if both failures are corrected as provided hereunder; or

         d.       If Licensee or its property:

                  (1)      Becomes subject to a receiver or trustee; or

                  (2)      Becomes insolvent; or

                                       10
<PAGE>   11
                  (3)      Becomes subject to an involuntary or voluntary
                           petition under National Bankruptcy Laws; or

                  (4)      Makes an assignment for the benefit of its creditors;
                           or

         e.       If there is any deliberate deficiency in the Licensee's
                  reporting which affects royalties or gross revenue or any
                  other aspect of this Agreement; or

         f.       If any warranty, representation or covenant made by Licensee
                  hereunder, or any information provided by Licensee as to
                  Licensee, its principals or agents or to product quality or
                  safety is false or misleading; or

         g.       If Licensee fails to comply with any term or condition of this
                  Agreement, other than those specifically set forth in clauses
                  (a) through (f) above, and such non-compliance continues
                  beyond a period of fifteen (15) days after notice thereof is
                  given by the Licensor.

         Any termination by Licensor shall be without prejudice to any of
         Licensor's other rights or remedies. Forbearance on the part of
         Licensor in exercising any of its rights hereunder or as otherwise
         provided by law shall not be construed to be a waiver of those rights.

13.      Effect of Termination

         a.       After expiration or other termination of this Agreement,
                  Licensee shall have no further right to manufacture,
                  distribute, sell, exploit, provide, render or otherwise deal
                  in any Licensed Articles which utilize the Marks, except that
                  Licensee may dispose of Licensed Articles which are on hand or
                  in process or to be provided at the time of expiration or
                  termination so long as (a) Licensee reports, in writing, to
                  Licensor, no later than thirty (30) days after termination of
                  this Agreement, the total number of Licensed Articles which
                  will be disposed of; (b) the sale or provision thereof is
                  completed within six months; (c) all payments when due are
                  made to Licensor; (d) such disposal or provision of Licensed
                  Articles shall be in accordance with the terms of this
                  Agreement; and (e) statements and royalty and gross revenue
                  share payments with respect to that period are made by
                  Licensee in accordance with Section 3. Notwithstanding the
                  foregoing, in the event this Agreement is terminated pursuant
                  to Sections 12(c), 12(d), 12(e), 12(f), or 12(g), Licensee
                  shall not dispose of or provide any Licensed Articles which
                  are on hand, in process or to be provided at the time of
                  termination in association with the Marks. A final statement
                  and payment shall be made by Licensee within fifteen (15) days
                  after the

                                       11
<PAGE>   12
                  end of such six-month period. Upon expiration of such 6-month
                  period herein, all molds, plates, prints and other materials
                  used to reproduce the Marks for the manufacture or provision
                  of the Licensed Articles and related advertising shall be
                  destroyed and evidence of such destruction shall be given to
                  the Licensor.

         b.       In the event this Agreement expires or is otherwise terminated
                  for any reason, Licensee shall, and hereby does agree to
                  assign to Licensor any and all rights of Licensee in the
                  Marks, including associated goodwill, and the designs, trade
                  dress and styles of the Licensed Articles to the extent such
                  design or styles contain or employ any of the Marks, and shall
                  not thereafter market, manufacture or sell any such designs or
                  styles or use the Marks in any manner in connection with any
                  provided services.

         c.       Except as provided in subsection (a) of this paragraph, upon
                  the expiration or termination of this Agreement, Licensee
                  shall immediately cease all further use of the Marks and any
                  names, trademarks, trade dress, characters, symbols, designs,
                  likenesses or visual representations as might be likely to
                  cause confusion or deceive purchasers or prospective
                  purchasers or dilute any trade name, trademark, trade dress or
                  service mark of Licensor including, without limitation,
                  Licensor's corporate and private names, other trademarks,
                  trade dress symbols, designations, indices, slogans and other
                  means of identifying products or services of Licensor, whether
                  or not identified herein as a Mark.

         d.       Licensee agrees that the Marks are distinctive and possess
                  special, unique and extraordinary characteristics which make
                  difficult the assessment of the monetary damages that Licensor
                  would sustain by unauthorized use. Licensee recognizes that
                  irreparable injury would be caused to Licensor by any
                  unauthorized use of the Marks and agrees that preliminary
                  and/or permanent injunctive and other equitable relief would
                  be appropriate in the event of a breach of this Agreement by
                  Licensee provided, however, that such remedy shall not be
                  exclusive of other legal remedies otherwise available.

         e.       Licensee's obligations and agreements set forth in Sections 3
                  through 11, 13, 14, 17, 19 and 20 shall survive any
                  termination or expiration of this Agreement.

14.      Notices:

                                       12
<PAGE>   13
         All notices and statements to be given hereunder shall be, in writing,
         any such notice or statement shall be deemed duly given if mailed by
         certified mail, return receipt requested, if to Licensor, at:

                  UMAREX SPORTWAFFEN, GmbH K.G.
                  c/o SMITH & WESSON CORP.
                  2100 Roosevelt Avenue
                  Springfield, MA 01102

                                            Attention: John Steele

and if to Licensee, at:

                  GUTMANN CUTLERY, INC.
                  1821 Valencia Street
                  Bellingham, WA 98226

                                            Attention: Shiraz Balolia

15.      No Joint Venture

         Nothing in this Agreement shall be construed to place the parties in
         the relationship of partners or joint ventures, and Licensee shall have
         no power to bind Licensor in any manner whatsoever. This Agreement
         shall not be construed as anything other than a trademark license
         between Licensor and Licensee.

16.      Cancellation

         Licensee acknowledges that Licensor and its subsidiaries, affiliates
         and franchisees use the Marks to advance and promote Licensor's
         business, and that Licensor has a paramount obligation to preserve its
         ability to so use such Marks. Should the use by Licensee of any Mark on
         Licensed Articles be deemed by Licensor in its discretion to be in
         violation of any federal, state or local law or to adversely affect the
         reputation of Licensor or affect the validity, enforceability or
         distinctiveness of the Mark as a designation of origin for Licensor's
         own products, then Licensor may terminate this Agreement on ninety (90)
         days notice to Licensee.

17.      Assignments, Transfers and Sublicenses

         Without the prior written consent of Licensor, which may be withheld in
         Licensor's sole and reasonable discretion (a) Licensee shall not
         voluntarily or by operation of law, assign or transfer this Agreement
         or any of Licensee's rights or duties hereunder or any interest of
         Licensee herein, except to a third

                                       13
<PAGE>   14
         party which is controlled by Licensee, or is associated therewith by
         common ownership, nor shall Licensee enter into any sublicense for use
         of the Marks by other persons otherwise than as contemplated by this
         Agreement; and (b) Licensee shall not sell or otherwise transmit or
         transfer to any party engaged in the design or manufacture of items
         similar to any of the Licensed Articles, any design, style, know-how,
         technology or other item or knowledge of a technical or competitive
         nature, furnished to Licensee by or through Licensor. Any transfer or
         attempt to transfer of this license to any entity in which the present
         directors of Licensee do not have voting control shall be deemed an
         assignment prohibited hereunder. The consent of Licensor to one
         assignment, transfer or sublicense shall not be deemed to be consent to
         any subsequent assignment, transfer or sublicense. Nothing provided
         herein shall limit Licensor's right to transfer and/or assign any of
         its rights hereunder.

18.      Scope and Modification

         This Agreement sets forth the entire agreement between the parties, and
         supersedes all prior agreements and understandings between the parties,
         relating to the subject matter hereof. None of the terms of this
         Agreement may be waived or modified except as expressly agreed, in
         writing, by both parties.

19.      Severability

         Should any provision of this Agreement be declared void or
         unenforceable, the validity of the remaining provisions shall not be
         affected thereby.

20.      Governing Laws, Jurisdiction and Venue for Suit

         a.       This Agreement shall be made in the Commonwealth of
                  Massachusetts and its terms shall be interpreted in accordance
                  with and governed by the laws thereof.

         b.       Any suit, action or other proceeding brought by Licensee which
                  stems from or relates to the subject matter of this Agreement
                  shall be limited to an action brought in U.S. District Court
                  in Springfield, Massachusetts, USA.

         c.       Licensee hereby waives any and all right to assert a defense
                  based on jurisdiction and/or venue for an action by Licensor
                  brought in U.S. District Court in Springfield, Massachusetts,
                  USA which stems from or relates to the subject matter of this
                  Agreement.

                                       14
<PAGE>   15
<TABLE>
<CAPTION>
<S>                                          <C>
                                             LICENSOR:

Witnessed By:                                UMAREX SPORTWAFFEN, GMBH & CO., KG

  /s/ [signature not legible]                By:    /s/ [signature not legible]
-----------------------------------             --------------------------------------------
                                             (Title)  President
                                                    ----------------------------------------
                                             Date:  August 23, 2000
                                                  ------------------------------------------

                                             LICENSEE:

Witnessed By:                                GUTMANN CUTLERY, INC.,

    /s/ [signature not legible]              By:    /s/ [signature not legible]
-----------------------------------             --------------------------------------------
                                             (Title)  President
                                                    ----------------------------------------
                                             Date:  July 10, 2000
                                                  ------------------------------------------
</TABLE>

                                       15
<PAGE>   16
                          EXHIBIT "A" - LICENSED MARKS

WALTHER - as seen in U.S. Registration Nos. 1120867 and 0303701
<PAGE>   17
                          EXHIBIT B - LICENSED ARTICLES

Knives
Binoculars
Spotting Scopes
Night-Vision Scopes
Bore Sights, Specifically excludes Rifle and Handgun Sight Scopes.
Shooting Safety Glasses and Bookends.
<PAGE>   18
                        UMAREX Sportwaffen GmbH & Co. KG

                    AMENDMENT TO TRADEMARK LICENSE AGREEMENT

This Amendment, effective as of March 14, 2001, by and between UMAREX
Sportwaffen GmbH & Co. KG, a corporation having its principal office at
Donnerfeld 2, 59757, Arnsberg, Germany (hereinafter called "Licensor") and
GUTMANN CUTLERY, INC., a corporation having its principal office at 1821
Valencia Street, Bellingham, Washington 98226 (hereinafter called "Licensee").

Whereas, the above parties have signed a TRADEMARK LICENSE AGREEMENT having an
effective date of July 1, 2000 (hereinafter "the Trademark Agreement").

Whereas, the parties desire to modify the Trademark Agreement.

In consideration of the mutual promises herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Licensor and Licensee, the parties agree to supplement the
Trademark Agreement as follows:

1.       Modification of Exhibit B

         The "Licensed Articles" as listed in Exhibit B of the Trademark
Agreement shall include "Tool Kits", "Socket Sets", "Wrenches", "Wrench Sets",
"Allen Key Sets", "Screwdriver Sets", "Gunsmithing Tools", "Pliers" and "Hearing
Protection".

         A copy of the modified Exhibit B is attached to this Amendment.

2.       Scope

This Amendment, together with the Trademark Agreement, sets forth the entire
agreement between the parties, and supersedes all prior agreements and
understandings between the parties, relating to the subject matter hereof. None
of the terms of this Amendment or the Trademark Agreement may be waived or
modified except as expressly agreed, in writing, by both parties.
<PAGE>   19
The parties acknowledge that no other term or provision of the Trademark
Agreement has been modified by this Amendment.
<TABLE>
<CAPTION>
<S>                                          <C>
                                             LICENSOR:

Witnessed By:                                UMAREX SPORTWAFFEN, GMBH & CO., KG

                                             By:    /s/ [signature not legible]
--------------------------------------          ---------------------------------------------------
                                             (Title)  President
                                                    -----------------------------------------------
                                             Date:  03.14.01
                                                  -------------------------------------------------

                                             LICENSEE:

Witnessed By:                                GUTMANN CUTLERY, INC.,

    /s/ [signature not legible]              By:    /s/ [signature not legible]
--------------------------------------       ------------------------------------------------------
                                             (Title)  President
                                                    -----------------------------------------------
                                             Date:  March 8, 2001
                                                  -------------------------------------------------
</TABLE>

                                       2
<PAGE>   20
                        EXHIBIT B - LICENSED ARTICLES
              (As modified by this Amendment dated March 14, 2001)

Knives
Binoculars
Spotting Scopes
Night-Vision Scopes
Bore Sights, Specifically excludes Rifle and Handgun Sight Scopes
Shooting Safety Glasses and Bookends
Tool Kits
Socket Sets
Wrenches
Wrench Sets
Allen Key Sets
Screwdriver Sets
Gunsmithing Tools
Pliers
Hearing Protection

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