1092796--7/1/2010--SMITH_&_WESSON_HOLDING

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{customer, product, revenue}

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{property, intellectual, protect}

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The weakness of demand for our hunting products is adversely affecting our overall results. We remain dependent on the sale of our firearm products in the sporting goods distribution channel. From time to time, we have been capacity constrained in our firearm business. Our agreement with Walther could be terminated. Our Springfield, Massachusetts facility is critical to our success. We rely heavily on third parties that act on our behalf. We face risks associated with government contracts. We could be subject to suspension or debarment from government contracting. The sale of our licensed products depends on the goodwill associated with our name and brand and the success of our licensees. Our businesses could sustain losses on fixed-price contracts. Our perimeter security business may incur liabilities related to professional services. Percentage-of-completion accounting used for our perimeter security contracts can result in overstated or understated profits or losses. We may act as a general contractor for certain perimeter security projects, which will subject us to risks associated with facility construction and development activities, including cost overruns, delays, and other contingencies, which could have a material adverse effect on our business and results of operations. Our dependence on subcontractors could adversely affect us. Our perimeter security division could be adversely affected by severe weather. We may incur higher employee medical costs in the future. Insurance and bonding is expensive and may be difficult to obtain. Shortages of components and materials may delay or reduce our sales and increase our costs, thereby harming our operating results. We may be unsuccessful in achieving one or more of our goals to increase revenue, increase gross margins, and reduce operating expense ratios. We face intense competition that could result in our losing or failing to gain market share and suffering reduced revenue. Our ability to compete successfully depends on a number of factors, both within and outside our control. Our objective of becoming a global leader in the businesses of safety, security, protection, and sport may not be successful. Potential strategic alliances may not achieve their objectives, and the failure to do so could impede our growth. The successful execution of our strategy will depend in part on our ability to make successful acquisitions. Any acquisitions that we undertake in the future could be difficult to integrate, disrupt our business, dilute stockholder value, and harm our operating results. Our growth strategy may require significant additional funds, the amount of which will depend upon the size, timing, and structure of future acquisitions and our working capital and general corporate needs. The failure to manage our growth could adversely affect our operations. Our inability to protect our intellectual property or obtain the right to use intellectual property from third parties could impair our competitive advantage, reduce our revenue, and increase our costs. We may incur substantial expenses and devote management resources in prosecuting others for their unauthorized use of our intellectual property rights. We face risks associated with international currency exchange. We face risks associated with international activities. We are subject to extensive regulation. We are currently involved in numerous lawsuits. We are under investigation by the U.S. Department of Justice for potential FCPA violations. We are under investigation by the SEC for potential violation of federal securities laws. Environmental laws and regulations may impact our business. Our indebtedness could adversely affect our business and limit our ability to plan for or respond to changes in our business, and we may be unable to generate sufficient cash flow to satisfy significant debt service obligations. Under the terms of the indenture governing our senior convertible notes, we are limited in our ability to incur future indebtedness until certain conditions are met. We may not have the funds necessary to repay the senior convertible notes at maturity or purchase the notes at the option of the noteholders or upon a fundamental change as required by the indenture governing the notes. Our governing documents and Nevada law could make it more difficult for a third party to acquire us and discourage a takeover. Our stockholders rights plan may adversely affect existing stockholders. The issuance of additional common stock in the future, including shares that we may issue pursuant to option grants, may result in dilution in the net tangible book value per share of our common stock. Sale of a substantial number of shares that are eligible for sale could adversely affect the price of our common stock. If holders of our senior convertible notes elect to convert their notes and sell material amounts of our common stock in the market, such sales could cause the price of our common stock to decline, and such downward pressure on the price of our common stock may encourage short selling of our common stock by holders of our senior convertible notes or others. We may issue securities that could dilute shareholder ownership and the net tangible book value per share of our common stock. Our operating results may involve significant fluctuations.

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1092796--7/1/2010--SMITH_&_WESSON_HOLDING_CORP