A Twin Falls gun shop that went to federal court to keep the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives from stripping its gun license has reached a tentative settlement agreement.

Attorneys on both sides told U.S. District Court Judge Mikel H. Williams on Wednesday that they had likely agreed on how to end the case. The agreement was reached after a day-long settlement conference, said U.S. Assistant Attorney Deborah Ferguson.

"It means that Red's (Trading Post) will be going forward in cooperation with the ATF," said Mark Geston, a Boise attorney representing Red's Trading Post. "Everybody decided to try to cooperate. And now we are literally on the same page."

Geston stopped short of saying the agreement would mean that Red's gets to keep its gun dealing license.

But he said, "That's the intent: That it should continue in its present line of business."

To say that Red's will simply continue selling guns as usual does not match the terms of the agreement, Ferguson said.

"Crucial factors would be missing from that statement," she said.

Ferguson said the agreement reached Wednesday would be formal within 10 days.

A necessary step before the deal becomes final is the ATF signing off on the deal, Ferguson said.

"I think the terms and conditions are mutually satisfying," Ferguson said. "I think it's a win-win. It has not been approved by ATF."

Ryan Horsley, manager of Red's Trading Post, declined comment.

The ATF linked 10 or more guns used in crimes to Red's. The number of incidents triggered an agency field inspection in 2000, an ATF official said.

Terry and Ryan Horsley, who run Red's, asked the federal court last year to review their case after the ATF revoked their license. The ATF contended the revocation was needed because the shop had repeatedly violated gun sales rules.

A 2005 audit uncovered several instances where store workers failed to alert police after a multiple-gun sale.

Horsley and his employees lost track of guns, neglected to warn police about potentially suspicious activity and lacked safeguards with some of its sales - even after promising the federal government to institute greater caution.

But the Horsleys said they had been targeted by the federal agency and that most of the errors were clerical in nature, such as abbreviating the words "yes" and "no" with their first letters, "y" and "n," on gun sale documentation. They further argued the ATF had failed to provide them enough training to meet compliance.

The Associated Press contributed to this report.

Cassidy Friedman can be reached at 208-735-3241 or cfriedman@magicvalley.com