<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 23, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
BRASS EAGLE INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 5091 71-0578572
(PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
(STATE OR OTHER CLASSIFICATION NUMBER) IDENTIFICATION NO.)
JURISDICTION OF
INCORPORATION OR
ORGANIZATION)
1203A NORTH SIXTH STREET
ROGERS, ARKANSAS 72756
(501) 621-4390
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
E. LYNN SCOTT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BRASS EAGLE INC.
1203A NORTH SIXTH STREET
ROGERS, ARKANSAS 72756
(501) 621-4390
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES OF COMMUNICATION TO:
PAUL B. BENHAM, III
ALAN D. ALFORD FRIDAY, ELDREDGE & CLARK
BAKER & HOSTETLER LLP 2000 FIRST COMMERCIAL BUILDING
1900 EAST 9TH STREET, SUITE 3200 400 WEST CAPITOL AVENUE
CLEVELAND, OHIO 44114-3485 LITTLE ROCK, ARKANSAS 72201-3493
(216) 627-0200 (501) 376-2011
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
AMOUNT MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE(2) PROCEEDS(2) FEE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value..... 2,616,250 $12.00 $31,395,000 $9,514
- -----------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Includes 341,250 shares subject to the exercise of the Underwriters' over-
allotment option.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a).
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 23, 1997
2,275,000 SHARES
BRASS EAGLE INC.
COMMON STOCK
All of the 2,275,000 shares of Common Stock offered hereby are being sold by
Brass Eagle Inc. ("Brass Eagle" or the "Company"). Prior to this Offering (the
"Offering"), there has been no public market for the Common Stock. It is
currently anticipated that the initial public offering price will be between
$10.00 and $12.00 per share. See "Underwriting" for information relating to the
factors to be considered in determining the initial public offering price.
Application has been made for the Common Stock to be approved for quotation on
the Nasdaq National Market under the symbol "XTRM."
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO THE
THE PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................. $ $ $
- --------------------------------------------------------------------------------
Total(3)............................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses estimated to be $610,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 341,250 additional shares of Common Stock solely to cover over-
allotments, if any. If that option is exercised in full, the Price to the
Public, Underwriting Discounts and Commissions and Proceeds to the Company
will be $ , $ , and $ , respectively. See "Underwriting."
-----------
The shares of Common Stock are offered by the Underwriters, subject to
receipt and acceptance of the shares by them. The Underwriters reserve the
right to reject any order in whole or in part. It is expected that delivery of
the shares of Common Stock will be made against payment therefor at the offices
of McDonald & Company Securities, Inc. or through the facilities of the
Depository Trust Company on or about , 1997.
MCDONALD & COMPANY DAIN BOSWORTH
SECURITIES, INC. INCORPORATED
The date of this Prospectus is , 1997.
<PAGE>
[INSERT PHOTOS HERE]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements and
related notes appearing elsewhere in this Prospectus. Unless otherwise
indicated, all share, per share, and financial information set forth herein:
(i) assumes an initial public offering price of $11.00 per share; (ii) has been
adjusted to reflect a 1,940.9-for-1 stock split in the form of a stock dividend
which will be effected prior to the Offering; (iii) gives effect to a corporate
reorganization which will take effect concurrently with the Offering; and (iv)
assumes no exercise of the Underwriters' over-allotment option.
THE COMPANY
Brass Eagle is a worldwide leader in the design, manufacture, marketing, and
distribution of paintball products, including paintball guns, paintballs, and
accessories. The Company believes it is the only manufacturer with a full line
of products that address step-by-step price points for beginner, recreational,
and competition level paintball participants. In addition, Brass Eagle is the
only manufacturer to offer paintball products to consumers through easily
accessible channels such as mass merchandisers and major sporting goods
retailers. As a result of these initiatives, Brass Eagle provides a large
consumer base with high quality paintball products and accessories that
generally sell for substantially less than those of its competitors. These
advances have significantly broadened the paintball industry's consumer base,
increased the overall number of paintball participants, and heightened the
general awareness of and excitement for the sport.
Approximately 80% of the Company's sales are to national and regional mass
merchandisers, such as Kmart, Wal*Mart, and Meijer, and major sporting goods
retailers, such as The Sports Authority, Dick's Sporting Goods, and Jumbo
Sports. Brass Eagle products are currently the only paintball products sold
through Kmart and Wal*Mart, and through most major sporting goods chains. The
Company's products are also sold through sporting goods distributors, specialty
distributors of paintball products, and paintball specialty shops.
The Company's sales have grown rapidly, from $2.6 million in 1994 to $13.8
million in 1996, a compound annual growth rate of 130.4%. This growth has
continued in 1997 with sales of $11.9 million through June 30, 1997, compared
to $4.8 million through June 30, 1996, an increase for the six month period of
147.9%. The Company believes its growth has been the result of increasing
market acceptance of paintball and, more specifically, growing consumer demand
through mass merchandisers and major sporting goods retailers for Brass Eagle
products. The Company believes significant opportunities for additional growth
exist worldwide and intends to increase paintball participation and the
Company's sales both nationally and internationally through an active growth
campaign.
The Company has developed the following growth strategies to capitalize on
its strong brand name, successful products, and operating capabilities:
. EXPAND PENETRATION OF NEW AND EXISTING MARKETS. Brass Eagle's sales and
marketing programs are aimed at increasing its presence in its existing
markets and expanding into new markets. In addition to selling to mass
merchandisers and major sporting goods retailers, the Company has a direct
sales program to reach consumers with unique, branded accessories and
apparel. It also intends to focus on increasing sales to wholesale
distributors which supply Brass Eagle products to specialty retailers and
international markets.
. INCREASE PARTICIPATION IN THE SPORT OF PAINTBALL. The Company believes that
its marketing efforts will heighten media exposure of paintball generally
and increase paintball participation. The Company promotes its brand name
and the paintball industry through focused marketing efforts such as
designing packaging and point-of-sale materials, sponsoring paintball
events, two professional paintball teams, and the National Professional
Paintball League ("NPPL"), developing fast-paced, modular field concept
games, such as HyperBall(TM), participating in trade shows, and advertising.
3
<PAGE>
. INCREASE INTERNATIONAL SALES OF PAINTBALL PRODUCTS. The Company believes
that international markets for paintball products and accessories present
significant opportunities for growth. Through its relationship with its
European distributor, WDP Ltd., the Company has been successful in expanding
its market share in Europe. Also, the Company believes that Central and
South America offer significant growth opportunities.
. INCREASE PRODUCT SALES THROUGH STEP-BY-STEP PRICE SEGMENTATION. The Company
believes that the total number of paintball guns sold in 1996 more than
doubled from 1995 to over 250,000 units worldwide (140,000 of which were
sold by the Company). Brass Eagle offers six paintball guns and has
successfully expanded the primary market for its paintball guns to price
points that range from approximately $35 to $500. The Company believes that
by offering products spanning a wide range of price points it is able to
meet the needs of new paintball consumers, as well as recreation and
competition players as they move to more sophisticated products.
. EVALUATE STRATEGIC ACQUISITIONS. The Company may, when and if the
opportunity arises, acquire other businesses involved in activities or
having product lines that are compatible with those of the Company. The
Company will evaluate acquisition opportunities as they arise and focus on
prospects that it believes complement its business and product lines.
The executive offices of the Company are located at 1203A North Sixth Street,
Rogers, Arkansas, 72756, and its telephone number is (501) 621-4390.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock outstanding prior to
the Offering(1).................. 5,031,358 shares
Common Stock offered by the Compa- 2,275,000 shares
ny(2)............................
Common Stock outstanding after the
Offering(1)(2)................... 7,306,358 shares
Use of proceeds(3)................ The Company intends to use the proceeds
from this Offering to (i) repay certain
indebtedness outstanding under Daisy's
credit facility which has been specifically
allocated to the Company, (ii) repay
certain intercompany indebtedness owed to
Daisy, and (iii) pay to Daisy the value of
its divisional equity in the Company,
representing historical retained earnings.
As of June 30, 1996, these amounts were as
follows: (i) $1.5 million, (ii)
approximately $2.7 million, and (iii)
approximately $2.3 million, respectively,
for a total of $6.5 million. The balance of
the net proceeds from the Offering will be
used for working capital to support the
planned growth of its business and for
other general corporate purposes, which may
include the investment in or acquisition of
complementary businesses. See "Use of
Proceeds."
Proposed Nasdaq National Market XTRM
Symbol...........................
</TABLE>
- --------
(1) After giving effect to a 1,940.9-for-1 stock split to be effected in the
form of a stock dividend to stockholders of record as of , 1997,
which will be effected prior to the Offering. Does not include 995,310
shares of Common Stock reserved for issuance under various stock option
plans, stock purchase agreements, and a director compensation arrangement.
See "Management--Employment Agreements," "--1997 Stock Option Plan," "--
Employee Stock Purchase Plan," "--Director Compensation," and "--Options
Granted to Certain Daisy Employees."
(2) Does not include 341,250 shares of Common Stock that may be sold by the
Company if the over-allotment option granted by the Company to the
Underwriters is exercised in full.
(3) The Company anticipates, however, that intercompany borrowings from Daisy
will increase significantly (to approximately $7.0 to $8.0 million) prior
to the consummation of this Offering due to the Company's increased working
capital needs to support sales growth, and that divisional equity will also
increase significantly (to approximately $3.5 to $4.5 million) as a result
of increased income. Consequently, the Company expects that total payments
to Daisy from the proceeds of this Offering will be approximately $12.0 to
$14.0 million.
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS SIX MONTHS
---------------------------- ENDED ENDED
1994 1995 1996 JUNE 30, 1996 JUNE 30, 1997
-------- -------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............. $ 2,615 $ 4,319 $ 13,838 $ 4,791 $ 11,905
Cost of sales......... 1,258 2,456 9,625 3,325 7,994
-------- -------- --------- -------- ---------
Gross profit.......... 1,357 1,863 4,213 1,466 3,911
Operating expenses.... 957 1,774 2,424 1,121 1,973
-------- -------- --------- -------- ---------
Operating income...... 400 89 1,789 345 1,938
Interest expense and
other, net(1)........ -- 87 360 167 123
-------- -------- --------- -------- ---------
Income before income
taxes................ 400 2 1,429 178 1,815
Provision for income
taxes................ 153 1 547 68 695
-------- -------- --------- -------- ---------
Net income............ $ 247 $ 1 $ 882 $ 110 $ 1,120
======== ======== ========= ======== =========
Net income per
share(2)............. $ 0.16 $ 0.21
Weighted average
shares
outstanding(2)....... 5,354,833 5,417,480
PRO FORMA STATEMENT OF
OPERATIONS DATA:
Net income(3)......... $ 1,315 $ 1,330
Net income per
share(2)............. $ 0.17 $ 0.17
Weighted average
shares
outstanding(2)....... 7,629,833 7,692,480
<CAPTION>
DECEMBER 31, JUNE 30, 1997
------------------- ---------------------------
AS
1995 1996 ACTUAL ADJUSTED(4)
-------- --------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (defi-
cit)................. $ (993) $ (734) $ (328) $ 19,085
Total assets.......... 6,288 9,269 12,199 28,423
Long-term debt (less
current portion)..... 3,043 1,892 1,414 414
Divisional equity(5).. 248 1,130 2,250 22,663
</TABLE>
- --------
(1) Intercompany borrowings from Daisy are non-interest bearing. See Note 9 to
Financial Statements.
(2) The net income per share and pro forma net income per share have been
calculated by dividing net income and pro forma net income by the pro forma
weighted average shares outstanding, after giving effect to the Offering
and dilutive stock options. See "Use of Proceeds" and "Reorganization."
(3) Pro forma net income has been computed by adjusting historical net income
for the year ended December 31, 1996, and the six months ended June 30,
1997, to give effect to the Offering and the application of the estimated
net proceeds therefrom as described in "Use of Proceeds" as if the Offering
had occurred on January 1, 1996, and 1997, respectively.
(4) Gives effect to the application of the proceeds from the Offering after the
deduction of the estimated expenses. See "Use of Proceeds."
(5) Divisional equity at June 30, 1997 (as adjusted) reflects stockholders'
equity after giving effect to the Offering and the application of the
proceeds therefrom.
6
<PAGE>
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, including
statements made with respect to the results of operations and businesses of the
Company. When used in this Prospectus, the words "may," "should," "believe,"
"anticipate," "estimate," "expect," "intend," "plan," and similar expressions
are intended to identify forward-looking statements. These forward-looking
statements involve certain risks and uncertainties. Factors that may cause
actual results to differ materially from those contemplated, projected,
forecast, estimated, or budgeted in such forward-looking statements include,
among others, the following possibilities: (i) intensifying competition,
including specifically the intensification of price competition, the entry of
new competitors and the introduction of new products by new and existing
competitors; (ii) failure to obtain new customers or retain existing customers;
(iii) inability to carry out marketing and sales plans; (iv) loss of key
executives; (v) general economic and business conditions which are less
favorable than expected; and (vi) unanticipated changes in industry trends.
Such forward-looking statements may be found in the "Risk Factors," "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business" sections as well as in this Prospectus
generally. Actual events or results may differ materially from those discussed
in the forward-looking statements as a result of various factors.
7
<PAGE>
RISK FACTORS
Prospective investors should take into account the following considerations,
as well as the other information set forth in this Prospectus, before
purchasing any of the shares of the Common Stock offered hereby.
RISKS ASSOCIATED WITH MARKET DEVELOPMENT; INDUSTRY AND PRODUCT CONCENTRATION
The market for paintball products has historically consisted primarily of a
relatively small consumer niche of paintball enthusiasts who purchased their
equipment through catalogue distributors and specialty retail outlets.
However, paintball has experienced rapid recent growth as participation has
increased to include a broader demographic group and as the Company has
increased its distribution of paintball products through mass merchandisers
and major sporting goods chains. The Company currently designs, manufactures,
markets, and distributes paintball products only. As a result of this industry
and product concentration and the current dependence of the industry's growth
upon the Company's efforts, the Company's future success will depend primarily
upon its ability to attract new paintball participants. There can be no
assurance that paintball will continue to grow at the rate at which it is
currently growing or that its popularity will not decline. The Company's
failure to expand the market and to accurately predict future trends could
have a material adverse effect on the Company and its prospects. See
"Business--Introduction," "--Industry Overview," and "--Products."
RISKS ASSOCIATED WITH RAPID GROWTH
The Company has experienced rapid and sustained growth since 1993, when it
commenced its paintball operations. However, there can be no assurance that
the Company will be able to implement its growth strategies in the future or
that, if implemented, such strategies will result in growth in, or maintenance
of, the Company's profitability. The Company's growth has placed significant
demands on the Company's management, working capital, and financial and
management control systems. Several members of the Company's senior management
have only recently been employed with the Company in their present capacities.
Moreover, concurrently with the Reorganization (as defined herein) the Company
will enter into an administrative services agreement with New Daisy, pursuant
to which New Daisy will agree to provide the Company with certain legal,
administrative, warehousing, shipping, and computer information services
through December 31, 1998, although the Company expects that it will terminate
this agreement with respect to most of these services prior to that date.
Effective management of future growth will require the Company (i) to plan for
and implement changes in its business as the market for paintball products
matures and (ii) to expand its operations, facilities, and internal controls
consistent with increased demand for its paintball products. Management's
inability to respond effectively to or plan for the Company's future
expansion, or encountering unexpected difficulties during expansion, could
have a material adverse effect on the Company and its prospects. See
"Corporate History," "Reorganization," "Business--Introduction," "--Industry
Overview," and "--Products," "Management--Executive Officers and Directors,"
and "Certain Transactions."
LIMITED OPERATING HISTORY
Daisy has conducted its paintball operations since 1993 through its Brass
Eagle division. The Company will not exist as a separately capitalized entity
until the consummation of the Reorganization, which is to be effected
concurrently with the Offering. Consequently, although Daisy has been in
existence for over one hundred years, the Company has a limited operating
history, all of which has been as a division of Daisy. Although the Company's
paintball operations have been profitable, there can be no assurance that the
Company will be able to continue to operate profitably as a stand-alone
business following the Reorganization. See "Corporate History" and
"Reorganization."
RISKS RELATED TO THE REORGANIZATION
Pursuant to the Reorganization, New Daisy (as defined herein) will acquire
and assume from the Company all of the Company's non-paintball related assets,
operations, and liabilities, including, without limitation, certain products
liability, employee benefits, and tax liabilities and obligations.
8
<PAGE>
For the period from July 1, 1993, to November 15, 1997, the Company has
self-insured the first $1.0 million of products liability claims exposure with
respect to each policy year included therein and maintains third party
insurance for certain excess exposure. In addition, the Company maintains
certain employee benefit plans, including an unfunded post-retirement medical
benefits plan and a defined benefit pension plan. In connection with the
Reorganization, New Daisy has agreed to indemnify the Company and its
officers, directors, employees and stockholders against all liabilities and
obligations related to the Company's non-paintball related operations,
including, without limitation (i) any products liability claim relating to any
products sold by the Company prior to the Reorganization (other than products
sold under the Brass Eagle name) and any products sold by New Daisy after the
Reorganization, and (ii) any claim by any employee or former employee of the
Company or of New Daisy to the extent that such claim relates to post-
retirement medical or pension benefits that are attributable to the employment
of any such individual in the Company's non-paintball related operations.
In addition, the Reorganization will include (i) the transfer of certain
assets and liabilities from the Company to New Daisy, and (ii) the
distribution by the Company of all of the outstanding capital stock of New
Daisy to the Company's existing stockholders in a spin-off transaction.
Although the Company does not believe that it will be required to recognize a
gain in connection with the transfer or the spin-off, there can be no
assurance that the Internal Revenue Service (the "Service") will agree with
the Company's treatment of these transactions for Federal income tax purposes.
The Company would be required to recognize gain on the transfer if and to the
extent that the value of the liabilities assumed by New Daisy exceeds the
Company's adjusted tax basis in the assets transferred, and would be required
to recognize gain on the spin-off if and to the extent that the fair market
value of the outstanding capital stock of New Daisy exceeds the Company's
adjusted tax basis in such stock. New Daisy has agreed to indemnify the
Company against all tax consequences related to the transactions contemplated
by the Reorganization.
Although the Company believes that such indemnity obligations and insurance
coverage are adequate to protect it from any material financial exposure with
respect to these risks, there can be no assurance that New Daisy will be able
to satisfy its indemnity obligations or that such insurance coverage will be
adequate or available or that the applicable insurer will be solvent at the
time of any covered loss. See "Corporate History" and "Reorganization."
DEPENDENCE ON CERTAIN CUSTOMERS
Kmart and Wal*Mart accounted for 36.0% of the Company's sales in 1996. The
Company's largest customers have significantly greater financial and
organizational resources than the Company and are generally able to exert
considerable influence over their suppliers. The Company does not have long-
term contracts with these customers or any of its other customers, and there
is no assurance that these or any other customer will continue to purchase the
Company's paintball products. Although the Company is currently the only
supplier of paintball products to Kmart and Wal*Mart, it does not have any
exclusive contractual supply rights. The loss or financial insolvency of, or a
substantial decline in purchases by, any of the Company's largest customers
individually, or a number of the Company's other customers in the aggregate,
could have a material adverse effect on the Company and its prospects. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Introduction" and "--Sales and Distribution."
DEPENDENCE ON LIMITED NUMBER OF SUPPLIERS; EXCLUSIVE ARRANGEMENTS AND
NONCOMPETITION COVENANTS
The Company is aware of only four manufacturers of the gelatin encapsulated
paintballs necessary for paintball play. The Company believes that the cost of
equipment and the knowledge required for the encapsulation process have
historically been significant barriers to the entry of additional paintball
suppliers. Accordingly, there can be no assurance that additional paintball
suppliers will exist in the future. Because the Company does not manufacture
its own paintballs, it has entered into a strategic alliance with a paintball
producer, pursuant to which the Company has agreed to serve as such producer's
exclusive worldwide paintball distributor. This agreement extends through
August 1999, but is terminable prior to that time upon one year's
9
<PAGE>
notice, and contains certain provisions which prohibit the Company from
selling any competing products during the term of the agreement. In addition,
the Company has entered into a strategic alliance with a producer of
facemasks, pursuant to which the Company has agreed to serve as such
producer's exclusive worldwide distributor of such products (except in Canada,
where such producer also sells its products). This agreement extends through
August 31, 1999, but is terminable prior to that time on six months' notice,
and also contains certain provisions which prohibit the Company from selling
any competing products within its distribution territory during the term of
the agreement. Despite these contractual arrangements, there can be no
assurance that these suppliers will continue to be able to supply sufficient
quantities of their products in order to meet the Company's current needs or
to support any growth in sales by the Company. The Company does not currently
have long-term contracts with any of its other vendors, nor does it currently
have multiple vendors for all parts, components, tooling, supplies and
services critical to its manufacturing process. The Company's supplier of
paintballs for its European sales has indicated that it wishes to terminate
its supply relationship with the Company, but has also indicated that it will
continue to supply the Company with its requirements of paintballs until an
alternative source of supply can be arranged. The Company's success will
depend, in part, on its ability to maintain relationships with its current
suppliers and on the ability of these and the Company's other suppliers to
satisfy its product requirements. Failure of a key supplier to meet the
Company's product needs on a timely basis or loss of a key supplier could have
a material adverse effect on the Company and its prospects. See "Business--
Manufacturing; Backlog."
DIFFICULTY IN FORECASTING PRODUCT DEMAND
Although the Company works closely with its customers to determine their
purchasing requirements, because of the rapid recent growth of paintball and
the relative newness of the sport, it has been difficult to forecast
accurately the demand for paintball products. Consequently, although the
Company believes that its current manufacturing facilities and access to
temporary and permanent labor are sufficient to accommodate significant surges
in production demand, as well as sustained increases in growth, there can be
no assurance that the Company's manufacturing resource planning systems will
be adequate to support product demand. The Company's failure to fulfill the
orders of its largest customers on a timely basis could have a material
adverse effect on the Company and its prospects. See "Business--Sales and
Distribution" and "--Manufacturing; Backlog."
RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS
The Company may pursue strategic acquisitions as part of its growth
strategy. Such acquisitons would require investment of operational and
financial resources and could require integration of dissimilar operations,
assimilation of new employees, diversion of management time and resources,
increases in administrative costs, potential loss of key employees of the
acquired company, and additional costs associated with debt or equity
financing. Any future acquisition by the Company could have an adverse effect
on the Company's results of operations or could result in dilution to existing
stockholders, including those purchasing shares of Common Stock in the
Offering. See "Use of Proceeds," "Business--Growth Strategies," and
"Business--Competition."
PRODUCT SAFETY AND LIABILITY
Because of the risks inherent in the use of paintball products, there is a
substantial risk that the Company will be a defendant in product liability
lawsuits and claims from time to time. As of August 31, 1997, the Company has
been named as a defendant in one lawsuit and has had three other claims made
against it by persons alleging to have been injured by its products. The
lawsuit and one of the claims were each resolved without a material adverse
effect on the Company or its prospects. The Company believes that the other
two claims will also be resolved without a material adverse effect.
Historically, paintball was played primarily by relatively experienced
enthusiasts at remote locations. The Company is currently expanding the
paintball market to a broader, less experienced group of participants, who may
participate in paintball in private yards and other less remote areas.
Although the Company stresses proper
10
<PAGE>
safety practices at all levels of play and requires in its product packaging
materials and promotional efforts that proper face, eye, and ear protection be
worn at all times, there can be no assurance that all paintball participants,
particularly less experienced ones, will observe all proper safety practices.
Failure to observe proper safety practices may result in injuries to such
participants, as well as to nearby non-participants. Consequently, the Company
anticipates that the frequency of product liability lawsuits and claims
against it may increase as its sales increase.
The Company maintains product liability, general liability, and excess
liability insurance to insure against potential claims, and believes that such
insurance and its anticipated cash flows will be adequate to cover its product
liability claims exposure. However, because of the uncertainty as to the
number of claims or the nature and extent of liability for personal injuries
and to changes in the historical or future levels of insurance coverage or the
terms or costs thereof, there can be no assurance that such insurance
coverages will be adequate or available in the future to cover product
liability claims or that the applicable insurer will be solvent at the time of
any covered loss. Moreover, even if the Company maintains adequate insurance,
any successful claim could materially and adversely affect the business,
reputation, and prospects of the Company and divert management time and
resources. See "Business--Legal Proceedings."
GOVERNMENT REGULATION
Paintball products are within the jurisdiction of the United States Consumer
Products Safety Commission (the "CPSC") and other Federal, state, local, and
foreign regulatory bodies. The CPSC has the authority under certain Federal
laws and regulations to protect consumers from hazardous goods. The CPSC may
exclude from the market goods it determines are hazardous, and may require a
manufacturer to repurchase such goods under certain circumstances. Some state,
local, and foreign governments have similar laws and regulations. If the
Company is found to have violated any such law or regulation, the sale of the
relevant products could be prohibited and the Company could be required to
repurchase such products. In addition, although the Company is not aware of
any legislation specifically targeted at paintball products, certain local and
foreign jurisdictions have enacted legislation that prohibits the sale of
certain product categories that are sufficiently broad to include paintball
guns. Although the Company is not aware of any Federal or state legislative or
regulatory initiatives to enact similar legislation or to prohibit or restrict
specifically the sale of paintball products, there can be no assurance that
such legislation will not be adopted in the future. Any such legislative
initiatives, if adopted, and any negative publicity surrounding such efforts,
whether or not adopted, could have a material adverse effect on the Company
and its prospects. See "Business--Government Regulation."
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon the management and leadership skills of the
members of its senior management team and other key personnel, including
certain members of its product development team. Several members of the
Company's senior management have only recently been employed with the Company
in their present capacities. The loss of any such personnel or the inability
to attract, retain, and motivate key personnel could have a material adverse
effect on the Company and its prospects. E. Lynn Scott, the President and
Chief Executive Officer of the Company, has entered into an employment and
noncompetition agreement with the Company that extends through the year 2000.
See "Management--Executive Officers and Directors" and "--Employment
Agreements."
DISCRETIONARY USE OF PROCEEDS
The Company intends to use the proceeds of the Offering to (i) repay certain
indebtedness outstanding under Daisy's credit facility which has been
specifically allocated to the Company, (ii) repay certain intercompany
indebtedness owed to Daisy, and (iii) pay to Daisy the value of its divisional
equity in the Company, representing historical retained earnings. The Company
anticipates that the sum of these amounts will total approximately $12.0 to
$14.0 million by the time of the consummation of the Offering. The balance of
the net proceeds from the Offering will be used for working capital to support
the planned growth of the Company's business and for
11
<PAGE>
other general corporate purposes, which may include the investment in or
acquisition of complimentary business. As a result, the Company's success will
depend substantially on the discretion and judgment of the Company's
management with respect to the application and allocation of a substantial
portion of the net proceeds of the Offering. See "Use of Proceeds."
ALLOCATION OF HISTORICAL FINANCIAL INFORMATION
Historically, Daisy and its Brass Eagle division shared operational and
administrative facilities, including management information systems. As a
result, in preparing the historical financial information included elsewhere
in this Prospectus, certain manufacturing, selling, and administrative
expenses that could not be specifically attributed to paintball operations had
to be allocated between Daisy and the Company. These allocations were based on
various factors and assumptions, including quantity of inventory produced,
quality of materials received, number of shipments, number of employees, and
amount of time spent by Daisy employees performing paintball-related
operations. Effective September 1, 1997, it was no longer necessary to
allocate certain of these costs due to the implementation of a new computer
management information services system. However, there can be no assurance
that the historical allocations accurately reflect the actual costs
attributable to the Company's operations or that these allocations are
reflective of what the Company will incur as an independent entity. See
"Summary Financial Information" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
COMPETITION
The Company believes that the market for paintball products is currently
fragmented and underdeveloped. The Company believes it faces a limited number
of competitors, particularly in the beginner and recreational segments, where
it concentrates its business, and that it has the leading market share in
paintball products. However, there can be no assurance that any number of new
competitors, some of which may have significantly greater financial and
organizational resources than the Company, will not emerge in the future as
the market for paintball products develops, or that the present competitors of
the Company will not be able to compete more successfully in the future. For
the Company to maintain or increase its market share, it must continue to
compete successfully in the design, manufacture, marketing, and distribution
of paintball products. See "--Limited Protection for Technology" and
"Business--Competition."
LIMITED PROTECTION FOR TECHNOLOGY
The Company has obtained patents for the design of certain of its paintball
gun products and will seek patent protection in the future for new products.
Nevertheless, the Company's competitors currently replicate and may continue
to replicate certain features and functions of the Company's paintball gun
products. There can be no assurance that current or future patent protection
will prevent competitors from offering competing products, that any issued
patents will be upheld, or that patent protection will be granted in any or
all of the countries in which applications are currently pending or granted on
the breadth of the description of the invention. In addition, due to
considerations relating to, among other things, cost, delay, or adverse
publicity, there can be no assurance that the Company will elect to enforce
its intellectual property rights.
The Company's competitors have also obtained and may continue to obtain
patents on certain features of their products which may prevent or discourage
the Company from offering such features on its products, which, in turn, could
result in a competitive disadvantage to the Company. There can be no assurance
that the Company's competitors will not assert against the Company claims of
intellectual property rights that relate to the Company's paintball gun
products and product features and, if asserted, that the Company will not
incur material liabilities in the future. See "Business--Intellectual
Property."
RISKS ASSOCIATED WITH INTERNATIONAL BUSINESS AND MARKET DEMAND
Although the Company currently manufactures its products only in the United
States, it distributes and sells its paintball products internationally,
principally in Europe. Although international sales only accounted for
12
<PAGE>
14.5% of the Company's sales in 1996, 82.0% of its foreign sales were to a
single distributor. Loss of the Company's relationship with this distributor
or changes in economic conditions, currency exchange rates, tariff
regulations, or other trade restrictions or political instability
("International Conditions") could adversely affect the international market
for the Company's paintball products, which in turn could have a material
adverse effect on the Company and its prospects. In addition, insufficient
international demand for the Company's paintball products, whether due to
changes in International Conditions, consumer preferences, or other factors,
could have a material adverse effect on the Company and its prospects. See
"Business--Sales and Distribution."
NO PRIOR PUBLIC MARKET; MAINTENANCE OF LISTING REQUIREMENTS AND POSSIBLE
VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock.
Although the Company will apply to have the shares listed on the Nasdaq
National Market, there can be no assurance that an active trading market will
develop or be sustained. The Nasdaq National Market has certain requirements
that must be satisfied to obtain and maintain listing status, including
certain requirements with respect to the number of market makers for, and
number of stockholders of, the Common Stock that are out of the Company's
control. Although the Company believes that it will satisfy the initial
listing requirements, there can be no assurance that it will be able to
continue to satisfy the listing maintenance requirements. Any failure by the
Company to satisfy these requirements could have a material adverse effect on
the liquidity and market price of the Common Stock.
The initial public offering price of the Common Stock offered hereby will be
determined by negotiations among the Company and the Underwriters and may not
be indicative of the market price for the Common Stock after the Offering. The
market price for shares of the Common Stock may be volatile and may fluctuate
based upon a number of factors, including, without limitation, business
performance, timing of revenues, news announcements, or changes in general
trading market conditions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Shares Eligible for Future
Sale," and "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Offering, the Company will have outstanding
7,306,358 shares of Common Stock (assuming no exercise of the Underwriters'
over-allotment option). Of these shares, all of the 2,275,000 shares sold in
the Offering will be freely transferable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act") by persons other than "affiliates" (as defined in the Securities Act) of
the Company. Future sales of substantial amounts of Common Stock (including
shares issued upon the exercise of options that may be granted pursuant to any
employee stock option or other equity plan of the Company), or the perception
that such sales could occur, could have an adverse effect on the market price
of the Common Stock. If such sales or any other factor should reduce the
market price of Common Stock, the Company's ability to raise additional
capital in the public equity markets could be adversely affected. The Company
and its directors and executive officers and certain shareholders have agreed,
subject to certain exceptions, not to sell, offer to sell, grant any option
(other than pursuant to the Company's 1997 Stock Option Plan) for the sale of,
or otherwise dispose of, any shares of Common Stock or securities convertible
into or exercisable or exchangeable for Common Stock (except for shares
offered in the Offering) for a period of 180 days after the date of this
Prospectus without the prior written consent of McDonald & Company Securities,
Inc. See "Description of Capital Stock," "Shares Eligible for Future Sale,"
and "Underwriting."
CONTROL BY PRINCIPAL STOCKHOLDER
Upon consummation of the Offering, without taking into account any dilutive
stock options, Charter Oak Partners, a Connecticut limited partnership, will
beneficially own 54.9% of the Common Stock of the Company. As a result,
Charter Oak Partners will be in a position to control the outcome of all
matters requiring stockholder approval, including the election or removal of
directors and approval of significant corporate transactions, and will have
the ability generally to direct the Company's affairs. Such concentration of
ownership may have the effect of delaying or preventing a change in control of
the Company, including transactions in which the holders of the Company's
Common Stock might otherwise receive a premium over current market prices for
their shares. See "Principal Stockholders."
13
<PAGE>
DILUTION
The initial public offering price is expected to be substantially higher
than the book value per share of the Common Stock. Investors purchasing shares
of Common Stock in the Offering will therefore incur immediate and substantial
dilution of $7.90 per share. See "Dilution."
ABSENCE OF DIVIDENDS
The Company does not expect to pay any cash dividends on shares of the
Common Stock in the foreseeable future. See "Dividend Policy."
FUTURE CAPITAL NEEDS
The Company believes that funds generated from operations, together with the
net proceeds of this Offering and borrowings under contemplated future credit
facilities, will be sufficient to meet working capital needs of the Company
for at least the next 18 months. The Company's long-term capital requirements
beyond that time will depend on many factors, including, but not limited to,
the rate at which the Company expands its business. To the extent that the
funds generated from the sources described above are insufficient to fund the
Company's activities in the short- or long-term, the Company will need to
raise additional funds through public or private financings. No assurance can
be given that additional financing will be available on terms favorable to the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
14
<PAGE>
CORPORATE HISTORY
The Company, including its predecessor organizations, has manufactured air
powered guns for over 100 years. The Company, operating under the name Daisy
Manufacturing Company, Inc. ("Daisy"), began manufacturing paintball guns as a
device to mark trees and cattle for commercial purposes in the early 1970's, a
market in which it was active until 1992. In 1993, Daisy began manufacturing,
marketing and distributing paintball products for sports and recreational use
under a royalty arrangement with Brass Eagle, Inc., a Mississauga, Ontario,
Canada, company ("BEI"). In October 1995, Daisy purchased certain assets,
patents, and trademarks, including the Brass Eagle name, from BEI (the "BEI
Acquisition"), and from 1993 to September 1997 sold paintball products through
its Brass Eagle division. In September 1997, Daisy changed its name to Brass
Eagle Inc. Pursuant to a corporate reorganization to be effected concurrently
with the Offering, the Company will transfer all of its non-paintball related
assets, operations, and liabilities to a newly created subsidiary, Daisy
Manufacturing Company, a Delaware corporation ("New Daisy"). Concurrently with
the Reorganization, the Company will enter into an administrative services
agreement with New Daisy, pursuant to which New Daisy will agree to provide
the Company with certain legal, administrative, warehousing, shipping, and
computer information services through December 31, 1998, although the Company
expects that it will terminate this agreement with respect to most of these
services prior to that date. See "Risk Factors--Limited Operating History,"
and "--Risks Related to the Reorganization," "Reorganization," and "Business--
Manufacturing; Backlog."
REORGANIZATION
Concurrently with the Offering, the Company will effect a reorganization
(the "Reorganization"), pursuant to which (i) the Company will transfer all of
its non-paintball related assets, operations, and liabilities to New Daisy,
retaining only its paintball related assets, operations, and liabilities, (ii)
the Company will then distribute all of the outstanding capital stock of New
Daisy to the Company's existing stockholders in a spin-off transaction, (iii)
all of the issued and outstanding preferred stock of the Company will be
cancelled, and (iv) New Daisy will agree to indemnify and hold harmless the
Company and its officers, directors, employees, and stockholders from and
against all liabilities and obligations related to the Company's non-paintball
related operations, including, without limitation, (A) any products liability
claim relating to any products sold by the Company prior to the Reorganization
(other than products sold under the Brass Eagle name) and any products sold by
New Daisy after the Reorganization, and (B) any claim by any employee or
former employee of the Company or of New Daisy to the extent that such claim
relates to post-retirement medical or pension benefits that are attributable
to the employment of any such individual in the Company's non-paintball
related operations. Although the Company does not believe that it will be
required to recognize a gain in connection with the transfer or the spin-off,
there can be no assurance that the Service will agree with the Company's
treatment of these transactions for Federal income tax purposes. The Company
would be required to recognize gain on the transfer if and to the extent that
the value of the liabilities assumed by New Daisy exceeds the Company's
adjusted tax basis in the assets transferred, and would be required to
recognize gain on the spin-off if and to the extent that the fair market value
of the outstanding capital stock of New Daisy exceeds the Company's adjusted
tax basis in such stock. New Daisy has agreed to indemnify the Company against
all tax consequences related to the transactions contemplated by the
Reorganization. Following the Reorganization, the Company will concentrate on
its paintball operations and New Daisy intends to continue to market airguns,
toy guns, and steel shot. See "Risk Factors--Risks Related to the
Reorganization."
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and does
not intend to pay cash dividends on its Common Stock in the foreseeable
future. The Company currently intends to reinvest its earnings, if any, in the
development and expansion of the Company's business. Any future declaration of
cash dividends will be at the discretion of the Company's Board of Directors
and will depend upon the earnings, capital requirements, and financial
position of the Company, general economic conditions, and other pertinent
factors.
15
<PAGE>
USE OF PROCEEDS
The Company intends to use the proceeds from the Offering to (i) repay
certain indebtedness outstanding under Daisy's credit facility which has been
specifically allocated to the Company, which matures in January 1998 and bears
interest at LIBOR plus 2.5%, (ii) repay certain intercompany indebtedness owed
to Daisy, and (iii) pay to Daisy the value of its divisional equity in the
Company, representing historical retained earnings. As of June 30, 1996, these
amounts were as follows (i) $1.5 million, (ii) approximately $2.7 million, and
(iii) approximately $2.3 million, respectively, for a total of $6.5 million.
The Company anticipates, however, that intercompany borrowings from Daisy
will increase significantly (to approximately $7.0 to $8.0 million) prior to
the consummation of the Offering due to the Company's increased working
capital needs to support sales growth, and that divisional equity will also
increase significantly (to approximately $3.5 to $4.5 million) as a result of
increased income. Consequently, the Company expects that total payments to
Daisy from the proceeds of the Offering will be approximately $12.0 to $14.0
million. The balance of the net proceeds from the Offering will be used for
working capital to support the planned growth of its business and for other
general corporate purposes, which may include the investment in or acquisition
of complementary businesses.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997, and as adjusted to reflect the sale by the Company of 2,275,000
shares of Common Stock offered hereby, after the deduction of the estimated
expenses of the Offering, assuming an initial public offering price of $11.00
per share (the mid-point of the estimated initial public offering price
range), and the application of the net proceeds therefrom as described under
"Use of Proceeds." The information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Conditions
and Results of Operations" and the financial statements and the related notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------
ACTUAL AS ADJUSTED(1)
------ --------------
(DOLLARS
IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current maturities of long-term debt................... $1,358 $858
Intercompany debt...................................... 2,689 --
------ -------
$4,047 $858
====== =======
Long-term debt, less current maturities(2)............... $1,414 $414
------ -------
Stockholders' equity:
Common Stock, $.01 par value, 10,000,000 shares
authorized;
7,306,358 issued and outstanding(3) .................. -- 73
Additional paid-in capital............................. -- 22,590
Retained earnings...................................... -- --
Divisional equity...................................... 2,250 --
------ -------
Total stockholders' equity............................. 2,250 22,663
------ -------
Total capitalization................................. $3,664 $23,077
====== =======
</TABLE>
- --------
(1) Gives effect to the application of the proceeds from the Offering after
the deduction of the estimated expenses. See "Use of Proceeds."
(2) See Note 5 to Financial Statements for information regarding the Company's
long-term indebtedness.
(3) Does not include 995,310 shares of the Common Stock reserved for issuance
under various stock option plans, stock purchase agreements, and director
compensation arrangements and 341,250 shares of Common Stock which the
Underwriters may purchase pursuant to the over-allotment option. See
"Management--Employment Agreements," "--1997 Stock Option Plan," "--
Employee Stock Purchase Plan," "--Director Compensation," and "--Options
Granted to Certain Daisy Employees."
16
<PAGE>
DILUTION
The net tangible book value of the Company as of June 30, 1997, was
approximately $2.25 million, or $.45 per share of Common Stock. Net tangible
book value per share represents the Company's total tangible assets less its
total liabilities divided by the number of shares of Common Stock outstanding.
After giving effect to the sale by the Company of 2,275,000 shares of Common
Stock in the Offering and the application of the net proceeds therefrom, the
pro forma net tangible book value of the Company as of June 30, 1997, would
have been approximately $22.66 million, or $3.10 per share. This represents an
immediate net tangible book value dilution of $7.90 per share to investors
purchasing shares in the Offering. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $11.00
------
Net tangible book value at June 30, 1997.................... $0.45
-----
Increase attributable to new investors in the Offering...... $2.65
-----
Pro forma net tangible book value per share after the
Offering(1).................................................. $ 3.10
------
Dilution per share to new investors........................... $ 7.90
======
</TABLE>
The following table summarizes on a pro forma basis as of June 30, 1997, the
difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid, and the average price per share paid by
the existing stockholders of the Company ("Existing Stockholders") and the
investors purchasing shares in the Offering ("New Investors").
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ----------------------------------
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders(2).. 5,031,358 68.87% $12,129,240 32.65% $ 2.41
New Investors............. 2,275,000 31.13 25,025,000 67.35 11.00
</TABLE>
- -------
(1) After deducting estimated underwriting discount and estimated expenses of
the Offering payable by the Company.
(2) Does not include 995,310 shares of the Common Stock reserved for issuance
under various stock option plans, stock purchase agreements, and director
compensation arrangements and 341,250 shares of Common Stock which the
Underwriters may purchase pursuant to the over-allotment option. See
"Management--Employment Agreements," "--1997 Stock Option Plan," "--
Employee Stock Purchase Plan," "--Director Compensation," and "--Options
Granted to Certain Daisy Employees."
17
<PAGE>
SELECTED FINANCIAL DATA
The following table presents selected historical financial data of the
Company. The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements and notes thereto included
elsewhere in this Prospectus. The statement of operations data set forth below
for each of the three years ended December 31, 1996, and the six months ended
June 30, 1997, and the balance sheet data at December 31, 1996, and 1995, and
June 30, 1997 are derived from, and are qualified by reference to, the audited
financial statements included elsewhere in this Prospectus, and should be read
in conjunction with those financial statements and the notes thereto. The
statement of operations data set forth below for the six months ended June 30,
1996, and the balance sheet data at June 30, 1996, are derived from unaudited
consolidated financial statements not included in this Prospectus.
The historical financial information may not be indicative of the Company's
future performance and does not necessarily reflect what the financial
position and results of operations of the Company would have been had the
Company operated as a separate, stand-alone entity during the periods covered.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS SIX MONTHS
---------------------------- ENDED ENDED
1994 1995 1996 JUNE 30, 1996 JUNE 30, 1997
-------- -------- --------- ------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT SHARES AND
PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $ 2,615 $ 4,319 $ 13,838 $ 4,791 $ 11,905
Cost of sales........... 1,258 2,456 9,625 3,325 7,994
-------- -------- --------- -------- ---------
Gross profit............ 1,357 1,863 4,213 1,466 3,911
Operating expenses
Selling and
marketing............ 279 640 1,472 614 1,463
General and
administrative....... 219 595 750 409 406
Royalty expense....... 459 487 -- -- --
Amortization expense.. -- 52 202 98 104
-------- -------- --------- -------- ---------
957 1,774 2,424 1,121 1,973
-------- -------- --------- -------- ---------
Operating income........ 400 89 1,789 345 1,938
Interest expense(1)... -- 87 315 167 123
Other, net............ -- -- 45 -- --
-------- -------- --------- -------- ---------
-- 87 360 167 123
-------- -------- --------- -------- ---------
Income before income
taxes.................. 400 2 1,429 178 1,815
Provision for income
taxes.................. 153 1 547 68 695
-------- -------- --------- -------- ---------
Net income.............. $ 247 $ 1 $ 882 $ 110 $ 1,120
======== ======== ========= ======== =========
Net income per
share(2)............... $ 0.16 $ 0.21
Weighted average shares
outstanding(2)......... 5,354,833 5,417,480
PRO FORMA STATEMENT OF
OPERATIONS DATA:
Net income(3)........... $ 1,315 $ 1,330
Net income per
share(2)............... $ 0.17 $ 0.17
Weighted average shares
outstanding(2)......... 7,629,833 7,692,480
<CAPTION>
DECEMBER 31, JUNE 30, 1997
------------------- ----------------------------
1995 1996 ACTUAL AS ADJUSTED(4)
-------- --------- ------------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
PERIOD END):
Working capital
(deficit).............. $ (993) $ (734) $ ( 328) $ 19,085
Total assets............ 6,288 9,269 12,199 28,423
Long-term debt (less
current portion)....... 3,043 1,892 1,414 414
Divisional equity(5).... 248 1,130 2,250 22,663
</TABLE>
18
<PAGE>
- --------
(1) Intercompany borrowings from Daisy are non-interest bearing. See Note 9 to
Financial Statements.
(2) The net income per share and pro forma net income per share have been
calculated by dividing net income and pro forma net income by the pro
forma weighted average shares outstanding, after giving effect to the
Offering and dilutive stock options. See "Use of Proceeds" and
"Reorganization."
(3) Pro forma net income has been computed by adjusting historical net income
for the year ended December 31, 1996, and the six months ended June 30,
1997, to give effect to the Offering and the application of the estimated
net proceeds therefrom as described in "Use of Proceeds" as if the
Offering had occurred on January 1, 1996, and 1997, respectively.
(4) Gives effect to the application of the proceeds from the Offering after
the deduction of the estimated expenses. See "Use of Proceeds."
(5) Divisional equity at June 30, 1997 (as adjusted) reflects stockholders
equity after giving effect to the Offering and the application of the
proceeds therefrom.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
"Selected Financial Data" and the Financial Statements and the related notes
thereto, which are included elsewhere in this Prospectus.
GENERAL
Brass Eagle is a worldwide leader in the design, manufacture, marketing, and
distribution of paintball products. The Company's sales have grown rapidly,
from $2.6 million in 1994 to $13.8 million in 1996, a compound annual growth
rate of 130.4%. This growth has continued in 1997 with sales of $11.9 million
through June 30, 1997, compared to $4.8 million through June 30, 1996, an
increase for the six month period of 147.9%. The Company believes its growth
has been the result of increasing market acceptance of paintball and, more
specifically, growing demand from consumers through mass merchandisers and
major sporting goods retailers for Brass Eagle products. The Company believes
significant opportunities for growth continue to exist worldwide and intends
to increase market awareness both nationally and internationally through an
active growth campaign.
The Company sells paintball guns and a full line of paintball-related
accessories, including paintballs, facemasks, and refillable CO\\2\\ cartridges.
Approximately 80% of the Company's sales are to national and regional mass
merchandisers, such as Kmart, Wal*Mart, and Meijer, and major sporting goods
retailers, such as The Sports Authority, Dick's Sporting Goods, and Jumbo
Sports. Brass Eagle products are currently the only paintball products sold
through Kmart and Wal*Mart, and through most major sporting goods chains. The
Company's products are also sold through sporting goods distributors,
specialty distributors of paintball products, and paintball specialty shops.
See "Risk Factors--Dependence on Limited Number of Customers" and "Business."
In connection with the BEI Aquisition, the Company purchased certain assets,
trademarks, and patents from BEI in October 1995 for cash and a long-term,
non-interest bearing note. As a result of this purchase, payments under a
royalty arrangement with BEI were discontinued. The purchase price is being
allocated over the useful lives of the tangible and intangible assets acquired
from BEI.
While the Company's gross profits have increased from $1.4 million in 1994
to $4.2 million in 1996, the Company's gross margins have been negatively
impacted by increased sales of lower margin paintballs and paintball
accessories. Operating expenses as a percentage of sales continue to decrease
as the Company realizes operating efficiencies from the additional volume, as
well as from the decrease in royalty expense beginning in October 1995.
During the six-month period ending June 30, 1997, and the years ending
December 31, 1996, 1995, and 1994, Brass Eagle shared operational and
administrative facilities with Daisy. As a result, manufacturing, selling, and
administrative expenses had to be allocated from Daisy to Brass Eagle.
Allocations were based on various activities including quantity of inventory
produced, quantity of inventory received, number of shipments, headcount, and
estimates of time spent on Brass Eagle. Sales, returns, material cost, and
direct labor cost were not allocated because they could be specifically
identified to Brass Eagle. Management must make estimates and assumptions in
preparing financial statements that affect the amounts reported therein and
the disclosures provided. These estimates, allocations, and assumptions may
change in the future and future results could differ.
20
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth operations data as a percentage of sales for
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED 6 MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------- ----------------
1994 1995 1996 1996 1997
----- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C>
Sales ................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................ 48.1% 56.9% 69.6% 69.4% 67.1%
Gross margin............................. 51.9% 43.1% 30.4% 30.6% 32.9%
Operating expenses....................... 36.6% 41.1% 17.5% 23.4% 16.6%
Operating income......................... 15.3% 2.0% 12.9% 7.2% 16.3%
Net income............................... 9.4% -- 6.4% 2.3% 9.4%
</TABLE>
SIX MONTHS ENDED JUNE 30, 1997, COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Sales. Sales increased by 147.9% to $11.9 million the first half of 1997
compared to $4.8 million in the first half of 1996. The increase in sales was
primarily due to higher unit volume of all products. Domestic sales increased
by 152.4% to $10.6 million (or 89.1% of sales) in the first half of 1997 from
$4.2 million (or 87.5% of sales) in the first half of 1996. International
sales increased by 116.3% to $1.3 million (or 10.9% of sales) in the first
half of 1997 from $601,000 (or 12.5% of sales) in the first half of 1996,
principally due to the addition of a new distributor in Europe.
Gross margin. Gross margin (gross profit as a percentage of net sales)
increased to 32.9% for the first half of 1997 compared to 30.6% for the first
half of 1996 principally due to raw materials purchasing and manufacturing
spending efficiencies.
Operating expenses. Operating expenses increased by 81.8% to $2.0 million in
the first half of 1997 compared to $1.1 million in the first half of 1996 due
to selling and marketing expense increases, but decreased as a percentage of
sales from 23.4% to 16.6%. The decrease in operating expenses as a percent of
sales was primarily the result of certain fixed expenses being allocated over
an increased sales base.
Operating income. Operating income increased by 450.7% to $1.9 million in
the first half of 1997 compared to $345,000 in the first half of 1996. The
increase was primarily due to higher unit sales volume.
Interest expense. The Company incurred interest expense of $123,000 in the
first half of 1997 compared to $167,000 in the first half of 1996. The
decrease was primarily due to the scheduled debt payments reducing outstanding
borrowings incurred in connection with the BEI Acquisition.
Income tax rate. The Company's effective Federal and state income tax rate
was 38.3% based upon tax expenses allocated on a separate return basis in the
first half of 1997 and 1996.
YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995
Sales. Sales increased by approximately 220.9% to $13.8 million in 1996
compared to $4.3 million in 1995. The increase was primarily due to higher
unit volume in all of the Company's products, the addition of new products in
the accessories category, and the introduction of the new Raptor paintball
gun. Domestic sales increased by 187.8% to $11.8 million (or 85.5% of sales)
in 1996 from $4.1 million (or 93.9% of sales) in 1995. International sales
increased by 660.5% to $2.0 million (or 14.5% of sales) in 1996 from $263,000
(or 6.1% of sales) in 1995.
Gross margin. Gross margin decreased to 30.4% in 1996 compared to 43.1% in
1995. The decrease was primarily due to increases in unit volume of
paintballs, which have significantly lower margins than the Company's other
products.
21
<PAGE>
Operating expenses. Operating expenses increased by 33.3% to $2.4 million in
1996 compared to $1.8 million in 1995, principally due to increased sales and
marketing expenses. The increase related in part to an increase in the number
of employees, but was primarily due to increased unit volume related expenses,
e.g., freight and commission. Operating expenses in 1995 decreased from 41.1%
to 17.5% of sales in 1996 primarily due to the elimination of royalties paid
to BEI of $487,000, or 11.2% of sales, in October 1995 and increases in unit
volume.
Operating income. Operating income increased by 1,922.5% to $1.8 million in
1996 compared to $89,000 in 1995. The increase was primarily due to higher
unit sales volume.
Interest expense. The Company incurred interest expense of $315,000 in 1996
compared to $87,000 in 1995. The increase was due to debt incurred in
connection with the BEI Acquisition.
Income tax rate. The Company's effective Federal and state income tax rate
was 38.3% based upon tax expenses allocated on a separate return basis in 1996
and 1995.
YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994
Sales. Sales increased by 65.4% to $4.3 million in 1995 compared to $2.6
million in 1994. The increase was primarily due to the introduction of several
new products in 1995 and continued higher unit volume sales of all of the
Company's products. Domestic sales increased by 64.0% to $4.1 million (or
93.9% of sales) in 1995 from $2.5 million (or 94.5% of sales) in 1994.
International sales increased by 82.6% to $263,000 (or 6.1% of sales) in 1995
from $144,000 (or 5.5% of sales) in 1994.
Gross margin. Gross margin decreased to 43.1% in 1995 compared to 51.9% in
1994. The decrease was due to increased sales volume of paintballs, which have
significantly lower margins than the Company's other products, and accessories
as a percentage of total sales.
Operating expenses. Operating expenses increased by 80.0% to $1.8 million in
1995 compared to $1.0 million in 1994. The increase was principally due to
increased marketing activities; increased volume related costs, e.g.,
commissions and freight; and was partially offset by a lower royalty cost as a
percent of sales due to the BEI Acquisition in October 1995.
Operating income. Operating income decreased by 349.4% to $89,000 in 1995
compared to $400,000 in 1994. The decrease was primarily due to lower gross
margins along with higher selling, marketing, general, and administrative
expenses.
Interest expense. Interest expense was $87,000 in 1995 compared to $0 in
1994, due to the debt incurred in connection with the BEI Acquisition.
Income tax rate. The Company's effective Federal and state income tax rate
was 38.3% based upon tax expenses allocated on a separate return basis in 1995
and 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital to finance increases in inventory and
receivables resulting from the rapid growth of the business. During the past
three years the Company has satisfied its operating cash needs, other than the
BEI Acquisition in October 1995, through intercompany borrowings from Daisy.
Net cash used in operations for 1996, was $499,000, which consisted
primarily of net income of $882,000, depreciation and amortization of
$426,000, and a net increase of accounts payable and accrued expenses over
prepaid expenses of $994,000, less the increases in accounts receivable of
$2.4 million and inventory of $649,000. Net cash provided by operating
activities for the six months ending June 30, 1997, was $1.4 million,
resulting primarily from increases in accounts receivable of $1.1 million and
inventory of $1.3 million, and an increase in accounts payable and accrued
expenses of $2.7 million.
22
<PAGE>
Net cash used in investing activities was $112,000 for 1996 and $485,000 for
the six months ending June 30, 1997, which consisted of purchases of property,
equipment, and other assets. The Company does not expect large capital
expenditures in the remaining months of 1997.
Net cash provided by financing activities was $611,000 in 1996, which
consisted of a $1.1 million reduction of the long-term debt and $1.7 million
of additional borrowings from Daisy. Net cash used in financing activities was
$934,000 in the six months ending June 30, 1997, which consisted of $271,000
reduction of the long-term debt and $663,000 reduction on the intercompany
borrowings from Daisy.
The Company has existing term debt specifically allocated from the Daisy
credit facility of $1.5 million and additional non-interest bearing term debt
of $1.5 million in face value due to the prior owners of BEI as of June 30,
1997. The Daisy credit facility is secured by all personal and intangible
properties of Daisy and Brass Eagle. The Company expects that the bank will
release its security interest in the personal and intangible properties of
Brass Eagle upon repayment of the intercompany debt and the credit facility
term loan specifically allocated to Brass Eagle. The non-interest bearing BEI
promissory note is secured by the assets acquired in the BEI Acquisition.
At June 30, 1997, the Company had a working capital deficit of $328,000,
including a balance due to Daisy of $2.7 million of non-interest bearing
intercompany borrowings. The Company expects significant increases in
intercompany borrowings prior to the time of the Offering. The Company intends
to replace the intercompany borrowings from Daisy with the proceeds from the
Offering and establish a separate credit facility and line of credit for the
Company. Although the Company has contacted financial institutions regarding
the new credit facility, the Company has not entered into any letter of intent
or other agreements relating to such facility. See "Use of Proceeds."
The Company believes that funds generated from operations, together with the
net proceeds of the Offering and borrowings under contemplated future credit
facilities, will be adequate to meet its anticipated cash requirements for the
next 18 months.
SEASONALITY
While more sales of the Company's paintball products occur in the spring and
fall, the Company does not believe that seasonality has had a significant
effect on the Company's operations to date.
23
<PAGE>
BUSINESS
INTRODUCTION
Brass Eagle is a worldwide leader in the design, manufacture, marketing, and
distribution of paintball products, including paintball guns, paintballs, and
accessories. The Company believes it is the only manufacturer with a full line
of products that address step-by-step price points for beginner, recreational,
and competition level paintball participants. In addition, Brass Eagle is the
only manufacturer to offer paintball products to consumers through easily
accessible channels such as mass merchandisers and major sporting goods
retailers. As a result of these initiatives, Brass Eagle provides a large
consumer base with high quality paintball products and accessories that
generally sell for substantially less than those of its competitors. These
advances have significantly broadened the paintball industry's consumer base,
increased the overall number of paintball participants, and heightened the
general awareness of and excitement for the sport.
Approximately 80% of the Company's sales are to national and regional mass
merchandisers, such as Kmart, Wal*Mart, and Meijer, and major sporting goods
retailers, such as The Sports Authority, Dick's Sporting Goods, and Jumbo
Sports. Brass Eagle products are currently the only paintball products sold
through Kmart and Wal*Mart, and through most major sporting goods chains. The
Company's products are also sold through sporting goods distributors,
specialty distributors of paintball products, and paintball specialty shops.
The Company's sales have grown rapidly, from $2.6 million in 1994 to $13.8
million in 1996, a compound annual growth rate of 130.4%. This growth has
continued in 1997 with sales of $11.9 million through June 30, 1997, compared
to $4.8 million through June 30, 1996, an increase for the six month period of
147.9%. The Company believes its growth has been the result of increasing
market acceptance of paintball and, more specifically, growing demand from
consumers through mass merchandisers and major sporting goods retailers for
Brass Eagle products. The Company believes significant opportunities for
additional growth exist worldwide and intends to increase paintball
participation and the Company's sales both nationally and internationally
through an active growth campaign.
The Company's growth strategy is to increase market awareness of paintball
worldwide, thereby expanding the paintball industry and strengthening its
leadership position. The principal strategies developed by the Company to
reach its objective are as follows: (i) expand penetration of new and existing
markets; (ii) increase participation in the sport of paintball; (iii) increase
international sales of paintball products; (iv) increase product sales through
step-by-step price segmentation, and (v) evaluate strategic acquisitions.
INDUSTRY OVERVIEW
The National Sporting Goods Association estimated 1996 retail sales of
sports equipment were $17.6 billion, and projects 1997 sales of $18.1 billion.
This category includes extreme sporting goods such as mountain bikes,
snowboards, alpine and cross-country snow skis, water skis, in-line skates,
and skateboards, which represented over $1.4 billion in sales in 1996, or 7.7%
of total sports equipment sales. Moreover, certain of these activities have
experienced substantial growth over the past several years. For example,
participation rates in mountain biking and in-line skating have grown at
compound annual growth rates of 14.6% and 34.7%, respectively, over the past
five years.
The Company believes that paintball, as an extreme sport, is positioned to
experience substantial growth as the sport becomes available to a broader
consumer group. The Company believes that total paintball expenditures,
including paintball guns, paintballs, accessories, and playing field fees,
will be approximately $250.0 million for 1997 and projects these expenditures
to increase substantially in the near future. Historically, paintball was
played primarily by avid enthusiasts, generally with relatively expensive,
high-end paintball guns and accessories. Enthusiasts typically obtained their
equipment from a highly fragmented base of catalogue distributors and
specialty retailers. Recently, an increasingly broader group of players,
including corporate groups, youth leagues, church organizations, and others,
have begun participating in paintball. These beginner and recreational players
often purchase paintball guns and accessories at mass merchandise stores or
sporting goods stores and play paintball several times per year. The Company
believes that its strategy of
24
<PAGE>
providing a full range of products at various price and performance points has
contributed significantly to the broadening of the industry's consumer base,
the increase in the overall number of paintball participants, and the growing
acceptance of the sport.
A key component to the continued growth of paintball is the availability of
playing facilities. Historically, these facilities have consisted of
commercial and private fields, typically located outside urban centers and in
rural areas and used primarily by paintball enthusiasts. In order to further
develop the market for paintball in more densely populated areas, the Company
intends to promote a modular paintball field concept that can be played in a
relatively small, self-contained area that can easily be adapted or designed
to fit into existing family amusement centers such as go-cart tracks, batting
cages and miniature golf courses or as a stand-alone facility. The Company
recently began marketing a version of this concept under the Hyperball(TM)
name. In addition, the Company believes that a significant number of field
operators are upgrading their facilities to cater to the growing number of
beginner and recreational players. Many operators are constructing "scenario
fields" where mock battlefields, forts, and other props are utilized to
provide a fun, exciting, fantasy-like experience.
GROWTH STRATEGIES
The Company has developed the following growth strategies to capitalize on
its strong brand name, successful products, and operating capabilities:
. EXPAND PENETRATION OF NEW AND EXISTING MARKETS. Brass Eagle's sales and
marketing programs are aimed at increasing its presence in its existing
markets and expanding into new markets. Approximately 80% of the
Company's sales are to national and regional mass merchandisers, such as
Kmart, Wal*Mart, and Meijer, and major sporting goods retailers, such as
The Sports Authority, Dick's Sporting Goods, and Jumbo Sports. The
Company estimates that its products are currently sold in approximately
3,500 retail outlets, and believes significant opportunities exist for
increased market penetration. In addition, the Company expects to
increase sales to wholesale distributors, which supply Brass Eagle
products to specialty retailers and international markets. The Company
also has a direct sales program to reach consumers with unique, branded
accessories and apparel. Brass Eagle also intends aggressively to pursue
new markets, such as family amusement centers and parks, using
Hyperball(TM) and shooting booths.
. INCREASE PARTICIPATION IN THE SPORT OF PAINTBALL. The Company believes
that its increased marketing efforts and heightened media exposure are
helping to promote and grow the sport of paintball. Through high
visibility promotion campaigns, such as the Company's "Ballin' on the
Beach at Spring Break '97" in Panama City Beach, Florida, professional
paintball tournament coverage on ESPN, MTV's Road Rules, and other
televised programs, paintball is being introduced to a broader group of
potential participants. The Company is involved in numerous paintball
events and promotions and currently sponsors the National Professional
Paintball League ("NPPL") and two professional paintball teams. The
Company has been featured and advertises in paintball-related
publications such as Action Pursuit Games, Paintball Player's Bible, and
Paintball Games International.
The Company is currently marketing the modular field concept under the
Hyperball(TM) name in a variety of urban areas through an exclusive
North and South American licensing agreement with WDP Europe Limited,
the Company's European distributor. High speed modular games such as
Hyperball(TM) provide the beginner, recreational, and competition
participant with convenient access to playing fields and the
opportunity to participate in an exciting new paintball activity. The
modular field concept has been widely accepted in the competition
segment with the introduction of Hyperball(TM) in 1996 at the World
Paintball Championships in Orlando, Florida, and the Company believes
that it will continue to be an important part of bringing the sport to
people of all skill levels. The Company is currently negotiating to be
a co-owner of modular fields operated under the Hyperball(TM) name in
Newberg, New York, Lansing, Illinois, and Kissimmee, Florida, to be
opened in October 1997, and anticipates it will be an owner or co-owner
in several additional locations.
25
<PAGE>
. INCREASE INTERNATIONAL SALES OF PAINTBALL PRODUCTS. The Company believes
that international markets for paintball products and accessories
present significant opportunities for growth. Through its relationship
with its European distributor, WDP Ltd., the Company has been successful
in expanding its market share in Europe. The Company believes that South
and Central America offer significant additional growth opportunities.
Sales outside of North America accounted for 14.5% of the Company's
total sales in 1996. As the popularity of paintball continues to grow
and the Company increases its marketing and sales efforts abroad, the
Company expects that sales outside of North America will account for a
larger portion of its sales.
. INCREASE PRODUCT SALES THROUGH STEP-BY-STEP PRICE SEGMENTATION. The
Company believes that the total number of paintball guns sold in 1996
more than doubled from 1995 to over 250,000 units worldwide (140,000 of
which were sold by the Company) primarily due to the growth in the
number of new users in the beginner price segment. In 1996, Brass Eagle
offered four paintball guns to consumers at price points from $35 for
beginner products to $110 for recreational products. The Company
believes that new 1997 product introductions in the competition segment,
such as the Raptor and the Rainmaker(TM), will satisfy the demands of
competition-level paintball participants. The Company believes that by
offering products spanning a wide range of price points it is able to
meet the needs of new paintball consumers as well as recreation and
competition players as they move to more sophisticated products. The
Company intends to continue to focus on research and development to
ensure that Brass Eagle is able to offer high quality paintball products
at step-by-step price points.
. EVALUATE STRATEGIC ACQUISITIONS. The Company may, when and if the
opportunity arises, acquire other businesses involved in activities or
having product lines that are compatible with those of the Company. The
Company will evaluate acquisition opportunities as they arise and focus
on prospects that it feels complement its business and product lines.
OPERATING STRATEGIES
The Company believes it currently has the leading market share in paintball
guns and is a major participant in the paintball and paintball accessories
markets. Brass Eagle has established and continues to enhance its position as
a worldwide leader in the design, manufacture, marketing, and distribution of
paintball products through the following operating strategies:
. STRONG RELATIONSHIPS WITH CUSTOMER BASE. The Company introduced
paintball products to mass merchandisers and major sporting goods
retailers at price points familiar to them and, due to the strong demand
for paintball products and their attractive retail profit margins, has
become an increasingly important supplier to this customer base. Brass
Eagle is currently the primary supplier of paintball products to the
leading mass merchandisers and major sporting goods retailers selling
paintball products and is the only supplier to Kmart and Wal*Mart. The
Company strives to maintain these strong relationships by providing
retailers high quality paintball products and strong sales and marketing
support through co-op advertising, unique promotions, and point-of-sale
support.
. PRODUCT LINE EXPANSION AND DISTRIBUTION CHANNEL SEGMENTATION. The
Company has expanded the market for paintball products by extending its
product line and segmenting product distribution to address a growing
range of price points and performance needs. In 1994, the Company
offered only two paintball guns and participated in a narrow market
segment represented by paintball guns which retailed from $200 to over
$1,000. Today, the Company's primary target market is the beginner and
recreational price segment. Brass Eagle now offers six paintball guns
and has successfully expanded the primary market for its paintball guns
to price points that range from approximately $35 to $500. The Company
believes its broad, segmented product lines enable it to capitalize on
its design and manufacturing capabilities to meet the cost and
performance needs of its customers at various price points, while
enhancing its brand name.
. WIDELY RECOGNIZED BRAND NAME AND DISTINCTIVE PRODUCTS. The Company is
responsible for expansion of paintball product distribution to mass
merchandisers and major sporting goods retailers,
26
<PAGE>
making Brass Eagle one of the most widely recognized brand names in the
paintball industry. Brass Eagle paintball products are currently the
only paintball products sold by Kmart and Wal*Mart and most major
sporting goods retailers. The Company promotes its brand name and image
through focused marketing programs, including sponsorship of
professional paintball teams and creative advertising in a variety of
U.S. and international paintball publications. The Company's brand name
and products also receive further promotion through frequent editorial
references in these paintball publications.
. INNOVATIVE PRODUCT DEVELOPMENT. Brass Eagle has established itself as a
leader in the growing paintball market by introducing a series of new
and innovative paintball products, such as the original semi-automatic
Stingray paintball gun, the new Rainmaker(TM) paintball gun, and the
Xtreme Vision 280(TM) facemask. The Company has introduced three new
paintball gun products and an array of new accessory products in the
last 18 months, while continuing to improve its earlier product
offerings. Brass Eagle supports its research and development efforts
with a team of professionals and sophisticated computer-based design
tools. The Company does extensive field tests on its new products
through teams of avid players who use the products in all types of
playing situations.
. INCREASINGLY EFFICIENT DESIGN AND MANUFACTURING PROCESSES. The Company
continually seeks to improve efficiency in its product development and
manufacturing activities. Continuing improvements in product design, as
well as the Company's ability to bring critical new technology and
advances to its products, have generated significant new opportunities.
As a result, Brass Eagle has been able to expand its market by
introducing more moderately-priced products. The Company believes that
its emphasis on design and manufacturing efficiencies will continue to
be a critical factor in its ability to expand the market for its
products.
PRODUCTS
The Company offers a full line of paintball products, including paintball
guns, paintballs, and accessories at various price points.
Paintball Guns. The Company designs and manufactures a full product line of
paintball guns with a variety of performance characteristics. There are three
primary classifications of paintball guns: 12 gram, pump action, and semi-
automatic. The 12 gram paintball gun, such as the Company's Talon model, is a
direct descendent of the original "splotch marker" used to mark cattle and
trees before the advent of the sport of paintball. These paintball guns use 12
gram CO\\2\\ jets, are actuated using a pump action, and usually have a small
paintball capacity. The pump action serves to chamber a paintball and compress
a spring in the paintball gun. The pump action paintball gun differs from a 12
gram paintball gun in that it uses a refillable cylinder as a power source and
a hopper to feed multiple paintballs into the chamber. An example of a pump
action paintball gun is the Company's Tigershark. The semi-automatic paintball
gun's firing mechanism needs to be cocked only once before firing the first
shot and then the paintball gun fires automatically after each trigger pull.
Depending upon the skill and equipment of the paintball participant, some
semi-automatic paintball guns can be fired in excess of 14 times per second.
Most organized paintball tournaments are played exclusively with semi-
automatic paintball guns. The Company currently offers four semi-automatic
paintball pistols and guns: Eagle, Stingray, Raptor, and Rainmaker(TM).
The following table summarizes the Company's line of paintball guns:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
APPROXIMATE 1996 ENDED JUNE
EXPERIENCE RETAIL UNIT 1997 UNIT
PRODUCT DESCRIPTION LEVEL PRICE VOLUME VOLUME
- ------------------------ ------------------------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Talon................... . Introduced in September 1996 Beginner $35 3,372
. 12 gram paintball gun
. Least expensive paintball gun
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
APPROXIMATE 1996 ENDED JUNE
EXPERIENCE RETAIL UNIT 1997 UNIT
PRODUCT DESCRIPTION LEVEL PRICE VOLUME VOLUME
- ------------------------ ------------------------------------ ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Player's Kit............ . Introduced in September 1996 Beginner $50 54,240
. Includes Talon paintball gun,
accessories such as a barrel plug
and ten round feed tube, "Fun
of Paintball" video covering
basic safety procedures, game
formats, and helpful hints for
new players, and a $5 rebate
coupon on purchase of Deluxe
Facemask
Tigershark.............. . Introduced in April 1994 Beginner $70 28,897
. Pump action, constant air capable
Eagle................... . Introduced in August 1995 Recreational $90 9,475
. Semi-automatic paintball pistol
. Spring fed internal magazine
. Shoots approximately 4 paintballs
per second
Stingray................ . Introduced in October 1993 Recreational $100-$110 40,447
. Semi-automatic paintball gun
. Co-polymer construction
. Shoots approximately 4 paintballs
per second
Raptor.................. . Introduced in September 1996 Competition $185-$200 3,196
. Semi-automatic paintball gun
. Extruded aircraft grade aluminum
. Shoots approximately 7 paintballs
per second
Rainmaker(TM)........... . Introduced in August 1997 Competition $500-$550 --
. Semi-automatic paintball gun
. Electronically controlled firing
system
. Electronically controlled feed
system to eliminate ball breakage
(patent pending)
. Shoots approximately 14 paintballs
per second
</TABLE>
Paintballs. Paintballs are made of a gelatinous material and are non-toxic,
biodegradable, and easily washable. Paintballs are manufactured using an
encapsulation process requiring special equipment and certain technical
knowledge. Brass Eagle sells its paintballs in multiple colors in packages of
200, 500, 1,800, and 2,500. In 1996, the Company sold approximately 149.2
million paintballs and for the six months ended June 30, 1997, the Company
sold approximately 140.0 million paintballs. The Company purchases all of its
paintball requirements from a single supplier through an exclusive
distribution arrangement. See "Risk Factors--Dependence on Limited Number of
Suppliers; Exclusive Arrangements and Noncompetitive Covenants."
Accessory Products. Brass Eagle markets a broad product line of paintball
accessories complementary to its paintball guns and paintballs. These
accessory products include facemasks, paintball hoppers, cleaning
28
<PAGE>
squeegees, and refillable CO\\2\\ tanks. Facemasks, a requirement for safe
paintball play, are a primary component of the Company's accessory product
line. The Company's facemasks are designed to provide full facial and ear
protection.
The following table summarizes the Company's line of facemasks:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
APPROXIMATE 1996 ENDED JUNE
RETAIL UNIT 1997 UNIT
PRODUCTS DESCRIPTION PRICE VOLUME VOLUME
- ------------------------ -------------------------------------------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Deluxe Facemask......... . Introduced in August 1995 $35 51,808
. Complete eye, face, forehead, and ear protection
. Anti-scratch and anti-fog coated lens
Xtreme Vision 280(TM)... . Introduced in August 1997 $55 --
. 280 degrees of peripheral vision
. Optically correct bubble lens
. Complete eye, face, forehead, and ear protection
. Anti-scratch and anti-fog coated lens
</TABLE>
SALES AND DISTRIBUTION
Brass Eagle's sales and distribution strategy is unique in the paintball
industry. Unlike its competitors, Brass Eagle makes its products readily
available to mainstream consumers through mass merchandisers, major sporting
goods retailers, and specialty retailers.
Mass Merchandisers. These retailers include major retail chains such as
Kmart, Wal*Mart, and Meijer. The Company believes that accessing these
retailers is instrumental in introducing its product line to a large and
diverse demographic group. For 1996 and for the first six months of 1997,
21.9% and 33.8%, respectively, of the Company's sales were to Kmart, and 13.7%
and 12.0%, respectively, of the Company's sales were to Wal*Mart. See "Risk
Factors--Dependence on Certain Customers."
Major Sporting Goods Retailers. These retailers include national and
regional chains such as The Sports Authority, Dick's Sporting Goods, Jumbo
Sports, Academy, Gart Brothers, and Galyan's. In addition to providing Brass
Eagle products to a large consumer base, the sale of the Company's products
through major sporting goods retailers helps to position paintball as a new
and growing sport. No customer in this channel accounted for more than 10% of
the Company's sales for 1996 or for the first six months of 1997.
Specialty Retailers. These retailers include a variety of small sporting
goods stores, outdoor equipment retailers, and paintball specialty stores. The
Company sells paintball products to specialty retailers through distributors,
sales representatives, and telemarketing. Specialty retailers complement the
Company's sales and distribution strategies by penetrating niche markets and
providing paintball products to higher skill level participants. No customer
in this channel accounted for more than 10% of the Company's sales for 1996 or
for the first six months of 1997.
The Company's distribution strategy is centered on a product segmentation
approach. Brass Eagle sells the product mix which it believes most accurately
addresses the price points and demand characteristics of its customers' end
consumers. In this manner, the Company believes it can best manage the long-
term growth and brand loyalty of its products while maximizing the efficiency
of its customers' space.
29
<PAGE>
To facilitate its sales and distribution strategy, the Company maintains a
sales and marketing staff, including senior management and in-house sales and
marketing personnel, and retains nine independent manufacturers' sales
representative organizations to service the United States market. The sales
representatives generally offer various lines of sporting goods and have
established relationships with retailers in the Company's targeted
distribution channels. Sales representatives operate under standard contracts
in defined geographic territories and are contractually prohibited from
selling competitors' paintball products.
The Company's products are distributed internationally by WDP Ltd., a UK-
based supplier of paintball guns and accessories primarily to European
specialty retailers. Additionally, the Company sells its products directly to
other organizations, such as the Army Air Force Exchange Service. For 1996 and
the first six months of 1997, the Company's international sales were $2.0
million and $1.3 million, respectively. In addition, 10.0% of the Company's
sales were to WDP Ltd. for 1996.
MARKETING
The Company's marketing strategy is to maintain and further develop Brass
Eagle as the leading paintball guns and accessories brand and to expand the
paintball industry. The Company promotes its brand name and the paintball
industry through focused marketing efforts such as designing packaging and
point-of-sale materials, sponsoring paintball events, two professional
paintball teams, and the NPPL, developing the HyperBall(TM) concept,
participating in trade shows, and advertising.
Brass Eagle assists customers in designing appropriate product layouts to
display paintball guns, paintballs, and accessories. In addition, the Company
has created unique packaging to attract players at varying skill levels. For
example, the Player's Kit, which is targeted to beginning players and retails
for only $50, offers the Talon paintball gun, an introductory video, and a
rebate toward the purchase of a Deluxe Facemask.
The Company believes that a key component to the continued growth of the
paintball industry is the availability of playing facilities, especially in
urban areas. The Company markets a modular paintball arena under the
Hyperball(TM) name that provides an exciting, fast-paced game that allows for
public viewing. Brass Eagle licenses the HyperBall(TM) name, and will provide
operators with equipment and accessories. The Company anticipates that modular
field operators will offer walk-on games as well as planned events such as
league play. The Company also directs consumers by offering free admission to
local playing areas through its Eagles Nest program, which provides incentives
to field operators and retail outlets to carry Brass Eagle products. Mass
merchandisers benefit by customers being exposed to fields allowing them to
use their equipment, which generates more purchases. Field operators benefit
from the increased exposure to the mass merchandisers' broader market, which
generates more field participation.
The sponsorship of paintball events, two professional paintball teams, and
the NPPL is an important part of the Company's marketing strategy as well as
its product development activities. By associating its name with
professionally staged events, the Company increases consumer awareness of, and
demand for, paintball and Brass Eagle products. The Brass Eagle sponsored
professional paintball teams compete in professional and amateur events, stage
demonstration events for retailers and other groups, and attend trade shows on
the Company's behalf. Team members also test new products and provide valuable
feedback to the Company's product development staff. The Company has also
sponsored other promotional events, such as "Ballin on the Beach at Spring
Break '97," an activity staged on a Hyperball(TM) field erected on a beach in
Panama City, Florida, during collegiate spring break, and various other
amateur tournaments.
The Company attends several key trade shows throughout each calendar year to
promote its product line to retailers and entertainment providers, including
the Super Show and the International Amusement Parks and Attractions Show. In
addition, the Company places print advertisements in outdoor recreation and
paintball magazines, including Action Pursuit Games, Paintball Games
International, and The Paintball Player's Bible, as well as on its website,
http://www.brasseagle.com.
30
<PAGE>
MANUFACTURING; BACKLOG
The Company designs all of its paintball guns and, in cooperation with
Leader and certain of its other key suppliers' facemasks and other accessory
items. Based on its designs, the Company has manufactured all tooling and dies
necessary for the production of paintball guns, and contracts with a number of
suppliers to provide all necessary components using the Company's tooling and
dies. All assembly manufacturing is then done at the Company's Granby,
Missouri, facility on continuous flow assembly lines. The Company generally
operates a single shift comprised of four 10-hour days. If overtime is
required, it is generally scheduled for the fifth weekday. The assembly lines
are comprised of a combination of automated and manual assembly stations
supported by satellite subassembly operations. They are designed for maximum
efficiency and can handle significant additional capacity. The Company
provides extensive training to all personnel to enable supervisors and lead
assemblers to manage their own work areas and continually monitor product
quality. Each paintball gun is individually pressure tested and fired prior to
shipment. Finished products are stored at warehouse space located at Daisy's
Rogers, Arkansas, manufacturing facilities, a portion of which the Company
leases from Daisy Manufacturing pursuant to an administrative services
agreement that expires in December 1998.
Production planning starts with a general forecast several months before the
beginning of each year. This general forecast is then refined and expanded
into a more complete, time-phased forecast which guides initial planning for
parts and labor requirements. As the year progresses, the forecast is
constantly reviewed and compared with actual customer orders. The planning
process is controlled by a fully-integrated manufacturing resource planning
system. Finished goods purchases, such as paintballs and protective facemasks,
are planned through the same materials planning system. The Company does not
consider its backlog to be significant. See "Risk Factors--Difficulty in
Forecasting Product Demand."
The Company has entered into an agreement with Goldcaps, Inc., a subsidiary
of IVAX Corp. of Miami, Florida, pursuant to which the Company has agreed to
act as Goldcaps' exclusive worldwide paintball distributor to all retail and
wholesale outlets and Goldcaps has agreed to provide paintballs as needed by
the Company. This agreement extends through August 1999, but is terminable
prior to that time upon one year's notice and contains certain provisions
which prohibit the Company from selling any competing products during the term
of the agreement. The Company's European paintball requirements are supplied
through Gelkaps, also a subsidiary of IVAX, which is located in Falkenhagen,
Germany, providing the Company a local source of paintballs for the European
market.
The Company has also entered into an agreement with Leader Industries of
Montreal, Quebec, Canada ("Leader"), a well known manufacturer of eye
protective equipment, pursuant to which the Company has agreed to serve as
Leader's exclusive worldwide distributor of facemasks (except in Canada, where
Leader also sells its products). This agreement extends through August 31,
1999, but is terminable prior to that time on six months' notice, and also
contains certain provisions which prohibit the Company from selling any
competing products within its distribution territory during the term of the
agreement. The facemask is a crucial accessory item, since its use is required
for safe paintball play and is mandated by all commercially operated paintball
fields.
The Company works closely with a variety of vendors to meet its production
needs, including machine shops, die casters, and injection molders. Although
the Company has established relationships with its principal suppliers and
manufacturing sources, it does not have long-term contracts with any vendors
other than Goldcaps and Leader, nor does it have multiple vendors for all
parts, tooling, supplies, or services critical to its manufacturing processes.
The Company continually reviews its vendor relationships with regard to cost,
delivery, and quality. See "Risk Factors--Dependence on Limited Number of
Suppliers; Exclusive Arrangements and Noncompetition Covenants."
COMPETITION
The Company believes that paintball competes in the extreme sports segment
of the sports and recreation industry, which is highly competitive. This
industry includes mountain biking, snowboarding, alpine and cross-country snow
skiing, water skiing, in-line skating, and skateboarding. The market for
paintball products
31
<PAGE>
specifically, however, is currently fragmented and underdeveloped. The Company
believes that it is the largest manufacturer and marketer of paintball guns
and accessories, particularly to new paintball players, and is a leader in the
design, manufacture, marketing, and distribution of paintball products
generally. There can be no assurance, however, that any number of new
competitors, some of which may have significantly greater financial and
organizational resources than the Company, will not emerge in the future as
the market for paintball products develops further, or that the present
competitors of the Company will not be able to compete more successfully in
the future. In order for the Company to maintain or grow its market share and
profitability, it must continue to develop the market for paintball while
competing successfully with others in the extreme sports segment of the sports
and recreation industries, as well as with other current and potential
paintball product manufacturers. See "Risk Factors--Competition."
INTELLECTUAL PROPERTY
The Company acquired certain patents as part of the BEI Acquisition. Also,
the Company has also applied for patent protection on the design of the new
Rainmaker(TM) paintball gun recently developed, and the Company anticipates
seeking patent protection on paintball guns or certain features of paintball
guns developed in the future. Nevertheless, the Company's competitors
currently replicate and may continue to replicate certain features and
functions of the Company's products. There can be no assurance that current or
future patent protection will prevent competitors from offering competing
products, that any issued patents will be upheld, or that patent protection
will be granted in any or all of the countries in which applications are
currently pending or granted on the breadth of the description of the
invention. In addition, due to considerations relating to, among other things,
cost, delay, or adverse publicity, there can be no assurance that the Company
will elect to enforce its intellectual property rights.
The Company currently holds patents in the United States and Canada on most
of its paintball guns and has a patent pending in the United States on the new
Rainmaker(TM) paintball gun. The Company also has trademark registrations for
its name and the name of its products in the United States and both
registrations and applications in Canada. Although the Company believes that
patents are useful in maintaining the Company's competitive position, it
considers other factors, such as the Company's brand name, ability to design
innovative products, technical and marketing expertise, and customer service
to be its primary competitive advantages.
The Company's competitors have also obtained and may continue to obtain
patents on certain features of their products, which may prevent or discourage
the Company from offering such features on its products, which, in turn, could
result in a competitive disadvantage to the Company. See "Risk Factors--
Limited Protection for Technology."
FACILITIES
The Company leases 6,400 square feet of space for its sales and
administrative offices in Rogers, Arkansas, and a 32,000 square foot
manufacturing facility located in Granby, Missouri, pursuant to two separate
leases, both of which expire in December 1999. The Company, through an
agreement with the Granby Economic Development Council, holds an option to
acquire the four-acre parcel adjacent to the land upon which the Company's
manufacturing facility is located. There will be no cost to the Company for
this acquisition provided the Company employs 25 people at the time the option
is exercised. The Company's finished goods warehouse and shipping functions
are located in New Daisy's warehouse in Rogers, Arkansas.
ENVIRONMENTAL MATTERS
The Company is subject to Federal, state, and local laws, regulations, and
ordinances that (i) govern activities or operations that may have adverse
environmental effects (such as emissions to air, discharges to water, and the
generation, handling, storage, transportation, treatment, and disposal of
solid and hazardous wastes) or (ii) impose liability for cleaning up or
remediating contaminated property (or the costs therefor), including damages
from spills, disposals, or other releases of hazardous substances or wastes in
certain
32
<PAGE>
circumstances without regard to fault. The Company's manufacturing operations
routinely involve the handling of small amounts of chemicals and wastes, some
of which are or may be regulated as hazardous substances. The Company has not
incurred, and does not expect to incur, any significant expenditures or
liabilities for environmental matters. As a result, the Company believes that
its environmental obligations will not have a material adverse effect on its
operations or financial position.
LEGAL PROCEEDINGS
Due to the risks inherent in paintball, the Company anticipates that it will
be a defendant in product liability lawsuits from time to time. Through August
31, 1997, the Company had been named as a defendant in one lawsuit and has had
three other claims made against it by persons alleging to have been injured by
its products. In each case, the alleged injury was to the eye of a paintball
participant. The lawsuit and one of the claims were each resolved without a
material adverse effect on the Company and its prospects. The Company believes
that the other two claims will also be resolved without a material adverse
effect on the Company or its prospects. However, the Company expects that the
volume of such claims and suits will increase as sales increase. The Company
may also from time to time be a party to various other claims, complaints, and
other legal actions that arise in the normal course of business. See "Risk
Factors--Product Safety and Liability."
GOVERNMENT REGULATION
Paintball products are within the jurisdiction of the United States Consumer
Products Safety Commission (the "CPSC") and other Federal, state, and foreign
regulatory bodies. Under CPSC regulations, a manufacturer of consumer goods is
obligated to notify the CPSC if, among other things, the manufacturer becomes
aware that one of its products has a defect that could create a substantial
risk of injury. If the manufacturer has not already undertaken to do so, the
CPSC may require a manufacturer to recall a product, which may involve product
repair, replacement, or refund. The Company is unaware of any activity by the
CPSC in the area of paintball products regarding the Company or any competitor
of the Company.
Some local and foreign jurisdictions have legislation that prohibits the
sale of certain types of products which would include paintball guns. Although
the Company is not aware of any state or Federal initiatives to enact
comparable legislation, there can be no assurance that such legislation will
not be enacted in the future.
The American Society of Testing Materials ("ASTM"), a non-governmental self-
regulating association, has been active in developing voluntary standards
regarding paintball fields, paintball face protection, and paintball guns.
Company representatives are active on the relevant ASTM subcommittees and in
developing the relevant safety standards. The Company does not believe that
any current or pending ASTM standards will have a material adverse effect on
the Company's cost of doing business.
Adverse publicity relating to the sport of paintball, or publicity
associated with actions by the CPSC or others expressing concern about the
safety or function of the Company's products or competitors products (whether
or not such publicity is associated with a claim against the Company or
results in any action by the Company or the CPSC) could have a material
adverse effect on the Company's reputation, brand image, or markets, any of
which could have a material adverse effect on the Company or its prospects.
See "Risk Factors--Government Regulation."
EMPLOYEES
As of August 31, 1997, the Company employed approximately 50 full-time
employees. In addition, the Company also utilizes additional temporary
personnel in its assembly operations to meet production demand when necessary.
The Company is not a party to any labor agreements and none of its employees
is represented by a labor union. The Company considers its relationship with
its employees to be excellent.
33
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Certain information regarding the Company's executive officers, directors,
and certain key employees is set forth below. The Board currently has five
members.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Marvin W. Griffin....... 59 Chairman of the Board of Directors
E. Lynn Scott........... 43 President; Chief Executive Officer; Director
Charles L. Prudhomme.... 46 Vice President, Marketing and Business Development
Steven R. DeMent........ 39 Vice President, Operations
Steven R. Cherry........ 41 Vice President, Brand Development
Daniel L. Obergfell..... 37 Vice President, Sales
Stephen J. Mattia....... 49 Controller; Assistant Secretary
J.J. Brookshire......... 32 Marketing Manager
Anthony J. Dowd......... 38 Director
H. Gregory Wold......... 63 Director
Stephen J. Schaubert.... 51 Director
</TABLE>
Marvin W. Griffin has been Chairman of the Board of the Company since its
inception in September 1997. He has been the President and Chief Executive
Officer of Daisy since 1988 and will continue to serve in that capacity after
the Offering. From 1983 to 1987, Mr. Griffin was the Chief Executive Officer
of the Coca-Cola Bottling Company Consolidated, a soft-drink bottling company,
and he was the Senior Vice President of Sales and Marketing at Coca-Cola
U.S.A., a soft-drink maker, from 1980 to 1983.
E. Lynn Scott has been President and Chief Executive Officer of the Company
since its inception in September 1997. Mr. Scott was responsible for
developing Daisy's paintball operations through its Brass Eagle division and
he has served as President of the division since November 1996. Prior to that,
he served as Vice President, Sales and Marketing of Daisy from June 1989 to
April 1997. Before joining Daisy, Mr. Scott served as Vice President, Sales
and Marketing at Skeeter Products and Crosman, both divisions of The Coleman
Company that specialize in sporting goods. He is also a Director of Daisy
Manufacturing.
Charles L. Prudhomme has been Vice President of Marketing and Business
Development of the Company since its inception in September 1997. Prior to
that he served as Vice President of Business Development and Director of
Marketing of Daisy from April 1996 and as a consultant at Daisy from August
1994 until March 1996. Mr. Prudhomme's responsibilities at Daisy included
developing paintball marketing programs. Before joining Daisy as an employee,
Mr. Prudhomme served as a principal in the Coronado Group, a management
consulting firm, from March 1993 to March 1996, and as a Vice President of the
Joey Reiman Advertising Agency, an advertising firm, from December 1991 to
February 1993.
Steven R. DeMent has been Vice President of Operations of the Company since
its inception in September 1997. Prior to that, he served as Director of
Operations of Daisy from September 1995 to August 1997. Mr. DeMent was
instrumental in the development and installation of Daisy's paintball
manufacturing processes. Before joining Daisy, Mr. DeMent served as President
of New Way Tours, a charter bus and transportation service, from May 1994 to
September 1995, Vice President of Operations for Competec International, Ltd.,
a maker of custom plastics, from April 1993 to May 1994, and as Plant Manager
for Key Tronic Corporation, a maker of computer key boards, from 1988 to March
1993.
Steven R. Cherry has been Vice President, Brand Management, of the Company
since its inception in September 1997. Prior to that, he served as Director of
Product Development of Daisy from May 1995 to August 1997. Mr. Cherry served
as a liaison between Daisy's paintball sales and manufacturing groups. He
served as Product Manager from October 1990 to May 1995, as Manufacturing
Engineering Manager from June 1988 to October 1990, and Chief Industrial
Engineer of Daisy from June 1986 to June 1988.
34
<PAGE>
Daniel L. Obergfell has been Vice President, Sales, of the Company since its
inception in September 1997. Prior to that, he served as Sales Manager of the
Brass Eagle division of Daisy from June 1997 to September 1997. Before joining
Daisy, he served as National Account Sales Manager for DeVilbiss Air Power
Company, a manufacturer of retail power equipment, from June 1996 to March
1997, and as National Account Sales Manager for the WD-40 Company, a multi-
purpose lubricant manufacturer, from November 1988 to May 1996.
Stephen J. Mattia has been Controller and Assistant Secretary of the Company
since its inception in September 1997. Prior to that, he served as Finance
Manager of the Brass Eagle division of Daisy from May 1997 to August 1997.
Before joining Daisy, Mr. Mattia served as Controller of the Global Stone
Corporation, an Oklahoma manufacturer of quick lime products, from November
1996 to May 1997, and as Controller of the Sierra Corporation, an Oklahoma
manufacturer of sporting goods, from September 1992 to September 1995.
J. J. Brookshire has been Marketing Manager of the Company since its
inception in September 1997. Prior to that, he served as Marketing Manager of
the Brass Eagle division of Daisy from October 1995 to August 1997. Before
joining Daisy, Mr. Brookshire served as Director of Marketing for National
Paintball/International Management Associates, Inc., a paintball products
distributor, from February 1992 to October 1995.
Anthony J. Dowd has been a Director of the Company since its inception in
September 1997. He also serves as Director of Private Investments for Charter
Oak Partners, a private investment firm, and has served in that capacity since
May 1992. Mr. Dowd has served as a director of Daisy since June 1993, and
serves as a director of several privately-held companies. Prior to joining the
Company, he served as a Senior Associate at James D. Wolfensohn, Inc. (now BT
Wolfensohn), an investment banking firm, from 1988 to 1991.
H. Gregory Wold has been a Director of the Company since its inception in
September 1997. Mr. Wold joined the Ford Motor Company, an auto manufacturer,
in 1964 and served as its Director of Business Development from 1996 to 1997
and its Associate Director-Corporate Strategy from 1986 to 1996. Mr. Wold
retired from the Ford Motor Company in 1997. He is also a director of Daisy.
Stephen J. Schaubert has been a Director of the Company since its inception
in September 1997. He is also a Director at Bain & Company Inc., an
international consulting firm headquartered in Boston. Prior to joining Bain
in 1979, Mr. Schaubert worked in the healthcare and aerospace industries in a
series of general management positions, both domestic and international.
BOARD COMMITTEES
The Company's By-laws provide that the Board may elect such directorate
committees as it may from time to time determine. Two such committees of the
Board have been established: the Audit Committee and the Compensation
Committee. The members of the Audit Committee are Messrs. Wold and Dowd,
neither of whom are officers or employees of, or otherwise affiliated with,
the Company. The Audit Committee will review the professional services
provided by the Company's independent auditors and the independence of such
auditors from management of the Company. The Audit Committee will also review
the scope of the audit by the Company's independent auditors, the annual
financial statements of the Company, the Company's system of internal
accounting controls, and such other matters with respect to the accounting,
auditing, and financial reporting practices and procedures of the Company as
it finds appropriate or as are brought to its attention. The Compensation
Committee's principal function will be to establish the compensation of
officers of the Company and to establish and administer the Company's
compensation programs. Messrs. Dowd, Scott, and Griffin will serve on the
Compensation Committee.
DIRECTOR COMPENSATION
Each director of the Company who is not also an employee of the Company (or
his or her designee) will receive, as an annual fee, Common Stock having a
fair market value of $8,000 at the time of its issuance in quarterly
installments. A director who is also an employee of the Company will receive
no additional compensation for serving as a director. All directors are
reimbursed for out-of-pocket expenses incurred in
35
<PAGE>
connection with attendance at meetings of the Board and Board committees and
other activities relating thereto.
EMPLOYMENT AGREEMENTS
Mr. Scott has entered into an employment agreement with the Company. The
agreement provides for an initial three-year term expiring September 15, 2000,
which automatically extends each year, subject to the right of either party
not to extend the agreement upon ninety days notice. In addition, Mr. Scott
may elect to terminate his employment in the event of a change-in-control of
the Company of the sale of all or substantially all of its assets. Mr. Scott
will be paid an annual base salary of $140,000 in 1997, increasing to $160,000
in 1998. In 1997, he will receive a bonus of up to $46,667 based upon the
Company's 1997 operating results. Mr. Scott's bonus compensation for
subsequent years will be determined based upon performance targets set by the
Company's Board of Directors after consultation with Mr. Scott.
Under his employment agreement, Mr. Scott is subject to certain non-
disclosure, non-competition, and non-solicitation covenants applicable during
the term of his employment under the agreement and until one year after
termination of his employment.
Pursuant to the 1997 Stock Option Plan, Mr. Scott was granted options to
purchase up to 72,250 shares of Common Stock at the initial public offering
price. His options vest in four annual installments after completion of this
Offering. Mr. Scott is eligible to receive additional options under the 1997
Stock Option Plan. See "--1997 Stock Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There were no compensation committee interlocks in 1996. E. Lynn Scott
currently serves on the Company's compensation committee and also serves on
the Board of Directors for New Daisy. Marvin W. Griffin is the President and
Chief Executive Officer of New Daisy and also serves on the Company's
Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid or accrued for services rendered to Daisy during Daisy's last year to the
Chief Executive Officer of the Company and each of the Company's other
executive officers whose compensation exceeded $100,000 (collectively, the
"Named Executive Officers"), based on salary and bonus earned for services
rendered to Daisy during 1996. The compensation described herein is being
provided only for those individuals who are executive officers of the Company
on a going forward basis and reflects the compensation paid to them by Daisy
in 1996. See "Reorganization."
36
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------- ---------------------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
NAME AND COMPEN- STOCK UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION AWARD(S) OPTIONS SATION(1)
------------------ ---- -------- ------ ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
E. Lynn Scott........... 1996 $130,200 -- -- -- $24,378 $5,780
President and Chief Ex-
ecutive Officer
Steven R. DeMent........ 1996 120,000 -- -- -- -- 1,274
Vice President, Opera-
tions
</TABLE>
- --------
(1) "All Other Compensation" includes the following: (i) Company contributions
to the 401(k) Retirement Savings Plan of $4,392 for Mr. Scott and (ii)
Company payments of life insurance premiums of $1,388 for Mr. Scott and
$1,274 for Mr. DeMent.
Option Grants During 1996. The following table provides information related
to options to purchase common stock of the Company granted to the Named
Executive Officers during 1996. See "Reorganization."
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE OR
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION
NAME OPTIONS YEAR PER SHARE DATE
---- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
E. Lynn Scott................ 24,378 40% $0.52 July 1, 2003
Options Exercised During 1996 and Year Ended Option Values. The following
table provides information related to options to purchase common stock of the
Company exercised by the Named Executive Officers during 1996 and the number
and value of such options held on June 30, 1997. The Company does not have any
outstanding stock appreciation rights. See "Reorganization."
OPTION EXERCISES IN 1996
<CAPTION>
NUMBER OF
SHARES SECURITIES
ACQUIRED UNDERLYING UNEXERCISED
ON VALUE OPTIONS AT
EXERCISE REALIZED DECEMBER 31, 1996
---------- ------------ -------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C> <C> <C>
E. Lynn Scott................ -- -- 54,851 --
</TABLE>
1997 STOCK OPTION PLAN
The 1997 Stock Option Plan ("Stock Option Plan") provides for the granting
to the Company's executive officers and other key employees of incentive stock
options and non-qualified stock options to purchase an aggregate of up to
430,000 shares of the Common Stock. The Stock Option Plan is intended to
provide an equity interest in the Company to eligible employees and thereby
enable such employees to share in the long-term growth and success of the
Company. The Stock Option Plan is also intended to aid in attracting and
retaining executive officers and other key employees essential to the success
of the Company. The Stock Option Plan is administered by the Company's
Compensation Committee.
37
<PAGE>
All stock options granted under the Stock Option Plan will have an exercise
price per share to be determined by the Compensation Committee, provided that
the exercise price per share shall not be less than the fair market value of
the Common Stock on the date of grant. The maximum term for all stock options
granted under the Stock Option Plan is 10 years. Options granted under the
Stock Option Plan may not be transferred, except by will or the laws of
descent and distribution and shall be exercisable during the optionee's
lifetime only by the optionee or his or her guardian or legal representative.
Awards granted under the Stock Option Plan may be subject to acceleration in
the event of a change in control of the Company, and, therefore, it is
possible that these change-in-control features may affect whether amounts
realized upon the receipt or exercise of stock options will be deductible by
the Company under the "excess parachute payments" provisions of the Internal
Revenue Code.
The foregoing discussion of the material provisions of the Stock Option Plan
is qualified in its entirety by reference to the full text of the Stock Option
Plan, which has been filed as an exhibit to the Registration Statement and is
incorporated herein by reference.
EMPLOYEE STOCK PURCHASE PLAN
Prior to consummation of the Offering the Company will adopt an Employee
Stock Purchase Plan (the "Purchase Plan"). A total of 70,000 shares of Common
Stock will be reserved for issuance under the Purchase Plan. The Purchase
Plan, which is intended to qualify under Section 423 of the Internal Revenue
Code, will be implemented by overlapping offering periods, each with a maximum
duration of 24-months, with purchases occurring at six-month intervals. The
initial offering period will commence on the closing of the Offering and will
end on December 31, 1998, with the first purchase date to be May 1, 1998. The
Purchase Plan will be administered by the Board of Directors of the Company or
the Compensation Committee of the Board. Employees will be eligible to
participate if they are employed by the Company for more than 30 hours per
week. The Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions, which may not exceed 10.0% of an employee's cash
compensation. No more than 500 shares may be purchased by each participant on
the initial purchase date and 250 shares per participant on all subsequent
purchase dates. The price of stock purchased under the Purchase Plan will be
85.0% of the lower of the fair market value of the Common Stock at the
beginning of the offering period or on the applicable semi-annual purchase
date. Employees may end their participation in the offering at any time during
the offering period, and participation ends automatically on termination of
employment with the Company. Each outstanding purchase right will be exercised
immediately prior to a merger or consolidation. The Board may amend or
terminate the Purchase Plan immediately after the close of any purchase date.
However, the Board may not, without stockholder approval, materially increase
the number of shares of Common Stock available for issuance or materially
modify the eligibility for participation. The Purchase Plan will in all events
terminate December 31, 2000.
OPTIONS GRANTED TO CERTAIN DAISY EMPLOYEES
Daisy has granted to five employees and one former employee non-contingent
options to purchase 280,347 shares of Common Stock exercisable as of September
15, 1997, in the aggregate, at a price of $0.52 per share. The options are
fully vested and may be exercised, in whole or in part, at any time before
July 1, 2003. None of the options have been exercised at the time of the
Offering. Messrs. Griffin, Scott, and DeMent hold options for 121,890 shares,
79,228, shares and 12,189 shares, respectively, at a price of $0.52 per share.
In addition, Messrs. Griffin and Scott have been granted options to purchase
136,641 shares and 68,320 shares of Common Stock, respectively. In
contemplation of the Offering, these options vested September 15, 1997, and
may be exercised, in whole or in part, at any time prior to the fifth
anniversary of the consummation of the Offering. No options have been
exercised at the time of the Offering. See "Reorganization."
38
<PAGE>
CERTAIN TRANSACTIONS
Messrs. Griffin and Scott, the Chairman of the Board and the President and
Chief Executive Officer of the Company, respectively, were holders of shares
of the preferred stock of the Company which will be canceled in connection
with the Reorganization. The Company has entered into agreements with each
whereby the Company has agreed to indemnify them against any adverse income
tax consequences that they suffer as a result of such cancellation. It is not
possible to predict whether such indemnification will be required or, if
required, to estimate the precise amount thereof; provided, however, that the
Company does not expect that its obligation would exceed approximately
$240,000 with respect to Mr. Griffin and approximately $90,000 with respect to
Mr. Scott. See "Reorganization."
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of August 31, 1997, and as adjusted to give
effect to the Offering by (i) each beneficial owner of more than 5% of Common
Stock, (ii) each of the Company's directors, (iii) each of the Named Executive
Officers, and (iv) all directors and executive officers of the Company as a
group. Except as otherwise indicated, the Company believes that the beneficial
owners of the Common Stock listed below, based on information furnished by
such owners, have sole investment and voting power with respect to such
shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
---------------------------------------
PERCENT PRIOR PERCENT AFTER
NAME AND ADDRESS(2) NUMBER TO THE OFFERING THE OFFERING
------------------- --------- --------------- -------------
<S> <C> <C> <C>
Charter Oak Partners.... 4,011,281 72.7% 51.5%
Marvin W. Griffin(3).... 659,916 12.0 8.5
E. Lynn Scott(3)........ 280,309 5.1 3.6
Anthony J. Dowd(4)...... 4,011,281 72.7 51.5
H. Gregory Wold......... 46,582 0.8 0.6
Stephen J. Schaubert.... 15,527 0.3 0.2
Steven R. DeMent(3)..... 19,953 0.4 0.3
All directors and
officers as a group.... 5,033,568 91.3% 64.7%
</TABLE>
- --------
(1) Determined in accordance with the regulations of the Securities and
Exchange Commission. Accordingly, beneficial ownership may include
securities owned by or for, among others, the spouse and/or minor children
of the individual and any other relative who has the same home as such
individual, as well as other securities as to which the individual has or
shares voting or investment power or has the right to acquire under
outstanding stock options within 60 days after the date of this table.
Beneficial ownership may be disclaimed as to certain of the securities.
(2) Unless otherwise indicated the address of each beneficial owner is 1203A
North Sixth Street, Rogers, Arkansas 72756.
(3) Amount includes the following number of currently exercisable options to
purchase shares of Common Stock by the individuals indicated: Marvin W.
Griffin (258,531); E. Lynn Scott (147,548); and Steven R. DeMent (12,189).
(4) Includes all of the shares of Common Stock owned by Charter Oak Partners,
because as Director of Private Investments of Charter Oak Partners, Mr.
Dowd may be deemed to beneficially own such shares. Mr. Dowd disclaims
beneficial ownership of shares held by Charter Oak Partners, except to the
extent of his proportionate interest therein.
40
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 10,000,000 shares of
Common Stock, par value $0.01 per share. Prior to completion of the Offering,
the Company had 5,031,358 shares of Common Stock outstanding. As of the date
of this Prospectus, options to purchase an aggregate of 995,310 shares of
Common Stock were also outstanding. Upon completion of the Offering, the
Company will have 7,306,358 outstanding shares of Common Stock (7,647,608
shares if the Underwriters' over-allotment option is exercised in full). See
"Management."
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
submitted to the stockholders for a vote, including the election of directors.
Holders of Common Stock are not entitled to cumulate their votes in elections
of directors. Holders of Common Stock are entitled to receive such dividends
as may be declared and paid in the discretion of the Board of Directors out of
funds legally available therefor and to share ratably in the net assets, if
any, of the Company upon liquidation after payment or provision for all
liabilities. Holders of Common Stock have no preemptive rights to purchase any
shares of the Company's capital stock. Shares of Common Stock are not subject
to any redemption provisions and are not convertible into any other securities
of the Company. All outstanding shares of Common Stock are, and the shares of
Common Stock to be issued pursuant to the Offering will be upon payment
therefor, fully paid and nonassessable.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS
The directors shall be elected for one-year terms at each annual meeting of
the stockholders. The number of directors shall be fixed by the Board of
Directors, but shall consist of no less than three nor more than nine
directors. In general, the Board of Directors, not the stockholders, has the
right to appoint persons to fill vacancies on the Board of Directors. The By-
laws of the Company may be amended only by the Board of Directors or by the
affirmative vote of a majority of the Company's voting stock.
LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS--INDEMNIFICATION
Delaware law authorizes corporations to limit or eliminate the personal
liability of officers and directors to corporations and their stockholders for
monetary damages for breach of officers' and directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the
corporation, officers and directors must exercise an informed business
judgment based on all material information reasonably available to them.
Absent the limitations authorized by Delaware law, officers and directors are
accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Delaware law enables corporations to limit available relief to equitable
remedies such as injunction or rescission. The Restated Certificate of
Incorporation limits the liability of officers and directors of the Company to
the Company or its stockholders to the fullest extent permitted by Delaware
law. Specifically, officers and directors of the Company will not be
personally liable for monetary damages for breach of an officer's or
director's fiduciary duty in such capacity, except for liability (i) for any
breach of the officer's or director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the officer and director derived an improper personal
benefit.
The inclusion of this provision in the Restated Certificate of Incorporation
may have the effect of reducing the likelihood of derivative litigation
against officers and directors, and may discourage or deter stockholders or
management from bringing a lawsuit against officers and directors for breach
of their duty of care, even though such an action, if successful, might
otherwise have benefitted the Company and its stockholders. Both the Company's
Restated Certificate of Incorporation and By-laws provide indemnification to
the Company's officers and directors and certain other persons with respect to
certain matters to the maximum extent allowed by
41
<PAGE>
Delaware law as it exists now or may hereafter be amended. These provisions do
not alter the liability of officers and directors under federal securities
laws and do not affect the right to sue or recover monetary damages under
federal securities laws for violations thereof.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is SunTrust
Bank, Atlanta located in Atlanta, Georgia.
42
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, assuming no exercise of the Underwriters'
over-allotment option, the Company will have 7,306,358 shares of Common Stock
outstanding (7,647,608 shares if the Underwriters' over-allotment option is
exercised in full). Of these outstanding shares of Common Stock, the 2,275,000
shares sold in the Offering (2,616,250 shares if the Underwriters' over-
allotment option is exercised in full) will be freely tradeable without
restriction unless acquired by affiliates of the Company. None of the
remaining 5,031,358 shares of outstanding Common Stock have been registered
under the Securities Act, which means that they may be resold publicly only
upon registration under the Securities Act or in compliance with an exemption
from the registration requirements of the Securities Act, including the
exemption provided by Rule 144 thereunder.
In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of the acquisition of restricted Common Stock from
either the Company or any affiliate (as defined in the Securities Act) of the
Company, the acquiror or subsequent holder thereof may sell, within any three
month period commencing 90 days after the date of this Prospectus, a number of
shares that does not exceed the greater of 1% of the then outstanding shares
of Common Stock (73,063 shares upon completion of the Offering assuming the
Underwriter's over-allotment is exercised in full), or the average weekly
trading volume of the shares of Common Stock on the Nasdaq National Market
during the four calendar weeks preceding the date on which notice of the
proposed sale is sent to the Commission. Sales under Rule 144 are also subject
to certain manner-of-sale provisions, notice requirements, and the
availability of current public information about the Company. If two years
have elapsed since the later of the date of the acquisition of restricted
Common Stock from the Company or any affiliate of the Company, a person who is
not deemed to have been an affiliate of the Company at any time for 90 days
preceding a sale would be entitled to sell such shares under Rule 144 without
regard to the volume limitations, manner of sale provisions, or notice
requirements. See "Risk Factors--Shares Eligible for Future Sale."
All of the executive officers, directors, and certain shareholders of the
Company have agreed not to sell or otherwise dispose of any shares of Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of the representatives. See "Underwriting."
Prior to the Offering, there has been no public market for the Common Stock.
No prediction can be made regarding the effect, if any, that public sales of
Common Stock or the availability of shares for sale will have on the market
price of the Common Stock after the Offering. Sales of substantial amounts of
the Common Stock in the public market following the Offering, or the
perception that such sales may occur, could adversely affect the market price
of the Common Stock and could impair the ability of the Company to raise
capital through sales of its equity securities. See "Risk Factors--No Prior
Public Market; Maintenance of Listing Requirements and Possible Volatility of
Stock Price."
43
<PAGE>
UNDERWRITING
In the Underwriting Agreement, the Underwriters, represented by McDonald &
Company Securities, Inc. and Dain Bosworth Incorporated (the
"Representatives"), have agreed, severally, subject to the terms and
conditions therein set forth, to purchase from the Company, and the Company
has agreed to sell to them, the number of shares of Common Stock offered
hereby. Each Underwriter will purchase the number of shares set forth opposite
its name below, and will purchase such shares at the price to public, less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. The Underwriters are committed to take and pay for all shares if
any shares are purchased.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
McDonald & Company Securities, Inc. .....................
Dain Bosworth Incorporated...............................
---
Total................................................
===
</TABLE>
The Company has been advised by the Representatives that the Underwriters
propose to offer the Common Stock to the public at the public offering price
set forth on the cover page of this Prospectus. The Underwriters may allow to
certain selected dealers who are members of the National Association of
Securities Dealers, Inc. (the "NASD") a discount not exceeding $ per share,
and the Underwriters may allow, and such selected dealers may re-allow, a
discount not exceeding $ per share to other dealers who are members of the
NASD. After the Offering, the public offering price and the discount to
dealers may be changed by the Representative.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of 341,250 shares of Common Stock at the public offering price, less
the underwriting discount, as set forth on the cover page of this Prospectus.
The Underwriters may exercise that option only to cover over-allotments in the
sale of the Common Stock that the Underwriters have agreed to purchase. To the
extent that the Underwriters exercise such option, each of the Underwriters
will have a firm commitment, subject to certain conditions, to purchase the
same percentage of the option shares as the number of shares to be purchased
and offered by that Underwriter in the table above bears to the total.
The Company has agreed to indemnify the Underwriters against certain
liabilities which may be incurred in connection with the Offering, including
liabilities under the Securities Act.
The Company and the directors, executive officers, and certain current
stockholders of the Company have agreed that they will not offer, sell,
transfer, or otherwise dispose of any Common Stock, or any securities
convertible into or exchangeable for Common Stock, for a period of 180 days
from the date of this Prospectus, without the prior written consent of
McDonald & Company Securities, Inc.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of Common Stock offered by this Prospectus to any
accounts over which they exercise discretionary authority.
At the request of the Company, up to shares of Common Stock offered
in the Offering have been reserved for sale to employees of the Company and
certain members of their families. The price of those shares to those persons
will be equal to the public offering price set forth on the cover page of this
Prospectus. The number of shares available to the general public will be
reduced to the extent those persons purchase reserved shares. Any shares not
so purchased will be offered in the Offering at the public offering price set
forth on the cover page of this Prospectus.
In connection with the Offering and in compliance with applicable law, the
Underwriters may over-allot or effect transactions that stabilize, maintain,
or otherwise affect the market price of the Common Stock at levels above those
that might otherwise prevail in the open market, including by entering
stabilizing bids, effecting syndicate covering transactions, or imposing
penalty bids. A stabilizing bid means the placing of any bid, or the
44
<PAGE>
effecting of any purchase, for the purpose of pegging, fixing, or maintaining
the price of a security. A syndicate covering transaction means the placing of
any bid on behalf of the underwriting syndicate or the effecting of any
purchase to reduce a short position created in connection with the Offering. A
penalty bid means an arrangement that permits McDonald & Company Securities,
Inc., as managing underwriter, to reclaim a selling concession from a
syndicate member in connection with the Offering when securities originally
sold by the syndicate member are purchased in stabilizing or syndicate
covering transactions. These transactions may be effected on the Nasdaq
National Market or otherwise. The Underwriters are not required to engage in
any of these activities. Any such activities, if commenced, may be
discontinued at any time.
Prior to the Offering, there has been no public market for the shares of
Common Stock. The initial public offering price will be determined by
negotiations among the Company and the Underwriters. Among the factors
considered in such negotiations will be the history of and prospects for the
Company's business and the industry in which it competes, an assessment of the
Company's management and the present state of the Company's development, the
past and present revenues and earnings of the Company, the prospects for
growth of the Company's revenues and earnings, the current state of the
economy in the United States and overseas and the current level of economic
activity in the industry in which the Company competes and in related
comparable industries, and currently prevailing conditions in the securities
markets, including current market valuations of publicly traded companies that
are comparable to the Company. Application has been made to have the Common
Stock approved for quotation on the Nasdaq National Market under the symbol
"XTRM."
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Friday, Eldredge & Clark, Little Rock, Arkansas, and certain legal
matters will be passed upon for the Underwriters by Baker & Hostetler LLP,
Cleveland, Ohio.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996, 1995, and 1994 and June 30, 1997, that appear in this Prospectus have
been audited by Crowe, Chizek and Company, LLP, independent certified public
accountants, and are included in reliance upon the reports of such firm given
upon their authority as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company is not currently subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result
of this Offering, the Company will be required to file reports and other
information with the Securities and Exchange Commission (the "Commission")
pursuant to the informational requirements of the Exchange Act.
The Company has filed with the Commission, in Washington D.C., a
Registration Statement Form S-1 under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all
the information set forth in Registration Statement and the Exhibits and
Schedules thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement
and the Exhibits and Schedules filed therewith. Statements contained in this
Prospectus as to the content of any contract or any other document referred to
are not necessarily complete, and, in each instance reference is made to the
copy of such contract or other document filed as an Exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. A copy of the Registration Statement, and the Exhibits and
Schedules thereto, may be inspected without charge at the public reference
45
<PAGE>
facilities maintained by the Securities and Exchange Commission at the
Judiciary Plaza, in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices located at 7 World Trade Center, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and copies of all or any part of the
Registration Statement may be obtained from such offices upon the payment of
the fees prescribed by the Commission. In addition, the Registration Statement
may be accessed electronically at the Commission's site on the World Wide Web
located at http://www.sec.gov.
46
<PAGE>
BRASS EAGLE/A DIVISION OF
DAISY MANUFACTURING COMPANY, INC.
ROGERS, ARKANSAS
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
REPORT OF INDEPENDENT AUDITORS.............................................. F-2
FINANCIAL STATEMENTS
BALANCE SHEETS............................................................ F-3
STATEMENTS OF OPERATIONS AND DIVISIONAL EQUITY............................ F-4
STATEMENTS OF CASH FLOWS.................................................. F-5
NOTES TO FINANCIAL STATEMENTS............................................. F-6
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Daisy Manufacturing Company, Inc.
Rogers, Arkansas
We have audited the accompanying balance sheets of Brass Eagle/a Division of
Daisy Manufacturing Company, Inc. (Brass Eagle), as of December 31, 1995 and
1996 and June 30, 1997, and the related statements of operations and
divisional equity and cash flows for each of the years in the three-year
period ended December 31, 1996 and the six-month period ended June 30, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brass Eagle as of December
31, 1995 and 1996 and June 30, 1997 and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1996 and the six-month period ended June 30, 1997, in conformity with
generally accepted accounting principles.
As explained in Note 1, the financial statements include significant
allocations of costs and expenses of Daisy Manufacturing Company allocated to
Brass Eagle.
Oak Brook, Illinois
September 4, 1997, except as to Note 14 for which
the date is , 1997
- -------------------------------------------------------------------------------
The above represents the form of report we expect to issue upon completion
of the transaction discussed in Note 14 to the financial statements.
Oak Brook, Illinois
September , 1997
F-2
<PAGE>
BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
ASSETS
Current assets
Accounts receivable--less allowance for doubtful
accounts of $18 in 1995, $52 in 1996, and $52 in
1997 (Note 5)...................................... $ 1,334 $ 3,656 $ 4,707
Inventories (Notes 3 and 5)......................... 546 1,195 2,470
Prepaid expenses.................................... 55 379 658
Deferred income taxes (Note 7)...................... 38 83 208
------- ------- --------
Total current assets.............................. 1,973 5,313 8,043
Property and equipment, net (Notes 4 and 5)........... 1,223 1,070 1,323
Other assets
Intangible assets, net (Note 1)..................... 3,092 2,886 2,781
Other............................................... -- -- 52
------- ------- --------
Total other assets................................ 3,092 2,886 2,833
------- ------- --------
$ 6,288 $ 9,269 $ 12,199
======= ======= ========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities
Current maturities of long-term debt (Note 5)....... $ 1,122 $ 1,151 $ 1,358
Accounts payable.................................... 52 1,122 3,681
Accrued expenses.................................... 173 422 643
Intercompany debt (Note 9).......................... 1,619 3,352 2,689
------- ------- --------
Total current liabilities......................... 2,966 6,047 8,371
Long-term debt, less current maturities (Note 5)...... 3,043 1,892 1,414
Deferred income taxes (Note 7)........................ 31 200 164
Divisional equity (Note 14)........................... 248 1,130 2,250
------- ------- --------
$ 6,288 $ 9,269 $ 12,199
======= ======= ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.
STATEMENTS OF OPERATIONS AND DIVISIONAL EQUITY
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------------- ---------------------
1994 1995 1996 1996 1997
------ ------ --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales....................... $2,615 $4,319 $ 13,838 $4,791 $ 11,905
Cost of sales................... 1,258 2,456 9,625 3,325 7,994
------ ------ --------- ------ ---------
Gross profit.................... 1,357 1,863 4,213 1,466 3,911
Operating expenses
Selling and marketing......... 279 640 1,472 614 1,463
General and administrative.... 219 595 750 409 406
Royalty expense............... 459 487 -- -- --
Amortization expense.......... -- 52 202 98 104
------ ------ --------- ------ ---------
957 1,774 2,424 1,121 1,973
------ ------ --------- ------ ---------
Operating income................ 400 89 1,789 345 1,938
Other expense
Interest expense.............. -- 87 315 167 123
Other, net.................... -- -- 45 -- --
------ ------ --------- ------ ---------
-- 87 360 167 123
------ ------ --------- ------ ---------
Income before income taxes...... 400 2 1,429 178 1,815
Provision for income taxes (Note
7)............................. 153 1 547 68 695
------ ------ --------- ------ ---------
Net income...................... 247 1 882 110 1,120
Divisional equity at beginning
of period...................... -- 247 248 1,130 1,130
------ ------ --------- ------ ---------
Divisional equity at end of
period......................... $ 247 $ 248 $ 1,130 $1,240 $ 2,250
====== ====== ========= ====== =========
Pro forma net income per share
(Note 14)...................... $ 0.16 $ 0.21
========= =========
Number of shares used to compute
Pro forma net income per share
(Note 14)...................... 5,354,833 5,417,480
========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------------- -------------------
1994 1995 1996 1996 1997
----- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net income................. $ 247 $ 1 $ 882 $ 110 $ 1,120
Adjustments to reconcile
net income to net cash
from operating activities
Deferred income taxes.... (17) 10 124 75 (161)
Depreciation and
amortization............ 1 102 426 223 337
Provision for doubtful
accounts................ -- 18 34 32 --
Loss on sale of
equipment............... -- -- 46 --
Changes in assets and
liabilities
Accounts receivable.... (616) (735) (2,356) (729) (1,051)
Inventories............ (232) (314) (649) (538) (1,275)
Prepaid expenses and
other assets.......... (32) (42) (323) (30) (331)
Accounts payable and
accrued expenses...... 91 188 1,317 806 2,780
----- ------- ------- ----- -------
Net cash provided by
(used in) operating
activities.......... (558) (772) (499) (51) 1,419
Cash flows from investing
activities
Purchases of property and
equipment................. (8) (48) (217) (127) (485)
Acquisition of Brass Eagle,
Inc....................... -- (2,178) -- -- --
Proceeds from sale of
equipment................. -- -- 105 -- --
----- ------- ------- ----- -------
Net cash used in
investing
activities.......... (8) (2,226) (112) (127) (485)
Cash flows from financing
activities
Proceeds (payments) on
long-term debt............ -- 2,000 (1,122) (199) (271)
Net proceeds (payments) on
intercompany debt......... 566 998 1,733 377 (663)
----- ------- ------- ----- -------
Net cash provided by
(used in) financing
activities.......... 566 2,998 611 178 (934)
----- ------- ------- ----- -------
Net change in cash........... -- -- -- -- --
Cash at beginning of period.. -- -- -- -- --
----- ------- ------- ----- -------
Cash at end of period........ $ -- $ -- $ -- $ -- $ --
===== ======= ======= ===== =======
Supplemental disclosures of
cash flow information
Cash paid during the year
Interest................. $ -- $ 41 $ 227 $ 165 $ 170
Supplemental schedule of noncash investing
and financing activities
The Company purchased
certain assets of Brass
Eagle, Inc. for
$4,343,475.
The purchase price was
allocated as follows:
Production equipment..... $ 73
Tooling.................. 1,146
Goodwill................. 3,125
-------
Total purchase price... 4,344
Cash paid................ (2,178)
-------
Amount financed by
seller................ $ 2,166
=======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by the Company
are as follows:
Description of Business: Brass Eagle (the "Company") is a leading
manufacturer of paintball guns and other paintball products and is a division
of Daisy Manufacturing Company, Inc. ("Daisy"). The Company sells its products
through both foreign and major national domestic retailers. In 1993, Daisy
began selling paintball products, which were supplied by Brass Eagle, Inc.,
under the Brass Eagle name. In October 1995, Daisy purchased certain assets,
trademarks, and patents of Brass Eagle, Inc. (see Note 2). Prior to the
purchase of assets from Brass Eagle, Inc. in October 1995, the Company paid
royalties to Brass Eagle, Inc. to sell paintball products under the Brass
Eagle name. The financial statements have been prepared using certain
estimates and allocations (see below) and include only the accounts of Brass
Eagle, the paintball division of Daisy Manufacturing Company, Inc.
Reorganization: Concurrently with the consummation of an initial public
offering of common stock the Company intends to effect a corporate
reorganization. In preparation for the reorganization, Daisy Manufacturing
Company, Inc. will change its name to Brass Eagle. Concurrently with the
Offering, the Company will cancel the existing preferred stock and will
transfer all of its non paintball related assets, operations and liabilities
to a newly created subsidiary, Daisy Manufacturing Company, a Delaware
corporation ("New Daisy"), retaining only its paintball related assets,
operations and liabilities. The Company will then distribute all of the issued
and outstanding common stock of New Daisy to the Company's existing
stockholders in a spin-off transaction described under Section 355 of the
Internal Revenue Code of 1986, as amended. New Daisy will agree to indemnify
and hold harmless the Company and its directors, officers, employees and
shareholders from and against all liabilities and obligations arising with
respect to the Company's non-paintball related operations. In addition, the
Company will agree to indemnify and hold harmless New Daisy and its directors,
officers, employees and shareholders from and against all liabilities and
obligations arising with respect to the paintball related operations.
Earnings Per Share: Earnings per share amounts were computed by dividing
earnings by the weighted average number of common shares outstanding after
giving effect to dilutive stock options (See Notes 13 and 14).
Inventories: Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
Property and Equipment: Property and equipment are stated at cost.
Expenditures for repairs and maintenance are charged to expense as incurred
and expenditures for additions and improvements which significantly extend the
lives of assets are capitalized. Upon sale or other retirement of depreciable
property, the cost and accumulated depreciation are removed from the related
accounts and any gain or loss is reflected in operations.
Tools and dies are depreciated using the units of production method.
Manufacturing equipment and office equipment are depreciated over the
estimated useful lives of the assets, ranging from six to twelve years, using
the straight-line method. Amortization of leasehold improvements is based on
the shorter of the lease term or the useful life, using the straight-line
method.
F-6
<PAGE>
BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Intangible Assets: Intangible assets and debt financing costs are stated at
amortized cost. Intangible assets are being amortized over 15 years on a
straight-line basis and debt financing costs are amortized over the period of
the related debt. Accumulated amortization was $52, $258, and $363 as of
December 31, 1995 and 1996 and June 30, 1997, respectively.
The valuation of intangible assets is reviewed on an ongoing basis by
comparing the unamortized cost of the asset to the related projected
undiscounted revenue streams. Any impairment is charged to operations in the
period determined.
Income Taxes: The Company has a tax allocation agreement with its parent
which provides for income taxes to be payable by Brass Eagle on the same basis
as if the Company had filed a separate income tax return.
A deferred tax liability or asset is determined at each balance sheet date.
It is measured by applying enacted tax laws to future amounts that will result
from differences in the financial statement and tax bases of assets and
liabilities.
Financial Instruments: The carrying value of accounts receivable and
accounts payable approximates fair value because of the short maturity of
these items. Based on the current market rates available to the Company, the
fair value of long-term debt approximates carrying value.
Unaudited Financial Statements: The statement of operations and divisional
equity and the related statement of cash flows for the six-month period ended
June 30, 1996 are unaudited but, in the opinion of management of the Company,
include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the results of operations and cash flows for the
six-month period ended June 30, 1996. The results of operations for the six-
month period ended June 30, 1997 are not necessarily indicative of the results
expected for the full calendar year.
Allocations and Use of Estimates: During the six-month period ending June
30, 1997 and the years ending December 31, 1996, 1995, and 1994, Brass Eagle
shared operational and administrative facilities with Daisy. As a result,
manufacturing, selling, and administrative expenses had to be allocated from
Daisy to Brass Eagle. Allocations were based on various activities including
quantity of inventory produced, quantity of inventory received, number of
shipments, headcount, and estimates of time spent on Brass Eagle. Sales,
returns, material cost, and direct labor cost were not allocated because they
could be specifically identified to Brass Eagle.
Management must make estimates and assumptions in preparing financial
statements that affect the amounts reported therein and the disclosures
provided. These estimates, allocations, and assumptions may change in the
future and future results could differ.
NOTE 2--ACQUISITIONS
On October 1, 1995, Daisy purchased certain assets of Brass Eagle, Inc. for
$4,344. The purchase price was allocated to machinery and equipment, patents,
trademarks, the Brass Eagle name, and technology. The purchase price is being
allocated over the useful lives of the tangible and intangible assets
acquired.
F-7
<PAGE>
BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 3--INVENTORIES
Inventories consist of the following components:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
------------- --------
<S> <C> <C> <C>
Finished goods........................................ $ 298 $ 437 $1,854
Raw materials......................................... 248 758 616
----- ------- ------
Total inventory..................................... $ 546 $ 1,195 $2,470
===== ======= ======
</TABLE>
NOTE 4--PROPERTY AND EQUIPMENT
Property and equipment consist of the following major classifications:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- JUNE 30,
1995 1996 1997
------ ------ --------
<S> <C> <C> <C>
Tools and dies...................................... $1,186 $1,117 $1,441
Manufacturing equipment............................. 88 169 242
Leasehold improvements.............................. -- -- 85
Office equipment.................................... -- 21 24
------ ------ ------
1,274 1,307 1,792
Accumulated depreciation............................ (51) (237) (469)
------ ------ ------
$1,223 $1,070 $1,323
====== ====== ======
</TABLE>
NOTE 5--LONG-TERM DEBT
The Company has a term loan agreement specifically allocated in the Daisy
credit facility at LIBOR plus 2.5%. This allocated portion along with
borrowings under the loan by Daisy Manufacturing are secured by all personal
assets including accounts receivable, inventory, property and equipment, and
intangible properties of both Daisy and Brass Eagle. As of December 31, 1995
and 1996 and June 30, 1997, the Company had $2,000, $1,800, and $1,500,
respectively, outstanding under this term loan agreement.
The Company, through Daisy, also has a non-interest-bearing promissory note
of $2,500 with the prior owners of Brass Eagle, Inc., which is secured by the
assets purchased in the acquisition. This note has been discounted at 8.4%
which was the Company's incremental borrowing rate as of October 1, 1995, the
inception of the note. The present value of the note outstanding at December
31, 1995 and 1996 and June 30, 1997 was $2,166, $1,243, and $1,243,
respectively. Installments of principal and accrued interest are due as
follows:
<TABLE>
<S> <C>
October 3, 1997................................. $ 650
January 31, 1998................................ 350
October 3, 1998................................. 500
------
$1,500
======
</TABLE>
Covenants related to the term loan agreement establish borrowing limitations
and net worth, interest coverage, and debt to equity and cash flow
requirements and impose restrictions on the disposition and purchase
F-8
<PAGE>
BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
of assets and the creation and retirement of debt for the parent company. As
of December 31, 1996 and June 30, 1997, the Company and Daisy were in
compliance with the covenants or had obtained the appropriate waivers from the
lender.
Aggregate maturities of long-term debt as of June 30 are as follows:
<TABLE>
<S> <C>
1998............................................ $1,358
1999............................................ 900
2000............................................ 509
2001............................................ 5
------
$2,772
======
</TABLE>
NOTE 6--LEASES
The Company leases a manufacturing facility under an operating lease which
expires December 1999. In addition, the Company leases office facilities under
an operating lease which expires December 1999. Rent expense approximated $27
for the year ended December 31, 1996 and $21 for the six-month period ended
June 30, 1997. Previous to the Company entering into these leases, the Company
was allocated facility cost from Daisy. Total minimum rentals under
noncancelable operating leases over future years as of June 30 are:
<TABLE>
<S> <C>
1998............................................. $ 136
1999............................................. 136
2000............................................. 68
-----
$ 340
=====
</TABLE>
NOTE 7--INCOME TAXES
The income tax provision is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------- -----------
1994 1995 1996 1996 1997
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Current payable................................ $170 $ (9) $423 $ (7) $ 856
Deferred income taxes.......................... (17) 10 124 75 (161)
---- ---- ---- ---- -----
$153 $ 1 $547 $68 $ 695
==== ==== ==== ==== =====
</TABLE>
Income tax expense is reconciled to the tax expense that would result from
applying regular statutory rates to pretax income as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------- ---------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income taxes at the statutory rate.................. $135 $ 1 $486 $60 $617
State taxes, net of federal benefit................. 18 -- 61 8 78
---- --- ---- --- ----
$153 $ 1 $547 $68 $695
==== === ==== === ====
</TABLE>
F-9
<PAGE>
BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- JUNE 30,
1995 1996 1997
------ ------- --------
<S> <C> <C> <C>
Current deferred items
Accounts receivable allowance..................... $ 7 $ 20 $ 50
Accrued warranty.................................. 16 34 115
Accrued vacation.................................. 5 10 15
Inventory valuation............................... 5 13 28
Accrued insurance................................. 5 6 --
----- ------- -----
38 83 208
Noncurrent deferred items
Accrued pension cost.............................. 10 27 41
Accrued postretirement benefit cost............... 11 18 22
Depreciation...................................... (52) (245) (227)
----- ------- -----
(31) (200) (164)
----- ------- -----
$ 7 $ (117) $ 44
===== ======= =====
</TABLE>
NOTE 8--EMPLOYEE BENEFIT PLANS
Along with the reorganization, the Company will assume responsibility for
pension and post-retirement benefits for retirees whose last work assignment
was with the Company (see Note 1). There will be no retirees assigned to the
Company. Until the reorganization, the Company's financial statements will
include the costs experienced by the Daisy plans for employees who the Company
will assume responsibility.
RETIREMENT INCOME PLAN
The Company participates in the Daisy defined benefit pension plan, which
covers all employees. Daisy's funding policy is to contribute an amount equal
to the minimum required employer contribution under the Employee Retirement
Income Security Act of 1974 (ERISA). Plan assets are invested in various
mutual funds. The expense for this plan allocated to Brass Eagle for the years
ended December 31, 1994, 1995, and 1996 and for the six-month periods ended
June 30, 1996 and 1997 was $8, $19, $44, $22, and $37, respectively. The
allocation of expense was based on wage accumulations.
Immediately following the Reorganization, the Company will establish another
comparable retirement plan for the employees and future retirees of the
Company. Pension liabilities will be funded based upon actuarial calculations
for the Brass Eagle Employees. For purposes of preparing these financial
statements, estimates were made, of unfunded pension obligations that will be
transferred by the Company. As of June 30, 1997, the estimated liability was
$108. The actual amounts funded will be measured at the Reorganization date,
using the same methodology, and will likely be different from these estimates.
As of December 31, 1995 and 1996, Daisy had accrued pension costs of $3,385
and $2,487, respectively. Based on the estimates described in this note, the
Company's share of the accrued pension costs as of December 31, 1995 and 1996
is $27 and $71, respectively.
F-10
<PAGE>
BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company also participates in a postretirement benefit plan maintained by
Daisy. Employees retiring from the Company on or after attaining age 60 with
ten years of service are entitled to postretirement health care benefits.
These benefits are subject to deductibles, copayment provisions, and other
limitations. After attaining age 65, an eligible retiree's health care benefit
coverage terminates. The expense for this plan allocated to Brass Eagle for
the years ended December 31, 1994, 1995, and 1996 and for the six-month
periods ended June 30, 1996 and 1997 was $4, $25, $17, $10, and $13,
respectively.
Immediately following the Reorganization, the Company will consider
establishing a separate post-retirement benefit plans for the employees of the
Company. Postretirement benefits will be funded as they are incurred. For
purposes of preparing these financial statements, estimates were made, as of
June 30, 1997 of the postretirement benefit obligations that will be
transferred to the Company. The accumulated postretirement benefit obligation
is estimated at $59. The actual amounts transferred will be measured at the
date, using the same methodology, and will likely be different from these
estimates.
As of December 31, 1995 and 1996, Daisy had an accrued postretirement
benefit liability of $1,100 and $1,016, respectively.
NOTE 9--INTERCOMPANY DEBT
Brass Eagle's cash collection and cash disbursements are administered by
Daisy. The net cash disbursed in excess of the net cash received is classified
as intercompany debt. In addition, assets transferred from Daisy to the
Company and liabilities assumed from Daisy by the Company are also accounted
for through the intercompany debt account. There has been no interest expense
changed for the use of these funds.
NOTE 10--MAJOR CUSTOMERS AND SUPPLIERS
Sales to two major retail customers, individually representing 10% or more
of net sales, totaled approximately $939 or 36% of net sales in 1994, $1,094
or 25% of net sales in 1995, $4,938 or 36% of net sales for 1996, $1,341 or
28% of net sales for the six months ended June 30, 1996, and $5,453 or 46% of
net sales for the six months ended June 30, 1997. Accounts receivable balances
to these customers were approximately $593, $1,202, and $1,431 at December 31,
1995 and 1996 and as of June 30, 1997, respectively.
Because the Company does not manufacture its own paintballs, it has entered
into a strategic alliance with a paintball producer, pursuant to which the
Company has agreed to serve as such producer's exclusive worldwide paintball
distributor to all retail and wholesale outlets (other than paintball field
operators, to whom the Company is prohibited from selling during the terms of
the Agreement). This Agreement extends through August 1999, but is terminable
prior to that time upon one year's notice and contains certain provisions
which prohibit the Company from selling any competing products during the term
of the Agreement. Failure of this supplier to meet the Company's product needs
on a timely basis or loss of this supplier could have a material adverse
effect on the Company.
NOTE 11--RELATED PARTY TRANSACTIONS
The Company is intending to enter into support agreements for customer
service, warehousing, shipping, human resources, information system, finance,
and legal services with its parent. The support agreements will define
specific services to be provided and the fees related to these services.
F-11
<PAGE>
BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
During 1994, 1995, and 1996, and for the six months ended June 30, 1996 and
1997, the expenses related to these services were allocated to Brass Eagle as
discussed in Note 1.
For the years 1994, 1995, and 1996, and for the six months ended June 30,
1996 and 1997, there was no interest expense charged on the intercompany debt.
NOTE 12--GEOGRAPHIC SEGMENTS
The Company sells paintball guns, paintballs, and accessories through both
foreign and major national domestic retailers. The following summarizes the
geographic segment activity:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------- --------------
1994 1995 1996 1996 1997
------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Revenues
United States........................ $2,471 $4,056 $11,845 $4,190 $10,618
Other geographic areas............... 144 263 1,993 601 1,287
</TABLE>
NOTE 13--EMPLOYEE STOCK OPTIONS
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock options. FASB Statement No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123") was issued by the FASB and if fully
adopted changes the methods for recognition of cost on plans similar to those
of the Company. Adoption of SFAS 123 is optional; however, pro forma
disclosures as if the Company adopted the cost recognition requirements under
SFAS 123 are presented below.
Certain employees of the Company have stock options in Daisy. The stock
options consist of options granted when Charter Oak Partners and certain
members of management acquired Daisy on June 30, 1993. The options granted in
June 1993 reserved 5% of Daisy's common stock for issuance under the plan. The
options granted vested on September 15, 1997, because of the Offering, and are
exercisable until September 15, 2002. The exercise price of the options is
fixed at $1,000 per share, $0.52 per share adjusted to reflect a 1,940.9-for-1
stock split (See Note 1). The exercise price of the options granted by Daisy
has generally been equal to or greater than fair market value at the date of
grant. Fair market value is determined by the Board of Directors without an
independent valuation. As of June 30, 1997, there were 105.6 shares granted
under this plan, 204,961 adjusted to reflect a 1,940.9-for-1 stock split (See
Note 1), of these Brass Eagle employees hold options to purchase 35.2 shares
(68,320 adjusted to reflect the stock split) of common stock granted on June
30, 1993.
The Company also reserved 157 shares on June 30, 1993, to be distributed at
the discretion of Daisy's compensation committee. The option price was fixed
at $1,000 per share, $0.52 per share adjusted to reflect the stock split) and
the options are exercisable until June 1, 2003. As of June 30, 1997, 94.2
shares were granted under this plan (182,833 adjusted to reflect the stock
split). Brass Eagle employees held options to purchase 28.3 shares of common
stock (54,850 adjusted to reflect the stock split) granted prior to June 30,
1997.
F-12
<PAGE>
BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Information regarding Brass Eagle employees participating in the plan is
shown below adjusted to reflect a 1,940.9-for-1 stock split (see Note 1):
<TABLE>
<CAPTION>
NUMBER AMOUNT AGGREGATE
OF SHARES PER SHARE VALUE
--------- --------- ---------
<S> <C> <C> <C>
Options outstanding at December 31, 1994..... 80,509 $0.52 $41,865
Granted...................................... 18,283 0.52 9,507
------- ----- -------
Options outstanding at December 31, 1995..... 98,792 0.52 51,372
Granted...................................... 24,378 0.52 12,676
------- ----- -------
Options outstanding at December 31, 1996..... 123,170 0.52 64,048
Granted...................................... -- -- --
------- ----- -------
Options outstanding at June 30, 1997......... 123,170 $0.52 $64,048
======= ===== =======
</TABLE>
There was no compensation expense recorded for the years ended December 31,
1995 and 1996 because the exercise price equaled or exceeded the fair market
value of the option on the date of the grant.
The Company's net income and net income per share would be the same under
SFAS 123 as under APB Opinion 25 for the years ended December 31, 1995 and
1996 because the options had no significant fair value on the dates
distributed.
Along with the reorganization and spin-off of New Daisy (see Note 1), the
Daisy employees will retain their stock options in the Company. These
individuals hold options to purchase 136.34 shares of common stock, 264,626
adjusted to reflect the stock split, at $1,000 per share, $0.52 per share
adjusted to reflect the stock split.
The effects of applying SFAS 123 are not indicative of future amounts. SFAS
123 does not apply to awards prior to 1995, and additional awards in future
years are anticipated.
NOTE 14--WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
As discussed in Note 1, the Company, concurrent with the consummation of the
initial public offering, will complete a reorganization. Accordingly, the
historical presentation of net income per common share is based on the number
of shares to be issued after the reorganization and a 1,940.9-for-one stock
split, as if the shares had been outstanding during all periods presented.
F-13
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS COR-
RECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECU-
RITY OTHER THAN THE SECURITIES COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTI-
TUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION WHERE SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH AN OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UN-
LAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
Corporate History........................................................ 15
Reorganization........................................................... 15
Dividend Policy.......................................................... 15
Use of Proceeds.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Financial Data.................................................. 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 24
Management............................................................... 34
Certain Transactions .................................................... 39
Principal Stockholders................................................... 40
Description of Capital Stock............................................. 41
Shares Eligible for Future Sale.......................................... 43
Underwriting............................................................. 44
Legal Matters............................................................ 45
Experts.................................................................. 45
Additional Information................................................... 45
</TABLE>
----------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPAT-
ING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIV-
ERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PRO-
SPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,275,000 SHARES
BRASS EAGLE INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
MCDONALD & COMPANY
SECURITIES, INC.
DAIN BOSWORTH
INCORPORATED
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with the
offering described in this Registration Statement.
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 10,000
NASD Filing Fee................................................. 4,000
The Nasdaq National Market Listing Fee.......................... 37,000
Legal Fees and Expenses......................................... 250,000
Printing and Engraving Expenses................................. 120,000
Accounting Fees and Expenses.................................... 100,000
Blue Sky Fees and Expenses (including counsel).................. 5,000
Transfer Agent and Registrars Fees.............................. 7,000
Directors and Officers Liability Insurance...................... 15,000
Miscellaneous Expenses.......................................... 62,000
--------
Total........................................................... $610,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Restated Certificate of Incorporation incorporates
substantially the provisions of the General Corporation Law of the State of
Delaware providing for indemnification of directors and officers of the
Registrant against expenses, judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding arising by
reason of the fact that such person is or was an officer or director of the
Registrant or is or was serving at the request of the Registrant as a
director, officer, employee, agent, or trustee of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise.
As permitted by Section 102 of the Delaware General Corporation Law, the
Registrant's Restated Certificate of Incorporation contains provisions
eliminating a director's personal liability for monetary damages to the
Registrant and its stockholders arising from a breach of a director's
fiduciary duty except for liability (a) for any breach of the director's duty
of loyalty to the Registrant or its stockholders, (b) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the Delaware General Corporation
Law, or (d) for any transaction from which the director derived an improper
personal benefit.
Section 145 of the Delaware General Corporation Law provides generally that
a person sued as a director, officer, employee, or agent of a corporation may
be indemnified by the corporation for reasonable expenses, including
attorney's fees, if in the case of other than derivative suits he has acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation (and, in the case of a criminal
proceeding, had no reasonable cause to believe that his conduct was unlawful).
In the case of a derivative suit, an officer, employee, or agent of the
corporation who is not protected by the Restated Certificate of Incorporation
may be indemnified by the corporation for reasonable expenses, including
attorney's fees, if he has acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification shall be made in the case of a derivative suit
in respect of any claim as to which an officer, employee or agent has been
adjudged to be liable to the corporation unless that person is fairly and
reasonably entitled to indemnity for proper expenses.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Daisy granted non-contingent options to purchase the following number of
shares of Common Stock at a price of $0.52 per share to the persons listed
herein on the dates specified:
<TABLE>
<C> <S>
Marvin Griffin: 24,378 on October 25, 1994
24,378 on August 4, 1995
24,378 on August 6, 1996
48,756 on August 20, 1997
E. Lynn Scott: 12,189 on October 25, 1994
18,283 on August 4, 1995
24,378 on August 6, 1996
24,378 on August 20, 1997
Bob DeGarmo: 12,189 on February 20, 1997
12,189 on August 20, 1997
Steven R. DeMent: 12,189 on August 20, 1997
James C. Moody: 12,189 on October 25, 1994
18,283 on August 4, 1995
John D. Flynn: 12,189 on September 4, 1997
</TABLE>
These grants were made in reliance on the exemption from registration set
forth in Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1 Form of Underwriting Agreement*
3(i)(a)(1) Restated Certificate of Incorporation
3(i)(a)(2) DMC Holdings, Inc. Certificate of Merger
3(i)(a)(3) Brass Eagle Inc. Certificate of Merger
3(i)(b) Form of Restated Certificate of Incorporation of Registrant
3(ii)(a) By-laws of Daisy (as predecessor to Registrant)
3(ii)(b) Form of By-laws of Registrant
4(i) Specimen Common Stock Certificate*
5 Opinion of Friday, Eldredge & Clark
10(i) Form of Assignment, Assumption, and Indemnification Agreement
between New Daisy and Registrant*
Distributor Agreement between Goldcaps, Inc. and Registrant
10(ii) dated July 28, 1995
10(iii) Distributor Agreement between Leader Industries and Registrant
dated August 31, 1995
10(iv) International Agency Agreement between WDP Ltd. and Registrant
dated June 19, 1996
10(v) Lease Agreement between R.L. Brown Investments and Registrant
dated June 5, 1997
10(vi) Lease between Granby Apparel, Inc. and Registrant dated December
11, 1995
10(vii) Form of Administrative Agreement between New Daisy and
Registrant
10(viii) Credit Agreement between Daisy and First Bank National
Association*
10(ix) Employment Agreement between E. Lynn Scott and Registrant dated
as of September 15, 1997
10(x) Form of 1997 Stock Option Plan
10(xi) Form of Employee Stock Purchase Plan
10(xii) Form of Indemnification Agreement between Marvin W. Griffin and
Registrant
10(xiii) Form of Indemnification Agreement between E. Lynn Scott and
Registrant
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
11 Computation of Earnings per share
23.1 Consent of Crowe, Chizek and Company, LLP
23.2 The Consent of Friday, Eldredge & Clark is contained in its Opinion
filed as Exhibit 5
24 Powers of Attorney (see page II-4)
27 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide the Underwriter at
the Closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person in connection with the securities being registered) the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant also hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROGERS,
STATE OF ARKANSAS, ON THIS DAY OF SEPTEMBER, 1997.
Brass Eagle Inc.
/s/ E. Lynn Scott
By: _________________________________
E. LYNN SCOTT PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned directors and
officers of Brass Eagle Inc., a Delaware corporation, which is filing a
Registration Statement on Form S-1 with the Securities and Exchange
Commission, Washington, D.C. 20549 under the provisions of the Securities Act
of 1933, as amended (the "Securities Act"), hereby constitute and appoint E.
Lynn Scott and John Flynn, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacitites, to sign such
Registration Statement and any or all amendments, including post--effective
amendments, to the Registration Statement, including a Prospectus or an
amended Prospectus therein and any registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act, and all other documents in connection therewith to be filed
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact as
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ E. Lynn Scott President, Chief September 22,
- ------------------------------------- Executive Officer, 1997
E. LYNN SCOTT and Director
(Principal
Executive Officer)
/s/ Stephen J. Mattia Controller September 22,
- ------------------------------------- (Principal 1997
STEPHEN J. MATTIA Financial Officer
and Principal
Accounting Officer)
/s/ Marvin Griffin Chairman of the September 22,
- ------------------------------------- Board of Directors 1997
MARVIN GRIFFIN
II-4
<PAGE>
SIGNATURE TITLE DATE
/s/ Anthony J. Dowd Director September 22, 1997
- -------------------------------------
ANTHONY J. DOWD
/s/ Stephen J. Schaubert Director September 22, 1997
- -------------------------------------
STEPHEN J. SCHAUBERT
/s/ H. Gregory Wold Director September 22, 1997
- -------------------------------------
H. GREGORY WOLD
II-5
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1 Form of Underwriting Agreement*
3(i)(a)(1) Restated Certificate of Incorporation
3(i)(a)(2) DMC Holdings, Inc. Certificate of Merger
3(i)(a)(3) Brass Eagle Inc. Certificate of Merger
Form of Restated Certificate of Incorporation of
3(i)(b) Registrant
3(ii)(a) By-laws of Daisy (as predecessor to Registrant)
3(ii)(b) Form of By-laws of Registrant
4(i) Specimen Common Stock Certificate*
5 Opinion of Friday, Eldredge & Clark
10(i) Form of Assignment, Assumption, and
Indemnification Agreement between New Daisy and
Registrant*
Distributor Agreement between Goldcaps, Inc. and
10(ii) Registrant dated July 28, 1995
10(iii) Distributor Agreement between Leader Industries
and Registrant dated August 31, 1995
10(iv) International Agency Agreement between WDP Ltd.
and Registrant dated June 19, 1996
10(v) Lease Agreement between R.L. Brown Investments
and Registrant dated June 5, 1997
10(vi) Lease between Granby Apparel, Inc. and Registrant
dated December 11, 1995
10(vii) Form of Administrative Agreement between New
Daisy and Registrant
10(viii) Credit Agreement between Daisy and First Bank
National Association*
10(ix) Employment Agreement between E. Lynn Scott and
Registrant dated as of September 15, 1997
10(x) Form of 1997 Stock Option Plan
10(xi) Form of Employee Stock Purchase Plan
10(xii) Form of Indemnification Agreement between Marvin
W. Griffin and Registrant
10(xiii) Form of Indemnification Agreement between E. Lynn
Scott and Registrant
11 Computation of Earnings per share
23.1 Consent of Crowe, Chizek and Company, LLP
23.2 The Consent of Friday, Eldredge & Clark is
contained in its Opinion filed as Exhibit 5
24 Powers of Attorney (see page II-4)
27 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment
<PAGE>
Exhibit 3(i)(a)(1)
RESTATED
CERTIFICATE OF INCORPORATION
OF
DAISY MANUFACTURING COMPANY, INC.
* * * * * * * * * *
The Board of Directors of Daisy Manufacturing Company, Inc. acting pursuant
to Sec. 241 & 245 of the General Corporation Law of Delaware hereby adopts the
following Amended and Restated Certificate of Incorporation. The following
document amends and restates, in its entirety, the Certificate of Incorporation
of Daisy Manufacturing Company, Inc. filed with the Delaware Secretary of State
on July 22, 1983. The Board has taken this action to increase the number of
authorized shares of Common Stock of the Corporation.
1. The name of the corporation is:
DAISY MANUFACTURING COMPANY, INC.
2. The address of its registered office in the State of Delaware is No. 100
West Tenth Street, in the City of Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is five hundred thousand (500,000) shares and the par value
of each such share is Ten Cents ($0.10).
5. The name and mailing address of each incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
William H. Kennedy, III 120 East Fourth Street
Little Rock, AR 72201
<PAGE>
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter or repeal the by-
laws of the corporation.
8. Elections of directors need not be by written ballot unless the by-laws of
the corporation shall so provide.
Meetings of stockholders may be held within or without the State of Delaware,
as the by-laws may provide. The books of the corporation may be kept (subject
to any provision contained in the statutes) outside the State of Delaware at
such place or places as may be designated from time to time by the Board of
Directors or in the by-laws of the corporation.
9. The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, do make this certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true, and accordingly have
hereunto set our hands this 10th day of November, 1983.
/s/ William H. Kennedy, III
-----------------------------------
WILLIAM H. KENNEDY, III
- 2 -
<PAGE>
EXHIBIT 3(i)(a)(2)
CERTIFICATE OF MERGER
OF
DMC HOLDINGS, INC.
WITH AND INTO
DAISY MANUFACTURING COMPANY, INC.
Daisy Manufacturing Company, Inc. hereby certifies that:
1. The name and state of incorporation of each of the constituent
corporations are:
(a) Daisy Manufacturing Company, Inc., a Delaware corporation; and
(b) DMC Holdings, Inc., an Arkansas corporation.
2. A Plan and Agreement of Merger has been approved, adopted, certified,
executed and acknowledged by DMC Holdings, Inc. and by Daisy Manufacturing
Company, Inc. in accordance with the provisions of subsection (c) of Section 252
of the General Corporation Law of the State of Delaware.
3. The name of the surviving corporation is Daisy Manufacturing Company,
Inc.
4. The certificate of incorporation of Daisy Manufacturing Company, Inc.,
as amended in the manner described below, shall be the certificate of
incorporation of the surviving corporation. Upon filing of this Certificate of
Merger, the Certificate of Incorporation of Daisy Manufacturing Company, Inc.
shall be amended so that Section 4 shall read as follows:
4. AUTHORIZED SHARES AND RIGHTS OF SHAREHOLDERS.
--------------------------------------------
(a) Authorized Shares and Par Value. The authorized capital
-------------------------------
stock of the Corporation shall consist of 9,600 shares of Preferred Stock,
and 3,000 shares of Common Stock. The relative rights, preferences and
limitations of the capital stock of the Corporation shall be as follows:
(i) PREFERRED STOCK.
---------------
(A) The Corporation shall have the authority to issue
9,600 shares of Nonvoting Preferred Stock, par value of $1.00 per share,
which shall be noncumulative and nonparticipating.
(B) Except as otherwise required by these Articles or by
applicable law, the holders of Preferred Stock shall have no voting rights.
<PAGE>
(C) The Preferred Stock shall entitle the holders thereof
to receive out of the surplus of the Corporation a noncumulative dividend
at the rate of 8% per annum, payable when, as and if declared by the Board
of Directors, before any dividend shall be set apart or paid on the Common
Stock for such year, and the remainder of the surplus or net earnings
applicable to the payment of dividends shall be distributed as dividends
among the holders of the Common Stock, if, as and when the Board of
Directors determines. If less than the full preferential dividend is paid
to the holders of Preferred Stock in any calendar year, the unpaid amount
shall lapse and shall not cumulate and shall not add to the preferential
dividends in any subsequent year, whether or not the earnings of the
Corporation were sufficient to cover the preferential dividend in the year
in which it was not fully paid.
(D) In case of the liquidation, dissolution, or other
distribution of assets of the Corporation, the holders of Preferred Stock
shall be paid a liquidation preference equal to $1,000.00 per share (the
"Liquidation Preference") before any amount shall be payable to the holders
of the Common Stock; and after the payment of the Liquidation Preference of
such Preferred Stock to the holders thereof, the balance of the assets and
funds of the Corporation available for distribution shall be distributed
wholly among the holders of the Common Stock. The consolidation or merger
of the Corporation at any time, or from time to time, with any other
corporation or corporations shall not be construed as a dissolution,
liquidation, or distribution of assets of the Corporation within the
meaning hereof.
(E) The affirmative vote or consent of the holders of at
least a majority of the shares of Preferred Stock at the time outstanding,
given in person or by proxy either in writing or at a meeting called for
the purpose at which the holders of Preferred Stock shall vote separately
as a class, shall be necessary to effect any one or more of the following:
(1) Any amendment, alteration or repeal of any of the
provisions of the Articles of Incorporation of the Corporation which
affects adversely the voting powers, rights or preferences of the holders
of Preferred Stock; provided, however, an amendment of these Articles of
Incorporation so as to authorize or create, or to increase the authorized
or outstanding amount of any shares of any class ranking junior to the
Preferred Stock shall not be deemed to affect adversely the voting powers,
rights or preferences of the holders of Preferred Stock; or
(2) The authorization or creation of, or the increase
in the authorized amount of, any shares of any class, or any security
convertible into shares of any class ranking on parity with or prior to the
Preferred Stock; or
-2-
<PAGE>
(3) The sale, lease or conveyance by the Corporation
of all or substantially all of it assets; or
(4) The consolidation of the Corporation with or its
merger into any other corporation unless the corporation resulting from
such consolidation or merger will have after such consolidation or merger
no class of shares either authorized or outstanding ranking prior to or on
a parity with the Preferred Stock, except the same number of shares ranking
prior to or on a parity with the Preferred Stock and having the same rights
and preferences as the shares of the Corporation authorized and outstanding
immediately preceding such consolidation or merger, and each holder of
Preferred Stock immediately preceding such consolidation or merger shall
receive the same number of shares, with the same rights and preferences, of
the resulting corporation.
(F) For the purpose of this Section 4: whenever reference
is made to shares "ranking prior to the Preferred Stock," such reference
shall mean and include all shares of the Corporation in respect of which
the rights of the holders thereof as to the payment of dividends or as to
distributions in the event of a voluntary or involuntary liquidation or
dissolution of the Corporation are given preference over the rights of the
holders of Preferred Stock; whenever reference is made to shares "on a
parity with the Preferred Stock," such reference shall mean and include all
shares of the Corporation in respect of which the rights of the holders
thereof as to the payment of dividends and as to distributions in the event
of a voluntary or involuntary liquidation or dissolution of the Corporation
rank on an equal basis (except as to the amounts fixed therefor) with the
rights of the holders of Preferred Stock; and whenever reference is made to
shares "ranking junior to the Preferred Stock," such reference shall mean
and include all shares of the Corporation which, with respect to the
payment of dividends and with respect to distributions in the event of a
voluntary or involuntary liquidation or dissolution of the Corporation, are
junior and subordinate to the rights of the holders of Preferred Stock.
(ii) COMMON STOCK. The Corporation shall have the authority to
------------
issue 3,000 shares of Common Stock, with a par value of $1.00 per share.
Holders of Common Stock shall be entitled to elect and appoint all members
of the Board of Directors of the Corporation and shall otherwise be
entitled to all of the rights generally inherent in the ownership of common
stock under the Delaware General Corporation Law.
5. The surviving corporation is a corporation of the State of Delaware.
6. The executed Plan and Agreement of Merger is on file at the principal
place of business of Daisy Manufacturing Company, Inc. at 2111 South 8th Street,
Rogers, Arkansas 72756.
-3-
<PAGE>
7. A copy of the Plan and Agreement of Merger will be furnished by Daisy
Manufacturing Company, Inc., on request and without cost, to any stockholder of
DMC Holdings, Inc. or Daisy Manufacturing Company, Inc.
8. The authorized capital stock of DMC Holdings, Inc. is 3,000 shares of
common stock, $1.00 par value and 9,600 shares of preferred stock, $1.00 par
value.
IN WITNESS WHEREOF, Daisy Manufacturing Company, Inc. has caused this
Certificate to be signed by its undersigned officers, on the 1st day of July,
1993.
DAISY MANUFACTURING COMPANY, INC.
By: /s/ Marvin W. Griffin, Jr.
------------------------------
Title: President
----------------------------
ATTEST:
James C. Moody
- --------------------------
Title: Assistant Secretary
-------------------
-4-
<PAGE>
Exhibit 3(i)(a)(3)
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
BRASS EAGLE INC.
(A DELAWARE CORPORATION)
WITH AND INTO
DAISY MANUFACTURING COMPANY, INC.
(A DELAWARE CORPORATION)
DAISY MANUFACTURING COMPANY, INC., a corporation organized and existing
under the laws of the State of Delaware ("Parent") and appearing herein through
its undersigned President, does hereby certify as follows:
FIRST: That Parent is organized pursuant to and currently is in good
standing under the provisions of corporate laws of the State of Delaware.
SECOND: That Parent owns all of the issued and outstanding shares of
BRASS EAGLE INC., a corporation organized and existing pursuant to the
provisions of the corporate laws of the State of Delaware ("Subsidiary").
THIRD: That the Board of Directors of Parent, at a meeting held on the
4th day of September, 1997, determined to merge Subsidiary with and into Parent,
and in connection with such merger, the Board of Directors adopted the following
corporate resolutions:
RESOLVED, that Brass Eagle Inc., a wholly-owned subsidiary of this
Corporation ("Subsidiary"), be merged with and into this Corporation (the
"Merger"), with the name of this Corporation being changed to be "Brass
Eagle Inc." and with the surviving corporation being this Corporation, as
so renamed (the "Surviving Corporation"), and assuming all of the
obligations of Subsidiary; and be it
FURTHER RESOLVED, that the terms and conditions of the Merger are as
follows:
1. Upon completion of the Merger, all of the shares of common stock or
other securities of Subsidiary held by the Surviving Corporation shall be
surrendered and cancelled, and no consideration shall be issued in respect
thereof, and the separate existence of Subsidiary shall cease, and the
Surviving Corporation shall succeed to all of the assets and obligations of
Subsidiary in accordance with applicable law; and
<PAGE>
2. Each share of this Corporation's common stock and preferred stock
outstanding immediately prior to the effective date of the Merger shall
remain unchanged as an outstanding share of common stock and of preferred
stock, respectively, of the Surviving Corporation after the Merger.
and be it
FURTHER RESOLVED, that the President and Secretary, and any Vice President
or any Assistant Secretary, of this Corporation, and such agents as they
may appoint, either orally or in writing, be and they each hereby are,
authorized, empowered and directed, by and on behalf of this Corporation,
to take any and all such actions, and to execute, deliver and file such
agreements, certificates, instruments, documents or other items that they
deem necessary or appropriate to effectuate the transactions contemplated
by the foregoing resolutions, including the Merger.
FOURTH: That Article 1 of the Certificate of Incorporation of this
Corporation shall be amended to read as follows:
"1. The name of the corporation is:
Brass Eagle Inc."
IN WITNESS WHEREOF, Parent has caused this certificate to be signed by its
President, the 4th day of September, 1997.
DAISY MANUFACTURING COMPANY, INC.
PARENT
By: /s/ Marvin Griffin
--------------------------------
Marvin Griffin, President
2
<PAGE>
EXHIBIT 3(i)(b)
FORM OF
RESTATED CERTIFICATE
OF
INCORPORATION
Brass Eagle Inc., a corporation organized and existing under the laws of
the State of Delaware, appearing herein by its undersigned President, hereby
certifies as follows:
1. The name of the Corporation is Brass Eagle Inc. The Corporation was
originally incorporated under the name Daisy Manufacturing Company, Inc., and
the original Certificate of Incorporation was filed with the Secretary of State
of the State of Delaware on July 22, 1983.
2. Pursuant to Sections 228, 242 and 245 of the General Corporation Law
of the State of Delaware, this Restated Certificate of Incorporation restates
and integrates and further amends the provisions of the Certificate of
Incorporation of the Corporation.
3. The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
ARTICLE FIRST: The name of the Corporation is:
Brass Eagle Inc.
ARTICLE SECOND: The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is the Corporation Trust Company.
ARTICLE THIRD: The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
ARTICLE FOURTH: The authorized capital stock of the Corporation shall
consist of 10,000,000 shares of Common Stock, par value of $.01 per share.
-1-
<PAGE>
ARTICLE FIFTH: The holders of the Common Stock shall have no preemptive
rights to subscribe for any shares of any class of stock of the Corporation
whether now or hereafter authorized.
ARTICLE SIXTH: (A) The number of Directors constituting the entire Board
shall be not less than three nor more than nine as fixed from time to time by
vote of a majority of the entire Board, provided, however, that the number of
Directors shall not be reduced so as to shorten the term of any Director at the
time in office, and provided further, that the number of Directors constituting
the entire Board shall be five until otherwise fixed by a majority of the entire
Board. Directors shall hold office from the time of their election until the
ensuing annual meeting of stockholders or until their successors are elected and
qualified. Directors need not be stockholders of the Corporation.
(B) Notwithstanding any other provisions of this Restated
Certificate of Incorporation or the By-laws of the Corporation, any director or
the entire Board of Directors of the Corporation may be removed at any time, but
only for cause and only by the affirmative vote of a majority the holders of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of Directors (considered for this purpose as one
class) cast at a meeting of the Stockholders called for that purpose.
ARTICLE SEVENTH: The Corporation is to have perpetual existence.
ARTICLE EIGHTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-laws of the Corporation.
ARTICLE NINTH: Elections of Directors need not be by written ballot unless
the By-laws of the Corporation shall so provide.
ARTICLE TENTH: Meetings of Stockholders may be held within or without the
State of Delaware, as the By-laws may provide. The books of the Corporation may
be kept (subject to any
-2-
<PAGE>
provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the By-laws of the Corporation.
ARTICLE ELEVENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon Stockholders herein are granted subject to this
reservation.
ARTICLE TWELFTH: A Director of the Corporation shall not be personally
liable to the Corporation or its Stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from liability
or limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter by amended. If the
General Corporation Law of the State of Delaware is amended after the effective
date of this Restated Certificate of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of Directors, then the
liability of a Director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended. Any amendment, modification or repeal of the
foregoing provisions of this ARTICLE TWELFTH shall not adversely affect any
right or protection of a Director of the Corporation hereunder in respect of any
act or omission occurring prior to the time of such amendment, modification or
repeal.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed by its President this ___ day of ______, 1997.
BRASS EAGLE INC.
By:
----------------------------------
E. Lynn Scott
President
-3-
<PAGE>
EXHIBIT 3(ii)(a)
DAISY MANUFACTURING COMPANY, INC.
************
BY-LAWS
************
ARTICLE 1
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The principal office of the Corporation shall be in the City
of Rogers, County of Benton, State of Arkansas.
Section 3. The Corporation may also have offices at such other places
both within and without the States of Delaware and Arkansas as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held at such place as may be fixed from time to time by the Board of
Directors, either within or without the States of Delaware or Arkansas as shall
be designated from time to time by the Board of Directors and stated in the
notice of the meeting. Meetings of stockholders for any other
<PAGE>
purpose may be held at such time and place, within or without the States of
Delaware and Arkansas, as shall be stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1983, shall be held in April of each year, upon such date and at such time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting, at which they shall elect by a plurality vote a Board
of Directors, and transact such other business as may properly be brought before
the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
- 2 -
<PAGE>
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the Corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than sixty days before the date of the meeting,
to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except
- 3 -
<PAGE>
as otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting, at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Certificate of Incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the Certificate of Incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for
- 4 -
<PAGE>
each share of the capital stock having voting power held by such stockholder,
but no proxy shall be voted on after three years from its date, unless the proxy
provides for a longer period.
Section 11. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than the unanimous written consent shall be given to
those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board shall be not less than three nor more than 15. The first Board shall
consist of three directors. Thereafter, within the limits above specified, the
number of directors shall be determined by the stockholders at the annual or any
special meeting. The directors shall be elected at the annual or any
- 5 -
<PAGE>
special meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the Corporation shall be managed by or under
the direction of its Board of Directors which may exercise all such powers of
the Corporation and do all such law-
- 6 -
<PAGE>
ful acts and things as are not by statute or by the Certificate of Incorporation
or by these by-laws directed or required to be exercised or done by the
stockholders. The Board of Directors shall fix the salaries, if any, of its
members, including the Chairman.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the States of Delaware and
Arkansas.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
-7-
<PAGE>
Section 7. Special meetings of the Board may be called by the President
on two days' notice to each director, either personally or by mail or by
telegram; special meetings shall be called by the President or Secretary in like
manner and on like notice on the written request of two directors.
Section 8. At all meetings of the Board a majority of the elected
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 10. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
committee designated by the Board of Directors,
- 8 -
<PAGE>
may participate in a meeting of the Board of Directors, or any committee, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property
and assets, recommending to the stockholders a dissolution of the
- 9 -
<PAGE>
Corporation or a revocation of a dissolution, or amending the By-laws of the
Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the Certificate of
Incorporation or these By-laws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
- 10 -
<PAGE>
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the Certificate of
Incorporation or By-laws, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provision of the statutes or of the
Certificate of Incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
- 11 -
<PAGE>
ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a Chairman of the Board, President, a Vice-
President, a Secretary and a Treasurer. The Board of Directors may also choose
additional Vice-Presidents, and one or more Assistant Secretaries and Assistant
Treasurers. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these By-laws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a Chairman of the Board, President,
one or more Vice-Presidents, a Secretary and a Treasurer.
Section 3. The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Boards
Section 4. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
- 12 -
<PAGE>
THE PRESIDENT
Section 6. The President shall be the Chief Executive Officer of the
Corporation and shall in the absence of the Chairman of the Board preside at all
meetings of stockholders and the Board of Directors. He shall have general and
active management of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the President or in the event of his
inability or refusal to act, the Vice-President (or in the event there be more
than one Vice-President, the Vice-Presidents in the order designated by the
Directors, or in the absence of any designation, then in the order of their
election) shall perform such duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice-Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
- 13 -
<PAGE>
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
Section 10. The Assistant Secretary, or if there be more than one,
the Assistant Secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the Secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
- 14 -
<PAGE>
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
Section 12. He shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation.
Section 13. If required by the Board of Directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in the case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 14. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined
- 15 -
<PAGE>
by the Board of Directors (or if there be no such determination, then in the
order of their election) shall, in the absence of the Treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.
Section 15. The Chairman of the Board shall preside at all meetings
of Stockholders and the Board of Directors.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation by,
the Chairman or Vice-Chairman of the Board of Directors, or the President or a
Vice-President and the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation, certifying the number of shares owned
by him in the Corporation.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
- 16 -
<PAGE>
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF SECURITIES
Section 4. Upon surrender to the Corporation or the transfer agent
of the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
- 17 -
<PAGE>
Provided, that the Board of Directors of the Corporation may, in its
discretion, by resolutions to be adopted from time to time, place restrictions
upon any of the Corporation's securities whereby the transfer of such securities
is limited in accordance with the provisions of Section 202 of the Delaware
General Corporation Law, as now in effect and as such section may be amended in
the future.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
- 18 -
<PAGE>
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to
- 19 -
<PAGE>
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the Corporation, or for such other purpose as the directors
shall think conducive to the interest of the Corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the Corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
- 20 -
<PAGE>
SEAL
Section 6. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE IX
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. Every person who was or is a party or is threatened to be
made a party to or is involved in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, by reason of the fact that he
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director or officer of another corporation, or
as its representative in a partnership, joint venture, trust, or other
enterprise, shall be indemnified and held harmless to the fullest extent legally
permissible under and pursuant to any procedures specified in the General
Corporation Law of the State of Delaware, as amended from time to time, against
all expenses, liabilities, and losses (including attorneys' fees, judgments,
fines, and amounts paid or to be paid in settlement) reasonably incurred or
suffered by him in connection therewith. Such right of indemnification shall be
a contract right that may be enforced
- 21 -
<PAGE>
in any lawful manner by such person. Such right of indemnification shall not be
exclusive of any other right which such directors or officers may have or
hereafter acquire and, without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any
agreement, vote of stockholders, provision of law, or otherwise, as well as
their rights under this paragraph.
The Board of Directors may cause the Corporation to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust, or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the Corporation would have the power to indemnify
such person.
Section 2. Expenses incurred by a director or officer of the
Corporation in defending a civil or criminal action, suit or proceeding by
reason of the fact that he is or was a director or officer of the Corporation
(or was serving at the Corporation's request as a director or officer of another
corporation, or as its representative in a partnership, joint venture, trust or
other enterprise) shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such person to repay such amount if it shall ultimately be
determined that he is not
- 22 -
<PAGE>
entitled to be indemnified by the Corporation as authorized by relevant sections
of the General Corporation Law of Delaware.
ARTICLE X
AMENDMENTS
Section 1. These By-laws may be altered, amended or repealed or new
By-laws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new By-
laws be contained in the notice of such special meeting. If the power to adopt,
amend or repeal By-laws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-laws.
APPROVED AS AMENDED this 28th day of April, 1988.
/s/ Cass S. Hough
------------------------------
Cass S. Hough, Chairman
ATTEST:
/s/ Frank Tarr
- -----------------
Frank Tarr
Secretary
- 23 -
<PAGE>
EXHIBIT 3(ii)(b)
BRASS EAGLE INC.
*****
FORM OF BY-LAWS
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington, County
of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section l. All meetings of the stockholders for the election of directors
shall be held at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual meetings of stockholders, commencing with the year 1998,
shall be held on such date in the months of April through June, at such time and
place, within or without the States of Delaware and Arkansas, as shall be
designated from time to time by the Board of Directors as stated in the Notice
of the Meeting, at which they shall elect by a plurality vote a Board of
Directors, and transact such other business as may be properly brought before
the meeting.
Section 3. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than 10 nor more than 60 days before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at
-1-
<PAGE>
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than 10 nor more than 60 days before the date of the
meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which, by express provision of the statutes or of the
certificate of incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting,
-2-
<PAGE>
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of Directors which shall constitute the whole Board
shall be not less than three (3) nor more than nine (9). The first Board shall
consist of five (5) Directors. Thereafter, within the limits above specified,
the number of Directors shall be determined by resolution of the Board of
Directors or by the stockholders at the annual meeting. Directors need not be
stockholders.
Section 2. Vacancies and newly created Directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, though less than a quorum, or by a sole remaining
Director, and the Directors so chosen shall hold office until the next annual
election and until their successors are duly elected and qualified, unless
sooner displaced. If there are no Directors in office, then an election of
Directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created Directorship, the Directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such Directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the Directors chosen by
the Directors then in office.
Section 3. The business of the corporation shall be managed by or under the
direction of its Board of Directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected Board of Directors shall
be held at such time and place as shall be fixed by the vote of the stockholders
at the annual meeting and no notice of such meeting shall be necessary to the
newly elected Directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to fix
the
-3-
<PAGE>
time or place of such first meeting of the newly elected Board of Directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the Directors.
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
Section 7. Special meetings of the Board may be called by the President on
two (2) days notice to each director, either personally or by mail or by
facsimile communication; special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of two
Directors unless the Board consists of only one Director, in which case special
meetings shall be called by the President or Secretary in like manner and on
like notice on the written request of the sole Director.
Section 8. At all meetings of the Board, a majority of the elected Board
shall constitute a quorum for the transaction of business and the act of a
majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors the
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation
or these by-laws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 10. Unless otherwise restricted by the certificate of incorporation
or these by-laws, members of the Board of Directors, or any committee designated
by the Board of Directors, may participate in a meeting of the Board of
Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may designate one or more committees,
each committee to consist of one or more of the Directors of the corporation.
The Board may designate one or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.
-4-
<PAGE>
Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to the following matters: (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
General Corporation Law of Delaware to be submitted to stockholders for approval
or (ii) adopting, amending or repealing any by-law of the corporation. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate or these By-
laws, the Board of Directors shall have the authority to fix the compensation of
Directors. The Directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
Director. No such payment shall preclude any Director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of incorporation
or By-laws, any director or the entire Board of Directors may be removed, but
only for cause, by the holders of 75% of shares entitled to vote at an election
of Directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these By-laws, notice is required to be given
to any Director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to Directors may also be given by facsimile telecommunication.
Section 2. Whenever any notice is required to be given under the provisions
of the statutes or of the certificate of incorporation or of these by-laws, a
waiver thereof in writing, signed by the
-5-
<PAGE>
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a President, a Vice-President, a Secretary and a
Treasurer. The Board of Directors may also choose additional Vice-Presidents,
and one or more Assistant Secretaries and Assistant Treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a President, one or more Vice-Presidents, a
Secretary and a Treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powders and perform such duties as shall be determined
from time to time by the Board.
Section 4. The salaries of all officers and agents of the corporation shall
be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE PRESIDENT
Section 6. The President shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the Board of
Directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 7. The President shall execute bonds, mortgages and other
instruments under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
-6-
<PAGE>
THE VICE-PRESIDENTS
Section 8. In the absence of the President or in the event of his
inability or refusal to act, the Vice-President (or in the event there be more
than one Vice-President, the Vice-Presidents in the order designated by the
Directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice-Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or President, under whose supervision he shall be. The Secretary shall have
custody of the corporate seal of the corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by such officer's signature.
Section 10. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 12. The Treasurer shall disburse the funds of the corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
-7-
<PAGE>
Section 13. If required by the Board of Directors, the Treasurer shall
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 14. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated. Certificates shall be signed by, or in
the name of the corporation by, the Chairman or Vice-Chairman of the Board of
Directors, or the President or a Vice-President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation.
Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
-8-
<PAGE>
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and record the transaction upon its books. Upon receipt of proper
transfer instructions from the registered owner of uncertificated shares such
uncertificated shares shall be canceled and issuance of new equivalent
uncertificated shares or certificated shares shall be made to the person
entitled thereto and the transaction shall be recorded upon the books of the
corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock
subject to the provisions of the certificate of incorporation.
-9-
<PAGE>
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the Directors shall think conducive to the interest of the
corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting, and
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by the
Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 7. Right to Indemnification. The corporation shall indemnify and
------------------------
hold harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorneys' fees) reasonably incurred by such person. The corporation
shall be required to indemnify a person in connection with a proceeding (or part
thereof) initiated by
-10-
<PAGE>
such person only if the proceeding (or part thereof) was authorized by the Board
of Directors of the corporation.
Section 2. Prepayment of Expenses. The corporation may, in its discretion,
----------------------
pay the expenses (including attorneys' fees) incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the director or officer to repay all amounts advanced if it should be
ultimately determined that the director or officer is not entitled to be
indemnified under this Article or otherwise.
Section 3. Claims. If a claim for indemnification or payment of expenses
------
under this Article is not paid in full within sixty days after a written claim
therefor has been received by the corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
Section 4. Non-Exclusivity of Rights. The rights conferred on any person
-------------------------
by this Article shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the certificate of
incorporation, these bylaws, agreement, vote of stockholders or disinterested
Directors or otherwise.
Section 5. Other Indemnification. The corporation's obligation, if any, to
---------------------
indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, enterprise or
nonprofit entity shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust
enterprise or nonprofit enterprise.
Section 6. Amendment or Repeal. Any repeal or modification of the foregoing
-------------------
provisions of this Article VIII shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE IX
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new by-laws
may be adopted by the stockholders or by the Board of Directors, when such power
is conferred upon the Board of Directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new by-laws be contained in
the notice of such special meeting. If the power to adopt, amend or repeal by-
laws is conferred upon the Board
-11-
<PAGE>
of Directors by the certificate of incorporation it shall not divest or limit
the power of the stockholders to adopt, amend or repeal by-laws.
-12-
<PAGE>
Exhibit (5)
[LETTERHEAD OF FRIDAY, ELDREDGE & CLARK APPEARS HERE]
September 20, 1997
Brass Eagle Inc.
1203A North Sixth Street
Rogers, Arkansas, 72756
Gentlemen:
We refer to the Registration Statement on Form S-1 (the "Registration
Statement") filed with the Securities and Exchange Commission on or about the
date hereof by Brass Eagle Inc. (the "Company") for registration under the
Securities Act of 1933, as amended (the "Act"), of 2,616,250 shares of the
Company's Common Stock, $.01 par value per share (the "Shares"), to be offered
in a public offering by the Company and the Selling Shareholder.
It is our opinion that all action necessary to register the Shares under
the Act will have been taken when:
a. The Registration Statement shall have become effective in
accordance with the applicable provisions of the Act; and
b. Appropriate action shall have been taken by the Board of Directors
of the Company for the purpose of authorizing the registration of the Shares.
It is our further opinion that the Shares are, or, with respect to the
Shares being offered by the Company, will be, upon issuance against receipt of
the purchase price therefor, validly authorized, validly issued, fully paid and
non-assessable. This opinion does not pass upon the matter of compliance with
"Blue Sky" laws or similar laws relating to the sale or distribution of the
Shares.
We are members of the Arkansas Bar and do not hold ourselves out as
experts on the laws of any other State.
<PAGE>
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, as it may be amended, and consent to such references to
our firm as are made therein.
Very truly yours,
/s/ Friday, Eldredge & Clark
FRIDAY, ELDREDGE & CLARK
PBB/bb
<PAGE>
EXHIBIT 10(ii)
DISTRIBUTOR AGREEMENT
---------------------
THIS AGREEMENT made this 28 day of July, 1995, between GOLDCAPS, INC., a
subsidiary of IVAX Corporation, a Florida corporation, with its principal place
of business at 50 N.W., 176th Street, Building 100, Miami, Florida 33169,
(hereinafter known as the "Company") and DAISY MANUFACTURING COMPANY, INC., a
Delaware corporation, with its principal place of business at Box 220, Rogers,
Arkansas 72757-0220 (hereinafter known as the "Distributor");
WHEREAS, the Company is engaged in the manufacture, production and sale of
softgel paintball capsules (the "Product") having the specifications set forth
in Schedule A hereto (the "Specifications"); and
WHEREAS, the Distributor plans to establish and maintain a marketing
organization and market the Product in the areas/ countries listed on Schedule
"B" hereto (the "Sales Territory"); and
WHEREAS, the Company and the Distributor wish to cooperate for the purpose of
making the Product available to purchasers in the Sales Territory.
NOW, THEREFORE, it is agreed as follows:
1. Appointment. The Company hereby appoints the Distributor as Exclusive
-----------
Distributor for sales of the Product in the Sales Territory. The Sales
Territory may be expanded, in the sole discretion of the Company, upon the
request of Distributor and the presentation of a satisfactory business plan
in connection therewith and execution of a written amendment hereto adding
such expanded Sales Territory to Schedule B. The Distributor accepts this
appointment and agrees to act as distributor and not to sell any products
within or outside the Sales Territory which compete with the Product during
the entire term of this Agreement nor to sell the Product, directly or
indirectly or as an associate,
<PAGE>
partner, manager, agent, owner, investor in any cooperation, partnership or
other entity, operator or otherwise, or by means of any corporate or other
devise, outside the Sales Territory. Notwithstanding the foregoing, from
time to time the Company may permit the Distributor to sell Product to
customer outside the Sales Territory, provided that such permission is
obtained in advance of any such sale, which permission will not be
unreasonably withheld, and such sale is conducted upon the terms and
conditions agreed upon in writing between the parties.
2. Duties. The Distributor shall carry continuously and have readily
------
available sufficient quantities of the Product to enable it to meet
promptly the demands of customers in the Sales Territory, provided the
Company has sufficient quantity in supply, and to make every reasonable
effort to use proper means to develop, promote and continue as far as
practicable sales of the Product, Distributor further agrees to provide
warehousing as needed to service customers in its Sales Territory.
Distributor will engage at its sole discretion, sales personnel to serve
the customers in the Sales Territory as part of its operation. Distributor
shall provide the Company, no less often then semi-annually, written
reports itemizing the unit sales volume for the Sales Territory.
Distributor shall promote the Product from time to time via trade journal
advertisements, printed brochures, direct mail or other means. The Company
reserves the right to pre-approve any advertisement in which the Company or
any of its trademarks are referred to, but will not unreasonably withhold
approval. The Company and Distributor will contribute to a promotion fund
each contributing an agreed upon amount. Distributor will include, at a
minimum, the warnings issued by the Company in all packaging used
-2-
<PAGE>
in connection with the sale of Product and shall use its best efforts to
ensure that all packaging containing Product sold to the end user shall
contain such warnings.
3. Purchases and Delivery. Unless otherwise agreed by the parties, all
----------------------
shipments shall be F.O.B. the Company's plant or their designated plant for
shipment directly to a location as agreed with the Distributor within the
Sales Territory. Source of shipments shall be in the sole discretion of
the Company. In addition to the terms and conditions set forth in this
Agreement, the terms and conditions of the Daisy Purchase Order shall be
incorporated herein as being fully set forth in Schedule C.
4. Payment and Credit Terms. Terms on all purchases shall be net 30.
------------------------
5. Prices. A list of current prices of the Product for various quantities is
------
listed on Schedule D, attached hereto and made a part hereof. The price of
the Product may be changed by the Company on an annual basis with 30 days
written notice to the Distributor. Any such modified prices will not be
unreasonable given the then current market and competitive conditions.
Prices for new products, if any, will be established by the Company at the
time of the initial commercial launch of such new products.
6. Returns. The Company will replace, free of charge, any products which does
-------
not conform to the Specifications set forth in Schedule A. The Company may
remove, reinspect or otherwise recover any such product and sell it again
to the Distributor, provided such recovered Product meets the
Specifications therefor. Advance authorization must be obtained from the
Company prior to any return or issuance of credit.
-3-
<PAGE>
7. Interruption of Deliveries. The Company shall make every effort to fill
--------------------------
all orders with reasonable promptness, except that in case of fire, riots,
strikes or other labor disputes, any other causes beyond the Company's
control, the Company, at its option, may cancel the delivery, or partially
cancel as the case may be, by giving written notice to the Distributor.
If, as a result of any such non-delivery of product by the Company,
Distributor fails to maintain sufficient quantities of Product as required
under paragraph 2 hereof, Distributor shall not be deemed thereby to be in
breach of this Agreement.
8. Distributor's Performance Criteria. Distributor will exercise its best
----------------------------------
efforts to sell the Product set forth in Schedule C in the Sales Territory.
Distributor agrees that it will attempt to sell 100 million capsules in
various colors during the two year period of this contract. During this
Agreement, the Company may at its option upon reasonable notice require a
conference between representatives of the Company and Distributor to
discuss the performance of Distributor in terms of the Distributor meeting
sales targets for product.
9. Termination. This Agreement will commence on the date of the first
-----------
shipment of paintballs to Distributor and shall be for a period of two
years. Unless terminated by either party in writing, as hereinafter set
forth, the contract will renew for an additional two years under the same
terms and conditions or modifications agreed to by the parties. Either the
Company or the Distributor may terminate this Agreement on the two year
anniversary, without cause, with one year written notice to the other
party. During the term of the Agreement, either the Company or Distributor
may terminate this Agreement for breach of its terms if, after 60 days
written notice, such breach or default has not
-4-
<PAGE>
been cured. Notwithstanding the foregoing, the Company or Distributor, at
any time, may terminate this Agreement immediately if either party is
declared bankrupt or insolvent, or makes an assignment for the benefit of
creditors, or if a receiver is appointed or any proceedings are commenced,
voluntary or involuntary, by or against Distributor under any bankruptcy or
similar law. Termination notices shall be sent as provided herein.
10. Obligation to Pay on Termination. Even though this Agreement is
--------------------------------
terminated, the Distributor's obligation to pay in full for product meeting
the Specifications delivered hereunder to the Distributor shall not be
affected and the Company's obligation to ship Product to Distributor for
which Distributor has in place with the Company confirmed open orders shall
not be affected.
11. Limitation of Liability. The Distributor shall maintain its own place of
-----------------------
business, facilities and the equipment in accordance with Distributor's own
discretion and resell Company's products. Both the Company and Distributor
will name as additional insureds each other on their respective general
liability policies. Neither the Company nor the Distributor shall by reason
of the termination or non-renewal of this Agreement, be liable to the other
for compensation, reimbursement, or damages on account of the loss of
perspective profits or anticipated sales on account of expenditures,
investments, leases, property improvements or commitments in connection
with business or goodwill of the Company or the Distributor.
12. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been given when delivered in person or
when sent by facsimile
-5-
<PAGE>
transmission confirmed by certified or registered mail, or two business
days after being sent by an internationally recognized "overnight" courier
service, to the last known address of the other party.
13. Relationship of Parties. The relationship between the Company and the
-----------------------
Distributor is that the buyer and seller. Distributor, including its
agents and employees, shall be regarded as an independent contractor. This
Agreement does not authorize the Distributor to be the agent or the legal
representative of the Company for any purpose. The Distributor is not
granted any right or authority to assume or to create any obligation or
responsibility, express or implied, on behalf of or in the name of the
Company or to bind the Company in any manner.
14. Confidential Information. Unless otherwise agreed to in writing, each
------------------------
party agrees to retain in strict confidence and, except as otherwise
expressly provided herein, not to issue or disclose to others any and all
information received from the other, including, but not limited to, know-
how, compilations, processes, plans, blueprints, technical information, new
product information, test procedures, product samples, specifications as
well as commercial and other information data considered confidential in
nature, whether communicated in writing or orally (the "Confidential
Information"); provided, however, that Confidential Information shall not
be deemed to include:
(a) such information which at the time of disclosure, is in the public
domain or thereafter becomes part of the public domain by publication or
otherwise through no act of the party receiving it;
-6-
<PAGE>
(b) such information which a party can conclusively establish was in its
possession prior to the time of disclosure to it and was not acquired
directly or indirectly from the disclosing party or any of its employees or
affiliates; or
(c) such information which is independently made available as a matter of
right by a third party who has not violated a confidential relationship
with the party seeking to maintain the confidentiality of such information.
15. Other Agreements. It is declared by both parties that there are no oral or
----------------
other agreements or understandings between them affecting this Agreement,
or related to the selling or servicing of said products in the Sales
Territory. This Agreement, together with the Schedules attached hereto,
supersedes all previous agreements between the parties relating to the
subject matter hereof.
16. Modification. This Agreement may be changed, waived, or amended only by an
------------
instrument in writing signed by both parties.
17. Severability. If any term of this Agreement thereof shall be invalid,
------------
breached or unenforceable, the remainder of this Agreement shall remain in
full force and effect. No representation or warranty is made by either
party with respect to the subject matter hereof other than as expressly set
forth herein of in the Schedules attached hereto.
18. No Implied Waivers. The failure of either party at any time to require
------------------
performance by the other party of any provision hereof shall in no way
affect the full right to require such performance at any time thereafter,
nor shall the waiver by either party of a breach of any provision hereof be
taken or held to be a waiver of any succeeding breach of such provision, or
as a wavier of the provision itself.
-7-
<PAGE>
19. Governing Law. This Agreement is to be governed by and construed according
-------------
to the domestic laws of the U.S.A. without regard to its conflicts of laws
provisions or Uniform United Nations Conventions. However, any provision
herein which in any way contravenes the laws of any country or jurisdiction
shall be deemed not to be a part of this Agreement. All actions concerning
any dispute arising or related hereto or the transactions contemplated
herein shall be filed and maintained only in a court sitting in Florida.
20. Packaging, Trademarks. It is agreed that the Company and Distributor will
---------------------
decide how the product is to be packaged. It is agreed that if the name
Goldcaps or any other past, present or future Company Trademark or logo,
will not be used by the Distributor upon the expiration or termination of
this Agreement or in any other manner except as provided herein. The
Distributor further agrees to make no claim thereto or against the use
thereof by the Company or other distributor's of the Company's products.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date above written.
WITNESS GOLDCAPS, INC.
(The Company)
/s/ /s/
- ----------------------------- ------------------------------
WITNESS Its: President
DAISY MANUFACTURING COMPANY, INC.
(The Distributor)
/s/ Jo Allison Speitel /s/ Marvin W. Griffin, Jr.
- ----------------------------- ------------------------------
Marvin W. Griffin, Jr.
Its: President
-8-
<PAGE>
Schedule A
----------
Product Specifications [upon receipt by Distributor]
- ----------------------------------------------------
Pole Range: Min .665
Max .705
Equator Range: Min .665
Max .695
Bounce Test: 10 capsule drop at 6 feet
Maximum breakage - 2 capsules
Shoot Test: 20 capsules shot
Maximum breakage in barrel - 2 capsules
Color: Matched to clients request
-9-
<PAGE>
Schedule B
----------
The Sales Territory shall consist of the following:
Exclusive worldwide distribution to all retail and wholesale outlets,
excluding Paintball Field Operators.
-10-
<PAGE>
Schedule C
----------
PURCHASE ORDER TERMS
1. Buyer shall not be charged for any costs of packing, crating, drayage or
storage without its prior written consent.
2. Buyer shall not be liable for the payment of any federal, state or local
taxes which may be applicable to the materials, goods or services covered
by this order unless the same shall have been separately itemized and set
forth in Seller's quotation.
3. Seller warrants and represents that the prices for the goods and materials
set forth herein does not exceed the net price now charged by Seller to any
other customer purchasing the same items in like or similar quantities, and
agrees that if at any time during the pendency of this order, lower net
prices are quoted to any other person for similar goods and materials, such
lower net prices shall be from that time substituted for the prices
contained herein.
4. (a) Seller warrants and represents that the goods furnished hereunder
shall be of the quantity, quality, description and specifications set
forth herein and free of defects in design, workmanship and materials.
(b) All such goods and materials shall be received subject to Buyer's
inspection and approval. Payment for the goods and materials shall
not constitute acceptance thereof.
(c) Seller agrees to promptly repair or replace any goods and materials
found to be defective in design, workmanship or material or not in
conformity with the specification therefor. Buyer may return any non-
conforming goods or materials at Seller's expense.
(d) Goods delivered in excess of the quantity specified herein may be
refused and returned to Seller at its expense.
(e) Buyer may cancel any portion of this order if shipment is not timely
made as specified.
(f) Seller warrants that the sale or use of the articles or materials
covered by this order, either alone or in combination with any other
articles or materials with which Seller intends or has advised or
advertised that they may be used, will not constitute an infringement
or contributory infringement of any patents or copyrights in any
country, and Seller hereby licenses Daisy Manufacturing Company, Inc.
and its customers under all of Seller's patents or
-11-
<PAGE>
trademarks or copyrights to use and sell the articles or materials
covered by this order, alone or in any combination for which the
materials may be used.
5. Seller covenants and agrees to hold harmless, defend, indemnify and keep
indemnified, the Buyer, its affiliated and Subsidiary companies,
successors, and assigns, customers and users of its products of and from
any and all action or actions, loss, claims, demands, expenses, fees and
charges, costs and damages of any person whomsoever, arising out of or
caused by any breach of warranties or violation of the terms and conditions
hereof.
6. The representations and warranties of the Seller and the remedies of the
Buyer for breach thereof set forth herein shall not be construed to limit
or exclude any other warranties or remedies provided by law.
7. The warranties herein shall run to the Buyer, its affiliated and subsidiary
companies, successors, assigns and its customers and the users of the goods
and materials involved.
8. Seller shall bear the sole responsibility for any materials furnished to it
by Buyer in connection with this order.
9. Seller shall not assign any portion of this order without Buyer's written
consent. Buyer's consent shall not release Seller from its obligation and
liabilities hereunder.
10. Any terms herein to the contrary notwithstanding, neither party shall be
liable for delays or defaults due to force majeure, acts of governmental
authority or public enemy, war, strikes and labor troubles, freight
embargoes or any other causes or contingencies beyond its control,
provided, however, that Buyer may cancel any portion of this order if
shipment is not timely made as specified hereunder.
11. This order is subject to and Seller shall comply with all applicable
federal, state and local laws and regulations, including the requirements
of the Fair Labor Standards Act of 1938, as amended and including, for
orders (or contracts) not exempt under Section 204 of Executive Order
11246, as amended by Executive Order 11375, the provisions of paragraphs
(1) through (7) of Section 202 thereof, which provisions are incorporated
herein by reference. Acceptance of this order on the part of the Seller
shall constitute its certification of full compliance with such laws and
regulations.
12. The terms of this order supersede any prior dealings or negotiations of the
parties and contain the entire agreement between them, and no amendment or
modification thereof shall be valid or binding upon the Buyer unless
contained in a written instrument signed by its authorized representative,
provided, however, that where this purchase order form is used in
connection with purchase release under formal written contracts, the
contract provisions shall prevail if inconsistent with the within terms;
and provided, further, that in the event this purchase order involves a
government contract the terms thereof shall
-12-
<PAGE>
be superseded by attachment of form entitled "Standard Terms and Conditions
For Fixed Price Purchase Orders," which form upon attachment shall become
part of the purchase order.
13. Daisy Manufacturing Company, Inc. is a Federal Contractor subject to
Section 402 of the Vietnam Era Veterans Readjustment Assistance Act of 1974
and Section 503 of the Rehabilitation Act of 1973 and as such vendors
[ ]are subject to these sections.
-13-
<PAGE>
Schedule D
----------
Pricing/Quantities:
- --------------------
A. Single Tone:
0 - 50 MM $21.00/M
50 - 100 MM $20.00/M
100+ $19.25/M
(after the Distributor has purchased 50 M paintballs, then
the price for the original 50 M will be calculated at
$20.00/M and credits issued forthwith. After the Distributor
has purchased 100 M paintballs, then the price of the
original 100 M will be calculated at $19.25/M and credits
issued forthwith).
B. Two Tone:
0 - 50 MM $21.50/M
50 - 100 MM $20.50/M
100+ $19.75/M
(after the Distributor has purchased 50 M paintballs, then
the price for the original 50 M will be calculated at
$20.50/M and credits issued forthwith. After the Distributor
has purchased 100 M paintballs, then the price of the
original 100 M will be calculated at $19.75/M and credits
issued forthwith).
NOTE: M = Thousand
-14-
<PAGE>
EXHIBIT 10(iii)
DISTRIBUTOR AGREEMENT
---------------------
THIS AGREEMENT made and entered into by and between LEADER INDUSTRIES, (a
Quebec corporation, doing business in the State of New York) with its principal
place of business at 1280 Nobel St., Boucherville, Quebec, Canada J4B5HI,
hereinafter referred to as "Manufacturer," and DAISY MANUFACTURING COMPANY, INC.
(a Delaware corporation), with its principal place of business at Box 220,
Rogers, Arkansas 72757-0220 hereinafter referred to as "Distributor".
WITNESSETH:
----------
WHEREAS, Manufacturer is engaged in the manufacture and sale of [paintball
masks] together with spare parts and accessories used in connection therewith as
set forth on Addendum "A" attached hereto (collectively sometimes called the
"Products,"); and
WHEREAS, distributor desires to market such Products and Manufacturer wants
it to do so in the manner hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, Manufacturer and Distributor
agree as follows:
Section 1. Purchase, Sales, and Delivery of Products.
-----------------------------------------------------
A. Territory. Manufacturer hereby appoints Distributor exclusive
---------
distributor for the sale of the Products worldwide, except Canada (the
"Territory").
B. Acceptance by Distributor. Distributor accepts the appointment made in
-------------------------
Section 1.A. hereof. Distributor agrees to use its best efforts to develop the
market for the Products in the Territory, and to promote, sell, and distribute
the Products in such a way as to maintain and enhance the demand therefor within
the Territory. Except as otherwise expressly set forth in
1
<PAGE>
this Agreement, Manufacturer shall not be required to furnish Distributor with
any know-how or other proprietary information.
C. Product Marketing by Distributor. During the term of this Agreement,
--------------------------------
except as otherwise expressly permitted in writing, neither Distributor or its
affiliates shall market, manufacture, or cause to be manufactured, sell, import,
or take any steps designed to lead to the act of marketing, manufacturing,
selling, or importing within the Territory any items in direct competition with
the Products. Distributor agrees that it shall not sell, market, or distribute
any Products outside the Territory. Nevertheless, Distributor will be free to
extend its capabilities in the field by acquiring distributor rights and/or
manufacturing licensing rights to complementary products, or to develop such
products manufactured by Manufacturer.
D. Price and Discounts. The prices of the Products and other terms of
-------------------
purchase shall be set forth in Manufacturer's Price bulletin attached hereto as
Addendum "A".
E. Orders. Distributor agrees to submit purchase orders in writing and
------
signed by Distributor for all Products ordered by it. In addition to the terms
and conditions set forth on the purchase order (Addendum "B"), the following
conditions shall apply to and become a part of each purchase order submitted by
Distributor for the Products:
1. Distributor shall have the right to select the mode of
transportation to be used in the shipment of the Products ordered by it.
2. All shipments shall be F.O.B. Plattsburg, New York. Transportation
charges shall be collect and title to all Products shall pass to Distributor and
Distributor shall assume all risk of loss upon delivery of such Products to a
carrier. Payment for all merchandise shall be made in the lawful currency of
the United States of America.
2
<PAGE>
3. a. Manufacturer hereby warrants that any Product to be delivered
pursuant to this Agreement and manufactured by Manufacturer shall (i) be free
from defects in material and workmanship which impair its functioning under
normal and proper use for the purpose for which it was intended and (ii) shall
comply with the specifications issued by Manufacturer describing such Product.
b. If Distributor notifies Manufacturer during such 90 day
warranty period of any such defect and such defect is demonstrated or
substantiated to the reasonable satisfaction of Manufacturer, then Manufacturer
shall at its expense, have the product returned, and its sole obligation,under
this warranty shall be to, either repair or replace the defective portion of the
relevant Product or credit Distributor with the price paid therefor.
c. Manufacturer extends this warranty to Distributor only with
respect to those Products (or portions thereof) manufactured by Manufacturer.
However, if Manufacturer obtains warranties from manufacturers (other than
Manufacturer) of Products (or portions thereof) sold to Distributor but not so
manufactured by Manufacturer, then Manufacturer shall, and hereby does, assign
to Distributor all of such manufacturers' warranties so obtained to the fullest
extent such assignment is permitted by such manufacturers.
d. The warranty set forth above shall be null and void and not
apply to any Product which is (i) altered, modified, damaged, or repaired by
someone other than Manufacturer, (ii) damaged due to use contrary to any package
insert, instruction manual, or other labeling furnished by Manufacturer, (iii)
damaged due to the use of equipment not manufactured, supplied, or approved by
Manufacturer, (iv) not maintained in accordance with
3
<PAGE>
any specifications or directions supplied by Manufacturer or (v) otherwise
abused, misused or subjected to an accident, whether intentional or negligent.
4. a. In the event Distributor determines that any unit of the
Product does not conform to Manufacturer's product specifications or is actually
otherwise defective, Distributor may reject such specific unit of the Product in
accordance with the provisions of the Arkansas Uniform Commercial Code, but such
rejection must be made by written notice mailed within ten (10) days after the
date of delivery by Manufacturer to Distributor of such nonconforming or
defective Product. Failure to notify Manufacturer shall constitute acceptance
but shall not constitute a waiver of any warranty-related claims.
b. Manufacturer shall have the right to replace the nonconforming
or defective Product or otherwise cure the nonconformance or defect within
thirty (30) days after the date of Distributor's written notice. If the
nonconformance or defect is not remedied within such thirty (30) day period,
Manufacturer shall refund to Distributor the purchase price paid by Distributor
for such nonconformance or defective Product by credit to Distributors account.
c. Upon Manufacturer's specific request in each instance,
Distributor shall promptly return any nonconforming Products to Manufacturer at
Manufacturer's expense.
5. The Distributor agrees to purchase a minimum of 10,000 units of the
Product the first year of the contract and 15,000 units of the Product in the
second year of the contract.
F. Withdrawal of Products and New Products. From time to time,
---------------------------------------
Manufacturer, in its reasonable and sole discretion, may elect to withdraw
worldwide any Product.
4
<PAGE>
Manufacturer agrees to give Distributor not less than six months prior written
notice as to any such withdrawal except in the case of emergency or recall.
Section 2. Operation Requirements.
----------------------------------
A. Dealers. Distributor has the responsibility to provide adequate sales
-------
coverage in all areas of the Territory and may appoint dealers ("Dealers") for
that purpose. Distributor shall be responsible for negotiating and effecting
appointment arrangements with his respective Dealers. Dealers must agree to
comply with the policies and practices of Manufacturer, as well as Distributor.
B. Obligations of Distributor. From and after the date hereof
--------------------------
Distributor, at its sole cost and expense, with sole responsibility in its
capacity as exclusive distributor and in full compliance with all applicable
laws and regulations in that capacity, including but not limited to those of
appropriate regulatory authorities, shall:
1. Store the Products under their respective labeled conditions using
appropriate facilities and equipment which comply with current good
manufacturing procedures and practices;
2. Distribute the Products and their labeling as received from
Manufacturer without any modifications unless such modifications are mutually
agreed upon prior to distribution;
3. Promptly forward, in writing, to Manufacturer all charges,
complaints or claims which Distributor receives or which otherwise come to
Distributor's attention covering any Product, and, at Manufacturer's request,
cooperate with Manufacturer in investigating any such charges, complaints or
claims;
5
<PAGE>
4. Submit for Manufacturer's review and approval, prior to
distribution and usage, all written trademark, labeling, and instructional
materials, and other items subject to regulatory control to be used in
connection with any Products and following approval and printing, provide
Manufacturer with ten (10) copies of each such item, and submit, for
informational purposes only, all other written promotional materials not
requiring regulatory approval for major promotions prior to distribution and
usage;
5. Obtain and maintain in full force and effect such federal, state,
and local records, authorizations, permits, and licenses as may be required by
law, including any appropriate regulatory authority, and fully comply with and
observe all applicable laws, ordinances, rules and regulations;
6. Maintain adequate sales and warehouse facilities for the Products;
7. Maintain a sufficient inventory of Products and replacement parts
reasonably to fulfill the requirements of Dealers and other customers located in
the Territory;
8. Maintain a training program for sales personnel in connection with
the demonstration, use, and sale of the Products;
9. Not make any warranty, representation, or claim concerning any
Product which violates applicable laws or regulations, including those of
appropriate regulatory authorities, or, without the express prior written
approval of Manufacturer, which is inconsistent or contrary to such Product's
specifications.
C. Name of Product.
---------------
1. Manufacturer agrees that it will place the name BRASS EAGLE on all
packaging of the Product manufactured for Daisy unless instructed to do
otherwise in writing.
6
<PAGE>
Section 3. Term and Termination of the Agreement.
-------------------------------------------------
A. Term. This Agreement shall be for a period of two (2) years with an
----
option to renew for another two year period under the terms and conditions
agreed to by the parties. If either party decides that it does not wish to
renew the Agreement at the end of two years, it shall give the other party sixty
(60) days written notice of its intent.
B. Termination Without Advance Notice. This Agreement shall terminate
----------------------------------
automatically and immediately by its own force without notice to or from either
party in the event of:
1. An attempted assignment of this Agreement by either party without
the written consent of the other.
2. An assignment by either party for the benefit of creditors.
3. The admitted insolvency of the either party.
4. The institution of voluntary or involuntary proceedings by or
against either party in bankruptcy, or under any of the provisions of the United
States federal or any state bankruptcy act or any comparable bankruptcy laws, or
the corporate reorganization or for a receivership, or for the dissolution or
merger of either party.
5. If Distributor does not purchase the minimums as set forth in
paragraph 5.
6. If Distributor does not pay for the Product as set forth in the
Addendum A.
C. Termination With Notice. Certain other conditions may arise under
-----------------------
which either party may wish to terminate this Agreement by giving notice to the
other party. It is therefore
7
<PAGE>
agreed that this Agreement may be terminated at any time by either party, with
or without cause, upon six (6) months written notice to the other party, but
such period of notice may be changed by mutual written consent. No other
provision herein contained shall be interpreted to limit or qualify the methods
of termination set forth in this Section 3.B.
D. Transactions After Termination.
------------------------------
1. Upon termination of this Agreement, Distributor will immediately
account for and pay over to Manufacturer all sums due Manufacturer. Upon
compliance with and performance of the termination procedures and obligations by
Distributor as herein set forth, Manufacturer will account for and pay over to
Distributor all sums due Distributor.
2. Because Distributor has spent a great deal of time and money over
the years cultivating its market and will continue to do so under this
Agreement, upon termination by Manufacturer of this Agreement for any reason
other than for cause, Manufacturer agrees that it will not for a period of three
(3) months after the effective date of termination, solicit orders from any
business entity to which Distributor has sold any of the Products during the
term of this Agreement, unless otherwise compensated.
3. Compensation shall be calculated as the operating profit of the
previous three months (Operating profit equals gross profit less operating
expenses).
Section 4. Indemnification.
---------------------------
Manufacturer shall defend, indemnify, and hold Distributor and its
affiliates harmless from, against, for and in respect of any and all damages,
losses, costs, and expenses (including, without limitation, reasonable
attorneys' fees) resulting or arising out of any suit, action or proceeding for
bodily injury, death, or property damage or other suit, action, or proceeding if
8
<PAGE>
and to the extent such injury or damage is caused by the acts, omission, or
negligence of Manufacturer, its affiliates or their respective agents during the
term of this Agreement except upon Distributor's breach of its warranties,
obligations, representations or required performance under this Agreement.
Both Manufacturer and Distributor agree to name each as an additional
insured on their respective general liability insurance policies and provide
proof thereof within thirty (30) days of the execution of the Agreement.
Section 5. General Terms and Conditions.
----------------------------------------
A. Distributor Not An Agent. This Agreement does not appoint Distributor
------------------------
as an agent or legal representative of Manufacturer for any purpose whatsoever.
Distributor is not granted any express or implied right or authority to assume
or to create any obligation or responsibility in behalf of or in the name of
Manufacturer or to bind Manufacturer in any manner or thing whatsoever.
B. Confidential Information. During the term of this Agreement and for
------------------------
three (3) years thereafter, each party shall use the same degree of care as it
uses with regard to its own confidential information to prevent the disclosure,
use or publication of confidential information relating to the other coming to
its knowledge as a result of this Agreement unless such use, disclosure or
publication is permitted by this Agreement or authorized by the other in
writing. However, neither party shall be obligated to treat information or data
as confidential which without breach of confidentiality, (i) is, or becomes
available to the public, (ii) is already possessed by such party or (iii) is
independently developed by such party.
9
<PAGE>
C. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or any breach thereof, shall be settled by arbitration conducted
at the American Arbitration Association in State of New York, in accordance with
the rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. All submissions and proceedings, including arguments and briefs, shall
be in English.
D. English Language. All communications relating to the subject matter of
----------------
this Agreement whether spoken or written, including, but without prejudice to
the generality of the foregoing, literature, manuals, price lists and training,
shall be in English.
E. Force Majeure. No party shall be liable for any failure to perform or
-------------
delay in performance of its obligation hereunder caused by circumstances beyond
its reasonable control which make performance commercially impracticable
including, without limitation, fire, storm, flood, earthquake, hurricane,
explosion, accident, acts of the public enemy, war, rebellion, insurrection,
sabotage, epidemic, quarantine, restrictions, labor shortages, transportation
embargoes or delays, inability to secure raw materials or machinery for the
manufacture of its devices, acts of God, acts of any government or any agency
thereof, judicial action and other such external circumstances.
F. No Implied Waivers. The failure of either party at any time to require
------------------
performance by the other party of any provision hereof shall in no way affect
the full right to require such performance at any time hereafter. Nor shall the
waiver by either party of a breach of any provision hereof constitute a waiver
of any succeeding breach of the same or any other such provision, nor constitute
a waiver of the provision itself.
10
<PAGE>
G. Notices. Any notice between the parties shall be deemed duly served
-------
when: (i) personally delivered and receipt thereof confirmed; (ii) five (5)
days after sent by registered airmail; or (iii) when transmitted by facsimile
machine with receipt thereof confirmed, and addressed as follows, or to such
other address as notified by the recipient:
If to Manufacturer: Leader Industries
1280 Nobel St.
Boucherville Quebec, Canada
J4B5HI
Attn: Jean Rochette
Telephone: (514) 641-4480
Facsimile: (514) 641-0510
If to Distributor: Daisy Manufacturing Company, Inc.
Box 220
Rogers, Arkansas 72756
U.S.A.
Attn: E. Lynn Scott
Telephone: (501) 636-1200
Facsimile: (501) 636-0573
H. Applicable Law. It is expressly agreed and understood that this
--------------
Agreement is a complete Agreement and that it shall be governed by the laws of
the State of New York in all matters, including, without limitation, validity,
obligation, interpretation, construction, performance and termination
I. Amendment, Alteration or Modification. The amendment, alteration or
-------------------------------------
modification of this Agreement shall only be valid when executed in writing and
signed personally by both an authorized officer of Manufacturer and Distributor.
J. Addenda. The Addenda, if any, attached hereto is by this express
-------
reference made a part of this Agreement as fully as though set out at length
herein. Notwithstanding anything
11
<PAGE>
to the contrary, such Addenda may be amended, altered or modified by
Manufacturer from time to time, and as so amended, altered or modified will be
binding upon Distributor.
K. Separability. If any provision of this Agreement is invalid or
------------
unenforceable, this Agreement shall be considered divisible as to such provision
and the remainder of the Agreement valid and binding as though such provision
were not included herein.
L. Gender. Wherever used herein, the masculine gender shall include both
------
the feminine and neuter genders.
M. This Constitutes Sole Agreement. The sole and total Agreement of the
-------------------------------
Parties is as set forth in Sections 1 through 5 preceding this Paragraph M, and
the "Witnesseth" clauses preceding Section 1, and there are no oral or implied
representations, rights or obligations to be considered or construed with the
express written provisions hereinabove set forth. No alterations, changes, or
interlineations of this written document shall be effective unless the same are
initialed by an authorized officer of each of the parties.
IN WITNESS WHEREOF, the parties hereto have hereunto signed this Agreement,
this 31st day of August, 1995.
WITNESS LEADER INDUSTRIES
/s/ By: /s/ Jean Rochette
- -------------------------- ---------------------------------
Jean Rochette
Its:
WITNESS DAISY MANUFACTURING COMPANY, INC.
/s/ Linda Wilkins By: /s/ E. Lynn Scott
- -------------------------- ---------------------------------
E. Lynn Scott
Its: Vice President
12
<PAGE>
ADDENDUM "A"
------------
1. Manufacturer hereby designates Distributor above named as Distributor for
the sale of:
UP X (single lens) $11.00 USD
UP XX (thermal lens) $13.20 USD
UP X (replacement lens) $ 4.40 USD
UP XX (replacement lens) $ 7.25 USD
Pricing includes all duties.
Pricing regarding new UP X & UP XX with face armor to follow shortly
upon design and costing completion
Terms of payment are 2% 10/net 30 days. Prices are subject to change
with 90 days written notice and will only reflect increases in raw
materials and labor salaries. Any stated prices will not be changed
unless on an annual basis.
13
<PAGE>
ADDENDUM "B"
PURCHASE ORDER TERMS
1. Buyer shall not be charged for any costs of packing, crating, drayage or
storage without its prior written consent.
2. Buyer shall not be liable for the payment of any federal, state or local
taxes which may be applicable to the materials, goods or services covered
by this order unless the same shall have been separately itemized and set
forth in Seller's quotation.
3. Seller warrants and represents that the prices for the goods and materials
set forth herein does not exceed the net price now charged by Seller to any
other customer purchasing the same items in like or similar quantities, and
agrees that if at any time during the pendency of this order, lower net
prices are quoted to any other person for similar goods and materials, such
lower net prices shall be from that time substituted for the prices
contained herein.
4. (a) Seller warrants and represents that the goods furnished hereunder
shall be of the quantity, quality, description and specifications set
forth herein and free of defects in design, workmanship and materials.
(b) All such goods and materials shall be received subject to Buyer's
inspection and approval. Payment for the goods and materials shall
not constitute acceptance thereof.
(c) Seller agrees to promptly repair or replace any goods and materials
found to be defective in design, workmanship or material or not in
conformity with the specification therefor. Buyer may return any non-
conforming goods or materials at Seller's expense.
(d) Goods delivered in excess of the quantity specified herein may be
refused and returned to Seller at its expense.
(e) Buyer may cancel any portion of this order if shipment is not timely
made as specified.
(f) Seller warrants that the sale or use of the articles or materials
covered by this order, either alone or in combination with any other
articles or materials with which Seller intends or has advised or
advertised that they may be used, will not constitute an infringement
or contributory infringement of any patents or trademarks or
copyrights in any country, and Seller hereby licenses Daisy
Manufacturing Company, Inc. and its customers under all of Seller's
patents or
14
<PAGE>
trademarks or copyrights to use and sell the articles or materials
covered by this order, alone or in any combination for which the
materials may be used.
5. Seller covenants and agrees to hold harmless, defend, indemnify and keep
indemnified, the Buyer, its affiliated and Subsidiary companies,
successors, and assigns, customers and users of its products of and from
any and all action or actions, loss, claims, demands, expenses, fees and
charges, costs and damages of any person whomsoever, arising out of or
caused by any breach of warranties or violation of the terms and conditions
hereof.
6. The representations and warranties of the Seller and the remedies of the
Buyer for breach thereof set forth herein shall not be construed to limit
or exclude any other warranties or remedies provided by law.
7. The warranties herein shall run to the Buyer, its affiliated and subsidiary
companies, successors, assigns and its customers and the users of the goods
and materials involved.
8. Seller shall bear the sole responsibility for any materials furnished to it
by Buyer in connection with this order.
9. Seller shall not assign any portion of this order without Buyer's written
consent. Buyer's consent shall not release Seller from its obligation and
liabilities hereunder.
10. Any terms herein to the contrary notwithstanding, neither party shall be
liable for delays or defaults due to force majeure, acts of governmental
authority or public enemy, war, strikes and labor troubles, freight
embargoes or any other causes or contingencies beyond its control,
provided, however, that Buyer may cancel any portion of this order if
shipment is not timely made as specified hereunder.
11. This order is subject to and Seller shall comply with all applicable
federal, state and local laws and regulations, including the requirements
of the Fair Labor Standards Act of 1938, as amended and including, for
orders (or contracts) not exempt under Section 204 of Executive Order
11246, as amended by Executive Order 11375, the provisions of paragraphs
(1) through (7) of Section 202 thereof, which provisions are incorporated
herein by reference. Acceptance of this order on the part of the Seller
shall constitute its certification of full compliance with such laws and
regulations.
12. The terms of this order supersede any prior dealings or negotiations of the
parties and contain the entire agreement between them, and no amendment or
modification thereof shall be valid or binding upon the Buyer unless
contained in a written instrument signed by its authorized representative,
provided, however, that where this purchase order form is used in
connection with purchase release under formal written contracts, the
contract provisions shall prevail if inconsistent with the within terms;
and provided, further, that in the event this purchase order involves a
government contract the terms thereof shall
15
<PAGE>
be superseded by attachment of form entitled "Standard Terms and Conditions
For Fixed Price Purchase Orders," which form upon attachment shall become
part of the purchase order.
13. Daisy Manufacturing Company, Inc. is a Federal Contractor subject to
Section 402 of the Vietnam Era Veterans Readjustment Assistance Act of 1974
and Section 503 of the Rehabilitation Act of 1973 and as such vendors [
]are subject to these sections.
16
<PAGE>
EXHIBIT 10(iv)
INTERNATIONAL AGENCY AGREEMENT
This Agreement, made this 19th day of June, 1996 between
DAISY MANUFACTURING COMPANY, INC. (D.B.A. BRASS EAGLE)
Post Office Box 220
Rogers, Arkansas 72757-0220
USA
(hereinafter called the "Company"); and
WDP Ltd.
Metro Triangle
221 Mount Street, Nechells
Birmingham B7 5QT
England
(hereinafter called the "Agent"); covers the distribution and servicing of all
products manufactured, sold or distributed by the Company (hereinafter referred
to as "Products").
ASSIGNED TERRITORY: The Company assigns to the Agent for the sale of Product,
- ------------------
the following territory, subject to the conditions hereinafter set forth: United
Kingdom, Norway, Sweden, Finland, Denmark, Germany, Holland, Baltic States,
Poland, Czech and Slovak Republics, Hungary, Austria, Switzerland, France,
Italy, Spain, the former Yugoslavia, Bulgaria, Rumania, Greece, Turkey, the
former Russian states, Portugal and all EEC member states.
This territory is hereinafter called the "Assigned Territory." Except as
provided otherwise in this Agreement, the Company agrees to refer to the Agent
all inquiries received from within the territory. The Agent will not solicit
business for the Company outside the Assigned Territory and will refer all
inquiries or order received, from outside of the territory to the Company.
The Assigned Territory shall not apply to paintball products supplied to WDP Ltd
utilizing WDP's own logos and Trademark brands of paintballs. The Company
recognizes that there is no geographical limitation placed upon WDP Ltd with
regard to WDP's own label branded paintballs for the avoidance of doubt WDP Ltd
may exploit its own paintball brands worldwide.
PURPOSE: The purpose of this Agreement is to secure efficient distribution and
- -------
servicing for Brass Eagle Product. The Agent shall promote this purpose to the
best of their ability, in accordance with the terms of this Agreement and
policies which may be established from time to time by the Company. The Company
shall assist the Agent in developing sales and promotional methods for the
effective distribution and sale of Brass Eagle Product.
<PAGE>
CHANGES IN ASSIGNED TERRITORY: If at any time the Company believes the Agent is
- -----------------------------
not working, or is not in a position to adequately work, any part of the
Assigned Territory, the Company reserves the right, by giving one month written
notice to the Agent, to cancel any part of the Agent's Assigned Territory
without, however, superseding the provisions of this Agreement with regard to
the remaining part of the territory as set forth in the Duration paragraph
below.
PURCHASE PRICE: The purchase price shall be as follows:
- --------------
Paintballs $18.90 USD per thousand, plus 5% in free paintballs
Paintballs will be packaged in standard cartons of 2,000 each, delivered C&F to
WDP Ltd warehouse in Birmingham, England. All paintballs are to be transported
in temperature controlled vehicles. Purchase price of paintballs is inclusive
of all shipping, transportation, duty and packaging. The Company agrees that
the Agent may request drop shipments of not less than one (1) million paintballs
be delivered free of transportation charges to Birmingham, Amsterdam, Brussels,
Paris, Zurich, Prague, Vienna, Warsaw, Stockholm and Copenhagen.
Stingray $54.55 USD
Tigershark $38.16 USD
Model 1430 $52.50 USD
Model 1440 $125.00 USD(Estimated)
Talon $25.00 USD(Estimated)
PAYMENT AND TERMS: Ninety (90) days open account for $150,000.00 USD.
- -----------------
Additional credit limits will be established per instructions of the Daisy
Credit Department. Payment must be in U.S. Dollars.
LIABILITY: No order shall be binding on the Company until it has been accepted
- ---------
in writing by the Company. The Company may accept orders or not, at its
discretion and option. The Company will not be held liable for loss or damage
caused by its non-acceptance of orders or by any delay in making delivery.
INVASION: The Company will use due diligence to protect the Assigned Territory
- --------
covered by this Agreement, but cannot guarantee to prevent the shipment of its
products into the Assigned Territory by parties other than itself and shall not
be held responsible therefore.
LEGAL TITLE CLAUSE: It is agreed that beneficial ownership of, and risk or loss
- ------------------
or damage to, all Product shipped under this Agreement shall remain in the
Company until the product has arrived at port of entry for the Agent's country.
Ownership of the Product shall not be transferred to the Agent at any other
place or time, regardless of the time, method, place or medium of payment, the
method of shipment, the payment of transportation charges or insurance, the
manner of consigning shipments, or any statement contained in, or implication
drawn from, the shipping documents or any other documents relating to the sale.
The use of
2
<PAGE>
such terms as "f.o.b.," "f.a.s.," "c.i.f.," and "c&f" shall be deemed to refer
only to price and not to transfer of ownership of the Product.
INSURANCE: The Company will insure all shipments hereunder, warehouse-to-
- ---------
warehouse, under its usual marine policy. The Agent may provide insurance
coverage for shipments hereunder, but only if (a) advanced approval of the
Company is obtained, (b) certified or photostatic copies of the master policy,
and copies of certificates covering individual shipments, are furnished to the
Company, and (c) the Company is named as a beneficiary, as interest may appear.
The company reserves the right to carry contingent insurance, for the Agent's
account, in any case in which the Agent's insurance is deemed acceptable to it.
MAIL SHIPMENTS: Postage, and insurance on, goods sent to the Agent, on his
- --------------
order, shall be for the Agent's account.
TRANSFER: Neither this Agreement, nor any of the rights herein conferred on the
- --------
Agent, may be transferred or assigned to others.
DURATION: It shall be agreed upon a duration of the Agreement for two (2)
- --------
years. Should the Agreement not be terminated, it will be extended for another
one (1) year. Either party may terminate this Agreement by giving to the other
notice in writing or by cable one month in advance, but any termination of this
Agreement, for any cause, shall not release the Agent from paying his account in
full, in accordance with the provisions of this Agreement, it being further
agreed that in the event of such notice of discontinuance of this Agreement
being given, the Company shall not be required to furnish, during the expiring
month of this Agreement, goods in greater number or volume than the monthly
average furnished during the last four months last preceding the service of
notice, and shall not be under obligation to furnish any goods unless all
amounts due have been paid in full in accordance with the terms of this
Agreement.
QUOTA: The Agent will endeavor to purchase and take delivery of approximately
- -----
100 million paintballs per year subject to the specification contained in
Schedule One and 5,000 Brass Eagle paintball guns (combination of all models)
per year. The Company recognizes that in the case of Brass Eagle gun sales,
targets can only be achieved by opening non-traditional paintball markets and
will provide every assistance to aid the Agent in achieving the target.
INDEPENDENT AGENT: The Agent agrees that they will conduct their business as an
- -----------------
independent Agent with respect to the products covered by this Agreement in such
a manner that no claims arising out of the conduct of such business can be
sustained against the Company by a third person(s), corporation, or by any
governmental body or authority. The Agent agrees that they will at all times
represent to third persons and to the public generally and to any governmental
body or authority, that the business conducted by the Agent with respect to the
products covered by this Agreement is that of an independent agent and that is
the sole relationship between Agent and Company with respect to such products.
3
<PAGE>
REPURCHASES: Upon the termination of this Agreement, the Company shall have the
- -----------
option of buying back from the Agent any new unsold Brass Eagle products
purchased from the Company at the prices charged the Agent, plus importation
costs, it being understood that by "new" it is meant products which have not
been used or damaged, and which have not been in stock more than six (6) months.
DISTRIBUTION: The Agent agrees:
- ------------
(a) To use every effort to promote the sale of the Company's products, to
advertise and canvass, to prominently display the Company's products,
and to maintain a sufficient stock at all times to fill orders
promptly;
(b) To establish, within a period of six (6) months, and to maintain
thereafter, suitable sales representation to sell the Company's
products in all principal commercial centers of the Assigned Territory
and to impose the conditions of this Agreement on such
representatives.
SERVICE: To maintain, at their own cost, a Service Department, properly
- -------
equipped to render satisfactory service to users of Daisy/Brass Eagle Products,
and to have on hand the necessary stock of repair parts. To maintain the
Company's usual guarantee on all products sold. Warranty parts will be supplied
free of charge in the case of guns under guarantee.
TRADEMARKS: To recognize the exclusive ownership and right of the Company, in
- ----------
and to all trade markets, trade names and patents used by the Company, in
connection with any and all of its products, made by and for the Company, and to
sell and advertise the products only under the trade names and trade marks
regularly applied to them by the Company.
Any rights acquired by the Agent within their country by reason of the use,
registration, etc. of the trade marks, trade names and patents used by the
Company shall be assigned to the Company without its present request.
The Company recognizes that an unspecified quantity of paintballs supplied
within the target quota of the above Quota clause herein will be manufactured
for WDP Ltd (the Agent) utilizing WDP's Trademarks. The Company recognizes the
exclusive ownership and rights of WDP Ltd (the Agent) to the Trademarks and
Intellectual property rights of WDP's Logos and Trademark Brand names. The
Company hereby agrees that it will not supply any other entities or company
worldwide with any product in which WDP Ltd (the Agent) Trademarks are utilized.
VISITS: To receive, at all times, visits throughout the Assigned Territory by a
- ------
duly accredited Company representative, for the purpose of inspecting,
consulting, and cooperating with the Agent in the upbuilding of the Company's
business, giving such representative full information regarding the Agent's
operations in Daisy/Brass Eagle Products in the various sections of this
Assigned Territory.
4
<PAGE>
SALES INFORMATION: To provide to the Company, when requested, all sales data
- -----------------
pertaining to where Daisy/Brass Eagle Product is sold in the Territory and in
what volume.
ARBITRATION: All disputes, controversies, claims, or differences which may
- -----------
arise between the parties, out of, in relation to, or in connection with, this
Agreement or any offers, including the breach thereof, shall be referred to and
finally settled by alternative dispute resolution mechanisms agreed upon by the
parties, or failing such Agreement, by arbitration. The arbitration shall take
place in the State of Arkansas in accordance with the International Commercial
Arbitration Rules of the American Arbitration Association. The award to be
rendered shall be final and binding upon both parties hereto, and judgment upon
the award rendered may be entered in any court having jurisdiction thereof.
LIMITATION OF LIABILITY: Neither the Company nor the Agent shall by reason of
- -----------------------
the termination or non-renewal of this Agreement be liable to the other for
compensation or damages on account of loss of prospective profits or anticipated
sales or on account of expenditures, investments, leases, property investments
or commitments in connection with the business or goodwill of the Company or of
the Agent or otherwise.
RETURNS: The company will replace free of charge any product which does not
- -------
conform to the specification as measured by the testing procedure contained in
the specification Schedule One.
FREE PRODUCT: Paintballs. Five percent (5%) of total paintballs purchased shall
- ------------
be added free of charge and shipped free of charge, duty paid with each delivery
to the Agent's warehouse in Birmingham, England, as described in the Purchase
Price clause above.
EXCLUSIVITY: All paintballs manufactured for the Company or Agent at the Ivax
- -----------
facility (Gelcaps) in Falkenhagen, Germany for sale in the Territory will be
manufactured exclusively for WDP Ltd. in accordance with the specifications
contained in Schedule One.
CHOICE OF LAW: This Agreement and all offers shall be governed by, and
- -------------
construed in accordance with, the laws of the State of Arkansas.
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be
duly executed, effective as of the date first above written.
DAISY MANUFACTURING COMPANY, INC.
("Company")
WITNESS:
By: /s/ Linda Wilkins By: /s/ Lynn Scott
--------------------- -----------------------------
Lynn Scott
Its: V.P. Sales and Marketing
5
<PAGE>
("Agent")
WITNESS:
By: /s/ By: /s/
------------------- -------------------------------
Its: Director
6
<PAGE>
EXHIBIT 10(v)
LEASE AGREEMENT
THIS AGREEMENT, entered into the 5th day of June 1997 by and between R.L. Brown
Investments who, whether one or more, will hereinafter be designated as Lessor,
and Daisy Manufacturing Company, Inc., Brass Eagle Division who, whether one or
more, will hereinafter be designated as Lessee.
WITNESSETH:
The Lessor shall let and the Lessee shall lease all that certain tract and
parcel described as 6,400 S.F. =/- office space, 1203 North 6th Street, Rogers,
Arkansas 72756 (the "Premises"). The term of this lease shall commence on the
1st day of July, 1997 and the primary terms shall be for a period of 30 months
ending midnight the 31st day of December 1999.
Lessee shall pay as rent to the Lessor the sum of $3,733.33 per month on the 1st
day of each and every month during the term hereof. The parties hereto covenant
as follows:
1. (a) Lessor hereby leases to Lessee and Lessee hereby leases from Lessor,
the Premises subject to the terms and conditions contained in this Lease.
Lessor agrees so long as Lessee fully complies with all the terms, covenants and
conditions of this Lease, that Lessee may peaceably have, hold and enjoy the
Premises during the term.
(b) Lessor warrants that Lessor has good title to the Premises, and that
there is no legal impediment to Lessor's right to lease the Premises.
2. Lessee will promptly pay the stipulated rent at the place designated. The
leased premises will be used by the Lessee only for the following purpose, to
wit:
General Office
3. The Lessee will not do or permit anything to be done, in, upon, or about the
leased premises that increases the premiums for fire hazard. The premiums are
to be paid by the Lessor for the first year continuously until tenant vacates
property. Lessee will not do or permit to be done anything which will make
uninsurable the leased premises or any part thereof.
4. Lessee will not do or permit to be done anything in, about or upon the
leased premises that interferes with State or Municipal laws, or the regulations
of the Fire Department or Board of Health; that creates a nuisance; or that is
dangerous to persons or property.
5. Except for assignment to any newly created corporation engaged in
substantially the same business as the current Brass Eagle Division, this Lease
shall not be assigned or any part of the leased premises sublet without the
written consent of the Lessor first endorsed hereon, said consent shall not be
unreasonably withheld. If Lessor consents to an assignment of subletting the
Lessee shall remain liable for payment of specified rental and the due
performance of all agreements and conditions herein.
<PAGE>
6. Lessor's interest in this Lease shall pass and vest in Lessor's heirs,
devisee, successors and assigns.
7. Lessee will not make any alterations, changes or improvements costing more
than five thousand ($5,000.00) dollars without Lessor's prior written consent,
which consent shall not be unreasonably withheld. If consent is given, then the
cost of such alterations, additions or improvements shall be paid by Lessee.
Upon termination of this Lease, Lessor shall have the right to retain the
premises as altered, changed or improved by Lessee, or Lessor may require the
Lessee to restore the premises to the conditions existing as of the date Lessee
went into possession of the leased premises under the terms of this Lease.
Should this Agreement be terminated, for any reason, any improvements not
required to be removed, shall be retained by Lessor.
8. Lessor shall keep the interior and exterior of the building, interior walls
and doors, wiring, plumbing and window and door glass in good repair, and shall
maintain the heating and air conditioning equipment. Lessor shall also be
responsible for the upkeep of the grounds and said grounds shall be kept in goo
[sic], neat order. In addition, Lessee shall maintain sidewalks and parking lot.
Lessee shall be responsible for snow removal. Above improvements to be in "as
is" condition at time of Lease commencement. Lessee shall have 14 days to notify
landlord of any mechanical, electrical or physical problems with property. If no
notice is received by landlord it shall be agreed all components of property are
in good working order and shall then become responsibility of Lessee. Lessee
shall cause property to be kept in a neat clean manner at all times or this
Lease may be voided by Lessor.
9. Upon the expiration of this Lease, in course or by breach of any of its
provisions, Lessee will restore the leased premises to Lessor in as good
condition as when possession was taken by Lessee, ordinary wear and tear
excepted.
10. Lessee will pay all utility bills in the amount of $500.00 per month.
11. Lessee shall be allowed to display such sign or advertisement on the
premises as shall comply with all municipal, county and state building and
zoning codes. Upon termination of this Lease, Lessee will remove any sign,
advertisement or notice painted on or affixed to the leased premises, and
restore that place it occupied to the condition which existed as of the date
this Lease takes effect.
12. Lessee shall be responsible for risk of and liability for damages to person
or property during the term of this Lease arising from its occupancy of the
premises. Lessee shall provide Lessor with a copy of said liability policy
showing Lessor as "also insured." Said policy shall show limits of not less than
$1,000,000 for any one occurrence. Lessor shall insure building against fire
damage. Lessee shall be responsible to insure Lessee's personal property.
13. In the event of a substantial destruction (substantial destruction as
herein used means destruction which will cost 30% of more of the value of the
improvements prior to destruction to restore such improvements) of the lease
premises by fire, cyclone or act of God, this Lease may be terminated on notice
by the Lessor or by the Lessee, or the parties shall agree to rebuild for the
use of the Lessee, and in that event, the parties shall agree whether to rebuild
within
2
<PAGE>
thirty (30) days after said destruction, and the Lessor shall then proceed with
all reasonable diligence, delay due to adjustment or insurance loss and other
unavoidable delays excepted, to restore the said premises; and this Lease shall
continue in full force and effect, except that, as the sole and exclusive remedy
of the Lessee, there shall be an abatement of the rent payable by Lessee during
the time the said premises are untenantable or in party untenantable. In the
event of a partial destruction (partial destruction as herein used means
destruction which will cost 30% of the value of the improvements prior to
destruction to restore such improvements) of the leased premises by fire,
cyclone, or act of God, the Lessee may terminate or the Lessor will repair said
leased premiums for use of the Lessee, and the Lease shall continue in full
force and effect, except that, as the remedy of the Lessee, there shall be an
abatement in the rent payable by the Lessee during the time the leased premises
are untenantable or in part untenantable.
14. The Lessee hereby subordinates this Lease to any mortgage, deed of trust or
encumbrance which the Lessor may have placed, or may hereafter place, on the
premises. Lessee agrees to execute, on demand, any instrument which may be
deemed necessary or desirable to render such mortgage, deed of trust or
encumbrance, whenever made, superior and prior to this Lease.
15. In the event of a breach of any other terms or conditions hereof by Lessee,
Lessor may: (a) take possession of the leased premises and lease the same for
the amount of the Lessee upon such terms as may be acceptable to Lessor, and
apply the proceeds received from such leasing, after paying the expenses
thereof, toward the payment of the rent which the Lessee herein is obligated to
pay and collect the balance thereof from the Lessee; or (b) to take possession
of the leased premises and collect from the Lessee all damages sustained by
reasons of such breach; or (c) to pursue any remedy or remedies which may be
available at law or in equity.
16. Should bankruptcy, insolvency or receivership proceedings of any kind by
instituted by or against Lessee, or any part of the Lessees if more than one are
included in the designation "Lessee" herein, or should Lessee's interest in the
Lease, or the interest of any one of the Lessees, if more than one are included
under the designation "lessee" herein, dissolve or pass by operation of law to
any other person or corporation, then at the option of Lessor, that shall be
considered a breach of the terms and conditions of this Lease, and Lessor may
pursue the remedies provided in paragraph 15 hereof.
17. On termination of this Lease, in due course Lessee agrees to surrender
possession of the Lease premises without demand. Failing to do so, Lessee will,
in addition to the damages generally recoverable, be liable to Lessor for all
damages Lessor may sustain, including claims made by any succeeding tenant
against Lessor which are found upon delay or failure in delivering possession of
the lease premises to the succeeding tenant.
18. Lessee shall pay a security deposit of $1,000 at time of occupancy.
19. The failure of the Lessor to insist upon performance of any of the
agreements and conditions herein in any one or more instances shall not be a
waiver of the right thereafter to insist upon full and complete performance of
such agreements and conditions. Receipt by the Lessor of rent with knowledge of
the breach of any of the agreements and conditions hereof shall not be deemed a
waiver of such breach.
3
<PAGE>
20. Any notice provided for herein will be deemed to have been give Lessee when
deposited in registered mail and addressed to Lessee, as follows:
Attention: President
Daisy Manufacturing Company, Inc.
Brass Eagle Division
1203 North 6th Street
Rogers, Arkansas 72756
21. Upon termination of this Lease in course or for breach of any of its terms
or conditions, Lessee agrees to restore the leased premises to Lessor in as good
condition as when possession is delivered to Lessee, ordinary wear and tear
excepted.
22. Lessor may place a "for rent" sign or signs on the leased premises during
the last 30 days this Lease is in force.
23. In the event any changes, alterations or additions are required by any law,
ordinance, or regulation of the Fire Department or Board of Health, as a direct
result of Lessee's occupancy, then the cost of such change, alterations or
additions required by any such law, ordinance or regulation should be paid by
Lessor.
24. If the leased premises be subjected to any eminent domain proceedings, the
Lease shall terminate if all the leased premises are taken or if the portion
taken renders the premises wholly inadequate for Lessee's purposes, as set out
in paragraph 2 hereof. In such condemnation proceedings, Lessee may claim
compensation for the taking of any removable installations which by the terms of
this Lease Lessee would be permitted to remove at the expiration of this Lease,
but Lessee shall be entitled to no additional award, it being agreed that all
damages allocable to full fee simple owners.
25. Lessor or his agents may, by prior appointment during regular business
hours, enter the leased premises for inspection purposes.
26. Lessor shall pay the amount of general taxes assessed and levied against
the leased premises and any improvements thereon.
27. Lessee shall have the option to renew Lease for three (3) one (1) year
rental periods at the same rental rate as the original term.
28. It is understood that Bill McClard of Lindsey and Associates, Inc. shall be
paid by Landlord a leasing fee of 6% of gross rent as collected on a monthly
basis for the terms of this Lease and all extensions. Should Lessee purchase
said property, Lindsey and Associates, Inc. will be paid a sales fee of 6% of
gross sales price at closing.
29. Prior to July 01, 1997, Lessor shall replace damaged ceiling tiles, repair
damaged carpet and replace carpet in the conference room along with repair
lattice work outside the conference area. Lessor shall allow Lessee access to
the premises to commence preparations for moving in.
4
<PAGE>
30. Lessee shall have the parking area designated for Lessee use having a
minimum of 40 parking spaces along with handicapped spaces as called for in the
Rogers City ordinances.
Witness the hand and seals of the parties this ____ day of ____________________,
1997.
ATTEST:
Daisy Manufacturing Company, Inc.
Brass Eagle Division
/s/ John Flynn By: /s/ Lynn Scott
- --------------------------- ----------------------------------
Lessor:
By: /s/ Robert Brown
- --------------------------- ----------------------------------
31. Lessee agrees to pay increases on gas, electricity, water and sewer on a
prorata basis to lessor as follows: Basis cost for utilities shall be $500.
Lessee shall not be charged for lessee's gross consumption so long as lessee is
not abusive by using unreasonable amounts of utilities. Increased utility cost
that are a result of increases for unit cost not for the number of units used
will be passed through to Daisy. The formula will be: Daisy will pay basis for
electricity $305 per month times the change in unit cost; basis for water and
sewer $13.00 per month times the percentage change in the unit cost; basis for
gas $182.00 per month times the percentage change in the unit cost.
Cost shall be in addition to the $500.00 basis.
Example: A 10% increase in electricity would be 10% of $305.00 or $30.50
increase above the basis or $530.50 per month.
5
<PAGE>
EXHIBIT 10(vi)
LEASE
THIS INDENTURE made this 11th day of December 1995, between GRANBY APPAREL,
INC., A Missouri Corporation, party of the first part, hereinafter called
"Granby", and DAISY MANUFACTURING COMPANY, INC., a Delaware Corporation,
authorized to do business in Missouri, or assigns, herein called "Daisy",
WITNESSETH:
For and in consideration of the mutual covenants and agreements herein
contained, IT IS MUTUALLY AGREED AS FOLLOWS:
PROPERTY LEASE That in consideration of the covenants herein contained on
--------------
the part of Daisy to be observed and performed, Granby does hereby lease unto
Daisy the premises located in Granby, Missouri, described as follows:
Part of the Northwest Quarter of the Southeast Quarter of Section 6,
township 25, Range 30, Newton County, Missouri, described as beginning at a
set iron pin N 89(Degrees)53'40" W 321.50 feet from a sandstone at the
Southeast Corner of said Northwest Quarter of the Southeast Quarter of
Section 6, thence N 89(Degrees)53'40" W 384.28 feet to a found pipe, thence
N 48(Degrees)57'19" W 203.80 feet to a found iron pin on the right of way
of a public street, thence N 28(Degrees)30' E 26.84 feet along said right
of way, thence N 61(Degrees)23' E 265.18 feet along said right of way,
thence n 74(Degrees)10' E 333.00 feet along said right of way, thence S
00(Degrees)07'29" W 545.11 feet to the point of beginning,
hereinafter called "Property".
To have and to hold said premises unto Daisy, its successors or assigns,
for the term of twenty four (24) months. The Lease shall commence on the 11th
day of December, 1995, and end on the 10th day of December, 1997. Daisy shall
have the right to cancel the Lease on July 1, 1996, if the availability or cost
of labor is not in keeping with the data presented by the Area Economic
Development Group, a copy of which is attached hereto and incorporated herein by
reference. Daisy shall pay as rental the sum of Seven Thousand Six Hundred
Dollars ($7,600.00) per month, payable in advance commencing on the 11th day of
December, 1995, and on the same day of each succeeding month thereafter during
the initial term and any extension of the Lease as hereinafter provided, with
the rent to be adjusted at the end of each yearly anniversary of the Lease to
reflect any change in Consumer Price Index issued by the Wall Street Journal.
Any rent not paid within twenty (20) days of the due date shall bear
interest at the rate of ten (10%) percent per annum until paid.
OPTION TO EXTEND TERM OF LEASE WITH GRANBY
------------------------------------------
<PAGE>
2
In the event Daisy has substantially complied with all the terms and
conditions of this agreement to be performed by Daisy, Granby hereby grants to
Daisy the option to extend the Lease for a period of two (2) years commencing on
the date of the end of the two (2) year term, and ending seven hundred thirty
(730) days thereafter, upon the same terms and conditions as herein stated. In
the event Daisy elects to exercise said option, it shall give written notice
thereof to Granby on or before sixty (60) days prior to the end of the initial
term of the two (2) year Lease.
TERMS AND PROVISIONS OF PROPERTY LEASE:
--------------------------------------
A. Granby covenants and agrees:
That it will put Daisy in possession of said Property and Daisy, paying the
rent hereby reserved and observing and performing the several covenants and
stipulations herein provided to be performed, shall peaceably hold and
enjoy the Property during the term hereof without any interruption by
Granby or any person, corporation or other entity or entities rightfully
claiming under it.
B. Daisy covenants and agrees:
1. To use the property for such business purposes as it may deem
appropriate in its sole discretion.
2. Daisy shall have the right to assign the Lease or to sublet the
Property in whole or in part, with prior written consent of Granby, and
such consent shall not be unreasonably withheld.
3. Daisy shall inform Granby of any alteration or remodeling work in the
building and Granby shall not unreasonably withhold such consent and
agreement. All such alteration or remodeling work shall comply with all
laws, orders, rules, regulations or requirements of any governmental
authority affecting the same and shall be at Daisy's expense.
4. To repair all injuries and damages done to the property through
Daisy's gross negligence during its occupancy or pay for the same.
5. Daisy accepts the Building "as is".
6. If default shall be made in the payment of rent or any part thereof
at the time provided, Granby shall, by written notice to Daisy, notify
Daisy of the same. If said default is not corrected within thirty (30) days
from the date of receipt of such notice, Granby shall have the right to re-
enter and take possession of the premises and Daisy will peacefully
surrender possession thereof to Granby or its registered agent.
<PAGE>
3
If default be made by Daisy in the performance or observance of any other
covenant, agreement or condition to be performed on its part, Granby shall give
written notice thereof to Daisy and if the same is not corrected within ninety
(90) days thereafter, Granby shall have the right to re-enter and take
possession of the premises and Daisy will peacefully surrender possession
thereof to Granby or its registered agent.
C. It is mutually agreed by and between the parties that:
1. In the event the building on the Property is destroyed or damaged so
that it is untenantable, without fault of Daisy, this Lease shall
terminate.
2. In the event the building on the Property is damaged so as to be
partially untenantable without fault of Daisy, the Lease may at Daisy's
option be terminated by giving written notice to Granby. The parties may,
however, agree to continue the Lease if a part of the building could be
used with the monthly rental to be reduced to an amount mutually agreed
upon until the entire building is rendered tenantable for Daisy's intended
use.
D. Daisy shall carry public liability insurance in a minimum amount of
One Million Dollars ($l,000,000.00) per occurrence and Granby shall be
shown as an additional insured on said policy and a copy thereof furnished
to Granby.
E. Daisy shall carry insurance on the building on the Property, insuring
the same against loss by fire or other casualty in an amount of Seven
Hundred Sixty Thousand Dollars ($760,000.00). Daisy shall have Granby
named as an additional insured on said policy, and a copy thereof furnished
Granby.
F. Daisy shall pay all of the taxes levied and assessed against any
business which Daisy may be engaged in, including real estate taxes on the
Property.
G. Granby warrants that the air conditioning system, the plumbing and
electrical systems will be in good operating condition for at least one
hundred twenty (120) days from the date the Lease begins. In the event
thereafter any of said systems require replacement or repair, the cost
thereof shall be paid by Daisy.
H. Any one or more of the following events shall constitute default:
1. The failure of Daisy to comply with all of the terms and provisions
of this Lease agreement;
2. The making by Daisy of an assignment for the benefit of creditors.
I. Any notice, request, demand, approval or consent given or required to
be given under this Lease shall be in writing and shall be deemed to have
been given when
<PAGE>
4
delivered or mailed by United States registered or certified mail, return
receipt requested, with all postage charges prepaid, addressed as follows:
To Granby: To Daisy:
Granby Apparel, Inc. Daisy Manufacturing Company, Inc.
C/O First State Bank Box 220
104 E. Cleveland Street Rogers, Arkansas 72757-0220
Monett, Missouri 65708
J. At the expiration of said term Daisy will peaceably yield up to
Granby or those having their estate therein, the Property and all erections
and additions made upon the same, in good repair and all respects,
reasonable wear and tear and damage by fire and other unavoidable
casualties excepted, as the same are now or may be put in by Granby.
K. That no assent, expressed or implied by either party to any breach of
the other party's covenants, shall be deemed to be a waiver of any
succeeding breach of the same covenant.
L. 1. All improvements, renovations and alterations made by Daisy
shall become a part of the real estate shall remain as leasehold
improvements except for the personal property and trade fixtures, and shall
not be removed by Daisy unless prior written consent to remove is obtained
from Granby.
2. This Lease and the rights and obligations of the parties hereunder
shall be construed in accordance with the laws of the State of Missouri.
3. This Lease and all covenants and conditions herein contained shall
inure to the benefit of and be binding upon Granby and Daisy and their
respective successors and assigns.
M. If any portion of the Premises shall be taken or condemned for a
public or quasi-public use, then this Lease shall terminate as to the
portion so taken as of the first notice of such taking given to Granby. If
the portion so taken is such as to render the remaining portion of the
Property unsuitable in Daisy's sole opinion and discretion for its intended
use, Daisy may terminate this Lease.
N. This Lease shall not be recorded but a memorandum hereof shall be
prepared and recorded in the County where the Premises are located, at the
expense of Daisy. The aforesaid memorandum shall contain such information
as is necessary to provide adequate record notice of the existence of the
Lease, including the parties, the term, the property involved and whether
options to renew or purchase exist.
O. The provisions hereof are independent covenants and should any
provision or provisions contained in this Lease be declared by a court or
other tribunal of competent
<PAGE>
5
jurisdiction to be void, unenforceable or illegal, then such provision or
provisions shall be severable and the remaining provisions hereof shall
remain at Daisy's option in full force and effect.
P. In the event that the parties hereto enter into litigation, legal
fees shall be paid the respective parties or as ordered by the Court.
Q. It is understood by and between the parties hereto that both are
independent of one another and neither shall have the authority to bind the
other to any contract or agreement whatsoever as a result of this
agreement.
R. The parties hereto covenant one to another that they are able to
enter into this agreement freely and of their own accord and that no other
entity or entities may act on their behalf other than those disclosed
herein as it pertains to this agreement.
OPTION TO PURCHASE
------------------
If Daisy has complied with the terms and provisions of this lease Granby
grants to Daisy or assigns the right and option to purchase the Property,
hereinbefore described, at any time during this lease or any execution thereof
at a negotiated price not to exceed $500,000.00, adjusted for the Consumer Price
Index in effect at the time of the option to purchase is exercised. Fifty
percent of the rent paid during the first 24 months of the lease shall be
credited on the purchase price. The balance of the purchase price shall be paid
to Granby by cashiers check.
Granby's Right to Sell
----------------------
Granby shall have the right to sell the Property at any time during the
term of this lease or any extension thereof, provided however such sale shall be
subject to the right of Daisy under this lease and subject to Daisy's option to
purchase under the terms and conditions and price herein set forth.
TERMS OF PURCHASE IF OPTION IS PROPERLY EXERCISED BY Daisy
----------------------------------------------------------
In the event Daisy exercises its option to purchase the Property, Granby
shall grant to Daisy or assigns the right to purchase the Property, upon the
following terms and conditions:
1. The purchase price for said Property, shall be negotiated, but shall
not exceed Five Hundred Thousand Dollars ($500,000.00), plus an adjustment
for the CPI at the time of the exercise of the option, payable as follows:
A. There shall be credited on the purchase price fifty (50%) percent of
the rental payments made not to exceed the first twenty-four (24) months of
the Lease. The balance shall be paid by cashier's check payable to Granby.
<PAGE>
6
2. Notwithstanding anything to the contrary, the following are matters
or conditions precedent to Daisy closing this transaction:
A. Within thirty (30) days from and after the exercise by Daisy of its
option to purchase, Granby shall furnish Daisy title insurance commitment
covering said Property in the amount of the total purchase price showing
marketable title vested in Granby, the cost of the commitment to be paid by
Granby.
B. In the event Daisy exercises the Option to purchase Granby shall
allow Daisy to conduct a complete and thorough "environmental assessment"
of the property performed by a geotechnical firm designated by Daisy, the
cost thereof to be paid by Daisy. The environmental assessment shall
include, without limitation, the geohydodrological survey of soil,
subsurface conditions, including depth and quality of ground water, results
of drillings and borings, and results of soil sample tests performed at a
chemistry laboratory for the purpose of determining the presence of
"hazardous substances" (as that term is defined in the CERCLA 42 USC P.
9601, hereinafter sometimes called the "act"), petroleum products or other
contaminants or other materials or substances posing a threat to the
environment, including the presence or absence of polychlorinated
biphenyls, on or about the property ("hazardous materials"). The above and
foregoing shall be a "Level 2" or "Phase 2" environmental impact study.
In the event the results of said "environmental assessment" herein
mentioned show that remedial action or "clean up" needs to be conducted on the
Property to bring the Property into compliance with any and all Federal, State
and Local standards in existence at the time, or the results of the
"environmental assessment" are not acceptable to Daisy in Daisy's sole
discretion, Daisy may, a) notify Granby of the action necessary to bring the
property into compliance with any and all Federal, State and Local standards
then in existence and Granby may take the requested action of Daisy and commence
the actions required by the "environmental assessment" to bring the Property
into compliance with any and all Federal, State and Local standards then in
existence at Granby's sole cost and expense, b) if Granby does not take action
to "clean up" the area then Daisy shall have the right to continue the then
current lease or the extension thereof for a period of ten additional years on
the same terms and conditions as herein set forth for the original term of the
lease and any extension thereof, or c) terminate the lease.
In the event Granby commences "clean up" and/or "remediation" as required
by the environmental assessment and said "cleanup" or "remediation" period
cannot be completed prior to the contemplated closing date herein specified,
Daisy shall make the lease payments herein provided during the period of
"cleanup" and/or "remediation" and such payments shall apply on the purchase
price.
In the event Daisy cancels this agreement for any reason, Daisy shall have
60 days to remove its equipment, trade fixtures and any other matters
- --
contemplated herein which shall be considered as the Personal Property of Daisy.
<PAGE>
7
All notices herein mentioned shall be written notice delivered either in
person or by registered or certified letter, U.S. Mail, postage prepaid,
addressed to Granby, and Daisy at the addresses hereinbefore stipulated.
3. Granby hereby makes the following warranties to Daisy:
A. As of the date of this agreement, Granby has received no notice from
any governmental authority of any violations of law or governmental
regulations affecting the Property which has not been corrected.
B. Granby knows of no condemnation or eminent domain proceedings pending
or contemplated against any or all of the Property.
C. Granby is not now a party to any litigation affecting the Property or
Granby's right to sell any portion of the Property, and Granby knows of no
litigation or threatened litigation affecting all or any portion of the
Property.
D. Granby states that as of the date of this agreement there are no
underground or buried storage tanks on the Property and that there are no
hazardous substances buried below the soil or otherwise upon the Property.
E. A promissory note and deed of trust on the real estate herein
described given by Granby to Kerry D. Douglas, trustee for the Pleasant
Hope Bank, has an unpaid principal balance of $52,901.69 with monthly
payments of principal and interest of $2,987.91. The payment is due on the
24th day of each month. The deed of trust is recorded in Book 341, Pages
6904 and rerecorded in Book 341, Page 7259, Office of the Recorder of Deeds
of Newton County, Missouri.
In the event default is made in any monthly payment on the note during the
term of this lease and any extension thereof, Daisy shall pay to the holder
of said note and deed of trust, the monthly payment from the rental due for
that month with the balance of the monthly rent paid to Granby. Granby
shall not place any further deed of trust or encumbrance on the real estate
during the term of this lease or any extension thereof. In the event Daisy
pays said holder the monthly payment on behalf of Granby, and pays the
balance of the rental hereunder to Granby, the same shall not constitute a
default of the rental payment due hereunder from Daisy to Granby.
4. In the event Granby is not able or does not fulfill any one or more
of the warranties listed in paragraph 3 above, Daisy shall have the right
at any time during the term of this agreement to cancel the agreement.
5. The provisions of this contract shall survive settlement and not be
merged upon the delivery and acceptance of the deed to the property.
<PAGE>
8
6. As used in this agreement, the singular shall include the plural and
the use of any gender shall be applicable to all genders.
7. This agreement shall be binding upon Granby and Daisy and their
respective successors and assigns.
8. This agreement shall be construed, interpreted and enforced according
to the laws of the State of Missouri without regard to principals' conflict
of interest.
9. This transaction shall be closed as soon as practicable but not later
than ninety (90) days following the exercise by Daisy of its option to
purchase, unless the parties, by mutual agreement, extend the time of
closing.
10. In the event Daisy exercises its option to purchase the Property,
Granby shall, within thirty (30) days after the closing of said
transaction, or as soon as practicable thereafter, furnish to Daisy title
insurance policy in the amount of the total purchase price, said policy
showing marketable title of Property vested in Daisy, the cost thereof to
be paid by Granby.
11. The parties hereto mutually agree that under the terms of this
agreement a facsimile signature shall constitute an original.
12. In the event Daisy exercises its option to purchase the
aforementioned Property, and Granby defaults on any provision of this
agreement, Daisy may do one of the following:
A. Specifically enforce this agreement and recover damages suffered by
Daisy as a result of the delay in the acquisition of the property; or
B. Terminate this agreement by written notice to Granby, and, at Daisy's
option, pursue any other remedy and damages available at law or in equity.
13. In the event Daisy exercises its option to purchase the
aforementioned Property, and Daisy defaults on any term or provision of
this agreement, Granby may do one of the following:
A. Specifically enforce this agreement and recover damages suffered by
Granby as a result of the delay in the sale of any of the above mentioned
property; or
B. Terminate this agreement upon written notice to Daisy and retain all
sums paid by Daisy to Granby.
14. In the event Daisy exercises its option to purchase the
aforementioned Property, then at the time of closing:
A. Granby shall comply with all conditions precedent to said closing.
<PAGE>
9
B. Granby shall make, execute and deliver to Daisy Warranty Deed to said
Property and deliver possession thereof to Daisy.
C. Daisy shall pay to Granby the purchase price less credit for rents
paid as herein provided.
D. This transaction shall be closed at Community Bank and Trust Company
in Granby, Missouri, or such other place as the parties agree upon.
E. Daisy and Granby agree to split the closing costs of this
transaction.
F. Each party shall be responsible for their respective attorney fees
incurred in connection herewith.
IN WITNESS WHEREOF, the parties have hereunto have set their hands and
seals, this 17th day of January, 1996.
Granby Apparel, Inc., A Missouri Corporation
By: /s/ Glen Ganett
--------------------------------
President
Attest: /s/ Jerry White
----------------------
Secretary Daisy Manufacturing Company, Inc. a Delaware
Corporation, authorized to do business in
Missouri
By: /s/ Marvin Griffin, Jr.
--------------------------------
President Marvin W. Griffin, Jr.
Attest: /s/ Ralph W. Barbier, Jr.
----------------------
Ralph W. Barbier, Jr.
Secretary
<PAGE>
Exhibit 10(vii)
FORM OF
ADMINISTRATIVE AGREEMENT
------------------------
This Agreement effective the day of 1997, is by and between
Daisy Manufacturing Company, a Delaware corporation, 2111 South Eighth Street,
Rogers, Arkansas 72758, ("Daisy"), and Brass Eagle Inc., a Delaware corporation,
1203A N. 6th Street, Rogers, Arkansas 72756 ("B E")
The parties hereby agree as follows:
1. Daisy will provide the following employee services for a total fee of
$37,598.00 per month:
(a) MIS and Software Support Including:
----------------------------------
(i) Telephone service for voice and data;
(ii) Computer hardware, equipment, links and hookups;
(iii) Software programs to run the business -e.g. MRP II;
(iv) Host facilities for data and backup;
(v) Employee services.
$7,708.00 per month.
(b) Legal Including:
---------------
(i) Supervising all litigation, insurance (property and
casualty and product liability matters;
(ii) Work on all B E contracts;
(iii) Routine legal review of transactions, employee-related
legal problems, and miscellaneous legal matters;
(iv) Corporate secretarial and Board of Directors.
$7,613.00 per month.
(c) Human Resources - Consult and Advise Regarding:
----------------------------------------------
(i) Assistance with hiring, firing, HR procedures and
functions;
(ii) Compliance with HR-related laws;
(iii) Payroll and related services;
(iv) Group medical, life, A.D.&D, 401(K).
$1,042.00 per month.
(d) Accounts Receivable and Credit Including:
----------------------------------------
(i) Review and credit-related decisions;
(ii) Collections of delinquent accounts;
$7,235.00 per month.
(e) Operations Support Including:
----------------------------
(i) Warehousing and shipping out of the Rogers facility until
December 31, 1997, and out of the Neosho Missouri
facility in 1998.
$14,000.00 per month.
<PAGE>
2. Full time employees shall provide these services on an as needed
basis. If B E should decide that any of the services are no longer needed, or
Daisy should decide they can no longer provide such services then an equitable
adjustment shall be made in the monthly fee, by mutual agreement of the parties.
To the extent B E requires outside consultants to assist in any of the above
areas, BE shall hire and pay such outside consultants directly.
3. The term of this Agreement shall be until December 31, 1998. Unless
either party gives thirty days prior written notice, it shall be renewed for a
like one-year term on an annual basis. Provided, however, this Agreement shall
terminate no later than December 31, 2001.
4. Daisy shall exercise ordinary care in providing these services to B
E, and said services shall be consistent with a quality level usual and
customary in the industry. Daisy shall be liable to B E for failure at such
services only in the case of gross negligence or willful misconduct.
5. This Agreement shall be governed according to the laws of the State
of Arkansas.
Executed and agreed to the date first written above.
Daisy Manufacturing Company, Inc. Brass Eagle Inc.
By By
------------------------------ ----------------------
Title Vice President, General Title President
--------------------------- -------------------
Counsel and Secretary
<PAGE>
EXHIBIT 10(ix)
EMPLOYMENT AND NONCOMPETITION AGREEMENT
---------------------------------------
This AGREEMENT is made as of September 15, 1997 by and between BRASS EAGLE
INC., a Delaware corporation ("Company"), and E. LYNN SCOTT ("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ Executive and Executive desires to
be employed by the Company to undertake such responsibilities as are necessary
to assist in running the businesses of the Company, all in accordance with the
provisions of this Agreement; and
WHEREAS, Executive has been an officer and a shareholder of the Company and
has valuable knowledge and experience pertaining to the business of the Company,
and the parties desire to arrange for the continuation of his services to the
Company; and
WHEREAS, as an inducement to the Company extending its employment
arrangement with Executive, the parties also desire to arrange for Executive's
undertaking not to compete with the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1. Employment. Commencing as of the date hereof and continuing through
----------
three (3) years following the date hereof (the "Initial Term"), the Company
hereby employs Executive as President and Chief Executive Officer of the Company
with responsibility for the performance of such executive services and duties as
shall be reasonably assigned to and requested of him by, and subject to the
direction and supervision of, the Board of Directors of the Company. Subject to
the provisions of Section 11 hereof, commencing on September 15, 2000 and the
15th day of each September thereafter, the term of this Agreement shall be
automatically extended for additional one (1) year period(s), on the same terms
and conditions as contained herein, unless either party gives written notice to
the other party of his or its intention not to extend the employment hereunder
at least ninety (90) days prior to September 15 of any year following the
Initial Term of this Agreement (the "Additional Term(s)") (the Initial Term and
the Additional Term(s), if any, are hereinafter referred to as the "Employment
Period"). Executive hereby accepts such employment and agrees that he will
devote his full time and undivided efforts to the business and affairs of the
Company and serve the Company in its business and perform his duties to the best
of his ability.
2. Salary and Bonus. (a) As compensation for his services during the
----------------
Employment Period, Executive shall receive a base annual salary at the rate of
One Hundred Forty Thousand Dollars ($140,000). Effective January 1, 1998, such
base annual salary shall be increased to One Hundred Sixty Thousand Dollars.
The Company will make a good faith effort to adjust Executive's salary to be
consistent with the top quartile of similarly situated executives. Such salary
shall be subject to being increased, but not decreased, based upon such annual
review,
-1-
<PAGE>
although any increase shall be at the sole discretion of the Board of Directors
of the Company. Such salary shall be payable in such installments as is
customary for the Company, but no less frequently than in equal monthly
installments. In the event Executive's employment with the Company is
terminated prior to the expiration of the Employment Period pursuant to
subsections (b) or (c) of Section 11 of this Agreement, Executive's accrual of
such salary shall terminate immediately and any unpaid installments of accrued
salary shall be paid at the next installment date. In the event Executive's
employment with the Company is terminated prior to the expiration of the
Employment Period pursuant to subsections (d), (e), (f) or (g) of Section 11 of
this Agreement, such salary shall be payable for either the remainder of the
Employment Period or for one (1) year after the date of Executive's termination,
whichever is greater.
(b) In addition to the base salary referred to in Section 2(a) hereof, and
subject to the discretion of the Company's Board of Directors, Executive will be
eligible to receive bonus compensation as a performance incentive. In order to
be eligible for bonus compensation, Executive must be employed by the Company on
December 31 of the year for which bonus compensation is to be paid. The
compensation will be based on Executive's base annual salary as of December 31,
1997 and will determined with reference to the Company's operating performance,
based on operating income net of bonuses paid and prior to amortization, as
follows:
(i) Annual bonus compensation payable for 1997 shall be equal to a
fixed percentage of Executive's base salary as of December 31, 1997,
according to the following table:
<TABLE>
<CAPTION>
Bonus of Dollar Amount Equal to
Operating Income Percentage of Base Salary
---------------- -------------------------
<S> <C>
$5 million 5.0%
$5.1 million 10.0%
$5.2 million 15.0%
$5.3 million 20.0%
$5.4 million 25.0%
$5.5 million 30.0%
$5.7 million 33.3%
</TABLE>
(ii) Annual bonus compensation payable for the years 1998 and
thereafter and performance targets established in connection therewith
shall be determined by the Company's Board of Directors based upon the
recommendation of Executive.
(c) In addition to the base salary and bonus compensation referred to in
Sections 2 (a) and (b) hereof, respectively, Executive will be eligible to
receive awards of options to purchase shares of the Company's common stock,
subject to the discretion of the Company's
-2-
<PAGE>
Board of Directors, in accordance with the provisions of any incentive or bonus
stock option plan as the Board of Directors may adopt, from time to time.
3. Expenses. The Company shall reimburse Executive for reasonable
--------
expenses incurred by him or on behalf of the Company with such documentation as
is requested by the Company in order for it to comply with the Internal Revenue
Code and regulations thereunder in connection with the proper deduction of such
expenses. Such reimbursements shall be due and payable upon receipt by the
Company of the related documentation. The Company's obligation to make such
reimbursements shall survive the termination of this Agreement with respect to
unreimbursed expenses incurred prior to such time.
4. Benefits. During the Employment Period, Executive shall be entitled
--------
to participate in any employee benefit plans which are maintained or established
by the Company for its senior executives generally, subject, however, to all of
the terms and conditions thereof, including any eligibility requirements
therefor. In any event, the Company agrees to provide (i) medical insurance
coverage equal to that provided for other senior executives of the Company; (ii)
life insurance coverage equal to 1.6 times Executive's base salary; and (iii)
participation in the Company's 401(k) plan or other standard retirement plan
maintained by the Company. In the event Executive's employment with the Company
is terminated prior to the expiration of the Employment Period pursuant to
subsections (b) or (c) of Section 11 of this Agreement, Executive's accrual of
such benefits shall immediately cease. In the event Executive's employment with
the Company is terminated prior to the expiration of the Employment Period
pursuant to subsections (d), (e), (f) or (g) of Section 11 of this Agreement,
Executive shall receive such benefits for either the remainder of the Employment
Period or for one (1) year after the date of Executive's termination, whichever
is greater.
5. Vacations. During the Employment Period, Executive shall be entitled
---------
to four (4) weeks of paid vacation.
6. Nondisclosure. Executive acknowledges that information obtained by him
-------------
relating to the Company and its business constitutes a valuable, special and
unique asset of the Company. Except for information which is already in the
public domain, which is publicly disclosed by persons other than Executive, or
which is required by law to be disclosed, Executive shall at all times during
and after his employment with the Company hold in strictest confidence any and
all confidential information within his knowledge (whether acquired prior to or
during his employment with the Company) concerning the products, processes,
services, business, suppliers and customers of the Company. Such confidential
information includes, without limitation, financial information, sales and
distribution information, price lists, the identity and lists of actual and
potential customers and technical information, all to the extent that such
information is not intended by the Company for public dissemination.
7. Noncompetition. Commencing as of the date hereof and continuing
--------------
through the date of the expiration of the Employment Period, or one (1) year
after the termination of his employment with the Company, whichever is later,
Executive shall not, without the prior written
-3-
<PAGE>
consent of the Company, (a) solicit business from or compete with the Company
for the business of any customer of the Company as reflected on the books of the
Company either as of the date hereof or as of the date of Executive's
termination of employment with the Company, provided, however, that this clause
(a) shall not preclude or prevent Executive from soliciting from any such
customer of the Company business for products or services that are not in
competition with the products developed, manufactured, prepared, sold or
distributed or services rendered by the Company or (b) either directly or
indirectly operate or perform any advisory or consulting services for, invest in
(other than stock in a publicly-held corporation which is traded on a recognized
securities exchange or in an established over-the-counter market, provided that
the ownership of such equity interest does not give Executive the right to
control or substantially influence the policy or operational decisions of such
corporation), or otherwise become associated with in any capacity, any company,
partnership, organization, proprietorship or other entity which develops,
manufactures, prepares, sells or distributes products or performs services then
in competition with the products developed, manufactured, prepared, sold or
distributed or services rendered by the Company anywhere in the markets in which
the Company competes at any time during such period.
8. Noninterference. Executive shall not, at any time during the
---------------
Employment Period, or within one (1) year after the termination of his
employment with the Company, whichever is later, without the prior written
consent of the Company, directly or indirectly, induce or attempt to induce any
employee, agent or other representative or associate of the Company to terminate
their relationship with the Company, or in any way directly or indirectly
interfere with such a relationship or any relationship between the Company and
any of its suppliers or customers.
9. Disclosure of Proprietary Information. Executive will promptly
-------------------------------------
disclose in writing to the Board each improvement, discovery, idea and invention
relating to the business of the Company made or conceived by Executive, either
alone or in conjunction with others, while employed by the Company during the
Employment Period, or one (1) year after termination of his employment with the
Company, whichever is later, if such improvement, discovery, idea or invention
results from or was suggested by such employment. Executive will not disclose
any such improvement, discovery, idea or invention to any person, except the
Company. Each such improvement, discovery, idea or invention shall be the sole
and exclusive property of, and is hereby assigned to, the Company and at the
request of the Company, Executive will assist and cooperate with the Company and
any person or persons from time to time designated by the Company to obtain for
the Company the grant of any letters patent in the United States and/or any
foreign country, covering any such improvement, discovery, idea or invention,
and will in conjunction therewith execute such applications, statements,
assignments or other documents, furnish such information and data and take all
such other action (including without limitation the giving of testimony) as the
Company may from time to time reasonably request. Should Executive not be an
employee of the Company at the time such cooperation and assistance is rendered,
he shall be reimbursed for all reasonable and related out-of-pocket expenses
incurred by him.
-4-
<PAGE>
10. Remedies. Executive acknowledges that Sections 6, 7, 8 and 9 hereof
--------
were negotiated at arms' length and are required for the fair and reasonable
protection of the Company. In the event of an alleged breach by Executive of
his obligations under Sections 6, 7, 8 and 9, the Company shall give Executive
written notice thereof, and Executive shall have thirty (30) days to cease such
activities to the satisfaction of the Company before the Company may file any
legal action pursuant to this Section 10. Executive and the Company further
acknowledge and agree that a continued breach of any of Executive's obligations
and agreements hereunder will result in irreparable and continuing damage to the
Company for which there will be no adequate remedy at law, and therefore,
Executive and the Company agree that, in the event of any breach of Executive's
obligations and agreements hereunder, the Company and its successors and assigns
shall be entitled to injunctive relief and such other and further relief,
including monetary damages, as is proper in the circumstances. It is further
agreed that the running of the periods provided above in Sections 7, 8 and 9,
respectively, shall be tolled during any period during which Executive shall be
adjudged to be in violation of any of his obligations under such Sections.
11. Termination. This Agreement shall terminate and, except for the
-----------
obligations of the Company set forth in Sections 2, 3 and 4 hereof and the
obligations of Executive set forth in Sections 6, 7, 8 and 9, all of which
obligations of the Company and Executive shall survive such termination, all
rights and obligations of the Company and Executive hereunder shall be
completely void upon the earliest to occur of the following, subject to the
provisions of Sections 2, 3 and 4:
(a) expiration of the Employment Period;
(b) voluntary termination by Executive of his employment with the
Company, a right reserved to Executive hereunder;
(c) discharge by the Company of Executive as a result of (i)
Executive's continuing, repeated , intentional and willful
failure or refusal to perform his duties as required by this
Agreement, including , without limitation, failures or refusals
that, in the Company's view, amount to insubordination or breach
of fiduciary duty or bring the company into disrepute in its
community; or (ii)Executive's (A) conviction of, or plea of no
contest to, any felony( whether or not involving the company)
other than felonies involving traffic offenses, (B) defrauding
the Company or embezzling its funds, or (C) habitual abuse of
alcohol or drugs;
(d) discharge by the Company of Executive without cause;
(e) the death of Executive;
(f) at the election of Executive, the change of control of the
Company or the merger, consolidation or other analogous
reorganization or transaction
-5-
<PAGE>
with any other entity or person or the sale, transfer, lease or
other conveyance by the Company of all or any substantial part of
its assets; or
(g) at the election of the Company, the disability of Executive,
which, for purposes hereof, shall mean the inability of Executive
for a continuous period of six (6) months to perform the
essential functions of his position hereunder on an active full
time basis, with or without reasonable accommodations, by reason
of disability or impairment of health. A certificate from a
physician acceptable to both the Company and Executive to the
effect that Executive is or has been disabled and incapable of
performing the essential functions of his position with or
without reasonable accommodations for the Company as previously
performed shall be conclusive of the fact that Executive is
incapable of performing such reasonable services and is or has
been disabled for the purposes of this Agreement.
12. Reformation of Agreement; Severability. In the event that any of
--------------------------------------
Sections 6, 7, 8 or 9 shall be found by a court of competent jurisdiction to be
invalid or unenforceable as against public policy, such court shall exercise its
discretion in reforming such provision to the end that Executive shall be
subject to such restrictions and obligations as are reasonable under the
circumstances and enforceable by the Company. In the event that any other
provision or term of this Agreement is found to be void or unenforceable to any
extent for any reason, it is the agreed upon intent of the parties hereto that
all remaining provisions or terms of this Agreement shall remain in full force
and effect to the maximum extent permitted and that this Agreement shall be
enforceable as if such void or unenforceable provision or term had never been a
part hereof.
13. Assignment. This Agreement shall inure to the benefit of, and shall
----------
be binding upon, the Company, its successors and assigns and upon Executive and
his heirs, estate and personal representatives. Neither the Company nor
Executive shall assign this Agreement without the prior, written consent of the
other party.
14. Arbitration. In the event a dispute concerning the terms and
-----------
operation of this Agreement arises, and if the Company and Executive do not come
to an agreement with respect to such dispute within thirty (30) days after the
notice of any such dispute is provided by either party under Section 15 hereof,
the Company and Executive shall submit the dispute to arbitration in Little
Rock, Arkansas, under the commercial rules of the American Arbitration
Association then in effect. Such arbitration shall be final and binding upon
the parties and enforceable in a court of competent jurisdiction. Judgment on
such arbitration award, from which no appeal or review may be taken, may be
entered in any court having jurisdiction and enforced accordingly.
15. Notice. Any notice required to be given under the terms of this
------
Agreement shall be in writing, and mailed to the recipient's last known address
or delivered in person. If sent
-6-
<PAGE>
by registered or certified mail with delivery restricted to the addressee, such
notice shall be effective when mailed; otherwise, it shall be effective upon
delivery.
(i) If to the Company, to:
Brass Eagle Inc.
c/o Charter Oak Partners
10 Wright Street, Building B
Westport, Connecticut 06880
Attn: Anthony J. Dowd
Telecopier: (203) 222-2720
(ii) If to Executive, to:
E. Lynn Scott
1203A North 6th Street
Rogers, Arkansas 72756
16. Entire Agreement; Amendments; Waivers. This Agreement contains the
-------------------------------------
entire agreement between the parties with respect to the subject matter hereof.
It may not be changed orally but only by a written agreement signed by Executive
and an officer of the Company specifically designated by the Board of Directors
of the Company to execute such amendment. The terms or covenants of this
Agreement may be waived only by a written instrument specifically referring to
this Agreement and executed by the party waiving compliance. The failure of the
Company at any time or from time to time to require performance of any of
Executive's obligations or agreements under this Agreement shall in no manner
affect the Company's right to enforce any provisions of this Agreement at a
subsequent time; and the waiver by the Company of any right arising out of any
breach shall not be construed as a waiver of any right arising out of any
subsequent breach.
17. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Arkansas.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BRASS EAGLE INC.
(the "Company")
By: /s/ Marvin Griffin
--------------------------------------------
Its: President
--------------------------------------------
/s/ E. Lynn Scott
-------------------------------------
E. Lynn Scott
("Executive")
-8-
<PAGE>
EXHIBIT 10(x)
FORM OF
BRASS EAGLE INC.
1997 STOCK OPTION PLAN
Section 1. Purpose
Brass Eagle Inc.(hereinafter referred to as the "Company") hereby
establishes the 1997 Stock Option Plan (the "Plan") to promote the interests of
the Company and its shareholders through the (i) attraction and retention of
executive officers and other key employees essential to the success of the
Company; and (ii) enabling of such employees to share in the long-term growth
and success of the Company. The Plan permits the grant of Nonqualified Stock
Options and Incentive Stock Options (intended to qualify under Section 422 of
the Internal Revenue Code of 1986, as amended).
Section 2. Definitions
Except as otherwise defined in the Plan, the following terms shall have the
meanings set forth below:
2.1 "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
under the Exchange Act.
2.2 "Agreement" means a written agreement which sets forth the terms of each
Award and is signed by an authorized officer of the Company.
2.3 "Award" means individually or collectively, a grant under this Plan of
Nonqualified Stock Options or Incentive Stock Options.
2.4 "Award Date" or "Grant Date" means the date on which an Award is made by
the Committee under this Plan
2.5 "Beneficial Owner" shall have the meaning ascribed to such term in Rule
13d-3 under the Exchange Act.
2.6 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.7 "Cashless Exercise" means the exercise of an option by the Participant
through the use of a brokerage firm to make payment to the Company of the
exercise price either from the proceeds of a loan to the Participant from
the brokerage firm or from the proceeds of the sale of Stock issued
pursuant to the exercise of the option, and upon receipt of such payment,
the Company delivers the exercised shares to the brokerage firm.
1
<PAGE>
2.8 "Change in Control" shall be deemed to have occurred if the conditions set
forth in any one of the following paragraphs shall have been satisfied:
(a) any person or persons (as defined in Section 3(a)(9) of the Exchange
Act, and shall also include any syndicate or group deemed to be a
"person" under Section 13(d)(3) of the Exchange Act) acting together,
excluding employee benefit plans of the Company, are or become the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act or any successor provisions thereto), directly or
indirectly, of securities of the Company representing twenty-five
percent (25%) or more of the combined voting power of the Company's
then outstanding securities; or
(b) the Company's shareholders approve (or, in the event no approval of
the Company's shareholders is required, the Company consummates) a
merger, consolidation, share exchange, division or other
reorganization or transaction of the Company (a "Fundamental
Transaction") with any other corporation, other than a Fundamental
Transaction which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving entity) at least sixty percent (60%) of the combined
voting power immediately after such Fundamental Transaction of (i) the
Company's outstanding securities, (ii) the surviving entity's
outstanding securities, or (iii) in the case of a division, the
outstanding securities of each entity resulting from the division; or
(c) the shareholders of the Company approve a plan of complete liquidation
or winding-up of the Company or an agreement for the sale or
disposition (in one transaction or a series of transactions) of all or
substantially all of the Company's assets; or
(d) during any period of twenty-four consecutive months, individuals who
at the beginning of such period constituted the Board (including for
this purpose any new director whose election or nomination for
election by the Company's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who were
directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board.
2.9 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.10 "Committee" means the Compensation Committee of the Board which will
administer the Plan pursuant to Section 3 herein.
2
<PAGE>
2.11 "Common Stock" or "Stock" means the Common Stock of the Company, with a par
value of $0.01 per share, or such other security or right or instrument
into which such common stock may be changed or converted in the future.
2.12 "Company" means Brass Eagle Inc., including all Affiliates and wholly owned
Subsidiaries, or any successor thereto.
2.13 "Department" means the Human Resources Department of the Company.
2.14 "Designated Beneficiary" means the beneficiary designated by the
Participant pursuant to the Participant's will and in accordance with
procedures established by the Department, to receive amounts due to the
Participant in the event of the Participant's death. If the Participant
does not make an effective designation, then the Designated Beneficiary
will be deemed to be the Participant's estate.
2.15 "Disability" means a determination by the Committee of "Total Disability,"
based on medical evidence that precludes the Participant from engaging in
any occupation or employment for wage or profit for at least twelve months
and appears to be permanent.
2.16 "Divestiture" means the sale of, or closing by, the Company of the business
operations in which the Participant is employed, or the elimination of the
Participant's position at the Company's discretion.
2.17 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.18 "Executive Officer" means any employee designated by the Company as an
officer or any employee covered by Rule 16b-3 of the Exchange Act.
2.19 "Fair Market Value" means, on any given date, the (i) average of the
closing bid and ask price as reported by the Nasdaq National Market on that
date or (ii) if the stock hereafter becomes listed on a stock exchange, the
closing price of Stock as reported on the exchange on such day or, if no
Shares were traded on the exchange on such day, then on the next preceding
day that Stock was traded on such exchange, all as reported by such source
as the Committee may select.
2.20 "Full-time Employee" means an employee designated by the Company's
Department as being a "permanent, full-time employee" who is eligible for
all plans and programs of the Company set forth for such employees. This
designation excludes all part-time, temporary, or contract employees or
consultants to the Company.
2.21 "Incentive Stock Option" or "ISO" means an option to purchase Stock,
granted under Section 6 herein, which is designated as an incentive stock
option and is intended to meet the requirements of Section 422A of the
Code.
3
<PAGE>
2.22 "Key Employee" means an officer or other key employee of the Company or its
Subsidiaries, who, in the opinion of the Committee, can contribute
significantly to the growth and profitability of, or perform services of
major importance to, the Company and its Subsidiaries.
2.23 "Nonqualified Stock Option" or "NQSO" means an option to purchase Stock,
granted under Article 6 herein, which is not intended to be an Incentive
Stock Option.
2.24 "Option" means an Incentive Stock Option or a Nonqualified Stock Option.
2.25 "Participant" means a Key Employee who has been granted an Award under the
Plan.
2.26 "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of
the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d).
2.27 "Plan" means the Brass Eagle Inc. 1997 Stock Option Plan as herein
described and as hereafter from time to time amended.
2.28 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act as
adopted in Exchange Act Release No. 34-37260 (May 31, 1996), or any
successor rule as amended from time to time.
2.29 "Section 162(m)" means Section 162(m) of the Code, or any successor section
under the Code, as amended from time to time and as interpreted by final or
proposed regulations promulgated thereunder from time to time.
2.30 "Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as amended from
time to time.
2.31 "Stock" or "Shares" means the Common Stock of the Company.
2.32 "Subsidiary" means a corporation in which the Company owns, either directly
or through one or more of its Subsidiaries, at least 50% of the total
combined voting power of all classes of stock.
Section 3. Administration
3.1 The Committee. The Plan shall be administered and interpreted by the
- ------------------
Committee which shall have full authority and all powers necessary or desirable
for such administration. The express grant in this Plan of any specific power
to the Committee shall not be construed as limiting any power or authority of
the Committee. In its sole and complete discretion the Committee may adopt,
alter, suspend and repeal any such administrative rules, regulations,
4
<PAGE>
guidelines, and practices governing the operation of the Plan as it shall from
time to time deem advisable. In addition to any other powers and, subject to
the provisions of the Plan, the Committee shall have the following specific
powers: (i) to determine the terms and conditions upon which the Awards may be
made and exercised; (ii) to determine all terms and provisions of each
Agreement, which need not be identical for types of awards nor for the same type
of award to different participants; (iii) to construe and interpret the
Agreements and the Plan; (iv) to establish, amend, or waive rules or regulations
for the Plan's administration; (v) to accelerate the exercisability of any
Award; and (vi) to make all other determinations and take all other actions
necessary or advisable for the administration of the Plan. The Committee may
take action by a meeting in person, by unanimous written consent, or by meeting
with the assistance of communications equipment which allows all Committee
members participating in the meeting to communicate in either oral or written
form. The Committee may seek the assistance or advice of any persons it deems
necessary to the proper administration of the Plan.
3.2 Selection of Participants. The Committee shall have sole and complete
- ------------------------------
discretion in determining those Key Employees who shall participate in the Plan.
The Committee may request recommendations for individual awards from the Chief
Executive Officer of the Company and may delegate to the Chief Executive Officer
of the Company the authority to make Awards to Participants who are not
Executive Officers of the Company, subject to a fixed maximum Award amount for
such a group and a maximum Award amount for any one Participant, as determined
by the Committee. Awards made to the Executive Officers shall be determined by
the Committee.
3.3 Committee Decisions. All determinations and decisions made by the
- ------------------------
Committee pursuant to the provisions of the Plan shall be final, conclusive, and
binding upon all persons, including the Company, its stockholders, employees,
Participants, and Designated Beneficiaries, except when the terms of any sale or
award of shares of Stock or any grant of rights or Options under the Plan are
required by law or by the Articles of Incorporation or Bylaws of the Company to
be approved by the Company's Board of Directors or shareholders prior to any
such sale, award or grant.
3.4 Rule 16b-3 Requirements. Notwithstanding any other provision of the Plan,
- ----------------------------
the Committee may impose such conditions on any Award, and the Board may amend
the Plan in any such respects, as may be required to satisfy the requirements of
Rule 16b-3 under the Exchange Act, as amended (or any successor or similar
rule), or Section 162(m) of the Internal Revenue Code.
3.5 Indemnification of Committee. In addition to such other rights of
- ---------------------------------
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against
reasonable expenses incurred from their administration of the Plan. Such
reasonable expenses include, but are not limited to, attorneys' fees, actually
and reasonably incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Award granted or made hereunder, and against all
amounts reasonably paid by them in settlement thereof or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, if such
members acted in good
5
<PAGE>
faith and in a manner which they believed to be in, and not opposed to, the best
interests of the Company and its Subsidiaries.
Section 4. Eligibility
The Committee in its sole and complete discretion shall determine the Key
Employees, including officers, who shall be eligible for participation under the
Plan, subject to the following limitations: (i) no non-Employee director of the
Company shall be eligible to participate under the Plan; (ii) no person owning,
directly or indirectly, more than 5% of the total combined voting power of all
classes of stock of the Company shall be eligible to participate under the Plan;
and (iii) only Full-time Employees shall be eligible to participate under the
Plan.
Section 5. Shares Subject to the Plan
5.1 Number of Shares. Subject to adjustment as provided in Section 5.4 herein,
- ---------------------
the maximum aggregate number of Shares that may be issued pursuant to Awards
made under the Plan shall not exceed Four Hundred Thirty Thousand (430,000)
Shares of Stock. No Participant may receive an Award which would cause such
Participant to be issued more than 50% of the total number of Shares issued over
the life of the Plan. Shares of Stock may be available from the authorized, but
unissued Shares of Stock or treasury Shares. Except as provided in Sections 5.2
and 5.3 herein, the issuance of Shares in connection with the exercise of, or as
other payment for, Awards under the Plan shall reduce the number of Shares
available for future Awards under the Plan.
5.2 Lapsed Awards of Forfeited Shares. In the event that (i) any Option
- --------------------------------------
granted under the Plan terminates, expires, or lapses for any reason other than
exercise of the Award, or (ii) if Shares issued pursuant to the Awards are
canceled or forfeited for any reason, such Shares subject to such Award shall
thereafter be again available for grant of an Award under the Plan.
5.3 Delivery of Shares as Payment. In the event a Participant pays for any
- ----------------------------------
Option through the delivery of previously acquired shares of Stock, the number
of shares of Stock available for Awards under the Plan shall be increased by the
number of shares surrendered by the Participant, subject to Rule 16b-3 under the
Exchange Act as interpreted by the Securities and Exchange Commission or its
staff.
5.4 Capital Adjustments. The number and class of Shares subject to each
- ------------------------
outstanding Award, the Option Price and the aggregate number, type and class of
Shares for which Awards thereafter may be made shall be subject to adjustment,
if any, as the Committee deems appropriate, based on the occurrence of a number
of specified and non-specified events. Such specified events are discussed
herein this Section 5.4, but such discussion is not intended to provide an
exhaustive list of such events which may necessitate such adjustments.
(a) If the outstanding shares of the Company are increased, decreased or
exchanged through merger, consolidation, sale of all or substantially all
of the property of the Company,
6
<PAGE>
reorganization, recapitalization, reclassification, stock dividend, stock
split or other distribution in respect to such Shares, for a different
number or type of Shares, or if additional Shares or new or different
Shares are distributed with respect to such Share, an appropriate and
proportionate adjustment shall be made in: (i) the maximum number of shares
of Stock available for the Plan as provided in Section 5.1 herein, (ii) the
type of shares or other securities available for the Plan, (iii) the number
of shares of Stock subject to any then outstanding Awards under the Plan,
and (iv) the price (including Exercise Price) for each share of Stock (or
other kind of shares or securities) subject to then outstanding awards, but
without change in the aggregate purchase price as to which such Options
remain exercisable.
(b) In the event other events not specified above in this Section 5.4, such as
any extraordinary cash dividend, split-up, spin-off, combination, exchange
of shares, warrants or rights offering to purchase Common Stock, or other
similar corporate event, affect the Common Stock such that an adjustment is
necessary to maintain the benefits or potential benefits intended to be
provided under this Plan, then the Committee in its discretion may make
adjustments to any or all of (i) the number and type of shares which
thereafter may be optioned and sold and (ii) the number and Option Price of
each share of Stock subject to then outstanding awards, but without change
in the aggregate purchase price as to which such Options remain
exercisable.
(c) Any adjustment made by the Committee pursuant to the provisions of this
Section 5.4, subject to approval by the Board of Directors, shall be final,
binding and conclusive. A notice of such adjustment, including
identification of the event causing such an adjustment, the calculation
method of such adjustment, and the change in price and the number of shares
of Stock, or securities, cash or property purchasable subject to each Award
shall be sent to each Participant. No fractional interests shall be issued
under the Plan based on such adjustments.
Section 6. Stock Options
6.1 Grant of Stock Options. Subject to the terms and provisions of the Plan
- ---------------------------
and applicable law, the Committee, at any time and from time to time, may grant
Options to Key Employees as it shall determine. The Committee shall have sole
and complete discretion in determining the type of Option granted, the Option
Price (as hereinafter defined), the duration of the Option, the number of Shares
to which an Option pertains, any conditions imposed upon the exercisability of
the Options, the conditions under which the Option may be terminated, any
restrictions upon the Stock awarded pursuant to the exercise of an Option and
any such other provisions as may be warranted to comply with the law or rules of
any securities trading system or stock exchange. Each Option grant shall have
such specified terms and conditions detailed in an Award Agreement. The
Agreement shall specify whether the Option is intended to be an Incentive Stock
Option within the meaning of Section 422A of the Code, or a Nonqualified Stock
Option not intended to be within the provisions of Section 422A of the Code.
7
<PAGE>
6.2 Option Price. The exercise price per share of Stock covered by an Option
- -----------------
("Option Price") shall be determined at the time of grant by the Committee,
subject to the limitation that the Option Price shall not be less than 100% of
Fair Market Value of the Stock on the Grant Date.
6.3 Exercisability. Options granted under the Plan shall be exercisable at
- -------------------
such times and be subject to such restrictions and conditions as the Committee
shall determine, which will be specified in the Award Agreement and need not be
the same for each Participant. However, no Option granted under the Plan may be
exercisable until the expiration of at least six months after the Grant Date
(except that such limitations shall not apply in the case of death or disability
of the Participant, or a Change in Control of the Company), nor after the
expiration of ten years from the Grant Date.
6.4 Method of Exercise. Options shall be exercised by the delivery of a
- -----------------------
written notice from the Participant to the Company in the form prescribed by the
Committee setting forth the number of Shares with respect to which the Option is
to be exercised, accompanied by full payment for the Shares. The Option price
shall be payable to the Company in full in cash, or its equivalent, or by
delivery of Shares of Stock (not subject to any security interest or pledge)
valued at Fair Market Value at the time of exercise or by a combination of the
foregoing. In addition, at the request of the Participant, and subject to
applicable laws and regulations, the Company may (but shall not be required to)
cooperate in a "Cashless Exercise" of the Option. As soon as practicable, after
receipt of written notice and payment, the Company shall deliver to the
Participant, stock certificates in an appropriate amount based upon the number
of Shares with respect to which the option is exercised, issued in the
Participant's name.
6.5 Change in Control. In the event of a Change in Control, the Committee may,
- ----------------------
in its sole and complete discretion, accelerate the exercisability of any
unexercisable Option and release any restrictions on any Stock awarded pursuant
to the exercise of any Option.
Section 7. General Provisions
7.1 Plan Term. The Plan was adopted on ________________________, 1997 by the
- --------------
Board. Subject to shareholder approval, the Plan shall be effective on
_________________________, 1997; however, no Options may be sold, awarded or
granted under the Plan until the Company is in receipt of a Registration
Statement under the Securities Act covering the shares of Stock to be issued
under the Plan. Any Options granted under this Plan shall be granted subject to
stockholder approval of the Plan.
The Plan terminates ___________________________, 2007; however, all Awards made
prior to, and outstanding on such date, shall remain valid in accordance with
their terms and conditions.
7.2 Withholding. The Company shall have the right to deduct or withhold, or
- ----------------
require a Participant to remit to the Company, any taxes required by law to be
withheld from Awards made under this Plan. The Committee may require the
Participant to remit to the Company the amount
8
<PAGE>
of any taxes required to be withheld from payment in Common Stock, or, in lieu
thereof, the Company may withhold (or the Participant may be provided the
opportunity to elect to tender) the number of shares of Common Stock equal in
Fair Market Value to the amount required to be withheld.
7.3 Awards. Each Award granted under the Plan shall be evidenced in a
- -----------
corresponding Award Agreement provided in writing to the Participant, which
shall specify the terms, conditions and any rules applicable to the Award,
including but not limited to the effect of a Change in Control, or death,
Disability, Divestiture or other termination of employment of the Participant on
the Award.
7.4 Nontransferability. No Award granted under the Plan may be sold,
- -----------------------
transferred, pledged, assigned, or otherwise alienated or hypothecated, except
by will or the laws of descent and distribution. Further, no lien, obligation,
or liability of the Participant may be assigned to any right or interest of any
Participant in an Award under this Plan.
7.5 Exercisability of Awards. All rights with respect to Awards granted to a
- -----------------------------
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant or his or her guardian or legal representative.
7.6 No Right to Employment. No granting of an Award shall be construed as a
- ---------------------------
right to employment with the Company.
7.7 Rights as Shareholder. No Participant or Designated Beneficiary shall be
- --------------------------
deemed a shareholder of the Company nor have any rights as such with respect to
any Shares of Common Stock to be provided under the Plan until he or she has
become the holder of such shares.
7.8 Amendment of Plan. The Committee or Board of Directors may amend, suspend,
- ----------------------
or terminate the Plan or any portion thereof at any time, provided such
amendment is made with shareholder approval if such approval is necessary to
comply with any tax or regulatory requirement, including for these purposes any
approval requirement which is a requirement for exemptive relief under Section
16(b) of the Exchange Act or an exception under Section 162(m) of the Code. The
Committee in its discretion may amend the Plan so as to conform with local rules
and regulations subject to any provisions to the contrary specified herein.
7.9 Amendment of Award. In its sole and complete discretion, the Committee may
- -----------------------
at any time amend any Award for the following reasons: (i) additions and/or
changes to the Code, any federal or state securities law, or other law or
regulations applicable to the Award; or (ii) any other event not described in
clause (i) occurs and the Participant gives his or her consent to such
amendment.
7.10 Exemption from Computation of Compensation for Other Purposes. By
- -------------------------------------------------------------------
acceptance of an applicable Award under this Plan, subject to the conditions of
such Award, each Participant shall be considered in agreement that all shares of
Stock sold or awarded and all Options granted under
9
<PAGE>
this Plan shall be considered special incentive compensation and will be exempt
from inclusion as "wages" or "salary" in pension, retirement, life insurance,
and other employee benefits arrangements of the Company, except as determined
otherwise by the Company. In addition, each Designated Beneficiary of a
deceased Participant shall be in agreement that all such Awards or grants will
be exempt from inclusion in "wages" or "salary" for purposes of calculating
benefits of any life insurance coverage sponsored by the Company.
7.11 Legend. In its sole and complete discretion, the Committee may elect to
- ------------
legend certificates representing shares of Stock sold or awarded under the Plan,
to make appropriate references to the restrictions imposed on such shares.
7.12 Certain Participants. All Award Agreements for Participants subject to
- --------------------------
Section 16(b) of the Exchange Act shall be deemed to include any such additional
terms, conditions, limitations and provisions as Rule 16b-3 requires, unless the
Committee in its discretion determines that any such Award should not be
governed by Rule 16b-3.
7.13 Construction of the Plan. The Plan, and its rules, rights, agreements and
- ------------------------------
regulations, shall be governed, construed, interpreted and administered solely
in accordance with the laws of the state of Arkansas. If the event any provision
of the Plan shall be held invalid, illegal or unenforceable, in whole or in
part, for any reason, such determination shall not affect the validity, legality
or enforceability of any remaining provision, portion of provision or Plan
overall, which shall remain in full force and effect as if the Plan had been
absent the invalid, illegal or unenforceable provision or portion thereof.
10
<PAGE>
EXHIBIT 10(xi)
FORM OF
BRASS EAGLE INC.
EMPLOYEE STOCK PURCHASE PLAN
Section 1. Purpose
The Brass Eagle Inc. Employee Stock Purchase Plan (the "Plan") is intended to
provide a method whereby employees of Brass Eagle Inc. and its subsidiary
corporations (hereinafter referred to, unless the context otherwise requires, as
the "Company") will have an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of the Common Stock of the Company. It is
the intention of the Company to have the Plan qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
that Section of the Code.
Section 2. Definitions
Except as otherwise defined in the Plan, the following terms shall have the
meanings set forth below:
2.1 "Base Pay" means regular straight-time earnings excluding payments for
overtime, shift premium, bonuses and other special payments, commissions
and other marketing incentive payments.
2.2 "Committee" means the Compensation Committee of the Board which will
administer the Plan pursuant to Section 11 herein.
2.3 "Employee" means any person who is customarily employed for more than five
(5) months in any calendar year and is regularly scheduled to work more
than 30 hours per week.
2.4 "Participant" means an Employee who has met the eligibility requirements of
Section 3.1 and has executed an authorization for payroll deduction
pursuant to Section 3.4.
2.5 "Stock" means the Common Stock of the Company.
2.6 "Subsidiary Corporation" means a corporation which is a "subsidiary
corporation" of Brass Eagle Inc. as that term is defined in Section 424 of
the Code.
Section 3. Eligibility and Participation
3.1 Initial Eligibility. Any Employee who shall have completed ninety (90)
- ------------------------
days'
<PAGE>
employment and shall be employed by the Company on the date his participation in
the Plan is to become effective shall be eligible to participate in Offerings
under the Plan which commence on or after such ninety day period has concluded.
3.2 Leave of Absence. For purposes of participation in the Plan, a person on
- ---------------------
leave of absence shall be deemed to be an Employee for the first 90 days of such
leave of absence and such Employee's employment shall be deemed to have
terminated at the close of business on the 90th day of such leave of absence
unless such employee shall have returned to regular employment prior to the
close of business on such 90th day. Termination by the Company of any Employee's
leave of absence, other than termination of such leave of absence on return to
employment, shall terminate an Employee's employment for all purposes of the
Plan and shall terminate such Employee's participation in the Plan and right to
exercise any option.
3.2 Restrictions on Participation. Notwithstanding any provisions of the Plan
- ----------------------------------
to the contrary, no Employee shall be granted an option to participate in the
Plan:
(a) if, immediately after the grant, such Employee would own stock, and/or hold
outstanding options to purchase stock, possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company (for
purposes of this paragraph, the rules of Section 424(d) of the Code shall
apply in determining stock ownership of any Employee); or
(b) which permits his rights to purchase stock under all employee stock
purchase plans of the Company to accrue at a rate which exceeds $25,000 in
fair market value of the stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding.
3.4 Commencement of Participation. An eligible Employee may become a
- ----------------------------------
Participant by completing an authorization for a payroll deduction on the form
provided by the Company and filing it with the office of the Treasurer of the
Company on or before the date set therefor by the Committee, which date shall be
prior to the Offering Commencement Date for the Offering (as such terms are
defined below). Payroll deductions for a Participant shall commence on the
applicable Offering Commencement Date when his authorization for a payroll
deduction becomes effective and shall end on the Offering Termination Date (as
such term is defined below) of the Offering to which such authorization is
applicable unless sooner terminated by the Participant as provided in Section 8.
Section 4. Offerings
4.1 Three Offerings. The Plan will be implemented by three overlapping
- -------------------
offerings of Stock (the "Offerings"). The first Offering shall begin on
November 15, 1997, and the next two Offerings shall begin on the 1st day of
January in each of the years 1998 and 1999. Each Offering shall terminate on
December 31 of the following calendar year. The maximum number of shares of
Stock issued in the respective years shall be:
<PAGE>
From November 17, 1997, to December 31, 1998: 20,000 shares.
From January 1, 1998, to December 31, 1999: 25,000 shares plus unissued
shares from the prior Offerings, whether offered or not.
From January 1, 1999, to December 31, 2000: 25,000 shares plus unissued
shares from the prior Offerings, whether offered or not.
As used in the Plan, "Offering Commencement Date" means the commencement date on
which the particular Offering begins. "Offering Termination Date" means the
date on which the particular Offering terminates.
Section 5 Payroll Deductions
5.1 Amount of Deduction. At the time a Participant files his authorization for
- ------------------------
payroll deduction, he or she shall elect to have deductions made from his or her
pay on each payday during the time he or she is a Participant in an Offering at
the rate of 1, 2, 3, 4, 5, 6, 7, 8, 9 or 10% of his or her Base Pay in effect at
the Offering Commencement Date of such Offering.
5.2 Participant's Account. All payroll deductions made for a Participant shall
- --------------------------
be credited to his or her account under the Plan. A Participant may not make
any separate cash payment into such account.
5.3 Changes in Payroll Deductions. A Participant may discontinue his
- ----------------------------------
participation in the Plan as provided in Section 8, but no other change can be
made during an Offering and, specifically, a Participant may not alter the
amount of his or her payroll deductions for that Offering.
5.4 Leave of Absence. If a Participant goes on a leave of absence, such
- ---------------------
Participant shall have the right to elect:
(a) to withdraw the balance in his or her account pursuant to Section 8.1,
(b) to discontinue contributions to the Plan but remain a Participant in the
Plan (until the time provided in Section 8.4) with payroll deductions to be
made from payments by the Company to the Participant during such leave of
absence.
Section 6 Granting of Options
6.1 Number of Option Shares. On the Offering Commencement Date of each
- ----------------------------
Offering, a Participant shall be deemed to have been granted an option to
purchase a maximum number of shares of Stock equal to an amount determined as
follows:
(a) that percentage of the Participant's Base Pay which he or she has elected
to have
<PAGE>
withheld (but not in any case in excess of 10%) multiplied by
(b) the Participant's Base Pay during the period of the Offering
(c) divided by 85% of the market value of the Stock on the applicable Offering
Commencement Date.
The market value of the Stock shall be determined as provided in paragraphs
(a) of Section 6.2 below. A Participant's "Base Pay during the period of the
Offering" shall be determined by multiplying his or her normal weekly rate of
pay (as in effect on the last day prior to the Offering Commencement Date of the
particular Offering) by 58 or the hourly rate (as in effect on the last day
prior to the Offering Commencement Date of the particular Offering) by 2,320 for
the first Offering, or, in the case of the two subsequent Offerings, by 104 or
4,160, as the case may be, provided that, in the case of a part time hourly
Employee, the Employee's "Base Pay during the period of the Offering" shall be
determined by multiplying such Employee's hourly rate (as in effect on the last
day prior to the Offering Commencement Date of the particular Offering) by the
number of regularly scheduled hours of work for such employee during such
Offering.
6.2 Option Price. The option price of Stock purchased with payroll deductions
- -----------------
made during each Offering for a Participant therein shall be the lower of:
(a) 85% of the closing price of the Stock on the Offering Commencement Date or
the nearest prior business day on which trading occurred on the NASDAQ
National Market System; or
(b) 85% of the closing price of the Stock on the Purchase Date (as such term is
defined below) or the nearest prior business day on which trading occurred
on the NASDAQ National Market System.
If the Stock is not admitted to trading on any of the aforesaid dates for which
closing prices of the stock are to be determined, then reference shall be made
to the fair market value of the Stock on that date, as determined on such basis
as shall be established or specified for the purpose by the Committee.
Section 7 Exercise of Option
7.1 Purchase Date. The Purchase Dates for the first Offering shall be May 1,
- -----------------
1998, and December 31, 1998. The Purchase Dates for the second Offering shall
be June 30, 1998, December 31, 1998, June 30, 1999 and December 31, 1999. The
Purchase Dates for the third and final Offering shall be June 30, 1999, December
31, 1999, June 30, 2000 and December 31, 2000.
7.2 Automatic Exercise. Unless a Participant gives written notice to the
- -----------------------
Company as
<PAGE>
hereinafter provided, his option for the purchase of Stock with payroll
deductions made during any Offering will be deemed to have been exercised
automatically on each of the Purchase Dates applicable to such Offering, for the
purchase of the number of shares of Stock which the accumulated payroll
deductions in his account on the Purchase Date will purchase at the applicable
option price (but not in excess of the number of shares of Stock for which
options have been granted to the employee pursuant to Section 6.1).
Notwithstanding the foregoing, in no event shall more than five hundred (500)
shares of Stock be purchased by any Participant on May 1, 1998, and no more than
two hundred fifty (250) shares of Stock be purchased by any Participant on any
subsequent Purchase Date. Any amount remaining in the Participant's account
after the Offering Termination Date will be returned to the Participant.
7.3 Fractional Shares of Stock. Fractional shares of Stock will not be issued
- --------------------------------
under the Plan and any accumulated payroll deductions which would have been used
to purchase fractional shares of Stock will be returned to any Participant
promptly following the termination of an Offering, without interest.
7.4 Transferability of Option. During a Participant's lifetime, options held
- ------------------------------
by such Participant shall be exercisable only by that Participant.
7.5 Delivery of Stock. As promptly as practicable after the Purchase Dates
- ----------------------
during each Offering, the Company will deliver to each Participant, as
appropriate, the stock purchased upon exercise of his option.
Section 8 Withdrawal
8.1 In General. A Participant may withdraw payroll deductions credited to his
- ---------------
account under the Plan at any time by giving written notice to the Treasurer of
the Company. All of the Participant's payroll deductions credited to his
account, without interest, will be paid to him promptly after receipt of his
notice of withdrawal, and no further payroll deductions will be made from his
pay during such Offering. The Company may, at its option, treat any attempt to
borrow by an employee on the security of his accumulated payroll deductions as
an election to withdraw such deductions.
8.2 Effect on Subsequent Participation. A Participant's withdrawal from any
- ---------------------------------------
Offering will not have any effect upon his eligibility to participate in any
succeeding Offering or in any similar plan which may hereafter be adopted by the
Company.
8.3 Termination of Employment. Upon termination of the Participant's
- ------------------------------
employment for any reason, including retirement or death (but excluding
continuation of a leave of absence for a period beyond 90 days), the payroll
deductions credited to his account, without interest, will be returned to the
Participant, or, in the case of the Participant's death, to the Participant's
estate.
8.4 Leave of Absence. A Participant on leave of absence shall, pursuant to
- ---------------------
Section 5.4, continue
<PAGE>
to be a Participant in the Plan so long as such Participant is on continuous
leave of absence. A Participant who has been on leave of absence for more than
90 days and who therefore is not an Employee pursuant to Section 3.2 for
participation in the Plan shall not be entitled to participate in any Offering
commencing after the 90th day of such leave of absence. Notwithstanding any
other provisions of the Plan, unless a Participant on leave of absence returns
to regular full time or part time employment with the Company at the earlier of:
(a) the termination of such leave of absence or (b) three months from the 90th
day of such leave of absence, such Participant's participation in the Plan shall
terminate on whichever of such dates first occurs and the payroll deductions
credited to the Participant's account will be returned to the Participant
without interest.
Section 9 Interest
9.1 Payment of Interest. No interest will be paid or allowed on any money paid
- ------------------------
into the Plan or credited to the account of any Participant.
Section 10 Stock
10.1 Maximum Shares of Stock. The maximum number of shares of Stock which
- -----------------------------
shall be issued under the Plan, subject to adjustment upon changes in
capitalization of the Company as provided in Section 12.3 shall be 70,000 shares
of Stock. If the total number of shares of Stock for which options are
exercised on any Purchase Date in accordance with Section 6 exceeds the maximum
number of shares of Stock for the applicable Offering, the Company shall make a
pro rata allocation of the shares of Stock available for delivery and
distribution in as nearly a uniform manner as shall be practicable and as it
shall determine to be equitable.
10.2 Participant's Interest in Option Stock. The Participant will have no
- --------------------------------------------
interest in Stock covered by his option until such option has been exercised.
10.3. Registration of Stock. Stock to be delivered to a Participant under the
- ----------------------------
Plan will be registered in the name of the Participant, or, if the Participant
so directs by written notice to the Treasurer of the Company prior to the
Purchase Date applicable thereto, in the names of the Participant and one such
other person as may be designate by the Participant, as joint tenants with
rights of survivorship or as tenants by the entireties, to the extent permitted
by applicable law.
10.4 Restrictions on Exercise. The Board of Directors of the Company may, in
- ------------------------------
its discretion, require as conditions to the exercise of any option that the
shares of Stock reserved for issuance upon the exercise of the option shall
have been duly listed, upon official notice of issuance, upon a stock exchange,
and that either:
(a) a Registration Statement under the Securities Act of 933, as amended, with
respect to said shares of Stock shall be effective, or
<PAGE>
(b) the Participant shall have represented at the time of purchase, in form and
substance satisfactory to the Company, that it is his intention to
purchase the shares of Stock for investment and not for resale or
distribution.
Section 11 Administration
11.1 Authority of Committee. Subject to the express provisions of the Plan,
- ----------------------------
the Committee shall have plenary authority in its discretion to interpret and
construe any and all provisions of the Plan, to adopt rules and regulations for
administering the Plan, and to make all other determinations deemed necessary or
advisable for administering the Plan. The Committee's determination on the
foregoing matters shall be conclusive.
11.2 Rules Governing the Administration of the Committee. The Committee may
- ---------------------------------------------------------
select one of its members as its Chairman and shall hold its meetings at such
times and places as it shall deem advisable and may hold telephonic meetings. A
majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by a majority of its members. The Committee may correct
any defect or omission or reconcile any inconsistency in the Plan, in the manner
and to the extent it shall deem desirable. Any decision or determination reduced
to writing and signed by a majority of the members of the Committee shall be as
fully effective as if it had been made by a majority vote at a meeting duly
called and held. The Committee may appoint a secretary and shall make such rules
and regulations for the conduct of its business as it shall deem advisable.
Section 12 Miscellaneous
12.1 Transferability. Neither payroll deductions credited to a Participant's
- ---------------------
account nor any rights with regard to the exercise of an option or to receive
Stock under the Plan may be assigned, transferred, pledged, or otherwise
disposed of in any way by the Participant. Any such attempted assignment,
transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw pursuant to Section 8.1.
12.2 Use of Funds. All payroll deductions received or held by the Company
- ------------------
under this Plan may be used by the Company for any corporate purpose and the
Company shall not be obligated to segregate such payroll deductions.
12.3 Adjustment Upon Changes in Capitalization.
- -----------------------------------------------
(a) If, while any options are outstanding, shares of Stock have increased,
decreased, changed into, or been exchanged for a different number or kind
of shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock split or
similar transaction, appropriate and proportionate adjustments may be made
by the Committee in the number and/or kind of shares which are subject to
purchase under outstanding options and on the option exercise price or
prices applicable to such outstanding options. In addition, in any such
event, the number and/or
<PAGE>
kind of shares which may be offered in the Offerings described in Section 4
hereof shall also be proportionately adjusted. No adjustments shall be made
for stock dividends. For the purposes of this Paragraph, any distribution
of shares of Stock to shareholders in an amount aggregating 20% or more of
the outstanding shares of Stock shall be deemed a stock split and any
distributions of shares of Stock aggregating less than 20% of the
outstanding shares of Stock shall be deemed a stock dividend.
(b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving
corporation, or upon a sale of substantially all of the property or stock
of the Company to another corporation, the holder of each option then
outstanding under the Plan will thereafter be entitled to receive at the
next Purchase Date upon the exercise of such option for each share as to
which such option shall be exercised, as nearly as reasonably may be
determined, the cash, securities and/or property which a holder of one
share of the Common stock was entitled to receive upon and at the time of
such transaction. The Board of Directors shall take such steps in
connection with such transactions as the Board shall deem necessary to
assure that the provisions of this Section 12.3 shall thereafter be
applicable, as nearly as reasonably may be determined, in relation to the
said cash, securities and/or property as to which such holder of such
option might thereafter be entitled to receive.
12.4 Amendment and Termination. The Committee or Board of Directors of the
- -------------------------------
Company shall have complete power and authority to terminate or amend the Plan;
provided, however, that the Committee or the Board of Directors shall not,
without the approval of the stockholders of Brass Eagle Inc.:
(a) increase the maximum number of shares of Stock which may be issued under
any Offering (except pursuant to Section 12.3);
(b) amend the requirements as to the class of employees eligible to purchase
stock under the Plan or permit the members of the Committee to purchase
stock under the Plan. No termination, modification, or amendment of the
Plan may, without the consent of an employee then having an option under
the Plan to purchase stock, adversely affect the rights of such employee
under such option.
12.5 Effective Date. The Plan shall become effective as of November 1, 1997,
- --------------------
subject to approval by the holders of the majority of the Common Stock of Brass
Eagle Inc. present and represented at a special or annual meeting of the
shareholders held on or before October 31, 1998. If the Plan is not so
approved, the Plan shall not become effective.
12.6 No Employment Rights. The Plan does not, directly or indirectly, create
- --------------------------
any right for the benefit of any Employee or class of employees to purchase any
shares of Stock under the Plan, or create in any Employee or class of employees
any right with respect to continuation of employment by the Company, and it
shall not be deemed to interfere in any way with the
<PAGE>
Company's right to terminate, or otherwise modify, an Employee's employment at
any time.
12.7 Effect of Plan. The provisions of the Plan shall, in accordance with its
- --------------------
terms, be binding upon, and inure to the benefit of, all successors of each
Employee participating in the Plan, including, without limitation, such
employee's estate and the executors, administrators or trustees thereof, heirs
and legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such Employee.
12.8 Governing Law. The law of the State of Arkansas will govern all matters
- -------------------
relating to this Plan except to the extent it is superseded by the laws of the
United States.
<PAGE>
Exhibit 10(xii)
FORM OF
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made by and between BRASS EAGLE INC. (the "Company")
and Marvin W. Griffin ("Griffin") as of ____________, 1997.
WHEREAS, Griffin is currently a Director of the Company and the holder
of shares of the Company's Preferred Stock (the "Preferred Stock"); and
WHEREAS, as the result of the Company's recent recapitalization the
Company is no longer authorized to issue Preferred Stock and Griffin's shares of
Preferred Stock have been canceled (the "Recapitalization"); and
WHEREAS, the Company desires to indemnify Griffin and hold him harmless
from any adverse income tax consequences arising from or attributable to the
cancellation of the Preferred Stock.
NOW THEREFORE, in consideration of the services rendered, and to be
rendered, by Griffin to and on behalf of the Company, the Company agrees as
follows:
1. The Company shall indemnify and hold Griffin harmless from any
adverse income tax consequences arising from or attributable to the cancellation
of the shares of Preferred Stock in connection with the Recapitalization
including any attorney's fees associated with any protest or other challenge
contemplated by paragraph 3 hereof (the "Indemnification").
2. The Indemnification shall be accomplished on an after-tax basis as to
Griffin.
3. Griffin and the Company agree to cooperate in protesting or
challenging any assessment or other proposal by any taxing authority to impose
any tax liability arising from or attributable to the cancellation of the
Preferred Stock in connection with the Recapitalization; provided, however, that
the Company reserves the right to require Griffin to abandon any such protest or
other challenge, subject to the Company's Indemnification obligation.
4. Griffin shall promptly notify the Company of any proposed assessment
or other attempt by any taxing authority to impose any tax liability on Griffin
which is subject to the Company's Indemnification obligation.
5. This Agreement shall be binding on the Company's successors and
assigns and shall inure to the benefit of Griffin's heirs and assigns.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and
Griffin have entered into this Agreement as of the day first above written.
BRASS EAGLE INC.
By:
------------------------------
Title:
---------------------------
---------------------------------
Marvin W. Griffin
<PAGE>
Exhibit 10(xiii)
FORM OF
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made by and between BRASS EAGLE INC. (the "Company") and
E. Lynn Scott ("Scott") as of ___________, 1997.
WHEREAS, Scott is currently an officer and an employee of the Company and
the holder of shares of the Company's Preferred Stock (the "Preferred Stock");
and
WHEREAS, as the result of the Company's recent recapitalization the Company
is no longer authorized to issue Preferred Stock and Scott's shares of Preferred
Stock have been canceled (the "Recapitalization"); and
WHEREAS, the Company desires to indemnify Scott and hold him harmless from
any adverse income tax consequences arising from or attributable to the
cancellation of the Preferred Stock.
NOW THEREFORE, in consideration of the services rendered, and to be
rendered, by Scott to and on behalf of the Company, the Company agrees as
follows:
1. The Company shall indemnify and hold Scott harmless from any adverse
income tax consequences arising from or attributable to the cancellation of the
shares of Preferred Stock in connection with the Recapitalization including any
attorney's fees associated with any protest or other challenge contemplated by
paragraph 3 hereof (the "Indemnification").
2. The Indemnification shall be accomplished on an after-tax basis as to
Scott.
3. Scott and the Company agree to cooperate in protesting or challenging
any assessment or other proposal by any taxing authority to impose any tax
liability arising from or attributable to the cancellation of the Preferred
Stock in connection with the Recapitalization; provided, however, that the
Company reserves the right to require Scott to abandon any such protest or
other challenge, subject to the Company's Indemnification obligation.
4. Scott shall promptly notify the Company of any proposed assessment or
other attempt by any taxing authority to impose any tax liability on Scott which
is subject to the Company's Indemnification obligation.
5. This Agreement shall be binding on the Company's successors and assigns
and shall inure to the benefit of Scott's heirs and assigns.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and Scott
have entered into this Agreement as of the day first written.
BRASS EAGLE INC.
By:
---------------------------
Title:
------------------------
------------------------------
E. Lynn Scott
<PAGE>
EXHIBIT 11
BRASS EAGLE
FULLY DILUTED NET INCOME PER SHARE
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
<S> <C> <C> <C> <C>
Weighted average shares
- -----------------------
The number of shares outstanding after split 5,031,358 5,031,358
Add: Number of weighted average shares
assumed to be outstanding from stock options 323,475 386,122
Add: Equivalent shares for 62186.44 of treasury shares
purchased March 31, 1996 15,547
----------- ------------
5,354,833 5,417,480
=========== ============
Net income $ 882,000 $ 0.16 $ 1,120,000 $ 0.21
----------- ------------
Weighted average shares outstanding 5,354,833 5,417,480
</TABLE>
<TABLE>
<CAPTION>
Number of weighted average shares
assumed to be outstanding from stock options
--------------------------------------------
<S> <C> <C>
Stock options outstanding at December 31, 1995 314,658.71 314,658.71
Weighted average shares for 60,944.26 options granted August 6, 1996 24,711.65 60,944.26
Less proceeds from weighted average options outstanding (15,895.64)
----------- -----------
Weighted average shares from stock options at December 31, 1996 323,474.71 375,602.97
===========
Weighted average shares for 12,188.85 options granted February 20,1997 10,519.15
Less proceeds from weighted average options outstanding (18,085.43)
===========
Weighted average shares from stock options at June 30, 1997 386,122.11
===========
</TABLE>
-1-
<PAGE>
EXHIBIT 11
BRASS EAGLE
PRO FORMA FULLY DILUTED NET INCOME PER SHARE
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
<S> <C> <C> <C> <C>
Weighted average shares
- -----------------------
The number of shares outstanding after split 7,306,358 7,306,358
Add: Number of weighted average shares
assumed to be outstanding from stock options 323,475 386,122
Add: Equivalent shares for 62186.44 of treasury shares purchased March 31, 1996 15,547
------------ -------------
7,629,833 7,692,480
============ =============
Net income $ 1,315,000 $ 0.17 $ 1,330,000 $ 0.17
------------ --------------
Weighted average shares outstanding 7,629,833 7,692,480
</TABLE>
<TABLE>
<CAPTION>
Number of weighted average shares
assumed to be outstanding from stock options
--------------------------------------------
<S> <C> <C>
Stock options outstanding at December 31, 1995 314,658.71 314,658.71
Weighted average shares for 60,944.26 options granted August 6, 1996 24,711.65 60,944.26
Less proceeds from weighted average options outstanding (15,895.64)
------------ ------------
Weighted average shares from stock options at December 31, 1996 323,474.71 375,602.97
============
Weighted average shares for 12,188.85 options granted February 20,1997 10,519.15
Less proceeds from weighted average options outstanding (18,085.43)
------------------
Weighted average shares from stock options at June 30, 1997 386,122.11
==================
</TABLE>
-2-
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in this Registration Statement on Form S-1
and the related Prospectus of our report dated September 4, 1997 on the
financial statements of Brass Eagle/A Division of Daisy Manufacturing Company,
Inc. and to the reference to our firm under the heading "Experts" included in
this Registration Statement and the related Prospectus.
Oak Brook, Illinois
- --------------------------------------------------------------------------------
The above represents the form of consent we expect to issue upon completion
of the transaction discussed in Note 14 to the consolidated financial
statements.
Crowe, Chizek and Company LLP
Oak Brook, Illinois
September 23, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACED FROM THE DECEMBER
31, 1995 AND DECEMBER 31, 1996 AND JUNE 30, 1997 CONSOLIDATED BALANCE SHEETS AND
THE STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996, AND
THE SIX MONTHS ENDED JUNE 30, 1997 AND THE NOTES THERETO, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 JUN-30-1997
<CASH> 0 0 0
<SECURITIES> 0 0 0
<RECEIVABLES> 1,352 3,708 4,759
<ALLOWANCES> 18 52 52
<INVENTORY> 546 1,195 2,470
<CURRENT-ASSETS> 1,973 5,313 8,043
<PP&E> 1,274 1,307 1,792
<DEPRECIATION> 51 237 469
<TOTAL-ASSETS> 6,288 9,269 12,199
<CURRENT-LIABILITIES> 2,966 6,047 8,371
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 248 1,130 2,250
<TOTAL-LIABILITY-AND-EQUITY> 6,288 9,269 12,199
<SALES> 4,319 13,838 11,905
<TOTAL-REVENUES> 4,319 13,838 11,905
<CGS> 2,456 9,625 7,994
<TOTAL-COSTS> 4,230 12,049 9,967
<OTHER-EXPENSES> 0 45 0
<LOSS-PROVISION> 18 34 0
<INTEREST-EXPENSE> 87 315 123
<INCOME-PRETAX> 2 1,429 1,815
<INCOME-TAX> 1 547 695
<INCOME-CONTINUING> 1 882 1,120
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1 882 1,120
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 .16 .21
</TABLE>
