<PAGE>
BRASS EAGLE INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
[BRASS EAGLE LOGO]
To the Stockholders of Brass Eagle Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of Brass
Eagle Inc. will be held at Las Colinas Hilton Garden Inn, 7516 Las Colinas
Boulevard, Irving, Texas 75063, on May 20, 1998, at 1:30 p.m. for the following
purposes:
1. To elect five directors of the Company.
2. To appoint outside auditors for the Company.
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on April 3, 1998 will
be entitled to notice of, and to vote at, the meeting.
You are cordially invited to the meeting. WE ASK THAT YOU SIGN AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE IN RETURNING YOUR PROXY.
By Order of the Board of Directors
/s/ John D. Flynn
-----------------------------------
John D. Flynn
SECRETARY
Rogers, Arkansas
April 17, 1998
YOUR VOTE IS IMPORTANT!
PLEASE SIGN AND RETURN THE ACCOMPANYING PROXY.<PAGE>
<PAGE>
BRASS EAGLE INC.
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
The enclosed Proxy is solicited by and on behalf of the management of
Brass Eagle Inc. (the _Company_), a Delaware corporation, for use at the annual
meeting of stockholders to be held on May 20, 1998, at 1:30 p.m. at the Las
Colinas Hilton Garden Inn, 7516 Las Colinas Boulevard, Irving, Texas 75063, or
at any adjournment or adjournments thereof. The Company's address is 1203A
North Sixth Street, Rogers, Arkansas 72756 and its telephone number is 501-621-
4390. This proxy material is first being mailed to stockholders on April 17,
1998. Only stockholders of record at the close of business on April 3, 1998,
are entitled to notice of, and to vote at, the meeting.
Any stockholder giving a Proxy has the power to revoke it, at any time
before it is voted, by written revocation delivered to the Secretary of the
Company. Proxies solicited herein will be voted in accordance with any
directions contained therein, unless the Proxy is received in such form or at
such time as to render it ineligible to vote, or unless properly revoked. If
no choice is specified, the shares will be voted in accordance with the
recommendations of the Board of Directors as described herein.
If matters of business other than those described in the Proxy properly
come before the meeting, the persons named in the Proxy will vote in accordance
with their best judgment on such matters. The Proxies solicited herein shall
not confer any authority to vote at any meeting of stockholders other than the
meeting to be held on May 20, 1998, or any adjournment or adjournments thereof.
The cost of soliciting Proxies will be borne by the Company. The Company
will reimburse brokers, custodians, nominees and other fiduciaries for their
charges and expenses in forwarding proxy material to beneficial owners of
shares. In addition to solicitation by mail, certain officers and employees of
the Company may solicit Proxies by telephone, telegraph and personally. These
persons will receive no compensation other than their regular salaries.
OUTSTANDING STOCK; VOTING RIGHTS;
VOTE REQUIRED FOR APPROVAL
The stock transfer books of the Company will not be closed, but only
stockholders of record at the close of business on April 3, 1998, will be
entitled to notice of, and to vote at, the meeting. At that date, there were
7,240,107 shares of Common Stock outstanding. Each stockholder is entitled to
one vote for each share of stock owned of record at the close of business on
April 3, 1998.<PAGE>
<PAGE>
In order to be elected as a Director of the Company, each nominee must
receive a plurality of the votes cast at the meeting for that position.
Abstentions and shares held by a broker that has indicated that it does not
have discretionary authority to vote on a particular matter will not be counted
as votes cast.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding persons who
beneficially owned five percent (5%) or more of the Company's Common Stock at
the close of business on March 15, 1998.
<TABLE>
<CAPTION>
Number of Shares of
Name and Address Common Stock Percent of
of Beneficial Owner Beneficially Owned Out-standing Shares
- ------------------- -------------------- --------------------
<C> <S> <S>
Charter Oak Partners 50.1%
10 Wright Street 3,674,474
Westport, Connecticut
06877
Marvin W. Griffin 8.1%
2111 South Eighth 604,506 (1)
Street
Rogers, Arkansas 72758
50.1%
Anthony J. Dowd 3,674,474 (2)
10 Wright Street
Westport, Connecticut
06877
</TABLE>
(1) Includes 236,824 shares subject to currently exercisable options.
(2) 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.<PAGE>
<PAGE>
EQUITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of March 15, 1998, by (i) each nominee
for election as a director, (ii) each of the named individuals in the Summary
Compensation Table, and (iii) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Number of Shares of Percent
Name of Common Stock Outstanding
Beneficial Owner Beneficially Owned Shares
- ----------------- -------------------- ---------------
<C> <S> <S>
Marvin W. Griffin 604,506 (1) 8.1%
E. Lynn Scott 256,772 (2) 3.5%
Anthony J. Dowd 3,674,474 (3) 50.1%
H. Gregory Wold 42,671 0.6%
Stephen J. Schaubert 14,224 0.2%
Steven R. DeMent 18,276 (4) 0.3%
Charles L. Prudhomme 16,246 0.2%
All directors and 4,627,169(3)(5) 60.7%
executive officers as a
group
</TABLE>
(1) Includes 236,824 shares subject to currently exercisable options.
(2) Includes 135,160 shares subject to currently exercisable options.
(3) 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.
(4) Includes 11,165 shares subject to currently exercisable options.
(5) Includes 383,149 shares subject to currently exercisable options.
ELECTION OF DIRECTORS
Five Directors are to be elected by the stockholders at the annual meeting
for a term of one year and until the election and qualification of their
successors. The Proxies solicited hereby will be voted _FOR_ the election as
Directors of the five persons hereinafter identified unless authority is
withheld. Management does not know of any nominee who will be unable to serve,
but should any nominee be unable or decline to serve, the discretionary
authority provided in the Proxy will be exercised to vote for a substitute or
substitutes. Management has no reason to believe that any substitute nominee
will be required.<PAGE>
<PAGE>
NOMINEES
MARVIN W. GRIFFIN, 59, 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 Manufacturing, Inc. (_Daisy_) since 1988. From 1983 to 1987,
Mr. Griffin was the Chief Executive Officer of the Coca-Cola Bottling Company
Consolidated, a soft-drink bottling company, and 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, 44, 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 Crossman, both divisions of The Coleman
Company that specialize in sporting goods. He is also a Director of Daisy.
ANTHONY J. DOWD, 38, 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, 63, 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, 51, 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.<PAGE>
<PAGE>
DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors met five times during the last 6-1/2 months, on
September 4, September 15, November 17, and December 15, 1997, and February 24,
1998, and acted four times by unanimous written consent.
The Board currently has two standing committees to assist it in the
discharge of its responsibilities: an Audit Committee and a Compensation
Committee. The Audit Committee, which did not meet in 1997 and met one time in
1998, is composed of Anthony J. Dowd and H. Gregory Wold and reviews the
professional services provided by the Company's independent auditors and the
independence of such auditors from management of the Company. Additionally,
the Audit Committee reviews 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, which did not meet in 1997 and met one time
during 1998,is composed of Anthony J. Dowd, E. Lynn Scott, and Marvin Griffin
and serves to establish the compensation of officers of the Company and to
establish and administer the Company's compensation programs.
None of the nominees for director attended fewer than 75% of the aggregate
of (1) the total number of meetings of the board of directors and (2) the total
number of meetings held by all committees of the board on which he served.
<PAGE>
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE ELECTION AS DIRECTORS OF THE FIVE PERSONS
IDENTIFIED ABOVE AS NOMINEES.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
CASH AND OTHER COMPENSATION
The following table sets forth, for the fiscal years indicated, the cash
and other compensation provided by the Company and its subsidiaries to the
Chief Executive Officer and each of the other most highly compensated executive
officers whose total annual salary and bonus exceed $100,000 (the "Named
Executive Officers") in all capacities in which they served.<PAGE>
<PAGE>
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------------------
Annual Compensation Awards Payouts
------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Other Annual Restricted Underlying LTIP All Other
Name and Principal Compensation Stock Options/ Payouts Compensation
Position Year Salary($) Bonus($) ($) Award(s)($) SAR(#) ($) ($)(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E. Lynn Scott
President and 1997 140,000 46,620 -- -- 94,581 -- 2,551
Chief Executive 1996 130,200 -- -- -- 22.331 -- 2,463
Officer 1995 130,200 -- -- -- 16,748 -- 1,530
Steven R. DeMent(3) 1997 120,000 24,000 -- -- 26,685 -- 171
Vice President _ 1996 106,845 -- -- -- -- -- 11,268
Operations 1995 -- -- -- -- -- -- --
Charles L.Prudhomme(4)
Vice President _ 1997 101,760 20,350 -- -- 15,520 -- 1,770
Marketing and 1996 72,245 -- -- -- -- -- 365
Business Development 1995 -- -- -- -- -- -- --
J. R. Brian Hanna(5) 1997 9,644 3,833 -- -- 15,520 -- 21
Chief Financial Officer 1996 -- -- -- -- -- -- --
1995 -- -- -- -- -- -- --
/TABLE
<PAGE>
<PAGE>
(1) Prior to November 25, 1997, the Company operated as a division of Daisy
Manufacturing Company, Inc. The Named Executive Officers identified
devoted substantially all of their time to the operations of Daisy's
Paintball Division. Accordingly, the summary compensation table includes
all the compensation paid by the Company and Daisy for the years
presented.
(2) Includes Company contributions to the 401(k) Retirement Savings Plan,
Company payments of life insurance premiums, and reimbursed relocation
expenses. For 1997 such amounts were as follows: E. Lynn Scott: $2,256
401(k) contributions, $295 insurance premiums; Steven R. DeMent, $171
insurance premiums; Charles Prudhomme: $1,443 401(k) contributions, $327
insurance premiums; J.R. Brian Hanna, $21 insurance premiums.
(3) Mr. DeMent became employed by the Company as of February 12, 1996.
Consequently, Mr. DeMent's salary for 1996 as set forth above represented
only eleven months of his annual salary. Had Mr. DeMent been employed for
the entire twelve months of 1996, his salary for such year would have been
approximately $120,000. Additionally, _All Other Compensation_ consists
of (i) Company payments of life insurance premiums of $1,115 and (ii)
$10,153 of reimbursed relocation expenses.
(4) Mr. Prudhomme became employed by the Company on April 2, 1996.
Consequently, Mr. Prudhomme's salary for 1996 as set forth above
represented only nine months of his annual salary. Had Mr. Prudhomme been
employed for the entire twelve months of 1996, his salary for such year
would have been approximately $101,760.
(5) Mr. Hanna became employed by the Company as of December 1, 1997.
Consequently, Mr. Hanna's salary for 1997 as set forth above represents
only one month of his annual salary. Had Mr. Hanna been employed for the
entire twelve months of 1997, his salary for such year would have been
approximately $115,000.
STOCK OPTION GRANTS
The following table sets forth information concerning stock options
granted to the Named Executive Officers during 1997:<PAGE>
<PAGE>
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term(5)
- -------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Number of
Securities % of Total Estimated
Underlying Options/SARs Exercise Market
Options/ Granted to or Base Value on
SARs Employees in Price Date of Expiration
Name Granted (#) Fiscal Year ($/Sh) Grant(3) Date(4) %($) 5%($) 10%($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E. Lynn Scott 72,250(1) 24.9% $11.00 $11.00 11/26/07 $ -- $499,814 $1,266,627
22,331(2) 7.7% .56 9.00 06/01/03 188,474 256,826 343,541
Steven R. DeMent 15,520(1) 5.3% $11.00 $11.00 11/26/07 $ -- $107,365 $ 272,084
11,165(2) 3.8% .56 9.00 06/01/03 94,241 128,419 171,779
Charles Prudhomme 15,520(1) 5.3% $11.00 $11.00 11/26/07 $ -- $107,365 $ 272,084
J. R. Brian Hanna 15,520(1) 5.3% $11.75 $11.75 12/01/07 $ -- $114,685 $ 290,635
/TABLE
<PAGE>
<PAGE>
(1) The options listed vest ratably over a four year period based on the grant
date.
(2) The options listed were granted under a Daisy Manufacturing stock option
plan which was established on June 30, 1993. Those options converted to
options to purchase the Company's stock concurrently with the Company's
Reorganization in November 1997. Those options are fully vested.
(3) The market value of the stock on the date of grant was determined by the
Company based on the anticipated offering price to the public of $11.00
per share, less the estimated expenses of the offering and a discount to
reflect the lack of marketability of the Company's stock and risk prior to
the initial public offering.
(4) In the event of a change of control as defined in the 1997 Stock Option
Plan, the Compensation Committee may, in its sole and complete discretion,
accelerate the exercisability of any unexercisable options.
(5) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price. There can be no
assurance that any of the values reflected in the table will be achieved.
<PAGE>
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning stock options
Exercised during the last fiscal year and stock options held as of the end
of the last fiscal year by the Named Executive Officers.
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities
Underlying Value of Unexercised
Unexercised Options/ In-the-Money Options/
Shares SARs at FY-End(#) SARs at FY-End($)
Acquired
Name On Exercise(#) Value Realized($) Exercisable Unexercisable Exercisable Unexercisable(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
E. Lynn Scott 0 $0 135,160 72,250 $1,596,915 $599,344
Steve R. DeMent 0 $0 11,165 15,520 $ 131,926 $ 21,340
Charles Prudhomme 0 $0 -- 15,520 -- $ 21,340
J. R. Brian Hanna 0 $0 -- 15,520 -- $ 9,700
/TABLE
<PAGE>
<PAGE>
(1) Represents the amount by which the market price at fiscal year end of the
shares underlying unexercised options exceeds the exercise price for such
shares.
COMPENSATION OF DIRECTORS
Each director of the Company who is not also an employee of the Company
receives, as an annual fee, Common Stock having a fair market value of $8,000
at the time of its issuance in quarterly installments. All directors are
reimbursed for out-of-pocket expenses incurred in connection with attendance at
meetings of the Board and Board committees and other activities relating
thereto.
EMPLOYMENT AGREEMENT
The Company has entered into an Employment Agreement with E. Lynn Scott.
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 (90) days notice. In addition,
Mr. Scott may elect to terminate his employment in the event of a change-in-
control of the Company or the sale of all or substantially all of its assets.
Pursuant to the terms of the Agreement Mr. Scott was paid an annual base salary
of $140,000 in 1997, which base salary will be increased to $160,000 in 1998.
The Agreement provides for certain bonus compensation in subsequent years to be
determined based upon performance targets set by the Company's Board of
Directors after consultation with Mr. Scott. Under the Employment Agreement,
Mr. Scott is subject to certain non-disclosure, non-competition, and non-
solicitation covenants applicable during the term of his employment and until
one year after termination of his employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Anthony J. Dowd, E. Lynn
Scott and Marvin Griffin. Mr. Scott serves as President and Chief Executive
Officer of the Company. Mr. Scott also serves on the Board of Directors of
Daisy. Mr. Griffin is the Chairman of the Board, President and Chief Executive
Officer of Daisy and also serves on the Company's Compensation Committee.
REPORT OF COMPENSATION COMMITTEE
The following report addressing the Company's compensation policies for
executive officers for 1997 is submitted by the Compensation Committee of the
Board of Directors.
As required by the proxy rules promulgated by the Securities and Exchange
Commission (the _SEC_), this Report of the Compensation Committee (the
_Committee_) of the Board of Directors describes the overall compensation goals
and policies applicable to the executive officers of the Company, including the
bases for determination of the compensation of executive officers for fiscal
<PAGE>
year 1997. The Report also discusses the setting of 1997 compensation of Mr.
E. Lynn Scott. The term _Executive Officers_ is used below to refer to the
executive officers of the Company other than Mr. Scott.
COMPOSITION OF COMPENSATION COMMITTEE. The members of the Compensation
Committee are Anthony Dowd, Marvin W. Griffin, Jr. and E. Lynn Scott. Since
Mr. Scott's compensation has been determined by contract, his inclusion on the
Committee is deemed a great advantage due to his intimate knowledge of the
performance of the Executive Officers. The philosophy of the Committee
emphasizes inclusiveness. Thus the Bonus Plan covers all employees of the
Company, and all employees are eligible to purchase stock under an Employee
Stock Purchase Plan.
COMPENSATION PHILOSOPHY AND OBJECTIVES. The Committee believes that
compensation of the Company `s executive officers should be set at a
competitive level and be based upon the Company's overall financial
performance, achievement of strategic goals, and individual performance, with a
view toward building value for the Company's shareholders. Within this overall
philosophy, the following principles guide the Company's compensation policies
for executive officers:
* Provide competitive levels of compensation that enable the Company to
attract and retain experienced, talented Executive Officers;
* Compensate Executive Officers based on the Company's progress toward
achievement of its short and long-term strategic and financial goals;
* Compensate Executive Officers based on the performance of the individual
Executive Officer, and his contribution to the Company's performance; and
* Maintain and strengthen the incentive for Executive Officers to increase
the price of the Company's Common Stock.
The Committee believes that adherence to these objectives is essential in
order to attract and retain highly qualified officers whose contributions are
necessary for the continued growth and success of the Company. Information
concerning the specific implementation of these policies in the 1997
compensation arrangements of the Executive Officers and Mr. Scott is provided
below. The Committee believes that the $1.0 million compensation deduction cap
recently promulgated under the Internal Revenue Code currently has no effect on
the Company's compensation policies.
ANNUAL SALARIES. Salaries of Executive Officers are generally reviewed on
an annual basis and adjustments made based on the Committee's subjective
evaluation of the individual's performance and the Company's performance,
taking into account both qualitative and quantitative factors. Among the
factors considered by the Committee have been the recommendations of Mr. Scott
and the importance of retaining key Executive Officers. Subject to Board
approval, the Committee makes decisions concerning the Executive Officers.
<PAGE>
At the beginning of 1997, three of the Executive Officers were
employees of Daisy Manufacturing Company, Inc., with duties varying from their
present positions. Two of the Executive Officers were hired from outside the
Company during the course of the year. For this reason, there are no
comparable year-to-year comparisons of annual salaries.
INCENTIVE BONUS. The 1997 Brass Eagle Bonus Plan was established in early
1997, when Brass Eagle was still a division of Daisy Manufacturing Company,
Inc. Cash payments were made in February 1998, with payouts based upon
operating income results. The Bonus Plan covers all employees of the Company,
although at varying percentages of base pay dependent on level. The total
payout under the Plan was $215,000.
In contrast, the 1998 Brass Eagle Bonus Plan, which is still being
finalized, will be based upon net income. The Compensation Committee has
directed that a study be undertaken, to assure comparability with the bonus
plans of similarly sized companies.
STOCK OPTIONS. The Company's 1997 Stock Option Plan permits the award of
options to purchase Common Stock of the Company to Executive Officers, managers
and key employees. The award of stock options is intended to align the
interests of Executive Officers with the shareholders by providing the
Executive Officers with an incentive to bring about increases in the price of
the Common Stock. The Company's policy is to award options to purchase Common
Stock at a price that equals or exceeds market price on the date of grant.
Accordingly, the Executive Officers derive a financial benefit from an option
only if the price of Common Stock increases. Options granted have not had
performance contingencies, but realization of the value provided through the
options has generally required the Executive Officer to remain with the Company
until the options vest. The options awarded vest at the rate of 25% per year.
In fiscal 1997, the Company determined to award options to purchase
106,620 shares of Common Stock to Executive Officers and key employees of the
Company. The number of options awarded to Executive Officers was based upon
the Committee's desire to maintain and strengthen the incentive for Executive
Officers to increase the price of the Common Stock.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Lynn Scott's compensation is set
pursuant to an Employment and Noncompetition Agreement dated September 15,
1997, which runs for a three year period, with options to renew. Mr. Scott's
compensation and bonus schedule is set by this Agreement. Mr. Scott is
eligible for stock options pursuant to this Agreement, and has been awarded
stock options including options to purchase 72,250 shares of Common Stock
pursuant to the 1997 Stock Option Plan.<PAGE>
<PAGE>
OTHER COMPENSATION PLANS. The Company has a number of broad-based employee
benefit plans in which Executive Officers participate on the same terms as
other employees meeting the eligibility requirements, subject to any legal
limitations on amounts that may be contributed to or benefits payable under the
plans.
The Omnibus Budget Reconciliation Act of 1993 (_OBRA_) generally prevents
public corporations from deducting as a business expense that portion of
compensation exceeding $1 million paid to a named executive officer in the
Summary Compensation Table. This deduction limit does not apply to
"performance-based compensation." The Compensation Committee intends to
monitor its compensation plan to comply with OBRA when necessary.
Submitted by the Compensation Committee of the Board of Directors:
Anthony Dowd
Marvin Griffin
Lynn Scott<PAGE>
<PAGE>
COMPANY PERFORMANCE
The graph below compares from the date the Company became traded on the
NASDAQ National Market (November 26, 1997) until December 31, 1997 the
cumulative total returns on the Company's Common Stock on the NASDAQ Financial
Stock Index. The cumulative total return on the Company's Common Stock assumes
$100 invested in such stock on November 26, 1997 and assumes reinvestment of
dividends.
<TABLE>
<CAPTION>
TOTAL RETURN ANALYSIS
11/25/1997 12/31/1997
- ------------------------------------------------------------------------
<S> <C> <C>
Brass Eagle $ 100.00 $ 112.50
Peer Group $ 100.00 $ 96.67
NASDAQ Composite(US) $ 100.00 $ 98.89
</TABLE>
Source: Carl Thompson Associate www.ctaonline.com (303)494-5472. Data from
Bloomberg Financial Markets.
<TABLE>
<CAPTION>
WEIGHTED AVG SHARES OUTSTANDING S/O S/O S/O
TICKER COMPANY NAME YEAR0 YEAR1
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Client XTRM Brass Eagle 7.225 7.225
------------------------------------------------------------------------
Peers BIKE Cannondale Corp. 9.1 9.1
BSPT Bell Sports Corp. 13.8 13.8
CLN Coleman Co. Inc. 53.4 53.4
ELY Callaway Golf Co. 69.4 69.4
FTSP First Team Sports 5.8 5.8
GTBX GT Bicycles Inc. 10.0 10.0
HUF Huffy Corp. 13.4 13.4
KTO K2 Inc. 16.7 16.7
MRKR Marker International 11.1 11.1
PIN AMF Bowling Inc. 53.7 53.7
/TABLE
<PAGE>
<PAGE>
CERTAIN TRANSACTIONS
1. Mr. Scott is the President, Chief Executive Officer and a director of
the Company and a director and shareholder of Daisy Manufacturing Company
(_Daisy_). Mr. Griffin is the Chairman of the Board of Directors of the
Company, the Chairman of the Board, President and Chief Executive Officer of
Daisy, and a greater than five percent stockholder of Daisy. Charter Oak
Partners (_Charter Oak_) is a greater than five percent stockholder of the
Company and a greater than five percent stockholder of Daisy. As a
consequence, each of these persons may be deemed to have a material direct or
indirect interest in Daisy. The Company, prior to November 24, 1997, operated
as a division of a predecessor to Daisy. On November 24, 1997, a
reorganization (the _Reorganization_) was effected pursuant to an assignment,
assumption and indemnification agreement (the _Assignment, Assumption and
Indemnification Agreement_) which provided for (i) the Company transferring all
of its non-paintball related assets, operations, and liabilities to Daisy,
retaining only its paintball related assets, operations, and liabilities, and
(ii) Daisy agreeing 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 Reorganization (other
than products sold under the Brass Eagle name) and any products sold by Daisy
after the Reorganization, and (B) any claim by an employee or former employee
of the Company or of 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.
2. Each of the directors (Anthony Dowd as agent for Charter Oak) and
each of the Named Executive Officers except for J.R. Brian Hanna are guarantors
under a Continuing Guaranty (the _Guaranty_) pursuant to which they have
guaranteed the obligations of Daisy under the Assignment, Assumption and
Indemnification Agreement. The obligations of the guarantors are several and
separate according to their pro rata ownership of the outstanding shares of
Daisy common stock at the time of the Reorganization. The aggregate amount of
Daisy's obligations guaranteed is Five Million Dollars for the two years
following the Reorganization and Three Million Dollars for the following two
years. The term of the Guaranty expires on the earlier of (i) four years
following the date of the Reorganization or (ii) the date that one of the
nation's six largest accounting firms renders a determination that Daisy alone
may satisfy its obligations under the Assignment, Assumption and
Indemnification Agreement. Obligations of guarantors for claims made prior to
the fourth anniversary of the effective date of the Guaranty shall survive its
termination.
3. Concurrently with the Reorganization, the Company entered into an
administrative services agreement with Daisy (the _Administrative Agreement_),
pursuant to which Daisy agreed to provide the Company with certain legal,
administrative, warehousing, shipping and computer information services through
<PAGE>
December 31, 1998, for $24,071.58 monthly. Unless terminated by prior written
notice, the Administrative Agreement is automatically renewed annually for
three years. The Administrative Agreement is terminable, in whole or in part,
without penalty by agreement of the parties if such services are no longer
required. The Company anticipates terminating the Administrative Agreement
with respect to all services except legal and computer information services
prior to December 31, 1998. The Company believes that the terms of the
Administrative Agreement are no less favorable than those that could have been
obtained from disinterested third parties.
4. Messrs. Griffin and Scott were holders of shares of preferred stock
of the Company which were canceled in connection with the Reorganization. The
Company entered into agreements with Messrs. Griffin and Scott concurrently
with the Reorganization, pursuant to which the Company will indemnify each of
them against any income tax imposed on them as a result of such cancellation of
their preferred stock. It is not possible to predict whether any such tax will
be imposed, and consequently, whether such indemnification will be required.
If such indemnification is required, it is also not possible to estimate the
precise amount thereof, although the Company does not believe that its
obligation would exceed approximately $240,000 with respect to Mr. Griffin and
approximately $90,000 with respect to Mr. Scott. If any such <PAGE>
indemnification payment is required, the Company believes that it would be
entitled to claim a corresponding compensation deduction for income tax
purposes, and therefore, any additional indemnification costs would be offset
by these income tax deductions. Consequently, the Company believes that any
additional indemnification payments that it may be required to make would not
have a material adverse effect on the Company or its prospects.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10%
of the Company's Common Stock, to file with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. initial
reports of ownership and reports of changes in ownership of stock of the
Company.
To the Company's knowledge, based solely on a review of copies of reports
provided by such individuals to the Company and written representations of such
individuals that no other reports were required, during the year ended December
31, 1997, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were met.
INDEPENDENT PUBLIC ACCOUNTANTS
A representative of Crowe, Chizek and Company LLP, the Company's
independent public accountants for the year ended December 31, 1997, and the
current year, will be present at the meeting, will have the opportunity to make
a statement, and also will be available to respond to appropriate questions.
<PAGE>
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Company's annual
meeting of stockholders in 1999 must be received by the Company at its
principal executive offices not later than December 18, 1998, in order to be
included in the Company's Proxy Statement and form of Proxy relating to that
meeting.
OTHER MATTERS
Management of the Company knows of no other matters that may come before
the meeting. However, if any matters other than those referred to herein
should properly come before the meeting, it is the intention of the persons
named in the enclosed Proxy to vote the Proxy in accordance with their
judgment.
ADDITIONAL INFORMATION AVAILABLE
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, MAY BE OBTAINED WITHOUT CHARGE BY ANY
STOCKHOLDER UPON WRITTEN REQUEST TO JOHN D. FLYNN, SECRETARY, 1203A NORTH SIXTH
STREET, ROGERS, ARKANSAS 72756.
By Order of the Board of Directors
/s/ John D. Flynn
----------------------------------
JOHN D. FLYNN
Secretary
Rogers, Arkansas
April 17, 1998<PAGE>
