UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM _____ TO _____
Commission File Number 0-23385
BRASS EAGLE INC.
(Exact name of registrant as specified in its charter)
Delaware 71-0578572
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
1203A North Sixth Street, Rogers, Arkansas 72756
(Address of principal executive offices) (zip code)
501-621-4390
(Registrant's telephone number, including area code)
Indicate by a check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports) Yes X No ____; and (2) has been
subject to such filing requirements for the past 90 days.
Yes ___ No X
The number of shares of the Registrant's Common Stock, $0.01
par value, outstanding as of December 8, 1997, was 7,225,121.
<PAGE>
BRASS EAGLE INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
INDEX
Page
----
Part I: Financial Information
Item 1. Condensed Financial Statements
Condensed Balance Sheets as of
September 30, 1997 (unaudited), Pro
Forma September 30, 1997 (unaudited)
and December 31, 1996 .................. 1
Condensed Statements of Operations for the
Three and Nine Months ended September 30,
1997 (unaudited), and September 30, 1996
(unaudited) ............................. 2
Condensed Statements of Cash Flows for the
Three and Nine Months Ended September 30,
1997 (unaudited), and September 30, 1996
(unaudited) .............................. 3
Notes to Condensed Financial Statements ... 4-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 8-12
Part II: Other Information
Item 1. Legal Proceedings ......................... 13
Item 2. Changes in Securities and Use of Proceeds .. 13
Item 4. Submission of Matters to a Vote of Security
Holders ..................................... 15
Item 6. Exhibits and Reports on Form 8-K ........... 15
Signatures .................................................... 17
<PAGE>
CONDENSED BALANCE SHEETS
(In thousands except share data)
Pro Forma
September 30, September 30, December 31,
1997 1997 1996
---- ---- ----
(unaudited) (unaudited)
ASSETS
Current assets
Cash $ 8 $ 14,433 $ -
Accounts receivable - less
allowance for doubtful
accounts of $52 in 1996 9,870 9,870 3,656
and 1997
Inventories 4,157 4,157 1,195
Prepaid expenses and other
current assets 1,274 1,274 462
------ ------ ------
Total current asset 15,309 29,734 5,313
Property and equipment, net 1,351 1,351 1,070
Other assets
Intangible assets, net 2,717 2,717 2,886
Other 85 12 -
------ ------ ------
Total other assets 2,802 2,729 2,886
----- ----- -----
$ 19,462 $ 33,814 $ 9,269
======== ======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Current maturities of
long-term debt $ 1,358 $ 858 $ 1,151
Accounts payable and
accrued expenses 6,515 6,442 1,544
Intercompany debt 6,390 - 3,352
------ ------ ------
Total current liabilities 14,263 7,300 6,047
<PAGE>
Long-term debt, less current
maturities 1,414 414 1,892
Deferred income taxes 286 286 200
Stockholders' equity
Common stock, $.01 par
value, 10,000,000 shares
authorized, 7,225,121 issued
and outstanding - 72 -
Additional paid-in capital 298 25,742 -
Divisional retained earnings 3,201 - 1,130
------ ------ ------
3,499 25,814 1,130
------ ------ ------
$ 19,462 $ 33,814 $ 9,269
======== ======== =======
See accompanying notes to condensed financial statements.
<PAGE>
BRASS EAGLE INC.
CONDENSED STATEMENTS OF OPERATIONS
(In thousands except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- ----------------
1996 1997 1996 1997
---- ---- ---- ----
(unaudited) (unaudited)
Net sales $ 3,637 $ 9,909 $ 8,428 $ 21,814
Cost of sales 2,534 6,645 5,859 14,639
------ ------ ------ -------
Gross profit 1,103 3,264 2,569 7,175
Operating expenses 611 1,665 1,732 3,638
Operating income 492 1,599 837 3,537
Interest expense 83 58 250 181
Income before income taxes 409 1,541 587 3,356
Provision for income taxes 157 590 225 1,285
Net income $ 252 $ 951 $ 362 $ 2,071
======= ======== ======= ========
Net income per share $ .18 $ .39
Number of shares used to
compute net income per
share 5,354,665 5,357,796
Pro forma statement of
operations data (unaudited)
Pro forma net income $ 979 $ 2,175
======== =======
Pro forma net income per share $ .13 $ .28
======== =========
Pro forma number of shares used
to compute pro forma net income
per share 7,652,824 7,655,955
========= =========
See accompanying notes to condensed financial statements.
<PAGE>
BRASS EAGLE INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
1996 1997 1996 1997
---- ---- ---- ----
(unaudited) (unaudited)
Cash flows from operating
activities
Net income $ 252 $ 951 $ 362 $ 2,071
Adjustments to reconcile
net income to net cash
from operating activities
Deferred income taxes 22 65 97 (96)
Depreciation and amortization 101 233 312 556
Provision for doubtful accounts - - 32 -
Stock option compensation
expense - 298 - 298
Changes in assets and
liabilities
Accounts receivable (493) (5,163) (1,222) (6,214)
Inventories 184 (1,687) (354) (2,962)
Prepaid expenses and
other assets (36) (384) (66) (715)
Accounts payable and
accrued expenses 304 2,191 1,110 4,971
Net cash provided by
(used in) operating
activities 334 (3,496) 271 (2,091)
Cash flows from investing
activities
Purchases of property and
equipment (5) (197) (120) (668)
Net cash used in ----- ----- ----- -----
investing activities (5) (197) (120) (668)
Cash flows from financing activities
Proceeds (payments) on long-term
debt - - (199) (271)
Net proceeds (payments) on
inter-company debt (329) 3,701 48 3,038
----- ----- ----- -----
Net cash provided by (used
in) financing activities (329) 3,701 (151) 2,767
----- ----- ----- -----
<PAGE>
Net change in cash
Cash at beginning of period - - - -
------ ------ ------ -----
Cash at end of period $ - $ 8 $ - $ 8
====== ====== ====== =====
Supplemental disclosures of cash
flow information
Cash paid during the year
Interest $ 38 $ 135 $ 114 $ 199
See accompanying notes to condensed financial statements.
<PAGE>
BRASS EAGLE INC.
Notes to Condensed Financial Statements
(All information for the three months and nine months ended
September 30, 1997 and 1996 is unaudited)
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 Inc. (the "Company" or
"Brass Eagle") is a leading manufacturer of paintball guns
and other paintball products and was a division of Daisy
Manufacturing Company, Inc. ("Daisy") until the
reorganization described below. The Company sells its
products through both foreign and major national domestic
retailers. 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.
Reorganization: Concurrently with the consummation of the
initial public offering (the Offering) of common stock on
November 26, 1997, Daisy effected a corporate
reorganization (the "Reorganization"). In preparation for
the Reorganization, Brass Eagle Inc., a wholly-owned
subsidiary of Daisy, was merged into Daisy which changed its
name to Brass Eagle Inc. On November 24, 1997, the Company
transferred 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 then distributed
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, and a majority of the
Company's common and preferred shareholders adopted a
Restated Certificate of Incorporation which, among other
things, increased the authorized capital stock of the
Company to 10 million shares of common stock and eliminated
the authorization for shares of preferred stock, whereupon
the outstanding shares of the Company's preferred stock were
canceled without consideration. New Daisy has agreed to
indemnify and hold harmless the Company and its directors,
<PAGE>
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 has agreed 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.
Interim Results (unaudited): The accompanying balance sheet
at September 30, 1997 and the statements of operations and
cash flows for the three- and nine-month periods ended
September 30, 1996 and 1997 are unaudited. In the opinion
of management, these statements have been prepared on the
same basis as the audited financial statements and include
all adjustments, consisting of only normal recurring
adjustments, necessary for the fair presentation of the
results of the interim periods. The data disclosed in these
notes to the financial statements for those interim periods
are also unaudited. The results of operations for the nine-
month period ended September 30, 1997 are not necessarily
indicative of the results expected for the full calendar
year. Because all of the disclosures required by generally
accepted accounting principles are not included, these
interim statements should be read in conjunction with the
financial statements and notes thereto contained in the
Company's Registration Statement on Form S-1 (File No. 333-
36179).
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Allocations and Use of Estimates: During the three- and
nine-month periods ended September 30, 1996 and 1997 and the
year ended December 31, 1996, Brass Eagle shared operational
and administrative facilities with Daisy. As a result,
certain 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's paintball related operations. Management
believes that these allocations are based on a reasonable
method. 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.
Weighted Average Common Shares Outstanding: As discussed
above, the Company completed a reorganization prior to the
initial public offering. Accordingly, the historical
presentation of net income per common share is based on the
shares outstanding prior to the offering, the weighted
average outstanding stock options and the number of shares
to be issued in the offering whose proceeds will be used to
pay the divisional equity to Daisy as if all shares had been
outstanding during all periods presented.
Pro Forma Information (unaudited): The pro forma balance
sheet reflects adjustments to give effect as of September
30, 1997 to events occurring in November 1997 in conjunction
with the reorganization described above including (i)
recording the distribution of divisional equity;
(ii) receipt of the net proceeds of approximately $25.8
million from the Offering, net of underwriting discounts and
estimated offering expenses; (iii) payment of the
distribution of divisional equity from the proceeds of the
Offering; (iv) repayment of certain indebtedness outstanding
under Daisy's credit facility which has been specifically
allocated to the Company; (v) repayment of certain
intercompany indebtedness owed to Daisy; and (vi) providing
working capital and funding for other general corporate
purposes as if the Offering had occurred on September 30,
1997.
<PAGE>
Pro forma net income has been computed by adjusting
historical net income for the three- and nine-month periods
ended September 30, 1997 to give effect to repayment of the
$1.5 million term debt specifically allocated to Brass Eagle
and the elimination of interest expense, net of tax, with
respect thereto, as if the Offering had occurred at the
beginning of each period presented.
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Pro forma net income per common and common equivalent share
(unaudited) for the nine- month and three-month periods
ended September 30, 1997, have been computed by dividing pro
forma net income by the weighted average number of common
and common equivalent shares outstanding (using the treasury
stock method and the initial public offering price) after
giving retroactive effect to (i) a change in the number of
outstanding shares effected by the Reorganization and the
Offering and (ii) common stock options issued during the
twelve-month period preceding the Offering computed under
the treasury stock method.
NOTE 2 - INVENTORIES
Inventories consist of the following components (in thousands:
Pro Forma
September 30, September 30, December 31,
1997 1997 1996
----------- ----------- -----------
(unaudited) (unaudited)
Finished Goods $2,950 $2,950 $ 437
Raw Materials 1,207 1,207 758
------ ------ ------
$4,157 $4,157 $1,195
====== ====== ======
NOTE 3 - SUBSEQUENT EVENTS
Initial Public Offering: On November 26, 1997, the Company
completed its initial public offering of its common stock.
In connection with the Offering, the Company issued
2,275,000 shares of stock and received net proceeds of
approximately $22,323,250, net of underwriting discounts and
offering expenses. On December 3, 1997, the Company sold
an additional 341,250 shares which had been reserved for the
underwriting over-allotment and received net proceeds of
$3,490,987, net of underwriting discounts.
Stock Option and Purchase Plans: Stock Option Plan: The
Company has adopted the 1997 Stock Option Plan which became
effective November 26, 1997. The Plan provides for the
granting to the Company's executive officers and other key
employees and consultants of incentive stock options and
non-qualified stock options to purchase an aggregate of up
to 430,000 shares of the common stock. 163,350 and 15,520
options were granted under the Plan on November 26 and
December 1, 1997, respectively.
<PAGE>
NOTE 3 - SUBSEQUENT EVENTS (Continued)
Employee Stock Purchase Plan: The Company has adopted the
Employee Stock Purchase Plan (the Purchase Plan ) which
became effective December 1, 1997. The Purchase Plan covers
an aggregate of 70,000 shares of common stock and is
intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue
Code.
Tax Allocation Agreement: The Company and New Daisy entered
into a Tax Allocation Agreement effective as of November 24,
1997. The Tax Allocation Agreement provides generally that
the Company and New Daisy shall compute their separate
federal and state tax liabilities as if they had always
filed separate returns for each taxable period. The Company
and New Daisy have agreed to reimburse each other for any
reduction or increase in tax obligation caused by the use of
tax attributes allocable to the other.
Administrative Services Agreement: The Company and New
Daisy entered into an administrative services agreement
effective as of November 24, 1997 (the "Administrative
Agreement"). Pursuant to the Administrative Agreement, New
Daisy will provide the Company with certain legal,
administrative, warehousing, shipping, and computer
information services through December 31, 1998 for $37,598
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.
Retirement Income Plan: The Company has approved the
establishment of the Brass Eagle Retirement Income Plan and
the spin-off of the assets equal to the liabilities of the
Daisy Manufacturing Company Retirement Plan attributable to
Brass Eagle employees to the Brass Eagle Retirement Income
Plan effective in 1998. In addition, the Company's Board
of Directors has authorized the ceasing of benefit accruals
under the current plan as of the end of the Plan year
ending December 31, 1997. All active Brass Eagle participants
shall be considered fully vested as of December 31, 1997.
When the spin-off described above occurs in 1998, the Brass
Eagle Income Retirement Plan will be fully funded and,
<PAGE>
accordingly, Management does not expect the curtailment of
benefits to significantly impact the Company's financial
position or results of operations.
Post-Retirement Other Than Pension: The Company has
approved the spin-off of the Retiree Medical Plan to New
Daisy. Because no employees of the Company are eligible for
benefits under the Retiree Medical Plan, the Company has no
obligations thereunder.
<PAGE>
BRASS EAGLE INC.
PART I: FINANCIAL INFORMATION
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Private Securities Litigation Reform Act Safe Harbor
Statement. In addition to historical information, this
Management's Discussion and Analysis includes certain
forward-looking statements regarding events and financial
trends which may affect the Company's future operating
results and financial position. Such statements are subject
to risks and uncertainties that could cause the Company's
actual results and financial position to differ materially.
Factors that could cause or contribute to such differences
include those discussed below. These and other risks and
uncertainties related to the business are described in
detail in the Company's Registration Statement on Form S-1
(File No. 333-36179) under the heading "Risk Factors"
as well as generally throughout the prospectus. Readers are
cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof.
The Company undertakes no obligation to publicly release
the result of any revisions to these forward-looking
statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
General
Brass Eagle Inc. ("Brass Eagle" or the "Company") sells
paintball guns and a full line of paintball-related
accessories, including paintballs, facemasks, and refillable
CO2 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.
As a result of the corporate reorganization effected in
November 1997, the Company separated its paintball related
assets, operations, and liabilities from its nonpaintball
related assets, operations, and liabilities. See Notes 1
and 3 of the Notes to Financial Statements.
For the year ended December 31, 1996, and the three- and
nine-month periods ended September 30, 1997, Brass Eagle
<PAGE>
shared operational and administrative facilities with Daisy
Manufacturing Company, Inc. ("Daisy"). As a result, certain
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's paintball related operations. 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. The Company
believes that all allocations made were reasonable and that
any errors in the historical allocations would not have a
material adverse effect on the Company and its prospects.
However, there can be no assurance that these historical
allocations reflect the costs the Company will incur as an
independent entity in the future.
<PAGE>
BRASS EAGLE INC.
Results of Operations
The following table sets forth operations data as a
percentage of sales for the periods indicated.
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
1996 1997 1996 1997
---- ---- ---- ----
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 69.7% 67.1% 69.5% 67.1%
Gross margin 30.3% 32.9% 30.5% 32.9%
Operating expenses 16.8% 16.8% 20.6% 16.7%
Operating income 13.5% 16.1% 9.9% 16.2%
Net income 6.9% 9.6% 4.3% 9.5%
Three Months Ended September 30, 1997 Compared to Three Months
Ended September 30, 1996
Sales. Sales increased by 175.0% to $9.9 million for the
three months ended September 30, 1997 compared to $3.6
million in the three months ended September 30, 1996. The
increase in sales was primarily due to higher unit volume of
all products. Domestic sales increased by 227.6% to $9.5
million (or 96.2% of sales) in the three months ended
September 30, 1997 from $2.9 million (or 78.9% of sales) in
the three months ended September 30, 1996. International
sales decreased by 51.8% to $373,000 (or 3.8% of sales) in
the three months ended September 30, 1997 from $774,000 (or
21.1% of sales) in the three months ended September 30,
1996, principally due to the heavy initial stocking orders
of a new distributor in Europe in 1996.
Gross margin. Gross margin (gross profit as a percentage of
net sales) increased to 32.9% for the three months ended
September 30, 1997 compared to 30.3% for the three months
ended September 30, 1996 principally due to raw materials
purchasing and manufacturing spending efficiencies.
Operating expenses. Operating expenses increased by 178.2%
to $1.7 million in the three months ended September 30, 1997
compared to $611,000 in the three months ended September 30,
1996 due to selling and marketing expense increases and
compensation expense associated with options granted, and
remained consistent as a percentage of sales at
approximately 16.8% in both periods.
<PAGE>
BRASS EAGLE INC.
Operating income. Operating income increased by 225.2% to
$1.6 million in the three months ended September 30, 1997
compared to $492,000 in the three months ended September 30,
1996. The increase was primarily due to higher unit sales
volume.
Interest expense. The Company incurred interest expense of
$58,000 in the three months ended September 30, 1997
compared to $83,000 in the three months ended September 30,
1996. The decrease was primarily due to the scheduled debt
payments reducing outstanding borrowings.
<PAGE>
BRASS EAGLE INC.
Results of Operations (Continued)
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 three months ended
September 30, 1997 and 1996.
Nine Months Ended September 30, 1997 Compared to Nine Months
Ended September 30, 1996
Sales. Sales increased by 159.5% to $21.8 million for the
first nine months of 1997 compared to $8.4 million in the
first nine months of 1996. The increase in sales was
primarily due to higher unit volume of all products.
Domestic sales increased by 187.1% to $20.1 million (or
92.2% of sales) in the first nine months of 1997 from $7.0
million (or 83.3% of sales) in the first nine months of
1996. International sales increased by 21.4% to $1.7
million (or 7.8% of sales) in the first nine months of 1997
from $1.4 million (or 16.7% of sales) in the first nine
months of 1996, principally due to the addition of a new
distributor in Europe in 1996.
Gross margin. Gross margin (gross profit as a percentage of
net sales) increased to 32.9% for the first nine months of
1997 compared to 30.5% for the first nine months of 1996
principally due to raw materials purchasing and
manufacturing spending efficiencies.
Operating expenses. Operating expenses increased by 111.8%
to $3.6 million in the first nine months of 1997 compared to
$1.7 million in the first nine months of 1996 due to selling
and marketing expense increases and compensation expense
associated with options granted, but decreased as a
percentage of sales from 20.6% to 16.7%. 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 318.2% to
$3.5 million in the first nine months of 1997 compared to
$837,000 in the first nine months of 1996. The increase was
primarily due to higher unit sales volume.
Interest expense. The Company incurred interest expense of
$181,000 in the first nine months of 1997 compared to
$250,000 in the first nine months of 1996. The decrease was
primarily due to the scheduled debt payments reducing
outstanding borrowings
<PAGE>
BRASS EAGLE INC.
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 nine months ended
September 30, 1997 and 1996.
<PAGE>
BRASS EAGLE INC.
Liquidity and Capital Resources
The Company requires capital to finance increases in
inventory and receivables resulting from the rapid growth of
its business. During the past two years, the Company has
satisfied its operating cash needs through intercompany
borrowings from Daisy.
Net cash used in operating activities for the nine months
ended September 30, 1997 was $2.1 million, which consisted
primarily of net income of $2.1 million, depreciation and
amortization expense of $556,000, stock option compensation
expense of $298,000, less increases in accounts receivable
of $6.2 million and inventory of $3.0 million and an
increase in accounts payable and accrued expenses over
prepaid expenses of $4.3 million.
Net cash used in investing activities was $668,000 for the
nine months ended September 30, 1997, which consisted of
purchases of property, equipment, and other assets. The
Company does not have any capital commitments for the next
12 months but expects to spend approximately $1.0 million
during that period for the following: plant and facilities,
a distribution center, product development, and increased
production capacity. The Company has upgraded its business
enterprise system to a version that is year 2000 compliant
and does not anticipate any significant cost to be incurred
related to year 2000 compliance issues.
Net cash provided by financing activities was $2.8 million
in the nine months ended September 30, 1997, which consisted
of a $271,000 reduction of long-term debt and a $3.0 million
reduction of the intercompany borrowings from Daisy.
As of September 30, 1997, the Company had existing debt
specifically allocated from the Daisy credit facility of
$1.5 million, which matures in January 1998 and bears
interest at LIBOR plus 2.5%, and an additional non-interest-
bearing term debt with a remaining face value of $1.4
million. The $1.4 million term note was discounted at 8.4%
which was the Company's incremental borrowing rate as of
October 1, 1995, the date of inception of the note. The
present value of the note outstanding at September 30, 1997
was $1.2 million. The face value of the note is payable in
three installments of $650,000, $350,000, and $395,000, on
October 3, 1997, January 31, 1998, and October 3, 1998,
respectively. The Daisy credit facility is secured by all
personal and intangible properties of Daisy and Brass Eagle.
<PAGE>
BRASS EAGLE INC.
On November 7, 1997, Daisy notified the bank that as of
September 30, 1997, Daisy was in default of a loan covenant.
On November 17, 1997, the bank waived the event of default.
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 term debt is secured by certain of the Company's
assets.
At September 30, 1997, the Company had working capital of
$1.0 million, including a balance due to Daisy of $6.4
million of non-interest-bearing intercompany borrowings.
Although the Company has contacted financial institutions
regarding a new credit facility, the Company has not entered
into any letter of intent or other agreements relating to
such facility. The Company has paid the intercompany
borrowings from Daisy with the proceeds from the Offering.
<PAGE>
BRASS EAGLE INC.
Liquidity and Capital Resources (Continued)
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 at
least the next 18 months. 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 or pursue the vertical integration of
production capabilities for one or more of the Company's
products which are currently purchased from third parties.
The capital expenditures which would be associated with any
such activities that may occur in the future would be funded
with available proceeds from the Offering, borrowings under
contemplated future credit facilities, working capital or a
combination of such sources.
<PAGE>
BRASS EAGLE INC.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
As reported in the Company's Registration Statement on Form
S-1 (File No. 333-36179), the Company, Daisy and certain
other entities and individuals, including certain of the
Company's distributors, were named as defendants in an
action filed by Powerball, Inc., d/b/a TASO ( TASO ) in Los
Angeles County, California Superior Court, Central District
(Case No. BC181097) on November 12, 1997, seeking
approximately $1.5 million in statutorily trebled damages
(based on compensatory damages of approximately $500,000),
$10.0 million in punitive damages, and temporary and
permanent injunctive relief. TASO, which is one of the
Company's distributors, alleged that the Company and the
other defendants engaged in unlawful secret and
discriminatory pricing practices in violation of California
law. Although the Company has not yet formally answered
this claim, based upon advice of counsel, it believes that
the claim is without merit and that it will be resolved
without any material cost or material adverse effect on the
Company and its prospects.
Item 2. Changes in Securities and Use of Proceeds
(d) Use of Proceeds Information:
Subsequent to the period covered by this report, the Company
effected an initial public offering (the "Offering") of its
Common Stock, par value $.01 per share, pursuant to a
Registration Statement on Form S-1 (File No. 333-36179) that
was declared effective by the Securities and Exchange
Commission on November 25, 1997. The Offering commenced on
November 26, 1997. The initial closing of the Offering
occurred on December 2, 1997 with respect to 2,275,000
shares of Common Stock offered by the Company. A subsequent
closing occurred on December 8, 1997 with respect to an
additional 341,250 shares of common stock which had been
reserved for over-allotments. The managing underwriters of
the Offering were McDonald and Company Securities, Inc. and
Dain Bosworth Incorporated.
The following table summarizes the number of shares of
common stock and aggregate offering price of the shares
registered for the account of the Company and the amount and
aggregate offering price sold through the date of this
report:
<PAGE>
BRASS EAGLE INC.
For the Account of the Company
------------------------------------------------------
Aggregate
Offering Price Aggregate
Amount of Amount Offering Price of
Registered Registered Amount Sold Amount Sold
---------- ------------ ----------- ---------------
2,616,250 $28,778,750 2,616,250 $28,778,750
Changes in Securities and Use of Proceeds (Continued)
The following table summarizes the gross proceeds to the
Company, the expenses incurred for the Company's account,
and the net proceeds to the Company in connection with the
issuance and distribution of common stock by the Company in
the Offering:
Gross proceeds: $28,778,750
-----------
Underwriting discounts and commissions: 2,014,513
Finders' fees: 0
Expenses paid to or for underwriters: 100,000
Other expenses: 850,000 (E)
-----------
Total expenses: 2,964,513 (E)
-----------
Net proceeds: $25,814,237 (E)
===========
- ---------------------
(E) Estimated
The following table summarizes the amounts of net Offering
proceeds to the Company used for the purposes listed,
through the date of this report:
Amount
-----------
Funding distribution of divisional equity to Daisy: $10,341,538
Construction of plant, building and facilities: 0
Purchase and installation of machinery and equipment: 0
Purchases of real estate: 0
Acquisition of other businesses: 0
Repayment of indebtedness: 1,500,000
Working capital: 1,272,699
Temporary investments: 12,700,000
<PAGE>
BRASS EAGLE INC.
Item 4. Submission of Matters to a Vote of Security Holders
During the period covered by this Report, the following actions
were taken by holders of securities of the Company:
(A) On September 4, 1997, a majority of the
holders of the outstanding shares of the equity
securities of Daisy Manufacturing Company, Inc.
( Daisy ), acting informally without a meeting,
approved (i) the merger of its wholly owned
subsidiary, Brass Eagle Inc., into Daisy, (ii) the
change of Daisy's name to Brass Eagle Inc. and
(iii) the formation of a new subsidiary of the
Company to facilitate the proposed reorganization
the Company.
(B) On November 20, 1997, a majority of the
holders of the outstanding shares of the equity
securities of the Company, acting informally
without a meeting, approved the adoption of the
Company's Restated Certificate of Incorporation
and the adoption of the Company's Employee Stock
Purchase Plan and 1997 Stock Option Plan.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Description of Document
- ------ -----------------------
3(i) Restated Certificate of Incorporation dated
November 20, 1997
3(ii) By-Laws effective November 20, 1997
4 Specimen Common Stock Certificate (Exhibit 4(1) to
Registration Statement Registration No. 333-36179)
10(i) Assignment, Assumption and Indemnification Agreement
effective as of November 24, 1997 between Brass
Eagle Inc. and Daisy Manufacturing Company
<PAGE>
BRASS EAGLE INC.
10(ii) Employment Agreement between E. Lynn Scott and Brass
Eagle Inc. dated as of September 15, 1997 (Exhibit
10(ix) to Registration Statement, Registration No.
333-36179
10(iii) 1997 Stock Option Plan adopted November 20, 1997
10(iv) Employee Stock Purchase Plan adopted November 20, 1997
10(v) Indemnification Agreement between Marvin W. Griffin and
Brass Eagle Inc. dated as of November 24, 1997
10(vi) Indemnification Agreement between E. Lynn Scott and
Brass Eagle Inc. dated as of November 24, 1997
10(vii) Tax Allocation Agreement between Brass Eagle Inc. and
Daisy Manufacturing Company dated November 24, 1997
10(viii) Administrative Agreement between Brass Eagle Inc.
and Daisy Manufacturing Company effective
November 24, 1997
11(i) Statement of Computation of Earnings Per Share
27(i) Financial Data Schedule of Earnings Per Share
- ---------------------
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended
September 30, 1997.
<PAGE>
BRASS EAGLE INC.
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
BRASS EAGLE INC.
By: /s/ J.R. Brian Hanna
_______________________
J.R. Brian Hanna
Vice President-Finance and
Chief Financial Officer and
Treasurer
(on behalf of the Registrant
and as the Registrant's
Principal Financial and
Accounting Officer)
<PAGE>
BRASS EAGLE INC.
EXHIBIT INDEX
-------------
Number Description of Document
- ------ -----------------------
3(i) Restated Certificate of Incorporation dated
November 20, 1997
3(ii) By-Laws effective November 20, 1997
4 Specimen Common Stock Certificate (Exhibit 4(1) to
Registration Statement Registration No. 333-36179)
10(i) Assignment, Assumption and Indemnification Agreement
effective as of November 24, 1997 between Brass
Eagle Inc. and Daisy Manufacturing Company
10(ii) Employment Agreement between E. Lynn Scott and Brass
Eagle Inc. dated as of September 15, 1997 (Exhibit
10(ix) to Registration Statement, Registration No.
333-36179
10(iii) 1997 Stock Option Plan adopted November 20, 1997
10(iv) Employee Stock Purchase Plan adopted November 20, 1997
10(v) Indemnification Agreement between Marvin W. Griffin and
Brass Eagle Inc. dated as of November 24, 1997
10(vi) Indemnification Agreement between E. Lynn Scott and
Brass Eagle Inc. dated as of November 24, 1997
10(vii) Tax Allocation Agreement between Brass Eagle Inc. and
Daisy Manufacturing Company dated November 24, 1997
10(viii) Administrative Agreement between Brass Eagle Inc.
and Daisy Manufacturing Company effective
November 24, 1997
11(i) Statement of Computation of Earnings Per Share
27(i) Financial Data Schedule of Earnings Per Share
<PAGE>
Exhibit 3(i)
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 and was
duly adopted by the directors of the Corporation and
approved by a majority of the shareholders of the
Corporation in accordance with Section 228(a) of The
General Corporation Law of the State of Delaware.
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: (A) The authorized capital
stock of the Corporation shall consist of 10,000,000
shares of Common Stock, par value of $0.01 per share.
<PAGE>
(B) Shares of the
Corporation's Nonvoting Preferred Stock, par value of
$1.00 per share, authorized and outstanding prior to
the effective time of this Restated Certificate of
Incorporation are hereby cancelled without
consideration as of the effective time of this Restated
Certificate of Incorporation.
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.
<PAGE>
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 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 Secretary this
20th day of November, 1997.
BRASS EAGLE INC.
By: /s/ J.D. Flynn
John D. Flynn
Secretary
<PAGE>
Exhibit 3(ii)
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
<PAGE>
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 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
<PAGE>
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, 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
<PAGE>
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
<PAGE>
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.
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
<PAGE>
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.
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.
<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, but
only for 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 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 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.
<PAGE>
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.
<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.
<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. 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.
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
<PAGE>
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.
<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.
<PAGE>
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.
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".
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
Exhibit 10(i)
ASSIGNMENT, ASSUMPTION AND
INDEMNIFICATION AGREEMENT
STATE OF ARKANSAS )
)
COUNTY OF BENTON )
KNOW ALL PERSONS BY THESE PRESENTS:
For and in consideration of the sum of Ten Dollars
($10.00) cash and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, BRASS
EAGLE INC. (the "Assignor"), a Delaware corporation, does
hereby grant, bargain, sell, convey, transfer, and assign
unto DAISY MANUFACTURING COMPANY (the "Assignee"), a
Delaware corporation, and unto said Assignee's successors
and assigns, forever, all of Assignor's rights, title and
interest in and to its nonpaintball related assets, (whether
tangible or intangible) contracts, licenses, leases and
agreements, of whatever kind and wherever located, including
all claims, causes of action and other rights with respect
to such property, known or unknown, fixed, contingent or
otherwise (the "Assets").
TO HAVE AND TO HOLD the same unto said Assignee, and
its successors and assigns forever, subject to the following
terms and obligations:
1. Assumption of Liabilities and Obligations.
Assignor, by this assignment, hereby transfers and assigns
to Assignee all of its rights, liabilities, obligations and
duties in connection with such Assets, including without
limitation (i) any liability attributable to any products
sold by Assignor through the date hereof (other than any
products sold by Assignor under the Brass Eagle name) and
any products sold by Assignee on or after the date hereof,
(ii) any liability attributable to any claim by any present
or former employee of Assignor or by any present, former or
future employee of Assignee to the extent that such claim
relates to medical, pension or other employee benefits that
are attributable to the employment of any such individual in
Assignor's non-paintball operations or in any operations of
Assignee, (iii) any Federal, state or local income taxes
imposed on or assessed against Assignor as a result of the
assignment and assumption contemplated hereby, (iv) any
Federal, state or local personal property, real property,
sales, use, excise, income or other tax imposed on or
assessed against Assignor to the extent that such taxes
relate or are attributable to the non-paintball related
business of Assignor or to any operations of Assignee, (v)
any indebtedness, accounts payable or other financial
obligations attributable to such Assets and (vi) any other
<PAGE>
liability or obligation attributable to the operation of the
Assignor's nonpaintball related business, or under any
contracts, licenses, leases or other agreements transferred
to the Assignee hereby (the "Assumed Liabilities"); and
Assignee, by acceptance hereof, hereby assumes and agrees to
fully and timely undertake and perform all of the Assumed
Liabilities and duties relating to the Assets.
2. Indemnification.
(a) By Assignee. Assignee hereby assumes
liability for, and irrevocably agrees to indemnify, defend
and hold Assignor (which term includes its officers,
directors, employees, agents, shareholders, subsidiaries and
affiliates) harmless from and against any and all claims,
actions, suits, losses, damages, liabilities, obligations,
costs and expenses (including, without limitation, attorneys
fees) of any nature whatsoever, whether direct or indirect,
matured or unmatured, accrued or unaccrued, liquidated or
unliquidated, asserted or unasserted, known or unknown,
absolute, fixed, contingent or otherwise, incurred by or
asserted against Assignor (specifically including, without
limitation, any thereof incurred by or asserted against
Assignor as predecessor in interest to Assignee) which arise
out of, result from or otherwise relate to the Assets, the
Assumed Liabilities and/or the operation of the nonpaintball
business conducted by Assignor or any business conducted by
Assignee, including without limitation (aa) any business or
other activities relating thereto and regardless of whether
the event giving rise thereto shall have occurred in the
past or shall occur in the future (including, but not
limited to, any product claims associated with any products
sold by Assignor prior to the effective date hereof (other
than paintball related products sold under the Brass Eagle
name); (bb) any of the foregoing arising out of, resulting
from or otherwise relating to the ownership or use of any of
the Assets or to the Assumed Liabilities; (cc) the conduct
of any businesses through the Assets or with respect to the
Assumed Liabilities, (dd) any violation of any applicable
law, rule, regulation or governmental order relating
thereto, (ee) any tort or other claims by third parties
relating thereto, and (ff) any and all other events,
occurrences, operations and activities relating to the
Assets or the Assumed Liabilities, specifically including,
without limitation, the ownership, processing, generation,
distribution, use, storage, disposal, transportation,
handling, emission, discharge, release or threatened release
into the environment of any pollutant, contaminant or
hazardous or toxic waste, substance or material, to, from,
on, under, or otherwise relating to any of the Assets.
<PAGE>
(b) By Assignor. As additional consideration for
Assignee's assumption of the Assumed Liabilities and the
indemnification obligations under (a) above, Assignor hereby
assumes liability for, and irrevocably agrees to indemnify,
defend and hold Assignee (which term includes its officers,
directors, employees, agents, shareholders, subsidiaries and
affiliates) harmless from and against any and all claims,
actions, suits, losses, damages, liabilities, obligations,
costs and expenses (including, without limitation, attorneys
fees) of any nature whatsoever, whether direct or indirect,
matured or unmatured, accrued or unaccrued, liquidated or
unliquidated, asserted or unasserted, know or unknown,
absolute, fixed, contingent or otherwise, incurred by or
asserted against Assignee (specifically including, without
limitation, any thereof incurred by or asserted against
Assignee as successor in interest or transferee of the
Assets) which arise out of, result from or otherwise relate
to Assignor's paintball business, the assets used
exclusively in connection therewith and the liabilities and
obligations incurred in connection with the same, including
without limitation (aa) any paintball business relating
thereto and regardless of whether the event giving rise
thereto shall have occurred in the past or shall occur in
the future; (bb) any of the foregoing arising out of,
resulting from or otherwise relating to the ownership or use
of any of the paintball assets; (cc) the conduct of any
businesses through the paintball assets, (dd) any violation
of any applicable law, rule, regulation or governmental
order relating thereto, (ee) any tort or other claims by
third parties relating thereto, and (ff) any and all other
events, occurrences, operations and activities directly
relating to the paintball assets, specifically including,
without limitation, the ownership, processing, generation,
distribution, use, storage, disposal, transportation,
handling, emission, discharge, release or threatened release
into the environment of any pollutant, contaminant or
hazardous or toxic waste, substance or material, to, from,
on, under, or otherwise directly relating to any of the
paintball assets located at Assignors Granby, Missouri
facility, but excluding any such claim, action, suit, loss,
damage, liability, obligation, cost or expense relating to
Assignee's Roger's, Arkansas facility.
(c) Indemnification Procedure.
(i) Notice. Within thirty (30) days, or
such shorter period as is required to avoid any prejudice to
the Indemnifying Party, after receipt by Assignor or
Assignee, as the case may be (the recipient being the
"Indemnified Party"), of any claim (written or oral) (a
"Third Party Claim"), asserted or made against the
Indemnified Party based on any facts or circumstances, the
<PAGE>
prosecution or assertion of which results in, or could
reasonably be expected to result in, the Indemnified Party's
right to indemnity from the other party (the "Indemnifying
Party") under the terms of this Assignment, Assumption and
Indemnification Agreement, the Indemnified Party shall
deliver to the Indemnifying Party a written notice of the
initiation or filing of, or a threat to initiate or file, a
Third Party Claim (the "Claim Notice"). To the extent known,
the Claim Notice shall describe in reasonable detail the
facts giving rise to or on which the Third Party Claim is
based, and the amount of such Third Party Claim. The failure
to timely deliver a Notice of Claim pursuant to any
provision contained herein shall not affect the Indemnifying
Party's obligations hereunder except to the extent such
failure actually prejudices Indemnifying Party's ability to
defend, or to reduce the loss attendant to, such Third Party
Claim.
(ii) Election to Defend. Within thirty (30)
days after receipt of the Claim Notice, or such shorter
period as is required to avoid prejudice in defense of the
Third Party Claim, Indemnifying Party may elect to defend
the Third Party Claim at its own expense if it acknowledges
in writing that it is fully responsible for all damages
relating to such Claim Notice, without reservation of
rights, and pays all damages with respect thereto incurred
as of the date of such acknowledgment (including all
attorneys' fees and expenses of any counsel employed by the
Indemnified Party in respect of such claim incurred through
the date of such acknowledgment). Notwithstanding the
foregoing, the Indemnified Party shall also have the right
to employ its own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of the
Indemnified Party. If Indemnifying Party timely elects to
defend a Third Party Claim, then Indemnifying Party shall do
so with counsel of its choosing, but which counsel shall be
reasonably acceptable to the Indemnified Party and, subject
to the limitations set forth in this section (ii) and
section (iv) below, may compromise or settle such action.
The Indemnifying Party shall not be entitled to assume
control of such defense and shall pay the fees and expenses
of counsel retained by the Indemnified Party if
(A) the claim for indemnification relates to or arises
in connection with any criminal proceeding, action,
indictment, allegation or investigation;
(B) there is a reasonable probability that the claim
may materially and adversely affect the Indemnified Party
other than as a result of money damages or other money
payments, including by having a detrimental impact on the
<PAGE>
Indemnified Party's reputation or future business prospects,
(C) the claim seeks an injunction or equitable relief
against the Indemnified Party or (D) upon petition by the
Indemnifying Party, the appropriate court rules that the
Indemnifying Party. failed or is failing to vigorously
prosecute or defend such claim.
(iii) Failure to Undertake Defense. If
Indemnifying Party does not timely elect to defend a Third
Party Claim, then the Indemnified Party may undertake the
defense thereof with counsel of its choosing and may
compromise or settle such action on behalf of and for the
account and risk of the Indemnifying Party. Thereafter, each
of the parties (and its respective counsel) shall timely
provide information (including without limitation copies of
all notices and documents, including court papers) to the
other (and to such other party's counsel) as shall be
necessary or desirable to keep the other party apprised of
the status and progress of, and any material matters
relating to, the defense of the Third Party Claim. Each
party shall cooperate with the other in responding to such
reasonable requests as are made for access to or copies of
records, books, documents, and other materials as shall be
necessary or desirable to the conduct of the defense of, or
to evaluate the defense of, any Third Party Claim. Such
cooperation shall also include making employees available on
a mutually convenient basis to provide additional
information and explanation of any materials provided
hereunder. Regardless of which party undertakes the defense
of any Third Party Claim, the other party shall have the
right to participate in such defense with its own counsel at
its own cost.
(iv) Settlement and Release. Unless the Third
Party Claim is fully satisfied and discharged by the
Indemnifying Party by the payment of money (without any
continuing obligation on the part of the Indemnified Party
hereunder, and subject to the delivery of the release set
forth below), neither party shall compromise or settle any
Third Party Claim or consent to the entry of any judgment
with respect to any Third Party Claim, without the prior
written consent of the other party, which consent shall not
be unreasonably withheld or delayed. Unless otherwise agreed
in writing by the Indemnified Party, any such settlement
must include as an unconditional term thereof a complete
release of the Indemnified Party and its officers,
directors, employees, agents, shareholders, subsidiaries and
affiliates from all liability with respect to such claim.
Except as set forth herein, the right to defend a Third
Party Claim shall include the right to settle or compromise
the same.
<PAGE>
(v) Payment of Indemnification.
(A) Notice of Loss. Upon final
resolution (including lapse of time in which to perfect an
appeal) of any Third Party Claim, whether by settlement or
final court order, which determines the existence of an
obligation to indemnify hereunder (an "Indemnified
Obligation"), the Indemnified Party shall promptly deliver
to the Indemnifying Party a written notice setting forth the
amount of any and all claims, actions, suits, losses,
damages, liabilities, obligations, costs and expenses which
comprise any Indemnified Obligation to which the Indemnified
Party is entitled to indemnity under this Agreement,
including without limitation any amount resulting from a
Third Party Claim (any such notice, a "Notice of Loss").
(B) Required Response to Notice of
Loss. Within ten (10) days after Indemnifying Party receives
a Notice of Loss, Indemnifying Party shall deliver to the
Indemnified Party current funds in such amount as is
required to fully pay the amount of the Indemnified
Obligation or notify the Indemnified Party that it disputes
all or a portion of the amount of the Indemnified Obligation
which is the subject of such Notice of Loss together with a
payment of the amount of the Indemnified Obligation that is
not in dispute.
(C) Dispute in the Amount of
Indemnified Obligation. If the Indemnifying Party disputes
all or a portion of the amount of the Indemnified Obligation
which is the subject of such Notice of Loss, the parties
shall attempt to negotiate a resolution of any disputed
portion of the Notice of Loss within thirty (30) days
thereafter.
(D) Tax Affect of Indemnity Payments.
The amount of any claim, action, suit, loss, damage,
liability, obligation, cost or expense for which
indemnification is provided under this Agreement shall be
increased or "grossed up" to take account of any net tax
cost incurred by the Indemnified Party arising from the
receipt of any indemnity payment made hereunder.
(E) No Obligation to Pursue Insurance.
Notwithstanding the availability or possible availability of
any insurance proceeds from any insurance coverage
maintained by the Indemnified Party with respect to any
claim, action, suit, loss, damage, liability, obligation,
cost or expense for which indemnification is sought or
provided hereunder, the Indemnified Party shall have no
obligation to pursue any such coverage or proceeds.
<PAGE>
(vi) Default by Indemnifying Party. If (i)
Indemnifying Party fails to timely pay (by delivery of
current funds) any undisputed amount of an Indemnified
Obligation, or (ii) if the parties are unable to resolve by
negotiation any dispute with regard to a Notice of Loss as
provided in (c)(v)(C) above, or (iii) the Indemnifying Party
is in breach of any representation, warranty, obligation,
covenant or other agreement of the Indemnifying Party
contained herein and fails to cure same to the reasonable
satisfaction of the Indemnified Party within thirty (30)
days after written notice thereof is delivered to the
Indemnifying Party by the Indemnified Party, then the
Indemnifying Party shall be deemed in "default" hereunder
and the Indemnified Party shall be entitled to pursue any
available remedy provided for in this Agreement or otherwise
available at law or in equity.
3. Miscellaneous.
(a) Authorization. The execution, delivery and
performance of this agreement and the consummation of the
assignment and assumption contemplated hereby, has been duly
authorized by all necessary action on the part of the
Assignor and the Assignee and their respective Boards of
Directors.
(b) Validity. Each party warrants and represents
that this agreement has been duly executed and delivered,
constitutes the legal, valid and binding obligation of such
party, enforceable against it in accordance with its terms,
except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the enforcement
of creditors' rights, or by general principles of equity.
(c) Survival. The covenants, agreements,
representations, warranties and obligations of the parties
hereto shall survive the effective date hereof and the
assignment of the Assets and assumption of the Assumed
Liabilities.
(d) Further Assurances. The parties agree that
from time to time hereafter, upon request, each of them will
execute, acknowledge and deliver such other documents and
instruments, and take such further action, as may be
reasonably necessary to carry out the intent of this
agreement.
(e) Binding Effect and Benefit. This agreement
shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and assigns.
<PAGE>
Otherwise, this agreement is not intended to create any
rights for the benefit of any third party.
(f) Governing Law. This agreement shall be
subject to and governed by the laws of the State of
Delaware.
(g) Assignment, Amendment, Cancellation. Neither
this Agreement nor any obligation or right hereunder shall
be amended, cancelled, assigned, transferred or otherwise
discharged (other than through performance hereunder)
without the prior written consent of both of the parties
hereto. Assignee shall not sell, enter into any agreement
to sell, or consummate any sale or other disposition of, the
"Daisy" name or all or substantially all of its assets,
enter into any agreement to merge or consolidate with any
other entity, or consummate any such merger or
consolidation, unless Assignee either requires and receives
as a condition precedent to the consummation of any such
transaction the express written assumption by the acquiring
or surviving entity, as the case may be, of all of
Assignee's obligations and liabilities under this Agreement
or provides security for Assignee's obligations and
liabilities under this Agreement which is reasonable under
the circumstances, as determined by one of the nations six
largest independent accounting firms. Any amendment,
cancellation, assignment, transfer or other discharge of
this Agreement or any right or obligation hereunder made in
violation of this Agreement shall be void and of no force or
effect.
(h) Notices. All notices, requests and demands
required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given if
(a) delivered personally,
(b) sent by certified or registered mail,
postage prepaid,
(c) sent by next-day or overnight mail or
delivery, or
(d) sent by fax, addressed as follows:
To Assignor:
Brass Eagle, Inc.
1203A North Sixth Street
Rogers, Arkansas 72756
Phone: (501) 621-4390
<PAGE>
Fax: (501) 986-6617
Attention: E. Lynn Scott, President and CEO
To Assignee:
Daisy Manufacturing Company
2111 South Eighth Street
Rogers, Arkansas 72757
Phone: (501) 621-4203
Fax: (501) 631-1406
Attention: Marvin Griffin, President
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this
Assignment effective as of the 24th day of November, 1997.
ASSIGNOR:
BRASS EAGLE INC.
By:/s/ E. Lynn Scott
Name: E. Lynn Scott
Title: President and CEO
ASSIGNEE:
DAISY MANUFACTURING COMPANY
By: /s/ Marvin Griffin
Name: Marvin Griffin
Title: President
<PAGE>
ACKNOWLEDGMENT
STATE OF ARKANSAS )
)
COUNTY OF BENTON )
On this the 24th day of November, 1997, before me, the
undersigned officer, personally appeared E. Lynn Scott, who
acknowledged himself to be the President and Chief Executive
Officer of Brass Eagle Inc., a Delaware corporation, and
that he, as such officer, being authorized so to do,
executed the foregoing instrument in the name of and on
behalf of said corporation for the purposes therein
contained.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
/s/ Carol A. Bowman
Notary Public
My Commission Expires:
7/10/2002
STATE OF ARKANSAS )
)
COUNTY OF BENTON )
On this the 24th day of November, 1997, before me, the
undersigned officer, personally appeared Marvin Griffin who
acknowledged himself to be the President of Daisy
Manufacturing Company, a Delaware corporation, and that he,
as such officer, being authorized so to do, executed the
foregoing instrument in the name of and on behalf of said
corporation for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
/s/ Carol A. Bowman
Notary Public
My Commission Expires:
7/10/2002
<PAGE>
Exhibit 10(iii)
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, other key employees
and consultants essential to the success of the Company;
and (ii) enabling of such employees and consultants 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
<PAGE>
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.
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
<PAGE>
(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.
2.11 "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 "Consultant" means a nonemployee consultant to the
Company.
2.14 "Department" means the Human Resources Department
of the Company.
2.15 "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.
2.16 "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.
<PAGE>
2.17 "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.
2.18 "Exchange Act" means the Securities Exchange Act of
1934, as amended.
2.19 "Executive Officer" means any employee designated
by the Company as an officer or any employee
covered by Rule 16b-3 of the Exchange Act.
2.20 "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.
2.21 "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.
2.22 "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.
2.23 "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.
2.24 "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.
2.25 "Option" means an Incentive Stock Option or a
Nonqualified Stock Option.
<PAGE>
2.26 "Participant" means a Key Employee or Consultant
who has been granted an Award under the Plan.
2.27 "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).
2.28 "Plan" means the Brass Eagle Inc.1997 Stock Option
Plan as herein described and as hereafter from time
to time amended.
2.29 "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.
2.30 "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.
2.31 "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.
2.32 "Stock" or "Shares" means the Common Stock of the
Company.
2.33 "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, 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
<PAGE>
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 and Consultants to the Company 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.
<PAGE>
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 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, and
Consultants 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 10% 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 be awarded Incentive Stock Options.
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.
<PAGE>
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, 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
<PAGE>
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 and Consultants 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.
<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 November 20,
1997 by the Board. Subject to shareholder approval, the
Plan shall be effective on November 26, 1997. Any
Options granted under this Plan shall be granted subject
<PAGE>
to stockholder approval of the Plan. The Plan
terminates December 31, 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 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
<PAGE>
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 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
<PAGE>
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.
As Adopted November 20, 1997
<PAGE>
Exhibit 10(iv)
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.
<PAGE>
Section 3. Eligibility and Participation
3.1 Initial Eligibility. Any Employee who shall have
completed ninety (90) days' 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
<PAGE>
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 January 15, 1998, and
the next two Offerings shall begin on the 1st day of
January in each of the years 1999 and 2000. Each Offering
shall terminate on December 31 of the same calendar year.
The maximum number of shares of Stock issued in the
respective years shall be:
From January 15, 1998, to December 31, 1998: 20,000
shares.
From January 1, 1999, to December 31, 1999: 25,000
shares plus unissued shares from the prior Offerings,
whether offered or not.
From January 1, 2000, 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
<PAGE>
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 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.
<PAGE>
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 Date for the first
Offering shall be December 31, 1998. The Purchase Date
for the second Offering shall be December 31, 1999. The
Purchase Date for the third and final Offering shall be
December 31, 2000.
7.2 Automatic Exercise. Unless a Participant gives
written notice to the Company as 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 the Purchase Date 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
December 31, 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
<PAGE>
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 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
<PAGE>
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
1933, 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 hall 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.
<PAGE>
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 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
<PAGE>
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 December 1, 1997, subject to approval by the holders of
the majority of the Common Stock of Brass Eagle Inc.
present and represented at or acting informally in lieu of
a special or annual meeting of the shareholders held on or
before November 30, 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 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.
As Approved by Shareholders November 20, 1997
<PAGE>
Exhibit 10(v)
INDEMNIFICATION AGREEMENT
MARVIN W. GRIFFIN
This AGREEMENT is made by and between BRASS EAGLE
INC. (the Company ) and MARVIN W. GRIFFIN ( Griffin )
as of November 24, 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 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
<PAGE>
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 asigns.
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: /s/ Lynn Scott
Title: President
/s/ Marvin W. Griffin
MARVIN W. GRIFFIN
<PAGE>
Exhibit 10(vi)
INDEMNIFICATION AGREEMENT
E. LYNN SCOTT
This AGREEMENT is made by and between BRASS EAGLE
INC. (the Company ) and E. LYNN SCOTT ( Scott ) as of
November 24, 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.
<PAGE>
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 above written.
BRASS EAGLE INC.
By: /s/ Daniel I. Obergfill
Title: Vice President, Sales
/s/ E. Lynn Scott
E. LYNN SCOTT
<PAGE>
Exhibit 10(vii)
TAX ALLOCATION AGREEMENT
This AGREEMENT dated November 24, 1997, by and between
BRASS EAGLE INC. ( Brass Eagle ), a Delaware corporation,
and DAISY MANUFACTURING COMPANY ( Daisy ), a Delaware
corporation.
WHEREAS, Brass Eagle and Daisy have operated as separate
operating divisions of the same corporation; and
WHEREAS, contemporaneous with the execution of this
agreement the operating assets of Daisy are being
contributed to a separate corporation and Daisy and Brass
Eagle will become members of an affiliated group as defined
in Section 1504(a) of the Internal Revenue Code of 1986,
as amended (the "Code") and will file a U.S. consolidated
income tax return for the current taxable year; and
WHEREAS, contemporaneous with the execution of this
Agreement, Brass Eagle is making a distribution to its
shareholders of all of the issued and outstanding shares of
the preferred and common stock of Daisy in a transaction
structured in accordance with Section 355 of the Code
(the Transaction ); and
WHEREAS, it is the intent and desire of the parties
hereto that a method be established for allocating the
federal and state tax liabilities between Daisy and Brass
Eagle as separate divisions and as separate members of the
affiliated group prior to the Transaction, for reimbursing
Brass Eagle for the payment of any tax liability
attributable to Daisy, for compensating any party for the
use of its losses or tax credits, and to provide for the
allocation and payment of any refund arising from a
carryback of losses or tax credits from subsequent taxable
years.
NOW, THEREFORE, in consideration of the mutual
covenants and promises contained herein, the parties hereto
agree as follows:
1. Brass Eagle shall file a U.S. income tax return
including the income or loss of Daisy as a division and as a
separate corporation through the effective date of the
Transaction. Daisy shall execute and file such consents,
elections and other documents that may be required or
appropriate for the proper filing of such return. The items
of income, deduction, credit and losses of Daisy from and
after the effective date of the Transaction shall be
reported on a separate return filed by Daisy. Thus, the
<PAGE>
parties will treat the taxable year of Daisy as consisting
of two short tax years, the first of which shall have
begun on the first day of Daisy's tax year and ending on the
effective date of the Transaction ( Pre-Transaction Short
Year ), and the second of which shall have begun on the
day after the effective date of the Transaction and end on
the last day of Daisy's taxable year.
2. For each taxable period, Brass Eagle and Daisy
shall compute their separate federal and state tax
liabilities ("Separate Return Liability") as if each had
filed separate tax returns. To the extent that there
is taxable income and tax of Daisy for the Pre-Transaction
Short Year, Daisy shall reimburse and pay to Brass Eagle
the amount of its separately computed tax liability
attributable to such income included on Brass Eagle's
consolidated return. Such Separate Return Liability
shall be computed in a manner consistent with the principals
of Reg. Section 1.1502-33(d)(3) (using 100%) as if the
Daisy division had been a separate subsidiary for the
entire taxable year.
3. For purposes of computing Daisy's separate federal
and state tax liabilities for the Pre- Transaction Short
Year, any gain or loss recognized in the contribution of the
Daisy assets to a separate corporation shall be considered
the gain of Daisy.
4. For purposes of computing the Separate Return
Liabilities and consolidated tax liabilities of Daisy and
Brass Eagle no consideration will be given to alternative
minimum taxes due for 1997.
5. For purposes of computing the Separate Return
Liabilities of Daisy and Brass Eagle, all loss and credit
carryovers from 1996 and prior years including but not
limited to federal net operating losses, state net operating
losses, charitable contribution deduction carryovers and any
credits shall be deemed to have been incurred by Daisy.
6. Payment of the tax liability for a taxable period
in which Dairy and Brass Eagle file a consolidated return
shall include the payment of estimated tax installment due
for such taxable period and Daisy shall pay and reimburse
Brass Eagle for Daisy's share of each payment within ten
(10) days of receiving notice of such payment from Brass
Eagle, but in no event later than the due date for each such
estimated tax installment payment. Any overpayment of
estimated tax attributable to the Pre-Transaction Short Year
taxable income of Daisy shall be refunded to Daisy.
7. If Daisy's Separate Return Liability for the
Pre-Transaction Short Year exceeds the consolidated tax
<PAGE>
liability of Daisy and Brass Eagle for the Pre-Transaction
Short Year as a result of the use of any losses or tax
credits of Brass Eagle then Daisy shall pay to Brass Eagle
such excess within ten (10) days after the filing of the
Brass Eagle return for the calendar year.
8. If Brass Eagle's Separate Return Liability for the
entire year exceeds the consolidated tax liability for such
year as a result of the use of any losses or tax credits of
Daisy, then Brass Eagle shall pay to Daisy such excess
within ten (10) days after the filing of the return for the
calendar year.
9. If, and to the extent, any loss or credit
allocable to Daisy is carried back or forward by Brass Eagle
and results in a reduction in federal or state taxes payable
by Brass Eagle, then Brass Eagle shall pay to Daisy an
amount equal to the difference between taxes computed
without consideration of the carryback or carryforward and
the taxes actually due and paid. For this purpose, any
utilization of the credit for alternative minimum taxes
previously paid in 1996 and prior years shall be a credit
for which payment is due Daisy. The amount so computed
shall be paid to Daisy within ten (l0) days after the filing
of the Brass Eagle return for the year in which the loss or
credit is utilized. Notwithstanding the previous provision,
no amount shall be payable pursuant to this provision as
long as amounts are due Brass Eagle pursuant to Section 10
below. Other than as provided in this Section 9, no refund
or reduction in tax liability arising from the carryback or
carryover of any unused loss or tax credit allocable to
Brass Eagle shall be paid to Daisy. Any such benefit shall
be retained by Brass Eagle and Brass Eagle shall have sole
and absolute discretion in determining whether or not an
election, where allowable, should be made not to carryback
part or all of any separate or consolidated net operating
loss or credit for any taxable year.
10. Brass Eagle and Daisy understand that it is Brass
Eagle's intent to terminate its LIFO election effective
January 1, 1997. To the extent the LIFO reserve is
includable in income ("Section 481(a) adjustment") as a
result of the termination then Daisy shall pay to Brass
Eagle the federal and state taxes due as a result of the
inclusion. For purpose of computing the amount due Brass
Eagle, any Section 481(a) adjustment includable in Brass
Eagle's consolidated return for the current taxable year
shall be considered to be Daisy's income for the Pre-
Transaction Short Year and be considered in computing
Daisy's Separate Return Liability. To the extent any Section
481(a) adjustment is includable in Brass Eagle's income in
any subsequent taxable year, the amount due from Daisy shall
<PAGE>
be equal to the difference between the actual regular tax
due and the regular tax liability computed on the income of
Brass Eagle before inclusion of the Section 481(a)
adjustment. To the extent taxable income when reduced by
the Section 481(a) adjustment is negative, the recomputed
tax liability of Brass Eagle shall be a refund amount
computed by multiplying the negative income by the highest
combined marginal federal and state tax rates to which Brass
Eagle could be subject in the year the calculation under
this Section 10 is being made. Net operating loss
carryforwards and credit carryforwards, but not carrybacks,
if any, will be considered in computing the amount due from
Daisy. For this purpose, no consideration will be given to
any alternative minimum tax nor to any credits for
alternative minimum tax paid to the extent generated in
years subsequent to 1996. The amount due Brass Eagle shall
be paid by Daisy within ten (10) days of the filing of the
returns for Brass Eagle for the year in which the Section
481(a) adjustment is included in income.
Notwithstanding provisions of Sections 9 and 10 to the
contrary, if any amount is due to Daisy by Brass Eagle
pursuant to Section 9 above while any Section 481(a)
adjustment remains to be includable in the income of Brass
Eagle and for which an amount will be due Brass Eagle, then
no amount will be paid to either party by the other until
the carryovers of losses and credits for which Daisy is to
be reimbursed have been fully absorbed by Brass Eagle.
11. If the tax liability is adjusted for the Pre-
Transaction Short Year or any prior taxable year, whether by
means of an amended return, claim for refund or after tax
audit by the Internal Revenue Service, the liability of each
member shall be recomputed to give effect to such
adjustments, and, in the case of a refund, Brass Eagle shall
make payment to Daisy for its proportionate share of the
refund, if any, determined in the same manner as described
in Paragraph 2 above, within ten (10) days after the refund
is received by Daisy. In the case of an increase in tax
liability, Daisy shall pay and/or reimburse Brass Eagle for
its allocable share of such increased tax liability
attributable to adjustments of Daisy within ten (10) days
after receiving notice of such liability from Brass Eagle.
12. This Agreement shall apply to Daisy's taxable year
ending on the effective date of the Transaction and the
taxable year of Brass Eagle in which the Transaction occurs.
Notwithstanding the effective date of this Agreement, the
obligations and duties under this Agreement shall continue
in effect with respect to the payment of any additional tax
refunds due for all taxable periods prior to the effective
date of the Transaction.
<PAGE>
13. This Agreement shall be binding upon and inure to
the benefit of any successor, whether by statutory merger,
acquisition of substantially all of the assets or otherwise,
to any of the parties hereto, to the same extent as if such
successor had been an original party hereto.
14. The parties agree to timely provide each other
with that information, including, but not limited to, tax
returns and workpapers necessary to verify the amounts due
pursuant to this Agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the day and year first
written above.
BRASS EAGLE INC.
By: /s/ E. Lynn Scott
E. Lynn Scott, President
DAISY MANUFACTURING COMPANY
By: /s/ Marvin Griffin
Marvin Griffin, President
<PAGE>
Exhibit 10(viii)
ADMINISTRATIVE AGREEMENT
This Agreement effective the 24th day of November,
1997, is by and between Daisy Manufacturing Company,
Inc., 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
<PAGE>
(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.
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,
B E 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: /s/ John D. Flynn By: /s/ Lynn Scott
Title: Vice President, General Counsel Title: President
<PAGE>
Exhibit 11(i)
BRASS EAGLE INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
1997 1997
---- ----
Net income per share
Common shares outstanding prior to the
offering 4,608,871 4,608,871
Weighted average options and options
treated as common share equivalents
pursuant to SEC Staff Accounting
Bulletin Topic 4d 427,703 430,834
Shares treated as common share
equivalents pursuant to SEC
Accounting Bulletin Topic 1b3 318,091 318,091
------------ ------------
Total common and common equivalent
shares 5,354,665 5,357,796
============ ============
Net income $ 951,000 $ 2,071,000
============ ============
Net income per common and common
equivalent share $ .18 $ .39
============ ============
Pro forma net income per share
Common shares outstanding - prior to
the offering 4,608,871 4,608,871
Common shares sold in the offering,
including overallotments 2,616,250 2,616,250
Weighted average options and options
treated as common share equivalents
pursuant to SEC Staff Accounting
Bulletin Topic 4d 427,703 430,834
Pro forma weighted average number of
shares of common stock and common
stock equivalents 7,652,824 7,655,955
========= =========
<PAGE>
Pro forma net income $ 979,000 $2,175,000
========== =========
Pro forma net income per common
and common equivalent share $.13 $.28
========== =========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE UNAUDITED SEPTEMBER 30, 1997 BALANCE SHEET
AND THE UNAUDITED STATEMENT OF OPERATIONS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997, AND THE UNAUDITED NOTES THERETO,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 9,922
<ALLOWANCES> 52
<INVENTORY> 4,157
<CURRENT-ASSETS> 15,309
<PP&E> 1,989
<DEPRECIATION> 638
<TOTAL-ASSETS> 19,462
<CURRENT-LIABILITIES> 14,263
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,499
<TOTAL-LIABILITY-AND-EQUITY> 19,462
<SALES> 21,814
<TOTAL-REVENUES> 21,814
<CGS> 14,639
<TOTAL-COSTS> 18,277
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 181
<INCOME-PRETAX> 3,356
<INCOME-TAX> 1,285
<INCOME-CONTINUING> 2,071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,071
<EPS-PRIMARY> 0
<EPS-DILUTED> .39
</TABLE>
