<PAGE>
BRASS EAGLE INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 13, 1999
(BRASS EAGLE LOGO)
To the Stockholders of Brass Eagle Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of Brass Eagle
Inc. will be held at the Clarion Hotel and Convention Center, 211 Southeast
Walton Boulevard, Bentonville, Arkansas 72712 on May 13, 1999, at 2 p.m. CDT
for the following purposes:
1. To elect five directors of Brass Eagle.
2. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on March 19, 1999, will be
entitled to notice of, and to vote at, the meeting.
You are cordially invited to the meeting. WE ASK THAT YOU SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE IN RETURNING YOUR PROXY.
By Order of the Board of Directors
JOHN D. FLYNN
Secretary
Rogers, Arkansas
April 5, 1999
YOUR VOTE IS IMPORTANT!
PLEASE SIGN AND RETURN THE ACCOMPANYING PROXY.
<PAGE>
BRASS EAGLE INC.
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1999
The enclosed Proxy is solicited by and on behalf of the management of
Brass Eagle Inc., a Delaware corporation, for use at the annual meeting of
stockholders to be held on May 13, 1999 at 2 p.m. CDT at the Clarion Hotel and
Convention Center, 211 Southeast Walton Boulevard, Bentonville, Arkansas 72712,
or at any adjournment or adjournments thereof. Brass Eagle's address is 1203A
North Sixth Street, Rogers, Arkansas 72756, and its telephone number is
501/986-9090. This proxy material is first being mailed to stockholders on
April 5, 1999. Only stockholders of record at the close of business on March
19, 1999 are entitled to notice of, and to vote at, the meeting.
Any stockholder giving a Proxy has the power to revoke it, at any time
before it is voted, by written revocation delivered to the Secretary of Brass
Eagle. Proxies solicited herein will be voted in accordance with any directions
contained therein, unless the Proxy is received in such form or at such time as
to render it ineligible to vote, or unless properly revoked. If no choice is
specified, the shares will be voted in accordance with the recommendations of
the Board of Directors as described herein.
If matters of business other than those described in the Proxy properly
come before the meeting, the persons named in the Proxy will vote in accordance
with their best judgment on such matters. The Proxies solicited herein shall
not confer any authority to vote at any meeting of stockholders other than the
meeting to be held on May 13, 1999, or any adjournment or adjournments thereof.
The cost of soliciting Proxies will be borne by Brass Eagle. Brass Eagle
will reimburse brokers, custodians, nominees and other fiduciaries for their
charges and expenses in forwarding proxy material to beneficial owners of
shares. In addition to solicitation by mail, certain officers and employees of
Brass Eagle may solicit Proxies by telephone, telegraph and personally. These
persons will receive no compensation other than their regular salaries.
OUTSTANDING STOCK; VOTING RIGHTS;
VOTE REQUIRED FOR APPROVAL
The stock transfer books of Brass Eagle will not be closed, but only
stockholders of record at the close of business on March 19, 1999 will be
entitled to notice of, and to vote at, the meeting. At that date, there were
7,245,511 shares of Common Stock outstanding. Each stockholder is entitled to
one vote for each share of stock owned of record at the close of business on
March 19, 1999.
In order to be elected as a Director of Brass Eagle, each nominee must
receive a plurality of the votes cast at the meeting for that position.
Abstentions and shares held by a broker that has indicated that it does not
have discretionary authority to vote on a particular matter will not be counted
as votes cast.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding persons who
beneficially owned five percent (5%) or more of Brass Eagle's Common Stock at
the close of business on March 19, 1999.
<TABLE>
<CAPTION>
Number of Shares of
Name and Address Common Stock Percent of
of Beneficial Owner Beneficially Owned Outstanding Shares
- -------------------------------------------------------------------------
<S> <C> <C>
Charter Oak Partners 3,674,474 50.7%
10 Wright Street
Westport, Connecticut 06877
Richard L. Chilton, Jr. 427,449 5.9%
c/o Fried, Frank, Harris
One New York Plaza
New York, NY 10004-1980
Anthony J. Dowd 3,675,065 (1) 50.7%
10 Wright Street
Westport, Connecticut 06877
Fleet Financial Group Inc. 415,347 5.7%
One Federal Street
Boston, MA 02110
Marvin W. Griffin 605,097 (2) 7.8%
2111 South Eighth Street
Rogers, Arkansas 72758
</TABLE>
(1) Includes all of the shares of Common Stock owned by Charter Oak Partners
because, as Director of Private Investments of Charter Oak Partners, Mr.
Dowd may be deemed to beneficially own such shares. Mr. Dowd disclaims
beneficial ownership of shares held by Charter Oak Partners except to the
extent of his proportionate interest therein.
(2) Includes 236,824 shares subject to currently exercisable options.
<PAGE>
EQUITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of March 19, 1999, by (i) each nominee
for election as a director, (ii) each of the named individuals in the Summary
Compensation Table, and (iii) all directors and executive officers of Brass
Eagle as a group.
<TABLE>
<CAPTION>
Number of Shares of
Name Common Stock Percent of
of Beneficial Owner Beneficially Owned Outstanding Shares
- ----------------------------------------------------------------------
<S> <C> <C>
Marvin W. Griffin 605,097 (1) 7.8%
E. Lynn Scott 274,834 (2) 3.6%
Anthony J. Dowd 3,675,065 (3) 50.7%
H. Gregory Wold 43,262 0.6%
Stephen J. Schaubert 14,814 0.2%
Steven R. DeMent 22,156 (4) 0.3%
J.R. Brian Hanna 4,130 (5) 0.1%
Charles L. Prudhomme 21,825 (5) 0.3%
Dan Obergfell 12,893 (5) 0.2%
All directors and executive
officers as a group 4,750,807 (3)(6) 61.6%
</TABLE>
(1) Includes 236,824 shares subject to currently exercisable options.
(2) Includes 153,222 shares subject to currently exercisable options.
(3) Includes all of the shares of Common Stock owned by Charter Oak Partners
because, as Director of Private Investments of Charter Oak Partners, Mr.
Dowd may be deemed to beneficially own such shares. Mr. Dowd disclaims
beneficial ownership of shares held by Charter Oak Partners except to the
extent of his proportionate interest therein.
(4) Includes 15,045 shares subject to currently exercisable options.
(5) Includes 3,880 shares subject to currently exercisable options.
(6) Includes 433,051 shares subject to currently exercisable options.
<PAGE>
ELECTION OF DIRECTORS
Five Directors are to be elected by the stockholders at the annual meeting
for a term of one year and until the election and qualification of their
successors. The Proxies solicited hereby will be voted 'FOR' the election as
Directors of the five persons hereinafter identified unless authority is
withheld. Management does not know of any nominee who will be unable to serve,
but should any nominee be unable or decline to serve, the discretionary
authority provided in the Proxy will be exercised to vote for a substitute or
substitutes. Management has no reason to believe that any substitute nominee
will be required.
Nominees
Marvin W. Griffin, 60, has been Chairman of the Board of Brass Eagle since
its inception in September 1997. Mr. Griffin has been Chairman of the Board of
Daisy Manufacturing Company since 1998 and was President and Chief Executive
Officer of Daisy Manufacturing, Inc. ('Daisy') from 1988 to 1998. From 1983 to
1987, Mr. Griffin was the Chief Executive Officer of the Coca-Cola Bottling
Company Consolidated, a soft-drink bottling company, and was the Senior Vice
President of Sales and Marketing at Coca-Cola U.S.A., a soft-drink maker, from
1980 to 1983.
E. Lynn Scott, 45, has been President and Chief Executive Officer of Brass
Eagle since its inception in September 1997. Mr. Scott was responsible for
developing Daisy's paintball operations through its Brass Eagle division and he
served as President of the division since November 1996. Prior to that, he
served as Vice President, Sales and Marketing of Daisy from June 1989 to April
1997. Before joining Daisy, Mr. Scott served as Vice President, Sales and
Marketing at Skeeter Products and Crosman, both divisions of The Coleman
Company that specialize in sporting goods. He is also a Director of Daisy.
Anthony J. Dowd, 39, has been a Director of Brass Eagle since its
inception in September 1997. He also serves as Director of Private Investments
for Charter Oak Partners, a private investment firm, and has served in that
capacity since May 1992. Mr. Dowd has served as a Director of Daisy since June
1993, and serves as a director of several privately held companies. Prior to
joining Brass Eagle, he served as a Senior Associate at James D. Wolfensohn,
Inc. (now BT Wolfensohn), an investment banking firm, from 1988 to 1991.
H. Gregory Wold, 64, has been a Director of Brass Eagle since its
inception in September 1997. Mr. Wold joined the Ford Motor Company, an auto
manufacturer, in 1964 and served as Director, Business Development from 1996 to
1997 and its Associate Director, Corporate Strategy from 1986 to 1996. Mr.
Wold retired from the Ford Motor Company in 1997. He is also a Director of
Daisy.
Stephen J. Schaubert, 52, has been a Director of Brass Eagle since its
inception in September 1997. He is also a Director at Bain & Company Inc., an
international consulting firm headquartered in Boston. Prior to joining Bain
in 1979, Mr. Schaubert worked in the healthcare and aerospace industries in a
series of general management positions, both domestic and international.<PAGE>
<PAGE>
Directors' Meetings and Committees
The Board of Directors met five times during 1998, on February 24, May 19,
July 13, August 18, and November 11, 1998, and acted one time by unanimous
written consent.
The Board currently has two standing committees to assist it in the
discharge of its responsibilities: an Audit Committee and a Compensation
Committee. The Audit Committee, which met one time in 1998, is composed of
Anthony J. Dowd and H. Gregory Wold and reviews the professional services
provided by Brass Eagle's independent auditors and the independence of such
auditors from management of Brass Eagle. Additionally, the Audit Committee
reviews the scope of the audit by Brass Eagle's independent auditors, the
annual financial statements of Brass Eagle, Brass Eagle's system of internal
accounting controls, and such other matters with respect to the accounting,
auditing, and financial reporting practices and procedures of Brass Eagle as it
finds appropriate or as are brought to its attention.
The Compensation Committee, which met three times during 1998, is composed
of Anthony J. Dowd, E. Lynn Scott, and Marvin Griffin and serves to establish
the compensation of officers of Brass Eagle and to establish and administer
Brass Eagle's compensation programs.
None of the nominees for director attended fewer than 75 percent (75%) of
the aggregate of (1) the total number of meetings of the Board of Directors and
(2) the total number of meetings held by all committees of the Board on which
he served.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE `FOR'
THE ELECTION AS DIRECTORS OF THE FIVE PERSONS
IDENTIFIED ABOVE AS NOMINEES.
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Cash and Other Compensation
The following table sets forth, for the fiscal years indicated, the cash
and other compensation provided by Brass Eagle and its subsidiaries to the
Chief Executive Officer and each of the other most highly compensated executive
officers whose total annual salary and bonus exceed $100,000 (the 'Named
Officers') in all capacities in which they served.
<TABLE>
<CAPTION>
Summary Compensation Table (1)
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Se-
Curi-
ties
Restri- Under-
cted lying LTIP
Name and Annual Stock Opt- Pay- All Other
Principal Salary Bonus Compen- Award(s) ions/ outs Compensation
Position Year ($) ($) sation ($) SAR(#) ($) ($) (2)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E. Lynn 1998 160,000 80,000 - - - - 5,376
Scott 1997 140,000 46,620 - - 94,581 - 2,551
President 1996 130,200 - - - 22,331 - 2,463
and Chief
Executive
Officer
Steven R. 1998 126,000 63,000 - - - - 1,647
DeMent(3) 1997 120,000 24,000 - - 26,685 - 171
Vice 1996 106,845 - - - - - 1,115
President,
Operations
J.R.Brian 1998 115,000 57,500 - - - - 2,079
Hanna (4) 1997 9,644 3,833 - - 15,520 - 21
Vice 1996 - - - - - - -
President,
and Chief
Financial
Officer
</TABLE>
<PAGE>
Summary Compensation Table (1) (Continued)
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Se-
Curi-
ties
Restri- Under-
cted lying LTIP
Name and Annual Stock Opt- Pay- All Other
Principal Salary Bonus Compen- Award(s) ions/ outs Compensation
Position Year ($) ($) sation ($) SAR(#) ($) ($) (2)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles L.1998 82,907 42,000 - - - - 2,850
Prudhomme 1997 101,760 20,350 - - 15,520 - 1,770
(5) 1996 72,245 - - - - - 365
Vice
President,
Marketing
Daniel L. 1998 78,500 41,000 - - - - 1,076
Obergfell 1997 43,916 14,000 - - 15,520 - -
Vice 1996 - - - - - - -
President,
Sales
</TALE>
(1) Prior to November 25, 1997, Brass Eagle operated as a division of Daisy
Manufacturing Company, Inc. The Named Executive Officers identified
devoted substantially all of their time to the operations of Daisy's
Paintball Division. Accordingly, the summary compensation table includes
all the compensation paid by Brass Eagle and Daisy prior to 1998.
(2) Includes Company contributions to the 401(k) Retirement Savings Plan,
Company payments of life insurance premiums. For 1998 such amounts were
as follows: E. Lynn Scott: $4,800 401(k) contributions, $576 insurance
premiums; Steven R. DeMent: $1,103 401(k) contributions, $544 insurance
premiums; J.R. Brian Hanna: $1,581 401(k) contributions, $498 insurance
premiums; Charles L. Prudhomme: $2,487 401(k) contributions, $363
insurance premiums; Daniel L. Obergfell: $722 401(k) contributions, $354
insurance contributions.
(3) Mr. DeMent became employed by Brass Eagle as of February 12, 1996.
Consequently, Mr. DeMent's salary for 1996 as set forth above represented
only eleven months of his annual salary.
(4) Mr. Hanna became employed by Brass Eagle as of December 1, 1997.
Consequently, Mr. Hanna's salary for 1997 as set forth above represents
only one month of his annual salary.
<PAGE>
(5) Mr. Prudhomme became employed by Brass Eagle on April 2, 1996.
Consequently, Mr. Prudhomme's salary for 1996 as set forth above
represented only nine months of his annual salary.
(6) Mr. Obergfell became employed by Brass Eagle on June 16, 1997.
Consequently, Mr. Obergfell's salary for 1997 as set forth above
represented only 6.5 months of his annual salary.
Stock Option Grants
The following table sets forth information concerning stock options
granted to the Named Executive Officers during 1998:
</TABLE>
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential
Realizable
Individual Grants Value at
Assumed
Annual Rates
of Stock
Price
Appreciation
for Option
Term
-------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
% of
Total
Number Options
Of /SARs
Securities Granted Exercise
Underlying to or Estimated
Options/ Employees Base Market
SARs in Fiscal Price Value on Expi-
Granted Year ($/ Date of ration
Name (#) Share) Grant Date %($) 5%($) 10%($)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E. Lynn
Scott None
Steven R.
DeMent None
J.R.Brian
Hanna None
Charles L.
Prudhomme None
Daniel L.
Obergfell None
</TABLE>
<PAGE>
Stock Option Exercises and Holdings
The following table sets forth information concerning stock options
exercised during the last fiscal year and stock options held as of the end of
the last fiscal year by the Named Executive Officers.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of Securities
Underlying Value of
Unexercised Options/ Unexercised
SAR's at FY-End (#) In-the-Money
SAR's at FY-End ($)
Shares
Acquired Value
Name on Exercise(#) Realized($)Exer. Unexer. Exer. Unexer. (1)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
E. Lynn
Scott 0 $0 153,222 54,188 $2,081,416 $237,073
Steven R.
DeMent 0 $0 15,045 11,640 $ 182,384 $ 50,925
J.R.
Brian
Hanna 0 $0 3,880 11,640 $ 14,065 $ 42,195
Charles
Prudhomme 0 $0 3,880 11,640 $ 16,975 $ 50,925
Daniel L.
Obergfell 0 $0 3,880 11,640 $ 16,975 $ 50,925
</TABLE>
(1) Represents the amount by which the market price at fiscal year end of the
shares underlying unexercised options exceed the exercise price for such
shares.
Compensation of Directors
Each director of Brass Eagle who is not also an employee of Brass Eagle
receives, as an annual fee, Common Stock having a fair market value of $8,000
at the time of its issuance in quarterly installments. All directors are
reimbursed for out-of-pocket expenses incurred in connection with attendance at
meetings of the Board and Board committees and other activities relating
thereto.
<PAGE>
Employment Agreement
Brass Eagle has entered into an Employment Agreement with E. Lynn Scott.
The Agreement provides for an initial three-year term expiring September 15,
2000, which automatically extends each year, subject to the right of either
party not to extend the Agreement upon ninety (90) days' notice. In addition,
Mr. Scott may elect to terminate his employment in the event of a change-in-
control of Brass Eagle or the sale of all or substantially all of its assets.
Pursuant to the terms of the Agreement, Mr. Scott was paid an annual base
salary of $160,000 in 1998. The Agreement provides for certain bonus
compensation in subsequent years to be determined based upon performance
targets set by Brass Eagle's Board of Directors after consultation with Mr.
Scott. Under the Employment Agreement, Mr. Scott is subject to certain non-
disclosure, non-competition and non-solicitation covenants applicable during
the term of his employment and until one year after termination of his
employment.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Anthony J. Dowd, E. Lynn
Scott and Marvin Griffin. Mr. Scott serves as President and Chief Executive
Officer of Brass Eagle. Mr. Scott also serves on the Board of Directors of
Daisy. Mr. Griffin is the Chairman of the Board of Daisy and also serves on
Brass Eagle's Compensation Committee.
Report of Compensation Committee
The following report addressing Brass Eagle's compensation policies for
executive officers for 1998 is submitted by the Compensation Committee of the
Board of Directors.
As required by the proxy rules promulgated by the Securities and Exchange
Commission, this Report of the Compensation Committee of the Board of Directors
describes the overall compensation goals and policies applicable to the
executive officers of Brass Eagle, including the basis for determination of the
compensation of executive officers for fiscal year 1998. The Report also
discusses the setting of 1998 compensation of Mr. E. Lynn Scott. The term
`Executive Officers' is used below to refer to the executive officers of Brass
Eagle other than Mr. Scott.
COMPOSITION OF COMPENSATION COMMITTEE. The members of the Compensation
Committee are Anthony Dowd, Marvin W. Griffin, Jr. and E. Lynn Scott. Since
Mr. Scott's compensation has been determined by contract, his inclusion on the
Committee is deemed a great advantage due to his intimate knowledge of the
performance of the Executive Officers. The philosophy of the committee
emphasizes inclusiveness. Thus the Bonus Plan covers all employees of Brass
Eagle, and all employees are eligible to purchase stock under an Employee Stock
Purchase Plan.
<PAGE>
COMPENSATION PHILOSOPHY AND OBJECTIVES. The Committee believes that
compensation of Brass Eagle's executive officers should be set at a competitive
level and be based upon Brass Eagle's overall financial performance,
achievement of strategic goals and individual performance, with a view toward
building value for Brass Eagle's shareholders. Within this overall philosophy,
the following principles guide Brass Eagle's compensation policies for
executive officers:
- Provide competitive levels of compensation that enable Brass Eagle to
attract and retain experienced, talented Executive Officers;
- Compensate Executive Officers based on Brass Eagle's progress toward
achievement of its short and long-term strategic and financial goals;
- Compensate Executive Officers based on the performance of the individual
Executive Officer, and his contribution to Brass Eagle's performance;
and
- Maintain and strengthen the incentive for Executive Officers to increase
the price of Brass Eagle's Common Stock.
The Committee believes that adherence to these objectives is essential in
order to attract and retain highly qualified officers whose contributions are
necessary for the continued growth and success of Brass Eagle. Information
concerning the specific implementation of these policies in the 1998
compensation arrangements of the Executive Officers and Mr. Scott is provided
below.
ANNUAL SALARIES. Salaries of Executive Officers are generally reviewed on
an annual basis and adjustments made based on the Committee's subjective
evaluation of the individual's performance and Brass Eagle's performance,
taking into account both qualitative and quantitative factors. Among the
factors considered by the Committee have been the recommendations of Mr. Scott
and the importance of retaining key Executive Officers. Subject to Board
approval, the Committee makes decisions concerning the Executive Officers.
Three of the executive officers were formerly employees at Daisy
Manufacturing Company, Inc. with duties varying from their present positions.
Two of the executives were hired from outside Brass Eagle. For this reason,
year-to-year comparisons of annual salaries are limited.
INCENTIVE BONUS. The 1998 Brass Eagle Bonus Plan was established in early
1998. Cash payments were made in February 1999, with payouts based upon net
income. The Bonus Plan covers all employees of Brass Eagle, although at
varying percentages of base pay dependent on level. The total pay out under
the Plan was $721,315.50.
<PAGE>
STOCK OPTIONS. Brass Eagle's 1997 Stock Option Plan permits the award of
options to purchase Common Stock of Brass Eagle to Executive Officers, managers
and key employees. The award of stock options is intended to align the
interests of Executive Officers with the shareholders by providing the
Executive Officers with an incentive to bring about increases in the price of
the Common Stock. Brass Eagle's policy is to award options to purchase Common
Stock at a price that equals or exceeds market price on the date of grant.
Accordingly, the Executive Officers derive a financial benefit from an option
only if the price of Common Stock increases. Options granted have not had
performance contingencies, but realization of the value provided through the
options has generally required the Executive Officer to remain with Brass Eagle
until the options vest. The options awarded vest at the rate of 25 percent
(25%) per year.
In fiscal year 1998, Brass Eagle awarded no options to Executive Officers,
but awarded options to purchase 21,000 shares to other key employees of Brass
Eagle.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. E. Lynn Scott's compensation is
set pursuant to an Employment and Non-competition Agreement dated September 15,
1997, which runs for a three-year period, with options to renew. Mr. Scott's
compensation and bonus schedule is set by this Agreement and included $160,000
salary and $80,000 of bonus (based on net income results) for 1998. Mr. Scott
is eligible for stock options pursuant to this Agreement, and as of December
31, 1998 had been awarded stock options including options to purchase 72,250
shares of Common Stock pursuant to the 1997 Stock Option Plan.
OTHER COMPENSATIONS. Brass Eagle has a number of broad-based employee
benefit plans in which Executive Officers participate on the same terms as
other employees meeting the eligibility requirements, subject to any legal
limitations on amounts that may be contributed to or benefits payable under the
plans.
The Omnibus Budget Reconciliation Act of 1993 ('OBRA') generally prevents
public corporations from deducting as a business expense that portion of
compensation exceeding $1 million paid to a named executive officer in the
Summary Compensation Table. This deduction limit does not apply to
'performance-based compensation.' The Compensation Committee intends to
monitor its compensation plan to comply with OBRA when necessary.
Submitted by the Compensation Committee of the Board of Directors:
Anthony J. Dowd
Marvin Griffin
Lynn Scott
<PAGE>
Company Performance
The graph below compares from November 25, 1997 until December 31, 1998,
the cumulative total returns on Brass Eagle's Common Stock to the NASDAQ Stock
Market Composite Index, and to the average of the cumulative total return for
ten peer group companies. The cumulative total return on Brass Eagle's Common
Stock assumes $100 invested in such stock on November 25, 1997, and assumes
reinvestment of dividends.
<TABLE>
<CAPTION>
Total Return Analysis
Nov. 25, 1997 Dec. 31, 1997 Dec. 31 1998
------------- ------------- ------------
<S> <C> <C> <C>
Brass Eagle $100.00 $112.50 $139.80
Peer Group* $100.00 $ 96.60 $ 40.10
Nasdaq Composite $100.00 $ 98.80 $138.00
</TABLE>
Source: Integrated Corporate Relations. Data from Fact Set and Bloomberg
Financial Markets
* The Peer Group is a composite of 10 leisure companies including; AMF Bowling
Inc., Cannondale Corp., Bell Sports Inc., Coleman, Callaway Inc., First Team
Sports Inc., GT Bikes, Huffy Corp, K2 Inc. and Marker International. Bell
Sports went private and stopped trading on August 17, 1998. GT Bikes was
acquired by Schwinn and stopped trading on October 2, 1998. Marker
International was de-listed from Nasdaq, but still trades on OTC Bulletin
Board.
<PAGE>
CERTAIN TRANSACTIONS
1. Mr. Scott is the President, Chief Executive Officer and a director of
Brass Eagle and a director and shareholder of Daisy Manufacturing Company
('Daisy'). Mr. Griffin is the Chairman of the Board of Directors of Brass
Eagle, the Chairman of the Board of Daisy and a greater than 5 percent
stockholder of Brass Eagle and a greater than 5 percent stockholder of
Daisy. As a consequence, each of these persons may be deemed to have a
material direct or indirect interest in Daisy. Brass Eagle, prior to
November 24, 1997, operated as a division of a predecessor to Daisy. On
November 24, 1997, a reorganization (the 'Reorganization') was effected
pursuant to an assignment, assumption and indemnification agreement (the
'Assignment, Assumption and Indemnification Agreement') which provided for
(i) Brass Eagle transferring all of its non-paintball related assets,
operations, and liabilities to Daisy, retaining only its paintball related
assets, operations, and liabilities, and (ii) Daisy agreeing to indemnify
and hold harmless Brass Eagle and its officers, directors, employees and
stockholders from and against all liabilities and obligations related to
Brass Eagle's non-paintball related operations, including, without
limitation, (a) any products liability claim relating to any products sold
by Brass Eagle prior to Reorganization (other than products sold under the
Brass Eagle name) and any products sold by Daisy after the Reorganization,
and (b) any claim by an employee or former employee of Brass Eagle or of
Daisy to the extent that such claim relates to post-retirement medical or
pension benefits that are attributable to the employment of any such
individual in Brass Eagle's non-paintball related operations.
2. Each of the directors, including Anthony Dowd as agent for Charter Oak,
and each of the Named Executive Officers except for J.R. Brian Hanna are
guarantors under a Continuing Guaranty pursuant to which they have
guaranteed the obligations of Daisy under the Assignment, Assumption and
Indemnification Agreement. The obligations of the guarantors are several
and separate according to their pro rata ownership of the outstanding
shares of Daisy common stock at the time of the Reorganization. The
aggregate amount of Daisy's obligations guaranteed is Five Million Dollars
for the two years following the Reorganization and Three Million Dollars
for the following two years. The term of the Guaranty expires on the
earlier of (i) four years following the date of the Reorganization, or
(ii) the date that one of the nation's six largest accounting firms
renders a determination that Daisy alone may satisfy its obligations under
the Assignment, Assumption and Indemnification Agreement. Obligations of
guarantors for claims made prior to the fourth anniversary of the
effective date of the Guaranty shall survive its termination.
3. Concurrently with the Reorganization, Brass Eagle entered into an
administrative services agreement with Daisy (the 'Administrative
Agreement'), pursuant to which Daisy agreed to provide Brass Eagle with
certain legal, administrative, warehousing, shipping and computer
information services through December 31, 1998, for $25,071.58 monthly.
Brass Eagle believes that the terms of the Administrative Agreement were
no less favorable than those that could have been obtained from
disinterested parties. By mutual agreement of the parties, the
Administrative Services Agreement was terminated as of December 31, 1998.
<PAGE>
4. Messrs. Griffin and Scott were holders of shares of preferred stock of
Brass Eagle, which were canceled in connection with the Reorganization.
Brass Eagle entered into agreements with Messrs. Griffin and Scott
concurrently with the Reorganization, pursuant to which Brass Eagle will
indemnify each of them against any income tax imposed on them as a result
of such cancellation of their preferred stock. It is not possible to
predict whether any such tax will be imposed and, consequently, whether
such indemnification will be required. If such indemnification is
required, it is also not possible to estimate the precise amount thereof,
although Brass Eagle does not believe that its obligation would exceed
approximately $240,000 with respect to Mr. Griffin and approximately
$90,000 with respect to Mr. Scott. If any such indemnification payment is
required, Brass Eagle believes that it would be entitled to claim a
corresponding compensation deduction for income tax purposes, and
therefore, any additional indemnification costs would be offset by these
income tax deductions. Consequently, Brass Eagle believes that any
additional indemnification payments that it may be required to make would
not have a material adverse effect on Brass Eagle or its prospects.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Brass
Eagle's directors and executive officers, and persons who own more than 10
percent of Brass Eagle's Common Stock, to file with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. initial
reports of ownership and reports of changes in ownership of stock of Brass
Eagle.
To Brass Eagle's knowledge, based solely on a review of copies of reports
provided by such individuals to Brass Eagle and written representations of such
individuals that no other reports were required, during the year ended December
31, 1998, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10 percent beneficial owners were met.
INDEPENDENT PUBLIC ACCOUNTANTS
Brass Eagle utilized Crowe, Chizek and Company LLP, as independent public
accountants for the year ended December 31, 1998. They will not be present at
the annual meeting of shareholders.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at Brass Eagle's annual
meeting of stockholders in 2000 must be received by Brass Eagle at its
principal executive offices not later than December 7, 1999 in order to be
included in Brass Eagle's Proxy Statement and form of Proxy relating to that
meeting. If a stockholder intends to present a proposal at Brass Eagle's
annual meeting in 2000 without requesting Brass Eagle to include the proposal
in Brass Eagle's proxy material, the stockholder must notify Brass Eagle of the
proposal on or prior to February 20, 2000. Otherwise, at the meeting
management may, with regard to the proposal, use its discretionary authority to
vote the proxies held by it even though there will be no discussion of the
proposal in the 2000 proxy statement.
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OTHER MATTERS
Management of Brass Eagle knows of no other matters that may come before
the meeting. However, if any matters other than those referred to herein
should properly come before the meeting, it is the intention of the persons
named in the enclosed Proxy to vote the Proxy in accordance with their
judgment.
ADDITIONAL INFORMATION AVAILABLE
A COPY OF BRASS EAGLE'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, MAY BE OBTAINED WITHOUT CHARGE BY ANY
STOCKHOLDER UPON WRITTEN REQUEST TO JOHN D. FLYNN, SECRETARY, 1203A NORTH SIXTH
STREET, ROGERS, ARKANSAS 72756.
By order of the Board of Directors
JOHN D. FLYNN
Secretary
Rogers, Arkansas
April 5, 1999
