the o’mara law firm, p.c. william m. o’mara, esq. 311 east...

1

THE O’MARA LAW FIRM, P.C. WILLIAM M. O’MARA, ESQ. Nevada Bar No. 00837 BRIAN O. O’MARA, ESQ. Nevada Bar No. 08214 DAVID C. O’MARA, ESQ. Nevada Bar No. 08599 311 East Liberty Street Reno, Nevada 89501 Telephone: 775/323-1321 775/323-4082 (fax)

UNITED STATES DISTRICT COURT

DISTRICT OF NEVADA

CARY GREEN, Derivatively on Behalf of Nominal Defendant Smith & Wesson Holding Corp,

Plaintiff,

vs.

BARRY M. MONHEIT, ROBERT L. SCOTT, MICHAEL F. GOLDEN, JEFFREY D. BUCHANAN, JOHN B. FURMAN, COLTON R. MELBY, MITCHELL A. SALTZ, DAVID M. STONE, JOHN A. KELLY and I. MARIE WADECKI,

Defendants,

and

SMITH & WESSON HOLDING CORP.,

Nominal Defendant.

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Case No.

VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT

JURY TRIAL DEMANDED

Case 2:08-cv-00238-BES-RJJ Document 1 Filed 02/25/2008 of 37www.courthousenews.com

Courth

ouse

New

s Ser

vice

http://www.courthousenews.com

2

1. This is a shareholder derivative action brought by Plaintiff and shareholders of

Smith & Wesson Holding Corp. (“Smith & Wesson” or the “Company”) against certain current

or former officers and directors of Smith & Wesson seeking to remedy the Individual

Defendants’ violations of state law, including breaches of fiduciary duties, abuse of control, gross

mismanagement, waste of corporate assets, unjust enrichment and negligence that occurred from

June 15, 2007 through the present, (the “Relevant Period”) and that have caused substantial

losses to the Company. 1

2. Throughout the Relevant Period, Defendants misrepresented to investors that the

market from various lines of the Company’s gun products was saturated with inventory. As a

result of increased inventory customers were reducing orders and postponing purchases. Due to

the foregoing, the Company’s sales did not represent true growth for the Company’s product but

were instead inventory stocking transactions that could not continue indefinitely. Furthermore,

Defendants lacked a reasonable basis for their positive statements about the Company and its

future prospects. While the foregoing events were occurring, Defendants were disposing of their

stock at a rapid pace, resulting in a windfall of millions of dollars to certain Defendants.

3. Defendants’ representations concerning the Company’s internal operational

controls and financial procedures were either patently untrue, or were made with reckless

disregard of the true material adverse facts. The undisclosed, material adverse facts about Smith

& Wesson included the following:

1 Because Defendants have failed to take action to remedy the breaches of fiduciary duties that occurred between June 15, 2007 and December 6, 2007, the Relevant Period continues through this day instead of ceasing on December 6, 2007, the day the public became aware of the wrongdoings at the Company.



3

a. Defendants materially misstated the existence of Smith & Wesson’s internal

operational controls and financial procedures, and Defendants had propped up the

Company’s results by manipulating Smith & Wesson’s accounting procedures;

b. Contrary to Defendants’ representations, Smith & Wesson did not have adequate

systems of internal operational or financial controls, and therefore Smith &

Wesson’s reported financial statements were not true, accurate or reliable.

JURISDICTION AND VENUE

4. This Court has jurisdiction over this action pursuant to 28 U.S.C. §1332(a)(2) in

that Plaintiff and Defendants are citizens of different states and the matter in controversy exceeds

$75,000.00, exclusive of interests and costs.

5. This action is not a collusive one designed to confer jurisdiction on a court of the

United States which it would not otherwise have.

6. Venue is proper in this district because a substantial portion of the transactions

and wrongs complained of herein, including the Individual Defendants’ participation in the

wrongful acts detailed herein, occurred in this district, and Smith & Wesson maintains its

corporate headquarters in this District. Further, Individual Defendants either reside in or

maintain executive offices in this district, and/or have received substantial compensation in this

district by engaging in numerous activities and conducting business here, which had an effect in

this district.

THE PARTIES

7. Plaintiff Cary Green (“Plaintiff”), as set forth in the accompanying Verification,

is, and was during all relevant times, a shareholder of Smith & Wesson. Plaintiff is a citizen of

the State of California.



4

8. Nominal Defendant Smith & Wesson is a Nevada corporation with its principal

place of business located at 2100 Roosevelt Avenue, Springfield, Massachusetts 01104.

According to the Company’s profile, Smith & Wesson is one of the world’s leading

manufacturers of firearms. The Company manufactures a wide array of pistols, revolvers,

tactical rifles, hunting rifles, black powder firearms, handcuffs and firearm-related products and

accessories.

9. Defendant Barry M. Monheit (“Monheit”) is a citizen of the State of

Massachusetts. He is, and was during the Relevant Period, Chairman of the Board of Directors.

10. Defendant Robert L. Scott (“Scott”) is a citizen of the State of Massachusetts. He

is, and was during the Relevant Period was Vice Chairman of the Board. Scott has served as a

director of the Company since December 1999. Scott served as a consultant to the Company

from May 2004 until February 2006; President of the Company from December 1999 until

September 2002; Chairman of the Company’s wholly owned subsidiary, Smith & Wesson Corp.,

from January 2003 through December 5, 2003; and served as President of Smith & Wesson

Corp. from May 2001 until December 2002. From December 1989 to December 1999, Scott

served as Vice President of Sales and Marketing and later as Vice President of Business

Development of Smith & Wesson Corp. prior to its acquisition by the Company.

11. Defendant Michael F. Golden (“Golden”) is a citizen of the State of Nevada. He

is, and was during the Relevant Period, President and Chief Executive Officer (“CEO”) of the

Company. Golden also serves as a director of the Company.

12. Defendant Jeffrey D. Buchanan (“Buchanan”) is a citizen of the State of Nevada.

He is, and was during the Relevant Period, a director of the Company. Buchanan also serves as



5

the Chairman of the Company’s Audit Committee and is a member of the Compensation

Committee.

13. Defendant John B. Furman (“Furman”) is a citizen of the State of Nevada. He is,

and was during the Relevant Period, a director of the Company. Furman also serves on the

Company’s Audit, Compensation and Nominations and Corporate Governance Committees.

14. Defendant Colton R. Melby (“Melby”) is a citizen of the State of Nevada. During

the Relevant Period, Melby served as a director of the Company. Melby announced his

retirement from the Board of Directors on January 8, 2008. Melby served as President and Chief

Operating Officer of the Company from September 2002 through December 5, 2003. In

addition, Melby served as Executive Vice President of the Company from May 2002 until

September 2002.

15. Defendant Mitchell A. Saltz (“Saltz”) is a citizen of the State of Nevada. He is,

and was during the Relevant Period, a director of the Company. Saltz served as Chairman of the

Board and CEO of the Company from February 1998 through December 5, 2003.

16. Defendant David M. Stone (“Stone”) is a citizen of the State of Nevada. He is,

and was during the Relevant Period, a director of the Company. Stone also serves on the

Company’s Compensation and Nominations and Corporate Governance Committees.

17. Defendant John A. Kelly (“Kelly”) is a citizen of the State of Nevada. Kelly has

served as Chief Financial Officer (“CFO”) of the Company since February 2004.

18. Defendant I. Marie Wadecki (“Wadecki”) is a citizen of the State of

Massachusetts. She is, and was during the Relevant Period, a director of the Company. Wadecki

serves on the Company’s Audit Committee and Chairs the Nominations and Corporate

Governance Committee.



6

19. Defendants Monheit, Scott, Golden, Buchanan, Furman, Melby, Kelly, Saltz,

Stone and Wadecki are collectively referred to herein as the “Individual Defendants.”

20. Each of the Defendants is liable as a participant in a fraudulent scheme and course

of business that operated as a fraud or deceit on purchasers of Smith & Wesson common stock

by disseminating materially false and misleading statements and/or concealing material adverse

facts. The scheme deceived the investing public regarding Smith & Wesson’s business,

operations, management and the intrinsic value of Smith & Wesson common stock, and allowed

Defendants to artificially inflate the price of Company shares and caused the investing public to

purchase Smith & Wesson common stock at artificially-inflated prices.

DUTIES OF THE INDIVIDUAL DEFENDANTS

21. By reason of their positions as officers and/or directors of the Company and

because of their ability to control the business and corporate affairs of the Company, the

Individual Defendants owed the Company and its shareholders the fiduciary obligations of good

faith, trust, loyalty, and due care, and were and are required to use their utmost ability to control

and manage the Company in a fair, just, honest, and equitable manner. The Individual

Defendants were and are required to act in furtherance of the best interests of the Company and

its shareholders so as to benefit all shareholders equally and not in furtherance of their personal

interest or benefit. Each director and officer of the Company owes to the Company and its

shareholders the fiduciary duty to exercise good faith and diligence in the administration of the

affairs of the Company and in the use and preservation of its property and assets, and the highest

obligations of fair dealing.



7

22. The Individual Defendants, because of their positions of control and authority as

directors and/or officers of the Company, were able to and did, directly and/or indirectly,

exercise control over the wrongful acts complained of herein.

23. To discharge their duties, the Individual Defendants were required to exercise

reasonable and prudent supervision over the management, policies, practices and controls of the

Company. By virtue of such duties, the Individual Defendants were required to, among other

things:

a. exercise good faith to ensure that the affairs of the Company were conducted in an efficient, business-like manner so as to make it possible to provide the highest quality performance of their business;

b. exercise good faith to ensure that the Company was operated in a diligent, honest and prudent manner and complied with all applicable federal and state laws, rules, regulations and requirements, and all contractual obligations, including acting only within the scope of its legal authority; and

c. when placed on notice of improper or imprudent conduct by the Company and/or its employees, exercise good faith in taking action to correct the misconduct and prevent its recurrence.

24. Because of the Individual Defendants’ positions with the Company, they had

access to the adverse undisclosed information about its business, operations, products,

operational trends, financial statements, markets and present and future business prospects via

access to internal corporate documents (including the Company’s operating plans, budgets and

forecasts and reports of actual operations compared thereto), conversations and connections with

other corporate officers and employees, attendance at management and Board of Directors

meetings and committees thereof and via reports and other information provided to them in

connection therewith.

25. Each of the above officers of Smith & Wesson, by virtue of their high-level

positions with the Company, directly participated in the management of the Company, was



8

directly involved in the day-to-day operations of the Company at the highest levels and was

privy to confidential proprietary information concerning the Company and its business,

operations, products, growth, financial statements, and financial condition, as alleged herein.

Said Defendants were involved in drafting, producing, reviewing and/or disseminating the false

and misleading statements and information alleged herein, were aware, or deliberately

disregarded, that the false and misleading statements were being issued regarding the Company,

and approved or ratified these statements.

26. As officers and controlling persons of a publicly-held company whose common

stock was, and is, registered with the Securities & Exchange Commission (“SEC”) pursuant to

the Exchange Act and, during the Relevant Period, was traded on the Nasdaq National Market

Exchange (the “Nasdaq”), and governed by the provisions of the federal securities laws, the

Individual Defendants each had a duty to disseminate promptly, accurate and truthful

information with respect to the Company’s financial condition and performance, growth,

operations, financial statements, business, products, markets, management, earnings and present

and future business prospects, and to correct any previously-issued statements that had become

materially misleading or untrue.

27. The Individual Defendants participated in the drafting, preparation, and/or

approval of the various public and shareholder and investor reports and other communications

complained of herein and were aware of, or deliberately disregarded, the misstatements

contained therein and omissions therefrom, and were aware of their materially false and

misleading nature. Because of their Board membership and/or executive and managerial

positions with Smith & Wesson, each of the Individual Defendants had access to the adverse

undisclosed information about Smith & Wesson’s business prospects and financial condition and



9

performance as particularized herein and knew (or deliberately disregarded) that these adverse

facts rendered the positive representations made by or about Smith & Wesson and its business

issued or adopted by the Company materially false and misleading.

28. The Individual Defendants, because of their positions of control and authority as

officers and/or directors of the Company, were able to and did control the content of the various

SEC filings, press releases and other public statements pertaining to the Company during the

Relevant Period. Each Individual Defendant was provided with copies of the documents alleged

herein to be misleading prior to or shortly after their issuance and/or had the ability and/or

opportunity to prevent their issuance or cause them to be corrected. Accordingly, each of the

Individual Defendants is responsible for the accuracy of the public reports and releases detailed

herein and is therefore primarily liable for the representations contained therein.

SUBSTANTIVE ALLEGATIONS

DEFENDANTS’ MATERIALLY FALSE AND MISLEADING STATEMENTS

29. On June 14, 2007, after the market closed, the Company issued a press release

announcing its financial results for the fourth quarter and full year of fiscal 2007, including a

forecast for the third quarter of 2007, the period ended April 30, 2007. The Company reported

record quarterly revenues of $82.6 million and record annual revenues of $234.8 million. The

Company also reported net income of $13 million, and record earnings per share of $0.31.

Specifically, Defendant Monheit commented on the results as follows:

Our results for fiscal 2007 reflect the tremendous execution of our business strategy by Mike Golden and his team. They have now delivered ten consecutive quarters of year-over-year, double digit sales growth in our core handgun business, and the recent acquisition of Thompson/Center, combined with the introduction of our new Smith & Wesson shotguns and bolt-action rifles, demonstrates that our diversification is successfully underway. The board of directors is excited with the progress this team has made, and we look forward to opportunities to build upon these successes in fiscal 2008.



10

Defendant Golden also stated as follows:

Fiscal 2007 was a year of exceptional progress toward establishing Smith & Wesson as a global supplier in the business of safety, security, protection and sport. Tremendous growth in our core handgun business was driven by a number of new products and our continuing penetration of existing and new markets, while our launch of new shotgun and rifle products reflected our ability to diversity both organically and through successful acquisitions. Our 48.8% increase in net product sales was driven by a number of initiatives. It has now been a full year since the implementation of our sporting goods sales force comprised entirely of employees, rather than independent manufacturers’ representatives. It has also been a full year of equipping our sporting goods sales force, as well as our law enforcement sales force, with the specially designed, M&P Line of polymer pistols. The results have been impressive. Net product sales in the sporting goods channel grew 35.2% for fiscal 2007, apart from the Thompson/Center acquisition. Equally important, we continued to deliver growth each quarter beyond the anniversary date of the implementation of this sales force. Sporting goods sales increased 30% for the second half of fiscal 2007 compared with the comparable period of fiscal 2006 even though the all-employee sales force was in place during both periods.

The Company also provided its outlook for fiscal 2008:

We are raising our sales expectations for fiscal 2008 from $320 million to $330 million, which would represent a 40.5% increase over fiscal 2007 sales. This increased sales expectation includes growth in our existing sporting goods channel and our continued penetration of the law enforcement and international markets. It also reflects a full fiscal year of impact from our Thompson/Center acquisition. The increased sales expectation does not include any significant revenue from federal government orders, nor does it include the results of any potential future diversification initiatives. The M&P pistol and tactical rifle series, along with our new shotgun and bolt-action rifle lines, are expected to be drivers in the sales increase for fiscal 2008.

Net income for fiscal 2008 is anticipated to be $28.0 million, or $0.62 per diluted share, double the earnings per diluted share for fiscal 2007. Our increased expectation of $0.62 per diluted share in net income reflects an increase over our previously announced guidance of $0.60. This increase is expected to result from higher expected sales volume, improvement in gross margin percentage to between 35% and 36%, a decline in operating expenses as a percentage of sales and licensing, and a full fiscal year of impact from our Thompson/Center acquisition. Because of the acquisition, the seasonality of the hunting segment will now be reflected in our quarterly results. Therefore, our first quarter (May through July) of fiscal 2008 will be our weakest quarter, while results in our



11

second quarter (August through October), traditionally a strong quarter, for hunting sales will improve substantially over results for the second quarter of fiscal 2006. We began the year with a strong order backlog and as a result, we expect earnings for the first quarter of fiscal 2008 to now be $0.9 per diluted share compared with $.08 per diluted share for the first quarter of fiscal 2007 and expect that the subsequent quarters through fiscal 2008 will increase more significantly on a year-over-year basis. 30. On July 16, 2007, the Company filed with the SEC its Form 10-K for the fiscal

year 2007, which included the same financial results previously reported. The Form 10-K was

signed by Defendants, with the exception of Defendant Saltz.

31. On September 6, 2007, after the market closed, the Company issued a press

release announcing its financial results for the first quarter revenues of $74.4 million and net

income for the quarter of $4.7 million, or $0.11 per diluted share, compared with $3.4 million, or

$.08 per diluted share, for the comparable quarter the previous year. Defendant Golden

commented on the results stating in relevant part:

Our results for the first quarter of fiscal 2008 demonstrate progress across many initiatives and reflect growth in our core handgun business as well as our newly established long gun business. Our sales growth was particularly strong given that the comparable quarter of the prior year included $5.2 million in U.S. government orders for Afghanistan that were not duplicated in the current quarter. Handgun sales into the retail channel increased by 41.0% for the quarter, driven by our direct sales force and a number of ongoing retail initiatives. We continued to penetrate the law enforcement channel in the first quarter. Our Military & Police (M&P) polymer pistols have a cumulative win rate of over 80% in all test and evaluation processes in which they have competed. The number of law enforcement agencies that have purchased or approved for carry our M&P pistol has now grown to 231, including recent wins at sizeable agencies such as the Hartford, Connecticut Police and the New Hampshire State Police.

32. The Company also provided its outlook for fiscal year 2008, stating in relevant

part:

We continue to expect revenue to increase to approximately $330 million in fiscal 2008, which would represent a 40% increase over fiscal 2007 revenue. This revenue expectation does not include the results of any potential future, diversification initiatives, but does include growth in our existing consumer



12

market, as well as continued penetration of the law enforcement, federal government, and international markets. Sales of our M&P pistols, M&P tactical rifles, our new shotguns and both of our new lines of hunting rifles are all expected to be key drivers of the revenue increase for fiscal 2008. We expect second quarter revenue to increase by approximately 60% over revenue in second quarter of fiscal 2007, driven by continued expansion in our existing markets and the addition of revenue from Thompson/Center.

We are increasing our expectations for fiscal 2008 net income to approximately $28.5 million, or $0.63 per diluted share, which is higher than our earlier expectation of $28.0 million, or $0.62 per share. These results would represent an increase of 119% over net income for fiscal 2007. While first quarter results were $0.02 per diluted share higher than our expectations, approximately one-half of this increase was due to timing on depreciation expense. Our capital expenditures for the first quarter were lower than anticipated, though we still expect to spend $17.7 million in fiscal 2008. We continue to expect gross margin improvement to the range of 35% to 36% for the full fiscal year, with second quarter gross margins of approximately 33%, reflecting the impact of the annual two week plant shutdown which occurs each August at our Springfield and Houlton facilities. The 33% gross margin reflects a 180 basis point increase over the second quarter of fiscal 2006. The seasonal nature of the hunting business will be reflected in higher marketing expenditures in the second quarter as a result of our increased advertising efforts during this peak buying period. We still expect operating expenses to be in the 20% to 21% range for the full fiscal year. We continue to expect positive cash flow in fiscal 2008 of approximately $41 million, with net cash flow of $23.0 million after capital expenditures of $17.7 million. We also continue to expect cash flow for the first half of fiscal 2008 to be negative, becoming positive in the third quarter and strengthening in the fourth quarter.

33. In response to the positive earnings announcement, the Company’s stock price

surged to $21.06 per share on over two million shares traded.

34. On September 10, 2007, the Company filed with the SEC its Form 10-Q for the

first quarter of 2008, which included the same financial results previously reported.

Defendants Kelly and Golden certified the 10-Q.

35. As a result of all the positive statements the Defendants caused the Company to

issue, the Company’s stock price continued to climb until it reached a high of $21.85 on October

18, 2007. The price of $21.85 per share represents a 47% increase in the price of the Company’s



13

stock from June 14, 2007, the last day prior to the commencement of the Relevant Period in

which the Company’s stock price was a mere $14.91 per share.

36. These statements were false and misleading when made because they failed to

disclose and misrepresented the following material adverse facts, which were known to

Defendants or recklessly disregarded by them: (a) that the market for various lines of the

Company’s gun products was saturated with inventory; (b) that as a result of this increased

inventory customers were reducing orders and postponing purchases; (c) that as a result of the

foregoing, the Company’s sales did not represent true growth for the Company’s product but

were instead inventory stocking transactions that could not continue indefinitely; and (d) that

based on the foregoing, Defendants lacked a reasonable basis for their positive statements about

the Company and its future prospects.

37. On October 29, 2007, after the market closed, the Company issued a press

release announcing its preliminary financial results for the second quarter of fiscal 2008, the

period ending October 31, 2007. Among other things the Company reduced its revenue and

earnings guidance for fiscal 2008. Specifically, the Company reduced revenue guidance to $325

million, down from the previously forecasted $330, and reduced its earning guidance to $23.8

million ($0.53 per share), down from the previously forecasted $28.5 million ($0.63 per share).

Defendant Golden commented in pertinent part as follows:

While second quarter sales growth came in strong at 36% to 40%, our results were impacted by a combination of factors that emerged late in the quarter. Among these factors were softness in the market for hunting rifles and shotguns, driven by lower than expected consumer demand, a buildup of pre-season retail inventories, and unseasonably warm autumn weather, which decreased retail traffic and compressed the fall hunting season. Sales of our Thompson/Center Arms hunting rifles, which have a brand name that is already well-established in the consumer hunting market, appear to be far less impacted by these factors than are sales of new Smith & Wesson rifles and shotguns, which have only just begun to arrive in retail locations.



14

38. On this announcement the Company’s stock plunged $7.97 (40%) from

$20.09 to $12.12 on nearly 15 million shares traded. Defendants, however, continued to conceal

the truth about the Company, its operations, and its prospects.

THE TRUTH IS DISCLOSED

39. Finally, on December 6, 2007, after the market closed, the Company issued

a press release announcing its financial results for the second quarter of fiscal 2008. This time

the Company revealed a more dismal outlook than previously reported. Revenue forecast

was slashed to $300 million (down from the previously forecasted $330 million) and net

income forecast was reduced to $17 million or $0.40 per share (down from the previously

forecasted $28.5 million, or $0.63 per share). Defendant Golden commented on the

reduced expectations as follows:

As we announced last month, our results for the second quarter of fiscal 2008 in the consumer channel was impacted by a combination of factors, including softness in the market for hunting rifles and shotguns driven by lower than expected consumer demand, an industry-wide buildup of pre-season retail inventories, and unseasonably warm autumn weather, which compressed the fall hunting season. Within the consumer channel, the reduced retail activity not only affected long guns but handguns as well, and was compounded by the fact that inventory in the channel was at an extremely high level, due in part to the anticipation of a strong hunting season. In fact, during the first six months of calendar 2007, federal excise tax data indicates that industry-wide long gun sales into the distribution channel increased 20% year-over-year and handgun sales increased 37% year-over-year. However, federal background check data, which is an indicator or retail purchases, resulting that retail purchases for the same period of time increased by only 5.2%. The resulting, industry-wide inventory buildup, accentuated by lower retail traffic, caused order activity to slow beginning in October. Several manufacturers responded with significant discounts on both long guns and handguns. This caused increased price competition in the channel and served to exacerbate already inflated inventory levels.



15

40. On this announcement the Company’s stock dropped an additional $2.84

(29%) to $7.08 per share, on over 12.5 million shares traded.

41. As a result of the Company’s misstatements during the Relevant Period, the

Company lost 68% of its market capitalization as the stock price plummeted from $21.85

on October 18, 2007, to $7.08 on December 7, 2007.

DEFENDANTS’ ILLEGAL INSIDER SALES

42. While in possession of undisclosed material adverse information, Defendants

Monheit, Melby, Saltz, Golden and Kelly, took full advantage of their position as officers

and directors of the Company to misinform the public while trading in the Company’s

stock at inflated prices, as demonstrated below:

Defendant Date No. of Shares Sold

Price Total

Barry M. Monheit 9/13/2007 2,602 $19.75 $51,389.50

9/13/2007 4,000 $19.76 $79,040.00

9/13/2007 1,000 $19.77 $19,770.00

9/13/2007 600 $19.78 $11,868.00

9/13/2007 500 $19.79 $9,895.00

9/13/2007 155 $19.80 $3,069.00

9/13/2007 1,845 $19.81 $36,549.45

9/13/2007 700 $19.82 $13,874.00

9/13/2007 100 $19.83 $1,983.00

9/13/2007 1,300 $19.84 $25,792.00

9/13/2007 1,544 $19.85 $30,648.40



16

9/13/2007 1,000 $19.86 $19,860.00

9/13/2007 300 $19.87 $5,961.00

9/13/2007 1,000 $19.89 $19,890.00

9/13/2007 2,700 $19.90 $53,730.00

9/13/2007 1,400 $19.92 $27,888.00

9/13/2007 2,100 $19.93 $41,853.00

9/13/2007 2,924 $19.94 $58,304.56

9/13/2007 3,476 $19.95 $69,346.20

9/13/2007 2,100 $19.96 $41,916.00

9/13/2007 1,000 $19.97 $19,970.00

9/13/2007 1,500 $19.98 $29,970.00

9/13/2007 2,500 $19.99 $49,975.00

9/13/2007 2,000 $20.00 $40,000.00

9/13/2007 500 $20.08 $10,040.00

9/13/2007 800 $20.09 $16,072.00

9/13/2007 1,400 $20.10 $28,140.00

9/13/2007 800 $20.21 $16,168.00

9/13/2007 100 $20.22 $2,022.00

9/13/2007 100 $20.25 $2,025.00

9/14/2007 1,500 $19.75 $29,625.00

9/14/2007 800 $19.76 $15,808.00

9/18/2007 1,600 $19.18 $30,688.00

9/18/2007 10,600 $19.19 $203,414.00



17

9/18/2007 24,900 $19.20 $478,080.00

9/18/2007 23,990 $19.21 $460,847.90

9/18/2007 13,380 $19.22 $257,163.60

9/18/2007 9,079 $19.23 $174,589.17

9/18/2007 5,900 $19.24 $113,516.00

9/18/2007 2,000 $19.25 $38,500.00

9/18/2007 3,000 $19.26 $57,780.00

9/18/2007 1,000 $19.28 $19,280.00

9/18/2007 1,000 $19.30 $19,300.00

9/18/2007 1,000 $19.31 $19,310.00

9/18/2007 1,000 $19.32 $19,320.00

9/18/2007 1,000 $19.33 $19,330.00

9/18/2007 1,000 $19.35 $19,350.00

9/18/2007 1,000 $19.36 $19,360.00

9/18/2007 1,000 $19.39 $19,390.00

9/18/2007 2,400 $19.43 $46,632.00

9/18/2007 3,850 $19.44 $74,844.00

9/18/2007 7,950 $19.45 $154,627.50

9/18/2007 2,600 $19.46 $50,596.00

9/18/2007 1,900 $19.47 $36,993.00

9/18/2007 4,170 $19.48 $81,231.60

9/18/2007 6,838 $19.49 $133,272.62

9/18/2007 1,100 $19.50 $21,450.00



18

9/18/2007 4,000 $19.51 $78,040.00

9/18/2007 5,400 $19.52 $105,408.00

9/18/2007 4,200 $19.53 $82,026.00

9/18/2007 1,000 $19.54 $19,540.00

9/18/2007 4,630 $19.55 $90,516.50

9/18/2007 6,600 $19.56 $129,096.00

9/18/2007 1,200 $19.57 $23,484.00

9/18/2007 2,000 $19.58 $39,160.00

9/18/2007 2,000 $19.59 $39.180.00

9/18/2007 4,000 $19.61 $78,440.00

9/18/2007 1,000 $19.2 $19,200.00

9/18/2007 6,100 $19.63 $119,743.00

9/18/2007 2,400 $19.64 $47,136.00

9/18/2007 1,300 $19.65 $25,545.00

9/18/2007 1,000 $19.66 $19.660.00

9/18/2007 2,000 $19.67 $39,340.00

9/18/2007 1,000 $19.68 $19,680.00

9/18/2007 4,000 $19.69 $78,760.00

9/18/2007 7,369 $19.70 $145,169.30

9/18/2007 9,931 $19.71 $195,740.01

9/18/2007 10,221 $19.72 $201,558.12

9/18/2007 7,115 $19.73 $140,378.95

9/18/2007 7,699 $19.74 $151,978.26



19

9/18/2007 4,774 $19.75 $94,286.50

9/18/2007 2,000 $19.76 $39,520.00

9/18/2007 3,000 $19.77 $59,310.00

9/18/2007 3,700 $19.78 $73,186.00

9/18/2007 1,000 $19.79 $19,790.00

9/18/2007 1,558 $19.80 $30,848.40

9/18/2007 1,000 $19.81 $19,810.00

9/18/2007 1,000 $19.84 $19,840.00

9/18/2007 1,000 $19.85 $19,850.00

9/18/2007 100 $19.87 $1,987.00

9/18/2007 1,000 $19.88 $19,880.00

9/18/2007 2,100 $19.89 $41,769.00

9/18/2007 2,000 $19.90 $39,800.00

9/18/2007 2,000 $19.91 $39.820.00

TOTAL: 300,000 $5,761,123.54

Colton R. Melby 6/15/2007 100,000 $16.00 $1,600,000

6/15/2007 100,000 $16.00 $1,600,000

7/11/2007 88,216 $17.50 $1,543,780

7/12/2007 161,784 $17.51 $2,832,837.84

10/01/2007 45 $18.35 $825.75

10/01/2007 307 $18.37 $5,639.59

10/01/2007 8,200 $18.38 $150,716.00



20

10/01/2007 5,775 $18.39 $106,202.25

10/01/2007 4,666 $18.40 $85,854.40

10/01/2007 900 $18.41 $16,569.00

10/01/2007 800 $18.42 $14,736.00

10/01/2007 400 $18.43 $7,372.00

10/01/2007 200 $18.44 $3,688.00

10/01/2007 100 $18.46 $1,846.00

10/01/2007 1,766 $18.47 $32,618.02

10/01/2007 7,734 $18.48 $142,924.32

10/01/2007 500 $18.49 $9,245.00

10/01/2007 3,983 $18.50 $73,685.50

10/01/2007 4,707 $18.51 $87,126.57

10/01/2007 5,450 $18.52 $100,934.00

10/01/2007 10,638 $18.53 $197,122.14

10/01/2007 1,100 $18.54 $20,394.00

10/01/2007 400 $18.55 $7,420.00

10/01/2007 1,144 $18.56 $21,232.64

10/01/2007 100 $18.57 $1,857.00

10/01/2007 202 $18.58 $3,753.16

10/01/2007 800 $18.59 $14,872.00

10/01/2007 500 $18.60 $9,300.00

10/01/2007 400 $18.61 $7,444.00

10/01/2007 200 $18.62 $3,724.00



21

10/01/2007 8,625 $18.63 $160,.683.75

10/01/2007 5,500 $18.64 $102,520.00

10/01/2007 3,680 $18.65 $68,632.00

10/01/2007 100 $18.66 $1,866.00

10/01/2007 25,582 $18.66 $477,360.12

10/01/2007 100 $18.67 $1,867.00

10/01/2007 3,486 $18.67 $65,083.62

10/01/2007 563 $18.68 $10,516.84

10/01/2007 1,000 $18.69 $18,690.00

10/01/2007 5,500 $18.69 $102,795.00

10/01/2007 10,809 $18.70 $202,128.30

10/01/2007 6,984 $18.71 $130,670.64

10/01/2007 700 $18.72 $13,104.00

10/01/2007 5,001 $18.72 $93,618.72

10/01/2007 6,011 $18.73 $112,586.03

10/01/2007 3,766 $18.74 $70,574.54

10/01/2007 24 $18.75 $450.00

10/01/2007 13,255 $18.75 $248,531.25

10/01/2007 200 $18.76 $3,752.00

10/01/2007 2,637 $18.76 $49,470.12

10/01/2007 100 $18.77 $1,877.00

10/01/2007 6,816 $18.77 $127,936.32

10/01/2007 2,896 $18.78 $54,386.88



22

10/01/2007 7,488 $18.79 $140,699.52

10/01/2007 8,553 $18.80 $160,796.40

10/01/2007 1,000 $18.81 $18,810.00

10/01/2007 6,746 $18.81 $126,892.26

10/01/2007 1,672 $18.82 $31,467.04

10/01/2007 4,528 $18.83 $85,262.24

10/01/2007 200 $18.84 $3,768.00

10/01/2007 700 $18.84 $13,188.00

10/01/2007 700 $18.85 $13,195.00

10/01/2007 800 $18.85 $15,080.00

10/01/2007 200 18.89 $3,778.00

10/01/2007 511 $18.90 $9,657.90

10/01/2007 700 $18.94 $13,258.00

10/01/2007 3,596 $18.95 $68,144.20

10/01/2007 500 $18.96 $9,480.00

10/01/2007 302 $18.97 $5,728.94

10/01/2007 400 $18.98 $7,592.00

10/01/2007 405 $18.99 $7,690.95

10/01/2007 4,700 $19.00 $89,300.00

10/01/2007 11,005 $19.01 $209,205.05

10/01/2007 1,900 $19.02 $36,138.00

10/01/2007 2,756 $19.03 $52,446.68

10/01/2007 4,228 $19.04 $80,501.12



23

10/01/2007 100 $19.05 $1,905.00

10/01/2007 244 $19.05 $4,648.20

10/01/2007 400 $19.07 $7,628.00

10/01/2007 400 $19.08 $7,632.00

10/01/2007 1,907 $19.09 $36,404.63

10/01/2007 300 $19.10 $5,730.00

10/01/2007 700 $19.12 $13,384.00

10/01/2007 3,300 $19.13 $63,129.00

10/01/2007 3,207 $19.14 $61,381.98

10/01/2007 600 $19.15 $11,490.00

10/01/2007 500 $19.18 $9,590.00

10/01/2007 400 $19.19 $7,676.00

TOTAL: 700,000 $12,094,813.67

Mitchell A. Saltz 6/15/2007 5,000 $16.00 $80,000.00

6/15/2007 10,000 $15.97 $159,700.00

6/15/2007 25,000 $15.95 $398,750.00

6/15/2007 40,000 $15.90 $636,000.00

6/15/2007 15,000 $15.89 $238,350.00

6/15/2007 15,000 $15.88 $238,200.00

6/15/2007 10,000 $15.87 $158,700.00

6/15/2007 80,000 $15.85 $1,268,000.00

7/12/2007 40,000 $17.66 $706,400.00



24

7/12/2007 60,000 $17.90 $1,074,000.00

7/12/2007 2,500 $18.29 $45,725.00

7/12/2007 50,000 $18.36 $918,000.00

7/12/2007 50,000 $18.53 $926,500.00

7/12/2007 12,000 $18.55 $222,600.00

7/13/2007 8,000 $17.80 $142,400.00

7/13/2007 5,000 $18.00 $90,000.00

9/28/2007 20,000 $19,25 $385,000.00

9/28/2007 35,000 $19.51 $682,850.00

9/28/2007 25,000 $19.53 $488,250.00

9./28/2007 25,000 $19.54 $488,500.00

10/1/2007 30,100 $18.50 $556,850.00

10/1/2007 5,900 $18.51 $109,209.00

10/1/2007 4,000 $18.54 $74,160.00

10/1/2007 7,000 $18.58 $130,060.00

10/1/2007 2,500 $18.61 $46,525.00

10/1/2007 2,500 $18.62 $46,550.00

10/1/2007 3,000 $18.63 $55,890.00

10/1/2007 3,000 $18.65 $55,950.00

10/1/2007 5,000 $18.67 $93,350.00

10/1/2007 4,500 $18.68 $84,060.00

10/1/2007 2,500 $18.69 $46,725.00

10/1/2007 5,000 $18.70 $93,500.00



25

10/1/2007 7,000 $18.73 $131,110.00

10/1/2007 4,500 $18.74 $84,330.00

10/1/2007 3,000 $18.75 $56,250.00

10/1/2007 5,500 $18.76 $103.180.00

10/1/2007 5,000 $18.77 $93,850.00

10/1/2007 10,000 $18.79 $187,900.00

10/1/2007 2,500 $18.80 $47,000.00

10/1/2007 7,500 $18.83 $141,225.00

10/1/2007 6,000 $19.00 $114,000.00

10/1/2007 5,500 $19.01 $104,555.00

10/1/2007 4,000 $19.02 $76,080.00

10/1/2007 4,500 $19.03 $85,635.00

10/1/2007 1,500 $19.10 $28,650.00

10/1/2007 3,500 $19.11 $66,885.00

Total: 677,500 $11,958,224.00

Michael F. Golden

11/12/2007 160,000 $0.00 $0.00

6/26/2007 4,200 $16.36 $68,712.00

6/26/2007 400 $16.37 $6,548.00

6/26/2007 2,800 $16.38 $45,864.00

6/26/2007 1,000 $16.39 $16,390.00

6/26/2007 200 $16.40 $3,280.00

6/26/2007 3,400 $16.41 $55,794.00

Total: 172,000 $196,588.00



26

John A. Kelly 6/26/2007 663 $16.30 $10,806.90

6/26/2007 100 $16.29 $1,629.00

6/26/2007 300 $16.28 $4,884.00

6/26/2007 1,871 $16.27 $30,441.17

Total: 2,934 $47,761.07

DEMAND WOULD BE FUTILE

43. Plaintiff brings this action derivatively in the right and for the benefit of Smith &

Wesson to redress injuries suffered and to be suffered by Smith & Wesson as a result of the

breaches of fiduciary duty by the Individual Defendants. This is not a collusive action to confer

jurisdiction on this Court that it would not otherwise have.

44. Plaintiff will adequately and fairly represent the interests of Smith & Wesson and

its shareholders in enforcing and prosecuting its rights.

45. Plaintiff did not make a demand on the Smith & Wesson Board to bring the

claims alleged herein because such a demand would have been futile. At the time Plaintiff filed

this derivative action, the Smith & Wesson Board consisted of the following members:

Defendants Monheit, Scott, Golden, Buchanan, Furman, Saltz, Stone and Wadecki. As detailed

below, each of the directors face a sufficiently substantial likelihood of liability on the derivative

claims alleged herein and are therefore in no position to render a disinterested judgment as to

whether the Company should bring such claims, and/or lacks sufficient independence with which

to render a disinterested decision on whether to pursue the derivative claims against the

Individual Defendants.

46. The Audit Committee is responsible, by its Charter, for overseeing the accounting

and financial reporting processes of the Company and the audit of the financial statements of the



27

Company. The Committee is also responsible for reviewing the financial information to be

provided to the stockholders, reviewing the systems of internal controls, and overseeing the

Company’s accounting and financial reporting processes.

47. The Audit Committee is responsible for assisting the Board in its oversight

responsibilities relating to the integrity of the Company’s systems of internal accounting and

financial controls. The Audit Committee Charter imposed a detailed set of responsibilities and

powers in connection with financial reporting and financial controls. Thus, the Audit Committee

was responsible for overseeing and directly participating in Smith & Wesson’s financial

reporting process. Director Defendants Buchanan, Furman and Wadecki were members of the

Audit Committee during the Relevant Period. Defendant Buchanan is the Chairman of the Audit

Committee. Moreover, Defendants Buchanan, Furman and Wadecki each qualify as an “audit

committee financial expert.” As a result, these Defendants face a sufficiently substantial

likelihood of liability for their breach of fiduciary duties. Therefore, demand is futile as to

Defendants Buchanan, Furman and Wadecki.

48. Each of the Director Defendants faces a sufficiently substantial likelihood of

liability in this action because of their failure, as directors, to ensure that reliable systems of

financial controls and information and reporting were in place and functioning effectively. The

dramatic breakdowns and gaps in those controls were so widespread and systemic that each of

the Director Defendants faces substantial exposure to liability for his/her total abrogation of

his/her duty of oversight. These directors either knew or should have known, in the absence of

complete recklessness, that violations of law were occurring and took no steps in good faith to

prevent or remedy that situation, proximately causing millions of dollars of losses to the

Company.



28

49. Each of the Director Defendants participated in the issuance of false and/or

misleading statements, including the preparation of the false and/or misleading press releases and

SEC filings during the relevant time period. As such, Director Defendants face a sufficiently

substantial likelihood of liability for the same.

50. Each of the Defendants knew, consciously disregarded, was reckless and grossly

negligent in not knowing or should have known the adverse, non-public information as a result

of their access to and review of internal corporate documents, attendance at Board meetings and

conversations and connections with other corporate officers, employees and directors. However,

Defendants Monheit, Golden and Saltz participated in the illegal insider selling. Thus, demand

is futile as to these Defendants.

51. The Smith & Wesson Board of Directors and senior management participated in,

approved and/or permitted the wrongs alleged herein to have occurred and participated in efforts

to conceal or disguise those wrongs from the Smith & Wesson stockholders or recklessly,

consciously and/or negligently disregarded the wrongs complained of herein, and are therefore

not disinterested parties. As a result of their access to and review of internal corporate

documents, conversations and connections with other corporate officers, employees and

directors, and attendance at management and/or Board meetings, each of the Defendants knew

the adverse non-public information regarding the issuance of false and/or misleading press

releases and/or SEC filings. Pursuant to their specific duties as Board members, Defendants are

charged with the management of the Company and to conduct its business affairs. Defendants

breached the fiduciary duties that they owed to Smith & Wesson in that they failed to prevent the

issuance of false and/or misleading press releases and/or SEC filings. Thus, the Smith &

Wesson Board cannot exercise independent objective judgment in deciding whether to bring this



29

action or whether to vigorously prosecute this action because each of its members participated

personally in the wrongdoing or are dependent upon other Defendants who did.

THE MEMBERS OF THE BOARD LACK INDEPENDENCE

52. Director Defendant Golden serves as Smith & Wesson’s Chief Executive Officer

and President. Golden is considered an inside director because of his employment as Chief

Executive Officer and President of the Company and is therefore not considered an independent

director. Due to Defendant Golden’s employment relationship with the Company, demand upon

Defendant Golden is futile.

53. Director Defendant Scott served as a consultant to the Company from May 2004

until February 2006, during which time he earned a fee of $1,500.00 per month, plus a fee of

$1,000.00 per day while traveling on behalf of the Company. He also served as President of the

Company from December 1999 until September 2002; Chairman of the Company’s wholly

owned subsidiary, Smith & Wesson Corp., from January 2003 through December 5, 2003; and

the President of Smith & Wesson Corp. from May 2001 until December 2002. Because of

Scott’s intertwining relationships with the Company, demand upon him is futile.

54. On September 12, 2005, the Company completed a sale of an aggregate of

6,000,000 shares of common stock and warrants to purchase an additional 1,200,000 shares of

common stock at $5.33 per share until September 26, 2006. The Company received gross

proceeds of 426,160,000 for the sale of the shares. The proceeds from the sale were used to

repurchase outstanding warrants to purchase the Company’s common stock held by Saltz and

Scott. The Company entered into an agreement with Saltz and Scott, pursuant to which Saltz and

Scott agreed to sell the Company an aggregate of 1,200,000 shares our the Company’s common

stock if requested by the Company, at a price per share of $5.33 in the event of the exercise of



30

the warrants. In October 2006, the Company purchased the 1,200,000 shares pursuant to that

agreement for $6,396,000. Due to Saltz’s and Scott’s intertwining financial relationship with the

Company, demand upon Saltz and Scott is futile.

55. In addition, should the Director Defendants decide to bring claims against

themselves, it would likely trigger an “insured vs. insured” exclusion which is typical for D&O

insurance policies, which would make D&O insurance coverage unavailable to them. Therefore,

demand is futile as to all Director Defendants.

56. In addition, demand would be futile and useless for the additional following

reasons:

a. The Director Defendants, because of their inter-related business,

professional and personal relationships, have developed debilitating

conflicts of interest that prevent the Board members of the Company from

taking the necessary and proper action on behalf of the Company as

requested herein;

b. The Director Defendants of Smith & Wesson, as more fully detailed

herein, participated in, approved and/or permitted the wrongs alleged

herein to have occurred and participated in efforts to conceal or disguise

those wrongs from the Company’s stockholders or recklessly and/or

negligently disregarded the wrongs complained of herein, and are

therefore not disinterested parties. Each of the Director Defendants

exhibited a sustained and systemic failure to fulfill their fiduciary duties,

which could not have been an exercise of good faith business judgment

and amounted to gross negligence and extreme recklessness;



31

c. In order to bring this suit, a majority of the directors of Smith & Wesson

would be forced to sue themselves and persons with whom they have

extensive business and personal entanglements, which they will not do,

thereby excusing demand;

d. The acts complained of constitute violations of the fiduciary duties owed

by the Smith & Wesson officers and directors and these acts are incapable

of ratification;

e. Smith & Wesson has been and will continue to be exposed to significant

losses due to the wrongdoing complained of herein, yet the Individual and

Director Defendants and current Board have not filed any lawsuits against

themselves or others who were responsible for that wrongful conduct to

attempt to recover for Smith & Wesson any part of the damages Smith &

Wesson suffered and will continue to suffer;

f. The actions of the directors have impaired the Board’s ability to validly

exercise its business judgment and rendered it incapable of reaching an

independent decision as to whether to accept Plaintiff’s demands; and

g. Any suit by the directors of Smith & Wesson to remedy these wrongs

would likely expose the Director Defendants and Smith & Wesson to

further violations of securities laws which could result in additional civil

actions being filed against one or more of the Director Defendants thus,

they are hopelessly conflicted in making any supposedly independent

determination as to whether to sue themselves.



32

57. Plaintiff has not made any demand on the shareholders of Smith & Wesson to

institute the respective action since demand would be a futile and useless act for the following

reasons:

a. Smith & Wesson is a publicly held company with approximately millions

of shares outstanding, and thousands of shareholders;

b. Making demand on such a number of shareholders would be impossible

for Plaintiff, who has no way of finding out the names, addresses or phone

numbers of all the shareholders; and

c. Making demand on all shareholders would force Plaintiff to incur huge

expenses, assuming all shareholders could be individually identified.

58. Smith & Wesson has expended and will continue to expend significant sums of

money as a result of the illegal and improper actions described above. Such expenditures will

include, but are not limited to Costs incurred to carry out internal investigations, including legal

fees paid to outside counsel and experts.

FIRST CAUSE OF ACTION

Against the Individual Defendants for Breach of Fiduciary Duty

59. Plaintiff incorporates by reference and realleges each and every allegation set

forth above as if set forth fully herein.

60. The Individual Defendants owed and owe Smith & Wesson fiduciary obligations.

By reason of their fiduciary relationships, the Individual Defendants owed and owe Smith &

Wesson the highest obligation of good faith, fair dealing, loyalty and due care.

61. The Individual Defendants, and each of them, violated and breached their

fiduciary duties of care, loyalty, reasonable inquiry, oversight, good faith and supervision.



33

62. The Individual Defendants had actual or constructive knowledge that they had

caused the Company to improperly misrepresent the business prospects of the Company and

failed to correct the Company’s public announcements. These actions could not have been a

good faith exercise of prudent business judgment to protect and promote the Company’s

corporate interests.

63. As a direct and proximate result of the Individual Defendants’ failure to perform

their fiduciary obligations, Smith & Wesson has sustained significant damages. As a result of

the misconduct alleged herein, the Individual Defendants are liable to the Company.

64. Plaintiff, on behalf of Smith & Wesson, has no adequate remedy at law.

SECOND CAUSE OF ACTION

Against The Individual Defendants for Abuse of Control



66. The Individual Defendants’ misconduct alleged herein constituted an abuse of

their ability to control and influence Smith & Wesson, for which they are legally responsible.

67. As a direct and proximate result of the Individual Defendants’ abuse of control,

Smith & Wesson has sustained significant damages.

68. As a result of the misconduct alleged herein, the Individual Defendants are liable

to the Company.




34

THIRD CAUSE OF ACTION

Against The Individual Defendants for Gross Mismanagement



71. By their actions alleged herein, the Individual Defendants, either directly or

through aiding and abetting, abandoned and abdicated their responsibilities and fiduciary duties

with regard to prudently managing the assets and business of Smith & Wesson in a manner

consistent with the operations of a publicly held corporation.

72. As a direct and proximate result of the Individual Defendants’ gross

mismanagement and breaches of duty alleged herein, Smith & Wesson has sustained significant

damages in excess of millions of dollars.

73. As a result of the misconduct and breaches of duty alleged herein, the Individual

Defendants are liable to the Company.


FOURTH CAUSE OF ACTION

Against The Individual Defendants for Waste of Corporate Assets



76. As a result of the Individual Defendants’ improper conduct and by failing to

properly consider the interests of the Company and its public shareholders by failing to conduct

proper supervision, Individual Defendants have caused Smith & Wesson to waste valuable

corporate assets by paying bonuses to certain of its executive officers and incur potentially



35

millions of dollars of legal liability and/or legal costs to defend the Individual Defendants’

unlawful actions.

77. As a result of the waste of corporate assets, Individual Defendants are liable to the

Company.


FIFTH CAUSE OF ACTION

Against The Individual Defendants for Unjust Enrichment



80. By their wrongful acts and omissions, the Individual Defendants were unjustly

enriched at the expense of and to the detriment of Smith & Wesson.

81. Plaintiff, as shareholder and representative of Smith & Wesson, seeks restitution

from the Individual Defendants, and seeks an order of this Court disgorging all profits, benefits

and other compensation obtained by the Individual Defendants, from their wrongful conduct and

fiduciary breaches.

SIXTH CAUSE OF ACTION

Against The Individual Defendants

for Contribution And Indemnification



83. Smith & Wesson is alleged to be liable to various persons, entities and/or classes

by virtue of the same facts or circumstances as are alleged herein to give rise to Individual

Defendants’ liability to Smith & Wesson.



36

84. Smith & Wesson’s alleged liability on account of the wrongful acts and practices

and related misconduct described above arises, in whole or in part, from the knowing, reckless,

disloyal and/or bad faith acts or omissions of the Individual Defendants as alleged above, and

Smith & Wesson is entitled to contribution and indemnification from each of the Individual

Defendants in connection with all such claims that have been, are or may in the future be

asserted against Smith & Wesson by virtue of the Individual Defendants’ misconduct.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays for relief and judgment, as follows:

A. Against the Individual Defendants and in favor of the Company for the amount of

damages sustained by the Company as a result of the Individual Defendants’ breaches of

fiduciary duties, abuse of control, gross mismanagement, waste of corporate assets and unjust

enrichment;

B. Extraordinary equitable and/or injunctive relief as permitted by law, equity and

state statutory provisions sued hereunder, including attaching, impounding, imposing a

constructive trust on or otherwise restricting the proceeds of the Individual Defendants’ trading

activities or their other assets so as to ensure that Plaintiff has an effective remedy;

C. Awarding to Smith & Wesson restitution from the Individual Defendants, and

each of them, and ordering disgorgement of all profits, benefits and other compensation obtained

by these Defendants;

D. Awarding to Plaintiff the costs and disbursements of the action, including

reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses; and

E. Granting such other and further relief as the Court deems just and proper.



37

JURY DEMAND

Plaintiff demands a trial by jury.

Respectfully submitted, DATED: February 25, 2008 THE O’MARA LAW FIRM, P.C.

WILLIAM M. O’MARA, ESQ. BRIAN O. O’MARA, ESQ DAVID C. O’MARA, ESQ

/s/ David C. O’Mara DAVID C. O’MARA, ESQ.

311 EAST LIBERTY STREET RENO, NEVADA 89501 TELEPHONE: 775/323-1321 775/323-4082 (FAX) WILLIAM B. FEDERMAN FEDERMAN & SHERWOOD 10205 N. PENNSYLVANIA OKLAHOMA CITY, OKLAHOMA 73120 TELEPHONE: 405/235-1560 405/239-2112 (FAX) -AND- 2926 MAPLE AVE., STE. 200 DALLAS, TEXAS 75201

Attorneys for Plaintiff I:\Pending\SMITH & WESSONInc\Pleadings\Complaint.doc



the o’mara law firm, p.c. william m. o’mara, esq. 311 east...

Documents