Exhibit 10.2

TAX MATTERS AGREEMENT

by and between

SMITH & WESSON BRANDS, INC.

and

AMERICAN OUTDOOR BRANDS, INC.

Dated as of August 21, 2020

--------------------------------------------------------------------------------

TAX MATTERS AGREEMENT

THIS TAX MATTERS AGREEMENT (this “Agreement”) is entered into as of August 21,
2020, by and between Smith & Wesson Brands, Inc., a Nevada corporation (“SWBI”),
and American Outdoor Brands, Inc., a Delaware corporation (“AOUT”). Each of SWBI
and AOUT is sometimes referred to herein as a “Party” and, collectively, as the
“Parties.”

WHEREAS, pursuant to the Separation and Distribution Agreement, dated as of
August 21, 2020, by and between SWBI and AOUT (the “Separation Agreement”), SWBI
agreed, among other things, to contribute certain assets to AOUT (the
“Contribution”) and to distribute all of the outstanding stock of AOUT to SWBI’s
stockholders (the “Distribution”);

WHEREAS, prior to consummation of the Distribution, SWBI was in “control” of
AOUT (within the meaning of Section 368(c) of the Code);

WHEREAS, the Parties intend that, for federal income Tax purposes, the
Contribution and the Distribution qualify as a reorganization within the meaning
of Section 368(a)(1)(D) of the Code and a distribution to which Section 355 of
the Code applies and this Agreement and any related agreement constitute a “plan
of reorganization” within the meaning of Section 368 of the Code;

WHEREAS, the obligation of SWBI to consummate the Contribution and Distribution
is conditioned, among other things, upon the receipt of a tax opinion from the
Tax Advisor that the Contribution and the Distribution will qualify as a
reorganization within the meaning of Section 368(a)(1)(D) of the Code and a
distribution to which Section 355 of the Code applies (the “Tax Opinion”); and

WHEREAS, the Parties wish to (a) provide for the payment of Tax liabilities and
entitlement to refunds thereof, allocate responsibility for, and cooperation in
the filing of Tax Returns, and provide for certain other matters relating to
Taxes, and (b) set forth certain covenants and indemnities relating to the
preservation of the intended Tax treatment of the Contribution and the
Distribution.

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions,
covenants and provisions of this Agreement, each of the Parties mutually
covenants and agrees as follows:

ARTICLE I

DEFINITIONS

Section 1.01. General. As used in this Agreement, the following terms have the
following meanings:

“Affiliated Group” means an affiliated group of corporations within the meaning
of Section 1504(a) of the Code, or any other group filing consolidated, combined
or unitary Tax Returns under state, local or foreign law.

“Agreement” has the meaning set forth in the preamble to this Agreement.

“AOUT” has the meaning set forth in the preamble to this Agreement.

“AOUT Equity Awards” has the meaning set forth in the Employee Matters
Agreement.

“AOUT Group” has the meaning set forth in the Separation Agreement.

--------------------------------------------------------------------------------

“AOUT Separate Tax Return” means any Tax Return that is required to be filed by,
or with respect to, a member of the AOUT Group that is not a Combined Tax
Return.

“AOUT Tax Representation Letter” means the tax representation letter from AOUT
addressed to the Tax Advisor dated July 1, 2020, supporting the Tax Opinion.

“Closing of the Books Method” means the apportionment of items between portions
of a taxable period based on a closing of the books and records on the close of
the Distribution Date (in the event that the Distribution Date is not the last
day of the taxable period, as if the Distribution Date were the last day of the
taxable period), subject to adjustment for items accrued on the Distribution
Date that are properly allocable to the taxable period following the
Distribution, as determined by SWBI in accordance with applicable law; provided,
however, that Taxes not based upon or measured by net or gross income or
specific events shall be apportioned between portions of a taxable period on a
pro rata basis in accordance with the number of days in each portion.

“Code” means the Internal Revenue Code of 1986, as amended.

“Combined Tax Return” means a Tax Return filed in respect of federal, state,
local or foreign income Taxes for an Affiliated Group, or any other affiliated,
consolidated, combined, unitary, fiscal unity or other group basis (including as
permitted by Section 1501 of the Code).

“Contribution” has the meaning set forth in the recitals to this Agreement.

“Disqualifying Action” means (i) any breach by AOUT of any representation,
warranty or covenant made by it in this Agreement or (ii) any event (or series
of events) involving the capital stock of AOUT that, in either case, would
negate the Tax-Free Status of the Transactions; provided, however, the term
“Disqualifying Action” shall not include any action required or expressly
permitted under any Transaction Document or that is undertaken pursuant to the
Contribution or the Distribution.

“Distribution” has the meaning set forth in the recitals to this Agreement.

“Distribution Date” means the date on which the Distribution occurs.

“Effective Time” means the time at which the Distribution becomes effective.

“Employee Matters Agreement” means the Employee Matters Agreement by and between
the Parties dated August 21, 2020.

“Final Determination” means the final resolution of liability for any Tax for
any taxable period, by or as a result of: (i) a final decision, judgment, decree
or other order by any court of competent jurisdiction that can no longer be
appealed; (ii) a final settlement with the IRS, a closing agreement or accepted
offer in compromise under Section 7121 or 7122 of the Code, or a comparable
agreement under the laws of other jurisdictions, that resolves the entire Tax
liability for any taxable period; or (iii) any other final resolution, including
by reason of the expiration of the applicable statute of limitations or the
execution of a pre-filing agreement with the IRS or other Tax Authority.

“Indemnified Party” means the Party that is entitled to seek indemnification
from the other Party pursuant to the provisions of Section 2.01.

“Indemnifying Party” means the Party from which the other Party is entitled to
seek indemnification pursuant to the provisions of Section 2.01.

 

2

--------------------------------------------------------------------------------

“IRS” means the Internal Revenue Service or any successor thereto, including its
agents, representatives, and attorneys.

“Outdoor Products and Accessories Business” has the meaning set forth in the
Separation Agreement.

“Party” has the meaning set forth in the preamble to this Agreement.

“Person” has the meaning set forth in Section 7701(a)(1) of the Code.

“Post-Distribution Period” means any taxable period (or portion thereof)
beginning after the Distribution Date.

“Pre-Distribution Period” means any taxable period (or portion thereof) ending
on or before the Distribution Date.

“Separation Agreement” has the meaning set forth in the recitals to this
Agreement.

“Separation Taxes” means any income Taxes (other than Transaction Taxes) that
arise in connection with the Contribution or the Distribution. For the avoidance
of doubt, Separation Taxes shall include, without limitation, any federal,
state, or local income Taxes arising out of deferred intercompany gains
recognized pursuant to Treasury Regulations Section 1.1502-13.

“SWBI” has the meaning set forth in the preamble to this Agreement.

“SWBI Equity Awards” has the meaning set forth in the Employee Matters
Agreement.

“SWBI Group” has the meaning set forth in the Separation Agreement.

“SWBI Separate Tax Return” means any Tax Return that is required to be filed by,
or with respect to, a member of the SWBI Group that is not a Combined Tax
Return.

“SWBI Tax Representation Letter” means the tax representation letter from SWBI
addressed to the Tax Advisor dated July 1, 2020, supporting the Tax Opinion.

“Tax” means (i) all taxes, charges, fees, duties, levies, imposts, or other
similar assessments, imposed by any federal, state or local or foreign
governmental authority, including income, gross receipts, excise, property,
sales, use, license, capital stock, transfer, franchise, payroll, withholding,
social security, value added, real property transfer, intangible, recordation,
registration, documentary, stamp and other taxes of any kind whatsoever, and
(ii) any interest, penalties or additions attributable thereto.

“Tax Advisor” means Greenberg Traurig, LLP.

“Tax Arbiter” has the meaning set forth in Section 5.08.

“Tax Attributes” means net operating losses, capital losses, investment tax
credit carryovers, earnings and profits, foreign tax credit carryovers, overall
foreign losses, previously taxed income, separate limitation losses, deductions,
credits or other comparable items, and assets basis, that could affect a Tax
liability for a past or future taxable period.

 

3

--------------------------------------------------------------------------------

“Tax Authority” means any governmental authority or any subdivision, agency,
commission or entity thereof or any quasi-governmental or private body having
jurisdiction over the assessment, determination, collection or imposition of any
Tax (including the IRS).

“Tax Detriment” means an increase in the Tax liability (or reduction in refund
or credit or item of deduction or expense, including any carryforward) of a
taxpayer for any taxable period.

“Tax Matter” has the meaning set forth in Section 4.01.

“Tax Notice” has the meaning set forth in Section 2.07.

“Tax Opinion” has the meaning set forth in the recitals to this Agreement.

“Tax Opinion Documents” means the Tax Opinion and the information and
representations provided by, or on behalf of, SWBI or AOUT to the Tax Advisor in
connection therewith.

“Tax Return” means any return, report, certificate, form or similar statement or
document (including any related or supporting information or schedule attached
thereto and any information return, or declaration of estimated Tax) supplied or
required to be supplied to, or filed with, a Tax Authority in connection with
the payment, determination, assessment or collection of any Tax or the
administration of any laws relating to any Tax and any amended Tax return or
claim for refund.

“Tax-Free Status of the Transactions” means the qualification of the
Contribution and the Distribution as a reorganization within the meaning of
Section 368(a)(1)(D) of the Code and a distribution with respect to which gain
or loss is not recognized by SWBI, AOUT, or their respective shareholders
pursuant to Section 355 of the Code and in which the AOUT Common Stock
distributed is “qualified property” under Section 361(c) of the Code.

“Transaction Documents” means this Agreement, the Separation Agreement, the
Transition Services Agreement, and the Employee Matters Agreement.

“Transaction Taxes” means any Tax Detriment incurred by SWBI or AOUT as a result
of the Contribution or the Distribution failing to qualify as a reorganization
within the meaning of Section 368(a)(1)(D) of the Code and a distribution to
which Section 355 of the Code applies or corresponding provisions of other
applicable laws with respect to Taxes.

“Transition Services Agreement” means the Transition Services Agreement by and
between the Parties dated August 21, 2020.

“Transfer Taxes” means all sales, use, transfer, real property transfer,
intangible, recordation, registration, documentary, stamp or similar Taxes
imposed on the Contribution or the Distribution.

“Treasury Regulations” means the final and temporary (but not proposed) income
Tax regulations promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).

Section 1.02. Additional Definitions. Capitalized terms used but not defined in
this Agreement have the meaning ascribed to them in the Separation Agreement.

 

4

--------------------------------------------------------------------------------

ARTICLE II

ALLOCATION, PAYMENT AND INDEMNIFICATION

Section 2.01. Responsibility for Taxes; Indemnification.

(a) SWBI shall be responsible for and shall pay, and shall indemnify and hold
harmless AOUT for, all Tax liabilities (and any loss, cost, damage or expense,
including reasonable attorneys’ fees and costs, incurred in connection
therewith) attributable to: (i) any Taxes reported or required to be reported on
(A) an SWBI Separate Tax Return, or (B) a Combined Tax Return that any member of
the SWBI Group files or is required to file; (ii) any Transaction Taxes; and
(iii) fifty percent (50%) of all Transfer Taxes; in each case, other than Taxes
for which AOUT is responsible for under Section 2.01(b).

(b) AOUT shall be responsible for and shall pay, and shall indemnify and hold
harmless SWBI for, all Tax liabilities (and any loss, cost, damage or expense,
including reasonable attorneys’ fees and costs, incurred in connection
therewith) attributable to: (i) any Taxes reported or required to be reported on
(A) an AOUT Separate Tax Return, or (B) a Combined Tax Return that any member of
the AOUT Group files or is required to file; (ii) any Taxes reported or required
to be reported on any Combined Tax Return that any member of the SWBI Group
files or is required to file to the extent such Taxes are attributable to the
Outdoor Products and Accessories Business, as determined pursuant to
Section 2.02; (iii) any Taxes that arise from or are attributable to a
Disqualifying Action; (iv) fifty percent (50%) of all Transfer Taxes; and
(v) any Separation Taxes.

(c) If the Indemnifying Party is required to indemnify the Indemnified Party
pursuant to this Section 2.01, the Indemnified Party shall submit its
calculations of the amount required to be paid pursuant to this Section 2.01,
showing such calculations in sufficient detail so as to permit the Indemnifying
Party to understand the calculations. Subject to the following sentence, the
Indemnifying Party shall pay to the Indemnified Party, no later than twenty
(20) days after the Indemnifying Party receives the Indemnified Party’s
calculations, the amount that the Indemnifying Party is required to pay the
Indemnified Party under this Section 2.01. If the Indemnifying Party disagrees
with such calculations, it must notify the Indemnified Party of its disagreement
in writing within fifteen (15) days of receiving such calculations.

(d) For all Tax purposes, SWBI and AOUT agree to treat (i) any payment required
by this Agreement (other than payments with respect to interest accruing after
the Effective Time) as either a contribution by SWBI to AOUT or a distribution
by AOUT to SWBI as the case may be, occurring immediately prior to the Effective
Time, and (ii) any payment of interest or non-federal Taxes by or to a Tax
Authority as taxable or deductible, as the case may be, to the party entitled
under this Agreement to retain such payment or required under this Agreement to
make such payment, in either case except as otherwise mandated by applicable
law.

(e) The amount of any indemnification payment pursuant to this Section 2.01
shall be reduced by the amount of any reduction in Taxes actually realized by
the Indemnified Party by the end of the taxable year in which the indemnity
payment is made, and shall be increased if and to the extent necessary to ensure
that, after all required Taxes on the indemnity payment are paid (including
Taxes applicable to any increases in the indemnity payment under this
Section 2.01(e)), the Indemnified Party receives the amount it would have
received if the indemnity payment was not taxable.

(f) The determination of the Tax liabilities of SWBI and AOUT, respectively,
shall be made in a manner consistent with the Employee Matters Agreement and the
Separation Agreement.

 

5

--------------------------------------------------------------------------------

Section 2.02. Determination of Taxes Attributable to the Outdoor Products and
Accessories Business.

(a) For purposes of Section 2.01(b)(ii), the amount of Taxes attributable to the
Outdoor Products and Accessories Business shall be determined by SWBI on a pro
forma Combined Tax Return of the AOUT Group prepared: (i) assuming that the
members of the AOUT Group were not included in the group that filed the relevant
Combined Tax Return; (ii) including only Tax items of members of the AOUT Group
that were included in the relevant Combined Tax Return; (iii) using all
elections, accounting methods and conventions used on the relevant Combined Tax
Return for such period; (iv) applying the highest statutory marginal corporate
income Tax rate in effect for the relevant taxable period; (v) assuming that the
AOUT Group elects not to carry back any net operating losses; and (vi) assuming
that the AOUT Group’s utilization of any Tax Attribute carryforward or carryback
is limited to the Tax Attributes of the AOUT Group that would be available if
the Tax liability of the AOUT Group for each prior taxable year were determined
in accordance with this Section 2.02.

(b) The Parties shall cooperate in good faith in order to jointly determine the
allocation of items of income and expense and intercompany eliminations for
purposes of preparing the pro forma Combined Tax Return of the AOUT Group
pursuant to Section 2.02(a).

Section 2.03. Preparation of Tax Returns.

(a) SWBI’s Responsibility. SWBI shall prepare and timely file (taking into
account applicable extensions) all (i) Combined Tax Returns that any member of
the SWBI Group is required to file or elects to file, and (ii) SWBI Separate Tax
Returns. To the extent that such a Combined Tax Return reflects operations of
the AOUT Group for a taxable period that includes the Distribution Date, SWBI
shall include in such Combined Tax Return the results of such member of the AOUT
Group on the basis of the Closing of the Books Method to the extent permitted by
applicable law.

(b) AOUT’s Responsibility. Subject to any arrangement under the Transaction
Documents, AOUT shall prepare and timely file (taking into account applicable
extensions) all Tax Returns required to be filed by or with respect to any
member of the AOUT Group other than those Tax Returns that SWBI is required to
prepare and file under Section 2.03(a).

Section 2.04. Payment of Sales, Use or Similar Taxes. Transfer Taxes shall be
borne fifty percent (50%) by SWBI and fifty percent (50%) by AOUT.
Notwithstanding anything in this Section 2.04 to the contrary, the Party
required by applicable law shall remit payment for any Transfer Taxes and duly
and timely file any related Tax Returns, subject to any indemnification rights
it may have against the other Party, which shall be paid in accordance with
Section 2.01(c). The Parties shall cooperate in: (i) determining the amount of
such Taxes; (ii) providing all available exemption certificates; and
(iii) preparing and timely filing any and all required Tax Returns for or with
respect to such Taxes with any and all appropriate Tax Authorities.

Section 2.05. Treatment of Equity Awards.

(a) To the extent permitted by law, income Tax deductions with respect to the
issuance, exercise, vesting or settlement after the Distribution Date of any
SWBI Equity Awards or AOUT Equity Awards shall be claimed: (i) in the case of an
active officer or employee, solely by the Group that employs such officer or
employee at the time of such issuance, exercise, vesting, or settlement, as
applicable; (ii) in the case of a former officer or employee, solely by the
Group that was the last to employ such former officer or employee; and (iii) in
the case of a director or former director (who is not an officer or employee or
former officer or employee of a member of either Group), (A) solely by the SWBI
Group if such person was, at any time before or after the Distribution, a
director of any member of the SWBI Group, and (B) in any other case, solely by
the AOUT Group.

 

6

--------------------------------------------------------------------------------

(b) If, notwithstanding clause (a), the AOUT Group actually utilizes any
deductions for a taxable period ending after the Distribution Date with respect
to (i) the issuance, exercise, vesting or settlement after the Distribution Date
of any SWBI Equity Awards, or (ii) any liability with respect to compensation
required to be paid or satisfied by, or otherwise allocated to, any member of
the SWBI Group in accordance with any Transaction Document, AOUT shall promptly
remit an amount equal to the overall net reduction in actual cash Taxes paid by
the AOUT Group (determined on a “with and without” basis) resulting from the
event giving rise to such deduction in the year of such event. If a Tax
Authority subsequently reduces or disallows the use of such a deduction by the
AOUT Group, SWBI shall return an amount equal to the overall net increase in Tax
liability of the AOUT Group owing to the Tax Authority to the remitting party.

(c) For any taxable period (or portion thereof), except as SWBI may at any time
determine in its reasonable discretion, SWBI shall satisfy, or shall cause to be
satisfied, all applicable withholding and reporting responsibilities (including
all income, payroll or other Tax reporting related to income to any current or
former employees) with respect to the issuance, exercise, vesting or settlement
of SWBI Equity Awards that settle with or with respect to stock of SWBI. For any
taxable period (or portion thereof), AOUT shall satisfy, or shall cause to be
satisfied, all applicable withholding and reporting responsibilities (including
all income, payroll or other Tax reporting related to income to any current or
former employees) with respect to the exercise, vesting or settlement of AOUT
Equity Awards that settle with or with respect to stock of AOUT. SWBI and AOUT
acknowledge and agree that the Parties shall cooperate with each other and with
third-party providers to effectuate withholding and remittance of Taxes, as well
as required Tax reporting, in a timely manner.

Section 2.06. Tax Refunds. SWBI shall be entitled to any refund (and any
interest thereon received from the applicable Tax Authority) of Taxes for which
SWBI is responsible for hereunder, AOUT shall be entitled to any refund (and any
interest thereon received from the applicable Tax Authority) of Taxes for which
AOUT is responsible for hereunder, and a Party receiving a refund to which the
other Party is entitled hereunder shall pay over such refund to such other Party
within twenty (20) days after such refund is received.

Section 2.07. Audits and Proceedings.

(a) Notwithstanding any other provision hereof, if after the Distribution Date,
an Indemnified Party receives any notice, letter, correspondence, claim or
decree from any Tax Authority (a “Tax Notice”) and, upon receipt of such Tax
Notice, believes it has suffered or potentially could suffer any Tax liability
for which it is indemnified pursuant to Section 2.01, the Indemnified Party
shall deliver such Tax Notice to the Indemnifying Party within ten (10) days of
the receipt of such Tax Notice; provided, however, that the failure of the
Indemnified Party to provide the Tax Notice to the Indemnifying Party shall not
affect the indemnification rights of the Indemnified Party pursuant to
Section 2.01, except to the extent that the Indemnifying Party is prejudiced by
the Indemnified Party’s failure to deliver such Tax Notice. The Indemnifying
Party shall have the right to handle, defend, conduct and control, at its own
expense, any Tax audit or other proceeding that relates to such Tax Notice;
provided that, in all events, SWBI shall have the right to control any Tax audit
or proceeding relating to Transaction Taxes or the Tax-Free Status of the
Transactions. The Indemnifying Party shall also have the right to compromise or
settle any such Tax audit or other proceeding that it has the authority to
control pursuant to the preceding sentence subject, in the case of a compromise
or settlement that could adversely affect the Indemnified Party, to the
Indemnified Party’s consent, which consent shall not be unreasonably withheld.
If the Indemnifying Party fails within a reasonable time after notice to defend
any such Tax Notice or the resulting audit or proceeding as provided herein, the
Indemnifying Party shall be bound by the results obtained by the Indemnified
Party in connection therewith. The Indemnifying Party shall pay to the
Indemnified Party the amount of any Tax liability within fifteen (15) days after
a Final Determination of such Tax liability.

 

7

--------------------------------------------------------------------------------

(b) If after the Distribution Date, SWBI or AOUT receive a Tax Notice that could
have an impact on the other Party, SWBI or AOUT, as applicable, shall deliver
such Tax Notice to the other Party within ten (10) days of the receipt of such
Tax Notice.

Section 2.08. Carryforwards and Carrybacks.

(a) SWBI shall notify AOUT after the Distribution Date of any consolidated
carryover item which may be partially or totally attributed to and carried over
by AOUT or a member of its Affiliated Group and will notify AOUT of subsequent
adjustments which may affect such carryover item.

(b) To the extent permitted by applicable law, AOUT shall not carry back any
federal income Tax item to any Pre-Distribution Period.

Section 2.09. Tax Attributes. Tax Attributes arising in a Pre-Distribution
Period shall be allocated to the SWBI Group and the AOUT Group in accordance
with the Code and Treasury Regulations. The Parties shall jointly determine the
allocation of such Tax Attributes arising in Pre-Distribution Periods as soon as
reasonably practicable following the Distribution Date, and hereby agree to
compute all Taxes for Post-Distribution Periods consistently with that
determination unless otherwise required by a Final Determination.

Section 2.10. Section 336(e) Election.

(a) Pursuant to Treasury Regulations Section 1.336-2(h) and (j), SWBI and AOUT
agree that SWBI may make a timely protective election under Section 336(e) of
the Code and the Treasury Regulations issued thereunder with respect to the
Distribution for each member of the AOUT Group that is a domestic corporation
for federal income Tax purposes.

(b) In the event that an election contemplated in Section 2.10(a) is made and
becomes effective, then the Parties shall share in any Tax benefit derived as a
result of such election in accordance with the Parties’ relative responsibility
for such Taxes under this Article II, and payments shall be made between the
Parties, if necessary.

(c) The Parties shall cooperate in good faith in order to determine whether to
make any elections contemplated in Section 2.10(a) and in the timely completion
of such elections, if any.

ARTICLE III

TAX-FREE STATUS OF THE TRANSACTIONS

Section 3.01. Representations and Warranties.

(a) AOUT. AOUT hereby represents and warrants or covenants and agrees, as
appropriate, that the facts presented and the representations made in the AOUT
Tax Representation Letter are, or will be from the time presented or made
through and including the Effective Time and thereafter, true, correct and
complete in all respects.

 

8

--------------------------------------------------------------------------------

(b) SWBI. SWBI hereby represents and warrants or covenants and agrees, as
appropriate, that the facts presented and the representations made in the SWBI
Tax Representation Letter and any other materials (including the Revenue
Procedure 96-30 checklist) delivered or deliverable by SWBI in connection with
the rendering by the Tax Advisor of the Tax Opinion are, or will be from the
time presented or made through and including the Effective Time and thereafter,
true, correct and complete in all respects.

(c) No Contrary Knowledge. Each of SWBI and AOUT represents and warrants that it
knows of no fact that may cause the Tax treatment of the Contribution or the
Distribution to be other than the Tax-Free Status of the Transactions.

Section 3.02. Covenants.

(a) Preservation of Tax-Free Status. Neither SWBI nor AOUT shall take or fail to
take any action within its control that would negate the Tax-Free Status of the
Transactions.

(b) Tax Reporting. Each of SWBI and AOUT covenants and agrees that it will not
take any position on any Tax Return that is inconsistent with the Tax-Free
Status of the Transactions.

(c) Actions Consistent with Representations and Covenants. Neither SWBI nor AOUT
shall take any action, or to fail to take any action, which action or failure
would be inconsistent with or cause to be untrue any material information,
covenant, or representation in this Agreement, the Separation Agreement, or the
Tax Opinion Documents.

(d) Plan or Series of Related Transactions. For a period of two (2) years from
the Distribution Date, none of AOUT, its affiliates, or any of their respective
officers, directors or authorized agents will enter into any agreement,
understanding or arrangement or any substantial negotiations with respect to any
transaction or series of transactions, including any issuance or transfer of an
option (within the meaning of Section 355(e) of the Code), that is for purposes
of Section 355(e) of the Code and the Treasury Regulations thereunder
(including, for purposes of this Section 3.02(d), any proposed income tax
regulations to the extent no final or temporary income tax regulations have been
issued that supersede such proposed regulations), part of a plan or series of
related transactions with the Distribution pursuant to which one or more Persons
acquire, directly or indirectly, stock possessing fifty percent (50%) or more of
the total combined voting power or value of all classes of stock of AOUT.

(e) During the two-year period following the Distribution Date:

(i) AOUT shall (A) maintain its status as a company engaged in an active trade
or business for purposes of Section 355(b)(2) of the Code, and (B) not engage in
any transaction that would result in it ceasing to be a company engaged in an
active trade or business for purposes of Section 355(b)(2) of the Code.

(ii) AOUT shall not, and shall not agree to, liquidate or merge, consolidate, or
amalgamate with any other Person.

(iii) AOUT shall not sell or otherwise dispose of, or allow the sale or other
disposition of, more than 30% of the consolidated gross assets of the AOUT Group
or more than 30% of the gross assets of the Outdoor Products and Accessories
Business, in each case measured based on fair market values as of the
Distribution Date.

 

9

--------------------------------------------------------------------------------

(iv) AOUT shall not purchase any of its outstanding stock, other than through
stock purchases meeting the requirements of Section 4.05(1)(b) of IRS Revenue
Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure
by IRS Revenue Procedure 2003-48).

(v) AOUT shall not amend its certificate of incorporation (or other
organizational documents), or take any other action, affecting the voting rights
of the equity interests of AOUT.

(f) Notwithstanding the provisions of Section 3.02(d) and Section 3.02(e), AOUT
and the other members of the AOUT Group may take any action that would
reasonably be expected to be inconsistent with the covenants contained in
Section 3.02(d) or Section 3.02(e) if either: (i) AOUT notifies SWBI of its
proposal to take such action and AOUT and SWBI obtain a ruling from the IRS to
the effect that such action will not affect the Tax-Free Status of the
Transactions, provided that AOUT agrees in writing to bear any expenses
associated with obtaining such a ruling and, provided further that AOUT shall
not be relieved of any liability under Section 2.01 of this Agreement by reason
of seeking or having obtained such a ruling; or (ii) AOUT notifies SWBI of its
proposal to take such action and obtains, at its own expense, an unqualified
opinion of counsel (A) from a Tax advisor recognized as an expert in federal
income Tax matters and acceptable to SWBI in its sole discretion, (B) on which
SWBI may rely, and (C) to the effect that such action “will” not affect the
Tax-Free Status of the Transactions, provided that AOUT shall not be relieved of
any liability under Section 2.01 of this Agreement by reason of having obtained
such an opinion.

ARTICLE IV

COOPERATION

Section 4.01. General Cooperation. The Parties shall each cooperate fully with
all reasonable requests in writing from the other Party, or from an agent,
representative or advisor to such Party, in connection with the preparation and
filing of Tax Returns, claims for Tax refunds, Tax proceedings, and calculations
of amounts required to be paid pursuant to this Agreement, in each case, related
or attributable to or arising in connection with Taxes of any of the Parties
covered by this Agreement and the establishment of any reserve required in
connection with any financial reporting (a “Tax Matter”). Such cooperation shall
include the provision of any information reasonably necessary or helpful in
connection with a Tax Matter and shall include, at each Party’s own cost:

(a) the provision of any Tax Returns of the Parties, books, records (including
information regarding ownership and Tax basis of property), documentation and
other information relating to such Tax Returns, including accompanying
schedules, related work papers, and documents relating to rulings or other
determinations by Tax Authorities;

(b) the execution of any document (including any power of attorney) in
connection with any Tax proceedings of any of the Parties, or the filing of a
Tax Return or a Tax refund claim of the Parties;

(c) the use of the Party’s reasonable best efforts to obtain any documentation
in connection with a Tax Matter; and

(d) the use of the Party’s reasonable best efforts to obtain any Tax Returns
(including accompanying schedules, related work papers, and documents),
documents, books, records or other information in connection with the filing of
any Tax Returns of any of the Parties.

 

10

--------------------------------------------------------------------------------

Each Party shall make its employees, advisors, and facilities available, without
charge, on a reasonable and mutually convenient basis in connection with the
foregoing matters.

Section 4.02. Retention of Records. SWBI and AOUT shall retain or cause to be
retained all Tax Returns, schedules and workpapers, and all material records or
other documents relating thereto in their possession, until sixty (60) days
after the expiration of the applicable statute of limitations (including any
waivers or extensions thereof) of the taxable periods to which such Tax Returns
and other documents relate or until the expiration of any additional period that
any Party reasonably requests, in writing, with respect to specific material
records or documents. A Party intending to destroy any material records or
documents required to be retained pursuant to this Section 4.02 shall provide
the other Party with reasonable advance notice and the opportunity to copy or
take possession of such records and documents. The Parties hereto will notify
each other in writing of any waivers or extensions of the applicable statute of
limitations that may affect the period for which the foregoing records or other
documents must be retained.

ARTICLE V

MISCELLANEOUS

Section 5.01. Tax Sharing Agreements. All Tax sharing, indemnification and
similar agreements, written or unwritten, as between SWBI, on the one hand, and
AOUT, on the other (other than this Agreement and any other Transaction
Document), shall be or shall have been terminated no later than the Effective
Time and, after the Effective Time, neither SWBI nor AOUT shall have any further
rights or obligations under any such Tax sharing, indemnification or similar
agreement.

Section 5.02. Interest on Late Payments. With respect to any payment between the
Parties pursuant to this Agreement not made by the due date set forth in this
Agreement for such payment, the outstanding amount will accrue interest at a
rate per annum equal to the rate in effect for underpayments under Section 6621
of the Code from such due date to and including the payment date.

Section 5.03. Survival of Covenants. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the Parties contained in this
Agreement shall survive the Effective Time and remain in full force and effect
in accordance with their applicable terms; provided, however, that the
representations and warranties and all indemnification for Taxes shall survive
until sixty (60) days following the expiration of the applicable statute of
limitations (taking into account all extensions thereof), if any, of the Tax
that gave rise to the indemnification; provided, further, that, in the event
that notice for indemnification has been given within the applicable survival
period, such indemnification shall survive until such time as such claim is
finally resolved.

Section 5.04. Termination. Notwithstanding any provision to the contrary, this
Agreement may be terminated and the Distribution abandoned at any time prior to
the Effective Time by and in the sole discretion of SWBI without the prior
approval of any Person, including AOUT. In the event of such termination, this
Agreement shall become void and no party, or any of its officers and directors,
shall have any liability to any Person by reason of this Agreement. After the
Effective Time, this Agreement may not be terminated except by an agreement in
writing signed by each of the Parties to this Agreement.

Section 5.05. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced under any law or as a matter of
public policy, all other conditions and provisions of this Agreement shall
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties to
this Agreement shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
be consummated as originally contemplated to the greatest extent possible.

 

11

--------------------------------------------------------------------------------

Section 5.06. Entire Agreement. Except as otherwise expressly provided in this
Agreement, this Agreement constitutes the entire agreement of the Parties hereto
with respect to the subject matter of this Agreement and supersedes all prior
agreements and undertakings, both written and oral, between or on behalf of the
Parties hereto with respect to the subject matter of this Agreement.

Section 5.07. Effective Date. This Agreement shall become effective only upon
the occurrence of the Distribution.

Section 5.08. Dispute Resolution. In the event of any dispute relating to this
Agreement, the Parties shall work together in good faith to resolve such dispute
within thirty (30) days. In the event that such dispute is not resolved, upon
written notice by a Party after such thirty (30)-day period, the matter shall be
referred to a Tax counsel or other Tax advisor of recognized national standing
(the “Tax Arbiter”) that will be jointly chosen by SWBI and AOUT. The Tax
Arbiter may, in its discretion, obtain the services of any third party necessary
to assist it in resolving the dispute. The Tax Arbiter shall furnish written
notice to the parties to the dispute of its resolution of the dispute as soon as
practicable, but in any event no later than ninety (90) days after acceptance of
the matter for resolution. Any such resolution by the Tax Arbiter shall be
binding on the Parties, and the Parties shall take, or cause to be taken, any
action necessary to implement such resolution. All fees and expenses of the Tax
Arbiter shall be shared equally by the Parties.

Section 5.09. Other. Sections 1.2 (Interpretation), 6.1 (Notices), 6.2
(Amendments; No Waivers), 6.4 (Successors and Assigns) 6.5 (Governing Law), 6.6
(Counterparts; Effectiveness; Third-Party Beneficiaries), 6.9 (Jurisdiction),
6.10 (Waiver of Jury Trial), 6.14 (Captions), 6.15 (Interpretation), 6.16
(Specific Performance), and 6.17 (Performance) of the Separation Agreement are
incorporated herein by reference, mutatis mutandis.

[Signature Page Follows]

 

12

--------------------------------------------------------------------------------

IN WITNESS WHEREOF the Parties hereto have caused this Agreement to be duly by
their respective authorized officers as of the date first above written.

 

SMITH & WESSON BRANDS, INC. By:  

/s/ Mark P. Smith

Name:   Mark P. Smith Title:   President and Chief Executive Officer AMERICAN
OUTDOOR BRANDS, INC. By:  

/s/ Brian D. Murphy

Name:   Brian D. Murphy Title:   President and Chief Executive Officer

 

 

Signature Page to Tax Matters Agreement