SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a -6(e)
(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
SWISS ARMY BRANDS , INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction apples:
N/A
(3) Per unit or other underlying value of transactions computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined.
N/A
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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SWISS ARMY BRANDS, INC.
ONE RESEARCH DRIVE
SHELTON, CONNECTICUT 06484
April 10, 1999
Dear Fellow Shareholder:
You are cordially invited to attend your Company's 1999 Annual Meeting of
Shareholders to be held at the Swiss Army Brands, Inc. Distribution Center, 65
Trap Falls Road, Shelton, Connecticut at 10:30 a.m. (local time) on Thursday,
May 13, 1999. We hope you will be able to attend and participate.
The Notice of Annual Meeting and Proxy Statement which follow fully describe the
formal business to be transacted at the annual meeting, which includes the
election of directors of the Company. Accordingly, we urge you to review the
accompanying materials carefully. Directors and officers of the Company will be
present to host the annual meeting and to respond to any questions from our
shareholders.
Your interest in Swiss Army Brands, Inc. as demonstrated by the representation
of your shares at our annual meeting is a great source of strength for our
company. Your vote is very important to us and, accordingly, we ask that you
sign, date and return the enclosed proxy as soon as conveniently possible
whether or not you plan to attend. This will ensure that your shares will be
represented at the meeting, and it will not limit your right to revoke your
proxy in the manner described in the accompanying Proxy Statement or to attend
the annual meeting and vote personally should you so choose.
The directors, officers and employees of Swiss Army Brands, Inc. look forward to
seeing you at the meeting.
Sincerely,
Peter W. Gilson J. Merrick Taggart
Chairman of the Board President and Chief
Executive Officer
Swiss Army Brands, Inc.
One Research Drive
Shelton, Connecticut 06484
_______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 13, 1999
_______________
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of Swiss
Army Brands, Inc. (the "Company") will be held on May 13, 1999 at 10:30 a.m.
(local time) at the Company's Distribution Center, 65 Trap Falls Road, Shelton,
Connecticut 06484 for the following purposes:
(1) To elect fourteen members of the Board of Directors to serve until the
next annual meeting of stockholders and until their successors are duly elected
and qualified;
(2) To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed March 30, 1999 as the record date for the
determination of the stockholders entitled to notice of and to vote at such
meeting or any adjournment thereof, and only stockholders of record at the close
of business on that date are entitled to notice of and to vote at such meeting.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1998 is enclosed herewith.
By Order of the Board of Directors.
THOMAS M. LUPINSKI, as Secretary
Dated: Shelton, Connecticut
April 10, 1999
YOUR VOTE IS IMPORTANT
TO ENSURE A QUORUM, PLEASE COMPLETE AND RETURN THE PROXY IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE MEETING, YOUR PROXY WILL BE RETURNED TO YOU AT THE MEETING UPON
REQUEST TO THE SECRETARY OF THE MEETING.
S W I S S A R M Y B R A N D S , I N C .
One Research Drive
Shelton, Connecticut 06484
P R O X Y S T A T E M E N T
This Proxy Statement and accompanying form of proxy are being furnished in
connection with the solicitation of proxies by the Board of Directors of Swiss
Army Brands, Inc., a Delaware corporation (the "Company"), for use at the
Company's Annual Meeting of Shareholders to be held on May 13, 1999, at 10:30
a.m. (local time) at the Company's Distribution Center at 65 Trap Falls Road,
Shelton, Connecticut, or any adjournment thereof (the "Meeting"). Copies of this
Proxy Statement, the attached Notice of Annual Meeting of Shareholders, and the
enclosed form of proxy were first mailed to the Company's shareholders on or
about April 11, 1999.
A proxy in the accompanying form, which is properly executed, duly returned
to the Board of Directors and not revoked, will be voted in accordance with the
instructions contained in the proxy. If no instructions are given with respect
to any matter specified in the Notice of Annual Meeting to be acted upon at the
Meeting, the proxy will vote the shares represented thereby FOR the nominees for
Directors set forth below, and in accordance with his best judgment on any other
matters which may properly come before the Meeting. The Board of Directors
currently knows of no other business that will be presented for consideration at
the Meeting. Each shareholder who has executed a proxy and returned it to the
Board of Directors may revoke the proxy by notice in writing to the Secretary of
the Company, or by attending the Meeting in person and requesting the return of
the proxy, in either case at any time prior to the voting of the proxy. Presence
at the Meeting does not itself revoke the proxy. The cost of the solicitation of
proxies will be paid by the Company. In addition to the solicitation of proxies
by the use of the mails, management and regularly engaged employees of the
Company may, without additional compensation therefor, solicit proxies on behalf
of the Company by personal interviews, telephone, telegraph or other means, as
appropriate. The Company may also engage a proxy-soliciting firm to solicit
proxies, although the Company has no current plans to do so. The Company will,
upon request, reimburse brokers and others who are only record holders of the
Company's Common Stock, for their reasonable expenses in forwarding proxy
material to, and obtaining voting instructions from, the beneficial owners of
such stock.
The close of business on March 30, 1999, has been fixed as the record date
(the "Record Date") for determining the shareholders entitled to notice of and
to vote at the Meeting. As of the Record Date, there were 7,851,510 shares of
Common Stock issued and outstanding and entitled to vote.
Each share of Common Stock entitles the holder thereof to one vote. A
majority of the shares of Common Stock issued and outstanding constitutes a
quorum. Abstentions and broker non-votes are counted as present in determining
whether the quorum requirement is satisfied. The affirmative votes of holders of
a plurality of the shares of Common Stock present in person or represented by
proxy at the Meeting will be necessary for the election of Directors. Thus,
abstentions and broker non-votes will not be included in the vote total in the
election of Directors and will have no effect on the outcome of the vote. A
broker non-vote occurs when a nominee holding shares for a beneficial owner does
not vote on a proposal because the nominee does not have discretionary voting
power and has not received instructions from the beneficial owner.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership
of the Common Stock on March 30, 1999, by each person or group known by the
Company to own beneficially 5% or more of the outstanding Common Stock. Except
as otherwise noted, each person listed below has sole voting and investment
power with respect to the shares listed next to his or its name.
Number of
Name of Beneficial Owner Shares Percent owned 1
Louis Marx, Jr.
667 Madison Avenue
New York, NY 10021 3,141,922 2 37.6%
Brae Group, Inc.
15710 John F. Kennedy Blvd.
Houston, TX 77032 3,117,900 3 37.3%
Victorinox A.G.
CH-6438
Ibach-Schwyz
Switzerland 2,152,700 27.4%
David L. Babson & Co., Inc.
One Memorial Drive
Cambridge, MA 02142 538,100 4 6.9%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
Santa Monica, CA 90401 480,724 5 6.1%
1 Based on 7,851,510, shares of Common Stock outstanding, not including
1,006,708, shares held as Treasury stock. Treated as outstanding for the
purposes of computing percentage ownership of each holder are 1,291,000 shares
issuable to such holder upon exercise of options and warrants.
2 Consists of 19,730 shares held directly by Mr. Marx, 4,292 shares held by
a trust for the benefit of Mr. Marx, 2,617,900 shares held by Brae Group, Inc.,
which corporation Mr. Marx may be deemed to control, and 500,000 shares issuable
upon the exercise of a stock option held by Brae Group, Inc.
3 Includes 500,000 shares issuable upon the exercise of a stock option
held by Brae Group, Inc.
4 According to a Schedule 13G dated February 1, 1999, consists of shares
which David L. Babson & Co., Inc. beneficially owns by virtue of serving as
investment advisor.
5 According to a Schedule 13G dated February 12, 1999, consists of shares
as to which Dimensional Fund Advisors, Inc. shares power of disposition by
virtue of serving as investment advisor to its clients.
2
The following table sets forth certain information concerning the beneficial
ownership of Common Stock on March 30, 1999, by each Director, each officer
named in the Summary Compensation Table herein and by all Directors and officers
of the Company as a group.
Number of
Name Shares Percent of Class 1
J. Merrick Taggart 148,250 2 1.9%
Harry R. Thompson 43,750 3 *
Michael J. Belleveau 35,725 4 *
Jerald J. Rinder 15,625 5 *
A. Clinton Allen 36,000 6 *
Clarke H. Bailey 28,000 7 *
Thomas A. Barron 85,000 8 1.1%
Vincent D. Farrell, Jr. 40,000 9 *
Herbert M. Friedman 15,868 10 *
Peter W. Gilson 171,250 11 2.1%
Keith R. Lively 1,000 *
Louis Marx, Jr. 3,141,922 12 37.6%
Robert S. Prather 45,823 *
Stanley R. Rawn, Jr. 142,711 13 1.8%
Eric M. Reynolds 26,000 14 *
John Spencer 1,000 *
John V. Tunney 1,000 *
All officers and directors 4,104,261 15 44.9%
as a group (23 persons)
*Less than 1% of the Class.
1 Based on 7,851,510 shares of Common Stock outstanding, not including
1,006,708 shares held as Treasury Stock. Treated as outstanding for the purpose
of computing the percentage ownership of each director and of all directors and
officers as a group are 1,291,000 shares issuable to such individuals upon
exercise of options and warrants.
2 Includes 97,000 shares of Common Stock issuable upon exercise of warrants
held by Mr. Taggart and 47,500 shares of Common Stock issuable upon exercise of
Options held by Mr. Taggart.
3 Consists of 43,750 shares of Common Stock issuable upon exercise of
Options held by Mr. Thompson.
4 Includes 35,000 shares of Common Stock issuable upon exercise of Options
held by Mr. Belleveau.
5 Includes 15,000 shares of Common Stock issuable upon exercise of Options
held by Mr. Rinder.
6 Includes 35,000 shares of Common Stock issuable upon exercise of Options
held by Mr. Allen.
7 Includes 25,000 shares of Common Stock issuable upon exercise of Options
held by Mr. Bailey.
8 Includes 50,000 shares of Common Stock issuable upon exercise of Options
held by Mr. Barron.
3
9 Includes 35,000 shares of Common Stock issuable upon exercise of Options
held by Mr. Farrell. Excludes shares beneficially owned by Spears, Benzak, a
general partnership in which Mr. Farrell has a 22% interest.
10 Includes 12,500 shares of Common Stock issuable upon exercise of Options
held by Mr. Friedman.
11 Includes 170,250 shares of Common Stock issuable upon exercise of
options held by Mr. Gilson.
12 Consists of 19,730 shares of Common Stock held directly by Mr. Marx,
4,292 shares held by a trust for the benefit of Mr. Marx, 2,617,900 shares held
by Brae Group, Inc., which corporation Mr. Marx may be deemed to control, and
500,000 shares issuable upon exercise of options held by Brae Group, Inc.
13 Includes 100,000 shares of Common Stock issuable upon exercise of
Options held by Mr. Rawn.
14 Includes 25,000 shares of Common Stock issuable upon exercise of Options
held by Mr. Reynolds.
15 Includes 1,194,000 shares of Common Stock issuable to directors and
officers upon exercise of Options and 97,000 shares of Common Stock issuable
upon exercise of warrants.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the meeting, fourteen Directors of the Company are to be elected by the
stockholders, to hold office until the next Annual Meeting of Stockholders of
the Company to be held in 2000, and until their successors shall have been duly
elected and qualified.
The nominees of the Board of Directors for election as Directors are Mr. A.
Clinton Allen, Mr. Clarke H. Bailey, Mr. Thomas A. Barron, Mr. Vincent D.
Farrell, Jr., Herbert M. Friedman, Esq., Mr. Peter W. Gilson, Mr. Keith R.
Lively, Mr. Louis Marx, Jr., Mr. Robert S. Prather, Jr., Mr. Stanley R. Rawn,
Jr., Mr. Eric M. Reynolds, Dr. John Spencer, Mr. J. Merrick Taggart and Mr. John
V. Tunney. All of the nominees are Directors elected at the 1998 Annual Meeting
of Stockholders, except for Mr. Robert S. Prather, Jr., who became a Director in
August 1998. If, for any reason not presently known, any of said nominees is not
available for election, it is intended that the Proxies will be voted for such
substitute nominees as the Board of Directors may designate unless the Board of
Directors reduces the number of directors. The Directors are to be elected by a
vote of the holders of a plurality of the shares of Common Stock entitled to
vote and present in person or represented by proxy at the meeting.
The following table sets forth the names and ages of each Director, each
nominee for Director, and each of the executive officers of the Company, the
period during which each person has served as a Director or officer of the
Company, and the positions and offices with the Company held by each such
person.
4
Director
and/or
Name Age Position(s) Officer Since
- ---- --- ----------- -------------
J. Merrick Taggart 48 President, Chief Executive Officer and
Director 1 1995
Peter W. Gilson 59 Chairman of the Board, Chairman
of the Executive Committee and
Director 2 1994
Louis Marx, Jr. 67 Chairman of the Management
Committee and Director 3 1990
Stanley R. Rawn, Jr. 71 Senior Managing Director
and Director 4 1990
Herbert M. Friedman 67 Vice President and General Counsel
and Director 5 1981
Harry R. Thompson 69 Managing Director 1994
Michael J. Belleveau 42 Senior Vice President and
Group Division Head 1994
Thomas M. Lupinski 46 Senior Vice President, Chief
Financial Officer, Secretary
and Treasurer 1986
A. Jeffrey Turner 41 Senior Vice President - Marketing
and Product Development Nov. 1998
James R. Cary 48 Vice President - Operations Nov. 1998
Marc A. Gold 33 Vice President and Controller Nov. 1998
Jerald J. Rinder 52 Vice President and
General Manager - Retail Division 1996
Douglas M. Rumbough 42 Vice President and
General Manager - Corporate
Markets Division 1992
Robert L. Topazio 50 Vice President and General Manager -
R.H. Forschner Division 1996
A. Clinton Allen 55 Director 6 1993
Clarke H. Bailey 44 Director 7 1997
Thomas A. Barron 47 Director 1983
Vincent D. Farrell, Jr. 52 Director 8 1992
Keith R. Lively 47 Director 9 1994
Robert S. Prather, Jr. 54 Director Aug. 1998
Eric M. Reynolds 46 Director 1994
John Spencer 69 Director 10 1990
John V. Tunney 64 Director 11 1992
1. Mr. Taggart is a member of the Company's Executive Committee, Management
Committee and Foreign Exchange Committee.
2.Mr. Gilson is Chairman of the Board, Chairman of the Executive Committee and a
member of the Nominating Committee.
5
3.Mr. Marx is Chairman of the Company's Management Committee and Nominating
Committee and a member of the Company's Executive Committee and Foreign Exchange
Committee.
4. Mr. Rawn is a member of the Company's Executive Committee, Management
Committee and Nominating Committee.
5. Mr. Friedman is a member of the Company's Executive Committee, Audit
Committee and Nominating Committee.
6.Mr. Allen is Chairman of the Company's Stock Option and Compensation Committee
and a member of the Executive Committee.
7.Mr. Bailey is a member of the Company's Executive Committee.
8.Mr. Farrell is Chairman of the Company's Audit Committee and a member of the
Executive Committee and Foreign Exchange Committee.
9.Mr. Lively is a member of the Company's Stock Option and Compensation
Committee.
10. Mr. Spencer is a member of the Company's Audit Committee and Stock Option
and Compensation Committee.
11. Mr. Tunney is a member of the Company's Stock Option and Compensation
Committee.
Biographical Information
------------------------
J. Merrick Taggart, President, Chief Executive Officer and Director of the
Company, was elected Chief Executive Officer on February 18, 1999 and President
on December 13, 1995. From 1993 to November 1995 Mr. Taggart was President of
Duofold, Inc, a sports apparel company, and Pringle of Scotland U.S.A., an
apparel company. From 1990 to November 1992 Mr. Taggart was President of O'Brien
International, a manufacturer and marketer of water sports equipment. Prior to
that Mr. Taggart was Senior Vice President of Product Development for the
Timberland Company, a footwear and apparel company. Mr. Taggart is also a
director of SWWT, Inc. ("SWWT"), a holding company formerly in the business of
manufacturing and marketing portable water filtration systems.
Peter W. Gilson, Chairman of the Board and Chairman of the Executive
Committee and a Director of the Company, also served as President and Chief
Executive Officer of Physician Support Systems, Inc., a company specializing in
the management of physicians' health care practices, from 1991 through January
1998. From 1989 to the present, Mr. Gilson has also served as President and
Chief Executive Officer of the Warrington Group, Inc., a manufacturer of safety
products which was previously a division of The Timberland Company. From 1987 to
1988, Mr. Gilson served as Chief Operating Officer of The Timberland Company, a
manufacturer of footwear and outdoor clothing. From 1978 to 1986, he served as
President of the Goretex Fabrics Division of W.L. Gore Associates. Mr. Gilson
is also Chairman of the Board and a director of SWWT and Glenayre Technologies,
Inc. ("Glenayre Technologies"), a paging and messaging infrastructure technology
firm.
6
Louis Marx, Jr., Chairman of the Management Committee and a Director of the
Company, has been associated with the Company for over 20 years and has played
the key role in helping to guide its affairs during that entire period. Through
discussions with the Chief Executive Officer of Victorinox Cutlery Company
("Victorinox"), the Company's principal supplier, he and Mr. Rawn were
responsible for the Company obtaining exclusive U.S. distribution rights for
Victorinox products and later, together with Mr. Rawn, he negotiated the
expansion of the Company's distribution rights to include Canada, Bermuda and
the Caribbean and also obtained for the Company exclusive distribution rights to
the Victorinox Watch. In a prior year he and Mr. Rawn played an important part
in negotiating, on behalf of the Company, the settlement of potentially
expensive litigation, and more recently, Mr. Marx has played an active role in
the Company's investment policy and, together with the Company's advisors, has
successfully managed the Company's currency hedging program. Mr. Marx has been a
venture capital investor for more than thirty years. Mr. Marx, together with his
close business associates, have been founders or substantial investors in such
companies as Pan Ocean Oil Corporation, Donaldson, Lufkin & Jenrette, Bridger
Petroleum Corporation Ltd., Questor Corporation, Environmental Testing and
Certification Corporation, Garnet Resources Corporation, The Prospect Group,
Inc. and Noel Group, Inc. ("Noel"), a publicly held company which prior to its
adoption in 1996 of a Plan of Complete Liquidation and Dissolution, conducted
its principal operations through small and medium sized operating companies in
which it holds controlling interests. Mr. Marx served as a director of The
Prospect Group, Inc., a company which, prior to its adoption in 1990 of a Plan
of Complete Liquidation and Dissolution, conducted its major operations through
subsidiaries acquired in leveraged buyout transactions ("Prospect"), from
February 1986, and as Chairman of Prospect's Asset Committee from October 1988,
until January 1990. Mr. Marx serves as a trustee of the New York University
Medical Center and Middlebury College and as Chairman of the Madison Avenue Fund
for Children. Mr. Marx is also Co-Chairman and a director of Hudson River
Capital LLC, a private equity firm specializing in middle market acquisitions,
recapitalizations and expansion capital investments ("Hudson River"), a
Co-Chairman, director and consultant of Victory Ventures LLC, a private equity
firm specializing in small market venture capital investments ("Victory
Ventures"), and the Chairman, President and controlling stockholder of Brae
Capital Corporation, a venture capital firm. He is President and a director of
Victorinox-Swiss Army Knife Foundation, a non-profit corporation formed by the
Company for charitable purposes including the improvement of the welfare of
underprivileged children.
Stanley R. Rawn, Jr., Senior Managing Director and a Director of the
Company, actively participates with Messrs. Marx and Taggart in furthering the
relationship between the Company and Victorinox as well as in coordinating
management strategies. He has also played an important part in obtaining and
expanding the Company's exclusive distribution rights covering Victorinox
products. Mr. Rawn was Chairman and Chief Executive Officer and a director of
Adobe Resources Corporation, an oil and gas exploration and production company
from November, 1985 until the merger of that company in May, 1992. Mr. Rawn is
also the Chief Executive Officer and a director of Noel; a director of Hudson
River, Victory Ventures, Career Blazers, Inc., a temporary help corporation, and
Victorinox - Swiss Army Knife Foundation; and a Trustee of the California
Institute of Technology.
Herbert M. Friedman, has served as Vice President and General Counsel of
the Company since May 1998 and is also a Director of the Company. Mr. Friedman
was partner in the law firm of Zimet, Haines, Friedman & Kaplan until April
1998, where he had been a member since 1967. Mr. Friedman is also a director of
Noel, Hudson River, Victory Ventures, Connectivity Technologies, Victorinox -
Swiss Army Knife Foundation and Carlyle Industries, Inc.
Harry R. Thompson, Managing Director of the Company was appointed Managing
Director in December 1994. From 1987 to 1995, Mr. Thompson was president of The
Strategy Group, a business and marketing consulting firm. Mr. Thompson had
previously served as a director of the Company from June 1987 to June 1991, and
as Chairman of the Company's Board of Directors from January 1990 to October
1990 and served in senior executive capacities with the Interpublic Group of
Companies, Inc., a leading marketing and communications organization. Mr.
Thompson currently serves as a director of Amnex, Inc., a telecommunications
company, and Schwin/GT Corp. a designer, marketer and manufacturer of bicycle
equipment.
Michael J. Belleveau, Senior Vice President and Group Division Head, has
been a Vice President of for more than five years and was promoted to Senior
Vice President and Group Division Head in 1998. Mr. Belleveau has served the
Company in various positions since 1991. Prior to that Mr. Belleveau was a
regional sales manager for Cartier, Inc., a manufacturer and marketer of watches
and luxury goods.
7
Thomas M. Lupinski, Senior Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company, has been a Senior Vice President of the
Company for more than five years. Prior to joining the Company, Mr. Lupinski was
Finance Manager for the Revlon Health Care Group from 1982 to 1986 and was with
Arthur Andersen & Co., from 1976 through 1982.
A. Jeffrey Turner, Senior Vice President- Marketing and Product Development
was elected to the office of Senior Vice President - Marketing and Product
Development in November 1998. Mr. Turner had served as Vice President of
Marketing for the company from March 1997. From 1995 through 1997, Mr. Turner
was Executive Vice President of Silhouette Optical Limited and from 1991 through
1995 he was General Manager/Eyewear Division of Nikon, Inc.
James R. Cary, Vice President - Operations, was elected to the office of
Vice President of Operations in November 1998. Mr. Cary had served as Director
of Sales Administration for the Company from May 1996 through November 1998.
From 1994 through 1996, Mr. Cary served as Vice President of Sales
Administration for Duofold, Inc. From May 1994 through September 1994, Mr. Cary
was an independent consultant and from 1991 through 1994 he was a General
Manager with Johnson Camping.
Marc A. Gold, Vice President and Controller, was elected to the office of
Vice President and Controller in November 1998. Mr. Gold has served the Company
as Controller from February 1997. Prior to that Mr. Gold was with Arthur
Andersen LLP from 1987 to January 1997 and served as an Audit Manager.
Jerald J. Rinder, Vice President and General Manager - Retail Division, was
elected to the office of Vice President in February 1996. From 1994 through 1995
Mr. Rinder was Executive Vice President of Pringle of Scotland USA, an apparel
company. From 1993 to 1994 Mr. Rinder was Vice President - Sales/Marketing of
Walkover Shoe Co. and from 1991 through 1993 was Vice President - Sales of
Stride Rite Corp.
Douglas M. Rumbough, Vice President and General Manager - Corporate Markets
Division, was elected to the office of Vice President in 1992. Mr. Rumbough has
served the Company in various positions since 1981.
Robert L. Topazio, Vice President and General Manager - R.H. Forschner
Division, was elected to the office of Vice President in February 1996. Mr.
Topazio has served the Company in various positions since September 1992. From
1991 to 1993 Mr. Topazio was Vice President of Cuisine de France, Ltd., a
marketer of consumer cutlery which was purchased by the Company in 1992. Prior
to that Mr. Topazio was National Sales Manager for J.A. Henckels.
A. Clinton Allen, a Director of the Company, is Chairman of A. C. Allen &
Co., a Massachusetts based consulting firm. Mr. Allen also serves as Vice
Chairman and a director of Psychemedics Corporation, a company that provides
testing services for the detection of abused substances through an analysis of
hair samples, DeWolfe Companies, Inc., a real estate company, Response U.S.A., a
company in the home alarm business, DCRI, a temporary staffing company, Image
Guided Technologies, a manufacturer of surgical equipment, and The Legal Club of
America, a company which provides legal services.
Clarke H. Bailey was elected a director of the Company in January 1997. He
served as Chief Executive Officer and a director of Glenayre Technologies from
December 1990 until March 1994 and as its Vice-Chairman of the Board from
November 1992 to July 1996. In March 1994, Mr. Bailey was named Chairman of the
Executive Committee of the Board of Glenayre Technologies, and he relinquished
the title of Chief Executive Officer and served as Chairman of the Executive
Committee until September 1998. Since February 1995, Mr. Bailey has served as
Co-Chairman of the Board and a director of Hudson River. He is also currently
Chairman, Chief Executive Officer and Director of National Fulfillment, Inc., a
provider of integrated marketing services, Chairman of the Executive Committee
and a director of Connectivity Technologies, Inc., an acquisition company with
interests in the wire and cable industry, a director of Iron Mountain
Incorporated, and a director of SWWT. He served as Chairman, Chief Executive
Officer and a director of Arcus Group Inc., the leading national provider of
secure off-site computer data storage and related disaster recovery services as
well as information technology staffing solutions, from February 1995 to January
1998.
8
Thomas A. Barron, a Director of the Company, is an author and has been
Chairman of Evergreen Management Corp., a private investment firm since January,
1990. From November, 1983 through November 1989, Mr. Barron was President and
Chief Operating Officer and a director of Prospect. From 1988 through January,
1990, Mr. Barron served as Chairman of the Board of the Company. Mr. Barron also
serves as a director of SWWT. Mr. Barron has served as a Trustee of Princeton
University.
Vincent D. Farrell, Jr., a Director of the Company, has been a Managing
Director of the investment management firm of Spears, Benzak, Salomon & Farrell,
Inc., ("Spears, Benzak") since 1982. Mr. Farrell is also a director of
HealthPlan Services Corporation, a provider of marketing and administrative
services for health and benefit programs.
Keith R. Lively, a Director of the Company is a private investor. From
January 1995 through December, 1995, he was a consultant to the Company. From
1988 through September 1994, Mr. Lively was the President, Chief Executive
Officer and a Director of The Famous Amos Chocolate Chip Cookie Corporation.
From September 1992 through September 1994, Mr. Lively was also Senior Vice
President, a member of the Executive Committee and a Director of President
Baking Company, which purchased The Famous Amos Chocolate Cookie Corporation in
September 1992.
Robert S. Prather, Jr., a Director of the Company, has served as President
and Chief Executive Officer of Bull Run Corporation since 1990. Mr. Prather also
serves as a director of Gray Communications, Inc., a company in the television
broadcasting business, Host Communications, Inc., a company in the collegiate
marketing and publishing ventures, Morgan Group, Inc., and Victory Ventures,
LLC.
Eric M. Reynolds, a Director of the Company, is a private investor and was
President, Chief Executive Officer and a director of SWWT, from January 1993 to
February 1998. Previously, from 1987 through 1990, Mr. Reynolds served as a
marketing consultant to various companies including W.L. Gore & Associates and
Marmot Mountain Works, Ltd., a company founded by Mr. Reynolds in 1974 that is
in the business of designing, manufacturing and marketing mountaineering,
backpacking and ski outerwear products.
John Spencer, a Director of the Company, held the African Studies
Professorship at Middlebury College where was a member of the faculty from 1974
to 1998. He also served as Dean of Middlebury College and Chairman of its
History Department. Dr. Spencer is co-Vice-Chairman of the Africa American
Institute, and a Trustee of the Cape of Good Hope Foundation, the Institute of
Current World Affairs, and Middlebury College and a director of Victorinox -
Swiss Army Knife Foundation.
John V. Tunney, a Director of the Company, is currently Chairman of the
Board of Cloverleaf Group, Inc., a general partner of Sun Valley Ventures, a
partnership engaged in venture capital and leveraged buyout activities and a
consultant to Trace International, Inc. an investment firm. From 1971 to 1977
Mr. Tunney served as a United States Senator from the state of California and as
a Member of the United States House of Representatives from 1965 to 1971. Mr.
Tunney is also a director of Illinois Central Corporation, Illinois Central
Railroad Company, and Foamex International, Inc., a foam manufacturer.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
- --------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, except for late filings
for a purchase transaction effected by Mr. A. Clinton Allen in 1998 and a
purchase transaction effected by Mr. John V. Tunney in 1998, all filing
requirements applicable to the Company's officers, directors, and greater than
ten-percent beneficial owners were complied with.
9
Directors held three meetings. All of the directors attended at least 75%
During the fiscal year ended December 31, 1998, the Board of Directors held
three meetings. All of the directors attended at least 75% of the total of the
meetings of the Board of Directors and the committees of which they were
members.
Committees of the Board of Directors
------------------------------------
The Board of Directors has created the Audit Committee, Nominating
Committee and Stock Option and Compensation Committee, each of which is
described below.
Audit Committee. The Audit Committee, consisting of Messrs. Vincent D.
Farrell, Jr. (Chairman), Herbert M. Friedman and John Spencer, is charged with
the duties of recommending to the Board of Directors the appointment of
independent public accountants, reviewing the scope of the audit and auditing
fees, meeting periodically with the independent public accountants and certain
officers of the Company to insure the adequacy of internal controls and
reporting, reviewing consolidated financial statements, examining audit reports
and performing any other duties or functions deemed appropriate by the Board.
The Audit Committee held one meeting during the fiscal year ended December 31,
1998.
Nominating Committee. The Nominating Committee, consisting of Messrs. Louis
Marx, Jr. (Chairman), Herbert M. Friedman, Peter W. Gilson, and Stanley R. Rawn,
Jr., has all of the power of the Board of Directors in respect of the nomination
of directors for submission to a vote of the stockholders and in respect of the
fixing of the time, place and record date of the Annual Meeting of Stockholders,
as well as all other matters relating to the Annual Meeting of Stockholders. The
Nominating Committee did not meet during the fiscal year ended December 31,
1998. While the Nominating Committee has no stated procedures for the submission
of nominees by the Company's stockholders, the committee will consider such
recommendations on an informal basis.
Stock Option and Compensation Committee. The Stock Option and Compensation
Committee, consisting of Messrs. A. Clinton Allen (Chairman), Keith R. Lively,
John Spencer and John V. Tunney, has all the power of the Board of Directors to
grant options and to exercise all other powers under and pursuant to the
Company's Stock Option Plans and to take all action in respect of the approval
of the compensation and bonuses paid by the Company. The Stock Option and
Compensation Committee held one meeting during the fiscal year ended December
31, 1998.
10
MANAGEMENT COMPENSATION
Summary Compensation Table
The Summary Compensation Table below sets forth individual compensation
information of the President and the four other most highly paid executive
officers of the Company for services rendered in all capacities during the
fiscal years ended December 31, 1998, 1997 and 1996.
Annual Compensation Long-Term Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus Sation Award SARS Payouts sation
- ------------------ ---- ------ ----- ------ ---------- -------- ------- ----------
J. Merrick Taggart 1998 $300,000 $30,000 - $26,250 1 70,000 - $5,000 2
President and Chief 1997 $300,000 - - - - - $4,750 3
Executive Officer 1996 $250,000 $40,000 $50,809 4 - 40,000 - $3,353 5
Peter W. Gilson 1998 $210,000 - - - 25,000 - -
Chairman of the Board 1997 $210,000 - - - - - -
1996 $200,000 - - - 20,000 - -
Harry R. Thompson 1998 $210,000 $8,000 - - - - $4,200 6
Managing Director 1997 $210,000 - - - - - $2,410 7
1996 $200,000 $20,000 - - 25,000 - $2,392 8
Michael J. Belleveau 1998 $176,667 $12,000 - $21,875 9 30,000 - $3,600 10
Senior Vice President and 1997 $160,000 - - - - - $3,145 11
Group Division Head 1996 $150,000 $17,500 - - 10,000 - $2,740 12
Jerald J. Rinder 1998 $170,000 $27,000 - $21,875 13 30,000 - $3,400 14
Vice President - Retail 1997 $170,000 $15,000 $103,737 15 - - - $2,779 16
Division 1996 $153,546 $25,000 $44,797 17 - 10,000 - -
11
1 Consists of the dollar value of a restricted stock grant of 3,000 shares
to Mr. Taggart. The dollar value of the award was calculated based upon the
value of the stock on the date (September 16, 1998) of the grant. The restricted
stock vests in four equal installments over three years starting with the grant
date.
2 Consists of $5,000 contributed by the Company to Mr. Taggart's account
under the Company's 401K savings plan.
3 Consists of $4,750 contributed by the Company to Mr. Taggart's account
under the Company's 401K savings plan.
4 Includes relocation benefits of $45,109.
5 Consists of $3,353 contributed by the Company to Mr. Taggart's account
under the Company's 401K savings plan.
6 Consists of $4,200 contributed by the Company to Mr. Thompson's account
under the Company's 401K savings plan.
7 Consists of $2,410 contributed by the Company to Mr. Thompson's account
under the Company's 401K savings plan.
8 Consists of $2,392 contributed by the Company to Mr. Thompson's account
under the Company's 401K savings plan.
9 Consists of the dollar value of a restricted stock grant of 2,500 shares
to Mr. Belleveau. The dollar value of the award was calculated based upon the
value of the stock on the date (September 16, 1998) of the grant. The restricted
stock vests in four equal installments over three years starting with the grant
date.
10 Consists of $3,600 contributed by the Company to Mr. Belleveau's account
under the Company's 401K savings plan.
11 Consists of $3,145 contributed by the Company to Mr. Belleveau's account
under the Company's 401K savings plan.
12 Consists of $2,740 contributed by the Company to Mr. Belleveau's account
under the Company's 401K savings plan.
13 Consists of the dollar value of a restricted stock grant of 2,500 shares
to Mr. Rinder. The dollar value of the award was calculated based upon the value
of the stock on the date (September 16, 1998) of the grant. The restricted stock
vests in four equal installments over three years starting with the grant date.
14 Consists of $3,400 contributed by the Company to Mr. Rinder's account
under the Company's 401K savings.
15 Includes relocation benefits of $102,297.
16 Consists of $2,779 contributed by the Company to Mr. Rinder's account
under the Company's 401K savings.
17 Includes relocation benefits of $40,693.
12
Option Grants in Last Fiscal Year
The following table sets forth, for each of the executive officers named in
the Summary Compensation Table information regarding individual grants of
options made in the last fiscal year, and their potential realizable values.
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
- -------------------------------------------------------------------------------- ---------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options Granted Exercise or
Options To Employees in Base Price Expiration
Name Granted Fiscal Year 1 ($/Sh) Date 5% ($) 10% ($)
- ---- ------- ---------------------------------------------- ------ --------
J. Merrick Taggart 70,000 12.6% $8.75 9/16/2008 $385,198 $976,167
Peter W. Gilson 25,000 4.5% 10.125 11/12/2008 $159,185 $403,416
Harry R. Thompson N/A N/A N/A N/A N/A N/A
Michael J. Belleveau 30,000 5.4% 8.75 9/16/2008 $165,085 $418,357
Jerald J. Rinder 30,000 5.4% 8.75 9/16/2008 $165,085 $418,357
1 Based upon 555,000 options granted.
Option Exercises and Year-End Value Table
The following table sets forth option exercise activity in the last fiscal
year and fiscal year-end option values with respect to each of the executive
officers named in the summary Compensation Table.
Aggregated Options Exercises in Last Fiscal year, and FY - End Option/SAR Value
- --------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Value of
Number of Unexercised Unexercised
Options/SARs In-the-Money
at FY-End # Options/SARs at
FY-End($)
Shares Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- ------------------ ------------ ------------- -------------
J. Merrick Taggart - - 144,500/62,500 $15,313/$45,937
Peter W. Gilson - - 170,250/23,750 -/-
Harry R. Thompson 8,250 $42,281 43,750/6,250 -/-
Michael J. Belleveau 1,250 $ 4,844 35,000/25,000 6,563/19,687
Jerald J. Rinder - - 15,000/62,500 6,563/19,687
13
Compensation of Directors
The Company compensates those of its directors who were not employees of
the Company in the amount of $10,000 annually plus $1,000 for attendance at each
meeting of the Board of Directors. The Chairmen of the Audit Committee and the
Stock Option and Compensation Committee of the Board of Directors are each paid
an additional annual fee of $10,000 in recognition of the additional
responsibilities and time commitments associated with such positions.
In addition, the Company has purchased split dollar life insurance policies
in respect of each of Messrs. Louis Marx, Jr. and Stanley R. Rawn, Jr. See
"Certain Transactions".
Pension Plan
Each employee of the Company at least twenty years of age becomes eligible
to participate in the Company's Pension Trust (the "Pension Trust") after
completing two Years of Credited Service (as defined in the Pension Trust).
Monthly benefits at Normal Retirement Age, age sixty-five, are computed as
follows: Average Monthly Compensation (as defined below) multiplied by 0.65%
plus Average Monthly Compensation in excess of Social Security Covered
Compensation (as defined below) multiplied by 0.65%, such sum multiplied by
Years of Credited Service, not to exceed 35 years. Accrued benefits under the
prior formula used by the Company's Pension Trust are grandfathered as of
December 31, 1993 for Non-Highly Compensated Employees and as of December 31,
1988 for Highly Compensated Employees.
"Average Monthly Compensation" is defined as one-twelfth of the highest
five consecutive years of total compensation. Social Security Covered
Compensation is defined as the average of the Taxable Wage Base over the 35-year
period ending with the year of the Social Security Normal Retirement (ages 65 -
67, depending on year of birth).
Participants will receive reduced benefits on a life annuity basis with
continuation of benefits to their spouses after death unless an optional form of
benefit is selected. Pre-retirement death benefit coverage is also provided. A
participant is 100% vested in his accrued benefits, as defined in the Pension
Trust, upon such accrual. The Years of Credited Service as of December 31, 1998
of each of the individuals named in the Cash Compensation table herein are as
follows:
J. Merrick Taggart................................ 3 years
Peter W. Gilson................................... 3 years
Harry R. Thompson................................. 3 years
Michael J. Belleveau.............................. 7 years
Jerald J. Rinder.................................. 3 years
14
The following table shows annual pension benefits under the Pension Trust
assuming retirement at age sixty-five in 1998, payable as a life annuity, in
various remuneration and years of employment classifications. Note that the
maximum allowable compensation for years beginning in 1994 is $150,000, so
remuneration in excess of that amount is not shown. Some grandfathering of
benefits earned at higher compensation levels is provided.
Pension Benefits for 1998 Retirees at Age 65
Years of Service
- --------------------------------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ -- -- -- -- --
$ 50,000 $ 6,529 $ 8,705 $10,881 $13,057 $15,233
75,000 11,404 15,205 19,006 22,807 26,608
100,000 16,279 21,705 27,131 32,557 37,983
125,000 21,154 28,205 35,256 42,307 49,358
150,000 26,029 34,705 43,381 52,057 60,733
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions regarding compensation of the Company's executives are generally
made by the Stock Option and Compensation Committee (the "Compensation
Committee") of the Company's Board of Directors. The Compensation Committee is
comprised of Messrs. A. Clinton Allen, Keith R. Lively, John V. Tunney and John
Spencer. Each member of the Compensation Committee is a non-employee director.
Pursuant to rules adopted by the Securities and Exchange Commission ("SEC")
designed to enhance disclosure of companies' policies regarding executive
compensation, set forth below is a report submitted by the members of the
Compensation Committee addressing the Company's compensation policies for 1998
as they affected the Company's executive officers generally and, in particular,
as they affected J. Merrick Taggart, President and Chief Executive Officer of
the Company.
Compensation Policies Regarding Executive Officers
--------------------------------------------------
The Compensation Committee's executive compensation policies are intended
to provide competitive levels of compensation in order to attract and retain
qualified executives, to recognize individual contributions to the successful
achievement of the Company's business objectives, and to align managements' and
shareholders' interests in the enhancement of shareholder value over the long
term. Compensation paid to the Company's executive officers for 1998 consisted
of base annual salary, bonus and the granting of restricted stock and stock
options. Through the grant to the Company's executive officers of options to
purchase shares of the Company's Common Stock, the Compensation Committee has
utilized the Company's 1993 Stock Option Plan (the "1993 Stock Option Plan") and
the Company's 1994 Stock Option Plan (the "1994 Stock Option Plan"), and the
Company's 1996 Stock Option Plan (the "1996 Stock Option Plan," and together
with the 1993 Stock Option Plan and the 1994 Stock Option Plan, the "Option
Plans") to provide long-term incentives to executive officers by enabling them
to share in the future growth of the Company's business. The Company has also
established a 401(k) Plan and a Pension Plan to assist it in retaining qualified
executives.
The Compensation Committee believes that the Company's executive officers
should be compensated comparably with executive officers of other publicly held
companies engaged in the business of importing, distributing, developing,
selling and marketing consumer and professional products. The Compensation
Committee also believes that the Company competes with such organizations for
qualified executives and is therefore required to adopt competitive salary
structures. In setting compensation, the Committee considers on an informal
basis compensation paid by other corporations in businesses similar to the
Company, as well as the individual contributions to the Company which each of
the executives has made and could be expected to make in the future and such
other factors as the compensation committee may deem relevant at the time of
making such determinations.
15
Base salaries for the Company's executive officers are determined by the
Compensation Committee on an annual basis. In setting such base salaries, the
Compensation Committee considered the factors set forth in the preceding
paragraph. In the case of certain executives, the Committee considered and
approved the purchase of split dollar life insurance as compensation to such
executives in lieu of the cash compensation the Committee might otherwise have
awarded to such executives.
The Compensation Committee believes that stock-based performance
compensation arrangements are beneficial in aligning managements' and
shareholders' interests in the enhancement of shareholder value over the
long-term. Thus, the Committee has utilized the Company's Stock Option Plans as
an element in the Company's compensation packages for its executive officers.
Options granted to executive officers pursuant to the Stock Option Plans have
had exercise prices equal to the market price of the Company's Common Stock on
the date the options were granted, typically vest over a three-year period, and,
with limited exceptions, are exercisable only during an executive officer's
tenure with the Company and for a specified period thereafter. Thus, amounts
which may be realized by an executive officer upon exercise of options result
directly from appreciation in the Company's stock price during the particular
executive officer's tenure with the Company.
The Company's 401(k) Plan is a broad-based employee benefit plan in which
the executive officers are permitted to participate on the same terms as
non-executive employees who meet applicable eligibility criteria, subject to any
legal limitations on the amounts that may be contributed or the benefits that
may be payable under the plan. The Company matches the contributions of
participating employees, including executive officers, up to a certain level
determined by the Board of Directors. Benefits under the 401(k) Plan are not
tied to Company performance.
1998 Compensation of Chief Executive Officer
The SEC regulations require the Compensation Committee to disclose the
Committee's bases for compensation reported for Mr. Taggart in 1998 and to
discuss the relationship between such compensation and the Company's performance
during the last fiscal year.
The Compensation Committee's decisions with respect to 1998 compensation
paid to Mr. Taggart were based on the factors discussed above applicable to all
of the Company's executive officers. The subjective factors considered in
determining 1998 annual compensation for Mr. Taggart included his overall
leadership of the Company, his continued role in reorganizing the structure of
the Company, and the improved financial results in the fiscal year ending
December 31, 1998.
SUBMITTED BY THE STOCK OPTION AND COMPENSATION COMMITTEE OF THE COMPANY'S BOARD
OF DIRECTORS:
A. Clinton Allen Keith R. Lively John Spencer John V. Tunney
Compensation Committee Interlocks and Insider Participation
In 1998, the Compensation Committee was comprised of A. Clinton Allen,
Keith R. Lively, John Spencer and John V. Tunney. None of these individuals is
an officer or employee of the Company or any of its subsidiaries.
16
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return over a
five-year period of the Company's Common Stock to that of the Russell 2000, a
broad market index, and the following companies; A.T. Cross Company, Bell Sports
Corporation, Ellett Brothers, Inc., Fossil, Inc., Gargoyles, Inc., Johnson
Worldwide Associates, Inc., Jostens, Inc., K2, Inc., Movado Group, Inc., Oakley,
Inc., Rawlings Sporting Goods, Swank, Inc., Tag Heuer International, The
Timberland Company and Variflex, Inc., which the Company believes constitute a
reasonable peer group by virtue of the fact that the primary business of each is
the marketing and distributing of consumer products.
Comparison of Five-Year Cumulative Total Return*
Performance Results Through 12/31/98
Assumes $100 invested at the close of trading 12/93 in Swiss Army Brands, Inc.,
Russell 2000 Index and the Peer Group
GRAPH
*Cumulative total return assumes reinvestment of dividends.
CERTAIN TRANSACTIONS
Messrs. Louis Marx, Jr., Chairman of the Company's Management Committee,
and a Director of the Company, and Stanley R. Rawn Jr., Senior Managing Director
and a Director of the Company, devoted considerable time and attention to the
affairs of the Company during 1998. During 1998 Messrs. Marx and Rawn were
principally compensated through split dollar insurance on their lives, a method
which allows the Company to recover, without interest, all premiums paid on the
death of the insured and which has substantially lower earnings impact over the
years than would similar amounts paid as cash compensation. Specifically, the
Company has purchased split dollar life insurance payable on the death of
Mr. Marx, some of which is payable on the later to die of Mr. Marx and his wife,
and split dollar life insurance payable on the death of Mr. Rawn. Under these
arrangements the Company will pay approximately $3,200,000 over the course of
the next 15 years as premiums under the policies for Mr. Marx and approximately
$2,400,000 over the course of the next 11 years under the policy for Mr. Rawn
(in each case including any amounts paid in the first fiscal quarter of 1999),
and will be reimbursed, without interest, for all of the premiums that it has
paid upon the death of the respective insured.
17
The actual premiums to be paid may be higher than estimated depending upon
the performance of the insurance company's investments and other factors.
Pursuant to the terms of life insurance agreements entered into with each of
Messrs. Marx and Rawn, the Company shall continue to be obligated to pay these
premiums during the insured's employment with the Company and in the event of
the termination of such employment for any reason, unless the insured willfully
and materially breaches the terms of a consulting agreement between him and the
Company and such breach continues for 30 days after written notice. Under the
terms of such consulting agreements, each of Messrs. Marx and Rawn is to be
engaged as a consultant immediately following the termination of his employment
with the Company and, in such event, shall receive such compensation as shall be
fair under the circumstances. Mr. Marx has been so engaged as a consultant to
the Company since February 15, 1995, the date on which he ceased to serve as
Chairman of the Company's Executive Committee. The consulting agreements may be
terminated by the Company upon thirty days notice. In 1998, the Company paid an
aggregate of $567,139 in premiums on the policies pertaining to Mr. Marx and
$315,150 in premiums on the policy pertaining to Mr. Rawn. There will be an
insignificant earnings impact in 1999 of the policies on Messrs. Marx's and
Rawn's lives, and an increasingly positive impact on earnings in the later
years.
In July 1994, the Company entered into a Services Agreement with Brae
Group, Inc. ("Brae") which beneficially owns 37.6% of the outstanding Common
Stock and in which Louis Marx, Jr., a Director of the Company, has a controlling
interest, and in which Victorinox Cutlery Company ("Victorinox"), a key supplier
and beneficial owner of approximately 27.4% of the outstanding Common Stock, has
a non-controlling stock interest. Under the Services Agreement, Brae is to
provide various services to the Company for a period of four years relating to
maintaining, enhancing and expanding the Company's relationship with Victorinox.
In exchange for these services, Brae received an option to purchase 500,000
shares of the Company's Common Stock at the then current market price of $10.75
per share. The option is fully vested and can be exercised for ten years from
the date of the Services Agreement.
In 1998, the Company paid $234,000 for legal services rendered by the law
firm of Zimet, Haines, Friedman & Kaplan, of which Mr. Herbert M. Friedman, Vice
President-General Counsel and Director of the Company, was a partner until April
30, 1998.
On May 1, 1998, the Company entered into an agreement with Brae Capital
Corporation ("Brae Capital"), an affiliate of Brae, whereby Brae Capital would
supply the Company with legal services. The fees for these services are expected
to be approximately $12,500 per month. The fees incurred for 1998 were
approximately $103,000. This agreement can be terminated by either party upon
thirty days written notice.
Victorinox Cutlery Company owns approximately 27.4% of the outstanding
Common Stock and is the supplier to the Company of Swiss Army Knives,
SwissCards, SwissTools, the majority of its professional cutlery products and
certain Victorinox watches. During the year ended December 31, 1998, the Company
purchased Victorinox products in aggregate amount of approximately $31,400,000.
Swiss Army Brands, Inc. Charitable Insurance Program
The Company recognizes its responsibility to the communities in which its
products are sold and the importance of charitable organizations to the country
at large. The Company is also aware of the benefits to commercial good will
resulting from the proper discharge of its responsibilities. In order to further
these objectives, the Company instituted its Charitable Insurance Program. This
program allows the Company to provide the maximum assistance to numerous
charities by utilizing tax provisions intended to encourage such activities, and
to eventually recover, without interest, all amounts expended.
Under the Company's Charitable Insurance Program (the "Program"), adopted
by the Company's Board of Directors in 1993, the Company will utilize insurance
on the lives of each of its directors and other designated persons (the "Insured
Directors") to fulfill charitable pledges to the Victorinox-Swiss Army Knife
Foundation (the "Foundation") and to charities recommended by the Insured
Directors. The Company previously purchased life insurance on one of the
Company's then Co-Chairmen and designated the Foundation as a beneficiary of a
portion of the proceeds, subject to the Company's right to revoke such
designation.
18
The Program enables the Company to make a meaningful commitment to the
Victorinox-Swiss Army Knife Foundation, as well as a broad range of charities
benefiting our communities. The Company anticipates that it will be able to make
substantial contributions in the future to these charities at a minimal cost to
the Company.
The Victorinox-Swiss Army Knife Foundation is a tax-exempt private
foundation, funded primarily by contributions from the Company and Victorinox.
It was organized in December, 1992 for general charitable purposes, including
the improvement of the welfare of underprivileged children (and others) through
the encouragement of organized athletic activities, including those sports in
which an underprivileged child would not ordinarily participate. Louis Marx,
Jr., a director of the Company, is President and a director of the Foundation.
Stanley R. Rawn, Jr., Senior Managing Director and a director of the Company,
and Herbert M. Friedman and John Spencer, directors of the Company, are
directors of the Foundation.
The Company is the owner and beneficiary of the policies, with the right to
borrow against them, and will receive the proceeds upon the death of each
Insured. The proceeds will not be legally segregated from the Company's general
funds and will remain subject to claims of the Company's creditors. Upon the
death of an Insured Director, the Company will retain a share of the insurance
proceeds equal to the cumulative premiums paid by the Company for the policy on
that Insured Director's life. One half of the remaining amount will be used to
fulfill a pledge to the Foundation and the other half will be used to fulfill
pledges to tax-exempt charities recommended by Insured Directors and approved by
the Board.
Generally, the Company will be bound to continue to pay all premiums on the
policy for the life of the Insured or, in the case of Mr. Marx, as long as he is
an officer or Board member or agrees to serve as a consultant to the Company.
Generally, there will be an insignificant impact on earnings in 1999, and
an increasingly positive impact on earnings after 1999 as the cash surrender
value of the insurance increases. If a director were to leave the Company prior
to the time when the cash surrender value of the policy exceeds the aggregate
premiums, and the Company received no further substantial benefit from his or
her services, the obligation to pay future premiums would result in a charge to
earnings at the time he or she left. The charge to earnings for 1998 with
respect to directors who left the Company in 1998 was insignificant.
The Company would not be entitled to a tax deduction, nor would the Company
realize income for regular income tax purposes, at the time the policy is
obtained nor as premiums are paid. Upon the death of the director (when the
policy matures and the insurance proceeds are paid) the Company would not
realize income for "regular" income tax purposes, but the Company might be
subject to alternative minimum tax ("AMT") on a portion of the receipts from the
policy. Upon the making of the cash contribution following the death of the
insured director, the Company would be entitled to a deduction. Since the
Company is entitled to claim as charitable deductions only 10% of its taxable
income in any year, the extent of the utilization of this deduction would depend
upon income. These deductions may be carried forward for a period of five years.
AUDITORS
The Board of Directors has selected Arthur Andersen LLP as independent
public accountants to audit the books and records of the Company at the close of
the fiscal year ending December 31, 1999. A representative of Arthur Andersen
LLP, is expected to be present at the Annual Meeting, and will have an
opportunity to make a statement if he or she desires to do so, and to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the next Annual Meeting
of Stockholders, to be held in 2000, must be received by the Company at One
Research Drive, Shelton, Connecticut 06484 by December 16, 1999 to be included
in the proxy statement and form of proxy relating to that meeting.
19
OTHER INFORMATION
The solicitation of Proxies in the accompanying form will be made at the
Company's expense, primarily by mail and through brokerage and banking firms
holding shares in their own names for customers.
A COPY OF FORM 10-K FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, MAY BE OBTAINED WITHOUT CHARGE BY
ANY SHAREHOLDER OF THE COMPANY ON WRITTEN REQUEST TO THE OFFICE OF THE
SECRETARY, SWISS ARMY BRANDS, INC., P.O. BOX 874, SHELTON, CONNECTICUT
06484-0874.
The Board of Directors is aware of no other matters that are to be
presented to stockholders for formal action at the meeting. If, however, any
other matters properly come before the meeting or any adjournment thereof, it is
the intention of the persons named in the enclosed form of proxy to vote such
proxies in accordance with their judgment on such matters.
By Order of the Board of Directors.
THOMAS M. LUPINSKI, as Secretary
Dated: Shelton, Connecticut
April 10, 1999
20