OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SWISS ARMY BRANDS, INC.
AT
$9.00 NET PER SHARE
BY
SABI ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
VICTORINOX AG
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, AUGUST 26, 2002 UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN THAT NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $.10
PER SHARE (THE "SHARES"), OF SWISS ARMY BRANDS, INC. ("SABI" OR THE "COMPANY")
WHICH, WHEN ADDED TO THE SHARES ALREADY OWNED BY VICTORINOX AG ("VICTORINOX"),
SABI ACQUISITION CORP. ("PURCHASER") AND THEIR AFFILIATES, OTHER THAN THE
COMPANY AND ITS SUBSIDIARIES (COLLECTIVELY, THE "VICTORINOX GROUP"), WILL
CONSTITUTE NOT LESS THAN NINETY PERCENT (90%) OF THE TOTAL NUMBER OF OUTSTANDING
SHARES AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER
(THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS
DESCRIBED IN SECTION 13.
---------------------
A SPECIAL COMMITTEE OF DIRECTORS APPOINTED BY THE BOARD OF DIRECTORS OF THE
COMPANY HAS UNANIMOUSLY DETERMINED THAT THE OFFER IS ADVISABLE, FAIR TO AND IN
THE BEST INTEREST OF THE STOCKHOLDERS OF THE COMPANY WHO ARE UNAFFILIATED WITH
VICTORINOX AND HAS UNANIMOUSLY RECOMMENDED THAT SUCH UNAFFILIATED STOCK HOLDERS
TENDER THEIR SHARES IN THE OFFER.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS OFFER, PASSED UPON THE FAIRNESS
OR MERITS OF THE OFFER OR DETERMINED WHETHER THIS OFFER TO PURCHASE IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
IMPORTANT
Any stockholder of the Company wishing to tender Shares in the Offer must
(i) complete and sign the Letter of Transmittal (or a facsimile thereof) in
accordance with the instructions in the Letter of Transmittal and mail or
deliver the Letter of Transmittal and all other required documents to the
Depositary together with certificates representing the Shares tendered or follow
the procedure for book-entry transfer set forth in Section 3 or (ii) request
such stockholder's broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for the stockholder. A stockholder whose
Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such person if such stockholder wishes to tender such Shares.
Any stockholder of the Company who wishes to tender Shares and cannot
deliver certificates representing such Shares and all other required documents
to the Depositary on or prior to the Expiration Date (as defined herein) or who
cannot comply with the procedures for book-entry transfer on a timely basis may
tender such Shares pursuant to the guaranteed delivery procedure set forth in
Section 3.
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and other related materials may
be obtained from the Information Agent. Stockholders may also contact their
broker, dealer, commercial bank, trust company or other nominee for copies of
these documents.
---------------------
July 23, 2002
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
SUMMARY TERM SHEET.................................................. ii
INTRODUCTION........................................................ 1
SPECIAL FACTORS..................................................... 3
I. Background of Victorinox's Investment in the Company........ 3
II. Background of the Offer..................................... 5
III. Purpose and Structure of the Offer and Merger; Reasons of
Victorinox for the Offer and the Merger; Plans for the
Company; Effects of the Offer and the Merger................ 7
IV. Position of Victorinox, Purchaser, Charles Elsener, Sr.,
Charles Elsener, Jr. and Eduard Elsener regarding Fairness
of the Offer and the Merger................................. 8
V. Reports, Opinions and Appraisals............................ 10
VI. Related Party Transactions.................................. 16
VII. Transactions and Arrangements Concerning the Shares......... 19
VIII. Interests of Certain Parties in the Offer and the Merger.... 19
THE TENDER OFFER.................................................... 22
1. Terms of the Offer.......................................... 22
2. Acceptance for Payment and Payment for Shares............... 23
3. Procedures for Accepting the Offer and Tendering Shares..... 24
4. Withdrawal Rights........................................... 27
5. Certain United States Federal Income Tax Consequences....... 28
6. Price Range of Shares; Dividends............................ 29
7. Certain Information Concerning the Company.................. 29
8. Certain Information Concerning Victorinox and Purchaser..... 30
9. Source and Amount of Funds.................................. 31
10. Appraisal Rights............................................ 31
11. Certain Effects of the Offer................................ 32
12. Dividends................................................... 33
13. Certain Conditions of the Offer............................. 33
14. Certain Legal Matters; Regulatory Approvals................. 35
15. Fees and Expenses........................................... 36
16. Miscellaneous............................................... 37
SCHEDULE I Directors and Executive Officers of Victorinox and 38
Purchaser..............................................
SCHEDULE II Purchases of Shares by Victorinox and Charles Elsener,
Sr. During the Last Two Years.......................... 39
SCHEDULE III Section 262 of the General Corporation Law of the State 41
of Delaware............................................
</Table>
i
SUMMARY TERM SHEET
This summary term sheet highlights selected information from this Offer to
Purchase, and may not contain all of the information that is important to you.
To better understand our offer to you and for a complete description of the
terms of the offer, you should read this entire Offer to Purchase and the
accompanying Letter of Transmittal carefully. Questions or requests for
assistance may be directed to the Information Agent at its address and telephone
number on the back cover of this Offer to Purchase.
WHO IS OFFERING TO BUY MY SECURITIES?
- We are SABI Acquisition Corp., a newly formed Delaware corporation and a
wholly owned subsidiary of Victorinox AG, a corporation organized under
the laws of Switzerland. We have been organized in connection with this
offer and have not carried on any activities other than in connection
with this offer.
- Victorinox AG (also known as Victorinox Cutlery Company) is a privately
held company headquartered in Ibach-Schwyz, Switzerland. Founded in 1884,
Victorinox is the creator and producer of Victorinox(R) original Swiss
Army(TM) knife. Victorinox produces over 400 types of household and
professional knives, and its products are exported to over 100 countries.
Swiss Army Brands, Inc. is Victorinox's largest single customer and has
been distributing Victorinox products since 1937, including the
Victorinox(R) original Swiss Army(TM) knife. Approximately half of the
Company's revenues for 2000 and 2001 were derived from sales of products
supplied to the Company by Victorinox. See Section I. Victorinox holds
approximately 67.8% of the shares of common stock of Swiss Army Brands.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
- We are seeking to purchase all of the outstanding shares of common stock,
par value $.10 per share, of Swiss Army Brands. See the "Introduction"
and Section 1.
HOW MUCH ARE YOU OFFERING TO PAY? WHAT IS THE FORM OF PAYMENT? WILL I HAVE TO
PAY ANY FEES OR COMMISSIONS?
- We are offering to pay $9.00 per share, net to you, in cash, less any
required withholding of taxes and without payment of interest. See the
"Introduction" and Section 1.
- If you are the record owner of your shares and you directly tender your
shares to us in the offer, you will not have to pay brokerage fees or
similar expenses. If you own your shares through a broker or other
nominee, and your broker tenders your shares on your behalf, your broker
or nominee may charge you a fee for doing so. You should consult your
broker or nominee to determine whether any charges will apply. See the
"Introduction." In addition, if you do not complete and sign the
Substitute Form W-9 included in the letter of transmittal, you may be
subject to required backup federal income tax withholding. See Section 3.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
- The offer is conditioned upon, among other things, (i) satisfaction of
the minimum tender condition, which requires there being validly tendered
and not withdrawn that number of shares of common stock of Swiss Army
Brands which, when added to the shares already owned by Victorinox and
its affiliates (other than Swiss Army Brands and its subsidiaries), will
constitute not less than ninety percent (90%) of the total number of
outstanding shares as of the date the shares are accepted for payment
pursuant to the offer, (ii) the special committee of the board of
directors of Swiss Army Brands not having withdrawn, amended or qualified
in any way its determination that the offer is advisable, fair to and in
the best interests of the stockholders of the Company or its
recommendation that you accept the offer and (iii) the board of directors
of Swiss Army Brands not having taken a position or action contrary to
such determination and recommendation of the special committee. For a
complete description of all of the conditions to which the offer is
subject, see Section 13.
ii
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
- Yes. We will obtain all necessary funds from Victorinox to purchase your
shares. The offer is not conditioned upon any financing arrangements. See
Section 9.
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER MY SHARES IN THE
OFFER?
- No. We do not think our financial condition is relevant to your decision
whether to tender shares and accept the offer because:
- the offer is being made for all outstanding shares solely for cash;
- we, through our parent company, Victorinox, have sufficient funds
available to purchase all shares successfully tendered in the offer;
- the offer is not subject to any financing condition; and
- if we consummate the offer, we will effect a merger transaction pursuant
to which all remaining shares will be automatically converted into the
right to receive $9.00 per share.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER MY SHARES IN THE OFFER?
- You will have at least until 12:00 midnight, New York City time, on
Monday, August 26, 2002, to tender your shares in the offer. Furthermore,
if you cannot deliver everything required to make a valid tender by that
time, you may still participate in the offer by using the guaranteed
delivery procedure that is described later in this offer to purchase. See
Section 1.
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
- Yes. We may elect to extend the offer one or more times if a sufficient
number of shares are not tendered to meet the minimum tender condition or
if any other condition is not fulfilled or waived by us. We may also be
required to extend the offer by the rules of the Securities and Exchange
Commission.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
- If we extend the offer, we will inform American Stock Transfer & Trust
Company, the depositary for the offer, of that extension and we will
issue a press release announcing the extension not later than 9:00 a.m.,
New York City time, on the next business day after the day on which the
offer was scheduled to expire. See Section 1.
WILL THERE BE A SUBSEQUENT OFFER PERIOD?
- We may elect to provide a "subsequent offering period" for the offer. A
subsequent offering period, if one is included, will be an additional
period of time beginning after we have purchased shares tendered in the
offer, during which stockholders may tender, but not withdraw, their
shares and receive the offer consideration.
HOW DO I TENDER MY SHARES?
- To tender your shares, you must deliver the certificates representing
your shares, together with a completed letter of transmittal and any
other documents required by the letter of transmittal, to American Stock
Transfer & Trust Company, the depositary for the offer, prior to the
expiration of the tender offer. If your shares are held in street name
(that is, through a broker, dealer or other nominee), they can be
tendered by your nominee through The Depository Trust Company. If you are
unable to deliver any required document or instrument to the depositary
by the expiration of the tender offer, you may still participate in the
offer by having a broker, a bank or other fiduciary that is an eligible
iii
institution guarantee that the missing items will be received by the
depositary within three Nasdaq National Market trading days. See Section
3.
UNTIL WHAT TIME MAY I WITHDRAW PREVIOUSLY TENDERED SHARES?
- You may withdraw your previously tendered shares at any time until the
offer has expired and, if we have not accepted your shares for payment by
September 21, 2002, you may withdraw them at any time after that date
until we accept shares for payment. This right to withdraw will not apply
to shares tendered in any subsequent offering period, if one is provided.
See Section 4.
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
- To withdraw previously tendered shares, you must deliver a written notice
of withdrawal, or a facsimile of one, with the required information to
the depositary while you still have the right to withdraw shares. If you
tendered shares by giving instructions to a broker or bank, you must
instruct the broker or bank to arrange for the withdrawal of your shares.
See Section 4.
WHEN WILL PAYMENT BE MADE FOR ACCEPTED SHARES?
- If all of the conditions of the offer are satisfied or waived and your
shares are accepted for payment, we will pay you promptly after the
expiration of the offer. See Section 2.
WHAT WILL THE U.S. FEDERAL INCOME TAX CONSEQUENCES BE FOR U.S. TAXPAYERS?
- The sale of your shares pursuant to the offer will be a taxable event.
See Section 5.
WHAT DOES SWISS ARMY BRANDS THINK OF THE OFFER?
- A special committee of directors was appointed by the board of directors
of Swiss Army Brands to evaluate the fairness of the offer and was
authorized to make a recommendation regarding the offer to stockholders.
The special committee has unanimously determined that the offer is
advisable, fair to and in the best interests of the stockholders of Swiss
Army Brands (other than Victorinox and its affiliates) and has
unanimously recommended that stockholders accept the offer and tender
their shares in the offer. The special committee's determination and
recommendation is contained in the Solicitation/ Recommendation Statement
on Schedule 14D-9, which was filed by Swiss Army Brands with the
Securities and Exchange Commission in connection with the offer and which
is being furnished to stockholders concurrently with this offer to
purchase. Stockholders should read the Solicitation/ Recommendation
Statement for additional information regarding the special committee's
determination and recommendation.
WHAT WILL HAPPEN IF ALL OF THE SHARES OF SWISS ARMY BRANDS ARE NOT TENDERED IN
THE OFFER?
- If we purchase shares of Swiss Army Brands in the offer, we will merge
with and into Swiss Army Brands. If that merger occurs, Swiss Army Brands
will then become a wholly owned subsidiary of Victorinox and each share
that remains outstanding (other than shares (i) held in the treasury of
Swiss Army Brands, (ii) owned by us or Victorinox or (iii) held by
stockholders seeking appraisal for their shares) will be canceled and
converted automatically into the right to receive $9.00 per share in cash
(or any greater amount per share paid pursuant to the offer). See the
"Introduction."
IF THE SHARES TENDERED ARE ACCEPTED FOR PAYMENT, WILL SWISS ARMY BRANDS CONTINUE
AS A PUBLIC COMPANY?
- No. Following the purchase of shares in the offer, we expect to
consummate the merger. If the merger takes place, Swiss Army Brands will
no longer be publicly owned. Even if for some reason the merger does not
take place, if we purchase all of the tendered shares, there will likely
be so few remaining stockholders and publicly held shares that the shares
will no longer be eligible to be traded through the Nasdaq National
Market or other securities exchanges, there will likely not be an active
iv
public trading market for the shares, and Swiss Army Brands will likely
cease making filings with the Securities and Exchange Commission or
otherwise cease being required to comply with the Securities and Exchange
Commission's rules relating to publicly held companies. See Section 11.
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
- If you decide not to tender your shares in the offer and the merger
occurs, you will receive the same amount of cash per share that you would
have received had you tendered your shares in the offer, without any
interest being paid on such amount, subject to any dissenters' rights
properly exercised under Delaware law. If you decide not to tender your
shares in the offer and we purchase the tendered shares, but the merger
does not occur, there will likely be so few remaining stockholders and
publicly traded shares that Swiss Army Brands common stock will no longer
be eligible to be traded through the Nasdaq National Market or other
securities exchanges and there will likely not be an active public
trading market for the shares. Also, as described above, Swiss Army
Brands will likely no longer be required to make filings with the
Securities and Exchange Commission or otherwise comply with the
Securities and Exchange Commission rules relating to publicly held
companies. See the "Introduction."
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
- On June 11, 2002, the last trading day before we announced the tender
offer, the closing sale price of the common stock of Swiss Army Brands
reported on the Nasdaq National Market was $6.35 per share. On July 22,
2002, the last trading day before we commenced the tender offer, the
closing sale price of the common stock of Swiss Army Brands reported on
the Nasdaq National Market was $9.01. See Section 6.
WHO SHOULD I CALL IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
- You may call MacKenzie Partners, Inc. at (800) 322-2885 (toll free). See
the back cover of this Offer to Purchase.
v
To the Holders of Shares of
Common Stock of Swiss Army Brands, Inc.:
INTRODUCTION
SABI Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Victorinox AG, a Swiss corporation ("Victorinox"),
hereby offers to purchase all outstanding shares (the "Shares") of common stock,
par value $.10 per share (the "Common Stock"), of Swiss Army Brands, Inc., a
Delaware corporation ("SABI" or the "Company"), at a price of $9.00 per Share,
net to the seller in cash, less any required withholding of taxes and without
payment of interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer").
Tendering stockholders who are record owners of their Shares and tender
directly to the Depositary (as defined below) will not be obligated to pay
brokerage fees or commissions or, except as otherwise provided in Instruction 6
of the Letter of Transmittal, stock transfer taxes with respect to the purchase
of Shares by Purchaser pursuant to the Offer. Nonetheless, any tendering
stockholder or other payee who fails to complete and sign the Substitute Form
W-9 that is included in the Letter of Transmittal may be subject to a required
back-up U.S. federal income tax withholding of 30% of the gross proceeds payable
to such stockholder or other payee pursuant to the Offer. See Section 5.
Victorinox or Purchaser will pay all charges and expenses of American Stock
Transfer & Trust Company, as depositary (the "Depositary"), and MacKenzie
Partners, Inc., as information agent (the "Information Agent"), incurred in
connection with the Offer. See Section 15.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn that number of Shares which, when added to the Shares
already owned by Purchaser, Victorinox and their affiliates, other than the
Company and its subsidiaries (collectively, the "Victorinox Group"), will
constitute not less than ninety percent (90%) of the total number of outstanding
Shares as of the date the Shares are accepted for payment pursuant to the offer
(the "Minimum Condition").
According to the Company, there were 8,275,811 Shares outstanding as of
July 15, 2002. Of the Shares outstanding, 5,609,105 are held by the Victorinox
Group. Accordingly, Purchaser believes that the Minimum Condition will be
satisfied if at least approximately 1,839,125 of the Shares not held by the
Victorinox Group are validly tendered and not withdrawn prior to the Expiration
Date (as defined herein).
The board of directors of the Company (the "Board of Directors") appointed
a special committee (the "Special Committee") to evaluate the fairness of the
Offer and authorized it to make a recommendation to stockholders of the Company.
The Special Committee has unanimously determined that the Offer is advisable,
fair to and in the best interests of the stockholders (other than the Victorinox
Group) and has recommended that stockholders accept the Offer and tender their
Shares in the Offer. The Special Committee's recommendation is contained in the
Solicitation/Recommendation Statement on Schedule 14D-9 (the "14D-9"), which was
filed by the Company with the Securities and Exchange Commission (the "SEC") in
connection with the Offer and which is being furnished to stockholders
concurrently with this Offer to Purchase. Stockholders should read the 14D-9 for
additional information regarding the Special Committee's determination and
recommendation.
Purchaser may waive, in its sole discretion, any of the conditions to the
Offer, other than the Minimum Condition. See Section 13.
Needham and Company, Inc., the financial advisor to the Special Committee,
has delivered its written opinion, dated June 14, 2002, to the effect that as of
that date and based upon and subject to the assumptions, factors and limitations
set forth in such opinion, the $9.00 per Share cash consideration to be received
by stockholders of the Company, other than the Victorinox Group, pursuant to the
Offer was fair from a financial point of view to such stockholders. A copy of
the written opinion, which sets forth the procedures followed, the assumptions
made, matters considered and limitations of review undertaken, is included as
Exhibit (c) to the Schedule TO filed with the SEC by Victorinox and Purchaser in
connection with the Offer (the "Schedule TO"). Purchaser encourages each
stockholder to read this opinion carefully in its entirety. The advisory
1
services and the written opinion of Needham were provided for the information of
the Special Committee in its evaluation of the Offer and the opinion is not
intended to be, nor does it constitute, a recommendation to any stockholder as
to whether or not such stockholder should tender its Shares in the Offer. See
Section V.
If the Minimum Condition and other conditions to the Offer are satisfied
and the Offer is consummated, the Victorinox Group will, collectively, own at
least ninety percent (90%) of the total number of Shares outstanding. In such
event, Purchaser will effect a merger pursuant to the short-form merger
provisions of the Delaware General Corporation Law (the "DGCL"), without any
prior notice to, or any action by, any other stockholder of the Company (the
"Merger"). At the effective time of the Merger (the "Effective Time"), each
Share outstanding immediately prior to the Effective Time (other than Shares
held by the Company as treasury stock, or owned by any subsidiaries of the
Company or the Victorinox Group, all of which will be cancelled and retired and
shall cease to exist, and other than Shares that are held by stockholders, if
any, who properly exercise their appraisal rights under the DGCL), will be
converted into the right to receive the same $9.00 per Share cash consideration
as stockholders who tendered their Shares pursuant to the Offer. If the Merger
is consummated, stockholders who have not tendered there Shares in the Offer and
who demand and fully perfect appraisal rights under the DGCL will be entitled to
receive, in connection with the Merger, cash equal to the fair value of their
Shares as determined pursuant to the procedures prescribed by the DGCL. See
Section 10. Certain federal income tax consequences of the sale of Shares
pursuant to the Offer and the Merger, as the case may be, are described in
Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE YOU MAKE ANY DECISION WITH RESPECT TO
THE OFFER.
2
SPECIAL FACTORS
I. BACKGROUND OF VICTORINOX'S INVESTMENT IN THE COMPANY
The Company is the exclusive distributor in the United States, Canada (with
one minor exception for cutlery) and the Caribbean of the following products
manufactured by Victorinox: Victorinox(R) original Swiss Army(TM) knife,
SwissTool(TM), SwissCard(R), Victorinox(R) cutlery and Victorinox(R) Swiss-made
watches. Approximately half of the Company's revenues for 2000 and 2001 were
derived from sales of products supplied to the Company by Victorinox. In
addition, Victorinox has granted the Company the right to utilize and
sub-license the Victorinox trademarks and the Victorinox Crest design to third
parties for Victorinox(R) Travel Gear and Victorinox(R) Apparel.
The Company, Victorinox's largest single customer, has been distributing
Victorinox's products since 1937. Distribution was on a non-exclusive basis for
more than 45 years until, as a result of understandings reached on the Company's
behalf by Mr. Louis Marx, Jr. and Mr. Stanley R. Rawn, Jr., both now directors
of the Company, and Victorinox, the Company became Victorinox's exclusive U.S.
distributor of Victorinox(R) original Swiss Army(TM) knives under an agreement
dated December 12, 1983 (as subsequently amended, the "U.S. Distribution
Agreement"). In 1992 and 1993, Messrs. Marx and Rawn held extensive
conversations with Victorinox looking to expand the scope of the Company's
exclusive territory. This resulted in the Company obtaining exclusive
distribution rights first in Canada, and then in Bermuda and the Caribbean
areas, as well as the Company's being granted exclusive U.S., Canadian and
Caribbean distribution rights to Victorinox(R) watches. In consideration of the
grant of the Canadian distribution rights in 1992, the Company issued to
Victorinox 277,066 shares of Common Stock. Prior to this issuance of such
shares, Victorinox was not a stockholder of the Company. In consideration for
the grant by Victorinox of the Caribbean distribution rights in 1993, the
Victorinox(R) watch distribution rights and the acquisition by the Company of
Victorinox's 20% interest in a subsidiary of the Company, the Company issued to
Victorinox a five-year warrant to purchase 1,000,000 shares of Common Stock.
Victorinox exercised the warrant in full in April 1994 at a price per share of
$9.75, a discount of $4.25 per share from the then-current market price of
Common Stock. These 1,000,000 shares were subsequently sold to Brae Group, Inc.
("Brae") in exchange for shares of the common stock of that corporation. Brae is
a corporation of which Victorinox owns slightly less than 50% and which, through
ownership of a class of "super voting" stock, is controlled by Mr. Marx.
From time to time beginning in March 1995 and continuing through October
2001, Victorinox purchased shares of the Company's Common Stock in open market
transactions. These transactions, which are more fully described below, were
made for investment purposes only and were not entered into for the purpose of
affecting the Company's management or operations in any manner. The purchases
were not made according to any pre-set plan or program; rather Victorinox bought
the stock only when shares became available at prices that were deemed by
Charles Elsener, Sr. and Charles Elsener, Jr. to be favorable at the time.
During the period of March 3, 1995 through April 4, 1995, Victorinox
purchased a total of 675,000 shares of Common Stock in open market transactions
for an aggregate purchase price (including brokerage commissions) of
$7,432,228.20 paid in cash from Victorinox's working capital.
On April 6, 1995, Victorinox purchased a total of 115,000 shares of Common
Stock in open market transactions for an aggregate purchase price (including
brokerage commissions) of $1,264,945 paid in cash from Victorinox's working
capital.
In June 1996, Victorinox purchased a total of 118,200 shares of Common
Stock in open market transactions for an aggregate purchase price (including
brokerage commissions) of $1,414,001 paid in cash from Victorinox's working
capital.
During the period of June 17, 1996 through October 23, 1996, Victorinox
purchased a total of 88,300 shares of Common Stock in open market transactions
for an aggregate purchase price (including brokerage commissions) of $1,157,475
paid in cash from Victorinox's working capital.
3
During the period of October 17, 1997 through November 4, 1997, Victorinox
purchased a total of 717,500 shares of Common Stock in open market transactions
for an aggregate purchase price (including brokerage commissions) of $7,651,719
paid in cash from Victorinox's working capital.
During the period of November 17, 1997 through December 22, 1997,
Victorinox purchased a total of 226,000 shares of Common Stock in open market
transactions for an aggregate purchase price (including brokerage commissions)
of $2,351,937.50 paid in cash from Victorinox's working capital.
During the period of October 18, 1998 through November 3, 1998, Victorinox
purchased a total of 113,500 shares of Common Stock in open market transactions
for an aggregate purchase price (including brokerage commissions) of
$1,193,062.50 paid in cash from Victorinox's working capital.
During the period of December 9, 1998 through April 16, 1999, Victorinox
purchased a total of 727,200 shares of Common Stock in both open market and
private transactions for an aggregate purchase price (including brokerage
commissions) of $5,898,975 paid in cash from Victorinox's working capital.
During the period of May 1999 through September 28, 2000, Victorinox
purchased a total of 85,200 shares of Common Stock in open market transactions
for an aggregate purchase price (including brokerage commissions) of $740,600.45
paid in cash from Victorinox's working capital.
On November 11, 2000, Victorinox and Brae entered into a letter agreement
(the "Private Purchase Agreement") pursuant to which Victorinox agreed to
purchase 1,917,900 shares of Common Stock for an aggregate purchase price of
$9,589,500. Under the terms of the Private Purchase Agreement, the $9,589,500
aggregate purchase price to be paid by Victorinox for the shares of Common Stock
will be paid by the satisfaction of indebtedness owed by Brae to Victorinox.
In December 2000, Victorinox acquired 1,917,000 shares of Common Stock from
Brae in satisfaction of $9,589,500 of indebtedness owed by Brae to Victorinox.
As a result of the acquisition of these Shares, Victorinox acquired a majority
equity interest in the Company. See Section VI.
During the period of January 2001 through March 2001, Victorinox purchased:
(i) 40,000 shares of Common Stock in an open market transaction on January 18,
2001 for an aggregate purchase price of $248,000, (ii) 40,800 shares of Common
Stock in an open market transaction on March 13, 2001 for an aggregate purchase
price of $265,200, and (iii) 1,700 shares of Common Stock in an open market
transaction on March 14, 2001 for an aggregate purchase price of $10,518.75. The
$523,718.55 aggregate purchase price paid by Victorinox for the shares was paid
in cash from Victorinox's working capital.
During the period of April 2001 through June 2001, Victorinox purchased:
(i) 15,000 shares of Common Stock in an open market transaction on April 20,
2001 for an aggregate purchase price of $95,700, (ii) 17,500 shares of Common
Stock in an open market transaction on May 1, 2001 for an aggregate purchase
price of $110,950, (iii) 25,000 shares of Common Stock in an open market
transaction on May 29, 2001 for an aggregate purchase price of $165,500, and
(iv) 30,000 shares of Common Stock in an open market transaction on June 27,
2001 for an aggregate purchase price of $201,000. The $573,150 aggregate
purchase price paid by Victorinox for shares was paid in cash from Victorinox's
working capital.
During the period of August 2001 through September 2001, Victorinox
purchased: (i) 15,000 shares of Common Stock in an open market transaction on
August 13, 2001 for an aggregate purchase price of $98,250, (ii) 26,000 shares
of Common Stock in an open market transaction on September 5, 2001 for an
aggregate purchase price of $175,500, (iii) 12,000 shares of Common Stock in an
open market transaction on September 5, 2001 for an aggregate purchase price of
$83,760, (iv) 17,500 shares of Common Stock in an open market transaction on
September 18, 2001 for an aggregate purchase price of $115,850, (v) 1,000 shares
of Common Stock in an open market transaction on September 21, 2001 for an
aggregate purchase price of $6,380, (vi) 12,500 shares of Common Stock in an
open market transaction on September 25, 2001 for an aggregate purchase price of
$79,125, (vii) 10,900 shares of Common Stock in an open market transaction on
September 26, 2001 for an aggregate purchase price of $66,490, and (viii) 2,500
shares of Common Stock in an open market transaction on September 28, 2001 for
an aggregate purchase price of $15,525. The $640,880 aggregate purchase price
paid by Victorinox for the shares was paid in cash from Victorinox's working
capital.
4
On October 5, 2001, Victorinox purchased: (i) 7,600 shares of Common Stock
in an open market transaction for an aggregate purchase price of $50,920; and
(ii) on October 10, 2001, 1,100 shares of Common Stock in an open market
transaction for an aggregate purchase price of $7,150. The $58,070 aggregate
purchase price paid by Victorinox for the shares was paid in cash from
Victorinox's working capital.
On September 14, 2000, Charles Elsener, Sr. purchased 248,205 shares of
Common Stock in an open market block trade transaction for an aggregate purchase
price of $1,202,243 paid in cash from Charles Elsener, Sr.'s personal funds. On
September 26, 2000, Charles Elsener, Sr. purchased 37,000 shares of Common Stock
in an open market block trade transaction for an aggregate purchase price of
$201,187.50 paid in cash from Charles Elsener, Sr.'s personal funds.
In October 2000, Charles Elsener, Sr. purchased: (i) 20,000 shares of
Common Stock in an open market block trade transaction on October 10, 2000 for
an aggregate purchase price of $115,000, paid in cash from Charles Elsener,
Sr.'s personal funds, (ii) 27,500 shares of Common Stock in an open market block
trade transaction on October 10, 2000 for an aggregate purchase price of
$160,875, paid in cash from Charles Elsener, Sr.'s personal funds, and (iii)
14,000 shares of Common Stock in an open market block trade transaction on
October 24, 2000 for an aggregate purchase price of $81,900, paid in cash from
Charles Elsener, Sr.'s personal funds.
II. BACKGROUND OF THE OFFER
Due to the commercial relationships between Victorinox and Purchaser as
described in Section I -- "Background of Victorinox's Investment in the Company"
and Section III -- "Reasons for the Offer and Merger and Effect," officers and
directors of Victorinox (specifically, Charles Elsener, Sr., its Chairman and
Chief Executive Officer, and Charles Elsener, Jr., its President) and officers
and directors of the Company confer on a variety of business issues on a daily
basis. In early January 2000, Peter Gilson, then the Chairman of the Board of
the Company and now also its Chief Executive Officer, initiated a general
discussion with Charles Elsener, Sr. and Charles Elsener, Jr. regarding the
potential advantages, including cost savings, that could be realized if the
Company were to "go private" through an acquisition by Victorinox. Charles
Elsener, Sr. and Charles Elsener, Jr. indicated at that time that they were not
interested in such a transaction. During routine business and product review
meetings held in June 2000, in response to Mr. Gilson's query, Charles Elsener,
Jr. reiterated the fact that Victorinox did not want to proceed with any
privatization efforts. A year and a half later, in December 2001, Mr. Gilson,
Charles Elsener, Sr. and Charles Elsener, Jr. discussed the possibility of a
transaction that would result in Victorinox becoming the 100% owner of the
Company. Among the reasons discussed for a transaction were the business
relationship between Victorinox and the Company, the avoidance of the costs of
SABI being a publicly traded reporting company and the increased financial
stability that Victorinox could bring to the Company. During the course of these
discussions, Charles Elsener, Sr. and Charles Elsener, Jr. restated their
unwillingness to proceed with such a transaction.
On January 31 and February 1, 2002, Charles Elsener, Jr. attended routine
business and product review meetings with the Company at its headquarters in
Connecticut. During these meetings, Charles Elsener, Jr. realized that the focus
of the Company's management team was moving away from the pocketknife business
and products not manufactured or sold by Victorinox. Because the Company is
Victorinox's single largest customer, Charles Elsener, Jr. felt that this
operational shift would have an adverse effect on Victorinox and its business.
Charles Elsener, Jr. determined that the challenges to Victorinox's core
business in the territories covered by the Company could best be addressed by a
company and management team that could have a similar focus and avoid the
distractions of public company reporting and other duties. It was at that time
that Charles Elsener, Jr. consulted over the telephone with Charles Elsener, Sr.
and determined that they should consider Victorinox's options with respect to
the Company, including options that might result in a proposal being made to
acquire all of the Common Stock not already owned by the Victorinox Group. After
this conversation, Charles Elsener, Jr. indicated to Mr. Gilson that they were
considering such options on behalf of Victorinox. Charles Elsener, Sr. and
Charles Elsener, Jr. determined to consider such options due to their
observations and conclusions reached as a result of Charles Elsener, Jr.'s
meetings with the Company in early 2002. At a Board of Directors meeting held on
February 7, 2002, Mr. Gilson informed the Board of his conversations with
Charles Elsener, Jr., and the Board established the Special Committee,
appointing as its
5
members two of the non-employee directors, A. Clinton Allen and Robert S.
Prather, Jr. In regularly scheduled business meetings in Switzerland on February
11 and 12, 2002, Charles Elsener, Sr., Charles Elsener, Jr. and Mr. Gilson
continued their discussions regarding the acquisition by Victorinox of all of
the Common Stock not already owned by the Victorinox Group.
During telephone conversations that took place on April 19, 22, and 26,
2002, counsel to Victorinox informed counsel retained by the Special Committee
that Victorinox was interested in acquiring all the Common Stock not already
owned by Victorinox at a price of $8.00 per share. Victorinox's counsel also
indicated that Charles Elsener, Sr., Charles Elsener, Jr. and Victorinox were
not interested in participating in alternative transactions such as selling its
interest to a third party or the sale of any portion of the Company's business.
After conferring with the Special Committee on April 30, 2002, counsel to the
Special Committee advised counsel to Victorinox that the Special Committee
considered $8.00 per share to be inadequate. Victorinox and the Special
Committee, through their respective counsel, continued their discussions
concerning the price for an acquisition proposal during late April and May 2002.
In a telephone conversation held on May 24, 2002, counsel to Victorinox advised
counsel to the Special Committee that Victorinox would be willing to consider
making a proposal to acquire the Shares of the Company not owned by the
Victorinox Group for $9.00 per share. In response to Special Committee inquiries
as to whether Victorinox would consider further, direct discussions regarding
this proposed price, counsel to Victorinox, informed Special Committee counsel
that it was not prepared to pay more than $9.00 per share.
From June 7 to June 11, 2002, Victorinox, through its counsel, continued
discussions and negotiations with the Special Committee, through its counsel,
regarding the structure and other terms of any proposal that Victorinox might
make to acquire the Common Stock not already owned by the Victorinox Group.
On June 12, 2002, Victorinox sent a written proposal to the Special
Committee to acquire all of the outstanding Shares not held by the Victorinox
Group for a cash purchase price of $9.00 per Share in a tender offer by
Purchaser, to be followed by a merger pursuant to which all Shares not tendered
would be automatically converted into the right to receive $9.00 per Share (the
"Proposal"). The Proposal was conditioned upon, among other things, the Board of
Directors recommending to stockholders that they accept the tender offer and the
number of shares tendered in the tender offer being a majority of the
outstanding Shares not owned by the Victorinox Group.
On June 12, 2002, Victorinox and the Company issued separate press releases
describing the terms of the Proposal and made filings with the SEC with respect
thereto. The Company's press release and SEC filing disclosed that the Proposal
was being considered by the Board.
On or about June 13, 2002, Victorinox learned of the filing in the Delaware
Court of Chancery of two lawsuits relating to the Proposal (the "Initial
Stockholder Suits") against the Company, certain of its directors and officers,
and Victorinox. Each of the these Initial Stockholder Suits was filed by a
stockholder of the Company on behalf of himself/herself and purportedly on
behalf of all stockholders of the Company similarly situated and alleged that,
among other things, the proposed $9.00 offer price contained in the Proposal was
inadequate and that the named officers and directors had breached their
fiduciary duties to such stockholders. On June 17, 2002, the Company issued a
press release disclosing the Initial Stockholder Suits and stating the Company's
belief that the suits do not state valid claims against the Company or any of
its officers or directors. Victorinox subsequently learned of the filing against
the Company, certain of its directors and officers, and Victorinox of two
additional lawsuits relating to the Proposal (the "Additional Stockholder
Suits"), one in the Delaware Court of Chancery and the other in Connecticut
Superior Court. Both Additional Stockholder Suits have asserted claims similar
to those made in the Initial Stockholder Suits and, like the Initial Stockholder
Suits, were brought by stockholders seeking class action representation and
certification on behalf of other stockholders. Purchaser and Victorinox do not
believe that the Initial Stockholder Suits or Additional Stockholder Suits state
valid claims against Victorinox or any of the other defendants named therein.
On June 14, 2002, Needham & Company, Inc., the financial advisor to the
Special Committee, issued its written opinion that as of such date, based upon
and subject to the assumptions and limitations described in the opinion, the
price of $9.00 per share was fair from a financial point of view to the
stockholders of the Company other than the Victorinox Group. A copy of this
fairness opinion is filed as an exhibit to the
6
Schedule TO of which this Offer to Purchase forms a part and is reprinted in
full at Annex A to the 14D-9 being furnished to stockholders herewith.
During the week of June 14, 2002, respective counsel to Victorinox, the
Company and the Special Committee discussed the conditions set forth in the
Proposal. During these conversations, Victorinox's counsel informed the Company
and Special Committee counsel that Victorinox was prepared to go forward with
its Proposal based on a recommendation of the Special Committee, as opposed to
the full Board of Directors, provided that the tender offer minimum condition be
raised from a majority of the non-Victorinox Group stockholders to 90% of the
outstanding Shares of the Company. This was accepted by the Special Committee,
and on June 21, 2002, the Special Committee advised the Board that it was
prepared to recommend to the Company's stockholders that they tender their
shares pursuant to the proposed tender offer subject to the Special Committee's
receipt and approval of the Offer to Purchase and related materials, including
the terms and conditions of the Offer.
From June 21, 2002 through July 19, 2002, counsel to Victorinox and counsel
to the Company prepared the SEC filings to be made in connection with the Offer.
On July 19, 2002, the Special Committee was furnished with the Offer to Purchase
in substantially final form, which contained the terms and conditions of the
Offer, and drafts of related SEC filings to be made by the Company, also in
substantially final form. On July 21, 2002, after reviewing the draft filings,
including the terms and conditions to the Offer, and determining that the terms
and conditions of the Offer were acceptable. The Special Committee then
authorized its representatives to finalize its recommendation for inclusion in
the Schedule 14D-9 to be filed by the Company in connection with the Offer.
Between June 21, 2002 and July 21, 2002, the Special Committee did not request
that any changes be made to the Offer.
III. PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONS OF VICTORINOX
FOR THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; EFFECTS OF THE OFFER
AND THE MERGER
Purpose. The purpose of the Offer and the Merger is for Victorinox to
become the 100% owner of SABI. Upon completion of the Merger that is to occur
following consummation of the Offer, the Company will become a wholly owned
subsidiary of Victorinox. The acquisition transaction has been structured as a
cash tender offer followed by a cash merger in order to effect a prompt and
orderly transfer of ownership of the Company from the public stockholders to
Victorinox and to provide stockholders with cash for all of their Shares as
promptly as practicable.
Reasons for Offer and Merger. The United States is the primary territory
in which the Company operates and has distribution and intellectual property
rights, and it is also the largest and most important market for Victorinox's(R)
original Swiss Army(TM) knives and other products. The success of the Company
with respect to these products is vitally important to the success and
profitability of Victorinox, and Victorinox has concluded that the best way to
ensure that success is to have and exert 100% ownership and control of the
Company. Having such ownership and control will allow Victorinox to direct the
Company's focus on Victorinox's core pocketknife line of business, which may not
at all times be consistent with the interests of the stockholders of the Company
who are not affiliated with Victorinox. Victorinox noted that the Company has
not been able to meet required minimum purchases of pocketknives from Victorinox
for any of the last five years. See Section IV.
Plans for the Company. Purchaser intends, as soon as practicable following
the consummation of the Offer, to consummate the Merger. Following completion of
the Offer and the Merger, Victorinox will cause the Company to delist the Common
Stock from the Nasdaq National Market and to terminate the registration of the
Common Stock under the Securities Exchange Act of 1934. At that point, the
Company will be a 100% privately held, nonreporting company.
Except for such changes as may be attendant to the planned redirected focus
and likely resource savings noted above, Victorinox currently intends to cause
the business and operations of the Company to continue to be conducted by the
Company substantially as they are currently being conducted. However, Victorinox
will continue to evaluate the business and operations of the Company after the
consummation of the Offer and the Merger and will take such actions as it deems
appropriate under the circumstances then existing. Victorinox
7
has designated Susanne Rechner as its nominee for the presidency of the Company
upon completion of the Offer and the Merger. Ms. Rechner, who currently serves
as the Senior Vice President -- Global Watch for the Company and as the CEO of
Victorinox-Swiss Army Watch, S.A., will replace A. Jeffrey Turner, the Company's
current president. Both Mr. Turner and Peter Gilson, the Company's CEO and
Chairman of the Board, have informed the Company of their intentions to resign
their positions in the immediate future. Victorinox has also decided to reduce
the size of the Company's Board from ten seats to one, and presently intends
that Charles Elsener, Jr. will serve as the sole Board member and CEO upon
completion of the Offer and the Merger. In addition to the foregoing changes,
Victorinox may elect and/or substitute individual Board members as it may deem
necessary from time to time. From time to time, Victorinox may also cause
certain changes to be made to various management positions at the Company.
Effects of the Offer and the Merger. As a result of the Offer and the
Merger, the Victorinox Group's interest in the Company's net book value and net
earnings or loss will increase from approximately 67.8% to 100% and Victorinox
will become the sole stockholder of the Company. Victorinox will be entitled to
all benefits resulting from that 100% ownership interest, including all income
generated by the Company's operations, any future increase in the Company's
value and the right to elect all members of the Board of Directors of the
Company and direct its management and policies. Accordingly, current
stockholders who are not affiliated with Victorinox will cease to be
stockholders and therefore will not participate in any earnings or growth of the
Company and will not have any right to vote on any corporate matter. However,
these stockholders will not face the risk of any losses generated by the
Company's operations or any decline in the value of the Company after completion
of the Offer and the Merger. As the 100% owner of the Company, Victorinox will
also bear the risk of all losses resulting from the Company's operations and
from any decline in the value of the Company following the Offer and the Merger.
Victorinox and Purchaser believe that, on balance, given the current market
conditions and recent declines in the Company's sales, the current stockholders
will benefit more from the significant premium they will receive for their
shares than from a continued investment in the Company should the Offer be
terminated.
Victorinox also believes that the Company should also benefit from being a
wholly owned subsidiary of Victorinox in that (i) maintaining the Company as a
public entity is expensive both in terms of the actual costs, including
retaining independent directors and providing audited financial statements and
other information to stockholders (approximately $400,000 per year) and the time
and attention required of management, whose energies might be better spent on
other matters, and (ii) as an integrated part of Victorinox, the Company can be
placed on a more stable financial footing than it has been as a "stand-alone"
entity. Victorinox is aware that the Company was not in compliance with
covenants under its $16 million credit facility agreements at June 30, 2001 and
at December 31, 2001. At times in the past, compliance with the Company's bank
covenants would not have been achieved without Victorinox's willingness to grant
extended payment terms to the Company.
IV. POSITION OF VICTORINOX, PURCHASER, CHARLES ELSENER, SR., CHARLES ELSENER,
JR. AND EDUARD ELSENER REGARDING FAIRNESS OF THE OFFER AND THE MERGER
Victorinox, Purchaser, Charles Elsener, Sr., Charles Elsener, Jr. and
Eduard Elsener believe that the Offer and the Merger are fair (both in terms of
price and structure) to the stockholders of the Company (excluding the
Victorinox Group). Victorinox, Purchaser, Charles Elsener, Sr., Charles Elsener,
Jr. and Eduard Elsener base their belief on the factors described below.
- After a thorough review with its independent financial and legal
advisors, the Special Committee, comprised of two non-employee directors
of the Company unanimously determined that the Offer is advisable, fair
to and in the best interests of the stockholders of the Company (other
than the Victorinox Group) and recommended to the Company's stockholders
to accept the offer and tender their shares in the Offer.
- On June 14, 2002, the Special Committee received a written opinion from
Needham that, as of that date and based upon and subject to the various
assumptions and limitations set forth in the opinion, the $9.00 per Share
cash consideration to be received by the stockholders of the Company
(other than the
8
Victorinox Group) in the Offer was fair to the stockholders of the
Company (other than the Victorinox Group) from a financial point of view.
- During a period of time of approximately two and one half months, the
consideration per Share was negotiated at arm's-length with the Special
Committee, which, with the assistance of legal advisors, acted
independently on behalf of the stockholders unaffiliated with the
Victorinox Group, resulting in the final purchase price of $9.00 per
Share.
- Over the course of the past few years, the Company's sales of
Victorinox(R) original Swiss Army(TM) knives has declined, largely due to
the increased importation into the United States of relatively
inexpensive pocketknives and similar devices produced in China. According
to figures published by the U.S. Customs Service, during 1985, domestic
imports of pocketknives and related products from Switzerland was
3,533,000 units compared to 736,000 from China. By 2001, imports for
these products from Switzerland had increased by 38.5% to 4,894,000 units
while imports from China increased by over 6,400% to 48,089,000 units.
Imports from China now exceed those from Switzerland by a factor of
almost 10.
- As a consequence of these declining sales, the Company has not been able
to meet required minimum purchases of pocketknives from Victorinox for
any of the last five years. The minimum purchase requirement equals 85%
of the maximum amount of pocketknives purchased by the Company from
Victorinox in any prior year. Victorinox has the right to terminate the
U.S. Distribution Agreement if the minimum purchase requirement in any
year has not been met. However, in each of the past five years,
Victorinox and the Company have agreed to an amount of pocketknives to be
purchased by the Company in lieu of the minimum purchase requirement.
- The recent terror attacks of September 11, 2001 and events that followed
have had a continuing negative impact on Company revenues and profits.
Victorinox believes that the general popular climate shaped by these
events may have created in the public's mind a negative feeling about
pocketknives, especially ones associated with the word "army".
- The majority of the Company's products are imported from Switzerland and
are paid for in Swiss francs. The Company enters into foreign currency
contracts and options to hedge the exposure associated with foreign
currency fluctuations. Despite such hedging activity, increases in the
value of the Swiss franc versus the U.S. dollar will increase the cost of
these products to the Company, which may result in reductions in the
Company's gross margins.
- The transaction is procedurally fair to the stockholders of the Company
because given the Victorinox Group's current holdings, satisfaction of
the Minimum Condition will require that approximately 69% of the Shares
held by persons unaffiliated with the Victorinox Group validly tender and
do not withdraw their Shares before Purchaser may accept the Offer. Each
Company stockholder will be able to decide voluntarily whether or not to
tender such stockholder's Shares in the Offer, and if such stockholder
elects not to tender, he or she will receive exactly the same type and
amount of consideration in the Merger that is expected to follow
completion of the Offer.
- Stockholders who do not tender their Shares in the Offer will be
entitled, upon consummation of the Merger following completion of the
Offer, to exercise Delaware statutory appraisal rights in the Merger,
allowing them to have the fair value of their Shares determined by the
Delaware Chancery Court and paid to them in cash.
- The Shares have historically traded at low volumes resulting in limited
liquidity in the Shares, and the Offer and the Merger provide the
stockholders with the opportunity to liquidate their holdings in the
Company.
- The consideration of $9.00 per Share to be paid in the Offer and the
Merger represents a premium of 41.7% when compared to $6.35, the reported
closing price per Share for the day immediately prior to Victorinox's
June 12, 2002 announcement of its $9.00 proposal, a premium of
approximately 42.2% above the average of the closing price of Shares over
the 30 trading days immediately prior to that date,
9
and a premium of approximately 36.8% above the average closing price of $6.58
over the 52-week period immediately prior to that date.
- The consideration is to be paid to stockholders of the Company entirely
in cash.
The foregoing discussion of the information and factors considered and
given weight by Victorinox, Purchaser, Charles Elsener, Sr., Charles Elsener,
Jr. and Eduard Elsener is not intended to be exhaustive but does include all the
material factors considered by Victorinox, Purchaser, Charles Elsener, Sr.,
Charles Elsener, Jr. and Eduard Elsener. Victorinox, Purchaser's, Charles
Elsener, Sr.'s, Charles Elsener, Jr.'s and Eduard Elsener's views as to the
fairness of the Offer to stockholders of the Company should not be construed as
a recommendation to stockholders as to whether they should tender their Shares
in the Offer. The Special Committee, comprised of two of the non-employee
directors of the Company, retained Needham as its unaffiliated financial
representative to prepare an opinion and a report concerning the fairness of the
transaction. The opinion and the report are Exhibits (c)(1) and (c)(2),
respectively, to the Schedule TO filed in connection with this Offer. The
Special Committee retained Lynch, Brewer, Hoffmann & Fink LLP as its
unaffiliated legal representative to negotiate the terms of the Offer. While the
Board did not make a formal recommendation of the Offer because the Board felt
that, due to the appearance of certain conflicts and interrelationships with
Victorinox, certain members of the Board could appear to have a conflict of
interest in connection with the Proposal, all of the members of the Board have
indicated their intent to tender their Shares in the transaction.
Although the foregoing discussion summarizes all the material factors
considered by Victorinox, Purchaser, Charles Elsener, Sr., Charles Elsener, Jr.
and Eduard Elsener with respect to the fairness of the Offer, the discussion is
not an exhaustive list of all information and factors considered. With respect
to their determination of the fairness of the Offer to unaffiliated stockholders
of the Company, Victorinox, Purchaser, Charles Elsener, Sr., Charles Elsener,
Jr. and Eduard Elsener considered a number of factors which can generally be
important in similar transactions -- including the liquidation value of the
Company, its net book value, and other recent firm offers for the Shares -- to
be irrelevant for their purposes. Victorinox, Purchaser, Charles Elsener, Sr.,
Charles Elsener, Jr. and Eduard Elsener generally considered the liquidation
value of the Company to be irrelevant because of their belief that there would
be substantial value in the Company continuing as a going concern, which value
would be eliminated in the event of liquidation. Victorinox, Purchaser, Charles
Elsener, Sr., Charles Elsener, Jr. and Eduard Elsener believe that an analysis
of book value is not a meaningful figure given the nature of the Company's
assets and business. Purchaser, Victorinox, Charles Elsener, Sr., Charles
Elsener, Jr. and Eduard Elsener are unaware of any recent firm offers for the
Shares and Victorinox did not wish to sell its share. Neither Purchaser,
Victorinox, Charles Elsener, Sr., Charles Elsener, Jr. nor Eduard Elsener
engaged the services of a financial advisor in proposing the Offer and instead
relied primarily on the arms' length negotiations with the Company in settling
on an offer which each believes to be fair. Based on that negotiation process,
Victorinox, Purchaser, Charles Elsener, Sr., Charles Elsener, Jr. and Eduard
Elsener concluded that, on balance, the potential benefits of the Offer to the
stockholders of the Company outweighed the risks associated therewith.
Victorinox, Purchaser, Charles Elsener, Sr., Charles Elsener, Jr. and Eduard
Elsener did not find it practicable to, and did not, quantify or otherwise
assign relative weight to, the specific positive or negative factors considered
in reaching their determination. Instead, they conducted an overall analysis of
the factors described above.
V. REPORTS, OPINIONS AND APPRAISALS
Needham & Company, Inc. ("Needham") delivered an oral opinion, subsequently
confirmed by delivery of a written opinion to the Special Committee of SABI,
dated as of June 14, 2002, that, as of that date, and subject to the matters and
assumptions set forth in the opinion, the proposed offer price of $9.00 per
share was fair from a financial point of view to the holders of shares of SABI
other than the Victorinox Group.
The full text of the written opinion of Needham which sets forth the
assumptions made, procedures followed, matters considered and limitations on the
review undertaken by Needham in connection with the opinion, is attached as
Annex A to the Schedule 14D-9 and is incorporated by reference in this Schedule
13E-3. Stockholders are urged to, and should read, the opinion in its entirety.
10
In arriving at its opinion, Needham, among other things:
- reviewed certain publicly available information concerning SABI and
certain other relevant financial and operating data of SABI furnished to
them by SABI;
- reviewed the historical stock price and trading volume of SABI's Common
Stock;
- held discussions with members of management of SABI concerning SABI's
past and current operations, past and current financial conditions,
current and future business prospects and long term relationship held
with Victorinox;
- reviewed certain internal financial forecasts prepared by the management
of SABI and certain financial forecasts prepared by Needham based on
these internal forecasts of SABI's management;
- compared certain publicly available financial data of companies whose
securities are traded in the public markets and that Needham deemed
relevant to similar data for SABI;
- compared precedent transaction multiples in which the acquiror had a
preexisting ownership of the target exceeding 50%;
- compared precedent transaction multiples of selected brand and apparel
acquisitions; and
- performed and/or considered such other studies, analyses, inquiries and
investigations as Needham deemed appropriate.
Needham assumed and relied on the accuracy and completeness of all of the
financial and other information reviewed by it for purposes of this opinion and
neither attempted to verify independently nor assumed responsibility for
verifying any of such information. In addition, Needham did not consider the tax
implications to SABI, Victorinox or any holders of the SABI's Common Stock in
connection with the Proposal. With respect to SABI's financial forecasts,
including forecasts of its subsidiaries, provided to Needham by SABI's
management, Needham, with SABI's consent and based upon discussions with SABI's
management, assumed that such forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments of such
management, at the time of preparation, of the future operating and financial
performance of SABI. Needham expressed no opinion with respect to such forecasts
or estimates or the assumptions on which they were based. Needham did not assume
any responsibility for or make or obtain any independent evaluation, appraisal
or physical inspection of the assets or liabilities of SABI.
No limitations were imposed by SABI on Needham with respect to the
investigations made or procedures followed by Needham in rendering its opinion.
In connection with its engagement, Needham was not requested to, and did not,
solicit third party indications of interest in the possible acquisition of all
or a part of SABI. In connection with its engagement, Needham was not requested
to and did not participate in the negotiation or structuring of the Proposal and
accordingly, Needham's opinion did not address and expressed no view as to the
relative merits of the Proposal as compared to any alternative business
strategies that might have existed for SABI or the effect of any other
transaction in which SABI might have engaged. In addition, Needham's opinion did
not take into account and was not based on its assessment of the structure or
terms of the Proposal and expressed no opinion with respect to (a) the
implications of the lack of a binding agreement expressing specific terms upon
which the proposed transaction must be consummated, and (b) the potentially
adverse effect that termination or modification of the Proposal might have on
SABI.
In preparing its opinion, Needham performed a variety of financial and
comparative analyses. The following paragraphs summarize the material financial
and comparative analyses performed by Needham in arriving at its opinion. Some
of the summaries of the financial analyses include information presented in
tabular format. The tables are not intended to stand alone, and in order to more
fully understand the financial analyses used by Needham, the tables must be read
together with the full text of each summary.
The following is a summary of the material financial analyses presented by
Needham to the Special Committee in connection with the rendering of its
opinion. This summary does not purport to be a complete description of the
analyses performed by Needham. Needham made no attempt to assign specific
weights to particular analyses or factors considered, but, rather, made
qualitative judgments as to the significance and relevance of all the analyses
and factors considered. Accordingly, Needham believed that its analysis and
summary set forth below, must be considered as a whole and that selecting
portions of the analyses and the
11
factors considered by Needham could create a misleading or incomplete view of
the processes underlying the analyses performed by Needham..
VALUATION METHODOLOGY. Needham analyzed the preexisting relationship
between SABI and Victorinox, including two joint ventures in which each of SABI
and Victorinox own 50% and that are consolidated into SABI's financial results.
These two joint ventures are:
- Xantia S.A., the principal supplier of watches to SABI and manufacturer
of watches for third-party customers; and
- Victorinox Swiss Army Watch S.A. ("VSA"), a watch company that combines
the watch businesses of SABI and Victorinox outside the United States,
Canada and the Caribbean.
Given the nature of the transaction, Needham's valuation of SABI was based
on the portion of SABI not owned by Victorinox. In addition, Needham's valuation
considered all significant non-operating assets of SABI.
SELECTED COMPANY ANALYSIS. Using publicly available information, Needham
compared selected historical and projected financial and market data and ratios
for SABI to the corresponding data and ratios of certain other publicly traded
companies that Needham deemed relevant because their respective business models
focused on brand recognition within the retail industry. The selected public
comparables were categorized in three tiers based on market capitalization.
These companies, referred to as the "selected companies," categorized by
tier, are:
Tier One: Tiffany & Co.; Coach, Inc.; and Oakley, Inc.
Tier Two: Energizer Holdings, Inc.; The Timberland Company; Columbia
Sportswear Company; Kenneth Cole Productions, Inc.; Fossil, Inc.;
Quicksilver, Inc.; and Movado Group, Inc.
Tier Three: Tropical Sportswear International Corporation; Vans,
Inc.; A.T. Cross Company; Perry Ellis International, Inc.; Cutter & Buck,
Inc.; and Deckers Outdoor Corporation.
The following table sets forth information concerning the following
multiples for the selected companies and for SABI:
- total enterprise value as a multiple of last twelve months revenues;
- total enterprise value as a multiple of estimated calendar 2002 revenues;
- total enterprise value as a multiple of estimated calendar 2003 revenues;
- total enterprise value as a multiple of last twelve months earnings
before interest, taxes, depreciation and amortization;
- total enterprise value as a multiple of last twelve months earnings
before interest and taxes;
- price as a multiple of last twelve months earnings per share;
- price as a multiple of estimated calendar 2002 earnings per share;
- price as a multiple of estimated calendar 2003 earnings per share; and
- market value as a multiple of most recent quarter book value.
Needham calculated multiples for the selected companies and SABI based on
the closing stock price of $6.23 on June 10, 2002. The table below sets forth
the multiples yielded from the selected company analysis.
12
<Table>
<Caption>
ENTERPRISE VALUE/ PRICE/
------------------------------------------- ---------------------------
REVENUES MARKET
-------------------------- EBITDA EBIT EPS VALUE/LAST Q
LTM CY 2002E CY 2003E LTM LTM LTM CY 2002E CY 2003E BOOK
---- -------- -------- ------ ----- ----- -------- -------- --------------
TIER ONE
Mean................. 3.3x 2.9x 2.4x 14.7x 18.5x 30.3x 25.5x 21.2x 6.9x
Median............... 3.4x 3.2x 2.4x 14.4x 19.0x 31.7x 26.2x 21.2x 5.0x
High................. 3.5x 3.2x 2.8x 16.0x 19.2x 31.7x 28.0x 24.0x 10.8x
Low.................. 3.0x 2.5x 2.0x 13.9x 17.3x 27.4x 22.2x 18.4x 4.7x
TIER TWO
Mean................. 1.3x 1.2x 1.1x 9.5x 11.5x 20.4x 16.8x 14.1x 3.1x
Median............... 1.2x 1.2x 1.1x 8.7x 11.0x 15.6x 16.2x 14.0x 3.7x
High................. 1.7x 1.6x 1.5x 15.4x 18.4x 33.3x 25.3x 20.6x 4.1x
Low.................. 1.1x 1.0x 0.9x 6.8x 7.7x 12.6x 12.5x 10.6x 1.5x
TIER THREE
Mean................. 0.6x 0.4x 0.3x 6.3x 9.3x 14.0x 12.7x 7.2x 1.2x
Median............... 0.6x 0.4x 0.3x 6.4x 9.2x 12.0x 8.2x 7.2x 0.9x
High................. 0.9x 0.5x 0.3x 8.7x 12.0x 19.9x 26.8x 7.2x 2.0x
Low.................. 0.4x 0.3x 0.3x 4.4x 5.9x 10.3x 7.5x 7.2x 0.8x
SABI*................ 0.5X 0.5X 0.4X NM NM NM 36.7X 14.2X 0.7X
</Table>
The financial data under the column headers CY 2002E and CY 2003E represents
estimated financial data for each the respective calendar year.
LTM: Last twelve months
NM: Not meaningful
EBIT: Earnings before interest and taxes
EBITDA: Earnings before interest, taxes, depreciation and amortization
Last Q Book: Last quarter's book value
*Multiples employ the $6.23 closing sale price on June 10, 2002 of SABI Common
Stock.
Based on the selected company analysis, a specific maximum and minimum
multiple range between the ranges below were used to value SABI consolidated,
Xantia S.A. and VSA individually.
<Table>
<Caption>
METRIC MULTIPLE RANGE
- ------ --------------
Total Enterprise Value/CY 2002E Revenue 0.7x - 1.3x
Total Enterprise Value/LTM EBITDA 7.5x - 10.2x
Price/CY 2002E Earnings 15.0x - 18.3x
Market Value/Most Recent Quarter Book Value 0.8x - 1.3x
</Table>
Valuations based on multiples of estimated 2003 earnings before interest,
taxes, depreciation and amortization and estimated 2003 earnings were discounted
to present values at discount rates between 13%-14%. To arrive at an implied
stock price range for SABI as a stand-alone entity, Needham made three
adjustments to the SABI consolidated implied equity valuation range:
- Deducting 50% of the value of Xantia S.A. held by Victorinox;
- Deducting 50% of the value of VSA held by Victorinox; and
- Adding the present value of non-operating assets that consist of life
insurance policies held by the Company. The valuation range of the life
insurance policies was based on the projected cash values of each policy
discounted at 4.0%. SABI provided Needham the projected cash values.
13
The valuation based on publicly traded comparable companies yielded a
valuation range for SABI net of Victorinox's holdings in Xantia S.A. and VSA
from approximately $58.2 million to $102.7 million. These values represent a
fully diluted per share value from approximately $6.98 to $11.76.
DISCOUNTED CASH FLOW ANALYSIS. Needham also performed a discounted cash
flow analysis based on the financial information provided by the management of
the Company for the fiscal years ending December 31, 2002 to December 31, 2006.
The discounted cash flow analysis determined the estimated after-tax cash flows
to be generated over the period commencing with the year ending December 21,
2002 and then added a terminal value based upon a range of multiples of earnings
before interest, taxes, depreciation and amortization for the year ending
December 31, 2004 based on the multiples of comparable companies. The discount
range used to calculate the present value of the terminal value and the free
cash flows for SABI consolidated, Xantia S.A. and VSA was 10.0% to 15.0%.
Having valued each entity on a discounted cash flow basis, Needham made
three adjustments to the SABI consolidated implied equity valuation range:
- Deducting 50% of the value of Xantia S.A. held by Victorinox;
- Deducting 50% of the value of VSA held by Victorinox; and
- Adding the present value of non-operating assets that consisted of life
insurance policies held by the Company. The valuation range of the life
insurance policies was based on the projected cash values of each policy
discounted at 4.0%. SABI provided Needham the projected cash values.
The valuation based on discounted cash flow analysis yielded a valuation
range for SABI net of Victorinox's holdings in Xantia S.A. and VSA from
approximately $65.8 million to $96.6 million. These values represent a fully
diluted per share value from approximately $7.84 to $11.15.
SELECTED TRANSACTION ANALYSIS. Needham analyzed publicly available
financial information for selected transactions that were deemed relevant. The
first set analyzed transaction multiples in which the acquiror had a preexisting
ownership of the target exceeding 50% for transactions since January 1, 2000.
The second set analyzed transaction multiples of selected brand and apparel
acquisitions since January 1, 1997.
In examining the selected transactions, Needham analyzed:
- total enterprise value as a multiple of target's last twelve months net
sales;
- total enterprise value as a multiple of target's last twelve months
earnings before interest and taxes;
- total enterprise value as a multiple of target's last twelve months
earnings before interest, taxes, depreciation and amortization;
- total equity value as a multiple of target's last twelve months net
income;
- total equity value as a multiple of target's most recent quarter book
value;
- one day target stock price premium;
- percentage of target owned by acquiror prior to announcement; and
- percentage of target acquired by acquiror post-transaction.
14
Based on the proposed $9.00 stock price of SABI, Needham calculated the implied
premium and multiples of SABI. The following table sets forth information
concerning the multiples and transaction premiums resulting from Needham's
analysis.
ACQUIRORS WITH PREEXISTING OWNERSHIP GREATER THAN 50%
January 1, 2000 to June 10, 2002
<Table>
<Caption>
EQUITY VALUE/
ENTERPRISE VALUE/TARGET LTM -------------------
--------------------------- LTM NET ONE-DAY
NET SALES EBIT EBITDA INCOME BOOK PREMIUM % OWNED % ACQUIRED
--------- ------ ------ ---------- ------ ------- ------- ----------
Mean....................... 2.1x 17.2x 15.3x 30.5x 2.5x 35.1% 72.8% 85.9%
Median..................... 1.1x 13.1x 9.3x 16.5x 1.8x 24.7% 73.2% 100.0%
High....................... 14.4x 102.6x 145.1x 260.2x 14.7x 220.0% 96.2% 100.0%
Low........................ 0.1x 2.1x 1.3x 2.8x (0.5)x (15.8)% 50.6% 3.8%
</Table>
SELECTED BRAND AND APPAREL RETAILERS
January 1, 1997 to June 10, 2002
<Table>
<Caption>
EQUITY VALUE/
ENTERPRISE VALUE/TARGET LTM ------------------
--------------------------- LTM NET ONE-DAY
NET SALES EBIT EBITDA INCOME BOOK PREMIUM % OWNED % ACQUIRED
--------- ------ ------ ---------- ----- ------- ------- ----------
Mean......................... 0.9x 30.1x 9.3x 17.2x 6.0x 39.1% 55.3% 83.4%
Median....................... 0.6x 14.4x 7.3x 18.6x 1.8x 38.8% 56.5% 100.0%
High......................... 2.9x 184.3x 25.8x 31.1x 29.8x 114.9% 92.3% 100.0%
Low.......................... 0.3x 6.3x 4.3x 1.3x 0.6x 7.1% 16.0% 7.7%
</Table>
SABI MULTIPLES AT AN IMPLIED STOCK PRICE OF $9.00
<Table>
<Caption>
EQUITY VALUE/
ENTERPRISE VALUE/TARGET LTM -----------------
- --------------------------- LTM NET ONE-DAY
NET SALES EBIT EBITDA INCOME BOOK PREMIUM
- --------- ----- ------- ---------- ---- -------
0.7x NM 31.5x NM 1.0x 44.4%
</Table>
The resulting one-day premium range within each the two sets analyzed by
Needham for its selected transaction analysis supported the 44.4% premium over
the price of SABI's Common Stock as of June 10, 2002.
No company, transaction or business used in the "Selected Company
Analysis," "Selected Transaction Analysis," or "Discounted Cash Flow Analysis"
as a comparison is identical to SABI or Victorinox. Accordingly, an evaluation
of the results of these analyses is not entirely mathematical; rather, it
involves complex considerations and judgments concerning differences in the
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the selected companies or
selected transactions or the business segments, companies or transactions to
which they are being compared.
OTHER ANALYSES. In rendering its opinion, Needham considered various other
analyses, including a history of trading prices and volumes for SABI, a purchase
price sensitivity analysis that measured trading multiples at varying prices of
SABI common stock and a current stockholder analysis of SABI. The history of
trading prices and volumes for SABI established a trading precedent for the
Company's stock over the last five calendar years. This trading precedent showed
that the Company's stock was very thinly traded and showed that for the one year
ending June 10, 2002, the trading price range was between $6.00 and $8.00 for
99.5% of the volume of shares traded. The purchase price sensitivity analysis
was used as a mathematical tool to compare the multiples implied by a $9.00
offer price to multiples implied by other theoretical prices. The current
stockholder analysis was used to determine the distribution of holdings among
institutional, retail and inside investors.
15
Needham also performed an analysis of insurance policies and an analysis of
license agreements. The analysis of the insurance policies was used to value the
Company's non-operating assets on the basis of the present value of expected
cash flows, a component in determining the total value of the Company. The
analysis of the license agreements was used for illustrative purposes in order
to provide background information on the Company's relationship with Victorinox
with respect to distribution and marketing rights in North America.
The summary set forth above does not purport to be a complete description
of the analyses performed by Needham in connection with the rendering of its
opinion. The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant quantitative and qualitative methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, Needham believes that its analyses must be
considered as a whole and that selecting portions of its analyses or the factors
it considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying its opinion. In its
analyses, Needham made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of the parties. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable.
Additionally, analyses relating to the values of businesses or assets do not
purport to be appraisals or necessarily reflect the prices at which businesses
or assets may actually be sold. Accordingly, these analyses and estimates are
inherently subject to substantial uncertainty. Needham's opinion and its related
analyses were only one of many factors considered by the Special Committee in
its evaluation of the Proposal and should not be viewed as determinative of the
views of the Special Committee with respect to the fairness of the offer price.
Needham has not expressed any opinion as to the prices that SABI Common
Stock will actually trade at any time. In addition, Needham expressed no opinion
or recommendation as to whether or not stockholders of SABI should tender their
shares pursuant to the Offer or as to any other matters relating to the Offer.
Under the terms of the Needham engagement letter, SABI has paid or agreed
to pay Needham a nonrefundable fee of $200,000 for rendering the Needham
opinion, an engagement fee of $25,000 upon retaining Needham as a financial
advisor and a fee of $25,000 upon receipt of an offer for the proposed
transaction. None of the fees to be received by Needham are contingent upon
successful completion of the Offer. SABI has also agreed to reimburse Needham
for its reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of its counsel, and to indemnify Needham and related parties
against certain liabilities arising out of or in connection with or as a result
of Needham's engagement as financial advisor to the Special Committee, including
certain liabilities under the federal securities laws.
We were informed by the Company that the Special Committee considered two
investment banking firms and that the Special Committee retained Needham to
provide an opinion as to the fairness of the offer based upon its experience and
expertise as a financial advisor in mergers and acquisitions, Needham's
familiarity with companies engaged in brand and apparel retail, and based on its
fees which the Special Committee deemed to be competitive. Needham is a
nationally recognized investment banking firm. As part of its investment banking
services, Needham is frequently engaged in the evaluation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
other purposes.
VI. RELATED PARTY TRANSACTIONS
The Victorinox Group owns approximately 67.8% of the outstanding Common
Stock. Victorinox is the supplier to the Company of the Victorinox(R) original
Swiss Army(TM) knife, SwissTool(TM), SwissCard(R), and the majority of the
Company's professional cutlery products. In the years ended December 31, 2001
and 2000 and for the first quarter of 2002, the Company purchased from
Victorinox, knives and tools with a cost of approximately $23,940,000,
$29,300,000 and $6,450,000, respectively. At December 31, 2001 and 2000 and at
March 31, 2002, the Company owed Victorinox approximately $5,930,000, $3,720,000
and $3,376,000 respectively, related to the purchase of knives and tools.
16
Under the terms of the Company's distribution agreements with Victorinox,
the Company is the exclusive distributor in the United States, Canada (with one
minor exception for cutlery) and the Caribbean of the following products
manufactured by Victorinox: Victorinox(R) original Swiss Army(TM) knife,
SwissTool(TM), SwissCard(R), Victorinox(R) cutlery and Victorinox(R) Swiss-made
watches. In addition the distribution agreements give the Company exclusive
rights to use Victorinox trademarks and trade names in such territories with
respect to those products. The U.S. Distribution Agreement was renewed in 1998
through December 12, 2003 and is subject to renewal at five year intervals at
the Company's option unless, in any two consecutive years, purchases of products
by the Company fall below the average purchases for 1981 and 1982, which was
19,766,035 CHF ($11,816,000).* The U.S. Distribution Agreement is also subject
to termination by Victorinox if the Company fails to purchase quantities of
Victorinox(R) original Swiss Army(TM) knives and cutlery (based on the Swiss
franc purchase price) at least equal to 85% of the maximum amount of purchases
of each in any preceding year. The Company has not been able to meet required
minimum purchases of pocketknives from Victorinox for any of the last five
years. Victorinox has the right to terminate the U.S. Distribution Agreement if
the minimum purchase requirement in any year has not been met. However, in each
of the past five years, Victorinox and the Company have agreed to an amount of
pocketknives to be purchased by the Company in lieu of the minimum purchase
requirement
The Company's distribution rights in Canada, which were renewed in 1999,
and in the Caribbean, which were renewed in 2000, have five-year terms, subject
to renewal. If Victorinox elects not to renew the Company's exclusive rights to
distribute in Canada, Victorinox must pay the Company $3,500,000.
Pricing provisions assure that the prices paid by the Company for
Victorinox products shipped to the United States will be as low as or lower than
those charged to any other Victorinox customer. In addition, the Company is
granted a 4% discount on purchases of pocket knives. For products shipped
directly to Canada, the prices paid by the Company are Victorinox's regular
export prices.
Victorinox has also granted the Company the right to utilize and
sub-license the Victorinox trademarks and the Victorinox Crest design to third
parties for Victorinox(R) Travel Gear and Victorinox(R) Apparel.
On July 30, 2001, the Company and Victorinox announced an agreement on the
formation of Victorinox Swiss Army Watch S.A. ("VSA"), a new watch company that
combines the watch businesses of the two companies outside the United States,
Canada and the Caribbean in order to market and distribute watches under the
Victorinox and Swiss Army trademarks in international markets. Each of the
Company and Victorinox has a 50% equity interest in VSA. Pursuant to the VSA
agreement, the board of VSA consists of two persons nominated by Victorinox and
three persons nominated by the Company. The board members nominated by
Victorinox are Charles Elsener, Sr. and Charles Elsener, Jr., and the board
members nominated by the Company are Peter Gilson, Susanne Rechner and Franz
Kellerhals. Each of the Company and Victorinox agreed to contribute up to
1,000,000 CHF ($598,000) in cash and an equal amount of its watch inventory
outside the United States, Canada and the Caribbean. On November 1, 2001, VSA
commenced operations. In 2001, each of the Company and Victorinox contributed
300,000 CHF ($186,000) of cash in respect of their 1,000,000 CHF ($598,000)
commitment, and the Company contributed approximately 2,221,000 CHF ($1,328,000)
in inventory and Victorinox contributed approximately 2,015,000 CHF ($1,205,000)
in inventory. VSA and Victorinox have entered into an agreement, effective as of
June 20, 2002, pursuant to which Victorinox has agreed to defer until October
15, 2003 payment of 5,200,000 CHF (approximately $3,459,747) owed by VSA to
Victorinox in respect of funds, property and services provided by Victorinox to
VSA in excess of amounts required to be contributed to VSA by Victorinox under
the July 30, 2001 agreement.
On July 24, 2000, the Company and Victorinox each acquired 50% of the
issued and outstanding capital stock of Xantia, S.A. ("Xantia"), a Swiss company
that designs and manufactures watches. Pursuant to an agreement with Victorinox,
the board of Xantia consists of two persons nominated by Victorinox and three
persons nominated by the Company. The board members nominated by Victorinox are
Charles Elsener, Sr.
- ---------------
* Conversion to U.S. dollars based on exchange rates used by the Company
for preparation of its 2001 annual financial statements.
17
and Charles Elsener, Jr., and the board members nominated by the Company are
Peter Gilson, Susanne Rechner and Annett Spycher. Xantia is the principal
supplier of watches to the Company and the Company purchases substantially all
of its Swiss Army Brand Watches from Xantia. Victorinox and VSA also purchase
watches from Xantia. In the years ended December 31, 2000 and 2001 and for the
first quarter of 2002, the Company purchased from Xantia watches with an
aggregate cost of $17.4 million, $18.1 million and $4.9 million, respectively.
In the years ended December 31, 2000 and 2001 and for the first quarter of 2002,
Victorinox purchased from Xantia watches with an aggregate cost of approximately
$17,000, $700,000 and $0, respectively. In the year ending December 31, 2001 and
for the first quarter of 2002, VSA purchased from Xantia watches with an
aggregate cost of approximately $1.0 million and $1.5 million, respectively.
As a result of the commercial relationships described above between
Victorinox and the Company, representatives of Victorinox and the Company confer
on a daily basis.
In July 1994, the Company entered into a Services Agreement with Brae
Group, Inc. ("Brae"), a corporation of which Victorinox owns slightly less than
50% and which, through ownership of a class of "super voting" stock, is
controlled by Louis Marx, Jr., a director of the Company. Under the Services
Agreement, Brae provided 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 Common Stock at the then current market
price of $10.75 per share.
On April 23, 1998, the Company entered into an agreement with Brae Capital
Corporation ("Brae Capital"), a wholly owned subsidiary of Brae, whereby Brae
Capital supplies the Company with legal services, which services are provided by
Herbert M. Friedman, a Vice President and General Counsel and a director of the
Company. The fees for these services have been and are expected to continue to
be approximately $15,000 per month in 2002. The fees incurred for 2001 were
approximately $180,000. This agreement can be terminated by either party upon
thirty days' written notice.
On November 8, 2000, Brae issued 1,020,340 shares of its Class A Common
Stock to Victorinox pursuant to a subscription agreement entered into between
Brae and Victorinox in 1995.
During December 1999 and January and March 2000, the Victorinox Personnel
Welfare Fund, a stockholder of Victorinox, advanced an aggregate of $7,560,000
to Brae Capital pursuant to a promissory note executed by Brae Capital in
December 1999. This indebtedness, as well as other indebtedness owed by Brae
Capital to Victorinox and/or its affiliates, was satisfied and cancelled in
connection with the sale by Brae to Victorinox of 1,917,900 shares of the Common
Stock on December 13, 2000, for an aggregate purchase price of $9,589,500. In
connection with such sale of Common Stock, Brae also issued to Victorinox a
promissory note in the principal amount of $825,070.99, which amount represented
the excess of the cancelled indebtedness over the purchase price for the shares
of Common Stock sold by Brae to Victorinox. The promissory note was due and
payable on August 23, 2001 and bears interest at the rate of 10% per annum. No
demand for payment has been made by Victorinox and Brae and Victorinox are in
the process of discussing resolution of the indebtedness.
The following paragraphs contain a summary of direct and indirect interests
that Victorinox and/or Charles Elsener, Sr. have in certain companies with which
the Company and/or certain directors of the Company have a relationship.
The Company, Charles Elsener, Sr., Charles Elsener, Jr., Brae Capital,
Clark Bailey (a director of the Company), A. Clinton Allen (a director of the
Company), Stanley R. Rawn, Jr. (Senior Managing Director of and a director of
the Company) and Herbert M. Friedman (Vice President and General Counsel and a
director of the Company) are investors in Highgate Capital LLC ("Highgate").
Highgate is a private equity firm specializing in middle market acquisitions,
recapitalizations and expansion capital investments. The Company owns 890,776
Preferred Units of Highgate, currently representing approximately 10.9% of the
equity of Highgate. Charles Elsener, Sr. owns 1,142,858 Series B Preferred Units
of Highgate, currently representing approximately 14.0% of the equity of
Highgate. Brae Capital owns 2,279,763 Series B Preferred Units and 490,000
Common Units of Highgate, currently representing, in the aggregate,
approximately 33.8% of the equity of Highgate. United Investors Group, Inc.
("UIG"), a private company 49.2% owned by Brae Capital,
18
owns 193,652.6 Series B Preferred Units of Highgate, currently representing
approximately 2.4% of the equity of Highgate. Mr. Marx is a director and
co-chairman of UIG. None of Mr. Bailey, Mr. Allen, Mr. Rawn or Mr. Friedman owns
greater than 2% of the equity of Highgate. Mr. Marx, Mr. Rawn and Mr. Friedman
serve as directors of Highgate.
Mr. Marx is the owner of 250 management units issued by ShipXact.com
Holdings LLC, the principal shareholder of ShipXact.com, Inc., Highgate's most
significant investment. These units entitle the holders thereof to a profit
participation in realized profits on ShipXact.com, Inc.
In 1996, Highgate distributed pro-rata to its members all of its interest
in Victory Ventures LLC ("Victory Ventures"), a private equity firm specializing
in small market venture capital investments. The Company received in the
distribution, and continues to hold, 890,776 preferred units of Victory
Ventures, currently representing approximately 1.2% of the equity of Victory
Ventures. Brae Capital currently owns 7,407,035 of Victory Ventures' Series A
Preferred Units, currently representing approximately 11.0% of the equity of
Victory Ventures. UIG owns 6,841,784 Series A Preferred Units of Victory
Ventures, currently representing approximately 10.2% of the equity of Victory
Ventures. Charles Elsener, Sr. and Charles Elsener, Jr. currently own 10,768,875
and 248,316, respectively, Series A Preferred Units of Victory Ventures,
currently representing a 16.0% and 0.37% respectively, of the equity of Victory
Ventures. Mr. Marx, Mr. Rawn, Mr. Friedman, Robert S. Prather, Jr. (a director
of the Company) and John V. Tunney (a director of the Company) serve as
directors of Victory Ventures. Mr. Marx is also a consultant to Victory
Ventures.
In 2001, Victory Ventures distributed pro-rata to its members all of its
interest in East River Ventures I, LP ("East River I"), a private equity firm
specializing in small market venture capital investments. The Company received
in the distribution a 1.2% ownership interest in East River I. In addition, Brae
Capital is currently the owner of approximately 23.3% of Victory Partners, LLC,
which in turn, owns approximately 2.3% of East River I. Charles Elsener, Sr. and
Charles Elsener, Jr. currently own approximately 15.8% and 0.37%, respectively,
of the equity of East River I. Mr. Marx owns 33.3% of ERV Partners LLC, which is
the general partner of East River I.
Brae and Brae Capital collectively own 83.8% of the outstanding capital
stock of Brae Land Corp. ("Brae Land"), a company that owns real estate in New
York State. Mr. Marx owns less than 0.1% of the outstanding capital stock of
Brae Land. Charles Elsener, Sr., owns 15.6% of the outstanding capital stock of
Brae Land.
VII. TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES
No transactions in the Shares have been effected during the past 60 days by
Victorinox or Purchaser or, to the best of their knowledge, any associate or
majority owned subsidiary of Victorinox or Purchaser, the Company, any pension,
profit-sharing or similar plan of the Company or any person listed in Schedule I
hereto, other than the issuance of shares by the Company pursuant to the
exercise of outstanding options by persons who are not directors, executive
officers or affiliates of the Company. Neither Victorinox nor Purchaser has made
any underwritten public offering of the Shares during the past three years that
was (i) registered under the Securities Act of 1933 or (ii) exempt from
registration under the Securities Act of 1933 pursuant to Regulation A
thereunder. Victorinox and Charles Elsener, Sr. purchased an aggregate of
2,368,500 Shares during the last two years at per share prices that ranged
between $4.84375 and $6.70 with an average price per Share of $5.8443. See
Schedule II.
VIII. INTERESTS OF CERTAIN PARTIES IN THE OFFER AND THE MERGER
In considering the recommendations of the Special Committee with respect to
the Offer and the fairness of the consideration to be received in the Offer,
stockholders should be aware that Victorinox has certain interests that present
actual or potential conflicts of interest in connection with the Offer and
Merger. See Section VI. As a result of the Victorinox Group's current ownership
of approximately 67.8% of the outstanding Common Stock, Victorinox may be deemed
to control the Company. The Special Committee was aware of these actual and
potential conflicts of interest and considered them along with other matters.
19
Directors and Officers. The Company has advised Victorinox that, to the
best of its knowledge after reasonable inquiry, all of the Company's executive
officers, directors and affiliates (other than certain officers of the Company
who were not involved or aware of the negotiations or deliberations related to
the Offer and have not indicated their intent because they have no basis upon
which to make a determination) currently intend to tender to Purchaser all
Shares held of record or beneficially owned by such person, as of the expiration
of the Offer including: Peter W. Gilson, A. Jeffrey Turner, Louis Marx, Jr.,
Stanley R. Rawn, Jr., Herbert M. Friedman, Thomas M. Lupinski, James R. Cary,
Susanne Rechner, Robert W. McElroy, Marc A. Gold, A. Clinton Allen, Clarke H.
Bailey, Robert S. Prather, Jr., John Spencer, John V. Tunney and Michel H.
Thievent, the Chief Executive Officer of the Company's affiliate, Xantia. The
Company has advised Victorinox that, to the best of its knowledge after
reasonable inquiry, none of the executive officers, directors and affiliates of
the Company listed above has made a recommendation either in support of or
opposed to the Offer other than A. Clinton Allen and Robert S. Prather, Jr., who
made a joint recommendation in support of the Offer as members of the Special
Committee. None of the Company's executive officers and directors has entered
into an agreement with Victorinox obliging such person to tender Shares in the
Offer.
Ownership of Shares By the Victorinox Group. The following table sets
forth, as of July 15, 2002, information concerning the beneficial ownership of
Shares for each member of the Victorinox Group that holds Shares, including
directors and executive officers of Victorinox and Purchaser. Unless otherwise
indicated, all such Shares are owned directly, and the indicated person or
entity has sole voting and investment power. "Beneficial ownership" means the
sole or shared power to vote or direct the voting or to dispose or direct the
disposition of any security. A person is deemed to be the "beneficial owner" of
securities that can be acquired within 60 days from July 15, 2002 through the
exercise of any option, warrant or right. Shares of common stock subject to
options, warrants or rights are deemed outstanding for computing the ownership
percentage of the person holding such options, warrants or rights, but are not
deemed to be outstanding for computing the ownership percentage of any other
person. The amounts and percentages are based upon 8,275,811 Shares outstanding
as of July 15, 2002.
<Table>
<Caption>
NUMBER OF SHARES
NAME BENEFICIALLY OWNED PERCENT OF ALL SHARES
- ---- ------------------ ---------------------
Charles Elsener, Sr........................................ 5,609,105(1) 67.8%
Victorinox AG.............................................. 5,262,400 63.6%
Charles Elsener, Jr. ...................................... -- --
Eduard Elsener............................................. -- --
</Table>
- ---------------
(1) Consists of 346,705 Shares directly held by Charles Elsener, Sr. and
5,262,400 Shares held directly by Victorinox AG, which corporation Charles
Elsener, Sr. may be deemed to control. Charles Elsener, Sr. and Victorinox
share with each other the power to vote or direct the vote, and to dispose
or direct disposition of, the 5,262,400 shares of Common Stock held by
Victorinox.
Ownership of Shares By the Directors or Executive Officers of the
Company: The following table sets forth as of July 15, 2002 the information
concerning the beneficial ownership of outstanding Shares for each director and
executive officer of the Company, as reported to the Purchaser after inquiry to
the Company. Unless otherwise indicated, all such Shares are owned directly, and
the indicated person or entity has sole voting and investment power. "Beneficial
ownership" means the sole or shared power to vote or direct the voting or to
dispose or direct the disposition of any security. A person is deemed to be the
"beneficial owner" of securities that can be acquired within 60 days from July
15, 2002 through the exercise of any option, warrant or right. The Company has
informed Victorinox that it intends to fully vest all employee stock options
immediately prior to the Merger. Accordingly, the table below includes all
options granted to each individual, whether or not currently vested. Shares of
common stock subject to options, warrants or rights are deemed outstanding for
computing the ownership percentage of the person holding such options, warrants
or rights, but are not deemed to be outstanding for computing the ownership
percentage of any other person. The amounts and percentages are based upon
8,275,811 Shares outstanding as of July 15, 2002.
20
<Table>
<Caption>
NUMBER OF SHARES
NAME BENEFICIALLY OWNED PERCENT OF ALL SHARES
- ---- ------------------ ---------------------
Louis Marx, Jr............................................. 524,022(1) 6.0%
Peter W. Gilson............................................ 245,000(2) 2.9%
A. Jeffrey Turner.......................................... 57,500(3) *
Thomas M. Lupinski......................................... 102,119(4) 1.2%
Susanne Rechner............................................ 30,000(5) *
James R. Cary.............................................. 62,500(6) *
A. Clinton Allen........................................... 51,000(7) *
Clarke H. Bailey........................................... 43,000(8) *
Herbert M. Friedman........................................ 3,368 *
Robert S. Prather, Jr...................................... 55,823(9) *
Stanley R. Rawn, Jr........................................ 142,711(10) 1.7%
John Spencer............................................... 11,000(11) *
John V. Tunney............................................. 11,000(12) *
Marc A. Gold............................................... 41,750(13) *
Robert W. McElroy.......................................... 60,010(14) *
All directors and executive officers as a group............ 1,440,803(15) 15.1%
</Table>
- ---------------
(1) Includes 4,292 Shares held by a trust for the benefit of Mr. Marx, and
500,000 Shares issuable upon the exercise of a stock option held by Brae
Group, Inc., which corporation Mr. Marx may be deemed to control. The
exercise price for the stock option is $10.75 per share.
(2) Includes 244,000 shares subject to options held by Mr. Gilson, of which
50,000 have a per share exercise price of $9.00 or less.
(3) Includes of 55,000 shares subject to options held by Mr. Turner, all of
which have a per share exercise price of $9.00 or less.
(4) Includes 85,000 shares subject to options held by Mr. Lupinski, of which
55,000 have a per share exercise price of $9.00 or less.
(5) Consists of 30,000 shares subject to options held by Ms. Rechner, all of
which have a per share exercise price of $9.00 or less.
(6) Includes 60,000 shares subject to options held by Mr. Cary, of which 55,000
have a per share exercise price of $9.00 or less.
(7) Includes 50,000 shares subject to options held by Mr. Allen, of which
15,000 have a per share exercise price of $9.00 or less.
(8) Includes 40,000 shares subject to options held by Mr. Bailey, of which
15,000 have a per share exercise price of $9.00 or less.
(9) Includes 10,000 shares subject to options held by Mr. Prather, all of which
have a per share exercise price of $9.00 or less.
(10) Includes 100,000 shares subject to options held by Mr. Rawn, none of which
have a per share exercise price of $9.00 or less.
(11) Includes 10,000 shares subject to options held by Mr. Spencer, all of which
have a per share exercise price of $9.00 or less.
(12) Includes 10,000 shares subject to options held by Mr. Tunney, all of which
have a per share exercise price of $9.00 or less.
(13) Includes 40,000 shares subject to options held by Mr. Gold, all of which
have a per share exercise price of $9.00 or less.
(14) Includes 60,000 shares subject to options held by Mr. McElroy, of which
35,000 have a per share exercise price of $9.00 or less.
(15) Includes 1,294,000 shares subject to options held by all directors and
executive officers as a group.
* Less than 1%.
21
THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of such extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date (as hereinafter defined) and not
theretofore properly withdrawn. The term "Expiration Date" means 12:00 midnight,
New York City time, on Monday, August 26, 2002, unless and until Purchaser shall
have further extended the period during which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date at which the
Offer, as so extended by Purchaser, shall expire.
Subject to applicable law and the rules and regulations of the SEC,
Purchaser expressly reserves the right (but will not be obligated), in its sole
discretion, at any time and from time to time, to extend the period during which
the Offer is open for any reason by giving oral or written notice of the
extension to the Depositary and by making a public announcement of the extension
in the manner described below. During any extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer and subject to the
right of a tendering stockholder to withdraw Shares.
Subject to applicable law and the rules and regulations of the SEC,
including Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), Purchaser also expressly reserves the right:
- to delay acceptance for payment of or (regardless of whether such Shares
were theretofore accepted for payment) payment for, any tendered Shares,
or to terminate or amend the Offer if any of the conditions referred to
in Section 13 has not been satisfied or upon the occurrence of any of the
events specified in Section 13; or
- waive any condition, other than the Minimum Condition, or otherwise amend
the Offer in any respect,
in each case, by giving oral or written notice of such delay, termination,
waiver or amendment to the Depositary and by making a public announcement
thereof, as described below.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by a public announcement thereof, such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules l4d-4(c), 14d-6(d)
and 14e-l under the Exchange Act, which require that material changes be
promptly disseminated to stockholders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which Purchaser may
choose to make any public announcement, Purchaser shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a press release or other announcement.
If Purchaser is delayed in its payment for the Shares or is unable to pay
for Shares pursuant to the Offer for any reason, then, without prejudice to
Purchaser's rights under the Offer, the Depositary may retain tendered Shares on
behalf of Purchaser, and such Shares may not be withdrawn except to the extent
tendering stockholders are entitled to withdrawal rights as described in
"Section 4. Withdrawal Rights." However, the ability of Purchaser to delay the
payment for Shares which Purchaser has accepted for payment is limited by Rule
14e-1(c) under the Exchange Act, which requires that a bidder pay the
consideration offered or return the securities deposited by, or on behalf of,
holders of securities promptly after the termination or withdrawal of the Offer.
If Purchaser decreases the percentage of Shares being sought or increases
or decreases the consideration to be paid for Shares pursuant to the Offer, such
increase or decrease shall be applicable to all holders whose Shares are
accepted for payment pursuant to the Offer and, if the Offer is scheduled to
expire at any time before the expiration of a period of ten business days from,
and including, the date that notice of such increase or decrease is first
published, sent or given to holders of Shares, the Offer will be extended until
the expiration of such ten business day period. If Purchaser makes a material
change in the terms of the Offer or the
22
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4(d),
l4d-6(c) and 14e-1 under the Exchange Act. The minimum period during which the
Offer must remain open following material changes in the terms of the Offer or
information concerning the Offer, other than a change in price or change in
percentage of securities sought, will depend upon the relevant facts and
circumstances then existing, including the relative materiality of the changed
terms or information. In a public release, the SEC has stated its views that an
offer must remain open for a minimum period of time following a material change
in the terms of the Offer and that waiver of a material condition is a material
change in the terms of the Offer. The release states that an offer should remain
open for a minimum of five business days from the date a material change is
first published or sent or given to security holders and that, if material
changes are made with respect to information that approaches the significance of
price and percentage of Shares sought, a minimum of ten business days may be
required to allow for adequate dissemination to stockholders and investor
response. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or United States federal holiday and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time.
Pursuant to Rule 14d-11 of the Exchange Act, after the expiration of the
Offer, if all the conditions to the Offer have been satisfied or waived, and
subject to certain other conditions, Purchaser may elect, in its sole
discretion, to provide a subsequent offering period (a "Subsequent Offering
Period") pursuant to which Purchaser may add a period of between three and 20
business days to permit additional tenders of Shares not tendered during the
period of the Offer prior to the Expiration Date. If Purchaser decides to
provide for a Subsequent Offering Period, Purchaser will make an announcement to
that effect by issuing a press release no later than 9:00 a.m., New York City
time, on the next business day after the Expiration Date. If Purchaser elects to
provide a Subsequent Offering Period, it expressly reserves the right, in its
sole discretion, to extend the Subsequent Offering Period by any period or
periods, provided that the aggregate of the Subsequent Offering Periods
(including extensions thereof) is no more than 20 business days, by giving oral
or written notice of such extension to the Depositary. SHARES TENDERED IN A
SUBSEQUENT OFFERING PERIOD MAY NOT BE WITHDRAWN.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies, and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment) and the satisfaction or waiver of all the conditions to the Offer
set forth in Section 13, Purchaser will accept for payment and will pay for all
Shares validly tendered prior to the Expiration Date, and not properly withdrawn
promptly after the Expiration Date. Subject to compliance with Rule 14e-1(c)
under the Exchange Act, Purchaser expressly reserves the right to delay payment
for Shares in order to comply in whole or in part with any applicable law. See
Section 14. If Purchaser decides to include a Subsequent Offering Period,
Purchaser will accept for payment, and promptly pay for all validly tendered
Shares as they are received during the Subsequent Offering Period. See Section
1.
In all cases (including during any Subsequent Offering Period), payment for
Shares accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) the certificates evidencing such Shares (the
"Share Certificates") or confirmation of a book-entry transfer of such Shares (a
"Book-Entry Confirmation") into the Depositary's account at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in Section 3, (ii) the Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message (as defined below) in lieu of the Letter of Transmittal and (iii) any
other documents required by the Letter of Transmittal. Accordingly, tendering
23
stockholders may be paid at different times depending upon when Share
Certificates or Book-Entry Confirmations with respect to Shares are actually
received by the Depositary.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to and received by the Depositary and forming a part of a
Book-Entry Confirmation, that states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Purchaser may enforce such agreement
against such participant.
For purposes of the Offer (including during any Subsequent Offering
Period), Purchaser will be deemed to have accepted for payment, and thereby
purchased, Shares validly tendered and not properly withdrawn as, if and when
Purchaser gives oral or written notice to the Depositary of Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the Offer Price for such Shares
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payments from Purchaser and transmitting such payments to
tendering stockholders whose Shares have been accepted for payment. If Purchaser
extends the Offer, is delayed in its acceptance for payment of Shares or is
unable to accept Shares for payment pursuant to the Offer for any reason, then,
without prejudice to Purchaser's rights under the Offer, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering stockholders are
entitled to withdrawal rights as described herein under Section 4 and as
otherwise required by Rule 14e-1(c) under the Exchange Act.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR THE SHARES BE PAID,
REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedure set forth in Section 3, such Shares will be credited to an account
maintained at the Book-Entry Transfer Facility), as promptly as practicable
following the expiration or termination of the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such transfer
or assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.
Valid Tenders. In order for a stockholder validly to tender Shares
pursuant to the Offer, either (i) the Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed, together with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal) and any other documents
required by the Letter of Transmittal must be received by the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase and
either (a) the Share Certificates evidencing tendered Shares must be received by
the Depositary at such address or (b) such Shares must be tendered pursuant to
the procedure for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary, in each case prior to the
Expiration Date (except with respect to any Subsequent Offering Period, if one
is provided), or (ii) the tendering stockholder must comply with the guaranteed
delivery procedures described below.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two (2) business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the system of the Book-Entry
Transfer Facility may
24
make a book-entry delivery of Shares by causing the Book-Entry Transfer Facility
to transfer such Shares into the Depositary's account at the Book-Entry Transfer
Facility in accordance with the Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer at the Book-Entry Transfer Facility, either the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed, together with any required signature guarantees, or an Agent's
Message in lieu of the Letter of Transmittal, and any other required documents,
must, in any case, be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date
(except with respect to any Subsequent Offering Period, if one is provided), or
the tendering stockholder must comply with the guaranteed delivery procedure
described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
For Shares to be validly tendered during any Subsequent Offering Period,
the tendering stockholder must comply with the foregoing procedures, except that
required documents and certificates must be received during the Subsequent
Offering Period.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section 3, includes any participant
in the Book-Entry Transfer Facility's systems whose name appears on a security
position listing as the owner of the Shares) of the Shares tendered therewith,
unless such holder has completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the Letter
of Transmittal or (ii) if the Shares are tendered for the account of a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program or any other "eligible guarantor institution," as such term is
defined in Rule 17Ad-15 of the Exchange Act (each an "Eligible Institution" and
collectively "Eligible Institutions"). In all other cases, all signatures on a
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 1 of the Letter of Transmittal. If a Share certificate is registered
in the name of a person or persons other than the signer of the Letter of
Transmittal, or if payment is to be made or delivered to, or a Share Certificate
not accepted for payment or not tendered is to be issued in, the name(s) of a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate duly executed stock powers, in either
case signed exactly as the name(s) of the registered holder(s) appear on the
Share Certificate, with the signature(s) on such Share Certificate or stock
powers guaranteed by an Eligible Institution as provided in the Letter of
Transmittal. See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and the Share Certificates evidencing such stockholder's Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such stockholder cannot complete the procedure for delivery
by book-entry transfer on a timely basis, such Shares may nevertheless be
tendered; provided that all of the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is
received prior to the Expiration Date by the Depositary as provided below;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message),
and any other documents required by the Letter of Transmittal are received
by the Depositary within three (3) trading days after the date of execution
of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by manually signed facsimile transmission or mailed to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the form
of Notice of Guaranteed Delivery made available by Purchaser.
25
Notwithstanding any other provision of this Offer, payment for Shares
accepted pursuant to the Offer will in all cases only be made after timely
receipt by the Depositary of (i) certificates evidencing such Shares or a
Book-Entry Confirmation of a book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in this Section 3, (ii) the Letter of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed, with
any required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal and (iii) any other
documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when Share
Certificates or Book-Entry Confirmations with respect to Shares are actually
received by the Depositary.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, RECEIPT OF A BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
The tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the Offer, as well as
the tendering stockholder's representation and warranty that such stockholder
has the full power and authority to tender and assign the Shares tendered, as
specified in the Letter of Transmittal. Purchaser's acceptance for payment of
Shares tendered pursuant to the Offer will constitute a binding agreement
between the tendering stockholder and Purchaser upon the terms and subject to
the conditions of the Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser, in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves the
absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
defect or irregularity in the tender of any Shares of any particular stockholder
and for any other stockholder having similar defects or irregularities in the
tender of their Shares. NO TENDER OF SHARES WILL BE DEEMED TO HAVE BEEN VALIDLY
MADE UNTIL ALL DEFECTS AND IRREGULARITIES HAVE BEEN CURED OR WAIVED TO THE
SATISFACTION OF PURCHASER. None of Purchaser, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to give
any such notification. Purchaser's interpretation of the terms and conditions of
the Offer (including the Letter of Transmittal and the instructions thereto)
will be final and binding.
Appointment. By executing the Letter of Transmittal as set forth above,
each tendering stockholder will irrevocably appoint designee(s) of Purchaser as
such stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by Purchaser and with respect to any and
all other Shares or other securities or rights issued or issuable in respect of
such Shares. All such powers of attorney and proxies will be considered
irrevocable and coupled with an interest in the tendered Shares. Such
appointment will be effective when, and only to the extent that, Purchaser
accepts for payment Shares tendered by such stockholder as provided herein. Upon
such appointment, all prior powers of attorney, proxies and consents given by
such stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given by such stockholder (and, if
given, will not be deemed effective). The designee(s) of Purchaser will thereby
be empowered to exercise all voting and other rights with respect to such Shares
and other securities or rights, including, without limitation, in respect of any
annual, special or adjourned meeting of the Company's stockholders, actions by
written consent in lieu of any
26
such meeting or otherwise, as they in their sole discretion deem proper.
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon Purchaser's acceptance for payment of such
Shares, Purchaser must be able to exercise full voting, consent and other rights
with respect to such Shares and other related securities or rights, including
voting at any meeting of stockholders.
UNDER THE "BACKUP WITHHOLDING" PROVISIONS OF UNITED STATES FEDERAL INCOME
TAX LAW, THE DEPOSITARY MAY BE REQUIRED TO WITHHOLD AND PAY OVER TO THE INTERNAL
REVENUE SERVICE A PORTION OF THE AMOUNT OF ANY PAYMENTS PURSUANT TO THE OFFER.
IN ORDER TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO
PAYMENTS TO CERTAIN STOCKHOLDERS OF THE OFFER PRICE FOR SHARES PURCHASED
PURSUANT TO THE OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH
SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER ("TIN") AND CERTIFY
THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING BY COMPLETING THE
SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 8 OF THE
LETTER OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn
at any time after September 21, 2002.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3, any notice of withdrawal must
also specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares.
If Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described herein.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will thereafter be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered by again following one of
the procedures described in Section 3 at any time prior to the Expiration Date
or during the Subsequent Offering Period, if any.
No withdrawal rights will apply to Shares tendered into a Subsequent
Offering Period and no withdrawal rights apply during the Subsequent Offering
Period with respect to Shares tendered in the Offer and accepted for payment.
See Section 1.
ALL QUESTIONS AS TO THE FORM AND VALIDITY (INCLUDING TIME OF RECEIPT) OF
ANY NOTICE OF WITHDRAWAL WILL BE DETERMINED BY PURCHASER, IN ITS SOLE
DISCRETION, WHOSE DETERMINATION WILL BE FINAL AND BINDING. NONE OF PURCHASER,
THE DEPOSITARY, THE INFORMATION AGENT OR ANY OTHER PERSON WILL BE
27
UNDER ANY DUTY TO GIVE NOTIFICATION OF ANY DEFECTS OR IRREGULARITIES IN ANY
NOTICE OF WITHDRAWAL OR INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY SUCH
NOTIFICATION.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to stockholders of the Company whose
Shares are tendered and accepted for payment pursuant to the Offer or whose
Shares are converted into the right to receive cash in the Merger. The
discussion is for general information only and does not purport to consider all
aspects of United States federal income taxation that might be relevant to
stockholders of the Company. The discussion is based on current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), existing, proposed
and temporary regulations thereunder and administrative and judicial
interpretations thereof, all of which are subject to change, possibly with a
retroactive effect. The discussion applies only to stockholders of the Company
in whose hands Shares are capital assets within the meaning of Section 1221 of
the Code. This discussion does not apply to Shares received pursuant to the
exercise of employee stock options or otherwise as compensation, or to certain
types of stockholders (such as insurance companies, tax-exempt organizations,
financial institutions and broker-dealers) who may be subject to special rules.
This discussion does not discuss the United States federal income tax
consequences to any stockholder of the Company who, for United States federal
income tax purposes, is a nonresident alien individual, a foreign corporation, a
foreign partnership or a foreign estate or trust, nor does it consider the
effect of any foreign, state or local tax laws.
Because individual circumstances may differ, each stockholder should
consult its, his or her own tax advisor to determine the applicability of the
rules discussed below and the particular tax effects of the Offer and the Merger
on a beneficial holder of Shares, including the application and effect of the
alternative minimum tax and any state, local and foreign tax laws and of changes
in such laws.
The exchange of Shares for cash pursuant to the Offer or the Merger will be
a taxable transaction for United States federal income tax purposes and possibly
for state, local and foreign income tax purposes as well. In general, a
stockholder who sells Shares pursuant to the Offer or receives cash in exchange
for Shares pursuant to the Merger will recognize gain or loss for United States
federal income tax purposes in an amount equal to the difference, if any,
between the amount of cash received and the stockholder's adjusted tax basis in
the Shares sold pursuant to the Offer or exchanged for cash pursuant to the
Merger. Gain or loss will be determined separately for each block of Shares
(that is, Shares acquired at the same cost in a single transaction) tendered
pursuant to the Offer or exchanged for cash pursuant to the Merger. Such gain or
loss will be long-term capital gain or loss provided that a stockholder's
holding period for such Shares is more than one year at the time of consummation
of the Offer or the Merger, as the case may be. Capital gains recognized by an
individual upon a disposition of a Share that has been held for more than one
year generally will be subject to a maximum United States federal income tax
rate of 20%. In the case of a Share that has been held for one year or less,
such capital gains generally will be subject to tax at ordinary income tax
rates. Certain limitations apply to the use of a stockholder's capital losses.
A stockholder whose Shares are purchased in the Offer or exchanged for cash
pursuant to the Merger may be subject to backup withholding unless certain
information is provided to the Depositary or an exemption applies. See Section
3.
28
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares trade on the Nasdaq National Market ("Nasdaq") under the symbol
"SABI." The following table sets forth, for the periods indicated, the high and
low closing sales prices per Share for the periods indicated. Share prices are
as reported on the Nasdaq based on published financial sources.
<Table>
<Caption>
COMMON STOCK
---------------
HIGH LOW
------ ------
Fiscal Year Ended December 31, 2000
First Quarter............................................. $ 8.50 $ 4.75
Second Quarter............................................ 6.875 5.00
Third Quarter............................................. 6.00 4.12
Fourth Quarter............................................ 6.438 5.188
Fiscal Year Ended December 31, 2001
First Quarter............................................. $6.313 $ 5.75
Second Quarter............................................ 7.00 6.094
Third Quarter............................................. 8.031 6.00
Fourth Quarter............................................ 6.938 6.156
Fiscal Year Ending December 31, 2002
First Quarter............................................. $ 6.10 $ 6.90
Second Quarter............................................ 9.05 6.07
Third Quarter (through July 22)........................... 9.05 8.90
</Table>
On July 22, 2002 the last full day of trading before the commencement of
the Offer, the closing price of the Shares on Nasdaq was $9.01 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
The Company has never paid a cash dividend on the Shares. On September 10,
1987, the Company effected a one-for-one stock dividend.
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
General. The Company is a Delaware corporation with its principal offices
located at One Research Drive, Shelton, CT, 06484. The telephone number for the
Company is (203) 929-6391. The Company imports, manufactures and distributes
consumer products, including watches, pocketknives, cutlery, multi-tools and
sunglasses.
Summary Financial Information. Set forth below is certain summary
financial information for the Company and its consolidated subsidiaries
excerpted from the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 and the Company's Quarterly Reports on Form 10-Q for the
three months ended March 31, 2002. More comprehensive financial information is
included in such reports and other documents filed by the Company with the SEC,
and the following summary is qualified in its entirety by reference to such
reports and other documents and all of the financial information and notes
contained therein.
Victorinox has no knowledge that any of the selected financial information
set forth below or the information contained in other materials filed with the
SEC is untrue, or of any failure by the Company to disclose events that may have
occurred or may affect the significance or accuracy of any such information.
Nonetheless, the selected financial information was compiled by the Company, not
Victorinox. Materials filed by the Company with the SEC may be examined and
copied in the manner set forth below.
29
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -----------------------
2002 2001 2001 2000
-------- -------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Net revenues....................................... $ 24,741 $ 21,023 $114,629 $132,022
Gross profit....................................... 10,313 7,736 46,314 50,706
Selling, general and administrative expenses....... 11,322 11,410 50,054 47,467
-------- -------- -------- --------
Operating income (loss)............................ (1,009) (3,674) (3,740) 3,239
-------- -------- -------- --------
Total interest and other income (expense), net..... (162) (218) 504 304
-------- -------- -------- --------
Income (loss) before income taxes.................. (1,171) (3,892) (3,236) 3,543
Income tax provision (benefit)..................... (343) (1,585) (344) 1,579
Minority interest.................................. 108 (48) 260 (49)
-------- -------- -------- --------
Net income (loss).................................. $ (936) $ (2,259) $ (3,152) $ 2,013
======== ======== ======== ========
Income (loss) per share:
Basic............................................ $ (0.11) $ (0.27) $ (0.39) $ 0.25
Diluted.......................................... $ (0.11) $ (0.27) $ (0.39) $ 0.25
BALANCE SHEET DATA:
Current assets..................................... $ 71,484 $ 70,765 $ 73,109 $ 78,612
Total assets....................................... 112,595 115,925 114,134 124,449
Current liabilities................................ 23,932 21,503 24,647 21,002
Total liabilities.................................. 31,328 33,810 31,730 31,715
Stockholders' equity............................... 74,611 76,756 75,760 80,684
Cash dividends per common share.................... $ -- $ -- $ -- $ --
Book value per share............................... $ 9.02 $ 9.27 $ 9.16 $ 9.75
</Table>
Available Information. The Shares are registered under the Exchange Act.
Accordingly, the Company is subject to the information reporting requirements of
the Exchange Act and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the SEC relating to its
business, financial condition and other matters. Such reports, proxy statements
and other information can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the SEC's regional offices located at 233
Broadway, New York, New York 10279 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Information regarding the public reference
facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. The
Company's filings are also available to the public on the SEC's internet site
(http://www.sec.gov). Copies of such materials may also be obtained by mail from
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or is based upon
reports and other documents on file with the SEC or otherwise publicly
available. Although Victorinox and Purchaser do not have any knowledge that any
such information is untrue, neither Victorinox nor Purchaser takes any
responsibility for the accuracy or completeness of the information contained in
such reports and other documents or for any failure by the Company to disclose
events that may have occurred and may affect the significance or accuracy of any
such information.
8. CERTAIN INFORMATION CONCERNING VICTORINOX AND PURCHASER.
General. Victorinox is a corporation organized under the laws of
Switzerland with its principal offices located at Schmiedgasse 57, CH-6438,
Ibach-Schwyz, Switzerland. The telephone number of Victorinox is
30
41 41 81 81 211. Victorinox is the creator and producer of the Victorinox(R)
original Swiss Army(TM) knife. Victorinox produces over 400 types of household
and professional knives, and its products are exported to over 100 countries.
Purchaser is a Delaware corporation with its principal offices located at
Schmiedgasse 57, CH-6438, Ibach-Schwyz, Switzerland. The telephone number of
Purchaser is 41 41 81 81 211. Purchaser is a wholly owned subsidiary of
Victorinox. Purchaser was formed for the purpose of making a tender offer for
all of the common stock of the Company and has not engaged, and does not expect
to engage, in any business other than in connection with the Offer and the
Merger.
The name, citizenship, business address, business phone number, present
principal occupation or employment and past material occupation, positions,
offices or employment for each director for at least the last five (5) years and
the name, citizenship, business address, business phone number, present
principal occupation or employment and material occupation, positions, offices
or employment for the past five (5) years of each of the executive officers of
Victorinox and Purchaser and certain other information are set forth in Schedule
I hereto.
Available Information. Pursuant to Rule 14d-3 under the Exchange Act,
Victorinox and Purchaser filed with the SEC a Tender Offer Statement on Schedule
TO (the "Schedule TO"), of which this Offer to Purchase forms a part, and
exhibits to the Schedule TO. The Schedule TO and the exhibits thereto can be
inspected and copied at the public reference facilities maintained by the SEC at
450 Fifth Street, NW, Room 1024, Washington, D.C. 20549, and at the SEC's
regional offices located at 233 Broadway, New York, New York 10279 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Information regarding the public reference facilities may be obtained from the
SEC by telephoning 1-800-SEC-0330. Victorinox filings with respect to the
Company are also available to the public on the SEC's internet site
(http://www.sec.gov). Copies of such materials may also be obtained by mail from
the Public Reference Section of the SEC at 450 Fifth Street, NW, Washington,
D.C. 20549 at prescribed rates.
9. SOURCE AND AMOUNT OF FUNDS.
The Offer is not conditioned upon Victorinox's or Purchaser's ability to
finance the purchase of Shares pursuant to the Offer.
Victorinox and Purchaser estimate that the total amount of funds required
to purchase all of the outstanding Shares pursuant to the Offer and the Merger
will be approximately $25,800,000, plus approximately $428,000 in related fees
and expenses for Victorinox. Victorinox has available to it sufficient funds to
close the Offer and the Merger, and will cause Purchaser to have sufficient
funds available to close the Offer and the Merger.
10. APPRAISAL RIGHTS.
Appraisal Rights. Under the DGCL, holders of Shares do not have
dissenters' rights as a result of the Offer. In connection with the Merger,
however, stockholders of the Company who have not tendered their Shares in the
Offer and who comply with the requirements of Section 262 of the DGCL will have
the right to dissent and demand appraisal of their Shares if the Merger is
consummated. Dissenting stockholders who comply with the applicable statutory
procedures under the DGCL will be entitled to receive a judicial determination
of the fair value of their Shares (exclusive of any element of value arising
from the accomplishment or expectation of the Merger) and to receive payment of
such fair value in cash. In Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983)
the Delaware Supreme Court stated, among other things, that "proof of value by
any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
an appraisal proceeding. Stockholders should recognize that the value so
determined could be higher or lower than the price per Share paid pursuant to
the Offer or the consideration per Share to be paid in the Merger. Moreover,
Purchaser may argue in an appraisal proceeding that, for purposes of such a
proceeding, the fair value of the Shares is less than the price paid in the
Offer or the Merger.
31
The foregoing description of appraisal rights is not complete and is
qualified in its entirety by reference to Section 262 of the DGCL, which is
attached to this Offer to Purchaser as Schedule III.
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET
FORTH ABOVE IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES
AVAILABLE TO STOCKHOLDERS IF THE MERGER IS CONSUMMATED. STOCKHOLDERS WHO WILL BE
ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER WILL RECEIVE
ADDITIONAL INFORMATION CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE
FOLLOWED IN CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY
ACTION RELATING THERETO.
STOCKHOLDERS WHO SELL SHARES IN THE OFFER WILL NOT BE ENTITLED TO EXERCISE
APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL RECEIVE THE OFFER PRICE.
11. CERTAIN EFFECTS OF THE OFFER.
Market for the Shares. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly, which could adversely affect the liquidity and market
value of the remaining Shares held by stockholders other than Purchaser.
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on the
market price for, or marketability of, the Shares or whether such reduction
would cause future market prices to be greater or less than the Offer Price.
Purchaser intends to cause the delisting of the Shares by NASDAQ following
consummation of the Offer.
Stock Quotation. The Shares are quoted on Nasdaq. According to the
published guidelines of Nasdaq, the Shares will likely no longer be eligible for
quotation on Nasdaq if, among other things, the number of publicly held Shares
falls below 750,000 or the number of record holders of round lots falls below
400. Shares held by officers or directors of the Company or their immediate
families, or by any beneficial owner of 10% or more of the Shares, ordinarily
will not be considered to be publicly held for this purpose.
If the Shares cease to be quoted on Nasdaq, the market for the Shares will
likely be adversely affected. It is possible that the Shares would be traded on
other securities exchanges (with trades published by such exchanges), the Nasdaq
SmallCap Market, the OTC Bulletin Board or in a local or regional
over-the-counter market. The extent of the public market for the Shares and the
availability of such quotations would, however, depend upon the number of
holders of Shares and the aggregate market value of the Shares remaining at such
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act, as described below, and other factors.
Margin Regulations. The Shares are currently "margin securities" under the
Regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding the market for the Shares and stock
quotations, it is possible that, following the Offer, the Shares would no longer
constitute "margin securities" for the purposes of the margin regulations of the
Federal Reserve Board and, therefore, could no longer be used as collateral for
loans made by brokers.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application of the
Company to the SEC if the Shares are neither listed on a national securities
exchange nor held by 300 or more holders of record. Termination of registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its stockholders and to the SEC and
would make certain provisions of the Exchange Act no longer applicable to the
Company, such as the short-swing profit recovery provisions of Section 16(b) of
the Exchange Act, the requirement of furnishing a proxy statement pursuant to
Section 14(a) of the Exchange Act in connection with stockholders' meetings and
the related requirement of furnishing an annual report to stockholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 promulgated under the
32
Securities Act of 1933, as amended, may be impaired or eliminated. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be "margin securities" or be eligible for quotation on Nasdaq.
Victorinox and Purchaser currently intend to seek to cause the Company to
terminate the registration of the Shares under the Exchange Act as soon after
consummation of the Offer as the requirements for termination of registration
are met.
12. DIVIDENDS.
If, on or after the date hereof, the Company should (i) split, combine or
otherwise change the Shares or its capitalization, (ii) acquire currently
outstanding Shares or otherwise cause a reduction in the number of outstanding
Shares or (iii) issue or sell additional Shares, shares of any other class of
capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, to acquire any of the foregoing, other than Shares
issued pursuant to the exercise of stock options outstanding as of the date
hereof, then, Purchaser, in its sole discretion, may make such adjustments as it
deems appropriate in the offer price and other terms of the Offer, including,
without limitation, the number or type of securities offered to be purchased.
If, on or after the date hereof, the Company should declare or pay any cash
dividend on the Shares or other distribution on the Shares, or issue with
respect to the Shares any additional Shares, shares of any other class of
capital stock other voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, payable or distributable to stockholders of record on the date prior
to the transfer of the Shares purchased pursuant to the Offer to Purchaser or
its nominee or transferee on the Company's stock transfer records, then (i) the
Offer Price and other terms of the Offer may, in the sole discretion of
Purchaser, be reduced by the amount of any such cash dividend or cash
distribution and (ii) the whole of any such noncash dividend, distribution or
issuance to be received by the tendering stockholders will (a) be received and
held by the tendering stockholders for the account of Purchaser and will be
required to be promptly remitted and transferred by each tendering stockholder
to the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer, or (b) at the direction of Purchaser, be exercised
for the benefit of Purchaser, in which case the proceeds of such exercise will
promptly be remitted to Purchaser. Pending such remittance and subject to
applicable law, Purchaser will be entitled to all rights and privileges as owner
of any such noncash dividend, distribution, issuance and proceeds and may
withhold the entire offer price or deduct from the offer price the amount or
value thereof, as determined by Purchaser in its sole discretion.
13. CERTAIN CONDITIONS OF THE OFFER.
Purchaser shall not be required to commence or continue the Offer; or
accept for payment, purchase or pay for any Shares tendered; may postpone the
acceptance for payment, the purchase of, and/or payment for, Shares; and/or may
amend or terminate the Offer; if: (1) there shall not have been validly tendered
and not withdrawn prior to the expiration of the Offer a number of Shares which,
together with the Shares beneficially owned by the Victorinox Group, represents
not less than 90% of all outstanding shares of common stock of the Company (the
"Minimum Condition"), or (2) at any time prior to the time of payment for any
such Shares (whether or not any Shares have theretofore been accepted for
payment or paid for pursuant to the Offer), any of the following events (each,
an "Event") shall have occurred (each of paragraphs (a) through (k) providing a
separate and independent condition to Purchaser's obligations pursuant to the
Offer):
(a) the Company shall have authorized, recommended or proposed, or
shall have announced an intention to authorize, recommend or propose, or
shall have entered into an agreement or agreement in principle with respect
to, any merger, consolidation, other business combination,
recapitalization, liquidation or dissolution, or any purchase or other
acquisition or sale or other disposition of assets (other than in the
ordinary course of business) or shares of capital stock of the Company or
any of its Subsidiaries (other than in connection with the exercise of
options to purchase Common Stock), or any similar transaction involving the
Company or any subsidiary or division of the Company or any subsidiary (the
foregoing being collectively referred to as a "Business Combination"), any
material change in its
33
capitalization, or any release or relinquishment of any material contract
or other rights not in the ordinary course of business; or
(b) the Special Committee of the Board of Directors of the Company
shall not have withdrawn, amended or qualified in any way (i) its
determination that the Offer is advisable, fair to and in the best
interests of the stockholders of the Company (other than Victorinox and its
affiliates) or (ii) its recommendation that stockholders accept the Offer
and tender their Shares in the Offer; or
(c) it shall have been publicly disclosed, or Purchaser or the Company
shall have learned that: (i) any person, entity (including the Company or
any of its subsidiaries or affiliates) or group (as defined in Section
13(d)(3) of the Exchange Act) (a "Person") shall have (x) acquired or
become the beneficial owner of more than 10% of the outstanding Shares, or
(y) been granted by the Company any warrant, option or right, conditional
or otherwise, to acquire beneficial ownership of more than 10% of the
outstanding Shares or (ii) any new group shall have been formed which
beneficially owns more than 10% of the Shares, or (iv) any Person shall
have commenced, or publicly proposed to commence, a tender offer for
outstanding Shares, or publicly proposed any Business Combination; or
(d) with respect to any pending action or proceeding before any court,
government or governmental authority or agency: (i) challenging or seeking
to make illegal, or to delay or otherwise directly or indirectly to
restrain or prohibit the making of the Offer, the acceptance for payment
of, payment for, or the purchase of, some or all of the Shares by Purchaser
or seeking to obtain material damages in connection with the Offer or the
Merger; (ii) seeking to impose or confirm limitations on the ability of
Purchaser effectively to exercise full rights of ownership and control of
any Shares acquired pursuant to the Offer or otherwise (directly or
indirectly), on all matters properly presented to the Company's
stockholders; (iii) seeking to require divestiture by Purchaser of any
Shares; or (iv) which otherwise might materially adversely affect
Purchaser, the Company or any of their respective subsidiaries or
affiliates; there shall not have been a material adverse change in the
status of any such action or proceeding as reasonably determined by
Purchaser; or
(e) there shall be any action taken, or any statute, rule, regulation,
judgment, order or injunction proposed, enacted, entered, enforced,
promulgated, issued or deemed applicable to the Offer or the Merger, by any
court, government or governmental authority or agency which may, directly
or indirectly, result in any of the consequences referred to in paragraph
(d) above; or
(f) the Company's published financial statements, other filings with
the SEC, and any other material information submitted to Victorinox,
Purchaser or their Representatives (as defined below) in writing in
connection with the transactions contemplated in this Offer to Purchase
shall not be and remain true and correct in all material respects; or
(g) the Company and its officers, directors, employees, professionals
and other advisors (including attorneys, accountants and other
professionals) ("Representatives") shall not at all relevant times grant to
Victorinox, Purchaser and their Representatives timely access to the books,
records and facilities of the Company and its subsidiaries; or
(h) all other legal matters incidental to the Offer and the proposed
Merger shall not be reasonably satisfactory to Victorinox, Purchaser and
counsel thereto; or
(i) there shall have occurred: (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or in the over-the-counter market, or (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in
Europe, or (iii) any limitation (whether or not mandatory) by any
governmental authority on, or any other event which, in the sole judgment
of Purchaser, might affect the extension of credit by banks or other
lending institutions in the United States, or (iv) any material change in
European or any other currency exchange rates or any suspension of, or
limitation on, the markets therefore, or (v) any extraordinary adverse
change in the financial markets, or (vi) any change in the general
political, market, economic or financial conditions in Europe or abroad
that could have a material adverse effect upon the business or operations
of the Company or any of its subsidiaries or affiliates or the trading of
the Shares, or (vii) a commencement of
34
war, armed hostilities or other international or national calamity directly
or indirectly involving Europe or (viii) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof; or which, in the sole judgment of
Purchaser, in any such case, and regardless of the circumstances (including
any action or inaction by Purchaser) giving rise to any such condition,
make it inadvisable to proceed with acceptance for payment or purchase of
or payment for any Shares tendered.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to such
condition, including (without limitation) any action or inaction by Purchaser,
or, except for the Minimum Condition, may be waived by Purchaser in whole at any
time or in part from time to time prior to the expiration of the Offer in its
sole discretion. All conditions to the Offer will be satisfied or waived by the
Purchaser prior to the expiration of the Offer. The failure by Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right and may be
asserted at any time prior to acceptance of the Shares and from time to time.
Any determination by Purchaser concerning any Event shall be final and binding
upon all parties.
14. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Except as described in this Section 14, based on its examination
of publicly available information filed by the Company with the SEC and other
publicly available information concerning the Company, Purchaser is not aware of
any governmental license or regulatory permit that appears to be material to the
Company's business that might be adversely affected by Purchaser's acquisition
of Shares as contemplated herein or of any approval or other action by any
governmental, administrative or regulatory authority or agency, domestic or
foreign, that would be required for the acquisition or ownership of Shares by
Purchaser or Victorinox as contemplated herein. Should any such approval or
other action be required, Purchaser currently contemplates that, except as
described below under "State Takeover Statutes," such approval or other action
will be sought. While Purchaser does not currently intend to delay acceptance
for payment of Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that if such approvals were not obtained or such other actions were not
taken, adverse consequences might not result to the Company's business, or
certain parts of the Company's business might not have to be disposed of, any of
which could cause Purchaser to elect to terminate the Offer without the purchase
of Shares thereunder under certain conditions. See Section 13.
State Takeover Statutes. A number of states have adopted laws that
purport, to varying degrees, to apply to attempts to acquire corporations that
are incorporated in, or that have substantial assets, stockholders, principal
executive offices or principal places of business or whose business operations
otherwise have substantial economic effects in, such states. The Company,
directly or through subsidiaries, conducts business in a number of states
throughout the United States, some of which have enacted such laws.
In Edgar v. MITE Corp., 457 U.S. 624 (1982) the Supreme Court of the United
States invalidated on constitutional grounds the Illinois Business Takeover
Statute which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987, in
CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987) the Supreme Court
held that the State of Indiana could, as a matter of corporate law,
constitutionally disqualify a potential acquiror from voting shares of a target
corporation without the prior approval of the remaining stockholders where,
among other things, the corporation is incorporated in, and has a substantial
number of stockholders in, the state. Subsequently, in TLX Acquisition Corp. v.
Telex Corp., 679 F.Supp 1022 (WD Okla 1987) a Federal District Court in Oklahoma
ruled that the Oklahoma statutes were unconstitutional insofar as they apply to
corporations incorporated outside Oklahoma in that they would subject such
corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v
McReynolds, 865 F.2d 99 (6th Cir 1989) a Federal District Court in Tennessee
ruled that four Tennessee takeover statutes were unconstitutional as applied to
corporations incorporated outside Tennessee. This decision was affirmed by the
United States Court of Appeals for the Sixth Circuit.
35
The Company is incorporated under the laws of the State of Delaware. In
general, Section 203 of the DGCL ("Section 203") prevents an "interested
stockholder" (including a person who has the right to acquire 15% or more of the
corporation's outstanding voting stock) from engaging in a "business
combination" (defined to include mergers and certain other actions) with a
Delaware corporation for a period of three (3) years following the date such
person became an interested stockholder. Victorinox believes that Section 203
does not present a restriction on the consummation of the Offer and the Merger
because it has been an interested stockholder for more than three years.
Purchaser is not aware of any state takeover laws or regulations which are
applicable to the Offer or the Merger and has not attempted to comply with any
state takeover laws or regulations. If any government official or third party
should seek to apply any state takeover law to the Offer or the Merger or other
business combination between Purchaser or any of its affiliates and the Company,
Purchaser will take such action as then appears desirable, which action may
include challenging the applicability or validity of such statute in appropriate
court proceedings. In the event it is asserted that one or more state takeover
statutes is applicable to the Offer or the Merger and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer or the
Merger, Purchaser might be required to file certain information with, or to
receive approvals from, the relevant state authorities or holders of Shares, and
Purchaser might be unable to accept for payment or pay for Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer or
the Merger. In such case, Purchaser may not be obligated to accept for payment
or pay for any tendered Shares. See Section 13.
Certain litigation. The Company, certain officers and directors of the
Company, and Victorinox have been named as defendants in four purported
stockholder class action suits. See Section II. Three of the lawsuits were filed
in the Delaware Court of Chancery in and for New Castle County during the second
week of June 2002 and are captioned, Eugenia G. Vogel v. Swiss Army Brands,
Inc., et al., Civil Action No. 19698, John Calabria v. Swiss Army Brands, Inc.,
et al., Civil Action No. 19699, and Alan R. Kahn v. Swiss Army Brands, Inc., et
al., Civil Action No. 19701 (collectively, the "Delaware Actions"). The fourth
lawsuit was filed in the Connecticut Superior Court, Judicial District of
Ansonia-Milford at Milford, during the third week of June 2002, and is captioned
Brickell Partners v. Peter W. Gilson, et al. (the "Connecticut Action").
The allegations in the Delaware Actions are substantially similar and
assert a variety of claims, including allegations that Victorinox's proposed
offer price of $9.00 in cash per Share is unfair and grossly inadequate; that
the Company, the officers and directors of the Company, and Victorinox have
breached their fiduciary duties to the public stockholders not affiliated with
Victorinox in connection with Victorinox's proposal; and that the timing of
Victorinox's proposal is unfair. The Connecticut Action contains similar
allegations and further alleges that appropriate steps and procedural safeguards
are not being taken to ensure that the stockholders of the Company not
affiliated with Victorinox will receive fair value for their Shares in the
proposed transaction. The Delaware Actions and the Connecticut Action pray for,
among other things, damages in an unspecified amount, injunctive relief,
rescission of the proposed transaction and rescissory damages in the event the
proposed transaction is consummated, and attorneys' fees and costs.
15. FEES AND EXPENSES.
Victorinox and Purchaser have retained MacKenzie Partners, Inc. to be the
Information Agent and American Stock Transfer & Trust Company to be the
Depositary in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telecopy, telegraph and personal interview
and may request banks, brokers, dealers and other nominees to forward materials
relating to the Offer to beneficial owners of Shares.
The Information Agent and the Depositary each will receive reasonable and
customary compensation for their respective services in connection with the
Offer, will be reimbursed for reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities under federal securities laws.
Neither Victorinox nor Purchaser will pay any fees or commissions to any
broker or dealer or to any other person (other than to the Depositary and the
Information Agent) in connection with the solicitation of tenders
36
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies will, upon request, be reimbursed by Purchaser for customary mailing
and handling expenses incurred by them in forwarding offering materials to their
customers.
Victorinox and Purchaser has paid or will be responsible for paying the
following expenses incurred or estimated to be incurred in connection with the
Offer and the Merger:
<Table>
Financial Advisor Fees...................................... $ 0
Filing Fees................................................. 2,953
Legal Fees and Expenses..................................... 300,000
Accounting Fees and Expenses................................ 0
Depositary Costs............................................ 20,000
Information Agent Costs..................................... 5,000
Printing and Mailing Costs.................................. 75,000
Miscellaneous............................................... 25,000
--------
Total.................................................. $427,953
</Table>
Purchaser has not made any provision in connection with the Offer to grant
the Company's stockholders access to its files or provide counsel, legal advice
or appraisal services at Purchaser's expense. In addition, the Company will
incur its own fees and expenses in connection with the Offer.
16. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, Purchaser may, in its discretion, take such action as it
may deem necessary to make the Offer in any such jurisdiction and extend the
Offer to holders of Shares in such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF VICTORINOX OR PURCHASER NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser has filed with the SEC a Tender Offer Statement on Schedule TO
pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange
Act, together with exhibits furnishing certain additional information with
respect to the Offer, and may file amendments thereto. In addition, the Company
has filed with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9, together with exhibits, pursuant to Rule 14d-9 under the Exchange Act,
setting forth the recommendation of the Company Board with respect to the Offer
and the reasons for such recommendation and furnishing certain additional
related information. A copy of such documents, and any amendments thereto, may
be examined at, and copies may be obtained from, the SEC (but not the regional
offices of the SEC) in the manner set forth under Section 7.
SABI Acquisition Corp.
July 23, 2002
37
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
VICTORINOX AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF VICTORINOX. The following table
sets forth the name, present principal occupation or employment and past
material occupations, positions, offices or employment for each director for at
least the past five (5) years and the name, present principal occupation or
employment and material occupations, positions, offices or employment for the
past five years for each executive officer of Victorinox. The current business
address of each person is Schmiedgasse 57, CH-6438 Ibach-Schwyz, Switzerland and
the current phone number is 41 41 81 81 211. During the last five years, neither
Victorinox nor, to the best knowledge of Victorinox, any of the persons listed
below (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) was a party to any judicial or
administrative proceeding that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of
such laws. Each person is a citizen of Switzerland.
<Table>
<Caption>
NAME BUSINESS EXPERIENCE
- ---- -------------------
Charles Elsener, Sr.................. Charles Elsener, Sr. has served as the Chairman and Chief
Executive Officer of Victorinox for more than the past five
years.
Charles Elsener, Jr.................. Charles Elsener, Jr. currently serves as the President and
Director of Victorinox and has served as the President of
Victorinox for more than the past five years.
Eduard Elsener....................... Eduard Elsener has served as the Senior Vice
President -- Production and Director of Victorinox for more
than the past five years.
</Table>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table
sets forth the name, present principal occupation or employment and past
material occupations, positions, offices or employment for each director for the
past five (5) years and the name, citizenship, business address, business phone
number, present principal occupation or employment and material occupations,
positions, offices or employment for the past five (5) years of each of the
executive officer of Purchaser. The current business address of each person is
Schmiedgasse 57, CH-6438 Ibach-Schwyz, Switzerland and the current phone number
is 0041 41 81 81 211. During the last five years, neither Purchaser nor, to the
best knowledge of Purchaser, any of the persons listed below (i) has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) was a party to any judicial or administrative proceeding
that resulted in a judgment, decree or final order enjoining the person from
future violations of, or prohibiting activities subject to, federal or state
securities laws, or a finding of any violation of such laws. Each person is a
citizen of Switzerland.
<Table>
<Caption>
NAME BUSINESS EXPERIENCE
- ---- -------------------
Charles Elsener, Jr.................. Charles Elsener, Jr. currently serves as the President and
Director of Victorinox, and has served as the President of
Victorinox for more than the past five years. Charles
Elsener, Jr. is also the President, Secretary, Treasurer and
sole director of Purchaser.
</Table>
38
SCHEDULE II
PURCHASES OF SHARES BY VICTORINOX AND CHARLES ELSENER, SR.
DURING THE LAST TWO YEARS
Unless otherwise indicated, all Shares purchased below were acquired in
open market block transactions.
1. PURCHASES BY CHARLES ELSENER, SR.
<Table>
<Caption>
NUMBER OF SHARES AVERAGE PURCHASE
PURCHASED PRICE PER SHARE
---------------- ----------------
Third Quarter 2000.................................... 285,205(1) $4.92
Fourth Quarter 2000................................... 61,500(2) $5.81748
</Table>
2. PURCHASES BY VICTORINOX
<Table>
<Caption>
NUMBER OF SHARES AVERAGE PURCHASE
PURCHASED PRICE PER SHARE
---------------- ----------------
Fourth Quarter 2000................................... 1,917,900(3) $5.00
First Quarter 2001.................................... 82,500(4) $6.34811
Second Quarter 2001................................... 87,500(5) $6.55029
Third Quarter 2001.................................... 97,400(6) $6.57988
Fourth Quarter 2001................................... 8,700(7) $6.67471
</Table>
- ---------------
(1) On September 14, 2000, Charles Elsener, Sr. purchased 248,205 shares of
Common Stock in an open market block trade transaction for an aggregate
purchase price of $1,202,243 paid in cash from Charles Elsener, Sr.'s
personal funds. On September 26, 2000, Charles Elsener, Sr. purchased 37,000
shares of Common Stock in an open market block trade transaction for an
aggregate purchase price of $201,187.50 paid in cash from Charles Elsener,
Sr.'s personal funds.
(2) In October 2000, Charles Elsener, Sr. purchased: (i) 20,000 shares of Common
Stock in an open market block trade transaction on October 10, 2000 for an
aggregate purchase price of $115,000, paid in cash from Charles Elsener,
Sr.'s personal funds, (ii) 27,500 shares of Common Stock in an open market
block trade transaction on October 10, 2000 for an aggregate purchase price
of $160,875, paid in cash from Charles Elsener, Sr.'s personal funds, and
(iii) 14,000 shares of Common Stock in an open market block trade
transaction on October 24, 2000 for an aggregate purchase price of $81,900,
paid in cash from Charles Elsener, Sr.'s personal funds.
(3) On November 16, 2000, Victorinox and Brae Group, Inc. entered into a letter
agreement pursuant to which Victorinox purchased 1,917,900 shares of Swiss
Army for $9,589,500 in the aggregate. These Shares were acquired from Brae
Group, Inc. in satisfaction and cancellation of certain indebtedness owed by
Brae to Victorinox.
(4) During the period of January 2001 through March 2001, Victorinox purchased:
(i) 40,000 shares of Common Stock in an open market transaction on January
18, 2001 for an aggregate purchase price of $248,000, (ii) 40,800 shares of
Common Stock in an open market transaction on March 13, 2001 for an
aggregate purchase price of $265,200, and (iii) 1,700 shares of Common Stock
in an open market transaction on March 14, 2001 for an aggregate purchase
price of $10,518.75. The $523,718.55 aggregate purchase price paid by
Victorinox for the shares was paid in cash from Victorinox's working
capital.
(5) During the period of April 2001 through June 2001, Victorinox purchased: (i)
15,000 shares of Common Stock in an open market transaction on April 20,
2001 for an aggregate purchase price of $95,700, (ii) 17,500 shares of
Common Stock in an open market transaction on May 1, 2001 for an aggregate
purchase price of $110,950, (iii) 25,000 shares of Common Stock in an open
market transaction on May 29, 2001 for an aggregate purchase price of
$165,500, and (iv) 30,000 shares of Common Stock in an open market
transaction on June 27, 2001 for an aggregate purchase price of $201,000.
The $573,150 aggregate purchase price paid by Victorinox for shares was paid
in cash from Victorinox's working capital.
39
(6) During the period of August 2001 through September 2001, Victorinox
purchased: (i) 15,000 shares of Common Stock in an open market transaction
on August 13, 2001 for an aggregate purchase price of $98,250, (ii) 26,000
shares of Common Stock in an open market transaction on September 5, 2001
for an aggregate purchase price of $175,500, (iii) 12,000 shares of Common
Stock in an open market transaction on September 5, 2001 for an aggregate
purchase price of $83,760, (iv) 17,500 shares of Common Stock in an open
market transaction on September 18, 2001 for an aggregate purchase price of
$115,850, (v) 1,000 shares of Common Stock in an open market transaction on
September 21, 2001 for an aggregate purchase price of $6,380, (vi) 12,500
shares of Common Stock in an open market transaction on September 25, 2001
for an aggregate purchase price of $79,125, or $6.33 per share, (vii) 10,900
shares of Common Stock in an open market transaction on September 26, 2001
for an aggregate purchase price of $66,490, and (viii) 2,500 shares of
Common Stock in an open market transaction on September 28, 2001 for an
aggregate purchase price of $15,525. The $640,880 aggregate purchase price
paid by Victorinox for the shares was paid in cash from Victorinox's working
capital.
(7) On October 5, 2001, Victorinox purchased: (i) 7,600 shares of Common Stock
in an open market transaction for an aggregate purchase price of $50,920;
and (ii) on October 10, 2001, 1,100 shares of Common Stock in an open market
transaction for an aggregate purchase price of $7,150. The $58,070 aggregate
purchase price paid by Victorinox for the shares was paid in cash from
Victorinox's working capital.
40
SCHEDULE III
SECTION 262 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS
sec. 262. Appraisal rights
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to sec.
251, sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 and sec. 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
41
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, then either a constituent corporation before the
effective date of the merger or consolidation or the surviving or resulting
corporation within 10 days thereafter shall notify each of the holders of
any class or series of stock of such constituent corporation who are
entitled to appraisal rights of the approval of the merger or consolidation
and that appraisal rights are available for any or all shares of such class
or series of stock of such constituent corporation, and shall include in
such notice a copy of this section. Such notice may, and, if given on or
after the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall
42
be such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or
43
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
44
Manually signed facsimiles of the Letter of Transmittal, properly
completed, will be accepted. The Letter of Transmittal and certificates
evidencing Shares and any other required documents should be sent or delivered
by each stockholder or its, his or her broker, dealer, commercial bank, trust
company or other nominee to the Depositary at one of its addresses set forth
below:
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Manually Signed Facsimile Transmission
(for Eligible Institutions only):
(718) 234-5001
Confirm by Telephone:
(718) 921-8200
<Table>
<Caption>
By Overnight Courier: By Mail: By Hand:
6201 15th Avenue 59 Maiden Lane 59 Maiden Lane
Brooklyn, NY 11219 New York, NY 10038 New York, NY 10038
</Table>
OTHER INFORMATION:
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent. Stockholders may also
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
105 Madison Avenue
New York, New York 10016
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
45