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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3)
SWISS ARMY BRANDS, INC.
(NAME OF SUBJECT COMPANY)
SWISS ARMY BRANDS, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.10 PER SHARE
(TITLE OF CLASS OF SECURITIES)
870827102
(CUSIP NUMBER OF CLASS OF SECURITIES)
THOMAS M. LUPINSKI
CHIEF FINANCIAL OFFICER
SWISS ARMY BRANDS, INC.
ONE RESEARCH DRIVE
SHELTON, CONNECTICUT 06484
(203) 929-6391
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPIES TO:
PRISCILLA C. HUGHES, ESQ.
MORRISON & FOERSTER LLP
1290 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10104-0050
(212) 468-8000
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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This Amendment No. 3 to the Schedule 14D-9 dated July 23, 2002 (as amended
and supplemented, this "Schedule 14D-9") amends and supplements the Schedule
14D-9 as follows:
ITEM 4. THE SOLICITATION OR RECOMMENDATION
Item 4(a) and Item 4(b) are hereby amended and supplemented as follows:
(a) Recommendation of the Special Committee.
At a telephonic meeting held on July 21, 2002, the Special Committee, on
behalf of the Company, determined that the transactions contemplated by the
Schedule TO, including the Offer and the Merger, are advisable, fair to and in
the best interests of the Company's stockholders (other than the Victorinox
Group). The Special Committee, on behalf of the Company, unanimously recommends
that stockholders accept the Offer and tender their Shares pursuant to the
Offer. A press release announcing the Special Committee's recommendation of the
Offer is filed herewith as Exhibit (a)(3)
(b) Background; Reasons for the Recommendation of the Special Committee.
BACKGROUND
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
Directors of the Company ("Board") 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 Mr.
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 towards 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. of Victorinox 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.
On February 7, 2002, at a meeting of the Board, Mr. Gilson informed the
Board that Charles Elsener, Jr. and Charles Elsener, Sr. might be considering
various options with respect to Victorinox's investment in the
Company, including options that might result in a proposal being made to acquire
all of the remaining Shares not held by the Victorinox Group. The Board
thereupon established the Special Committee, comprised solely of non-employee
directors, for the purpose of considering any proposal that might be
forthcoming, evaluating any such proposal, if made, and representing the
interests of the stockholders not affiliated with the Victorinox Group in any
negotiations in relation to any such proposal. The Board appointed Messrs. A.
Clinton Allen and Robert S. Prather, Jr. to serve on the Special Committee, and
they accepted such appointment. The Special Committee was also authorized to
retain legal, financial and other advisors in order to assist the Special
Committee in its consideration and evaluation of any proposal and was provided
with unrestricted access to the Company's officers, members of management and to
all information and materials about the Company, and was authorized to provide
such access to its legal and financial advisors.
Pursuant to the authorization of the Board, from February 7, 2002 to
February 22, 2002, the Special Committee considered two potential legal and two
potential financial advisors. On February 20, 2002 the Special Committee
informally engaged Needham & Company, Inc. ("Needham") as the Special
Committee's financial advisor. 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. 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 possible acquisition by Victorinox of all of the Common Stock not
already owned by the Victorinox Group. Over the next few weeks, Needham began
its review and analysis of the Company's financial condition. On February 22,
2002, the Special Committee informally engaged Lynch, Brewer, Hoffman and Fink,
LLP ("LBHF") to serve as its legal counsel. The Special Committee retained LBHF
as its legal advisor based on LBHF's experience as a legal advisor in mergers
and acquisitions, its experience with SEC filings, the lack of legal conflicts,
and based on its fees which the Special Committee deemed to be competitive. At a
telephonic meeting on March 28, 2002, the Special Committee approved the formal
engagement of Needham as the Special Committee's financial advisor for financial
advisory services and LBHF as legal counsel to the Special Committee.
At a meeting on April 26, 2002, the Board authorized the Special Committee
to agree to a financial advisory fee of up to $250,000, to conduct negotiations
with the Victorinox Group with respect to any proposal that the Victorinox Group
might make and to consider any alternatives to such proposal.
At a telephonic meeting on April 30, 2002, counsel to the Special Committee
advised the Special Committee concerning several telephone conferences that took
place on April 19, 22 and 26, 2002 with counsel to Victorinox, who indicated
that Victorinox was interested in acquiring all of the Shares of the Company not
already owned by the Victorinox Group at a price of $8.00 per share.
Victorinox's counsel had also indicated that Victorinox was 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. On April 30,
2002, Needham advised the Special Committee that it had been evaluating the
financial condition and prospects of the Company since it had been informally
engaged in February and that, although Needham's analysis was not completed, a
price of $8.00 per share was not likely to be considered by Needham to be fair,
from a financial point of view, to the Company's stockholders (other than the
Victorinox Group). After further discussion, the Special Committee instructed
its counsel to communicate that the $8.00 price was not acceptable and to
attempt to negotiate an increased price.
Over the next several weeks, Needham continued its financial review and
analysis of the Company, and the Victorinox Group and the Special Committee,
through their respective counsel, continued their discussions concerning an
acceptable price to be contained in the acquisition proposal.
At a telephonic meeting on May 24, 2002, counsel to the Special Committee
reported to the Special Committee on the discussions held over the prior weeks
with counsel to the Victorinox Group and informed the Special Committee that
earlier that day, Charles Elsener, Jr. on behalf of Victorinox had indicated
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.
Needham updated the Special Committee as to the status of its
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financial analysis and review of the Company. The Special Committee determined
that it needed additional time to consider the $9.00 price and agreed to
reconvene on May 28, 2002.
At a telephonic meeting on May 28, 2002, the Special Committee discussed
the possible acquisition of Shares by Victorinox at $9.00 per share. Needham
addressed the Special Committee concerning its financial analysis of the
Company. The Special Committee and its advisors discussed strategies for
obtaining a higher price.
At a telephonic meeting on June 6, 2002, counsel to the Special Committee
reported on the status of negotiations with Victorinox's counsel, including that
Victorinox was not prepared to pay more than $9.00 per share for the Shares of
the Company not owned by the Victorinox Group. The Special Committee then
discussed the financial condition and business of the Company, including the
matters described below under Reasons for the Recommendation of the Special
Committee. The Special Committee noted that a price of $9.00 per share
represented a premium of more than 40% over the then-current share price of the
Company.
From June 7 to June 11, 2002, the Special Committee, through its counsel,
continued discussions and negotiations with Victorinox, through its counsel,
regarding the structure and other terms that might be contained in a proposal by
Victorinox to acquire the Shares of the Company not owned by the Victorinox
Group.
At a telephonic meeting on June 11, 2002, Needham made a presentation to
the Special Committee concerning its financial analysis and advised that the
price of $9.00 per share, if offered for the Shares of the Company not owned by
the Victorinox Group, was fair from a financial point of view to the
stockholders of the Company other than the Victorinox Group. The Special
Committee then determined that the proposed offer was advisable to, fair to and
in the best interests of the stockholders (other than the Victorinox Group) and
voted to recommend to the Board that the Board recommend to the stockholders
(other than the Victorinox Group) that they tender their Shares should a formal
proposal at $9.00 per share be made by Victorinox, provided that the offer
required that at least a majority of the Shares not owned by the Victorinox
Group be tendered and that any stockholders not tendering their Shares would
receive the same $9.00 per share in any subsequent merger.
On June 12, 2002, the Special Committee received a written proposal from
Victorinox 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 the same $9.00 per
Share price (the "Proposal"). The Proposal was conditioned upon, among other
things, the number of shares tendered in the tender offer being a majority of
the outstanding Shares not owned by the Victorinox Group and the Board of
Directors recommending to stockholders that they accept the tender offer. At a
special meeting of the Board on June 12, 2002, the Special Committee made a
presentation to the Board concerning the negotiations with Victorinox's counsel
and its deliberations concerning the Proposal. Needham made a presentation to
the Board concerning its financial analysis and rendered its oral opinion,
subsequently confirmed in writing, that, 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. The Special Committee reported to the Board
that, based on the fairness opinion of Needham and its negotiations with
Victorinox's counsel, the Special Committee unanimously believed that the
Proposal was advisable to, fair to and in the best interests of the stockholders
other than the Victorinox Group. The Board discussed the Special Committee's
report but decided that it needed more time to consider the Proposal and agreed
to adjourn the meeting until June 14, 2002.
After the meeting adjourned, the respective counsels to Victorinox, the
Special Committee and the Company discussed issues related to the structure of
the proposed transaction contemplated by the Proposal.
On June 12, 2002, Victorinox issued a press release describing the terms of
the Proposal and filed a copy of the letter containing the Proposal and the
related press release with the SEC as an amendment to Victorinox's Schedule 13D
and as a Schedule TO.
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On June 12, 2002, the Company also issued a press release indicating its
receipt of the Proposal and filed a copy of the press release with the SEC on
Schedule 14D-9. The Company's press release included a description of the
Proposal's general terms and indicated that the Proposal was being considered by
the Board.
On or about June 13, 2002, the Company became aware of two lawsuits
relating to the Proposal filed in the Court of Chancery of the State of Delaware
(the "Initial Stockholder Suits") against the Company, certain of its directors
and officers and Victorinox. Each of the 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 the 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. The press release was filed with the SEC as an
amendment to Schedule 14D-9 on June 17, 2002. Subsequently, the Company became
aware of two additional lawsuits filed against the Company, certain of its
directors and officers and Victorinox, one in the Delaware Court of Chancery and
one in Connecticut in Superior Court ("Additional Stockholder Suits"). 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. The Company does not believe that the Additional
Stockholder Suits contain valid claims against the Company or any of its
officers or directors.
On June 14, 2002, Needham 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 attached hereto as Annex A.
On June 14, 2002, the Board reconvened its meeting telephonically. Counsel
to the Company reported to the Board concerning the Initial Stockholder Suits.
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. After further
discussion, the Board adjourned the meeting until June 21, 2002.
During the week of June 14, 2002 through June 20, 2002, counsel to the
Special Committee, counsel to the Company and counsel to Victorinox discussed
the conditions set forth in the Proposal. During these conversations,
Victorinox's counsel informed the Company's counsel that Victorinox was prepared
to go forward with its Proposal based on a recommendation of the Special
Committee, provided that the tender offer minimum condition be raised from a
majority of the non-Victorinox Group stockholders to 90% of the Shares of the
Company.
At a telephonic meeting on June 20, 2002, the Special Committee confirmed
their belief that the price of $9.00 per share set forth in the Proposal was
advisable to, fair to and in the best interests of the stockholders other than
the Victorinox Group.
On June 21, 2002, the Board reconvened its Special Meeting. After
discussion and in order to avoid any appearance of a conflict of interest, the
Board authorized the Special Committee to fulfill the Company's obligation under
Regulation 14D of the Exchange Act with respect to whether or not to make a
recommendation to stockholders in connection with the proposed tender offer. 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, after reviewing the draft filings,
including the terms and conditions of the Offer and determining that
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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.
REASONS FOR THE RECOMMENDATION OF THE SPECIAL COMMITTEE
In evaluating the Offer, the Special Committee relied upon its knowledge of
the business, financial condition and prospects of the Company, and the advice
of its financial and legal advisors.
In reaching its recommendations described above in paragraph (a) of this
Item 4, the Special Committee considered a number of factors, including the
following:
- Market Price and Premium. The Special Committee considered the recent
and historical price and the low volume of trading activity of the
Shares. In particular, the Special Committee considered that the price of
$9.00 per Share to be paid in the Offer represents: (a) a premium of
50.0% when compared to $6.00, the lowest closing price per Share for the
52 weeks immediately prior to the Victorinox Announcement date; (b) a
premium of 41.7% when compared to $6.35, the closing price per Share on
the day immediately prior to Victorinox's June 12, 2002 announcement of
its $9.00 proposal (the "Victorinox Announcement"); (c) a premium of
36.8% when compared to $6.58, the average closing price per Share for the
52 weeks immediately prior to the Victorinox Announcement date; (d) a
premium of 12.5% when compared to the initial acquisition price of $8.00
per Share suggested by Victorinox on April 30, 2002; and (e) a premium of
42.2% when compared to $6.33, the three-month average closing price
immediately prior to the Victorinox Announcement date.
- Needham Fairness Opinion and Analysis. The Special Committee considered
the Fairness Opinion of Needham, dated June 14, 2002, that as of such
date, based upon and subject to the assumptions and limitations described
in the opinion, the Offer Price was fair, from a financial point of view,
to the holders of Shares, other than the Victorinox Group, as well as the
presentation by Needham to the Special Committee at a meeting of the
Special Committee held on June 11, 2002, rendering its analysis of the
financial terms of the Offer and its valuation analysis of the Company. A
copy of such presentation is filed with the Securities and Exchange
Commission as exhibit (c)(2) to the Company's Schedule 13E-3 (the
"Company's 13E-3"). In addition, a copy of the Fairness Opinion setting
forth the assumptions made, matters considered and limitations on the
review undertaken by Needham is attached as Annex A to this Statement.
Stockholders are urged to read the Fairness Opinion and the Company's
13E-3 carefully and in their entirety.
- Special Committee Formation and Arm's-Length Negotiations. The Special
Committee also considered the fact that the Offer and the transactions
contemplated thereby were the product of arm's-length negotiations
between the Victorinox Group and the Special Committee, none of whose
members were employed by or affiliated with the Company (except in their
capacities as directors of the Company) or the Victorinox Group.
- Minimum Condition. The Special Committee also considered that the
Minimum Condition, which can not be waived by the Purchaser, has the
effect of requiring that the Offer not be consummated unless the number
of Shares validly tendered and not withdrawn, when added to the Shares
already owned by the Victorinox Group, constitutes at least 90% ownership
in the Company.
- Offer Price and Merger Consideration. The Special Committee concluded,
based on its negotiations with the Victorinox Group, that the Offer Price
and Merger consideration represented the highest price that Victorinox
would be willing to pay in acquiring the Shares at this time. This
determination was the result of the Special Committee's negotiations with
the Victorinox Group in an attempt to obtain the highest possible price.
- Timing of Completion. The Special Committee considered the anticipated
timing for the completion of the transactions contemplated by the
Schedule TO, including the structure of the transactions as a tender
offer for all of the Shares followed by the Merger for any Shares not
tendered. The Special
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Committee considered that the tender offer could allow stockholders to
receive the transaction consideration promptly. The Offer discloses that
the Purchaser will pay the same consideration for Shares in the Merger as
paid for Shares tendered in the Offer.
- Limited Conditions to Consummation. The Special Committee considered
that Victorinox has committed in the Offer to consummate the Offer and
the Merger subject only to a limited number of conditions (as set forth
in Section 1 of the Offer to Purchase, "The Tender Offer -- Terms of the
Offer"), with no financing condition. The Special Committee also
considered that the Offer does not give Victorinox the ability to waive
the Minimum Condition.
- Strategic Alternatives. The Special Committee considered the percentage
of outstanding Shares of the Company owned by the Victorinox Group, the
absence of contractual restrictions on additional purchases by the
Victorinox Group, and the Victorinox Group's stated unwillingness to
pursue a transaction that involved selling its interest or a portion of
the Company, all of which led the Special Committee to conclude that
soliciting an alternative transaction was not practicable. The Special
Committee also considered that the Company is not obligated to pay a
termination fee to the Victorinox Group under any circumstances.
- Transaction Structure. The Special Committee also evaluated the benefits
of the transaction being structured as an immediate cash tender offer for
all of the outstanding Shares, followed by the Merger. The Special
Committee considered that the cash tender offer would give the public
stockholders of the Company the opportunity to voluntarily obtain cash
for all of their Shares at the earliest possible time, and that the
Victorinox Group will complete the Merger and pay the same per Share
consideration to be paid in the Offer. The Special Committee considered
that the lack of a Merger Agreement would prevent the Company from
bringing suit for breach of contract against the Victorinox Group in the
event Victorinox were to fail to uphold any of its obligations described
in the Offer.
- Potential Conflicts of Interest. The Special Committee considered the
interests of certain Company executives in the Offer and the Merger. See
"Item 3. Past Contacts, Transactions, Negotiations and Agreements".
- Terror Attacks. The Special Committee considered the recent terror
attacks on September 11, 2001 in the United States and terror attacks
elsewhere and the possibility of such events causing a continuing
negative impact on revenues and income. The Special Committee also
considered the restrictions on the carrying of knives and other devices
such as multi-tools on commercial airliners and the possibility of future
similar restrictions and how they believe such restrictions have
negatively affected sales of the Company's knife and tool products and
that such negative effects might continue.
- Bank Covenants and Financial Stability. The Special Committee also
considered 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, and at times the Company's compliance with its bank
covenants has depended on Victorinox's flexibility in allowing extended
payment terms under its distribution agreements with the Company. The
Special Committee considered its belief that it is desirable for the
Company to become wholly owned by Victorinox because the Company will be
more financially stable than the Company is as a stand-alone entity.
- Liquidity for Stockholders. The Special Committee also considered the
historically low volume of trading of the Shares, the limited liquidity
in the Shares as a result thereof and the opportunity that the Offer and
the Merger provide the stockholders to liquidate their holdings in the
Company.
- Possible Decline in Market Price of Common Stock. The Special Committee
also considered the possibility that if a transaction with Victorinox
were not completed and the Company remained as a publicly-owned
corporation, it is possible that because of a decline in the market price
of the Shares or the stock market in general, the price that might be
received by the holders of the Shares in the open market or in a future
transaction might be less than the per Share price to be received by
stockholders in connection with the Offer and the Merger.
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- Availability of Dissenters' Rights. The Special Committee also
considered the fact that dissenters' rights of appraisal would be
available to the non-tendering holders of Shares under the DGCL in
connection with the Merger.
- Future Prospects of the Company. The Special Committee also considered
the fact that, assuming the Merger is completed, all holders of the
Shares (except for the Victorinox Group) whose Shares are purchased in
the Offer or converted into the right to receive cash in the Merger will
not participate in any future growth of the Company. Because of the risks
and uncertainties associated with the Company's future prospects, the
Special Committee concluded that this detriment was not quantifiable. The
Special Committee also concluded that obtaining a cash premium for the
Shares now was preferable to enabling the holders of Shares to have a
speculative potential future return.
- Costs of Remaining Public. The Special Committee also considered that
maintaining the Company as a public entity is expensive both in terms of
actual costs, including providing audited financial statements and other
information to stockholders and retaining disinterested directors
(approximately $400,000 per year) and the time and attention required of
management, whose energies might be better spent on other matters.
- Exclusive Distribution Agreement. The Special Committee also considered
that due to declining pocketknife sales the Company has not been able to
meet required minimum purchases of pocketknives for each of the last five
years under its exclusive distribution agreement in the United States
with Victorinox and, as a result, Victorinox has had the right to
terminate this distribution agreement. The minimum purchase requirement
equals 85% of the maximum amount of pocketknives purchased by the Company
from Victorinox in any prior year. Although Victorinox has given no
indication of its intent to terminate this agreement due to the Company's
failure to meet the minimum purchase requirement, and for each of the
past five years Victorinox has agreed to waive this requirement, the
Special Committee considered the potential adverse effect on the business
of any termination of this exclusive distribution agreement. In addition,
the Special Committee also considered that approximately half of the
Company's revenues for 2000 and 2001 were derived from sales of products
supplied to the Company by Victorinox.
The description set forth above is not intended to be exhaustive but
summarizes the primary factors considered by the Special Committee. In view of
its many considerations, the Special Committee did not find it practical to, and
did not, quantify or otherwise assign relative weights to the specific factors
considered. In addition, individual members of the Special Committee may have
given different weights to the various factors considered. After weighing all of
these considerations, the Special Committee, on behalf of the Company,
unanimously approved the terms of the Offer and recommended that holders of
Shares tender their Shares in the Offer.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
SWISS ARMY BRANDS, INC.
By: /s/ THOMAS M. LUPINSKI
------------------------------------
Name: Thomas M. Lupinski
Title: Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
Date: August 20, 2002
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