10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-1282-3

Swiss Army Brands, Inc.
(Exact name of registrant as specified in its charter)

                                                             Delaware                                             13-2797726
                                                  (State of incorporation)               (I.R.S. Employer Identification No.)

                                                       One Research Drive, Shelton, Connecticut                     06484
                                                          (Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code: (203) 929-6391

NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report.)

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

                                                                                                                                                   Yes  X  No

          The number of shares of Registrant's Common Stock, $.10 par value, outstanding on August 9, 2002, was 8,295,811 shares.

SWISS ARMY BRANDS, INC.
AND SUBSIDIARIES
INDEX

PART I:	FINANCIAL INFORMATION	Page No.
Item 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets as of June 30, 2002 (unaudited) and December 31, 2001	3 - 4
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2002 and 2001 (unaudited)	5
	Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) for the Six Months Ended June 30, 2002 and 2001 (unaudited)	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001 (unaudited)	7
	Notes to Consolidated Financial Statements	8 - 10
Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	11 - 17
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	17
Part II:	OTHER INFORMATION
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	18
Item 6.	EXHIBITS AND REPORTS ON FORM 8-K	19
Signatures		19

The Exhibit Index appears on page 15.

SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
Assets

	June 30,                                  2002                                      (unaudited)	December 31, 2001
Current assets:
Cash and cash equivalents	$ 845	$ 2,639
Accounts receivable, less        allowance for doubtful        accounts of $1,210, and        $1,310, respectively	23,372	29,172
Inventories	47,000	34,758
Deferred income taxes	926	1,768
Prepaid and other	10,705	4,772
Total current assets	82,848	73,109
Deferred income taxes	3,660	896
Property, plant and equipment, net	7,429	7,153
Investments	3,151	3,834
Intangible assets, net	3,840	11,246
Other assets, net	18,647	17,896
Total Assets	$119,575	$114,134

The accompanying notes to consolidated financial statements are an integral part of these balance sheets.

3

SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
Liabilities and Stockholders’ Equity

	June 30,                                     2002                                            (unaudited)	December 31, 2001
Current liabilities:
Current portion of long-term debt	$ 6,818	$ 1,264
Accounts Payable	15,693	14,034
Accrued liabilities	9,455	9,349
Total current liabilities	31,966	24,647
Long-term liabilities:
Long-term debt	6,671	6,408
Other	932	675
Total Liabilities	39,569	31,730
Minority interest	8,144	6,644
Commitments and contingencies
Stockholders' equity:      Preferred stock, par value $.10 per share:  shares          authorized – 2,000,000;  no shares issued	–	–
Common stock, par value $.10 per          share:  shares authorized–           18,000,000;  shares issued  –  9,183,054 and           9,076,442, respectively	919	908
Additional paid-in capital	48,980	48,988
Accumulated other comprehensive income (loss)	513	(550)
Retained earnings	29,473	34,437
	79,885	83,783
Less:  Treasury stock:   908,743 shares for both           periods,	(8,023)	(8,023)
Total stockholders' equity	71,862	75,760
Total Liabilities and Stockholders' Equity	$119,575	$114,134

The accompanying notes to consolidated financial statements are an integral part of these balance sheets.

4

SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
(unaudited)

	Three Months Ended June 30, 2002               2001		Six Months Ended June 30, 2002               2001
Net revenues	$25,853	$27,077	$50,594	$48,100
Cost of sales Gross profit	14,306     11,547	15,961     11,116	28,734     21,860	29,248     18,852
Selling, general and administrative expenses	12,133	11,068	23,455	22,478
Operating income (loss)	(586)	48	(1,595)	(3,626)
Interest expense and other, net	(200)	(237)	(362)	(455)
Investment loss	(683)	–	(683)	–
Total other income (expense), net	(883)	(237)	(1,045)	(455)
Loss before income taxes and cumulative effect of    a change in accounting principle	(1,469)	(189)	(2,640)	(4,081)
Income tax benefit	(1,838)	(44)	(2,181)	(1,629)
Minority interest	(191)	(71)	(83)	(119)
Net income (loss) before cumulative effect of a   change in accounting principle	560	(74)	(376)	(2,333)
Cumulative effect of a change in accounting   principle	–	–	(4,588)	–
Net income (loss)	$ 560	($74)	($4,964)	($2,333)
Basic earnings per share: Net income (loss) per share before cumulative effect    of a change in accounting principle Cumulative effect per share of a change in     accounting principle Net income (loss) per share	$0.07         –         $0.07	($0.01)         –         ($0.01)	($0.05)     ($0.55)     ($0.60)	($0.28)         –         ($0.28)
Diluted earnings per share: Net income (loss) per share before cumulative effect    of a change in accounting principle Cumulative effect per share of a change in     accounting principle Net income (loss) per share	$0.07         –         $0.07	($0.01)         –         ($0.01)	($0.05)     ($0.55)     ($0.60)	($0.28)         –         ($0.28)
Weighted average number of shares outstanding:       Basic       Diluted	8,274    8,362	8,278    8,278	8,274    8,274	8,278    8,278

The accompanying notes to consolidated financial statements are an integral part of these statements.

5

	Common Stock Par Value $.10 Shares      Amount		Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Treasury Stock	Comprehensive Income (Loss)
BALANCE
December 31, 2000	8,971,080	$897	$49,005	$1,234	$37,589	($8,003)
Comprehensive loss:   Net loss	–	–	–	–	(2,333)	–	($2,333)
Cumulative effect    transition adjustment for    derivatives, net of tax	–	–	–	(415)	–	–	(415)
Unrealized gain on    marketable securities	–	–	–	266	–	–	266
Fair value adjustment    for derivatives, net of tax	–	–	–	(942)	–	–	(942)
Foreign currency    translation adjustment	–	–	–	46	–	–	46
Comprehensive loss							3,378
Issuance of common stock	106,112	11	(11)	–	–	–
BALANCE
June 30, 2001 (unaudited)	9,077,192	$908	$48,994	$189	$35,256	($8,003)
BALANCE
December 31, 2001	9,076,442	$908	$48,988	($550)	$34,437	($8,023)
Comprehensive Loss:
Net loss	–	–	–	–	(4,964)	–	($4,964)
Fair value adjustment     for derivatives, net of tax	–	–	–	1,313	–	–	1,313
Foreign currency     translation adjustment	–	–	–	(250)	–	–	(250)
Comprehensive loss							($3,901)
Stock options exercised	500	–	3	–	–	–
Issuance of common stock	106,112	11	(11)	–	–	–
BALANCE
June 30, 2002 (unaudited)	9,183,054	$919	$ 48,980	$513	$29,473	($8,023)

The accompanying notes to consolidated financial statements are an integral part of these statements

6

	Six Months Ended June 30, 2002     2001
Cash flows from operating activities:      Net income (loss)      Adjustments to reconcile net income (loss) to net cash      provided by (used in) operating activities:         Depreciation and amortization         Investment loss         Minority interest         Cumulative effect of a change in accounting principle         Deferred income taxes         Stock compensation expense	($4,964) 1,637 683 (83) 4,588 (74) –	($2,333) 2,115 – (119) – – 36
Changes in other current assets and liabilities:      Accounts receivable      Inventories      Prepaid and other      Accounts payable      Accrued liabilities            Net cash provided by (used in) operating activities	9,564 (11,995) (3,198) (1,544) (125) (5,511)	14,195 (8,009) (1,618) (1,882) (1,971) 414
Cash flows from investing activities:      Capital expenditures      Additions to other assets            Net cash used in investing activities	(1,004) (907) (1,911)	(612) (320) (932)
Cash flows from financing activities:      Borrowings under debt agreements      Repayments under debt agreements      Proceeds from the exercise of stock options           Net cash provided by (used in) from financing activities	31,421 (25,972) 3 5,452	23,330 (26,588) – (3,258)
Effect of exchange rate changes on cash	176	(278)
Net decrease in cash     Cash and cash equivalents, beginning of period     Cash and cash equivalents, end of period	(1,794) 2,639 $845	(4,054) 5,002 $948
Cash paid during the period:      Interest      Income taxes	$384 $174	$446 $676

The accompanying notes to consolidated financial statements are an integral part of these statements

7

SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 and 2001
(unaudited)

1. CONSOLIDATED FINANCIAL STATEMENTS
   
   

           The consolidated financial statements included in this Form 10-Q have been prepared by Swiss Army Brands, Inc. ("Swiss Army" or the "Company") without audit. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's report on Form 10-K for the year ended December 31, 2001. In the opinion of management of the Company, the interim financial statements included herein reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Due to the seasonal nature of the Company's business, the results of operations for the interim periods presented are not necessarily indicative of the operating results for the full year.
   
   

2. INVENTORIES
   
   

           Domestic inventories are stated at the lower of cost (determined by the last-in, first-out (LIFO) method) or market. Foreign inventories are valued at the lower of cost or market (determined by the first-in, first-out (FIFO) method). Inventories principally consist of finished goods. The increase in inventories from December 31, 2001 to June 30, 2002 was due to the normal seasonal build of inventory and an increase due to the rebranding of the inventory related to Victorinox Swiss Army Watch S.A. ("VSA").
   
   

3. EARNINGS PER SHARE
   
   

           For the six month periods ended June 30, 2002 and 2001, and the three month period ended June 30, 2001, the weighted average number of shares of common stock outstanding do not include the dilutive effect of stock options as they would have an anti-dilutive effect.
   
   

4. INCOME TAXES
   
   

           Income taxes are provided at the estimated annual effective tax rate. The income tax benefit for the interim 2002 and 2001 periods differ from the federal statutory rate of 34% due primarily to state income taxes (net of federal benefit), foreign income taxes, capital losses not benefited for tax purposes and expenses related to the tender offer, see Note 10, which are not deductible for tax purposes. For the quarter ended June 30, 2002, the Company recorded an income tax benefit at an effective rate of 125.1%. This rate is higher than the effective rate for the six months ended
   
   

   8

   June 30, 2002 of 82.6% as the Company's effective rate for first quarter ended was recorded at a 29.3% effective rate. The Company expects that the effective tax rate for the remainder of 2002 will continue to be significantly higher than the statutory rate of 34% due to the above reasons.
   
   

5. INVESTMENTS
   
   

           In the quarter ended June 30, 2002, the Company recorded a $683,000 write-down of its investment in Highgate Capital LLC, a private equity firm, due to the other than temporary impairment in the value of the investment.
   
   

6. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
   
   

           In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 133, as amended in June 2000 by SFAS No. 138, "Accounting for Derivative Instruments and Hedging Activities," which standardizes the accounting for derivative instruments, including certain derivative instruments embedded in other contracts. This standard requires that an entity recognize those items as assets or liabilities in the balance sheet and measure them at fair value, resulting in an offsetting adjustment to income or other comprehensive income, depending on effectiveness of the hedge. SFAS 133, as amended by SFAS 138, was effective for the Company beginning January 1, 2001. The Company adopted this statement effective January 1, 2001. Based upon the estimated fair value of the Company's derivative instruments, at January 1, 2001 derivative liabilities of approximately $415,000, net of tax, were recognized in the balance sheet with an offsetting amount in other comprehensive income (loss).
   
   

           The Company is exposed to foreign currency risks relating to purchases of inventories as part of its ongoing business operations and uses derivative financial instruments, where appropriate, to manage these risks. In general, instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. At the inception of the contract, the Company has designated its use of derivatives for foreign currency forecasted transactions as cash flow hedges. The Company hedges its exposure to variability in future cash flows for forecasted transactions up to a maximum of 24 months. At such time that inventory is received, the position is re-designated from a cash flow hedge to a fair value hedge. Gains and losses on derivatives qualifying as cash flow hedges are recorded in other comprehensive income to the extent that hedges are effective until the underlying transactions are recognized in earnings. Gains and losses from fair value hedges are included in net income. It is expected that approximately $1.7 million (net of tax) of unrealized gains included in other comprehensive income at June 30, 2002, will be reclassified into earnings in the next twelve months. Gains and losses related to the ineffective portion of hedging instruments, which are included in net income, and gains and losses from fair value hedges were insignificant.
   
   

7. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
   
           Effective January 1, 2002, the Company adopted the Emerging Issues Task Force ("EITF") Issue No. 00-14, "Accounting for Certain Sales Incentives," and EITF Issue No. 00-25, "Accounting for Consideration from a Vendor to a Retailer in Connection with the Purchase or Promotion of the Vendor's Products." The impact of the new accounting in the reclassification of
   
   

   9

   certain revenue incentives, cooperative advertising and promotional expenses from selling, general and administrative expenses to a reduction of net revenues, but will have no impact on the Company's financial position or net income. The adoption of these EITF Issues resulted in a reduction of net revenues and selling, general and administrative expenses of approximately $550,000 and $500,000 for the three months ended June 30, 2002 and 2001, respectively, and approximately $1,100,000 and $750,000 for the six months ended June 30, 2002 and 2001, respectively.
   
   

8. GOODWILL AND OTHER INTANGIBLE ASSETS
   
   

           In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." Effective January 1, 2002, the Company adopted SFAS No. 142. SFAS No. 142 requires goodwill and intangible assets with indefinite lives no longer to be amortized, but instead be tested for impairment at least annually.
   
   

           SFAS No. 142 provides a six-month transitional period from the effective date of adoption for the Company to perform an assessment of whether there is an indication that goodwill is impaired. To the extent that an indication of impairment exists, the Company must perform a second test to measure the amount of impairment. The Company determined that an impairment existed for the goodwill of Bear Cutlery, Inc. ("Bear"). The Company, with the help of a third party valuation firm, then determined the implied fair value of Bear using a discounted cash flow analysis and compared such value to the carrying amounts of Bear's assets and liabilities. This evaluation indicated that the entire amount of goodwill related to Bear of approximately $7.3 million was impaired as of January 1, 2002. Conditions that contributed to the goodwill impairment included a decline in the multi-tool business. Accordingly, as of January 1, 2002, the Company recognized a $4.6 million, net of tax, non-cash charge as a cumulative effect of a change in accounting principle for the write-down of the goodwill.
   
   

9. RECENTLY ISSUED ACCOUNTING STATEMENTS
   
   

           On January 1, 2002, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" also became effective and it provides further implementation guidance relative to SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption of SFAS No. 144 did not have a material adverse impact on the results of operations or financial condition of the Company.
   
   

10. RELATED PARTY TRANSACTION - TENDER OFFER
    
    

            On July 23, 2002, SABI Acquisition Corp. ("Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Victorinox AG, a Swiss corporation and a Company's major supplier and majority stockholder ("Victorinox"), made an offer to purchase all of the outstanding shares of common stock of the Company not held by Victorinox or its affiliates (other than the Company) for a cash price of $9.00 per share. The offer will expire at 12:00 Midnight on August 19, 2002.
    
    

10

Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(unaudited)

FORWARD LOOKING STATEMENTS

        The following discussion contains, in addition, to historical information, forward looking statements. The forward looking statements were prepared on the basis of certain assumptions which relate, among other things, to the demand for and cost of purchasing and marketing the Company's products; the prices at which such products may be sold; new product development; seasonal selling trends; the strength of the retail market; the Swiss franc- U.S. dollar exchange rates; the extent to which the Company is able to successfully manage the effects of foreign currency fluctuations through financial instruments; the continued ability to obtain satisfactory payment terms from Victorinox; future compliance with bank covenants; and the Company's anticipated credit needs and ability to obtain such credit. Even if the assumptions upon which the forward looking statements are based prove accurate and appropriate, the actual results of the Company's operations in the future may vary widely from financial projections due to the effects of a possible continuation of the national economic decline and its impact on retail sales, continuing effects of the terrorist attacks of September 11, 2001 on sales of knives, luggage and other items sold or licensed by the Company, increased competition, the restrictions on the carrying of knives on airliners and similar restrictions, changes in consumer tastes and other factors not yet known, evaluated or anticipated. Accordingly, the actual results of the Company's operations in the future may vary widely from the forward-looking statements included herein.

RESULTS OF OPERATIONS

Comparison of the Three Months Ended June 30, 2002 and 2001

        Net revenues consist of the following (in thousands):

	2002	2001
Product sales, net	$25,038	$26,451
Royalty income	815	626
	$25,853	$27,077

11

        Product sales for the three months ended June 30, 2002 were $25.0 million compared with $26.5 million for the same period in 2001, representing a decrease of $1.4 million or 5.3%. The sales decrease was primarily due to a 34% decrease in sales of Victorinox® Original Swiss Army™ Knives and tools offset by a 7% increase in watch sales and a 16% increase in professional cutlery sales. The Company believes that the restrictions on the carrying of knives and tools on airliners and similar restrictions have negatively affected sales of the Company's knife and tool products and that such negative trends may continue. In addition, product sales amounts for each quarter have been reduced as the result of the reclassification of certain promotional expenses from selling, general and administrative expenses in accordance with EITF Issues No. 00-14 and 00-25, which the Company adopted during the first quarter of 2002. The reclassified amounts for the second quarter of 2002 and 2001 were approximately $550,000 and $500,000, respectively. Royalty income relates to the licensing program of Victorinox® Travel Gear and Victorinox® Apparel.

        Gross profit of $11.5 million for the three months ended June 30, 2002 increased $0.4 million or 3.9% from 2001. The gross profit margin percentage for the second quarter of 2002 of 44.7% was higher than the gross profit margin percentage of 41.1% reported for the same period in 2001 primarily due to an increase in watch sales, which have a higher gross margin than the Company's other products, and also due to an increase in the value of the U.S. dollar versus the Swiss franc. The Company's gross profit margin is a function of both product mix (including royalty revenues) and Swiss franc exchange rates. Since the Company imports the majority of its products from Switzerland, its costs are affected by both the spot rate of exchange and by its foreign currency hedging program. The Company enters into foreign currency contracts and options to hedge the exposure associated with foreign currency fluctuations. Based upon current Swiss franc requirements, the Company believes it is hedged through 2002. However, such hedging activity cannot eliminate the long-term adverse impact on the Company's competitive position and results of operations that would result from a sustained decrease in the value of the dollar versus the Swiss franc. These hedging transactions, which are meant to reduce foreign currency risk, also reduce the beneficial effects to the Company if the dollar increases relative to the Swiss franc. The Company plans to continue to engage in hedging transactions; however, it is uncertain of the extent to which such hedging transactions will reduce the effect of adverse currency fluctuations.

        Selling, general and administrative expenses for the three months ended June 30, 2002 of $12.1 million were $1.1 million or 9.6% higher than the comparable period in 2001 due to expenses related to the Company's retail store, which opened in October 2001, an increase in professional fees related to the tender offer and expenses related to Victorinox Swiss Army Watch S.A. ("VSA"). The Company expects that expenses for 2002 will be higher than 2001, due to the above as well as severance costs of $0.6 million which will be recorded in the third quarter of 2002.

        Interest expense and other, net was $200,000 for the three months ended June 30, 2002 compared to $237,000 for the comparable period in 2001 primarily due to decreased borrowings and lower effective interest rates.

        Investment loss of $683,000 for the three months ended June 30, 2002, was due to the Company's write-down of its investment in Highgate Capital LLC.

        As a result of these changes, loss before income taxes for the three months ended June 30, 2002 was a loss of $1,469,000 versus $189,000 for the same period in 2001, a change of $1,280,000.

12

        Income tax benefit was provided at an effective rate of 125.1% and 23.3% in 2002 and 2001, respectively. The effective rate for 2002 differs significantly from the statutory rate of 34% due to expenses related to the tender offer which are not deductible for tax purposes, state income taxes, capital losses not benefited for tax purposes and the benefit recorded for the losses related to VSA were recorded at a significantly lower tax rate than 34%. In addition, the income tax benefit for the second quarter is higher than the estimated income tax benefit of 82.6% as the Company had recorded an income tax benefit of 29.3% for the first quarter of 2002 and therefore had to increase the second quarter effective rate to reach the estimated effective rate of 82.6%.

        Minority interest income of $191,000 and $71,000 for the three months ended June 30, 2002 and 2001 respectively, related to Xantia and VSA.

        As a result of these changes and that the efective rate was 125.1% for the quarter, net income (loss) for the three months ended June 30, 2002 was income of $560,000 ($0.07 per share - basic and diluted) versus a loss of $74,000 ($0.01 per share - basic and diluted) for the same period in 2001, a change of $634,000.

Comparison for the Six Months Ended June 30, 2002 and 2001

        Net revenues consist of the following (in thousands):

	2002	2001
Product sales, net	$49,175	$46,917
Royalty income	1,419	1,183
	$50,594	$48,100

        Product sales for the six months ended June 30, 2002 were $49.2 million compared with $46.9 million for the same period in 2001, representing an increase of $2.3 million or 4.8%. The sales increase was primarily due to a 27% increase in watch sales and a $3.7 million increase in sales related to a special promotional program with one customer offset by a 36% decrease in sales of Victorinox® Original Swiss Army™ Knives and tools. The Company believes that the restrictions on the carrying of knives and tools on airliners and similar restrictions have negatively affected sales of the Company's knife and tool products and that such negative trends may continue. Sales to one customer related to the special promotional program were approximately 11% of net revenues for the six months ended June 30, 2002. In addition, product sales amounts for each six month period have been reduced as the result of the reclassification of certain promotional expenses from selling, general and administrative expenses in accordance with EITF Issues No. 00-14 and 00-25 which the Company adopted during the first quarter of 2002. The reclassified amounts for the six months ended June 30, 2002 and 2001 were approximately $1,100,000 and $750,000, respectively. Royalty income relates to the licensing program of Victorinox® Travel Gear and Victorinox® Apparel.

        Gross profit of $21.9 million for the six months ended June 30, 2002 increased by $3.0 million or 16.0% from 2001. The gross profit margin percentage for the six months of 2002 of 43.2% was higher than the gross profit margin percentage of 39.2% reported for the same period in 2001 primarily due to an increase in watch sales, which have a higher gross margin that the Company's other products, and also due to an increase in the value of the U.S. dollar versus the Swiss franc.

13

        Selling, general and administrative expenses for the six months ended June 30, 2002 of $23.5 million were $1.0 million or 4.3% higher than the amount for the comparable period in 2001. The increase was primarily due to expenses related to the Company's retail store, which opened in October 2001, expenses related to VSA and an increase in professional fees related to the tender offer offset by special charges in 2001 of $0.8 million for personnel costs related to senior management realignments and asset write-downs.

        Interest expense and other, net was $362,000 for the six months ended June 30, 2002 compared to $455,000 for the comparable period in 2001, primarily due to decreased borrowings and lower effective interest rates.

        Investment loss of $683,000 for the six months ended June 30, 2002 was due to the Company's write-down of its investment in Highgate Capital LLC.

        As a result of these changes, loss before income taxes and cumulative effect of a change in accounting principle for the six months ended June 30, 2002 was a loss of $2,640,000 versus $4,081,000 for the same period in 2001, a change of $1,441,000.

        Income tax benefit was provided at an effective rate of 82.6% and 39.9% in 2002 and 2001, respectively. The effective rate for 2002 differs significantly from the statutory rate of 34% due to expenses related to the tender offer which are not deductible for tax purposes, state income taxes, capital losses not benefited for tax purposes and the benefit recorded for the losses related to VSA were recorded at a significantly lower tax rate than 34%.

        Minority interest income of $83,000 and $119,000 for the six month period ended June 30, 2002 and 2001, respectively, related to Xantia and VSA.

        As a result, net loss for the six months ended June 30, 2002 was a loss of $376,000 ($0.05 per share - basic and diluted) versus $2,333,000 ($0.28 per share - basic and diluted) for the same period in 2001, a change of $1,957,000.

        Cumulative effect of a change in accounting principle for the six months ended June 30, 2002 was $4.6 million ($0.55 per share - basic and diluted), net of tax, due to the write-down of the entire amount of goodwill of Bear resulting from the adoption of SFAS No. 142.

        As a result of these changes, net loss for the six month period ended June 30, 2002 was a loss of $4,964,000 ($0.60 per share - basic and diluted) versus $2,333,000 ($0.28 per share - basic and diluted) for the same period in 2001, a change of $2,631,000.

14

LIQUIDITY AND CAPITAL RESOURCES

        The table below presents summary cash flow information for the six month periods ended June 30, 2002 and 2001(in thousands):

	2002	2001
Net cash provided by (used in) operating activities	($5,511)	$414
Net cash provided by (used in) investing activities	(1,911)	(932)
Net cash provided by (used in) financing activities	5,452	(3,258)
Total change in cash and cash equivalents(a)	($1,970)	($3,776)

        (a)     Before exchange rate effects

Operating Activities

        Cash provided by operating activities is the Company's primary source of funds to finance operating needs. The Company's revolving credit agreement provides additional liquidity for seasonal and specific purpose expenditures. The Company believes that cash generated from operations and the availability under its revolving credit agreement provide sufficient liquidity to support its planned business activities.

        As of June 30, 2002, the Company had working capital of $50.9 million compared with $48.5 million as of December 31, 2001, an increase of $2.4 million. Significant uses of working capital consisted of additions to other assets of $0.9 million and capital expenditures of $1.0 million. The Company currently has no material commitments for capital expenditures. The Company does expect to record severance charges of $0.6 million in the third quarter of 2002 which will negatively impact working capital.

        Cash used in operating activities was approximately $5.5 million in the six months ended June 30, 2002 compared to cash provided by operating activities of $0.4 million in the six months ended June 30, 2001. The change primarily resulted from a significantly smaller decrease in accounts receivable in 2002 compared to 2001 and a larger increase in inventory in 2002 compared to 2001. The increase in inventory was due to the Company's normal seasonal build in inventory and an increase due to the rebranding of the inventory related to VSA.

Investing Activities

        Investing activities during 2002 consisted of capital expenditures of $1.0 million and additions to other assets of $0.9 million.

        Investing activities during 2001 consisted of capital expenditures of $0.6 million and additions to other assets of $0.3 million.

        The Company anticipates that its capital expenditures and additions to other assets during all of 2002 will be higher in than the amounts spent in 2001 by approximately $1.0 million due to the construction of a new trade show booth and investments in information technology.

15

Financing Activities

        During 2002 and 2001, the Company's principal financing activities consisted of the borrowing and repayment of bank debt and repayment of debt owed to the former owners of Xantia, as well in 2002 borrowings from Victorinox related to VSA.

        The Company meets its short-term liquidity needs with cash generated from operations, and, when necessary, bank borrowings under its bank agreement. As of June 30, 2002, the Company had a $16.0 million credit line, of which $3,450,000 was outstanding and $12,550,000 was available for borrowings. Also, the Company has approximately $6,579,000 of outstanding term loans and debt related to the acquisitions of Bear and Xantia. The line of credit expires in June 2003. The Company's credit facility includes various financial covenants, including maintenance of a leverage coverage ratio and interest coverage ratio based on operating results for the previous four quarters. The Company was in compliance with its bank covenants at June 30, 2002. For the remainder of 2002, the financial covenants contained in the agreement are at levels that the Company believes it will not attain. Accordingly, the Company is currently in negotiations with its lender which will, among other things, amend the financial covenants to levels that the Company can attain as well extending the term of the agreement. The Company expects to complete these negotiations in September 2002. As the debt agreement with the lender expires in June 2003, the Company has classified all bank debt as of June 30, 2002 as current in the accompanying balance sheet. The Company believes its current liquidity levels and financial resources available under its current agreement will be sufficient to meet its operating needs in the next twelve months.

        The Company and Victorinox have entered into an agreement, effective June 20, 2002, pursuant to which Victorinox has agreed to defer until October 15, 2003, payment of 5,200,000 CHF ($3,459,747) related to amounts owed by VSA to Victorinox. These funds were used by VSA to fund a new trade booth, purchases inventories and for other operating activities. The amount deferred has been included in long-term debt as of June 30, 2002.

RECENTLY ISSUED ACCOUNTING STANDARDS

        On January 1, 2002, SFAS No. 142, "Goodwill and Other Intangible Assets," became effective and as a result, the Company no longer amortizes goodwill. In lieu of amortization, the Company is required to complete an initial impairment assessment of goodwill no later than six months after the adoption of SFAS No. 142 and perform an annual impairment review thereafter. The Company completed its initial impairment assessment of goodwill in the second quarter of 2002. As a result, the Company recorded a $4.6 million, net of tax, write-down of the goodwill related to Bear Cutlery, Inc.

        In January 1, 2002, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" also became effective and it provides further implementation guidance relative to SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption of SFAS No. 144 did not have a material adverse impact on the results of operations or financial condition of the Company.

16

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Risk

        The Company is exposed to significant market risk from changes in foreign exchange rates as the Company imports virtually all its products from Switzerland. To minimize the risks associated with fluctuations in the value of the Swiss franc versus the U.S. dollar, the Company enters into foreign currency contracts and options. Pursuant to guidelines approved by its Board of Directors, the Company is to engage in these activities only as a hedging mechanism against foreign exchange rate fluctuations associated with specific inventory purchase commitments to protect gross margin and is not to engage in speculative trading. Gains or losses on these contracts and options are deferred in accumulated other comprehensive income (loss) and recognized in cost of sales when the related inventory is sold. At June 30, 2002, the Company entered into foreign currency contracts and options to purchase approximately 29.2 million Swiss francs in 2002 and 3.0 million Swiss francs in 2003 at a weighed average rate of $1.71 Swiss franc/dollar. The Company's ultimate unrealized gain or loss on these contracts and options will primarily depend on the currency exchange rates in effect at the time the contracts and options mature. At June 30, 2002, the Company has reviewed its foreign exchange risks and based upon its foreign currency hedging program and review of its outstanding foreign exchange contracts, it believes that a near-term increase in the value of the Swiss franc versus the U.S. dollar would not have a material effect on the Company's results of operations or financial condition.

Interest Rate Risk

        The Company has entered into interest rate protection agreements to manage its exposure to fluctuations in earnings related to changes in interest rates on its variable rate debt. At June 30, 2002, a 50 basis point increase or decrease in market interest rates, principally LIBOR, would not materially increase or decrease interest expense or cash flows.

17

PART II.                - OTHER INFORMATION

Item 2.                LEGAL ACTIONS

     On or about June 13, 2002, the Company became aware of two lawsuits relating to the tender offer 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 tender offer 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 Stockholders 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.

Item 4.                SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The annual meeting of the stockholders of the Company was held on May 30, 2002, pursuant to notice, at which meeting shareholders elected the following directors:

NAME	NUMBER OF VOTES         FOR	NUMBER OF VOTES WITHHELD
A. Clinton Allen	7,087,885	24,731
Clarke H. Bailey	7,088,485	24,131
Herbert M. Friedman	7,048,485	64,131
Peter W. Gilson	7,087,885	24,731
Louis Marx, Jr.	7,048,489	64,127
Robert S. Prather, Jr.	7,088,485	24,131
Stanley R. Rawn, Jr.	7,048,489	64,127
John Spencer	7,087,889	24,727
A. Jeffrey Turner	7,087,889	24,727
John V. Tunney	7,088,485	24,131

Item 6.                EXHIBITS AND REPORTS ON FORM 8-K

A.)                Exhibits

(10.1)               Temporary modification to the 2001 (second) Amended and Restated Commercial Loan Agreement between Swiss Army Brands, Inc. and Fleet Bank, N.A. and exhibits.

(10.2)               Letter Agreement as of June 20, 2002 between Victorinox Swiss Army Watch, S.A. and Victorinox AG incorporated by reference to the schedule 14D-9 filed by the Company with the SEC on August 13, 2002.

(11)               Statement regarding computation of per share earnings is not required because the relevant computation can be clearly determined from the material contained in the Financial Statements included herein.

(99.1)              Section 906 Certification of Chief Executive Officer

(99.2)              Section 906 Certification of Chief Financial Officer

B.)                There were no reports on Form 8-K for the three months ended June 30, 2002.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

                                                                                                              SWISS ARMY BRANDS, INC.

Date: August 14, 2002
                                                                                                                         By /s/ Thomas M. Lupinski
                                                                                                                         Name: Thomas M. Lupinski
                                                                                                                         Title:Senior Vice President,
                                                                                                                         Chief Financial Officer,
                                                                                                                         Secretary and Treasurer

EX-10

TEMPORARY MODIFICATION TO
2001 (SECOND) AMENDED AND RESTATED
COMMERCIAL LOAN AGREEMENT

        This Temporary Modification to 2001 (Second) Amended and Restated Commercial Loan Agreement is made and entered into as of this 25th day of June, 2002 (the "Temporary Modification") by and among SWISS ARMY BRANDS,INC., having its principal office at One Research Drive, Shelton, Connecticut 06484 (the "Borrower") and FLEET NATIONAL BANK, having an office at 777 Main Street, Hartford, Connecticut 06115 (the "Bank").

W I T N E S S E T H:

        WHEREAS, the Borrower and the Bank entered into the 2001 (Second) Amended and Restated Commercial Loan Agreement dated as of September 28, 2001 (the "Loan Agreement"); and

        WHEREAS, in connection with the waiver of certain defaults under the Loan Agreement, the Borrower and the Bank wish to modify the Loan Agreement by temporarily changing certain of the financial covenants thereunder; and

        WHEREAS, any capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement.

        NOW, THEREFORE, Borrower and Bank agree as follows:

1. Representations and Warranties. The Borrower acknowledges, agrees, and affirms as follows:
   
   

1.         It is legally and validly indebted to the Bank by virtue of the Loan Agreement and the Notes.
   
   
2.         It has no defense, counterclaim, offset or independent action against the Bank with respect to the Loan Agreement or the Notes.
   
   
3.         Except as otherwise disclosed in the most recent public filings with the Securities and Exchange Commission, copies of which have been provided to the Bank, and as set forth on Schedule A attached hereto, all representations and warranties contained in the Loan Agreement or any other document executed pursuant to the Loan Agreement are true and correct as of the date hereof.
   
   
4.         The Borrower is in compliance on the date of this Temporary Modification with all covenants contained in the Loan Agreement, as hereby amended and in any other document executed pursuant to the Loan Agreement.
   
   
5.         No event or condition which, with the passage of time, the giving of notice or both, would constitute a default or an event of default, has occurred under the Loan Agreement, as hereby amended, or in connection with any other indebtedness owing to the Bank by the Borrower.
   
   
6.         This transaction is duly authorized by the Borrower and the Guarantors.
   
   
7.         This Temporary Modification is the legal valid and binding obligation of the Borrower and Guarantors enforceable in accordance with their respective terms.
   
   
8.         All applicable taxes owed by the Borrower are current, including local property taxes to the extent required by applicable law.
   
   

2. Temporary Modifications to Loan Agreement.
   
   

1.         The Loan Agreement is temporarily modified by amending and restating Sections 7.2, 7.4 and 7.5 of the Loan Agreement to read, in full, as follows:
   
   

                    7.2 Funded Debt to EBITDA Ratio. On a rolling four quarter basis, Borrower shall not permit its ratio of Funded Debt to EBITDA to be greater than:
                          2.25 to 1.0 as of March 31, 2002;
                          4.0 to 1.0 as of June 30, September 30 and December 31, 2002; and
                          2.25 to 1.0 as of March 31, 2003 and thereafter.

                    7.4 EBITDA to Interest Expense plus CMLTD Ratio. On a rolling four quarter basis, Borrower shall not permit its ratio of EBITDA to Interest Expense plus CMLTD to be less than:
                          2.0 to 1.0 as of March 31, 2002;
                          1.5 to 1.0 as of June 30, 2002;
                          1.25 to 1.0 as of September 30, 2002;
                          2.0 to 1.0 as of December 31, 2002 and thereafter.

                    7.5 Tangible Net Worth:Borrower shall not permit Tangible Net Worth to be less than:
                          $65,000,000 as of December 31, 2001;
                          $62,800,000 as of March 31, 2002;
                          $60,500,000 as of June 30, 2002;
                          $60,500,000 as of September 30, 2002; and
                          $61,500,000 as of December 31, 2002;
                           $65,000,000 as of March 31, 2003 and thereafter.

2.         The Loan Agreement is temporarily modified by amending and restating the following definition in Section 1 of the Loan Agreement:
   
   

                    Funded Debt means: (a) for fiscal year 2002: the sum of(i) Indebtedness on account of borrowed money plus (ii) obligations under Capital Leases less (iii) Indebtedness on account of the Xantia Note; and (b)for fiscal year 2003 and thereafter the sum of: (i) Indebtedness on account of borrowed money plus (ii) obligations under Capital Leases.

3. Termination of Temporary Modifications to Loan Agreement. As of September 23, 2002, the temporary modifications to the Loan Agreement set forth above shall expire and the applicable sections of the Loan Agreement shall revert to the language of such sections of the Loan Agreement as such sections existed prior to the execution of this Temporary Modification.
   
   
4. Reaffirmation of Loan Agreement. In all other respects the Loan Agreement, as amended hereby, is ratified and confirmed and it shall be and remain in full force and effect.
   
   
5. Reaffirmation of Security Agreement. The Borrower ratifies and reaffirms the 2000 Substituted Security Agreement dated July 24, 2000 as reaffirmed by letter agreements dated as of May 25, 2001 and September 28, 2001 by the Borrower and in favor of the Bank and confirms that the Security Agreement continues to secure, without limitation, the Borrower's obligations pursuant to the Loan Agreement as modified by this Temporary Modification.
   
   

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

                                                                                                              SWISS ARMY BRANDS, INC.

                                                                                                              By—————————
                                                                                                                      Name
                                                                                                                      Title

                                                                                                              FLEET NATIONAL BANK

                                                                                                              By—————————
                                                                                                                      Name
                                                                                                                      Title

ACKNOWLEDGED AND AGREED:

        The undersigned guarantors pursuant to the 2001 Amended and Restated Agreement of Guaranty and Suretyship (the "Guaranty") dated September 28, 2001 by the undersigned and in favor of the Bank, hereby acknowledge the execution by the Borrower of the Temporary Modification and confirm that the Guaranty extends to the obligations of the Borrower pursuant to the Loan Agreement as modified by the Temporary Modification.

SWISS ARMY BRAND, LTD.                                                BEAR CUTLERY, INC.

By————————————                                                By—————————
        Name                                                                                              Name
        Title                                                                                                 Title

SWISS ARMY BRANDS (SUISSE) S.A.                                SWISS ARMY BRANDS CH, INC.

By————————————                                                By—————————
        Name                                                                                              Name
        Title                                                                                                 Title

EXCELSIOR ADVERTISING, INC.

By————————————
        Name
        Title

EX-10

AGREEMENT OF GUARANTY AND SURETYSHIP

        THIS 2002 AMENDED AND RESTATED AGREEMENT OF GUARANTY AND SURETYSHIP ("Guaranty") is made as of this 25th day of June, 2002 by SWISS ARMY RETAIL, INC. ("Retail") (hereinafter each individually and all collectively referred to as the "Undersigned") in favor of FLEET NATIONAL BANK, 777 Main Street, Hartford, Connecticut 06103 (the "Bank").

W I T N E S S E T H:

W I T N E S S E T H :

        WHEREAS, the Undersigned has requested the Bank to make a loan or advances or otherwise extend further credit (the "Loan") to Swiss Army Brands, Inc., a corporation organized under the laws of Delaware (the "Principal") pursuant to the 2001 Substituted Commercial Revolving Promissory Note in the original principal amount of up to $16,000,000, dated as of May 25, 2001, and the 1999 Commercial Promissory Term Note in the principal amount of $7,000,000, dated as of November 15, 1999, and each made by the Principal and payable to the order of the Bank (collectively, the "Notes"), and the 2001 (Second) Amended and Restated Commercial Loan Agreement between the Principal and the Bank dated as of September 28, 2001 (the "Loan Agreement"), and the foreign exchange contracts between the Bank the Principal entered into from time to time (the "FX Facilities"); and

        WHEREAS, the Bank, as a condition precedent to its agreement to extend the Loan to the Principal, has required that the Undersigned unconditionally guarantee the full and prompt payment of all liabilities and Indebtedness (as hereinafter defined) due or to become due from the Principal to the Bank whether under or pursuant to the Notes, the Loan Agreement, the Related Agreements (as that term is defined in the Loan Agreement), the FX Facilities or otherwise.

        NOW THEREFORE, the Undersigned jointly and severally, in consideration of One Dollar ($1.00) and other valuable consideration from the Bank, receipt of which is hereby acknowledged, hereby absolutely and unconditionally guarantees to the Bank, its successors, endorsees and assigns the full and prompt payment, together with interest, as and when the same becomes due and payable, whether in accordance with its terms or by acceleration or otherwise, of the obligations, liabilities, sums of money, and indebtedness of any kind or nature whether presently existing or hereafter created or arising, which have heretofore been, are now, or which may hereafter become, due and payable to the Bank by, from, or at the request of or on behalf of the Principal, including, without limitation, all sums now or hereafter coming due under or in connection with the Loan and the FX Facilities (all of which obligations, liabilities, sums of money, and indebtedness are hereinafter referred to as the "Indebtedness").

1.         This Guaranty is a continuing guaranty and security for the Indebtedness now due or owing to the Bank, or which may hereafter at any time become due or owing to it from or by the Principal, and the Bank may grant renewal(s) and extension(s) of time for payment of any of the Indebtedness, without impairing, lessening or canceling this Guaranty in any particular until all of the said Indebtedness, and any renewal(s) or extension(s) thereof, shall have been paid in full.
   
   
2.         This Guaranty is irrevocable and shall continue in full force and effect until all of the Indebtedness plus all costs of collection, have been fully and finally paid to the Bank.
   
   
3.         For all purposes of the liability of the Undersigned under this Guaranty, all Indebtedness which may now be or which may hereafter from time to time become due or owing to the Bank by the Principal shall be deemed to continue due and owing to the Bank until the same shall be actually repaid to the Bank, notwithstanding the bankruptcy or winding up of the affairs of the Principal or any other event whatever.
   
   
4.         The Undersigned agrees to reimburse the Bank for any payments on account of the Indebtedness which the Bank has received from or on behalf of the Principal but has returned to the Principal or any debtor-in-possession or trustee or other custodian of the property or affairs of the Principal by reason of any claim of preference, fraudulent transfer or the like in connection with any bankruptcy, insolvency or similar proceeding involving the Principal.
   
   
5.         If, for any reason, the Principal has no legal existence or is under no legal obligation to discharge any of the Indebtedness or if any of the Indebtedness has become irrecoverable from the Principal by operation of law or from any other reason, this Agreement of Guaranty and Suretyship shall nevertheless be binding upon the Undersigned to the same extent as if the Undersigned had been at all times the principal obligor on all such Indebtedness.
   
   

2. The liability of the Undersigned hereunder is direct, absolute and unconditional without regard to the liability of any other person. The Bank shall have the right to proceed against the Undersigned immediately upon any default by the Principal and shall not be requested to cease any action or proceeding of any kind against the Principal or any other party liable for the Indebtedness or any collateral or security which the Bank may have before proceeding against the Undersigned hereunder.
   
   
3. The Undersigned hereby waives, releases, and relinquishes any claim, right or remedy which the Undersigned may now have or hereafter acquire against the Principal or any of its assets or property that arises hereunder or from the performance by the Undersigned hereunder, including, without limitation, any claim, right or remedy of subrogation, reimbursement, exoneration, contribution, indemnification or participation in any claim, right or remedy that the Undersigned may have against the Principal or any collateral for the Indebtedness which the Undersigned now have or hereafter acquire, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise.
   
   
4. The Undersigned hereby grants to Bank a lien, security interest and right of setoff as security for the Indebtedness, whether now existing or hereafter arising, upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of the Bank or any entity under the control of FleetBoston Financial Corporation, or in transit to any of them. At any time, without demand or notice, Bank may set off such deposits, credits or other property of the Undersigned, or any part thereof, and apply the same to the Indebtedness even though unmatured and regardless of the adequacy of any other collateral securing all or part of the Indebtedness and without resort to legal process or judicial proceeding, order or authorization. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE INDEBTEDNESS PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE UNDERSIGNED, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
   
   
5. The Undersigned hereby expressly waives presentment, demand for payment, protest, notice of protest, and notice of nonpayment, with respect to the Indebtedness.
   
   
6. In the event of the failure of the Principal to pay or perform all of the Indebtedness in accordance with its terms and of the failure of the Undersigned to pay the Indebtedness in accordance with the terms hereof, the Bank may take such action with respect thereto as it may deem advisable to protect its interest.
   
   
7. In the event that the Principal becomes bankrupt or insolvent, or enters into a composition or arrangement with its creditors, or in the event of the Principal going into liquidation or being wound up, any dividends or payments received by the Bank from such Principal or its estate, receiver or trustee, shall be taken and applied as payments in gross and shall not prejudice the right of the Bank to recover from the Undersigned, to the full extent of this Guaranty, so much of the Indebtedness which after the receipt of such dividends or payments, remains owing to it. In addition, the Undersigned agrees that in the event of bankruptcy, insolvency, liquidation proceedings, or assignment for the benefit of creditors, or proceedings looking toward the winding up of its affairs, or other similar proceedings, being instituted by or against the Principal, any dividend, share payment or credit of any type whatsoever due to the Undersigned in any such proceeding is hereby assigned over to the Bank to be applied by it against the Indebtedness until the Indebtedness is fully paid.
   
   
8. The Bank may, without affecting any of its rights hereunder, receive and hold collateral or security from the Principal or from the Undersigned or any other party directly or indirectly liable for all or any of the Indebtedness to secure the payment of the Indebtedness and may release such collateral or security or any part thereof, at any time, in its discretion, with or without the reduction of any of the Indebtedness or the substitution of any other collateral or security and likewise in its sole discretion, the Bank may, without notice to the Undersigned and without affecting in any way its rights hereunder:
   
   

1. extend or refuse to extend further credit to the Principal which further credit may contain terms requiring that it be paid before any payments are made on the Indebtedness and which credit may be secured by collateral or security which may have been collateral or security for payment of the Indebtedness;
   
   
2. modify or otherwise change any terms of all or any part of the Indebtedness or the rate of interest thereon or grant any extension(s) or renewal(s) for any period or periods of time for payment thereof or grant any other indulgence(s) with respect thereto, and effect any release, compromise or settlement with respect thereto;
   
   
3. enter into any agreement of forbearance with respect to all or any part of the Indebtedness, or with respect to all or any part of the collateral securing the Indebtedness, and change the terms of any such agreement;
   
   
4. call for or forbear from calling for, additional collateral or security from the Principal to secure any of the Indebtedness;
   
   
5. in the event of nonpayment when due, whether by acceleration or otherwise, of any of the Indebtedness, realize on the collateral or any part thereof, as a whole or in such parcels or subdivided interest as the Bank may elect in a commercially reasonable manner, at any public or private sale or sales for cash or on credit or for future delivery, without demand and without resort to legal process or judicial hearing, order, or authorization, or by foreclosure or otherwise, or forbear from realizing thereof, all as the Bank in its discretion may deem proper, and purchase all or any part of the collateral for its own account at any such sale or foreclosure;
   
   
6. enter into any agreement or agreements with the Principal concerning then existing or additional Indebtedness; and/or
   
   
7. release or effect any settlement or compromise with respect to the Indebtedness with the Principal or any other party primarily or secondarily liable for the Indebtedness.
   
   

9. The obligations of the Undersigned hereunder, and the rights of the Bank in any collateral or security, shall not be released, discharged or in any way affected, nor shall the Undersigned have any rights against the Bank:
   
   

1. by reason of the fact that any collateral securing the Indebtedness may be in default at the time of the acceptance hereof by the Bank or later;
   
   
2. by reason of the fact that a valid lien on any of the collateral may not be conveyed to, or created or continue to exist in favor of, the Bank, or by reason of the fact that, for any reason, a lien shall not have been properly perfected, or shall cease to be perfected;
   
   
3. by reason of the fact that any of the collateral may be subject to equities, liens or defenses or claims in favor of others or may be or become invalid or defective in any way;
   
   
4. by reason of the fact that any of the Indebtedness, may be invalid or void for any reason whatsoever, or may be avoided or set aside by any creditor or representative of creditors, including, without limitation a receiver or a trustee in bankruptcy; and/or
   
   
5. by reason of any deterioration, waste or loss by fire, theft or otherwise, of any of the collateral, or the decline in value thereof.
   
   

10. The books and records of the Bank showing the account between it and Principal shall be admissible in any action or proceeding, and shall constitute prima facie proof thereof.
    
    
11. The Undersigned expressly agrees that its obligations and liabilities hereunder shall in no way be released, lessened, or impaired by reason of the release of or unenforceability of any agreement or undertaking by any other guarantor or other party liable, whether primarily or secondarily, for the repayment of all or any part of the Indebtedness.
    
    
12. The Undersigned shall deliver to the Bank such statements as to the Undersigned's assets, liabilities, and net worth as may be requested by the Bank, in such form as shall be reasonably satisfactory to the Bank.
    
    
13. This Guaranty shall inure to the benefit of the Bank, and its successors and assigns, and shall continue to bind the Undersigned notwithstanding any merger, consolidation, or other change involving or affecting the Principal, it being the intent hereof that the Guaranty shall remain valid and effective as to the Indebtedness due from the Principal and its successors.
    
    
14. No modification or waiver of any provision of this Guaranty and no consent by the Bank to any departure therefrom by the Undersigned shall be effective unless such modification or waiver shall be in writing and signed by a duly authorized officer of the Bank, and the same shall then be effective only for the period and on the conditions and for the specific reasons and purposes specified in such writing. No notice to or demand upon the Undersigned in any case shall entitle the Undersigned to any other or further notice or demand in similar or other circumstances.
    
    
15. In the event that any provision hereof shall be deemed to be invalid or unenforceable in any context, such invalidity or unenforceability shall affect only the particular provision in the particular context and shall not have any effect upon the remaining provision hereof or the application of the challenged provision in any other context.
    
    
16. Nothing in this agreement shall be deemed to modify or amend any of the agreements between the Principal and the Bank.
    
    
17. The Undersigned hereby agrees to pay all costs and expenses, including reasonable attorney's fees, arising out of or with respect to the validity, enforcement or preservation of the Indebtedness or any collateral of the Guaranty.
    
    
18. If there is more than one Undersigned, their liability hereunder shall be joint and several.
    
    
19. Whenever herein used and the context so permit, the singular shall be construed to include the plural and the masculine shall be construed to include both the feminine and neuter gender.
    
    
20. This Guaranty has been delivered in and shall be deemed to have been made in Connecticut, and shall be governed and interpreted, and the rights and liabilities of the parties hereto determined, in accordance with the laws of the State of Connecticut.
    
    
21. This Guaranty is expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the Indebtedness, shall the amount paid or agreed to be paid to Bank for the use or the forbearance of the Indebtedness exceed the maximum permissible under applicable law. As used herein, "applicable law" shall mean the law in effect as of the date hereof provided, however, that in the event there is a change in the law which results in a higher permissible rate of interest, then this Guaranty shall be governed by such new law as of its effective date. In this regard, it is expressly agreed that it is the intent of the Undersigned and Bank in the execution, delivery and acceptance of this Guaranty to contract in strict compliance with the laws of the State of Connecticut from time to time in effect. If, under or from any circumstances whatsoever, fulfillment of any provision hereof at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by applicable law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from circumstances whatsoever Bank should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not the payment of interest. This provision shall control every other provision of all agreements between the Undersigned and Bank.
    
    
22. THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT THE TRANSACTIONS OF WHICH THIS GUARANTY IS A PART ARE COMMERCIAL TRANSACTIONS AS THAT TERM IS DEFINED IN SECTION 52-278a OF THE CONNECTICUT GENERAL STATUTES, AS AMENDED, AND THE UNDERSIGNED HEREBY VOLUNTARILY AND KNOWINGLY WAIVES AND RELINQUISHES ANY AND ALL RIGHTS WHICH IT MAY HAVE PURSUANT TO ANY LAW OR CONSTITUTIONAL PROVISION, INCLUDING WITHOUT LIMITATION CHAPTER 903(a) OF THE CONNECTICUT GENERAL STATUTES, AS AMENDED, TO ANY NOTICE OR HEARING PRIOR TO ANY ATTEMPT BY THE BANK TO OBTAIN A PREJUDGMENT REMEDY AGAINST THE UNDERSIGNED IN CONNECTION WITH SUCH TRANSACTIONS.
    
    
23. THE UNDERSIGNED HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN CONNECTICUT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON THE UNDERSIGNED, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE UNDERSIGNED AT THE ADDRESS STATED BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. THE UNDERSIGNED WAIVES TRIAL BY JURY AND WAIVES ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
    
    

    IN WITNESS WHEREOF, the Undersigned have caused these presents to be executed as of the day and year above written.

                                                                                                              SWISS ARMY BRANDS, INC.

                                                                                                              By—————————
                                                                                                                      Name
                                                                                                                      Title

EX-10

WAIVER OF NOTICE OF EXERCISE OF PREJUDGMENT
REMEDY AND WAIVER OF JURY TRIAL

        WAIVER made this 25th day of June, 2002, by and among SWISS ARMY BRANDS, INC. (the "Borrower") and SWISS ARMY BRAND, LTD., SWISS ARMY BRANDS (SUISSE) S.A., EXCELSIOR ADVERTISING, INC., BEAR CUTLERY, INC. ("Bear"), SWISS ARMY BRANDS CH, INC. ("SWABCHI") (collectively, the "Guarantors") and SWISS ARMY RETAIL, INC ("Retail") in favor of FLEET NATIONAL BANK (the "Bank").

W I T N E S S E T H:

        WHEREAS, the Borrower and the Guarantors have entered into Temporary Modification to 2001 (Second) Amended and Restated Commercial Loan Agreement dated as of even date herewith (the "Temporary Modification"); and

        WHEREAS, Retail has entered into that Agreement of Guaranty and Suretyship dated as of even date herewith (the "Retail Guaranty")

        NOW THEREFORE, for a valuable consideration received by Borrower and the Guarantors, the receipt and sufficiency of which are hereby acknowledged, the Borrower and each of the Guarantors each:

1. ACKNOWLEDGE AND AGREE THAT THE TRANSACTION OF WHICH THE TEMPORARY MODIFICATION AND THE RETAIL GUARANTY ARE PART, ARE COMMERCIAL TRANSACTIONS AS THAT TERM IS DEFINED IN SECTION 52-278a OF THE CONNECTICUT GENERAL STATUTES, AS AMENDED, AND THE BORROWER, THE GUARANTORS AND RETAIL HEREBY VOLUNTARILY AND KNOWINGLY WAIVE AND RELINQUISH (A) ANY AND ALL RIGHTS WHICH THEY MAY HAVE PURSUANT TO ANY LAW OR CONSTITUTIONAL PROVISION, INCLUDING WITHOUT LIMITATION CHAPTER 903(a) OF THE CONNECTICUT GENERAL STATUTES, AS AMENDED, TO ANY NOTICE OR HEARING PRIOR TO ANY ATTEMPT BY THE BANK TO OBTAIN A PREJUDGMENT REMEDY AGAINST THE BORROWER AND/OR ANY OF THE GUARANTORS IN CONNECTION WITH SUCH TRANSACTIONS, AND (B) ALL RIGHTS UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY LAW, TO REQUEST THAT THE BANK POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT THE BORROWER AND/OR ANY OF THE GUARANTORS AND/OR RETAIL OR ANY OTHER PERSON OR ENTITY LIABLE IN CONNECTION WITH THIS TRANSACTION AGAINST DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY THE BANK, AND THE BORROWER, THE GUARANTORS AND RETAIL EACH HEREBY CONSENT TO THE ISSUANCE OF ANY SUCH PREJUDGMENT REMEDY WITHOUT SUCH A BOND.
   
   
   
   
   
   
   
   
   
   
   
2. CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN CONNECTICUT. THE BORROWER, THE GUARANTORS AND RETAIL WAIVE TRIAL BY JURY AND WAIVE ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
   
   

   Agreed to as of the date first above written.

                                                                                                              BORROWER:

                                                                                                              SWISS ARMY BRANDS, INC.

                                                                                                              By—————————
                                                                                                                      Name
                                                                                                                      Title

GUARANTORS AND RETAIL:

SWISS ARMY BRAND, LTD.                                                EXCELSIOR ADVERTISING, INC.

By————————————                                                By—————————
        Name                                                                                              Name
        Title                                                                                                 Title

SWISS ARMY BRANDS (SUISSE) S.A.                                SWISS ARMY BRANDS CH, INC.

By————————————                                                By—————————
        Name                                                                                              Name
        Title                                                                                                 Title

BEAR CUTLERY, INC.                                                          SWISS ARMY RETAIL, INC.

By————————————                                                By—————————
        Name                                                                                              Name
        Title                                                                                                 Title

ACCEPTED:
FLEET NATIONAL BANK

By————————————
            Kevin E. Burke
            Vice President

EX-99

SWISS ARMY BRANDS, INC.

CERTIFICATION

In connection with the periodic report of Swiss Army Brands, Inc. (the "Company") on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission (the "Report"), I, Peter W. Gilson, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission.

Date: August 14, 2002
                                                                                                                         By /s/ Peter W. Gilson
                                                                                                                         Peter W. Gilson
                                                                                                                         Chief Executive Officer

Notes to Clients:

1. Section 906 of the Sarbanes-Oxley Act references only that the periodic report must be accompanied by the above certification. We recommend that if the periodic report is transmitted electronically, the certifications be transmitted electronically via EDGAR in a separate file tagged as correspondence immediately following the transmission of the report, but not filed as part of the report. If the periodic report is filed in paper, the certifications should be transmitted at the same time in paper.
   
   
2. Certification is only required for periodic reports that contain financial statements.
   
   
3. It is unclear whether the Sarbanes-Oxley Act requires separate certifications by the chief executive officer and the chief financial officer of the issuer, or whether both officers can provide a joint certification. Until further guidance is provided, we recommend that two separate certifications be prepared.
   
   

EX-99

SWISS ARMY BRANDS, INC.

CERTIFICATION

In connection with the periodic report of Swiss Army Brands, Inc. (the "Company") on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission (the "Report"), I, Thomas M. Lupinski, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission.

Date: August 14, 2002
                                                                                                                         By /s/ Thomas M. Lupinski
                                                                                                                         Thomas M. Lupinski
                                                                                                                         Chief Financial Officer

Notes to Clients:

1. Section 906 of the Sarbanes-Oxley Act references only that the periodic report must be accompanied by the above certification. We recommend that if the periodic report is transmitted electronically, the certifications be transmitted electronically via EDGAR in a separate file tagged as correspondence immediately following the transmission of the report, but not filed as part of the report. If the periodic report is filed in paper, the certifications should be transmitted at the same time in paper.
   
   
2. Certification is only required for periodic reports that contain financial statements.
   
   
3. It is unclear whether the Sarbanes-Oxley Act requires separate certifications by the chief executive officer and the chief financial officer of the issuer, or whether both officers can provide a joint certification. Until further guidance is provided, we recommend that two separate certifications be prepared.