SVI HOLDINGS, INC.
DESCRIPTION OF AGREEMENT BETWEEN SOFTLINE LIMITED AND
SVI HOLDINGS, INC. REGARDING SALE OF TRIPLE-S COMPUTERS (PTY) LIMITED
INTRODUCTION
Softline Limited ("Softline"), the majority shareholder of SVI Holdings, Inc.
("SVI"), entered into an Acquisition Agreement as of April 1, 1998 ("Acquisition
Agreement") to acquire Triple-S Computers (Pty) Limited ("Triple-S") of Cape
Town, South Africa. Pursuant to the terms of the Acquisition Agreement, Softline
was permitted to designate a nominee as the purchaser of Triple-S, and through
an Assignment and Assumption of Acquisition Agreement ("Assumption Agreement")
dated effective April 1, 1998, Softline designated a wholly-owned subsidiary of
SVI to serve as the purchaser under the Acquisition Agreement. SVI in turn
agreed to reimburse Softline for all of its costs associated with the
acquisition of Triple-S.
The acquisition of Triple-S did not produce the desired results for SVI.
Softline however believed it could use Triple-S personnel in other
Softline-controlled business units in the Cape Town area. Softline therefore
agreed to purchase Triple-S from SVI effective October 1, 1999, and acquired day
to day control over the operations of Triple-S on that date.
SVI'S PURCHASE PRICE FOR TRIPLE-S
Softline agreed to purchase Triple-S from the former shareholders of Triple-S
(collectively, the "Seller") for R3,200,000, with R1,600,000 paid upon execution
of the purchase agreement and R1,600,000 withheld and dependent upon Triple-S
achieving certain post-acquisition profit targets. Additionally, Softline repaid
a bank line used by Triple-S in the sum of R1,000,000 plus accrued interest of
R219,000. Softline made all payments in connection with the acquisition of
Triple-S, subject to SVI's agreement to reimburse Softline for such payments.
On or about May 6, 1998, Softline paid R1,100,000 to the Seller in partial
satisfaction of the R1,600,000 earn-out obligation. On May 27, 1998, SVI and
Softline agreed that all amounts then paid by Softline for Triple-S would be
reimbursed in the form of SVI common stock valued at the closing price of such
stock on the OTC Bulletin Board on that date.
Pursuant to such agreement, the initial payment due to Softline was as follows:
Initial cash payment R1,600,000
Bank line + interest R1,219,000
Initial earn-out payment R1,100,000
Total = R3,919,000
Conversion R/US$ at 5/27/98 = 5.1545
US$ equivalent = $760,307
SVI share price at 5/27/98 = $4.5625
SVI shares issuable to Softline as reimbursement = 166,642 shares
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Certificates for 119,869 of these shares were issued in Softline's name on March
31, 1999. Certificates for the balance of 46,774 shares were not issued at that
time because of a miscommunication between Softline's and SVI's accounting
departments about payments made prior to the May 27, 1998 agreement. The failure
to issue certificates for those shares was discovered in March 2000 upon a
review of expenses in connection of the sale of Triple-S to Softline, and those
shares were credited against the shares surrendered by Softline to purchase
Triple-S.
EARN-OUT SETTLEMENT
A dispute subsequently arose between the Seller on the one hand and SVI and
Softline on the other hand concerning the balance due on the earn-out. This
dispute was settled during the quarter ended June 30, 1999, through payment by
Softline of R700,000 (or $113,436) to the Seller.
On March 29, 2000, Softline exercised outstanding options to purchase 56,718 SVI
shares at $2.00 per share. The exercise price of $113,436 was applied against
SVI's obligation to reimburse Softline for the settlement with the Seller.
SALE OF TRIPLE-S TO SOFTLINE
SVI and Softline agreed during the quarter ended September 30, 1999 that
Triple-S would be sold to Softline effective October 1, 1999, for a purchase
price equal to the historical book basis of SVI's investment in Triple-S. The
purchase price was to be paid by transfer from Softline to SVI of SVI shares
valued at the October 1, 1999 closing price reported on the American Stock
Exchange for such shares.
The historical book basis of SVI's investment was as follows:
Initial purchase price $ 310,408
Repayment of bank line 236,493
First earn-out payment 213,406
Settlement of earn-out 113,436
Accumulated net loss for 4/1/98 through 9/30/99
(unaudited) (208,698)
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Net book value at 10/01/99 $ 665,045
Closing price of SVI shares at 10/01/99 $ 8.50
Total SVI shares to be transferred by Softline 78,241 shares
The 78,241 shares (less the 46,774 previously unissued shares credited to
Softline) were surrendered by Softline on March 29, 2000 following a final
review by SVI of all aspects of the Triple-S acquisition and disposition.
