<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 3, 1999
--------------------
SVI Holdings, Inc.
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada
- ------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-23049 84-1131608
- ------------------------ -------------------------------
(Commission File Number) IRS Employer Identification No.)
7979 Ivanhoe Avenue, Suite 500, La Jolla, California 92037
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(858) 551-2365
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- ------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The Registrant filed a Form 8-K on June 18, 1999 concerning an acquisition of
Island Pacific Systems Corporation ("Island Pacific"). All capitalized terms in
this Form 8-K/A have the same meanings as set forth in the previously filed Form
8-K. Subsequent to the filing of the Form 8-K, Island Pacific entered into a
three year employment agreement with Philip J. Friesen, a Selling Shareholder,
which is in addition to those employment agreements already entered into with
Mark T. Wulff and Todd T. Hammett. Mr. Friesen will be paid a salary of $110,000
per year during the term of the agreement. The agreement may be terminated at
will by either party upon six months' prior written notice, and Island Pacific
can terminate the agreement for cause. Mr. Friesen also entered into an
agreement with SVI and Island Pacific not to compete with Island Pacific's
business in the United States during the term of the employment agreement and
for a period of three years after the termination of employment.
This filing on Form 8-K/A also includes the required historical financial
information of Island Pacific pursuant to Item 7(a) and the required pro forma
financial information of the Registrant pursuant to Item 7(b) of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
F-1 Unaudited Balance Sheet as of March 31, 1999
F-2 Unaudited Income Statement for the quarter Ended March 31,
1999
F-3 Report of Independent Certified Accountants
F-4 Balance Sheets as of December 31, 1998 and 1997
F-5 Statement of Operations and Retained Earnings for the
fiscal years ended December 31, 1998 and 1997
F-6 Statement of Cash Flows for the Years Ended December 31,
1998 and 1997
F-7 Notes to Financial Statements
(b) Pro Forma Financial Information
F-12 Introductory Notes
F-13 Pro Forma Consolidated Balance Sheet as of March 31, 1999
F-15 Pro Forma Consolidated Statement of Operations for the
fiscal year ended March 31, 1999
(c) Exhibits
Exhibit
NUMBER DESCRIPTION
------ -----------
2.5 Employment Agreement of Philip J. Friesen
Exhibits 2.1 - 2.4, 10.1 - 10.7 and 99.1 are incorporated by
reference from the Registrant's Form 8-K filed on June 18,
1999.
<PAGE>
SIGNATURE
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 hereto duly authorized.
Date: August 16, 1999
SVI Holdings, Inc.
(Registrant)
By: /s/ David L. Reese
---------------------------------------
David L. Reese, Chief Financial Officer
<PAGE>
Island Pacific Systems Corporation
Balance Sheet
As of March 31, 1999
(Unaudited)
Assets
Current assets:
Cash in banks $ 1,647,025
Accounts receivable 2,864,116
--------------
Total current assets 4,511,141
--------------
Fixed assets:
Equipment and fixtures 3,423,412
Less: accumulated depreciation (1,772,344)
--------------
1,651,068
--------------
Other assets
Prepaid rent 48,876
Other prepaid expenses 202,765
Refundable deposits 44,855
--------------
296,496
--------------
Total Assets $ 6,458,705
==============
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $ 53,493
Accrued vacation pay 329,292
Accrued payroll 994,613
Accrued commissions & license fees 790,738
Deferred rent - FASB 13 104,083
Accrued taxes 87,040
Accrued pension obligations 27,241
Accrued SVI consulting fees 300,000
Refundable customer deposits 1,003,822
--------------
Total current liabilities 3,690,322
--------------
Stockholder's equity:
Capital stock 800
Current earnings 38,202
Retained earnings 2,729,381
--------------
Total stockholder's equity 2,768,383
--------------
Total Liabilities and Stockholder's Equity $ 6,458,705
==============
F-1
<PAGE>
Island Pacific Systems Corporation
Income Statement
For Three Months Ended March 31, 1999
(Unaudited)
Product Revenue and Sales
Direct domestic product sales $ 130,044
Direct offshore product sales 333,435
System upgrade income 874,652
Education and consulting fees 1,719,203
Program modification income 104,365
System support fees 955,876
Other income 6,452
--------------
4,124,027
--------------
Cost of sales
Concessions and allowances 50,543
3rd party software license fees 26,750
--------------
77,293
--------------
Gross profit 4,046,734
--------------
General and administrative expenses
Advertising 39,817
Promotion and trade shows 65,965
Computer supplies 21,112
Depreciation 76,940
Dues and subscriptions 1,027
Insurance 29,221
Legal and accounting services 73,128
Maintenance and repairs 33,344
Miscellaneous 481,581
Office supplies 40,669
Postage and shipping 14,140
Facilities rent 237,905
Programmer salaries 927,103
System support/QA salaries 259,695
Marketing salaries 182,384
Documentation salaries 54,710
Education salaries 949,300
Administrative salaries 210,827
Employee recruitment fees 5,534
Employee welfare/401(k) 20,945
Payroll and property taxes 213,305
Telephone and telecommunications 57,186
Travel expenses 12,694
--------------
Total operating expenses 4,008,532
--------------
Net income $ 38,202
==============
F-2
<PAGE>
KPMG
Center Tower
650 Town Center Drive
Costa Mesa, CA 92626
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Island Pacific Systems Corporation
We have audited the accompanying balance sheets of Island Pacific Systems
Corporation as of December 31, 1998 and 1997 and the related statements of
operations and retained earnings and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Island Pacific Systems
Corporation as of December 31, 1998 and 1997 and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
KPMG LLP
March 16, 1999
F-3
<PAGE>
<TABLE>
ISLAND PACIFIC SYSTEMS CORPORATION
Balance Sheets
December 31, 1998 and 1997
<CAPTION>
ASSETS (NOTE 6)
1998 1997
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,165,800 $ 578,748
Accounts receivable, net of allowance for doubtful account of $45,000
and $18,393 at December 31, 1998 and 1997 1,299,729 1,176,556
Unbilled accounts receivable 806,947 194,597
Notes receivable 30,000 57,000
Prepaid expenses and other assets 249,067 126,802
-------------- --------------
Total current assets 3,551,543 2,133,703
Property and equipment, net (note 3) 847,184 805,327
Long-term real estate investment, net (note 4) 855,958 888,758
Other assets 44,855 43,355
-------------- --------------
$ 5,299,540 $ 3,871,143
============== ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Borrowings on line of credit, current (note 6) $ 466,715 $ -
Accounts payable and accrued liabilities (notes 5 and 8) 1,904,336 1,689,970
Deferred revenue 78,100 701,320
Customer deposits 20,980 -
-------------- --------------
Total current liabilities 2,470,131 2,391,290
-------------- --------------
Long-term borrowings on line of credit (note 6) - 661,947
Deferred rent 99,228 69,413
-------------- --------------
2,569,359 3,122,650
-------------- --------------
Shareholder's equity (note 9):
Common stock, no par value. Authorized 10,000 shares; 800 800
issued and outstanding 800 shares
Retained earnings 2,729,381 747,693
-------------- --------------
Total shareholder's equity 2,730,181 748,493
Commitments (note 7)
-------------- --------------
$ 5,299,540 $ 3,871,143
============== ==============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
<TABLE>
ISLAND PACIFIC SYSTEMS CORPORATION
Statements of Operations and Retained Earnings
Years ended December 31, 1998 and 1997
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Program product sales $ 13,144,448 $ 7,600,694
System support sales 3,592,681 2,680,294
-------------- --------------
Total sales 16,737,129 10,280,988
Cost of sales (note 5) 4,898,988 2,344,283
-------------- --------------
Gross profit 11,838,141 7,936,705
Selling general and administrative expenses 5,555,340 5,174,008
Research and development expenses 4,270,814 3,399,597
Other income (46,755) (21,065)
-------------- --------------
Income (loss) before provision for state income taxes 2,058,742 (615,835)
Provision for income taxes 77,054 41,275
-------------- --------------
Net income (loss) 1,981,688 (657,110)
Retained earnings at beginning of year 747,693 1,404,803
-------------- --------------
Retained earnings at end of year $ 2,729,381 $ 747,693
============== ==============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
<TABLE>
ISLAND PACIFIC SYSTEMS CORPORATION
Statements of Cash Flows
Years ended December 31, 1998 and 1997
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Cash Flows from operating activities:
Net Income (loss) $ 1,981,688 $ (657,110)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Increase (decrease) in allowance for doubtful account 26,607 (184,536)
Depreciation and amortization 355,392 365,190
Loss on disposal of equipment and fixtures -- 5,698
Change in assets and liabilities:
Accounts receivable (762,130) (563,090)
Prepaid expenses and other assets (123,765) 23,544
Accounts payable and accrued liabilities 214,366 674,366
Customer deposits 20,980 --
Deferred rent 29,815 27,765
Deferred revenue (623,220) 701,320
-------------- --------------
Net cash provided by operating activities 1,119,733 393,147
-------------- --------------
Cash flows from investing activities:
Purchase of equipment and fixtures (364,449) (145,980)
Purchase of improvements to investment in long-term
real estate -- (2,550)
-------------- --------------
Net cash used in investing activities (364,449) (148,530)
Cash flows from financing activities:
Payments on line of credit (195,232) (3,284)
Receipts on Note 27,000 --
-------------- --------------
Net cash used in financing activities (168,232) (3,284)
-------------- --------------
Net increase in cash and cash equivalents 587,052 241,333
Cash and cash equivalents at beginning of year 578,748 337,415
-------------- --------------
Cash and cash equivalents at end of year $ 1,165,800 $ 578,748
============== ==============
Supplemental disclosure of cash flow information-cash paid during $ 77,054 $ 41,275
the year for income taxes ============== ==============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
ISLAND PACIFIC SYSTEMS CORPORATION
Notes to Financial Statements
December 31, 1998 and 1997
(1) COMPANY DESCRIPTION
Island Pacific Systems Corporation ( the Company), a California
corporation, is wholly owned by Paul Mickelsen (the President). The
Company develops and designs software for the retail industry. The
Company's primary source of revenue is from sales and licensing of
computer software. The Company grants credit to customers throughout
the United States and Europe.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) REVENUE RECOGNITION
Effective January 1, 1998, the Company adopted Statement of
Position (SOP) 97-2, "Software Revenue Recognition," which
supersedes SOP 91-1. SOP 97-2 generally requires revenue
earned on software arrangements involving multiple elements
(i.e., software products, upgrades/enhancements, postcontract
customer support, installation, training, etc.) to be
allocated to each element based on the relative fair values of
the elements. The fair value of an element must be based on
evidence which is specific to the vendor. The revenue
allocated to software products (including specified
upgrades/enhancements) generally is recognized upon delivery
of the products. The revenue allocated to post contract
customer support generally is recognized ratably over the term
of the support and revenue allocated to service elements (such
as training and installation) generally is recognized as the
services are performed. If a vendor does not have evidence of
the fair value for all elements in a multiple-element
arrangement, all revenue from the arrangement is deferred
until such evidence exists or until all elements are
delivered. The adoption of SOP 97-2 did not have a material
impact on the Company's results of operations.
Included in accounts receivable at December 31, 1998 and 1997
is $806,947 and $194,597, respectively, of unbilled accounts
receivable.
(b) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated
depreciation and are being depreciated using accelerated
methods over their estimated useful lives of five to seven
years. Leasehold improvements are amortized on an accelerated
basis over the shorter of the lease term or estimated useful
lives of the related improvements.
Long-lived assets and certain identifiable intangibles are
reviewed whenever events or changes in circumstances indicate
the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net
cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
F-7
<PAGE>
ISLAND PACIFIC SYSTEMS CORPORATION
Notes to Financial Statements
December 31, 1998 and 1997
(c) CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of trade
accounts receivable. The Company controls credit risk through
credit approvals and monitoring procedures. Credit losses have
historically been minimal.
(d) INCOME TAXES
The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109 (SFAS No. 109),
"Accounting for Income Taxes." SFAS No. 109 requires use of
the asset and liability method of accounting for income taxes.
Under the asset and liability method of SFAS No. 109, deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and
liabilities are measured using a California state income tax
rate of 1.5% applied to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. At December 31, 1998 and 1997 no deferred tax assets
or liabilities have been recorded in the financial statements
as they were insignificant.
The shareholder of the Company has elected S Corporation
status under the Internal Revenue Code and the tax laws of the
state of California. S Corporation income is taxed directly to
the shareholder for Federal income tax purposes. There can be
no assurance that the Company and its shareholder will receive
the benefits of being taxed as an S Corporation.
The provision for income taxes at December 31, 1998 and 1997
represents the statutory state income tax rate imposed on S
Corporations of $800. In addition, the provision includes
foreign income taxes of $76,254 and $40,475, respectively, for
the years ended December 31, 1998 and 1997.
(e) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and
liabilities to prepare these financial statements in
conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(f) CASH EQUIVALENTS
Cash equivalents are highly liquid investments readily
convertible into known amounts of cash and having original
maturities of three months or less.
F-8
<PAGE>
ISLAND PACIFIC SYSTEMS CORPORATION
Notes to Financial Statements
December 31, 1998 and 1997
(g) STOCK OPTIONS
The Company accounts for stock options under Statement of
Financial Accounting Standards No. 123 (SFAS No. 123),
"Accounting for Stock-Based Compensation." This statement
encourages but does not require companies to recognize as
expense over the vesting period the fair value of all
stock-based awards on the date of grant. SFAS No. 123 allows
entities to continue to apply the provision of APB Opinion No.
25, "Accounting for Stock Issued to Employees," and related
interpretations, and provide pro forma net income disclosures
for employee stock option grants as if the fair-value- based
method defined in SFAS No. 123 has been applied. The Company
has elected to continue to apply the provisions of APB Opinion
No. 25. Accordingly, no compensation cost has been recognized
for its stock option plan as the exercise price approximates
market price. No pro forma net income information has been
disclosed as it is not significantly different from reported
net income (loss).
(3) PROPERTY AND EQUIPMENT
The components of property and equipment, at cost, are as follows:
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
<S> <C> <C>
Equipment $ 2,074,594 $ 1,837,834
Furniture and fixtures 252,868 205,134
Leasehold improvements 215,125 135,170
---------------- ----------------
2,542,587 2,178,138
Less accumulated depreciation
and amortization (1,695,403) (1,372,811)
---------------- ----------------
$ 847,184 $ 805,327
================ ================
</TABLE>
(4) LONG-TERM REAL ESTATE INVESTMENT
The Company owns a residence in the United Kingdom to accommodate
employees from the United States who travel to the United Kingdom to
work with European customers. The residence has been recorded at the
original purchase price plus improvements and is being depreciated over
30 years using the straight-line method. Accumulated depreciation as of
December 31, 1998 and 1997 was $128,053 and $95,253, respectively.
F-9
<PAGE>
ISLAND PACIFIC SYSTEMS CORPORATION
Notes to Financial Statements
December 31, 1998 and 1997
(5) RELATED PARTY TRANSACTIONS
The Company has a licensing agreement with its President, granting the
Company the right to use certain copyrights belonging to the President.
This agreement was amended on January 1, 1995. Licensing payments
thereunder are calculated on the gross sales prices of all software
products which are based on these copyrights. Payments are calculated
based on the following schedule as applied to 40% of applicable
software sales.
15% of the first $400,000 in gross sales
25% of the next $100,000 in gross sales
30% of the next $100,000 in gross sales
35% of the amount over $600,000 in gross sales
During 1998 and 1997, the Company's expense under this license
agreement was $1,198,315 and $628,383, respectively, and is included in
cost of sales in the accompanying financial statements. At December 31,
1998 and 1997, the Company had a liability of $930,381 and $941,515,
respectively, related to this obligation which is included in accounts
payable and accrued liabilities in the accompanying financial
statements.
(6) LINE OF CREDIT
The Company has a line of credit with a bank in the amount of
$1,000,000. The line bears interest at 2.9% over the 30-day commercial
paper rate (8.2% at December 31, 1998). The line matures on April 30,
1999 and is secured by the assets of the Company.
(7) COMMITMENTS
The Company leases its domestic and foreign office space and certain
equipment under noncancellable operating leases. Future obligations are
as follows:
Year ending December 31:
1999 $ 499,976
2000 522,131
2001 549,896
2002 549,896
2003 532,903
Thereafter 761,217
-------------
$ 3,416,019
=============
During 1998 and 1997, rental expense approximated $576,000 and
$426,000, respectively. The accompanying statements of earnings reflect
rent expense on a straight-line basis over the term of the leases.
Deferred rental obligations of $99,228 represent the pro rata payments
over the remaining lease term for leases which have contractual future
rent increases.
F-10
<PAGE>
ISLAND PACIFIC SYSTEMS CORPORATION
Notes to Financial Statements
December 31, 1998 and 1997
(8) EMPLOYEE BENEFIT PLAN
The Company has a 401(k) plan to provide retirement benefits to
eligible employees. The Company matches employee contributions up to 2%
of the employee's salary. Contributions of $82,764 and $70,234 have
been incurred by the Company for the years ended December 31, 1998 and
1997, respectively, and contributions of $10,365 and $8,396 are
included in accounts payable and accrued liabilities at December 31,
1998 and 1997, respectively.
(9) STOCK OPTIONS
During 1995, the Company granted stock options to three employees.
Under the stock option agreements, the employees are entitled to
purchase the number of shares necessary to give each employee a
percentage ownership interest ranging from 1% to 2% of the Company at a
purchase price equal to the net book value per share at the time of
exercise. No compensation expense associated with these stock options
has been recognized as management believes the Company's net book value
approximates market value at the date of grant. The options are
exercisable only in the event of an agreement effecting the transfer of
a 90% or greater interest in the Company to a third party and expire 30
days after notice of transfer to the employees. At December 31, 1998
and 1997, none of these options had been exercised or were exercisable.
F-11
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
SVI Holdings, Inc. and Subsidiaries
Introductory Notes
The accompanying unaudited pro forma consolidated balance sheet
includes the balance sheet of SVI Holdings, Inc. and its subsidiaries
(collectively, the "Company") as of March 31, 1999, which assumes the
acquisition of Island Pacific Systems Corporation ("Island Pacific") occurred on
April 1, 1998. The acquisition of Island Pacific actually occurred on June 3,
1999. The pro forma consolidated balance sheet uses the purchase method of
accounting and is based on the assumptions set forth in the notes to the
statement.
The accompanying unaudited pro forma consolidated statement of
operations for the twelve months ended March 31, 1999 combines the consolidated
operations of the Company with (i) the operations of Applied Retail Solutions,
Inc., the stock of which was acquired by a wholly-owned subsidiary of the
Company on July 1, 1998; and (ii) excludes the operations of IBIS Systems Pty.
Limited ("IBIS") which was sold by the Company on January 1, 1999, as if such
transactions were completed on April 1, 1998. The pro forma consolidated
statement of operations uses the purchase method of accounting and is based on
the assumptions set forth in the notes to the statement.
These statements are not necessarily indicative of future operations or
the actual results which would have occurred had the various transactions been
consummated on the dates indicated.
The unaudited pro forma consolidated financial statements should be
read in conjunction with the historical financial statements of the Company and
the notes to such statements included in the Company's Form 10-KSB for the
fiscal year ended March 31, 1999, as well as the historical financial statements
of Island Pacific included in this Form 8-K/A.
F-12
<PAGE>
<TABLE>
SVI Holdings, Inc. and Subsidiaries
Pro Forma Consolidated Balance Sheet
As of March 31, 1999
(Unaudited)
<CAPTION>
SVI Holdings Island Pro forma Pro forma
and Subsidiaries Pacific Adjustments Notes Consolidated
--------------------------------------------- -------------\
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash $ 13,006,153 $ 1,647,025 $ (14,040,227) (A,C,G,H) $ 612,951
Accounts receivable, net 3,310,008 2,864,116 6,174,124
Other receivables 2,994,836 - 2,994,836
Note receivable 13,608,000 - (13,608,000) (E,G) -
Inventories 238,314 - 238,314
Prepaid expenses and other current assets 183,760 296,497 480,257
--------------------------------------------- -------------
Total current assets 33,341,071 4,807,638 (27,648,227) 10,500,482
Furniture and equipment, net 734,386 795,111 1,529,497
Capitalized software, net 14,053,186 - 19,800,000 (A,B) 33,853,186
Goodwill on acquisition of subsidiaries, net 4,534,570 - 9,715,477 (A,B) 14,250,047
Not-to-compete agreements, net 1,677,112 - 1,300,000 (A,B) 2,977,112
Deferred tax asset 762,910 762,910
Other assets 175,649 - 175,649
--------------------------------------------- -------------
Total assets $ 55,278,884 $ 5,602,749 $ 3,167,250 $ 64,048,883
============================================= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 345,275 53,496 398,771
Accrued expenses 1,908,105 4,384,707 - 6,292,812
Line of credit 231,876 - - 231,876
Note payable to bank - - (A,H) -
Income taxes payable 2,576,151 87,040 (1,443,592) (F) 1,219,599
--------------------------------------------- -------------
Total current liabilities 5,061,407 4,525,243 (1,443,592) 8,143,058
Note payables - 1,750,000 (A,H) 1,750,000
Due to stockholder - 2,484,000 (A,E) 2,484,000
Long-term liabilities 2,000,000 2,000,000
Deferred tax liabilities 805,433 805,433
--------------------------------------------- -------------
Total liabilities 7,866,840 4,525,243 2,790,408 15,182,491
--------------------------------------------- -------------
Stockholders' equity
Preferred stock -
Common stock 2,987 800 (601) (A) 3,186
Additional paid in capital 39,435,921 3,988,335 (A) 43,424,256
Treasury Stock (951,404) (951,404)
Retained earnings 9,885,138 1,076,706 (1,076,706) (A) 9,885,138
Net income from pro forma adjustments (2,534,186) (2,534,186)
Cumulative translation adjustment (960,598) - - (960,598)
--------------------------------------------- -------------
47,412,044 1,077,506 376,842 48,866,392
--------------------------------------------- -------------
Total liabilities and stockholders' equity $ 55,278,884 $ 5,602,749 $ 3,167,250 $ 64,048,883
============================================= =============
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
Pro forma adjustments:
<S> <C> <C>
(A) Funding for acquisition of Island Pacific:
Cash on hand at March 31, 1999 10,515,794
Softline Limited exercised options to purchase 1,994,267 SVI shares: -
Common stock 199
Paid in capital 3,988,335
------------
3,988,534
Bank loan #1, due in six months 15,000,000
Bank loan #2, amortize over two years 3,500,000
Loan from a stockholder 2,300,000
-------------
Cash paid for acquisition of Island Pacific 35,304,328
=============
Assets acquired from acquisition of Island Pacific:
Capital stock 800
Retained earnings 1,076,706
Software 22,000,000
Non-compete covenants 2,000,000
Goodwill 10,226,822
-------------
Purchase price 35,304,328
=============
(B) Amortization of intangible assets acquired in connection with the acquisition of Island Pacific:
Software rights 2,200,000
Goodwill 511,345
Non-compete agreements 700,000
-------------
3,411,345
=============
(C) Cash paid for interest expense on loans for the Island Pacific acquisition
Bank loan #1, $15 million, due in six months 598,125
Bank loan #2, $3.5 million, amortize over two years 294,608
-------------
892,733
=============
(D) Accrual for interest due on stockholder's loan 184,000
=============
(E) Interest income on note receivable from buyers of IBIS Systems Ltd.
Note receivable @ 7.5%, due in six months 510,300
=============
(F) Income tax benefits:
Pro forma adjustments (3,608,981)
Effective tax rate 40%
-------------
Income tax benefits (1,443,592)
=============
(G) Assumed principal and interest due on note receivable are fully collec 14,118,300
=============
(H) Assumed principal amounts on Union Bank loans due within the first year are paid
Bank loan #1, due in six months (15,000,000)
Bank loan #2, amortize over two years (1,750,000)
-------------
(16,750,000)
=============
F-14
</TABLE>
<PAGE>
<TABLE>
SVI Holdings, Inc. and Subsidiaries
Pro Forma Consolidated Statement of Operations
For the Year Ended March 31, 1999
(Unaudited)
<CAPTION>
SVI Holdings IBIS Island Pro Forma Pro Forma
and Subsidiaries Disposition Pacific Adjustments Consolidated
-------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $ 17,486,670 $ - $ 16,152,608 $ 33,639,278
Cost of goods sold 5,347,376 - 4,507,783 9,855,159
-------------------------------------------------------------- -------------
Gross profit 12,139,294 - 11,644,825 - 23,784,119
Research and development expenses - 4,270,814 4,270,814
Selling, general and admin. expenses 9,997,805 - 6,860,805 3,042,548 (A,B) 19,901,158
------------------------------------------------------------- -------------
Income from operations 2,141,489 - 513,206 (3,042,548) (387,853)
Interest income 646,343 - 510,300 (D) 1,156,643
Interest expense (90,467) (1,076,733) (C) (1,167,200)
Other income 817,108 - 46,755 863,863
Foreign exchange gain (loss) (145,850) - - (145,850)
-------------------------------------------------------------- -------------
Income before income taxes 3,368,623 - 559,961 (3,608,981) 319,603
Income tax provision 1,670,966 - 47,177 (1,443,592) (E) 274,551
-------------------------------------------------------------- -------------
Income from continuing operations 1,697,657 - 512,784 (2,165,389) 45,052
-------------------------------------------------------------- -------------
Discontinued operations
Income from operations of IBIS 3,613,432 (3,613,432) -
Gain on disposal of IBIS 274,055 3,613,432 (368,797) (B) 3,518,690
-------------------------------------------------------------- -------------
Income from discontinued operations 3,887,487 - - (368,797) 3,518,690
-------------------------------------------------------------- -------------
Net income $ 5,585,144 $ - $ 512,784 $(2,534,186) $ 3,563,742
============================================================== =============
Basic earnings per share:
Continuing operations 0.06 0.00
Discontinued operations 0.14 0.12
--------------- -------------
Basic $ 0.20 $ 0.12
=============== =============
Diluted earnings per share:
Continuing operations 0.05 0.00
Discontinued operations 0.12 0.10
--------------- -------------
Diluted $ 0.17 $ 0.10
=============== =============
Shares outstanding:
Basic 28,599,597 1,994,267 (F) 30,593,864
Diluted 33,071,287 1,994,267 (F) 35,065,554
F-15
</TABLE>
<PAGE>
IBIS SYSTEMS LTD.
IBIS was sold effective January 1, 1999. These pro forma financial
statements, however, assumed IBIS was sold effective April 1, 1998 for the
same price.
PRO FORMA ADJUSTMENTS:
(A) Amortization of intangible assets acquired in connection with the
acquisition of Island Pacific:
Software rights 2,200,000
Goodwill 511,345
Non-compete agreements 700,000
-------------
3,411,345
=============
(B) Reverse transactions related to IBIS on the books of Sabica Ventures
(Parent):
-
Amortization of IBIS software (175,273)
Amortization of goodwill - IBIS (193,524)
------------
(368,797)
============
(C) Interest expense on loans for the Island Pacific acquisition
Bank loan $15 million, six months 598,125
Bank loan $3.5 million, two years 294,608
Stockholder's loan @8% 184,000
------------
1,076,733
============
(D) Interest income on note receivable from buyers of IBIS Systems Ltd.
Note receivable @ 7.5%, due in six months 510,300
============
(E) Income tax benefits:
Pro forma adjustments (3,608,981)
Effective tax rate 40%
------------
Income tax benefits (1,443,592)
============
(F) Softline Limited exercised options to purchase
SVI common stock 1,994,267 shares
============
F-16
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of June 3, 1999
(the "Effective Date") by and between Island Pacific Systems Corporation, a
California corporation (the "Company"), and Philip J. Friesen ("Executive"),
with reference to the following facts:
A. Executive is experienced in managing the business conducted by the
Company.
B. Island Pacific has been acquired by SVI Holdings, Inc., a Nevada
corporation ("SVI"), pursuant to the Stock Purchase Agreement dated as of June
1, 1999 among SVI, the Company, Paul Mickelsen, an individual, The Michelsen
Family Trust, Todd Hammett, an individual, Mark Wulff, an individual, Clayton
Harless, an individual, and Executive (the "Stock Purchase Agreement").
C. Under the Stock Purchase Agreement Executive sold to SVI, the
holding company of the Company, all of Executive's shares in the Company.
D. The Company desires to employ Executive to perform the duties and
responsibilities described herein on the terms and conditions hereinafter set
forth.
1. EMPLOYMENT. The Company hereby employs Executive and Executive
hereby accepts such employment upon the terms and conditions hereinafter set
forth.
2. DUTIES. Subject to the terms and provisions of this Agreement,
Executive hereby is employed by the Company as the V.P. Emerging Technologies of
the Company. Executive's duties shall consist of such duties as customarily are
associated with service as the V.P. Emerging Technologies of a corporate
business, and shall have full responsibility and authority, along with the
President, for managing the day-to-day operations of the Company and
implementing such policies as the Board of Directors of the Company may from
time to time promulgate. Executive shall report directly to the Chairman of the
Board of Directors of the Company or his designee.
3. SCOPE OF SERVICES. Executive shall devote substantially all of his
business time, attention, energies, skills, learning and efforts to the
Company's business.
4. TERM OF EMPLOYMENT AND VOLUNTARY TERMINATION. Subject to prior
termination of this Agreement as hereinafter provided, the term of this
Agreement shall commence on the Effective Date and shall continue for three
years thereafter, unless earlier terminated as provided in this Agreement.
5. COMPENSATION.
5.1. Executive's annual compensation ("Base Compensation")
under this Agreement prorated for any partial year, shall be $110,000 per year,
commencing June 1, 1999. The Base Compensation shall be payable semi-monthly in
arrears from the Effective Date in accordance with the ordinary payroll
procedures of the Company. Any increases in Base Compensation shall be in the
sole and absolute discretion of the Company.
1
<PAGE>
6. OTHER RIGHTS AND BENEFITS. Executive shall also be entitled to
receive all other rights and benefits, including health insurance, vacations,
sick pay and retirement plan participation, as are made available to other
senior executives of the Company and its affiliates.
7. TERMINATION. The employment of Executive may be terminated as
follows:
7.1. TERMINATION BY MUTUAL AGREEMENT. The Company and
Executive may mutually agree in writing to terminate Executive's employment.
7.2. TERMINATION FOR DEATH. Executive's employment shall
terminate immediately upon Executive's death.
7.3. TERMINATION UPON DISABILITY. Executive's employment shall
terminate if Executive should become totally and permanently disabled. For
purposes of this Agreement, Executive shall be considered "totally and
permanently disabled" if Executive is treated as permanently "disabled" under
any permanent disability insurance policy maintained by the Company and is
entitled to full benefits payable under such policy upon a total and permanent
disability. In the event any such policy is either not in force or the benefits
are not available under such policy, then "total and permanent disability" shall
mean the inability of Executive, as a result of substance abuse, any mental,
nervous or psychiatric disorder, or physical condition, injury or illness to
perform substantially all of his duties on a full-time basis currently for a
period of six (6) consecutive months, as determined by a licensed physician
selected by the Board of Directors of the Company.
7.4. TERMINATION BY THE COMPANY OR EXECUTIVE. Executive or the
Company may terminate this Agreement at will, for any reason, or for no reason
at all, upon six (6) months prior written notice.
7.5. TERMINATION BY EMPLOYEE FOR "CAUSE". The Company may
terminate this Agreement for "Cause" upon three days written notice so long as
the Company has given Executive written notice describing the Cause and
Executive has not cured such Cause within a reasonable time, but no less than
fourteen (14) days. For purposes of this Agreement, "Cause" shall mean the
existence or occurrence of any of the following:
7.5.1. Executive's conviction of a felony involving
the Company or moral turpitude.
7.5.2. Executive's commission of theft, embezzlement
or fraud.
7.5.3. Executive's willful violation of a reasonable
the Company policy previously made known to him or a reasonable directive of the
Board of Directors of the Company.
7.5.4. Executive's breach of his obligations set
forth in Sections 9, 10, 11 and 12 below.
7.5.5. Any neglect or breach of duty by Executive
under this Agreement, or any failure by Executive to perform under this
Agreement which remains a breach for fourteen days after receipt of written
notice describing such breach.
2
<PAGE>
7.5.6. If Executive breaches any material term of the
Stock Purchase Agreement and remains in breach for 14 days after receipt of
written notice describing such breach.
8. REPRESENTATIONS AND WARRANTIES. Executive hereby represents and
warrants that as of the date of execution of this Agreement: (i) this Agreement
will not cause or require Executive to breach any obligation to, or agreement or
confidence with, any other person; (ii) Executive is not representing, or
otherwise affiliated in any capacity with, any other lines of products,
manufacturers, vendors or customers of the Company; and (iii) Executive has not
been induced to enter into this Agreement by any promise or representation other
than as expressly set forth in this Agreement.
9. CONFIDENTIALITY. Executive hereby acknowledges that the Company has
made (or may make) available to Executive certain customer lists, product design
information, performance standards and other confidential and/or proprietary
information of the Company or licensed to the Company, including without
limitation trade secrets, copyrighted materials and/or financial information of
the Company (or any of its Affiliates, as defined in Section 11.5 below),
including without limitation, financial statements, reports and data
(collectively, the "Confidential Material"). Except as essential to Executive's
obligations under this Agreement, neither Executive nor any agent, employee,
officer, or independent contractor of or retained by Executive shall make any
disclosure of this Agreement, the terms of this Agreement, or any of the
Confidential Material. Except as essential to Executive's obligations under this
Agreement, neither employee nor any agent, employee, officer, or independent
contractor of or retained by Executive shall make any duplication or other copy
of any of the Confidential Material. Immediately upon request from the Company,
Executive shall return to the Company all Confidential Material. Executive shall
notify each person to whom any disclosure is made that such disclosure is made
in confidence, that the Confidential Material shall be kept in confidence by
such person, and that such person shall be bound by the provisions of this
Section. Nothing contained in this section 9 shall be construed as preventing
Executive from providing Confidential Material in compliance with a valid court
order issued by court of competent jurisdiction, providing Executive takes
reasonable steps to prevent dissemination of such Confidential Material.
10. PROPRIETARY INFORMATION. For purposes of this Agreement,
"Proprietary Information" shall mean any information, observation, data, written
material, record, document, computer program, software, firmware, invention,
discovery, improvement, development, tool, machine, apparatus, appliance,
design, promotional idea, customer list, practice, process, formula, method,
technique, trade secret, product and/or research related to the actual or
anticipated research, marketing strategies, pricing information, business
records, development, products, organization, business or finances of the
Company. Proprietary Information shall not include information in the public
domain as of execution of this Agreement except through any act or omission of
Employee. All right, title and interest of every kind and nature whatsoever in
and to the Proprietary Information made, discussed, developed, secured, obtained
or learned by Executive during the term of this Agreement, or the 60-day period
immediately following termination of this Agreement, shall be the sole and
exclusive property of the Company for any purposes or uses whatsoever, and shall
be disclosed promptly by Executive to the Company. The covenants set forth in
the preceding sentence shall apply regardless of whether any Proprietary
Information is made, discovered, developed, secured, obtained or learned (a)
solely or jointly with others, (b) during the usual hours of work or otherwise,
(c) at the request and upon the suggestion of the Company or otherwise, or (d)
with the Company's materials, tools, instruments or on the Company's premises or
otherwise. All Proprietary Information developed, created, invented, devised,
conceived or discovered by Executive that are subject to copyright protection
are explicitly considered by Executive and the Company to be works made for hire
3
<PAGE>
to the extent permitted by law. Executive hereby assigns to the Company all of
Executive's right, title and interest in and to the Proprietary Information.
Executive hereby forever fully releases and discharges the Company, any
Affiliates of the Company and their respective officers, directors and
employees, from and against any and all claims, demands, damages, liabilities,
costs and expenses of Executive arising out of, or relating to, any Proprietary
Information. Executive shall execute any documents and take any action the
Company may deem necessary or appropriate to effectuate the provisions of this
Agreement, including without limitation assisting the Company in obtaining
and/or maintaining patents, copyrights or similar rights to any Proprietary
Information assigned to the Company, if the Company, in its sole discretion,
requests such assistance. Executive shall comply with any reasonable rules
established from time to time by the Company for the protection of the
confidentiality of any Proprietary Information. Executive irrevocably appoints
the Chairman of the Company's Holding Company to act as Executive's agent and
attorney-in-fact to perform all acts necessary to obtain and/or maintain
patents, copyrights and similar rights to any Proprietary Information assigned
by Executive to the Company under this Agreement if (a) Executive refuses to
perform those acts, or (b) is unavailable, within the meaning of any applicable
laws. Executive acknowledges that the grant of the foregoing power of attorney
is coupled with an interest and shall survive the death or disability of
Executive. Executive shall promptly disclose to the Company, in confidence (a)
all Proprietary Information that Executive creates during the term of this
Agreement, and (b) all patent applications filed by Executive within one year
after termination of this Agreement. Any application for a patent, copyright
registration or similar right filed by Executive within one year after
termination of this Agreement shall be presumed to relate to Proprietary
Information created by Executive during the term of this Agreement, unless
Executive can prove otherwise. Nothing contained in this Agreement shall be
construed to preclude the Company from exercising all of its rights and
privileges as sole and exclusive owner of all of the Proprietary Information
owned by or assigned to the Company under this Agreement. The Company, in
exercising such rights and privileges with respect to any particular item of
Proprietary Information, may decide not to file any patent application or any
copyright registration on such Proprietary Information, may decide to maintain
such Proprietary Information as secret and confidential, or may decide to
abandon such Proprietary Information or dedicate it to the public. Executive
shall have no authority to exercise any rights or privileges with respect to the
Proprietary Information owned by or assigned to the Company under this
Agreement. This Agreement does not apply to any Proprietary Information that
qualifies fully under the provisions of California Labor Code Section 2870 or
any similar or successor statute.
11. COVENANT NOT TO COMPETE AND NONCOMPETITION. Executive acknowledges
that this Agreement is being entered in connection with the acquisition by the
Company of all of Executive's shares in the Company. To the extent permitted by
applicable law, during the period of time set forth in Section 11.5 below:
11.1. Executive shall not, directly or indirectly, engage or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, or control of, be employed by, associated
with, or in any manner connected with, or render services or advice to, any
business whose products or activities compete in whole or in part with the
products or business of the Company anywhere in the United States, which
business consists of the business that the Company conducts as of the date of
this Agreement ("the Company's Business"). This paragraph 11.1 shall not apply
if: (a) the Company terminates this Agreement without Cause or (b) the Company
transfers Executive out of Orange County, California and Executive terminates
this Agreement as a result of such transfer.
4
<PAGE>
11.2. Executive shall not undertake any employment or activity
competitive with the Company's Business, including without limitation the
inducement or solicitation of the Company's customers, if the duties or work of,
in connection with or related to such competitive employment or activity would
or might cause Executive to reveal or use any Confidential Material or
Proprietary Information. The restriction set forth in this Section 11 shall not
be limited to a particular geographical area.
11.3. Executive shall not, directly or indirectly, either for
himself or any other person, (i) induce or attempt to induce any employee of the
Company or any Affiliate (as defined below) to leave the employ of such the
Company, (ii) in any way interfere with the relationship between the Company or
any Affiliate and any employee of such the Company, (iii) employ, or otherwise
engage as an employee, independent contractor, or otherwise, any employee of the
Company or any Affiliate, or (iv) induce or attempt to induce any customer,
supplier, licensee, or business relation of the Company or any Affiliate to
cease doing business with such company, or in any way interfere with the
relationship between any customer, supplier, licensee, or business relation of
such the Company.
11.4. Executive shall not, directly or indirectly, either for
himself or any other person, solicit the business of any person known to
Executive to be a customer of the Company or any Affiliate, whether or not
Executive had business or personal contact with such person, unless Executive's
solicitation of such person is done in connection with a business that is not
competitive with that of the Company or any Affiliate.
11.5. The duration of the covenants set forth in this Section
11 shall be the entire term of Executive's employment with the Company plus a
period of three years after the termination of such employment. Executive agrees
that this covenant is reasonable with respect to its duration, geographical
area, and scope. Notwithstanding such restriction, Executive may purchase or
otherwise acquire up to (but not more than) one percent (1%) of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934.
In the event of a breach by Executive of any covenant set
forth in this Section 11, the term of such covenant will be extended by the
period of the duration of such breach, provided, however, that such extension
shall be limited to three years. In addition to the Company's right to damages
and any other rights it may have, to obtain injunctive or other equitable relief
to restrain any breach or threatened breach or otherwise to specifically enforce
the provisions of this Section, Executive agrees that money damages alone would
be inadequate to compensate the Company and would be an inadequate remedy for
such breach. If a court of competent jurisdiction holds that the obligations of
Executive pursuant to this Section 11 are unenforceable due to the duration,
geographical areas or scope of this covenant, then such duration, geographical
area or scope of this covenant shall be reduced to the least degree necessary to
render this covenant enforceable. For purposes of this Agreement, "Affiliate"
shall mean any partner, employee, director, shareholder, officer of the Company
or any person or entity controlled by, controlling, or under common control
with, directly or indirectly, the Company, and its successor in title and
interest.
5
<PAGE>
12. BUSINESS OPPORTUNITIES. During the term of this Agreement, if
Executive (or any agent, employee, officer or independent contractor of or
retained by Executive) becomes aware of, or develops, creates, invests, devises,
conceives or discovered, any project, investment, venture, business or other
opportunity (any of the preceding, an "Opportunity") that is similar to,
competitive with, related to or in the same field as the Company or any
Affiliate, or any project, investment, venture, or business of the Company or
any Affiliate, then Executive shall so notify the Company immediately in writing
of such Opportunity and shall use Executive's good-faith efforts to cause the
Company to have the opportunity to invest in, participate in or otherwise become
affiliated with such Opportunity.
13. SECTION HEADINGS. The section headings or captions in this
Agreement are for convenience of reference only and do not form a part hereof,
and do not in any way modify, interpret or construe the intent of the parties or
affect any of the provisions of this Agreement.
14. SURVIVAL. The obligations and rights imposed upon the parties
hereto by the provisions of this Agreement which relate to acts or events
subsequent to the termination of this Agreement shall survive the termination of
this Agreement and shall remain fully effective thereafter.
15. VENUE AND JURISDICTION. For purposes of venue and jurisdiction,
this Agreement shall be deemed made and to be performed in the City of San
Diego, California.
16. ARBITRATION.
16.1. Any claim, dispute or other controversy (a
"Controversy") relating to this Agreement shall be settled and resolved by
binding arbitration in San Diego County, California, before the American
Arbitration Association ("AAA"). The arbitration shall be conducted in
accordance with AAA's rules and procedures, except as expressly modified by this
Section. The Parties to this Agreement (the "Parties") shall be entitled to full
discovery regarding the Controversy as permitted by the California Code of Civil
Procedure. The arbitrator's decision on the Controversy shall be a final and
binding determination of the Controversy and shall be fully enforceable as an
arbitration award in any court having jurisdiction and venue over the Parties.
The arbitrator shall also award the prevailing Party any attorneys' fees and
expenses the prevailing Party incurs in connection with the arbitration, and the
other Party shall pay the arbitrator's fees and expenses. The arbitrator shall
determine who is the prevailing Party. Each Party submits to the exclusive
jurisdiction of the courts located in San Diego County, California, for purposes
of Section 16.2 below compelling arbitration or giving legal confirmation of any
arbitration award. Each Party also agrees to accept service of process for all
arbitration proceedings in accordance with AAA's rules.
16.2. The obligation to arbitrate shall not be binding upon
either party with respect to requests for temporary restraining orders,
preliminary injunctions or other procedures in a court of competent jurisdiction
to obtain interim relief when deemed necessary by such court to preserve the
status quo or prevent irreparable injury pending resolution by arbitration of
the actual dispute between the parties.
16.3. The provisions of this Section shall be construed as
independent of any other covenant or provision of this Agreement; provided that
if a court of competent jurisdiction determines that any such provisions are
unlawful in any way, such court shall modify or interpret such provisions to the
minimum extent necessary to have them comply with the law.
6
<PAGE>
16.4. This arbitration provision shall be deemed to be
self-executing and shall remain in full force and effect after expiration or
termination of this Agreement. In the event either party fails to appear at any
properly noticed arbitration proceeding, an award may be entered against such
party by default or otherwise notwithstanding said failure to appear.
17. SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable in any relevant
jurisdiction, then such illegal or unenforceable provision shall be modified by
the proper court, if possible, but only to the extent necessary to make such
provision enforceable, and such modified provision and all other provisions of
this Agreement shall be given effect separately from the provision or portion
thereof determined to be illegal or unenforceable and shall not be affected
thereby; provided, that any such modification shall apply only with respect to
the operation of this Agreement in the particular jurisdiction in which such
determination of illegality or unenforceability is made.
18. WAIVER. The failure of either party to enforce any provision of
this Agreement shall not be construed as a waiver of any such provision, nor
prevent such party thereafter from enforcing such provision or any other
provision of this Agreement. The rights granted both parties herein are
cumulative and the election of one shall not constitute a waiver of such party's
right to assert all other legal remedies available under the circumstances.
19. PARTIES IN INTEREST. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to this Agreement and the
successors, assigns and affiliates of the Company, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third person to any party to this Agreement, nor shall any provision give any
third person any right of action over or against any party to this Agreement.
20. ASSIGNMENT. The rights and obligations under this Agreement shall
be binding upon, and inure to the benefit of, the heirs, executors, successors
and assigns of Executive and the Company. Except as specifically provided in
this Section 20, neither the Company nor Executive may assign this Agreement or
delegate their respective responsibilities under this Agreement without the
consent of the other party hereto. Upon the sale, exchange or other transfer of
substantially all of the assets of the Company, the Company shall assign this
Agreement to the transferee of such assets. No assignment of this Agreement by
the Company shall relieve the Company of, and the Company shall remain obligated
to perform, its duties and obligations under this Agreement, including, without
limitation, payment of the annual salary set forth in Section 5, above.
21. ATTORNEYS' FEES. In the event of any suit, action or arbitration to
enforce any of the terms or provisions of this Agreement, the prevailing party
shall be entitled to its reasonable attorneys' fees and costs. The foregoing
entitlement shall also include attorneys' fees and costs of the prevailing party
on any appeal of a judgment and for any action to enforce a judgment.
22. MODIFICATION. This Agreement may be modified only by a contract in
writing executed by the party(ies) to this Agreement against whom enforcement of
such modification is sought.
23. PRIOR UNDERSTANDINGS. This Agreement contains the entire agreement
between the parties to this Agreement with respect to the subject matter of this
Agreement, is intended as a final expression of such parties' agreement with
respect to such terms as are included in this Agreement, is intended as a
complete and exclusive statement of the terms of such agreement, and supersedes
all negotiations, stipulations, understandings, agreements, representations and
warranties, if any, with respect to such subject matter, which precede or
accompany the execution of this Agreement.
7
<PAGE>
24. INTERPRETATION. Whenever the context so requires in this Agreement,
all words used in the singular shall be construed to have been used in the
plural (and vice versa), each gender shall be construed to include any other
genders, and the word "person" shall be construed to include a natural person, a
corporation, a firm, a partnership, a joint venture, a trust, an estate or any
other entity.
25. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
26. APPLICABLE LAW. This Agreement and the rights and obligations of
the parties hereunder shall be construed under, and governed by, the laws of the
State of California without giving effect to conflict of laws provisions.
27. DRAFTING AMBIGUITIES. Each party to this Agreement has reviewed and
revised this Agreement. Each party to this Agreement has had the opportunity to
have such party's legal counsel review and revise this Agreement. The rule of
construction that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or of any
amendments or exhibits to this Agreement.
28. CONSTRUCTION. Where used in this Agreement, the terms "include" or
"including" mean include or including, as applicable, without limitation.
THE COMPANY:
ISLAND PACIFIC SYSTEMS CORPORATION,
a California corporation
By: /s/ Barry Schechter
---------------------------------
EXECUTIVE:
/s/ Philip J. Friesen
------------------------------------
PHILIP J. FRIESEN
