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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities and Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SVI HOLDINGS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
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1) Amount Previously Paid:
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October 23, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
on Thursday, November 16, 2000 at 9 a.m., Pacific Daylight Time. The meeting
will be held at 12707 High Bluff Drive, Suite 335, San Diego, California 92130.
The matters to be voted upon at the meeting will be:
o The election of directors;
o The approval of a plan of merger by which the Company will
change its state of incorporation from Nevada to Delaware;
o A change in the corporate name to "SVI Solutions, Inc.";
o An increase in the number of shares of common stock authorized
from 50,000,000 to 100,000,000;
o A reduction of the required quorum at meetings of stockholders
from a majority of the outstanding shares to one-third of the
outstanding shares;
o Amendments to the 1998 Incentive Stock Plan ("1998 Plan") to:
(i) increase the aggregate number of shares of common stock
authorized for issuance under the 1998 Plan to 4,000,000
shares; (ii) authorize an automatic annual increase in the
shares reserved for issuance under the 1998 Plan by an amount
equal to the lesser of 2% of the total number of shares
outstanding on the last trading day of the fiscal year or
600,000 shares (or a lesser amount as determined by the
Board); and (iii) prohibit the granting of stock awards under
the 1998 Plan to any one participant in excess of 500,000
shares in any calendar year.
o Ratification of the Company's continued engagement of Deloitte
& Touche LLP as the Company's independent auditors for the
fiscal year ending March 31, 2001.
Please complete and sign the enclosed proxy card and return it
promptly. This will ensure that your shares are represented at the meeting even
if you cannot attend. Returning your proxy card to us will not prevent you from
voting in person at the meeting if you are present and wish to do so.
Thank you for your cooperation in returning your proxy card as promptly
as possible. We hope to see many of you at our meeting in San Diego.
Very truly yours,
Barry M. Schechter
Chairman of the Board
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SVI HOLDINGS, INC.
12707 High Bluff Drive, Suite 335
San Diego, CA 92130
(858) 481-4404
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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TO BE HELD ON NOVEMBER 16, 2000
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TO ALL STOCKHOLDERS:
An annual meeting of the stockholders of SVI Holdings, Inc. (the
"Company") will be held on November 16, 2000 at 9 a.m., Pacific Daylight Time.
The meeting will be held at 12707 High Bluff Drive, Suite 335, San Diego,
California 92130. The following items will be on the agenda:
1. The election of eight directors to serve until the next Annual
Meeting of Stockholders and until their successors are elected
and qualified;
2. The approval of a plan of merger by which the Company will
change its state of incorporation from Nevada to Delaware;
3. The approval of a change of the corporate name to "SVI
Solutions, Inc."
4. The approval of an increase in the authorized common stock
from 50,000,000 shares to 100,000,000 shares;
5. The approval of a change in the Articles of Incorporation and
the Bylaws reducing the required quorum at meetings of
stockholders from a majority of the outstanding shares to
one-third of the outstanding shares;
6. Amendments to the 1998 Incentive Stock Plan ("1998 Plan") to:
(i) increase the aggregate number of shares of common stock
authorized for issuance under the 1998 Plan to 4,000,000
shares; (ii) authorize an automatic annual increase in the
shares reserved for issuance under the 1998 Plan by an amount
equal to the lesser of 2% of the total number of shares
outstanding on the last trading day of the fiscal year or
600,000 shares (or a lesser amount as determined by the
Board); and (iii) prohibit the granting of stock awards under
the 1998 Plan to any one participant in excess of 500,000
shares in any calendar year.
7. The ratification of the Company's continued engagement of
Deloitte & Touche LLP as the Company's independent auditors
for the fiscal year ending March 31, 2001; and
8. The transaction of any other business which may properly come
before the meeting.
Only stockholders of record at the close of business on October 2, 2000
will be entitled to vote at this meeting.
Please execute and return the accompanying proxy card as soon as
possible. Any Stockholder who signs and returns the accompanying proxy may
revoke it at any time before it is exercised.
By Order of the Board of Directors
DAVID L. REESE
Secretary
San Diego, California
October 23, 2000
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SVI HOLDINGS, INC.
12707 High Bluff Drive, Suite 335
San Diego, CA 92130
(858) 481-4404
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 16, 2000
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INFORMATION CONCERNING SOLICITATION AND VOTING
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GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
SVI Holdings, Inc., a Nevada corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on November 16, 2000, at 9 a.m. local time
(the "Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at 12707 High Bluff Drive, Suite 335, San Diego,
California 92130. The Company intends to mail this proxy statement and
accompanying proxy card on or about October 23, 2000, to all stockholders
entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this proxy statement,
the proxy card and any additional information furnished to stockholders. Copies
of solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of common stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of common stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of common stock at the close of business on
October 2, 2000 will be entitled to notice of and to vote at the Annual Meeting.
As of August 31, 2000 the Company had outstanding and entitled to vote
33,897,884 shares of common stock.
Each holder of record of common stock on October 2, 2000 will be
entitled to one vote for each share held on all matters to be voted upon at the
Annual Meeting. If the proxy is signed and returned without any direction given,
shares will be voted in accordance with the Board of Directors' recommendations.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Except for Proposals 2, 3, 4 and 5,
broker non-votes are counted towards a quorum, but are not counted for any
purpose in determining whether a matter has been approved. With respect to
Proposals 2, 3, 4 and 5, abstentions and broker non-votes will have the same
effect as negative votes.
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REVOCABILITY OF PROXIES
Any stockholder granting a proxy pursuant to this solicitation has the
power to revoke it at any time before it is voted. A proxy may be revoked by
filing with the Company's Secretary at the Company's principal executive office,
12707 High Bluff Drive, Suite 335, San Diego, California 92130, a written
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the Annual Meeting and voting in person. Attendance at the meeting
will not, by itself, revoke a proxy.
If a proxy is provided but no instructions are given, the proxy will be
voted FOR Proposal 1 relating to management's slate of directors, FOR Proposals
2 through 5 relating to the Company's reincorporation in Delaware from Nevada,
FOR Proposal 6 relating to the amendments to the 1998 Plan, and FOR Proposal 7
relating to ratification of the Company's continued engagement of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year ending
March 31, 2001.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the Company's proxy statement
and form of proxy for the Company's 2001 Annual Meeting pursuant to Rule 14a-8
of the Securities and Exchange Commission must be received at the Company's
principal executive office, 12707 High Bluff Drive, Suite 335, San Diego,
California 92130, by June 25, 2001. Stockholders wishing to submit proposals or
director nominations that are not to be included in such proxy statement and
proxy must do so no later than the close of business on the 90th day nor earlier
than the close of business on the 120th day prior to the first anniversary of
the preceding year's annual meeting. Stockholders are also advised to review the
Company's Bylaws, which contain additional requirements with respect to advance
notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
There are eight nominees for the eight Board of Director positions
presently authorized by the Company's Bylaws. Each director to be elected will
hold office until the next annual meeting of stockholders and until his
successor is elected and has qualified, or until such director's earlier death,
resignation or removal. Each nominee listed below is currently a director of the
Company.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote. Shares represented by executed
proxies will be voted, if authority to do so is not withheld, for the election
of the eight nominees named below. In the event that any nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected and
management has no reason to believe that any nominee will be unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set
forth below:
NAME AGE POSITION
Barry M. Schechter 46 Chairman , Chief Executive Officer
and Director
David L. Reese 55 Chief Financial Officer, Secretary
and Director
Arthur S. Klitofsky 46 Vice President and Director
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Donald S. Radcliffe 55 Director
Ivan M. Epstein 39 Director
Gerald Rubenstein 66 Director
Ian Bonner 45 Director
Steven Cohen 38 Director
Barry M. Schechter has been Chairman of the Board and Chief Executive
Officer of the Company from February 1994 to the present. He has been Chief
Executive Officer of the Company's predecessor and wholly-owned subsidiary,
Sabica Ventures, Inc., since its inception in February 1990. He also serves as
Chairman of the Board of each of the Company's other subsidiaries. Mr. Schechter
is a director of Softline Limited ("Softline"), which beneficially owns 56.2% of
the outstanding common stock of the Company, and which is listed on the
Johannesburg Stock Exchange. Mr. Schechter is also a director of Integrity
Software, Inc., for which the Company has an indirect equity interest (see
"Certain Relationships and Related Transactions").
David L. Reese became a director of the Company in July 1998. He joined
the Company in November 1997 and became Chief Financial Officer and Secretary in
February 1998. Prior to joining the Company, Mr. Reese served as Chief Financial
Officer for Pygmalion Asset Management Company from 1993 to 1997. Mr. Reese has
served in various financial and accounting capacities for a number of public
companies over the past twenty years. Mr. Reese received a B.S. and an M.S. from
the University of Southern California. He is a certified public accountant.
Arthur Klitofsky has been Vice President and a director of the Company
from February 1994 to the present. He has been President of the Company's SVI
Training Products, Inc. subsidiary since 1991. From 1985 to 1991, he was
Managing Director of Punch Line Columbia Training Ltd., which became the largest
computer education company in South Africa. Mr. Klitofsky has a Bachelor of
Science Degree in Electrical Engineering from the University of Witwatersrand,
Johannesburg, South Africa and a Bachelor in Accounting Science Degree from the
University of South Africa.
Donald S. Radcliffe became a director of the Company in May 1998. He
has been President of Radcliffe & Associates since 1990. Radcliffe & Associates
provides financial consulting services to public companies, and currently
provides financial advisory and public relations services to the Company. Since
1984 he has also been Executive Vice President and Chief Operating and Financial
Officer of World-Wide Business Centres, which is a privately held operator of
shared office space facilities. Mr. Radcliffe is a director of Complete Wellness
Centers, Inc. and Integrity Software, Inc. The Company has an indirect equity
interest in Integrity Software, Inc. (see "Certain Relationships and Related
Transactions"). Mr. Radcliffe received a B.S. from Lehigh University and an
M.B.A. from Dartmouth College. He is a certified public accountant.
Ivan M. Epstein became a director of the Company in May 1998. He is the
Chief Executive Officer and a director of Softline, which he co-founded in 1988.
Softline is listed in the Information Technology sector of the Johannesburg
Stock Exchange and is one of the largest accounting software vendors in the
world. Softline operates in 37 countries with products available in eight
languages, and targets mainly small to medium size enterprises. Softline
beneficially owns 56.2% of the outstanding common stock of the Company. Mr.
Epstein is also a director of Integrity Software, Inc., for which the Company
has an indirect equity interest (see "Certain Relationships and Related
Transactions").
Gerald Rubenstein became a director of the Company in May 1998. He is
an attorney in South Africa and is currently a consultant to the law firm of
Fluxman Rabinowitz-Raphaely Weiner. He specializes in corporate finance and
mergers and acquisitions. He is also the chairman of Protea Furnishers Limited
and Vestacor Limited. He currently serves as a director of seven public
companies in South Africa, including Softline, which beneficially owns 56.2% of
the outstanding common stock of the Company.
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Ian Bonner became a director of the Company in May 1998. Since 1993 he
has held various positions with IBM Corporation, and he currently serves as Vice
President of Partner Marketing and Programs for the IBM/Lotus/Tivoli Software
Group. His responsibilities include the development and implementation of
marketing campaigns and programs designed to serve the business partners of IBM,
Lotus and Tivoli, including major accounts, independent software vendors and
global systems integrators. He also oversees the IBM BESTeam and the Lotus
Business Partner programs which are designed to provide enhanced opportunities,
including education, marketing and training support, to qualified providers of
IBM's and Lotus's portfolio of network solutions. Mr. Bonner received a Bachelor
of Commerce from the University of the Witwatersrand in 1976 and a graduate
degree in Marketing Management and Market Research and Advertising from the
University of South Africa in 1978.
Steven Cohen became a director of the Company in June 2000. He is the
Chief Operating Officer and a director of Softline, which he joined in 1989 as
financial director. Mr. Cohen played a key role in the development of Softline's
"Brilliant Accounting" software package, and he was an active participant in the
growth of Softline to its current position as one of the largest international
providers of midrange accounting software. Softline beneficially owns 56.2% of
the outstanding common stock of the Company.
There are no family relationships among the directors. There are no
arrangements or understandings between any director and any other person
pursuant to which that director was or is to be elected.
COMMITTEES AND MEETINGS
During fiscal year 2000, the Board of Directors met seven times and
acted by unanimous written consent one time. No director attended less than 75%
of the total of Board and committee meetings held during the director's tenure
on the Board and its committees. The Board of Directors has a Compensation
Committee and an Audit Committee.
The Board of Directors formed a Compensation Committee in April 1998.
The Compensation Committee's primary function is to establish the Company's
compensation policies and recommend to the Board the compensation arrangements
for senior management and directors. Beginning April 1, 2000, the Compensation
Committee will recommend the adoption of compensation plans in which officers
and directors are eligible to participate and the granting of stock options or
other benefits to executive officers. The Board of Directors as a whole
previously approved all grants of stock options under the Company's stock option
plans. Current members of the Compensation Committee are Ian Bonner and Gerald
Rubenstein. The Compensation Committee met two times during the fiscal year.
The Board of Directors also formed an Audit Committee in April 1998.
The purpose of the Audit Committee is to assist the Board in fulfilling its
responsibilities for financial reporting by the Company. The Audit Committee
recommends the engagement and discharge of independent auditors, reviews with
independent auditors the audit plan and the results of the audit, reviews the
independence of the independent auditors, reviews internal accounting procedures
and discharges such other duties as may from time to time be assigned to it by
the Board of Directors. Current members of the Audit Committee are Ian Bonner
and Donald S. Radcliffe. The Audit Committee met two times during the fiscal
year.
DIRECTOR COMPENSATION
No direct or indirect remuneration has been paid or is payable by the
Company to the directors in their capacity as directors during the fiscal year
ended March 31, 2000. The Company does not anticipate paying during the fiscal
year ending March 31, 2001 any direct or indirect remuneration to any directors
of the Company in their capacity as directors other than reimbursement of
expenses for attending directors' or committee meetings and discretionary stock
option grants under the 1998 Plan. During the fiscal year ended March 31, 2000,
Ivan Epstein received an option to purchase 100,000 shares of the common stock
of the Company at an exercise price of $7.75. The option expires on October 20,
2009 and is fully vested.
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PROPOSALS 2 THROUGH 5
REINCORPORATION IN DELAWARE AND
RELATED CHANGES TO ORGANIZATIONAL DOCUMENTS
The following discussion summarizes certain aspects of the proposed
reincorporation in Delaware (the "Reincorporation") and changes to the Company's
organizational documents occurring simultaneously with the Reincorporation. It
is a summary only and is subject to:
o the Nevada Revised Statutes ("Nevada Law");
o the General Corporation Law of the State of Delaware
("Delaware Law");
o the Agreement and Plan of Merger (the "Merger Agreement"), a
copy of which is attached as Exhibit A;
o the current Articles of Incorporation of the Company (the
"Nevada Charter");
o the Restated Certificate of Incorporation of SVI Solutions,
Inc. (the "Delaware Charter"), a copy of which is attached as
Exhibit B;
o the current Amended and Restated Bylaws of the Company (the
"Nevada Bylaws"); and
o the Restated Bylaws of SVI Solutions, Inc. (the "Delaware
Bylaws"), a copy of which is attached as Exhibit C.
Copies of the Nevada Charter and the Nevada Bylaws are available from
the Company at no charge upon written request.
The Company requested and received the affirmative vote of a majority
of the stockholders at the Annual Meeting of Stockholders held on August 30,
1999 for Proposal 2 to change the state of incorporation from Nevada to
Delaware, for Proposal 4 to approve an increase in the authorized common stock
from 50,000,000 shares to 100,000,000 shares and for Proposal 5 to reduce the
required quorum at meetings of stockholders from a majority of the outstanding
Shares to one-third of the outstanding shares. However, the Company did not
consummate these proposals due to the unavailability in Delaware of the new name
of the Company approved by stockholders in 1999. The Company determined to ask
the stockholders to approve the name "SVI Solutions, Inc." at the 2000 annual
meeting, and, as a matter of good corporate governance, to seek reapproval for
the other proposals related to reincorporation in Delaware.
Stockholders are being asked to vote separately on the Reincorporation
as proposed herein and each of three material changes to the Company's
organizational documents. Stockholders are not being asked to vote separately on
non-material changes to the organizational documents or changes made solely to
conform to differences between Delaware Law and Nevada Law. These differences
are summarized in the discussions below. In the event some but not all of the
following proposals are adopted by the stockholders, the Board of Directors will
determine which if any of the approved proposals will be implemented.
The Board of Directors approved the Reincorporation as proposed herein
and the change of corporate name to "SVI Solutions, Inc." on February 14, 2000.
The Board approved the current form of the Delaware Charter and the Delaware
Bylaws as proposed herein on August 18, 2000.
Under Nevada Law, the merger which will effect the Reincorporation must
be approved by the affirmative vote of the holders of a majority of the
outstanding shares of Company common stock. Although all changes to the
Company's organizational documents could be approved by the same vote which
approves the Reincorporation, the Company will seek the vote of a majority of
the outstanding shares of Company common stock for each such separate proposal.
Softline Limited ("Softline") owns a sufficient number of shares of Company
common stock in order to approve the Reincorporation and each of the changes to
the Company's organizational documents. Softline has indicated that it intends
to vote FOR the Reincorporation and each of the changes to the Company's
organizational documents.
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EFFECT ON POSSIBLE BUSINESS COMBINATION WITH SOFTLINE
The Company announced in May 2000 that it was in preliminary
discussions with its majority stockholder, Softline Limited, concerning a
possible business combination. See "Certain Relationships and Related
Transactions - Transactions with Softline Limited." Because of the preliminary
stage of discussions, the Company does not know whether the proposed changes in
its domicile and governing documents will affect the transaction. The Company
anticipates that any such business combination will require subsequent approval
of stockholders under the rules of the American Stock Exchange whether or not
such approval is required under of Nevada or Delaware law. Based on current
holdings, Softline would control the outcome of that vote under either Nevada or
Delaware law. The Company and Softline have not yet determined the structure of
a transaction or what other stockholder voting procedures the Company might
follow, so the Company is unable to predict whether Delaware law will facilitate
structuring of a transaction. Management hopes that the large body of case law
interpreting Delaware corporate law will provide more legal certainty in
connection a potential transaction structure and voting procedure than would be
the case under Nevada law.
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PROPOSAL 2
REINCORPORATION IN DELAWARE
PURPOSE OF THE REINCORPORATION
The primary reason for the Board's recommendation of the
Reincorporation is the well-developed case law interpreting Delaware Law. The
Board believes the guidance of prior Delaware decisions will allow it to more
effectively perform its duties. Although the provisions of Nevada Law are
similar in a number of respects to those of Delaware Law, there is a lack of
predictability under Nevada Law resulting from the limited body of case law
interpreting Nevada Law. Delaware law and the court decisions construing it are
widely regarded as the most extensive and well-defined body of corporate law in
the United States.
Delaware has a long-established policy of encouraging companies to
incorporate in that state. In furtherance of that policy, Delaware has been a
leader in adopting comprehensive, modern and flexible corporate laws which are
periodically updated and revised to meet changing business needs. As a result,
many major corporations have initially chosen Delaware for their domicile or
have subsequently reincorporated in Delaware in a manner similar to that
proposed by the Company. Delaware's courts have therefore developed considerable
expertise in dealing with corporate issues and a substantial body of case law
has developed construing Delaware Law and establishing public policies with
respect to corporate legal issues.
The Board therefore believes that the overall effect of the
Reincorporation will be to enhance the Board's ability to consider all
appropriate courses of action with respect to significant transactions, along
with more general corporate matters, for the benefit of all stockholders.
Moreover, the Board believes that enhanced certainty with respect to the duties
of directors could be an important factor in attracting and retaining quality
persons to serve on the Board of Directors.
MECHANICS OF THE REINCORPORATION
The Reincorporation will be effected by merging the Company with and
into SVI Solutions, Inc. ("SVI Solutions"), a Delaware corporation. SVI
Solutions has been formed solely for the purpose of this merger (the "Merger")
and has no operations. At the effective time of the Merger, the corporate
existence of the Company will cease and each share of SVI Holdings common stock
issued and outstanding immediately prior to the Merger will be converted
automatically into one share of SVI Solutions common stock. If the Company
issues any shares of preferred stock prior to the Merger, each such share will
be converted automatically into one share of SVI Solutions preferred stock with
the same relative rights, preferences and limitations. Each outstanding option
to purchase SVI Holdings common stock will be converted into an option to
purchase the same number of shares of SVI Solutions common stock. Holders of SVI
Holdings common or preferred stock certificates may be asked to surrender such
certificates in exchange for an SVI Solutions common or preferred stock
certificate. Unless and until surrendered, each certificate representing SVI
Holdings common or preferred stock will be deemed to represent the same number
of shares of SVI Solutions common or preferred stock.
From and after the effective time of the Merger: (i) the name of the
surviving corporation will be "SVI Solutions, Inc."; (ii) SVI Solutions will
conduct business as presently conducted by the Company; (iii) the charter and
bylaws of SVI Solutions in effect immediately prior to the Merger will be the
charter and bylaws of the surviving corporation; and (iv) the directors and
officers of SVI Holdings immediately prior to the Merger will be the directors
and officers of SVI Solutions.
Following the consummation of the Merger and the resulting change of
the Company's name to "SVI Solutions, Inc.," the SVI Solutions common stock will
be identified by a new CUSIP number but will continue to trade on the American
Stock Exchange under the symbol "SVI." The Merger may be abandoned by the Boards
of Directors of the Company and SVI Solutions at any time prior to the effective
time of the Merger. If the Merger is abandoned, the Board of Directors of the
Company may in its discretion implement changes to the organizational documents
approved by the stockholders at the Annual Meeting, although such changes would
in that case be made to the Nevada Charter and the Nevada Bylaws, as
appropriate.
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The Boards of Directors of the Company and SVI Solutions may amend the
Merger Agreement at any time prior to the effective time of the Merger. If the
amendment would alter or change the amount or nature of the securities of SVI
Solutions to be received in the merger, or would otherwise adversely affect the
holders of SVI Holdings common stock, the Company will seek shareholder approval
of such amendment. The Boards of Directors may also abandon the Merger and the
Merger Agreement at any time prior to the filing of the Merger Agreement with
the Delaware Secretary of State, notwithstanding the approval of the Merger by
the Company's stockholders.
NO DISSENTERS RIGHT IN RESPECT OF THE MERGER
The Company's stockholders will have no right of dissent in connection
with the Merger due to a Nevada statutory exemption for companies whose
securities trade on a national securities exchange. SVI Holdings common stock is
listed on the American Stock Exchange and after the Merger, the shares of SVI
Solutions common stock will be listed on the American Stock Exchange. The Board
of Directors of SVI Solutions has no present intention to take any action to
delist the SVI Solutions common stock from the American Stock Exchange.
CONVERSION OF COMPANY COMMON STOCK
By virtue of the Merger, each share of SVI Holdings common stock will
be converted, without any action on the part of the holder thereof, into one
share of SVI Solutions common stock.
PLEASE DO NOT SEND IN ANY OF YOUR STOCK CERTIFICATES REPRESENTING
SHARES OF COMPANY COMMON STOCK. UNTIL SUCH TIME AS SURRENDER OF SVI HOLDINGS
COMMON STOCK IS REQUIRED, DELIVERY OF SVI HOLDINGS STOCK CERTIFICATES WILL
CONSTITUTE DELIVERY FOR TRANSACTIONS IN SHARES OF SVI SOLUTIONS COMMON STOCK
AFTER THE EFFECTIVE DATE OF THE MERGER. FOLLOWING CONSUMMATION OF THE MERGER,
POSITIONS IN SHARES OF SVI HOLDINGS COMMON STOCK HELD WITH THE DEPOSITORY TRUST
COMPANY WILL BE TRANSFERRED AUTOMATICALLY TO POSITIONS IN THE SAME NUMBER OF
SHARES OF SVI SOLUTIONS COMMON STOCK.
APPROVALS
A Certificate of Merger must be filed with the State of Delaware and
Articles of Merger must be filed with the State of Nevada to effect the Merger.
In addition, SVI Solutions will be required to file a Form 8-K with the
Securities and Exchange Commission, post-effective amendments to the Company's
effective registration statements which relate to ongoing offerings and a
substitution listing application with the American Stock Exchange. Except for
these filings, no federal or state regulatory requirements apply and no
approvals are required in connection with the Merger.
COMPARISON OF DELAWARE LAW TO NEVADA LAW
The corporation laws of Delaware and Nevada differ in some respects. It
is impracticable to summarize all of the differences in this Proxy Statement,
but certain differences between Nevada Law and Delaware Law that could affect
the rights of stockholders of the Company are as follows:
1. TENDER OFFER AND BUSINESS COMBINATION STATUTES. Delaware Law
regulates hostile takeovers by providing that an "interested stockholder,"
defined as a stockholder owning 15% or more of the corporation's voting stock or
an affiliate or associate thereof, may not engage in a "business combination"
transaction, defined to include a merger, consolidation or a variety of
self-dealing transactions, with the corporation for a period of three years from
the date on which such stockholder became an "interested stockholder" unless (i)
prior to such date the corporation's board of directors approved either the
"business combination" transaction or the transaction in which the stockholder
became an "interested stockholder", (ii) the stockholder, in a single
transaction in which he became an "interested stockholder," acquires at least
85% of the voting stock outstanding at the time the transaction commenced
(excluding shares owned by certain employee stock plans and persons who are
directors and also officers of the corporation) or (iii) on or subsequent to
such date, the "business combination" transaction is approved by the
corporation's board of directors and authorized at an annual or special meeting
of the corporation's stockholders, by the affirmative vote of at least
two-thirds of the outstanding voting stock not owned by the "interested
stockholder." A Delaware corporation may elect not to be governed by Section 203
of the Delaware Law by an express provision to that effect in its certificate of
incorporation, but SVI Solutions has not made such election. Accordingly, SVI
Solutions will be subject to Section 203.
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Because the Board has approved the Merger, and because the
Board previously approved the series of transactions by which Softline became an
"interested stockholder" of the Company, the Company does not believe that
Section 203 will inhibit any potential business combination with Softline.
Nevada Law regulates hostile takeovers of publicly traded
corporations by providing that an "interested stockholder," defined as a
stockholder owning 10% or more of the corporation's voting stock or an affiliate
or associate thereof, may not engage in a "business combination" with the
corporation for a period of three years from the date on which such stockholder
became an "interested stockholder" unless (i) prior to such date the
corporation's board of directors approved either the "business combination"
transaction or the transaction in which the stockholder became an "interested
stockholder" or (ii) no earlier than three years after such stockholder became
an "interested stockholder" the majority of the outstanding voting power
approves the "business combination." Nevada Law further regulates tender offers
and business combinations involving certain Nevada corporations by providing
that any acquisition by a person, either directly or indirectly, of ownership
of, or the power to direct the voting of, 20% or more ("Control Shares") of the
outstanding voting securities of a corporation is a "Control Share Acquisition."
These provisions apply only to "issuing corporations," which are (i)
corporations with at least 200 stockholders, at least 100 or more of which are
located in Nevada, and (ii) which do business in Nevada. A Control Share
Acquisition must be approved by a majority of each class of outstanding voting
securities of such corporation excluding the shares held or controlled by the
person seeking approval before the Control Shares may be voted. A special
meeting of stockholders must be held by the corporation to approve a Control
Share Acquisition within 50 days after a request for such meeting is submitted
by the person seeking to acquire control. If the Control Shares are accorded
full voting rights and the acquiring person has acquired Control Shares with a
majority or more of the voting power of the Corporation, all stockholders who
have not voted in favor of granting full voting rights to the Control Shares
would have dissenters right. Nevada Law provides that a corporation may elect
out of the Control Share protections by expressly specifying so in its articles
or bylaws. SVI Holdings has not elected out of these provisions, but believes
that they have not applied because SVI Holdings has not met the definition of an
"issuing corporation."
The Company does not believe that the foregoing provisions of
Nevada law would inhibit any potential business combination with Softline.
3. REMOVAL OF DIRECTORS. Under Nevada Law, a vote of two-thirds of the
outstanding voting shares is required to remove a director. Under Delaware Law,
the holders of a majority of shares entitled to vote at a meeting may remove one
or more directors.
4. PERSONAL LIABILITY OF DIRECTORS. Under Delaware Law, directors are
jointly and severally liable to a corporation for violations of statutory
provisions relating to the purchase or redemption of a corporation's own shares
or the payment of dividends, for a period of six years from the date of such
unlawful act. A director who was either absent or dissented from the taking of
such action may exonerate himself from liability by causing his dissent to be
entered in the corporation's minutes. Under Nevada Law, directors are jointly
and severally liable to the corporation for violations of statutory provisions
relating to the purchase of a corporation's own shares, the payment of
dividends, the distribution of assets in liquidation or any loans or guarantees
made to a director, until the repayment thereof. Under Nevada Law, absent
directors are not liable as long as they did not vote for or assent to any of
the illegal acts and, unlike Delaware Law, Nevada Law allows a director who was
present at a meeting which approved an illegal act to avoid liability, even if
he did not register his dissent in the minutes of the meeting, by voting against
the illegal act and registering his dissent at a later time in a separate
writing filed with the secretary of the meeting.
5. LOANS TO OFFICERS. Under Nevada Law, there is no specific
restriction with respect to a loan or guaranty to or for the benefit of a
corporation's officers or employees and those of its subsidiaries. However, such
transactions may be void or voidable if the transaction at issue is not fair to
the corporation at the time it is authorized or approved by the board. Under
Delaware Law, a corporation may make loans to, guarantee the obligations of, or
otherwise assist, its officers or other employees and those of its subsidiaries
when such action, in the judgment of the Company's Board of Directors, may
reasonably be expected to benefit the Company.
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6. INDEMNIFICATION. Delaware and Nevada have similar laws with respect
to indemnification by a corporation of its officers, directors, employees and
other agents. For example, the laws of both states permit corporations to adopt
a provision in the Certificate or Articles of Incorporation eliminating the
liability of a director (and also an officer in the case of Nevada) to the
corporation or its stockholders for monetary damages for breach of the
director's fiduciary duty of care (and the fiduciary duty of loyalty as well in
the case of Nevada). There are nonetheless certain differences between the laws
of the two states respecting indemnification and limitation of liability.
The Delaware Charter eliminates the liability of directors to
the fullest extent permissible under Delaware Law. The Nevada Charter likewise
eliminates the liability of directors and officers to the fullest extent
permissible under Nevada Law. Under Nevada Law, such provision may not eliminate
or limit director or officer liability for: (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law; or (b) the payment
of unlawful dividends or distributions. Under Delaware Law, such provision may
not eliminate or limit director monetary liability for: (a) breaches of the
director's duty of loyalty to the corporation or its stockholders; (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law; (c) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (d) transactions in which the director received
an improper personal benefit.
The limitations of liability provisions permissible under
Delaware Law and Nevada Law may not limit a director's liability for violation
of, or otherwise relieve a corporation or its directors from the necessity of
complying with, federal or state securities laws, or affect the availability of
non-monetary remedies such as injunctive relief or rescission.
Nevada Law and Delaware Law require indemnification when the
individual has successfully defended the action on the merits or otherwise.
Nevada Law generally permits indemnification of expenses incurred in the defense
or settlement of a derivative or third-party action, provided there is a
determination by a disinterested quorum of the directors, by independent legal
counsel, or by a majority vote of a quorum of the stockholders that
indemnification is proper in the circumstances. Without court approval, however,
no indemnification may be made in respect of any derivative action in which such
person is adjudged liable for negligence or misconduct in the performance of his
or her duty to the corporation. Delaware Law generally permits indemnification
of expenses incurred in the defense or settlement of a derivative or third-party
action, provided there is a determination by a disinterested quorum of the
directors, by independent legal counsel or by a majority vote of a quorum of the
stockholders that the person seeking indemnification acted in good faith and in
a manner reasonably believed to be in or not opposed to the best interests of
the corporation. Without court approval, however, no indemnification may be made
in respect of any derivative action in which such person is adjudged liable for
negligence or misconduct in the performance of his or her duty to the
corporation.
7. INSPECTION OF STOCKHOLDERS' LIST. Nevada Law permits any person who
has been a stockholder of record for at least six months, or any person holding
at least 5% of all outstanding shares, to inspect the stockholders' list of a
corporation for a purpose reasonably related to such person's interest as a
stockholder. Delaware Law permits any stockholder to inspect a corporation's
stockholders' list for a purpose reasonably related to such person's interest as
a stockholder and, during the ten days preceding a stockholders' meeting, for
any purpose germane to that meeting.
8. PAYMENTS OF DIVIDENDS. Nevada Law permits the payment of dividends
if, after the dividends have been paid, the corporation is able to pay its debts
as they become due in the usual course of business (equity test for insolvency),
and the corporation's total assets are not less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were to be
dissolved at the time of the dividend payment, to satisfy the preferential
rights upon dissolution of stockholders whose preferential rights are superior
to those receiving the dividend (balance sheet test for insolvency). In
addition, Nevada Law generally provides that a corporation may redeem or
repurchase its shares only if the same equity and balance sheet tests for
insolvency are satisfied.
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Delaware Law permits the payment of dividends out of surplus
or, if there is no surplus, out of net profits for the current and preceding
fiscal years (provided that the amount of capital of the corporation is not less
than the aggregate amount of the capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets). Surplus is the excess, if any, of the stockholders' equity over stated
capital of a corporation. In addition, Delaware Law generally provides that a
corporation may redeem or repurchase its shares only if such redemption or
repurchase would not impair the capital of the corporation. The ability of a
Delaware corporation to pay dividends on, or to make repurchases or redemptions
of, its shares is dependent on the financial status of the corporation standing
alone and not on a consolidated basis. In determining the amount of surplus of a
Delaware corporation, the assets of the corporation, including stock of
subsidiaries owned by the corporation, must be valued at their fair market value
as determined by the Board of Directors, without regard to their historical book
value.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
For federal income tax purposes (i) the Merger will constitute a
reorganization within the meaning of 368(a) of the Internal Revenue Code, (ii)
no gain or loss will be recognized by Company stockholders as a consequence of
the Merger, (iii) a stockholder's aggregate tax basis in SVI Solutions common
stock after the Merger will be the same as such holder's aggregate tax basis in
the shares of SVI Holdings common stock immediately prior to the Merger, (iv) a
stockholder's holding period in SVI Solutions common stock received in the
Merger will include the period in which the SVI Holdings common stock was held,
provided the SVI Holdings common stock was held as a capital asset at the time
of the Merger, and (v) no gain or loss will be recognized by SVI Holdings or SVI
Solutions as a consequence of the Merger.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of common stock
will be required to approve the reincorporation into Delaware. As a result,
abstentions and broker non-votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
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PROPOSAL 3
CHANGE OF THE CORPORATE NAME TO SVI SOLUTIONS, INC.
The Board of Directors has determined to change the name of the Company
to SVI Solutions, Inc. to better reflect the primary business of the Company.
The name change will be reflected in the Delaware Charter if this proposal is
approved by stockholders. The name change should not have any adverse effect on
stockholders.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
common stock will be required to approve the change of the corporate name to SVI
Solutions, Inc. As a result, abstentions and broker non-votes will have the same
effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
PROPOSAL 4
INCREASE IN AUTHORIZED CAPITALIZATION
If this proposal is approved by the stockholders, the Delaware Charter
will authorize 100,000,000 shares of $0.0001 par value common stock and
5,000,000 shares of $0.0001 par value preferred stock. The Nevada Charter
authorizes 50,000,000 shares of $0.0001 par value common stock and 5,000,000
shares of $0.0001 preferred stock as of August 31, 2000. As of August 31, 2000
the Company has issued and outstanding 33,897,884 shares of common stock. At
August 31, 2000, the Company also has reserved for issuance under currently
outstanding options and warrants, for options or other convertible securities
authorized but not yet issued under employee benefit plans, and for shares
issuable pursuant to certain investor rights a total of 6,496,024 shares of
common stock.
Authorization of 50,000,000 additional shares of common stock in the
Delaware Charter will give the Company additional flexibility to raise capital
in public or private transactions through the issuance of common stock, and to
issue common stock in acquisitions of businesses or assets, without the time and
expense needed to obtain further stockholder approval. However, the rules of the
American Stock Exchange will require the Company to seek stockholder approval as
a prerequisite to listing additional shares issued in the following
circumstances:
o If the Company proposes to issue, as consideration for an
acquisition of the stock or assets of another company, shares
representing 5% or more of the total outstanding shares prior
to the transaction, if any director, officer or substantial
shareholder of the Company has a 5% or greater interest (or
such persons collectively have a 10% or greater interest) in
the company or assets to be acquired or in the consideration
to be paid in the transaction.
o If the Company proposes to issue, as consideration for an
acquisition of the stock or assets of another company, shares
representing 20% or more of the total outstanding shares prior
to the transaction.
o If the Company proposes to issue shares at a price less than
fair market value (or book value, if higher than fair market
value) which together with sales by officers, directors or
principal shareholders of the company, if any, equals 20% of
more of the total outstanding shares prior to the transaction.
Where such rules do not apply, the Company may issue or reserve shares in merger
or acquisition transactions, in capital raising transactions or otherwise,
without further stockholder approval. Any such issuances will have the effect of
diluting existing stockholders.
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Because of the foregoing rules, the Company believes that further
stockholder approval will be required for any potential business combination
with Softline. Accordingly, adoption of this proposal should not affect a
potential business combination with Softline.
The Company is currently considering a number of capital raising
alternatives which might involve the issuance of common or preferred stock.
However, the Company does not anticipate issuing in any such transaction more
shares than are currently available for issuance. Accordingly, the adoption of
this proposal should not affect any current financing plans of the Company.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
common stock will be required to approve the increase in authorized
capitalization. As a result, abstentions and broker non-votes will have the same
effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
PROPOSAL 5
REDUCTION IN QUORUM
Under the Nevada Charter, a majority of the shares of common stock
entitled to vote must be represented in person or by proxy in order to
constitute a quorum for the conduct of business at a meeting of stockholders.
The Delaware Charter does not specify the required quorum for conduct of
business at stockholders meetings. The proposed Delaware Bylaws state that
one-third of the common stock entitled to vote, represented in person or by
proxy, will constitute a quorum at meetings of stockholders. This lower quorum
requirement is consistent with Delaware Law and with the rules of the American
Stock Exchange. The Company believes that reducing the required presence for a
quorum will make it easier for the Company to obtain the necessary approval for
important corporate actions which require stockholder approval without the
delays and costs associated with hiring proxy solicitors. The reduced quorum
requirement could however lead to the approval of important corporate actions by
stockholders representing significantly less than an absolute majority of the
outstanding shares.
In any stockholder vote to approve a potential business combination
with Softline, Softline's presence at the meeting would constitute a quorum
under both our current and proposed governing documents. Accordingly, adoption
of this proposal should not affect a potential business combination with
Softline.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
common stock will be required to approve the reduction in quorum. As a result,
abstentions and broker non-votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 5.
PROPOSAL 6
APPROVAL OF AMENDMENTS TO 1998 INCENTIVE STOCK PLAN
On October 5, 1998 the Board of Directors adopted, and the stockholders
subsequently approved on November 2, 1998, the Company's 1998 Incentive Stock
Plan ("1998 Plan") authorizing the issuance of 3,500,000 shares of the Company's
common stock. As of July 31, 2000, options covering an aggregate of 934,500
shares of the Company's common stock had been granted under the 1998 Plan and
2,565,500 shares remain available for future stock awards.
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On August 18, 2000, the Board of Directors approved amendments to the
1998 Plan. Three of the amendments require stockholder approval. The amendments
which require stockholder approval would: (i) increase the aggregate number of
shares of common stock authorized for issuance under the 1998 Plan to 4,000,000
shares; (ii) authorize an annual increase in the shares reserved for issuance
under the 1998 Plan by an amount equal to the lesser of 2% of the total number
of shares outstanding on the last trading day of the fiscal year or 600,000
shares (or a lesser amount as determined by the Board); and (iii) prohibit the
granting of stock awards under the 1998 Plan to any one participant in excess of
500,000 shares in any calendar year.
In the event this Proposal 6 is not approved by the stockholders, the
Company's management believes that it will negatively affect the Company's
ability to retain current personnel and attract additional highly qualified
personnel in the future, and could cause adverse income tax effects for the
Company with respect to future award grants.
The Board of Directors adopted these amendments to the 1998 Plan to
ensure that the Company can continue to grant equity incentives to employees,
directors and consultants by increasing the number of shares available for
issuance both initially and on an annual basis and, with respect to the per
person per calendar year limitation, to permit stock option awards to the CEO
and the four most highly compensated executive officers to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
(the "Code").
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the meeting will be
required to approve the amendments to the 1998 Plan submitted for stockholder
approval. Abstentions will be counted toward the tabulation of votes cast in
proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 6.
The essential features of the 1998 Plan, as amended, are outlined
below:
GENERAL
Employees, directors and consultants to the Company and its parents and
subsidiaries are eligible to participate in the 1998 Plan, as amended. The
purpose of the 1998 Plan, as amended, is to give employees, directors and
consultants of the Company and its subsidiaries an opportunity to benefit from
increases in the value of the Company's common stock. The Company believes that
the 1998 Plan, as amended, will help the Company to secure and retain the
services of highly qualified individuals, and to provide incentives to eligible
persons to exert maximum efforts toward the success of the Company.
The 1998 Plan provides for the granting of: (i) incentive stock options
("ISOs"), (ii) nonqualified stock options ("NSOs"), (iii) stock bonuses, (iv)
rights to purchase restricted stock, and (v) stock appreciation rights
(collectively, "Stock Awards"). Only employees are eligible to receive ISOs and
stock appreciation rights connected with ISOs. All other Stock Awards may be
awarded to employees, directors and consultants.
STOCK SUBJECT TO THE 1998 PLAN AND PER PERSON LIMITATIONS
Subject to stockholder approval of this Proposal 6, an aggregate of
4,000,000 shares of common stock are reserved for issuance under the 1998 Plan.
In addition, the 1998 Plan, as amended, provides for automatic annual increases
in the number of shares reserved for issuance thereunder equal to the least of
(i) 2% of the total number of shares outstanding on the last trading day of the
fiscal year; (ii) 600,000 shares; or (iii) the amount determined by the Board.
The 1998 Plan is also proposed to be amended to add a provision that in any
calendar year a single participant may not receive a grant of stock awards in
excess of 500,000 shares. This provision is designed to permit stock option
awards and stock appreciation rights to qualify as performance-based
compensation under Section 162(m) of the Code.
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ADMINISTRATION
The Board of Directors administers the 1998 Plan, but the Board may, in
its discretion, delegate administration of the plan to one or more committees of
one or more members of the Board. Subject to the provisions of the 1998 Plan,
the Board or such committee will have complete discretion in determining the
recipients of, terms and conditions for and number of Stock Awards granted under
the plan.
INCENTIVE AND NONQUALIFIED STOCK OPTIONS
ISOs granted under the 1998 Plan must be granted with an exercise price
of at least the fair market value of the common stock on the date of grant. NSOs
must have an exercise price of at least 85% of the fair market value of the
common stock on the date of the grant. Options granted to recipients who own 10%
or more of the Company's outstanding common stock must have an exercise price of
at least 110% of the fair market value of the common stock.
Options must have a term of ten years or less, except options granted
to 10% or greater stockholders, which must have a term of five years or less.
Vesting provisions for options granted under the 1998 Plan may vary but in each
case will provide for the vesting of at least 20% of the total number of shares
subject to the option per year. Upon termination of the option holder's status
as an employee, consultant or director of the Company, the holder may exercise
his or her then vested options for a period after termination as determined by
the Board. The period must be at least three months, but will not extend beyond
the expiration date of the option. If the termination is due to the death or
disability of the option holder, the exercise period must be at least one year
following death or disability, but will not extend beyond the expiration date of
the option.
The option holder may pay the exercise price for options in cash, or in
the discretion of the Board, by any of the following methods:
o Delivery of other shares of common stock of the Company.
o According to a preferred payment schedule or other
arrangement.
o Surrender of a sufficient number of options which have "built
in gain" equal to the exercise price of the options exercised.
Built in gain means the difference between the fair market
value on the exercise date and the exercise price.
o Any other legal form of payment approved by the Board.
Tax rules applicable to ISOs may limit the availability of some of
these payment methods.
Options granted under the 1998 Plan are generally not transferable
except upon death or divorce, except that NSOs may be transferred by employees
pursuant to (i) a transfer under a domestic relations order in settlement of
marital property rights, (ii) a transfer to an entity in which more than fifty
percent of the voting interests are owned by family members (or the employee) in
exchange for an interest in that entity, or (iii) by gift to a family member.
The 1998 Plan allows option holders to satisfy tax withholding
obligations relating to the exercise of an option, to the extent permitted by
the option agreement, by paying the withholding tax in cash, by allowing the
Company to withhold shares issuable upon exercise, or by delivering other
unencumbered shares of common stock to the Company.
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STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
The 1998 Plan also provides for the granting of stock bonuses and
purchases of restricted stock. The Board or committee administering the 1998
Plan will establish the terms and conditions of these grants and purchases,
subject to the following conditions. The purchase price under each stock
purchase agreement must be at least 85% of the fair market value of the stock on
the date such award is made. Stock purchase agreements in favor of 10% or
greater stockholders must have a purchase price at least equal to 100% of the
fair market value of the stock on the date of the award. Stock bonuses may be
awarded pursuant to a stock bonus agreement in consideration for past services
rendered to the Company. Rights under a stock bonus or restricted stock purchase
agreement will not be transferable except by employees pursuant to (i) a
transfer under a domestic relations order in settlement of marital property
rights, (ii) a transfer to an entity in which more than fifty percent of the
voting interests are owned by family members (or the employee) in exchange for
an interest in that entity, or (iii) by gift to a family member. In the event of
the recipient's termination of status as an employee, director or consultant to
the Company, the Company may repurchase or otherwise reacquire all shares held
by such recipient which have not vested at the date of termination, pursuant to
the terms of the stock bonus or restricted stock purchase agreement.
STOCK APPRECIATION RIGHTS
The 1998 Plan also provides for the grant of stock appreciation rights
("SARs") to employees, directors or consultants of the Company. SARs entitle the
holder to a distribution based on the appreciation in the fair market value of a
designated amount of stock. Three types of SARs are authorized for issuance
under the 1998 Plan: tandem, concurrent and independent SARs.
Tandem SARs are granted together with an option and require the holder
to elect between the exercise of the underlying option or receipt of the
distribution under the SAR. Tandem stock appreciation rights may be tied to
either ISOs or NSOs and will be subject to the same terms and conditions as the
option to which the SAR pertains.
Concurrent SARs are granted with an option and are automatically
exercised when the option is exercised, entitling the holder to the distribution
under the SAR. Concurrent rights may be tied to any or all shares subject to any
ISO or NSO and will be subject to the same terms and conditions as the option to
which the SAR pertains.
Independent SARs may be granted independently of any option.
Independent SARs will be denominated in share equivalents and will be subject to
the same terms and conditions applicable to NSOs.
CANCELLATION AND RESCISSION OF STOCK AWARDS
The 1998 Plan, as amended, provides that the Board of Directors or a
committee thereof has the authority to cancel, rescind, suspend, withhold or
otherwise limit or restrict any unexpired, unpaid or deferred stock awards at
any time if a participant is not in compliance with all applicable provisions of
the stock award agreement and the 1998 Plan or if the participant engages in any
detrimental activity. Detrimental activity includes without limitation,
competing with the Company; disclosing confidential information; failure to
disclose and assign inventions or ideas to the Company conceived during
employment; activities that result in termination for cause; and violations of
rules, policies or procedures of the Company. These provisions will only apply
to Stock Awards granted after August 18, 2000.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the 1998 Plan
are intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the
participant or the Company by reason of the grant or exercise of an incentive
stock option. However, the exercise of an incentive stock option may increase
the participant's alternative minimum tax liability, if any.
If a participant holds stock acquired through exercise of an incentive
stock option for at least two years from the date on which the option is granted
and at least one year from the date on which the shares are transferred to the
participant upon exercise of the option, any gain or loss on a disposition of
such stock will be a long-term capital gain or loss if the participant held the
stock for more than one year.
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Generally, if the participant disposes of the stock before the
expiration of either of these holding periods (a "disqualifying disposition"),
then at the time of disposition the participant will realize taxable ordinary
income equal to the lesser of (i) the excess of the stock's fair market value on
the date of exercise over the exercise price, or (ii) the participant's actual
gain, if any, on the purchase and sale. The participant's additional gain or any
loss upon the disqualifying disposition will be a capital gain or loss, which
will be long-term or short-term depending on whether the stock was held for more
than one year.
To the extent the participant recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
NONQUALIFIED STOCK OPTIONS, RESTRICTED STOCK PURCHASE AWARDS AND STOCK
BONUSES. Nonqualified stock options, restricted stock purchase awards and stock
bonuses granted under the 1998 Plan generally have the following federal income
tax consequences.
There are no tax consequences to the participant or the Company by
reason of the grant. Upon acquisition of the stock, the participant normally
will recognize taxable ordinary income equal to the excess, if any, of the
stock's fair market value on the acquisition date over the purchase price.
However, to the extent the stock is subject to certain types of vesting
restrictions, the taxable event will be delayed until the vesting restrictions
lapse unless the participant elects to be taxed on receipt of the stock. With
respect to employees, the Company is generally required to withhold from regular
wages or supplemental wage payments an amount based on the ordinary income
recognized. Subject to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of a tax reporting obligation,
the Company will generally be entitled to a business expense deduction equal to
the taxable ordinary income realized by the participant.
Upon disposition of the stock, the participant will recognize a capital
gain or loss equal to the difference between the selling price and the sum of
the amount paid for such stock plus any amount recognized as ordinary income
upon acquisition (or vesting) of the stock. Such gain or loss will be long-term
or short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to participants who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Securities
Exchange Act of 1934.
STOCK APPRECIATION RIGHTS. No taxable income is realized upon the
receipt of a stock appreciation right, but upon exercise of the stock
appreciation right the fair market value of the shares (or cash in lieu of
shares) received must be treated as compensation taxable as ordinary income to
the participant in the year of such exercise. Generally, with respect to
employees, the Company is required to withhold from the payment made on exercise
of the stock appreciation right or from regular wages or supplemental wage
payments an amount based on the ordinary income recognized. Subject to the
requirement of reasonableness, Section 162(m) of the Code and the satisfaction
of a reporting obligation, the Company will be entitled to a business expense
deduction equal to the taxable ordinary income recognized by the participant.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. Section 162(m) of the Code
denies a deduction to any publicly-held corporation for compensation paid to
certain "covered employees" in a taxable year to the extent that compensation to
such covered employee exceeds $1 million. It is possible that compensation
attributable to stock awards, when combined with all other types of compensation
received by a covered employee from the Company, may cause this limitation to be
exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options and stock appreciation rights will qualify as
performance-based compensation if the award is granted by a compensation
committee comprised solely of "outside directors" and either (i) the plan
contains a per-employee limitation on the number of shares for which such awards
may be granted during a specified period, the per-employee limitation is
approved by the stockholders, and the exercise price of the award is no less
than the fair market value of the stock on the date of grant, or (ii) the award
is granted (or exercisable) only upon the achievement (as certified in writing
by the compensation committee) of an objective performance goal established in
writing by the compensation committee while the outcome is substantially
uncertain, and the award is approved by stockholders.
17
<PAGE>
Compensation attributable to restricted stock and stock bonuses will
qualify as performance-based compensation, provided that: (i) the award is
granted by a compensation committee comprised solely of "outside directors" and
(ii) the purchase price of the award is no less than the fair market value of
the stock on the date of grant. Stock bonuses qualify as performance-based
compensation under the Treasury regulations only if (i) the award is granted by
a compensation committee comprised solely of "outside directors," (ii) the award
is granted (or exercisable) only upon the achievement of an objective
performance goal established in writing by the compensation committee while the
outcome is substantially uncertain, (iii) the compensation committee certifies
in writing prior to the granting (or exercisability) of the award that the
performance goal has been satisfied and (iv) prior to the granting (or
exercisability) of the award, stockholders have approved the material terms of
the award (including the class of employees eligible for such award, the
business criteria in which the performance goal is based, and the maximum amount
or formula used to calculate the amount payable upon attainment of the
performance goal.)
PROPOSAL 7
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP served as the Company's independent public
accountants for the fiscal year ended March 31, 1999. The Company's Audit
Committee and the Board of Directors intend to continue the engagement of
Deloitte & Touche LLP for the fiscal year ending March 31, 2001.
Although not required by law, management is asking the stockholders to
ratify the engagement of Deloitte & Touche LLP. The Company does not expect a
representative of Deloitte & Touche LLP to be present at the meeting.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the meeting will be
required to approve the ratification of the independent public accountants.
Abstentions will be counted towards the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes.
Broker non-votes are counted towards a quorum, but are not counted for any other
purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 7.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table shows beneficial ownership of shares of the
Company's outstanding common stock as of August 31, 2000 (i) by all persons
known by the Company to own more than 5% of such stock and (ii) by each
director, each of the Named Executive Officers, and all directors and executive
officers as a group. Except as otherwise specified, the address for each person
is 12707 High Bluff Drive, Suite 335, San Diego, California 92130. As of August
31, 2000, there were 33,897,884 shares of common stock outstanding. Each of the
named persons has sole voting and investment power with respect to the shares
shown (subject to community property laws), except as stated below.
Name and Address of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership(1) Of Class
---------------- -------------------------- --------
Softline Limited 19,100,527(2) 56.2%
16 Commerce Crescent
Eastgate Extension 13
Sandton 2148
South Africa
18
<PAGE>
Claudav Holdings Ltd. B.V. 5,511,925(3) 16.2%
9 Rue Charles Humbert
1205 Geneva
Switzerland
The Ivanhoe Irrevocable Trust 5,511,925(3) 16.2%
Barry M. Schechter 5,511,925(3) 16.2%
David L. Reese 77,000(4) < 1%
Arthur S. Klitofsky 377,440(5) 1.1%
Donald S. Radcliffe 662,300(6) 1.9%
575 Madison Avenue
New York, NY 10022
Ivan M. Epstein 105,000(7) < 1%
2 Victoria
Eastgate Extension 13
Sandton 2148
South Africa
Gerald Rubenstein 5,000(8) < 1%
16 Commerce Crescent
Eastgate Extension 13
Sandton 2148
South Africa
Ian Bonner 20,000(9) < 1%
5527 Inverrary Court
Dallas, Texas 75287
Steven Cohen 0 0%
16 Commerce Crescent
Eastgate Extension 13
Sandton 2148
South Africa
Mark T. Wulff 0 0%
All directors and executive 5,940,700(10) 19.5%
officers as a group (9 persons)
a group (9 persons)
(1) This table is based on information supplied by officers, directors and
principal stockholders. The inclusion in this table of such shares does not
constitute an admission that the named stockholder is a direct or indirect
beneficial owner of, or receives the economic benefit of, such shares.
(2) Includes 71,812 shares pursuant to outstanding options exercisable within
60 days of Augsut 31, 2000. The nine directors of Softline are Marcel
Golding, Ivan M. Epstein, Steven Cohen, Carlos de Santos, Ivan Ferrer,
Larry Nestadt, Gerald Rubenstein, John Copelyn and Barry M. Schechter. Mr.
Golding serves as Chairman of the Board, Mr. Epstein serves as Chief
Executive Officer, and Mr. Cohen serves as Director of Operations. Mr.
Schechter may also be deemed an executive officer of Softline Limited
due to his role as Chairman and Chief Executive Officer of SVI Holdings,
Inc. Each of the foregoing persons disclaims beneficial ownership of the
shares and options held by Softline.
19
<PAGE>
(3) Claudav Holdings Ltd. B.V. ("Claudav"), the Ivanhoe Irrevocable Trust
("Ivanhoe") and Barry M. Schechter may be deemed a group pursuant to Rule
13d-5 promulgated under the Securities Exchange Act of 1934. Claudav holds
2,224,500 shares, for which it shares voting power with Mr. Schechter
pursuant to a proxy. Claudav is managed by Erwin Wachter, Trustee. Mr.
Wachter therefore shares beneficial ownership with Mr. Schechter of the
shares held by Claudav. Ivanhoe holds 3,100,000 shares for which it shares
voting and dispositive power with Mr. Schechter pursuant to Mr. Schechter's
position as a trustee. Includes 2,000 shares held by Mr. Schechter's minor
children and 185,425 shares pursuant to options of Mr. Schechter
exercisable within 60 days of August 31, 2000. Excludes 10,000 shares held
by Mr. Schechter's spouse, for which Mr. Schechter disclaims beneficial
ownership.
(4) Consists of outstanding options exercisable within 60 days of August 31,
2000.
(5) Includes 114,540 shares pursuant to outstanding options exercisable within
60 days of August 31, 2000.
(6) Includes 311,000 shares pursuant to outstanding options exercisable within
60 days of August 31, 2000. Also includes 11,500 shares held by an entity
for which Mr. Radcliffe has sole voting and dispositive power. Also
includes an aggregate of 80,100 shares and 11,000 options held by three
entities for which Mr. Radcliffe has shared voting and dispositive power.
Excludes 119,500 shares held by Mr. Radcliffe's spouse, for which Mr.
Radcliffe disclaims beneficial ownership.
(7) Consists of outstanding options exercisable within 60 days of August 31,
2000.
(8) Consists of outstanding options exercisable within 60 days of August 31,
2000.
(9) Consists of outstanding options exercisable within 60 days of August 31,
2000.
(10) Includes 812,965 shares pursuant to outstanding options exercisable within
60 days of August 31, 2000.
COMPLIANCE WITH SECTION 16(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers, directors and persons who own more than
10% of a class of the Company's securities registered under Section 12 of the
Exchange Act to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and greater than
10% stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on a review of copies of such reports furnished to the
Company and written representations that no other reports were required during
the fiscal year ended March 31, 2000, the Company believes that all persons
subject to the reporting requirements pursuant to Section 16(a) filed the
required reports on a timely basis with the SEC, except Softline Limited (4
reports, 4 transactions), the Ivanhoe Irrevocable Trust (1 report, 1
transaction), Mark T. Wulff (1 report, no transactions), David L. Reese (1
report, 1 transaction) and Donald S. Radcliffe (6 reports, 14 transactions). In
addition, Barry M. Schechter disclosed on his Form 5 for the fiscal year ending
March 31, 2000 holdings of his spouse which should have been previously reported
as indirect holdings, and Softline Limited filed an amended report subsequent to
March 31, 2000 describing one transaction effective in the fiscal year ended
March 31, 1999 not previously reported.
20
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company, the positions held by them and
their ages as of August 31, 2000 are as follows:
NAME AGE POSITION
Barry M. Schechter 46 Chairman, Chief Executive Officer
and Director
David L. Reese 55 Chief Financial Officer, Secretary
and Director
Arthur S. Klitofsky 46 Vice President and Director
Mark T. Wulff 39 Chief Executive Officer of SVI
Retail, Inc.
For the biographical summaries of Barry M. Schechter, David L. Reese,
and Arthur Klitofsky, see "Election of Directors."
Mark T. Wulff joined the Company as Chief Executive Officer of Island
Pacific Systems Corporation ("Island Pacific") in April 1999 upon the Company's
acquisition of Island Pacific. He became Chief Executive Officer of the
Company's retail division in January 2000. Mr. Wulff joined Island Pacific in
1986 and held various positions there prior to its acquisition by the Company,
including Vice President.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services in all capacities to the Company for the full fiscal
years ended March 31, 2000 and 1999, the transitional six month fiscal year
ended March 31, 1998 and the fiscal year ended September 30, 1997, received by
the Company's Chief Executive Officer and the four other most highly compensated
executive officers of the Company during the last completed fiscal year (the
"Named Executive Officers").
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
------------ ------------
Securities Underlying
Name and Principal Position Fiscal Year Salary ($) Options (#)
--------------------------- ----------- ---------- -----------
<S> <C> <C> <C>
Barry M. Schechter 2000 270,000 24,750
Chairman of the Board and Chief Executive 1999 198,000 110,675
Officer 1998(1) 86,000 50,000
1997(2) 156,000 --
Mark T. Wulff 2000 280,769 --
Chief Executive Officer of SVI Retail, Inc.
Arthur S. Klitofsky 2000 140,400 12,700
Vice President 1999 134,100 35,000
1998(1) 66,000 2,000
1997(2) 127,000 57,000
David L. Reese 2000 116,667 59,000
Chief Financial Officer 1999 90,248 51,000
1998(1) 32,378 10,000
21
<PAGE>
Shaun Rosen 2000(3) 112,500 120,000
Former Chief Executive Officer, Retail 1999 165,000 80,000
Operations 1998(1) 82,500 --
1997(2) 165,000 --
</TABLE>
(1) Six month transitional fiscal year ended March 31, 1998.
(2) Twelve month fiscal year ended September 30, 1997.
(3) Mr. Rosen terminated his employment on December 31, 1999 and became a
consultant to the Company.
The Company also provides certain compensatory benefits and other
non-cash compensation to the Named Executive Officers. The incremental cost to
the Company of all such benefits and other compensation paid in the years
indicated to each such person was less than 10% of his reported compensation and
also less than $50,000.
The following table sets forth the information concerning individual
grants of stock options during the last fiscal year to the Named Executive
Officers. Except as otherwise indicated, the options are fully vested.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
----------------------------------------------------------------------------------- ------------------------------
Percent of
Total Options
Granted to
Employees Exercise or
in Fiscal Base Price Expiration
Name Year ($/Sh) Date 5% 10%
---- ---- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Barry M. Schechter 24,750 3.4% $7.8125 10/11/2004 $53,423 $118,045
Arthur S. Klitofsky 12,700(1) 1.7% $7.8125 10/11/2009 $62,401 $158,134
David L. Reese 9,000 1.2% $7.8125 10/11/2004 $19,427 $42,926
50,000 6.8% $7.7500 10/20/2009 $243,700 $617,600
Shaun Rosen 20,000(1) 2.7% $7.8125 10/11/2009 $98,270 $249,030
100,000(1) 13.7% $7.7500 10/20/2009 $487,400 $1,235,200
</TABLE>
(1) Options vest 20% per year over five years beginning on the first
anniversary of the grant, subject to continuing service to the Company.
The potential realizable value is calculated based on the term of the
option at its time of grant. It is calculated based on assumed annualized rates
of total price appreciation from the exercise price at the date of grant of 5%
and 10% (compounded annually) over the full term of the grant with appreciation
determined as of the expiration date. The 5% and 10% assumed rates of
appreciation are mandated by SEC rules and do not represent the Company's
estimate or projections of future common stock prices. Actual gains, if any, on
stock option exercises are dependent on the future performance of the common
stock and overall stock market conditions. The amounts reflected in the table
may not be achieved.
22
<PAGE>
The following table sets forth the information concerning each exercise
of stock options during the last fiscal year by each of the Named Executive
Officers and the fiscal year end value of unexercised options.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Securities
Underlying Value of Unexercised
Unexercised In-The-Money
Shares Value Options at FY-End Options At FY-End
Acquired on Realized (#) Exercisable/ ($) Exercisable/
Name Exercise (#) ($)(1) Unexercisable Unexercisable(2)
---- ------------ ------ ------------- ----------------
<S> <C> <C> <C> <C>
Barry M. Schechter 0 $0 185,425/0 $894,363/$0
Mark T. Wulff 0 $0 0/0 $0/$0
Arthur S. Klitofsky 0 $0 112,000/12,700 $830,625/$26,187
David L. Reese 3,000 $16,875 77,000/0 $192,308/$0
Shaun Rosen 0 $0 80,000/120,000 $550,000/$253,750
</TABLE>
(1) Based upon the market price of the purchased shares, determined on the
basis of the closing sale price per share of the Company's common stock
on the American Stock Exchange on the exercise date less the option
exercise price paid for the shares.
(2) Based upon the market price of $9.875 per share, determined on the
basis of the closing sale price per share of the Company's common stock
on the American Stock Exchange on the last day of the 2000 fiscal year,
less the option exercise price payable per share.
STOCK OPTION PLANS
The Company has two stock option plans. The Incentive Stock Option Plan
(the "1989 Plan") terminated in October 1999. It provided for issuance of
incentive stock options to purchase up to 1,500,000 shares of the Company's
common stock to employees of the Company. 698,535 of such shares remain subject
to option as of July 31, 2000. The 1989 Plan was administered by the Board of
Directors, which established the terms and conditions of each option grant.
The 1998 Incentive Stock Plan (the "1998 Plan") is proposed to be
amended, and is the subject of Proposal 6 herein, which includes a discussion of
the principal features of the 1998 Plan and the amendments proposed.
LONG-TERM INCENTIVE PLANS
The Company does not have any stock appreciation rights in effect and
has no long-term incentive plans, as those terms are defined in Securities and
Exchange Commission regulations. During the fiscal year ended March 31, 2000,
the Company did not adjust or amend the exercise price of stock options awarded
to the Named Executive Officers. The Company has no defined benefit or actuarial
plans covering any Named Executive Officer.
23
<PAGE>
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Barry M.
Schechter effective October 1, 1997. This agreement will continue until
September 30, 2000 unless earlier terminated for cause. Under the agreement, Mr.
Schechter has the right to annual compensation of $180,000 for the first year of
the agreement, $240,000 for the second year of the agreement and $300,000 for
the third year of the agreement. In addition, Mr. Schechter is entitled to
receive options on each anniversary of the agreement to purchase the number of
shares equal to 150% of his annual compensation for the prior year divided by
the average price per share for the 30 day period preceding such anniversary.
This average price per share will also be the exercise price of the options. The
agreement states that options will be fully vested when issued, assignable, and
exercisable for five years after the date of the grant. Mr. Schechter agreed to
receive non-assignable options so that these options could be issued under the
1989 Plan. The Company expects to enter into a new three year employment
agreement with Mr. Schechter upon expiration of the current agreement. The terms
of the agreement have not yet been approved by the Board.
Shaun Rosen entered into an employment agreement with the Company's SVI
Retail Pty. Ltd. (Australia) subsidiary ("SVI Australia") dated November 5,
1996. The agreement was to continue in effect until November 4, 2001, unless
earlier terminated by SVI Australia or Mr. Rosen. Mr. Rosen's employment
agreement was terminated by mutual agreement on December 31, 1999; however, he
continues as an employee of SVI Australia. Mr. Rosen's employment agreement
provided for an initial annual salary of $147,500. The salary was subject to
annual increases to reflect inflation and discretionary annual increases. The
employment agreement further provides that Mr. Rosen will not compete with SVI
Australia for three years after the termination of the agreement, which was
deemed to occur on December 31, 1999.
Island Pacific, which merged into the Company's wholly-owned SVI
Retail, Inc. subsidiary ("SVI Retail") on April 1, 1999, entered into a
three-year employment agreement with Mark T. Wulff effective June 3, 1999
whereby he is employed as Island Pacific's Chief Executive Officer. The
agreement provides that Mr. Wulff cannot compete with Island Pacific's business
in the U.S. during the term of the agreement and for three years after
termination of the agreement unless SVI Retail terminates the agreement without
cause or Mr. Wulff terminates the agreement due to a relocation out of Orange
County, California. Mr. Wulff's annual compensation under the agreement is
$300,000. The agreement may be terminated at will by either party upon six
months prior written notice. SVI Retail may also terminate the agreement for
cause on three days' written notice for cause.
DIRECTOR COMPENSATION
No direct or indirect remuneration has been paid or is payable by the
Company to the directors in their capacity as directors during the fiscal year
ended March 31, 2000. The Company does not anticipate paying during the fiscal
year ending March 31, 2001 any direct or indirect remuneration to any directors
of the Company in their capacity as directors other than reimbursement of
expenses for attending directors' or committee meetings and discretionary stock
option grants under the 1998 Plan. During the fiscal year ended March 31, 2000,
Ivan M. Epstein received an option to purchase 100,000 shares of the common
stock of the Company at an exercise price of $7.75. The option expires on
October 20, 2009 and is fully vested.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION (1)
It is the duty of the Compensation Committee to review and determine
the salaries and bonuses of executive officers of the Company, including the
Chief Executive Officer, and to establish general compensation policies for such
individuals. The Compensation Committee was formed in April 1998. During the
2000 fiscal year, the Compensation Committee consisted of Ian Bonner and Donald
S. Radcliffe. Subsequent to March 31, 2000, Gerald Rubenstein was appointed to
the Compensation Committee in place of Mr. Radcliffe.
The primary compensation philosophy of the Company is to offer
competitive compensation packages that reflect the technical requirements of the
software development business sector and reward employees for their direct
contribution to the Company's overall financial performance and growth during
the previous fiscal year.
The Company measures individual and group performance on the basis of
both qualitative and quantitative factors. The Company believes that the general
components of compensation should include a competitive base salary, performance
based bonuses where applicable and stock option grants tied to specific and
group performance.
24
<PAGE>
EXECUTIVE COMPENSATION:
Base salaries are intended to be competitive with the software
development market and include an internal evaluation of the responsibilities of
each position. Salaries for executive officers are reviewed annually. This
annual review includes a detailed review of all compensation elements in
relationship to the competitive market for similar executives, the Company's
historic financial performance and growth and the executive's direct
contribution to this performance. Other matters considered include any changes
in responsibility or any exceptional contribution.
The compensation policies for executives are designed to align salaries
and bonus compensation to the individual's performance in the short term and to
emphasize compensation from equity, primarily employee stock options, for
long-term incentives.
The Company's long-term incentive programs consist solely of stock
option programs under which all executives and other employees are periodically
granted stock options at the stock closing price on the date of the grant. The
option programs are designed to provide employees with significant compensation
based on overall Company performance as reflected in the stock price. Options
are typically issued with ten-year lives and a five-year vesting schedule to
create an incentive for long-term employment. Options are typically granted at
the time of hire for new key employees, at the time of promotion for certain
employees and at least annually to a broad group of existing employees and
executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION:
Barry M. Schechter, the Company's founder and Chief Executive Officer,
is currently employed under a three-year employment agreement which expires on
September 30, 2000. Under this agreement, Mr. Schechter received a base annual
salary of $240,000 from April 1, 1999 to September 30, which increased to
$300,000 on October 1, 1999. Additional compensation is provided in the form of
stock options to be granted on each employment anniversary date equal to 150% of
base salary for the preceding year divided by the average price per share of the
Company's common stock for the 30 day period immediately preceding the
anniversary date. All compensation to Mr. Schechter was paid pursuant to this
agreement.
Compensation payments in excess of $1 million to each of the Chief
Executive Officer or four other most highly compensated executive officers are
subject to a limitation on deductibility for the Company under Section 162(m) of
the Internal Revenue Code. Certain performance-based compensation is not subject
to the limitation on deductibility. Cash compensation for the fiscal year ended
March 31, 2000 to the Chief Executive Officer and the four other most highly
compensated executive officers was below $1 million. The Company has issued
stock options to its Chief Executive Officer and certain other of its most
highly compensated executive officers. To the extent these options are
non-qualified stock options, or to the extent any of these executive officers
makes a disqualifying disposition of an incentive stock option, the amount of
the deduction which the Company will be entitled may be limited to the extent
the ordinary income recognized by the executive together with all other
compensation in a given year exceeds the $1 million limitation in Section
162(m).
Compensation Committee
Ian Bonner
Gerald Rubenstein
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ian Bonner and Donald S. Radcliffe served as the members of the
Compensation Committee during the fiscal year ended March 31, 2000. No member of
the Company's Compensation Committee during the last completed fiscal year has
ever been an officer of the Company or any of its subsidiaries. During the last
completed fiscal year, no executive officer of the Company served as a member of
a compensation committee or board of directors of any entity that had one or
more of its executive officers serving as a member of the Company's Compensation
Committee.
25
<PAGE>
STOCK PERFORMANCE GRAPH (1)
The following graph shows a comparison of total stockholder return of
an investment of $100 cash on March 31, 1995 through March 31, 2000 for (i) the
Company's common stock, (ii) the S&P Computer Software Small Capitalization
Group and (iii) the Russell 2000 Index.
All values assume reinvestment of the full amount of all dividends. No
cash dividends have been declared on the Company's common stock. Stockholder
returns over the indicated period should not be considered indicative of future
stockholder returns.
<TABLE>
<CAPTION>
31-Mar-95 29-Mar-96 31-Mar-97 31-Mar-98 31-Mar-99 31-Mar-00
<S> <C> <C> <C> <C> <C> <C>
SVI HOLDINGS, INC 100.00 2162.81 557.14 1147.05 3637.80 2589.06
COMPUTER(SOFTWARE&SVC)-SMALL 100.00 153.92 118.85 189.45 178.95 347.50
RUSSELL 2000 INDEX 100.00 129.04 135.64 192.62 161.32 221.74
</TABLE>
[Total Return Index graph represented above here]
(1)This Section is not deemed "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference in any filing of
the Company under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, whether made before or after the date hereof
and irrespective of any general incorporation language in any such filing.
26
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description of transactions entered into between
the Company and certain of its executive officers, directors and stockholders
holding more than 5% of the outstanding common stock during the fiscal year.
Certain of these transactions will continue in effect and may result in
conflicts of interest between the Company and such individuals. Although these
persons may owe fiduciary duties to the Company and its stockholders, there is a
risk that such conflicts of interest may not be resolved in favor of the
Company.
TRANSACTIONS WITH SOFTLINE LIMITED
Softline Limited ("Softline") beneficially owns approximately 56.2% of
the outstanding common stock of the Company, and is therefore a parent
corporation to the Company. Softline is a South African company listed on the
Johannesburg Stock Exchange. Barry M. Schechter, Ivan M. Epstein, Gerald
Rubenstein and Steven Cohen are each directors of Softline. Mr. Epstein is Chief
Executive Officer and Mr. Cohen is Chief Operating Officer of Softline.
During the fiscal year ended March 31, 2000, Softline exercised
outstanding options to purchase 2,376,188 shares of common stock of the Company
at $2.00 per share.
In June 1999, the Company granted Softline an option to purchase 10,000
shares of common stock of the Company at an exercise price of $11.75 per share,
exercisable for four years, as consideration for services performed by Softline
personnel on behalf of the Company.
In October 1999, the Company sold its South African retail software
subsidiary doing business under the name Triple-S Computers ("Triple-S") to
Softline. The purchase price was the Company's historical book basis in Triple-S
of $665,000. This amount was paid through Softline's surrender of 78,241 shares
of Company common stock valued at the $8.50 per share closing price of such
shares on the American Stock Exchange on October 1, 1999. Softline entered into
an acquisition agreement as of April 1, 1998 (the "Acquisition Agreement") to
acquire Triple-S and designated a subsidiary of the Company as nominee purchaser
to complete the acquisition. The Company in turn agreed to reimburse Softline
for all of its costs associated with the acquisition of Triple-S. On May 27,
1998, Softline agreed to accept shares of the Company's common stock valued at
the $4.5625 market price on that date for reimbursement of such costs.
Softline's initial acquisition costs totaled $760,000, and the Company
issued a total of 166,643 shares to Softline pursuant to such agreement. A
dispute subsequently arose between the seller of Triple-S on the one hand and
the Company and Softline on the other hand concerning an earn-out provision in
the acquisition agreement. This dispute was settled during the quarter ended
June 30, 1999, through payment by Softline of $113,000 to such seller. That
amount was credited against the exercise price of 56,718 outstanding options to
purchase common stock of the Company exercised by Softline in March 2000.
In May 2000, the Company announced that it is in discussions with
Softline concerning a possible business combination between the Company and
Softline. Softline has submitted an application to the Reserve Bank of South
Africa for a required preliminary approval of a business combination, but the
Reserve Bank has not yet acted on the application. If the Reserve Bank gives
preliminary approval and the parties decide to proceed, the terms ultimately
negotiated will be subject to further approval of the Minister of Finance of
South Africa. Any proposed transaction will also be subject to approval under
United States anti-trust laws, and most likely the approval of the stockholders
of both companies. The Company and Softline have no binding agreement and have
not yet established terms of a potential transaction.
In July 2000, Softline loaned the Company $10,000,000 pursuant to a
promissory note bearing interest at 10% per annum and due August 1, 2001. The
proceeds from this loan were used for a required principal payment on bank
indebtedness of the Company bearing interest at a higher rate. The note is
subordinated to the remaining bank indebtedness of the Company.
27
<PAGE>
OTHER TRANSACTIONS
In May 1999, the Company closed the sale of its IBIS Systems Limited
subsidiary ("IBIS") to a company affiliated with Peter Nagle and other members
of IBIS management with effect from January 1999. The sale price for IBIS was
(a) $2,250,000 cash, (b) 141,000 shares of Company common stock, (c) the
surrender by Mr. Nagle of the net shares issuable upon exercise of an option to
purchase 50,000 shares of Company common stock at $3.00 per share; and (d) a
promissory note (the "IBIS Note") in the stated principal amount of $18,108,000,
due October 1, 1999, bearing interest from May 1, 1999 at 2% over the base prime
rate for U.S. dollar deposits quoted by HSBC Plc. The promissory note was
secured by a pledge in favor of the Company of all of the common stock of IBIS.
As part of the transaction, the Company agreed to pay to an entity affiliated
with Mr. Nagle the $4,500,000 which is last payable under the IBIS Note, in
settlement of certain obligations assumed by the Company from Softline in
connection with the acquisition of IBIS. For this reason, the Company recorded a
net receivable on the IBIS Note of $13,608,000.
The purchaser did not repay the IBIS Note on the original due date
because it had not yet completed a reorganization that was intended to serve as
the source of funds to repay the note. The Company agreed to extend the due date
of the IBIS Note to November 15, 2000. The Company also agreed to permit the
purchaser to proceed with its reorganization with a wholly-owned subsidiary of
Integrity Software, Inc. ("Integrity"), a publicly traded company with prices
quoted on the National Quotation Bureau Pink Sheets. The purchaser exchanged all
of the outstanding IBIS stock for 1,536,000 common shares of Integrity,
representing approximately 11% of Integrity's outstanding shares at March 20,
2000. The Company agreed to substitute its security interest in the IBIS shares
for a security interest in the purchaser's Integrity shares. The Company also
obtained the right to convert all or any portion of the unpaid indebtedness
under the IBIS Note to Integrity shares valued at $12.50 per share and limited
rights to require Integrity to register such shares for resale under the
Securities Act of 1933. Three of our directors, Barry M. Schechter, Ivan M.
Epstein and Donald S. Radcliffe now serve on Integrity's board. The amount of
the receivable on the IBIS Note including accrued interest was $14,367,000 at
June 30, 2000.
In June 1999, Claudav Holdings Ltd. B.V., which may be deemed the
beneficial owner of 16% of the Company's outstanding common stock, loaned the
Company $1,500,000. The Company used the proceeds of this loan to pay a portion
of the purchase price for Island Pacific. The loan bears interest at the prime
rate with no stated maturity. The balance outstanding on this loan at June 30,
2000 was $756,000.
The office space for the Company's Sydney, Australia office is leased
from a company affiliated with Shaun Rosen, a former executive officer of the
Company. During the year ended March 31, 2000, the Company paid $163,000 in rent
for this office.
OTHER MATTERS TO BE PRESENTED AT MEETING
Management does not know of any other matters to be brought before the
Annual Meeting. If any other matters not mentioned in this proxy statement are
properly brought before the meeting, the individuals named in the enclosed proxy
intend to vote such proxy in accordance with their best judgment on such
matters.
Financial information for the Company's fiscal year ended March 31,
2000 is available in the Company's March 31, 2000 Report on Form 10-K. The
Company will provide a copy of the latest Form 10-K or a Form 10-K for a prior
fiscal year without charge, to each record or beneficial owner of its common
stock on the record date, if so requested. If the stockholder asks the Company
to provide copies of exhibits to the Form 10-K, there will be a reasonable
charge for copies of the exhibits to the report. Requests for these copies
should be directed to the Company at 12707 High Bluff Drive, Suite 335, San
Diego, California 92130, attention: David L. Reese, Secretary.
By Order of the Board of Directors
DAVID L. REESE
Secretary
October 23, 2000
28
<PAGE>
SVI HOLDINGS, INC.
12707 High Bluff Drive, Suite 335
San Diego, CA 92130
(858) 481-4404
----------
PROXY
----------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 16, 2000
----------
THIS PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS OF
SVI HOLDINGS, INC.
----------
The undersigned stockholder of SVI Holdings, Inc., a Nevada
corporation, hereby appoints Barry M. Schechter, Chief Executive Officer and
Chairman of the Board, or in his absence, David L. Reese, Chief Financial
Officer and Secretary, my proxy to attend and represent me at the annual meeting
of the stockholders of the corporation to be held on November 16, 2000 at 9 A.M.
(PDT), and at any adjournment thereof, and to vote my shares on any matter or
resolution which may come before the meeting and to take any other action which
I could personally take if present at the meeting.
1. ELECTION OF DIRECTORS
Management has nominated the following eight persons to stand for election. You
may vote "for" or you may withhold your vote from any of those persons
nominated.
a. Barry M. Schechter For _____
Withhold _____
b. Arthur S. Klitofsky For _____
Withhold _____
c. David L. Reese For _____
Withhold _____
d. Donald S. Radcliffe For _____
Withhold _____
e. Ivan M. Epstein For _____
Withhold _____
f. Gerald Rubenstein For _____
Withhold _____
g. Ian Bonner For _____
Withhold _____
h. Steven Cohen For _____
Withhold _____
<PAGE>
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSALS 2 THROUGH 7.
2. REINCORPORATION IN DELAWARE
To approve the plan of merger of the Company with and into its wholly
owned Delaware subsidiary, which merger will cause a change in the Company's
state of incorporation from Nevada to Delaware, including changes to the
organizational documents of the Company to conform to Delaware law and certain
other non-material changes.
For _______________ Against _______________ Abstain _______________
3. CHANGE OF CORPORATION NAME
To approve a change of the corporate name to "SVI Solutions, Inc."
For _______________ Against _______________ Abstain _______________
4. INCREASE IN AUTHORIZED CAPITALIZATION
To approve an increase in the authorized common stock from 50,000,000
shares to 100,000,000 shares.
For _______________ Against _______________ Abstain _______________
5. REDUCTION IN QUORUM
To approve a reduction in the required quorum for meetings of
stockholders from a majority of outstanding shares to one-third of the
outstanding shares.
For _______________ Against _______________ Abstain _______________
6. APPROVE AMENDMENTS TO 1998 INCENTIVE STOCK PLAN
Approve the proposed amendments to the 1998 Incentive Stock Plan ("1998
Plan") to: (i) increase the aggregate number of shares of common stock
authorized for issuance under the 1998 Plan to 4,000,000 shares; (ii) authorize
an automatic annual increase in the shares reserved for issuance under the 1998
Plan by an amount equal to the lesser of 2% of the total number of shares
outstanding on the last trading day of the fiscal year or 600,000 shares (or a
lesser amount determined by the Board); and (iii) prohibit the granting of stock
awards under the 1998 Plan to any one participant in excess of 500,000 shares in
any calendar year.
For _______________ Against _______________ Abstain _______________
<PAGE>
7. ENGAGEMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Ratification of the continued engagement of Deloitte & Touche LLP as
the Company's independent public accountants and auditors for the fiscal year
ending March 31, 2001.
For _______________ Against _______________ Abstain _______________
Failure to check any of these boxes for each proposal will give Barry M.
Schechter or David L. Reese the authority to vote the proxy at his discretion.
This Proxy gives discretionary authority to my proxy to vote for me on such
other matters as may properly come before this meeting.
Number of Shares Owned:____________
Dated:_____________________________
--------------------------------------------
--------------------------------------------
SIGNATURE(S)
Please sign exactly as your name appears
hereon. If the stock is registered in the
names of two or more persons, each should
sign. Executors, administrators, trustees,
guardians and attorneys-in-fact should add
their titles. If signer is a corporation,
please give full corporate name and have a
duly authorized officer sign, stating title.
If signer is a partnership, please sign in
partnership name by authorized person.
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.
