Document:

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Exhibit 10.14

                               SVI SOLUTIONS, INC.

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                               PURCHASE AGREEMENT

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                                  May 29, 2002

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                                         SVI SOLUTIONS, INC.

                                 ----------------------------------

                                         PURCHASE AGREEMENT

                                 ----------------------------------

                                          TABLE OF CONTENTS

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<S>                                                                                                              <C>
1.       Definitions..............................................................................................1

         1.1   Definitions........................................................................................1

2.       Sale of Warrant and Convertible Note.....................................................................8

         2.1   Sale...............................................................................................8

         2.2   Delivery and Payment...............................................................................8

3.       Representations and Warranties of the Company............................................................9

         3.1   Organization and Standing..........................................................................9

         3.2   Capitalization.....................................................................................9

         3.3   Authorization......................................................................................9

         3.4   Validity of the Underlying Common Stock...........................................................10

         3.5   SEC Documents.....................................................................................10

         3.6   Preservation of Securities Law Exemption..........................................................10

         3.7   Voting Agreements.................................................................................11

         3.8   Consents..........................................................................................11

         3.9   Finders' Fees.....................................................................................11

         3.10   Investment Company...............................................................................11

         3.11   Compliance with Other Instruments................................................................11

                                                 i
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4.       Representations and Warranties of the Purchaser.........................................................12

         4.1   Power and Authority...............................................................................12

         4.2   Due Execution.....................................................................................12

         4.3   Investment Representations........................................................................12

         4.4   Finders' Fees.....................................................................................13

5.       Delivery and Condition..................................................................................13

         5.1   Opinion of the Company's Counsel..................................................................13

         5.2   Certificate of Good Standing......................................................................13

         5.3   Secretary's Certificate...........................................................................13

         5.4   Development Agreement.............................................................................14

         5.5   Escrow Agreement..................................................................................14

         5.6   Reorganization....................................................................................14

6.       Exercise of the Warrant and Conversion of the Face Amount of the Convertible Note.......................14

         6.1   Exercise of the Warrant and Conversion of the Face Amount of the Convertible Note.................14

         6.2   Mechanics of Exercise of the Warrant..............................................................15

         6.3   Mechanics of Conversion of the Face Amount of the Convertible Note................................16

7.       Adjustment to the Applicable Price of the Warrant and the Convertible Note..............................17

         7.1   Adjustment of the Applicable Price................................................................17

         7.2   Adjustment for Stock Dividends, Subdivisions and Combinations.....................................17

         7.3   Adjustments for Other Dividends and Distributions.................................................17

         7.4   Adjustment for Reclassification, Exchange or Substitution.........................................18

         7.5   Adjustment for Reorganizations, Mergers, Consolidations or Asset Sales............................18

         7.6   No Impairment.....................................................................................18

         7.7   Notice of Adjustment of Applicable Price..........................................................19

         7.8   Notice of Certain Corporate Actions...............................................................19

                                                 ii
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         7.9   Limitation on Holders' Rights.....................................................................19

         7.10   Reservation of Common Stock......................................................................20

         7.11   Taking of Record; Stock and Warrant Transfer Books...............................................20

         7.12   Replacement of Instruments.......................................................................20

8.       Covenants...............................................................................................21

         8.1   Inspection........................................................................................21

         8.2   Confidential Information..........................................................................21

         8.3   Observation Rights................................................................................21

         8.4   Maintenance of Insurance..........................................................................22

         8.5   Material Changes and Other Notices................................................................22

         8.6   Restrictions on Certain Action....................................................................22

         8.7   Weekly Project Meetings and Other Obligations of the Company......................................22

         8.8   Press Releases....................................................................................22

         8.9   Termination of Covenants..........................................................................23

         8.10   Certain Negative Covenants.......................................................................23

9.       Remedies................................................................................................23

         9.1   Adjustment of the Applicable Price Upon Breach of Covenants.......................................23

         9.2   Notice of Breach..................................................................................24

         9.3   Dispute of Breach Notice..........................................................................24

         9.4   Determination of Breach...........................................................................24

10.      Registration Rights.....................................................................................24

         10.1   Grant of Right...................................................................................24

         10.2   Certain Definitions..............................................................................25

         10.3   Piggyback Registration...........................................................................25

         10.4   Form S-3.........................................................................................27

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         10.5   Expenses of Registration.........................................................................28

         10.6   Obligations of the Company.......................................................................28

         10.7   Obligations of the Holders.......................................................................30

         10.8   Rule 144 Reporting...............................................................................30

         10.9   Termination of Registration Rights...............................................................31

11.      Transfer................................................................................................31

         11.1   Transfers Generally..............................................................................31

         11.2   Disposition of Securities........................................................................31

         11.3   Transfers of Restricted Securities Pursuant to Registration Statements and Rule 144, Etc.........32

         11.4   Notice of Certain Transfers......................................................................32

         11.5   Restrictive Legend...............................................................................32

         11.6   Termination of Restrictions......................................................................32

         11.7   Transfer, Division and Combination...............................................................32

12.      Release.................................................................................................33

13.      Survival; Indemnification...............................................................................34

         13.1   Survival.........................................................................................34

         13.2   Indemnification by the Company and the Purchaser.................................................34

         13.3   Notification by Indemnified Party................................................................37

14.      Miscellaneous...........................................................................................37

         14.1   Entire Agreement.................................................................................37

         14.2   Governing Law....................................................................................38

         14.3   Counterparts.....................................................................................38
         14.4   Jurisdiction.....................................................................................38

         14.5   Attorneys' Fees..................................................................................38

         14.6   Waiver of Jury Trial.............................................................................38

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         14.7   Headings.........................................................................................38

         14.8   Notices..........................................................................................38

         14.9   Severability.....................................................................................39

         14.10   Delays or Omissions.............................................................................40

         14.11   Amendments and Waivers..........................................................................40
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                                                 v

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A.       FORM OF WARRANT
         Notice of Exercise
         Form of Assignment

B.       FORM OF CONVERTIBLE NOTE
         Notice of Conversion
         Form of Assignment

C.       SCHEDULE OF EXCEPTIONS
D.       FORM OF OPINION
E.       DEVELOPMENT AGREEMENT
F.       FORM OF ESCROW AGREEMENT

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                               SVI SOLUTIONS, INC.

                       -----------------------------------

                               PURCHASE AGREEMENT

                       -----------------------------------

         This Purchase Agreement (the "AGREEMENT") is entered into as of the
29th day of May 2002, by and between Toys "R" Us, Inc., a Delaware corporation,
(the "PURCHASER") and SVI Solutions, Inc., a Delaware corporation, (the
"COMPANY").

         WHEREAS, the Company desires to raise additional capital through the
sale and issuance of (i) a Warrant, as hereinafter described, and (ii) a
Convertible Note, as hereinafter described, to the Purchaser;

         WHEREAS, the Purchaser desires to enter into this Agreement to acquire
(i) the Warrant and (ii) the Convertible Note on the terms and conditions set
forth herein;

         WHEREAS, each party hereto desires to release the other from Claims
arising prior to execution of this Agreement, including without limitation,
arising out of, derived from, predicated upon or relating to the professional
services agreement dated as of July 10, 2001 between SVI Retail, Inc. and
Purchaser;

         WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Company and Purchaser are entering into a new development
agreement (the "DEVELOPMENT AGREEMENT" and together with the Warrant, the
Convertible Note and this Agreement, collectively the "TRANSACTION DOCUMENTS")
as a condition to Purchaser entering into this Agreement;

         WHEREAS, the Company has entered into the Transaction Documents and
granted Purchaser certain material benefits in consideration for and the
expectation of Purchasers full, complete and punctual performance under the
Development Agreement;

         NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties to this Agreement mutually agree as follows:

         1.       DEFINITIONS.

                  1.1 DEFINITIONS

                  1. Except as expressly provided herein, the following terms
shall have the following meanings (all terms in this Section 1 or in other
provisions of this Agreement in the singular to have the same meanings in the
plural and vice versa):

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                  2. "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares
(including treasury shares) of Common Stock issued or sold by the Company on or
after the date hereof, other than (a) the shares of Common Stock to be issued
upon exercise of the Warrant, (b) the shares of Common Stock to be issued upon
conversion of the Face Amount of the Convertible Note, (c) the shares of Common
Stock to be issued pursuant to the 1989 Plan and the 1998 Plan, (d) the shares
of Common Stock to be issued to Softline upon conversion of the Softline
Preferred Shares, and (e) shares of Common Stock issued to officers, directors
or employees of or consultants to the Company pursuant to other stock option or
stock purchase plans or agreements on terms approved by the Board.

                  3. "AFFILIATE" shall have the meaning assigned thereto in Rule
12b-2 of the Exchange Act.

                  4. "AGREEMENT" shall have the meaning assigned in the forepart
of this agreement.

                  5. "AMEX" shall mean the American Stock Exchange.

                  6. "APPLICABLE LAWS" shall mean any applicable statutes, laws,
ordinances, rules and regulations of any Governmental Authority of competent
jurisdiction and any filing requirements relating thereto.

                  7. "APPLICABLE PRICE" shall mean, with respect to the issuance
of securities by the Company to any Person, the Conversion Price or Exercise
Price, as the case may be.

                  8. "BOARD" shall mean the Board of Directors of the Company.

                  9. "BREACH NOTICE" shall have the meaning assigned to such
term in Section 9.2 of this Agreement.

                  10. "BREACH OCCURRENCE" shall have the meaning assigned to
such term in Section 9.1 of this Agreement.

                  11. "BUSINESS DAY" shall mean any day on which commercial
banks are not authorized or required to close in New York City.

                  12. "CAPITAL REORGANIZATION" shall have the meaning assigned
to such term in Section 7.5 of this Agreement.

                  13. "CLAIMS" shall have the meaning assigned to such term in
Section 12(a) of this Agreement.

                  14. "COMMENCEMENT DATE" shall have the meaning assigned to
such term in Section 6.1 of this Agreement.

                  15. "COMMISSION" shall mean the Securities and Exchange
Commission or any other similar or successor agency of the Federal government
with primary responsibility for administering the Securities Act.

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                  16. "COMMON STOCK" shall mean the Company's authorized Common
Stock, par value $0.0001 per share, and any stock into which such Common Stock
may thereafter be changed, including any subdivisions, combinations,
consolidation, splits or reclassifications thereof.

                  17. "COMPANY" shall have the meaning assigned to such term in
the forepart of this Agreement, and shall include any successors and permitted
assigns of the Company.

                  18. "COMPANY INDEMNIFIED PARTY" shall have the meaning
assigned to such term in Section 13.2(b) of this Agreement.

                  19. "COMPANY LOSSES" shall have the meaning assigned to such
term in Section 13.2(b) of the Agreement.

                  20. "COMPLETION DATE" shall have the meaning assigned to such
term in the Development Agreement.

                  21. "CONVERSION PERIOD" shall have the meaning assigned to
such term in Section 6.1 of this Agreement.

                  22. "CONVERSION PRICE" shall have the meaning assigned to such
term in Section 2.1 of the Agreement, as adjusted from time to time pursuant to
the provisions hereof.

                  23. "CONVERTIBLE NOTE" shall mean the convertible note
certificate in the form of Exhibit B to this Agreement, originally issued
pursuant to this Agreement, and all Convertible Notes issued upon transfer,
division or combination of, or in substitution for, any thereof.

                  24. "CONVERTIBLE NOTE STOCK" shall mean the shares of Common
Stock purchasable or purchased upon the conversion of the Face Amount of the
Convertible Note issued by the Company, including any such Common Stock into
which such Common Stock may thereafter be changed.

                  25. "CURRENT MARKET PRICE" means (i) if the Common Stock is
traded on a securities exchange, the average of the closing price each day over
the five (5) consecutive day period ending three days before the day the Current
Market Price of the securities is being determined, (ii) if the Common Stock is
actively traded over-the counter, the average of the closing bid and asked
prices quoted on the AMEX system (or similar system) each day over the five (5)
consecutive day period ending three days before the day the Current Market Price
of the securities is being determined, or (iii) if at any time the Common Stock
is not listed on any securities exchange or quoted in the AMEX System or the
over-the-counter market, then the Fair Value.

                  26. "DEVELOPMENT AGREEMENT" shall have the meaning assigned to
such term in the forepart of this Agreement.

                                       3
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                  27. "ESCROW AGREEMENT" shall have the meaning assigned to such
term in Section 5.5 of this Agreement.

                  28. "EVENT OF DEFAULT" shall have the meaning assigned to such
term in Exhibit B attached hereto.

                  29. "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time or any replacement act.

                  30. "EXERCISE PERIOD" shall have the meaning assigned to such
term in Section 6.1 of this Agreement.

                  31. "EXERCISE PRICE" shall have the meaning assigned to such
term in Section 2.1 and form of Warrant attached as Exhibit A hereto, as
adjusted from time to time pursuant to the provisions hereof.

                  32. "EXPIRATION DATE" shall mean the earlier of 7 years from
the date hereof or 3 years from the Completion Date (as defined in the
Development Agreement).

                  33. "FACE AMOUNT" shall have the meaning assigned to such term
in Exhibit B attached hereto.

                  34. "FAIR VALUE" per share of Common Stock (or other property
as the case may be) shall be the fair market value as determined in good faith
by the Board, provided that if the Holder disagrees with such determination,
then the Company and the Holder shall each designate a representative, and such
representatives will meet and use their best efforts to reach an agreement on
the Fair Value. If the representatives designated by the Company and the Holder
are unable to reach such an agreement, then the Holder will submit a list of at
least three independent appraisers each of which is a recognized independent
expert experienced in valuing businesses similar or related to the principal
business of the Company and its Subsidiaries. The Company shall select one of
the independent appraisers set forth on such list. The independent appraiser so
selected by the Company will determine the fair market value of a share of
Common Stock (or other property, as the case may be) and its determination
thereof will be final and binding on all parties concerned. The Company will
provide the independent appraiser so selected by the Company with all
information about the Company and its Subsidiaries that such independent
appraiser reasonably deems necessary for determining the Fair Value. The fees
and expenses of the appraisal process (including those of the independent
appraiser) will be paid by the Company. The Company may require that the
independent appraiser keep confidential any non-public information received as a
result of this paragraph pursuant to reasonable confidentiality arrangements.

                  35. "GAAP" shall mean United States generally accepted
accounting principles applied on a consistent basis.

                                       4
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                  36. "GOVERNMENTAL AUTHORITY" shall mean any nation or
government, any state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any such government.

                  37. "HOLDER" shall mean the Purchaser or, alternatively, any
Permitted Transferee who holds the Warrant, Warrant Stock, the Convertible Note
or Convertible Note Stock.

                  38. "INCENTIVE STOCK OPTION PLANS" shall mean the 1989 Plan
and the 1998 Plan.

                  39. "INDEMNIFIED PARTY" shall have the meaning assigned to
such term in Section 13.2(c) of this Agreement.

                  40. "INDEMNIFYING PARTY" shall have the meaning assigned to
such term in Section 13.2(c) of this Agreement.

                  41. "KNOWLEDGE OF THE COMPANY" shall mean the actual knowledge
of any executive officer of the Company without independent investigation.

                  42. "LIEN" shall mean any pledge, assignment, hypothecation,
mortgage, security interest, deposit arrangement, conditional sale or title
retaining contract, sale and leaseback transaction, financing statement filing,
or any other type of lien, charge, encumbrance or preferential arrangement.

                  43. "LOSSES" shall have the meaning assigned to such term in
Section 13.2(a) of this Agreement.

                  44. "MATERIAL ADVERSE EFFECT" means any material adverse
change or effect (i) on the business, assets, properties, condition (financial
or otherwise), prospects or results of operations of the Company and its
Subsidiaries, taken as a whole, or (ii) which would, directly or indirectly,
prevent or materially impede or delay the Company's obligations under this
Agreement or the other Transaction Documents, except in the case of either (i)
or (ii) for any change or effect (x) specifically set forth in the Schedule of
Exceptions or (y) relating to financial markets or the economy in general.

                  45. "1989 INCENTIVE STOCK OPTION PLAN" OR THE "1989 PLAN"
shall mean the Company's 1989 Incentive Stock Option Plan, the term of which
expired in October 1999.

                  46. "1998 INCENTIVE STOCK OPTION PLAN" OR THE "1998 PLAN"
shall mean the Company's 1998 Incentive Stock Option Plan, as amended in August
2000.

                  47. "NOTICE OF CONVERSION" shall have the meaning assigned to
such term in Section 6.3(i) of this Agreement.

                  48. "NOTICE OF EXERCISE" shall have the meaning assigned to
such term in Section 6.2(i) of this Agreement.

                                       5
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                  49. "PERMITTED TRANSFER" shall mean a transfer to a Permitted
Transferee by a Holder.

                  50. "PERMITTED TRANSFEREE" shall mean an "Affiliate" or
"Subsidiary" of a Holder as those terms are defined in Rule 405 under the
Securities Act who agrees to be bound by the terms of this Agreement and the
Warrant or the Convertible Note, as the case may be.

                  51. "PERSON" shall mean a corporation, an association, a
limited liability company, a partnership, a joint venture, an organization, a
business, an individual or a Government Authority.

                  52. "PROCEEDING" shall have the meaning assigned to such term
in Section 14.5 of this Agreement.

                  53. "PURCHASE PRICE" shall have the meaning assigned to such
term in Section 2.1 of this Agreement.

                  54. "PURCHASER" shall have the meaning assigned to such term
in the forepart of this Agreement.

                  55. "PURCHASER INDEMNIFIED PARTY" shall have the meaning
assigned to such term in Section 13.2(a) of this Agreement.

                  56. "REGISTER," "REGISTERED" or "REGISTRATION" shall have the
meaning assigned to such term in Section 10.2(a) of this Agreement.

                  57. "REGISTRABLE SECURITIES" shall have the meaning assigned
to such term in Section 10.2(b) of this Agreement.

                  58. "REGISTRATION EXPENSES" shall have the meaning assigned to
such term in Section 10.5 of this Agreement.

                  59. "REGISTRATION STATEMENT" shall have the meaning assigned
to such term in Section 10.2(a) of this Agreement.

                  60. "RELATED PARTIES" shall have the meaning assigned to such
term in Section 12(a) of this Agreement.

                  61. "REORGANIZATION" shall have the meaning assigned to such
term in Section 5.6 of this Agreement.

                  62. "REPRESENTATIVES" shall have the meaning assigned to such
term in Section 8.3 of this Agreement.

                  63. "RESTRICTED CERTIFICATE" shall mean a certificate for
Warrants, Convertible Notes or Underlying Common Stock, as the case may be,
required to bear the restrictive legend set forth in Exhibit A and Exhibit B
attached hereto and incorporated herein by reference.

                                       6
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                  64. "RESTRICTED SECURITIES" shall mean Underlying Common Stock
evidenced by a Restricted Certificate, Warrants evidenced by a Restricted
Certificate and Convertible Notes evidenced by a Restricted Certificate.

                  65. "RULE 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act and any successor provision thereto, all as
the same shall be in effect at the time.

                  66. "SCHEDULE OF EXCEPTIONS" shall have the meaning assigned
to such term in Section 3 of this Agreement.

                  67. "SEC DOCUMENTS" shall have the meaning assigned to such
term in Section 3.5 of this Agreement.

                  68. "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time or any replacement act.

                  69. "SENIOR INDEBTEDNESS" shall have the meaning assigned in
Exhibit B attached hereto.

                  70. "SOFTLINE" shall have the meaning assigned to such term in
Section 5.6 of this Agreement.

                  71. "SOFTLINE PREFERRED SHARES" shall have the meaning
assigned to such term in Section 5.6 of this Agreement.

                  72. "SUBSIDIARY" shall mean, for any Person, any corporation
or other entity of which at least a majority of the securities or other
ownership interests having by the terms thereof ordinary voting power to elect a
majority of the Board or other persons performing similar functions of such
corporation or other entity is at the time directly or indirectly owned or
controlled by such Person and/or one or more Subsidiaries of such Person.

                  73. "SUPERSEDED DOCUMENTS" shall have the meaning assigned to
such term in Section 12(a) of this Agreement.

                  74. "TRANSACTION DOCUMENTS" shall have the meaning assigned to
such term in the forepart of this Agreement.

                  75. "TRANSFERRED CONVERTIBLE NOTE" shall have the meaning
assigned to such term in Section 11.7 of this Agreement.

                  76. "TRANSFERRED WARRANT" shall have the meaning assigned to
such term in Section 11.7 of this Agreement.

                  77. "UNDERLYING COMMON STOCK" shall mean the underlying shares
of Common Stock issuable upon exercise of the Warrant or conversion of the Face
Amount of the Convertible Note as adjusted from time to time hereunder.

                                       7
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                  78. "WARRANT" shall mean the warrant certificate in the form
of Exhibit A to this Agreement, originally issued by the Company pursuant to
this Agreement, and all Warrants issued upon transfer, division or combination
of, or in substitution for, any thereof. All Warrants shall at all times be
identical as to terms and conditions and expiration date, except as to the
Underlying Common Stock for which they may be exercised.

                  79. "WARRANT STOCK" shall mean the shares of Common Stock of
the Company purchasable or purchased upon the exercise of Warrant issued by the
Company, including any such Common Stock into which such Common Stock may
thereafter be changed.

         2.       SALE OF WARRANT AND CONVERTIBLE NOTE.

                  2.1 SALE. Subject to the terms and conditions of this
Agreement, (i) the Company agrees to sell and issue to the Purchaser and the
Purchaser agrees to purchase from the Company a Warrant, exercisable upon
seventy-five (75) days notice, which entitles the Purchaser to purchase
2,500,000 shares of the Company's Common Stock at an exercise price of $0.553
per share, as adjusted from time to time pursuant to the provisions hereof (the
"EXERCISE PRICE") and in the form of Warrant attached hereto as Exhibit A and
incorporated herein by reference and (ii) the Company agrees to sell and issue
to the Purchaser and the Purchaser agrees to purchase from the Company a
Convertible Note which entitles the Purchaser to convert the Face Amount of the
Convertible Note, upon seventy-five (75) days notice, into shares of the
Company's Common Stock at a conversion price of $0.553 per share, as adjusted
from time to time pursuant to the provisions hereof (the "CONVERSION PRICE") and
in the form of Convertible Note attached hereto as Exhibit B and incorporated
herein by reference for the purchase price (the "PURCHASE PRICE") of one million
three hundred eighty two thousand six hundred and two dollars ($1,382,602.00),
paid in installments as provided in Section 2.2 of the Agreement.

                  2.2 DELIVERY AND PAYMENT. The Company agrees to deliver the
Warrant and the Convertible Note to the Purchaser upon execution of this
Agreement and Purchaser agrees to pay the following amounts at the time
indicated by wire transfer or by such other means as shall be mutually agreed
upon by the Company and the Purchaser; PROVIDED, HOWEVER, the Purchaser shall
not be required to make any additional payments under this Section 2.2 if the
Development Agreement has been terminated by Purchaser pursuant to and in
accordance with Section 1.3, Section 1.4(b) or Section 1.4(c)(i), (c)(ii) or
(c)(iii) thereof.

                                PAYMENT SCHEDULE
                                ----------------
DATE                                                              AMOUNT
----                                                              ------
Prior to the date hereof................................       $324,235.00
May 29, 2002............................................        $50,000.00
June 26, 2002...........................................       $500,000.00
July 29, 2002...........................................       $140,000.00
August 28, 2002.........................................       $140,000.00
September 27, 2002......................................       $228,367.00

                                       8
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         3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Subject to and except
as disclosed by the Company in the Schedule of Exceptions attached hereto as
Exhibit C and incorporated herein by reference (the "SCHEDULE OF EXCEPTIONS"),
the Company makes the following representations and warranties to the Purchaser
as of the date hereof.

                  3.1 ORGANIZATION AND STANDING. The Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware, has all requisite corporate power and authority to own and
operate its properties and assets and to carry on its business as now conducted
and as currently proposed to be conducted. The Company is duly qualified and
authorized to do business and is in good standing as a foreign corporation in
each jurisdiction where the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for any failures to
be so qualified which would not, individually or in the aggregate, have and
reasonably be expected to have a Material Adverse Effect.

                  3.2 CAPITALIZATION. The authorized capital stock of the
Company consists of:

                           (a) PREFERRED STOCK: 5,000,000 shares of preferred
stock, $.0001 par value, 141,000 shares of which are issued and outstanding.

                           (b) COMMON STOCK: 100,000,000 shares of Common Stock,
$.0001 par value, of which 28,566,941 shares are issued and outstanding (the
"COMMON STOCK").

         All of the outstanding shares of capital stock of the Company have been
duly authorized and validly issued, are fully paid and nonassessable and were
issued in compliance with all Applicable Laws. The Company has duly and validly
reserved (i) 2,500,000 shares of Common Stock for issuance upon exercise of the
Warrant; (ii) 2,500,000 shares of Common Stock for issuance upon conversion of
the Face Amount of the Convertible Note; (iii) 6,100,000 shares of the Company's
Common Stock for issuance under the Incentive Stock Option Plans, pursuant to
which 761,575 shares of Common Stock are issued and outstanding, options to
purchase 4,459,749 shares are outstanding, and 878,676 shares remain available
for future grant; (iv) 1,046,812 shares of Common Stock issuable on the exercise
of non-statutory stock options granted to non-employees; and (v) 3,966,639
shares of Common Stock issuable on the exercise of warrants outstanding.

                  3.3 AUTHORIZATION. All corporate action on the part of the
Company and its Subsidiaries, officers, directors and shareholders necessary for
(i) the authorization, execution and delivery of the Transaction Documents, (ii)
the performance of all the Company's obligations hereunder and thereunder and
(iii) the authorization, issuance, conversion, sale and delivery of the Warrant
and the Convertible Note and the reservation of the Underlying Common Stock has

                                       9
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been taken prior to the date hereof. The Transaction Documents, when executed
and delivered by Purchaser, will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws affecting creditors' rights, and subject
to general principles of equity and to limitations of equitable relief.

                  3.4 VALIDITY OF THE UNDERLYING COMMON STOCK. The exercise of
the Warrant and the conversion of the Face Amount of the Convertible Note into
the Underlying Common Stock will not be subject to any preemptive rights, rights
of first refusal or other preferential rights that have not been waived, and the
Underlying Common Stock when issued upon exercise of the Warrant or conversion
of the Face Amount of the Convertible Note will be duly and validly issued
(including, without limitation, issued in compliance with all Applicable Laws),
fully paid and nonassessable and will be free of any Liens; PROVIDED, however,
that the Underlying Common Stock will be subject to restrictions on transfer as
set forth herein or imposed by applicable securities laws.

                  3.5 SEC DOCUMENTS. The Company has filed with the Commission
all forms, reports, schedules, statements and other documents required to be
filed with the Commission by the Company (together with all information
incorporated therein by reference, the "SEC DOCUMENTS"). Except as set forth in
Section 3.9 of the Schedule of Exceptions attached hereto, no Subsidiary of the
Company is required to file any form, report, schedule, statement or other
document with the Commission. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the
Commission promulgated thereunder applicable to such SEC Documents, and none of
the SEC Documents at the time they were filed contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any SEC Document has been revised or superseded by
a later filed SEC Document, none of the SEC Documents contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements (including the related notes) included in the SEC Documents comply as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto, have
been prepared in accordance with GAAP (except, in the case of unaudited
statements, as permitted by Form 10-QSB of the Commission and except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
dates thereof and their consolidated results of operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal,
recurring year-end audit adjustments).

                  3.6 PRESERVATION OF SECURITIES LAW EXEMPTION. Assuming the
accuracy of Purchaser's representations and warranties set forth in Section 4.3

                                       10
<PAGE>

hereof, the issuance of the Warrant and the Convertible Note as contemplated by
this Agreement are exempt from the registration requirements of any Applicable
Laws, and neither the Company nor any authorized agent acting on its behalf to
the Knowledge of the Company has taken or will take any action hereafter that
would cause the loss of such exemption.

                  3.7 VOTING AGREEMENTS. The Company has no agreement,
obligation or commitment with respect to the election of any individual or
individuals to the Board and, to the Knowledge of the Company, there is no
voting agreement or other arrangement among its shareholders with respect to the
election of any individual or individuals to the Board or for any other purpose.

                  3.8 CONSENTS. Except as provided in Schedule 3.8, no consent,
approval, order, license, permit or authorization of, or notification,
registration, declaration or filing with, any Governmental Authority or any
other Person is required to be obtained or made by or with respect to the
Company or any of its Subsidiaries in connection with the execution, delivery
and performance by the Company of the Transaction Documents or the consummation
of the transactions contemplated thereby, including but not limited to, the
issuance and sale of the Warrant, the Convertible Note and the Underlying Common
Stock.

                  3.9 FINDERS' FEES. The Company has retained no finder or
broker in connection with the transactions contemplated by the Transaction
Documents and will have no liability to any such person in connection with the
transactions contemplated hereby.

                  3.10 INVESTMENT COMPANY. Neither the Company nor any person
controlling the Company is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

                  3.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation of any provisions of its articles of incorporation or its bylaws in
effect on and as of the date hereof, or of any provisions of any judgment,
decree or order by which it is bound. The execution and delivery by the Company
of the Transaction Documents do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms thereof, and the
issuance and sale of the Warrant, the Convertible Note and the Underlying Common
Stock pursuant thereto, will not breach, conflict with, or result in any
violation of or default (with or without notice or lapse of time or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of any benefit under, or result in the creation or
imposition of any Lien upon any of the properties or assets of the Company
under, (a) any loan or credit agreement, note, bond, mortgage, indenture, deed
of trust, license, franchise, lease, contract, commitment, permit, agreement,
understanding, instrument or obligation or other arrangement to which the

                                       11
<PAGE>

Company is a party or by which the Company or any of its properties or assets
may be bound or affected, (b) any provision of the certificate of incorporation
or bylaws of the Company, (c) any Applicable Law, in the case of subsections (a)
and (c) as would not, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect.

         4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company as follows.

                  4.1 POWER AND AUTHORITY. The Purchaser has the requisite power
and authority to enter into the Transaction Documents, to purchase the Warrant
and the Convertible Note subject to all of the terms under this Agreement, and
to carry out and perform its obligations under the terms of this Agreement.

                  4.2 DUE EXECUTION. This Agreement has been duly authorized,
executed and delivered by the Purchaser, and, upon due execution and delivery by
the Company, this Agreement will be a valid and binding agreement of the
Purchaser.

                  4.3 INVESTMENT REPRESENTATIONS.

                           (a) The Warrant, the Convertible Note and the
Underlying Common Stock to be received by the Purchaser will be acquired for
investment for its own account, not as a nominee or agent, and not with a view
to the sale or distribution of any part thereof, and the Purchaser has no
present intention of selling, granting participation in, or otherwise
distributing the same.

                           (b) The Purchaser is an "accredited investor" as that
term is defined in Section 501(a) of the Rules promulgated under the Securities
Act, is experienced in evaluating companies such as the Company, has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment, and has the ability to bear
the economic risks of its investment. The Purchaser has had access, during the
course of the transactions and prior to its purchase of the Warrant and the
Convertible Note, to all such information as it deemed necessary or appropriate
(to the extent the Company possessed such information or could acquire it
without unreasonable effort or expense) and that it has had, during the course
of the transactions and prior to its purchase of the Warrant and the Convertible
Note, the opportunity to ask questions of, and receive answers from, the Company
concerning the terms and conditions of the offering and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access.

                                       12
<PAGE>

                           (c) The Purchaser understands that the Warrant and
the Convertible Note (and the Underlying Common Stock) may not be sold,
transferred or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Warrant and the Convertible Note (or the
Underlying Common Stock) or an available exemption from registration under the
Securities Act, the Warrant and the Convertible Note (and the Underlying Common
Stock) must be held indefinitely.

                           (d) The Purchaser understands that the Warrant (and
the Underlying Common Stock) will be endorsed with a legend in the form provided
in Exhibit A attached hereto.

                           (e) The Purchaser understands that the Convertible
Note (and the Underlying Common Stock) will be endorsed with a legend in the
form provided in Exhibit B attached hereto.

                  4.4 FINDERS' FEES. The Purchaser has retained no finder or
broker in connection with the transactions contemplated by the Transaction
Documents and will have no liability to any such person in connection with the
transactions contemplated hereby.

         5. DELIVERY AND CONDITION. On or before the date hereof, the Company
has delivered to the Purchaser each of the following documents and the
Reorganization (as defined below) has occurred:

                  5.1 OPINION OF THE COMPANY'S COUNSEL. The Purchaser has
received from counsel to the Company an opinion letter addressed to them, dated
the date hereof, in the form attached hereto as Exhibit D.

                  5.2 CERTIFICATE OF GOOD STANDING. There has been delivered to
the Purchaser a Certificate of Good Standing for the Company from the Secretary
of State of the State of Delaware, dated within ten (10) days prior to the date
hereof.

                  5.3 SECRETARY'S CERTIFICATE. There has been delivered to the
Purchaser a certificate, dated as of the date hereof, signed by the Company's
Secretary or an Assistant Secretary and in form and substance satisfactory to
the Purchaser, that certifies (i) the names of its officers authorized to sign
the Transaction Documents, the Warrant and the Convertible Note and the other
documents, instruments or certificates to be delivered pursuant to the
Transaction Documents by the Company or any of its officers, together with true
signatures of such officers; (ii) that the copy of Board's resolutions attached
thereto evidencing the approval of the Transaction Documents, the issuance of
the Warrant and the Convertible Note, the completion of the Reorganization and
the other matters contemplated hereby was duly adopted and is in full force and
effect; and (iii) that the matters set forth in Section 5.6 have been completed
consistently with the terms set forth in such section.

                                       13
<PAGE>

                  5.4 DEVELOPMENT AGREEMENT. The Company and the Purchaser shall
have entered into a new Development Agreement in the form of Exhibit E attached
hereto.

                  5.5 ESCROW AGREEMENT. The Company, the Purchaser and a third
party fiduciary shall have entered into the Escrow Agreement in the form of
Exhibit F attached hereto.

                  5.6 REORGANIZATION. As a condition precedent to the
Purchaser's obligations hereunder, the Company shall have completed a series of
transactions whereby (i) Softline Limited ("SOFTLINE") surrendered 10,700,000
shares of the Company's Common Stock in exchange for a $7.0 million note payable
by Kielduff Investments Limited held by the Company; (ii) Softline surrendered
and cancelled an $12.3 million subordinated promissory note payable by the
Company held by Softline in exchange for up to 141,000 shares of the Company's
preferred stock, par value $0.0001, (the "SOFTLINE PREFERRED SHARES") with the
terms set forth in the Certificate of Designations of the Company filed with the
Secretary of State of the state of Delaware on April 1, 2002; (iii) the Company
has entered into a "stand-still" agreement with Union Bank of California, N.A.
to extend the maturity date of the Company's indebtedness until August 2003 and
(iv) the Company has completed the sale of SVI Retail (Pty) Limited (Australia),
its wholly owned Australian Subsidiary (collectively, the "REORGANIZATION").

         6. EXERCISE OF THE WARRANT AND CONVERSION OF THE FACE AMOUNT OF THE
CONVERTIBLE NOTE.

                  6.1 EXERCISE OF THE WARRANT AND CONVERSION OF THE FACE AMOUNT
OF THE CONVERTIBLE NOTE. The Warrant and the Convertible Note shall be
exercisable or convertible in whole or in part during the period commencing on
the date hereof (the "COMMENCEMENT DATE") and ending at 5:00 p.m., New York City
time, on the Expiration Date (the "EXERCISE PERIOD" with respect to the Warrant
and the "CONVERSION PERIOD" with respect to the Convertible Note). Upon
seventy-five (75) days notice to the Company, each Holder may, on one or more
occasions, on any Business Day, in whole or in part:

                           (a) exercise all or a portion of the Warrant into
Warrant Stock in accordance with the terms of the Warrant,

                                       14
<PAGE>

                           (b) convert all or a portion of the Face Amount of
the Convertible Note into Convertible Note Stock in accordance with the terms of
the Convertible Note.

80. All Underlying Common Stock issuable upon the exercise of the Warrant upon
payment therefore in accordance herewith, or conversion of the Face Amount of
the Convertible Note, shall be duly and validly issued by the Company, fully
paid and non-assessable and free and clear of all Liens.

81. The Company shall not be required to issue a fractional share of Common
Stock upon the exercise of any portion of the Warrant or the conversion of any
portion of the Face Amount of the Convertible Note. As to any fraction of a
share of Common Stock which a Holder would otherwise be entitled to purchase
upon such exercise or conversion, the Company at its option may in lieu of the
issuance of a fractional share either (i) pay a cash adjustment in respect of
such final fraction in an amount equal to the same fraction multiplied by the
Applicable Price on the date of exercise or (ii) issue a number of shares of
Common Stock rounded up or down to the next whole share.

82. If, anytime prior to February 28, 2004, the Purchaser terminates the
Development Agreement pursuant to and in accordance with Section 1.4(a) or
Section 1.4(b) thereof, the Purchaser shall only be entitled to exercise the
Warrant or convert the Face Amount of the Convertible Note for that number of
shares of Common Stock for which the Warrant or the Convertible Note are
exercisable or convertible, as the case may be, upon the effective date of such
termination. If, anytime prior to February 28, 2004, the Company terminates the
Development Agreement pursuant to and in accordance with Section 1.3 thereof,
the Purchaser may not exercise the Warrant or convert the Face Amount of the
Convertible Note in whole or in part. If, anytime prior to February 28, 2004,
the Purchaser terminates the Development Agreement pursuant to and in accordance
with Section 1.3 thereof, the Purchaser shall be entitled to exercise the
Warrant for 2,500,000 shares of Common Stock and the Face Amount of the
Convertible Note shall be $1,382,602.

                  6.2 MECHANICS OF EXERCISE OF THE WARRANT. In order to exercise
the Warrant the Holder shall deliver to the Company:

                  (i) written notice of such Holder's election to exercise all
         or some of such Warrant, in the form of the Notice of Exercise included
         in Exhibit A attached hereto (or a reasonable facsimile thereof) (the
         "NOTICE OF EXERCISE"); and

                  (ii) such Warrant; and

                  (iii) cash or a certified or bank check or checks payable to
         the Company or cancellation by the Holder of indebtedness or other
         obligations of the Company to the Holder in an aggregate amount equal
         to the Exercise Price multiplied by the number of shares of Underlying
         Common Stock exercised by the Warrant.

On the seventy-fifth day following the Company's receipt of the form of the
Notice of Exercise included in Exhibit A attached hereto, the Company shall
issue and deliver to such Holder a stock certificate or certificates
representing the Warrant Stock issuable by virtue of the exercise of any
Warrant.

                                       15
<PAGE>

83. If such Warrant shall have been exercised only in part, the Company shall,
at the time of delivery of the Warrant Stock, execute and deliver to such Holder
a new Warrant evidencing the rights of such Holder to purchase the unpurchased
Underlying Common Stock called for by such Warrant, which new Warrant shall in
all other respects be identical with the surrendered Warrant.

84. Notwithstanding anything to the contrary in Section 6.2 (iii), if the
Exercise Price is less than the Current Market Price of one share of Common
Stock the Holder may elect to exercise the Warrant by cashless exercise, in lieu
of exercising the Warrant for cash, and receive shares equal to the value (as
determined below) of this Warrant (or the portion thereof being surrendered) by
surrender of the Warrant at the principal office of the company together with a
properly executed and delivered form of the Notice of Exercise included in
Exhibit A attached hereto in which event the Company shall issue to the Holder a
number of shares of Warrant Stock computed using the following formula:

                          Y (A-B)
                  X =  ----------
                            A

                  Where:

                  X = number of shares of Warrant Stock to be issued to the
                      Purchaser
                  Y = number of shares of Warrant Stock purchasable under
                      the Warrant or, if only a portion of the Warrant is
                      being exercised, the portion of the Warrant being
                      exercised
                  A = Current Market Value
                  B = Exercise Price

                  6.3 MECHANICS OF CONVERSION OF THE FACE AMOUNT OF THE
CONVERTIBLE NOTE. In order to convert the Convertible Note the Holder shall
deliver to the Company:

                  (i) a written notice of such Holder's election to convert all
         or a portion of the Face Amount of such Convertible Note, in the form
         of the Notice of Conversion included in Exhibit B attached hereto (or a
         reasonable facsimile thereof) (the "NOTICE OF CONVERSION") ; and

                  (ii) such Convertible Note.

On the seventy-fifth day following the Company's receipt of the form of the
Notice of Conversion included in Exhibit B attached hereto, the Company shall
issue and deliver to such Holder a stock certificate or certificates for a
number of shares of Convertible Note Stock equal to the Face Amount of the
Convertible Note divided by the Conversion Price.

                                       16
<PAGE>

If the Face Amount of such Convertible Note shall have been converted only in
part, the Company shall, at the time of delivery of the certificate or
certificates representing the Convertible Note Stock to which the Holder is
entitled, execute and deliver to such Holder a new Convertible Note of any
authorized denomination as requested by a Holder in an aggregate principal
amount equal to and in exchange for the unredeemed portion of the Face Amount of
the Convertible Note, which new Convertible Note shall in all other respects be
identical with the surrendered Convertible Note.

         7. ADJUSTMENT TO THE APPLICABLE PRICE OF THE WARRANT AND THE
CONVERTIBLE NOTE.

                  7.1 ADJUSTMENT OF THE APPLICABLE PRICE. The Applicable Price
shall be subject to adjustment from time to time as set forth in this Section 7
and Section 9.1 hereof. All of the adjustments referred to in this Section 7
shall apply only to the Warrants which have not yet been exercised or to the
Face Amount of the Convertible Note which has not yet been converted.

                  7.2 ADJUSTMENT FOR STOCK DIVIDENDS, SUBDIVISIONS AND
COMBINATIONS. If the Company shall at any time from the Commencement Date:

                  (a) declare or pay, without consideration, a dividend payable
         in Additional Shares of Common Stock, or

                  (b) subdivide or reclassify its outstanding shares of Common
         Stock into a larger number of shares of Common Stock, or

                  (c) combine its outstanding shares of Common Stock into a
         smaller number of shares of Common Stock,

then the Applicable Price in effect immediately prior to such event shall,
concurrently with the effectiveness of such event, proportionately decrease or
increase as appropriate.

                  7.3 ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time, or from time to time after, the Commencement Date
shall make or issue, a dividend or other distribution payable in securities of
the Company (other than shares of Common Stock) or other assets or properties,
then and in each such event provision shall be made so that the Holders of the
Warrant and the Convertible Note shall receive in addition to the number of
shares of Common Stock receivable upon exercise of the Warrant or conversion of
the Face Amount of the Convertible Note, the amount of securities of the Company
or other assets or properties that they would have received had their Warrant or
Convertible Note been converted into Common Stock on the date of such event and
had thereafter, during the period from the date of such event to and including
the applicable exercise date of conversion date, as the case may be, retained
such securities or other assets or properties receivable by them as aforesaid
during such period giving application to all adjustments called for during such
period, under this paragraph with respect to the rights of the Holders of the
Warrant and the Convertible Note.

                                       17
<PAGE>

                  7.4 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION.
If at any time after the Commencement Date the Common Stock issuable upon the
exercise of the Warrant or conversion of the Face Amount of the Convertible Note
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by Capital Reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares, stock dividend or
reorganization, reclassification, merger, consolidation or asset sale provided
for elsewhere in this Section 7), then and in each such event and concurrently
upon such event's effectiveness the Applicable Price shall be proportionately
adjusted so that the Warrant and the Convertible Note shall be convertible into,
in lieu of the number of shares of Common Stock which the Holders would
otherwise have been entitled to receive, a number of shares of such other class
or classes of stock equivalent to the number of shares of Common Stock that
would have been subject to receipt by the Holders upon exercise of the Warrant
and conversion of the Face Amount of the Convertible Note immediately prior to
such event.

                  7.5 ADJUSTMENT FOR REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR
ASSET SALES. If at any time after the Commencement Date there is a merger,
consolidation, recapitalization, sale of all or substantially all of the
Company's assets or reorganization involving the Common Stock (collectively, a
"CAPITAL REORGANIZATION"), as part of such Capital Reorganization, provision
shall be made so that the Holders of the Warrants and the Convertible Notes will
thereafter be entitled to receive upon exercise or conversion the number of
shares of stock or other securities or property of the Company to which a Holder
of the number of shares of Common Stock deliverable upon conversion would have
been entitled on such Capital Reorganization, subject to adjustment in respect
to such stock or securities by the terms thereof. In any such case, appropriate
adjustment will be made in the application of the provisions of this Section 7
with respect to the rights of the Holders of the Warrants and the Convertible
Notes after the Capital Reorganization to the end that the provisions of this
Agreement (including adjustment of the Applicable Price then in effect and the
number of shares issuable upon exercise of the Warrants or conversion of the
Face Amount of the Convertible Notes) will be applicable after that event and be
as nearly equivalent as practicable. In the event that the Company is not the
surviving entity of any such Capital Reorganization, each Warrant and each
Convertible Note shall become Warrants and Convertible Notes of such surviving
entity, with the same powers, rights and preferences as provided therein.

                  7.6 NO IMPAIRMENT. The Company will not, by amendment of its
certificate of incorporation or bylaws, or through reorganization,
consolidation, merger, dissolution, issue or sale of securities, sale of assets
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Warrant or the Convertible Note, but will
at all times in good faith assist in the carrying out of all such terms and in
the taking of all such action as may be necessary or appropriate in order to

                                       18
<PAGE>

protect the rights of the Holders of the Warrant and the Convertible Note
against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any shares of stock issuable upon
the exercise of the Warrant or conversion of the Face Amount of the Convertible
Note above the amount payable therefor upon such exercise or conversion, and (b)
will take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable shares of
Underlying Common Stock upon exercise of the Warrant or conversion of the
Convertible Note.

                  7.7 NOTICE OF ADJUSTMENT OF APPLICABLE PRICE. Whenever the
Applicable Price shall be adjusted pursuant to this Section 7 and Section 9.1
hereof, the Company, at its expense, shall promptly, and in any case within 20
days after the making of such adjustments, prepare and deliver to the Holders a
certificate signed by the chief financial officer, chief executive officer or
President of the Company, setting forth, in reasonable detail, (a) such
adjustment or readjustment to the Applicable Price and (b) the method by which
such adjustment was calculated.

                  7.8 NOTICE OF CERTAIN CORPORATE ACTIONS. In case the Company
shall propose (a) to pay any dividend to the holders of its Common Stock or to
make any other distribution to the holders of its Common Stock, or (b) to offer
to the holders of its Common Stock rights to subscribe for or to purchase any
Additional Shares of Common Stock or other securities, rights or options, or (c)
to effect any reclassification of its Common Stock (other than a
reclassification involving only the subdivision, or combination, of outstanding
shares of Common Stock), or (d) to effect any Capital Reorganization, or (e) to
effect any consolidation, merger or share exchange, or any sale, lease, transfer
or other disposition of all or a majority of its property, assets or business,
or (f) to effect the liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to each Holder prior notice of
such proposed action, which shall specify the date on which a record is to be
taken for the purposes of such stock dividend, distribution or offering of
rights, or the date on which such reclassification, reorganization,
consolidation, merger, share exchange, sale, lease, transfer, disposition,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of Common Stock, if any such date is to be
fixed and shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action on the Common Stock,
if any, and the number and kind of any other shares of stock which will comprise
the Underlying Common Stock, and the purchase price or prices thereof, after
giving effect to any adjustment, if any, which will be required as a result of
such action. Such notice shall be so given in the case of any action covered by
clause (a) or (b) above at least twenty (20) days prior to the record date for
determining holders of the Common Stock for purposes of such action, and in the
case of any other such action, at least twenty (20) days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.

                  7.9 LIMITATION ON HOLDERS' RIGHTS. Prior to the exercise of
the Warrant or the conversion of the Face Amount of the Convertible Note, the
Holder thereof shall not be entitled to any rights of a stockholder by reason of
holding the Warrant or the Convertible Note, including, without limitation, the
right to vote or receive dividends or other distributions, or any notice of any
proceedings of the Company except as expressly provided in this Agreement.

                                       19
<PAGE>

                  7.10 RESERVATION OF COMMON STOCK. The Company shall at all
times reserve and keep available for issuance upon the exercise of any Warrant
or the conversion of the Face Amount of the Convertible Note such Underlying
Common Stock as will be sufficient to permit the exercise and conversion in full
of any outstanding Warrant and Convertible Note. If at any time the number of
authorized but unissued shares of the Common Stock shall not be sufficient to
effect the exercise of this Warrant, the Company will take all such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock as shall be sufficient for such purpose.

                  85. Before taking any action which would result in an
adjustment to the Applicable Price the Company shall (a) take any corporate
action which is necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Underlying Common Stock free and
clear of all taxes, Liens and charges upon the exercise of any Warrant or the
conversion of the Face Amount of any Convertible Note, as the case may be,
immediately after the taking of such action and (b) obtain all such
authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.

                  86. The Company will list on each national securities exchange
or AMEX on which any Common Stock may at any time be listed, subject to official
notice of issuance upon exercise of any Warrant or conversion of any Convertible
Note, as the case may be, and will maintain such listing of, all shares of
Common Stock from time to time issuable upon the exercise of the Warrant or the
Convertible Note, as the case may be. The Company will also so list on each
national securities exchange, and will maintain such listing of, any other
securities if at the time any securities of the same class shall be listed on
such national securities exchange or AMEX by the Company.

                  7.11 TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. The
Company shall not at any time, except upon complete dissolution, liquidation or
winding up, close its stock transfer books, its Warrant transfer books or its
Convertible Note transfer books so as to result in preventing or delaying the
exercise, conversion or transfer of any Warrant or any Convertible Note, as the
case may be, unless otherwise required by any applicable federal, state or local
law.

                  7.12 REPLACEMENT OF INSTRUMENTS. Upon receipt by the Company
of evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any certificate or instrument evidencing any
Warrant or the Convertible Note issued by the Company, and

                  (a) in the case of loss, theft or destruction, of an indemnity
         reasonably satisfactory to it, PROVIDED that, if the owner of the same
         is an initial Holder, its own agreement of indemnity shall be deemed to
         be satisfactory, or if the owner of the same is a Holder the Company
         may require a bond, or

                                       20
<PAGE>

                  (b) in the case of mutilation, upon surrender or cancellation
         thereof,

the Company, at its expense, shall execute, register and deliver, in lieu
thereof, a new certificate or instrument for (or covering the purchase of) an
equal number of Warrants or Warrant Stock or Convertible Notes or Convertible
Note Stock, as the case may be.

         8.       COVENANTS.

                  8.1 INSPECTION. At reasonable times and during normal business
hours, in a manner which does not unreasonably interfere with the business and
operations of the Company, the Company shall permit the Purchaser, its attorney
or its other representative to visit and inspect the Company's properties, to
examine the Company's books of account and other records and agreements, to make
copies or extracts therefrom and to discuss the Company's affairs, finances and
accounts with its officers, management employees and independent auditors often
as such Purchaser or transferee may reasonably request; PROVIDED, however, that
the Purchaser shall bear any costs or expenses of such investigations or
inquiries.

                  8.2 CONFIDENTIAL INFORMATION. The Purchaser understands and
acknowledges that the purchase or sale of securities by a person that possesses
material, non-public information concerning the issuer of the securities may
violate Applicable Laws. The Purchaser hereby agrees that it shall not trade in
the Company's securities in violation of Section 10(b) of the Exchange Act and
Rule 10b-5 thereunder.

                  8.3 OBSERVATION RIGHTS. So long as the Purchaser holds the
Convertible Note or Warrant or any Underlying Common Stock, the Company shall
invite two representatives of the Purchaser to attend all meetings of its Board
(the "REPRESENTATIVES"), including any committee thereof, in a
nonvoting-observer capacity and shall give such Representatives copies of all
notices, minutes, consents and other materials it provides to its directors,
PROVIDED, HOWEVER, that such Representatives shall agree in writing not to
disclose such materials to any third party unless legally required to do so (in
which case Purchaser shall agree to use its commercially reasonable efforts to
obtain reliable assurance that confidential treatment will be accorded such
materials) and, if an attorney-client privileged communication will occur, such
Representatives may be excused from participation in such communication if the
Company determines in good faith, based on the advice of counsel, that such
excusal is necessary in order to preserve the Company's attorney-client
privilege (in which case Purchaser shall be provided advance notice of such
excusal and a summary of the subject matter discussed to the fullest extent
possible while preserving such attorney-client privileged communication). All
reasonable expenses of one such Representative incurred in connection with his
or her service as a nonvoting-observer on the Board (including travel expenses
to the location of such meetings) shall be promptly reimbursed by the Company.
The Purchaser shall use its best efforts to minimize such expenses including,
without limitation, by attending meetings telephonically.

                                       21
<PAGE>

                  8.4 MAINTENANCE OF INSURANCE. The Company and each Subsidiary
shall keep in full force and effect fire, casualty and liability insurance
policies (including directors and officers insurance), in amount on terms that
its Board deems appropriate.

                  8.5 MATERIAL CHANGES AND OTHER NOTICES. The Company shall
promptly notify the Purchaser in writing of (a) any materially adverse changes
in the assets, properties, financial condition, operating results, prospects or
business of the Company and its Subsidiaries, including by promptly providing to
the Purchaser a copy of any press release or Form 8-K relating to the foregoing,
and (b) any lawsuit, claim, proceeding or investigation pending or, to the
Knowledge of the Company, threatened, or any judgment, order or decree involving
the Company or its Subsidiaries that has or would reasonably be expected to have
a Material Adverse Effect.

                  8.6 RESTRICTIONS ON CERTAIN ACTION. The Company shall not at
any time enter into an agreement or other instrument which limits or is intended
to limit in any manner its ability to perform its obligations under the
Transaction Documents or making such performance or the issuance of shares of
Common Stock upon the exercise of any Warrant, or the conversion of the Face
Amount of the Convertible Note, as the case may be, issued by it a default under
any such agreement or instrument.

                  8.7 WEEKLY PROJECT MEETINGS AND OTHER OBLIGATIONS OF THE
COMPANY. The Chief Executive Officer of the Company shall confer with the
Purchaser's project manager on a weekly basis to discuss the services being
provided to the Purchaser under the Development Agreement. The project manager
responsible for the services being provided to the Purchaser under the
Development Agreement, currently Colleen McNally, shall devote adequate time to
the services.

                  8.8 PRESS RELEASES. Subject to the Company's obligations to
comply with applicable laws and regulations, including without limitation
applicable securities' laws; provided the Company shall provide Purchaser with
prompt written notice of any such obligations and shall take no actions beyond
the scope of such obligations, the Company will receive Purchaser's approval in
its reasonable discretion before (i) releasing any press release that provides
any information regarding Purchaser and/or this Agreement or (ii) including
Purchaser's name on any published list of customers. Neither party shall use the
name, logos, service marks, trademarks and identity of the other (and the
Company shall not use those of Purchaser's sublicensees) in publicity,
advertising, or any similar activity without the prior written consent of the
other.

                                       22
<PAGE>

                  8.9 TERMINATION OF COVENANTS. The covenants set forth in
Sections 8.1 through 8.7 shall terminate as to the Purchaser and be of no
further force and effect at the time the Purchaser no longer holds at least (1)
25% of the Face Amount of the Convertible Note or (2) 25% of the underlying
Common Stock issuable upon conversion of the Face Amount of the Convertible Note
or (3) 25% of the Warrant or (4) 25% of the Underlying Common Stock issuable
upon exercise of the Warrant.

                  8.10 CERTAIN NEGATIVE COVENANTS. So long as the Purchaser
holds at least (1) 25% of the Face Amount of the Convertible Note or (2) 25% of
the underlying Common Stock issuable upon conversion of the Face Amount of the
Convertible Note or (3) 25% of the Warrant or (4) 25% of the Underlying Common
Stock issuable upon exercise of the Warrant, (a) the Company shall provide prior
written notice to the Purchaser for any action by the Company under clause (i)
below and (b) the prior written consent of the Purchaser shall be required for
any action by the Company under clauses (ii) or (iii) below:

                  (i) authorizes any sale or transfer of all or substantially
         all of the Company's assets or any transaction or series of
         transactions that have the economic effect of the foregoing, or

                  (ii) fundamentally changes the Company's business purpose; or

                  (iii) authorizes any material agreement, transaction or
         relationship with any person that controls, is controlled by, or is
         under common control with, the Company or with any officer, director,
         shareholder or employee of the Company, including any member of any of
         their immediate families, unless such agreement, transaction or
         relationship is (i) substantially on terms that would be offered by an
         unaffiliated party and (ii) approved by a majority of the unaffiliated
         members of the Board.

         9.       REMEDIES.

                  9.1 ADJUSTMENT OF THE APPLICABLE PRICE UPON BREACH OF
COVENANTS. If it is determined in accordance with the procedure outlined in
Section 9.4 that the Company has breached any of the covenants contained in
Section 8 herein, and the Company fails to cure such breach or obtain a waiver
as provided by herein, then (1) the Purchaser shall be entitled to stop any
further payments contemplated pursuant to the Development Agreement (effective
immediately upon written notice), and (2) the Exercise Price and Conversion
Price shall each be reduced by 10% of its then current amount, it being
understood, however, that such remedies shall not be the sole or exclusive
remedy of the Purchaser except for damages and that the Purchaser shall be
entitled to pursue remedies at law other than damages, including injunctive
relief or other equitable remedies, in the event of any such breach; it is
further understood that no remedy is exclusive of any other remedy and that all
available remedies are cumulative to the extent permitted by law. A "BREACH
OCCURRENCE" shall refer to a breach by the Company that has been determined as
set forth in Section 9.4.

                                       23
<PAGE>

                  9.2 NOTICE OF BREACH. The Purchaser shall give written notice
to the Chief Executive Officer of the Company, with a copy to the Secretary of
the Company and the Company's counsel, of any claim of breach of any covenant
contained in Sections 8, including in such notice a detailed description of the
facts upon which such breach is based (the "BREACH NOTICE") within a reasonable
period of time following the date on which the Purchaser obtained or should have
obtained knowledge thereof. The Company will have the right to make such
investigation of the Purchaser's claim as the Company may deem necessary or
desirable. The Company shall have 60 days from the date of receipt of the Breach
Notice to dispute the Breach Notice, or to cure such breach or obtain a waiver
thereof in accordance with the provisions hereto; PROVIDED, if by the nature of
such breach it is not susceptible to cure within 60 days, such 60 day period
will be extended for a reasonable period of time (but in no event beyond 180
days from the date of receipt of the Breach Notice) so long as the Company
diligently prosecutes appropriate curative action to completion.

                  9.3 DISPUTE OF BREACH NOTICE. If the Company disputes the
breach described in the Breach Notice, within 60 days after receipt of the
Breach Notice it shall give written notice to the Purchaser setting forth with
reasonable specificity the reasons for objecting thereto, whereupon the Company
and the Purchaser shall promptly and in good faith attempt to resolve such
dispute. If no such resolution can be reached after good faith negotiation,
either party may demand arbitration of the matter, and in any such event the
matter shall be settled by arbitration conducted by three arbitrators. The
Company and the Purchaser shall each select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The decision of the
arbitrators so selected as to the validity of any breach in such Breach Notice
shall be binding and conclusive upon the parties to this Agreement, and the
parties shall act promptly in accordance with such decision. Any such
arbitration shall be held in San Diego, California. Any such arbitration shall
be conducted under the rules then in effect of the American Arbitration
Association.

                  9.4 DETERMINATION OF BREACH. Any such breach shall be deemed
to be a Breach Occurrence triggering adjustment of the Applicable Price if the
Company fails to cure such breach within the time contemplated by Section 9.2,
or obtain a waiver thereof or invoke the dispute resolution procedures of
Section 9.3 within 60 days after the date of receipt of the Breach Notice.

         10.      REGISTRATION RIGHTS.

                  10.1 GRANT OF RIGHT. The Company hereby grants to each Holder
the registration rights set forth in this Section 10, with respect to the
Registrable Securities (as defined below) owned by such Holder.

                                       24
<PAGE>

                  10.2 CERTAIN DEFINITIONS. As used in this Section 10:

                  (a) The terms "REGISTER," "REGISTERED" and "REGISTRATION"
refer to a registration effected by filing with the Commission a registration
statement (the "REGISTRATION STATEMENT") in compliance with the Securities Act,
and the declaration or ordering by the Commission of the effectiveness of such
Registration Statement.

                  (b) The term "REGISTRABLE SECURITIES" means (i) shares of the
Warrant Stock, (iii) shares of the Convertible Note Stock and (iii) any shares
of Common Stock issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange or in replacement of, such shares
referenced in clauses (i) and (ii) above; PROVIDED, HOWEVER, that shares of
Common Stock or other securities shall only be treated as Registrable Securities
if and so long as (A) they have not been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, (B)
they have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(l)
thereof so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of such sale, and (C) they are held by
a Holder who cannot sell all Registrable Securities held by such Holder in any
three-month period except in a private transaction exempt from registration
pursuant to Rule 144, PROVIDED, HOWEVER, that such shares of Common Stock or
other securities shall continue to be treated as Registrable Securities with
respect to any Holder owning more than two percent (2%) of the Company's
outstanding Common Stock until such time as such Holder owns less than two
percent (2%) of the Company's outstanding Common Stock.

                  10.3 PIGGYBACK REGISTRATION.

                  (a) COMPANY REGISTRATION. If at any time or from time to time
the Company shall determine to register any of its securities for its own
account (other than a registration relating to an employee benefit plan or a
Rule 145 transaction), the Company will:

                           (i) promptly (but in any event within 10 days) give
to each Holder written notice thereof; and

                           (ii) subject to subsection (b) below, include in such
registration (and any related qualification under Applicable Laws or other
compliance so long as the Company is not required to execute a general consent
to service of process), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made within
fifteen (15) days after receipt of such written notice from the Company, by any
Holders.

                                       25
<PAGE>

                  (b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 10.3(a)(i). In such event the right of any Holders to
registration pursuant to this Section 10.3 shall be conditioned upon such
Holders' participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.

                  87. All Holders proposing to distribute their Registrable
Securities through such underwriting shall, together with the Company and the
other parties distributing their securities through such underwriting, enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 10.3, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Registrable Securities to
be included in the registration and underwriting. If such a limitation is
required, the Company shall so advise all holders of the Company's securities
that would otherwise be registered and underwritten pursuant hereto, and the
number of shares of such securities, including Registrable Securities, that may
be included in the registration and underwriting shall be allocated in the
following manner: shares, other than Registrable Securities and other securities
that have contractual rights with respect to registration with similar or
greater priority to those provided for in this Section 10.3, requested to be
included in such registration by shareholders shall be excluded, and if a
limitation on the number of shares is still required, the number of Registrable
Securities and other securities that have similar or greater contractual rights
with respect to registration that may be included shall be allocated among the
holders thereof in proportion, as nearly as practicable, to the amounts of
Registrable Securities requested to be registered and such other securities
requested to be registered and held by each such Holder at the time of filing
the Registration Statement. Any securities excluded or withdrawn from such
underwriting shall not be transferred in a public distribution prior to 90 days
after the effective date of the registration statement relating thereto, or such
shorter period as the underwriters shall require. For purposes of any such
underwriter cutback, all Registrable Securities and other securities held by any
Holder that is a partnership or corporation, shall also include any Registrable
Securities held by the partners, retired partners, shareholders or Affiliated
entities of such Holder, or the estates and family members of any such partners
and retired partners and any trusts for the benefit of any of the foregoing
persons, and such Holder and other persons shall be deemed to be a single
"selling holder," and any pro rata reduction with respect to such "selling
holder" shall be based upon the aggregate amount of shares carrying registration
rights and requested to be registered owned by all entities and individuals
included in such "selling holder," as defined in this sentence. No securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. Nothing in this Section 10.3
is intended to diminish the number of securities to be included by the Company
in the underwriting.

                  88. If any Holder disapproves of the terms of the
underwriting, it may elect to withdraw therefrom by written notice to the
Company and the underwriter. The Registrable Securities so withdrawn shall also
be withdrawn from registration.

                  (c) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 10.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.

                                       26
<PAGE>

                  10.4 FORM S-3.

                  (a) Within ninety (90) days after a request by a Holder, the
Company shall prepare and file with the Commission a registration statement on
Form S-3 (or, if Form S-3 is not then available to the Company, within 90 days
following such date on which Form S-3 next becomes available to the Company)
covering the registration of any Registrable Securities then outstanding or with
respect to which a Notice of Exercise or a Notice of Conversion has been
properly delivered to the Company pursuant to Section 14.7 hereof. The Company
shall use its commercially reasonable efforts to obtain the effectiveness of the
Registration Statement. The Company shall use commercially reasonable efforts to
keep such registration statement effective at all times until the termination of
the registration rights pursuant to Section 10 hereof. The Company shall not be
requested to effect more than two registrations in any 12 month period under
this Section 10.4.

                  (b) If the Company shall receive from any Holder a written
demand that the Company effect a registration pursuant to this Section 10.4, the
Company shall promptly give notice to all Holders that hold Registrable
Securities of the receipt of a request for registration pursuant to this Section
10.4 and shall provide a reasonable opportunity for other Holders to participate
in the registration; PROVIDED, HOWEVER, that the Company shall not be obligated
to effect any such registration if the Holders, as the case may be, together
with the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public of less than $500,000.
Notwithstanding the foregoing, nothing herein shall restrict, prohibit, or limit
in any way a Holder's ability to exercise its registration rights under Section
10 hereof.

                  (c) In the event that (i) the Company receives from a Holder a
written demand that the Company effect a registration pursuant to this Section
10.4 and (ii) the offering to which such registration relates is to be an
underwritten public offering, then to the extent that either the Holders of a
majority of the Registrable Securities to which such registration relates or the
managing underwriter notifies the Company in writing that, in the judgment of
such Holders or such managing underwriter, the inclusion of additional
information in the Form S-3 registration statement is of material importance to
the success of the offering, then the Company shall be obligated to include such
additional information in the registration statement to the reasonable
satisfaction of the Initiating Grantees or such managing underwriter, as the
case may be

                  (d) The Company shall not be required to take any action under
this Section 10.4, (i) if the Company within 21 days of the request of the
initiating Holder(s), give notice of its bona fide intentions to effect a filing
of a registration statement in connection with a primary offering of Common
Stock by the Company within 45 days of the receipt of the request, or (ii) the
Company shall furnish to such Holder(s) a certificate signed by the President or
chief financial officer of the Company stating that in the good faith judgment
of its Board of Directors it would be seriously detrimental to the Company and
its shareholders for a registration statement to be filed at the date such
filing would be required, in which case the Company shall have an additional
period of not more than (90) days within which to file such registration
statement; PROVIDED, HOWEVER, that the Company shall not use this right more
than once in any 12-month period.

                                       27
<PAGE>

                  10.5 EXPENSES OF REGISTRATION. All Registration Expenses (as
defined below) incurred in connection with all registrations effected pursuant
to Sections 10.3 and 10.4 shall be borne by the Company; PROVIDED, HOWEVER, that
the Company shall not be required to pay stock transfer taxes or underwriters'
discounts or selling commissions relating to Registrable Securities.
"REGISTRATION EXPENSES" means any and all expenses incident to performance of or
compliance with this Agreement, including, without limitation, (a) all
registration and filing fees of the Commission, a stock exchange or the National
Association of Securities Dealers, Inc., (b) all fees and expenses of complying
with Applicable Laws (including fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities) unless paid by the underwriters, (c) all printing, messenger and
delivery expenses, (d) all fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange, (e) the
reasonable fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incidental to such performance and
compliance, (f) the reasonable fees and disbursements of one counsel selected by
the Holders holding a majority of the Registrable Securities being registered to
represent all Holders that hold the Registrable Securities being registered in
connection with each such registration, (g) any fees and disbursements of
underwriters customarily paid by the issuers or sellers of securities, including
fees and disbursements of counsel for the underwriters, but excluding
underwriting discounts and commissions, (h) liability insurance if the Company
so desires or if the underwriters so require, and (i) the fees and expenses of
any special experts retained by the Company in connection with the requested
registration.

                  10.6 OBLIGATIONS OF THE COMPANY. In connection with the
registration of Registrable Securities, the Company shall, as expeditiously as
reasonably possible:

                  (a) Except as otherwise provided in this Section 10, use its
commercially reasonable efforts to cause such Registration Statement to become
effective, and keep such Registration Statement effective for the lesser of 120
days or until the Holders have completed the distribution relating thereto;

                  (b) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to keep such Registration
Statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such Registration Statement; PROVIDED, that
before filing a Registration Statement or prospectus, or any amendments or
supplements thereto, the Company will furnish to one counsel selected by the
Holders that hold a majority of the Registrable Securities covered by such
Registration Statement to represent all Holders of Registrable Securities
covered by such Registration Statement, copies of all documents proposed to be
filed, which documents will be subject to the review of such counsel;

                                       28
<PAGE>

                  (c) furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them;

                  (d) use its best efforts to register or otherwise qualify the
securities covered by such Registration Statement under such other Applicable
Laws as shall be reasonably requested by the Holders or the managing
underwriter, PROVIDED that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions where,
but for the requirements of this paragraph (d), it would not be obligated to be
so qualified;

                  (e) in the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering (each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement);

                  (f) notify each Holder that holds Registrable Securities
covered by such Registration Statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing and at the request of any such seller, promptly prepare and
promptly furnish to such seller a reasonable number of copies of an amended or
supplemental prospectus as may be necessary so that, as thereafter delivered to
the sellers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing;

                  (g) in the event of an underwritten public offering, obtain a
"cold comfort" letter or letters from the Company's independent public
accountants in customary form and covering matters of the type customarily
covered by "cold comfort" letters as the underwriter of such offering of such
Registrable Securities shall reasonably request;

                  (h) in the event of an underwritten public offering, obtain an
opinion of counsel for the Company in customary form and covering matters of the
type customarily covered in opinions of issuer's counsel as the underwriter of
such offering shall reasonably request;

                                       29
<PAGE>

                  (i) use its best efforts to list the Registrable Securities
covered by such Registration Statement with any securities exchange or AMEX, as
the case may be, on which the Common Stock is then listed;

                  (j) make available for inspection by each Holder including
Registrable Securities in such registration, any underwriter participating in
any distribution pursuant to such registration, and any attorney, accountant or
other agent retained by such Grantee or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, as such
parties may reasonably request, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such Grantee,
underwriter, attorney, accountant or agent in connection with such Registration
Statement, PROVIDED, HOWEVER, that such Holder, underwriter or agent shall agree
in writing, in a form satisfactory to the Company, to maintain the
confidentiality of any such information furnished to such Holder, underwriter or
agent in connection with such registration;

                  (k) cooperate with Holders including Registrable Securities in
such registration and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold, such certificates to be in such denominations and
registered in such names as such Holders or the managing underwriters may
request at least two Business Days prior to any sale of Registrable Securities;

                  (l) permit any Holder, which Holders, in the sole and
exclusive judgment, exercised in good faith, of such Holder, might be deemed to
be a controlling person of the Company, to participate in good faith in the
preparation of such Registration Statement and to require the insertion therein
of material, furnished to the Company in writing, that in the reasonable
judgment of such Holder and its counsel should be included; and

                  (m) promptly notify each Holders including Registrable
Securities in such registration and the underwriters, if any, (i) when the
Registration Statement, any pre-effective amendment, the prospectus or any
prospectus supplement or post-effective amendment to the Registration Statement
has been filed and, with respect to the registration statement or any
post-effective amendment, when the same has become effective, (ii) of any
written request by the Commission for amendments or supplements to the
Registration Statement or prospectus, (iii) of any the notification to the
Company by the Commission of its initiation of any proceedings with respect to
the issuance by the Commission of, or the issuance of by the Commission of, any
stop order suspending the effectiveness of the Registration Statement, and (iv)
of the receipt by the Company of any notification with respect to the suspension
of the qualification of any Registrable Securities for sale under the Applicable
Laws of any jurisdiction.

                  10.7 OBLIGATIONS OF THE HOLDERS. The Holder(s) of Registrable
Securities included in a Registration Statement shall furnish the Company such
information regarding such Holder(s), the Registrable Securities held by them
and the distribution proposed by such Holder(s) as is required by Applicable Law
to be disclosed in such Registration Statement or in a prospectus used in
connection therewith.

                  10.8 RULE 144 REPORTING. With a view to making available to
the Holders the benefits of certain rules and regulations of the Commission that
may permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:

                                       30
<PAGE>

                  (a) make and keep current public information available, within
the meaning of Rule 144 or any similar or analogous rule promulgated under the
Securities Act;

                  (b) file with the Commission, in a timely manner, all reports
and other documents required of the Company under the Securities Act and the
Exchange Act;

                  (c) so long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144, the Securities
Act and the Exchange Act; a copy of the most recent annual or quarterly report
of the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
it to sell any such securities without registration.

                  10.9 TERMINATION OF REGISTRATION RIGHTS. The rights of any
particular Holder to cause the Company to register securities under Sections
10.3 and 10.4 hereof shall terminate as to any Holder on the date such Holder is
able to dispose of all of its Registrable Securities in any 90-day period
pursuant to Rule 144 (or any similar or analogous rule promulgated under the
Securities Act); PROVIDED, HOWEVER, that such rights shall not terminate with
respect to any Holder owning more than two percent (2%) of the Company's
outstanding Common Stock of the Company until such time as such Holder owns less
than two percent (2%) of the outstanding Common Stock of the Company.

         11.      TRANSFER.

                  11.1 TRANSFERS GENERALLY. Except as otherwise permitted by
Section 11.2 and 11.6 hereof, Restricted Securities shall be transferable to a
Permitted Transferee only upon the conditions specified in this Section 11,
which conditions are intended, among other things, to insure compliance with the
provisions of the Securities Act in respect of the transfer of any Restricted
Securities. Any Holder shall, by its acceptance of any Warrant or Convertible
Note hereunder, be deemed to have made the representations, warranties and
agreements set forth in Section 4 hereof on the date of such acceptance.

                  11.2 DISPOSITION OF SECURITIES. Subject to compliance with the
provisions of this Section 11, any Holder shall have the right to transfer any
Restricted Securities to a Permitted Transferee in whole but not in part.

                                       31
<PAGE>

                  11.3 TRANSFERS OF RESTRICTED SECURITIES PURSUANT TO
REGISTRATION STATEMENTS AND RULE 144, ETC. The Restricted Securities may be
offered or sold by the Holder thereof pursuant to (a) an effective registration
statement under the Securities Act, (b) to the extent applicable, Rule 144 or
(c) any other applicable exemption from the Securities Act.

                  11.4 NOTICE OF CERTAIN TRANSFERS. If any Holder of any
Restricted Security desires to transfer such Restricted Security other than
pursuant to an effective registration statement or Rule 144 under the Securities
Act, such Holder shall deliver to the Company at least three Business Days'
prior written notice with respect to the proposed transfer, together with an
opinion (obtained at such Holder's expense) of such counsel reasonably
satisfactory to the Company, to the effect that an exemption from registration
under the Securities Act is available and specifying the applicable exemption.

                  11.5 RESTRICTIVE LEGEND. Each Warrant or Convertible Note
Certificate issued under this Agreement as well as any Transferred Warrants or
Transferred Convertible Notes transferred pursuant to Section 11.6 herein and
the Underlying Common Stock shall be stamped or otherwise imprinted with a
legend (a) in the form provided in Exhibit A with respect to the Warrant, the
Warrant Stock and any Transferred Warrants and (b) in the form provided in
Exhibit B with respect to Convertible Notes, the Convertible Note Stock and any
Transferred Convertible Notes.

                  11.6 TERMINATION OF RESTRICTIONS. The restrictions imposed by
this Section 11 upon the transferability of the Restricted Securities shall
cease and terminate as to any particular Restricted Security when such
Restricted Security shall have been effectively registered under the Securities
Act and sold by the Holder thereof in accordance with such registration or sold
under and pursuant to Rule 144 or are eligible to be sold pursuant to paragraph
(k) of Rule 144. Whenever the restrictions imposed by this Section 11 shall
terminate as to any Restricted Security as hereinabove provided, the Holder
thereof shall, upon written request, be entitled to receive from the Company,
without expense, a new certificate evidencing such Restricted Security not
bearing the restrictive legend noted above in Section 11.4 otherwise required to
be borne by a certificate evidencing such Restricted Security.

                  11.7 TRANSFER, DIVISION AND COMBINATION. Subject to Section 11
hereof, transfer of a Warrant and all rights thereunder, in whole or in part, or
a Convertible Note and all rights thereunder, in whole or in part (respectively,
the "TRANSFERRED WARRANT" or the "TRANSFERRED CONVERTIBLE NOTE"), shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of such Transferred Warrant or such Transferred Convertible Note, as
the case may be, at the office of the Company maintained for such purpose
pursuant to Section 14.7 hereof, together with a Form of Assignment
substantially in the form included in each of Exhibit A and Exhibit B attached
hereto, duly executed by the relevant Holder and payment of funds sufficient to

                                       32
<PAGE>

pay any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall, subject to Section
11 hereof and the second following sentence, (a) execute and deliver a new
Warrant or a new Convertible Note in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, (b) issue to
the assignor a new Warrant or a new Convertible Note evidencing the portion of
such Transferred Warrant or such Transferred Convertible Note not so assigned or
transferred and (c) promptly cancel such Transferred Warrant or such Transferred
Convertible Note. A Warrant or a Convertible Note, if properly assigned in
compliance with Section 11 hereof, may be exercised or converted by an assignee
for the purchase of shares of Underlying Common Stock without having a new
Warrant or a new Convertible Note issued. Notwithstanding any provision herein
to the contrary, the Company shall not be required to register the transfer of
Warrant or Underlying Common Stock issued pursuant thereto, or the transfer of a
Convertible Note or any Underlying Common Stock issued pursuant thereto, in the
name of any Person who acquired such Warrant (or part thereof) or any Underlying
Common Stock issued pursuant thereto, or such Convertible Note or any Underlying
Common Stock issued pursuant thereto, otherwise than in accordance with this
Agreement.

                  89. The Company shall maintain with its transfer agent or at
its aforesaid office, books for the registration and transfer of the Warrant and
the Convertible Note.

         12.      RELEASE.

                  (a) In consideration of the mutual execution of this Agreement
and the mutual agreement to be legally bound by its terms, each party, on behalf
of itself and its Affiliates, Subsidiaries, parents, members, directors,
officers, employees, agents, representatives, heirs, assigns, predecessors
and/or successors (the "RELATED PARTIES"), hereby releases, acquits and forever
discharges the other party hereto and its Related Parties of and from any and
all claims, demands, actions, suits, debts, liabilities, losses, attorney's
fees, expenses, judgments, settlements and other damages or costs of whatever
nature, known or unknown, as may exist between the parties and/or their Related
Parties as of the date hereof (the "CLAIMS"), including claims arising out of,
derived from, predicated upon or relating to the Professional Services Agreement
and related Schedules dated July 10, 2001 between SVI Retail, Inc. and/or its
Affiliates and Purchaser and prior service and/or modification agreements
between SVI Retail, Inc. and/or its Affiliates and Purchaser (the "SUPERSEDED
DOCUMENTS"). Notwithstanding the foregoing, this release shall not relate to (i)
any future Claims, after the date hereof, arising out of, derived from,
predicated upon or relating to the License Agreement between Island Pacific
Systems Corp. and Purchaser including all attachments thereto, dated May 20,
1999 or (ii) any third-party indemnification claims. The foregoing shall not
prevent or impair the right of either party to bring an action, claim, lawsuit,
arbitration or other proceeding for a breach of the Transaction Documents,
including any representation, warranty or covenant contained herein.

                  (b) With respect to the Claims, each party hereby expressly
waives the provisions of California Civil Code section 1542 (or any equivalent
statute or law in applicable jurisdictions), which reads:

                                       33
<PAGE>

                  "A general release does not extend to claims which the
                  creditor does not know or suspect to exist in the creditor's
                  favor at the time of executing the release, which if known by
                  creditor must have materially affected his settlement with the
                  debtor."

         13.      SURVIVAL; INDEMNIFICATION.

                  13.1 SURVIVAL. The representations and warranties contained in
Sections 3 and 4 hereof shall survive from the date hereof and shall continue in
full force and effect for two (2) years from execution of this Agreement, except
that the representations and warranties contained in Section 3.4 shall survive
for the limitation period under applicable law.

                  13.2 INDEMNIFICATION BY THE COMPANY AND THE PURCHASER.

                  (a) The Company shall defend, hold harmless and indemnify the
Purchaser for any and all Losses arising out of or based on subparagraph (a)(i)
and (a) (iii) below and each Holder of Registrable Securities for any Losses
arising out of or based on subparagraph (a)(iii) below and their respective
officers, directors, partners, employees and agents, each person controlling
such Purchaser or Holder, each underwriter in connection with a registration, if
any, and each person who controls any such underwriter (each, a "PURCHASER
INDEMNIFIED PARTY") against, and hold each Purchaser Indemnified Party harmless
from, all Losses (including any diminution in value of the Underlying Common
Stock or other securities of the Company hereafter acquired by the Purchaser
under this Agreement), demands, actions, causes of action, assessments, damages,
liabilities, costs or expenses, including without limitation, interest,
penalties, fines, fees, deficiencies, claims of damage, reasonable attorneys'
and other professional fees and expenses incurred in the investigation,
prosecution, defense or settlement thereof (collectively, the "LOSSES")

                  (i) arising out of or based on any breach or inaccuracy of any
         warranty, representation or covenant (other than Section 8.9) of the
         Company set forth in this Agreement other than any Losses resulting
         from any action on the part of such Purchaser Indemnified Party that is
         finally determined in such proceeding to be the result of such party's
         gross negligence or willful misconduct; PROVIDED, that the Purchaser
         Indemnified Party shall not be entitled to indemnification hereunder
         unless the total of all such Losses exceeds $25,000, in which case all
         such Losses up to the amount paid by the Purchaser pursuant to Section
         2.2, including the first $25,000, shall be entitled to indemnification
         hereunder PROVIDED, that the Company's aggregate liability under this
         subparagraph (a)(i) shall not exceed the amount paid pursuant to
         Section 2.2.

                  (ii) arising out of or related to the Purchaser's governance
         rights provided for by Section 8.9 hereof. The Company shall use its
         commercially reasonable best efforts not to allow the subrogation of
         any claim of the type discussed in this subparagraph (a)(ii) against
         the Purchaser.

                                       34
<PAGE>

                  (iii) to which they may become subject under the Securities
         Act and Exchange Act or other federal or state law arising out of or
         based on (x) any untrue statement (or alleged untrue statement) of a
         material fact contained in any prospectus, offering circular or other
         similar document (including any related Registration Statement,
         notification, or the like) incident to any registration or related
         qualification or compliance, or based on any omission (or alleged
         omission) to state therein a material fact required to be stated
         therein or necessary to make the statements therein not misleading in
         light of the circumstances in which they were made, (y) any violation
         or alleged violation by the Company of any federal, state or common law
         rule or regulation applicable to the Company in connection with any
         such registration or related qualification or compliance, or (z) any
         failure to register or qualify Registrable Securities in any state
         where the Company or its agents have affirmatively undertaken or agreed
         in writing that the Company (the undertaking of any underwriter chosen
         by the Company being attributed to the Company) will undertake such
         registration or qualification on behalf of the Holders of Registrable
         Securities (provided that in such instance the Company shall not be so
         liable if it has undertaken its reasonable best efforts to so register
         or qualify such Registrable Securities) and will reimburse, as
         incurred, each such Holder, each such underwriter and each of their
         respective officers, directors, partners, employees and agents and
         controlling persons, for any legal and any other expenses reasonably
         incurred in connection with investigating or defending any such claim,
         loss, damage, liability or action; PROVIDED that the Company will not
         be liable in any such case to the extent that any such claim, loss,
         damage, liability or expense arises out of or is based on any untrue
         statement or omission made in conformity with written information
         furnished to the Company by such Holder or underwriter specifically for
         inclusion therein; PROVIDED, FURTHER, that the indemnity provided
         hereby shall not inure to the benefit of any Holder of Registrable
         Securities, each of such Holder's officers, directors, partners,
         employees and agents and controlling persons, or to the benefit of any
         underwriter and any person who controls any underwriter in connection
         with any claim, loss, damage or liability arising out of or based upon
         any untrue statement (or alleged untrue statement) of a material fact
         contained in any prospectus, offering circular or other similar
         document or based on any omission (or alleged omission) to state
         therein a material fact required to be stated therein or necessary to
         make the statement therein not misleading in light of the circumstances
         under which it was made if such Holder (to the extent such Holder is
         required to deliver a prospectus) or underwriter failed to send or give
         a copy of the prospectus, offering circular or similar document, as the
         same may be amended or supplemented, in a timely manner and the untrue
         statement or alleged untrue statement of a material fact or omission
         (or alleged omission) to state a material fact in such earlier
         prospectus, offering circular or similar document, was corrected in the
         final prospectus, offering circular or similar document, unless such
         failure resulted from non-compliance by the Company with its obligation
         to prepare and deliver a final prospectus.

                  (b) The Purchaser shall defend, hold harmless and indemnify
the Company and its respective officers, directors, partners, employees and
agents and each person controlling the Company (each, a "COMPANY INDEMNIFIED
PARTY") against, and hold each Company Indemnified Party harmless from all
losses, demands, actions, causes of action, assessments, damages, liabilities,
costs or expenses, including without limitation, interest, penalties, fines,
fees, deficiencies, claims of damage, reasonable attorneys' and other
professional fees and expenses incurred in the investigation, prosecution,

                                       35
<PAGE>

defense or settlement thereof (collectively, the "COMPANY LOSSES") arising out
of or based on any breach or inaccuracy of any warranty, representation or
covenant of the Purchaser set forth in this Agreement other than any Company
Losses resulting from any action on the part of such Company Indemnified Party
that is finally determined in such proceeding to be the result of such Company
Indemnified Party's gross negligence or willful misconduct; PROVIDED, that the
Company Indemnified Party shall not be entitled to indemnification hereunder
unless the total of all such Losses exceeds $25,000, in which case all such
Company Losses up to the amount paid by the Purchaser pursuant to Section 2.2,
including the first $25,000, shall be entitled to indemnification hereunder
PROVIDED, that the Purchaser's aggregate liability under this subparagraph (b)
shall not exceed the amount paid pursuant to Section 2.2.

                  (c) Each party entitled to indemnification under this Section
13.2 ("INDEMNIFIED PARTY") shall give notice to the party required to provide
such indemnification (the "INDEMNIFYING PARTY") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; PROVIDED that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding; and PROVIDED FURTHER that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 13.2,
except to the extent that such failure to give notice shall materially adversely
affect the Indemnifying Party in the defense of any such claim or any such
litigation. An Indemnifying Party, in the defense of any such claim or
litigation, may, without the consent of each Indemnified Party, consent to entry
of any judgment or enter into any settlement that includes as an unconditional
term thereof the giving by the claimant or plaintiff therein, to such
Indemnified Party, of a release from all liability with respect to such claim or
litigation.

                  (d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which any Indemnified
Party under this Agreement, or any controlling person of any such Indemnified
Party, makes a claim for indemnification pursuant to this Section 13.2 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 13.2 provides for indemnification in
such case; then, and in each such case, the Company and such Holder will
contribute to the aggregate claims, losses, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so that such
Holder is responsible for the portion represented by the percentage that the
public offering price of the securities offered by such Holder pursuant to the
Registration Statement bears to the public offering price of all securities
offered by such Registration Statement, and the Company will be responsible for
the remaining portion; PROVIDED, HOWEVER, that, in any case, (A) no such Holder
will be required to contribute any amount in excess of the public offering price
of all securities offered by it pursuant to such Registration Statement, after
deduction of underwriting discounts and commissions; and (B) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.

                                       36
<PAGE>

                  (e) The indemnities provided in this Section 13.2 shall
survive the transfer of any Registrable Securities by such Holder.

                  (f) Nothing contained in this Section 13.2 shall limit in any
manner any remedy at law or in equity to which a Purchaser Indemnified Party
shall be entitled against the Company as a result of fraud or intentional
misrepresentation by the Company or any of its representatives or agents.

                  (g) Any indemnification payment made by the Company to a
Purchaser pursuant to this Section 13.2, including the issuance of any
additional Common Stock, shall be treated for federal, state, local and foreign
tax purposes as an adjustment to the price paid by the Purchase for the Common
Stock.

                  13.3 NOTIFICATION BY INDEMNIFIED PARTY. In the event of a
claim by a third party for which a party hereto is entitled to indemnification,
the Indemnified Party shall give written notice to the Indemnifying Party
promptly after such Indemnified Party has knowledge of any claim, action,
proceeding or investigation as to which indemnity may be sought. The
Indemnifying Party shall be entitled to assume the defense of any such claim,
action, proceeding or investigation, including the employment of counsel and the
payment of all fees and expenses. The Indemnified Party shall have the right to
employ separate counsel in connection with any such claim, action, proceeding or
investigation and to participate in the defense thereof, but the fees and
expenses of such counsel shall be paid by the Indemnified Party. However, if the
Indemnifying Party declines or fails to assume the defense of any such claim,
action, proceeding or investigation and the Indemnified Party then employs
counsel to assume defense thereof, the Indemnifying Party shall pay all
reasonable fees and expenses of such counsel employed by the Indemnified Party.
The Indemnifying Party shall be liable only for settlement of any claim against
an Indemnified Party made with the Indemnifying Party's written consent, not to
be unreasonably withheld.

         14.      MISCELLANEOUS.

                  14.1 ENTIRE AGREEMENT. This Agreement and the other
Transaction Documents constitute the entire agreement among the parties hereto
with respect to the subject matter hereof, and, for the avoidance of doubt,
shall supersede in all respects the Superseded Documents. No party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any third party any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.

                                       37
<PAGE>

                  14.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California (exclusive of such state's
choice of conflict rules).

                  14.3 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                  14.4 JURISDICTION. Each party hereto hereby irrevocably and
unconditionally submits to the jurisdiction of the state and federal courts
located in the County of San Diego, State of California for any actions, suits,
or proceedings arising out of or relating to this agreement and the transactions
contemplated hereby. Each party hereto agrees not to commence any action, suit
or proceeding relating thereto except in such courts. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this agreement or the
transactions contemplated hereby, in such state or federal courts as aforesaid
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.

                  14.5 ATTORNEYS' FEES. In the event any litigation,
arbitration, mediation, or other proceeding ("PROCEEDING") is initiated by any
party(ies) against any other party(ies) to enforce, interpret or otherwise
obtain judicial or quasi-judicial relief in connection with this Agreement, the
prevailing party(ies) in such Proceeding shall be entitled to recover from the
unsuccessful party(ies) all costs, expenses, and actual attorneys' fees relating
to or arising out of (a) such Proceeding (whether or not such Proceeding
proceeds to judgment), and (b) any post-judgment or post-award proceeding,
including without limitation one to enforce any judgment or award, shall contain
a specific provision for the recovery of all such subsequently incurred costs,
expenses, and actual attorneys' fees.

                  14.6 WAIVER OF JURY TRIAL. The parties hereby waive trial by
jury in any judicial proceeding to which they are parties involving, directly or
indirectly, any matter in any way arising out of, related to or connected with
this Agreement.

                  14.7 HEADINGS. The headings used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.

                  14.8 NOTICES. Any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid, or sent by confirmed fax,
addressed

                                       38
<PAGE>

                  (a) if to the Company, at:

                  SVI Solutions, Inc.
                  5607 Palmer Way
                  Carlsbad, CA 92008
                  Fax:  (858) 481-8557
                  Attention: Barry Schechter, Chief Executive Officer

                  With a copy to:

                  Solomon Ward Seidenwurm & Smith, LLP
                  401 B Street, Suite 1200
                  San Diego, CA 92101
                  Fax:  (619) 231-4755
                  Attention: Norman L. Smith, Esq.

or at such other address as the Company shall have furnished to the Purchaser or
other Holder in writing, and

                  (b) if to the Purchaser or other Holder, at:

                  Toys "R" Us, Inc.
                  461 From Road
                  Paramus, NJ 07652
                  Attention: General Counsel

                  With a copy to:

                  Simpson Thacher & Bartlett
                  425 Lexington Avenue
                  New York, NY  10017
                  Fax:  (212) 455-2502
                  Attention:  Philip T. Ruegger, Esq.

or at such other address as the Purchaser or other Holder shall have furnished
to the Company in writing.

                  14.9 SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall to the extent practicable,
be modified so as to make it valid, legal and enforceable and to retain as
nearly as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

                                       39
<PAGE>

                  14.10 DELAYS OR OMISSIONS. No delay or omission to exercise
any right, power or remedy accruing to the Company or the Purchaser or any
subsequent Holder of the Warrant or the Convertible Note upon any breach,
default or noncompliance of the Company, the Purchaser or any subsequent Holder
of the Warrant or the Convertible Note under this Agreement, shall impair any
such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
the part of the Company or the Purchaser of any breach, default or noncompliance
under this Agreement or any waiver on the Company's or the Purchaser's part of
any provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing and that all
remedies, either under this Agreement, by law, or otherwise afforded to the
Company and the Purchaser, shall be cumulative and not alternative.

                  14.11 AMENDMENTS AND WAIVERS. Except as otherwise expressly
provided herein, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) with the written consent of the Company and the
Purchaser. Any amendment or waiver effected in accordance with this Section
14.10 shall be binding upon the Purchaser and each subsequent Holder of the
Warrant, the Warrant Stock, the Convertible Note or the Convertible Note Stock.

                                       40
<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties as of the date first above written.

                                                      SVI SOLUTIONS, INC.

                                                      By:
                                                         -----------------------
                                                          Name:
THE COMPANY:                                              Title:

                                                      TOYS "R" US, INC.

                                                      By:
                                                         -----------------------
                                                          Name:
PURCHASER:                                                Title:

                                       41<PAGE>

Exhibit 10.15

                                CONVERTIBLE NOTE

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
         SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE
         TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
         THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND
         STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.

         THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
         SUBJECT TO THE CONDITIONS SPECIFIED IN THAT CERTAIN AGREEMENT DATED AS
         OF MAY 29, 2002, BETWEEN SVI SOLUTIONS, INC., A DELAWARE CORPORATION,
         AND TOYS "R" US, INC., A DELAWARE CORPORATION, AS SUCH WARRANT AND
         CONVERTIBLE NOTE PURCHASE AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED
         AND IN EFFECT FROM TIME TO TIME, AND NO TRANSFER OF THE SECURITIES
         REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH
         CONDITIONS HAVE BEEN FULFILLED. A COPY OF THE FORM OF SUCH PURCHASE
         AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE
         OFFICE OF THE AFORESAID CORPORATION. THE HOLDER OF THIS CERTIFICATE, BY
         ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF
         SUCH PURCHASE AGREEMENT.

$1,382,602.00 (original principal amount)                     New York, New York
                                                                    May 29, 2002

                                CONVERTIBLE NOTE
                      TO PURCHASE SHARES OF COMMON STOCK OF
                               SVI SOLUTIONS, INC.

                  FOR VALUE RECEIVED, the undersigned, SVI SOLUTIONS, INC., a
Delaware corporation, (the "COMPANY"), promises to pay to TOYS "R" US, INC.,
(the "PURCHASER"), or its registered assigns, solely by means of the delivery of
shares of the Company's common stock, par value $.0001 per share, (the "COMMON
STOCK"), the aggregate principal amount of one million three hundred eighty two
thousand six hundred and two dollars ($1,382,602.00) (the "FACE Amount"), or
such other amount as shall then equal the outstanding Face Amount hereof, in
accordance with the provisions of this Convertible Note or, solely at the
Company's option in cash, during the period commencing on the date of the
Agreement (the "COMMENCEMENT DATE") and ending at 5:00 p.m., New York City time,
on the Expiration Date (the "CONVERSION PERIOD").

<PAGE>

                  This Convertible Note was issued pursuant to the Purchase
Agreement, dated as of May 29, 2002 (the "AGREEMENT"), between the Company and
Purchaser. The Holder of this Convertible Note consents to all of the terms
contained in the Agreement by acceptance hereof. Each term used herein without
definition shall have the meaning assigned thereto in the Agreement.

                  This Convertible Note shall be a non-recourse
non-interest-bearing note with Purchaser being entitled to receive Convertible
Note Stock as provided herein.

                  The Company may not prepay all or a portion of this
Convertible Note without the consent of the Purchaser.

                  The following events shall be deemed to be an event of default
hereunder (herein individually referred to as an "EVENT OF DEFAULT"):

                  o Any breach by the Company of any material representation,
         warranty, or covenant in this Convertible Note or the Transaction
         Documents provided that any breach of any such representation,
         warranty, or covenant qualified as to materiality shall be deemed to be
         a breach hereof; PROVIDED, that, in the event of any such breach, to
         the extent such breach is susceptible to cure, such breach shall not
         have been cured by the Company or waived within 60 days after written
         notice to the Company of such breach, or

                  o The institution by the Company of proceedings to be
         adjudicated as bankrupt or insolvent, or the consent by it to
         institution of bankruptcy or insolvency proceedings against it or the
         filing by it of a petition or answer or consent seeking reorganization
         or release under the Federal Bankruptcy Act, or any other applicable
         federal or state law, or the consent by it to the filing of any such
         petition or the appointment of a receiver, liquidator, assignee,
         trustee or other similar official of the Company, or of any substantial
         part of its property, or the making by it of a general assignment for
         the benefit of creditors, or the taking of corporate action by the
         Company intended to further any such action; or

                  o If, within sixty (60) days after the commencement of an
         action against the Company (and service of process in connection
         therewith on the Company) seeking any bankruptcy, insolvency,
         reorganization, liquidation, dissolution or similar relief under any
         present or future statute, law or regulation, such action shall not
         have been resolved in favor of the Company or all orders or proceedings
         thereunder affecting the operations or the business of the Company
         stayed, or if the stay of any such order or proceeding shall thereafter
         be set aside, or if, within sixty (60) days after the appointment
         without the consent or acquiescence of the Company of any trustee,
         receiver or liquidator of the Company or of all or any substantial part
         of the properties of the Company, such appointment shall not have been
         vacated; or

                                       2
<PAGE>

                  o Any declared default of the Company under any Senior
         Indebtedness that gives the holder thereof the right to accelerate such
         Senior Indebtedness; or

                  o Any Breach Occurrence as defined in Section 9.1 of the
         Agreement.

                  As used in this Convertible Note, the term "Senior
Indebtedness" shall mean the principal of and unpaid accrued interest on: (i)
all indebtedness of the Company to banks, commercial finance lenders, insurance
companies or other financial institutions regularly engaged in the business of
lending money, which is for money borrowed by the Company (whether or not
secured), and (ii) any such indebtedness or any debentures, notes or other
evidence of indebtedness issued in exchange for or to refinance such Senior
Indebtedness, or any indebtedness arising from the satisfaction of such Senior
Indebtedness by a guarantor.

                  Upon the occurrence of an Event of Default, Holder's sole
recourse and remedy shall be to receive the shares of Convertible Note Stock
contemplated hereunder, and the Company shall not be obligated to pay any
deficiency or other sums on account of the occurrence of any Event or Default.

                  The Holder of this Convertible Note has the right, at the
Holder's option, at any time during the Conversion Period to convert this
Convertible Note, in whole or in part, into fully paid and nonassessable shares
of Convertible Note Stock. The number of shares of Convertible Note Stock into
which this Convertible Note may be converted shall be determined by dividing the
Face Amount of the Convertible Note by the Conversion Price. Subject to the next
paragraph, the Face Amount of the Convertible Note shall be as follows (for the
avoidance of doubt, the Face Amount of this Convertible Note shown in the table
below shall be reduced by the portion of the Face Amount that is converted by
Purchaser in any partial conversion in accordance with the provisions set forth
herein):

IF DATE OF CONVERSION IS ON OR BEFORE:                       FACE AMOUNT
--------------------------------------                       -----------
May 29, 2002                                                 $221,216
June 26, 2002                                                $276,520
July 29, 2002                                                $331,824
August 28, 2002                                              $387,128
September 27, 2002                                           $442,432
October 31, 2002                                             $497,736
November 30, 2002                                            $553,040
December 31, 2002                                            $608,344
January 31, 2003                                             $663,648
February 28, 2003                                            $718,952
March 31, 2003                                               $774,256
April 30, 2003                                               $829,560
May 31, 2003                                                 $884,864
June 30, 2003                                                $940,168
July 31, 2003                                                $995,472
August 30, 2003                                              $1,050,776
September 30, 2003                                           $1,106,080
October 31, 2003                                             $1,161,384
November 30, 2003                                            $1,216,688
December 31, 2003                                            $1,271,992
January 31, 2004                                             $1,327,296
February 28, 2004                                            $1,382,602

                                       3
<PAGE>

                  If, anytime prior to February 28, 2004, the Purchaser
terminates the Development Agreement pursuant to and in accordance with Section
1.4(a) or 1.4(b) thereof, the Purchaser shall only be entitled to convert the
Face Amount of this Convertible Note for that number of shares of Common Stock
for which this Convertible Note is convertible upon the effective date of such
termination based on the table above. If, anytime prior to February 28, 2004,
the Company terminates the Development Agreement pursuant to and in accordance
with Section 1.3 thereof, the Purchaser may not convert the Face Amount of this
Convertible Note in whole or in part. If, anytime prior to February 28, 2004,
the Purchaser terminates the Development Agreement pursuant to and in accordance
with Section 1.3 thereof, the Face Amount of this Convertible Note shall be
$1,382,602.

                  Before the Holder of the Convertible Note shall be entitled to
convert this Convertible Note into shares of Convertible Note Stock, it shall
surrender this Convertible Note to the Company at its office referred to in
Section 14.7 of the Agreement and deliver written notice in the form of the
Notice of Conversion (or a reasonable facsimile thereof) attached hereto
seventy-five (75) days prior to the date of conversion, duly completed and
signed.

                  This Convertible Note shall be deemed to have been converted
on the close of business on the seventy-fifth day following its surrender for
conversion as provided above, and the person entitled to receive the shares of
Convertible Note Stock shall be treated for all purposes as the Holder of record
of such shares as of the close of business on such date. On the seventy-fifth
day following the Company's receipt of the form of the Notice of Conversion set
out at the end of Exhibit B attached hereto, the Company shall issue and deliver
to such Holder a stock certificate or certificates for a number of shares of
Convertible Note Stock equal to the Face Amount of the Convertible Note divided
by the Conversion Price.

                  The Company shall not be required to issue a fractional share
of Convertible Note Stock upon conversion of this Convertible Note. As to any
fraction of a share which the Holder hereof would otherwise be entitled to
purchase upon such conversion, the Company may in lieu of the issuance of a
fractional share either (i) pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of conversion or (ii) issue a number of shares
rounded up or down to the nearest whole share.

                  Upon conversion of the total Face Amount of this Convertible
Note, the Company shall be forever released from all its obligations and
liabilities under this Convertible Note.

                  The Conversion Price is subject to adjustment in certain
events as provided in Section 7 of the Agreement. The Conversion Price is also
subject to adjustment in the event of a Breach Occurrence as provided in Section
9.1 of the Agreement.

                                       4
<PAGE>

                  The Convertible Note and the Convertible Note Stock shall be
transferable only upon compliance with the conditions specified Section 11 of
the Agreement, which conditions are intended, among other things, to ensure
compliance with the provisions of the Securities Act in respect of the transfer
of any Convertible Note or any Convertible Note Stock, and any Holder hereof
shall be bound by the provisions of (and entitled to the benefits of) said
Section 11 of the Agreement. Upon surrender of such Convertible Note at the
office of the Company maintained for such purpose pursuant to Section 14.7
hereof, together with a Form of Assignment annexed hereto, duly executed by the
relevant Holder and payment of funds sufficient to pay any transfer taxes
payable upon the making of such transfer, the Company shall, subject to Section
11 of the Agreement and the second following sentence, (a) execute and deliver a
new Convertible Note in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, (b) issue to the
assignor a new Convertible Note evidencing the portion of such surrendered
Convertible Note not so assigned or transferred and (c) promptly cancel such
surrendered Convertible Note. A Convertible Note, if properly assigned in
compliance with Section 11 of the Agreement, may be converted or surrendered by
an assignee for the purchase of shares of Convertible Note Stock without having
a new Convertible Note issued. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register the transfer of a
Convertible Note, or the Convertible Note Stock issued pursuant thereto, in the
name of any Person who acquired such Convertible Note (or part thereof), or
Convertible Note Stock issued pursuant thereto otherwise than in accordance with
the Agreement.

                  All shares of Convertible Note Stock issuable upon conversion
of the Face Amount of this Convertible Note shall be deemed to be Registrable
Securities entitled to registration rights pursuant to Section 10 of the
Agreement, and are entitled, subject to the terms and conditions of the
Agreement, to all registration rights granted to Holders of Registrable
Securities thereunder.

                  Nothing contained in the Agreement or in this Convertible Note
shall be construed by itself to entitle the Holder to any voting rights or other
rights as a stockholder of the Company. In the absence of affirmative action by
the Holder to purchase Convertible Note Stock by conversion of the Face Amount
of this Convertible Note, no provisions of this Convertible Note, and no mere
enumeration herein of the rights or privileges of the Holder, shall (a) cause
the Holder to be a stockholder of the Company for any purpose or (b) give rise
to any liability of such Holder for the Conversion Price or as a stockholder of
the Company, whether such liability is asserted by the Company, by any creditor
of the Company or any other Person.

                  The Company shall, during the Conversion Period of this
Convertible Note, reserve from its authorized and unissued Convertible Note
Stock a sufficient number of shares to provide for the issuance of Common Stock
upon conversion of this Convertible Note. If at any time the number of
authorized but unissued shares of the Common Stock shall not be sufficient to
effect the conversion of this Convertible Note, the Company shall take all such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock as shall be sufficient for such purpose. All shares of
Convertible Note Stock that may be issued by the Company upon conversion of this
Convertible Note will be free of all taxes, Liens and charges in respect of the
issue thereof. The Company shall, in connection with this Convertible Note and
its conversion, obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof. The Company agrees that its issuance of this
Convertible Note shall constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the necessary
certificates for Convertible Note Stock upon conversion of this Convertible
Note.

                                       5
<PAGE>

                  The Company shall not, by amendment of its certificate of
incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Convertible Note, but shall at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of this
Convertible Note against impairment. Without limiting the generality of the
foregoing, the Company (a) shall not increase the par value of any shares of
stock issuable upon the conversion of this Convertible Note above the amount
payable therefor upon such conversion, and (b) shall take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable shares of Convertible Note Stock upon
conversion of this Convertible Note.

                  Whenever the Conversion Price shall be adjusted in accordance
with Section 7 of the Agreement, the Company shall give notice to each Holder,
in accordance with Section 7.7 of the Agreement. Whenever the Company shall
engage in any of the corporate actions specified in Section 7.8 of the
Agreement, the Company shall give notice to each Holder, in accordance with
Section 7.8 of the Agreement.

                  This Convertible Note shall be deemed a contract made under
the laws of the State of California (exclusive of such state's choice of
conflict rules).

                  Each party hereto hereby irrevocably and unconditionally
submits to the jurisdiction of the state and federal courts located in the
County of San Diego, State of California for any actions, suits, or proceedings
arising out of or relating to this agreement and the transactions contemplated
hereby. Each party hereto agrees not to commence any action, suit or proceeding
relating thereto except in such courts. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this agreement or the transactions
contemplated hereby, in such state or federal courts as aforesaid and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.

                  The parties hereby waive trial by jury in any judicial
proceeding to which they are parties involving, directly or indirectly, any
matter in any way arising out of, related to or connected with this Convertible
Note.

                  In case any provision of this Convertible Note shall be
invalid, illegal or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

                                       6
<PAGE>

                  No delay or omission to exercise any right, power or remedy
accruing to the Company or the Purchaser or any subsequent Holder of the
Convertible Note upon any breach, default or noncompliance of the Company, the
Purchaser or any subsequent Holder of any Convertible Note under this Agreement,
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character on the part of the Company or the Purchaser of any breach,
default or noncompliance under this Convertible Note or any waiver on the
Company's or the Purchaser's part of any provisions or conditions of this
Convertible Note must be in writing and shall be effective only to the extent
specifically set forth in such writing and that all remedies, either under this
Convertible Note, by law, or otherwise afforded to the Company and the
Purchaser, shall be cumulative and not alternative.

                  Except as otherwise expressly provided herein, any term of
this Convertible Note may be amended and the observance of any term of this
Convertible Note may be waived (either generally or in a particular instance,
either retroactively or prospectively and either for a specified period of time
or indefinitely) with the written consent of the Company and the Holder hereof.
Any amendment or waiver effected in accordance with this provision shall be
binding upon such Holder.

                  Except as otherwise provided herein, this Convertible Note
shall terminate on the earlier of (i) the seventh (7th) anniversary of the date
hereof or (ii) the third (3rd) anniversary of the Completion Date.

                                       7
<PAGE>

                  IN WITNESS WHEREOF, the Company has duly executed this
Convertible Note.

Dated:  May 29, 2002

                                                     SVI SOLUTIONS, INC.

                                                     By:
                                                        ------------------------
                                                        Name:
                                                        Title:

                                       8
<PAGE>

                                 CONVERSION FORM

         The undersigned, the Holder of the foregoing Convertible Note, hereby
surrenders such Convertible Note for conversion into shares of Common Stock to
the extent of $_____ unpaid Face Amount of such Convertible Note according to
the conditions thereof.

         GENERAL REPRESENTATION AND WARRANTIES. In connection with the foregoing
exercise, the Holder hereby makes the following representations and warranties
to the Company:

         1.       The Holder is a [Delaware] [corporation] with its principal
                  executive offices at the location indicated below the Holder's
                  signature at the foot hereof.

         2.       The Holder confirms that all documents, records and books
                  pertaining to the investment in the Company and requested by
                  it have been made available or delivered to it.

         3.       The shares purchased herein are being acquired solely for the
                  Holder's own account, for investment purposes only and are not
                  being purchased with a view to or for the resale,
                  distribution, subdivision or fractionalization thereof. The
                  Holder has no current plans to enter into any such contract,
                  undertaking, agreement or arrangement.

         4.       The Holder acknowledges the shares have not been registered
                  under the Securities Act of 1933 or other Applicable Laws and
                  may not be sold or otherwise disposed of except in compliance
                  with applicable laws or, if the Company deems necessary,
                  receipt by the Company of an opinion of counsel reasonably
                  satisfactory to the Company that an exemption therefrom is
                  available.

                                       9
<PAGE>

         Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:

-------------------------------------------------------------------------------

Dated: -----------------                        -------------------------------
                                                           (signature)

                                                -------------------------------
                                                      (print name and title)

                                                -------------------------------

                                                -------------------------------

                                                            (address)

         Please issue a new Convertible Note for the unpaid Face Amount of the
attached Convertible Note in the name of the undersigned or in such other name
as is specified below:

-------------------------------------------------------------------------------

Dated: -----------------                        -------------------------------
                                                           (signature)

                                                -------------------------------
                                                      (print name and title)

                                                -------------------------------

                                                -------------------------------

                                                            (address)

                                       10
<PAGE>

                               FORM OF ASSIGNMENT
                               ------------------

                  FOR VALUE RECEIVED the undersigned registered owner of this
Convertible Note hereby sells, assigns and transfers unto the assignee named
below all the rights of the undersigned under this Convertible Note with respect
to the unpaid Face Amount of the Convertible Note covered thereby set forth
herein below unto:

                                                         The Unpaid Face Amount
Name of Assignee                   Address               of the Convertible Note
----------------                   -------               -----------------------

Dated:__________________

                                                 ------------------------------
                                                 Signature of Registered Holder

                                                 ------------------------------
                                                 Name of Registered Holder
                                                 (Please Print)

The assignee acknowledges receipt of the Purchase Agreement dated as of May 29,
2002 between SVI Solutions, Inc. and Toys "R" Us, Inc. and hereby agrees to be
bound by the provisions thereof and of this Convertible as a Holder thereunder.
The assignee further represents that this Convertible Note and the Convertible
Note Stock are being acquired solely for its own account, for investment
purposes only and are not being purchased with a view to or for the resale,
distribution, subdivision or fractionalization thereof. The assignee further
represents that it has no present plans to enter into any such contract,
undertaking, agreement or arrangement.

Dated:__________________

                                                ------------------------------
                                                Signature of Assignee

                                                ------------------------------
                                                Name of Assignee
                                                (Please Print)

                                       11

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