Document:

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EXHIBIT 4.1

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO ISLAND PACIFIC, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.

                                SECURED TERM NOTE

         FOR VALUE RECEIVED, ISLAND PACIFIC, INC., a Delaware corporation (the
"BORROWER"), hereby promises to pay to Multi-Channel Holdings, Inc., c/o Golden
Gate Private Equity, Inc., One Embarcadero Center, 33rd Floor, San Francisco, CA
94111, Facsimile: (415) 627-4501 (the "HOLDER") or its registered assigns or
successors in interest, on order, the sum of Two Million Dollars ($2,000,000),
together with any accrued and unpaid interest hereon, on October 18, 2005 (the
"Maturity Date");

         Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Note Purchase Agreement dated as
of the date hereof between the Borrower and the Holder (the "Purchase
Agreement").

         The following terms shall apply to this Note:

1.
         INTEREST & AMORTIZATION

         (a)      INTEREST RATE. Subject to Sections 3(k) and 4(f) hereof,
                  interest payable on this Note shall accrue at a rate per annum
                  (the "Interest Rate") equal to the "prime rate" published in
                  The Wall Street Journal from time to time, plus three percent
                  (3.0%). The prime rate shall be increased or decreased as the
                  case may be for each increase or decrease in the prime rate in
                  an amount equal to such increase or decrease in the prime
                  rate; each change to be effective as of the day of the change
                  in such rate. Interest shall be (i) calculated on the basis of
                  a 365 day year.

         (b)      AMORTIZATION. Principal and interest shall be due and payable
                  on demand on the earlier of (i) the Maturity Date or (ii) any
                  acceleration of this Note.

2.
         OPTIONAL PREPAYMENT; PREPAYMENT FEE

         (a)      The Borrower will have the option of prepaying this Note (such
                  prepayment, an "Optional Prepayment") at any time by paying to
                  the Holder a sum of money equal to one hundred percent (100%)
                  of the principal amount of this Note together with accrued but
                  unpaid interest thereon and any and all other sums due,
                  accrued or payable to the Holder arising under this Note, the
                  Purchase Agreement, or any Related Agreement (collectively,
                  the "Prepayment Amount") outstanding on the day written notice
                  of prepayment (the "Notice of Prepayment") is given to the
                  Holder. The Prepayment Amount shall include the Prepayment Fee
                  (as defined below). The Notice of Prepayment shall specify the
                  date for such Optional Prepayment (the "Prepayment Date")
                  which date shall be seven (7) business days after the date of
                  the Notice of Prepayment. On the Prepayment Date, the
                  Prepayment Amount must be paid in good funds to the Holder. In
                  the event the Borrower fails to pay the Prepayment Amount on
                  the Prepayment Date as set forth herein, then this Note shall
                  remain in full force and effect.

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         (b)      In the event of any Optional Prepayment made pursuant to
                  Section 2(a) above, or an acceleration under Section 3 below,
                  the Borrower shall pay the Prepayment Fee (as defined below).
                  The Prepayment Fee shall be (a) in the case of an Optional
                  Prepayment where no Transaction (as such term is defined in
                  the Purchase Agreement) is consummated, $500,000 and (b) in
                  the case of an Event of Default or in the case of a prepayment
                  in conjunction with a Transaction consummated by a person
                  other than the Holder or an affiliate of the Holder,
                  $1,000,000. There shall be no Prepayment Fee if, in
                  conjunction with any prepayment, a Transaction is consummated
                  with the Holder or one or more affiliates of the Holder.

3.
         EVENTS OF DEFAULT

         Upon the occurrence and continuance of an Event of Default beyond any
applicable grace period, the Holder may make all sums of principal, interest and
other fees then remaining unpaid hereon and all other amounts payable hereunder
immediately due and payable. In the event of such an acceleration, within five
(5) days after written notice from Holder to Borrower (each occurrence being a
"Default Notice Period") the amount due and owing to the Holder shall be 100% of
the outstanding principal amount of the Note (plus accrued and unpaid interest
and fees, if any) plus the Prepayment Fee (collectively, the "Default Payment").
If, with respect to any Event of Default, the Borrower cures the Event of
Default, the Event of Default will be deemed to no longer exist and any rights
and remedies of Holder pertaining to such Event of Default will be of no further
force or effect. The Default Payment shall be applied first to any fees due and
payable to Holder pursuant to the Note, the Purchase Agreement or the Related
Agreements (including, without limitation, the Prepayment Fee), then to accrued
and unpaid interest due on the Note and then to outstanding principal balance of
the Note.

The occurrence of any of the following events set forth in Sections 3.1(a)
through (j), inclusive, is an "EVENT OF DEFAULT:"

         (a)      FAILURE TO PAY PRINCIPAL, INTEREST OR OTHER FEES. The Borrower
                  fails to pay when due any installment of principal, interest
                  or other fees hereon in accordance herewith or the other Note
                  Parties fail to pay any amounts due under the Subsidiary
                  Guaranty upon demand in accordance with the terms thereof, or
                  the Borrower fails to pay when due any amount due under any
                  other promissory note issued by Borrower, other than the
                  interest due on the Tomczak Note and the Boone Note, and in
                  any such case, such failure shall continue for a period of
                  three (3) days following written notice thereof.

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         (b)      BREACH OF COVENANT. The Borrower breaches any covenant or any
                  other term or condition of this Note or the Purchase Agreement
                  in any material respect, any Subsidiary breaches any covenant
                  or any other term or condition of the Purchase Agreement or
                  the Borrower or any of its Subsidiaries breaches any covenant
                  or any other term or condition of any Related Agreement in any
                  material respect and, in any such case (other than a breach of
                  Section 9 of the Purchase Agreement, with respect to which no
                  cure period is available), such breach, if subject to cure,
                  continues for a period of fifteen (15) days after the
                  occurrence thereof; provided that, if such breach is of a
                  nature that it can not be cured within fifteen (15) days and
                  Borrower has taken reasonable steps to cure such default
                  within fifteen (15) days, upon written notice to and the
                  consent of Holder, the Borrower will have a commercially
                  reasonable amount of time to cure such breach before such
                  breach shall be deemed an Event of Default. If the breach is
                  not subject to cure, such Event of Default will be immediate.

         (c)      BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation
                  or warranty made by the Borrower in this Note or the Purchase
                  Agreement, or by the Borrower or any of its Subsidiaries in
                  any Related Agreement, shall, in any such case, be false or
                  misleading in any material respect on the Closing Date or the
                  date that such representation or warranty is deemed made, if
                  such representation or warranty expressly states that it is
                  made as of a specific date.

         (d)      RECEIVER OR TRUSTEE. The Borrower or any of its Subsidiaries
                  shall make an assignment for the benefit of creditors, or
                  apply for or consent to the appointment of a receiver or
                  trustee for it or for a substantial part of its property or
                  business; or such a receiver or trustee shall otherwise be
                  appointed.

         (e)      JUDGMENTS. Any money judgment, writ or similar final process
                  shall be entered or filed against the Borrower or any of its
                  Subsidiaries or any of its or their respective property or
                  other assets for more than $250,000, and shall remain
                  unvacated, unbonded or unstayed for a period of thirty (30)
                  days.

         (f)      BANKRUPTCY. Bankruptcy, insolvency, reorganization or
                  liquidation proceedings or other proceedings or relief under
                  any bankruptcy law or any law for the relief of debtors shall
                  be instituted by or against the Borrower or any of its
                  Subsidiaries.

         (g)      DEFAULT UNDER RELATED AGREEMENTS OR OTHER AGREEMENTS. The
                  occurrence and continuance of any Event of Default (as defined
                  in the Purchase Agreement or any Related Agreement) or any
                  event of default (or similar term) under any other
                  indebtedness of the Borrower or any of its Subsidiaries.

         (h)      CHANGE IN CONTROL. The occurrence of a change in the
                  controlling ownership of the Borrower or any of the
                  Subsidiaries.

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         (i)      FAILURE OF EXCLUSIVITY. Any failure to comply with Section 9
                  of the Purchase Agreement.

         (j)      MIDSUMMER NOTICE OF DEFAULT. Midsummer declares a default or
                  an event of default under Section 3(a)(ii) of the Midsummer
                  Debenture due to the entering into of the transactions
                  contemplated hereunder, under the Note Purchase Agreement and
                  the Related Agreements and such event of default is not cured
                  within the time periods allocated therein.

                           DEFAULT RELATED PROVISIONS

         (k)      PAYMENT GRACE PERIOD. Following the occurrence and continuance
                  of an Event of Default beyond any applicable cure period
                  hereunder, the Borrower shall pay the Holder a default
                  interest rate of eight percent (8%) per annum on all amounts
                  due and owing under the Note, which default interest shall be
                  payable upon demand.

         (l)      CUMULATIVE REMEDIES. The remedies under this Note shall be
                  cumulative.

4.
         MISCELLANEOUS

         (a)      FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
                  part of the Holder hereof in the exercise of any power, right
                  or privilege hereunder shall operate as a waiver thereof, nor
                  shall any single or partial exercise of any such power, right
                  or privilege preclude other or further exercise thereof or of
                  any other right, power or privilege. All rights and remedies
                  existing hereunder are cumulative to, and not exclusive of,
                  any rights or remedies otherwise available.

         (b)      NOTICES. Any notice herein required or permitted to be given
                  shall be in writing and shall be deemed effectively given: (a)
                  upon personal delivery to the party notified, (b) when sent by
                  confirmed telex or facsimile if sent during normal business
                  hours of the recipient, if not, then on the next business day,
                  (c) five days after having been sent by registered or
                  certified mail, return receipt requested, postage prepaid, or
                  (d) one day after deposit with a nationally recognized
                  overnight courier, specifying next day delivery, with written
                  verification of receipt. All communications shall be sent to
                  the Borrower at the address provided in the Purchase Agreement
                  executed in connection herewith, and to the Holder at the
                  address provided in the Purchase Agreement for such Holder,
                  with a copy to Patrick Lawler and Stephen Oetgen, c/o Kirkland
                  & Ellis LLP, 555 California Street, Suite 2700, San Francisco,
                  CA 94104, facsimile number (415) 439-1500, or at such other
                  address as the Borrower or the Holder may designate by ten
                  days advance written notice to the other parties hereto.

         (c)      AMENDMENT PROVISION. The term "Note" and all reference
                  thereto, as used throughout this instrument, shall mean this
                  instrument as originally executed, or if later amended or
                  supplemented, then as so amended or supplemented.

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         (d)      ASSIGNABILITY. This Note shall be binding upon the Borrower
                  and its successors and assigns, and shall inure to the benefit
                  of the Holder and its successors and assigns, and may be
                  assigned by the Holder in accordance with the requirements of
                  the Purchase Agreement. This Note shall not be assigned by the
                  Borrower without the consent of the Holder.

         (e)      GOVERNING LAW. This Note shall be governed by and construed in
                  accordance with the laws of the State of California, without
                  regard to principles of conflicts of laws. Any action brought
                  by either party against the other concerning the transactions
                  contemplated by this Agreement shall be brought only in the
                  state courts of California or in the federal courts located in
                  the state of California. Both parties and the individual
                  signing this Note on behalf of the Borrower agree to submit to
                  the jurisdiction of such courts. The prevailing party shall be
                  entitled to recover from the other party its reasonable
                  attorney's fees and costs. In the event that any provision of
                  this Note is invalid or unenforceable under any applicable
                  statute or rule of law, then such provision shall be deemed
                  inoperative to the extent that it may conflict therewith and
                  shall be deemed modified to conform with such statute or rule
                  of law. Any such provision which may prove invalid or
                  unenforceable under any law shall not affect the validity or
                  unenforceability of any other provision of this Note. Nothing
                  contained herein shall be deemed or operate to preclude the
                  Holder from bringing suit or taking other legal action against
                  the Borrower in any other jurisdiction to collect on the
                  Borrower's obligations to Holder, to realize on any collateral
                  or any other security for such obligations, or to enforce a
                  judgment or other court in favor of the Holder.

         (f)      MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
                  establish or require the payment of a rate of interest or
                  other charges in excess of the maximum permitted by applicable
                  law. In the event that the rate of interest required to be
                  paid or other charges hereunder exceed the maximum permitted
                  by such law, any payments in excess of such maximum shall be
                  credited against amounts owed by the Borrower to the Holder
                  and thus refunded to the Borrower.

         (g)      SECURITY INTEREST AND GUARANTEE. The Holder has been granted a
                  security interest (i) in certain assets of the Borrower and
                  its Subsidiaries as more fully described in the Master
                  Security Agreement dated as of the date hereof and (ii)
                  pursuant to the Stock Pledge Agreement dated as of the date
                  hereof. The obligations of the Borrower under this Note are
                  guaranteed by certain Subsidiaries of the Borrower pursuant to
                  the Subsidiary Guaranty dated as of the date hereof.

         (h)      CONSTRUCTION. Each party acknowledges that its legal counsel
                  participated in the preparation of this Note and, therefore,
                  stipulates that the rule of construction that ambiguities are
                  to be resolved against the drafting party shall not be applied
                  in the interpretation of this Note to favor any party against
                  the other.

         (i)      COST OF COLLECTION. If default is made in the payment of this
                  Note, the Borrower shall pay to Holder reasonable costs of
                  collection, including reasonable attorney's fees.

       [Balance of page intentionally left blank; signature page follows.]

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IN WITNESS WHEREOF, the Borrower has caused this Secured Term Note to be signed
in its name effective as of this 18th day of April, 2005.

                                             ISLAND PACIFIC, INC.

                                             By: /s/ M. Tomczak
                                             Name: Mike Tomczak
                                             Title: President

WITNESS:

/s/ Corinne Bertrand
----------------------------

                                       6<PAGE>
EXHIBIT 4.2

                             NOTE PURCHASE AGREEMENT

THIS NOTE PURCHASE AGREEMENT (this "Agreement") is made and entered into as of
April 18, 2005, among (i) ISLAND PACIFIC, INC., a Delaware corporation (the
"Company"), (ii) each of the subsidiaries of the Company listed on the signature
page hereto (together with the Company, each a "Note Party" and collectively,
the "Note Parties") and (iii) Multi-Channel Holdings, Inc., a Delaware
corporation (the "Purchaser").

                                    RECITALS

         WHEREAS, the Company has authorized the sale to the Purchaser of a
Secured Term Note in the aggregate principal amount of Two Million Dollars
($2,000,000) (the "Note");

         WHEREAS, Purchaser desires to purchase the Note on the terms and
conditions set forth herein; and

         WHEREAS, the Company desires to issue and sell the Note to Purchaser on
the terms and conditions set forth herein.

                                    AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

1.       AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions
         set forth in this Agreement, on the Closing Date (as defined in Section
         3), the Company agrees to sell to the Purchaser, and the Purchaser
         hereby agrees to purchase from the Company, a Note in the aggregate
         principal amount of $2,000,000. A form of the Note is annexed hereto as
         Exhibit A. The Note will mature on the Maturity Date (as defined in the
         Note).

2.       FEES AND EXPENSES. On the Closing Date, the Company shall reimburse the
         Purchaser for its reasonable expenses not to exceed $100,000 (including
         legal fees and expenses) incurred in connection with the preparation
         and negotiation of this Agreement and the Related Agreements (as
         hereinafter defined), and expenses incurred in connection with the
         Purchaser's due diligence review of the Company and its Subsidiaries
         (as defined in Section 4(b)) and all related matters.

3.       CLOSING, DELIVERY AND PAYMENT.

         (a)      CLOSING. Subject to the terms and conditions herein, the
                  closing of the transactions contemplated hereby (the
                  "Closing"), shall take place on the date hereof, at such time
                  or place as the Company and Purchaser may mutually agree (such
                  date is hereinafter referred to as the "Closing Date").

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         (b)      DELIVERY. At the Closing on the Closing Date, the Company will
                  deliver to the Purchaser, among other things, a Note in the
                  form attached as Exhibit A representing the aggregate
                  principal amount of $2,000,000.

4.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as otherwise
         specifically identified on the disclosure schedule delivered by the
         Company to Purchase pursuant to this Section 4 (the "Disclosure
         Schedule"), the Company (and, where specifically provided or
         referenced, each of the Note Parties) represents and warrants to the
         Purchaser as set forth below in this Section 4. Any disclosure or
         exception set forth on the Disclosure Schedule shall be deemed to apply
         to any representation and warranty to which it is applicable regardless
         of whether or not it is disclosed or cross referenced with respect to a
         particular representation or warranty:

         (a)      ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the
                  Note Parties is a corporation, partnership or limited
                  liability company, as the case may be, duly organized, validly
                  existing and in good standing under the laws of its
                  jurisdiction of organization. Each of the Note Parties has the
                  corporate power and authority to own and operate its
                  properties and assets, to execute and deliver (i) this
                  Agreement, (ii) the Note to be issued in connection with this
                  Agreement, (iii) the Master Security Agreement dated as of the
                  date hereof between the Company, certain Subsidiaries of the
                  Company and the Purchaser (as amended, modified or
                  supplemented from time to time, the "Master Security
                  Agreement"), (iv) the Subsidiary Guaranty dated as of the date
                  hereof made by certain Subsidiaries of the Company (as
                  amended, modified or supplemented from time to time, the
                  "Subsidiary Guaranty"), (v) the Stock Pledge Agreement dated
                  as of the date hereof among the Company, and the Purchaser
                  (the "Stock Pledge Agreement") and (vi) all other agreements
                  related to this Agreement and the Note and referred to herein
                  (the preceding clauses (ii) through (vi), collectively, the
                  "Related Agreements"), to issue and sell the Note and to carry
                  out the provisions of this Agreement and the Related
                  Agreements and to carry on its business as presently
                  conducted. Each of the Note Parties is duly qualified and is
                  authorized to do business and is in good standing as a foreign
                  corporation, partnership or limited liability company, as the
                  case may be, in all jurisdictions in which the nature of its
                  activities and of its properties (both owned and leased) makes
                  such qualification necessary, except for those jurisdictions
                  in which failure to do so has not, or could not reasonably be
                  expected to have, individually or in the aggregate, a material
                  adverse effect on the business, assets, liabilities, condition
                  (financial or otherwise), properties, operations or prospects
                  of the Company and its Subsidiaries, taken individually and as
                  a whole (a "Material Adverse Effect").

         (b)      SUBSIDIARIES. Each direct and indirect Subsidiary of the
                  Company, the direct owner of such Subsidiary and its
                  percentage ownership thereof, is set forth on Schedule 4(b).
                  For the purpose of this Agreement, a "Subsidiary" of any
                  person or entity means (i) a corporation or other entity whose

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                  shares of stock or other ownership interests having ordinary
                  voting power (other than stock or other ownership interests
                  having such power only by reason of the happening of a
                  contingency) to elect a majority of the directors of such
                  corporation, or other persons or entities performing similar
                  functions for such person or entity, are owned, directly or
                  indirectly, by such person or entity or (ii) a corporation or
                  other entity in which such person or entity owns, directly or
                  indirectly, more than 50% of the equity interests at such
                  time.

         (c)      CAPITALIZATION; VOTING RIGHTS.

                  (i)      The authorized capital stock of the Company, as of
                           the date hereof consists of 250,000,000 shares of
                           common stock par value $0.0001 of which 64,437,833
                           are issued and outstanding and 5,000,000 shares of
                           preferred stock par value $0.0001, of which 141,000
                           are designated as Series A Preferred Stock, all of
                           which are issued and outstanding and 2,517,233 shares
                           are designated as Series B Preferred Stock, none of
                           which are issued and outstanding. The authorized
                           capital stock of each Subsidiary of the Company is
                           set forth on Schedule 4(c).

                  (ii)     Except as disclosed on Schedule 4(c), other than: (A)
                           the shares reserved for issuance under the Company's
                           stock option plans; and (B) shares which may be
                           granted pursuant to that certain Securities Purchase
                           Agreement dated as of July 12, 2004 between the
                           Company and Laurus Master Fund, Ltd. ("Laurus"), a
                           Cayman Islands company (as amended, modified or
                           supplemented, the "Laurus Agreement") and the
                           "Related Agreements" (as such term is defined in the
                           Laurus Agreement, and as such Related Agreements are
                           amended modified or supplemented, the "Laurus Related
                           Agreements"), there are no outstanding options,
                           warrants, rights (including conversion or preemptive
                           rights and rights of first refusal), proxy or
                           stockholder agreements, or arrangements or agreements
                           of any kind for the purchase or acquisition from the
                           Company of any of its securities.

                  (iii)    All issued and outstanding shares of the Company's
                           Common Stock: (A) have been duly authorized and
                           validly issued and are fully paid and nonassessable;
                           and (B) were issued by the Company in compliance with
                           all applicable state and federal laws concerning the
                           issuance of securities.

                  (iv)     The rights, preferences, privileges and restrictions
                           of the shares of the Common Stock are as stated in
                           the Company's Certificate of Incorporation (the
                           "Charter") and pursuant to applicable law.

         (d)      AUTHORIZATION; BINDING OBLIGATIONS. All corporate, partnership
                  or limited liability company, as the case may be, action on
                  the part of the Company and each of its Subsidiaries
                  (including the respective officers and directors) necessary
                  for the authorization of this Agreement, the Note and the
                  Related Agreements, the performance of all obligations of the

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                  Company and its Subsidiaries hereunder and under the other
                  Related Agreements at the Closing and, the authorization,
                  sale, issuance and delivery of the Note has been taken or will
                  be taken prior to the Closing. This Agreement, the Note and
                  the Related Agreements, when executed and delivered and to the
                  extent it is a party thereto, will be valid and binding
                  obligations of each of the Company and each of its
                  Subsidiaries, enforceable against each such Person in
                  accordance with their terms, except:

                  (i)      as limited by applicable bankruptcy, insolvency,
                           reorganization, moratorium or other laws of general
                           application affecting enforcement of creditors'
                           rights; and

                  (ii)     general principles of equity that restrict the
                           availability of equitable or legal remedies.

         (e)      LIABILITIES. Neither the Company nor any of its Subsidiaries
                  has any material contingent liabilities, except current
                  liabilities incurred in the ordinary course of business and
                  liabilities disclosed in any of the Company's filings under
                  the Securities Exchange Act of 1934 (such filings, the
                  "Exchange Act Filings").

         (f)      AGREEMENTS; ACTION. Except as set forth on Schedule 4(f) or as
                  disclosed in any Exchange Act Filings:

                  (i)      there are no agreements, understandings, instruments,
                           contracts, proposed transactions, judgments, orders,
                           writs or decrees to which the Company or any of its
                           Subsidiaries is a party or by which it is bound which
                           may involve: (A) obligations (contingent or
                           otherwise) of, or payments to, the Company in excess
                           of $50,000 (other than obligations of, or payments
                           to, the Company arising from purchase or sale
                           agreements entered into in the ordinary course of
                           business); or (B) the transfer or license of any
                           patent, copyright, trade secret or other proprietary
                           right to or from the Company (other than licenses
                           arising from the purchase of "off the shelf" or other
                           standard products); or (C) provisions restricting the
                           development, manufacture or distribution of the
                           Company's products or services; or (D)
                           indemnification by the Company with respect to
                           infringements of proprietary rights.

                  (ii)     Since December 31, 2004, neither the Company nor any
                           of its Subsidiaries has: (A) declared or paid any
                           dividends, or authorized or made any distribution
                           upon or with respect to any class or series of its
                           capital stock; (B) incurred any indebtedness for
                           money borrowed or any other liabilities (other than
                           ordinary course obligations) individually in excess
                           of $50,000 or, in the case of indebtedness and/or
                           liabilities individually less than $50,000, in excess
                           of $100,000 in the aggregate; (C) made any loans or
                           advances to any Person not in excess, individually or
                           in the aggregate, of $100,000, other than ordinary
                           course advances for travel expenses; or (D) sold,
                           exchanged or otherwise disposed of any of its assets
                           or rights, other than the sale of its inventory in
                           the ordinary course of business.

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<PAGE>

                  (iii)    For the purposes of subsections (i) and (ii) above,
                           all indebtedness, liabilities, agreements,
                           understandings, instruments, contracts and proposed
                           transactions involving the same person or entity
                           (including persons or entities the Company has reason
                           to believe are affiliated therewith) shall be
                           aggregated for the purpose of meeting the individual
                           minimum dollar amounts of such subsections.

         (g)      OBLIGATIONS TO RELATED PARTIES. Except as set forth on
                  Schedule 4(g), there are no obligations of the Company or any
                  of its Subsidiaries to officers, directors, stockholders or
                  employees of the Company or any of its Subsidiaries other
                  than:

                  (i)      for payment of salary for services rendered and for
                           bonus payments;

                  (ii)     reimbursement for reasonable expenses incurred on
                           behalf of the Company and its Subsidiaries;

                  (iii)    for other standard employee benefits made generally
                           available to all employees (including stock option
                           agreements outstanding under any stock option plan
                           approved by the Board of Directors of the Company);
                           and

                  (iv)     obligations listed in the Company's financial
                           statements or disclosed in any of its Exchange Act
                           Filings.

Except as described above or set forth on Schedule 4(g), none of the officers,
directors or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any members of their immediate families, are
indebted to the Company, individually or in the aggregate, in excess of $50,000
or have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the Company, other
than passive investments in publicly traded companies (representing less than
one percent (1%) of such company) which may compete with the Company. Except as
described above, no officer, director or stockholder, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company and no agreements, understandings or proposed
transactions are contemplated between the Company and any such person. Except as
set forth on Schedule 4(g), the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.

         (h)      CHANGES. Since December 31, 2004, except as disclosed in any
                  Exchange Act Filing, Schedule 4(h) or any other Schedule to
                  this Agreement or to any of the Related Agreements, there has
                  not been:

                  (i)      any change in the business, assets, liabilities,
                           condition (financial or otherwise), properties,
                           operations or prospects of the Company or any of its
                           Subsidiaries, which individually or in the aggregate
                           has had, or could reasonably be expected to have,
                           individually or in the aggregate, a Material Adverse
                           Effect;

                                       5
<PAGE>

                  (ii)     any resignation or termination of any officer, key
                           employee or group of employees of the Company or any
                           of its Subsidiaries;

                  (iii)    any material change, except in the ordinary course of
                           business, in the contingent obligations of the
                           Company or any of its Subsidiaries by way of
                           guaranty, endorsement, indemnity, warranty or
                           otherwise;

                  (iv)     any damage, destruction or loss, whether or not
                           covered by insurance, has had, or could reasonably be
                           expected to have, individually or in the aggregate, a
                           Material Adverse Effect;

                  (v)      any waiver by the Company or any of its Subsidiaries
                           of a valuable right or of a material debt owed to it;

                  (vi)     any direct or indirect loans made by the Company or
                           any of its Subsidiaries to any stockholder, employee,
                           officer or director of the Company or any of its
                           Subsidiaries, other than advances made in the
                           ordinary course of business;

                  (vii)    any material change in any compensation arrangement
                           or agreement with any employee, officer, director or
                           stockholder of the Company or any of its
                           Subsidiaries;

                  (viii)   any declaration or payment of any dividend or other
                           distribution of the assets of the Company or any of
                           its Subsidiaries;

                  (ix)     any labor organization activity related to the
                           Company or any of its Subsidiaries;

                  (x)      any debt, obligation or liability incurred, assumed
                           or guaranteed by the Company or any of its
                           Subsidiaries, except those for immaterial amounts and
                           for current liabilities incurred in the ordinary
                           course of business;

                  (xi)     any sale, assignment or transfer of any patents,
                           trademarks, copyrights, trade secrets or other
                           intangible assets owned by the Company or any of its
                           Subsidiaries;

                  (xii)    any change in any material agreement to which the
                           Company or any of its Subsidiaries is a party or by
                           which either the Company or any of its Subsidiaries
                           is bound which either individually or in the
                           aggregate has had, or could reasonably be expected to
                           have, individually or in the aggregate, a Material
                           Adverse Effect;

                  (xiii)   any other event or condition of any character that,
                           either individually or in the aggregate, has had, or
                           could reasonably be expected to have, individually or
                           in the aggregate, a Material Adverse Effect; or

                                       6
<PAGE>

                  (xiv)    any arrangement or commitment by the Company or any
                           of its Subsidiaries to do any of the acts described
                           in subsection (a) through (m) above.

         (i)      TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Except as set
                  forth on Schedule 4(i), each of the Company and each of its
                  Subsidiaries has good and marketable title to its properties
                  and assets, and good title to its leasehold estates, in each
                  case subject to no mortgage, pledge, lien, lease, encumbrance
                  or charge, other than:

                  (i)      those liens arising in connection with the
                           Obligations (as such term is defined in the Note);

                  (ii)     those liens under the Laurus Indebtedness (as such
                           term is defined below)

                  (iii)    those resulting from taxes which have not yet become
                           delinquent;

                  (iv)     minor liens and encumbrances which do not materially
                           detract from the value of the property subject
                           thereto or materially impair the operations of the
                           Company or any of its Subsidiaries; and

                  (v)      those that have otherwise arisen in the ordinary
                           course of business.

All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on Schedule 4(i), the Company and
its Subsidiaries are in compliance with all material terms of each lease to
which it is a party or is otherwise bound except where such failure to be in
compliance, either individually or in the aggregate has had, or could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.

         (j)      INTELLECTUAL PROPERTY.

                  (i)      Each of the Company and each of its Subsidiaries owns
                           or possesses sufficient legal rights to all patents,
                           trademarks, service marks, trade names, copyrights,
                           trade secrets, licenses, information and other
                           proprietary rights and processes necessary for its
                           business as now conducted and to the Company's
                           knowledge, as presently proposed to be conducted (the
                           "Intellectual Property"), without any known
                           infringement of the rights of others. There are no
                           outstanding options, licenses or agreements of any
                           kind relating to the foregoing proprietary rights,
                           nor is the Company or any of its Subsidiaries bound
                           by or a party to any options, licenses or agreements
                           of any kind with respect to the patents, trademarks,
                           service marks, trade names, copyrights, trade
                           secrets, licenses, information and other proprietary
                           rights and processes of any other person or entity
                           other than such licenses or agreements arising from
                           the purchase of "off the shelf" or standard products.
                           Set forth on Schedule 4(j) is a list of all
                           Intellectual Property owned by the Note Parties,
                           indicating, which, if any, is registered.

                                       7
<PAGE>

                  (ii)     Neither the Company nor any of its Subsidiaries has
                           received any communications alleging that the Company
                           or any of its Subsidiaries has violated any of the
                           patents, trademarks, service marks, trade names,
                           copyrights or trade secrets or other proprietary
                           rights of any other person or entity, nor is the
                           Company or any of its Subsidiaries aware of any basis
                           therefor.

                  (iii)    The Company does not believe it is or will be
                           necessary to utilize any inventions, trade secrets or
                           proprietary information of any of its employees made
                           prior to their employment by the Company or any of
                           its Subsidiaries, except for inventions, trade
                           secrets or proprietary information that have been
                           rightfully assigned to the Company or any of its
                           Subsidiaries.

         (k)      COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor any
                  of its Subsidiaries is in violation or default of (i) any
                  material term of its Charter or Bylaws, or (ii) of any
                  provision of any indebtedness, mortgage, indenture, contract,
                  agreement or instrument to which it is party or by which it is
                  bound or of any judgment, decree, order or writ, which
                  violation or default, in the case of this clause (ii), has
                  had, or could reasonably be expected to have, either
                  individually or in the aggregate, a Material Adverse Effect.
                  The execution, delivery and performance of and compliance with
                  this Agreement and the Related Agreements to which it is a
                  party, and the issuance and sale of the Note by the Company
                  pursuant hereto, will not, with or without the passage of time
                  or giving of notice, result in any such material violation, or
                  be in conflict with or constitute a default under any such
                  term or provision, or result in the creation of any mortgage,
                  pledge, lien, encumbrance or charge upon any of the properties
                  or assets of the Company or any of its Subsidiaries or the
                  suspension, revocation, impairment, forfeiture or nonrenewal
                  of any permit, license, authorization or approval applicable
                  to the Company, its business or operations or any of its
                  assets or properties.

         (l)      LITIGATION. Except as set forth on Schedule 4(l) hereto, there
                  is no action, suit, proceeding or investigation pending or, to
                  the Company's knowledge, currently threatened against the
                  Company or any of its Subsidiaries that prevents the Company
                  or any of its Subsidiaries from entering into this Agreement
                  or the other Related Agreements, or from consummating the
                  transactions contemplated hereby or thereby, or which has had,
                  or could reasonably be expected to have, either individually
                  or in the aggregate, a Material Adverse Effect or any change
                  in the current equity ownership of the Company or any of its
                  Subsidiaries, nor is the Company aware that there is any basis
                  to assert any of the foregoing. Neither the Company nor any of
                  its Subsidiaries is a party or subject to the provisions of
                  any order, writ, injunction, judgment or decree of any court
                  or government agency or instrumentality. There is no action,
                  suit, proceeding or investigation by the Company or any of its
                  Subsidiaries currently pending or which the Company or any of
                  its Subsidiaries intends to initiate.

                                       8
<PAGE>

         (m)      TAX RETURNS AND PAYMENTS. Each of the Company and each of its
                  Subsidiaries has timely filed all tax returns (federal, state
                  and local) required to be filed by it. All taxes shown to be
                  due and payable on such returns, any assessments imposed, and
                  all other taxes due and payable by the Company or any of its
                  Subsidiaries on or before the Closing, have been paid or will
                  be paid prior to the time they become delinquent. Except as
                  set forth on Schedule 4(m), neither the Company nor any of its
                  Subsidiaries has been advised:

                  (i)      that any of its returns, federal, state or other,
                           have been or are being audited as of the date hereof;
                           or

                  (ii)     of any deficiency in assessment or proposed judgment
                           to its federal, state or other taxes.

The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.

         (n)      EMPLOYEES. Except as set forth on Schedule 4(n), neither the
                  Company nor any of its Subsidiaries has any collective
                  bargaining agreements with any of its employees. There is no
                  labor union organizing activity pending or, to the Company's
                  knowledge, threatened with respect to the Company or any of
                  its Subsidiaries. Except as disclosed in the Exchange Act
                  Filings or on Schedule 4(n), neither the Company nor any of
                  its Subsidiaries is a party to or bound by any currently
                  effective employment contract, deferred compensation
                  arrangement, bonus plan, incentive plan, profit sharing plan,
                  retirement agreement or other employee compensation plan or
                  agreement. To the Company's knowledge, no employee of the
                  Company or any of its Subsidiaries, nor any consultant with
                  whom the Company or any of its Subsidiaries has contracted, is
                  in violation of any term of any employment contract,
                  proprietary information agreement or any other agreement
                  relating to the right of any such individual to be employed
                  by, or to contract with, the Company or any of its
                  Subsidiaries because of the nature of the business to be
                  conducted by the Company or any of its Subsidiaries; and to
                  the Company's knowledge the continued employment by the
                  Company or any of its Subsidiaries of its present employees,
                  and the performance of the Company's and its Subsidiaries'
                  contracts with its independent contractors, will not result in
                  any such violation. Neither the Company nor any of its
                  Subsidiaries is aware that any of its employees is obligated
                  under any contract (including licenses, covenants or
                  commitments of any nature) or other agreement, or subject to
                  any judgment, decree or order of any court or administrative
                  agency, that would interfere with their duties to the Company
                  or any of its Subsidiaries. Neither the Company nor any of its
                  Subsidiaries has received any notice alleging that any such
                  violation has occurred. Except for employees who have a
                  current effective employment agreement with the Company or any
                  of its Subsidiaries, no employee of the Company or any of its
                  Subsidiaries has been granted the right to continued

                                       9
<PAGE>

                  employment by the Company or any of its Subsidiaries or to any
                  material compensation following termination of employment with
                  the Company or any of its Subsidiaries. Except as set forth on
                  Schedule 4(n), the Company is not aware that any officer, key
                  employee or group of employees intends to terminate his, her
                  or their employment with the Company or any of its
                  Subsidiaries, nor does the Company or any of its Subsidiaries
                  have a present intention to terminate the employment of any
                  officer, key employee or group of employees.

         (o)      COMPLIANCE WITH LAWS; PERMITS. Neither the Company nor any of
                  its Subsidiaries is in violation of any applicable statute,
                  rule, regulation, order or restriction of any domestic or
                  foreign government or any instrumentality or agency thereof in
                  respect of the conduct of its business or the ownership of its
                  properties which has had, or could reasonably be expected to
                  have, either individually or in the aggregate, a Material
                  Adverse Effect. No governmental orders, permissions, consents,
                  approvals or authorizations are required to be obtained and no
                  registrations or declarations are required to be filed in
                  connection with the execution and delivery of this Agreement
                  or any other Related Agreement and the issuance of any of the
                  Securities, except such as has been duly and validly obtained
                  or filed, or with respect to any filings that must be made
                  after the Closing, as will be filed in a timely manner. Each
                  of the Company and its Subsidiaries has all material
                  franchises, permits, licenses and any similar authority
                  necessary for the conduct of its business as now being
                  conducted by it, the lack of which could, either individually
                  or in the aggregate, reasonably be expected to have a Material
                  Adverse Effect.

         (p)      ENVIRONMENTAL AND SAFETY LAWS. Neither the Company nor any of
                  its Subsidiaries is in violation of any applicable statute,
                  law or regulation relating to the environment or occupational
                  health and safety, and to its knowledge, no material
                  expenditures are or will be required in order to comply with
                  any such existing statute, law or regulation except for such
                  violations that individually, or in the aggregate, have had,
                  or could reasonably be expected to have, individually or in
                  the aggregate, a Material Adverse Effect. Except as set forth
                  on Schedule 4(p), no Hazardous Materials (as defined below)
                  are used or have been used, stored, or disposed of by the
                  Company or any of its Subsidiaries or, to the Company's
                  knowledge, by any other person or entity on any property
                  owned, leased or used by the Company or any of its
                  Subsidiaries. For the purposes of the preceding sentence,
                  "Hazardous Materials" shall mean:

                  (i)      materials which are listed or otherwise defined as
                           "hazardous" or "toxic" under any applicable local,
                           state, federal and/or foreign laws and regulations
                           that govern the existence and/or remedy of
                           contamination on property, the protection of the
                           environment from contamination, the control of
                           hazardous wastes, or other activities involving
                           hazardous substances, including building materials;
                           or

                  (ii)     any petroleum products or nuclear materials.

                                       10
<PAGE>

         (q)      SOLVENCY. On the Closing Date, after giving effect to the
                  transactions contemplated hereby, each of the Company and each
                  of its Subsidiaries is, and the Note Parties on a consolidated
                  basis are, Solvent. For purposes of this Agreement,
                  "Solvent" means, with respect to any Person (as such term is
                  defined below) on a particular date, that on such Person's
                  total assets exceed their total liabilities. For purposes of
                  this Agreement, "Person" means an individual, corporation,
                  limited liability company, partnership, association,
                  joint-stock company, trust, unincorporated organization, joint
                  venture or other enterprise or entity or governmental
                  authority.

         (r)      INSURANCE. Each of the Company and each of its Subsidiaries
                  has general commercial, product liability, fire and casualty
                  insurance policies with coverages which the Company believes
                  are customary for companies similarly situated to the Company
                  and its Subsidiaries in the same or similar business.

         (s)      FULL DISCLOSURE. Each of the Company and each of its
                  Subsidiaries has provided the Purchaser with its SEC Reports
                  (below) and all information requested by the Purchaser in
                  connection with its decision to purchase the Note. Neither
                  this Agreement, the Related Agreements, the exhibits and
                  schedules hereto and thereto nor any other document delivered
                  by the Company or any of its Subsidiaries to Purchaser or its
                  attorneys or agents in connection herewith or therewith or
                  with the transactions contemplated hereby or thereby, as
                  qualified by the statements of the Company in its SEC Reports,
                  contain any untrue statement of a material fact nor omit to
                  state a material fact necessary in order to make the
                  statements contained herein or therein, in light of the
                  circumstances in which they are made, not misleading. Any
                  financial projections and other estimates provided to the
                  Purchaser by the Company or any of its Subsidiaries were based
                  on the Company's and its Subsidiaries' experience in the
                  industry and on assumptions of fact and opinion as to future
                  events which the Company or any of its Subsidiaries, at the
                  date of the issuance of such projections or estimates,
                  believed to be reasonable.

         (t)      SEC REPORTS. Except as set forth on Schedule 4(t), the Company
                  has filed all proxy statements, reports and other documents
                  required to be filed by it under the Securities Exchange Act
                  1934, as amended (the "Exchange Act"). The Company has
                  furnished the Purchaser with copies of: (i) its Annual Reports
                  on Form 10-K for its fiscal years ended March 31, 2004; (ii)
                  its quarterly reports on Form 10-Q for the fiscal quarters
                  ended June 30, 2004, September 30, 2004 and December 31, 2004
                  and (iii) its reports on Form 8-K which have been filed from
                  December 31, 2004 to date (collectively, the "SEC Reports").
                  Except as set forth on Schedule 4(t), each SEC Report was, at
                  the time of its filing, in substantial compliance with the
                  requirements of its respective form and none of the SEC
                  Reports, nor the financial statements (and the notes thereto)
                  included in the SEC Reports, as of their respective filing
                  dates, contained any untrue statement of a material fact or
                  omitted to state a material fact required to be stated therein
                  or necessary to make the statements therein, in light of the
                  circumstances under which they were made, not misleading.

                                       11
<PAGE>

         (u)      LISTING. The Company's Common Stock is listed for trading on
                  the American Stock Exchange ("AMEX") and satisfies all
                  requirements for the continuation of such listing. The Company
                  has not received any notice that its Common Stock will be
                  delisted from AMEX or that its Common Stock does not meet all
                  requirements for such continued listing.

         (v)      PATRIOT ACT. The Company certifies that, to the best of
                  Company's knowledge, neither the Company nor any of its
                  Subsidiaries has been designated, and is not owned or
                  controlled, by a "suspected terrorist" as defined in Executive
                  Order 13224. The Company hereby acknowledges that the
                  Purchaser seeks to comply with all applicable laws concerning
                  money laundering and related activities. In furtherance of
                  those efforts, the Company hereby represents, warrants and
                  agrees that: (i) none of the cash or property that the Company
                  or any of its Subsidiaries will pay or will contribute to the
                  Purchaser has been or shall be derived from, or related to,
                  any activity that is deemed criminal under United States law;
                  and (ii) no contribution or payment by the Company or any of
                  its Subsidiaries to the Purchaser, to the extent that they are
                  within the Company's and/or its Subsidiaries' control shall
                  cause the Purchaser to be in violation of the United States
                  Bank Secrecy Act, the United States International Money
                  Laundering Control Act of 1986 or the United States
                  International Money Laundering Abatement and Anti-Terrorist
                  Financing Act of 2001. The Company shall promptly notify the
                  Purchaser if any of these representations ceases to be true
                  and accurate regarding the Company or any of its Subsidiaries.
                  The Company agrees to provide the Purchaser any additional
                  information regarding the Company or any of its Subsidiaries
                  that the Purchaser reasonably deems necessary or convenient to
                  ensure compliance with all applicable laws concerning money
                  laundering and similar activities. The Company understands and
                  agrees that if at any time it is discovered that any of the
                  foregoing representations are incorrect, or if otherwise
                  required by applicable law or regulation related to money
                  laundering similar activities, the Purchaser may undertake
                  appropriate actions to ensure compliance with applicable law
                  or regulation, including but not limited to segregation and/or
                  redemption of the Purchaser's investment in the Company. The
                  Company further understands that the Purchaser may release
                  confidential information about the Company and its
                  Subsidiaries and, if applicable, any underlying beneficial
                  owners, to proper authorities if and as required by applicable
                  law .

         (w)      CONSENT OF EXISTING LENDERS. Laurus has consented to the
                  issuance of the Note and the incurrence of debt thereunder and
                  hereunder and Mike Tomczak and Jeff Boone have consented to
                  full subordination of their right to payment under the Tomczak
                  Note and the Boone Note, respectively, until the Note is paid
                  in full.

         (x)      NO VIOLATION OF CONTRACTS The Company is not, by its execution
                  and delivery of this Agreement, the Notes and the Related
                  Agreements and its taking all actions contemplated by such
                  documents, including the incurrence of indebtedness, the
                  granting of security interests and the provision of
                  guaranties, in violation of (A) the terms of the 9%
                  Convertible Debenture due May 15, 2006 between Midsummer
                  Investment, Ltd. ("Midsummer") and the Company (the "Midsummer
                  Debenture"), including Section 9 thereof and (B) any other
                  contract to which it is a party.

                                       12
<PAGE>

         (y)      REPAYMENT OF ALL AMOUNTS OWED TO MAUERER TRUSTS. The Company
                  hereby confirms that all amounts (including the Earnout
                  Consideration and the Escrow Indemnity Amount, each as defined
                  in the Stock Purchase Agreement referred to below) payable to
                  the Michael R. Mauerer and Carmen G. Mauerer Revocable Trust
                  (the "Revocable Trust"), the Carmen Gamboa Mauerer Charitable
                  Remainder Trust (the "Carmen Trust") and the Michael Mauerer
                  Charitable Remainder Trust (the "Michael Trust", and together
                  with the Revocable Trust and the Caremen Trust, each a
                  "Mauerer Trust" and collectively, the "Mauerer Trusts") under
                  that certain Stock Purchase Agreement, dated as of December
                  20, 2002 among the Company, Michael R. Mauerer and each of the
                  Mauerer Trusts, have been paid in full.

5.       REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
         represents and warrants to the Company as follows (such representations
         and warranties do not lessen or obviate the representations and
         warranties of the Company set forth in this Agreement):

         (a)      REQUISITE POWER AND AUTHORITY. The Purchaser has all necessary
                  power and authority under all applicable provisions of law to
                  execute and deliver this Agreement and the Related Agreements
                  and to carry out their provisions. All corporate action on
                  Purchaser's part required for the lawful execution and
                  delivery of this Agreement and the Related Agreements have
                  been or will be effectively taken prior to the Closing. Upon
                  their execution and delivery, this Agreement and the Related
                  Agreements will be valid and binding obligations of Purchaser,
                  enforceable in accordance with their terms, except:

                  (i)      as limited by applicable bankruptcy, insolvency,
                           reorganization, moratorium or other laws of general
                           application affecting enforcement of creditors'
                           rights; and

                  (ii)     as limited by general principles of equity that
                           restrict the availability of equitable and legal
                           remedies.

         (b)      INVESTMENT REPRESENTATIONS. Purchaser understands that the
                  Note is being offered and sold pursuant to an exemption from
                  registration contained in the Securities Act of 1933, as
                  amended, based in part upon Purchaser's representations
                  contained in the Agreement. The Purchaser confirms that it has
                  received or has had full access to all the information it
                  considers necessary or appropriate to make an informed
                  investment decision with respect to the Note to be purchased
                  by it under this Agreement. The Purchaser further confirms
                  that it has had an opportunity to ask questions and receive
                  answers from the Company regarding the Company's and its
                  Subsidiaries' business, management and financial affairs and
                  the terms and conditions of the Note 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 any information furnished to the
                  Purchaser or to which the Purchaser had access.

                                       13
<PAGE>

         (c)      ACQUISITION FOR OWN ACCOUNT. The Purchaser is acquiring the
                  Note for the Purchaser's own account for investment only, and
                  not as a nominee or agent and not with a view towards or for
                  resale in connection with their distribution.

         (d)      LEGENDS. The Note shall bear substantially the following
                  legend:

         "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
         AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD,
         OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
         EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND
         STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
         TO ISLAND PACIFIC, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

6.       COVENANTS OF THE COMPANY. The Company (and, where specifically provided
         or referenced, each of the Note Parties) covenants and agrees with the
         Purchaser as follows:

         (a)      STOP-ORDERS. The Company will advise the Purchaser, promptly
                  after it receives notice of issuance by the Securities and
                  Exchange Commission (the "SEC"), any state securities
                  commission or any other regulatory authority of any stop order
                  or of any order preventing or suspending any offering of any
                  securities of the Company, or of the suspension of the
                  qualification of the Common Stock of the Company for offering
                  or sale in any jurisdiction, or the initiation of any
                  proceeding for any such purpose.

         (b)      LISTING. The Company will maintain the listing of its Common
                  Stock on the American Stock Exchange, and will comply in all
                  material respects with the Company's reporting, filing and
                  other obligations under the bylaws or rules of the National
                  Association of Securities Dealers ("NASD") and such exchanges,
                  as applicable.

         (c)      MARKET REGULATIONS. The Company shall notify the SEC, NASD and
                  applicable state authorities, in accordance with their
                  requirements, of the transactions contemplated by this
                  Agreement, and shall take all other necessary action and
                  proceedings as may be required and permitted by applicable
                  law, rule and regulation, for the legal and valid issuance of
                  the Securities to the Purchaser and promptly provide copies
                  thereof to the Purchaser.

         (d)      REPORTING REQUIREMENTS. The Company will timely file with the
                  SEC all reports required to be filed pursuant to the Exchange
                  Act and refrain from terminating its status as an issuer
                  required by the Exchange Act to file reports thereunder even
                  if the Exchange Act or the rules or regulations thereunder
                  would permit such termination.

                                       14
<PAGE>

         (e)      USE OF FUNDS. The Company agrees that it will use the proceeds
                  of the sale of the Note for general working capital purposes
                  and to make the payments substantially as indicated on the
                  cash flow statement attached hereto as Schedule 6(e) attached
                  hereto.

         (f)      ACCESS TO FACILITIES. Each of the Note Parties will permit any
                  representatives designated by the Purchaser (or any successor
                  of the Purchaser), upon reasonable notice and during normal
                  business hours, at such person's expense and accompanied by a
                  representative of the Company, to:

                  (i)      visit and inspect any of the properties of the
                           Company or any of its Subsidiaries;

                  (ii)     examine the corporate and financial records of the
                           Company or any of its Subsidiaries (unless such
                           examination is not permitted by federal, state or
                           local law or by contract) and make copies thereof or
                           extracts therefrom; and

                  (iii)    discuss the affairs, finances and accounts of the
                           Company or any of its Subsidiaries with the
                           directors, officers and independent accountants of
                           the Company or any of its Subsidiaries.

                  (iv)     attend as an observer the Company's Board of
                           Directors meetings; provided that such attendance
                           does not violate applicable law or subject the
                           Company to any liability and that Purchaser and its
                           representative and Agent (as defined below) agree to
                           the restrictions set forth in this Agreement
                           regarding confidentiality and those prohibitions
                           pursuant to applicable law on trading in the
                           Company's securities.

         (g)      BOARD OBSERVATION RIGHTS. The Company shall allow any
                  representatives designated by the Purchaser (or any successor
                  of the Purchaser) to attend as an observer all meetings of the
                  Board of Directors. The Company shall send to such
                  representatives all of the notices, information and other
                  materials that are distributed to the directors of the
                  Company, including copies of the minutes of all meetings of
                  the Board of Directors and all notices, information and other
                  materials that are distributed by or to the directors of the
                  Company with respect to the meetings of the Board or the
                  Executive Committee of the Board; provided, however, that upon
                  the request of Purchaser's representative, the Company shall
                  refrain from sending such notices, information and other
                  materials to such representative for so long as such
                  representative shall request. If Company proposes to take any
                  action by written consent in lieu of a meeting of the Board of
                  Directors, the Company shall give notice thereof to
                  Purchaser's representative at the same time and in the same
                  manner as notice is given to the directors of the Company.
                  Purchaser shall provide to the Borrower the identity and
                  address of, or any change with respect to the identity or
                  address of, its representative. The Borrower shall reimburse
                  Purchaser's representative for the reasonable out-of-pocket
                  expenses of such representative incurred in connection with
                  the attendance at such meetings.

                                       15
<PAGE>

         (h)      TAXES. Each of the Note Parties will promptly pay and
                  discharge, or cause to be paid and discharged, when due and
                  payable, all lawful taxes, assessments and governmental
                  charges or levies imposed upon the income, profits, property
                  or business of the Company and its Subsidiaries; provided,
                  however, that any such tax, assessment, charge or levy need
                  not be paid if the validity thereof shall currently be
                  contested in good faith by appropriate proceedings and if the
                  Company and/or such Subsidiary shall have set aside on its
                  books adequate reserves with respect thereto, and provided,
                  further, that the Company and its Subsidiaries will pay all
                  such taxes, assessments, charges or levies forthwith upon the
                  commencement of proceedings to foreclose any lien which may
                  have attached as security therefor.

         (i)      INSURANCE. Each of the Note Parties will keep its assets which
                  are of an insurable character insured by financially sound and
                  reputable insurers against loss or damage by fire, explosion
                  and other risks customarily insured against by companies in
                  similar business similarly situated as the Company and its
                  Subsidiaries; and the Note Parties will maintain, with
                  financially sound and reputable insurers, insurance against
                  other hazards and risks and liability to persons and property
                  to the extent and in the manner which the Company reasonably
                  believes is customary for companies in similar business
                  similarly situated as the Company and its Subsidiaries and to
                  the extent available on commercially reasonable terms. The
                  Company, and each of its Subsidiaries will jointly and
                  severally bear the full risk of loss from any loss of any
                  nature whatsoever with respect to the assets pledged to the
                  Purchaser as security for its obligations hereunder and under
                  the Related Agreements. At the Company's and each of its
                  Subsidiaries' joint and several cost and expense in amounts
                  and with carriers reasonably acceptable to Purchaser, the
                  Company and each of its Subsidiaries shall (i) keep all its
                  insurable properties and properties in which it has an
                  interest insured against the hazards of fire, flood, sprinkler
                  leakage, those hazards covered by extended coverage insurance
                  and such other hazards, and for such amounts, as is customary
                  in the case of companies engaged in businesses similar to the
                  Company's or the respective Subsidiary's including business
                  interruption insurance; (ii) maintain a bond in such amounts
                  as is customary in the case of companies engaged in businesses
                  similar to the Company's or the respective Subsidiary's
                  insuring against larceny, embezzlement or other criminal
                  misappropriation of insured's officers and employees who may
                  either singly or jointly with others at any time have access
                  to the assets or funds of the Company or any of its
                  Subsidiaries either directly or through governmental authority
                  to draw upon such funds or to direct generally the disposition
                  of such assets; (iii) maintain public and product liability
                  insurance against claims for personal injury, death or
                  property damage suffered by others; (iv) maintain all such
                  worker's compensation or similar insurance as may be required
                  under the laws of any state or jurisdiction in which the
                  Company or the respective Subsidiary is engaged in business;
                  and (v) furnish Purchaser with (x) copies of all policies and
                  evidence of the maintenance of such policies at least thirty
                  (30) days before any expiration date, (y) policy endorsements
                  to its Liability Insurance issued by Chubb (policy #
                  3578-26-61 NBO), which covers General Liability and Employee
                  Benefits Errors or Omissions and its Commercial Excess and
                  Umbrella Insurance issued by Chubb (policy #7979-84-13) naming
                  Purchaser as "co-insured" or "additional insured" and
                  appropriate loss payable endorsements in form and substance
                  satisfactory to Purchaser, naming Purchaser as loss payee, and
                  (z) evidence that as to Purchaser the insurance coverage shall
                  not be impaired or invalidated by any act or neglect of any
                  Note Party and the insurer will provide Purchaser with at
                  least thirty (30) days notice prior to cancellation. The Note
                  Parties shall instruct the insurance carriers that in the
                  event of any loss thereunder, the carriers shall make payment
                  for such loss to the Note Parties and Purchaser jointly. In
                  the event that as of the date of receipt of each loss recovery
                  upon any such insurance, the Purchaser has not declared an
                  Event of Default (as such term is defined in the Note) with
                  respect to this Agreement, the Note or any of the Related
                  Agreements, then the Company and/or such Subsidiary shall be
                  permitted to direct the application of such loss recovery

                                       16
<PAGE>

                  proceeds toward investment in property, plant and equipment
                  that would comprise Collateral (as such term is defined in the
                  Master Security Agreement) with any surplus funds, upon an
                  Event of Default which has occurred and is continuing beyond
                  any applicable grace period, to be applied toward payment of
                  the obligations of the Company to Purchaser. In the event that
                  Purchaser has properly declared an Event of Default with
                  respect to this Agreement or any of the Related Agreements,
                  then all loss recoveries received by Purchaser upon any such
                  insurance thereafter may be applied to the obligations of the
                  Company hereunder and under the Related Agreements, in such
                  order as the Purchaser may determine. Any surplus (following
                  satisfaction of all Company obligations to Purchaser) shall be
                  paid by Purchaser to the Company or applied as may be
                  otherwise required by law. Any deficiency thereon shall be
                  paid by the Company or the Subsidiary, as applicable, to
                  Purchaser, on demand.

         (j)      INTELLECTUAL PROPERTY. Each of the Note Parties shall maintain
                  in full force and effect its existence, rights and franchises
                  and all licenses and other rights to use Intellectual Property
                  owned or possessed by it and reasonably deemed to be necessary
                  to the conduct of its business.

         (k)      PROPERTIES. Each of the Note Parties will keep its properties
                  in good repair, working order and condition, reasonable wear
                  and tear excepted, and from time to time make all needful and
                  proper repairs, renewals, replacements, additions and
                  improvements thereto; and each of the Company and each of its
                  Subsidiaries will at all times comply with each provision of
                  all leases to which it is a party or under which it occupies
                  property if the breach of such provision could, either
                  individually or in the aggregate, reasonably be expected to
                  have a Material Adverse Effect.

                                       17
<PAGE>

         (l)      CONFIDENTIALITY. The Company agrees that it will not disclose,
                  and will not include in any public announcement, the name of
                  the Purchaser, unless expressly agreed to by the Purchaser or
                  unless and until such disclosure is required by law or
                  applicable regulation, and then only to the extent of such
                  requirement. Notwithstanding the foregoing, the Company may
                  disclose Purchaser's identity and the terms of this Agreement
                  in a Form 8-K filed with the SEC disclosing this transaction
                  within four (4) days after the Closing Date and the Company
                  may disclose to its current and prospective debt and equity
                  financing sources, subject to the exclusivity restrictions in
                  Section 9 herein.

         (m)      REQUIRED APPROVALS. For so long as any obligations under the
                  Note are outstanding, the Company, without the prior written
                  consent of the Purchaser, shall not, and shall not permit any
                  of its Subsidiaries to:

                  (i)      directly or indirectly declare or pay any dividends,
                           other than dividends paid to the Company or any of
                           its wholly-owned Subsidiaries;

                  (ii)     liquidate, dissolve or effect a material
                           reorganization (it being understood that in no event
                           shall the Company dissolve, liquidate or merge with
                           any other person or entity (unless the Company is the
                           surviving entity);

                  (iii)    become subject to (including, without limitation, by
                           way of amendment to or modification of) any agreement
                           or instrument which by its terms would (under any
                           circumstances) restrict the Company's or any of its
                           Subsidiaries right to perform the provisions of this
                           Agreement, any Related Agreement or any of the
                           agreements contemplated hereby or thereby;

                  (iv)     materially alter or change the scope of the business
                           of the Company and its Subsidiaries taken as a whole;

                  (v)      (i) create, incur, assume or suffer to exist any
                           indebtedness (exclusive of trade debt and debt
                           incurred to finance the purchase of equipment (not in
                           excess of ten percent (10%) per annum of the fair
                           market value of the Company's assets) whether secured
                           or unsecured other than (A) the Company's
                           indebtedness to the Purchaser, (B) the obligations
                           owing to Laurus under the Laurus Agreement and the
                           Laurus Related Agreements (such obligations, the
                           "Laurus Indebtedness"), (C) indebtedness set forth on
                           Schedule 6(m)(v) attached hereto and made a part
                           hereof and any refinancings or replacements thereof
                           on terms no less favorable to the Purchaser than the
                           indebtedness being refinanced or replaced, (D) any
                           debt incurred in connection with the purchase of
                           assets in the ordinary course of business, or any
                           refinancings or replacements thereof on terms no less
                           favorable to the Purchaser than the indebtedness

                                       18
<PAGE>

                           being refinanced or replaced; (E) cancel any debt
                           owing to it in excess of $50,000 in the aggregate
                           during any 12 month period; and (F) assume,
                           guarantee, endorse or otherwise become directly or
                           contingently liable in connection with any
                           obligations of any other Person, except the
                           endorsement of negotiable instruments by the Company
                           for deposit or collection or similar transactions in
                           the ordinary course of business or guarantees of
                           indebtedness otherwise permitted to be outstanding
                           pursuant to this clause (v);

                  (vi)     create or allow to exist any Liens other than Liens
                           directly related to indebtedness allowed under
                           Section 6(m)(v) above, existing Liens disclosed on
                           the Disclosure Schedule or statutory liens arising as
                           a matter of law.

                  (vii)    sell, transfer, lease or otherwise dispose of all or
                           any part of its property, other than the sale or
                           lease of inventory or the non-exclusive licensing of
                           Intellectual Property in the ordinary course or any
                           transactions disclosed on the Disclosure Schedule.

                  (viii)   create or acquire any Subsidiary after the date
                           hereof unless (A) such Subsidiary is controlled by
                           the Company, (B) the capital stock of such Subsidiary
                           is pledged pursuant to the terms of the Stock Pledge
                           Agreement (either by an amendment or joinder in
                           respect thereof) and (C) such Subsidiary becomes
                           party to the Master Security Agreement and the
                           Subsidiary Guaranty (either by executing a
                           counterpart thereof or an assumption or joinder
                           agreement in respect thereof) and, to the extent
                           reasonably required by the Purchaser, satisfies each
                           condition of this Agreement and the Related
                           Agreements as if such Subsidiary were a Note Party on
                           the Closing Date.

                  (ix)     move any assets (other than inventory sold or leased
                           in the ordinary course of business and Intellectual
                           Property licensed non-exclusively to third parties in
                           the ordinary course of business) to locations other
                           than those listed on Schedule 6(m)(ix).

                  (x)      open any other depositary accounts other than those
                           currently existing and listed on Schedule 6(m)(ix).

         (n)      OPINION. On the Closing Date, the Company will deliver to the
                  Purchaser an opinion acceptable to the Purchaser from the
                  Company's external legal counsel.

         (o)      MARGIN STOCK. The Company will not permit any of the proceeds
                  of the Note to be used directly or indirectly to "purchase" or
                  "carry" "margin stock" or to repay indebtedness incurred to
                  "purchase" or "carry" "margin stock" within the respective
                  meanings of each of the quoted terms under Regulation U of the
                  Board of Governors of the Federal Reserve System as now and
                  from time to time hereafter in effect.

                                       19
<PAGE>

         (p)      LOCK-BOX ACCOUNTS. Immediately upon repayment of the Laurus
                  Indebtedness, the Company will establish a lock-box account
                  with each of Silicon Valley National Bank and California Bank
                  & Trust to hold all of the cash, cash equivalents, accounts,
                  deposit accounts or other holdings of the Company and all of
                  its Subsidiaries (the "Lock-box Accounts"). The Company shall
                  enter into Deposit Account Control Agreements with the
                  Purchaser to secure the Purchaser's security interest in the
                  Lock-box Accounts and that provides the Purchaser can assume
                  control of the Lock-box accounts in the event of an Event of
                  Default.

         (q)      NOTICES. Promptly upon receipt or delivery thereof, the
                  Company will deliver to the Purchaser copies of any notices of
                  default or any other notices given or received by any holder
                  of any indebtedness of the Company, including, without
                  limitation, the Laurus Indebtedness, the RTI Notes, the
                  Tomczak Note and the Boone Note.

         (r)      MODIFICATION OF INDEBTEDNESS. The Company will not amend,
                  modify or otherwise change (or permit the amendment,
                  modification or other change in any manner of) any of the
                  provisions of any indebtedness of the Company other than the
                  Laurus Indebtedness (including, without limitation, the
                  Midsummer Debenture, the RTI Notes, the Tomczak Note and the
                  Boone Note) without the Purchaser's prior written consent,
                  which consent shall not be unreasonably withheld.

         (s)      PAYMENTS ON OTHER INDEBTEDNESS. Until the Note has been
                  indefeasibly paid in full, the Company shall not make (i) any
                  prepayment on the principal of the Laurus Indebtedness in
                  violation of the terms of the Subordination Agreement dated as
                  of the date hereof between Laurus and the Purchaser (the
                  "Subordination Agreement"), the Midsummer Debenture, the RTI
                  Notes, the Tomczak Note or the Boone Note and (ii) any
                  interest payments on the Tomczak Note or the Boone Note.

         (t)      ANTI-LAYERING. Notwithstanding anything to the contrary
                  contained in this Agreement, and other than the indebtedness
                  arising under the Midsummer Debenture (the "Midsummer
                  Indebtedness"), no Note Party shall incur any indebtedness
                  that is subordinated to the Laurus Indebtedness structurally
                  or in right of payment, unless (a) such indebtedness is
                  subordinated to the Laurus Indebtedness structurally and in
                  right of payment at least to the same extent and on the same
                  terms as are the Obligations and (b) such indebtedness is
                  subordinated to the Obligations structurally and in right of
                  payment. No Note Party shall incur any indebtedness that is
                  senior in right of payment to the Obligations. For purposes of
                  this Section 6(t), unsecured indebtedness is not deemed to be
                  subordinate or junior to secured indebtedness merely because
                  it is unsecured, and indebtedness that is not guaranteed by a
                  particular Person is not deemed to be subordinated or junior
                  to indebtedness that is so guaranteed merely because it is not
                  so guaranteed.

                                       20
<PAGE>

         (u)      FURTHER ASSURANCES. The Company shall take such action and
                  execute, acknowledge and deliver, and cause each of its
                  Subsidiaries to take such action and execute, acknowledge and
                  deliver, at its sole cost and expense, such agreements,
                  instruments or other documents (including a post-closing
                  agreement detailing those actions required to be taken and
                  those documents and instruments required to be delivered after
                  the Closing Date) as Purchaser may reasonably require from
                  time to time to establish and maintain the validity and
                  effectiveness of any of this Agreement, the Note or any of the
                  Related Agreements or otherwise carry out the purposes of this
                  Agreement, the Note or any of the Related Agreements and the
                  transactions contemplated hereunder and thereunder.

7.       COVENANTS OF THE PURCHASER. The Purchaser covenants and agrees with the
         Company as follows:

         (a)      CONFIDENTIALITY. The Purchaser agrees that it will not
                  disclose, and will not include in any public announcement, the
                  name of the Company, unless expressly agreed to by the Company
                  or unless and until such disclosure is required by law or
                  applicable regulation, and then only to the extent of such
                  requirement. The Purchaser acknowledges that all information
                  learned by the Purchaser or any of its affiliates, officers,
                  directors, employees, representatives or agents ("Agents")
                  through attendance of the Company's board meetings constitutes
                  confidential information of the Company and such confidential
                  will be kept confidential and will not be disclosed by
                  Purchase or its Agents without the prior written consent of
                  the Company or until such time as the Company publicly
                  discloses such information; provided, however, that such
                  obligations shall not apply to the extent disclosure is
                  required in response to an order by a court or governmental
                  authority or pursuant to any law or government regulation.

         (b)      NON-PUBLIC INFORMATION. The Purchaser agrees not to effect any
                  sales in the shares of the Company's Common Stock while in
                  possession of material, non-public information regarding the
                  Company if such sales would violate applicable securities law.

         (c)      POSITION OF MIDSUMMER INDEBTEDNESS. The Purchaser agrees that
                  the Obligations are subordinate in right of payment to the
                  Midsummer Indebtedness and that Midsummer will have a prior
                  right of payment in the event of bankruptcy filing,
                  liquidation or foreclosure.

8.       INDEMNIFICATION.

         (a)      The Company agrees to indemnify, hold harmless, reimburse and
                  defend the Purchaser, each of the Purchaser's officers,
                  directors, agents, affiliates, control persons, and principal
                  shareholders, against any claim, cost, expense, liability,
                  obligation, loss or damage (including reasonable legal fees)
                  of any nature (each, an "Indemnified Liability" and
                  collectively, the "Indemnified Liabilities"), incurred by or
                  imposed upon the Purchaser which results, arises out of or is
                  based upon: (i) any misrepresentation by the Company or any of
                  its Subsidiaries or breach of any warranty by the Company or
                  any of its Subsidiaries in this Agreement, any other Related
                  Agreement or in any exhibits or schedules attached hereto or
                  thereto; or (ii) any breach or default in performance by
                  Company or any of its Subsidiaries of any covenant or
                  undertaking to be performed by Company or any of its
                  Subsidiaries hereunder, under any other Related Agreement or
                  any other agreement entered into by the Company and/or any of
                  its Subsidiaries and Purchaser relating hereto or thereto.

                                       21
<PAGE>

         (b)      Purchaser agrees to indemnify, hold harmless, reimburse and
                  defend the Company and each of the Company's officers,
                  directors, agents, affiliate, control persons and principal
                  shareholders against any claim, cost, expense, liability,
                  obligation, loss or damage (including reasonable legal fees)
                  of any nature incurred or imposed upon the Company which
                  results, arises out of or is based upon the Purchaser or its
                  Agent's breach of the Confidentiality and Non-Public
                  Information Covenants set forth in Section 7 above.

9.       EXCLUSIVITY PERIOD. For a period of 30 days after the date hereof (the
         "Exclusivity Termination Date"), the Company and the other Note Parties
         hereby agree that they will not, and will cause their respective
         affiliates, directors, officers, employees, representatives and agents
         not to, directly or indirectly, solicit or initiate or enter into
         discussions or transactions with, or announce or enter into
         documentation relating to, or encourage, or provide any information to,
         any Person (other than the Purchaser or its designated affiliates)
         concerning any sale of ownership interests or assets, or any
         recapitalization, reorganization or similar transaction involving the
         Company and/or its assets (each, a "Transaction"). The Company and the
         other Note Parties represent that neither they nor any other affiliated
         entities are bound by any other agreement with respect to any such
         Transaction. The Company shall notify the Purchaser immediately upon
         receipt of any inquiries from any Person with respect to a potential
         Transaction. The Exclusivity Termination Date shall automatically
         extend for a period of 10 business days if the Purchaser informs the
         Company in writing that the Purchaser is prepared to execute a
         definitive agreement without a due diligence condition.

10.      MISCELLANEOUS.

         (a)      GOVERNING LAW. THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL
                  BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
                  THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF
                  CONFLICTS OF LAWS, WITH THE EXCEPTION OF THE EXCLUSIVITY
                  PROVISION SET FORTH IN SECTION 9 WHICH SHALL BE GOVERNED BY
                  AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
                  DELAWARE. ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER
                  CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND
                  EACH RELATED AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE
                  COURTS OF CALIFORNIA OR IN THE FEDERAL COURTS LOCATED IN THE
                  STATE OF CALIFORNIA. BOTH PARTIES AND THE INDIVIDUALS

                                       22
<PAGE>

                  EXECUTING THIS AGREEMENT AND THE RELATED AGREEMENTS ON BEHALF
                  OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF SUCH
                  COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY
                  PROVISION OF THIS AGREEMENT OR ANY RELATED AGREEMENT DELIVERED
                  IN CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY
                  APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION SHALL
                  BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT
                  THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH
                  STATUTE OR RULE OF LAW. ANY SUCH PROVISION WHICH MAY PROVE
                  INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT THE
                  VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS
                  AGREEMENT OR ANY RELATED AGREEMENT.

         (b)      DEFINED TERMS. Capitalized terms not otherwise defined herein
                  shall have the meanings ascribed to them in the Note, the
                  Master Security Agreement or the Subsidiary Guaranty, as the
                  case may be.

         (c)      KNOWLEDGE OF THE COMPANY. For the purposes of this Agreement,
                  the Company shall only be deemed to have "knowledge" of a
                  particular fact or other matter, if an executive officer of
                  the Company is actually aware of such fact or matter, or a
                  reasonably prudent individual operating in the capacity of an
                  executive officer of the Company could be expected to discover
                  or otherwise become aware of such fact or matter in the
                  ordinary course of fulfilling the responsibilities of an
                  executive officer.

         (d)      SURVIVAL. The representations, warranties, covenants and
                  agreements made herein shall survive any investigation made by
                  the Purchaser and the closing of the transactions contemplated
                  hereby to the extent provided therein. All statements as to
                  factual matters contained in any certificate or other
                  instrument delivered by or on behalf of the Company pursuant
                  hereto in connection with the transactions contemplated hereby
                  shall be deemed to be representations and warranties by the
                  Company hereunder solely as of the date of such certificate or
                  instrument.

         (e)      SUCCESSORS. Except as otherwise expressly provided herein, the
                  provisions hereof shall inure to the benefit of, and be
                  binding upon, the successors, heirs, executors and
                  administrators of the parties hereto and shall inure to the
                  benefit of and be enforceable by each person who shall be a
                  holder of this Note from time to time. Purchaser may not
                  assign its rights hereunder to a competitor of the Company.

         (f)      ENTIRE AGREEMENT. This Agreement, the Related Agreements, the
                  exhibits and schedules hereto and thereto and the other
                  documents delivered pursuant hereto constitute the full and
                  entire understanding and agreement between the parties with
                  regard to the subjects hereof and no party shall be liable or
                  bound to any other in any manner by any representations,
                  warranties, covenants and agreements except as specifically
                  set forth herein and therein.

                                       23
<PAGE>

         (g)      SEVERABILITY. In case any provision of the Agreement shall be
                  invalid, illegal or unenforceable, the validity, legality and
                  enforceability of the remaining provisions shall not in any
                  way be affected or impaired thereby.

         (h)      AMENDMENT AND WAIVER.

                  (i)      This Agreement may be amended or modified only upon
                           the written consent of the Company and the Purchaser.

                  (ii)     The obligations of the Company and the rights of the
                           Purchaser under this Agreement may be waived only
                           with the written consent of the Purchaser.

                  (iii)    The obligations of the Purchaser and the rights of
                           the Company under this Agreement may be waived only
                           with the written consent of the Company.

         (i)      DELAYS OR OMISSIONS. It is agreed that no delay or omission to
                  exercise any right, power or remedy accruing to any party,
                  upon any breach, default or noncompliance by another party
                  under this Agreement or the Related Agreements, 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 or in any similar breach,
                  default or noncompliance thereafter occurring. All remedies,
                  either under this Agreement or the Related Agreements, by law
                  or otherwise afforded to any party, shall be cumulative and
                  not alternative.

         (j)      NOTICES. All notices required or permitted hereunder shall be
                  in writing and shall be deemed effectively given:

                  (i)      upon personal delivery to the party to be notified;

                  (ii)     when sent by confirmed facsimile if sent during
                           normal business hours of the recipient, if not, then
                           on the next business day;

                  (iii)    three (3) business days after having been sent by
                           registered or certified mail, return receipt
                           requested, postage prepaid; or

                  (iv)     one (1) day after deposit with a nationally
                           recognized overnight courier, specifying next day
                           delivery, with written verification of receipt.

All communications shall be sent as follows:

                  IF TO THE COMPANY, TO:    Island Pacific, Inc.
                                            19800 MacArthur Boulevard
                                            Suite 1200
                                            Irvine, California 92612

                                            Attention: Chief Financial Officer
                                            Facsimile: 858-450-9736

                                       24
<PAGE>

                  WITH A COPY NOT CONSTITUTING NOTICE TO:

                                            Solomon Ward Seidenwurm & Smith, LLP
                                            401 "B" Street
                                            Suite 1200
                                            San Diego, CA 92101

                                            Attention: Norman L. Smith, Esq.
                                            Facsimile: (619) 231-4755

                  IF TO THE PURCHASER, TO:  Multi-Channel Holdings, Inc.
                                            c/o Golden Gate Private Equity, Inc.
                                            One Embarcadero Center, 33rd Floor
                                            San Francisco, CA 94111

                                            Attention:  Prescott Ashe and Rajeev
                                                        Amara
                                            Facsimile: (415) 627-4501

                  WITH A COPY NOT CONSTITUTING NOTICE TO:

                                            Stephen Oetgen, Esq.
                                            c/o Kirkland & Ellis LLP
                                            555 California Street, Suite 2700
                                            San Francisco, CA  94104

                                            Facsimile: 415-439-1500

or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.

         (k)      ATTORNEYS' FEES. In the event that any suit or action is
                  instituted to enforce any provision in this Agreement, the
                  prevailing party in such dispute shall be entitled to recover
                  from the losing party all fees, costs and expenses of
                  enforcing any right of such prevailing party under or with
                  respect to this Agreement, including, without limitation, such
                  reasonable fees and expenses of attorneys and accountants,
                  which shall include, without limitation, all fees, costs and
                  expenses of appeals.

         (l)      TITLES AND SUBTITLES. The titles of the sections and
                  subsections of this Agreement are for convenience of reference
                  only and are not to be considered in construing this
                  Agreement.

         (m)      FACSIMILE SIGNATURES; COUNTERPARTS. This Agreement may be
                  executed by facsimile signatures and in any number of
                  counterparts, each of which shall be an original, but all of
                  which together shall constitute one instrument.

                                       25
<PAGE>

         (n)      BROKER'S FEES. Except as set forth on Schedule 11(n) hereof,
                  each party hereto represents and warrants that no agent,
                  broker, investment banker, person or firm acting on behalf of
                  or under the authority of such party hereto is or will be
                  entitled to any broker's or finder's fee or any other
                  commission directly or indirectly in connection with the
                  transactions contemplated herein. Each party hereto further
                  agrees to indemnify each other party for any claims, losses or
                  expenses incurred by such other party as a result of the
                  representation in this Section 11(n) being untrue.

         (o)      CONSTRUCTION. Each party acknowledges that its legal counsel
                  participated in the preparation of this Agreement and the
                  Related Agreements and, therefore, stipulates that the rule of
                  construction that ambiguities are to be resolved against the
                  drafting party shall not be applied in the interpretation of
                  this Agreement to favor any party against the other.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       26
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this NOTE PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.

COMPANY:                                     PURCHASER:

ISLAND PACIFIC, INC.                         MULTI-CHANNEL HOLDINGS, INC.

By: /s/ M. Tomczak                           By: /s/ Prescott Ashe
-------------------------------              -----------------------------------
Name: Mike Tomczak                           Name: Prescott Ashe
Title: President                             Title: Managing Director

ADDITIONAL NOTE PARTIES:

PAGE DIGITAL INCORPORATED                    IP RETAIL TECHNOLOGIES
                                             INTERNATIONAL, INC.

By: /s/ M. Tomczak                           By: /s/ M. Tomczak
-------------------------------              -----------------------------------
Name: Mike Tomczak                           Name: Mike Tomczak
Title: President                             Title: President

SABICA VENTURES, INC.

By: /s/ M. Tomczak
-------------------------------
Name: Mike Tomczak
Title: President

                                       27
<PAGE>

                                    EXHIBIT A

                            FORM OF SECURED TERM NOTE
                            -------------------------

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