SVI Solutions, Inc.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

784872103

(CUSIP Number)

Robert J. Law, Esq.

ICM Asset Management, Inc.

601 W. Main Ave., Suite 600

Spokane, WA 99201

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

October 24, 2001

(Date of Event Which Requires Filing of this Statement)

This statement relates to shares of Common Stock (the "Stock") of SVI Solutions, Inc. (the "Issuer"). The principal executive office of the Issuer is located at 5607 Palmer Way, Carlsbad, CA 92008.

The persons filing this statement and the persons enumerated in Instruction C of Schedule 13D and, where applicable, their respective places of organization, general partners, directors, executive officers and controlling persons, and the information regarding them, are as follows:

The source and amount of funds used in purchasing the Stock were as follows (but see Note 4 below):

(1) The funds used came from accounts of ICM's investment advisory clients.

(2) The funds used came from the working capital of investment limited partnerships of which Koyah or Koyah and Raven are the general partners.

(3) Includes $125,000 from investment limited partnerships of which Raven is also general partner shown below, and funds of Koyah Leverage shown below.

(4) Of the Stock beneficially owned by the Reporting Persons, 2,941,176 shares were purchased pursuant to that certain Common Stock Purchase Agreement (the "Agreement") entered into on December 22, 2000, between the Issuer and certain of the Reporting Persons, among others. That Stock was purchased in closings that occurred on December 22, 2000, January 11, 2001 and February 13, 2001 (the "Closings").

In connection with the Agreement, the Issuer issued to the Reporting Persons warrants (the "Warrants") representing the right to purchase one-half share of Stock per each share of Stock purchased by the Reporting Persons pursuant to the Agreement. Each Warrant is currently exercisable and expires two years from the date of the Closing at which it was issued. The Warrants are subject to earlier expiration, however, and the exercise price of the Warrants is subject to adjustment, upon the occurrence of certain events. The Warrants represent 1,470,588 shares of the Stock beneficially owned by the Reporting Persons.

On the date of the Agreement, the Issuer and the Reporting Persons who are parties to the Agreement, among others, entered into a Investors' Rights Agreement (the "Investors' Rights Agreement") with respect to the Stock purchased pursuant to the Agreement. Of the Stock beneficially owned by the Reporting Persons, 661,765 shares are represented by warrants issued without additional consideration under the terms of the Investors' Rights Agreement, which warrants are currently exercisable.

On May 31, 2001, and June 14, 2001, the Issuer issued to certain of the Reporting Persons Convertible Promissory Notes (the "Notes") in the principal amounts of $1,000,000 and $250,000, respectively. The Notes are convertible at any time into 740,741 and 185,185 shares of Stock, respectively, at an exercise price of $1.35 per share. The Notes became payable on August 30, 2001. They have not yet been repaid or converted, however. In connection with the issuance of the Notes, the Issuer issued to the Reporting Persons that purchased the Notes warrants to purchase 250,000 and 62,500 shares of Stock, respectively. The exercise price of those warrants is $1.50 per share and they expire on May 30, 2004 and June 13, 2004, respectively.

Recently, the Chief Executive Officer and Chief Financial Officer of the Issuer resigned. Mr. Simmons and other representatives of ICM have had discussions with members of the Issuer's Board of Directors and with other shareholders regarding the departure of those officers and the future direction of the Issuer. Mr. Simmons and other representatives of ICM may in the future have additional discussions with senior management of the Issuer concerning various operational and financial aspects of the Issuer's business. Mr. Simmons and other representatives of ICM may also have future discussions with other shareholders concerning various alternative ways of maximizing long-term shareholder value. In addition, the Reporting Persons may solicit indications of interest from potential purchasers of the Issuer and may retain an investment banking firm to assist them and to explore ways of maximizing long-term shareholder value.

The Reporting Persons intend continuously to review their investment in the Issuer and may in the future change their present course of action. The Reporting Persons may determine to acquire additional Stock or to dispose of all or a portion of the Stock they now own or may hereafter acquire. In reaching any decision as to their investment, the Reporting Persons will take into consideration various factors, such as the Issuer's business and prospects, other developments concerning the Issuer (including, but not limited to, actions of the Board of Directors and management of the Issuer), other investment opportunities available to the Reporting Persons, developments with respect to the other investments of the Reporting Persons, general economic conditions, and money and stock market conditions.

The beneficial ownership of the Stock by each Reporting Person at the date hereof is reflected on that Reporting Person's cover page.

The Reporting Persons effected the following transactions in the Stock on the dates indicated, and such transactions are the only transactions in the Stock by the Reporting Persons since August 20, 2001:

(1) These shares are represented by warrants issued without consideration pursuant to the terms of the Investors' Rights Agreement.

(2) These warrants accrued on August 20, 2001 under the terms of the Investors' Rights Agreement, but actually were issued in September 2001.

(3) These warrants accrued on September 19, 2001 under the terms of the Investors' Rights Agreement, but actually were issued in October 2001.

(4) These warrants accrued on October 19, 2001 under the terms of the Investors' Rights Agreement, but have not yet been issued.

Pursuant to an Investment Management Agreement entered into with respect to each such client, ICM is the investment adviser to investment limited partnerships of which Koyah and Raven are the general partners and to other client accounts. Such agreement provides ICM the authority, among other things, to invest the funds of those clients and partnerships in the Stock, to vote and dispose of Stock and to file this statement on behalf of those clients and partnerships. Pursuant to the Agreement of Limited Partnership with respect to each of those partnerships, as the general partner, Koyah and/or Raven, as the case may be, is entitled to allocations from the capital accounts of investors in that partnership based on assets under management and realized and unrealized gains.

A. Agreement Regarding Joint Filing of Statement on Schedule 13D or 13G.

B. SVI Holdings, Inc. Common Stock Purchase Agreement dated as of December 22, 2000.

C. Exhibit A to Common Stock Purchase Agreement, Form of Initial Warrant to Purchase Common Stock of SVI Holdings, Inc.

D. SVI Holdings, Inc. Investor's Rights Agreement dated as of December 22, 2000.

E. Exhibit A to Investors' Rights Agreement, Form of Registration Warrant to Purchase Common Stock of SVI Holdings, Inc.

F. Convertible Promissory Note from SVI Solutions, Inc. in the amount of $150,000 dated May 31, 2001 payable to the order of Koyah Partners, L.P.

G. Convertible Promissory Note from SVI Solutions, Inc. in the amount of $100,000 dated May 31, 2001 payable to the order of Koyah Community Partners, L.P.

H. Convertible Promissory Note from SVI Solutions, Inc. in the amount of $750,000 dated May 31, 2001 payable to the order of Koyah Leverage Partners, L.P.

I. Exhibit A to Convertible Promissory Notes dated May 31, 2001, Form of Warrant to Purchase Common Stock of SVI Solutions, Inc.

J. Convertible Promissory Note from SVI Solutions, Inc. in the amount of $37,500 dated June 14, 2001 payable to the order of Koyah Partners, L.P.

K. Convertible Promissory Note from SVI Solutions, Inc. in the amount of $25,000 dated June 14, 2001 payable to the order of Koyah Community Partners, L.P.

L. Convertible Promissory Note from SVI Solutions, Inc. in the amount of $187,500 dated June 14, 2001 payable to the order of Koyah Leverage Partners, L.P.

M. Exhibit A to Convertible Promissory Notes dated June 14, 2001, Form of Warrant to Purchase Common Stock of SVI Solutions, Inc.

SIGNATURES

After reasonable inquiry and to the best of my knowledge, I certify that the information set forth in this statement is true, complete and correct.

Dated: November 1, 2001

EXHIBIT A

AGREEMENT REGARDING JOINT FILING

OF STATEMENT ON SCHEDULE 13D OR 13G

The undersigned agree to file jointly with the Securities and Exchange Commission (the "SEC") any and all statements on Schedule 13D or Schedule 13G (and any amendments or supplements thereto) required under section 13(d) of the Securities Exchange Act of 1934, as amended, in connection with purchases by the undersigned of the common stock of SVI Solutions, Inc.. For that purpose, the undersigned hereby constitute and appoint ICM Asset Management, Inc., a Washington corporation, as their true and lawful agent and attorney-in-fact, with full power and authority for and on behalf of the undersigned to prepare or cause to be prepared, sign, file with the SEC and furnish to any other person all certificates, instruments, agreements and documents necessary to comply with section 13(d) and section 16(a) of the Securities Exchange Act of 1934, as amended, in connection with said purchases, and to do and perform every act necessary and proper to be done incident to the exercise of the foregoing power, as fully as the undersigned might or could do if personally present.

Dated: November 1, 2001

Dated as of December 22, 2000

THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of December 22, 2000, by and among SVI Holdings, Inc., a Nevada corporation (the "Company"), and the parties listed on the Schedule of Investors attached hereto (each, an "Investor"), with reference to the following facts:

WHEREAS, the Company has authorized the sale and issuance of up to 2,941,176 shares of its Common Stock (the "Common Stock") pursuant to the terms of this Agreement.

WHEREAS, the Investors hereto wish to purchase, and the Company wishes to sell to those Investors, shares of the Common Stock on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and conditions set forth in this Agreement, the parties agree as follows:

1. Authorization and Sale of the Shares.

0. Authorization. The Company has authorized the issuance and sale pursuant to the terms and conditions hereof of up to 2,941,176 shares of its Common Stock.
1. Issuance and Sale of Common Stock. Subject to the terms and conditions hereof, each Investor agrees, severally but not jointly, to purchase, and the Company agrees to issue and sell to each such Investor, at each Closing (as such term is hereinafter defined), the respective number of shares of Common Stock specified opposite the name of such Investor for such Closing on the Schedule of Investors attached hereto at a purchase price of $0.85 per share.
2. Issuance and Sale of Warrants. Subject to the terms and conditions hereof, the Company agrees to issue to each Investor participating in the applicable Closing a warrant to purchase shares of Common Stock equal to one-half the number of shares of Common Stock that Investor acquires in such Closing. The warrants will be in the form of Exhibit A hereto (each, a "Warrant" and collectively, the "Warrants"). The exercise price of each Warrant will be $1.50 per share of Common Stock issuable on exercise of the Warrant.
3. Closings; Delivery.

1. First Closing. Upon satisfaction of the conditions set forth in Sections 4 and 5, the closing of the purchase and sale of the shares of Common Stock listed in Part I of the Schedule of Investors attached hereto and the issuance of the Warrants related thereto shall take place at the offices of Paine Hamblen Coffin Brooke Miller LLP, 717 W. Sprague, Suite 1200, Spokane, Washington 99201, on or before December 22, 2000 (the "First Closing Date"), at 10:00 a.m., or at such other time and place as the parties may agree (the "First Closing"). The First Closing Date and all subsequent closing dates referred to Section 1.4(c) of this Agreement are collectively referred to herein as the "Closing Dates" and each individually as a "Closing Date." The First Closing and all subsequent closings referred to Section 1.4(c) of this Agreement are collectively referred to herein as the "Closings" and each individually as a "Closing."
2. Delivery at the First Closing. Subject to the terms of this Agreement, at the First Closing the Company will deliver to each Investor listed in Part I of the Schedule of Investors a stock certificate representing the number of shares of Common Stock set forth beside such Investor's name in Part I of the Schedule of Investors and a Warrant exercisable into the applicable number of shares of Common Stock against (i) in the case of principal of and accrued interest on the Convertible Promissory Note and Grant of Security Interest dated December 14, 2000, (the "Convertible Note") made by the Company in favor of Koyah Leverage Partners, L.P., cancellation of such principal and interest pursuant to the Convertible Note pursuant to the automatic conversion provisions of the Convertible Note and (ii) in the case of the remainder of the purchase price, delivery to the Company by each such Investor at the First Closing of a check or wire transfer of funds for the purchase price of the shares of Common Stock.
3. Subsequent Sales of Shares.

1. Second Closing. Upon satisfaction of the conditions set forth in Section 4 and 5, the closing of the purchase and sale of the shares of Common Stock listed in Part II of Schedule of Investors attached hereto and the issuance of the Warrants related thereto shall take place at the offices of Paine Hamblen Coffin Brooke & Miller LLP, on or before January 20, 2001 (the "Second Closing Date"), at 10:00 a.m., or at such other time and place as the parties may agree (the "Second Closing").
2. Additional Optional Purchase. At any time on or before the date that is 60 days after the First Closing Date, Koyah Partners, L.P., Koyah Leverage Partners, L.P. and any other entity or account managed by or under common investment management with ICM Asset Management, Inc. (collectively, the "Approved Investors") have the exclusive right, upon the election of one or more of the Approved Investors, as the case may be, to purchase, and the Company agrees to sell to such Approved Investor or Approved Investors, as the case may be, upon such election, up to an additional 588,235 shares of such Common Stock not sold in the First Closing or the Second Closing at a purchase price of $0.85 per share. All such subsequent sales shall be at the election of the Approved Investors (but without obligation on their part), but shall otherwise be made on the terms and conditions set forth in this Agreement, including, without limitation, satisfaction of the conditions set forth in Sections 4 and 5.
3. Treatment of Subsequent Sales of Shares. Any shares of Common Stock sold pursuant to this Section 1.4(c) shall be deemed to be "Common Stock" for all purposes under this Agreement and any investors thereof shall be deemed to be "Investors" for all purposes under this Agreement and under the Investors' Rights Agreement, dated as of the date hereof, by and among the Company and the Investors, the form of which is attached hereto as Exhibit B (the "Investors' Rights Agreement"), and such investors shall automatically become parties to this Agreement and the Investors' Rights Agreement and shall have the rights and obligations of an Investor hereunder and thereunder.

4. Delivery at each Subsequent Closing. Subject to the terms of this Agreement, at each Closing after the First Closing, the Company shall deliver to each Investor acquiring shares of Common Stock at such Closing a stock certificate representing that number of shares of Common Stock set forth beside such Investor's name for such Closing on the Schedule of Investors attached hereto and a Warrant exercisable into the applicable number of shares of Common Stock against delivery to the Company by each such Investor participating in such Closing of a check or wire transfer of funds for the purchase price of the shares of Common Stock. After each such Closing, the Company will update the Schedule of Investors attached hereto by adding the investors in such Closing to a new Part of the Schedule of Investors.

4. [Intentionally omitted]
5. Effect of Change in Company's Capital Structure. For purposes of this Section 1, appropriate adjustments shall be made in the price, number and class of shares in the event of a stock split, reverse stock split, combination, reclassification or like change in the capital structure of the Company after the date of this Agreement.

2. Representations, Warranties and Agreements of the Company. The Company (expressly including for purposes of this Section 2 its wholly owned subsidiaries, Divergent Technologies Pty. Ltd., an Australian corporation, Chapman Computers Pty. Ltd., a _________ corporation, Applied Retail Solutions, Inc., a ___________ corporation, Island Pacific Systems Corporation, a _________ corporation, and Market Place Systems Corporation, a __________ corporation) hereby represents and warrants to each Investor, as of the date of this Agreement and as of each Closing, that except as set forth on the Schedules attached hereto (which exceptions shall be deemed to be representations and warranties as if made hereunder):

0. Organization; Standing and Power. The Company (a) is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, (b) has all requisite corporate power and authority to own and operate its properties and to carry on its businesses as presently conducted and as proposed hereafter to be conducted, and (c) is duly qualified and in good standing to do business as a foreign corporation in each and every jurisdiction where its assets are located and wherever such qualification is necessary to carry out its business and operations except where the failure to so qualify or be in good standing would not have a material adverse effect on the condition (financial or otherwise), business, operations, assets or prospects of the Company (the "Condition of the Company"). The Company has all requisite corporate power and authority to execute and deliver, and perform all of its obligations under this Agreement and the other Related Documents (as defined in Section 8).
1. Capitalization; Reserved Stock, Preemptive Rights. The total authorized capital stock of the Company immediately prior to the First Closing consists of 50,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, of which 34,340,468 shares of Common Stock are issued and outstanding and no shares of Series Preferred Stock are issued and outstanding. All capital stock of the Company that is outstanding immediately prior to the First Closing has been duly and validly issued, is fully paid and nonassessable and has been issued in accordance with all applicable federal and state securities laws. Except for (a) 3,500,000 shares of Common Stock issuable upon conversion of options which are outstanding or reserved for issuance under the SVI Holdings, Inc. 1998 Equity Incentive Plan, (b) 25,000 shares of Common Stock issuable on exercise of warrant outstanding prior to the First Closing and (c) the Warrants, no other shares have been reserved for issuance on the First Closing Date and there are no outstanding options, warrants or other rights to subscribe for or purchase from the Company any shares of its capital stock or any securities convertible into or exchangeable for its capital stock. There are no preemptive rights or rights of first refusal or similar rights which are binding on the Company permitting any person to subscribe for or purchase from the Company shares of its capital stock pursuant to any provision of law, the articles of incorporation or bylaws of the Company or by agreement or otherwise. The designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of each class and series of authorized capital stock of the Company are as set forth in the certificate or articles of incorporation of the Company, and all such designations, powers, preferences, rights, qualifications, limitations and restrictions are valid, binding and enforceable against the Company and in accordance with all applicable laws, rules and regulations.
2. Authorization and Binding Obligation.

1. The execution and delivery by the Company of this Agreement, the other Related Documents, the performance of the Company's obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby (including the issuance and delivery of the shares of Common Stock and the Common Stock issuable on exercise of the Warrants) have been duly authorized by all necessary corporate action and will not, either prior to or as a result of the consummation of the transactions contemplated by this Agreement: (i) violate any law or any governmental rule or regulation applicable to the Company, any provision of the certificate or articles of incorporation or bylaws of the Company, or any contract, indenture, agreement or other instrument to which the Company is a party, or by which the Company or any of its assets or properties are bound, or (ii) be in conflict with, result in a breach of, or constitute (after the giving of notice or lapse of time or both) a default under, or result in the creation or imposition of any lien of any nature whatsoever upon any of the property or assets of the Company pursuant to the provisions of any contract, indenture, agreement or other instrument to which the Company is a party or by which its assets or property is bound. The Company is not required to obtain any approval, consent or authorization from, or to file any declaration or statement with, any governmental instrumentality or agency in connection with or as a condition to the execution, delivery or performance of this Agreement (including the issuance and delivery of the shares of Common Stock and the Common Stock issuable on exercise of the Warrants), or the other Related Documents, other than (i) approval of the board of directors of the Company, which has been obtained, and (ii) the filing of the Form D and any applicable state securities law filings, which filing or filings, as the case may be, will be made in accordance with applicable laws and regulations.
2. Each of the Agreement and the other Related Documents has been duly executed and delivered by the Company and is the legally valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.
3. The Common Stock that is being issued hereunder, when issued, sold, paid for and delivered in accordance with the terms of this Agreement will be duly and validly issued, fully paid and non-assessable, and free and clear of any restrictions on transfer (other than any restrictions under the Securities Act of 1933, as amended (the "Securities Act"), and state securities laws) and any taxes, security interests, options, warrants, purchase rights, preemptive rights, contracts, commitments, equities, claims or demands. The shares of Common Stock issuable on exercise of the Warrants, when issued in accordance with the terms of the Warrants, will be duly and validly issued, fully paid and non-assessable, and free and clear of any restrictions on transfer (other than any restrictions under the Securities Act and state securities laws) and any taxes, security interests, options, warrants, purchase rights, preemptive rights, contracts, commitments, equities, claims or demands.

3. Securities Law Exemption. The offer, sale and issuance of the shares of the Common Stock and Warrants as contemplated by this Agreement are exempt from the registration requirements of the Securities Act and applicable state securities laws, and neither the Company nor any authorized agent acting on its behalf has taken or will take any action hereafter that would cause the loss of such exemption.
4. Non-contravention. Except as set forth on Schedule 2.5 hereof, the Company is not in violation or breach of or in default with respect to, any material provision of any contract, agreement, instrument, lease, license, arrangement or understanding to which it is a party, and each such contract, agreement, instrument, lease, license, arrangement and understanding is in full force and effect and is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.
5. SEC Reports. The Company has filed all required reports, schedules, forms, statements, and other documents with the Securities and Exchange Commission (the "SEC") [since October 31, 2000, the date of the Company's latest Form 10-Q] (together with other documents that revise or supersede earlier filed documents, the "SEC Reports"). The Company has delivered or made available to the Investors true and complete copies of the SEC Reports. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the 1933 Act or the 1934 Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Reports. None of the SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports complied as of their respective dates of filing with the SEC in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except, in the case of unaudited statements, as permitted by Regulation S-X promulgated by the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto), and fairly present the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). As of the date hereof, the Company has on a timely basis made all filings required to be made by the Company with the SEC.
6. Litigation. Except as set forth in the SEC Reports, there is no action, suit or litigation, administrative proceeding, arbitration or other proceeding to which the Company is a party or of which the Company is aware, pending or threatened, which might materially and adversely affect the Condition of the Company, and none of which questions the validity or impairs the ability of the Company to perform on a timely basis any obligation under this Agreement or the or the other Related Documents or any action taken or to be taken in connection herewith or therewith. None of the transactions contemplated hereby or by any of the other Related Documents has been enjoined by any Authority and no suit or other proceeding challenging the transactions contemplated by the Related Documents (of which the Company has been served or is aware) has been instituted or, to the best of the Company's knowledge, threatened and no investigative demand on the Company related to such transactions has been made by any Authority. There are no unsatisfied judgments or outstanding orders, injunctions, decrees, stipulations or awards against the Company or any of its properties or assets that, individually or in the aggregate, exceed $10,000 or otherwise have a material adverse effect on the Condition of the Company.
7. Financial Statements. The financial statements of the Company included in the SEC Reports and an unaudited income statement and balance sheet for the three-month period ending October [31], 2000, attached hereto as Schedule 2.8 (the "Financial Statements") (a) have been prepared (i) in accordance with generally accepted accounting principles ("GAAP") (except that the unaudited Financial Statements have not been reviewed by the independent public accountants of the Company, and are expected to have adjustments as described on Schedule 2.8(a), and do not contain footnotes and are subject to year-end adjustments, which adjustments will not be material, individually or in the aggregate), (ii) on a consistent basis for all periods presented, and (iii) in accordance with the books and records of the Company, (b) are complete and correct in all material respects, and (c) fairly present in all material respects the financial condition of the Company as at said dates, and the results of operations for the periods stated. As of the date hereof, there are no liabilities or obligations of the Company ("Liabilities"), whether known or unknown, accrued, absolute, contingent or otherwise, and whether due or to become due, other than Liabilities that are reflected in the SEC Reports or the Financial Statements or Liabilities incurred since the date of the Financial Statements that are not and would not be, individually or in the aggregate, material to the Condition of the Company. The Company is not aware of any reasonable basis for the assertion against the Company of any other debt, duty, liability, obligation or loss contingency other than Liabilities that are not and would not be, individually or in the aggregate, material to the Condition of the Company.
8. Use of Proceeds. The proceeds from the sale of the shares of Common Stock shall be used solely for general corporate purposes. The proceeds from the sale of the shares of Common Stock may not be used to redeem, repurchase or otherwise acquire any shares of preferred stock, common stock or other equity securities issued by the Company.
9. Intellectual Property.

1. The Company owns, or has the contractual right to use, sell or license all intellectual property necessary or required for the conduct of its business as presently conducted and as proposed to be conducted, including, without limitation, all trade secrets, processes, source code, licenses, trademarks, service marks, trade names, logos, brands, copyrights, patents, franchises, domain names, permits and Proprietary Information (all such intellectual property and the rights thereto are collectively referred to as the "Company IP Rights"), except for any failure to own or have the right to use, sell or license that would not have a material adverse effect on the Condition of the Company. Set forth in the SEC Reports or on Schedule 2.10 are all (i) patents, applications for patents, registrations of trademarks and applications therefor, and registrations of copyrights and applications therefor that are owned by the Company, and (ii) unexpired licenses relating to the Company IP Rights that have been granted to the Company and that are material to the conduct of the Company's business as presently conducted or as proposed to be conducted, but excluding end-user licenses granted to the Company relating to standard "off the shelf" software that is generally available on commercially reasonable terms.
2. Neither the execution, delivery and performance of this Agreement or the other Related Documents nor the consummation of the transactions contemplated hereby or thereby will (i) constitute a breach of any instrument or agreement governing any Company IP Rights, (ii) cause the forfeiture or termination or give rise to a right of forfeiture or termination of any Company IP Rights or (iii) impair the right of the Company to use, sell or license any Company IP Rights or portion thereof, except for any such breach, forfeiture, termination, right of forfeiture or termination or impairment that would not, individually or in the aggregate, have a material adverse effect on the Condition of the Company.
3. The manufacture, marketing, license, sale or intended use of any product currently licensed or sold by the Company is not in breach of any material license or agreement between the Company and any third party or, to the best of the Company's knowledge, has not infringed and is not infringing on any intellectual property right of any other party. To the best of the Company's knowledge, there is no claim or litigation, pending or threatened, which contests the validity, ownership or right to use, sell, license or dispose of any Company IP Rights.
4. Except as set forth on Schedule 2.10(d), the Company owns the Company IP Rights free and clear of all liens or other encumbrances. The Company has not received any communications alleging that the Company has violated or, by conducting its business presently conducted or as proposed to be conducted, violates or will violate any intellectual property rights of any other person or entity. The Company is not aware that any of its employees are 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 that would conflict with the Company's business as presently conducted or as proposed to be conducted. Neither the execution nor delivery of this Agreement or the other Related Documents, nor the carrying on of the Company's business by the employees of the Company, nor the conduct of the Company's business as presently conducted or as proposed to be conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any employee is now bound. 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 (or people the Company currently intends to hire) made prior to their employment by the Company, except for Company IP Rights that have been assigned to the Company.
5. The Company has taken reasonable security measures to maintain the confidentiality of and to protect the Company IP Rights. Each employee, consultant and officer of the Company has executed a Company IP Rights and inventions agreement to protect the rights of the Company to all Company IP Rights in substantially the form provided to the Investors.

10. Title to Property and Assets. The Company does not own any real property. The Company has good and marketable title to or, in the case of leases and licenses, has valid and subsisting leasehold interests or licenses in, all of its properties and assets of whatever kind (whether real or personal, tangible or intangible) free and clear of any liens or other encumbrances, except for liens or other encumbrances that are not, individually or in the aggregate, material to the Condition of the Company. No person other than the Company owns any equipment or other tangible assets or property situated on the premises of the Company that is necessary to the operation of the business of the Company as conducted or as proposed to be conducted, except for leased items that are leased. With respect to property leased by the Company, the Company has a valid leasehold interest in such property pursuant to leases which are in full force and effect, and the Company is in compliance in all material respects with the material provisions of such leases. All facilities, equipment and other material items of tangible property and assets of the Company are in good operating condition and repair, subject to normal wear and maintenance, and conform to all applicable Laws relating to their construction, use and operation.
11. Compliance with Laws. The Company is and has been in compliance in all material respects with all Laws that are applicable to the Company, the conduct of its business as presently conducted and as proposed to be conducted, and the ownership of its property and assets (including, without limitation, all occupational safety, health, wage and hour, employment discrimination and environmental laws), and the Company, to its knowledge, is not aware of any state of facts, events, conditions or occurrences which may now or hereafter constitute or result in a violation of any of such Laws or which may give rise to the assertion of any such violation, the effect of which could have a material adverse effect on the Condition of the Company. All required reports and filings with Authorities have been properly made as and when required, except where the failure to report or file would not, individually or in the aggregate, have a material adverse effect on the Condition of the Company.
12. Licenses and Permits. The Company has obtained and maintains all federal, state and local licenses, permits, consents, approvals, registrations, memberships, authorizations and qualifications required to be maintained in connection with and material to the operations of the Company as presently conducted and as proposed to be conducted, and all such licenses, permits, consents, approvals, registrations, memberships, authorizations and qualifications obtained are valid and in full force and effect.
13. Related Entities. Except as set forth on Schedule 2.14, the Company does not presently own or control, directly or indirectly, any interest in any other subsidiary, corporation, association or other business entity. The Company is not a party to any joint venture.
14. Related Party Transactions and Agreements.

1. Except as disclosed in the SEC Reports or on Schedule 2.15, there are no agreements, understandings or proposed transactions (other than employer/employee relationships) between the Company, on the one hand, and any of its respective officers, directors, shareholders (who hold one percent or more of the Company's Common Stock (on a fully-diluted basis)) or any affiliate thereof, on the other hand.
2. Except as disclosed on Schedule 2.15, no employee, officer or director of the Company or shareholder who holds one percent or more of the Company's Common Stock (on a fully-diluted basis) or member of the immediate family of any of the foregoing (i) owns, directly or indirectly, any interest in (except for less than 1% stock holdings for investment purposes in securities of publicly traded companies), or is an officer, director, employee or consultant of, any company which is or was engaged in business as, a competitor, lessor, lessee, supplier or customer of the Company; (ii) owns, directly or indirectly, as a whole or in part, any tangible or intangible property that the Company uses or contemplates using in the conduct of its business as presently conducted or as proposed to be conducted; or (iii) has any cause of action or other claim whatsoever against, or is owed any amount from, the Company, except as disclosed in the SEC Reports and except for immaterial claims in the ordinary course of business, such as accrued vacation pay, accrued benefits under employee benefit plans and medical, dental and other similar health benefit plans existing on the date hereof.

15. Marketing Rights. The Company has not granted rights to develop, license, market, distribute or sell its products or use any of its Proprietary Information to any other person or entity and is not bound by any agreement that affects the exclusive right of the Company to develop, license, market, distribute or sell its products or any other products that utilize the Proprietary Information.
16. Changes. Since the date of the most recent SEC Report, [except as disclosed on Schedule 2.17], the Company has operated its respective business diligently and in the ordinary course of business and there has not been, or the Company has not caused, permitted or suffered to exist:

1. any material adverse change in the Condition of the Company;
2. any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the Condition of the Company;
3. any waiver or compromise by the Company of a valuable right or of a material debt owed it;
4. sold, encumbered, assigned or transferred any assets or properties of the Company, other than in the ordinary course of business;
5. incurred any liability other than in the ordinary course of business;
6. created, incurred, assumed or guaranteed any indebtedness or subjected any of its assets to any lien or encumbrance, except for indebtedness, liens or encumbrances that are not, individually or in the aggregate, material to the Condition of the Company;
7. declared, set aside or paid any dividends or made any other distributions in cash or property on the Company's capital stock;
8. directly or indirectly redeemed, purchased or otherwise acquired any shares of capital stock of the Company;
9. suffered any resignation or termination of employment of any key officers or employees;
10. except in the ordinary course of business of the Company, increased the compensation payable or to become payable by the Company to any of its officers, employees or directors or increased any bonus, insurance, pension or other employee benefit plan, payment or arrangement made by the Company for or with any such officers, employees or directors;
11. made any direct or indirect loan to any shareholder, employee, officer or director of the Company, other than advances made in the ordinary course of business;
12. changed any agreement to which the Company is a party which materially and adversely affects the Condition of the Company; or
13. (m) entered into any agreement or commitment to do any of the things described in this Section 2.17.

17. Employee Benefit Plans. Set forth in the SEC Reports or on Schedule 2.18 are all "employee benefit plans," as such term is defined in the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to which the Company has any liability or obligation, contingent or otherwise. All such employee benefit plans comply and have been maintained and administered in compliance with ERISA, the Code (as defined in Section 2.19) and all other statutes, orders and governmental rules and regulations applicable to such employee benefit plans. The Company does not maintain or contribute to, and has not maintained or contributed to, any "multiemployer plan," as such term is defined in ERISA.
18. Taxes. The Company has timely filed all tax returns and reports (federal, state and local) as required by Law and these returns and reports are true and correct in all material respects. The Company has paid all taxes and other assessments shown to be due on such returns or reports. Neither the Internal Revenue Service nor any state or local taxing authority has, during the past three years, examined or informed the Company it is in the process of examining, any such tax returns and reports. The provision for taxes of the Company, as shown on the most recent Financial Statements, is adequate for taxes due or accrued as of the date thereof. The Company has not elected, pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to be treated as a collapsible corporation pursuant to Section 341(f) of the Code, nor has it made any other elections pursuant to the Code (other than elections that relate solely to methods of accounting, depreciation or amortization) that would have a material effect on the Condition of the Company.
19. Insurance. The Company has in full force and effect fire, casualty and liability insurance policies, with extended coverage, sufficient in amount (subject to reasonable deductibles) to allow the Company to replace any of its properties that might be damaged or destroyed to the extent and in the manner customary for companies in similar business similarly situated.
20. Employees. The Company does not have 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. Except as set forth on Schedule 2.21, no employee has any agreement or contract, written or verbal, regarding his employment contracts. Except as set forth in the SEC Reports or on Schedule 2.21, the Company is not a party to or bound by any deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement. The Company is not aware that any officer or key employee, or that any group of key employees, intends to terminate their employment with the Company, nor does the Company have a present intention to terminate the employment of any of the foregoing. Except as set forth on Schedule 2.21, the employment of each officer and employee of the Company is terminable at the will of the Company. The Company is and has been in compliance with all applicable Laws regulating employment and employment practices or prescribing terms and conditions of employment, wages and hours and the provisions of all Laws applicable to any employee benefit, stock option or other similar plan maintained or contributed to by the Company for the benefit of its employees, and there are no claims (other than routine claims for benefits and claims in connection with terminations of employment) pending or threatened with respect to any of such plans or arrangements.
21. Material Contracts. Set forth in the SEC Reports and on Schedule 2.22, are all material contracts, agreements, commitments and arrangements that require capital expenditures or payments in excess of $25,000 or that are otherwise material, necessary or otherwise desirable to conduct the Company's business as presently conducted or as proposed to be conducted ("Material Contracts"). The Material Contracts are valid and in full force and effect as to the Company, and, to the best of the Company's knowledge, to the other parties thereto. Except as otherwise disclosed herein, the Company is not in violation of, or default under (and there does not exist any event or condition which, after notice or lapse of time or both, would constitute such a default under), the Material Contracts, except to the extent that such violations or defaults, individually or in the aggregate, could not reasonably be expected to (a) affect the validity of this Agreement or the other Related Documents, (b) have a material adverse effect on the Condition of the Company, or (c) impair the ability of the Company to perform fully on a timely basis any material obligation which the Company has or will have under this Agreement or the other Related Documents. To the Company's knowledge, none of the other parties to any Material Contract are in violation of or default under any Material Contract in any respect that would result in a material adverse effect on the Condition of the Company. The Company has not received any notice of cancellation or any written communication threatening cancellation of any Material Contract by any other party thereto. The Company is not a party to and is not bound by any contract, agreement or instrument, or subject to any restriction under its articles of incorporation, as amended, bylaws or other governing documents that materially adversely affects (i) it business as presently conducted or as proposed to be conducted or (ii) the Condition of the Company.
22. Real Property Holding Company. The Company is not a real property holding company within the meaning of Section 897 of the Code.
23. Significant Customers and Suppliers. No customer or supplier that was significant to the Company during the period covered by the Financial Statements or that has been significant to the Company thereafter, has terminated, materially reduced or threatened to terminate or material reduce its purchases from or provision of products or services to the Company.
24. Brokers and Finders. Except as set forth on Schedule 2.25, the Company has not employed any broker, finder, consultant or intermediary in connection with the transactions contemplated by this Agreement that would be entitled to a broker's, finder's or similar fee or commission in connection herewith and therewith.
25. Registration Rights. Except as provided by the Investors' Rights Agreement and on Schedule 2.26, the Company is not under any obligation to register any presently outstanding securities, or any securities which may hereafter be issued, under the Securities Act of 1933, as amended.
26. Foreign Corrupt Practices. Neither the Company nor any director, officer, employee, agent or other person acting on behalf of the Company has, in the course of that person's actions for, or on behalf of, the Company, (a) used any corporate assets for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity, (b) made any direct or indirect unlawful payment to any foreign or domestic governmental official or employee, (c) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, or (d) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic governmental official or employee.
27. Form S-3 Eligibility. The Company is currently eligible to register the resale of its Common Stock on a registration statement on Form S-3 under the Securities Act.
28. Disclosure. This Agreement, Schedules and Exhibits hereto, the other Related Documents, and all other documents delivered to the Investors in connection herewith or therewith at the Closing, do not contain any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. There are no facts that, individually or in the aggregate, materially adversely affect the Condition of the Company that has not been disclosed to the Investors in this Agreement (including the Schedules and Exhibits hereto), the other Related Documents and all other documents delivered to the Investors in connection herewith or therewith at the Closing.

3. Representations and Warranties of each Investor. Each Investor, severally but not jointly, represents and warrants that:

0. Investment Intent. The Investor is acquiring the Common Stock and the Warrants (collectively, the "Securities") pursuant to this Agreement with his, her or its own funds for his, her or its own account and not as a nominee or agent for the account of any other person. No other person has any interest, beneficial or otherwise, in any of the Securities to be purchased by the Investor. Except as provided herein, the Investor is not obligated to transfer any Securities to any other person, nor does the Investor have any agreement or understanding with any other person to do so. The Investor is purchasing the Securities for investment purposes and not with a view to the sale or distribution of any Securities, by public or private sale or other disposition, and the Investor has no intention of selling, granting any participation in or otherwise distributing or disposing of any of the Securities. Except as provided in Section 6 hereof, the Investor does not intend to subdivide or transfer to any other person the Securities acquired by the Investor herewith. Notwithstanding the foregoing, the disposition of the Investor's property shall be at all times within the Investor's own control, and the Investor's right to sell or otherwise dispose of all or any part of the Securities purchased by it pursuant to an effective registration statement under the Securities Act or under an exemption under the Securities Act shall not be prejudiced; provided, that the Investor complies with Section 6 herein. Nothing herein shall prevent the distribution of any Securities to any member, partner or stockholder, former member, partner or stockholder of the Investor in compliance with the Securities Act and applicable state "blue sky" laws.
1. No Public Offering. The Investor is able to bear the economic risk of his, her or its investment in the Securities. The Investor is aware that it must be prepared to hold the Securities for an indefinite period and that the Securities have not been, and when issued will not be, registered under the Securities Act or registered or qualified under any state securities law, on the ground that the Securities are being issued by the Company without any public offering within the meaning of Section 4(2) of the Securities Act. The Investor has had an opportunity to discuss the Company's business, management and financial affairs with the Company's management. The Investor is not subscribing for the Securities as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or any solicitation of a subscription by any person not previously known to the Investor in connection with investments in securities generally.
2. Certificates to be Legended. The Investor understands that each stock certificate representing Securities acquired hereunder will bear a legend on the face thereof (or on the reverse thereof with a reference to such legend on the face thereof) required by the SEC or a state securities commission.
3. Securities Will be "Restricted Securities". The Investor understands that the Securities will be "restricted securities" as that term is defined in Rule 144 promulgated under the Securities Act and, accordingly, that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. The Investor understands and agrees that, except as provided herein and in the Investors' Rights Agreement, the Company is not under any obligation to register the Securities under the Securities Act or to comply with Regulation A or any other exemption.
4. Accredited Investor. The Investor has been advised or is aware of the provisions of Regulation D under the Securities Act relating to the accreditation of investors, and the Investor is an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act.
5. Sophistication of the Investor. The Investor has such knowledge and experience in financial and business matters that the Investor is capable of evaluating the merits and risks of the investment contemplated by this Agreement and has the capacity to protect his, her or its own interests. The Investor acknowledges that investment in the Securities is highly speculative and involves a substantial and high degree of risk of loss of the Investor's entire investment. The Investor has adequate means of providing for current and anticipated financial needs and contingencies, is able to bear the economic risk of the investment for an indefinite period of time and has no need for liquidity of the investment in the Securities and could afford complete loss of such investment.
6. Brokers' Fees. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Investor.
7. Organization. Unless the Investor is an individual, the Investor is a corporation, limited liability company or limited partnership, as the case may be, duly organized, validly existing and in good standing in the jurisdiction of its formation. The Investor has all requisite power and authority to execute, deliver and carry out the terms of this Agreement and the Investors' Rights Agreement.
8. Execution and Binding Effect. The execution and delivery of this Agreement and the Investors' Rights Agreement and the consummation of the transactions contemplated hereby or thereby have been duly authorized by all necessary action on the part of the Investor. Upon the execution and delivery by the Investor, this Agreement and the Investors' Rights Agreement shall constitute the legal, valid and binding obligations of the Investor enforceable against the Investor in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, liquidation, reorganization, moratorium or other laws relating to or limited creditors' rights generally or by equitable principles relating to enforceability.

4. Each Investor's Conditions to each Closing. Each Investor's obligation to purchase and pay for the shares of Common Stock to be sold to such Investor at the applicable Closing and the issuance of the Warrants is subject to the fulfillment to such Investor's satisfaction, prior to or at the such Closing, of the following conditions:

0. Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true and correct when made and as of the applicable Closing with the same effect as though such representations and warranties had been made on and as of the date of such Closing, except to the extent of changes caused by transactions expressly contemplated herein.
1. Performance. The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed by it or with which it is required to have complied on or before the applicable Closing.
2. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the applicable Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Investor, and the Investor shall have received all such counterpart original and certified or other copies of such documents as they may reasonably request.
3. Securities Compliance. Upon the filing of its Form D in the appropriate jurisdictions, the Company shall have taken all action necessary to comply with any federal or state securities laws applicable to the transactions contemplated hereunder.
4. Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement and the Investors' Rights Agreement (except for such as may be properly obtained subsequent to the applicable Closing).
5. Certificate. The Company shall deliver to each Investor at the applicable Closing, relating to such Investor's purchase of shares of Common Stock and the issuance of the Warrants, a certificate signed by the President of the Company certifying the matters set forth in Sections 4.1 through 4.5.
6. Investors' Rights Agreement. The Investors' Rights Agreement, in the form attached hereto as Exhibit B, shall have been executed by all the parties thereto on or prior to the applicable Closing.
7. Stock Certificate. The Company shall deliver to each Investor at the applicable Closing a duly executed stock certificate evidencing the shares of Common Stock purchased by such Investor at such Closing.
8. Warrants. The Company shall deliver to each Investor at the applicable Closing a duly executed Warrant.
9. Opinion of Counsel. The Company shall deliver to each Investor at the applicable Closing an opinion of counsel for the Company, dated as of such Closing, in the form attached hereto as Exhibit C.
10. Expenses. The Company shall pay (i) the legal fees and expenses of Paine Hamblen Coffin Brooke & Miller LLP (legal counsel only for ICM Asset Management, Inc.), in an amount not to exceed $15,000, incurred in connection with the First Closing under this Agreement, the Other Related Documents and the transactions contemplated hereby and thereby and (ii) the legal fees and expenses of Paine Hamblen Coffin Brooke & Miller LLP, in an amount not to exceed $3,000 with respect to each subsequent Closing, incurred in connection with each subsequent Closing contemplated by this Agreement. The Company shall pay the reasonable fees and out of pocket expenses of Raven Ventures, LLC, in an amount not to exceed $10,000, incurred in connection with the transactions contemplated by this Agreement, the Other Related Documents and the transactions contemplated hereby and thereby.
11. Due Diligence. The Investors shall have completed due diligence to their satisfaction.
12. Legal Matters. All matters of a legal nature which pertain to this Agreement and the transactions contemplated hereby shall have been approved by counsel to the Investors.

5. The Company's Conditions to each Closing. The Company's obligation to deliver the shares of Common Stock and issuance of the Warrants at the applicable Closing is subject to the fulfillment to the Company's satisfaction, prior to or at such Closing, of the following conditions:

0. Representations and Warranties. The representations and warranties of each Investor participating in the applicable Closing contained in Section 3 hereof shall be true and correct on and as of such Closing.
1. Performance. Each Investor participating in the applicable Closing shall have performed and complied with all agreements, obligations, and conditions contained in the Agreement that are required to be performed by it or them or with which it or they are required to have complied on or before such Closing.
2. Payment. Each Investor participating in the applicable Closing shall have delivered the consideration specified in Section 1 for each share of Common Stock purchased by the Investor at such Closing.
3. Legal Matters. All matters of a legal nature which pertain to this Agreement and the transactions contemplated hereby shall have been approved by counsel to the Company.

6. Transfer of Securities.

0. Restrictions on Transfer. The Securities are not transferable except upon the conditions specified in the Investors' Rights Agreement and applicable federal and state securities laws.
1. Restrictive Legends. The Warrants and the stock certificates representing the shares of Common Stock shall be stamped or otherwise imprinted with legends in substantially the following forms:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND THUS MAY NOT BE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER THAT ACT OR SUCH LAWS OR UNLESS, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, AN EXEMPTION FROM REGISTRATION OR QUALIFICATION IS AVAILABLE.

7. Miscellaneous.

0. Survival of Warranties. The warranties, representations and covenants of the Company and each Investor contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closings.
1. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investors holding more than 50% of the outstanding shares of Common Stock acquired hereunder. Any amendment or waiver effective in accordance with this Section 7.2 shall be binding upon each Investor, his, her or its heirs, representatives or permitted assigns, and the Company and its heirs, representatives and permitted assigns.
2. Notices. Any notice, consent, authorization or other communication to be given hereunder shall be in writing and shall be deemed duly given and received when delivered personally or transmitted by facsimile transmission with receipt acknowledged by the addressee or three days after being mailed by first class mail, or the next business day after being deposited for next-day delivery with a nationally recognized overnight delivery service, charges and postage prepaid, properly addressed to the party to receive such notice at the address(es) specified on the signature page of this Agreement for the Company and each Investor (or at such other address as shall be specified by like notice).
3. Entire Agreement. This Agreement (including the Schedules and Exhibits, and the Warrants and the Investors' Rights Agreement) contains the entire agreement of the parties and supersede all prior negotiations, correspondence, term sheets, agreements and understandings, written and oral, between or among the parties regarding the subject matter hereof.
4. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the respective heirs, representatives, successors and permitted assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective heirs, representatives, successors and permitted assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
5. Severability. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid or unenforceable, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it is held to be invalid or unenforceable, shall not be affected thereby.
6. Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the law of the State of Washington, without regard to that state's conflict of laws principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non-conveniens. Notwithstanding the foregoing, any party obtaining any order or judgment in any of the above referenced courts may bring an action in a court in another jurisdiction in order to enforce such order or judgment.
7. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement or the other Related Documents, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.
8. Interpretation. This Agreement shall be construed according to its fair language. The rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.
9. Further Assurances. Each party shall execute such other and further certificates, instruments and other documents as may be reasonably necessary and proper to implement, complete and perfect the transactions contemplated by this Agreement.
10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute an original, and all of which together shall be considered one and the same agreement.
11. Assignment. Each Investor may assign or transfer all or any part of the Securities acquired hereunder provided that the conditions specified in Section 6 are satisfied, which conditions are, among other things, intended to insure compliance with the provisions of the Securities Act and state securities laws in respect of the transfer of any of the Securities acquired hereunder. The Company shall not assign this Agreement or any rights hereunder or delegate any duties hereunder. Any attempted or purported assignment or delegation in violation of the preceding sentence shall be void.
12. Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
13. Exculpation Among Investors. Each Investor acknowledges that it is not relying upon any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Investor agrees that no Investor nor the respective controlling person, officers, directors, partners, agents or employees of any Investor shall be liable to any other Investor for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the purchase of the Common Stock or the execution of or performance under any of this Agreement or the Other Related Documents.
14. Representation. Each party hereto acknowledges that (a) ICM Asset Management, Inc. retained Paine Hamblen Coffin Brooke & Miller LLP to represent only ICM Asset Management, Inc. and its affiliates (collectively, "ICM") in connection with this Agreement, the other Related Documents and the transaction related hereto and thereto, (b) the interests of ICM may not necessarily coincide with the interests of other Investors, (c) Paine Hamblen Coffin Brooke & Miller LLP does not represent any Investor other than ICM, and (d) each Investor has consulted with, or has had an opportunity to consult with, its own legal counsel and has not relied on Paine Hamblen Coffin Brooke & Miller LLP for legal counsel in connection with this Agreement, the other Related Documents and the transactions related hereto and thereto.

8. Glossary. For purposes of this Agreement, the following terms shall have the meanings set forth below, which shall be equally applicable to both the singular and plural forms of any of such terms:

"Authority" shall mean any government or political subdivision, or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury, arbitrator or mediator, in each case whether federal, state, local or foreign.

"Law" shall mean any judgment, decree, order, statute, law, ordinance, rule or regulation of any Authority (including common law), constitution, statute, treaty, regulation, rule, ordinance, judgment, order, foreign injunction, writ, decree or award of any Authority.

"Proprietary Information" shall mean all trade secrets, technical knowledge and experience, confidential information and other proprietary knowledge, whether or not patentable, possessed by, accumulated or owned by the Company concerning the design, formulation, manufacturing, quality control, testing, storage, development, improvement, installation and operation of the products and services of the Company, including, without limitation, the Company IP Rights, technical, engineering and operating data relating to the products, designs, schematics, plans, operating principles, formulas, computer software programs, electronically recordable data or concepts, marketing data, inventions, improvements, research and development records and reports, experimental and engineering reports, product specifications, drawings, photographs, models, compilations of information, records, books and papers, quality control reports and specifications, and any other information possessed by the Company, relating to its products or services.

"Related Documents" shall mean this Agreement, the Investors' Rights Agreement (including the exhibits attached thereto) and the Warrants.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first set forth above.

Nigel Davey

Address:

Tel:

Fax:

Brian Cathcart

Address:

Tel:

Fax:

FORM OF WARRANT

Please see executed Investors' Rights Agreement.

Please see signed legal opinion.

_____________, ___

No. W-__

This certifies that ____________________ (the "Holder") is entitled, subject to the terms and conditions of this Warrant, to purchase from SVI Holdings, a Nevada corporation (the "Company"), all or any part of an aggregate of _________ shares of the Company's authorized and unissued Common Stock, par value $.0001 (the "Warrant Stock"), at the Warrant Price (as defined herein), upon surrender of this Warrant at the principal offices of the Company, together with a duly executed subscription form in the form attached hereto as Exhibit 1 and simultaneous payment of the Warrant Price for each share of Warrant Stock so purchased in lawful money of the United States, unless exercised in accordance with the provisions of Section 2.6 of this Warrant. The Holder may exercise the Warrant at any time after the date of this Warrant and prior to the second anniversary of the date hereof, subject to the provisions of Section 2.5 hereof (the "Expiration Date").

This Warrant is issued pursuant to that certain Common Stock Purchase Agreement dated as of December 22, 2000 (the "Purchase Agreement"), by and among the Company, the Holder and certain of the other investors listed on the Schedule of Investors attached to the Purchase Agreement (the "Investors").

1. Definitions. The following definitions shall apply for purposes of this Warrant:

0. "Acquisition" means any consolidation, merger or reorganization of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent of the Company's voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent of the Company's voting power is transferred, excluding any consolidation, merger or reorganization effected exclusively to change the domicile of the Company.
1. "Asset Transfer" means a sale, lease or other disposition of all or substantially all of the assets of the Company.
2. "Company" means the "Company" as defined above and includes any corporation or other entity that succeeds to or assumes the obligations of the Company under this Warrant.
3. "Fair Market Value" of a share of Warrant Stock means (i) if the Common Stock is traded on a securities exchange, the average of the closing price each day over the thirty consecutive day period ending three days before the day the Fair Market Value of the securities is being determined, (ii) if the Common Stock is actively traded over-the counter, the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) each day over the thirty consecutive day period ending three days before the day the Fair Market Value of the securities is being determined, or (iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, then the Fair Market Value determined by the Company's Board of Directors in good faith.
4. "Holder" means the "Holder" as defined above and includes any transferee who shall at the time be the registered holder of this Warrant.
5. "Warrant" means this Warrant and any warrant(s) delivered in substitution or exchange therefor, as provided herein.
6. "Warrant Price" means $1.50 per share of Warrant Stock. The Warrant Price is subject to adjustment as provided herein.
7. "Warrant Stock" means the Common Stock of the Company. The number and character of shares of Warrant Stock are subject to adjustment as provided herein and the term "Warrant Stock" shall include stock and other securities and property at any time receivable or issuable upon exercise of this Warrant in accordance with its terms.

2. Exercise.

0. Method of Exercise. Subject to the terms and conditions of this Warrant, the Holder may exercise the purchase rights represented by this Warrant in whole or in part, at any time or from time to time, on or after the date hereof and before the Expiration Date, by surrendering this Warrant at the principal offices of the Company, with the subscription form attached hereto duly executed by the Holder, and payment of an amount equal to the product obtained by multiplying (i) the number of shares of Warrant Stock so purchased by (ii) the Warrant Price, as specified in Section 2.2 below.
1. Form of Payment. Except as provided in Section 2.6, payment may be made by (i) a check payable to the Company's order, (ii) wire transfer of funds to the Company, (iii) cancellation of indebtedness of the Company to the Holder, or (iv) any combination of the foregoing.
2. Partial Exercise. Upon a partial exercise of this Warrant, this Warrant shall be surrendered by the Holder and replaced with a new Warrant or Warrants of like tenor for the balance of the shares of Warrant Stock purchasable under the Warrant surrendered upon such purchase. The Warrant or Warrants will be delivered to the Holder thereof within a reasonable time.
3. No Fractional Shares. No fractional shares may be issued upon any exercise of this Warrant, and any fractions shall be rounded down to the nearest whole number of shares. If upon any exercise of this Warrant a fraction of a share results, the Company will pay an amount equal to the such fraction multiplied by the Fair Market Value of a share of Warrant Stock.
4. Automatic Exercise. Anything herein to the contrary notwithstanding, this Warrant shall be callable by the Company as follows: (i) 50% of this Warrant shall be callable, in whole or in part, by the Company on any date if (A) the closing price of the Warrant Stock, as listed on any securities exchange or as quoted in the NASDAQ System, each day over a thirty consecutive day period ending on such date is more than $2.00 per share of Common Stock (as appropriately and proportionately adjusted to reflect any event referred to in Section 4.1) and (B) on such date all of the "Registrable Securities" or such other definition of securities entitled to registration rights pursuant to the Investors' Rights Agreement dated as of December 22, 2000 (the Investors' Rights Agreement"), by and among the Company, the Holder and certain other Investors shall be fully registered and saleable as provided therein; and (ii) if the foregoing call has been fully exercised by the Company, the remaining 50% of this Warrant shall be callable, in whole or in part, by the Company on any date if (A) the closing price of the Warrant Stock, as listed on any securities exchange or as quoted in the NASDAQ System, each day over a thirty consecutive day period ending on such date is more than $3.00 per share of Common Stock (as appropriately and proportionately adjusted to reflect any event referred to in Section 4.1) and (B) on such date all of the "Registrable Securities" or such other definition of securities entitled to registration rights pursuant to the Investors Rights Agreement shall be fully registered and saleable as provided therein. Notwithstanding the foregoing, this Warrant shall not be callable under either of the foregoing call provisions on any date that a sale by any Investors would be subject to the "short-swing" profit rules under Section 16 of the Securities Exchange Act of 1934, as amended. The Company may exercise either of the foregoing call provisions by giving written notice to the Holder of such exercise, specifying the affected portion(s) of this Warrant and accompanied by evidence of the events giving rise to the call. The Holder shall have thirty days after receipt of such notice to exercise the affected portion(s) of this Warrant. In the event the Holder does not so exercise the affected portion(s) of this Warrant within such thirty day period, such affected portion(s) of this Warrant shall cease to be exercisable at the end of such thirty day period.
5. Net Exercise Election. The Holder may elect to convert all or a portion of this Warrant, without the payment by the Holder of any additional consideration, by the surrender of this Warrant or such portion to the Company, with the net exercise election selected in the subscription form attached hereto duly executed by the Holder, into up to the number of shares of Warrant Stock that is obtained under the following formula:

X = Y (A-B)

A

where X = the number of shares of Warrant Stock to be issued to the Holder pursuant to this Section 2.6.

Y = the number of shares of Warrant Stock purchasable under this Warrant, or if only a portion of the Warrant is being exercised, the number of shares of Warrant Stock represented by the portion of the Warrant being exercised.

A = the Fair Market Value of one share of Warrant Stock as at the time the net exercise election is made pursuant to this Section 2.6.

B = the Warrant Price.

3. Issuance of Stock. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Warrant Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As soon as practicable, but in any event no later than three days after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of whole shares of Warrant Stock issuable upon such exercise. The Company covenants and agrees that all shares of Warrant Stock that are issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from all preemptive rights of any stockholder, free of all taxes, liens and charges with respect to the issue thereof and free and clear of any restrictions on transfer (other than under the Act and state securities laws).
4. Adjustment Provisions. The number and character of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities or property at the time receivable or issuable upon exercise of this Warrant) and the Warrant Price for the Common Stock are subject to adjustment upon the occurrence of the following events between the date this Warrant is issued and the date it is exercised:

0. Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The Warrant Price of this Warrant and the number of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall each be appropriately and proportionally adjusted to reflect any stock dividend, stock split, reverse stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of Warrant Stock (or such other stock or securities).
1. Adjustment for Other Dividends and Distributions. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution payable with respect to the Warrant Stock that is payable in (a) securities of the Company (other than issuances with respect to which adjustment is made under Section 4.1), or (b) assets (other than cash dividends paid or payable solely out of retained earnings), then, and in each such case, the Holder, upon exercise of this Warrant at any time after the consummation, effective date or record date of such event, shall receive, in addition to the shares of Warrant Stock issuable upon such exercise prior to such date, the securities or such other assets of the Company to which the Holder would have been entitled upon such date if the Holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).
2. Adjustment for Reorganization, Consolidation, Merger. In case of any reorganization of the Company (or of any other corporation or entity, the stock or other securities of which are at the time receivable on the exercise of this Warrant), after the date of this Warrant, or in case, after such date, the Company (or any such corporation or entity) shall consolidate with or merge into another corporation or entity or convey all or substantially all of its assets to another corporation or entity, then, and in each such case, the Holder, upon the exercise of this Warrant (as provided in Section 2), at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which the Holder would have been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if the Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Warrant, and the successor or purchasing corporation or entity in such reorganization, consolidation, merger or conveyance (if other than the Company) shall duly execute and deliver to the Holder a supplement hereto acknowledging such corporation's or entity's obligations under this Warrant; and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after the consummation of such reorganization, consolidation, merger or conveyance.
3. Notice of Certain Events and Adjustments. The Company shall give thirty days prior written notice of the record date fixed for any Acquisition, Asset Transfer or event referred to in Section 4.2 or 4.3. The Company shall promptly give written notice of (i) each adjustment or readjustment of the Warrant Price or the number of shares of Warrant Stock or other securities issuable upon exercise of this Warrant and (ii) each adjustment or readjustment of the price per share of Common Stock triggering the call provisions set forth in Section 2.5. The notice shall describe the adjustment or readjustment and show in reasonable detail the facts on which the adjustment or readjustment is based.
4. No Change Necessary. The form of this Warrant need not be changed because of any adjustment in the Warrant Price or in the number of shares of Warrant Stock issuable upon its exercise.

5. No Rights or Liabilities as Stockholder. This Warrant does not by itself entitle the Holder to any voting rights or other rights as a stockholder of the Company. In the absence of affirmative action by the Holder to purchase Warrant Stock by exercise of this Warrant, no provisions of this Warrant, and no enumeration herein of the rights or privileges of the Holder, shall cause the Holder to be a stockholder of the Company for any purpose.
6. Attorneys' Fees. In the event any party is required to engage the services of any attorneys for the purpose of enforcing this Warrant, or any provision thereof, the prevailing party shall be entitled to recover its reasonable expenses and costs in enforcing this Warrant, including attorneys' fees.
7. Transfer. This Warrant may be transferred or assigned by the Holder hereof in whole or in part, if, on the Company's reasonable request, the Holder provides an opinion of counsel reasonably satisfactory to the Company that such transfer does not require registration under the Act and the applicable state securities law, except that this Warrant may be transferred by a Holder which is a partnership or limited liability company to a partner, former partner, member, former member or other affiliate of such partnership or limited liability company, as the case may be, if (a) the transferee agrees in writing to be subject to the terms of this Warrant; and (b) the Holder delivers notice of such transfer to the Company. The rights and obligations of the Company and the Holder under this Warrant shall be binding upon and benefit their respective permitted successors, assigns, heirs, administrators and transferees.
8. Loss or Mutilation. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership and the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to it, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver in lieu thereof a new Warrant of like tenor.
9. Reservation of Warrant Stock. If at any time the number of authorized but unissued shares of the Warrant Stock shall not be sufficient to effect the exercise of this Warrant, the Company will take all such corporate action as may be necessary to increase its authorized but unissued shares of Warrant Stock to such number of shares of Warrant Stock as shall be sufficient for such purpose.
10. Governing Law. This Warrant shall be governed by and construed and interpreted in accordance with the laws of the State of Washington, without giving effect to its conflicts of law principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non conveniens.
11. Headings. The headings and captions used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant. All references in this Warrant to sections and exhibits shall, unless otherwise provided, refer to sections hereof and exhibits attached hereto, all of which exhibits are incorporated herein by this reference.
12. Notices. Any request, consent, notice or other communication required or permitted under this Warrant shall be in writing and shall be deemed duly given and received when delivered personally or transmitted by facsimile, one business day after being deposited for next-day delivery with a nationally recognized overnight delivery service, or three days after being deposited as first class mail with the United States Postal Service, all charges or postage prepaid, and properly addressed to the party to receive the same at the address indicated for such party on the signature pages of the Purchase Agreement. Any party may, at any time, by providing ten days' advance notice to the other party hereto, designate any other address in substitution of the an address established pursuant to the foregoing.
13. Amendment; Waiver. Any term of this Warrant may be amended, and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
14. Severability. If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Warrant and the balance of the Warrant shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.
15. Terms Binding. By acceptance of this Warrant, the Holder accepts and agrees to be bound by all the terms and conditions of this Warrant.
16. Valid Issuance; Taxes. All shares of Warrant Stock issued upon the exercise of this Warrant shall be validly issued, fully paid and non-assessable, and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof. The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Warrant Stock in any name other than that of the Holder of this Warrant.
17. Registration Rights. All shares of Warrant Stock issuable upon exercise of this Warrant shall be deemed to be "Registrable Securities" or such other definition of securities entitled to registration rights pursuant to the Investor Rights Agreement, and are entitled, subject to the terms and conditions of that agreement, to all registration rights granted to holders of Registrable Securities thereunder.
18. No Impairment. The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Warrant against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock issuable upon the exercise of this Warrant above the amount payable therefor upon such exercise, and (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Warrant Stock upon exercise of this Warrant.

[Signature appears on the following page.]

IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the date and year set forth below.

(To be signed only upon exercise of Warrant)

To: SVI Holdings Inc.

Dated as of December 22, 2000

THIS INVESTORS' RIGHTS AGREEMENT is made as of December 22, 2000, by and among SVI Holdings, Inc., a Nevada corporation (the "Company"), and the Investors listed on Schedule A hereto (each of whom is herein called individually, a "Investor" and all of whom are herein called, collectively, the "Investors"), with reference to the following facts:

The Investors are parties to the Purchase Agreement, dated as of December 22, 2000 (the "Purchase Agreement"), among the Company and the Investors, which provides that as a condition to the closing of the transactions contemplated therein, pursuant to which the Company will issue up to 2,941,176 shares of the Company's Common Stock, par value $0.0001 per share (the "Common Stock"), to the Investors, this Agreement must be executed and delivered by the Investors and the Company.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein and for other consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto further agree as follows:

1. Registration Rights. The Company covenants and agrees as follows:

0. Definitions. For purposes of this Section 1:

1. "Form S-3" means such form under the 1933 Act as in effect on the date hereof or any registration form under the 1933 Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.
2. "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.11 hereof.
3. "1933 Act" means the Securities Act of 1933, as amended.
4. "1934 Act" means the Securities Exchange Act of 1934, as amended.
5. "register", "registered", and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the 1933 Act, and the declaration or ordering of effectiveness of such registration statement or document.
6. "Registrable Securities" means (i) the shares of the Company's Common Stock issued pursuant to the Purchase Agreement upon the First Closing or any subsequent Closing, (ii) shares of the Company's Common Stock issuable on exercise of the Initial Warrants (as defined in the Purchase Agreement) issued pursuant to the Purchase Agreement, (iii) shares of the Company's Common Stock issuable on exercise of the Registration Warrants (as defined in Section 1.3(c)), and (iv) any Common Stock of the Company issued as (or issuable on the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in clauses (i) (iii) above; provided that there shall be excluded any Registrable Securities sold by a person in a transaction in which that person's rights under this Section 1 are not assigned.
7. The number of shares of "Registrable Securities" outstanding shall be determined by the number of shares of Common Stock outstanding that are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities that are, Registrable Securities.
8. "SEC" means the Securities and Exchange Commission.

(i) Any other capitalized term not defined herein shall have the meaning set forth in the Purchase Agreement.

1. [Intentionally Omitted].
2. Request for Registration.

1. Within thirty (30) days after the First Closing, the Company shall prepare and file with the SEC a registration statement on Form S-3 (or, if Form S-3 is not then available, on such form of registration statement that is then available to effect a registration of all Registrable Securities, subject to consent of the Investors holding at least a majority of the Registrable Securities) covering the registration of all of the Registrable Securities. The Company shall use best efforts to obtain the effectiveness of the Registration Statement as soon as possible after the date of the First Closing. The Company shall keep such registration statement effective at all times until the earlier of the date on which all the Registrable Securities (i) are sold and (ii) can be sold by the Holders (and any affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) in any three-month period without volume limitation and without registration in compliance with Rule 144 under the 1933 Act.
2. If the Holders intend to distribute the Registrable Securities by means of an underwriting, they shall so advise the Company. The underwriter will be selected by a majority in interest (as determined by the number of Registrable Securities held) of the Holders and shall be reasonably acceptable to the Company. In such event, the right of any Holder to include his, her or its Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Holders) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 1.6(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.3, if the underwriter advises the Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Holders shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, provided that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.
3. If on the date one hundred twenty (120) days after the First Closing either (i) the registration statement described in Section 1.3(a) is not declared effective or (ii) the registration statement described in Section 1.3(a) is no longer deemed to be effective after initial effectiveness, the Company, unless waived by the Investors who purchased at least 10% of the Common Stock, shall issue to each Investor a warrant in the form attached hereto as Exhibit A (each, a "Registration Warrant" and, collectively, the "Registration Warrants") to acquire the number of shares of Common Stock equal to (i) 5% multiplied by (ii) the aggregate number of shares of Common Stock sold to such Investor under the Purchase Agreement at any Closing thereunder. The exercise price of each such Registration Warrant will be $.85 per share of Common Stock issuable on exercise of the Registration Warrant.
4. If the end of the first thirty-day period after the initial one hundred twenty-day period referred to in Section 1.3(c) either (i) the registration statement described in Section 1.3(a) is not declared effective or (ii) the registration statement described in Section 1.3(a) is no longer deemed to be effective after initial effectiveness, the Company shall, unless waived by the Investors who purchased at least 10% of the Common Stock, issue to each Investor an additional Registration Warrant to acquire the number of shares of Common Stock equal to (i) 5% multiplied by (ii) the aggregate number of shares of Common Stock sold to such Investor pursuant to the Purchase Agreement at any Closing thereunder. The exercise price of each such Registration Warrant will be $.85 per share of Common Stock issuable on exercise of the Registration Warrant.
5. If at the end of each subsequent thirty-day period after the first thirty-day period after the initial one hundred twenty-day period referred to in Section 1.3(c) either (i) the registration statement described in Section 1.3(a) is not declared effective or (ii) the registration statement described in Section 1.3(a) is no longer deemed to be effective after initial effectiveness, the Company shall, unless waived by the Investors who purchased at least 10% of the Common Stock, issue to each Investor an additional Registration Warrant to acquire the number of shares of Common Stock equal to (i) 2.5% multiplied by (ii) the aggregate number of shares of Common Stock sold to such Investor pursuant to the Purchase Agreement at any Closing thereunder. The exercise price of each such Registration Warrant will be $.85 per share of Common Stock issuable on exercise of the Registration Warrant.
6. The Company shall execute such other and further certificates, instruments and other documents as may be reasonably requested by the Investors or reasonably necessary or proper to implement, complete and perfect the Investors' rights under this Section 1.3 and to freely trade the Registrable Securities without limitation or restriction imposed or created by the Company or securities law.
7. The terms and covenants set forth in this Section 1.3 shall terminate as to each Holder and be of no further force and effect on the earlier of the date on which all the Registrable Securities beneficially owned by that Holder (i) are registered pursuant to this Section 1.3 and sold by that Holder in an open market transaction or (ii) can be sold by that Holder (and any affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) in any three-month period without volume limitation and without registration in compliance with Rule 144 under the 1933 Act.

3. Company Registration.

1. If (but without any obligation to do so) the Company proposes to register any of its stock (including a registration effected by the Company for stockholders other than the Holders) or other securities under the 1933 Act in connection with the public offering of such securities, the Company shall, at such time, promptly give each Holder notice of such registration. On the request of each Holder given within thirty (30) days after such notice by the Company, the Company shall, subject to the provisions of Section 1.4(c), cause to be registered under the 1933 Act all of the Registrable Securities that each such Holder has requested to be registered.
2. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 1.4 prior to the effectiveness of such registration, whether or not any Holder shall have elected to include securities in such registration. The expenses of such withdrawn registration shall be borne by the Company in accordance with Section 1.8 hereof.
3. In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under this Section 1.4 to include any requesting Holder's securities in such underwriting, unless such Holder accepts the terms of the underwriting as agreed between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters) and enters into an underwriting agreement in customary form with the underwriter or underwriters selected by the Company, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by the Holders to be included in such offering exceeds the amount of Registrable Securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such Registrable Securities that the underwriters determine in their sole discretion will not jeopardize the success of the offering (the Registrable Securities so included to be apportioned pro rata among the selling Holders according to the total amount of Registrable Securities entitled to be included therein owned by each selling Holder or in such other proportions as shall mutually be agreed to by such selling Holders); provided, that in no event shall the amount of Registrable Securities of the selling Holders included in the offering be reduced below twenty-five percent of the total amount of securities included in such offering; provided further, that the number of shares of Registrable Securities requested by the Holders to be included in such offering shall not be reduced unless all other securities, other than securities registered by the Company, are first entirely excluded from such offering. For purposes of such apportionment among Holders, for any selling stockholder that is a Holder of Registrable Securities and that is a partnership or corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling Holder", and any pro rata reduction with respect to such "selling Holder" shall be based on the aggregate amount of Registrable Securities owned by all such related entities and individuals.

4. Form S-3 Registration. If the Company shall receive from one or more Holders a request or requests that the Company effect a registration on Form S-3 and any related blue sky or similar qualification or compliance with respect to at least 25% (or a lesser percentage if the requirements of Section 1.5(b)(i) are met) of the Registrable Securities owned by such Holder or Holders, the Company shall:

1. promptly give notice of the proposed registration, and any related blue sky or similar qualification or compliance, to all other Holders; and
2. cause, as soon as practicable, such Registrable Securities to be registered for offering and sale on Form S-3 and cause such Registrable Securities to be qualified in such jurisdictions as such Holders may reasonable request, together with all or such portion of the Registrable Securities of any other Holders joining in such request as are specified in a request given within fifteen days after receipt of such notice from the Company; provided that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.5:

1. if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than $500,000;
2. if the Company has, within the twelve month period preceding the date of such request, already effected two registrations on Form S-3 for the Holders pursuant to this Section 1.5;
3. if the Company shall furnish to the Holders a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than sixty (60) days after receipt of the request of the Holder or Holders under this Section 1.5; provided that the Company shall not utilize this right more than once in any twelve month period; provided, further, that the Company shall not register shares for its own account during such sixty (60) day period, but such prohibition shall not apply to the registration of Company shares in connection with (x) a merger or (y) registration of shares relating to a stock option, stock purchase or similar plan; or
4. in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

3. Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders.

5. Obligations of the Company. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

1. except as otherwise provided in Section 1.3, prepare and file with the SEC a registration statement with respect to such Registrable Securities and use best efforts to cause such registration statement to become effective, and keep such registration statement effective for a period of up to 270 days or, if earlier, until the distribution contemplated in the Registration Statement has been completed; provided that (i) such 270-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company; and (ii) in the case of any registration of Registrable Securities on Form S-3 (or any other Form, to the extent permitted by law) that are intended to be offered on a continuous or delayed basis, such 270-day period shall be extended, if necessary, to keep the Registration Statement effective until all such Registrable Securities are sold, except to the extent that the Holders (and any affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) of such Registrable Securities may sell those Registrable Securities in any three-month period without regard to the volume limitation and without registration in compliance with Rule 144 under the 1933 Act;
2. prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the 1933 Act with respect to the disposition of all securities covered by such registration statement during the period of time such registration statement remains effective;
3. furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the 1933 Act, and such other documents as they may reasonably request to facilitate the disposition of Registrable Securities owned by them;
4. use best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;
5. in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering;
6. during the period of time such registration statement remains effective, notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the 1933 Act or the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;
7. cause all such Registrable Securities registered hereunder to be listed on each securities exchange on which securities of the same class issued by the Company are then listed;
8. provide a transfer agent and registrar for all Registrable Securities registered hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; and
9. (i) furnish, at the request of any Holder, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities, and (ii) a "comfort" letter signed by the independent public accountants who have certified the Company's financial statements included in the registration statement, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and with respect to events subsequent to the date of the financial statements, as are customarily covered in accountants' letters delivered to the underwriters in underwritten public offerings of securities addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities.

6. Information from Holder. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding such Holder, the Registrable Securities held by such Holder, and the intended method of disposition of such securities as shall be required to effect the registration of such Registrable Securities.
7. Expenses of Registration. All expenses incurred in connection with registrations, filings or qualifications pursuant to this Section 1, including (without limitation) all registration, filing and qualification fees, printing fees and expenses, accounting fees and expenses, fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel for the selling Holders selected by the Holders, shall be borne by the Company. Notwithstanding the foregoing, the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Sections 1.3 and 1.5 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses pro rata based on the number of Registrable Securities that were requested to be included in the withdrawn registration); provided that, if at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and shall have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Sections 1.3 and 1.5. Anything herein to the contrary notwithstanding, all underwriting discounts and commissions incurred in connection with a sale of Registrable Securities shall be borne and paid by the Holder thereof, and the Company shall have no responsibility therefor.
8. Indemnification. If any Registrable Securities are included in a registration statement under this Section 1:

1. To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners or officers, directors and stockholders of such Holder, legal counsel and accountants for such Holder, any underwriter (as defined in the 1933 Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the 1933 Act or the 1934 Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the 1933 Act, the 1934 Act or any other federal or state securities law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based on any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the 1933 Act, the 1934 Act or any state securities law; and the Company will reimburse such Holder, underwriter or controlling person for any legal or other expenses incurred, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided that the indemnity agreement in this Section 1.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based on a Violation that occurs in reliance on and in conformity with written information furnished expressly for use in connection with such registration by such Holder, underwriter or controlling person.
2. To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who shall have signed the registration statement, each person, if any, who controls the Company within the meaning of the 1933 Act, legal counsel and accountants for the Company, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities to which any of the foregoing persons may become subject, under the 1933 Act, the 1934 Act or any other federal or state securities law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based on any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance on and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any person intended to be indemnified pursuant to this Section 1.9(b), for any legal or other expenses reasonably incurred, as incurred, by such person in connection with investigating or defending any such loss, claim, damage, liability or action; provided that the indemnity agreement in this Section 1.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld or delayed); and provided further that in no event shall any indemnity by such Holder under this Section 1.9(b), when aggregated with amounts contributed, if any, pursuant to Section 1.9(d), exceed the net proceeds from the sale of Registrable Securities hereunder received by such Holder.
3. Promptly after receipt by an indemnified party under this Section 1.9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.9, deliver to the indemnifying party notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent that the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to notify the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.9, but the omission so to notify the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.9.
4. If the indemnification provided in this Section 1.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that shall have resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations; provided that in no event shall any contribution by a Holder under this Section 1.9(d), when aggregate with amounts paid, if any, pursuant to Section 1.9(b), exceed the net proceeds from the sale of Registrable Securities hereunder received by such Holder. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.
5. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.
6. The obligations of the Company and Holders under this Section 1.9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise.

9. Reports under 1934 Act. With a view to making available to the Holders the benefits of Rule 144 promulgated under the 1933 Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration statement (including, without limitation, Form S-3), the Company agrees to:

1. make and keep public information available, as those terms are used in SEC Rule 144, at all times;
2. take such action as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities;
3. file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act; and
4. furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith on request, (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the 1933 Act and the 1934 Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to such form.

10. Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such Registrable Securities that (i) is a subsidiary, parent, current or former partner, current or former limited partner, current or former member, current or former manager or stockholder of a Holder, (ii) is an entity controlling, controlled by or under common control with a Holder, including without limitation a corporation or limited liability company that is a direct or indirect parent or subsidiary of the Holder, (iii) is a transferee or assignee of a Holder and the number of shares transferred or assigned constitute at least 100,000 shares of Registrable Securities held by such Holder (as adjusted for stock split, combinations, dividends and the like); provided that: (a) the Company is, within a reasonable time after such transfer, notified of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement; (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act; and (d) such assignment is not made pursuant to a registration statement effected pursuant to this Agreement.
11. Limitations on Subsequent Registration Rights. For a period of one year after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of at least 80% of the Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder or prospective holder any rights to require the Company to register such securities under terms or conditions that are pari passu or that are more favorable than those provided for herein and will not grant any registration rights that diminish or adversely affect the registration rights of the Holders hereunder (including, without limitation, reducing the number of Registrable Securities that are to be included in any registration or proposed registration filed under the terms hereof), unless (i) the prospective holder or holders purchase in excess of $10,000,000 worth of securities from the Company and (ii) under the terms of such agreement, such holder or prospective holder shall have been granted rights to require the Company to register such securities under terms or conditions that are pari passu or that are less favorable than those provided for herein and such rights do not diminish or adversely affect the registration rights of the Holders hereunder (except that such rights may result in a pari passu reduction in the number of Registrable Securities that are to be included in any registration or proposed registration filed under the terms hereof).
12. Termination of Registration Rights. No Holder shall be entitled to exercise any right provided in this Section 1 with respect to a Registrable Security (i) after the date on which that Registrable Security has been sold under a registration statement filed in accordance with this Agreement or (ii) if all Registrable Securities held by such Holder (and any affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) can be sold in any three-month period without volume limitation and without registration in compliance with Rule 144 under the 1933 Act.

2. Covenants.

0. Delivery of SEC Reports. The Company shall deliver to each Holder holding Registrable Securities all reports and other documents of the Company that the Company is required to file with the SEC under the 1933 Act or the 1934 Act within twenty-four hours of the time such reports or other documents are filed with the SEC.
1. Confidential Information.

1. The Company shall provide to each Holder not less than ten days' prior written notice of its intention to deliver to such Holder confidential or non-public information relating to the Company which is marked as "confidential" or "non-public." If a Holder notifies Company that it does not desire to receive such confidential or non-public information, then the Company shall not deliver such confidential or non-public information to such Holder.
2. Each Holder covenants with the Company that, subject to the Company's compliance with the provision of Section 2.2(a) hereto, the Holder confirms, acknowledges, and covenants that information which is marked "confidential" or "non-public", and is received by it with respect to the Company pursuant to this Agreement, or with respect to the transactions described herein or in the Purchase Agreement, or in connection with the participation by the Holder or its employee or agent as a stockholder of the Company, is and shall be confidential and for the Holder's use only, and the Holder will not use such information in violation of the securities laws, or any other laws, or reproduce, disclose or disseminate such information to any other person (other than the Holder's employees, directors or agents having a need to know the contents of such information and the Holder's attorneys), except in connection with the exercise of rights under this Agreement, unless (i) the Company has made such information available to the public generally, (ii) such information has otherwise been made generally or publicly available, or (iii) the Holder is required to disclose such information by a governmental body or pursuant to legal process, in which case the Holder shall provide at least three days' prior notice of such proposed disclosure or such lesser notice as the Holder shall have received. Company acknowledges no information contained in this Agreement and the Purchase Agreement is confidential or non-public information. Notwithstanding the foregoing, the Holder may, in its sole discretion, decline to receive from the Company information which is marked "confidential" or "non-public", and as a result thereof shall not be deemed to have received or have any knowledge of such information marked "confidential" or "non-public", provided it has not received same.

2. Conflicts of Interest. The Company shall use its best efforts to ensure that the Company's employees, during the term of their employment with the Company, do not engage in activities which would result in a conflict of interest with the Company. The Company's obligations hereunder include, but are not limited to, requiring that the Company's employees devote their primary productive time, ability and attention to the business of the Company, requiring that the Company's executive officers enter into reasonable and customary agreements regarding proprietary information and confidentiality and inventions, and preventing the Company's employees from engaging or participating in any business that is in competition with the business of the Company.
3. Proprietary Agreements. The Company shall have each executive officer of the Company execute the Company's standard form of non-disclosure and proprietary information agreements, prior to disclosing any proprietary information to any such officer, employee and consultant. The Company will use its best efforts to prevent any executive officer from violating the confidentiality and proprietary information agreement entered into between the Company and each of its executive officers.
4. Extraordinary Remuneration. The Board of Directors may not approve any plan or action to grant extraordinary remuneration to management in connection with the sale of the Company or any subsidiary of the Company, or the termination of employment or otherwise, unless such plan or action has been approved by a majority of the non-employee members of the Board of Directors.
5. Related Party Agreements. Without prior written consent of the Holders of at least 80% of the Registrable Securities, the Company shall not and the Company shall cause its subsidiaries to not enter into any agreements, understandings or transactions (other than employer/employee relationships) with any of its or its subsidiaries' respective officers, directors, shareholders (who hold one percent or more of the Company's Common Stock (on a fully-diluted basis) or who hold one percent or more of the equity of any subsidiary of the Company) or any affiliate thereof, which would have a material adverse effect on the Condition of the Company.
6. Right of First Refusal. The Company hereby grants to the Holders, as a group, the exclusive right of first refusal to purchase all New Securities (as defined in this Section 2.7) which the Company may, from time to time, propose to sell and issue. Each Holder shall have a right of first refusal for such Holder's pro rata share of the right of first refusal of all Holders, as a group. A Holder's pro rata share, for purposes of this right of first refusal, is the ratio of (i) the number of shares of Common Stock owned by such Holder and Common Stock issuable to Holder upon the exercise of any Warrant held by such Holder immediately prior to the issuance of New Securities to (ii) the total number of shares of Common Stock owned by all Holders and Common Stock issuable to all Holders upon the exercise of any Warrant immediately prior to the issuance of New Securities. Each Holder shall have a right of over-allotment such that if any Holder fails to exercise its right hereunder to purchase its full pro rata share of New Securities, the other Holders may elect to purchase the non-purchasing Holder's unexercised portion on a pro rata basis within fifteen (15) days from the date such non-purchasing Holder so fails to exercise its right hereunder. This right of first refusal shall be subject to the following provisions:

(a) "New Securities" shall mean any subordinated debentures of the Company and any capital stock (including Common Stock and/or Preferred Stock) of the Company whether now authorized or not, and rights, options or warrants to purchase such capital stock, and securities of any type whatsoever that are, or may become, convertible into capital stock; provided that the term "New Securities" does not include (i) 3,500,000 shares of common stock issuable to employees, consultants, officers or directors of the Company pursuant to the Company's 1998 Equity Incentive Plan and 688,535 shares of Common Stock issuable to employees, consultants, officers or directors of the Company pursuant to the Company's 1989 Incentive Stock Option Plan; (ii) Common Stock issuable upon exercise of a warrant for 25,000 shares of Common Stock outstanding prior to the First Closing; (iii) Common Stock to be issued upon the First Closing or any subsequent Closing under the Purchase Agreement; (iv) Common Stock issuable upon exercise of any Warrant; and (v) securities issued in connection with any stock split, stock dividend or recapitalization of the Company;

(b) In the event the Company proposes to undertake an issuance of New Securities, it shall give each Holder written notice of its intention, describing the type of New Securities, and their price and the general terms upon which the Company proposes to issue the same. Each Holder shall have fifteen (15) days after any such notice is mailed or delivered to agree to purchase such Holder's pro rata share of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased.

(c) In the event the Holders fail to exercise fully the right of first refusal within said fifteen (15) day period and after the expiration of the 15-day period for the exercise of the over-allotment provisions of this Section 2.7, the Company shall have sixty (60) days thereafter to sell the New Securities as to which the Holders' right of first refusal option set forth in this Section 2.7 was not exercised, at a price and upon terms no more favorable to the purchasers thereof than specified in the Company's notice to Holders pursuant to this Section 2.7. In the event the Company has not sold the New Securities within such sixty (60) day period, the Company shall not thereafter issue or sell any New Securities without first again offering such securities to the Holders in the manner provided in this Section 2.7.

7. Reserve for Exercise Shares. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares of Common Stock (the "Exercise Shares") as shall be sufficient to enable it to comply with its exercise obligations under the Warrants. If at any time the number of Exercise Shares shall not be sufficient to effect the exercise of the Warrants, the Company will forthwith take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number as will be sufficient for such purposes. The Company will obtain authorization, consent, approval or other action by, or make any filing with, any administrative body that may be required under applicable state securities laws in connection with the issuance of Exercise Shares.
8. Termination of Covenants. The covenants set forth in Sections 2.1 through 2.7 shall terminate as to each Investor and be of no further force and effect at the time the Investors no longer hold any Registrable Securities.

3. Miscellaneous.

0. Successors and Assigns. Except as otherwise provided herein, this Agreement shall inure to the benefit of and bind the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer on any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
1. Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Washington, without giving effect to its conflicts of law principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non conveniens.
2. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
3. Headings. The headings of sections and subsections in this Agreement are used for convenience of reference only and are not to be considered in construing or interpreting this Agreement.
4. Notices. Any request, consent, notice or other communication required or permitted under this Agreement shall be in writing and shall be deemed duly given and received when delivered personally or transmitted by facsimile, one business day after being deposited for next-day delivery with a nationally recognized overnight delivery service, or three days after being deposited as first class mail with the United States Postal Service, all charges or postage prepaid, and properly addressed to the party to receive the same at the address indicated for such party on the applicable signature page hereof, or at such other address as such party may designate by ten days' advance notice to the other parties.
5. Expenses. If any action at law or in equity is necessary to enforce or interpret any of the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.
6. Entire Agreement: Amendments and Waivers. This Agreement (including the Schedule hereto) constitutes the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the consent of the Company and the holders of more than 50% of the Registrable Securities; provided that no amendment shall be effective unless approved by the holder or holders of Registrable Securities that shall be affected adversely, or affected differently from the Holders generally, by such amendment. Any amendment or waiver effected in accordance with this paragraph shall be binding on the Company, each holder of any Registrable Securities and each future holder of all such Registrable Securities.
7. Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

IN WITNESS WHEREOF, this Investors' Rights Agreement has been duly executed by or on behalf of the parties hereto as of the date first above written.

SCHEDULE A TO INVESTORS' RIGHTS AGREEMENT

Schedule of Investors

Koyah Leverage Partners, L.P.

Koyah Partners, L.P.

Nigel Davey

Brian Cathcart

EXHIBIT A TO THE INVESTORS' RIGHTS AGREEMENT

Form of Registration Warrant

W:\28\601\00001\A\Investors Rights Agreement\001-3 Investor rights Agreement draft 3 - NO REDLINE.doc

_____________, ___

No. W-__

This certifies that ____________________ (the "Holder") is entitled, subject to the terms and conditions of this Warrant, to purchase from SVI Holdings, a Nevada corporation (the "Company"), all or any part of an aggregate of _________ shares of the Company's authorized and unissued Common Stock, par value $.0001 (the "Warrant Stock"), at the Warrant Price (as defined herein), upon surrender of this Warrant at the principal offices of the Company, together with a duly executed subscription form in the form attached hereto as Exhibit 1 and simultaneous payment of the Warrant Price for each share of Warrant Stock so purchased in lawful money of the United States, unless exercised in accordance with the provisions of Section 2.6 of this Warrant. The Holder may exercise the Warrant at any time after the date of this Warrant and prior to the second anniversary of the date hereof, subject to the provisions of Section 2.5 hereof (the "Expiration Date").

This Warrant is issued pursuant to that certain Investors' Rights Agreement dated as of December 22, 2000 (the "Investors' Rights Agreement"), by and among the Company, the Holder and certain of the other investors listed on the Schedule of Investors ("Investors") attached to the Common Stock Purchase Agreement by and among the Company, the Holder and certain other Investors dated December 22, 2000 (the "Purchase Agreement").

1. Definitions. The following definitions shall apply for purposes of this Warrant:

0. "Acquisition" means any consolidation, merger or reorganization of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent of the Company's voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent of the Company's voting power is transferred, excluding any consolidation, merger or reorganization effected exclusively to change the domicile of the Company.
1. "Asset Transfer" means a sale, lease or other disposition of all or substantially all of the assets of the Company.
2. "Company" means the "Company" as defined above and includes any corporation or other entity that succeeds to or assumes the obligations of the Company under this Warrant.
3. "Fair Market Value" of a share of Warrant Stock means (i) if the Common Stock is traded on a securities exchange, the average of the closing price each day over the thirty consecutive day period ending three days before the day the Fair Market Value of the securities is being determined, (ii) if the Common Stock is actively traded over-the counter, the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) each day over the thirty consecutive day period ending three days before the day the Fair Market Value of the securities is being determined, or (iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, then the Fair Market Value determined by the Company's Board of Directors in good faith.
4. "Holder" means the "Holder" as defined above and includes any transferee who shall at the time be the registered holder of this Warrant.
5. "Warrant" means this Warrant and any warrant(s) delivered in substitution or exchange therefor, as provided herein.
6. "Warrant Price" means $1.50 per share of Warrant Stock. The Warrant Price is subject to adjustment as provided herein.
7. "Warrant Stock" means the Common Stock of the Company. The number and character of shares of Warrant Stock are subject to adjustment as provided herein and the term "Warrant Stock" shall include stock and other securities and property at any time receivable or issuable upon exercise of this Warrant in accordance with its terms.

2. Exercise.

0. Method of Exercise. Subject to the terms and conditions of this Warrant, the Holder may exercise the purchase rights represented by this Warrant in whole or in part, at any time or from time to time, on or after the date hereof and before the Expiration Date, by surrendering this Warrant at the principal offices of the Company, with the subscription form attached hereto duly executed by the Holder, and payment of an amount equal to the product obtained by multiplying (i) the number of shares of Warrant Stock so purchased by (ii) the Warrant Price, as specified in Section 2.2 below.
1. Form of Payment. Except as provided in Section 2.6, payment may be made by (i) a check payable to the Company's order, (ii) wire transfer of funds to the Company, (iii) cancellation of indebtedness of the Company to the Holder, or (iv) any combination of the foregoing.
2. Partial Exercise. Upon a partial exercise of this Warrant, this Warrant shall be surrendered by the Holder and replaced with a new Warrant or Warrants of like tenor for the balance of the shares of Warrant Stock purchasable under the Warrant surrendered upon such purchase. The Warrant or Warrants will be delivered to the Holder thereof within a reasonable time.
3. No Fractional Shares. No fractional shares may be issued upon any exercise of this Warrant, and any fractions shall be rounded down to the nearest whole number of shares. If upon any exercise of this Warrant a fraction of a share results, the Company will pay an amount equal to the such fraction multiplied by the Fair Market Value of a share of Warrant Stock.
4. Automatic Exercise. Anything herein to the contrary notwithstanding, this Warrant shall be callable by the Company as follows: (i) 50% of this Warrant shall be callable, in whole or in part, by the Company on any date if (A) the closing price of the Warrant Stock, as listed on any securities exchange or as quoted in the NASDAQ System, each day over a thirty consecutive day period ending on such date is more than $2.00 per share of Common Stock (as appropriately and proportionately adjusted to reflect any event referred to in Section 4.1) and (B) on such date all of the "Registrable Securities" or such other definition of securities entitled to registration rights pursuant to the Investors' Rights Agreement shall be fully registered and saleable as provided therein; and (ii) if the foregoing call has been fully exercised by the Company, the remaining 50% of this Warrant shall be callable, in whole or in part, by the Company on any date if (A) the closing price of the Warrant Stock, as listed on any securities exchange or as quoted in the NASDAQ System, each day over a thirty consecutive day period ending on such date is more than $3.00 per share of Common Stock (as appropriately and proportionately adjusted to reflect any event referred to in Section 4.1) and (B) on such date all of the "Registrable Securities" or such other definition of securities entitled to registration rights pursuant to the Investors Rights Agreement shall be fully registered and saleable as provided therein. Notwithstanding the foregoing, this Warrant shall not be callable under either of the foregoing call provisions on any date that a sale by any Investors would be subject to the "short-swing" profit rules under Section 16 of the Securities Exchange Act of 1934, as amended. The Company may exercise either of the foregoing call provisions by giving written notice to the Holder of such exercise, specifying the affected portion(s) of this Warrant and accompanied by evidence of the events giving rise to the call. The Holder shall have thirty days after receipt of such notice to exercise the affected portion(s) of this Warrant. In the event the Holder does not so exercise the affected portion(s) of this Warrant within such thirty day period, such affected portion(s) of this Warrant shall cease to be exercisable at the end of such thirty day period.
5. Net Exercise Election. The Holder may elect to convert all or a portion of this Warrant, without the payment by the Holder of any additional consideration, by the surrender of this Warrant or such portion to the Company, with the net exercise election selected in the subscription form attached hereto duly executed by the Holder, into up to the number of shares of Warrant Stock that is obtained under the following formula:

X = Y (A-B)

A

where X = the number of shares of Warrant Stock to be issued to the Holder pursuant to this Section 2.6.

Y = the number of shares of Warrant Stock purchasable under this Warrant, or if only a portion of the Warrant is being exercised, the number of shares of Warrant Stock represented by the portion of the Warrant being exercised.

A = the Fair Market Value of one share of Warrant Stock as at the time the net exercise election is made pursuant to this Section 2.6.

B = the Warrant Price.

3. Issuance of Stock. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Warrant Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As soon as practicable, but in any event no later than three days after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of whole shares of Warrant Stock issuable upon such exercise. The Company covenants and agrees that all shares of Warrant Stock that are issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from all preemptive rights of any stockholder, free of all taxes, liens and charges with respect to the issue thereof and free and clear of any restrictions on transfer (other than under the Act and state securities laws).
4. Adjustment Provisions. The number and character of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities or property at the time receivable or issuable upon exercise of this Warrant) and the Warrant Price for the Common Stock are subject to adjustment upon the occurrence of the following events between the date this Warrant is issued and the date it is exercised:

0. Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The Warrant Price of this Warrant and the number of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall each be appropriately and proportionally adjusted to reflect any stock dividend, stock split, reverse stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of Warrant Stock (or such other stock or securities).
1. Adjustment for Other Dividends and Distributions. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution payable with respect to the Warrant Stock that is payable in (a) securities of the Company (other than issuances with respect to which adjustment is made under Section 4.1), or (b) assets (other than cash dividends paid or payable solely out of retained earnings), then, and in each such case, the Holder, upon exercise of this Warrant at any time after the consummation, effective date or record date of such event, shall receive, in addition to the shares of Warrant Stock issuable upon such exercise prior to such date, the securities or such other assets of the Company to which the Holder would have been entitled upon such date if the Holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).
2. Adjustment for Reorganization, Consolidation, Merger. In case of any reorganization of the Company (or of any other corporation or entity, the stock or other securities of which are at the time receivable on the exercise of this Warrant), after the date of this Warrant, or in case, after such date, the Company (or any such corporation or entity) shall consolidate with or merge into another corporation or entity or convey all or substantially all of its assets to another corporation or entity, then, and in each such case, the Holder, upon the exercise of this Warrant (as provided in Section 2), at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which the Holder would have been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if the Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Warrant, and the successor or purchasing corporation or entity in such reorganization, consolidation, merger or conveyance (if other than the Company) shall duly execute and deliver to the Holder a supplement hereto acknowledging such corporation's or entity's obligations under this Warrant; and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after the consummation of such reorganization, consolidation, merger or conveyance.
3. Notice of Certain Events and Adjustments. The Company shall give thirty days prior written notice of the record date fixed for any Acquisition, Asset Transfer or event referred to in Section 4.2 or 4.3. The Company shall promptly give written notice of (i) each adjustment or readjustment of the Warrant Price or the number of shares of Warrant Stock or other securities issuable upon exercise of this Warrant and (ii) each adjustment or readjustment of the price per share of Common Stock triggering the call provisions set forth in Section 2.5. The notice shall describe the adjustment or readjustment and show in reasonable detail the facts on which the adjustment or readjustment is based.
4. No Change Necessary. The form of this Warrant need not be changed because of any adjustment in the Warrant Price or in the number of shares of Warrant Stock issuable upon its exercise.

5. No Rights or Liabilities as Stockholder. This Warrant does not by itself entitle the Holder to any voting rights or other rights as a stockholder of the Company. In the absence of affirmative action by the Holder to purchase Warrant Stock by exercise of this Warrant, no provisions of this Warrant, and no enumeration herein of the rights or privileges of the Holder, shall cause the Holder to be a stockholder of the Company for any purpose.
6. Attorneys' Fees. In the event any party is required to engage the services of any attorneys for the purpose of enforcing this Warrant, or any provision thereof, the prevailing party shall be entitled to recover its reasonable expenses and costs in enforcing this Warrant, including attorneys' fees.
7. Transfer. This Warrant may be transferred or assigned by the Holder hereof in whole or in part, if, on the Company's reasonable request, the Holder provides an opinion of counsel reasonably satisfactory to the Company that such transfer does not require registration under the Act and the applicable state securities law, except that this Warrant may be transferred by a Holder which is a partnership or limited liability company to a partner, former partner, member, former member or other affiliate of such partnership or limited liability company, as the case may be, if (a) the transferee agrees in writing to be subject to the terms of this Warrant; and (b) the Holder delivers notice of such transfer to the Company. The rights and obligations of the Company and the Holder under this Warrant shall be binding upon and benefit their respective permitted successors, assigns, heirs, administrators and transferees.
8. Loss or Mutilation. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership and the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to it, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver in lieu thereof a new Warrant of like tenor.
9. Reservation of Warrant Stock. If at any time the number of authorized but unissued shares of the Warrant Stock shall not be sufficient to effect the exercise of this Warrant, the Company will take all such corporate action as may be necessary to increase its authorized but unissued shares of Warrant Stock to such number of shares of Warrant Stock as shall be sufficient for such purpose.
10. Governing Law. This Warrant shall be governed by and construed and interpreted in accordance with the laws of the State of Washington, without giving effect to its conflicts of law principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non conveniens.
11. Headings. The headings and captions used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant. All references in this Warrant to sections and exhibits shall, unless otherwise provided, refer to sections hereof and exhibits attached hereto, all of which exhibits are incorporated herein by this reference.
12. Notices. Any request, consent, notice or other communication required or permitted under this Warrant shall be in writing and shall be deemed duly given and received when delivered personally or transmitted by facsimile, one business day after being deposited for next-day delivery with a nationally recognized overnight delivery service, or three days after being deposited as first class mail with the United States Postal Service, all charges or postage prepaid, and properly addressed to the party to receive the same at the address indicated for such party on the signature pages of the Purchase Agreement. Any party may, at any time, by providing ten days' advance notice to the other party hereto, designate any other address in substitution of the an address established pursuant to the foregoing.
13. Amendment; Waiver. Any term of this Warrant may be amended, and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
14. Severability. If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Warrant and the balance of the Warrant shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.
15. Terms Binding. By acceptance of this Warrant, the Holder accepts and agrees to be bound by all the terms and conditions of this Warrant.
16. Valid Issuance; Taxes. All shares of Warrant Stock issued upon the exercise of this Warrant shall be validly issued, fully paid and non-assessable, and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof. The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Warrant Stock in any name other than that of the Holder of this Warrant.
17. Registration Rights. All shares of Warrant Stock issuable upon exercise of this Warrant shall be deemed to be "Registrable Securities" or such other definition of securities entitled to registration rights pursuant to the Investor Rights Agreement, and are entitled, subject to the terms and conditions of that agreement, to all registration rights granted to holders of Registrable Securities thereunder.
18. No Impairment. The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Warrant against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock issuable upon the exercise of this Warrant above the amount payable therefor upon such exercise, and (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Warrant Stock upon exercise of this Warrant.

[Signature appears on the following page.]

IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the date and year set forth below.

(To be signed only upon exercise of Warrant)

To: SVI Holdings Inc.

Loan Amount: $150,000 Spokane, Washington
Interest Rate: 12% May 31, 2001

FOR VALUE RECEIVED, the undersigned, SVI Solutions, Inc., a Delaware corporation ("Borrower"), hereby promises to pay to the order of Koyah Partners, L.P. ("Lender"), at such places and times and under the terms and conditions set forth below, the amounts, including interest, set forth below.

1. Principal Amount. Borrower hereby borrows from Lender and Lender hereby loans to Borrower the principal amount of One Hundred Fifty Thousand Dollars ($150,000), which principal amount shall incur interest and otherwise be subject to the terms and conditions set forth herein.
2. Payments. The entire principal balance of this Promissory Note (this "Note"), together with all accrued but unpaid interest thereon, shall be due and payable on August 30, 2001 (the "Maturity Date"). The principal balance of this Note shall accrue interest at the rate of twelve percent (12%) per annum.
3. Prepayment. Borrower shall have the right to prepay the principal balance of this Note, in part or in full, together with all accrued but unpaid interest thereon, upon ten (10) days prior written notice to Lender.
4. Collection Costs Borne by Borrower. Borrower agrees to pay all costs and expenses, including without limitation reasonable attorneys' fees, incurred by Lender in enforcing the terms of this Note in collecting this Note, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.
5. Late Charge. If any payment of principal or interest under this Note shall not be made within five (5) days after the due date, Borrower agrees to pay, in addition to the unpaid principal or interest, interest on such defaulted amount from the due date, up to the date of actual payment (after as well as before judgment) at a rate of five percent (5%) per annum above the rate which would have been payable under this Note or the maximum rate of interest permitted to be charged by applicable law, whichever is less.
6. Governing Law. This Note shall be governed by and construed and interpreted in accordance with the law of the State of Washington, without regard to that state's conflict of laws principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non-conveniens. Notwithstanding the foregoing, any party obtaining any order or judgment in any of the above referenced courts may bring an action in a court in another jurisdiction in order to enforce such order or judgment.
7. Successors. This Note shall be binding upon Borrower and the permitted successors and assigns of Borrower. Nothing in this Note, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note.
8. Severability. If any part of this Note is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.
9. Conversion of Note. At the option of Lender, the outstanding principal balance of this Note and all accrued but unpaid interest thereon, at any time prior to payment thereof, may be converted, in whole or in part, into duly authorized, fully paid and non-assessable shares of common stock, par value $.0001 per share, of the Company ("Common Stock") at a conversion price of $1.35 per share (subject to appropriate adjustment in the event of any stock splits, stock dividends or similar events). Lender may exercise such conversion right by providing written notice to Borrower. Such conversion shall be effective immediately upon giving such notice and as of such date Borrower shall be treated for all purposes as the holder of the shares issuable upon conversion. As soon as practicable after such conversion, Borrower, at its expense, shall cause to be issued in the name of and delivered to Lender a certificate or certificates for the number of shares to which Lender shall be entitled upon such conversion. No fractional shares shall be issued upon such conversion. If upon such conversion a fractional share results, the number of shares to be issued upon conversion shall be rounded to the next highest whole number.
10. Representations of Lender. By acceptance of this Note, Lender represents to Borrower that Lender is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that this Note and any securities issuable upon any conversion thereof are being acquired for Lender's own account and for the purpose of investment and not with a view to, or for sale in connection with, the distribution of the same, nor with any present intention of distributing or selling the same.
11. No Shareholder Rights. This Note shall not entitle Lender to any voting rights or any other rights as a shareholder of Borrower until any conversion of this Note.
12. Warrant. As additional consideration for making the loans evidenced by this Note, Borrower shall issue to Lender a Warrant, in the form attached hereto as Exhibit A (the "Warrant"), to purchase two hundred fifty (250) shares of Common Stock for each one thousand dollars ($1,000) of original principal amount of this Note.
13. Registration Rights. As further additional consideration for making the loan(s) evidenced by this Note, Borrower hereby agrees that any shares of Common Stock issued upon any conversion of this Note or upon any exercise of the Warrant shall be entitled to the same registration rights contained in the Investor's Rights Agreement dated as of December 22, 2000 among Borrower and the Investors party thereto (the "Investor's Rights Agreement") and for all purposes shall be considered Registrable Securities (as defined in the Investor's Rights Agreement), except that the provisions of Section 1.3 of the Investor's Rights Agreement shall not apply to such shares.
14. Conditions to Loan. As conditions to making the loan(s) to Borrower evidenced by this Note, (i) on the date hereof, Borrower shall obtain and deliver to Lender a subordination letter (the "Subordination Letter"), in form and substance acceptable to Lender in Lender's sole discretion, of Softline Limited, a South African corporation ("Softline"), to subordinate any and all debt owed to Softline by Borrower to the debt evidenced by this Note, (ii) on the date hereof, Borrower shall execute and deliver to Lender the Warrant and (iii) within ten (10) business days after the date hereof, Borrower shall obtain and deliver to Lender a Subordination Agreement (the "Subordination Agreement"), in form and substance acceptable to Lender in its sole discretion, of Softline to more fully memorialize the full subordination of such debt owed to Softline by Borrower to the debt evidenced by this Note (it being understood that Lender already has provided Borrower the form of Subordination Agreement acceptable to Lender). Borrower hereby agrees to satisfy such conditions and that failure to satisfy any such conditions on or before the date specified above shall constitute a Default (as defined below) under this Note.
15. Agreed Terms for Softline/SSII Transaction. Borrower has had discussions with Softline and Schmulik Stein International Investments Limited ("SSII") regarding a possible transaction involving (i) conversion of the debt owed to Softline by Borrower into shares of Common Stock and (ii) transfer by Softline to SSII of the shares of Common Stock resulting from such conversion and/or the shares of Common Stock already held by Softline. Borrower has informed Lender that Borrower is willing to engage in any such debt-equity conversion only on certain terms and Borrower desires to make certain agreements with Lender regarding the terms of such debt-equity conversion. Borrower hereby agrees not to engage in any such debt-equity conversion or similar transaction unless (x) SSII enters into an agreement with Borrower (for the benefit of Lender as well) containing (a) a "standstill" provision restricting SSII or any of its affiliates from acquiring any additional shares of Common Stock or other stock of Borrower for a period of twelve (12) months after such transfer from Softline and (b) a method of disposition provision restricting SSII or any of its affiliates from selling or otherwise disposing of any shares of Common Stock or other stock of Borrower held by them for a period of twelve (12) months after such transfer (and Borrower shall also use its best efforts to obtain SSII's agreement to a period of eighteen (18) months or longer) except on the American Stock Exchange or such other exchange as the Common Stock or other stock may then be listed, (y) such debt equity conversion occurs at a conversion or similar transaction price of not less than $1.00 per share of Common Stock and (2) the shares acquired by SSII will be "restricted securities" under Rule 144 under the Securities Act.
16. Defaults. Each of the following shall constitute a default under this Note (a "Default"):

1. Failure by Borrower to make any payment due under this Note or under any other agreement with Lender, Koyah Leverage Partners, L.P. or Koyah Community Partners, L.P. (collectively, the "Affiliated Lenders") within five (5) days of its due date; failure by Borrower to satisfy the conditions set forth in Section 14 on or before the date specified therein; or failure by Borrower to comply with the provisions of any other covenant, obligation or term of this Note or any other agreement with the Affiliated Lenders which shall unremedied for five (5) days after written notice from the Affiliated Lenders;
2. Failure by Borrower to pay when due any other indebtedness or obligations in excess of two hundred thousand dollars ($200,000) which shall continue after the applicable grace period, if any, specified in the agreement relating to such indebtedness or obligation; failure by Borrower to comply with the provisions of any other covenant, obligation or term of any agreement relating to such indebtedness or obligation which shall continue after the applicable grace period, if any, specified in such agreement if the effect of such failure is to accelerate, or permit the acceleration of, the due date of such indebtedness or obligation; or any such indebtedness or obligation shall be declared to be due and payable, or required to be prepaid, prior to the stated maturity date thereof;
3. Borrower makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions to any court for a receiver or trustee for Borrower or any substantial part of its property, commences any proceeding relating to the arrangement, readjustment, reorganization or liquidation under any bankruptcy or similar laws; there is commenced against Borrower any such proceedings which remain undismissed for a period of thirty (30) days; or Borrower by any act indicates its consent or acquiescence in any such proceeding or the appointment of any such trustee or receiver;
4. Occurrence of any extraordinary situation which gives Lender reasonable grounds to believe that Borrower will or may not be able to perform its obligations under this Note or any other agreement with the Affiliated Lenders; or

(e) The provisions of any covenant, agreement or term of the Subordination Letter or Subordination Agreement shall for any reason be invalidated or otherwise cease to be in full force and effect; the debt evidenced by this Note shall for any reason not have the seniority and priority contemplated by the provisions of the Subordination Letter or Subordination Agreement; Softline or Borrower shall fail to comply with the provisions of any covenant, obligation or term of the Subordination Letter or Subordination Agreement; or Softline shall revoke or repudiate or attempt to contest any of its obligations under the Subordination Letter or Subordination Agreement.

17. Acceleration; No Exclusive Remedy. Upon written notice from Lender of a Default, Lender may declare, by written notice to Borrower, that all principal and accrued interest hereunder shall be immediately due and payable to Lender. Notwithstanding anything to the contrary herein, Lender shall be entitled to any and all remedies available to it in the event of a Default hereunder and Lender's pursuance of any particular remedy shall not preclude Lender from seeking any other remedies available to it at law or in equity.
18. Notices. Any notice under this Note shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

"Borrower"

SVI Solutions, Inc.

12707 Highbluff Drive, Suite 355

San Diego, CA 92130

Fax: 858-481-9703

Attention: Kevin O'Neill

"Lender"

Koyah Partners, L.P.

c/o ICM Asset Management, Inc.

601 W. Main Avenue, Suite 600

Spokane, WA 99201

Fax: 509-444-4500

Attention: Robert Law

19. Costs and Expenses. Borrower shall pay the costs and expenses of legal counsel to the Affiliated Lenders (i) in connection with this Note, the Subordination Letter, the Subordination Agreement and the Warrant and the transactions contemplated hereby and thereby and (ii) in connection with the registration on Form S-3 contemplated by the Investor's Rights Agreement and Lender may withhold such costs and expenses or estimates thereof out of the proceeds of the loan to be disbursed to Borrower evidenced by this Note.
20. Miscellaneous.

1. No delay or omission on the part of Lender in exercising any right under this Note shall operate as a waiver of such right or of any other right under this Note.
2. Borrower hereby waives presentation for payment, demand, notice of demand and of dishonor and non-payment of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party. The pleading of any statute of limitations as a defense to any demand against the Borrower, any endorsers, guarantors and sureties of this Note is expressly waived by each and all of such parties to the extent permitted by law. Time is of the essence under this Note.
3. Any payment hereunder shall first be applied to any collections costs, then against accrued and unpaid interest hereunder and then against the outstanding principal balance of this Note.
4. This Note, together with the Subordination Letter, the Subordination Agreement and the Warrant, constitutes the entire agreement of the parties with respect to the subject matter hereof and thereof and supersedes all prior discussions, negotiations, understandings or agreements of the parties with respect to such subject matter.

(e) All payments under this Note shall be made without set-off, deduction or counterclaim.

IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its corporate name by its duly authorized officer and dated the day and year first above written.

SVI SOLUTIONS, INC.

By:______________________

Its:______________________

Loan Amount: $100,000 Spokane, Washington
Interest Rate: 12% May 31, 2001

FOR VALUE RECEIVED, the undersigned, SVI Solutions, Inc., a Delaware corporation ("Borrower"), hereby promises to pay to the order of Koyah Community Partners, L.P. ("Lender"), at such places and times and under the terms and conditions set forth below, the amounts, including interest, set forth below.

1. Principal Amount. Borrower hereby borrows from Lender and Lender hereby loans to Borrower the principal amount of One Hundred Thousand Dollars ($100,000), which principal amount shall incur interest and otherwise be subject to the terms and conditions set forth herein.
2. Payments. The entire principal balance of this Promissory Note (this "Note"), together with all accrued but unpaid interest thereon, shall be due and payable on August 30, 2001 (the "Maturity Date"). The principal balance of this Note shall accrue interest at the rate of twelve percent (12%) per annum.
3. Prepayment. Borrower shall have the right to prepay the principal balance of this Note, in part or in full, together with all accrued but unpaid interest thereon, upon ten (10) days prior written notice to Lender.
4. Collection Costs Borne by Borrower. Borrower agrees to pay all costs and expenses, including without limitation reasonable attorneys' fees, incurred by Lender in enforcing the terms of this Note in collecting this Note, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.
5. Late Charge. If any payment of principal or interest under this Note shall not be made within five (5) days after the due date, Borrower agrees to pay, in addition to the unpaid principal or interest, interest on such defaulted amount from the due date, up to the date of actual payment (after as well as before judgment) at a rate of five percent (5%) per annum above the rate which would have been payable under this Note or the maximum rate of interest permitted to be charged by applicable law, whichever is less.
6. Governing Law. This Note shall be governed by and construed and interpreted in accordance with the law of the State of Washington, without regard to that state's conflict of laws principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non-conveniens. Notwithstanding the foregoing, any party obtaining any order or judgment in any of the above referenced courts may bring an action in a court in another jurisdiction in order to enforce such order or judgment.
7. Successors. This Note shall be binding upon Borrower and the permitted successors and assigns of Borrower. Nothing in this Note, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note.
8. Severability. If any part of this Note is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.
9. Conversion of Note. At the option of Lender, the outstanding principal balance of this Note and all accrued but unpaid interest thereon, at any time prior to payment thereof, may be converted, in whole or in part, into duly authorized, fully paid and non-assessable shares of common stock, par value $.0001 per share, of the Company ("Common Stock") at a conversion price of $1.35 per share (subject to appropriate adjustment in the event of any stock splits, stock dividends or similar events). Lender may exercise such conversion right by providing written notice to Borrower. Such conversion shall be effective immediately upon giving such notice and as of such date Borrower shall be treated for all purposes as the holder of the shares issuable upon conversion. As soon as practicable after such conversion, Borrower, at its expense, shall cause to be issued in the name of and delivered to Lender a certificate or certificates for the number of shares to which Lender shall be entitled upon such conversion. No fractional shares shall be issued upon such conversion. If upon such conversion a fractional share results, the number of shares to be issued upon conversion shall be rounded to the next highest whole number.
10. Representations of Lender. By acceptance of this Note, Lender represents to Borrower that Lender is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that this Note and any securities issuable upon any conversion thereof are being acquired for Lender's own account and for the purpose of investment and not with a view to, or for sale in connection with, the distribution of the same, nor with any present intention of distributing or selling the same.
11. No Shareholder Rights. This Note shall not entitle Lender to any voting rights or any other rights as a shareholder of Borrower until any conversion of this Note.
12. Warrant. As additional consideration for making the loans evidenced by this Note, Borrower shall issue to Lender a Warrant, in the form attached hereto as Exhibit A (the "Warrant"), to purchase two hundred fifty (250) shares of Common Stock for each one thousand dollars ($1,000) of original principal amount of this Note.
13. Registration Rights. As further additional consideration for making the loan(s) evidenced by this Note, Borrower hereby agrees that any shares of Common Stock issued upon any conversion of this Note or upon any exercise of the Warrant shall be entitled to the same registration rights contained in the Investor's Rights Agreement dated as of December 22, 2000 among Borrower and the Investors party thereto (the "Investor's Rights Agreement") and for all purposes shall be considered Registrable Securities (as defined in the Investor's Rights Agreement), except that the provisions of Section 1.3 of the Investor's Rights Agreement shall not apply to such shares.
14. Conditions to Loan. As conditions to making the loan(s) to Borrower evidenced by this Note, (i) on the date hereof, Borrower shall obtain and deliver to Lender a subordination letter (the "Subordination Letter"), in form and substance acceptable to Lender in Lender's sole discretion, of Softline Limited, a South African corporation ("Softline"), to subordinate any and all debt owed to Softline by Borrower to the debt evidenced by this Note, (ii) on the date hereof, Borrower shall execute and deliver to Lender the Warrant and (iii) within ten (10) business days after the date hereof, Borrower shall obtain and deliver to Lender a Subordination Agreement (the "Subordination Agreement"), in form and substance acceptable to Lender in its sole discretion, of Softline to more fully memorialize the full subordination of such debt owed to Softline by Borrower to the debt evidenced by this Note (it being understood that Lender already has provided Borrower the form of Subordination Agreement acceptable to Lender). Borrower hereby agrees to satisfy such conditions and that failure to satisfy any such conditions on or before the date specified above shall constitute a Default (as defined below) under this Note.
15. Agreed Terms for Softline/SSII Transaction. Borrower has had discussions with Softline and Schmulik Stein International Investments Limited ("SSII") regarding a possible transaction involving (i) conversion of the debt owed to Softline by Borrower into shares of Common Stock and (ii) transfer by Softline to SSII of the shares of Common Stock resulting from such conversion and/or the shares of Common Stock already held by Softline. Borrower has informed Lender that Borrower is willing to engage in any such debt-equity conversion only on certain terms and Borrower desires to make certain agreements with Lender regarding the terms of such debt-equity conversion. Borrower hereby agrees not to engage in any such debt-equity conversion or similar transaction unless (x) SSII enters into an agreement with Borrower (for the benefit of Lender as well) containing (a) a "standstill" provision restricting SSII or any of its affiliates from acquiring any additional shares of Common Stock or other stock of Borrower for a period of twelve (12) months after such transfer from Softline and (b) a method of disposition provision restricting SSII or any of its affiliates from selling or otherwise disposing of any shares of Common Stock or other stock of Borrower held by them for a period of twelve (12) months after such transfer (and Borrower shall also use its best efforts to obtain SSII's agreement to a period of eighteen (18) months or longer) except on the American Stock Exchange or such other exchange as the Common Stock or other stock may then be listed, (y) such debt equity conversion occurs at a conversion or similar transaction price of not less than $1.00 per share of Common Stock and (2) the shares acquired by SSII will be "restricted securities" under Rule 144 under the Securities Act.
16. Defaults. Each of the following shall constitute a default under this Note (a "Default"):

1. Failure by Borrower to make any payment due under this Note or under any other agreement with Lender, Koyah Leverage Partners, L.P. or Koyah Partners, L.P. (collectively, the "Affiliated Lenders") within five (5) days of its due date; failure by Borrower to satisfy the conditions set forth in Section 14 on or before the date specified therein; or failure by Borrower to comply with the provisions of any other covenant, obligation or term of this Note or any other agreement with the Affiliated Lenders which shall unremedied for five (5) days after written notice from the Affiliated Lenders;
2. Failure by Borrower to pay when due any other indebtedness or obligations in excess of two hundred thousand dollars ($200,000) which shall continue after the applicable grace period, if any, specified in the agreement relating to such indebtedness or obligation; failure by Borrower to comply with the provisions of any other covenant, obligation or term of any agreement relating to such indebtedness or obligation which shall continue after the applicable grace period, if any, specified in such agreement if the effect of such failure is to accelerate, or permit the acceleration of, the due date of such indebtedness or obligation; or any such indebtedness or obligation shall be declared to be due and payable, or required to be prepaid, prior to the stated maturity date thereof;
3. Borrower makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions to any court for a receiver or trustee for Borrower or any substantial part of its property, commences any proceeding relating to the arrangement, readjustment, reorganization or liquidation under any bankruptcy or similar laws; there is commenced against Borrower any such proceedings which remain undismissed for a period of thirty (30) days; or Borrower by any act indicates its consent or acquiescence in any such proceeding or the appointment of any such trustee or receiver;
4. Occurrence of any extraordinary situation which gives Lender reasonable grounds to believe that Borrower will or may not be able to perform its obligations under this Note or any other agreement with the Affiliated Lenders; or

(e) The provisions of any covenant, agreement or term of the Subordination Letter or Subordination Agreement shall for any reason be invalidated or otherwise cease to be in full force and effect; the debt evidenced by this Note shall for any reason not have the seniority and priority contemplated by the provisions of the Subordination Letter or Subordination Agreement; Softline or Borrower shall fail to comply with the provisions of any covenant, obligation or term of the Subordination Letter or Subordination Agreement; or Softline shall revoke or repudiate or attempt to contest any of its obligations under the Subordination Letter or Subordination Agreement.

17. Acceleration; No Exclusive Remedy. Upon written notice from Lender of a Default, Lender may declare, by written notice to Borrower, that all principal and accrued interest hereunder shall be immediately due and payable to Lender. Notwithstanding anything to the contrary herein, Lender shall be entitled to any and all remedies available to it in the event of a Default hereunder and Lender's pursuance of any particular remedy shall not preclude Lender from seeking any other remedies available to it at law or in equity.
18. Notices. Any notice under this Note shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

"Borrower"

SVI Solutions, Inc.

12707 Highbluff Drive, Suite 355

San Diego, CA 92130

Fax: 858-481-9703

Attention: Kevin O'Neill

"Lender"

Koyah Community Partners, L.P.

c/o ICM Asset Management, Inc.

601 W. Main Avenue, Suite 600

Spokane, WA 99201

Fax: 509-444-4500

Attention: Robert Law

19. Costs and Expenses. Borrower shall pay the costs and expenses of legal counsel to the Affiliated Lenders (i) in connection with this Note, the Subordination Letter, the Subordination Agreement and the Warrant and the transactions contemplated hereby and thereby and (ii) in connection with the registration on Form S-3 contemplated by the Investor's Rights Agreement and Lender may withhold such costs and expenses or estimates thereof out of the proceeds of the loan to be disbursed to Borrower evidenced by this Note.
20. Miscellaneous.

1. No delay or omission on the part of Lender in exercising any right under this Note shall operate as a waiver of such right or of any other right under this Note.
2. Borrower hereby waives presentation for payment, demand, notice of demand and of dishonor and non-payment of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party. The pleading of any statute of limitations as a defense to any demand against the Borrower, any endorsers, guarantors and sureties of this Note is expressly waived by each and all of such parties to the extent permitted by law. Time is of the essence under this Note.
3. Any payment hereunder shall first be applied to any collections costs, then against accrued and unpaid interest hereunder and then against the outstanding principal balance of this Note.
4. This Note, together with the Subordination Letter, the Subordination Agreement and the Warrant, constitutes the entire agreement of the parties with respect to the subject matter hereof and thereof and supersedes all prior discussions, negotiations, understandings or agreements of the parties with respect to such subject matter.

(e) All payments under this Note shall be made without set-off, deduction or counterclaim.

IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its corporate name by its duly authorized officer and dated the day and year first above written.

SVI SOLUTIONS, INC.

By:______________________

Its:______________________

Loan Amount: $750,000 Spokane, Washington
Interest Rate: 12% May 31, 2001

FOR VALUE RECEIVED, the undersigned, SVI Solutions, Inc., a Delaware corporation ("Borrower"), hereby promises to pay to the order of Koyah Leverage Partners, L.P. ("Lender"), at such places and times and under the terms and conditions set forth below, the amounts, including interest, set forth below.

1. Principal Amount. Borrower hereby borrows from Lender and Lender hereby loans to Borrower the principal amount of Seven Hundred Fifty Thousand Dollars ($750,000), which principal amount shall incur interest and otherwise be subject to the terms and conditions set forth herein.
2. Payments. The entire principal balance of this Promissory Note (this "Note"), together with all accrued but unpaid interest thereon, shall be due and payable on August 30, 2001 (the "Maturity Date"). The principal balance of this Note shall accrue interest at the rate of twelve percent (12%) per annum.
3. Prepayment. Borrower shall have the right to prepay the principal balance of this Note, in part or in full, together with all accrued but unpaid interest thereon, upon ten (10) days prior written notice to Lender.
4. Collection Costs Borne by Borrower. Borrower agrees to pay all costs and expenses, including without limitation reasonable attorneys' fees, incurred by Lender in enforcing the terms of this Note in collecting this Note, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.
5. Late Charge. If any payment of principal or interest under this Note shall not be made within five (5) days after the due date, Borrower agrees to pay, in addition to the unpaid principal or interest, interest on such defaulted amount from the due date, up to the date of actual payment (after as well as before judgment) at a rate of five percent (5%) per annum above the rate which would have been payable under this Note or the maximum rate of interest permitted to be charged by applicable law, whichever is less.
6. Governing Law. This Note shall be governed by and construed and interpreted in accordance with the law of the State of Washington, without regard to that state's conflict of laws principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non-conveniens. Notwithstanding the foregoing, any party obtaining any order or judgment in any of the above referenced courts may bring an action in a court in another jurisdiction in order to enforce such order or judgment.
7. Successors. This Note shall be binding upon Borrower and the permitted successors and assigns of Borrower. Nothing in this Note, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note.
8. Severability. If any part of this Note is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.
9. Conversion of Note. At the option of Lender, the outstanding principal balance of this Note and all accrued but unpaid interest thereon, at any time prior to payment thereof, may be converted, in whole or in part, into duly authorized, fully paid and non-assessable shares of common stock, par value $.0001 per share, of the Company ("Common Stock") at a conversion price of $1.35 per share (subject to appropriate adjustment in the event of any stock splits, stock dividends or similar events). Lender may exercise such conversion right by providing written notice to Borrower. Such conversion shall be effective immediately upon giving such notice and as of such date Borrower shall be treated for all purposes as the holder of the shares issuable upon conversion. As soon as practicable after such conversion, Borrower, at its expense, shall cause to be issued in the name of and delivered to Lender a certificate or certificates for the number of shares to which Lender shall be entitled upon such conversion. No fractional shares shall be issued upon such conversion. If upon such conversion a fractional share results, the number of shares to be issued upon conversion shall be rounded to the next highest whole number.
10. Representations of Lender. By acceptance of this Note, Lender represents to Borrower that Lender is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that this Note and any securities issuable upon any conversion thereof are being acquired for Lender's own account and for the purpose of investment and not with a view to, or for sale in connection with, the distribution of the same, nor with any present intention of distributing or selling the same.
11. No Shareholder Rights. This Note shall not entitle Lender to any voting rights or any other rights as a shareholder of Borrower until any conversion of this Note.
12. Warrant. As additional consideration for making the loans evidenced by this Note, Borrower shall issue to Lender a Warrant, in the form attached hereto as Exhibit A (the "Warrant"), to purchase two hundred fifty (250) shares of Common Stock for each one thousand dollars ($1,000) of original principal amount of this Note.
13. Registration Rights. As further additional consideration for making the loan(s) evidenced by this Note, Borrower hereby agrees that any shares of Common Stock issued upon any conversion of this Note or upon any exercise of the Warrant shall be entitled to the same registration rights contained in the Investor's Rights Agreement dated as of December 22, 2000 among Borrower and the Investors party thereto (the "Investor's Rights Agreement") and for all purposes shall be considered Registrable Securities (as defined in the Investor's Rights Agreement), except that the provisions of Section 1.3 of the Investor's Rights Agreement shall not apply to such shares.
14. Conditions to Loan. As conditions to making the loan(s) to Borrower evidenced by this Note, (i) on the date hereof, Borrower shall obtain and deliver to Lender a subordination letter (the "Subordination Letter"), in form and substance acceptable to Lender in Lender's sole discretion, of Softline Limited, a South African corporation ("Softline"), to subordinate any and all debt owed to Softline by Borrower to the debt evidenced by this Note, (ii) on the date hereof, Borrower shall execute and deliver to Lender the Warrant and (iii) within ten (10) business days after the date hereof, Borrower shall obtain and deliver to Lender a Subordination Agreement (the "Subordination Agreement"), in form and substance acceptable to Lender in its sole discretion, of Softline to more fully memorialize the full subordination of such debt owed to Softline by Borrower to the debt evidenced by this Note (it being understood that Lender already has provided Borrower the form of Subordination Agreement acceptable to Lender). Borrower hereby agrees to satisfy such conditions and that failure to satisfy any such conditions on or before the date specified above shall constitute a Default (as defined below) under this Note.
15. Agreed Terms for Softline/SSII Transaction. Borrower has had discussions with Softline and Schmulik Stein International Investments Limited ("SSII") regarding a possible transaction involving (i) conversion of the debt owed to Softline by Borrower into shares of Common Stock and (ii) transfer by Softline to SSII of the shares of Common Stock resulting from such conversion and/or the shares of Common Stock already held by Softline. Borrower has informed Lender that Borrower is willing to engage in any such debt-equity conversion only on certain terms and Borrower desires to make certain agreements with Lender regarding the terms of such debt-equity conversion. Borrower hereby agrees not to engage in any such debt-equity conversion or similar transaction unless (x) SSII enters into an agreement with Borrower (for the benefit of Lender as well) containing (a) a "standstill" provision restricting SSII or any of its affiliates from acquiring any additional shares of Common Stock or other stock of Borrower for a period of twelve (12) months after such transfer from Softline and (b) a method of disposition provision restricting SSII or any of its affiliates from selling or otherwise disposing of any shares of Common Stock or other stock of Borrower held by them for a period of twelve (12) months after such transfer (and Borrower shall also use its best efforts to obtain SSII's agreement to a period of eighteen (18) months or longer) except on the American Stock Exchange or such other exchange as the Common Stock or other stock may then be listed, (y) such debt equity conversion occurs at a conversion or similar transaction price of not less than $1.00 per share of Common Stock and (2) the shares acquired by SSII will be "restricted securities" under Rule 144 under the Securities Act.
16. Defaults. Each of the following shall constitute a default under this Note (a "Default"):

1. Failure by Borrower to make any payment due under this Note or under any other agreement with Lender, Koyah Partners, L.P., or Koyah Community Partners, L.P. (collectively, the "Affiliated Lenders") within five (5) days of its due date; failure by Borrower to satisfy the conditions set forth in Section 14 on or before the date specified therein; or failure by Borrower to comply with the provisions of any other covenant, obligation or term of this Note or any other agreement with the Affiliated Lenders which shall unremedied for five (5) days after written notice from the Affiliated Lenders;
2. Failure by Borrower to pay when due any other indebtedness or obligations in excess of two hundred thousand dollars ($200,000) which shall continue after the applicable grace period, if any, specified in the agreement relating to such indebtedness or obligation; failure by Borrower to comply with the provisions of any other covenant, obligation or term of any agreement relating to such indebtedness or obligation which shall continue after the applicable grace period, if any, specified in such agreement if the effect of such failure is to accelerate, or permit the acceleration of, the due date of such indebtedness or obligation; or any such indebtedness or obligation shall be declared to be due and payable, or required to be prepaid, prior to the stated maturity date thereof;
3. Borrower makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions to any court for a receiver or trustee for Borrower or any substantial part of its property, commences any proceeding relating to the arrangement, readjustment, reorganization or liquidation under any bankruptcy or similar laws; there is commenced against Borrower any such proceedings which remain undismissed for a period of thirty (30) days; or Borrower by any act indicates its consent or acquiescence in any such proceeding or the appointment of any such trustee or receiver;
4. Occurrence of any extraordinary situation which gives Lender reasonable grounds to believe that Borrower will or may not be able to perform its obligations under this Note or any other agreement with the Affiliated Lenders; or

(e) The provisions of any covenant, agreement or term of the Subordination Letter or Subordination Agreement shall for any reason be invalidated or otherwise cease to be in full force and effect; the debt evidenced by this Note shall for any reason not have the seniority and priority contemplated by the provisions of the Subordination Letter or Subordination Agreement; Softline or Borrower shall fail to comply with the provisions of any covenant, obligation or term of the Subordination Letter or Subordination Agreement; or Softline shall revoke or repudiate or attempt to contest any of its obligations under the Subordination Letter or Subordination Agreement.

17. Acceleration; No Exclusive Remedy. Upon written notice from Lender of a Default, Lender may declare, by written notice to Borrower, that all principal and accrued interest hereunder shall be immediately due and payable to Lender. Notwithstanding anything to the contrary herein, Lender shall be entitled to any and all remedies available to it in the event of a Default hereunder and Lender's pursuance of any particular remedy shall not preclude Lender from seeking any other remedies available to it at law or in equity.
18. Notices. Any notice under this Note shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

"Borrower"

SVI Solutions, Inc.

12707 Highbluff Drive, Suite 355

San Diego, CA 92130

Fax: 858-481-9703

Attention: Kevin O'Neill

"Lender"

Koyah Leverage Partners, L.P.

c/o ICM Asset Management, Inc.

601 W. Main Avenue, Suite 600

Spokane, WA 99201

Fax: 509-444-4500

Attention: Robert Law

19. Costs and Expenses. Borrower shall pay the costs and expenses of legal counsel to the Affiliated Lenders (i) in connection with this Note, the Subordination Letter, the Subordination Agreement and the Warrant and the transactions contemplated hereby and thereby and (ii) in connection with the registration on Form S-3 contemplated by the Investor's Rights Agreement and Lender may withhold such costs and expenses or estimates thereof out of the proceeds of the loan to be disbursed to Borrower evidenced by this Note.
20. Miscellaneous.

1. No delay or omission on the part of Lender in exercising any right under this Note shall operate as a waiver of such right or of any other right under this Note.
2. Borrower hereby waives presentation for payment, demand, notice of demand and of dishonor and non-payment of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party. The pleading of any statute of limitations as a defense to any demand against the Borrower, any endorsers, guarantors and sureties of this Note is expressly waived by each and all of such parties to the extent permitted by law. Time is of the essence under this Note.
3. Any payment hereunder shall first be applied to any collections costs, then against accrued and unpaid interest hereunder and then against the outstanding principal balance of this Note.
4. This Note, together with the Subordination Letter, the Subordination Agreement and the Warrant, constitutes the entire agreement of the parties with respect to the subject matter hereof and thereof and supersedes all prior discussions, negotiations, understandings or agreements of the parties with respect to such subject matter.

(e) All payments under this Note shall be made without set-off, deduction or counterclaim.

IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its corporate name by its duly authorized officer and dated the day and year first above written.

SVI SOLUTIONS, INC.

By:______________________

Its:______________________

May 31, 2001

No. W-__

This certifies that ____________________ (the "Holder") is entitled, subject to the terms and conditions of this Warrant, to purchase from SVI Solutions, Inc., a Delaware corporation (the "Company"), all or any part of an aggregate of _________ shares of the Company's authorized and unissued Common Stock, par value $.0001 (the "Warrant Stock"), at the Warrant Price (as defined herein), upon surrender of this Warrant at the principal offices of the Company, together with a duly executed subscription form in the form attached hereto as Exhibit 1 and simultaneous payment of the Warrant Price for each share of Warrant Stock so purchased in lawful money of the United States, unless exercised in accordance with the provisions of Section 2.5 of this Warrant. The Holder may exercise the Warrant at any time after the date of this Warrant and prior to the third (3^rd) anniversary of the date hereof (the "Expiration Date").

This Warrant is issued pursuant to that certain Convertible Promissory Note dated as of May 31, 2001 (the "Promissory Note"), executed by the Company in favor of the Holder.

1. Definitions. The following definitions shall apply for purposes of this Warrant:

0. "Acquisition" means any consolidation, merger or reorganization of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent of the Company's voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent of the Company's voting power is transferred, excluding any consolidation, merger or reorganization effected exclusively to change the domicile of the Company.
1. "Asset Transfer" means a sale, lease or other disposition of all or substantially all of the assets of the Company.
2. "Company" means the "Company" as defined above and includes any corporation or other entity that succeeds to or assumes the obligations of the Company under this Warrant.
3. "Fair Market Value" of a share of Warrant Stock means (i) if the Common Stock is traded on a securities exchange, the average of the closing price each day over the thirty consecutive day period ending three days before the day the Fair Market Value of the securities is being determined, (ii) if the Common Stock is actively traded over-the counter, the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) each day over the thirty consecutive day period ending three days before the day the Fair Market Value of the securities is being determined, or (iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, then the Fair Market Value determined by the Company's Board of Directors in good faith.
4. "Holder" means the "Holder" as defined above and includes any transferee who shall at the time be the registered holder of this Warrant.
5. "Warrant" means this Warrant and any warrant(s) delivered in substitution or exchange therefor, as provided herein.
6. "Warrant Price" means $1.50 per share of Warrant Stock. The Warrant Price is subject to adjustment as provided herein.
7. "Warrant Stock" means the Common Stock of the Company. The number and character of shares of Warrant Stock are subject to adjustment as provided herein and the term "Warrant Stock" shall include stock and other securities and property at any time receivable or issuable upon exercise of this Warrant in accordance with its terms.

2. Exercise.

0. Method of Exercise. Subject to the terms and conditions of this Warrant, the Holder may exercise the purchase rights represented by this Warrant in whole or in part, at any time or from time to time, on or after the date hereof and before the Expiration Date, by surrendering this Warrant at the principal offices of the Company, with the subscription form attached hereto duly executed by the Holder, and payment of an amount equal to the product obtained by multiplying (i) the number of shares of Warrant Stock so purchased by (ii) the Warrant Price, as specified in Section 2.2 below.
1. Form of Payment. Except as provided in Section 2.5, payment may be made by (i) a check payable to the Company's order, (ii) wire transfer of funds to the Company, (iii) cancellation of indebtedness of the Company to the Holder, or (iv) any combination of the foregoing.
2. Partial Exercise. Upon a partial exercise of this Warrant, this Warrant shall be surrendered by the Holder and replaced with a new Warrant or Warrants of like tenor for the balance of the shares of Warrant Stock purchasable under the Warrant surrendered upon such purchase. The Warrant or Warrants will be delivered to the Holder thereof within a reasonable time.
3. No Fractional Shares. No fractional shares may be issued upon any exercise of this Warrant, and any fractions shall be rounded down to the nearest whole number of shares. If upon any exercise of this Warrant a fraction of a share results, the Company will pay an amount equal to the such fraction multiplied by the Fair Market Value of a share of Warrant Stock.
4. Net Exercise Election. The Holder may elect to convert all or a portion of this Warrant, without the payment by the Holder of any additional consideration, by the surrender of this Warrant or such portion to the Company, with the net exercise election selected in the subscription form attached hereto duly executed by the Holder, into up to the number of shares of Warrant Stock that is obtained under the following formula:

X = Y (A-B)

A

where X = the number of shares of Warrant Stock to be issued to the Holder pursuant to this Section 2.5.

Y = the number of shares of Warrant Stock purchasable under this Warrant, or if only a portion of the Warrant is being exercised, the number of shares of Warrant Stock represented by the portion of the Warrant being exercised.

A = the Fair Market Value of one share of Warrant Stock as at the time the net exercise election is made pursuant to this Section 2.5.

B = the Warrant Price.

3. Issuance of Stock. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Warrant Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As soon as practicable, but in any event no later than three days after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of whole shares of Warrant Stock issuable upon such exercise. The Company covenants and agrees that all shares of Warrant Stock that are issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from all preemptive rights of any stockholder, free of all taxes, liens and charges with respect to the issue thereof and free and clear of any restrictions on transfer (other than under the Act and state securities laws).
4. Adjustment Provisions. The number and character of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities or property at the time receivable or issuable upon exercise of this Warrant) and the Warrant Price for the Common Stock are subject to adjustment upon the occurrence of the following events between the date this Warrant is issued and the date it is exercised:

0. Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The Warrant Price of this Warrant and the number of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall each be appropriately and proportionally adjusted to reflect any stock dividend, stock split, reverse stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of Warrant Stock (or such other stock or securities).
1. Adjustment for Other Dividends and Distributions. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution payable with respect to the Warrant Stock that is payable in (a) securities of the Company (other than issuances with respect to which adjustment is made under Section 4.1), or (b) assets (other than cash dividends paid or payable solely out of retained earnings), then, and in each such case, the Holder, upon exercise of this Warrant at any time after the consummation, effective date or record date of such event, shall receive, in addition to the shares of Warrant Stock issuable upon such exercise prior to such date, the securities or such other assets of the Company to which the Holder would have been entitled upon such date if the Holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).
2. Adjustment for Reorganization, Consolidation, Merger. In case of any reorganization of the Company (or of any other corporation or entity, the stock or other securities of which are at the time receivable on the exercise of this Warrant), after the date of this Warrant, or in case, after such date, the Company (or any such corporation or entity) shall consolidate with or merge into another corporation or entity or convey all or substantially all of its assets to another corporation or entity, then, and in each such case, the Holder, upon the exercise of this Warrant (as provided in Section 2), at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which the Holder would have been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if the Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Warrant, and the successor or purchasing corporation or entity in such reorganization, consolidation, merger or conveyance (if other than the Company) shall duly execute and deliver to the Holder a supplement hereto acknowledging such corporation's or entity's obligations under this Warrant; and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after the consummation of such reorganization, consolidation, merger or conveyance.
3. Notice of Certain Events and Adjustments. The Company shall give thirty days prior written notice of the record date fixed for any Acquisition, Asset Transfer or event referred to in Section 4.2 or 4.3. The Company shall promptly give written notice of each adjustment or readjustment of the Warrant Price or the number of shares of Warrant Stock or other securities issuable upon exercise of this Warrant. The notice shall describe the adjustment or readjustment and show in reasonable detail the facts on which the adjustment or readjustment is based.
4. No Change Necessary. The form of this Warrant need not be changed because of any adjustment in the Warrant Price or in the number of shares of Warrant Stock issuable upon its exercise.

5. No Rights or Liabilities as Stockholder. This Warrant does not by itself entitle the Holder to any voting rights or other rights as a stockholder of the Company. In the absence of affirmative action by the Holder to purchase Warrant Stock by exercise of this Warrant, no provisions of this Warrant, and no enumeration herein of the rights or privileges of the Holder, shall cause the Holder to be a stockholder of the Company for any purpose.
6. Attorneys' Fees. In the event any party is required to engage the services of any attorneys for the purpose of enforcing this Warrant, or any provision thereof, the prevailing party shall be entitled to recover its reasonable expenses and costs in enforcing this Warrant, including attorneys' fees.
7. Transfer. This Warrant may be transferred or assigned by the Holder hereof in whole or in part, if, on the Company's reasonable request, the Holder provides an opinion of counsel reasonably satisfactory to the Company that such transfer does not require registration under the Act and the applicable state securities law, except that this Warrant may be transferred by a Holder which is a partnership or limited liability company to a partner, former partner, member, former member or other affiliate of such partnership or limited liability company, as the case may be, if (a) the transferee agrees in writing to be subject to the terms of this Warrant; and (b) the Holder delivers notice of such transfer to the Company. The rights and obligations of the Company and the Holder under this Warrant shall be binding upon and benefit their respective permitted successors, assigns, heirs, administrators and transferees.
8. Loss or Mutilation. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership and the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to it, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver in lieu thereof a new Warrant of like tenor.
9. Reservation of Warrant Stock. If at any time the number of authorized but unissued shares of the Warrant Stock shall not be sufficient to effect the exercise of this Warrant, the Company will take all such corporate action as may be necessary to increase its authorized but unissued shares of Warrant Stock to such number of shares of Warrant Stock as shall be sufficient for such purpose.
10. Governing Law. This Warrant shall be governed by and construed and interpreted in accordance with the laws of the State of Washington, without giving effect to its conflicts of law principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non conveniens.
11. Headings. The headings and captions used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant. All references in this Warrant to sections and exhibits shall, unless otherwise provided, refer to sections hereof and exhibits attached hereto, all of which exhibits are incorporated herein by this reference.
12. Notices. Any request, consent, notice or other communication required or permitted under this Warrant shall be in writing and shall be deemed duly given and received when delivered personally or transmitted by facsimile, one business day after being deposited for next-day delivery with a nationally recognized overnight delivery service, or three days after being deposited as first class mail with the United States Postal Service, all charges or postage prepaid, and properly addressed to the party to receive the same at the address indicated for such party on the signature pages of the Purchase Agreement. Any party may, at any time, by providing ten days' advance notice to the other party hereto, designate any other address in substitution of the address established pursuant to the foregoing.
13. Amendment; Waiver. Any term of this Warrant may be amended, and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
14. Severability. If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Warrant and the balance of the Warrant shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.
15. Terms Binding. By acceptance of this Warrant, the Holder accepts and agrees to be bound by all the terms and conditions of this Warrant.
16. Valid Issuance; Taxes. All shares of Warrant Stock issued upon the exercise of this Warrant shall be validly issued, fully paid and non-assessable, and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof. The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Warrant Stock in any name other than that of the Holder of this Warrant.
17. Registration Rights. All shares of Warrant Stock issuable upon exercise of this Warrant shall be deemed to be "Registrable Securities" or such other definition of securities entitled to registration rights pursuant to the Investors' Rights Agreement dated as of December 22, 2000, by and among the Company, the Holder and certain other Investors, and are entitled, subject to the terms and conditions of that agreement, to all registration rights granted to holders of Registrable Securities thereunder.
18. No Impairment. The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Warrant against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock issuable upon the exercise of this Warrant above the amount payable therefor upon such exercise, and (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Warrant Stock upon exercise of this Warrant.

[Signature appears on the following page.]

IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the date and year set forth below.

(To be signed only upon exercise of Warrant)

To: SVI Solutions Inc.

Loan Amount: $25,000 Spokane, Washington
Interest Rate: 12% June 14, 2001

FOR VALUE RECEIVED, the undersigned, SVI Solutions, Inc., a Delaware corporation ("Borrower"), hereby promises to pay to the order of Koyah Community Partners, L.P. ("Lender"), at such places and times and under the terms and conditions set forth below, the amounts, including interest, set forth below.

1. Principal Amount. Borrower hereby borrows from Lender and Lender hereby loans to Borrower the principal amount of Twenty-Five Thousand Dollars ($25,000), which principal amount shall incur interest and otherwise be subject to the terms and conditions set forth herein.
2. Payments. The entire principal balance of this Promissory Note (this "Note"), together with all accrued but unpaid interest thereon, shall be due and payable on August 30, 2001 (the "Maturity Date"). The principal balance of this Note shall accrue interest at the rate of twelve percent (12%) per annum.
3. Prepayment. Borrower shall have the right to prepay the principal balance of this Note, in part or in full, together with all accrued but unpaid interest thereon, upon ten (10) days prior written notice to Lender.
4. Collection Costs Borne by Borrower. Borrower agrees to pay all costs and expenses, including without limitation reasonable attorneys' fees, incurred by Lender in enforcing the terms of this Note in collecting this Note, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.
5. Late Charge. If any payment of principal or interest under this Note shall not be made within five (5) days after the due date, Borrower agrees to pay, in addition to the unpaid principal or interest, interest on such defaulted amount from the due date, up to the date of actual payment (after as well as before judgment) at a rate of five percent (5%) per annum above the rate which would have been payable under this Note or the maximum rate of interest permitted to be charged by applicable law, whichever is less.
6. Governing Law. This Note shall be governed by and construed and interpreted in accordance with the law of the State of Washington, without regard to that state's conflict of laws principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non-conveniens. Notwithstanding the foregoing, any party obtaining any order or judgment in any of the above referenced courts may bring an action in a court in another jurisdiction in order to enforce such order or judgment.
7. Successors. This Note shall be binding upon Borrower and the permitted successors and assigns of Borrower. Nothing in this Note, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note.
8. Severability. If any part of this Note is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.
9. Conversion of Note. At the option of Lender, the outstanding principal balance of this Note and all accrued but unpaid interest thereon, at any time prior to payment thereof, may be converted, in whole or in part, into duly authorized, fully paid and non-assessable shares of common stock, par value $.0001 per share, of the Company ("Common Stock") at a conversion price of $1.35 per share (subject to appropriate adjustment in the event of any stock splits, stock dividends or similar events). Lender may exercise such conversion right by providing written notice to Borrower. Such conversion shall be effective immediately upon giving such notice and as of such date Borrower shall be treated for all purposes as the holder of the shares issuable upon conversion. As soon as practicable after such conversion, Borrower, at its expense, shall cause to be issued in the name of and delivered to Lender a certificate or certificates for the number of shares to which Lender shall be entitled upon such conversion. No fractional shares shall be issued upon such conversion. If upon such conversion a fractional share results, the number of shares to be issued upon conversion shall be rounded to the next highest whole number.
10. Representations of Lender. By acceptance of this Note, Lender represents to Borrower that Lender is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that this Note and any securities issuable upon any conversion thereof are being acquired for Lender's own account and for the purpose of investment and not with a view to, or for sale in connection with, the distribution of the same, nor with any present intention of distributing or selling the same.
11. No Shareholder Rights. This Note shall not entitle Lender to any voting rights or any other rights as a shareholder of Borrower until any conversion of this Note.
12. Warrant. As additional consideration for making the loans evidenced by this Note, Borrower shall issue to Lender a Warrant, in the form attached hereto as Exhibit A (the "Warrant"), to purchase two hundred fifty (250) shares of Common Stock for each one thousand dollars ($1,000) of original principal amount of this Note.
13. Registration Rights. As further additional consideration for making the loan(s) evidenced by this Note, Borrower hereby agrees that any shares of Common Stock issued upon any conversion of this Note or upon any exercise of the Warrant shall be entitled to the same registration rights contained in the Investor's Rights Agreement dated as of December 22, 2000 among Borrower and the Investors party thereto (the "Investor's Rights Agreement") and for all purposes shall be considered Registrable Securities (as defined in the Investor's Rights Agreement), except that the provisions of Section 1.3 of the Investor's Rights Agreement shall not apply to such shares.
14. Conditions to Loan. As conditions to making the loan(s) to Borrower evidenced by this Note, (i) on the date hereof, Borrower shall obtain and deliver to Lender a subordination letter (the "Subordination Letter"), in form and substance acceptable to Lender in Lender's sole discretion, of Softline Limited, a South African corporation ("Softline"), to subordinate any and all debt owed to Softline by Borrower to the debt evidenced by this Note, (ii) on the date hereof, Borrower shall execute and deliver to Lender the Warrant and (iii) by June 15, 2001, Borrower shall obtain and deliver to Lender a Subordination Agreement (the "Subordination Agreement"), in form and substance acceptable to Lender in its sole discretion, of Softline to more fully memorialize the full subordination of such debt owed to Softline by Borrower to the debt evidenced by this Note (it being understood that Lender already has provided Borrower the form of Subordination Agreement acceptable to Lender). Borrower hereby agrees to satisfy such conditions and that failure to satisfy any such conditions on or before the date specified above shall constitute a Default (as defined below) under this Note.
15. Agreed Terms for Softline/SSII Transaction. Borrower has had discussions with Softline and Schmulik Stein International Investments Limited ("SSII") regarding a possible transaction involving (i) conversion of the debt owed to Softline by Borrower into shares of Common Stock and (ii) transfer by Softline to SSII of the shares of Common Stock resulting from such conversion and/or the shares of Common Stock already held by Softline. Borrower has informed Lender that Borrower is willing to engage in any such debt-equity conversion only on certain terms and Borrower desires to make certain agreements with Lender regarding the terms of such debt-equity conversion. Borrower hereby agrees not to engage in any such debt-equity conversion or similar transaction unless (x) SSII enters into an agreement with Borrower (for the benefit of Lender as well) containing (a) a "standstill" provision restricting SSII or any of its affiliates from acquiring any additional shares of Common Stock or other stock of Borrower for a period of twelve (12) months after such transfer from Softline and (b) a method of disposition provision restricting SSII or any of its affiliates from selling or otherwise disposing of any shares of Common Stock or other stock of Borrower held by them for a period of twelve (12) months after such transfer (and Borrower shall also use its best efforts to obtain SSII's agreement to a period of eighteen (18) months or longer) except on the American Stock Exchange or such other exchange as the Common Stock or other stock may then be listed, (y) such debt equity conversion occurs at a conversion or similar transaction price of not less than $1.00 per share of Common Stock and (2) the shares acquired by SSII will be "restricted securities" under Rule 144 under the Securities Act.
16. Defaults. Each of the following shall constitute a default under this Note (a "Default"):

1. Failure by Borrower to make any payment due under this Note or under any other agreement with Lender, Koyah Leverage Partners, L.P. or Koyah Partners, L.P. (collectively, the "Affiliated Lenders") within five (5) days of its due date; failure by Borrower to satisfy the conditions set forth in Section 14 on or before the date specified therein; or failure by Borrower to comply with the provisions of any other covenant, obligation or term of this Note or any other agreement with the Affiliated Lenders which shall unremedied for five (5) days after written notice from the Affiliated Lenders;
2. Failure by Borrower to pay when due any other indebtedness or obligations in excess of two hundred thousand dollars ($200,000) which shall continue after the applicable grace period, if any, specified in the agreement relating to such indebtedness or obligation; failure by Borrower to comply with the provisions of any other covenant, obligation or term of any agreement relating to such indebtedness or obligation which shall continue after the applicable grace period, if any, specified in such agreement if the effect of such failure is to accelerate, or permit the acceleration of, the due date of such indebtedness or obligation; or any such indebtedness or obligation shall be declared to be due and payable, or required to be prepaid, prior to the stated maturity date thereof;
3. Borrower makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions to any court for a receiver or trustee for Borrower or any substantial part of its property, commences any proceeding relating to the arrangement, readjustment, reorganization or liquidation under any bankruptcy or similar laws; there is commenced against Borrower any such proceedings which remain undismissed for a period of thirty (30) days; or Borrower by any act indicates its consent or acquiescence in any such proceeding or the appointment of any such trustee or receiver;
4. Occurrence of any extraordinary situation which gives Lender reasonable grounds to believe that Borrower will or may not be able to perform its obligations under this Note or any other agreement with the Affiliated Lenders; or

(e) The provisions of any covenant, agreement or term of the Subordination Letter or Subordination Agreement shall for any reason be invalidated or otherwise cease to be in full force and effect; the debt evidenced by this Note shall for any reason not have the seniority and priority contemplated by the provisions of the Subordination Letter or Subordination Agreement; Softline or Borrower shall fail to comply with the provisions of any covenant, obligation or term of the Subordination Letter or Subordination Agreement; or Softline shall revoke or repudiate or attempt to contest any of its obligations under the Subordination Letter or Subordination Agreement.

17. Acceleration; No Exclusive Remedy. Upon written notice from Lender of a Default, Lender may declare, by written notice to Borrower, that all principal and accrued interest hereunder shall be immediately due and payable to Lender. Notwithstanding anything to the contrary herein, Lender shall be entitled to any and all remedies available to it in the event of a Default hereunder and Lender's pursuance of any particular remedy shall not preclude Lender from seeking any other remedies available to it at law or in equity.
18. Notices. Any notice under this Note shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

"Borrower"

SVI Solutions, Inc.

12707 Highbluff Drive, Suite 355

San Diego, CA 92130

Fax: 858-481-9703

Attention: Kevin O'Neill

"Lender"

Koyah Community Partners, L.P.

c/o ICM Asset Management, Inc.

601 W. Main Avenue, Suite 600

Spokane, WA 99201

Fax: 509-444-4500

Attention: Robert Law

19. Costs and Expenses. Borrower shall pay the costs and expenses of legal counsel to the Affiliated Lenders (i) in connection with this Note, the Subordination Letter, the Subordination Agreement and the Warrant and the transactions contemplated hereby and thereby and (ii) in connection with the registration on Form S-3 contemplated by the Investor's Rights Agreement and Lender may withhold such costs and expenses or estimates thereof out of the proceeds of the loan to be disbursed to Borrower evidenced by this Note.
20. Miscellaneous.

1. No delay or omission on the part of Lender in exercising any right under this Note shall operate as a waiver of such right or of any other right under this Note.
2. Borrower hereby waives presentation for payment, demand, notice of demand and of dishonor and non-payment of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party. The pleading of any statute of limitations as a defense to any demand against the Borrower, any endorsers, guarantors and sureties of this Note is expressly waived by each and all of such parties to the extent permitted by law. Time is of the essence under this Note.
3. Any payment hereunder shall first be applied to any collections costs, then against accrued and unpaid interest hereunder and then against the outstanding principal balance of this Note.
4. This Note, together with the Subordination Letter, the Subordination Agreement and the Warrant, constitutes the entire agreement of the parties with respect to the subject matter hereof and thereof and supersedes all prior discussions, negotiations, understandings or agreements of the parties with respect to such subject matter.

(e) All payments under this Note shall be made without set-off, deduction or counterclaim.

IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its corporate name by its duly authorized officer and dated the day and year first above written.

SVI SOLUTIONS, INC.

By:______________________

Its:______________________

Loan Amount: $187,500 Spokane, Washington
Interest Rate: 12% June 14, 2001

FOR VALUE RECEIVED, the undersigned, SVI Solutions, Inc., a Delaware corporation ("Borrower"), hereby promises to pay to the order of Koyah Leverage Partners, L.P. ("Lender"), at such places and times and under the terms and conditions set forth below, the amounts, including interest, set forth below.

1. Principal Amount. Borrower hereby borrows from Lender and Lender hereby loans to Borrower the principal amount of One Hundred Eighty-Seven Thousand Five Hundred Dollars ($187,500), which principal amount shall incur interest and otherwise be subject to the terms and conditions set forth herein.
2. Payments. The entire principal balance of this Promissory Note (this "Note"), together with all accrued but unpaid interest thereon, shall be due and payable on August 30, 2001 (the "Maturity Date"). The principal balance of this Note shall accrue interest at the rate of twelve percent (12%) per annum.
3. Prepayment. Borrower shall have the right to prepay the principal balance of this Note, in part or in full, together with all accrued but unpaid interest thereon, upon ten (10) days prior written notice to Lender.
4. Collection Costs Borne by Borrower. Borrower agrees to pay all costs and expenses, including without limitation reasonable attorneys' fees, incurred by Lender in enforcing the terms of this Note in collecting this Note, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.
5. Late Charge. If any payment of principal or interest under this Note shall not be made within five (5) days after the due date, Borrower agrees to pay, in addition to the unpaid principal or interest, interest on such defaulted amount from the due date, up to the date of actual payment (after as well as before judgment) at a rate of five percent (5%) per annum above the rate which would have been payable under this Note or the maximum rate of interest permitted to be charged by applicable law, whichever is less.
6. Governing Law. This Note shall be governed by and construed and interpreted in accordance with the law of the State of Washington, without regard to that state's conflict of laws principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non-conveniens. Notwithstanding the foregoing, any party obtaining any order or judgment in any of the above referenced courts may bring an action in a court in another jurisdiction in order to enforce such order or judgment.
7. Successors. This Note shall be binding upon Borrower and the permitted successors and assigns of Borrower. Nothing in this Note, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note.
8. Severability. If any part of this Note is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.
9. Conversion of Note. At the option of Lender, the outstanding principal balance of this Note and all accrued but unpaid interest thereon, at any time prior to payment thereof, may be converted, in whole or in part, into duly authorized, fully paid and non-assessable shares of common stock, par value $.0001 per share, of the Company ("Common Stock") at a conversion price of $1.35 per share (subject to appropriate adjustment in the event of any stock splits, stock dividends or similar events). Lender may exercise such conversion right by providing written notice to Borrower. Such conversion shall be effective immediately upon giving such notice and as of such date Borrower shall be treated for all purposes as the holder of the shares issuable upon conversion. As soon as practicable after such conversion, Borrower, at its expense, shall cause to be issued in the name of and delivered to Lender a certificate or certificates for the number of shares to which Lender shall be entitled upon such conversion. No fractional shares shall be issued upon such conversion. If upon such conversion a fractional share results, the number of shares to be issued upon conversion shall be rounded to the next highest whole number.
10. Representations of Lender. By acceptance of this Note, Lender represents to Borrower that Lender is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that this Note and any securities issuable upon any conversion thereof are being acquired for Lender's own account and for the purpose of investment and not with a view to, or for sale in connection with, the distribution of the same, nor with any present intention of distributing or selling the same.
11. No Shareholder Rights. This Note shall not entitle Lender to any voting rights or any other rights as a shareholder of Borrower until any conversion of this Note.
12. Warrant. As additional consideration for making the loans evidenced by this Note, Borrower shall issue to Lender a Warrant, in the form attached hereto as Exhibit A (the "Warrant"), to purchase two hundred fifty (250) shares of Common Stock for each one thousand dollars ($1,000) of original principal amount of this Note.
13. Registration Rights. As further additional consideration for making the loan(s) evidenced by this Note, Borrower hereby agrees that any shares of Common Stock issued upon any conversion of this Note or upon any exercise of the Warrant shall be entitled to the same registration rights contained in the Investor's Rights Agreement dated as of December 22, 2000 among Borrower and the Investors party thereto (the "Investor's Rights Agreement") and for all purposes shall be considered Registrable Securities (as defined in the Investor's Rights Agreement), except that the provisions of Section 1.3 of the Investor's Rights Agreement shall not apply to such shares.
14. Conditions to Loan. As conditions to making the loan(s) to Borrower evidenced by this Note, (i) on the date hereof, Borrower shall obtain and deliver to Lender a subordination letter (the "Subordination Letter"), in form and substance acceptable to Lender in Lender's sole discretion, of Softline Limited, a South African corporation ("Softline"), to subordinate any and all debt owed to Softline by Borrower to the debt evidenced by this Note, (ii) on the date hereof, Borrower shall execute and deliver to Lender the Warrant and (iii) by June 15, 2001, Borrower shall obtain and deliver to Lender a Subordination Agreement (the "Subordination Agreement"), in form and substance acceptable to Lender in its sole discretion, of Softline to more fully memorialize the full subordination of such debt owed to Softline by Borrower to the debt evidenced by this Note (it being understood that Lender already has provided Borrower the form of Subordination Agreement acceptable to Lender). Borrower hereby agrees to satisfy such conditions and that failure to satisfy any such conditions on or before the date specified above shall constitute a Default (as defined below) under this Note.
15. Agreed Terms for Softline/SSII Transaction. Borrower has had discussions with Softline and Schmulik Stein International Investments Limited ("SSII") regarding a possible transaction involving (i) conversion of the debt owed to Softline by Borrower into shares of Common Stock and (ii) transfer by Softline to SSII of the shares of Common Stock resulting from such conversion and/or the shares of Common Stock already held by Softline. Borrower has informed Lender that Borrower is willing to engage in any such debt-equity conversion only on certain terms and Borrower desires to make certain agreements with Lender regarding the terms of such debt-equity conversion. Borrower hereby agrees not to engage in any such debt-equity conversion or similar transaction unless (x) SSII enters into an agreement with Borrower (for the benefit of Lender as well) containing (a) a "standstill" provision restricting SSII or any of its affiliates from acquiring any additional shares of Common Stock or other stock of Borrower for a period of twelve (12) months after such transfer from Softline and (b) a method of disposition provision restricting SSII or any of its affiliates from selling or otherwise disposing of any shares of Common Stock or other stock of Borrower held by them for a period of twelve (12) months after such transfer (and Borrower shall also use its best efforts to obtain SSII's agreement to a period of eighteen (18) months or longer) except on the American Stock Exchange or such other exchange as the Common Stock or other stock may then be listed, (y) such debt equity conversion occurs at a conversion or similar transaction price of not less than $1.00 per share of Common Stock and (2) the shares acquired by SSII will be "restricted securities" under Rule 144 under the Securities Act.
16. Defaults. Each of the following shall constitute a default under this Note (a "Default"):

1. Failure by Borrower to make any payment due under this Note or under any other agreement with Lender, Koyah Partners, L.P., or Koyah Community Partners, L.P. (collectively, the "Affiliated Lenders") within five (5) days of its due date; failure by Borrower to satisfy the conditions set forth in Section 14 on or before the date specified therein; or failure by Borrower to comply with the provisions of any other covenant, obligation or term of this Note or any other agreement with the Affiliated Lenders which shall unremedied for five (5) days after written notice from the Affiliated Lenders;
2. Failure by Borrower to pay when due any other indebtedness or obligations in excess of two hundred thousand dollars ($200,000) which shall continue after the applicable grace period, if any, specified in the agreement relating to such indebtedness or obligation; failure by Borrower to comply with the provisions of any other covenant, obligation or term of any agreement relating to such indebtedness or obligation which shall continue after the applicable grace period, if any, specified in such agreement if the effect of such failure is to accelerate, or permit the acceleration of, the due date of such indebtedness or obligation; or any such indebtedness or obligation shall be declared to be due and payable, or required to be prepaid, prior to the stated maturity date thereof;
3. Borrower makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions to any court for a receiver or trustee for Borrower or any substantial part of its property, commences any proceeding relating to the arrangement, readjustment, reorganization or liquidation under any bankruptcy or similar laws; there is commenced against Borrower any such proceedings which remain undismissed for a period of thirty (30) days; or Borrower by any act indicates its consent or acquiescence in any such proceeding or the appointment of any such trustee or receiver;
4. Occurrence of any extraordinary situation which gives Lender reasonable grounds to believe that Borrower will or may not be able to perform its obligations under this Note or any other agreement with the Affiliated Lenders; or

(e) The provisions of any covenant, agreement or term of the Subordination Letter or Subordination Agreement shall for any reason be invalidated or otherwise cease to be in full force and effect; the debt evidenced by this Note shall for any reason not have the seniority and priority contemplated by the provisions of the Subordination Letter or Subordination Agreement; Softline or Borrower shall fail to comply with the provisions of any covenant, obligation or term of the Subordination Letter or Subordination Agreement; or Softline shall revoke or repudiate or attempt to contest any of its obligations under the Subordination Letter or Subordination Agreement.

17. Acceleration; No Exclusive Remedy. Upon written notice from Lender of a Default, Lender may declare, by written notice to Borrower, that all principal and accrued interest hereunder shall be immediately due and payable to Lender. Notwithstanding anything to the contrary herein, Lender shall be entitled to any and all remedies available to it in the event of a Default hereunder and Lender's pursuance of any particular remedy shall not preclude Lender from seeking any other remedies available to it at law or in equity.
18. Notices. Any notice under this Note shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

"Borrower"

SVI Solutions, Inc.

12707 Highbluff Drive, Suite 355

San Diego, CA 92130

Fax: 858-481-9703

Attention: Kevin O'Neill

"Lender"

Koyah Leverage Partners, L.P.

c/o ICM Asset Management, Inc.

601 W. Main Avenue, Suite 600

Spokane, WA 99201

Fax: 509-444-4500

Attention: Robert Law

19. Costs and Expenses. Borrower shall pay the costs and expenses of legal counsel to the Affiliated Lenders (i) in connection with this Note, the Subordination Letter, the Subordination Agreement and the Warrant and the transactions contemplated hereby and thereby and (ii) in connection with the registration on Form S-3 contemplated by the Investor's Rights Agreement and Lender may withhold such costs and expenses or estimates thereof out of the proceeds of the loan to be disbursed to Borrower evidenced by this Note.
20. Miscellaneous.

1. No delay or omission on the part of Lender in exercising any right under this Note shall operate as a waiver of such right or of any other right under this Note.
2. Borrower hereby waives presentation for payment, demand, notice of demand and of dishonor and non-payment of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party. The pleading of any statute of limitations as a defense to any demand against the Borrower, any endorsers, guarantors and sureties of this Note is expressly waived by each and all of such parties to the extent permitted by law. Time is of the essence under this Note.
3. Any payment hereunder shall first be applied to any collections costs, then against accrued and unpaid interest hereunder and then against the outstanding principal balance of this Note.
4. This Note, together with the Subordination Letter, the Subordination Agreement and the Warrant, constitutes the entire agreement of the parties with respect to the subject matter hereof and thereof and supersedes all prior discussions, negotiations, understandings or agreements of the parties with respect to such subject matter.

(e) All payments under this Note shall be made without set-off, deduction or counterclaim.

IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its corporate name by its duly authorized officer and dated the day and year first above written.

SVI SOLUTIONS, INC.

By:______________________

Its:______________________

Loan Amount: $37,500 Spokane, Washington
Interest Rate: 12% June 14, 2001

FOR VALUE RECEIVED, the undersigned, SVI Solutions, Inc., a Delaware corporation ("Borrower"), hereby promises to pay to the order of Koyah Partners, L.P. ("Lender"), at such places and times and under the terms and conditions set forth below, the amounts, including interest, set forth below.

1. Principal Amount. Borrower hereby borrows from Lender and Lender hereby loans to Borrower the principal amount of Thirty-Seven Thousand Five Hundred Dollars ($37,500), which principal amount shall incur interest and otherwise be subject to the terms and conditions set forth herein.
2. Payments. The entire principal balance of this Promissory Note (this "Note"), together with all accrued but unpaid interest thereon, shall be due and payable on August 30, 2001 (the "Maturity Date"). The principal balance of this Note shall accrue interest at the rate of twelve percent (12%) per annum.
3. Prepayment. Borrower shall have the right to prepay the principal balance of this Note, in part or in full, together with all accrued but unpaid interest thereon, upon ten (10) days prior written notice to Lender.
4. Collection Costs Borne by Borrower. Borrower agrees to pay all costs and expenses, including without limitation reasonable attorneys' fees, incurred by Lender in enforcing the terms of this Note in collecting this Note, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.
5. Late Charge. If any payment of principal or interest under this Note shall not be made within five (5) days after the due date, Borrower agrees to pay, in addition to the unpaid principal or interest, interest on such defaulted amount from the due date, up to the date of actual payment (after as well as before judgment) at a rate of five percent (5%) per annum above the rate which would have been payable under this Note or the maximum rate of interest permitted to be charged by applicable law, whichever is less.
6. Governing Law. This Note shall be governed by and construed and interpreted in accordance with the law of the State of Washington, without regard to that state's conflict of laws principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non-conveniens. Notwithstanding the foregoing, any party obtaining any order or judgment in any of the above referenced courts may bring an action in a court in another jurisdiction in order to enforce such order or judgment.
7. Successors. This Note shall be binding upon Borrower and the permitted successors and assigns of Borrower. Nothing in this Note, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note.
8. Severability. If any part of this Note is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.
9. Conversion of Note. At the option of Lender, the outstanding principal balance of this Note and all accrued but unpaid interest thereon, at any time prior to payment thereof, may be converted, in whole or in part, into duly authorized, fully paid and non-assessable shares of common stock, par value $.0001 per share, of the Company ("Common Stock") at a conversion price of $1.35 per share (subject to appropriate adjustment in the event of any stock splits, stock dividends or similar events). Lender may exercise such conversion right by providing written notice to Borrower. Such conversion shall be effective immediately upon giving such notice and as of such date Borrower shall be treated for all purposes as the holder of the shares issuable upon conversion. As soon as practicable after such conversion, Borrower, at its expense, shall cause to be issued in the name of and delivered to Lender a certificate or certificates for the number of shares to which Lender shall be entitled upon such conversion. No fractional shares shall be issued upon such conversion. If upon such conversion a fractional share results, the number of shares to be issued upon conversion shall be rounded to the next highest whole number.
10. Representations of Lender. By acceptance of this Note, Lender represents to Borrower that Lender is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that this Note and any securities issuable upon any conversion thereof are being acquired for Lender's own account and for the purpose of investment and not with a view to, or for sale in connection with, the distribution of the same, nor with any present intention of distributing or selling the same.
11. No Shareholder Rights. This Note shall not entitle Lender to any voting rights or any other rights as a shareholder of Borrower until any conversion of this Note.
12. Warrant. As additional consideration for making the loans evidenced by this Note, Borrower shall issue to Lender a Warrant, in the form attached hereto as Exhibit A (the "Warrant"), to purchase two hundred fifty (250) shares of Common Stock for each one thousand dollars ($1,000) of original principal amount of this Note.
13. Registration Rights. As further additional consideration for making the loan(s) evidenced by this Note, Borrower hereby agrees that any shares of Common Stock issued upon any conversion of this Note or upon any exercise of the Warrant shall be entitled to the same registration rights contained in the Investor's Rights Agreement dated as of December 22, 2000 among Borrower and the Investors party thereto (the "Investor's Rights Agreement") and for all purposes shall be considered Registrable Securities (as defined in the Investor's Rights Agreement), except that the provisions of Section 1.3 of the Investor's Rights Agreement shall not apply to such shares.
14. Conditions to Loan. As conditions to making the loan(s) to Borrower evidenced by this Note, (i) on the date hereof, Borrower shall obtain and deliver to Lender a subordination letter (the "Subordination Letter"), in form and substance acceptable to Lender in Lender's sole discretion, of Softline Limited, a South African corporation ("Softline"), to subordinate any and all debt owed to Softline by Borrower to the debt evidenced by this Note, (ii) on the date hereof, Borrower shall execute and deliver to Lender the Warrant and (iii) by June 15, 2001, Borrower shall obtain and deliver to Lender a Subordination Agreement (the "Subordination Agreement"), in form and substance acceptable to Lender in its sole discretion, of Softline to more fully memorialize the full subordination of such debt owed to Softline by Borrower to the debt evidenced by this Note (it being understood that Lender already has provided Borrower the form of Subordination Agreement acceptable to Lender). Borrower hereby agrees to satisfy such conditions and that failure to satisfy any such conditions on or before the date specified above shall constitute a Default (as defined below) under this Note.
15. Agreed Terms for Softline/SSII Transaction. Borrower has had discussions with Softline and Schmulik Stein International Investments Limited ("SSII") regarding a possible transaction involving (i) conversion of the debt owed to Softline by Borrower into shares of Common Stock and (ii) transfer by Softline to SSII of the shares of Common Stock resulting from such conversion and/or the shares of Common Stock already held by Softline. Borrower has informed Lender that Borrower is willing to engage in any such debt-equity conversion only on certain terms and Borrower desires to make certain agreements with Lender regarding the terms of such debt-equity conversion. Borrower hereby agrees not to engage in any such debt-equity conversion or similar transaction unless (x) SSII enters into an agreement with Borrower (for the benefit of Lender as well) containing (a) a "standstill" provision restricting SSII or any of its affiliates from acquiring any additional shares of Common Stock or other stock of Borrower for a period of twelve (12) months after such transfer from Softline and (b) a method of disposition provision restricting SSII or any of its affiliates from selling or otherwise disposing of any shares of Common Stock or other stock of Borrower held by them for a period of twelve (12) months after such transfer (and Borrower shall also use its best efforts to obtain SSII's agreement to a period of eighteen (18) months or longer) except on the American Stock Exchange or such other exchange as the Common Stock or other stock may then be listed, (y) such debt equity conversion occurs at a conversion or similar transaction price of not less than $1.00 per share of Common Stock and (2) the shares acquired by SSII will be "restricted securities" under Rule 144 under the Securities Act.
16. Defaults. Each of the following shall constitute a default under this Note (a "Default"):

1. Failure by Borrower to make any payment due under this Note or under any other agreement with Lender, Koyah Leverage Partners, L.P. or Koyah Community Partners, L.P. (collectively, the "Affiliated Lenders") within five (5) days of its due date; failure by Borrower to satisfy the conditions set forth in Section 14 on or before the date specified therein; or failure by Borrower to comply with the provisions of any other covenant, obligation or term of this Note or any other agreement with the Affiliated Lenders which shall unremedied for five (5) days after written notice from the Affiliated Lenders;
2. Failure by Borrower to pay when due any other indebtedness or obligations in excess of two hundred thousand dollars ($200,000) which shall continue after the applicable grace period, if any, specified in the agreement relating to such indebtedness or obligation; failure by Borrower to comply with the provisions of any other covenant, obligation or term of any agreement relating to such indebtedness or obligation which shall continue after the applicable grace period, if any, specified in such agreement if the effect of such failure is to accelerate, or permit the acceleration of, the due date of such indebtedness or obligation; or any such indebtedness or obligation shall be declared to be due and payable, or required to be prepaid, prior to the stated maturity date thereof;
3. Borrower makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions to any court for a receiver or trustee for Borrower or any substantial part of its property, commences any proceeding relating to the arrangement, readjustment, reorganization or liquidation under any bankruptcy or similar laws; there is commenced against Borrower any such proceedings which remain undismissed for a period of thirty (30) days; or Borrower by any act indicates its consent or acquiescence in any such proceeding or the appointment of any such trustee or receiver;
4. Occurrence of any extraordinary situation which gives Lender reasonable grounds to believe that Borrower will or may not be able to perform its obligations under this Note or any other agreement with the Affiliated Lenders; or

(e) The provisions of any covenant, agreement or term of the Subordination Letter or Subordination Agreement shall for any reason be invalidated or otherwise cease to be in full force and effect; the debt evidenced by this Note shall for any reason not have the seniority and priority contemplated by the provisions of the Subordination Letter or Subordination Agreement; Softline or Borrower shall fail to comply with the provisions of any covenant, obligation or term of the Subordination Letter or Subordination Agreement; or Softline shall revoke or repudiate or attempt to contest any of its obligations under the Subordination Letter or Subordination Agreement.

17. Acceleration; No Exclusive Remedy. Upon written notice from Lender of a Default, Lender may declare, by written notice to Borrower, that all principal and accrued interest hereunder shall be immediately due and payable to Lender. Notwithstanding anything to the contrary herein, Lender shall be entitled to any and all remedies available to it in the event of a Default hereunder and Lender's pursuance of any particular remedy shall not preclude Lender from seeking any other remedies available to it at law or in equity.
18. Notices. Any notice under this Note shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

"Borrower"

SVI Solutions, Inc.

12707 Highbluff Drive, Suite 355

San Diego, CA 92130

Fax: 858-481-9703

Attention: Kevin O'Neill

"Lender"

Koyah Partners, L.P.

c/o ICM Asset Management, Inc.

601 W. Main Avenue, Suite 600

Spokane, WA 99201

Fax: 509-444-4500

Attention: Robert Law

19. Costs and Expenses. Borrower shall pay the costs and expenses of legal counsel to the Affiliated Lenders (i) in connection with this Note, the Subordination Letter, the Subordination Agreement and the Warrant and the transactions contemplated hereby and thereby and (ii) in connection with the registration on Form S-3 contemplated by the Investor's Rights Agreement and Lender may withhold such costs and expenses or estimates thereof out of the proceeds of the loan to be disbursed to Borrower evidenced by this Note.
20. Miscellaneous.

1. No delay or omission on the part of Lender in exercising any right under this Note shall operate as a waiver of such right or of any other right under this Note.
2. Borrower hereby waives presentation for payment, demand, notice of demand and of dishonor and non-payment of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party. The pleading of any statute of limitations as a defense to any demand against the Borrower, any endorsers, guarantors and sureties of this Note is expressly waived by each and all of such parties to the extent permitted by law. Time is of the essence under this Note.
3. Any payment hereunder shall first be applied to any collections costs, then against accrued and unpaid interest hereunder and then against the outstanding principal balance of this Note.
4. This Note, together with the Subordination Letter, the Subordination Agreement and the Warrant, constitutes the entire agreement of the parties with respect to the subject matter hereof and thereof and supersedes all prior discussions, negotiations, understandings or agreements of the parties with respect to such subject matter.

(e) All payments under this Note shall be made without set-off, deduction or counterclaim.

IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its corporate name by its duly authorized officer and dated the day and year first above written.

SVI SOLUTIONS, INC.

By:______________________

Its:______________________

June 14, 2001

No. W-__

This certifies that ____________________ (the "Holder") is entitled, subject to the terms and conditions of this Warrant, to purchase from SVI Solutions, Inc., a Delaware corporation (the "Company"), all or any part of an aggregate of _________ shares of the Company's authorized and unissued Common Stock, par value $.0001 (the "Warrant Stock"), at the Warrant Price (as defined herein), upon surrender of this Warrant at the principal offices of the Company, together with a duly executed subscription form in the form attached hereto as Exhibit 1 and simultaneous payment of the Warrant Price for each share of Warrant Stock so purchased in lawful money of the United States, unless exercised in accordance with the provisions of Section 2.5 of this Warrant. The Holder may exercise the Warrant at any time after the date of this Warrant and prior to the third (3^rd) anniversary of the date hereof (the "Expiration Date").

This Warrant is issued pursuant to that certain Convertible Promissory Note dated as of June 14, 2001 (the "Promissory Note"), executed by the Company in favor of the Holder.

1. Definitions. The following definitions shall apply for purposes of this Warrant:

0. "Acquisition" means any consolidation, merger or reorganization of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent of the Company's voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent of the Company's voting power is transferred, excluding any consolidation, merger or reorganization effected exclusively to change the domicile of the Company.
1. "Asset Transfer" means a sale, lease or other disposition of all or substantially all of the assets of the Company.
2. "Company" means the "Company" as defined above and includes any corporation or other entity that succeeds to or assumes the obligations of the Company under this Warrant.
3. "Fair Market Value" of a share of Warrant Stock means (i) if the Common Stock is traded on a securities exchange, the average of the closing price each day over the thirty consecutive day period ending three days before the day the Fair Market Value of the securities is being determined, (ii) if the Common Stock is actively traded over-the counter, the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) each day over the thirty consecutive day period ending three days before the day the Fair Market Value of the securities is being determined, or (iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, then the Fair Market Value determined by the Company's Board of Directors in good faith.
4. "Holder" means the "Holder" as defined above and includes any transferee who shall at the time be the registered holder of this Warrant.
5. "Warrant" means this Warrant and any warrant(s) delivered in substitution or exchange therefor, as provided herein.
6. "Warrant Price" means $1.50 per share of Warrant Stock. The Warrant Price is subject to adjustment as provided herein.
7. "Warrant Stock" means the Common Stock of the Company. The number and character of shares of Warrant Stock are subject to adjustment as provided herein and the term "Warrant Stock" shall include stock and other securities and property at any time receivable or issuable upon exercise of this Warrant in accordance with its terms.

2. Exercise.

0. Method of Exercise. Subject to the terms and conditions of this Warrant, the Holder may exercise the purchase rights represented by this Warrant in whole or in part, at any time or from time to time, on or after the date hereof and before the Expiration Date, by surrendering this Warrant at the principal offices of the Company, with the subscription form attached hereto duly executed by the Holder, and payment of an amount equal to the product obtained by multiplying (i) the number of shares of Warrant Stock so purchased by (ii) the Warrant Price, as specified in Section 2.2 below.
1. Form of Payment. Except as provided in Section 2.5, payment may be made by (i) a check payable to the Company's order, (ii) wire transfer of funds to the Company, (iii) cancellation of indebtedness of the Company to the Holder, or (iv) any combination of the foregoing.
2. Partial Exercise. Upon a partial exercise of this Warrant, this Warrant shall be surrendered by the Holder and replaced with a new Warrant or Warrants of like tenor for the balance of the shares of Warrant Stock purchasable under the Warrant surrendered upon such purchase. The Warrant or Warrants will be delivered to the Holder thereof within a reasonable time.
3. No Fractional Shares. No fractional shares may be issued upon any exercise of this Warrant, and any fractions shall be rounded down to the nearest whole number of shares. If upon any exercise of this Warrant a fraction of a share results, the Company will pay an amount equal to the such fraction multiplied by the Fair Market Value of a share of Warrant Stock.
4. Net Exercise Election. The Holder may elect to convert all or a portion of this Warrant, without the payment by the Holder of any additional consideration, by the surrender of this Warrant or such portion to the Company, with the net exercise election selected in the subscription form attached hereto duly executed by the Holder, into up to the number of shares of Warrant Stock that is obtained under the following formula:

X = Y (A-B)

A

where X = the number of shares of Warrant Stock to be issued to the Holder pursuant to this Section 2.5.

Y = the number of shares of Warrant Stock purchasable under this Warrant, or if only a portion of the Warrant is being exercised, the number of shares of Warrant Stock represented by the portion of the Warrant being exercised.

A = the Fair Market Value of one share of Warrant Stock as at the time the net exercise election is made pursuant to this Section 2.5.

B = the Warrant Price.

3. Issuance of Stock. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Warrant Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As soon as practicable, but in any event no later than three days after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of whole shares of Warrant Stock issuable upon such exercise. The Company covenants and agrees that all shares of Warrant Stock that are issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from all preemptive rights of any stockholder, free of all taxes, liens and charges with respect to the issue thereof and free and clear of any restrictions on transfer (other than under the Act and state securities laws).
4. Adjustment Provisions. The number and character of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities or property at the time receivable or issuable upon exercise of this Warrant) and the Warrant Price for the Common Stock are subject to adjustment upon the occurrence of the following events between the date this Warrant is issued and the date it is exercised:

0. Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The Warrant Price of this Warrant and the number of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall each be appropriately and proportionally adjusted to reflect any stock dividend, stock split, reverse stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of Warrant Stock (or such other stock or securities).
1. Adjustment for Other Dividends and Distributions. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution payable with respect to the Warrant Stock that is payable in (a) securities of the Company (other than issuances with respect to which adjustment is made under Section 4.1), or (b) assets (other than cash dividends paid or payable solely out of retained earnings), then, and in each such case, the Holder, upon exercise of this Warrant at any time after the consummation, effective date or record date of such event, shall receive, in addition to the shares of Warrant Stock issuable upon such exercise prior to such date, the securities or such other assets of the Company to which the Holder would have been entitled upon such date if the Holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).
2. Adjustment for Reorganization, Consolidation, Merger. In case of any reorganization of the Company (or of any other corporation or entity, the stock or other securities of which are at the time receivable on the exercise of this Warrant), after the date of this Warrant, or in case, after such date, the Company (or any such corporation or entity) shall consolidate with or merge into another corporation or entity or convey all or substantially all of its assets to another corporation or entity, then, and in each such case, the Holder, upon the exercise of this Warrant (as provided in Section 2), at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which the Holder would have been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if the Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Warrant, and the successor or purchasing corporation or entity in such reorganization, consolidation, merger or conveyance (if other than the Company) shall duly execute and deliver to the Holder a supplement hereto acknowledging such corporation's or entity's obligations under this Warrant; and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after the consummation of such reorganization, consolidation, merger or conveyance.
3. Notice of Certain Events and Adjustments. The Company shall give thirty days prior written notice of the record date fixed for any Acquisition, Asset Transfer or event referred to in Section 4.2 or 4.3. The Company shall promptly give written notice of each adjustment or readjustment of the Warrant Price or the number of shares of Warrant Stock or other securities issuable upon exercise of this Warrant. The notice shall describe the adjustment or readjustment and show in reasonable detail the facts on which the adjustment or readjustment is based.
4. No Change Necessary. The form of this Warrant need not be changed because of any adjustment in the Warrant Price or in the number of shares of Warrant Stock issuable upon its exercise.

5. No Rights or Liabilities as Stockholder. This Warrant does not by itself entitle the Holder to any voting rights or other rights as a stockholder of the Company. In the absence of affirmative action by the Holder to purchase Warrant Stock by exercise of this Warrant, no provisions of this Warrant, and no enumeration herein of the rights or privileges of the Holder, shall cause the Holder to be a stockholder of the Company for any purpose.
6. Attorneys' Fees. In the event any party is required to engage the services of any attorneys for the purpose of enforcing this Warrant, or any provision thereof, the prevailing party shall be entitled to recover its reasonable expenses and costs in enforcing this Warrant, including attorneys' fees.
7. Transfer. This Warrant may be transferred or assigned by the Holder hereof in whole or in part, if, on the Company's reasonable request, the Holder provides an opinion of counsel reasonably satisfactory to the Company that such transfer does not require registration under the Act and the applicable state securities law, except that this Warrant may be transferred by a Holder which is a partnership or limited liability company to a partner, former partner, member, former member or other affiliate of such partnership or limited liability company, as the case may be, if (a) the transferee agrees in writing to be subject to the terms of this Warrant; and (b) the Holder delivers notice of such transfer to the Company. The rights and obligations of the Company and the Holder under this Warrant shall be binding upon and benefit their respective permitted successors, assigns, heirs, administrators and transferees.
8. Loss or Mutilation. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership and the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to it, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver in lieu thereof a new Warrant of like tenor.
9. Reservation of Warrant Stock. If at any time the number of authorized but unissued shares of the Warrant Stock shall not be sufficient to effect the exercise of this Warrant, the Company will take all such corporate action as may be necessary to increase its authorized but unissued shares of Warrant Stock to such number of shares of Warrant Stock as shall be sufficient for such purpose.
10. Governing Law. This Warrant shall be governed by and construed and interpreted in accordance with the laws of the State of Washington, without giving effect to its conflicts of law principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Spokane, Washington, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non conveniens.
11. Headings. The headings and captions used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant. All references in this Warrant to sections and exhibits shall, unless otherwise provided, refer to sections hereof and exhibits attached hereto, all of which exhibits are incorporated herein by this reference.
12. Notices. Any request, consent, notice or other communication required or permitted under this Warrant shall be in writing and shall be deemed duly given and received when delivered personally or transmitted by facsimile, one business day after being deposited for next-day delivery with a nationally recognized overnight delivery service, or three days after being deposited as first class mail with the United States Postal Service, all charges or postage prepaid, and properly addressed to the party to receive the same at the address indicated for such party on the signature pages of the Purchase Agreement. Any party may, at any time, by providing ten days' advance notice to the other party hereto, designate any other address in substitution of the address established pursuant to the foregoing.
13. Amendment; Waiver. Any term of this Warrant may be amended, and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
14. Severability. If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Warrant and the balance of the Warrant shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.
15. Terms Binding. By acceptance of this Warrant, the Holder accepts and agrees to be bound by all the terms and conditions of this Warrant.
16. Valid Issuance; Taxes. All shares of Warrant Stock issued upon the exercise of this Warrant shall be validly issued, fully paid and non-assessable, and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof. The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Warrant Stock in any name other than that of the Holder of this Warrant.
17. Registration Rights. All shares of Warrant Stock issuable upon exercise of this Warrant shall be deemed to be "Registrable Securities" or such other definition of securities entitled to registration rights pursuant to the Investors' Rights Agreement dated as of December 22, 2000, by and among the Company, the Holder and certain other Investors, and are entitled, subject to the terms and conditions of that agreement, to all registration rights granted to holders of Registrable Securities thereunder.
18. No Impairment. The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Warrant against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock issuable upon the exercise of this Warrant above the amount payable therefor upon such exercise, and (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Warrant Stock upon exercise of this Warrant.

[Signature appears on the following page.]

IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the date and year set forth below.

(To be signed only upon exercise of Warrant)

To: SVI Solutions Inc.