ASSET
      PURCHASE AGREEMENT

     

    Dated
      as of January 9, 2008

     

    Between

     

    KYOCERA
      MITA CORPORATION

     

    As
      Buyer

     

    and
      

     

    PEERLESS
      SYSTEMS CORPORATION 

     

    As
      Seller

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TABLE
      OF CONTENTS

     

    
      	 	 	 	
              PAGE

            
	
              ARTICLE
                1

            	 	
              DEFINITIONS

            	
              1

            
	
              1.1

            	 	
              Specific
                Definitions

            	
              1

            
	
              1.2

            	 	
              Other
                Terms and Dollar Amounts

            	
              9

            
	 	 	 	 
	
              ARTICLE
                2

            	 	
              PURCHASE,
                SALE AND TRANSFER OF SPECIFIED ASSETS

            	
              10

            
	
              2.1

            	 	
              Purchased
                Assets

            	
              10

            
	
              2.2

            	 	
              Excluded
                Assets

            	
              10

            
	
              2.3

            	 	
              Purchase
                Price

            	
              11

            
	
              2.4

            	 	
              Payment
                of Purchase Price

            	
              11

            
	
              2.5

            	 	
              Assumed
                Liabilities

            	
              12

            
	
              2.6

            	 	
              Retained
                Liabilities

            	
              12

            
	
              2.7

            	 	
              Allocation
                of Purchase Price

            	
              12

            
	 	 	 	 
	
              ARTICLE
                3

            	 	
              REPRESENTATIONS
                AND WARRANTIES OF SELLER

            	
              13

            
	
              3.1

            	 	
              Organization;
                Directors and Officers

            	
              13

            
	
              3.2

            	 	
              Authority

            	
              13

            
	
              3.3

            	 	
              Financial
                Information.

            	
              14

            
	
              3.4

            	 	
              Absence
                of Liabilities, Changes and Events

            	
              14

            
	
              3.5

            	 	
              Litigation
                and Claims

            	
              14

            
	
              3.6

            	 	
              Compliance
                with Law

            	
              15

            
	
              3.7

            	 	
              Consents

            	
              15

            
	
              3.8

            	 	
              Title
                to and Condition of Specified Assets

            	
              15

            
	
              3.9

            	 	
              Intellectual
                Property.

            	
              16

            
	
              3.10

            	 	
              Seller’s
                Products.

            	
              19

            
	
              3.11

            	 	
              WARN
                Act and Other Employee Matters

            	
              20

            
	
              3.12

            	 	
              Contracts
                and Commitments

            	
              20

            
	
              3.13

            	 	
              Employment
                and Labor Matters

            	
              21

            
	
              3.14

            	 	
              Employee
                Benefit Matters.

            	
              21

            
	
              3.15

            	 	
              Insurance

            	
              22

            
	
              3.16

            	 	
              No
                Finders

            	
              23

            
	
              3.17

            	 	
              Fairness
                Opinion

            	
              23

            
	
              3.18

            	 	
              Disclosure

            	
              23

            
	 	 	 	 
	
              ARTICLE
                4

            	 	
              REPRESENTATIONS
                AND WARRANTIES OF BUYER

            	
              23

            
	
              4.1

            	 	
              Organization
                of Buyer and KTD

            	
              23

            
	
              4.2

            	 	
              Authority

            	
              23

            
	
              4.3

            	 	
              Litigation
                and Claims

            	
              24

            
	
              4.4

            	 	
              No
                Finders

            	
              24

            
	
              4.5

            	 	
              Electronic
                Delivery

            	
              24

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              ARTICLE
                5

            	 	
              CERTAIN
                COVENANTS AND AGREEMENTS

            	
              25

            
	
              5.1

            	 	
              Approvals
                and Consents/Stockholder Approval.

            	
              25

            
	
              5.2

            	 	
              Cooperation
                by Buyer.

            	
              26

            
	
              5.3

            	 	
              Accuracy
                of Representations and Warranties

            	
              27

            
	
              5.4

            	 	
              Pre-Closing
                Access to Information, Records and Employees

            	
              27

            
	
              5.5

            	 	
              Further
                Assurances

            	
              28

            
	
              5.6

            	 	
              No
                Solicitation of Other Offers.

            	
              28

            
	
              5.7

            	 	
              Maintenance
                of Specified Assets

            	
              30

            
	
              5.8

            	 	
              Enforcement
                of Agreement(s).

            	
              30

            
	
              5.9

            	 	
              Bulk
                Sales

            	
              30

            
	
              5.10

            	 	
              Termination
                of Existing Agreements

            	
              31

            
	
              5.11

            	 	
              Employees
                and Employee Benefit Matters.

            	
              31

            
	
              5.12

            	 	
              Employee
                Files

            	
              32

            
	
              5.13

            	 	
              Past
                Service Credit

            	
              32

            
	
              5.14

            	 	
              Affirmative
                Covenants of Seller.

            	
              33

            
	
              5.15

            	 	
              Negative
                Covenants of Seller

            	
              33

            
	
              5.16

            	 	
              Covenant
                Not to Solicit.

            	
              34

            
	
              5.17

            	 	
              Engineering
                Fees

            	
              34

            
	
              5.18

            	 	
              Supplementation
                and Amendment of Schedules

            	
              35

            
	 	 	 	 
	
              ARTICLE
                6

            	 	
              CONDITIONS
                TO BUYER’S OBLIGATIONS

            	
              35

            
	
              6.1

            	 	
              Representations,
                Warranties and Covenants

            	
              35

            
	
              6.2

            	 	
              Approvals
                and Consents

            	
              35

            
	
              6.3

            	 	
              No
                Injunction, etc

            	
              35

            
	
              6.4

            	 	
              Transfer
                Documents

            	
              36

            
	
              6.5

            	 	
              Other
                Transaction Documents

            	
              36

            
	
              6.6

            	 	
              Secretary’s
                Certificate

            	
              36

            
	
              6.7

            	 	
              Stockholder
                Approval

            	
              36

            
	
              6.8

            	 	
              Employees

            	
              36

            
	
              6.9

            	 	
              No
                Material Adverse Effect

            	
              36

            
	
              6.10

            	 	
              Opinion

            	
              36

            
	 	 	 	 
	
              ARTICLE
                7

            	 	
              CONDITIONS
                TO SELLER’S OBLIGATIONS

            	
              36

            
	
              7.1

            	 	
              Representations,
                Warranties and Covenants

            	
              37

            
	
              7.2

            	 	
              Approvals;
                Consents

            	
              37

            
	
              7.3

            	 	
              No
                Injunction, etc

            	
              37

            
	
              7.4

            	 	
              Other
                Transaction Documents

            	
              37

            
	
              7.5

            	 	
              Secretary’s
                Certificate

            	
              37

            
	
              7.6

            	 	
              Stockholder
                Approval

            	
              37

            
	
              7.7

            	 	
              Opinion

            	
              37

            
	 	 	 	 
	
              ARTICLE
                8

            	 	
              CLOSING

            	
              37

            
	
              8.1

            	 	
              Closing
                Date

            	
              37

            


    

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

    
      	
              8.2

            	 	
              Software
                Deliveries

            	
              38

            
	
              8.3

            	 	
              Proceedings

            	
              38

            
	 	 	 	 
	
              ARTICLE
                9

            	 	
              INDEMNIFICATION

            	
              38

            
	
              9.1

            	 	
              Indemnification
                of Buyer

            	
              38

            
	
              9.2

            	 	
              Indemnification
                of Seller

            	
              39

            
	
              9.3

            	 	
              Third-Party
                Claims and Other Claims.

            	
              40

            
	
              9.4

            	 	
              Indemnification
                Limitations.

            	
              41

            
	
              9.5

            	 	
              Cooperation
                as to Indemnified Liability

            	
              43

            
	
              9.6

            	 	
              Nature
                of Indemnification

            	
              43

            
	
              9.7

            	 	
              Calculation
                of Damages

            	
              43

            
	
              9.8

            	 	
              Tax
                Treatment

            	
              43

            
	 	 	 	 
	
              ARTICLE
                10

            	 	
              TERMINATION

            	
              43

            
	
              10.1

            	 	
              Termination
                Prior to Closing

            	
              43

            
	
              10.2

            	 	
              Effect
                of Termination

            	
              45

            
	 	 	 	 
	
              ARTICLE
                11

            	 	
              MISCELLANEOUS

            	
              45

            
	
              11.1

            	 	
              Complete
                Agreement

            	
              45

            
	
              11.2

            	 	
              Survival
                of Representations and Warranties

            	
              45

            
	
              11.3

            	 	
              Waiver,
                Discharge, Amendment, Etc

            	
              45

            
	
              11.4

            	 	
              Notices

            	
              46

            
	
              11.5

            	 	
              Transfer
                and Sales Taxes, Expenses and Termination Fee

            	
              47

            
	
              11.6

            	 	
              Governing
                Law; Consent to Jurisdiction and Venue.

            	
              48

            
	
              11.7

            	 	
              Public
                Announcement

            	
              49

            
	
              11.8

            	 	
              Successors
                and Assigns

            	
              49

            
	
              11.9

            	 	
              Titles
                and Headings; Construction

            	
              49

            
	
              11.10

            	 	
              Severability

            	
              50

            
	
              11.11

            	 	
              Counterparts

            	
              50

            
	
              11.12

            	 	
              Confidentiality

            	
              50

            
	
              11.13

            	 	
              Specific
                Performance

            	
              51

            


    

    


    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    


    EXHIBITS

     

    
      	
              Exhibit
                A

            	
              Escrow
                Agreement

            
	
              Exhibit
                B

            	
              License
                Agreement

            
	
              Exhibit
                C

            	
              Sublease
                and Guaranty of Sublease

            
	
              Exhibit
                D

            	
              Sublicense
                Agreements

            


    

    


    SCHEDULES

     

    
      	
              Schedule
                1.1(a)

            	
              Anticipated
                Transferred Employees

            
	
              Schedule
                1.2

            	
              Key
                Employees

            
	
              Schedule
                2.1

            	
              Transferred
                Contracts

            
	
              Schedule
                2.1(a)

            	
              Transferred
                Intellectual Property

            
	
              Schedule
                2.1(b)

            	
              Fixed
                Assets

            
	
              Schedule
                2.7

            	
              Purchase
                Price Allocation

            
	
              Schedule
                3.4

            	
              Absence
                of Changes

            
	
              Schedule
                3.5

            	
              Litigation

            
	
              Schedule
                3.6

            	
              Compliance
                with Laws

            
	
              Schedule
                3.7

            	
              Consents

            
	
              Schedule
                3.9(a)

            	
              Exceptions
                to Transferred Intellectual Property

            
	
              Schedule
                3.9(b)

            	
              Licensed
                IP

            
	
              Schedule
                3.9(c)

            	
              Other
                IP

            
	
              Schedule
                3.9(d)

            	
              Owned
                IP

            
	
              Schedule
                3.9(e)

            	
              Licenses

            
	
              Schedule
                3.9(f)

            	
              Restrictions
                on Licensed IP or Other IP

            
	
              Schedule
                3.9(g)

            	
              Exceptions
                to IP Applications

            
	
              Schedule
                3.9(k)

            	
              Non-Disclosure
                Agreements

            
	
              Schedule
                3.10(a)

            	
              Seller’s
                Tools

            
	
              Schedule
                3.10(c)

            	
              Rights
                to Seller’s Tools

            
	
              Schedule
                3.12

            	
              Contracts
                and Commitments

            
	
              Schedule
                3.13

            	
              Employment
                Matters

            
	
              Schedule
                3.14

            	
              Employee
                Benefit Matters

            
	
              Schedule
                3.15

            	
              Insurance

            
	
              Schedule
                6.10

            	
              Opinion
                of Seller’s Counsel

            
	
              Schedule
                7.7

            	
              Opinion
                of Buyer’s Counsel

            


    

     

    
      
        
        

      

      
        iv

        
          

        

      

      
        
        

      

    

     

    ASSET
      PURCHASE AGREEMENT

     

    THIS
      ASSET PURCHASE AGREEMENT is made and entered into as of January 9, 2008 (this
      “Agreement”),
      by
      and among KYOCERA
      MITA CORPORATION,
      a
      Japanese corporation (“Buyer”),
      and
PEERLESS
      SYSTEMS CORPORATION,
      a
      Delaware corporation (“Seller”).

     

    W
      I T N E S S E T H:

     

    WHEREAS,
      the parties hereto desire that Seller sell, transfer and assign to Buyer, and
      Buyer purchase from Seller, all of the Specified Assets (as defined herein)
      of
      Seller on the terms and for the consideration hereinafter provided;

     

    WHEREAS,
      the Board of Directors of Seller has approved, and deems it advisable and in
      the
      best interests of its stockholders to consummate the transactions provided
      for
      herein; and

     

    WHEREAS,
      the Board of Directors of Buyer has approved the acquisition of the Specified
      Assets and the other transactions contemplated hereby are consistent with,
      and
      will further, its business strategies and goals.

     

    NOW,
      THEREFORE, in consideration of the respective representations, warranties,
      covenants and agreements contained herein, and subject to the terms and
      conditions set forth herein, the parties hereto agree as follows:

     

    ARTICLE
      1

    DEFINITIONS

     

    1.1  Specific
      Definitions.
      As used
      in this Agreement, the following terms shall have the meanings set forth or
      referenced below:

     

    “Acquisition”
shall
      mean the sale by Seller and acquisition by Buyer of the Specified Assets as
      contemplated by this Agreement.

     

    “Acquisition
      Proposal”
shall
      mean any offer or proposal, relating to any transaction or series of related
      transactions involving: (A) any purchase from Seller or acquisition by any
      Person or “Group” (as defined under Section 13(d) of the Exchange Act and the
      rules and regulations thereunder) of more than a fifteen percent (15%) interest
      in the total outstanding voting securities of Seller or any tender offer or
      exchange offer that if consummated would result in any Person or Group
      beneficially purchasing fifteen percent (15%) or more of the total outstanding
      voting securities of Seller, or any acquisition, consolidation, change of
      control business combination merger, consolidation or similar transaction
      involving a change of control of Seller, or (B) any sale, lease (other than
      in
      the ordinary course of business), exchange, transfer, license (other than in
      the
      ordinary course of business), acquisition or disposition of more than fifteen
      percent (15%) of the assets of Seller; provided, however, that an offer or
      proposal shall not be deemed to be an Acquisition Proposal if upon receipt
      of an
      unsolicited Acquisition Proposal and prior to any additional discussions, Seller
      informs such party of the requirements for a Permitted Acquisition Proposal,
      and
      such party agrees to pursue such transaction in accordance with the criteria
      set
      forth in the definition of a Permitted Acquisition Proposal.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Affiliate”
of
      a
      specified person (natural or juridical) means a person that directly, or
      indirectly through one or more intermediaries, controls, or is controlled by,
      or
      is under common control with, the person specified. For purpose of this
      definition, “control” shall mean ownership of more than ten percent (10%) of the
      shares of stock entitled to vote for the election of directors in the case
      of a
      corporation, and more than ten (10%) percent of the voting power in the case
      of
      a business entity other than a corporation.

     

    “Anticipated
      Transferred Employee”
means
      an employee of Seller on the date hereof who is listed on Schedule 1.1(a),
      or
      any other employee of Seller who is hereafter designated as an Anticipated
      Transferred Employee in a writing signed both by Buyer and Seller, whether
      or
      not such employee commences or agrees to commence employment with Buyer on
      the
      Closing Date or thereafter.

     

    “Assignment
      and Assumption Agreement”
means
      an agreement in form satisfactory to Seller and Buyer under which Seller shall
      assign to Buyer and Buyer shall assume from Seller all of Seller’s rights and
      obligations, to the extent such rights and obligations arise following the
      Closing, under the Transferred Contracts.

     

    “Assumed
      Liabilities”
means
      the liabilities described in Section 2.5.

     

    “Bill
      of Sale”
means
      the document delivered by Seller to Buyer under which Seller shall convey to
      Buyer, unencumbered title to the Specified Assets, in form satisfactory to
      Buyer
      and Seller.

     

    “Block
      License Agreement”
means
      the agreement by Seller to license Buyer certain third party rights pursuant
      to
      Licensed Software Addendum #4, as amended, and Licensed Software Addendum #6
      (“LSA #6”) and Licensed Software Addendum #7 (“LSA #7”), as LSA # 6 and LSA #7
      have been amended in connection with Buyer’s products as described in that
      certain “Amendment #1 to Licensed Software Addendum #6 and Amendment #1 to
      Licensed Software Addendum #7 to Master Technology License Agreement (MTLA)
      dated April 1, 1997, for the per unit license fee set forth therein which is
      to
      be applied in accordance with Section 2 therein, and all of Buyer’s obligations
      thereunder with respect to such license. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Buyer”
means
      Kyocera Mita Corporation or one or more of its Affiliates to which it assigns
      rights under this Agreement.

     

    “Business
      Day”
means
      a
      day other than a Saturday, Sunday or any other day on which commercial banks
      in
      Japan or California are authorized or obligated by law to close.

     

    “Buyer
      Indemnified Parties”
has
      the
      meaning set forth in Section 9.1.

     

    “Closing”
and
      “Closing
      Date”
have
      the meanings set forth in Section 8.1.

     

    “Code”
means
      the Internal Revenue Code of 1986, as amended.

     

    “Confidential
      Information”
means
      any and all information disclosed by or on behalf of one of the parties (the
      “disclosing
      party”)
      to the
      other party (the “receiving
      party”),
      whether previously delivered, generated in connection with this Agreement,
      or
      otherwise learned by the receiving party from the disclosing party, excluding
      information which:

     

    (a)  has
      been
      independently developed by or for the receiving party without breach of this
      Agreement or use of any Confidential Information of the other party (provided
      that the receiving party is able to provide the disclosing party with written
      proof thereof);

     

    (b)  is
      or
      becomes available to the receiving party from a source other than the disclosing
      party which source has rightfully obtained such information and has no direct
      or
      indirect obligation of non-disclosure or confidentiality to the disclosing
      party
      with respect thereto;

     

    (c)  is
      or
      becomes part of the public domain by reason of acts not attributable to the
      receiving party; or

     

    (d)  was
      already in the possession of the receiving party prior to its original receipt
      from the disclosing party (provided that the receiving party is able to provide
      the disclosing party with written proof thereof and, if received from a third
      party, that such information was acquired without any party’s breach of a
      confidentiality or non-disclosure obligation to the disclosing party related
      to
      such information).

     

    “Consents”
has
      the
      meaning set forth in Section 3.7.

     

    “Contract(s)”
means
      contracts, instruments, loans, permits, leases, licenses, commitments and other
      agreements in each case, whether written or oral, proposed, contingent or
      otherwise.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Copyrights”
means
      all copyrights, including all renewals and extensions thereof, copyright
      registrations and applications for registration thereof, non-registered
      copyrights and all works of authorship and embodiments whether or not the
      subject of the forgoing.

     

    “DGCL”
means
      the General Corporation Law of the State of Delaware, as amended.

     

    “Engineering
      Fee”
has
      the
      meaning set forth in Section 5.17.

     

    “Environmental
      Laws”
means
      any one or more Laws that relates to or deals with safety, Hazardous Substances,
      human health or the environment, all as they may be amended from time to time
      and to the extent that they apply specifically to Seller, judgments, orders,
      decrees, injunctions, permits, concessions, grants, franchises, licenses or
      agreements that relate to safety, human health, the environment or emissions,
      discharges, or releases of Hazardous Substances into the environment including
      ambient air, surface water, ground water, facilities, structures, or land,
      or
      otherwise relating to the manufacture, processing, distribution, use, treatment,
      storage, disposal, transport, or handling of pollutants, contaminants, Hazardous
      Substances, or wastes or the investigation, clean-up, or other remediation
      thereof.

     

    “Escrow
      Agent”
shall
      mean the escrow agent mutually selected by Buyer and Seller and who shall serve
      pursuant to the Escrow Agreement.

     

    “Escrow
      Agreement”
means
      an escrow agreement to be entered into on the Closing Date between the Escrow
      Agent, Buyer and Seller, in the form of Exhibit
      A,
      and
      which provides, among other things, that the Holdback Amount shall be deposited
      into an interest-bearing account for the benefit of Seller, that interest
      thereon shall be paid to Seller from time to time and that the Holdback Amount
      shall be released to Seller pursuant to Section 2.4(b) and (c) or applied
      pursuant to Article 9.

     

    “Escrow
      Fund”
      shall
      have the meaning set forth in the Escrow Agreement.

     

    “Escrow
      Termination Date”
shall
      have the meaning set forth in the Escrow Agreement.

     

    “Excluded
      Assets”
has
      the
      meaning set forth in Section 2.2.

     

    “Existing
      Agreements”
means
      the Memorandum of Understanding, the Master Development Agreement and the Master
      Maintenance and Support Agreement, each between Buyer and Seller (and/or their
      respective Subsidiaries) effective as of February 1, 2005 and the Master
      Development Agreement and the Master Technology License Agreement between Buyer
      and Seller effective April 1, 1997 and any addendums, amendments or other
      agreements related thereto (including any non disclosure agreements), but shall
      not include the Non-Disclosure Agreement and the portion of the Existing
      Agreements that constitute the Block License Agreement.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Fixed
      Assets”
means
      other than the Excluded Assets, all of the Seller’s fixed assets, including
      without limitation, computers, work stations, third party software licensed
      for
      such computers or work stations, electronic files, multi-function printers
      and
      copiers, copiers, office furniture and other tangible assets presently used
      principally by and necessary for each of the Anticipated Transferred Employees,
      which are necessary for each of such Transferred Employees to continue to
      perform their respective duties for the Buyer after the Closing without
      interruption. Subject to adjustment at Closing to reflect the actual Transferred
      Employees, the Fixed Assets are listed on Schedule
      2.1(b)
      based on
      the Anticipated Transferred Employees presently listed on Schedule
      1.1(a).

     

    “Hazardous
      Substance”
means
      asbestos, urea formaldehyde, polychlorinated biphenyls, nuclear fuel or
      materials, chemical waste, radioactive materials, explosives, known carcinogens,
      petroleum products, pesticides, fertilizers, or any other pollutant,
      contaminant, chemical, material or substance defined as hazardous or as a
      pollutant or contaminant in, or the use, transportation, storage, release or
      disposal of which is regulated by, any Environmental Laws.

     

    “Holdback
      Amount”
has
      the
      meaning set forth in Section 2.4(b).

     

    “Indemnified
      Parties”
has
      the
      meaning set forth in Section 9.2.

     

    “Initial
      Payment”
has
      the
      meaning set forth in Section 2.4(a).

     

    “Intellectual
      Property”
means
      Patents, Know-How, Copyrights and Software.

     

    “Key
      Employee”
means
      an Anticipated Transferred Employee listed on Schedule
      1.1(b)
      hereto.

     

    “Know-How”
means
      all trade secrets, confidential technical and business information and other
      proprietary technical and business information including designs, research
      and
      development information, technical information, specifications, operating and
      maintenance manuals, sources of supply, methods, engineering drawings, know-how,
      data, discoveries, inventions, industrial designs and other proprietary rights,
      including ideas, discoveries, improvements, concepts (whether or not patentable
      or subject to copyright or trade secret protection).

     

    “Knowledge”
of
      Seller means, whether or not capitalized, actual knowledge of the following
      individuals at the Seller after reasonable investigation: Richard Roll, John
      Rigali, Elliot Shirwo and Robert Westervelt.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “KTD”
means
      Kyocera Technology Development, Inc., a California corporation and an indirectly
      wholly owned subsidiary of the Buyer.

     

    “Law”
or
      “Laws”
means
      any constitutional provision, specified statute, code or other law, rule,
      regulation, ordinance, Order, decree, or interpretation of any of the foregoing,
      of any governmental entity or authority or having the effect of law in the
      United States or any other country or jurisdiction, or any state, county, city
      or other political subdivision, including common law and, including, without
      limitation rules imposed by Nasdaq or any other authority (whether or not
      governmental).

     

    “Lease”
means
      the lease by Seller of space located at 2381 Rosecrans Avenue, El Segundo,
      California 90245.

     

    “License
      Agreement”
means
      the License Agreement to be executed between Buyer as licensor and Seller as
      licensee and effective as of the Closing Date substantially in the form of
      Exhibit
      B.

     

    “Liens”
means
      any liens, security interests, collateral assignments, pledges or other
      encumbrances.

     

    “LSA
      #7”
has
      the
      meaning set forth in the definition of Block License Agreement. 

     

    “Material
      Adverse Effect”
means
      any fact, event, series of events, change, effect or circumstance that,
      individually or in the aggregate with any other facts, events, series of events,
      changes, effects or circumstances, has or would reasonably be expected to have
      a
      material adverse effect on the Specified Assets, on the ability of Buyer to
      hire
      Transferred Employee Amount or on the ability to consummate the transactions
      contemplated by the Transaction Documents; provided, however, that Material
      Adverse Effect shall not include any fact, event, series of events, change,
      effect or circumstance resulting from (a) this Agreement, the transactions
      contemplated hereby, the announcement thereof or the filing of a proxy statement
      by Seller, (b) an act or omission by Buyer or its Affiliates or any of their
      employees or representatives, or (c) changes in general economic or
      political conditions or the securities markets in general (whether as a result
      of acts of terrorism, war (whether or not declared), armed conflicts or
      otherwise) that do not materially and disproportionately adversely affect the
      Specified Assets or the ability of Buyer to hire the Minimum Transferred
      Employee Amount.

     

    “Minimum
      Transferred Employee Amount”
means
      not less than thirty (30) of the individuals designated as an Anticipated
      Transferred Employee.

     

    “Non-Disclosure
      Agreement”
means
      the Non-Disclosure Agreement dated September 21, 2007 between Buyer and
      Seller.

     

    “Notice
      of Dispute”
has
      the
      meaning set forth in Section 11.6(b).

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Other
      IP”
has
      the
      meaning set forth in Section 3.9(c).

     

    “Patents”
means
      all foreign and domestic patents, patent applications, industrial rights and
      the
      inventions, discoveries, designs and improvements described and claimed therein,
      patentable inventions, and other patent rights (including any divisionals,
      continuations, continuations-in-part, renewals, substitutions, reexaminations
      or
      reissues thereof, whether or not patents are issued on any such applications
      and
      whether or not any such applications are amended modified, withdrawn or
      refiled).

     

    “Permitted
      Acquisition Proposal”
shall
      mean an acquisition for fifteen percent (15%) or more of the total outstanding
      voting securities of Seller if (a) the potential acquirer has agreed in writing
      to be bound by the provisions of this Agreement and the other Transaction
      Documents and to vote any shares of Seller Common Stock it holds in favor of
      this Agreement, (b) no stockholder vote on such proposed transaction is held
      prior to the Stockholders’ Meeting, and (c) such proposed transaction does not
      have any adverse impact on the timing or probability of the consummation of
      the
      Acquisition and the transactions contemplated hereby, including the filing
      of
      the proxy statement or any other closing conditions contained in Article 6
      hereof.

     

    “Person”
means
      any individual, corporation, association, partnership (general or limited),
      limited liability company, joint venture, trust, association, unincorporated
      organization, business, governmental entity or other entity.

     

    “Purchase
      Price”
has
      the
      meaning set forth in Section 2.3.

     

    “Retained
      Liabilities”
has
      the
      meaning set forth in Section 2.6.

     

    “Seller
      Common Stock”
means
      common stock of the Seller.

     

    “Seller
      Indemnified Parties”
has
      the
      meaning set forth in Section 9.2.

     

    “Seller
      Intellectual Property”
has
      the
      meaning set forth in Section 3.9.

     

    “Seller
      Product Information”
means
      all records, reports (internal and external), submissions (internal and
      external), data, files, marketing materials, specifications, manufacturing
      documentation and quality assurance information associated with any products
      or
      concepts, or development or manufacturing thereof, that have been created,
      initiated and/or conducted by Seller relating to the Specified
      Assets.

     

    “Seller’s
      Products”
means
      products developed by Seller for Buyer pursuant to the Existing
      Agreements.

     

    “Seller
      Recommendation”
has
      the
      meaning set forth in Section 5.1(d).

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    “Seller
      Regulatory Information”
means
      all authorizations, permits, licenses, records, reports (internal and external),
      submissions (internal and external), data and files associated with regulatory
      requirements and communications between Seller and regulatory or governmental
      bodies worldwide relating to the Specified Assets.

     

    “Seller’s
      Stockholders”
means
      the holders of Seller Common Stock.

     

    “Software”
means
      all computer software programs and software systems, including all libraries,
      code of any kind, web programs (whether in HTML, XML or other form), application
      program interfaces and software programs that interface with third-party APIs,
      data structures, databases, compilations, tool sets, compilers, higher level
      or
“proprietary” languages, and all related Technical Documentation and
      information, whether in source code, object code, binary or other
      form.

     

    “Specified
      Assets”
means
      the Transferred Intellectual Property and the Fixed Assets to be acquired by
      Buyer pursuant to the terms hereof and as set forth on Schedule 2.1(a) and,
      subject to adjustment, on Schedule 2.1(b).

     

    “Sublease”
means
      the sublease by KTD of a portion of Seller’s premises at 2381 Rosecrans Avenue,
      El Segundo, California 90245, to be executed and effective as of the Closing
      Date and, subject to the terms thereof, to be in effect for a forty (40) month
      period from the Closing Date and the Guaranty thereof by the Buyer, in the
      form
      of Exhibit C.

     

    “Sublicense
      Agreement”
means
      the Sublicense Agreements to be executed by Seller as sublicensor and Buyer
      as
      sublicensee with respect to the Other IP and effective as of the Closing Date
      substantially in the form of Exhibit D.

     

    “Subsidiary”
means
      with respect to any Person any corporation or other Person of which securities
      or other interests having the power to elect a majority of that corporation’s or
      other Person’s board of directors or similar governing body, or otherwise having
      the power to direct the business and policies of that corporation or other
      Person (other than securities or other interests having such power only upon
      the
      happening of a contingency that has not occurred), are held by the owner or
      one
      or more of its Subsidiaries.

     

    “Superior
      Offer”
shall
      mean an unsolicited, bona fide offer made by a third party to acquire, directly
      or indirectly, pursuant to a merger, tender offer, exchange offer, acquisition,
      consolidation or other business combination, either the Specified Assets or
      substantially all of the assets of Seller or more than 50% of the total
      outstanding voting securities of Seller on the terms that the Board of Directors
      of Seller has in good faith concluded (following the receipt of advice of its
      outside legal counsel and consultation with its financial adviser of recognized
      reputation), taking into account, among other things, all legal, financial,
      regulatory and other aspects of the offer and the Person making the offer,
      to be
      more favorable, from a financial point of view, than the terms of the
      Acquisition and is reasonably capable of being consummated.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    “Taxes”
and
      “Tax”
means
      all taxes, additions to tax, penalties, interest, fines, duties, withholdings,
      assessments, and charges assessed or imposed by any governmental authority,
      including but not limited to all national, federal, state, county, local and
      foreign income, profits, gross receipts, import, ad valorem, real and personal
      property, franchise, license, sales, use, value added, stamp, transfer,
      withholding, payroll, employment, excise, custom, duty, and any other taxes,
      obligations and assessments of any kind whatsoever; the foregoing shall include,
      but not be limited to, any liability arising as a result of being (or ceasing
      to
      be) a member of any affiliated, consolidated, combined, or unitary group as
      well
      as any liability under any Tax allocation, Tax sharing, Tax indemnity or similar
      agreement.

     

    “Technical
      Documentation”
means
      any and all technical and descriptive materials relating to the acquisition,
      design, development, testing, fixing, use, or maintenance of, and the program
      documentation and materials for, Seller’s Products.

     

    “Transaction
      Documents”
means
      this Agreement, the License Agreement, the Sublease, the Bill of Sale, the
      Assignment and Assumption Agreement, the Escrow Agreement, the Sublicense
      Agreement, and all documents ancillary thereto.

     

    “Transfer
      and Sales Taxes”
means
      all sales tax, use taxes, stamp taxes, conveyance taxes, transfer taxes, filing
      fees and other similar duties, taxes and fees, if any, imposed upon, or
      resulting from, the transfer of the Specified Assets.

     

    “Transferred
      Contracts”
means
      the Contracts listed on Schedule 2.1 to be transferred to Buyer.

     

    “Transferred
      Employee”
means
      an employee of Seller on the date hereof who is an Anticipated Transferred
      Employee and who accepts employment with Buyer commencing as of the Closing
      Date.

     

    “Transferred
      Intellectual Property”
means
      Seller’s Patents, Know-How, Copyrights and Software, other than any Know-How,
      Copyrights and Software which are part of the Excluded Assets.

     

    1.2  Other
      Terms and Dollar Amounts.
      Other
      terms may be defined elsewhere in the text of this Agreement and shall have
      the
      meanings indicated throughout this Agreement. All dollar amounts shall refer
      to
      the lawful currency of the United States of America. 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      2

    PURCHASE,
      SALE AND TRANSFER OF SPECIFIED ASSETS

     

    2.1  Purchased
      Assets.
      Upon
      the terms and subject to the conditions set forth in this Agreement, effective
      as of the Closing, Seller agrees to irrevocably sell, transfer, assign and
      convey to Buyer, and Buyer agrees to purchase from Seller the assets listed
      on
Schedules
      2.1(a)
      (Transferred Intellectual Property) and 2.1(b)
      (Fixed
      Assets) hereto (the “Specified
      Assets”)
      free
      and clear of all Liens. At the Closing, Seller shall deliver the Bill of Sale
      to
      Buyer and the Buyer and Seller shall execute the Assignment and Assumption
      Agreement and such other documents and instruments of assignment and transfer
      as
      Buyer shall reasonably request.

     

    2.2  Excluded
      Assets.
      Buyer
      is not acquiring any of Seller’s cash, cash equivalents, receivables, fixed
      assets not described as part of the Specified Assets or any other asset of
      Seller that is not within the definition of Specified Assets. Additionally,
      Specified Assets, as such term is used herein, also shall not include any of
      the
      following assets of Seller (the “Excluded
      Assets”):

     

    (i)  all
      rights of Seller under its licenses or agreements with Adobe Systems
      Incorporated and Novell Inc.;

     

    (ii)  all
      rights and obligations of Seller under all existing agreements with all of
      its
      other vendors, independent contractors or licensors, including, without
      limitation, license agreements, maintenance and service agreements and
      engineering service agreements; provided none of which transfer title to any
      Intellectual Property owned by Seller;

     

    (iii)  all
      of
      Seller’s customized Intellectual Property that has been previously integrated
      into products or services licensed or otherwise provided by Seller to third
      parties or specifically created for customers of the Seller after December
      7,
      2007 other than Buyer and, which, in either case, (i) has not also been provided
      to or integrated into products or services licensed to Buyer, or (ii) developed
      pursuant to or in connection with the Existing Agreements;

     

    (iv)  all
      rights and obligations of Seller under all existing agreements with all of
      its
      customers, including, without limitation, license agreements, maintenance and
      service agreements and engineering service agreements with all of its customers,
      provided none of which transfer title to any Intellectual Property owned by
      Seller;

     

    (v)  all
      rights of Seller under the Lease (except to the extent and subject to the terms
      of the Sublease);

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (vi)  the
      telephone system, telephones, telephone lines, cables, wiring, servers,
      leasehold improvements (except to the extent rights of ownership or use are
      granted under the Sublease) and any other tangible assets that are used on
      a
      company wide basis by Seller;

     

    (vii)  any
      third-party software listed on Schedules 2.1(b) and 2.2(c) hereto that is
      presently licensed to Seller for the computers and work stations which are
      part
      of the Fixed Assets (except to the extent that consent can be obtained without
      cost to Seller and without delay in the Closing or as may be otherwise agreed
      to
      by Buyer and Seller, in which case Schedules 2.1(b) and 2.2(c) will be
      appropriately amended); 

     

    (viii)  all
      of
      Seller’s trademarks, service marks, trade names, trademark and service mark
      applications, domain names and websites;

     

    (ix)  any
      Intellectual Property developed or created after December 7, 2007 that has
      not
      been developed, created or utilized for the Buyer or integrated into products
      or
      services licensed to Buyer or developed pursuant to or in connection with the
      Existing Agreements; and

     

    (x)  any
      Intellectual Property purchased after December 7, 2007, except to the extent
      such Intellectual Property is provided to or integrated into products or
      services licensed to Buyer.

     

    2.3  Purchase
      Price.
      The
      total consideration to be paid to Seller from Buyer for the Specified Assets
      (the “Purchase
      Price”)
      shall
      be Thirty Seven Million Dollars ($37,000,000), subject to Section
      9.8.

     

    2.4  Payment
      of Purchase Price.
      The
      Purchase Price shall be paid as follows:

     

    (a)  On
      the
      Closing Date, Buyer shall pay (i) to Seller by wire transfer of immediately
      available funds, to a bank account designated in writing by Seller, an amount
      equal to Thirty Three Million Dollars ($33,000,000) (the “Initial
      Payment”)
      and
      (ii) to the Escrow Agent by wire transfer of immediately available funds, to
      a
      bank account designated in writing by the Escrow Agent, an amount equal to
      Four
      Million Dollars ($4,000,000) (the “Holdback
      Amount”).

     

    (b)  On
      the
      date that is the first Business Day after fifteen (15) months following the
      Closing Date, in accordance with the terms of the Escrow Agreement, the Escrow
      Agent shall release to Seller by wire transfer of immediately available funds,
      to a bank account designated in writing by Seller, an amount equal to Two
      Million Dollars ($2,000,000), less any reductions thereto permitted pursuant
      to
      Article 9.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (c)  On
      the
      date that is the first Business Day after twenty-four (24) months following
      the
      Closing Date, in accordance with the terms of the Escrow Agreement, the Escrow
      Agent shall pay to Seller by wire transfer of immediately available funds,
      to a
      bank account designated in writing by Seller, an amount equal to the remaining
      portion of the Holdback Amount, less any reductions thereto permitted pursuant
      to Article 9.

     

    2.5  Assumed
      Liabilities.
      At the
      Closing, Buyer shall only assume and agree to pay, perform and discharge in
      due
      course only the following liabilities and obligations of the Seller (the
“Assumed
      Liabilities”):
      (a)
      accrued and unpaid vacation, sick and leave time of the Transferred Employees
      prior to Closing in accordance with the policies of Seller in effect prior
      to
      the execution of this Agreement as disclosed on Schedule
      3.14; (b)
      the
      payment of any filing and maintenance fees required to be paid after the Closing
      Date to maintain the effectiveness of any filings made with respect to the
      Intellectual Property; (c) all obligations of Buyer under the Sublease; and
      (d)
      all obligations arising from and after the Closing Date under the Transferred
      Contracts. 

     

    2.6  Retained
      Liabilities.
      The
      parties agree that Buyer is not, nor shall be considered, the successor to
      Seller, and that Buyer does not hereby agree to assume or become liable to
      pay,
      perform or discharge any of Seller’s obligations, undertakings or liabilities of
      any kind or nature whatsoever, whether known or unknown, fixed or contingent,
      determined or determinable, due or not yet due, or otherwise, that is not
      expressly assumed by Buyer under Section 2.5 (the “Retained
      Liabilities”)
      or
      payable by Buyer under Section 11.5.

     

    2.7  Allocation
      of Purchase Price.
      Subject
      to adjustment to reflect the actual Fixed Assets to be transferred at Closing,
      Buyer and Seller have agreed to allocate the Purchase Price among the Specified
      Assets, the Assumed Liabilities and the licenses granted under the License
      Agreement in accordance with Schedule
      2.7.
      The
      allocation has been agreed to by Seller and Buyer after arm’s-length
      negotiations and in accordance with Section 1060 of the Code and other
      applicable laws. Seller and Buyer will, to the extent permitted by applicable
      law, adopt and utilize the amounts allocated to each asset or class of assets,
      as such allocations may be adjusted pursuant to this Agreement, for purposes
      of
      all foreign, federal, state, local and other tax returns or reports, in any
      claim for refund, or otherwise with respect to such tax returns or reports.
      Each
      party agrees to timely file an IRS Form 8594 or other applicable form reflecting
      the allocation of the Purchase Price for the taxable year that includes the
      Closing and to timely file any comparable or similar forms required by
      applicable federal, state, local, and foreign tax laws.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      3

    REPRESENTATIONS
      AND WARRANTIES OF SELLER

     

    Seller
      represents and warrants to Buyer as follows:

     

    3.1  Organization;
      Directors and Officers.
      Seller
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the State of Delaware. Seller has all necessary power and authority
      to
      own its properties and assets and conduct the business presently being conducted
      by it. Seller is duly licensed or qualified to do business as a corporation
      and
      is in good standing in the jurisdictions where the conduct or nature of the
      business or the ownership, leasing, holding or use of any property or asset
      related to or used in connection with the business makes such qualification
      necessary, except for those jurisdictions where the failure to be so qualified
      would not have a Material Adverse Effect.

     

    3.2  Authority.
      Seller
      has full power and authority to enter into this Agreement and the Transaction
      Documents and, subject to the receipt of the affirmative vote of the holders
      of
      a majority in voting power of the outstanding capital stock of Seller in respect
      of this Agreement and the Acquisition (“Seller
      Stockholder Approval”),
      the
      Seller will have full power and authority to perform its obligations hereunder
      and under the other Transaction Documents. This Agreement has been duly
      authorized, executed and delivered by all necessary corporate action of Seller,
      other than Seller Stockholder Approval and, subject to receiving Seller
      Stockholder Approval, constitutes a legal, valid and binding agreement of Seller
      enforceable against it in accordance with its terms, subject to (a) bankruptcy,
      insolvency, fraudulent transfer, reorganization, moratorium and similar laws
      of
      general applicability relating to or affecting creditors’ rights and to general
      equity principles and (b) laws relating to the availability of specific
      performance, injunctive relief or other equitable remedies. The other
      Transaction Documents have been duly authorized, other than Seller Stockholder
      Approval, and, subject to receiving Seller Stockholder Approval, upon due
      execution and delivery will constitute legal, valid and binding agreements
      of
      Seller enforceable against it in accordance with its terms, subject to (a)
      bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
      similar laws of general applicability relating to or affecting creditors’ rights
      and to general equity principles and (b) laws relating to the availability
      of
      specific performance, injunctive relief or other equitable remedies. Except
      for
      the Seller Stockholder Approval, no further proceeding on the part of Seller
      is
      necessary to authorize this Agreement and the other Transaction Documents and
      the transactions contemplated hereby and thereby. Neither the execution and
      delivery of this Agreement or the other Transaction Documents nor compliance
      by
      Seller with the terms and provisions hereunder and thereunder will (i) violate
      or conflict with any provision of the certificate of incorporation, bylaws
      or
      other governing instruments of Seller, (ii) subject to obtaining the Consents
      as
      set forth of Schedule
      3.7,
      require
      any consent under or violate or conflict with any Contract of Seller, or (iii)
      other than any export licenses or permits, violate or conflict with any Law
      to
      which Seller or any of the Specified Assets is subject or (iv) create any Lien
      upon any of the Specified Assets or any other assets of the Seller.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    3.3  Financial
      Information.

     

    (a)  Seller
      has delivered or made available to Buyer (through reference to documents filed
      by EDGAR or otherwise) copies of all forms, reports and documents filed by
      Seller with the Securities and Exchange Commission (“SEC”)
      since
      December 31, 2005.

     

    (b)  Seller
      and each of its Subsidiaries is able to pay its debts generally as they become
      due and is solvent (determined by the fair market value of its assets exceeding
      its liabilities) and will not be rendered insolvent as a result of the
      transactions contemplated by the Transaction Documents. Seller has not either
      voluntarily or involuntarily, (i) admitted in writing that it is or may become
      unable to pay its debts generally as they become due, (ii) filed or consented
      to
      the filing against it of a petition in bankruptcy or a petition to take
      advantage of an insolvency act, (iii) made an assignment for the benefit of
      its
      creditors, (iv) consented to the appointment of a receiver for itself or for
      the
      whole or any substantial part of its property, (v) had a petition in bankruptcy
      filed against it, (vi) been adjudged bankrupt or filed a petition or answer
      seeking reorganization or arrangement under the federal bankruptcy laws or any
      Law, or (vii) incurred, or believed or reasonably should have believed it would
      incur, debts that are or will be beyond its ability to pay as such debts mature.
      Seller is not engaged nor currently contemplates being engaged in a business
      or
      transaction for which any property remaining would be insufficient to continue
      to operate its businesses.

     

    3.4  Absence
      of Liabilities, Changes and Events.
      Since
      December 31, 2006, except as set forth on Schedule
      3.4
      hereto,
      Seller has not (a) incurred any debts, liabilities, claims against or
      obligations, and to Seller’s Knowledge, there is no reasonable legal basis
      therefor, that may adversely affect Seller’ ability to perform its obligations
      hereunder or under the other Transaction Documents or may adversely affect
      the
      ownership of the Specified Assets or the use thereof by Buyer in the manner
      currently used by Seller, whether accrued, absolute, contingent or otherwise,
      and whether due or to become due, including but not limited to liabilities
      on
      account of taxes, other governmental charges, duties, penalties, interest or
      fine; (b) sold, assigned or transferred any tangible or intangible asset of
      Seller other than in the ordinary course of business; or (c) increased any
      salaries, wages or employee benefits or made any arrangement for payment of
      any
      bonus or special compensation for any Anticipated Transferred Employee other
      than in the ordinary course of business; or (d) agreed to take any action
      described in (a) through (c) above.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    3.5  Litigation
      and Claims.
      Except
      as set forth on Schedule
      3.5,
      there
      are no actions, suits, claims, or proceedings pending or, to Seller’s Knowledge,
      threatened against or by Seller or the Specified Assets, at law, in equity
      or
      otherwise, in, before, or by, any court, arbitrator, or governmental agency
      or
      authority which could have a Material Adverse Effect, and, to the Knowledge
      of
      Seller, no reasonable basis for any such claim exists. There are no unsatisfied
      judgments or outstanding orders, injunctions, decrees, stipulations or awards
      (whether rendered by a court or administrative agency or by arbitration) against
      or affecting Seller or its assets.

     

    3.6  Compliance
      with Law.
      The use
      of the Specified Assets as currently conducted by Seller has not violated and
      is
      not in violation of any applicable Law. Other than any export licenses or
      permits, all governmental approvals, registrations, notifications, permits,
      licenses and other permissions or authorizations required in connection with
      the
      use of Specified Assets as currently conducted by Seller have been obtained
      and
      are in full force and effect and are being complied with. In the three (3)
      years
      prior to the date hereof, Seller has not received any written notification
      of
      any asserted past or present violation of any applicable Law, or any written
      complaint, inquiry or request for information from any governmental entity
      relating thereto in connection with the Specified Assets or the use of the
      Specified Assets. Other than as specified in Schedule
      3.6,
      the
      Seller has received no written notice that any of the Specified Assets is the
      subject of any federal, state or local enforcement action or other
      investigation. All documentation, correspondence, reports, data, analysis and
      certifications relating to or regarding the Specified Assets filed or delivered
      (or, if amended, as of the date for which such amendment speaks) by or on its
      behalf to any governmental authority, agency or body were true and accurate
      when
      so filed or delivered and remain, to the extent required by any applicable
      Laws.

     

    3.7  Consents.
      Other
      than any export licenses or permits, Schedule
      3.7
      hereto
      lists each consent, approval, notice, permit, exemption, waiver or authorization
      (collectively, the “Consents”), that is legally or contractually required to
      duly and validly transfer or assign to Buyer the Specified Assets or Assumed
      Liabilities, pursuant to the terms hereof or pursuant to the other Transaction
      Documents.

     

    3.8  Title
      to and Condition of Specified Assets.
      Seller
      has full right, title and interest to the intangible Specified Assets and good
      and valid title to the tangible Specified Assets, free and clear of all Liens
      and will convey the same to Buyer at the Closing, except that to the extent
      that
      Seller will license its rights to Other IP pursuant to the Sublicense Agreements
      (the “Sublicensed IP”). The tangible Specified Assets are in normal operating
      condition and free from any significant defects, ordinary wear and tear
      excepted. Seller has paid or will have paid all filing and maintenance fees
      with
      respect to the Patents due and payable prior to the Closing Date. All of the
      Specified Assets are in the possession and/or control of Seller and no
      Subsidiary has any other right or interest in the Specified Assets.

     

    
      
        
        

      

      
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    3.9  Intellectual
      Property.

     

    (a)  Except
      for the Patents, Know-How, Copyrights and Software which are part of the
      Excluded Assets, the Transferred Intellectual Property and the Sublicensed
      IP
      contain all Patents, Know-How, Copyrights and Software of or used by Seller
      and
      its Subsidiaries from December 31, 2003 to the Closing Date and no other
      Patents, Know-How, Copyrights and Software (other than those which are part
      of
      the Excluded Assets) are necessary to or used in the conduct of Seller’s
      business. Except as set forth on Schedule
      3.9(a)
      hereto,
      Seller owns the Transferred Intellectual Property (the “Owned
      IP”),
      or is
      licensed or authorized or otherwise has the right to use the Transferred
      Intellectual Property (the “Licensed
      IP”).
      All
      Transferred Intellectual Property is either Owned IP or Licensed
      IP.

     

    (b)  Schedule
      3.9(b)
      hereto
      lists all Licensed IP specifying to each item, as applicable: (i) the nature
      of
      the item, including the title, (ii) the owner of the item, (iii) the title
      of
      the Contract or other arrangements pursuant to which Seller has the right to
      use
      such Intellectual Property, (iv) whether the license is exclusive or
      non-exclusive and any limitations on the right to use such Intellectual
      Property, and (v) any royalties or other consideration payable thereunder
      (collectively the “Licensed
      IP Licenses”).

     

    (c)  Schedule
      3.9(c)
      hereto
      lists all Intellectual Property (other than any Intellectual Property that
      is
      the subject of the Block License Agreement) that is licensed to Seller,
      incorporated in the Owned IP and is not Licensed IP (collectively the
“Other
      IP”),
      specifying as to each such Other IP, as applicable: (i) the nature of the Other
      IP, (ii) the Transferred Intellectual Property into which such Other IP is
      incorporated, (iii) the owner of such Other IP, (iv) the title of any
      license agreement relating to the Other IP (collectively, the “Other
      IP Licenses”),
      (v) any limitations on the right to use such Intellectual Property, and,
      (vi) any royalties or other consideration payable thereunder.

     

    (d)  Schedule
      3.9(d)
      hereto
      lists all Owned IP specifying as to each item, as applicable: (i) the nature
      of
      the item, including the title, (ii) the jurisdictions in which the item is
      issued or registered or in which an application for issuance or registration
      has
      been filed, and (iii) the issuance, registration or application numbers and
      dates.

     

    (e)  Seller
      owns, free and clear of all Liens, has, to the Seller’s Knowledge, valid and
      enforceable rights in, and has the unrestricted right to use, sell, license,
      transfer or assign, all Owned IP and at the Closing, will transfer the same
      to
      Buyer. Seller has not transferred its title in or to any Owned IP, and no Owned
      IP has been licensed or supplied by Seller to any Person since December 31,
      2003
      except as set forth in Schedule
      3.9(e).

     

    
      
        
        

      

      
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    (f)  Except
      as
      set forth on Schedule
      3.9(f),
      Seller
      has a valid and enforceable license or other right to use all Licensed IP and
      Other IP and at the Closing, will transfer the right to use the Licensed IP
      to
      Buyer pursuant to the Assignment and Assumption Agreement or license to Buyer
      the right to use the Other IP pursuant to the Sublicense Agreement. Seller
      has
      performed all obligations imposed on it in the Licensed IP Licenses and the
      Other IP Licenses, has made all payments required to date, and is not in breach
      or default thereunder in any respect, nor to the Seller’s Knowledge, is there
      any event which with notice or lapse of time or both would constitute a default
      or breach thereunder by Seller.

     

    (g)  Except
      as
      set forth on Schedule
      3.9(g),
      all
      Owned IP which are granted and issued Patents are subsisting and unexpired
      and
      have not been abandoned and all filing, renewal or other fees have been timely
      and fully paid by Seller when due, and all such Owned IP is, to Seller’s
      Knowledge, valid and enforceable. Except as set forth on Schedule
      3.9(g),
      all
      Owned IP which are applications for Patent registrations (collectively, the
      “IP
      Applications”)
      are
      pending, active, subsisting and have not been abandoned and all filing, renewal
      or other fees have been timely and fully paid when due by Seller. To Seller’s
      Knowledge, Seller has timely and fully responded to all office actions or other
      comments, actions or filings of any kind made by any governmental entity with
      respect to any IP Application to full satisfaction of the applicable
      governmental entity. To Seller’s Knowledge, there is no currently existing
      reason or basis why any pending IP Application which has not been abandoned
      by
      Seller should not be granted or any Seller’s Patent should not be held valid or
      enforceable. To Seller’s Knowledge, neither Seller nor any officer, employee or
      agent of Seller has made an untrue statement of a material fact or fraudulent
      statement to any governmental authority, failed to disclose a material fact
      required to be disclosed to any governmental authority, or committed an act,
      made a statement, or failed to make a statement that would provide a basis
      to
      invalidate or hold unenforceable any Patent, whenever granted. Buyer has been
      provided with copies of the files for all Owned IP which are granted and issued
      Patents or IP Applications and, all such files are true, accurate and complete
      in all material respects. The Owned IP does not consist of any registered
      Copyrights or applications to register Copyrights.

     

    (h)  To
      Seller’s Knowledge, Seller’s rights in the Transferred Intellectual Property are
      valid and enforceable and there is no current event or circumstance that would
      impair the validity or enforceability thereof. No claim or action is pending
      or,
      to Seller’s Knowledge, threatened and Seller has no Knowledge of any basis for
      any claim that challenges the validity, enforceability, ownership, or right
      to
      use, sell, license or sublicense any Transferred Intellectual Property, and
      no
      Transferred Intellectual Property is subject to any outstanding order, ruling,
      decree, stipulation, charge or agreement restricting in any manner the use,
      the
      licensing, or the sublicensing thereof.

     

    
      
        
        

      

      
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    (i)  None
      of
      the Owned IP is, to Seller’s Knowledge, being infringed by others, or is subject
      to any outstanding order, decree, judgment, or stipulation. No litigation (or
      other proceeding in or before any governmental authority or arbitral body)
      relating to the Owned IP is pending, or to Seller’s Knowledge, threatened, nor,
      to Seller’s Knowledge, is there any basis for any such litigation or proceeding.
      To Seller’s Knowledge, none of the Licensed IP is being infringed by others or
      is subject to any outstanding order, decree, judgment, or stipulation. To
      Seller’s Knowledge, no litigation (or other proceeding in or before any
      governmental authority or arbitral body) relating to the Licensed IP is pending
      or threatened nor is there any basis for any such litigation or
      proceeding.

     

    (j)  Except
      as set forth on Schedule 3.5,
      the
      Transferred Intellectual Property does not infringe, and Seller has not made
      unlawful use of the Intellectual Property of another Person. Except as set
      forth
      on Schedule
      3.5,
      no
      litigation (or other proceeding in or before any governmental authority or
      arbitral body) charging Seller with infringement or unauthorized or unlawful
      use
      of any Transferred Intellectual Property is pending, or to Seller’s Knowledge,
      threatened.

     

    (k)  Seller
      maintains commercially reasonable security measures for the preservation of
      the
      secrecy and proprietary nature of the Transferred Intellectual Property. All
      Anticipated Transferred Employees have executed and delivered to Seller
      non-disclosure agreements that are in full force and effect and, to Seller’s
      Knowledge, fully enforceable by Seller. All of such Contracts are listed in
      Schedule 3.9(k) and copies thereof have been delivered to Buyer. To Seller’s
      Knowledge there have been no breaches of such agreements or of any of Seller’s
      security measures.

     

    (l)  Each
      present employee, officer, consultant to the Seller or any Person who was an
      employee, officer or consultant to the Seller at any time after January 1,
      2001
      or any other Person who developed any part of any Transferred Intellectual
      Property, either: (i) is a party to a Contract that conveys or obligates such
      Person to convey to Seller any and all right, title and interest in and to
      all
      such Transferred Intellectual Property Rights developed by such Person, (ii)
      as
      to copyrighted or copyrightable material created in the course of such Person’s
      employment with or engagement on behalf of Seller is a party to a “work made for
      hire” Contract pursuant to which Seller is deemed as a matter of Law to be the
      original owner/author of all proprietary rights in such material, or (iii)
      otherwise has by operation of Law vested in Seller any and all right, title
      and
      interest in and to all such Transferred Intellectual Property developed by
      such
      Person. To Seller’s Knowledge, at no time during the conception or reduction to
      practice of any Transferred Intellectual Property was any developer, inventor
      or
      other contributor to such Transferred Intellectual Property operating directly
      or indirectly under any grants from any governmental authority or subject to
      any
      employment agreement, invention assignment, nondisclosure agreement or other
      Contract with any Person that could adversely affect the rights of Seller,
      and
      upon the Acquisition, Buyer to such Transferred Intellectual
      Property.

     

    
      
        
        

      

      
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    (m)  The
      execution and performance by Seller of this Agreement and the other Transaction
      Documents will not result in the loss or impairment of the rights of Buyer
      to
      own or use any of the Transferred Intellectual Property and Seller is not,
      nor
      as a result of the execution and delivery of this Agreement or the other
      Transaction Documents or the performance of its obligations hereunder or
      thereunder will be, in violation of any IP License.

     

    3.10  Seller’s
      Products.

     

    (a)  Schedule
      3.10(a)
      hereto
      contains a complete list and description of all products (other than Seller’s
      Products) used by Seller to develop the Seller’s Products (“Seller’s
      Tools”)
      specifying to each item, as applicable: (i) the nature and purpose of the item,
      including the title, (ii) the owner of the item, (iii) if Seller is not the
      owner thereof, the title of the licenses or other Contracts or arrangements
      pursuant to which Seller has the right to use such Seller’s Tool (which
      information shall be provided by Seller to Buyer prior to the Closing), and
      (iv)
      if Seller is not the owner thereof, whether such Seller’s Tool is part of the
      Licensed IP or the Other IP or whether Buyer will need to obtain its own rights
      to use Seller’s Tool from the owner thereof.

     

    (b)  True
      and
      correct copies of the Technical Documentation that presently exists for all
      Seller’s Products have been delivered to Buyer. True and correct copies of the
      Technical Documentation that presently exists for all Seller’s Tools have been
      delivered to Buyer except to the extent that Seller is restricted from providing
      any or all of such Technical Documentation pursuant to agreements with the
      owners of such Seller’s Tools. The Technical Documentation for Seller’s Products
      includes the documentation, statements of principal of operation, and
      schematics, as well as any pertinent commentary or explanation that may be
      necessary to render such materials understandable and usable by
      Buyer.

     

    (c)  Except
      as
      set forth on Schedule 3.10(c),
      Seller
      owns all rights, title and interest in and to, or otherwise has the sole and
      exclusive right to use, without the payment of royalties or other consideration,
      all of Seller’s Products and those of Seller’s Tools owned by Seller and
      Technical Documentation for both of the foregoing contain no other programming
      or materials in which any third party may claim superior, joint, or common
      ownership, including any right or license. Seller’s Products and those of
      Seller’s Tools owned by Seller and Technical Documentation for both of the
      foregoing do not contain derivative works of any programming or materials not
      owned in their entirety by Seller.

     

    
      
        
        

      

      
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    3.11  WARN
      Act and Other Employee Matters.
      Seller
      has not taken and does not intend to take any action that could constitute
      a
“mass layoff,” “mass termination” or “plant closing” within the meaning of the
      Worker Adjustment and Retraining Notification Act, as amended, and the rules
      and
      regulations promulgated thereunder or otherwise trigger notice requirements
      or
      liability under any federal, local, state or foreign plant closing notice law
      in
      connection with the transactions contemplated by this Agreement. 

     

    3.12  Contracts
      and Commitments.
      Schedule
      3.12
      hereto
      contains a complete and accurate list of all material Contracts of the Seller
      (the “Seller
      Agreements”)
      concerning the following matters:

     

    (i)
      the
      employment or engagement of any Anticipated Transferred Employee;

     

    (ii)
      any
      covenant not to compete or confidentiality agreement affecting an Anticipated
      Transferred Employee;

     

    (iii)
      any
      arrangement limiting the freedom of Seller to use the Transferred Intellectual
      Property in any manner;

     

    (iv)
      any
      arrangement that could reasonably be anticipated to have a Material Adverse
      Effect;

     

    (v)
      any
      agreement restricting the Seller’s transfer or sale of Transferred Intellectual
      Property or the other Specified Assets;

     

    (vi)
      any
      royalty agreement which requires a payment by Seller with respect to the Owned
      IP;

     

    (vii)
      any
      contract for the sale of any Specified Assets or the business of Seller;
      and

     

    (viii)
      any
      license, as licensee, of the Licensed IP or Other IP.

     

    The
      Seller Agreements are valid and, to Seller’s Knowledge, enforceable in
      accordance with their terms, and there is not under any of such Seller
      Agreements (i) any existing or claimed default by any Seller or, to Seller’s
      Knowledge, any event which, with the notice or lapse in time, or both, would
      constitute a default by any Seller or (ii) to the Knowledge of Seller, any
      existing or claimed default by any other party or event which with notice or
      lapse of time, or both, would constitute a material default by any such party.
      Except as indicated on Schedule 3.12, the continuation, validity and
      effectiveness of the Seller Agreements will not be affected by the Acquisition,
      and the Acquisition will not result in a breach of or default under, or require
      the Consent of any other party to, any of the Seller Agreements. There is no
      actual or, to the Knowledge of Seller, threatened termination, cancellation
      or
      limitation of any Seller Agreements. To Seller’s Knowledge, there is no pending
      or threatened bankruptcy, insolvency or similar proceeding with respect to
      any
      other party to the Seller Agreements.

     

    
      
        
        

      

      
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    3.13  Employment
      and Labor Matters.
      The
      Seller has withheld and reported all amounts required by Law to be withheld
      and
      reported with respect to wages, salaries and other payments to the Anticipated
      Transfer Employees. Except as disclosed on Schedule
      3.13,
      with
      respect to the Anticipated Transferred Employees:

     

    (i)  except
      for routine government inquiries, examinations and inspections which Seller
      has
      no reason to believe are material, there are no charges, governmental audits,
      investigations, administrative proceedings or complaints, grievances or actions
      concerning the employment practices of Seller pending, nor has Seller been
      expressly notified of any such matter being threatened, before any federal,
      state or local agency or court and, to the Knowledge of Seller, no basis for
      any
      such matter exists;

     

    (ii)  Seller
      is
      not a party to any union or collective bargaining agreement, no union attempts
      to organize its employees have been made, nor are any such attempts now
      threatened;

     

    (iii)  Seller
      has not experienced any organized slowdown, work interruption, strike, or work
      stoppage by any such employees; and

     

    (iv)  Seller
      will not violate any applicable Laws respecting employment and employment
      practices relating to such employees as a result of the transactions
      contemplated by this Agreement.

     

    3.14  Employee
      Benefit Matters.

     

    (a)  A
      true,
      correct and complete list of the names, titles, base salaries, bonus information
      (including retention if payments made by Seller after December 7, 2007), date
      of
      hiring, sick and vacation leave that is accrued and unused and all other
      benefits of the Anticipated Transferred Employees as of the date hereof is
      included on Schedule
      3.14.
      To
      Seller’s Knowledge as of the date hereof, except as contemplated by this
      Agreement (a) it is not expected that any of the Anticipated Transferred
      Employees will be terminating employment with the Seller prior to the Closing
      Date or will not commence employment with Buyer as of the Closing Date,
      (b) none of the Anticipated Transferred Employees have violated any
      confidentiality agreement with Seller and (c) none of the Anticipated
      Transferred Employees have, in the course of their duties as employees of
      Seller, violated any Laws or Seller company policies.

     

    
      
        
        

      

      
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    (b)  The
      Anticipated Transferred Employees receive benefits or are eligible under only
      the employee pension benefit plans, as defined in Section 3(2) of ERISA, as
      are
      listed in Schedule
      3.14
      hereto
      (the “Pension
      Plans”).
      Except as disclosed on Schedule
      3.14,
      Seller
      has maintained or contributed within the last six (6) years to any other
      employee pension benefit plan, as defined in Section 3(2) of ERISA, which was
      subject to Title IV of ERISA.

     

    (c)  The
      Anticipated Transferred Employees receive benefits or are eligible under only
      the employee welfare benefit plans, as defined in Section 3(1) of ERISA
      (including but not limited to, life insurance, medical, hospitalization,
      holiday, vacation, disability dental and vision plans) as are listed on
Schedule
      3.14
      (the
“Welfare
      Plans”).

     

    (d)  The
      Anticipated Transferred Employees receive benefits or are eligible under the
      incentive compensation, material fringe benefit, material payroll or employment
      practice, bonus, option, stock purchase, severance, sick pay, salary
      continuation, deferred compensation, supplemental executive compensation plans,
      employment agreements (other than those terminable at will without severance)
      and consulting agreements listed in Schedule
      3.14
      (the
“Compensation
      Programs”).

     

    (e)  Each
      Pension Plan and Welfare Plan has been operated and administered in substantial
      compliance with ERISA and the Code; each Pension Plan which is intended to
      be
      qualified under Section 401(a) of the Code has been determined by the IRS to
      be
      so qualified or a request for such determination has been timely filed with
      theirs or the Pension Plan is a prototype plan for which the prototype sponsor
      has obtained a favorable IRS opinion letter (and to Seller’s Knowledge, no event
      has occurred between the date of the last such determination and the Closing
      Date that would reasonably be expected to cause the Internal Revenue Service
      to
      revoke such determination).

     

    (f)  All
      amounts required to be paid by any Seller with respect to any Anticipated
      Transferred Employee under each Pension Plan, Welfare Plan and Compensation
      Program on or before the Closing Date have or will be paid.

     

    (g)  Except
      as
      set forth in Schedule
      3.14,
      neither
      the execution and delivery of this Agreement nor the consummation of any of
      the
      transactions contemplated hereby or by the Transaction Documents will (i) result
      in any severance, golden parachute or comparable payment becoming due to any
      Anticipated Transferred Employee, or (ii) increase any benefits otherwise
      payable under any Pension Plan, Welfare Plan or Compensation Program to any
      Anticipated Transferred Employee.

     

    
      
        
        

      

      
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    3.15  Insurance.
      Seller
      maintains insurance policies that it considers adequate, including, without
      limitation, general liability, employer’s liability, business liability and
      errors and omissions policies. All such insurance policies are listed on
Schedule
      3.15
      and are
      in full force and effect and, to Seller’s Knowledge, enforceable in accordance
      with their terms. All of the Specified Assets and the use of the Specified
      Assets of an insurable nature are insured by Seller in such amounts and against
      such losses or risks as it considers adequate.

     

    3.16  No
      Finders.
      Neither
      Seller nor any of its Affiliates is obligated to pay a brokerage commission,
      finder’s fee or other like payment to any third party (which excludes any
      director, officer, employee or consultant of Seller who may receive a bonus
      or
      success fee) in connection with the transactions contemplated hereby or by
      the
      other Transaction Documents.

     

    3.17  Fairness
      Opinion.
      Seller
      has received the opinion of Morgan Joseph & Co., Inc. dated January 2, 2008
      to the effect that as of the date of this Agreement, the consideration to be
      received by Seller in the Acquisition is fair, from a financial point of view,
      to Seller.

     

    3.18  Disclosure.
      Neither
      the representations and warranties of Seller contained in this Article 3 nor
      in
      any statement, schedule, exhibit, certificate or instrument to be furnished
      to
      Buyer by Seller pursuant to or in connection with this Agreement contain an
      untrue statement of a material fact or omit to state any material fact necessary
      in order to make the statements contained herein or therein, in light of the
      circumstances under which they were made, not misleading.

     

    ARTICLE
      4

    REPRESENTATIONS
      AND WARRANTIES OF BUYER

     

    Buyer
      represents and warrants to Seller as follows:

     

    4.1  Organization
      of Buyer and KTD.
      Buyer
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the Japan. KTD is a corporation duly organized, validly existing and
      in
      good standing under the laws of California. Each of Buyer and KTD has all
      necessary power and authority to own its properties and assets and conduct
      the
      business presently being conducted by it.

     

    
      
        
        

      

      
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    4.2  Authority.
      Buyer
      has full power and authority to enter into this Agreement and the other
      Transaction Documents to which it is a party and to perform its obligations
      hereunder or thereunder. KTD has full power and authority to enter into the
      Sublease and to perform its obligations thereunder.This Agreement has been
      duly
      authorized, executed and delivered by all necessary corporate action of Buyer,
      and constitutes a legal, valid and binding agreement of Buyer, enforceable
      against Buyer in accordance with its terms, subject to (a) bankruptcy,
      insolvency, fraudulent transfer, reorganization, moratorium and similar laws
      of
      general applicability relating to or affecting creditors’ rights and to general
      equity principles and (b) laws relating to the availability of specific
      performance, injunctive relief or other equitable remedies. The other
      Transaction Documents have been duly authorized, and upon due execution and
      delivery, will constitute legal, valid and binding agreements of Buyer (and
      KTD
      in the case of the Sublease), enforceable against it in accordance with their
      terms, subject to (a) bankruptcy, insolvency, fraudulent transfer,
      reorganization, moratorium and similar laws of general applicability relating
      to
      or affecting creditors’ rights and to general equity principles and (b) laws
      relating to the availability of specific performance, injunctive relief or
      other
      equitable remedies. No further proceeding on the part of Buyer is necessary
      to
      authorize this Agreement or the other Transaction Documents (or on the part
      of
      KTD in the case of the Sublease) and the transactions contemplated hereby or
      thereby. Neither the execution and delivery of this Agreement or the other
      Transaction Documents nor compliance by Buyer with the terms and provisions
      hereof or thereof will (i) violate or conflict with any provision of the
      applicable corporate organizational documents of Buyer, (ii) violate or conflict
      with any Contract of Buyer, (iii) violate or conflict with any Law to which
      Buyer is subject, or (iv) create any Lien upon any of the assets of
      Buyer.
      Neither
      the execution and delivery of the Sublease nor compliance by KTD with the terms
      and provisions thereof will (i) violate or conflict with any provision of the
      applicable corporate organizational documents of KTD, (ii) violate or conflict
      with any Contract of KTD, (iii) violate or conflict with any Law to which KTD
      is
      subject, or (iv) create any Lien upon any of the assets of KTD.

     

    4.3  Litigation
      and Claims.
      As of
      the date of this Agreement, there are no actions, suits, claims, or proceedings
      pending or, to Buyer’s knowledge, threatened against or by Buyer or KTD in
      connection with or relating to the transactions contemplated by this Agreement
      or the other Transaction Documents, at law, in equity or otherwise, in, before,
      or by, any court, arbitrator, or governmental agency or authority, and, to
      the
      knowledge of Buyer, no reasonable basis for any such claim exists.

     

    4.4  No
      Finders.
      No act
      of Buyer or KTD or any of their Affiliates has given or will give rise to any
      claim against any of the parties hereto for a brokerage commission, finder’s fee
      or other like payment in connection with the transactions contemplated by this
      Agreement.

     

    4.5  Electronic
      Delivery.
      Buyer
      acknowledges that any and all Software of the Seller transferred pursuant to
      this Agreement has been received by electronic transmission. 

     

    
      
        
        

      

      
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    ARTICLE
      5

    CERTAIN
      COVENANTS AND AGREEMENTS

     

    5.1  Approvals
      and Consents/Stockholder Approval.

     

    (a)  As
      promptly as practicable after the execution of this Agreement, Seller will
      use
      commercially reasonable efforts to obtain, at its cost and expense, all
      approvals and Consents of all third parties (other than the Governmental
      Consents required to be obtained by Buyer pursuant to Section 5.2(c) necessary
      for the transactions contemplated herein. Without limiting the generality of
      the
      foregoing, subject to Section 5.6, Seller agrees to take all reasonable action
      necessary or advisable in accordance with the DGCL, the Exchange Act and all
      applicable Laws and Seller’s Certificate of Incorporation and Bylaws to obtain
      the approval of the Seller’s Stockholders of this Agreement and the Acquisition
      at a meeting of the Seller’s Stockholders as soon as practicable after the SEC
      has cleared a proxy statement to be prepared and filed by Seller in accordance
      with the Exchange Act. Seller will, prior to filing the proxy statement, or
      amendments or supplements thereto, with the SEC, consult with Buyer and give
      Buyer a reasonable opportunity to comment thereon. With respect to any
      supplements or other proxy communication (other than press releases) that Seller
      may file with the SEC, Seller shall, to the extent and only to the extent that
      Seller believes that it is reasonable under the circumstances then existing,
      shall consult with Buyer prior to such filings and give Buyer a reasonable
      opportunity to comment thereon.

     

    (b)  None
      of
      the information supplied or to be supplied by or on behalf of Seller for
      inclusion or incorporation by reference in the proxy statement will, at the
      time
      such incorporated documents are filed with the SEC or will, at the time the
      proxy statement is mailed to the Seller’s Stockholders, or at the time of the
      Seller’s Stockholders’ Meeting (hereinafter defined), contain any untrue
      statement of a material fact or omit to state any material fact required to
      be
      stated therein or necessary in order to make the statements therein, in the
      light of the circumstances under which they are made, not misleading. The proxy
      statement will comply as to form in all material respects with the provisions
      of
      the Exchange Act and the rules and regulations promulgated by the SEC
      thereunder, except that no representation or warranty is made by Seller with
      respect to statements made or incorporated by reference therein which are by
      or
      about Buyer or based on information supplied by Buyer for inclusion or
      incorporation by reference in the proxy statement.

     

    
      
        
        

      

      
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    (c)  Seller
      shall promptly take all action necessary in accordance with the DGCL and its
      Certificate of Incorporation and Bylaws and other applicable Laws to call,
      hold
      and convene a meeting of its stockholders to consider the adoption and approval
      of this Agreement and the Acquisition (“Stockholders’
      Meeting”)
      to be
      held as promptly as practicable after the proxy statement has been cleared
      by
      the SEC and that all proxies are voted at such Stockholder’s Meetings in
      accordance with their instructions. Subject to Section 5.6, Seller shall use
      commercially reasonable efforts to solicit from its stockholders proxies in
      favor of the adoption and approval of this Agreement and the Acquisition.
      Notwithstanding anything to the contrary contained in this Agreement, Seller
      may
      adjourn or postpone its Stockholders’ Meeting to the extent necessary to ensure
      that any necessary supplement or amendment to the proxy statement is provided
      to
      its stockholders in advance of a vote on this Agreement or the Acquisition,
      or
      if as of the time for which the Stockholders’ Meeting is originally scheduled
      (as set forth in the proxy statement) there are insufficient shares of Seller
      Common Stock represented (either in person or by proxy) to constitute a quorum
      necessary to conduct the business of such Stockholders’ Meeting or in response
      to an Acquisition Proposal if the Board of Directors of Seller determines,
      after
      consultation with its outside legal counsel and financial advisors, that there
      is a reasonable likelihood that such Acquisition Proposal could lead to a
      Superior Offer and that the failure to do so would result in a breach of the
      Board of Directors’ fiduciary obligations under applicable Law.

     

    (d)  Subject
      to Section 5.6: (i) the Board of Directors of Seller shall recommend that its
      stockholders vote in favor of adoption and approval of this Agreement and the
      Acquisition, at its Stockholder’s Meeting, (ii) the proxy statement shall
      include a statement to the effect that the Board of Directors of Seller has
      recommended that Seller’s Stockholders vote in favor of the adoption and
      approval of this Agreement and approval of the Acquisition, and (iii) neither
      the Board of Directors of Seller nor any committee thereof designated by the
      Board of Directors of Seller shall withdraw, amend or modify, or propose or
      resolve to withdraw, amend or modify in a manner adverse to Buyer, the
      recommendation of the Board of Directors of Seller that Seller’s Stockholders
      vote in favor of adoption and approval of this Agreement and the Acquisition
      (the “Seller
      Recommendation”)
      For
      purposes of this Agreement, references to the “Board of Directors of Seller”
shall refer to actions taken or approved by Seller’s Board of Directors in
      accordance with Seller’s Certificate
      of Incorporation,
      Bylaws
      and the DGCL, and shall not refer to the actions taken by one or more members
      of
      such Board of Directors who do not constitute a majority of the members of
      such
      Board of Directors. Buyer acknowledges and agrees that any acts taken, or
      filings made, by one or more members of Seller’s Board of Directors in his or
      their individual capacities as a director or stockholder, which have not been
      approved by the Board of Directors of Seller or a committee thereof designated
      by the Board of Directors of Seller, shall not be considered acts of Seller,
      and
      Seller shall have no liability under this Agreement for any such
      actions.

     

    5.2  Cooperation
      by Buyer.

     

    (a)  Buyer
      shall execute and deliver such instruments, documents, conveyances or assurances
      and take such other actions as shall be necessary, or otherwise reasonably
      requested by Seller, to confirm and assure the rights and obligations provided
      for in this Agreement or the other Transaction Documents and render effective
      the consummation of the transactions contemplated hereby and
      thereby.

     

    
      
        
        

      

      
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    (b)  None
      of
      the information supplied or to be supplied by or on behalf of Buyer for
      inclusion or incorporation by reference in the proxy statement will, at the
      time
      such incorporated documents are filed with the SEC or will, at the time the
      proxy statement is mailed to the Seller’s Stockholders, or at the time of the
      Stockholders’ Meeting contain any untrue statement of a material fact or omit to
      state any material fact required to be stated therein or necessary in order
      to
      make the statements therein, in the light of the circumstances under which
      they
      are made, not misleading except that no representation or warranty is made
      by
      Buyer with respect to statements made or incorporated by reference therein
      based
      on information supplied by Seller for inclusion or incorporation by reference
      in
      the proxy statement.

     

    (c)  Consistent
      with the provisions of Section 13 of the MDA, if the transfer of any Transferred
      Intellectual Property, or the sublicense of any Other IP, to Buyer requires
      any
      consent, approval, notice, permit, exemption, waiver or authorization from
      any
      governmental, regulatory or administrative body, agency or authority as a result
      of Buyer being a foreign entity (“Governmental
      Consent”),
      Buyer
      shall promptly either (i) if no Governmental Consent would be required if a
      United States Affiliate acquired the Transferred Intellectual Property and
      received the sublicense of the Other IP, assign its rights, but not its
      obligations, hereunder to such Affiliate, or (ii) use its reasonable best
      efforts to obtain, at its cost and expense, all Governmental Consents necessary
      to transfer the Transferred Intellectual Property to Buyer and sublicense the
      Other IP to Buyer. Seller shall provide Buyer with reasonable assistance in
      obtaining any such Governmental Consents.

     

    5.3  Accuracy
      of Representations and Warranties.
      Seller
      shall refrain from taking any action or inaction, except with the prior written
      consent of Buyer, that would rendered any representation, warranty, covenant,
      or
      agreement of Seller in this Agreement inaccurate, or breached, in any material
      respect as of the Closing. At all times prior to the Closing, Seller will
      promptly inform Buyer in writing with respect to any matters hereafter arising
      that, if existing or occurring at the date of this Agreement, would have render
      any representation, warranty, covenant or agreement contained in this Agreement
      as inaccurate, or breached, in any material respect or would have been required
      to be set forth or described on a Schedule hereto.

     

    5.4  Pre-Closing
      Access to Information, Records and Employees.
      Subject
      to Section 11.12, prior to the Closing Seller shall permit Buyer and such
      persons as it may designate, at Buyer’s expense, to visit and inspect any of the
      Specified Assets, and to examine the Seller Product Information and Seller
      Regulatory Information and take copies and extracts therefrom, all at reasonable
      times and upon reasonable notice. Prior to Closing, Seller shall make the
      Anticipated Transferred Employees, available for meetings and/or interviews
      with
      Buyer at such time and with such frequency as may be reasonably requested by
      Buyer without unreasonably disrupting Seller’s operations in order to assist
      Buyer in consummating the transactions contemplated by this
      Agreement.

     

    
      
        
        

      

      
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    5.5  Further
      Assurances.
      At such
      times and from time to time on and after the Closing Date, upon reasonable
      request by Buyer, Seller will execute, acknowledge and deliver, or will cause
      to
      be done, executed, acknowledged and delivered, all such further acts, deeds,
      assignments, transfers, conveyances, powers of attorney, and assurances that
      may
      reasonably be required for the better conveying, transferring, assigning,
      delivering and confirming ownership to, or reducing to the possession of, Buyer
      or its respective successors and assigns all of the Specified Assets and to
      otherwise carry out the purposes of this Agreement; provided, that such
      documents shall not increase the liability or obligations of Seller beyond
      those
      set forth in this Agreement.
      The cost
      of any filing or recording fees for any of the foregoing shall be paid by
      Buyer.

     

    5.6  No
      Solicitation of Other Offers.

     

    (a)  From
      the
      date of this Agreement to the Closing Date, Seller agrees that it shall not,
      and
      shall not authorize or permit any of its officers or authorized agents or
      representatives to directly or indirectly: (i) solicit, initiate, knowingly
      facilitate or induce or encourage any Acquisition Proposal, (ii) participate
      in
      any discussions or negotiations with, or furnish any nonpublic information
      to,
      any Person that has made an Acquisition Proposal, (iii) approve, endorse or
      recommend any Acquisition Proposal (except to the extent specifically permitted
      pursuant to this Section 5.6), or (iv) enter into any letter of intent or
      agreement with respect to any Acquisition Proposal. Seller shall, and shall
      instruct its officers and authorized agents and representatives to, immediately
      cease any and all existing activities, discussions or negotiations with any
      third parties conducted heretofore with respect to any Acquisition Proposal.
      Nothing in this Section 5.6(a) shall be deemed to restrict Seller from having
      the discussions referred to in the definition of Acquisition Proposal to
      determine whether an Acquisition Proposal constitutes a Permitted Acquisition
      Proposal and, if an Acquisition Proposal constitutes a Permitted Acquisition
      Proposal, to engage in any discussions, negotiations or other activities with
      respect to such Permitted Acquisition Proposal, the provisions of this Section
      5.6 being inapplicable to any Permitted Acquisition Proposal.

     

    
      
        
        

      

      
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    (b)  Notwithstanding
      anything to the contrary contained in Section 5.6(a), in the event that Seller
      receives an unsolicited Acquisition Proposal from a Person that the Board of
      Directors of Seller has in good faith concluded (after consultation with its
      financial advisor), will lead to a Superior Offer, it may then take the
      following actions but only if and to the extent that the Board of Directors
      of
      Seller concludes in good faith, following consultation with its outside legal
      counsel, that the failure to do so would be inconsistent with its fiduciary
      obligations under applicable Law: (i) furnish nonpublic information to the
      third
      party making such Acquisition Proposal, provided that (A)(1) concurrently with
      furnishing any such nonpublic information to such party, it gives Buyer written
      notice that it is furnishing nonpublic information in accordance with this
      Section 5.6 and (2) it receives from the third party an executed confidentiality
      agreement containing customary limitations on the use and disclosure of all
      nonpublic written and oral information furnished to such third party on its
      behalf, the terms of which are at least as restrictive as the terms contained
      in
      the Non-Disclosure Agreement between Buyer and Seller in anticipation of this
      Agreement (but which shall not, in any event, contain restrictions on Seller’s
      ability to renegotiate with Buyer) and (B) contemporaneously with furnishing
      any
      such nonpublic information to such third party, it furnishes such nonpublic
      information to Buyer (to the extent such nonpublic information has not been
      previously so furnished); and (ii) engage in negotiations with the third party
      with respect to the Acquisition Proposal, provided that concurrently with
      entering into negotiations with such third party, it gives Buyer written notice
      that it is entering into negotiations with such third party. Notwithstanding
      anything to the contrary contained in this Agreement, Seller shall be permitted
      to (i) effect a change in the Seller Recommendation or enter into an agreement
      with respect to an Acquisition Proposal if Seller has complied with this Section
      5.6 and the other provisions of this Agreement and has received an Acquisition
      Proposal from a third party and the Board of Directors of Seller, after
      consultation with its outside legal counsel and a financial advisor of
      recognized reputation, determines that such Acquisition Proposal constitutes
      a
      Superior Offer, or (ii) outside of the context of an Acquisition Proposal,
      effect a change in the Seller Recommendation if Seller’s Board of Director’s
      determines, after consultation with its outside legal counsel, that the failure
      to do so would constitute a breach of its fiduciary duties under applicable
      law.

     

    (c)  Upon
      receipt of any Acquisition Proposal, Seller shall provide Buyer as promptly
      as
      practicable oral and written notice setting forth all such information as is
      reasonably necessary to keep Buyer informed in all material respects of the
      status and details (including material amendments or proposed material
      amendments) of any such Acquisition Proposal and shall promptly provide to
      Buyer
      a copy of all written materials subsequently provided in connection with such
      Acquisition Proposal, request or inquiry (to the extent such materials of Seller
      has not previously been provided to Buyer). Seller shall provide Buyer with
      forty-eight (48) hours notice of any meeting of its Board of Directors at which
      its Board of Directors is reasonably expected to consider any Acquisition
      Proposal and prior to effecting a change in the Seller Recommendation or
      terminating this Agreement during which time it shall be afforded the
      opportunity to propose to revise the terms of the Acquisition or match the
      terms
      and conditions of the Superior Offer.

     

    (d)  It
      shall
      be understood that any violation of the restrictions contained in Section 5.6
      by
      any officer or authorized agent or representative of Seller shall be deemed
      a
      breach by Seller.

     

    
      
        
        

      

      
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    (e)  Nothing
      contained in this Agreement shall prohibit the Board of Directors of Seller
      from
      taking and disclosing to Seller’s Stockholders a position contemplated by Rule
      14d-9 and Rule 14e-2(a) promulgated under the Exchange Act.

     

    5.7  Maintenance
      of Specified Assets.
      Until
      Seller shall have effected the transfer of the Specified Assets pursuant to
      this
      Agreement, Seller shall (i) maintain the insurance on the Specified Assets
      that
      it presently maintains; and (ii) maintain the condition of the Specified Assets
      so that such Specified Assets continue to be in normal operating condition
      and
      free from any significant defects, ordinary wear and tear excepted, including
      the usual and customary service and maintenance of such Specified Assets. With
      respect to the Transferred Intellectual Property, until Seller shall have
      effected the transfer of the Specified Assets (and without further consideration
      therefore), Seller shall take any and all action as may be reasonably necessary,
      desirable or appropriate to protect, maintain, keep confidential, defend and
      enforce the Transferred Intellectual Property (other than those that Seller
      decided to abandon), including, without limitation, to bring any infringement
      or
      other proceeding, prosecute all claims related to the Transferred Intellectual
      Property, timely and fully pay all fees, respond to all inquiries and actions
      and to take any and all of such other actions available in law or equity,
      consistent with Seller’s past practice (but in any event, not less than
      reasonable measures under the circumstances), to maintain the Transferred
      Intellectual Property (other than those that Seller decided to abandon). Without
      limiting the generality of the foregoing, and for the avoidance of any doubt,
      Seller shall ensure that it is able to continue to make the representations
      and
      warranties contained in Section 3.9 and that such remain true and accurate
      through the Closing Date.

     

    5.8  Enforcement
      of Agreement(s).
      In the
      event that prior to Closing, Seller obtains Knowledge or any reason to believe
      that any employee, former employee or other Person has used confidential
      information of Seller with respect to the Specified Assets in violation of
      the
      terms of any agreement between such Person and Seller, then Seller shall
      immediately notify Buyer in writing of such violation. Prior to Closing, Seller
      shall use its reasonable best efforts to enforce its rights under such
      agreement. Following the Closing, Seller shall use reasonable best efforts
      to
      seek to enforce any rights of Seller, its successors or assigns available under
      such agreements for the benefit of Buyer and Seller shall consult with and
      permit Buyer to participate in any such enforcement action; provided that all
      costs and expenses incurred by Seller after the Closing Date in connection
      with
      such enforcement activities shall be borne solely by Buyer.

     

    5.9  Bulk
      Sales.
      Seller
      shall indemnify Buyer for any non-compliance with any applicable “Bulk Sales”
laws as they pertain to Seller in connection with the sale of the Specified
      Assets to Buyer.

     

    
      
        
        

      

      
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    5.10  Termination
      of Existing Agreements.
      Other
      than the Block License Agreement and the obligation of the Buyer to make
      payments under Section 2.5 of LSA #7, all Existing Agreements shall terminate
      as
      of the Closing; provided, however, (i) all terms in the Existing Agreements
      which by their terms shall survive termination, shall survive this termination
      in accordance with their terms, and (ii) and for a period of six (6) months
      after the Closing, either the Buyer or Seller may bring claims under the
      Existing Agreements against the other party that such party has defaulted in
      its
      obligations under any of the Existing Agreements.
      At the
      Closing, each of Buyer and Seller shall execute and deliver the Assignment
      and
      Assumption Agreement, License Agreement, Sublease Agreement, Sublicense
      Agreement and Escrow Agreement. Buyer shall cause KTD to execute and deliver
      the
      Sublease at the Closing. 

     

    5.11  Employees
      and Employee Benefit Matters.

     

    (a)  Buyer
      will offer employment agreements or employment offer letters, as the case may
      be, to the Anticipated Transferred Employees to be effective only upon Closing,
      upon terms and conditions that are substantially similar as those provided
      by
      Seller on the date hereof, subject to changes in the ordinary course of business
      (other than annual salary increases or bonuses that are not atypical from those
      awarded in prior years) between the date hereof and the Closing, as consented
      to
      by Buyer and such modifications as are agreed to between each such Anticipated
      Transferred Employee and the Buyer (including, without limitation, that the
      Anticipated Transferred Employee will not receive equity or options to acquire
      equity in the Buyer or its Affiliates) and authorizing Buyer to assume the
      liabilities and obligations of Seller described in clause (a) of Section 2.5
      in
      lieu of Seller fulfilling such obligations. Each Transferred Employee shall,
      prior to commencement of employment with Buyer (a) execute an agreement agreeing
      to provide services to Buyer for a period of 24 months from the Closing, subject
      to customary termination provisions and (b) execute an employment agreement
      with
      each such Transferred Employee restricting such employee to the extent permitted
      by applicable law from competing, or being employed by an entity which competes
      with the Buyer or disclosing or using confidential information or soliciting
      customers or employees of Buyer during or after termination of his or her
      employment with Buyer and execute such other agreements assigning to Buyer
      any
      such similar agreements in effect with Seller. Prior to delivering any
      employment agreements or employment offer letter to any Anticipated Transferred
      Employee, Buyer shall provide a true and correct copy thereof to Seller for
      its
      review and comment. Prior to Closing, Buyer shall not delete, terminate or
      waive
      any provision in an employment agreement or employment offer letter with respect
      to Buyer’s assumption of the liabilities and obligations of Seller described in
      clause (a) of Section 2.5. In connection with each offer of employment by Buyer,
      Buyer shall offer to each Anticipated Transferred Employee at Closing a
      retention package providing for payments to be made within a specified period
      after Closing, as determined by Buyer and for which Buyer will be responsible
      for each Transferred Employee remaining an employee of Buyer on the specified
      date.

     

    
      
        
        

      

      
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    (b)  Seller
      shall cooperate with Buyer and use reasonable efforts to assist Buyer in
      obtaining the acceptance of offers of employment by all Anticipated Transferred
      Employees.

     

    (c)  Except
      as
      otherwise expressly provided herein, nothing contained herein shall restrict
      Buyer in the future in the exercise of its independent business judgment as
      to
      the terms and conditions under which such employment shall continue, the
      duration of such employment, the basis on which such employment is terminated
      or
      the benefits provided to Transferred Employees.

     

    (d)  Except
      as
      expressly provided in Section 2.5 or Section 5.11(a) Buyer shall not assume
      or
      be liable for or be required to maintain any Welfare Plan, Pension Plan or
      Compensation Program that Seller sponsors, contributes to, or participates
      in on
      the date hereof, or for which Seller has or may have, whether or not disclosed
      under this Agreement or in a Schedule.

     

    (e)  Other
      than as specifically set forth in Section 2.5 or Section 5.11(a), Seller shall
      be responsible for the payment of any amounts due to its employees pursuant
      to
      its Welfare Plan, Pension Plan and Compensation Plans or any other employee
      benefit plans of Seller as a result of the employment of the Transferred
      Employees prior to the Closing Date.

     

    5.12  Employee
      Files.
      To the
      extent authorized by an Anticipated Transferred Employee, on or prior to the
      Closing Date, Seller shall deliver to a designee of Buyer a copy of all
      historical personnel and medical records of such Anticipated Transferred
      Employee, including, but not limited to, employment agreements, confidentiality
      and noncompete agreements, employment applications, disciplinary reports, other
      similar documents and all medial records. Buyer acknowledges that no Anticipated
      Transferred Employee has any obligation to provide such authorization, that
      Seller has any obligation to obtain any such authorization, and, if such
      authorization is provided, Buyer shall be solely responsible for any unlawful
      use or disclosure by it of any such personnel or medical records.

     

    5.13  Past
      Service Credit.
      For
      purposes of eligibility, waiting periods and vesting, Buyer shall, with respect
      to each benefit plan, policy, program or arrangement maintained by the Buyer
      after the Closing Date, credit each Transferred Employee with all service
      credited to such Transferred Employees under Seller’s corresponding plan,
      policy, program or arrangement applicable to such Transferred Employee as of
      the
      Closing Date, except that the case of KTD’s 401(k) plan, such vesting credit as
      to the matching employer contribution shall be only to the extent permissible
      under such plan.

     

    
      
        
        

      

      
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    5.14  Affirmative
      Covenants of Seller.

     

    (a)  From
      the
      date hereof until the earlier of the Closing Date or the termination of this
      Agreement, unless the prior written consent of Buyer shall have been obtained,
      and except as otherwise expressly contemplated herein, Seller
      shall:

     

    (i)
      with
      respect to the Specified Assets and the Existing Agreements, operate its
      business in the ordinary and usual course of business, consistent with the
      past
      practices;

     

    (ii)
      use
      reasonable best efforts to preserve intact and maintain its business
      organization, licenses and permits;

     

    (iii)
      use
      reasonable best efforts to maintain the services of the Anticipated Transferred
      Employees on substantially the terms and conditions as those existing prior
      to
      the date hereof and to prevent any material or adverse changes to relations
      with
      those employees;

     

    (iv)
      keep
      and
      maintain the Fixed Assets in their present condition, repair and working order,
      except for normal depreciation and wear and tear, and maintain its insurance,
      rights and licenses;

     

    (v)
      use
      reasonable best efforts to maintain and protect the Transferred Intellectual
      Property, keep confidential all information regarding the Transferred
      Intellectual Property and enforce the provisions of all confidentiality
      agreements with all persons;

     

    (vi)
      perform
      in all material respects all obligations under this Agreement; and

     

    (vii)
      notify
      Buyer of (i) any event or circumstance of which Seller has Knowledge which
      would
      reasonably be expected to constitute a Material Adverse Effect or would cause
      or
      constitute a breach of any representations, warranties or covenants of Seller
      contained herein or (ii) any material change in the Specified
      Assets.

     

    5.15  Negative
      Covenants of Seller.
      From
      the date hereof until the earlier of the Closing Date or the termination of
      this
      Agreement, Seller will not do any of the following without the prior written
      consent of Buyer:

     

    (i)
      take
      any
      action which would (a) adversely affect the Seller’s ability of obtain any
      Consents required for the transactions contemplated thereby, or (b) adversely
      affect the ability of any party hereto to perform its covenants and agreements
      under the Transaction Documents or (c) cause any of the Seller’s representations
      to become untrue or inaccurate;

     

    
      
        
        

      

      
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    (ii)
      amend
      any
      of its organization or governing documents;

     

    (iii)
      impose,
      or suffer the imposition, on any Specified Asset any Lien or permit any such
      Lien to exist;

     

    (iv)
      other
      than pursuant to the Transaction Documents, sell, pledge or encumber, or enter
      into any contract to sell, pledge or encumber, any interest in the Specified
      Asset; or

     

    (v)
      alter
      the
      compensation or benefits to any Anticipated Transferred Employee as described
      on
      Schedule 3.14, except in accordance with past practice; or pay any severance
      or
      termination pay or any bonus to any Anticipated Transferred Employee other
      than
      pursuant to written policies or written contracts in effect as of the date
      hereof and disclosed on Schedule 3.14 or the provisions of Section 5.11(b);
      or
      enter into or amend any agreements with any Anticipated Transferred
      Employee.

     

    5.16  Covenant
      Not to Solicit.

     

    (a)  For
      two
      (2) years from and after the Closing Date, neither Seller nor any of its
      Affiliate will directly or indirectly, solicit to hire (other than a
      solicitation by general advertisement), hire, divert, entice away (or in any
      manner persuade or attempt to do any of the foregoing), any Transferred Employee
      or any employee of KTD other than a Transferred Employee who is terminated
      by
      Buyer or KTD as part of a reduction in workforce or lay-off.

     

    (b)  From
      the
      date hereof until April 30, 2010, neither Buyer nor any of its Affiliates will,
      directly or indirectly, without the prior written approval of Seller, solicit
      to
      hire (other than a solicitation by general advertisement), hire, divert, entice
      away (or in any manner persuade or attempt to do any of the foregoing) any
      Anticipated Transferred Employee or other current employee of Seller, or
      encourage any Transferred Employee or other current employee of Seller to
      terminate his or her employment with Seller, except as described in Section
      5.11(a) or with respect to an employee who is terminated by Seller as part
      of a
      reduction in workforce or lay-off.

     

    (c)  The
      parties agree that the covenants contained herein are reasonable under the
      circumstances and further agree that the covenants contained in this Section
      5.16(a) should be interpreted in such a manner as to be effective and valid
      under applicable Law.

     

    
      
        
        

      

      
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    5.17  Engineering
      Fees.
      For the
      period commencing on February 1, 2008 and continuing until the earlier of
      Closing or termination of this Agreement, Buyer agrees that it will pay to
      Seller for the continued provision by Seller of the services described under
      the
      Memorandum of Understanding and the Master Development Agreement which are
      part
      of the Existing Agreements and such provision of services to be performed in
      a
      manner consistent with past practice, a monthly fee (prorated for the actual
      number of days in any incomplete month) of $625,000 (the “Engineering
      Fee”).
      The
      Engineering Fee is based on the number of engineers presently working on Buyer’s
      projects spending 14,500 hours per quarter (prorated for the actual number
      of
      days in any incomplete quarter), and, to the extent services are provided at
      Buyer’s request which result in more than 14,500 hours of service as in any
      quarter on Buyer’s projects, as documented with reasonable specificity, the
      Engineering Fee shall be proportionately increased at an hourly rate to be
      agreed upon by Buyer and Seller, but which shall not be less than the current
      hourly rate.

     

    5.18  Supplementation
      and Amendment of Schedules.
      From
      time to time prior to the Closing, the Seller shall have the right to supplement
      and amend, and Buyer shall have the right to comment upon and approve such
      supplementation and amendment of, the Schedules to this Agreement with respect
      to any matter; provided,
      however,
      that
      for purposes of determining whether the conditions set forth in Section
      6.1
      have
      been fulfilled, the Schedules shall be deemed to exclude all information
      contained in any amendment or supplement thereto delivered pursuant to this
      Section
      5.18
      to the
      extent that any such supplements or amendments individually or in the aggregate
      reflects a Material Adverse Effect.

     

    ARTICLE
      6

    CONDITIONS
      TO BUYER’S OBLIGATIONS

     

    The
      obligations of Buyer under this Agreement shall, at its option, be subject
      to
      the satisfaction, on or prior to the Closing Date, of all of the following
      conditions:

     

    6.1  Representations,
      Warranties and Covenants.
      The
      representations and warranties of Seller herein that are qualified by
      materiality shall be true on the Closing Date with the same effect as though
      made at such time, and any such representations and warranties that are not
      so
      qualified shall be true in all material respects. Seller shall in all material
      respects have performed all of its obligations and complied with all of its
      covenants herein prior to or as of the Closing Date. Seller shall have delivered
      to Buyer a certificate in form and substance satisfactory to Buyer dated as
      of
      the Closing Date and executed by its chief executive officer to all such
      effects.

     

    6.2  Approvals
      and Consents.
      All
      permissions, releases, Consents, approvals, governmental or otherwise (other
      than necessary Governmental Consents for which Buyer is responsible under the
      terms of this Agreement), on the part of Seller to consummate the transactions
      contemplated hereunder shall have been obtained.

     

    6.3  No
      Injunction, etc.
      Consummation of the transactions contemplated by this Agreement or any of the
      Transaction Documents shall not have been restrained, enjoined or otherwise
      prohibited by any order, injunction, decree or judgment of any court or other
      governmental authority. No court or other governmental authority shall have
      determined that any applicable Law makes illegal the consummation of the
      transactions contemplated by the Transaction Documents.

     

    
      
        
        

      

      
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    6.4  Transfer
      Documents.
      Buyer
      shall have received from Seller such instruments of transfer, assignment,
      conveyance and other instruments sufficient to convey, transfer and assign
      to
      Buyer all right, title and interest in the Specified Assets, free and clear
      of
      all Liens, all in form and substance reasonably satisfactory to the parties,
      including but not limited to the Assignment and Assumption Agreement, the Bill
      of Sale and patent assignments.

     

    6.5  Other
      Transaction Documents.
      Seller
      shall have executed and delivered the License Agreement, the Sublease, the
      Escrow Agreement and the Sublicense Agreement.

     

    6.6  Secretary’s
      Certificate.
      Buyer
      shall have received from Seller a certificate, dated as of the Closing Date,
      executed by the Secretary of Seller, certifying the incumbency of the Seller’s
      executive officers who are executing the Transaction Documents and any
      certificates, and the authenticity of the resolutions authorizing the
      transactions contemplated by this Agreement and the other Transaction
      Documents.

     

    6.7  Stockholder
      Approval.
      Seller
      shall have obtained the Seller Stockholder Approval.

     

    6.8  Employees.
      Buyer
      shall have reached agreement with the Key Transferred Employees and the Minimum
      Transferred Employee Amount shall have agreed to accept employment by Buyer
      and
      agreed to commence employment with Buyer as of the Closing Date in accordance
      with the terms of Section 5.11 and such Key Transferred Employees and Minimum
      Transferred Employee Amount shall commence employment with Buyer as of the
      Closing Date.

     

    6.9  No
      Material Adverse Effect.
      No
      Material Adverse Effect shall have occurred with respect to any of the Specified
      Assets and no material loss or damage to all or any material portion of the
      Specified Assets shall have occurred.

     

    6.10  Opinion.
      Buyer
      shall have received an opinion of counsel to Seller with respect to the matters
      set forth in Schedule 6.10.

     

    
      
        
        

      

      
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    ARTICLE
      7

    CONDITIONS
      TO SELLER’S OBLIGATIONS

     

    The
      obligations of Seller under this Agreement shall, at its option, be subject
      to
      the satisfaction, on or prior to the Closing Date, of all of the following
      conditions:

     

    7.1  Representations,
      Warranties and Covenants.
      The
      representations and warranties of Buyer herein that are qualified by materiality
      shall be true on the Closing Date with the same effect as though made at such
      time and any such representations and warranties that are not so qualified
      shall
      be true in all material respects. Buyer shall in all material respects have
      performed all of its obligations and complied with all of its covenants herein
      prior to or as of the Closing Date. Buyer shall have delivered to Seller a
      certificate in form and substance satisfactory to Seller dated as of the Closing
      Date and executed by an authorized officer to all such effects.

     

    7.2  Approvals;
      Consents.
      All
      Consents and Governmental Consents, governmental or otherwise, necessary on
      the
      part of Buyer to consummate the transactions contemplated hereunder shall have
      been obtained.

     

    7.3  No
      Injunction, etc.
      Consummation of the transactions contemplated by this Agreement or any of the
      other Transaction Documents shall not have been restrained, enjoined or
      otherwise prohibited by any order, injunction, decree or judgment of any court
      or other governmental authority. No court or other governmental authority shall
      have determined that any applicable Law makes illegal the consummation of the
      transactions contemplated by the Transaction Documents.

     

    7.4  Other
      Transaction Documents.
      Buyer
      shall have executed and delivered the Assignment and Assumption Agreement,
      License Agreement, Sublease, Sublicense Agreement and Escrow Agreement, and
      KTD
      shall have executed and delivered the Sublease.

     

    7.5  Secretary’s
      Certificate.
      Seller
      shall have received from Buyer a certificate, dated as of the Closing Date,
      executed by the Secretary of Buyer, certifying the incumbency of the Buyer’s
      executive officers who are executing the Transaction Documents and any
      certificates, and the authenticity of the resolutions authorizing the
      transactions contemplated by this Agreement and the other Transaction
      Documents.

     

    7.6  Stockholder
      Approval.
      Seller
      shall have obtained the Seller Stockholder Approval.

     

    7.7  Opinion.
      Seller
      shall have received an opinion of counsel to Buyer with respect to the matters
      set forth in Schedule 7.7.

     

    
      
        
        

      

      
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    ARTICLE
      8

    CLOSING

     

    8.1  Closing
      Date.
      The
      consummation of the transactions provided for herein (the “Closing”) shall take
      place at 9:00 a.m. (California time) on the third Business Day after all
      conditions to Closing have been satisfied or waived, or on such other date
      and/or at such other time as the parties may agree upon (the “Closing
      Date”).
      The
      Closing shall take place at such place or in such other manner (e.g., by
      telecopy exchange of signature pages with originals to follow by overnight
      delivery) as the parties hereto may agree.

     

    8.2  Software
      Deliveries.
      Delivery of all Software which is included in the Specified Assets shall be
      made
      solely by Buyer electronically accessing an online site designated by Seller,
      and shall not be accomplished by delivery of any physical tangible
      property.

     

    8.3  Proceedings.
      All
      proceedings taken and all documents executed and delivered by the parties hereto
      at the Closing shall be deemed to have been taken and executed simultaneously
      and no proceedings shall be deemed taken nor any documents executed or delivered
      until all have been taken, executed and delivered.

     

    ARTICLE
      9

    INDEMNIFICATION

     

    9.1  Indemnification
      of Buyer.
      Seller
      shall indemnify, defend and hold harmless Buyer and each of its Subsidiaries,
      divisions, officers, directors, and employees (the “Buyer
      Indemnified Parties”)
      from
      and against and in respect of any and all demands, claims, actions or causes
      of
      action, assessments, losses, damages, liabilities, interest and penalties,
      costs
      and expenses (including, without limitation, reasonable legal fees and
      disbursements incurred in connection therewith and in seeking indemnification
      therefore, and any amounts or expenses required to be paid or incurred in
      connection with any action, suit, proceeding, claim, appeal, demand, assessment
      or judgment) whether or not involving a third-party claim, but excluding any
      punitive, special, incidental or consequential damages (collectively
“Indemnifiable
      Losses”),
      directly or indirectly resulting from, arising out of, or imposed upon or
      incurred by any Buyer Indemnified Party from and after the Closing, by reason
      of
      any one or more of the following:

     

    (a)  Any
      breach of any representation or warranty of Seller contained in this Agreement,
      or any agreement, certificate or document executed and delivered by Seller
      pursuant hereto or in connection with any of the transactions contemplated
      by
      this Agreement;

     

    (b)  Any
      breach of any covenant or obligation of Seller contained in this Agreement,
      or
      any agreement, certificate or document executed and delivered by Seller pursuant
      hereto or in connection with any of the transactions contemplated by this
      Agreement; 

     

    (c)  Any
      failure by Seller to satisfy, perform, pay, discharge or resolve any liabilities
      and obligations of, or claims against, Seller not included within the Assumed
      Liabilities; 

     

    
      
        
        

      

      
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    (d)  Except
      as
      set forth on Schedule 3.9(g), the failure by Seller as of the Closing to have
      had valid and enforceable rights in the Owned IP, which are granted and issued
      Patents, and the remainder of the Transferred Intellectual
      Property;

     

    (e)  The
      failure of the Seller to have timely and fully responded to all office actions
      or other comments, actions or filings of any kind made by any governmental
      entity with respect to any IP Application to the full satisfaction of the
      applicable governmental entity;

     

    (f)  Any
      of
      Seller’s Patents is invalidated or is held unenforceable as a result of Seller
      or any officer, employee or agent of Seller having made (i) an untrue statement
      of a material fact or fraudulent statement to any governmental authority, or
      (ii) having failed to disclose a material fact required to be disclosed to
      any
      governmental authority; or

     

    (g)  Any
      and
      all actions, suits, proceedings, claims or demands by third parties, or
      assessments or judgments in their favor, directly resulting or arising from
      any
      of the foregoing or any allegations thereof.

     

    9.2  Indemnification
      of Seller.
      Buyer
      shall indemnify, defend and hold harmless Seller and each of its subsidiaries,
      divisions, officers, directors and employees (the “Seller
      Indemnified Parties”
and
      together with the Buyer Indemnified Parties, the “Indemnified
      Parties”)
      from
      and against and in respect of any and all Indemnifiable Losses resulting from,
      arising out of, or imposed upon or incurred by any Seller Indemnified Party
      from
      and after the Closing by reason of the following:

     

    (a)  Any
      breach of any representation or warranty of Buyer contained in this Agreement
      or
      any agreement, certificate or document executed and delivered by Buyer pursuant
      hereto or in connection with the transactions contemplated by this
      Agreement;

     

    (b)  Any
      breach of any covenant or obligation of Buyer contained in this Agreement or
      any
      agreement, certificate or document executed and delivered by Buyer pursuant
      hereto or in connection with the transactions contemplated by this
      Agreement;

     

    (c)  Any
      and
      all Indemnifiable Losses arising out of the use of the Specified Assets by
      Buyer
      after the Closing Date (but excluding for this purpose any such use of Specified
      Assets by Seller under the License Agreement);

     

    (d)  Buyer’s
      failure to satisfy, perform, pay, discharge or resolve any Assumed Liability;
      or

     

    
      
        
        

      

      
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    (e)  Any
      and
      all actions, suits, proceedings, claims or demands by third parties, or
      assessments or judgments in their favor, directly resulting or arising from
      any
      of the foregoing or any allegations thereof.

     

    9.3  Third-Party
      Claims and Other Claims.

     

    (a)  If
      a
      claim by a third party is made against any Indemnified Party, and if the
      Indemnified Party intends to seek indemnity with respect thereto under this
      Article 9, such Indemnified Party shall promptly notify the indemnifying party
      of such claim; provided, however, that failure to give timely notice shall
      not
      affect the rights of the Indemnified Party so long as the failure to give timely
      notice does not adversely affect the indemnifying party’s ability to defend such
      claim against a third party and the indemnifying party shall be entitled to
      settle or assume the defense of such claim, including the employment of counsel
      reasonably satisfactory to the Indemnified Party. If the indemnifying party
      elects to settle or defend such claim, the indemnifying party shall notify
      the
      Indemnified Party within thirty (30) days (but in no event less than ten (10)
      days before any pleading, filing or response on behalf of the Indemnified Party
      is due) of the indemnifying party’s intent to do so. If the indemnifying party
      elects not to settle or defend such claim or fails to notify the Indemnified
      Party of the election within thirty (30) days (or such shorter period provided
      above) after receipt of the Indemnified Party’s notice of a claim of indemnity
      hereunder, the Indemnified Party shall have the right to contest, settle or
      compromise the claim without prejudice to any rights to indemnification
      hereunder. Regardless of which party is controlling the settlement of defense
      of
      any claim, (i) both the Indemnified Party and indemnifying party shall act
      in
      good faith, (ii) the indemnifying party shall not thereby permit to exist any
      lien, encumbrance or other adverse charge upon any asset of any Indemnified
      Party or of its subsidiaries, (iii) the indemnifying party shall permit the
      Indemnified Party to participate in such settlement or defense through counsel
      chosen by the Indemnified Party, with all fees, costs and expenses of such
      counsel borne by the Indemnified Party, unless the indemnifying party and
      Indemnified Party have available inconsistent defenses to such third-party
      claim, in which case such fees, costs and expenses shall be borne by the
      indemnifying party, (iv) no entry of judgment or settlement of a claim may
      be
      agreed to without the written consent of the Indemnified Party, which consent
      shall not be unreasonably withheld, and (v) the indemnifying party shall
      promptly reimburse the Indemnified Party for the indemnified amount as incurred
      by the Indemnified Party pursuant to this Article 9. So long as the indemnifying
      party is reasonably contesting any such third party claim in good faith as
      permitted herein, the Indemnified Party shall not pay or settle any such claim
      (or, if it does, it shall not be indemnified for such settlement amount).
      Notwithstanding anything to the contrary contained herein, if the claim could
      result in a judgment which could adversely affect Seller’s licenses or business
      relationships with any of its customers, Seller may control the defense of
      the
      claim even if Seller is the Indemnified Party. The controlling party shall
      upon
      request deliver, or cause to be delivered, to the other party copies of all
      correspondence, pleadings, motions, briefs, appeals or other written statements
      relating to or submitted in connection with the settlement or defense of any
      such claim, and timely notices of any hearing or other court proceeding relating
      to such claim.

     

    
      
        
        

      

      
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    (b)  A
      claim
      for indemnification for any matter not involving a third-party claim may be
      asserted by notice to the party from whom indemnification is sought. Such notice
      shall state the amount of Indemnifiable Losses, if known, the method of
      computation thereof, and contain a reference to the provisions of the Agreement
      in respect to which such right of indemnification is claimed or
      arises.

     

    9.4  Indemnification
      Limitations.

     

    (a)  Except
      with respect to claims based on fraud and except for other remedies specifically
      provided for elsewhere in this Agreement (including with respect to specific
      performance), the rights of the Buyer Indemnified Parties under this Article
      9
      shall be the sole and exclusive post-Closing remedies of the Buyer Indemnified
      Parties with respect to claims resulting from or relating to any breach of
      a
      representation or warranty by Seller contained in this Agreement or the other
      Transaction Documents or any claim for indemnification under Sections 9.1(d),
      (e) and (f).

     

    (b)  Neither
      party shall have liability with respect to claims under this Article 9 until
      the
      total of all Indemnifiable Losses with respect to such matters exceeds One
      Hundred Thousand Dollars ($100,000) in which case, the Indemnified Parties
      shall
      be entitled to indemnification to the full amount of Indemnifiable Losses
      incurred by them for the amount of Indemnifiable Losses in excess of One Hundred
      Thousand Dollars ($100,000).

     

    (c)  (i)
      Subject
      to the limitations set forth in this Article 9, if Buyer believes that it has
      a
      claim for indemnification pursuant to Section 9.1 (a “Buyer Claim”), the amount
      of which is then known, the Buyer shall, as soon as reasonably practicable
      after
      it becomes aware of such Buyer Claim, notify the Seller of such Buyer Claim
      by
      means of a written notice describing the Buyer Claim in reasonable detail and
      setting forth the Buyer’s good faith calculation of the Indemnifiable Losses
      incurred by the Buyer with respect thereto (a “Buyer Claim Notice”). If, by the
      thirtieth (30th)
      day
      following receipt of a Buyer Claim Notice by the Seller and others identified
      in
      the Notice section of this Agreement (the “Indemnification Dispute Period”), (x)
      the Buyer has not received from the Seller notice in writing that the Seller
      objects to the Buyer Claim Notice (or the amount of Indemnifiable Losses set
      forth therein) asserted in such Buyer Claim Notice (an “Indemnification Dispute
      Notice”), and (y) if such Buyer Claim shall have been made prior to the Escrow
      Termination Date, the Buyer and the Seller shall deliver a joint written
      instruction to the Escrow Agent instructing the Escrow Agent to pay to the
      Buyer
      or to reserve from the Escrow Fund the amount of Indemnifiable Losses specified
      in the Buyer Claim Notice subject to the limitations contained in this Article
      9. If the Indemnifying Party is the Seller, the Seller will be entitled to
      defend, settle or compromise a Buyer Claim using the Escrow Fund, and the Seller
      and the Buyer shell jointly instruct the Escrow Agent to release funds held
      under by the Escrow Agreement for this purpose in accordance with the provisions
      of the Escrow Agreement.

     

    
      
        
        

      

      
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    (ii)
      f
      the
      Seller delivers an Indemnification Dispute Notice to the Buyer within the
      Indemnification Dispute Period, the Buyer and the Seller shall promptly meet
      and
      use their reasonable efforts to settle the dispute as to whether and to what
      extent the Buyer Indemnitees are entitled to reimbursement on account of such
      Buyer Claim Notice. If the Buyer and the Seller are able to reach agreement
      within thirty (30) days after the Buyer receives such Indemnification Dispute
      Notice, and if such Buyer Claim Notice shall have been made prior to the Escrow
      Termination Date, the Buyer and the Seller shall deliver a joint written
      instruction to the Escrow Agent setting forth such agreement and instructing
      the
      Escrow Agent to pay the Buyer or to reserve from the Escrow Fund an amount
      in
      accordance with such agreement. If the Buyer and the Seller are unable to reach
      agreement within thirty (30) days after the Buyer receives such Indemnification
      Dispute Notice, then either the Buyer or the Seller may resort to other legal
      remedies. For all purposes of this Section 9.4, the Buyer and the Seller shall
      cooperate with an make available to the other Party and its respective
      representatives all information, records and data, and shall permit reasonable
      access to its facilities and personnel, as may be reasonably required in
      connection with the resolution of such disputes.

     

    (d)  Notwithstanding
      anything to the contrary in the Agreement, the total amount of Indemnifiable
      Losses that either party shall be obligated to pay to the other party shall
      not
      exceed Four Million Dollars ($4,000,000).

     

    (e)  The
      provisions of this Section 9.4 shall not apply to Indemnifiable Losses resulting
      from, arising out of, or based upon (i) any fraud or intentional
      misrepresentation by Seller or Buyer; (ii) any failure by Seller to deliver
      to
      Buyer all Specified Assets in accordance with this Agreement; (iii) any failure
      by Seller to satisfy, perform, pay, discharge or resolve the liabilities and
      obligations of, and claims against, Seller included within the Retained
      Liabilities; (iv) any failure by Buyer to satisfy, perform, pay, discharge
      or
      resolve the liabilities and obligations of, and claims against, Buyer included
      within the Assumed Liabilities; (v) a breach by Seller of any covenant or
      agreement (other than those contained in this Article 9) to be performed by
      Seller after the Closing under this Agreement or any other Transaction Document,
      or (vi) a breach by Buyer of any covenant or agreement (other than those
      contained in this Article 9) to be performed by Buyer after the Closing under
      this Agreement or any other Transaction Document; or (vii) a breach by Seller
      of
      any of the representations and warranties contained in the first sentence of
      Section 3.8. For purposes of determining the amount of any Indemnifiable Losses,
      any breach of or inaccuracy in any representation or warranty shall be
      determined without regard to any materiality qualifier set forth in such
      representation or warranty, and all references to materiality qualifiers shall
      be ignored for purposes of determining whether such representation or warranty
      was true and correct when made.

     

    
      
        
        

      

      
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    9.5  Cooperation
      as to Indemnified Liability.
      Each
      party hereto shall reasonably cooperate with the other parties with respect
      to
      access to books, records, or other documentation within such party’s control
      that is not confidential information of a third party, if deemed reasonably
      necessary or appropriate by any party in the defense of any claim that may
      give
      rise to indemnification hereunder.

     

    9.6  Nature
      of Indemnification.
      The
      Indemnified Party’s right to indemnification and payment of Indemnifiable
      Losses, or other remedy, based on the Indemnified Party’s representations,
      warranties, covenants and obligations, shall not be affected by any
      investigation conducted by the Indemnified Party or any knowledge acquired
      (or
      capable of being acquired) at any time by the indemnified party, whether before
      or after the execution and delivery of this Agreement or the Closing, with
      respect to the accuracy or inaccuracy of or compliance with, any such
      representation, warranty, covenant or obligation, provided, however, that the
      Indemnified Party shall be obligated to disclose to the indemnifying party
      any
      such information uncovered by the Indemnified Party and allow the indemnifying
      party a reasonable time to cure such inaccuracy or non-compliance with, any
      such
      representation, warranty, covenant or obligation. The parties recognize and
      agree that the parties’ respective knowledge, and the waiver of any condition
      based on the accuracy of any representation or warranty, or on the performance
      of or compliance with any covenant or obligation, shall not affect the right
      to
      indemnification or payment of Indemnifiable Losses pursuant to this Article
      9,
      or other remedy, based on such representations, warranties, covenants, and
      obligations.

     

    9.7  Calculation
      of Damages.
      The
      amount of any Indemnifiable Losses for which indemnification is provided under
      this Article 9 shall be reduced by any insurance proceeds that the Indemnified
      Party actually is entitled to receive (and does receive) pursuant to any
      insurance policy on account of the matter resulting in such Indemnifiable
      Loss.

     

    9.8  Tax
      Treatment.
      The
      parties shall report any indemnification payment made pursuant to this Article
      9
      as a purchase price adjustment unless otherwise required by law.

     

    ARTICLE
      10

    TERMINATION

     

    10.1  Termination
      Prior to Closing.
      Notwithstanding any contrary provisions of this Agreement, the respective
      obligations of the parties hereto to consummate the Closing may be terminated
      and abandoned at any time at or before the Closing only as follows:

     

    
      
        
        

      

      
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    (a)  By
      and at
      the option of Buyer if the Closing shall not have occurred by June 30, 2008;
      provided that Buyer shall not have breached in any material respect its
      obligations under this Agreement in any manner that shall have been the
      proximate cause of, or resulted in, the failure to consummate the
      Closing.

     

    (b)  By
      and at
      the option of Seller if the Closing shall not have occurred by June 30, 2008,
      provided that Seller shall not have breached in any material respect its
      obligations under this Agreement in any manner that shall have been the
      proximate cause of, or resulted in, the failure to consummate the
      Closing.

     

    (c)  At
      any
      time, without liability of any party to the others, upon the mutual written
      consent of Buyer and Seller.

     

    (d)  By
      either
      Buyer or Seller in the event the Seller Stockholder Approval of the Acquisition
      is not obtained at the Seller’s Stockholder Meeting at which such matters were
      presented to such stockholders for approval and voted upon; provided, however,
      that the right to terminate this Agreement under this Section 10.1(d) shall
      not
      be available to Seller where the failure to obtain the Seller Stockholder
      Approval shall have been caused by the action or failure to act by Seller and
      such action or failure to act constitutes a material breach by Seller of this
      Agreement; or

     

    (e)  By
      Buyer
      in the event that (i) the Board of Directors of Seller shall have failed to
      include in the proxy statement the Seller Recommendation, without modification
      or qualification, or (ii) the Board of Directors of Seller shall have made
      a
      change in the Seller Recommendation; or

     

    (f)  By
      Seller
      (provided that Seller has complied with Sections 5.1 and 5.6 hereof), if (i)
      the
      Board of Directors of Seller accepts a Superior Offer; and (ii) Seller shall
      have rendered to Buyer payment in full of the amount specified in Section 11.5
      concurrently with delivery of its final notice of termination pursuant to this
      Section 10.1(f); or

     

    (g)  By
      either
      Buyer or Seller (provided that the terminating Party is not then in material
      breach of any representation, warranty, covenant, or other agreement contained
      in this Agreement) in the event that any of the conditions precedent to the
      obligations of such Party (as contained in Article 6 and 7, as applicable)
      to
      consummate the Acquisition is incapable of being satisfied or fulfilled by
      June
      30, 2008; or 

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    (h)  By
      either
      Buyer or Seller, if the other party has materially breached any representations,
      warranty, covenant or agreement contained herein and has not cured within five
      (5) Business Days or it is unable to be cured.

     

    10.2  Effect
      of Termination.
      In the
      event of the termination of this Agreement as provided in Section 10.1, written
      notice thereof shall forthwith be given to the other party specifying the
      provision hereof pursuant to which such termination is made, and this Agreement
      shall forthwith become null and void (except for the provisions of Section
      5.16(a) and (b), this Section 10.2, and Article 11 of this Agreement, which
      shall survive such termination) and there shall be no liability on the part
      of
      Buyer or Seller, except (i) as set forth in Section 11.5, and (ii) for damages
      resulting from any breach by Buyer or Seller of this Agreement. 

     

    ARTICLE
      11

    MISCELLANEOUS

     

    11.1  Complete
      Agreement.
      The
      Schedules and Exhibits to this Agreement shall be construed as an integral
      part
      of this Agreement to the same extent as if they had been set forth verbatim
      herein. This Agreement and the Schedules and Exhibits hereto, the other
      Transaction Documents and the Non-Disclosure Agreement constitute the entire
      agreement between the parties hereto with respect to the subject matter hereof
      and supersede all prior agreements whether written or oral relating hereto
      and
      thereto.

     

    11.2  Survival
      of Representations and Warranties.
      The
      representations and warranties contained in this Agreement and certificates
      delivered in connection therewith shall survive and remain in full force and
      effect for twenty-four (24) months after the Closing Date (the end of such
      period is referred to as the “Survival
      Date”).
      Except for claims related to the representations and warranties contained in
      the
      first sentence of Section 3.8 and claims based on fraud (which claims shall
      survive for the applicable statute of limitations), neither party nor any other
      Indemnified Party shall have any right under Article 9 or otherwise to bring
      a
      claim against the other party with respect to any representations and warranties
      contained in this Agreement or any certificate delivered in connection therewith
      unless it shall have given the indemnifying party notice of the Indemnifiable
      Losses for which it seeks indemnification on or before the Survival Date. Except
      as provided in Section 5.18, no independent investigation by Seller or Buyer,
      its counsel, or any of its agents or employees shall in any way limit or
      restrict the scope of the representations and warranties made by Seller or
      Buyer
      in this Agreement or either party’s entitlement to indemnification under Article
      9.

     

    11.3  Waiver,
      Discharge, Amendment, Etc.
      The
      failure of any party hereto to enforce at any time any of the provisions of
      this
      Agreement, shall in no way be construed to be a waiver of any such provision,
      nor in any way to affect the validity of this Agreement or any part thereof
      or
      the right of the party thereafter to enforce each and every such provision.
      No
      waiver of any breach of this Agreement shall be held to be a waiver of any
      other
      or subsequent breach. Any amendment to this Agreement shall be in writing and
      signed by the parties hereto

     

    
      
        
        

      

      
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    11.4  Notices.
      All
      notices hereunder shall be deemed given if in writing and delivered personally
      or sent by facsimile (with confirmation of transmission) or certified mail
      (return receipt requested) or reputable courier service to the parties at the
      following addresses (or at such other addresses as shall be specified by like
      notice):

     

    if
      to
      Buyer, to:

     

    Kyocera
      Mita Corporation

    2-28,
      1-Chome, Tamatsukuri

    Chuo-Ku,
      Osaka 540-8585 Japan

    Attention:
      Katsumi Komaguchi

    Facsimile:
      81-6-6764-6492

     

    with
      separate copies thereof addressed to:

     

    Kyocera
      Mita America, Inc.

    225
      Sand
      Road

    Fairfield,
      New Jersey 07004

    Attention:
      Calvin Rosen, Esq. 

    Facsimile:
      973.882.4421

     

    with
      a
      separate copy thereof addressed to:

     

    Cole,
      Schotz, Meisel,

    Forman
      & Leonard, P.A.

    Court
      Plaza North

    25
      Main
      Street

    P.O.
      Box
      800

    Hackensack,
      NJ 07602-0800

    Facsimile:
      201.678.6271

    Attention:
      Marc Press, Esq.

     

    and
      if to
      Seller, to:

     

    Peerless
      Systems Corporation

    2381
      Rosecrans Avenue

    El
      Segundo, California 90245

    Facsimile:
      310.536.9460

    Attention:
      President and CEO

     

    
      
        
        

      

      
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    with
      separate copies thereof addressed to:

     

    Loeb
      & Loeb LLP

    10100
      Santa Monica Boulevard

    Suite
      2200

    Los
      Angeles, California 90067

    Facsimile:
      310.919.3965

    Attention:
      Allan B. Duboff, Esq.

     

    Any
      party
      may change the above specified recipient and/or mailing address by notice to
      all
      other parties given in the manner herein prescribed. All notices shall be deemed
      given on the day when actually delivered as provided above (if delivered
      personally, by telecopy or by reputable courier service) or on the date that
      is
      three (3) Business Days after the date shown on the return receipt (if delivered
      by mail).

     

    11.5  Transfer
      and Sales Taxes, Expenses and Termination Fee.
      Any
      filing and recording fees for the transfer of the Specified Assets and any
      Transfer Taxes payable with respect to the Fixed Assets, not to exceed $12,500
      shall be paid by Buyer. Within three (3) Business Days of a notice from Seller,
      Buyer shall pay, or reimburse Seller for the payment of, such Transfer Taxes
      in
      an amount reasonably documented and not to exceed $12,500. Any other Transfer
      Taxes, if any, with respect to the sale of the Specified Assets shall be the
      responsibility of Seller. Except as otherwise expressly provided herein, Buyer
      and Seller shall each pay their own expenses (including, but not limited to,
      all
      compensation and expenses of counsel, financial advisors, consultants, actuaries
      and independent accountants) incident to this Agreement and the preparation
      for,
      and consummation of, the transactions provided for herein; provided, however,
      in
      the event this Agreement is terminated (a) by Seller pursuant to Section
      10.1(h), Buyer shall promptly reimburse Seller for its reasonable out-of-pocket
      expenses with respect to the transactions contemplated by this Agreement, not
      to
      exceed $200,000, and pay to Seller an amount equal to $125,000 per month (and
      prorated for any partial months), from February 1, 2008 to the date of
      termination, by wire transfer of same day funds to an account designated by
      Seller or (b) by Buyer pursuant to Section 10.1 (e), (f) or (h), Seller shall
      promptly reimburse Buyer for its reasonable out-of-pocket expenses, not to
      exceed $200,000 by wire transfer of same day funds to an account designated
      by
      Buyer and in the case of termination pursuant to Sections 10.1(e) or 10.1(f)
      promptly pay Buyer a termination fee of $400,000 by wire transfer of same day
      funds to an account designated by Buyer. Notwithstanding the foregoing, (i)
      the
      obligation of Buyer to make the payments to Seller described in clause (a)
      above
      shall be in addition to and not in lieu of any rights and remedies available
      to
      Seller, and (ii) the non-terminating shall not be required to pay such fees
      or
      expenses described in clause (a) or (b) above in the event the terminating
      party
      is in material breach of its representations, covenants or agreements contained
      in this Agreement, such that the non-terminating party would have been able
      to
      terminate the Agreement pursuant to Section 10.1(h).

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

     

    11.6  Governing
      Law; Consent to Jurisdiction and Venue.

     

    (a)  This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of Delaware, including all matters of construction, validity,
      performance and enforcement, without giving effect to principles of conflicts
      of
      laws.

     

    (b)  EACH
      OF
      THE PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS
      OF THE STATE OF DELAWARE OR THE UNITED STATES DISTRICT COURT FOR DELAWARE,
      AS
      WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM
      SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING
      OUT
      OF, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE CONTEMPLATED
      TRANSACTIONS. EACH PARTY HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO BRING
      ANY
      SUIT, ACTION OR OTHER PROCEEDING IN OR BEFORE ANY COURT OR TRIBUNAL OTHER THAN
      THE COURTS DESCRIBED ABOVE AND COVENANTS THAT IT SHALL NOT SEEK IN ANY MANNER
      TO
      RESOLVE ANY DISPUTE OTHER THAN AS SET FORTH IN THIS SECTION 11.6 OR TO CHALLENGE
      OR SET ASIDE ANY DECISION, AWARD OR JUDGMENT OBTAINED IN ACCORDANCE WITH THE
      PROVISIONS HEREOF.

     

    (c)  EACH
      OF
      THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE
      TO
      VENUE, INCLUDING THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN
      ADDITION, EACH OF THE PARTIES CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL
      SERVICE OR ANY MANNER IN WHICH NOTICES MAY BE DELIVERED HEREUNDER IN ACCORDANCE
      WITH SECTION 11.6 OF THIS AGREEMENT.

     

    (d)  EACH
      PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER
      THIS AGREEMENT OR ANY RELATED AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
      DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
      ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
      OR INDIRECTLY ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT, THE RELATED
      AGREEMENTS OR ANY OF THE CONTEMPLATED TRANSACTIONS. EACH PARTY HERETO CERTIFIES
      AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
      PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
      NOT,
      IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (B) IT UNDERSTANDS
      AND
      HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER
      VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
      OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
      11.6.

     

    
      
        
        

      

      
        48

        
          

        

      

      
        
        

      

    

     

    11.7  Public
      Announcement.
      The
      parties agree that prior to issuing any press release or public announcement
      concerning any provisions of this Agreement or the transactions contemplated
      hereby, each party shall so advise the other party hereto, and the parties
      shall
      use their reasonable efforts to cause a mutually agreeable release or
      announcement to be issued. Notwithstanding the foregoing, and, to the extent
      applicable, subject to Section 5.1(a) : (a) Seller may file a Form 8-K,
      preliminary proxy statement, revisions thereto, a final proxy statement, or
      any
      other filings under the Exchange Act, together with a copy of this Agreement
      and
      such other agreements referred to herein as it deems appropriate, (b) each
      party
      may make any other public disclosure it believes in good faith is required
      by
      applicable law or any listing or trading agreement concerning its
      publicly-traded securities and (c) Seller may correspond with third parties
      in
      writings with respect to obtaining Consents. In furtherance of the foregoing
      sentence, the parties agree and acknowledge that Buyer and Seller will each
      issue a press release following the execution and delivery of this Agreement
      by
      the parties in the form previously agreed to by the parties.

     

    11.8  Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties hereto
      and the successors or assigns of the parties hereto; provided that the rights
      and obligations of Seller herein may not be assigned and the rights of Buyer
      may
      be assigned only to one or more Affiliates of Buyer or to such business
      organization that shall succeed to the business of Buyer or of such subsidiary
      to which this Agreement relates.

     

    11.9  Titles
      and Headings; Construction.
      The
      titles and headings to Sections herein and to the Exhibits and Schedules hereto
      are inserted for the convenience of reference only and are not intended to
      be a
      part of or to affect the meaning or interpretation of this Agreement. This
      Agreement shall be construed without regard to any presumption or other rule
      requiring construction hereof against the party causing this Agreement to be
      drafted. The words “include”, “includes”, “included”, “including” and “such as”
do not limit the preceding words or terms and shall be deemed to be followed
      by
      the words “without limitation”. All pronouns and any variations thereof refer to
      the masculine, feminine or neuter, singular or plural, as the context may
      require. All terms defined in this Agreement in their singular or plural forms,
      have correlative meanings when used herein in their plural or singular forms,
      respectively. All references herein to a Section, Article, Exhibit or Schedule
      are to a Section, Article, Exhibit or Schedule of or to this Agreement, unless
      otherwise indicated. The inclusion of any information in a Schedule shall not
      be
      deemed to be an admission or acknowledgment by Seller in and of itself, that
      such information is required to be listed on such Schedules or is material
      to or
      outside the ordinary course of the business of Seller. Any disclosure made
      in
      any Schedule which could, based on the substance of such disclosure, be
      reasonably applied to another Schedule to this Agreement and is reasonably
      apparent that it would so apply, shall be deemed to be made with respect to
      such
      other Schedule regardless of whether or not a specific reference is made
      thereto.

     

    
      
        
        

      

      
        49

        
          

        

      

      
        
        

      

    

     

    11.10  Severability.
      If any
      provision of this Agreement is held invalid, unenforceable or void by a court
      of
      competent jurisdiction, the remaining provisions shall not for that reason
      alone
      be unenforceable or invalid. In such case, the parties agree to negotiate in
      good faith to create an enforceable contractual provision to achieve the purpose
      of the invalid provision. Further, if any provision is held to be overbroad
      as
      written, such provision shall be deemed amended to narrow its application to
      the
      extent necessary to make the provision enforceable according to applicable
      law
      and shall be enforced as amended.

     

    11.11  Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original and all of which when taken together shall constitute one
      and
      the same instrument.

     

    11.12  Confidentiality.
      Each
      party will, for a period of five (5) years, (i) keep secret and confidential
      and
      not disclose to others, all Confidential Information of the other party, and
      (ii) not use any of the other party’s Confidential Information for its own
      direct or indirect benefit, or the direct or indirect benefit of any third
      party. The foregoing shall not prohibit disclosures: (x) made to the receiving
      party’s employees or agents who have a “need to know” the other party’s
      Confidential Information to the extent such disclosure is necessary to perform
      such party’s duties and obligations, or to enforce such party’s rights, under
      this Agreement, provided that such employees or agents agree in writing or
      are
      otherwise compelled to comply with the obligations of this Section 11.12, and
      the receiving party remains directly responsible to the disclosing party for
      their compliance; or (y) compelled to be made by any requirement of law or
      pursuant to any legal, regulatory or investigative proceeding before any court,
      or governmental or regulatory authority, agency or commission so long as the
      party so compelled to make disclosure of Confidential Information of the other
      party provides prior written notice to such other party so that the other party
      may seek a protective order or other remedy to protect the confidentiality
      of
      the Confidential Information and/or waive the compelled party’s compliance with
      this Section 11.12, provided that all such information so disclosed (other
      then
      in a way which makes it generally available to the public) shall remain
      Confidential Information for all other purposes. If such protective order,
      other
      remedy or waiver is not obtained by the time the compelled party is required
      to
      comply, the compelled party may furnish only that portion of the Confidential
      Information of the other party that it is legally compelled, in the opinion
      of
      counsel, to disclose and shall request, at the other party’s expense, that such
      Confidential Information be accorded confidential treatment (if such procedure
      is available), including redaction of any payment terms specified herein. Each
      party further agrees to take appropriate measures to prevent any such prohibited
      disclosure of Confidential Information by its present and future employees,
      officers, agents, subsidiaries, or consultants. Notwithstanding the foregoing,
      this Section 11.12 shall not reduce, eliminate, terminate or otherwise modify
      any of Buyer’s obligations under the Non-Disclosure Agreement.

     

    
      
        
        

      

      
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    11.13  Specific
      Performance.
      The
      parties recognize and acknowledge that in the event that all of the conditions
      set forth in Article 6 or Article 7, as the case may be, to a party’s
      performance of its obligations have been satisfied on a timely basis and such
      party shall fail to perform its obligations under the terms of this Agreement,
      money damages alone will not be adequate to compensate the other party. It
      is
      expressly understood and agreed that in such event, irreparable injury to the
      other party shall result and that therefore the other party will be entitled
      to
      specific performance of the terms of this Agreement and of the covenants and
      obligations hereunder including temporary, preliminary and permanent injunctive
      relief.

     

    (Remainder
      of page intentionally blank; signatures follow on next page)

     

    
      
        
        

      

      
        51

        
          

        

      

      
        
        

      

    

    


    


    IN
      WITNESS WHEREOF, each of the parties has caused this Asset Purchase Agreement
      to
      be executed in the manner appropriate for each, as of the date first above
      written.

     

    
      	 	 	 
	 	PEERLESS
              SYSTEMS
              CORPORATION
	 
 	 
 	 
 
	 	By:  	/s/ Richard
              L. Roll 
	 	
              

              Name:
                Richard
                L. Roll

              Title:
                President and Chief Executive Officer

            
	 	 


    

     

    
      	 	 	 
	 	KYOCERA
              MITA CORPORATION
	 
 	 
 	 
 
	 	By:  	/s/
              Katsumi Komaguchi
	 	
              

              Name:
                Katsumi Komaguchi

              Title:
                President

            
	 	 


    

     

    
      
        
        

      

      
        52

        
          

        

      

      
        
        

      

    

     

    
      
        	
                GENERAL
                  ESCROW AGREEMENT

              	
                

              


      

    

     

    EXHIBIT
      A

    

      This
        Escrow Agreement (the "Escrow Agreement") is entered into as of      
        by and
        among City National Bank, national association (the "Escrow Agent"), Kyocera
        Mita Corporation, a Japanese corporation (“Buyer”) and Peerless Systems
        Corporation, a Delaware corporation (“Seller”), herein collectively referred to
        herein as the “Parties” (“Parties”).

      


      BACKGROUND

      


      A. Seller
        and Buyer have entered into an Asset Purchase Agreement (the “Asset Purchase
        Agreement”), dated as of January ___, 2008, pursuant to which Buyer has agreed
        to deposit in escrow $4,000,000 of the purchase price otherwise payable to
        Seller (the “Escrow Funds”) for the purpose of providing Buyer with a source of
        funds to satisfy Seller’s indemnification obligations under the terms of the
        Asset Purchase Agreement.

       

      B. Subject
        to the terms and provisions of this Escrow Agreement, Seller and Buyer desire
        to
        appoint Escrow Agent as an escrow agent hereunder for the purposes of
        establishing an escrow account to satisfy, if any, such indemnification claims,
        and Escrow Agent desires to accept such appointment and hold, and disburse
        the
        Escrow Funds deposited with it and the interest and earnings thereon in
        accordance with the terms of this Escrow Agreement.

       

      In
        order
        to establish the escrow of the Escrow Funds and to effect the provisions
        of the
        Asset Purchase Agreement, the parties hereto have entered into this Escrow
        Agreement. Capitalized terms used herein not otherwise defined herein shall
        have
        the meanings given to them in the Asset Purchase Agreement.

       

      ARTICLE
        I

      ESCROW
        FUND

       

      
        	
                1.1

              	
                Establishment
                  of Escrow .
                  Simultaneously with the execution and delivery of this Escrow Agreement,
                  Buyer shall deposit the Escrow Funds with Escrow Agent in immediately
                  available funds pursuant to the wire instructions set forth on
                  Schedule
                  A
                  hereto. 

              


      

       

      
        	
                1.2

              	
                Escrow
                  Account.
                  Upon receipt of the Escrow Funds, Escrow Agent agrees to hold the
                  funds in
                  a separate interest bearing escrow account (the “Escrow Account”). Seller
                  shall be deemed the owner of all Escrow Funds and investments in
                  the
                  Escrow Account, and shall be responsible for the preparation of
                  all tax
                  returns associated with the investments therein and shall pay all
                  costs
                  relating to such returns, and all taxes, fines and penalties and
                  interest.
                  The Escrow Account shall be assigned the federal tax identification
                  number
                  of Seller. Seller shall provide Escrow Agent, at any time upon
                  request of
                  Escrow Agent with a Form W-9 to evidence Seller is not subject
                  to any
                  back-up withholding under the United States Internal Revenue
                  Code. Seller
                  shall report all income, if any, that is earned on, or derived
                  from, the
                  Escrow Funds as its income, in the taxable year or years in which
                  such
                  income is properly includible and pay any taxes attributable thereto.
                  Escrow Agent shall not be required without its consent to relinquish,
                  deliver or pay over any instrument, money or other property deposited
                  with
                  it in this Escrow Agreement unless and until it shall have been
                  paid and
                  reimbursed its fees and expenses.

              


      

       

      
        
          
          

        

        
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            1 of
            13

          
            

          

        

        
          
          

        

      

      
         

        
          
            	
                    GENERAL
                      ESCROW AGREEMENT

                  	
                    

                  


          

        

         

      

      
        	
                1.3

              	
                Disbursement
                  of Escrow Funds.
                  

              


      

      
      

      
        
          
            	
                  	1.3.1	
                    Subject
                      to the limitations set forth in Article 9 of the Asset Purchase
                      Agreement,
                      if Buyer believes that it has a claim for indemnification pursuant
                      to
                      Section 9.1 of the Asset Purchase Agreement (a “Buyer Claim”), the amount
                      of which is then known, the Buyer shall, as soon as reasonably
                      practicable
                      after it becomes aware of such Buyer Claim, notify the Seller
                      of such
                      Buyer Claim by means of a written notice describing the Buyer
                      Claim in
                      reasonable detail and setting forth the Buyer’s good faith calculation of
                      the Indemnifiable Losses incurred by the Buyer with respect
                      thereto (a
                      “Buyer Claim Notice”). If, by the thirtieth (30th)
                      day following receipt of a Buyer Claim Notice by the Seller
                      and others
                      identified in the Notice section of the Asset Purchase Agreement
                      (the
                      “Indemnification Dispute Period”), (x) the Buyer has not received from the
                      Seller notice in writing that the Seller objects to the Buyer
                      Claim Notice
                      (or the amount of Indemnifiable Losses asserted in such Buyer
                      Claim
                      Notice) (an “Indemnification Dispute Notice”), and (y) if such Buyer Claim
                      shall have been made prior to the Escrow Termination Date (as
                      hereinafter
                      defined), the Buyer and the Seller shall deliver a joint written
                      instruction to the Escrow Agent (the “Escrow Disbursement Instruction”)
                      instructing the Escrow Agent to pay to the Buyer or reserve
                      from the
                      Escrow Funds the amount of Indemnifiable Losses specified in
                      the Buyer
                      Claim Notice subject to the limitations contained in Article
                      9 of the
                      Asset Purchase Agreement. Within one (1) Business Day following
                      the Escrow
                      Agent’s receipt of an Escrow Disbursement Instruction, the Escrow
                      Agent
                      shall comply with the instructions and directives concerning
                      the release
                      or reservation of the Escrow Funds set forth
                      therein.

                  


          

        

      

      
      

      
        
          
            	
                  	1.3.2	
                    If
                      the Seller delivers an Indemnification Dispute Notice to the
                      Buyer within
                      the Indemnification Dispute Period, the Buyer and the Seller
                      shall
                      promptly meet and use their reasonable efforts to settle the
                      dispute as to
                      whether and to what extent the Buyer Indemnitees are entitled
                      to
                      reimbursement on account of such Buyer Claim Notice. If the
                      Buyer and the
                      Seller are able to reach agreement within thirty (30) days
                      after the Buyer
                      receives such Indemnification Dispute Notice, and if such Buyer
                      Claim
                      Notice shall have been made prior to the Escrow Termination
                      Date, the
                      Buyer and the Seller shall deliver an Escrow Disbursement Instruction
                      to
                      the Escrow Agent setting forth such agreement and instructing
                      the Escrow
                      Agent to pay the Buyer or reserve from the Escrow Fund an amount
                      in
                      accordance with such agreement. Within one (1) Business Day
                      following the
                      Escrow Agent’s receipt of an Escrow Disbursement Instruction, the Escrow
                      Agent shall comply with the instructions and directives concerning
                      the
                      release or reservation of the Escrow Funds set forth therein.
                      If the Buyer
                      and the Seller are unable to reach agreement within thirty
                      (30) days after
                      the Buyer receives such Indemnification Dispute Notice, then
                      either the
                      Buyer or the Seller may resort to other legal remedies.
                      

                  


          

        

      

       

      
        
          
          

        

        
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            13

          
            

          

        

        
          
          

        

      

      
         

        
          
            	
                    GENERAL
                      ESCROW AGREEMENT

                  	
                    

                  


          

        

          


      

      
        
          
            	
                  	1.3.3	
                    If
                      the Indemnifying Party is the Seller, such Indemnifying Party
                      will be
                      entitled to defend, settle or compromise a Buyer Claim using
                      the Escrow
                      Fund, and the Seller and the Buyer shall jointly instruct the
                      Escrow Agent
                      to release funds held under this Agreement for this purpose
                      in accordance
                      with the provisions of this Agreement.


                  


          

        

      

      
      

      
        
          
            	
                  	1.3.4	
                    On
                      the date that is the first Business Day after fifteen (15)
                      months
                      following the Closing Date, the Escrow Agent shall release
                      to Seller by
                      wire transfer of immediately available funds, to a bank account
                      designated
                      in writing by Seller, an amount equal to Two Million Dollars
                      ($2,000,000),
                      less any reductions thereto in accordance with Section 1.3.1,
                      Section
                      1.3.2, and Section 1.3.3
                      above.

                  


          

        

      

      
      

      
        
          
            	
                  	1.3.5	
                    On
                      the date that is the first Business Day after twenty-four (24)
                      months
                      following the Closing Date (the “Escrow Termination Date”), the Escrow
                      Agent shall pay to Seller by wire transfer of immediately available
                      funds,
                      to a bank account designated in writing by Seller, an amount
                      equal to the
                      remaining portion of the Escrow Fund, less (x) any funds reserved
                      or
                      remaining to be paid in accordance with Section 1.3.1, Section
                      1.3.2, and
                      Section 1.3.3 above, and (y) [any]
                      fees and out-of-pocket expenses due the Escrow Agent pursuant
                      to the terms
                      of this Agreement.

                  


          

        

      

      
      

      
        
          
            	
                  	1.3.6	
                    Notwithstanding
                      anything in this Section 1.3 to the contrary, and for the avoidance
                      of
                      doubt, disbursement of the Escrow Funds in accordance with
                      this Section
                      1.3 shall be disbursement of the initial $4,000,000 of Escrow
                      Funds only,
                      and not of any interest accrued thereon. Interest on the Escrow
                      Funds
                      shall be disbursed only to Seller and only in accordance with
                      Section 3.1
                      below.

                  


          

        

      

       

      ARTICLE
        II

      THE
        ESCROW AGENT

       

      
        	
                2.1

              	
                Scope
                  of Powers, Duties and Obligations of the Escrow Agent.
                  Subject to the Party’s directions, the Escrow Agent has whatever powers
                  are conferred by law and which are required to discharge its obligations
                  and exercise its rights under this Escrow Agreement, including
                  but not
                  limited to the powers specified in the following Paragraphs of
                  this
                  Article, and the powers and authority granted to the Escrow Agent
                  under
                  other provisions of this Escrow Agreement. The Escrow Agent shall
                  have no
                  duties or obligations except those specifically set forth in this
                  agreement.

              


      

       

      
        
          
          

        

        
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                    GENERAL
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                2.2

              	
                Powers
                  Exercisable by the Escrow Agent, Subject to this Agreement.
                  The Escrow Agent is authorized and empowered to exercise the following
                  powers, subject to the limitations contained in this Agreement:
                  

              


      

      
        	 	
                2.2.1

              	
                To
                  register any investment held in the Escrow Fund in its own name
                  or in the
                  name of a nominee and to hold any investment in bearer form. The
                  books and
                  records of the Escrow Agent shall show that all such investments
                  are part
                  of the Escrow Fund. The Escrow Agent shall be liable for all acts
                  of its
                  nominee.

              


      

      
        	 	
                2.2.2

              	
                To
                  utilize registered securities depositories to hold assets of the
                  Escrow
                  Fund, provided however that the Escrow Agent shall not be relieved
                  of any
                  fiduciary responsibility with respect to the assets so
                  held.

              


      

      
        	 	
                2.2.3

              	
                To
                  employ agents, including public accountants and legal counsel (which
                  may
                  be counsel for Parties), as it shall determine appropriate, and
                  to pay
                  their reasonable expenses and compensation from Escrow
                  Funds;

              


      

      
        	 	
                2.2.4

              	
                To
                  rely on Parties to defend and litigate, or settle, at their expense,
                  any
                  suit brought against the Escrow Funds or any order sought to be
                  satisfied
                  out of the Escrow Funds, without duty on the Escrow Agent beyond
                  forwarding related papers to Parties and complying with any final
                  order to
                  the extent of the Escrow Funds;

              


      

      
        	 	
                2.2.5

              	
                To
                  withhold from taking any action until it receives proper written
                  notice of
                  an occurrence of an event affecting this
                  Escrow;

              


      

      
        	 	
                2.2.6

              	
                To
                  treat as genuine, sufficient and correct, in form, execution and
                  validity,
                  and as the document it purports to be, and from the party it purports
                  to
                  be from, any notice, instruction, letter, paper, telex or other
                  document
                  purported to be furnished to Escrow Agent by Parties and believed
                  by
                  Escrow Agent to be both genuine and to have been transmitted by
                  the proper
                  party or parties, and Escrow Agent shall have no liability with
                  respect to
                  any action taken or foregone by Escrow Agent in good faith in reliance
                  on
                  such document;

              


      

      
        	 	
                2.2.7

              	
                To
                  be fully released and discharged from any obligation to perform
                  any
                  further duties imposed upon it with respect to this Escrow following
                  its
                  resignation or removal and the appointment of a successor or the
                  deposit
                  of the Escrow Funds; and

              


      

      
        	 	
                2.2.8

              	
                To
                  be free from any liabilities or change in duties, other than as
                  may be
                  specifically described elsewhere herein, for the action or inaction
                  of a
                  party to this Escrow Agreement, or any other party, or the occurrence
                  or
                  non-occurrence of an event outside of this
                  Escrow.

              


      

       

      
        
          
          

        

        
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                    GENERAL
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      ARTICLE
        III

      INVESTMENT
        OF THE ESCROW FUND

       

      
        	
                3.1

              	
                Permitted
                  Investments.
                  Escrow Agent shall hold the Escrow Funds and at the verbal or written
                  instruction of Seller invest and reinvest the principal and accumulated
                  income of the Escrow Fund in the following investments ("Permitted
                  Investment"):

              


      

      
        	 	
                (i)

              	
                Any
                  U.S. Government or U.S. Government Agency
                  security;

              


      

      
        	 	
                (ii)

              	
                Any
                  commercial paper;

              


      

      
        	 	
                (iii)

              	
                Any
                  certificate of deposit or time deposit in any bank (including Escrow
                  Agent);

              


      

      
        	 	
                (iv)

              	
                Escrow
                  Agent's money market fund or any other interest-bearing deposit
                  accounts
                  with any federally-insured bank (including the Escrow Agent or
                  its
                  affiliates).

              


      

       

      In
        the
        absence of instructions to the contrary from the Seller, the Escrow Agent
        shall
        invest the Escrow Funds in the Permitted Investments set forth in clause
        (iv) of
        this Section 3.1.

      
        	 	
                3.1.1

              	
                Any
                  Interest shall be added to the Escrow Funds; provided, however,
                  that any
                  interest shall not be subject to disbursement to Buyer as provided
                  for in
                  Section 1.3 above. Escrow Agent shall make disbursements to Seller
                  solely
                  of the interest accrued on the Escrow Funds on a quarterly basis
                  as of the
                  last day of March, June, September and December, and at such other
                  times
                  at the written request of Seller.

              


      

      
        	 	
                3.1.2

              	
                The
                  Escrow Agent will act upon written investment instructions the
                  Business
                  Day after such instructions are received, provided the requests
                  are
                  communicated within sufficient amount of time to allow the Escrow
                  Agent to
                  make the specified investment. Instructions received after an applicable
                  investment cutoff deadline will be treated as being received by
                  the Escrow
                  Agent on the next Business Day, and the Escrow Agent shall not
                  be liable
                  for any loss arising directly or indirectly, in whole or in part,
                  from the
                  inability to invest Escrow Funds on the day the instructions are
                  received.
                  The Escrow Agent shall not be liable for any loss incurred by the
                  actions
                  or third parties or by any loss arising by error, failure or delay
                  in
                  making of an investment or reinvestment, and the Escrow Agent shall
                  not be
                  liable for any loss of principal or income in connection therewith,
                  unless
                  such error, failure or delay results from the Escrow Agent's gross
                  negligence or willful misconduct or failure of the Escrow Agent
                  to comply
                  with any of the terms of this Escrow Agreement. As and when the
                  Escrow
                  funds or any interest or any portion there of is to be released
                  under this
                  Escrow Agreement, the Escrow Agent shall cause the Permitted Investments
                  to be converted into cash, and the Escrow Agent shall not be liable
                  for
                  any loss or principal or income in connection therewith, unless
                  such loss
                  results from the Escrow Agent's gross negligence or willful misconduct
                  or
                  the failure of the Escrow Agent to comply with any of the terms
                  of this
                  Escrow Agreement. None of the parties hereto shall be liable for
                  any loss
                  of principal or income due to the choice of Permitted Investments
                  in which
                  the Escrow Funds are invested or the choice of Permitted Investments
                  that
                  are converted into cash pursuant to this Section
                  3.1.2.

              


      

       

      
        
          
          

        

        
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                    GENERAL
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                3.2

              	
                Escrow
                  Agent Not Responsible For Investment Advice.
                  The Escrow Agent assumes no responsibility for advising the Parties
                  with
                  respect to the investment and reinvestment of the Escrow Funds.
                  The Escrow
                  Agent shall as promptly as possible comply with any direction given
                  by the
                  Seller as to the investment of the Escrow Funds; provided, however,
                  that
                  the Escrow Agent shall have no duty to take any action which, in
                  the
                  Escrow Agent's opinion, would expose the Escrow Agent to liability
                  unless
                  and until the Seller indemnifies the Escrow Agent to its reasonable
                  satisfaction. The Escrow Agent shall neither be liable in any manner
                  nor
                  for any reason for any losses or other unfavorable investment results
                  arising from its compliance with such direction, nor be liable
                  for failing
                  to invest any assets of the Escrow Fund in the absence of written
                  investment directions regarding such
                  assets.

              


      

       

      
        	
                3.3

              	
                Delegation
                  of Responsibility and Authority for Investment of Escrow
                  Fund.
                  The Seller may by written resolution delegate its authority over
                  the
                  investments of the Escrow Fund to a designated representative
                  ("Representative"), and Escrow Agent shall accept Representative's
                  instructions to invest and reinvest the assets of all or any portion
                  of
                  the Escrow Fund. The Seller may revoke the delegation of any such
                  investment responsibility and authority by written notice to the
                  Escrow
                  Agent, and Representative may relinquish such responsibility and
                  authority
                  by written notice to the Escrow
                  Agent.

              


      

       

      
        	
                3.4

              	
                Notification
                  of Rights Regarding Securities.
                  Following receipt of information, the Escrow Agent will notify
                  the Seller
                  of any conversion, redemption, exchange, subscription or other
                  right
                  relating to any securities purchased hereunder of which notice
                  was given
                  after the acquisition of such securities by the Escrow Agent, and
                  the
                  Escrow Agent shall have no obligation to exercise any such right
                  unless it
                  is instructed by the Seller or its Representative in writing to
                  exercise
                  such right, within a reasonable time prior to the expiration of
                  such
                  right.

              


      

       

      
        	
                3.5

              	
                Uninvested
                  Cash.
                  Subject to the directions of the Seller, or its Representative,
                  the Escrow
                  Agent may hold any or all of the Escrow Fund in cash, uninvested
                  and
                  nonproductive of income. The Escrow Agent shall not be required
                  to pay
                  interest on any cash so held uninvested. The Escrow Agent may deposit
                  cash
                  awaiting investment or distribution in any interest-bearing account
                  in any
                  Bank (including the Escrow Agent).

              


      

       

      
        	
                3.6

              	
                Shareholder
                  Communications.
                  The Parties direct the Escrow Agent not to disclose to any company
                  requesting shareholder information the name and the address of
                  the Parties
                  or the share position of the securities of the inquiring company
                  in the
                  Escrow Fund.

              


      

       

      
        
          
          

        

        
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                    GENERAL
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      ARTICLE
        IV

      ESCROW
        AGENT NOTICES AND INSTRUCTIONS

       

      
        	
                4.1

              	
                Instructions;
                  Notices.
                  Except as hereafter provided, any directions, instructions or notices
                  which the Parties or any other duly authorized person is required
                  or
                  permitted to give to the Escrow Agent under this Escrow Agreement
                  (the
                  "Instructions") shall be in writing and shall be deemed effective
                  upon
                  receipt by the Escrow Agent; provided, however, that the Escrow
                  Agent in
                  its discretion may act upon oral Instructions if it believes them
                  to be
                  genuine, but the Escrow Agent shall not be required to do so. If
                  the
                  Escrow Agent requires, all oral Instructions are to be promptly
                  confirmed
                  in writing, but the Escrow Agent shall not be liable for any action
                  or any
                  failure to act in accordance with oral Instructions, even though
                  it fails
                  to receive written confirmation from the Parties. The Escrow Agent
                  shall
                  be provided with specimen signatures of the authorized representatives
                  of
                  the Parties. The Escrow Agent shall be entitled to rely in good
                  faith upon
                  any Instructions signed by any authorized representative of the
                  Parties,
                  and shall incur no liability for following such directions. Any
                  written
                  notices, affidavits or other communications hereunder shall be
                  deemed to
                  have been duly given if delivered or mailed first class, certified
                  mail,
                  postage prepaid, addressed as
                  follows:

              


      

       

      City
        National Bank, national association

      Wealth
        Management Services-Business Trusts, Escrows

      Attn:
        Sue
        Behning/VP

      555
        S.
        Flower Street, 12th
        Floor

      Los
        Angeles, CA 90071

      Tel:
        (213) 673-8844

      Fax:
        (213) 673-8850

      


      
        	
                Signer's
                  name:

              	
                 

              
	
                Signer's
                  address: 

              	
                 

              
	
                Signer's
                  telephone number:

              	
                 

              
	
                Signer's
                  fax number: 

              	
                 

              


      

      


      
        	
                Signer's
                  name:

              	
                 

              
	
                Signer's
                  address: 

              	
                 

              
	
                Signer's
                  telephone number:

              	
                 

              
	
                Signer's
                  fax number: 

              	
                 

              


      

       

      
        	
                4.2

              	
                E-Mail/Photostatic
                  Teletransmission.
                  The transmission of the Instructions by electronic transmission
                  (e-mail)
                  as attributed to an authorized person or photostatic teletransmission
                  with
                  duplicate or facsimile signatures with confirmed receipt shall
                  be an
                  authorized method of communication and shall be considered in writing
                  until the Parties notify the Escrow Agent to the
                  contrary.

              


      

       

      
        
          
          

        

        
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                    GENERAL
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                4.3

              	
                Electronic
                  Affirmation.
                  Notwithstanding any other provision of this Article IV, the Escrow
                  Agent
                  may settle securities trades effected by the Parties through a
                  securities
                  depository that utilizes an institutional delivery system, in which
                  event
                  the Escrow Agent may deliver or receive securities in accordance
                  with
                  appropriate trade reports or statements given to the Escrow Agent
                  by such
                  depository without having received direct communications or instructions
                  from the Parties.

              


      

       

      
        	
                4.4

              	
                Additional
                  Instructions.
                  In any matter under this Escrow Agreement in which the Escrow Agent
                  is
                  permitted or required to act upon Instructions, the Escrow Agent,
                  where it
                  deems necessary, may request further Instructions from the person
                  or
                  entity giving the original instructions, or from the Parties, as
                  the case
                  may be, and may defer any and all action pending receipt
                  thereof.

              


      

       

      ARTICLE
        V

      COMPENSATION
        AND EXPENSES OF THE ESCROW AGENT

       

      
        	
                5.1

              	
                Escrow
                  Agent's fees will be as set forth on the fee schedule attached
                  hereto,
                  plus actual expenses incurred in performing its duties hereunder.
                  Seller
                  and Buyer will each pay for one-half of such fees and expenses
                  and will be
                  billed on a monthly basis therefor by the Escrow Agent. Escrow
                  Agent is
                  hereby granted a lien on the Escrow Funds for such amounts. Any
                  setup fee
                  will be split equally between Seller and Buyer and will be payable
                  in
                  advance by [them].
                  In
                  addition, Escrow Agent will receive its usual sweep fee for any
                  Escrow
                  Funds, which are invested in a sweep vehicle selected by the Parties.
                  Unless other payment arrangements are set forth herein or are agreed
                  to by
                  Escrow Agent in writing, Escrow Agent may disburse from the Escrow
                  Funds
                  sufficient funds to pay its compensation and expenses. If at any
                  time cash
                  is not available in the Escrow Funds to pay the Escrow Agents compensation
                  and expenses, then Escrow Agent may bill Parties for such
                  amounts.

              


      

       

      ARTICLE
        VI

      RECORDS
        AND ACCOUNTS

       

      
        	
                6.1

              	
                Accurate
                  Records and Accounts.
                  The Escrow Agent shall keep accurate records and accounts with
                  respect to
                  all cash and other assets held by it in the Escrow Fund, and all
                  receipts
                  and disbursements and other transactions involving such cash, securities
                  and other assets. The Parties shall have access to all such accounts,
                  books and records at all reasonable times. All such accounts, books
                  and
                  records shall be open for inspection and audit at all reasonable
                  times by
                  the Parties or by any person or persons duly authorized by the
                  Parties.

              


      

       

      
        	
                6.2

              	
                Periodic
                  Reports.
                  The Escrow Agent shall furnish the Parties and any third party
                  with such
                  periodic reports, as the Parties and the Escrow Agent shall mutually
                  agree, setting forth all receipts, disbursements and transactions
                  effected
                  by the Escrow Agent.

              


      

       

      
        
          
          

        

        
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                    GENERAL
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                6.3

              	
                Principal
                  and Income.
                  Except as otherwise specifically provided in this Escrow, the
                  determination of all matters with respect to what is principal
                  or income
                  of the Escrow Fund and the apportionment and allocation of receipts
                  and
                  disbursements between these accounts (if any), shall be governed
                  by the
                  provisions of the California Revised Uniform Principal and Income
                  Act from
                  time to time existing. Any such matter not provided for herein
                  or in the
                  California Revised Uniform Principal and Income Act shall be determined
                  by
                  the Escrow Agent in the Escrow Agent's reasonable
                  discretion.

              


      

       

      ARTICLE
        VII

      [INTENTIONALLY
        OMITTED]

       

      ARTICLE
        VIII

      RESIGNATION
        AND REMOVAL OF THE ESCROW AGENT

       

      
        	
                8.1

              	
                Resignation
                  and Removal.
                  The Escrow Agent may resign at any time upon thirty- (30) days'
                  written
                  notice to the Parties, unless a shorter period is acceptable to
                  the
                  Parties. The Parties may at any time remove the Escrow Agent upon
                  thirty-
                  (30) days' written notice to the Escrow Agent, unless a shorter
                  period is
                  acceptable to the Escrow Agent.

              


      

       

      
        	
                8.2

              	
                Appointment
                  of Successor.
                  In the event of the removal or resignation of the Escrow Agent,
                  the
                  Parties shall appoint a successor which, upon its acceptance in
                  writing of
                  such appointment delivered to the Parties and the former Escrow
                  Agent,
                  shall be vested with all the rights, powers and duties of the Escrow
                  Agent
                  under this Escrow Agreement, and the retiring Escrow Agent shall
                  be
                  released and discharged from all further liability with respect
                  to the
                  Escrow. If the Parties fail to appoint a successor Escrow Agent
                  within
                  thirty (30) days after removal or resignation of the Escrow Agent,
                  the
                  Escrow Agent is authorized to deliver the Escrow Fund to a court
                  of
                  competent jurisdiction to be held by such court until such time
                  as a new
                  Escrow Agent is appointed by the Buyer and the Seller. The retiring
                  Escrow
                  Agent shall transfer, assign and deliver to its successor all of
                  the
                  property then held by it under the Escrow, except such reasonable
                  compensation and expenses in connection with the settlement of
                  accounts
                  and the delivery of the assets to the successor Escrow Agent. After
                  settlement of the retiring Escrow Agent's final accounting, the
                  retiring
                  Escrow Agent shall also transfer to the successor Escrow Agent
                  true copies
                  of its records as relate to the Escrow Fund, as may be requested
                  by the
                  successor Escrow Agent. The successor Escrow Agent shall not be
                  liable or
                  responsible for anything done or omitted in the administration
                  of the
                  Escrow Fund pursuant to this Escrow Agreement prior to the date
                  it shall
                  have become Escrow Agent, nor to audit or otherwise inquire into
                  or take
                  any action concerning the acts of any retiring Escrow
                  Agent.

              


      

       

      
        	
                8.3

              	
                Final
                  Periodic Report.
                  Within sixty (60) days after the transfer of the assets of the
                  Escrow Fund
                  to the successor Escrow Agent, unless a different period is mutually
                  agreed to, the Escrow Agent shall file with the Parties a final
                  periodic
                  report, covering the period since the close of the last periodic
                  report.

              


      

       

      
        
          
          

        

        
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                    GENERAL
                      ESCROW AGREEMENT

                  	
                    

                  


          

        

         

      

      
        	
                8.4

              	
                Deemed
                  Acceptance.
                  In the absence of any exception thereto filed in writing with the
                  Escrow
                  Agent within ninety (90) days after the date of filing with the
                  Parties,
                  any periodic report filed with the Parties shall constitute a final
                  periodic report by and discharge of the Escrow Agent from all claims
                  and
                  liabilities with respect to the acts and transactions as shown
                  in such
                  report, and shall be binding and conclusive upon all
                  persons.

              


      

       

      ARTICLE
        IX

      AMENDMENT
        AND TERMINATION

       

      
        	
                9.1

              	
                Amendment.
                  This Escrow Agreement may be modified at any time by writing signed
                  by the
                  Parties.

              


      

       

      
        	
                9.2

              	
                Termination.
                  This Escrow may be terminated at any time upon two (2) Business
                  Days'
                  written notice delivered by the Parties to the Escrow Agent; provided,
                  however, that this Escrow Agreement shall continue thereafter for
                  such
                  period as may be necessary for the complete divestiture of all
                  cash,
                  securities and other instruments held hereunder by the Escrow Agent,
                  but
                  solely to the extent necessary to effect such complete divestiture.
                  Upon
                  such termination, all assets remaining in the Escrow after payment
                  of all
                  expenses properly chargeable thereto shall be paid or distributed
                  in
                  accordance with written directions of the Parties. Unless sooner
                  terminated in accordance with other provisions hereof, any Escrow
                  created
                  hereunder shall terminate five (5) years after the date of execution
                  of
                  this Escrow Agreement.

              


      

       

      
        	
                9.3

              	
                Final
                  Periodic Report.
                  Within sixty (60) days after the termination of the Escrow Fund,
                  unless a
                  different period is mutually agreed to, the Escrow Agent shall
                  file with
                  the Parties a final periodic report, covering the period since
                  the close
                  of the last periodic report.

              


      

       

      
        	
                9.4

              	
                Deemed
                  Acceptance.
                  In the absence of any exception thereto filed in writing with the
                  Escrow
                  Agent within ninety (90) days after the date of filing with the
                  Parties,
                  any periodic report filed with the Parties shall constitute a final
                  periodic report by and discharge of the Escrow Agent from all claims
                  and
                  liabilities with respect to the acts and transactions as shown
                  in such
                  report, and shall be binding and conclusive upon all
                  persons.

              


      

       

      
        
          
          

        

        
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      ARTICLE
        X

      LIMITATION
        ON LIABILITY

       

      
        	10.1	
                Liability
                  of Escrow Agent. In
                  performing any duties under this Escrow Agreement, Escrow Agent
                  shall not
                  be liable for any damages, losses, or expenses, except for gross
                  negligence or willful misconduct on the part of the Escrow Agent.
                  Escrow
                  Agent shall not incur any liability for: (a) any act or failure
                  to act
                  made or omitted in good faith, or (b) any action taken or omitted
                  in
                  reliance upon any instrument, including any written statement or
                  affidavit
                  provided for in this Escrow Agreement that the Escrow Agent shall
                  in good
                  faith believe to be genuine, nor will the Escrow Agent be liable
                  or
                  responsible for forgeries, fraud, impersonations or determining
                  and
                  verifying the scope of any representative authority, or any person
                  acting
                  or purporting to act on behalf of any party to this agreement.
                  

              


      

       

      
        	
                10.2

              	
                Indemnification
                  by Parties.
                  Parties further agree to pay on demand, and to indemnify and hold
                  Escrow
                  Agent harmless from and against, all costs, damages, judgments,
                  attorneys
                  fees, expenses, obligations and liabilities of any kind or nature
                  (collectively, “Losses”) which, in good faith, Escrow Agent may incur or
                  sustain in connection with or arising out of the Escrow, and Escrow
                  Agent
                  is hereby given a lien upon all the rights, titles and interests
                  of the
                  Parties in the Escrow Funds, to protect Escrow Agent's rights and
                  to
                  indemnify and reimburse Escrow Agent under this Escrow Agreement.
                  The
                  parties agree that neither the payment by Buyer or Seller of any
                  claim by
                  Escrow Agent for indemnification hereunder, nor the disbursement
                  of any
                  amounts to Escrow Agent from the Escrow Funds in respect of a claim
                  by
                  Escrow Agent for indemnification shall impair, limit, modify, or
                  affect,
                  as between Buyer and Seller, the respective rights and obligations
                  of
                  Buyer, on the one hand, and Seller, on the other hand, under the
                  Asset
                  Purchase Agreement. The Parties further agree that as between the
                  Buyer
                  and the Seller, each shall be responsible for the payment of fifty
                  (50%)
                  percent of the amount of indemnification sought by the Escrow
                  Agent.

              


      

       

      
        	
                10.3

              	
                Force
                  Majeure.
                  The Escrow Agent shall not be liable for any delay or failure to
                  act as
                  may be required hereunder when such delay or failure is due to
                  fire,
                  earthquake, any act of God, interruption or suspension of any
                  communication or wire facilities or services, war, emergency conditions
                  or
                  other circumstances beyond its control, provided it exercises such
                  diligence as the circumstances may reasonably
                  require.

              


      

       

      
        	10.4	
                Scope.
                  The
                  Escrow Agent shall have no duties or obligations hereunder except
                  those
                  specifically set forth herein and such duties and obligations shall
                  be
                  determined solely by the express provisions of this Escrow
                  Agreement.

              


      

       

      
        	
                10.5

              	
                Controversies.

              


      

      
        	 	
                10.5.1

              	
                Upon
                  receipt of conflicting demands or notices relating to this Escrow,
                  Escrow
                  Agent may, at its election, without liability to Parties, do either
                  or
                  both of the following:

              


      

       

      
        	
              	10.5.1.1	
                Withhold
                  and stop all further proceedings in, and performance of, this Escrow,
                  until such conflict is resolved to Escrow Agent's
                  satisfaction;

              


      

       

      
        
          
          

        

        
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            11 of
            13

          
            

          

        

        
          
          

        

      

      
         

        
          
            	
                    GENERAL
                      ESCROW AGREEMENT

                  	
                    

                  


          

        

         

      

      
        	
              	10.5.1.2	
                File
                  a suit in interpleader and obtain an order from the court requiring
                  the
                  parties to litigate their several claims and rights among themselves,
                  in
                  which case, Escrow Agent shall be fully released and discharged
                  from any
                  obligation to perform any further duties imposed upon it with respect
                  to
                  this Escrow, and the parties shall pay Escrow Agent all costs,
                  expenses
                  and reasonable attorney fees expended or incurred by it, the amount
                  thereof to be fixed and a judgment thereof to be rendered by the
                  court in
                  such suit.

              


      

       

      
        	 	
                10.5.2

              	
                Any
                  dispute arising out of or relating to this Escrow Agreement, including
                  a
                  breach of this Escrow Agreement, will be decided by reference under
                  California Code of Civil Procedure 638
                  and related sections. A referee, either an active attorney or retired
                  judge, will be selected according to the procedures of the American
                  Arbitration Association and then appointed by the court in which
                  the
                  action regarding the dispute or controversy originated. The dispute
                  will
                  be submitted to the referee for determination in place of a trial
                  before a
                  judge and jury.

              


      

       

      
        	
                10.6

              	
                Legal
                  Counsel.
                  The Escrow Agent may consult with, and obtain advice from, legal
                  counsel
                  of its own selection as to the construction of any of the provisions
                  of
                  this Escrow Agreement or the Escrow Agent's obligations and duties,
                  and
                  shall incur no liability in acting in good faith in accordance
                  with the
                  reasonable advice and opinion of such
                  counsel.

              


      

       

      ARTICLE
        XI

      MISCELLANEOUS

       

      
        	
                11.1

              	
                Governing
                  Law.
                  This Escrow Agreement shall be governed, construed, regulated and
                  administered under the laws of the State of
                  California.

              


      

       

      
        	
                11.2

              	
                Invalid
                  Provisions.
                  It is not the intention of any party to this Escrow Agreement to
                  violate
                  any statute, regulation, ruling, judicial decision, or other legal
                  provision applicable to this Escrow Agreement or the performance
                  thereof.
                  If any term of this Escrow Agreement, or any act or omission in
                  the
                  performance thereof, is or becomes violative of any such provision,
                  such
                  term, act or omission shall be of no force or effect and any such
                  term
                  shall be severed from this Escrow Agreement. Any such invalid term,
                  act or
                  omission shall not affect the validity of any other term of this
                  Escrow
                  Agreement that is otherwise valid, nor the validity of any otherwise
                  valid
                  act or omission in the performance thereof, unless such invalidity
                  prevents accomplishment of the objectives and purposes of this
                  Escrow
                  Agreement. In the event any such term, act or omission is determined
                  to be
                  illegal or otherwise invalid, the necessary steps to remedy such
                  illegality or invalidity shall be taken immediately by the
                  parties.

              


      

       

      
        
          
          

        

        
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                    GENERAL
                      ESCROW AGREEMENT

                  	
                    

                  


          

        

         

      

      
        	
                11.3

              	
                Counterparts.
                  This Escrow Agreement may be executed in several counterparts,
                  each of
                  which shall be deemed an original, and said counterparts shall
                  constitute
                  but one and the same instrument, which may be sufficiently evidenced
                  by
                  any one counterpart.

              


      

       

      
        	
                11.4

              	
                Successors
                  and Assigns.
                  This Escrow Agreement shall inure to the benefit of, and be binding
                  upon,
                  the parties hereto and their successors and assigns, except as
                  is
                  expressly provided to the contrary
                  herein.

              


      

       

      
        	
                11.5

              	
                Important
                  Information About Procedures for Opening a New Account.
                  To
                  help the government fight the funding of terrorism and money laundering
                  activities, Federal law requires all financial institutions to
                  obtain,
                  verify, and record information that identifies each person who
                  opens an
                  account. What this means for the Parties: Upon opening an account,
                  CNB
                  will ask Parties’ names, addresses, dates of birth, and other information
                  that will allow CNB to identify the Parties. CNB may also ask to
                  see the
                  Parties’ driver’s licenses or other identifying
                  documents.

              


      

       

      IN
        WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
        be
        executed by their respective duly authorized officers on the dates set forth
        below.

      


      
        	
                Date

              	 	 	
                COMPANY:

              	 	
                Kyocera
                  Mita Corporation

              
	 	 	 	
                By

              	 	 
	 	 	 	
                It’s:

              	 	 


      

      
        


        
          	
                  Date

                	 	 	
                  COMPANY:

                	 	
                  
                    Peerless
                      Systems Corporation

                  

                
	 	 	 	
                  By

                	 	 
	 	 	 	
                  It’s:

                	 	 


        

        
          


          
            	
                    Date

                  	 	 	
                    
                      City
                        National Bank, national association

                    

                  
	 	 	 	 	 	
                    ESCROW
                      AGENT

                  
	 	 	 	
                    By

                  	 	 
	 	 	 	
                    It’s:

                  	 	 


          

           

          
            	
                    ESCROW
                      ACCOUNT #:

                  	 	 


          

        

      

       

      
        
          
          

        

        
          Page
            13 of
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    EXHIBIT
      B

    

      CONFIDENTIAL
        TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATEMENT HAS BEEN
        REQUESTED IS OMITTED AND IS NOTED WITH “[REDACTED].” AN UNREDACTED VERSION OF
        THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
        COMMISSION.

    

    

       

      LICENSE
        AGREEMENT

       

      THIS
        LICENSE AGREEMENT (the “Agreement”) is entered into, effective as of _________,
        2008 (the “Effective Date”), by and between Peerless Systems Corporation
        (“Licensee”), and Kyocera Mita Corporation (“Licensor”), and is made with
        reference to the following facts:

       

      A. Concurrent
        with the execution of this Agreement, the parties hereto have consummated
        the
        transactions contemplated by that certain Asset Purchase Agreement dated
        _______, 2008 (“Sale Agreement”).

       

      B. Pursuant
        to terms and conditions of the Sale Agreement, among other things, Licensee
        has
        sold, assigned and transferred the Intellectual Property to
        Licensor.

       

      C. The
        execution and delivery of this Agreement and the performance of the transactions
        contemplated hereby is required by and a condition of the Sale Agreement,
        and
        this Agreement constitutes Exhibit B to
        the
        Sale Agreement.

       

      DEFINITIONS.
        For
        purposes of this Agreement:

       

      1.1 “Affiliates”
means
        an entity directly or indirectly controlling, controlled by or under common
        control with such party, provided that such entity shall be considered an
        Affiliate only during the time when such control exists. For purposes of
        this
        definition, “control” means the ownership of more than fifty percent (50%) of
        the total voting power of the shares (or other securities or rights) entitled
        to
        vote of the relevant affiliated party or other entity.

       

      1.2 “Change
        Of Control” means
        the
        sale of all or substantially all of Licensee’s assets or the consummation of a
        merger, consolidation, statutory share exchange, reorganization, or similar
        form
        of corporate transaction involving Licensee resulting in a cumulative change,
        from the date hereof, in the holders of more than fifty (50%) percent of
        the
        voting securities or equity of Licensee.

       

      1.3 “Confidential
        Information” shall
        have the meaning set forth in Section 9.

       

      1.4 “Improvements”
        means
        any
        improvements to, derivative works of, modifications of or enhancements to
        the
        Intellectual Property which are developed by Licensor or Licensee and which
        are
        based on or incorporate any part of the Intellectual Property, including,
        without limitation, any revisions, modifications, translations, abridgments,
        condensations or expansions thereof or thereto.

       

      1.5 “Intellectual
        Property”
means
        the Transferred Intellectual Property as defined in the Sale
        Agreement.

       

      1.6 “License”
        means
        the licenses granted by Licensor to Licensee pursuant to
        Section 2.1.

       

      1.7 “Operating
        Restrictions”
        shall
        have the meaning set forth in Section 3.4.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      CONFIDENTIAL
        TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATEMENT HAS BEEN
        REQUESTED IS OMITTED AND IS NOTED WITH “[REDACTED].” AN UNREDACTED VERSION OF
        THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
        COMMISSION.

       

      1.8 “Patent”
means
        Patent as defined in the Sale Agreement.

       

      1.9 “Products
        And Services” means
        any
        products or services that Licensee makes, has made, provides, licenses, uses,
        distributes or sells that contain, utilize or are based on the Intellectual
        Property, or any part thereof, and the provision of maintenance or support
        services with respect thereto.

       

      1.10 “Proceeding”
shall
        have the meaning set forth in Section 13.5.

       

      1.11 “Prosecution”
means
        the application, maintenance, reexamination, reissue, opposition and prosecution
        of any kind of a Patent.

       

      1.12 “Sale
        Agreement” shall
        have the meaning set forth in Recital A of this Agreement

       

      1.13 “Restricted
        Territory” means
        the
        Peoples Republic of China, Taiwan and Korea.

       

      1.14 “Software”
        means
        all
        Software as defined in the Sale Agreement.

       

      2. GRANT
        OF LICENSE.

       

      2.1 LICENSE.
        Subject
        to termination in accordance with Section 10.2, Licensor hereby grants to
        Licensee, and Licensee hereby accepts from Licensor, a nonexclusive,
royalty-free,
        irrevocable, fully paid up, perpetual, non-assignable (except as provided
        by
        Sections 3.1 and 13.4) worldwide right and license, to the Intellectual Property
        to make and have made, offer to sell and sell, use import, develop, reproduce,
        prepare derivative works of, sublicense and otherwise commercialize the Products
        and Services subject to the Operating Restrictions. Licensee shall cause
        those
        of its’ and its Affiliates’ employees, agents, representatives and contractors
        that are provided with a copy or access to any or all of the Intellectual
        Property to execute Licensee’s then customary form of proprietary information
        agreement under which such persons shall be required to maintain Licensor’s
        confidential information to the same extent that such persons are required
        to
        maintain confidential information of Licensee. Such agreements shall contain
        reasonable
        security measures for the preservation of the secrecy and proprietary nature
        of
        the Intellectual Property.

       

      3. OPERATING
        RESTRICTIONS.
        The
        License shall be subject at all times to the following terms and
        conditions:

       

      3.1 ASSIGNMENT
        RESTRICTIONS. Except
        as
        permitted by Section 13.4, none of the Intellectual Property may be assigned,
        sublicensed or otherwise transferred by Licensee to any third party other
        than
        (x) the limited right to grant non-transferable, non-assignable sublicenses
        of
        the Intellectual Property in connection with the delivery and performance,
        respectively, of the Products and Services subject to the Operating
        Restrictions, or (y) to Licensee’s Affiliates and then only if (i) such
        Affiliates are bound by written agreement to all of the limitations and
        restrictions applicable to Licensee under this Agreement, including, without
        limitation, the Operating Restrictions, and (ii) no such Affiliates shall
        have
        the right to further assign, sublicense or otherwise transfer such License,
        except to other Affiliates of Licensee provided such Affiliates are bound
        by
        written agreement to all of the limitations and restrictions applicable to
        Licensee under this Agreement, including, without limitation, the Operating
        Restrictions. Licensee shall not, and Licensee shall not cause or permit
        any
        other person to, provide the use of the Software to or for the benefit of
        any
        other person on a service bureau, remote, time-share, application service
        provider or any other shared or distributed basis.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      CONFIDENTIAL
        TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATEMENT HAS BEEN
        REQUESTED IS OMITTED AND IS NOTED WITH “[REDACTED].” AN UNREDACTED VERSION OF
        THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
        COMMISSION.

       

      3.2 RESERVATION
        OF RIGHTS.
        Except
        as provided by this Agreement and the License granted hereunder, as between
        the
        parties hereto, Licensor is and shall remain the sole owner of the Intellectual
        Property and all rights therein and thereto, and Licensee shall not contest
        or
        challenge the validity, ownership, title or, if applicable, any registration
        thereof. All rights not expressly granted by Licensor in this Agreement are
        expressly reserved by Licensor, and Licensor shall retain the right to assign,
        license, sell, transfer, use and otherwise exploit in any manner all of its
        rights in and to the Intellectual Property.

       

      3.3 PROTECTION.
        Licensor
        acknowledges that Licensee’s use and protection of the Intellectual Property
        shall include the implementation of reasonable security measures for the
        preservation of the secrecy and proprietary nature of the Intellectual
        Property.

       

      3.4 OPERATING
        RESTRICTIONS.
        As to
        Licensee’s relationships with existing customers under renewals of existing
        contracts and as to Licensee’s relationships with new customers or existing
        customers under new contracts, Licensee shall provide its Products and Services
        under arms-length terms and conditions, including sale, license or service
        pricing terms that, measured in the aggregate at the time the relevant
        agreements are entered into or renewed, are [REDACTED].
        In
        addition, neither Licensee nor its Affiliates shall use the Intellectual
        Property for Products or Services to be sold, licensed or otherwise provided
        to
        persons or companies owned or controlled by, directly or indirectly, a company
        based in or headquartered in the Restricted Territory, or any Affliate of
        any
        person or company owned or controlled by, directly or indirectly, a company
        based in or headquartered in the Restricted Territory, for a period expiring
        fifteen (15) months from the closing date under Sale Agreement (the "Restricted
        Period"). For the avoidance of doubt, the foregoing restrictions ("Operating
        Restrictions") shall not apply to any business activity or undertaking of
        Licensee except for those directly involving commercialization of the
        Intellectual Property.

       

      4. IMPROVEMENTS.

       

      4.1 IMPROVEMENTS
        BY LICENSOR.
        Licensor retains all rights, title, and interest in any Improvements made
        by
        Licensor. Licensor shall have no obligation to include any such Improvements
        within the License granted to Licensee, and Licensee shall not be entitled
        to
        obtain the right to use any such Improvements.

       

      4.2 IMPROVEMENTS
        BY LICENSEE.
        Licensee retains all rights, title, and interest in any Improvements made
        by
        Licensee. Licensee shall have no obligation to provide Licensor with any
        right
        or license to use such Improvements, and Licensor shall not be entitled to
        obtain the right to use any such Improvements.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
          TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATEMENT HAS
          BEEN
          REQUESTED IS OMITTED AND IS NOTED WITH “[REDACTED].” AN UNREDACTED VERSION OF
          THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
          COMMISSION.

         

      

      5. COMPLIANCE.
        During
        the Restricted Period, Licensee shall notify Licensor of the name of any
        party
        to whom it has granted any new sublicenses in the Intellectual Property.
        Such
        notices shall be provided within thirty (30) days after the end of each calendar
        quarter during the Restricted Period except that notice shall not be given
        until
        after the first full calendar quarter following the date hereof. Contemporaneous
        with the delivery of each notice under this Section 5, Licensee shall deliver
        to
        Licensor a Certificate of an executive officer of Licensee certifying to
        Licensee’s compliance with the Operating Restrictions set forth in Section 3.4
        hereof. During the Restricted Period, but not more frequently than once every
        seven (7) months during the Restricted Period, Licensor or its duly authorized
        representative shall have the right, at its sole cost and expense, and subject
        to the execution of a confidentiality agreement in form reasonably satisfactory
        to Licensee, upon reasonable notice to Licensee, to review redacted agreements
        entered into by Licensee after the date of the Sale Agreement solely with
        respect to its use (including sublicense) of the Intellectual Property (with
        such redacted agreements to reflect only the name of the other party and
        a
        description of the intellectual property that is the subject of such agreement).
        Upon Licensor’s reasonable request, Licensee shall, and shall cause its
        sub-licensees to, promptly remedy any non-compliant use of the Intellectual
        Property identified by Licensor.

       

      6. PATENTS.

       

      6.1 LICENSOR’S
        RESPONSIBILITIES.
        Licensor, at its sole cost and expense, shall have the full responsibility
        for
        the application, maintenance, reexamination, reissue, opposition and prosecution
        of any kind (collectively, “Prosecution”) relating to any Patent that is part of
        the Intellectual Property; provided, however, Licensor may, in accordance
        with
        Section 6.2 below, elect to abandon the Prosecution of any Patent. 

       

      6.2 LICENSEE’S
        RIGHTS.
        If
        Licensor shall elect to abandon the Prosecution of any Patent, Licensor shall
        notify Licensee of such election at least thirty (30) days before a final
        due
        date which would result in the abandonment or bar of patentability of any
        Patent. In such event, Licensee may, at its sole option and expense, assume
        the
        Prosecution of such Patent. If Licensee elects to assume the Prosecution
        of such
        Patent, Licensee shall notify Licensor of such election in writing, and Licensor
        shall provide to Licensee copies of (x) any and all material or pertinent
        communications with the United States Patent and Trademark Office, or any
        foreign patent office, relating to the Prosecution of such Patent, and (y)
        the
        complete texts of all filings with respect to such Patent as well as information
        sent to or received from the patent office of any such country regarding
        such
        filing, including all office actions and other official correspondence as
        well
        as information concerning the institution or possible institution of any
        interference, opposition, re examination, reissue, revocation, nullification
        or
        any official proceeding involving such Patent. If Licensee elects to assume
        the
        Prosecution of a Patent abandoned by Licensor, Licensee shall pay all filing
        and
        maintenance fees with respect to such Patent, past due and due with respect
        to
        the periods from and after the date of Licensor’s abandonment of the Prosecution
        of such Patent and Licensee shall thereafter have all rights of ownership
        as to
        any such Patent. 

       

      6.3 LICENSOR
        RIGHT TO CONTINUED USE OF PATENTS.
        Notwithstanding Licensor’s election to abandon the Prosecution of a Patent and
        the Licensee’s election to assume the Prosecution of such Patent, Licensor may
        continue to use any such Patent so abandoned on a perpetual royalty free
        basis,
        and Licensor’s use of such Patent or of any Intellectual Property rights
        associated with such Patent in a manner consistent with its prior use of
        such
        Patent will not be deemed to be infringing upon the Patent and other
        intellectual property rights of Licensee.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
          TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATEMENT HAS
          BEEN
          REQUESTED IS OMITTED AND IS NOTED WITH “[REDACTED].” AN UNREDACTED VERSION OF
          THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
          COMMISSION.

         

      

      6.4 NOTIFICATION
        OBLIGATIONS.
        In the
        event that either party becomes aware of any product that is made, used,
        or sold
        that it believes (i) infringes any Patent, or (ii) constitutes a
        misappropriation of Confidential Information, such party (the “Notifying Party”)
        will promptly advise the other party of all the relevant facts and circumstances
        known by the Notifying Party in connection with the infringement or
        misappropriation and determine in good faith an appropriate plan to enforce
        their respective rights. The parties shall keep one another informed of the
        status of their respective activities regarding any litigation or settlement
        thereof; provided that no settlement or consent judgment or other voluntary
        final disposition of any suit defended or action brought by a party pursuant
        to
        this Section may be entered into without the consent of the other party if
        such
        settlement would require the other party to be subject to an injunction or
        to
        make a monetary payment or would otherwise adversely affect the other party’s
        rights under this Agreement. If either party is unable to initiate or prosecute
        any action described in this Section solely in its own name, or it is otherwise
        advisable in order to obtain an effective remedy, the other party shall join
        such action voluntarily and will execute all documents necessary to initiate
        and
        conduct litigation to prosecute and maintain such action. Each party shall
        cooperate with the other in all suits and actions referred to in this Section,
        including the furnishing of all documents as may reasonably be requested,
        and
        providing reasonable access to potential witnesses.

       

      7. DELIVERY
        OF INTELLECTUAL PROPERTY.
        The
        parties acknowledge that the Intellectual Property, immediately prior to
        the
        consummation of the transactions contemplated by the Sale Agreement, was
        in the
        possession, control and ownership of Licensee. The parties further acknowledge
        and agree that Licensee shall retain copies of all Intellectual Property,
        and
        every part thereof, in addition to the other deliveries required by the Sale
        Agreement. Accordingly, no delivery back of the Intellectual Property to
        Licensee will be required for the transactions contemplated hereby.

       

      8. LIMITATIONS
        OF LIABILITY.

       

      8.1 NO
        WARRANTIES.
        LICENSOR
        MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT TO THE INTELLECTUAL
        PROPERTY, INCLUDING, WITHOUT LIMITATION, THAT THE INTELLECTUAL PROPERTY OR
        ANY
        PART THEREOF IS OR WILL BE ERROR FREE OR IS NOT INFRINGING THE RIGHTS OF
        ANY
        THIRD PARTY. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, LICENSOR MAKES NO EXPRESS,
        IMPLIED OR STATUTORY WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES
        OF DESIGN, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR ARISING
        FROM A COURSE OF DEALING, TRADE USAGE OR TRADE PRACTICE WITH RESPECT TO THE
        INTELLECTUAL PROPERTY, OR ANY PART THEREOF. THE PARTIES RECOGNIZE THAT THE
        RIGHTS TO THE INTELLECTUAL PROPERTY HAVE BEEN PURCHASED BY LICENSOR FROM
        LICENSEE CONCURRENTLY HEREWITH PURSUANT TO THE SALE AGREEMENT.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
          TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATEMENT HAS
          BEEN
          REQUESTED IS OMITTED AND IS NOTED WITH “[REDACTED].” AN UNREDACTED VERSION OF
          THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
          COMMISSION.

         

      

      8.2 DISCLAIMER
        OF LIABILITY.
        UNDER
        NO CIRCUMSTANCES SHALL LICENSOR BE LIABLE TO LICENSEE OR ANY OTHER PERSON
        OR
        ENTITY IN THE EVENT OF ANY CLAIM OF INFRINGEMENT, MISAPPROPRIATION OR DILUTION
        OF THE INTELLECTUAL PROPERTY, TRADE SECRET, PROPRIETARY OR SIMILAR RIGHTS
        OF ANY
        OTHER PERSON OR ENTITY INVOLVING THE INTELLECTUAL PROPERTY AS TRANSFERRED
        TO THE
        LICENSOR AT THE CLOSING UNDER THE SALE AGREEMENT OR THAT CONCERNS OR RELATES
        TO
        THE PERIOD PRIOR TO THE DATE HEREOF. THE WITHIN DISCLAIMER OF LIABILITY SHALL
        NOT BE CONSTRUED TO BE A DISCLAIMER OF ANY OF THE OBLIGATIONS OF LICENSOR
        UNDER
        THIS AGREEMENT.

       

      9. CONFIDENTIAL
        INFORMATION.

       

      9.1 DEFINED.
        All
        information, documents, notes, memoranda and intellectual property of any
        kind
        received, compiled, produced or otherwise made available by either party
        to the
        other related to this Agreement, the Intellectual Property, including, but
        not
        limited to ideas, concepts, product concepts, technical, financial and business
        plans and models, names of customers or partners, proposed business
        transactions, reports, market projections, know-how, software programs,
        software, technology, graphics, and other visual and audio assets, data or
        any
        other confidential and proprietary information relating to the subject matter
        hereof or relating to Licensor or Licensee and their respective Affiliates,
        and
        any information, documents, notes, memoranda, materials and intellectual
        property developed by, or disclosed to, by either party to the other which
        is
        confidential to the disclosing party (“Confidential Information”) shall be and
        remain the sole and exclusive property of the disclosing party and shall
        in
        perpetuity be maintained in the utmost confidence by the receiving party
        in
        trust for the benefit of the disclosing party.

       

      9.2 EXCEPTIONS.
        The
        term “Confidential Information” as used herein does not include any data or
        information (a) which is already known to the receiving party at the time
        it is
        disclosed, or (b) which before being divulged by the receiving party (i)
        has
        become generally known to the public through no wrongful act of the receiving
        party; (ii) has been rightfully received by the receiving party from a
        third party without restriction on disclosure and without breach of an
        obligation of confidentiality running directly or indirectly to the disclosing
        party; (iii) has been approved for release by a written authorization by
        the
        disclosing party; or (iv) is independently developed by the receiving party
        without use, directly or indirectly, of the Confidential Information received
        from the disclosing party. Furthermore, the restrictions provided by this
        Section 9 shall not preclude Licensee from commercialization of the Intellectual
        Property, or any transactions otherwise permitted by the License granted
        hereunder, so long as Licensee shall take the same steps to protect the
        Intellectual Property as shall be consistent with the types of measures and
        protections that it has taken in the past while owner of the Intellectual
        Property.

       

      9.3 NON-DISCLOSURE.
        Neither
        party nor any other person acting on his or its behalf shall directly or
        indirectly release or disclose to any other person any Confidential Information
        of the other party except with the express prior written consent of the other
        party or as required by law. Upon any termination of this Agreement, each
        party
        shall return promptly any materials, wherever located, in its possession
        or
        control, incorporating any Confidential Information of the other party received,
        compiled, produced or otherwise made available to such party prior to the
        termination of this Agreement, without keeping any copies thereof.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
          TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATEMENT HAS
          BEEN
          REQUESTED IS OMITTED AND IS NOTED WITH “[REDACTED].” AN UNREDACTED VERSION OF
          THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
          COMMISSION.

         

      

      9.4 CONCURRENT
        DEVELOPMENT. Each
        party understands that the other party may currently or in future be developing
        information internally, or receiving information from other parties, that
        may be
        similar to the Confidential Information furnished by such party. In addition,
        each party understands that either party may have, or in the future may enter
        into, relationships with third parties having pre-existing relationships
        with
        the other party. Provided that each party complies with its obligations
        contained herein, and except as otherwise expressly provided herein, this
        Agreement shall not in any way limit, restrict or preclude either party from
        pursuing any of its present or future business activities or interests or
        from
        entering into any agreement or transaction with any person.

       

      10. TERM;
        TERMINATION.

       

      10.1 TERM.
        Subject
        to early termination in accordance with Section 10.2, the term of this Agreement
        (the “Term”) and each License shall commence on the Effective Date and shall
        continue in perpetuity.

       

      10.2 TERMINATION.
        This
        Agreement and the rights of Licensor and Licensee hereunder shall terminate
        immediately upon the occurrence of any of the following events: (i) a Change
        in
        Control during the Restricted Period involving the Licensee concerning or
        involving a company or an Affiliate of a company owned or controlled by,
        directly or indirectly, a company based in or headquartered in one of the
        Restricted Territories; (ii) any breach by Licensee of this Agreement which
        is
        not remedied within thirty (30) days following Licensor’s notice to Licensee of
        the breach; (iii) Licensee’s making an assignment for the benefit of its
        creditors, the filing (voluntary or involuntary) of a petition seeking relief
        under any bankruptcy or insolvency law, under the reorganization or arrangement
        provisions of the United States Bankruptcy Code, or under the provisions
        of any
        law of like import in connection with Licensee; or (iv) the appointment of
        a
        trustee or receiver for Licensee or its property.

       

      11. INJUNCTIVE
        RELIEF. Licensee
        acknowledges and agrees that in the event of Licensee’s breach of Sections 3 or
        9 of this Agreement, and Licensor acknowledges and agrees that in the event
        of
        Licensor’s breach of Section 9 of this Agreement, the other party will suffer
        irreparable injuries not compensated by money damages and therefore may not
        have
        an adequate remedy at law. Accordingly, the non-breaching party shall be
        entitled to seek a preliminary and final injunction without the necessity
        of
        proving damages or posting any bond. This remedy is separate and apart from
        any
        other remedy each party may have at law or in equity.

       

      12. INDEMNIFICATION.
        Licensee
        shall indemnify, defend and hold harmless Licensor and its Affiliates and
        its
        and their respective officers, directors, employees, agents, contractors
        and
        representatives from and against any and all losses, liabilities, claims,
        obligations, costs, expenses (including reasonable attorney’s fees and costs)
        which result from, arise in connection with or are related to claims by third
        parties arising out of or in connection with Licensee’s acts or omissions
        relating to its use of the Intellectual Property and delivery and performance
        of
        the Products and Services, its sublicense to its customers in relation to
        the
        Products and Services and its business activities in any kind. Licensor shall
        indemnify, defend and hold harmless Licensee and its Affiliates and its and
        their respective officers, directors, employees, agents, contractors and
        representatives from and against any and all losses, liabilities, claims,
        obligations, costs, expenses (including reasonable attorney’s fees and costs)
        which result from, arise in connection with or are related to claims by third
        parties arising out of or in connection with Licensor’s acts or omissions
        relating to its use of the Intellectual Property and delivery and performance
        of
        its products and services, its sublicense to its customers in relation to
        its
        products and services and its business activities in any kind.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      
         

        CONFIDENTIAL
          TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATEMENT HAS
          BEEN
          REQUESTED IS OMITTED AND IS NOTED WITH “[REDACTED].” AN UNREDACTED VERSION OF
          THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
          COMMISSION.

         

      

      13. MISCELLANEOUS.

       

      13.1 SEVERABILITY.
        If any
        provision of this Agreement is for any reason found to be ineffective,
        unenforceable, or illegal by any court having jurisdiction, such condition
        shall
        not affect the validity or enforceability of any of the remaining portions
        hereof, unless it deprives any party hereto of any material right or license
        held by such party under this Agreement. The parties shall negotiate in good
        faith to replace any such ineffective, unenforceable or illegal provisions
        as
        soon as is practicable, and the substituted provision shall, as closely as
        possible, have the same economic effect as the eliminated
        provision.

       

      13.2 NOTICES.
        All
        notices, requests, demands and other communications provided for by this
        Agreement shall be in writing, effective on receipt, and personally delivered
        or
        mailed (by registered or certified mail) or sent by telecopy (receipt confirmed)
        to the address of the party as provided below.

       

      To
        Licensor, at:

       

      Kyocera
        Mita Corporation

      2-28,
        1-Chome, Tamatsukuri

      Chuo-Ku,
        Osaka 540-8585 Japan

      Attention:__________________

      Facsimile:__________________

       

      with
        separate copies thereof addressed to:

       

      Kyocera
        Mita America, Inc.

      225
        Sand
        Road

      Fairfield,
        New Jersey 07004

      Attention:
        Calvin Rosen, Esq. 

      Telecopier:
        973.882.4421

       

      with
        a
        separate copy thereof addressed to:

       

      Cole,
        Schotz, Meisel, Forman & Leonard, P.A.

      Court
        Plaza North

      25
        Main
        Street

      P.O.
        Box
        800

      Hackensack,
        NJ 07602-0800

      Facsimile:
        201.678.6271

      Attention:
        Marc Press, Esq. 

      Telecopier:
        201.678.6271

       

      
        
          
          

        

        
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        CONFIDENTIAL
          TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATEMENT HAS
          BEEN
          REQUESTED IS OMITTED AND IS NOTED WITH “[REDACTED].” AN UNREDACTED VERSION OF
          THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
          COMMISSION.

         

      

      To
        Licensee, at:

       

      Peerless
        Systems Corporation

      2381
        Rosecrans Avenue

      El
        Segundo, CA 90245

      Attention:
        Elliot M. Shirwo, General Counsel and Corporate Secretary

      Telecopier:
        (310) 297-3142

      Email:eshirwo@peerless.com

       

      13.3 INDEPENDENT
        CONTRACTORS.
        Performance by the parties under this Agreement shall be as independent
        contractors. This Agreement is not intended and shall not be construed as
        creating a joint venture or partnership, or as causing either party to be
        treated as the agent of the other party for any purpose or in any sense
        whatsoever, or to create any fiduciary or any other obligations other than
        those
        expressly imposed by this Agreement.

       

      13.4 ASSIGNMENT.
        Neither
        party may assign or transfer all or any part of its rights or obligations
        hereunder to any person or entity, except to a party that acquires all or
        substantially all of the assets of the assignor or the product line of the
        assignor in which the Intellectual Property, or a substantial part thereof,
        is
        employed; provided,
        however,
        that
        any such assignment shall be expressly subject to the terms of this Agreement,
        including, without limitation, the Operating Restrictions and the termination
        rights in Section 10.2. Except as so provided, this Agreement shall be binding
        upon and inure to the benefit of the successors and assigns and of the parties
        hereto.

       

      13.5 GOVERNING
        LAW.
        This
        Agreement shall be construed and enforced in accordance with the laws of
        the
        State of Delaware without regard to the choice of law principles thereof.
        All
        actions or proceedings arising
        in connection with, touching upon or relating to this
        Agreement, the breach thereof and/or the scope of the provisions of this
        Section
        (a “Proceeding”) shall be
        exclusively resolved by federal and state courts located in
        Delaware.

       

      13.6 ENTIRE
        AGREEMENT; AMENDMENTS. This
        Agreement (i) sets forth the entire understanding of the parties concerning
        the
        subject matter hereof, and supersedes all prior and contemporaneous agreements
        and understandings relating to the subject matter hereof, whether oral or
        written, and (ii) may not be modified or amended, except by a written instrument
        executed after the effective date of this Agreement by the party sought to
        be
        charged by the amendment or modification.

       

      
        
          
          

        

        
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          CONFIDENTIAL
            TREATMENT REQUESTED: INFORMATION FOR
            WHICH CONFIDENTIAL TREATEMENT HAS BEEN REQUESTED IS OMITTED AND IS NOTED
            WITH
“[REDACTED].” AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED SEPARATELY
            WITH THE SECURITIES AND EXCHANGE COMMISSION.

           

        

      

      IN
        WITNESS WHEREOF, the parties hereto have executed this Agreement, effective
        as
        of the date set forth above.

      


      
        	
                PEERLESS
                  SYSTEMS CORPORATION

                 

                By:
                                                                                      
                  

                 

                NAME:
                  Richard L. Roll

                 

                TITLE:
                  President and CEO

              	
                KYOCERA
                  MITA CORPORATION

                 

                By:
                                                                                      
                  

                 

                NAME:

                 

                TITLE:

              


      

      


      
        
          
          

        

        
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    EXHIBIT
      C

     

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

      ADDENDUM
        TO STANDARD SUBLEASE

       

      This
        Addendum to Standard Sublease (the "Addendum") modifies and amends the Standard
        Sublease (the "Sublease") dated as of __________, 2008 by and between Peerless
        Systems Corporation, a Delaware corporation ("Sublessor") and Kyocera Technology
        Development, Inc., a California corporation ("Sublessee") to which it is
        attached. In the event of a conflict between the terms and conditions of
        the
        Sublease and this Addendum, this Addendum shall control. Terms not otherwise
        defined herein shall have the meanings assigned to them in the
        Sublease.

       

      13.  As-Is;
        Where-Is Condition of Premises.
        Sublessee has made such investigations as it deems necessary with respect
        to the
        condition of the Premises, including, but not limited to, the electrical,
        HVAC,
        fire sprinkler systems, security, environmental and compliance with laws.
        Accordingly, except for the limited representations provided in Section 33(S)
        below and notwithstanding anything to the contrary contained in the Master
        Lease, Sublessee hereby accepts the Premises in its "as-is", "where-is"
        condition without any representations or warranties whatsoever or any obligation
        on Sublessor's part to make any improvements or alterations to the
        Premises.

       

      14.  Obligations
        of the Parties.
        Notwithstanding anything to the contrary contained in this Sublease, Sublessor
        shall not be obligated to perform and shall not be liable for the performance
        or
        nonperformance by the Master Lessor of any of the obligations of the Master
        Lessor and Sublessee shall have no claim against Sublessor by reason of any
        default upon the part of the Master Lessor. Nothing contained in this Sublease
        shall be construed as a guarantee by Sublessor of any of the obligations,
        covenants, warranties, agreements or undertakings of the lessor in the Master
        Lease, nor as an absolute or unconditional undertaking by Sublessor of the
        Master Lessor’s obligations on the same terms as are contained in the Master
        Lease. If the Sublessor becomes entitled, as lessee in the Master Lease,
        to make
        or forbear making any election, give or receive any notice, grant or withhold
        any approval, do any act, or otherwise enforce any right or exercise any
        remedy
        under any of the provisions of the Master Lease, Sublessor, in its sole and
        absolute discretion, may either take or forbear taking such action as it
        deems
        appropriate for the protection of its interest as lessee, or may assign to
        Sublessee (with the Sublessee’s prior written consent which consent shall not be
        unreasonably withheld or delayed), without recourse on or liability of any
        kind
        to Sublessor, such rights as the Sublessor may have in the matter under the
        Master Lease. Except as expressly permitted herein, Sublessee shall not have
        the
        right to exercise any of Sublessor's rights (including, without limitation,
        rights of first refusal), options or elections permitted or authorized under
        the
        Master Lease, or to institute any action or proceeding against the Master
        Lessor
        for the enforcement of the Master Lease. Sublessee acknowledges receipt of
        a
        copy of the Master Lease and agrees that during the term of this Sublease,
        Sublessee will not violate any of the terms and conditions of the Master
        Lease.
        Sublessor shall not be obligated to Sublessee to pay to the Master Lessor
        any
        sum due or asserted by the Master Lessor to be due under the Master Lease
        with
        respect to the subleased Premises unless and until Sublessee shall have paid
        Sublessor the sums due hereunder.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      15.  Common
        Area Operating Expenses.
        In
        accordance with Article 4 of the Master Lease, Sublessee shall be responsible
        to
        Sublessor, and shall timely pay to Sublessor (a) Sublessee’s Share of Common
        Area Operating Expenses payable by Sublessor pursuant to Section 4.2 of the
        Master Lease, and (b) Sublessee’s Share of all other additional charges payable
        by Sublessor in accordance with Section 3.3 of the Master Lease (collectively,
        the "Additional Charges"). Sublessee’s actual share of Common Area Operating
        Expenses shall be determined by mutual agreement of Sublessor and Sublessee
        prior to the inception of the term of this Sublease (or early possession
        by
        Sublessee, if applicable). The Additional Charges, together with the Base
        Rent,
        are collectively referred to herein and considered as “Rent”. Rent shall be paid
        to Sublessor, without any prior notice or demand therefor, and without any
        abatement, deduction or offset whatsoever, in lawful money of the United
        States
        of America, which shall be legal tender at the time of payment; provided,
        however, that (i) if any Rent abatement is available to Sublessor on account
        of
        the failure of Master Lessor to perform any obligation pursuant to the Master
        Lease that relates to the subleased Premises, in whole or in part, then
        Sublessee shall be entitled to a Rent abatement to the extent that the benefit
        received by Sublessor relates to the subleased Premises, (ii) in the event
        that
        Sublessor receives any other abatement, reduction or diminution of Rent from
        Master Lessor that relates to the subleased Premises, in whole or in part,
        Sublessee shall be entitled to an abatement, reduction or diminution of Rent
        under this Sublease, to the extent that the benefit received by Sublessor
        relates to the subleased Premises and (iii) if Sublessor fails to pay the
        Rent
        received from Sublessee to the Master Lessor, and Sublessee thereafter pays
        such
        Rent to the Master Lessor as well either at the demand of the Master Lessor
        or
        to cure a default resulting from such non-payment by Sublessor, Sublessee
        may
        offset such payment against Rent thereafter due and payable to Sublessor.
        Sublessor shall provide Sublessee with a monthly statement of all such
        Additional Charges and Sublessee shall pay Sublessor its pro rata share of
        such
        charges within five (5) business days of receipt of such statement.

       

      16.  Premises
        Square Footage.
        The
        square footage of the Premises as set forth in Section 1.2(a) hereof shall
        be a
        minimum of 15,000 square feet and not more than 20,000 square feet. The actual
        square footage of the Premises shall be determined by mutual agreement of
        Sublessor and Sublessee prior to the inception of the term of this Sublease
        (or
        early possession by Sublessee, if applicable).

       

      17.  Compliance
        with Lease.
        


       

      (a)  Definitions.
        Except
        as otherwise expressly provided herein, during the Term and for all subsequent
        periods with respect to obligations arising prior to the termination of this
        Sublease, Sublessor shall comply with and perform, for the benefit of Master
        Lessor and Sublessee, all of the terms, covenants, conditions and obligations
        of
        the “Lessee” under the Master Lease allocable or applicable to the subleased
        Premises. Such terms, covenants, conditions and obligations shall, unless
        the
        context of the Master Lease indicates otherwise, be applied with the terms
        “Sublessor” and “Sublessee” substituted respectively for “Lessor” and “Lessee”
and with the term “Premises” under the Master Lease meaning the subleased
        Premises demised hereunder. Sublessor acknowledges and agrees that this Sublease
        shall be subject and subordinate to the provisions of the Master
        Lease.

       

      (b)  Obligations
        under the Master Lease.
        Sublessee shall not do, permit or suffer any act, occurrence or omission
        which
        if done, permitted or suffered by Sublessee would be (with notice, the passage
        of time or both) in violation of or a default by the lessee under the Master
        Lease, or could result in any respect to the termination of the Master Lease.
        Sublessee shall not commit any act that requires Master Lessor’s consent under
        the Master Lease without first obtaining the consent of Master Lessor and
        Sublessor. Sublessor shall have the obligation to obtain Master Lessor’s consent
        on behalf of Sublessee, but shall not be liable for any failure of Master
        Lessor
        to grant its consent. Sublessee acknowledges and agrees that it is responsible
        for understanding and complying with the terms and conditions of the Master
        Lease as applicable to the subleased Premises.

       

      
        
          
          

        

        
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      (c)  Consent
        of Master Lessor Required.
        Whenever in the Master Lease Sublessor is required to obtain the consent
        of the
        Master Lessor prior to taking any action, Sublessee shall be required to
        obtain
        the consent of Sublessor and the Master Lessor as a condition to taking any
        such
        action. Excluding obtaining the consent of Master Lessor to this Sublease,
        Sublessee shall pay any charges, fees and reimbursements which the Master
        Lessor
        charges Sublessor pursuant to the Master Lease in connection with any such
        required consent in addition to Sublessor's actual out-of-pocket reasonable
        costs.

       

      (d)  Sublessor
        Compliance under Master Lease.
        Provided Sublessee shall timely pay all Rent when due under this Sublease,
        Sublessor shall pay, when due, all Rent, Excess Operating Expenses and other
        charges payable by Sublessor to Master Lessor with respect to the subleased
        Premises under the Master Lease. Sublessor shall not (1) cancel, surrender
        or
        terminate the Master Lease except as provided hereunder or, if the Master
        Landlord enters into a recognition agreement with Sublessee as described
        in
        Section 32 herein or if an event occurs or an action is taken or not taken
        by
        the Master Landlord which affects the subleased Premises and the other premises
        under the Master Lease, except as provided under the Master Lease, or (2)
        amend
        or modify the Master Lease, the result of which would materially adversely
        affect Sublessee’s rights or obligations hereunder or the subleased Premises,
        and any such cancellation, surrender, termination (except as expressly provided
        hereunder), amendment or modification of the Master Lease made without
        Sublessee’s written consent shall not be binding on Sublessee, to the extent the
        same materially decreases the rights or materially increases the obligations
        of
        Sublessee with respect to the subleased Premises or this Sublease.

       

      (e)  Obligations
        of Master Lessor.
        Except
        as expressly set forth herein, it is agreed that Sublessor shall not be
        obligated to perform any obligation which is the obligation of Master Lessor
        under the Master Lease and Master Lessor shall be solely responsible for
        providing all services and performing all duties and obligations of the Master
        Lessor under the Master Lease. However, notwithstanding the immediately
        preceding sentence or anything in this Sublease to the contrary, Sublessor
        shall
        endeavor (using good faith efforts), and shall otherwise use commercially
        reasonable efforts to cooperate with Sublessee upon Sublessee’s reasonable
        request, to obtain the performance of and furnishing of such services for
        the
        subleased Premises by Master Lessor pursuant to the terms of the Master Lease.
        If, after receipt of such written request from Sublessee, Sublessor shall
        fail
        or refuse within ten (10) days thereafter to use such efforts for the
        enforcement of Sublessor’s rights against Master Lessor with respect to the
        subleased Premises, Sublessee shall have the right to take such action as
        Sublessor would be permitted to take under the Master Lease in its own name
        ,
        and for that purpose and only to such extent, such rights of Sublessor under
        the
        Master Lease with respect to the subleased Premises are hereby conferred
        upon
        Sublessee. Sublessor shall have no liability to Sublessee by reason of the
        default of Master Lessor under the Master Lease.

       

      
        
          
          

        

        
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      (f)  Time
        for Performance.
        Notwithstanding anything to the contrary contained herein, any provision
        in the
        Master Lease providing to Sublessor a limited time to perform an obligation,
        which is dependent on Sublessee’s performance to Sublessor, shall be deemed to
        be shortened hereunder (as between Sublessee and Sublessor) in the amount
        reasonably necessary to afford Sublessor sufficient time to receive the benefit
        of such performance and redirect the same to Master Lessor.

       

      18.  Incorporation
        by Reference.
        Subject
        to the provisions of this Section 17 and this Sublease, and except to the
        extent
        inapplicable, the provisions of the Master Lease are hereby incorporated
        by this
        reference. As between the parties to this Sublease only, if a direct conflict
        exists between the terms of the Master Lease and the terms of this Sublease,
        the
        terms of this Sublease will control.

       

      19.  Event
        of Default.
         The
        occurrence of any Event of Default (as defined in the Master Lease) by Sublessee
        under this Sublease shall entitle Sublessor to each and all of the rights
        and
        remedies afforded Master Lessor upon the occurrence of a default under the
        Master Lease, or otherwise available at law or in equity.

       

      20.  Condition
        of Subleased Premises; Improvement and Alteration.
        Sublessee shall not make alterations, modifications or renovations to the
        subleased Premises without first obtaining Master Lessor's and, if such
        alterations, modifications or renovations affect or impact any other space
        under
        the Master Lease, Sublessor’s consent, which shall not be unreasonably withheld.
        Upon the termination or expiration of this Sublease, Sublessee shall restore
        the
        subleased Premises to its condition as of the date of this Sublease, ordinary
        wear and tear, condemnation and insured casualty excepted, at its sole cost
        and
        expense, except as may otherwise be agreed by Master Lessor in
        writing.

       

      21.  Maintenance
        and Repair.
        Sublessee shall, at Sublessee’s sole expense, keep the subleased Premises in
        good condition, ordinary wear and tear, condemnation and insured casualty
        excepted. If (a) Sublessor reasonably determines that any maintenance
        and/or repair of the subleased Premises is required under the terms of the
        Master Lease, or (b) any maintenance and/or repair to the Premises is
        required by reason of the negligent act or omission or willful misconduct
        of
        Sublessee or its agents, employees, contractors, invitees, or licensees,
        and
        Sublessor or Master Lessor performs the required maintenance or repair work,
        Sublessee shall pay to Sublessor or Master Lessor (as applicable) the reasonable
        cost of such maintenance and repairs. Sublessor shall have no obligation
        to
        operate, maintain, or repair the subleased Premises or the Project. There
        shall
        be no abatement of Rent with respect to, and Sublessor shall not be liable
        for,
        any injury to or interference with Sublessee’s business arising
        from any repairs, maintenance, alteration, or improvement in or to any portion
        of the Premises, including the subleased Premises, or in or to the fixtures,
        appurtenances, and equipment therein. Sublessee hereby waives and releases
        any
        right under any applicable laws now or hereafter in effect to offset Rent
        for
        any repairs, maintenance, alteration, or improvement .

       

      22.  Assignment
        and Sublease.
        Sublessee shall have the same rights to assign this Sublease as Sublessor
        has as
        lessee under the Master Lease. Sublessor shall not have the right to assign
        or
        sub-sublet the subleased Premises without first obtaining the written consent
        and approval of Sublessor (which consent may not be unreasonably withheld).
        Notwithstanding any assignment or sub-sublease, Sublessee shall at all times
        remain fully and primarily responsible and liable for the payment of Rent
        and
        for compliance with all of Sublessee’s other obligations under this Sublease. If
        the total of all amounts due and payable by a sub-sublessee or assignee of
        Sublessee exceeds the total Rent payable under this Sublease for the comparable
        period, less the actual and reasonable brokerage fees, legal costs, and
        construction fees directly related to and required pursuant to the terms
        of any
        such sub-sublease, then Sublessee shall be bound and obligated to pay Sublessor
        fifty percent (50%) of such excess rental and other excess consideration
        within
        ten (10) business days following receipt thereof by Sublessee (as calculated
        under Section 12.3 of the Master Lease).

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      23.  Insurance.
        Sublessee shall name Master Lessor, Sublessor, and such other entities as
        reasonably requested by Master Lessor and Sublessor, as additional insureds
        under an insurance policy meeting the requirements applicable to Sublessor
        as
        lessee under the Master Lease. Upon request, Sublessee shall furnish to Master
        Lessor and Sublessor written proof that the required insurance is in full
        force
        and effect with all premiums paid current.

       

      24.  Indemnity.
        Sublessee agrees to indemnify and hold harmless Sublessor from and against
        all
        liability, claims, demands, expenses (including reasonable attorneys’ fees and
        court costs, if any), damages and judgments arising from property damage
        or
        injury to third parties (including wrongful death) upon the subleased Premises
        during the Term or any extensions thereof, unless due to the negligence or
        willful misconduct of Sublessor, Master Lessor or their respective employees,
        agents or contractors, or any default by Sublessor or Master Lessor under
        the
        Master Lease. Sublessee further agrees to indemnify and hold harmless Sublessor
        and Master Lessor from all liability arising out of the filing of any mechanic’s
        or materialman’s lien against the subleased Premises by reason of any act or
        omission of Sublessee. Sublessee waives all claims against Sublessor for
        any
        injury or damage to any person or property in or about the subleased Premises
        by
        or from any cause whatsoever, except for such injury or damage arising from
        the
        negligence or willful misconduct of Sublessor or Master Lessor or their
        respective employees, agents or contractors.

       

      25.  Personal
        Property.
        Sublessee agrees to assume full responsibility for its personal property
        located
        at the subleased Premises, and to indemnify and hold harmless Sublessor and
        Master Lessor against damage sustained thereto by fire, theft or other casualty
        loss, except such loss as may be due to Sublessor’s or Master Lessor's gross
        negligence or wrongful misconduct. Sublessee shall remove its personal property
        from the subleased Premises upon termination of this Sublease.

       

      26.  Access
        by Sublessor.
        Except
        in case of an emergency, Sublessor may enter the subleased Premises for the
        purpose of effecting any repairs, alterations or maintenance of the subleased
        Premises only upon 24 hours’ prior notice to Sublessee and only at reasonable
        times.

       

      27.  Sublessor's
        Right to Cure.
        Except
        as otherwise expressly set forth herein, any grace period provided for the
        lessee's performance under the Master Lease, shall be reduced by five (5)
        days.
        If Sublessee shall default in the performance of any of its obligations under
        this Sublease beyond the expiration of any grace and notice periods applicable
        to Sublessee, then Sublessor, without being under any obligation to do so
        and
        without thereby waiving such default, shall have the right to cure such default
        for the account and at the expense of Sublessee. Sublessor shall have the
        right
        to enter the Premises upon reasonable notice at such times as may be reasonably
        necessary to exercise its right to cure Sublessee's defaults. If Sublessor
        makes
        any expenditures or incurs any obligation for the payment of money in connection
        therewith, such sums paid or obligations incurred, together with interest
        at the
        rate equal to the lesser of (a) ten percent (10%) per annum or (b) the
        maximum rate permitted by law, shall be paid to it by Sublessee on
        demand.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      28.  Cancellation
        of Lease.
        In the
        event of the cancellation or termination of the Master Lease prior to the
        expiration of this Sublease, this Sublease shall automatically
        terminate.

       

      29.  Surrender.
        Sublessee shall, upon the expiration or earlier termination of this Sublease,
        surrender the subleased Premises to Sublessor in
        the
        same condition as when received, except for ordinary wear and tear, condemnation
        or insured casualty.

       

      30.  Holdover.

       

      (a)  If
        Sublessee holds over after the expiration or earlier termination of the Term
        hereof without the express written consent of Sublessor and the Master Lessor,
        then Sublessee shall become a lessee at sufferance only, and be liable for
        all
        holdover charges incurred by Sublessor under the Master Lease.

       

      (b)  Acceptance
        by Sublessor of Rent after such expiration or earlier termination shall not
        result in a renewal of this Sublease. The foregoing provisions of this Paragraph
        are in addition to and do not affect Sublessor's right of reentry or any
        rights
        of Sublessor hereunder or as otherwise provided by law. In the event Sublessee
        continues to occupy the subleased Premises following such expiration or earlier
        termination without the consent of Sublessor and Sublessee fails to surrender
        the subleased Premises despite demand to do so by Sublessor, Sublessee does
        and
        hereby agrees to indemnify, defend, protect and hold harmless Sublessor from
        and
        against any and all claims, demands, causes of action, actions, losses or
        liabilities, including, without limitation, any claim made by the Master
        Lessor,
        any succeeding lessee or sublessee or any other third party founded on or
        resulting from such failure to surrender and reasonable attorneys' fees and
        costs.

       

      31.  Additional
        Services; Parking.
        In
        addition to monthly Base Rent, during the Term hereof, Sublessee shall pay
        Sublessor for any services provided to Sublessee by Sublessor at the request
        of
        Sublessee, to the extent that such services are not required to be provided
        by
        Sublessor hereunder or by Master Lessor under the Master Lease. Sublessee
        agrees
        to pay Sublessor within fifteen (15) days of the presentation of any invoice
        for
        such services. During the term of this Sublease, Sublessee and Sublessor
        shall
        each be entitled their pro rata share of parking spaces made available to
        Sublessor by Master Landlord based upon their respective number of employees
        as
        of the date hereof. By way of example, if on the date hereof Master Landlord
        made one hundred (100) parking spaces available to Sublessor and Sublessor
        had
        sixty (60) employees and Sublessee had forty (40) employees, Sublessee would
        be
        entitled to forty (40) parking spaces and Sublessor would be entitled to
        sixty
        (60) parking spaces. Notwithstanding the foregoing, Sublessee shall only
        be
        entitled to such parking spaces for so long as the same parking spaces would
        otherwise be available to Sublessor under the Master Lease. Sublessee shall
        be
        responsible for the payment of all costs and charges associated with any
        such
        parking spaces utilized.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      32.  Directory
        Listing; Building Signage; Recognition Agreement.
        At
        Sublessee’s request, Sublessor shall use commercially reasonable efforts to
        negotiate with Master Landlord for the provision of a lobby/directory listing
        and building signage for Sublessee. The costs and expenses of any such listing
        and/or signage shall be the sole responsibility of Sublessee. Sublessor shall
        use commercially reasonable efforts to obtain a recognition agreement between
        Master Landlord and Sublessee pursuant to the terms and conditions of Section
        12.6 of the Master Lease. Sublessee agrees and acknowledges that pursuant
        to the
        express conditions of Section 12.6 of the Master lease, Sublesse may not
        be
        entitled to any such recognition agreement with Master Landlord.

       

      33.  Representations
        and Warranties of Sublessor.
        Sublessor represents and warrants to Sublessee, and covenants as
        follows:

       

      A.  A
        true,
        correct and complete copy of the Master Lease is attached hereto as Exhibit
        B.

       

      B.  Sublessor
        has not given or received any notice of any default under the Master Lease,
        which default remains uncured, and, to the best of its knowledge, no event
        has
        occurred or failed to occur which with the passage of time and/or the giving
        of
        notice would ripen into such a default.

       

      C.  Sublessor
        has not received written notice of any violation of Applicable Requirements
        (including, without limitation, environmental laws).

       

      D.  There
        is
        no pending and, to the best of Sublessor’s knowledge, threatened litigation
        affecting Sublessor’s interest in the Master Lease or the subleased
        Premises.

       

      E.  There
        is
        no litigation pending between Sublessor and Master Lessor.

       

      F.  Subject
        to Landlord’s consent to this Sublease, Sublessor has all of the requisite power
        and authority to execute, deliver and perform its obligations under this
        Sublease and the Master Lease, and the person executing and delivering this
        Sublease on behalf of Sublessor has the requisite authority to perform such
        acts
        on behalf of Sublessor.

       

      G.  Sublessor
        shall, promptly following receipt thereof, deliver to Sublessee a copy of
        any
        notice received by it from Master Lessor which would have any effect upon
        the
        subleased Premises or this Sublease.

       

      H.  Sublessor
        agrees that, with respect to any non-disturbance agreement it has or may
        hereafter enter into with respect to the Master Lease, it will enforce for
        the
        benefit of the subleased Premises and Sublessee, the terms of any such
        non-disturbance agreement that it has the right to enforce.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      I.  There
        are
        no defaults under the Master Lease by Master Lessor of which Sublessor has
        notice or knowledge. 

       

      J.  Sublessor
        holds the entire lessee’s interest in the subleased Premises under the Master
        Lease, free and clear of any liens, claims, mortgages, charges or encumbrances,
        subleases and occupancies (other than this Sublease and the Master Lease),
        other
        than matters to which the tenancy of Sublessor, as lessee under the Master
        Lease, is or may be subordinate.

       

      K.  Except
        as
        expressly provided herein, Sublessor has obtained all necessary consents
        and
        approvals.

       

      L.  Sublessor
        has no knowledge of any pending or threatened condemnation against the Building
        or the subleased Premises.

       

      M.  Sublessor
        shall use its reasonable efforts to minimize interference with Sublessee’s
        business in connection with any repair, replacement, improvement and/or work
        which Sublessor is obligated to perform or desires to perform, in and to
        the
        subleased Premises, or in connection with any inspection or showing thereof,
        or
        entry therein, by Sublessor, pursuant to the terms, covenants, conditions,
        provisions and agreements of this Sublease.

       

      N.  In
        any
        instance in this Sublease in which any matter is subject to Sublessor’s
        judgment, opinion, requirements, discretion, determination, acceptability
        and/or
        satisfaction, the same shall be subject to the standard of reasonableness.
        Notwithstanding the foregoing, the Master Lease shall prevail in setting
        forth
        the standard applicable to Sublessor’s judgment, opinion, requirements,
        determination, discretion, acceptability and/or satisfaction.

       

      O.  Sublessee
        may make cosmetic/decorative changes in and to the subleased Premises, subject
        to the terms, conditions and requirements of the Master Lease.

       

      P.  In
        no
        event shall Sublessee be liable for consequential damages incurred or which
        may
        be incurred by Sublessor hereunder.

       

      Q.  All
        demands made by Sublessor for payment of Additional Rent by Sublessee hereunder,
        shall be accompanied by supporting documentation.

       

      R.  Sublessor
        covenants and agrees to indemnify and hold Sublessee harmless from and against
        any and all claims, losses, damages and liabilities (including reasonable
        attorneys’ fees) resulting from, or arising out of, any breach or default by
        Sublessor or its employees, agents or contractors under this Sublease and/or
        the
        Master Lease.

       

      S.  To
        the
        knowledge of Sublessor (which for the purposes of this Section 33(S) shall
        mean
        the actual knowledge of John Rigali), on the date hereof, the existing
        electrical, plumbing, lighting, fire sprinkler and HVAC systems (other than
        those constructed by Sublessee) are in good operating condition and the
        improvements, alterations and utilities made or installed by or on behalf
        of
        Sublessor to or on the Premises comply with all applicable covenants and
        restrictions of record, applicable building codes, regulations and ordinances
        in
        effect on the date they were made or installed. The foregoing representation
        shall survive for a period of thirty (30) days from the date hereof.


       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      34.  Indemnification.
        Sublessor covenants and agrees to indemnify and hold Sublessee harmless from
        and
        against any and all claims, losses, damages and liabilities (including
        reasonable attorneys’ fees) resulting from, or arising out of, any breach or
        default by Sublessor or its employees, agents or contractors under this Sublease
        and/or the Master Lease. Sublessee covenants and agrees to indemnify and
        hold
        Sublessor harmless from and against any and all claims, losses, damages and
        liabilities (including reasonable attorneys’ fees) resulting from, or arising
        out of, any breach or default by Sublessee or its employees, agents or
        contractors under this Sublease and/or the Master Lease.

       

      35.  Default
        By Master Lessor.
        If
        Master Lessor shall default in any of its obligations to Sublessor with respect
        to the subleased Premises, Sublessor shall use its reasonable efforts to
        enforce
        its rights against Master Lessor. 

       

      36.  Representations
        of Sublessor Under Master Lease.
        Sublessee shall not be deemed to be making any representations and warranties
        which were made by Sublessor as lessee under the Master Lease.

       

      37.  Counterparts.
        This
        Sublease may be executed in one or more counterparts by the parties hereto.
        All
        counterparts shall be construed together and shall constitute one
        agreement.

       

      38.  Entire
        Agreement.
        This
        Sublease contains all of the understandings of the parties and all
        representations made by either party to the other are merged
        herein.

       

      39.  Modification.
        This
        Sublease may not be modified in any respect except by a document in writing
        executed by both parties hereto or their respective successors.

       

      40.  Successors.
        As
        limited by Section 7, of this Sublease shall bind and inure to the benefit
        of
        the parties hereto and their permitted heirs, representatives, successors
        and
        assigns.

       

      41.  Severability.
        If any
        term or provision of this Sublease, or the application thereof to any person
        or
        circumstance, will to any extent be invalid or unenforceable, the remainder
        of
        this Sublease, or the application of such provision to persons or circumstances
        other than those as to which it is invalid or unenforceable, will not be
        affected thereby, and each provision of this Sublease will be valid and will
        be
        enforceable to the extent permitted by law.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      Exhibit
        A

       

      Depiction
        of Premises

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Exhibit
        B

       

      Master
        Lease

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      D

    
       

      SUBLICENSE
        AGREEMENT

       

      THIS
        SUBLICENSE AGREEMENT (this “Agreement”), is entered into as of ___________ ___,
        2008 (the “Effective Date”), by and between Peerless Systems (“Sublicensor”) and
        Kyocera Mita Corporation (“Sublicensee”).

       

      RECITALS

       

      WHEREAS,
        the Sublicensor and Sublicensee are currently entering into an Asset Purchase
        Agreement and License Back Agreement; 

       

      WHEREAS
        Sublicensor and Color Print Solutions, Inc. (“CPS”) entered into the License
        Agreement (defined in Section 1.4 herein) relating to the Licensed Software
        (defined in Section 1.5 herein);

       

      WHEREAS
        the License Agreement gives Sublicensor the right to sublicense the Licensed
        Software to Sublicensee; and

       

      WHEREAS
        Sublicensor wishes to sublicense the Licensed Software to Sublicensee and
        Sublicensee wishes to accept such sublicense.

       

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

       

      AGREEMENT

       

      1.Definitions.
        For
        purposes of this Agreement, in addition to the bold capitalized terms defined
        elsewhere in this Agreement, the following terms shall have the meanings
        ascribed to them below:

       

      1.1 “Code”
        means computer-programming code. If not otherwise specified, Code shall include
        both Object Code and Source Code.

       

      1.2 “Derivative
        Work” means (i) for copyrightable or copyrighted material that is based upon one
        or more preexisting works, such as a revision, modification, translation,
        abridgment, condensation, expansion, or any other form in which such preexisting
        works may be recast, transformed, or adapted; and (ii) for patentable or
        patented material, any improvement thereon; and (iii) for material which
        is
        protected by trade secret, any new material derived from such existing trade
        secret material, including new material which may be protected or protectable
        by
        copyright, patent and/or trade secret, and that, if prepared without
        authorization of the owner of the copyright, patent and trade secret in such
        preexisting work, would constitute an infringement.

       

      1.3 “Documentation”
        means user manuals and other written materials that relate to any Licensed
        Software (for example, specifications, logic manuals, flow charts, and
        principles of operation), as may be revised from time to time.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      1.4 “License
        Agreement” means that certain License Agreement, dated November 29, 2004, by and
        between Sublicensor and CPS relating to the Licensed Software.

       

      1.5 “Licensed
        Software” means the software programs and Code that are set forth in “Exhibit
        A”. “Licensed Software” also include any bug fixes, corrections, patches,
        modifications, or replacements for any Licensed Software generally made
        available to other licensees of the Licensed Software which is made available
        to
        Sublicensor by CPS.

       

      1.6 “Object
        Code” means, as it relates to the Licensed Software, computer programs assembled
        or compiled in magnetic or electronic binary form on software media, which
        are
        readable and usable by machines, but not generally readable by humans without
        reverse-assembly, reverse-compiling, or reverse-engineering..

       

      1.7 “Source
        Code” means, as it relates to the Licensed Software, the human readable form of
        the Code and related system documentation, including all comments and any
        procedural code such as job control language.

       

      2. Sublicense
        Grant.
        Pursuant to Sections 2.1 and 2.2 of the License Agreement, Sublicensor hereby
        grants to Sublicensee, and Sublicensee hereby accepts, a non-exclusive,
        worldwide, fully paid-up, perpetual right and license to use, copy, modify,
        create Derivative Works from and distribute the Licensed Software, the Code
        for
        the Licensed Software, any Documentation related to the Licensed Software
        and
        any Derivative Works created from any of the foregoing by Sublicensor. The
        sublicense hereunder shall also apply to all bug fixes, corrections, patches,
        modifications, or replacements for any Licensed Software generally made
        available to other licensees of the Licensed Software which is made available
        to
        Sublicensor by CPS.

       

      3. Delivery.
        On the
        Effective Date, Sublicensor shall deliver to Sublicensee (a) one (1) copy
        of the
        Licensed Software in Source Code and Object Code, and (b) one (1) copy of
        the
        Documentation, which shall be made solely by Sublicensee electronically
        accessing an online site designated by Sublicensor, and shall not be
        accomplished by delivery of any physical tangible property .

       

      4. Ownership
        of Licensed Software.
        Sublicensor and/or CPS retain all right, title and interest, including all
        intellectual property rights, in and to the Licensed Software. Apart from
        the
        license rights expressly set forth in this Agreement, Sublicensor does not
        grant
        and CPS does not receive any ownership right, title or interest nor any security
        interest or other interest in any intellectual property rights relating to
        the
        Licensed Software, nor in any copy of any part of the foregoing.

       

      5. Warranty;
        Limitation of Liability.

       

      5.1 Warranty.
        EXCEPT
        AS SPECIFICALLY SET FORTH IN THIS SECTION 5.1, THE LICENSED SOFTWARE IS OFFERED
        “AS IS,” AND SUBLICENSOR GRANTS AND SUBLICENSEE RECEIVES NO WARRANTIES OF ANY
        KIND, EXPRESS OR IMPLIED, BY STATUTE, COMMUNICATION OR CONDUCT WITH SUBLICENSEE,
        OR OTHERWISE. SUBLICENSOR SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF
        MERCHANTABILITY, FITNESS FOR A SPECIFIC PURPOSE OR NONINFRINGEMENT CONCERNING
        THE LICENSED SOFTWARE OR ANY DOCUMENTATION FOR THE LICENSED SOFTWARE. WITHOUT
        LIMITATION OF THE ABOVE, SUBLICENSOR GRANTS NO WARRANTY THAT THE LICENSED
        SOFTWARE IS ERROR-FREE OR WILL OPERATE WITHOUT INTERRUPTION, AND GRANTS NO
        WARRANTY REGARDING ITS USE OR THE RESULTS THEREFROM INCLUDING, WITHOUT
        LIMITATION, ITS CORRECTNESS, ACCURACY OR RELIABILITY. NOTWITHSTANDING THE
        FOREGOING, SUBLICENSOR WILL PASS THROUGH TO SUBLICENSEE, IF AND TO THE EXTENT
        PERMITTED, ANY WARRANTIES EXPRESSLY PROVIDED BY CPS TO SUBLICENSOR FOR THE
        LICENSED SOFTWARE.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      5.2 Support
        by Sublicensee.
        Sublicensee shall, at its own expense, be solely responsible for providing
        technical support and training to any end-user for the Products (as defined
        in
        the License Back Agreement), and Sublicensor shall have no obligation with
        respect thereto. Sublicensee shall be solely responsible for, and Sublicensor
        shall have no obligation to honor, any warranties that Sublicensee provides
        to
        end users with respect to the Licensed Software or Derivative Works from
        the
        Licensed Software. Sublicensee shall defend any claim against Sublicensor
        arising in connection with any such warranties, express, implied, statutory,
        or
        otherwise, and shall pay any settlements or damages awarded against Sublicensor
        that are based on any such warranties.

       

      5.3 Limitation
        of Liability.
        EXCEPT
        FOR A BREACH BY EITHER PARTY OF SECTION 7 (CONFIDENTIAL INFORMATION), IN
        NO
        EVENT SHALL EITHER PARTY HAVE ANY LIABILITY FOR ANY INDIRECT, INCIDENTAL,
        SPECIAL, OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF
        LIABILITY, WHETHER FOR BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR
        OTHERWISE, ARISING OUT OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO LOSS
        OF
        PROFITS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
        THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE
        OF ANY LIMITED REMEDY.

       

      6. Confidential
        Information.

       

      6.1 Defined.
        The
        terms of this Agreement, and any other information (if such other information
        is
        identified as confidential or should be recognized as confidential under
        the
        circumstances) disclosed by one party to the other in writing and designated
        as
        confidential shall constitute confidential information (“Confidential
        Information”). Each party shall retain all Confidential Information in strict
        confidence and not disclose it to any third party or use it in any way except
        as
        permitted by this Agreement without the other party’s express written consent.
        Each party will exercise at least the same amount of diligence in preserving
        the
        secrecy of the Confidential Information as it uses in preserving the secrecy
        of
        its own most valuable confidential information, but in no event less than
        reasonable diligence.

       

      6.2 Exceptions.
        The
        term “Confidential Information” as used herein does not include any data or
        information (a) which is already known to the receiving party at the time
        it is
        disclosed, or (b) which before being divulged by the receiving party (i)
        has
        become generally known to the public through no wrongful act of the receiving
        party; (ii) has been rightfully received by the receiving party from a third
        party without restriction on disclosure and without breach of an obligation
        of
        confidentiality running directly or indirectly to the disclosing party; (iii)
        has been approved for release by a written authorization by the disclosing
        party; or (iv) is independently developed by the receiving party without
        use,
        directly or indirectly, of the Confidential Information received from the
        disclosing party.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      6.3 Non-Disclosure.
        Neither
        party nor any other person acting on his or its behalf shall directly or
        indirectly release or disclose to any other person any Confidential Information
        of the other party except with the express prior written consent of the other
        party or as required by law. Upon any termination of this Agreement, each
        party
        shall return promptly any materials, wherever located, in its possession
        or
        control, incorporating any Confidential Information of the other party received,
        compiled, produced or otherwise made available to such party prior to the
        termination of this Agreement, without keeping any copies thereof.

       

      7. Term.

       

      7.1 Term.
        This
        Agreement shall become effective on the Effective Date and shall remain in
        effect in perpetuity. This is a non-terminable agreement.

       

      8. Miscellaneous.

       

      8.1 Severability.
        If any
        provision of this Agreement is for any reason found to be ineffective,
        unenforceable, or illegal by any court having jurisdiction, such condition
        shall
        not affect the validity or enforceability of any of the remaining portions
        hereof, unless it deprives any party hereto of any material right or license
        held by such party under this Agreement. The parties shall negotiate in good
        faith to replace any such ineffective, unenforceable or illegal provisions
        as
        soon as is practicable, and the substituted provision shall, as closely as
        possible, have the same economic effect as the eliminated
        provision.

       

      8.2 Notices.
        All
        notices, requests, demands and other communications provided for by this
        Agreement shall be in writing, effective on receipt, and personally delivered
        or
        mailed (by registered or certified mail) or sent by telecopy (receipt confirmed)
        to the address of the party as provided below.

       

      To
        Sublicensor, at:

       

      Peerless
        Systems Corporation

                                                           

                                                           

      Attention:                                   

      Telecopier:
        (___) _________

       

      To
        Sublicensee, at:

       

      Kyocera
        Mita Corporation

      
                                                             

                                                             

        Attention:                                   

        Telecopier:
          (___) _________

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      9. Independent
        Contractors.
        Performance by the parties under this Agreement shall be as independent
        contractors. This Agreement is not intended and shall not be construed as
        creating a joint venture or partnership, or as causing either party to be
        treated as the agent of the other party for any purpose or in any sense
        whatsoever, or to create any fiduciary or any other obligations other than
        those
        expressly imposed by this Agreement.

       

      10. Assignment.
        Neither
        party may assign or transfer all or any part of its rights or obligations
        hereunder to any person or entity, except to a party that acquires all or
        substantially all of the assets of the assignor or the product line of the
        assignor in which the Intellectual Property, or a substantial part thereof,
        is
        employed; provided, however, that any such assignment shall be expressly
        subject
        to the Operating Restrictions (as defined in the License Back Agreement).
        Except
        as so provided, this Agreement shall be binding upon and inure to the benefit
        of
        the successors and assigns and of the parties hereto.

       

      11. Governing
        law.
        This
        Agreement shall be construed and enforced in accordance with the laws of
        the
        State of California without regard to the choice of law principles thereof.
        All
        actions or proceedings arising in connection with, touching upon or relating
        to
        this Agreement, the breach thereof and/or the scope of the provisions of
        this
        Section (a “Proceeding”) shall be exclusively resolved by federal and state
        courts located in Los Angeles, California.

       

      12. Entire
        Agreement; Amendments.
        This
        Agreement (i) sets forth the entire understanding of the parties concerning
        the
        subject matter hereof, and supersedes all prior and contemporaneous agreements
        and understandings relating to the subject matter hereof, whether oral or
        written, and (ii) may not be modified or amended, except by a written instrument
        executed after the effective date of this Agreement by the party sought to
        be
        charged by the amendment or modification.

       

      13. Counterparts.
        This
        Agreement may be executed in counterparts, each of which shall be deemed
        an
        original and all of which together shall constitute one instrument.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
        Date by their duly authorized representatives as set forth below.

      


      
        	
                PEERLESS
                  SYSTEMS CORPORATION

                (Sublicensor)

              	
                KYOCERA
                  MITA CORPORATION 

                (Sublicensee)

              
	 	 
	
                By:                                                            
                  

              	
                By:                                                            

              
	 	 
	
                Name:                                                       

              	
                
                  Name:                                                       

                

              
	 	 
	
                Its:
                                                                           
                   

              	
                
                  Its:
                                                                             
                     

                

              


      

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      
         

      

      EXHIBIT
        A

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      

         

        SUBLICENSE
          AGREEMENT

         

        THIS
          SUBLICENSE AGREEMENT (this “Agreement”), is entered into as of ___________ ___,
          2008 (the “Effective Date”), by and between Peerless Systems (“Sublicensor”) and
          Kyocera Mita Corporation (“Sublicensee”).

         

        RECITALS

         

        WHEREAS,
          the Sublicensor and Sublicensee are currently entering into an Asset Purchase
          Agreement and License Back Agreement; 

         

        WHEREAS
          Sublicensor and Computer Graphics Technology Pty. Ltd. (“CGT”) entered into the
          License Agreement (defined in Section 1.2 herein) relating to the Licensed
          Software (defined in Section 1.3 herein);

         

        WHEREAS
          the License Agreement gives Sublicensor the right to sublicense the Licensed
          Software to Sublicensee; and

         

        WHEREAS
          Sublicensor wishes to sublicense the Licensed Software to Sublicensee and
          Sublicensee wishes to accept such sublicense.

         

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

         

        AGREEMENT

         

        1.
          Definitions.
          For
          purposes of this Agreement, in addition to the bold capitalized terms defined
          elsewhere in this Agreement, the following terms shall have the meanings
          ascribed to them below:

         

        1.1
          “Derivative
          Work” means any modified, altered, enhanced or adapted version of the Licensed
          Software, or derivative work thereof (as that term is defined under United
          States copyright law) based on the Licensed Software.

         

        1.2
          “License
          Agreement” means that certain License Agreement, dated November 21, 2007, by and
          between Sublicensor and CGT relating to the Licensed Software.

         

        1.3
          “Licensed
          Software” means that software and related documentation which is described in
“Exhibit A”.

         

        1.4
          “Object
          Code” means those portions of the Licensed Software, if any, furnished to
          Sublicensee in object code or machine readable form, or source code rendered
          into object code or machine readable form through the process of
          compilation.

         

        1.5
          “Products”
          means any Sublicensor product (as defined in the License Back
          Agreement).

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        1.6
          “Source
          Code” means those portions of the Licensed Software, if any, furnished to
          Sublicensee in source code or human readable form.

         

        2.     a)Sublicense
          Grant.
          Pursuant to Section 2.1 of the License Agreement, Sublicensor hereby grants
          to
          Sublicensee, and Sublicensee hereby accepts, a worldwide, fully paid-up,
          non-exclusive license to (i) use the Licensed Software for the purpose
          of
          incorporating the Licensed Software in Products (as defined in the License
          Back
          Agreement); (ii) use, make or have made, demonstrate or have demonstrated,
          market or have marketed, offer for sale or have offered for sale, sell
          or have
          sold, license or have licensed, and/or otherwise distribute or have distributed
          the Licensed Software solely as part of Products (as defined in the License
          Back
          Agreement); (iii) reproduce or have reproduced the Licensed Software as
          necessary to carry out the foregoing rights; (iv) use, modify and create
          Derivative Works from the Licensed Software for commercial business purposes;
          and (v) provide end-users a limited right to use the Licensed Software
          in Object
          Code form in Products (as defined in the License Back Agreement) that benefit
          from or rely on the functionality of the Licensed Software, provided the
          Licensed Software is embedded in Products (as defined in the License Back
          Agreement) in a manner that is not readily accessible to end-users.

         

        b) Step-In
          Rights: In the event of any notification to or allegation against Sublicensor
          of
          a breach of the License Agreement for non-payment, Sublicensor shall notify
          Sublicensee of such notice or allegation. Further, in the event that Sublicensee
          reasonably believes that there is a risk of termination of such Agreement
          for
          non-payment, Sublicensee may make the disputed payments to CGT to avoid
          such
          termination pending resolution of the issues. Sublicensee shall be entitled
          to
          reimbursement of such payments upon resolution of such issues from
          Sublicensor.

         

        3.
          Delivery.
          On the
          Effective Date, Sublicensor shall provide access to Sublicensee one (1)
          copy of
          the Licensed Software in Source Code and Object Code, which shall be made
          solely
          by Sublicensee electronically accessing an online site designated by
          Sublicensor, and shall not be accomplished by delivery of any physical
          tangible
          property.

         

        4. Ownership
          of Licensed Software.
          Sublicensor and/or CGT retain all right, title and interest, including
          all
          intellectual property rights, in and to the Licensed Software. Apart from
          the
          license rights expressly set forth in this Agreement, Sublicensor does
          not grant
          and CGT does not receive any ownership right, title or interest nor any
          security
          interest or other interest in any intellectual property rights relating
          to the
          Licensed Software, nor in any copy of any part of the foregoing.

         

        5. Warranty;
          Limitation of Liability.

         

        5.1 Warranty.
          EXCEPT
          AS SPECIFICALLY SET FORTH IN THIS SECTION 5.1, THE LICENSED SOFTWARE IS
          OFFERED
“AS IS,” AND SUBLICENSOR GRANTS AND SUBLICENSEE RECEIVES NO WARRANTIES OF ANY
          KIND, EXPRESS OR IMPLIED, BY STATUTE, COMMUNICATION OR CONDUCT WITH SUBLICENSEE,
          OR OTHERWISE. SUBLICENSOR SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES
          OF
          MERCHANTABILITY, FITNESS FOR A SPECIFIC PURPOSE OR NONINFRINGEMENT CONCERNING
          THE LICENSED SOFTWARE OR ANY DOCUMENTATION FOR THE LICENSED SOFTWARE. WITHOUT
          LIMITATION OF THE ABOVE, SUBLICENSOR GRANTS NO WARRANTY THAT THE LICENSED
          SOFTWARE IS ERROR-FREE OR WILL OPERATE WITHOUT INTERRUPTION, AND GRANTS
          NO
          WARRANTY REGARDING ITS USE OR THE RESULTS THEREFROM INCLUDING, WITHOUT
          LIMITATION, ITS CORRECTNESS, ACCURACY OR RELIABILITY. NOTWITHSTANDING THE
          FOREGOING, SUBLICENSOR WILL PASS THROUGH TO SUBLICENSEE, IF AND TO THE
          EXTENT
          PERMITTED, ANY WARRANTIES EXPRESSLY PROVIDED BY CGT TO SUBLICENSOR FOR
          THE
          LICENSED SOFTWARE.

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

         

        5.2 Support
          by Sublicensee.
          Sublicensee shall, at its own expense, be solely responsible for providing
          technical support and training to any end-user for the Products (as defined
          in
          the License Back Agreement), and Sublicensor shall have no obligation with
          respect thereto. Sublicensee shall be solely responsible for, and Sublicensor
          shall have no obligation to honor, any warranties that Sublicensee provides
          to
          end users with respect to the Licensed Software or Derivative Works. Sublicensee
          shall defend any claim against Sublicensor arising in connection with any
          such
          warranties, express, implied, statutory, or otherwise, and shall pay any
          settlements or damages awarded against Sublicensor that are based on any
          such
          warranties.

         

        5.3 Limitation
          of Liability.
          EXCEPT
          FOR A BREACH BY EITHER PARTY OF SECTION 7 (CONFIDENTIAL INFORMATION), IN
          NO
          EVENT SHALL EITHER PARTY HAVE ANY LIABILITY FOR ANY INDIRECT, INCIDENTAL,
          SPECIAL, OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF
          LIABILITY, WHETHER FOR BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE)
          OR
          OTHERWISE, ARISING OUT OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO
          LOSS OF
          PROFITS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
          DAMAGES.
          THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL
          PURPOSE
          OF ANY LIMITED REMEDY.

         

        6. Confidential
          Information.

         

        6.1 Defined.
          The
          terms of this Agreement, and any other information (if such other information
          is
          identified as confidential or should be recognized as confidential under
          the
          circumstances) disclosed by one party to the other in writing and designated
          as
          confidential shall constitute confidential information (“Confidential
          Information”). Each party shall retain all Confidential Information in strict
          confidence and not disclose it to any third party or use it in any way
          except as
          permitted by this Agreement without the other party’s express written consent.
          Each party will exercise at least the same amount of diligence in preserving
          the
          secrecy of the Confidential Information as it uses in preserving the secrecy
          of
          its own most valuable confidential information, but in no event less than
          reasonable diligence.

         

        6.2 Exceptions.
          The
          term “Confidential Information” as used herein does not include any data or
          information (a) which is already known to the receiving party at the time
          it is
          disclosed, or (b) which before being divulged by the receiving party (i)
          has
          become generally known to the public through no wrongful act of the receiving
          party; (ii) has been rightfully received by the receiving party from a
          third
          party without restriction on disclosure and without breach of an obligation
          of
          confidentiality running directly or indirectly to the disclosing party;
          (iii)
          has been approved for release by a written authorization by the disclosing
          party; or (iv) is independently developed by the receiving party without
          use,
          directly or indirectly, of the Confidential Information received from the
          disclosing party.

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

         

        6.3 Non-Disclosure.
          Neither
          party nor any other person acting on his or its behalf shall directly or
          indirectly release or disclose to any other person any Confidential Information
          of the other party except with the express prior written consent of the
          other
          party or as required by law. Upon any termination of this Agreement, each
          party
          shall return promptly any materials, wherever located, in its possession
          or
          control, incorporating any Confidential Information of the other party
          received,
          compiled, produced or otherwise made available to such party prior to the
          termination of this Agreement, without keeping any copies thereof.

         

        7. Term
          and Termination.

         

        7.1 Term.
          This
          Agreement shall become effective on the Effective Date and shall remain
          in
          effect perpetually unless terminated as provided below.

         

        7.2 Termination
          for Breach.
          Sublicensor will have the right to terminate this Agreement immediately
          upon
          written notice to Sublicensee in the event that either Sublicensee or the
          Sublicensor’s licensor for the Licensed Software: (a) becomes insolvent, files
          for bankruptcy or is the subject of an involuntary bankruptcy proceeding,
          has a
          receiver or similar officer appointed for it or has its assets assigned
          for the
          benefit of creditors; or (b) fails to comply with any material provision
          of this
          Agreement (including payment obligations under this Agreement) and such
          noncompliance is not remedied within sixty (60) days after written notice
          thereof has been given.

         

        7.3 Effect
          of Termination.
          The
          rights and licenses granted under this Agreement shall immediately terminate.
          Upon termination, each party shall promptly ship to the other party all
          tangible
          items in its possession or control which are proprietary to the other party;
          and
          Sublicensee shall destroy or return to Sublicensor, at Sublicensor’s option, all
          copies of the Licensed Software (including, without limitation, source
          code) in
          its possession or control.

         

        7.4 Survival.
          The
          provisions of Sections 1, 4, 5, 7.3, 7.4, and 8 shall survive termination
          of
          this Agreement.

         

        8. Miscellaneous.

         

        8.1 Severability.
          If any
          provision of this Agreement is for any reason found to be ineffective,
          unenforceable, or illegal by any court having jurisdiction, such condition
          shall
          not affect the validity or enforceability of any of the remaining portions
          hereof, unless it deprives any party hereto of any material right or license
          held by such party under this Agreement. The parties shall negotiate in
          good
          faith to replace any such ineffective, unenforceable or illegal provisions
          as
          soon as is practicable, and the substituted provision shall, as closely
          as
          possible, have the same economic effect as the eliminated
          provision.

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

         

        8.2 Notices.
          All
          notices, requests, demands and other communications provided for by this
          Agreement shall be in writing, effective on receipt, and personally delivered
          or
          mailed (by registered or certified mail) or sent by telecopy (receipt confirmed)
          to the address of the party as provided below.

         

        
          To
            Sublicensor, at:

           

          Peerless
            Systems Corporation

                                                               
            

                                                               
            

          Attention:
                          
                   


          Telecopier:
            (___) _________

           

          To
            Sublicensee, at:

           

          Kyocera
            Mita Corporation

          
                                                                 
              

                                                                 
              

            Attention:
                            
                   


            Telecopier:
              (___) _________

          

        

         

        9.
          Independent
          Contractors.
          Performance by the parties under this Agreement shall be as independent
          contractors. This Agreement is not intended and shall not be construed
          as
          creating a joint venture or partnership, or as causing either party to
          be
          treated as the agent of the other party for any purpose or in any sense
          whatsoever, or to create any fiduciary or any other obligations other than
          those
          expressly imposed by this Agreement.

         

        10. Assignment.
          Neither
          party may assign or transfer all or any part of its rights or obligations
          hereunder to any person or entity, except to a party that acquires all
          or
          substantially all of the assets of the assignor or the product line of
          the
          assignor in which the Intellectual Property, or a substantial part thereof,
          is
          employed; provided, however, that any such assignment shall be expressly
          subject
          to the Operating Restrictions (as defined in the License Back Agreement).
          Except
          as so provided, this Agreement shall be binding upon and inure to the benefit
          of
          the successors and assigns and of the parties hereto.

         

        11. Governing
          law.
          This
          Agreement shall be construed and enforced in accordance with the laws of
          the
          State of California without regard to the choice of law principles thereof.
          All
          actions or proceedings arising in connection with, touching upon or relating
          to
          this Agreement, the breach thereof and/or the scope of the provisions of
          this
          Section (a “Proceeding”) shall be exclusively resolved by federal and state
          courts located in Los Angeles, California.

         

        12. Entire
          Agreement; Amendments.
          This
          Agreement (i) sets forth the entire understanding of the parties concerning
          the
          subject matter hereof, and supersedes all prior and contemporaneous agreements
          and understandings relating to the subject matter hereof, whether oral
          or
          written, and (ii) may not be modified or amended, except by a written instrument
          executed after the effective date of this Agreement by the party sought
          to be
          charged by the amendment or modification.

         

        14. Counterparts.
          This
          Agreement may be executed in counterparts, each of which shall be deemed
          an
          original and all of which together shall constitute one instrument.

         

        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        

         

        IN
          WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
          Date by their duly authorized representatives as set forth below.

        


        
          


          
            	
                    PEERLESS
                      SYSTEMS CORPORATION

                    (Sublicensor)

                  	
                    KYOCERA
                      MITA CORPORATION 

                    (Sublicensee)

                  
	 	 
	
                    By:                                                            
                      

                  	
                    By:                                                            

                  
	 	 
	
                    Name:                                                       

                  	
                    
                      Name:                                                       

                    

                  
	 	 
	
                    Its:
                                                                               
                       

                  	
                    
                      Its:
                                                                                 
                         

                    

                  


          

           

          
            
              
              

            

            
              6

              
                

              

            

            
              
              

            

          

        

         

        EXHIBIT
          A

      

       

       

      
        
          
          

        

        
          7