ASSET PURCHASE AGREEMENT

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Exhibit 2.1

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of

[October 31], 2007 (the "Agreement Date") by and between 3Q Holdings Limited ACN

089 058 293 ("3Q"), Island Pacific (UK) Limited Company No. 6409686 ("UK Sub")

and Applied Retail Solutions, Inc. ("ARS" and together with 3Q and UK Sub,

"Buyer") on the one hand, and Island Pacific, Inc., a Delaware corporation

("Seller") on the other hand. Buyer and Seller are sometimes referred to

collectively herein as the "Parties" or individually as a "Party". The Parties

agree as follows:

RECITALS

A. Seller owns and operates a portion of its business through a division of

Seller commonly known as the IPMS division (the "Division").

B. Seller desires to sell to Buyer, and Buyer desires to purchase from

Seller, certain of the assets used in connection with the Division pursuant to

the terms of this Agreement.

C. The Parties agree to make certain representations, warranties, and

covenants as set forth below.

1. Definitions. As used in this Agreement, the following terms shall

have the meanings indicated below.

"Accounts Receivable" means the trade debts owed to the Seller at

Closing in respect of the Division Business.

"Acquired Assets" means all of the right, title, and interest in and

to all the assets used predominately in connection with the Division including

(a) the Division Software, (b) the Division Documentation, (c) the Division

Intellectual Property Rights, (d) the Accounts Receivable, (e) the Prepaid

Expenses and deposits, (f) the Division Technology Deliverables, (g) the

Division Inventory, (h) the Division Plant and Equipment (i) the Assigned

Agreements, (j) the Business Records, (k) the Governmental Permits, (l) the

Goodwill, (m) each Product Warranty, (n) the Deferred Revenue, (o) all credit

for the UK Employee Advances and rights to recoup from each of the UK Employees

such employees' respective UK Employee Advances, and (p) all other tangible and

intangible assets owned, leased or licensed by the Seller and used predominately

in connection with the Division Business, but does not include the excluded

assets listed on EXHIBIT A as "Excluded Assets" (the "Excluded Assets").

"Affiliate" of a specified Person means a Person who, directly or

indirectly through one or more intermediaries, controls, is controlled by, or is

under common control with, such specified Person.

"Agreed Form" means, in respect of a document, that document in the

form, or substantially in the form, which has been agreed by the Parties and

initialed by them for the purposes of identification.

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"Ancillary Agreements' has the meaning given to it in Subsection

3(a).

"Asset Purchase" means the sale and purchase of the Acquired Assets

and the assumption of the Assumed Liabilities in accordance with this Agreement.

"Assigned Agreements" means: (a) all customer contracts relating

predominantly to the Division Business outstanding as of the Agreement Date

including those listed on EXHIBIT B; (b) all other contracts relating

predominantly to the Division Business outstanding as of the Agreement Date as

listed on EXHIBIT B; (c) all licenses or other agreements for the sale of

product to new or existing customers of the Division Business (to the extent

such licenses and agreements relate predominately to the Division Business)

between the Agreement Date and Closing ("Relevant Post Agreement Date

Contracts"); and (d) such contracts (other than the Relevant Post Agreement Date

Contracts) that Seller enters into between the Agreement Date and Closing

relating predominately to the Division Business, providing such agreements are

on commercially reasonable terms consistent with Seller's past practice,

including for each of clause (a) - (d) above any right to renew such contracts

or solicit a new contract with such third parties after the Closing.

"Balance Sheet Date" means March 31, 2007.

"Benefit Plan" means any plan, program, policy, practice, contract,

agreement or other arrangement providing for compensation, severance,

termination pay, deferred compensation, performance awards, stock or

stock-related awards, fringe benefits or other employee benefits or remuneration

of any kind, whether written or unwritten or otherwise, funded or unfunded,

including without limitation, each "employee benefit plan" within the meaning of

Section 3(3) of ERISA which is or has been maintained, contributed to, or

required to be contributed to, by Seller or any of its ERISA affiliates for the

benefit of any employee of Seller or with respect to which Seller or any of its

ERISA affiliates have or may have any liability or obligation.

"Business Day" means a day on which banks are open for business in

Irvine, California, other than a Saturday, Sunday or public holiday in Irvine,

California.

"Business Records" means copies of all of Seller's general and

financial records, financial information, correspondence and records relating to

Accounts Receivable, systems and software, marketing and sales information,

pricing, marketing plans, business plans, books of account and accounting

records, financial and business projections, customer and supplier lists,

mailing lists, brochures, advertising materials, customer contracts (in whatever

form), personnel records, test reports, invoices, purchase orders, operating

records and all other files and records (or applicable portions thereof),

pertaining to the Acquired Assets, the Division Business, the Assumed

Liabilities and the Division Employees and Division Contractors, it being

understood that Seller may retain the original copies of such Business Records

for purposes of its internal record-keeping, financial statements and any Tax

related matters.

"Buyer Group" means the Buyer and each of its Affiliates and Buyer

Group Member means any member of the Buyer Group.

"Closing" has the meaning given to it in Subsection 2(e).

"Closing Date" has the meaning given to it in Subsection 2(e).

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"Closing Division Net Tangible Asset Value" means the Division Net

Tangible Asset Value as of the Closing Date as specified in the Division Net

Tangible Assets Certificate.

"Closing Payment" has the meaning given to it in Subsection 2(d)(i).

"Cobra" means the Consolidated Omnibus Budget Reconciliation Act of

1985, as amended, and the rules and regulations promulgated thereunder.

"Code" means the Internal Revenue Code of 1986, as amended.

"Confidential Information" means any information concerning the

Division Business and affairs of Seller and its Affiliates that is not already

generally available to the public, including but not limited to the Seller's

Confidential Information (as defined in Subsection 5(q)).

"Confidentiality Agreement" means the confidentiality and

non-disclosure agreement between Seller and Buyer dated 3 August 2006.

"contract" means any written or oral legally binding contract

(including active and inactive customers), agreement, instrument, obligation,

commitment or undertaking of any nature (including leases, licenses, loans,

mortgages, notes, guarantees, letters of credit, sublicenses, subcontracts,

covenants not to compete, employment agreements, letters of intent and purchase

orders) as of the Agreement Date or as may hereafter be in effect.

"control" (including the terms "controlled by" and "under common

control with") means the possession, directly or indirectly, of the power to

direct or cause the direction of the management policies of a Person, whether

through the ownership of stock, as an officer, director, trustee or executor, by

contract or otherwise.

"Deferred Revenue" means the obligation to supply goods or provide

maintenance after Closing in respect of which Seller invoiced income in advance

of Closing in relation to the Division Business.

"Disclosure Materials" means the written information provided by the

Seller of any of its agents, advisers or representatives to Buyer or any of its

agents, advisers or representatives in connection with the negotiations for the

Asset Purchase which are referred to in the index of Disclosure Materials in the

Agreed Form (as updated, if applicable, before Closing pursuant to Subsection

5(s)), and includes without limitation the Seller Disclosure Letter.

"Division" has the meaning given to it in Recital A.

"Division Business" means the business carried out by the Division

of developing, selling, implementing and integrating retail technology

solutions.

"Division Domain Names" means the domain names used predominately in

relation to the Division, including the domain name listed in Part 1 of EXHIBIT

O.

"Division Documentation" means, collectively, all programmers' notes

or logs, source code annotations, user guides, manuals, instructions, software

architecture designs, layouts, any know-how, and any other designs, plans,

drawings, documentation or materials that relate to any Division Software or any

Division Intellectual Property Rights, whether in tangible or intangible form.

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"Division Employees and Division Contractors" means all employees

and contractors who provide services to the Division Business including those

employees and contractors listed in Parts A, B, C and D of Exhibit L.

"Division Intellectual Property Rights" means, collectively, all

worldwide Intellectual Property Rights related predominately to: (i) the

Division Software or any aspect or part thereof; (ii) the Division Documentation

or any aspect or part thereof; (iii) the Division Products (iv) the Division

Trade Marks; (v) the Division Domain Names; (vi) the Acquired Assets; (vii) the

Division Registered Intellectual Property; and/or (viii) the Division, including

as set out in Part 1 of EXHIBIT O, but excluding Third Party Intellectual

Property.

"Division Net Tangible Asset Value" has the meaning given to it in

Subsection 2(d)(v).

"Division Net Tangible Assets Certificate" means a certificate

executed by the Chief Executive Officer of Seller which sets out Seller's

calculation of the Closing Division Net Tangible Asset Value.

"Division IP and Technology" has the meaning given to it in

Subsection 2(a)(i).

"Division Plant and Equipment" means all assets (including without

limitation workstations and personal computers and their associated third-party

software programs and licenses thereto, logbooks, notebooks, furniture, file

cabinets, white boards, personal office supplies and equipment and motor

vehicles and including the spare parts and accessories relating to those items)

used predominately in connection with the Division Business including those

items listed in Part 2 of EXHIBIT C.

"Division Products" has the meaning given to it in Subsection

3(k)(vii).

"Division Software" means, collectively, all of the software and any

other systems used predominately in connection with the Division Business

(including all programs, objects, modules, routines, algorithm and code, in both

source code and object code form), and includes, without limitation, (i) the

components of such software and systems; (ii) the development or utilization of

the software and systems described in this paragraph; and (iii) all derivative

works of any of the software and systems described in this paragraph, including

as set out in EXHIBIT O.

"Division Inventory" means any Division Business inventory owned by

Seller as of the close of business on the Closing Date described as inventory on

the Division Net Tangible Assets Certificate, including all merchandise, raw

materials work in progress and in respect of which Seller holds a matching

purchase order and/or components, spare parts, equipment,, documentation,

marketing materials, promotional literature, other sales or marketing-related

materials and other consumables held by the Seller in connection with such

purchase orders;

"Division Technology Deliverables" means all copies in a tangible

medium and other tangible embodiments of (i) the Division Software (in source

code and object code form); (ii) the Division Documentation (iii) the Division

Products, and (iv) any other Intellectual Property Rights related to the

Division

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"Division Trade Marks" means all logos, symbols, get up, trademarks,

trade names, service marks, brand names and similar rights that are used

predominately in the Division Business, whether registered or unregistered, and

all associated goodwill, including the trade marks and registrations or

applications of the trade marks listed in Part 1 of EXHIBIT O.

"Division UK Employees" means those Division Employees and

Contractors who are providing services to the U.K. operations of the Division

Business including those listed in Part A of EXHIBIT L.

"Division US Employees" means those Division Employees and

Contractors who are providing services to the U.S. operations of the Division

Business including those listed in Part B of EXHIBIT L.

"Employee Benefit Plan" means any "employee benefit plan" (as such

term is defined in ERISA Section 3(3)) and any other material employee benefit

plan, program or arrangement.

"Employee Pension Benefit Plan" has the meaning set forth in ERISA

Section 3(2).

"Employee Welfare Benefit Plan" has the meaning set forth in ERISA

Section 3(1). "Environmental, Health, and Safety Requirements" means all

federal, state, local, and foreign statutes, regulations, and ordinances

concerning public health and safety, worker health and safety, pollution, or

protection of the environment, including all those relating to the presence,

use, production, generation, handling, transportation, treatment, storage,

disposal, distribution, labeling, testing, processing, discharge, release,

threatened release, control, or cleanup of any hazardous materials, substances,

or wastes, as such requirements are enacted and in effect on or prior to the

Closing Date.

"ERISA" means the Employee Retirement Income Security Act of 1974,

as amended, and the rules and regulations promulgated thereunder.

"ERISA Affiliate" means any person or entity under common control

with Seller within the meaning of Section 414(b), (c), (m) or (o) of the Code.

"Escrow Amount" means $1,000,000.

"Exclusivity Deposit" has the meaning given to it in Subsection

2(d)(i).

"GAAP" means United States generally accepted accounting principles

applied on a consistent basis.

"Goodwill" means the goodwill of the Division Business and includes

the exclusive right for the Buyer to represent itself as carrying on the

Division Business as the Seller's successor.

"Governmental Permits" means all licenses, franchises, permits,

agreements, waivers and authorizations issued by governmental authorities in

connection with Seller's conduct of the Division Business (whether foreign,

federal, state or local) held by Seller that are necessary for the past or

present conduct of the Division.

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"Governmental Entity" means any supranational, national, state,

municipal, local or foreign government, any court, tribunal, arbitrator,

administrative agency, commission or other governmental official, authority or

instrumentality, in each case whether domestic or foreign, any stock exchange or

similar self regulatory organization or any quasi governmental or private body

exercising any regulatory, Taxing or other governmental or quasi governmental

authority and any political or other subdivision, department or branch of any of

the foregoing.

"Immediately Available Funds" means cash, bank check or telegraphic

or other electronic means of transfer of immediately available and cleared funds

into a bank account nominated in advance by the payee.

"Intellectual Property Rights" means, collectively, all intellectual

and industrial property rights throughout the world including the following

intangible worldwide legal rights, whether or not filed, perfected, registered

or recorded to the extent used by the Seller predominately (except for the name

"Island Pacific" which is not subject to the predominant limitation) in

connection with the Division Business: (i) patents, patent applications, and

patent rights, including any and all continuations, continuations-in-part,

divisions, reissues, reexaminations or extensions thereof, whether now existing

or hereafter filed, issued or acquired; (ii) rights associated with works of

authorship (including audiovisual works), including copyrights, copyright

applications, and copyright registrations, moral rights, mask work rights, mask

work applications, mask work registrations and circuit layouts; (iii) rights

relating to trade secrets, know-how and confidential information, including the

protection thereof; (iv) design rights and industrial property rights; (v) any

rights analogous to those set forth in the preceding clauses and any other

proprietary rights relating to intangible property including trademarks, service

marks, trademark and service mark registrations and applications therefore,

trade names, business names and business name registrations domain names and

websites (including with respect to the Division, the domain

www.islandpacific.com and the related website and including the "Island Pacific"

name and related trademarks, service marks and trade names), rights in trade

dress and packaging and all goodwill associated with the same; (vi) rights in

customer and prospect lists, trade secrets, know-how, inventions, designs, plans

and specifications and rights in the Seller's Confidential Information (as

defined in Subsection 5(o)); and (vii) all rights to sue for any past, present

or future infringement of any of the foregoing rights and the right to all

income, royalties, damages and payments now or hereafter due or payable with

respect to any of the foregoing rights, including without limitation damages for

past, present or future infringement thereof.

"Internal Revenue Code" means the Internal Revenue Code of 1986, as

amended, and the rulings and regulations promulgated thereunder.

"Invention Assignment Agreements" has the meaning given to it in

Subsection 3(K)(xvi).

"Irvine Lease" means the lease between Seller and Brin-Mar, LLC

dated 29 March 1995, as amended by Amendment No.1 dated 31 January 1998,

Amendment No.2 dated 30 December 1999 and Amendment No.3 dated 10 February 2005

in respect of the property located at Newport Gateway Tower I, Suite 1200, 19800

MacArthur Boulevard, Irvine, California 92715.

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"Key Employees" has the meaning given to it in Subsection 2(f)(vii).

"Knowledge" of the Seller in relation to the warranties and

representations given by the Seller under Section 3 of this Agreement and the

Seller Disclosure Letter means, with respect to any fact, circumstance, event or

other matter in question, the actual knowledge of the executive officers of the

Seller who are involved with the conduct of the Division and Seller's directors

on the date the warranty or representation is given, or the knowledge which such

officers and directors of the Seller could be reasonably expected to have on the

date in respect of which the warranty or representation is given as the result

of their specific position and duties with the Seller.

"Leased Real Property" means all leasehold or subleasehold estates

and other rights to use or occupy any land, buildings, structures, improvements,

fixtures or other interest in real property that is exclusively used in the

Division as listed on part 2 of EXHIBIT C.

"Leases" means all leases, subleases, licenses, concessions and

other agreements (written or oral), including all amendments, extensions,

renewals, guaranties, and other agreements with respect thereto, pursuant to

which Seller holds any Leased Real Property.

"Leave Benefits" means annual leave and leave loading, sick leave

and long service leave.

"Legal Requirement" means any federal, state, foreign, local,

municipal or other law, statute, constitution, principle of common law,

resolution, ordinance, code, edict, decree, rule, regulation, ruling or

requirement issued, enacted, adopted, promulgated, implemented or otherwise put

into effect by or under the authority of any Governmental Entity and any orders,

writs, injunctions, awards, judgments and decrees applicable to Seller or to any

of its assets, properties or the Division Business.

"Liabilities" means with respect to any Person, any debts,

liabilities or obligations of such Person, of any kind, character or

description, whether accrued or fixed, absolute or contingent, matured or

unmatured, executory, determined or determinable, known or unknown, asserted or

unasserted, joint or several, vested or unvested, due or to become due,

including those arising under any Legal Requirement, those arising under any

contract or those arising in connection with any product delivered by such

Person or any service performed by such Person.

"Lien" means any mortgage, deed of trust, pledge, lien, encumbrance,

charge, security interest, collateral assignment, claim, charge, adverse claim

of title, restriction or encumbrance of any kind (including any restriction on

(a) the voting of any security or the transfer of any security or other asset,

(b) the receipt of any income derived from any asset, (c) the use of any asset,

or (d) the possession, exercise or transfer of any other attribute of ownership

of any asset).

"Material Adverse Effect" or "Material Adverse Change" means any

effect or change that would be materially adverse to the business, assets,

Liabilities, condition (financial or otherwise), operating results, operations,

public image or business prospects of the Division, or to the ability of any

party to consummate timely the transactions contemplated hereby or any event or

condition which would, with the passage of time, constitute a "Material Adverse

Effect" or "Material Adverse Change."

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"ordinary course of business" means, with respect to the Division,

the ordinary course of business consistent with Seller's past custom and

practice (including with respect to quantity and frequency).

"Pension Scheme" means the group personal pension scheme provided

through Friends Provident which is registered in the United Kingdom under

Chapter 2 Part 4 of the Finance Act 2004.

"Person" means an individual, a partnership, a corporation, a

limited liability company, an association, a joint stock company, a trust, a

joint venture, an unincorporated organization, any other business entity, or a

governmental entity (or any department, agency, or political subdivision

thereof).

"Prepaid Expenses" means amounts paid in advance for goods or

services, to be supplied to the Division Business in the ordinary course of

business after Closing, plus the amount of the UK Employee Advances.

"Product Warranty" means a guarantee, warranty, undertaking,

representation or promise made by a third party in connection with the quality ,

performance, promotion, supply or repair of goods included in the Acquired

Assets or affixed to or attached to the Leased Real Property or the provision of

services in respect of those goods.

"Purchase Price" means $16,000,000 as adjusted in accordance with

Section 2.

"Restricted Period" means the date from Closing up to the expiration

of 3 years from the Closing Date.

"Securities Act" means the Securities Act of 1933, as amended.

"Seller Disclosure Letter" means the letter prepared and delivered

by Seller to Buyer as of the date hereof which sets forth the exceptions to the

representations and warranties contained in Section 3 hereof and certain other

information called for by this Agreement.

"Seller Indebtedness" means all debts (i) owing by the Seller and

its Affiliates on the one hand, to the Buyer and its Affiliates on the other

hand, which are set out in Exhibit F and (ii) all amounts of any nature

whatsoever owing by the Seller and its Affiliates on the one hand, to the Buyer

and its Affiliates on the other hand, at Closing, but only to the extent (i) and

(ii) arise from subcontract services for implementation of the planning product

commonly referred to as IP Planning.

"Specified Current Assets" means Accounts Receivable, plus Prepaid

Expenses plus Division Inventory.

"Sub-Lease" means the sub-Lease between the Seller and UK Sub in

respect of the UK Lease in the Agreed Form.

"Tax" or "Taxes" means any federal, state, local, or foreign income,

gross receipts, license, payroll, employment, excise, severance, stamp,

occupation, premium, windfall profits, environmental (including taxes under Code

Section 59A), customs duties, capital stock, franchise, profits, withholding,

social security (or similar), unemployment, disability, real property, personal

property, sales, use, transfer, registration, value added, alternative or add-on

minimum, estimated, or other tax of any kind whatsoever, whether computed on a

separate or consolidated, unitary or combined basis or in any other manner,

including any interest, penalty, or addition thereto, whether disputed or not.

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"Tax Return" means any return, declaration, report, claim for

refund, or information return or statement relating to Taxes, including any

schedule or attachment thereto, and including any amendment thereof.

"Third Party Intellectual Property" means the Intellectual Property

Rights listed in Part 2 of Exhibit O.

"Threatened" means a claim, proceeding, dispute, action, or other

matter will be deemed to have been "threatened" if any demand or statement has

been made (in writing) or any notice has been given (in writing), or if any

other event has occurred or any other circumstances exist, that would lead a

prudent Person to conclude that such a claim, proceeding, dispute, legal action,

or other matter is likely to be asserted, commenced, taken, or otherwise pursued

in the future.

"Transferring Employees" means the US Transferring Employees and the

UK Transferring Employees.

"Unaudited Financial Statements" means the balance sheets and

statement of operations referred to in Subsection 3(n)(i) (Financial Statements

of the Division; Accounts Receivable).

"UK Assets" means those Acquired Assets which are owned, leased, or

licensed by Seller and used predominantly in connection with the Division

Business and which are located in the United Kingdom.

"UK Employee Advances" means the amount of remuneration advanced by

the Seller to the UK Transferring Employees as set forth on Exhibit Q.

"UK Lease" means the lease between Seller and Mannix Properties

Limited in respect of the property located at Old Building Mill House Mill Lane

Wendens Ambo, Essex.

"UK Transferring Employees" means the Division UK Employees who

continue employment with the Division Business following Closing.

"US Transferring Employees" means the Division US Employees who

accept an offer of employment made by the Buyer under Subsection 5(n)(ii) of

this Agreement.

"Vendor Finance" means the finance which may be made available by

Seller to Buyer as contemplated by the provisions of Section 2(d)(ii).

Other capitalized terms defined elsewhere in this Agreement and not

defined in this Section 1 shall have the meanings assigned to such terms in this

Agreement.

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2. Transaction.

(a) Purchase and Sale of Assets. On and subject to the terms and

conditions of this Agreement:

(i) Seller agrees to sell, transfer, convey, and

deliver to 3Q and 3Q agrees to purchase all right, title and

interest in and to the Division Software, the Division

Documentation, the Division Intellectual Property Rights (including

Seller's right and interest in all Third Party Intellectual

Property) and the Division Technology Deliverables ("Division IP and

Technology");

(ii) Seller agrees to sell, transfer, convey, and

deliver to ARS, and ARS agrees to purchase the right, title and

interest in and to the Acquired Assets (other than the Division IP

and Technology and the UK Assets); and

(iii) Seller agrees to sell, transfer, convey, and

deliver to UK Sub, and UK Sub agrees to purchase the right, title

and interest in and to the UK Assets (other than the Division IP and

Technology), in each case free and clear of all Liens on and as of

the Closing for the assumption of the Assumed Liabilities and the

payment of the consideration specified below in this Section 2.

(b) Title and Risk. Title and risk in the Acquired Assets passes

to Buyer on Closing.

(c) Assumption and Exclusion of Liabilities.

(i) Assumed Liabilities. Subject to the terms and

conditions of this Agreement, Buyer, upon the successful

consummation of the sale and purchase of the Acquired Assets

pursuant hereto on the Closing Date, will assume and pay, perform

and discharge when due those, and only those, obligations and

liabilities of Seller under and with respect to (A) any Assigned

Agreements, to the extent that such obligations and liabilities

first accrued or arose after the Closing Date for reasons other than

any breach, violation or default by Seller of the terms of the

Assigned Agreements and (B) those liabilities and obligation of

Seller specified on EXHIBIT D, attached hereto ((A) and (B)

together, the "Assumed Liabilities").

(ii) No Other Liabilities Assumed. Notwithstanding

anything else, as a material consideration and inducement to Buyer

to enter into this Agreement, Seller will retain, and will be solely

responsible for paying, performing and discharging when due, and

Buyer will not assume or otherwise have any responsibility or

liability for, any and all Liabilities of Seller (whether now

existing or hereafter arising) other than the Assumed Liabilities

(the "Excluded Liabilities").

(d) Exclusivity Deposit; Purchase Price; Closing Division Net

Tangible Asset Value.

(i) Exclusivity Deposit. Buyer has paid Seller the sum

of $100,000 as a refundable deposit ("Exclusivity Deposit") in

consideration for Seller's Exclusivity Covenant set forth in Section

7(b). On the date on which the parties execute this Agreement, the

amount of the Exclusivity Deposit together with all interest accrued

thereon shall be refunded to Buyer in Immediately Available Funds.

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(ii) Purchase Price. Subject to Seller complying in

full with its obligations under Subsection 2(f), Buyer agrees to pay

to Seller at the Closing an amount (the "Closing Payment") equal to

Sixteen Million dollars ($16,000,000) less (A) any Vendor Finance

and (B) the Escrow Amount, by wire or such other means as the

Buyer's financiers may require of Immediately Available Funds to an

account designated by Seller. At Closing, Buyer agrees to deliver

the Escrow Amount on account of Seller by wire or such other means

the Buyer's financiers may require of Immediately Available Funds to

an account designated by California Bank & Trust, as escrow agent

("Escrow Agent") to be held by Escrow Agent pursuant to an escrow

agreement in substantially the form of EXHIBIT E attached hereto

(the "Escrow Agreement"). Buyer acknowledges that the Escrow Amount

is the property of Seller and will be held by Escrow Agent as a fund

from which Buyer may be reimbursed for breach of Seller's

indemnification obligations as set forth in Section 8 below and for

any Downward Adjustment Amount as set forth in Subsection 2(d)(viii)

below.

(iii) Vendor Finance. Seller agrees to grant Buyer

Vendor Finance up to an amount equal to three million dollars

($3,000,000) should the Buyer require, on such arms length terms and

conditions acceptable to Seller in Seller's sole and absolute

discretion.

(iv) Preparation of the Division Net Tangible Assets

Certificate. The Seller no later than 30 Business Days after the

date of Closing will prepare and deliver the Division Net Tangible

Assets Certificate to Buyer. Seller must provide to Buyer and

Buyer's representatives access to all the information, books,

records and working papers which Buyer may reasonably require and

request from Seller in writing relating to the calculation of the

Specified Current Assets and the preparation of the Division Net

Tangible Assets Certificate.

(v) Closing Division Net Tangible Asset Value

Agreement. The Buyer must complete its examination and review of the

Division Net Tangible Assets Certificate within twenty (20) Business

Days of receiving the Division Net Tangible Assets Certificate

pursuant to Subsection 2(d)(iii), and notify Seller in writing

during this twenty (20) Business Day period if it disagrees in good

faith with the amount of the Closing Division Net Tangible Asset

Value specified in the Division Net Tangible Assets Certificate. If

Buyer does not notify Seller during this twenty (20) Business Day

period that it disagrees with the amount of the Closing Division Net

Tangible Asset Value specified in the Division Net Tangible Assets

Certificate then the Division Net Tangible Asset Certificate will be

deemed to be final and will be conclusive, final and binding on the

parties. For purposes of this Agreement "Division Net Tangible Asset

Value" shall mean the Specified Current Assets as of the Closing and

in accordance with GAAP (excluding cash and cash equivalents) less

the Leave Benefits in respect of the UK Transferring Employees.

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(vi) Closing Division Net Tangible Asset Value

Disputes. If Buyer disagrees with any item within the Division Net

Tangible Assets Certificate, Buyer shall deliver a written notice to

the Seller within twenty (20) Business Days following the Closing

Date pursuant to Subsection 2(d)(iv) disagreeing with such item and

setting forth Buyer's calculation of such item (a "Notice of

Disagreement"). Any such Notice of Disagreement shall, to the extent

reasonably practicable, specify in reasonable detail those items or

amounts as to which Buyer disagrees, and, to the extent practicable,

shall set forth in reasonable detail Buyer's calculation of those

items or amounts, together with an explanation of the disagreement.

If Buyer delivers a Notice of Disagreement pursuant to this

Subsection 2(c)(vi), Buyer and Seller shall, during the 30 days

following such delivery, use reasonable efforts to reach agreement

on the disputed items or amounts (with such agreement, sometimes

referred to herein as the "Closing Division Net Tangible Asset Value

Resolution").

(vii) Independent Accounting. If Buyer and Seller are

unable to reach a Closing Division Net Tangible Asset Value

Resolution during the 30 day period following the delivery of a

Notice of Disagreement pursuant to Subsection 2(d)(iv), Buyer and

Seller shall promptly thereafter cause independent accountants

reasonably satisfactory to Buyer and Seller (the "Independent

Accountants") to review the disputed items or amounts for the sole

purpose of calculating the Closing Division Net Tangible Asset Value

and for the sole purpose of determining whether there should be an

adjustment to the Purchase Price based on the Closing Division Net

Tangible Asset Value (the "Independent Accountants' Closing Division

Net Tangible Asset Value Analysis"). In calculating the Independent

Accountants' Closing Division Net Tangible Asset Value Analysis,

such Independent Accountants shall consider only those items or

amounts in the calculation of Closing Division Net Tangible Asset

Value as to which Buyer and Seller have disagreed. Such Independent

Accountants shall deliver to Buyer and Seller, as promptly as

practicable (and in any event within 30 days following the delivery

of the Notice of Disagreement to Seller), a report that explains any

discrepancies and sets forth the Independent Accountants'

calculation of the Closing Division Net Tangible Asset Value. Such

report and the calculations set forth therein shall be final and

binding upon Buyer, Seller and their respective Affiliates and shall

not be subject to challenge in a court of law or otherwise. The cost

of such review and report shall be borne equally by the Buyer and

the Seller.

(viii) Purchase Price Adjustments. If the Closing

Division Net Tangible Asset Value is less than $800,000 then within

ten (10) days of the date on which the Closing Division Tangible

Asset Value is agreed or determined in accordance with Subsections

2(d)(iv), (v) or (vi) respectively, the Parties shall mutually

instruct the Escrow Agent to distribute from the Escrow Fund to

Buyer an amount equal to the shortfall, as a downwards adjustment to

the Purchase Price ("Downward Adjustment Amount"). To the extent

that the Downward Adjustment Amount exceeds the Escrow Amount,

Seller shall immediately deliver to Buyer in cash the amount by

which the Downward Adjustment Amount exceeds the Escrow Amount.

Conversely, if the Closing Division Net Tangible Asset Value is

greater than $800,000, then Buyer shall deliver in cash to Seller

the amount of any such excess as an upwards adjustment to the

Purchase Price ("Upwards Adjustment") on the later of the date which

is ten (10) days from the date on which the Closing Division Net

Tangible Asset Value is agreed or determined in accordance with

Subsections 2(d)(iv), (v) or (vi) respectively and the date on which

Accounts Receivable to the value of the Upwards Adjustment have been

collected by the Buyer Group. Buyer will use its best efforts

collect each of the Accounts Receivable immediately upon such

Accounts Receivable becoming due, provided that nothing in this

Subsection 2(d)(viii) will oblige the Buyer to institute legal

proceedings.

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(e) The Closing. Subject to the terms and conditions of this

Agreement, the closing of the transactions contemplated by this Agreement (the

"Closing", with the date upon which the Closing occurs, sometimes referred to

herein as the "Closing Date") shall take place at the offices of Solomon Ward

Seidenwurm & Smith LLP, 401 B Street, Suite 1200, San Diego, California,

commencing at 10:00 a.m. local time on the third Business Day following the

satisfaction or waiver of all conditions specified in Section 6 and when each of

the events in Subsections 2(f) and 2(g) must take place or in such other manner,

time and date as the parties may mutually agree in writing.

(f) Certain Closing Deliveries of Seller. At the Closing, (in

addition to Seller's delivery of the items, documents and certificates to be

delivered by Seller at the Closing pursuant to Section 6(b), Seller will deliver

or cause to be delivered to Buyer all of the following items:

(i) counterparts of one or more Bill of Sale in

substantially the form of Exhibit G attached hereto (the "Bill of

Sale") conveying in the aggregate all of Seller's ownership in

personal property included in the Acquired Assets and executed on

Seller's behalf by a duly authorized officer of Seller;

(ii) counterparts of the assignment and assumption

agreement in substantially the form of Exhibit H attached hereto

(the "Assumption Agreement") with respect to the Assigned Agreements

and executed by a duly authorized officer of Seller;

(iii) a receipt for the Closing Payment, executed by a

duly authorized officer of Seller;

(iv) counterparts of the Escrow Agreement executed by a

duly authorized officer of Seller;

(v) assignments from Seller to Buyer of all registered

and unregistered copyrights, trademarks and service marks included

in the Acquired Assets, duly executed on behalf of Seller by a duly

authorized officer of Seller and notarized, and in a form acceptable

for recording with the United States Copyright Office or the United

States Patent and Trademark Office, as applicable, and in

substantially the form of EXHIBIT J hereto (the "Mark Assignment");

(vi) assignment from Seller to Buyer of all Domain

Names and other Intellectual Property Rights (other than those

assigned above) included in the Acquired Assets, duly executed on

behalf of Seller by a duly authorized officer of Seller;

(vii) written evidence that at least 80% of the Division

Employees and Division Contractors, including all of the key

Division Employees and Division Contractors listed in EXHIBIT N and

any other Division Employees and Division Contractors that Buyer

notifies to Seller as being, in its sole and absolute discretion,

"key" employees or contractors ("Key Employees"), in the case of

Division US Employees have accepted the Buyer's offer of employment

made under Subsection 5(n)(ii) or, in the case of Division UK

Employees who transfer pursuant to TUPE have agreed to transfer to

Buyer;

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(viii) written evidence in the form reasonably

satisfactory to Buyer, of full discharge of all Liens over any of

the Acquired Assets;

(ix) duly executed counterparts of the Sub-Lease;

(x) duly executed counterparts of the Transitional

Services Agreement in substantially the form of Exhibit M attached

hereto; and

(xi) subject to Subsection 5(t), duly executed

counterparts of, a deed of assignment in respect of the Irvine Lease

or a written sublease for the Irvine Lease, in a form mutually

agreeable to the Parties.

(g) Certain Closing Deliveries of Buyer. Subject to Seller

complying with its obligations under Subsection 2(f), in addition to Buyer's

delivery of the items, documents and certificates to be delivered by Buyer

pursuant to Section 6(c)), Buyer will deliver or cause to be delivered to Seller

all of the following items:

(i) the Closing Payment in Immediately Available

Funds;

(ii) counterparts to the Assumption Agreement, executed

on behalf of Buyer by a duly authorized officer of Buyer;

(iii) counterparts of the Sub-Lease and, subject to

Subsection 5(t), duly executed counterparts of, a deed of assignment

in respect of the Irvine Lease or a written sublease for the Irvine

Lease, in a form mutually agreeable to the Parties;

(iv) counterparts of the Escrow Agreement, executed on

Buyer's behalf by a duly authorized representative of Buyer.

(h) Assignment of Division Intellectual Property Rights. With

effect from Closing, the Seller assigns the Division Intellectual Property

Rights to the Buyer.

(i) Closing Simultaneous. Subject to the right of either party to

waive any or all of the actions that the other party is required to perform

under Subsections 2(f) or (g) above (as applicable), the actions to take place

as contemplated by Subsections 2(f) and (g) above are interdependent and must

take place, as nearly as possible, simultaneously. If one action does not take

place, then without prejudice to any rights available to any party as a

consequence: (A) there is no obligation on any party to undertake or perform any

of the other actions; (B) to the extent that such actions have already been

undertaken, the parties must do everything reasonably required to reverse those

actions; and (C) Seller and Buyer must each return to the other all documents

delivered to it under Subsections 2(f) and (g) and must each repay to the other

all payments received by it under Subsections (2)(f) and (g), without prejudice

to any other rights any party may have in respect of that failure.

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(j) Method of Delivery; Transfer Taxes. At the Closing, Seller

shall deliver or cause to be delivered to Buyer or an Affiliate of Buyer, as

applicable, all of the Acquired Assets, which shall be delivered to 3Q, UK Sub

and ARS in the manner directed by Buyer consistent with Section 2(a)(i), (ii)

and (iii) above in the form and to the location to be determined by Buyer in its

reasonable discretion on or before the Closing Date at Buyer's cost and expense;

provided, however, that to the extent practicable, Seller shall deliver all of

the Acquired Assets through electronic delivery. Buyer will pay all sales,

transfer, bulk sales, stamp, income, capital gains, use or other Taxes

(excepting income taxes) associated with the transactions contemplated by this

Agreement.

3. Seller's Representations and Warranties. The Seller represents and

warrants to Buyer as follows, in each case subject to such exceptions as are set

forth in the Seller Disclosure Letter:

(a) Incorporation and Authority. Seller is a corporation duly

incorporated, validly existing and in good standing under the laws of the State

of Delaware and has all necessary corporate power and authority to own the

Acquired Assets and carry on the Division Business as it is being carried on

prior to Closing, to perform all of its obligations under the Assigned

Agreements and to enter into this Agreement, the Bill of Sale, the Assumption

Agreement, the Escrow Agreement, the Sub-Lease, the Invention Assignment

Agreements the Transitional Services Agreement (the Bill of Sale, the Escrow

Agreement, the Assumption Agreement, the Sub-Lease, the Invention Assignment

Agreements, the Transitional Services Agreement, together with all other

assignments and documents that Seller is to execute and deliver pursuant to this

Agreement being hereinafter collectively referred to as the "Ancillary

Agreements"), to carry out and perform its obligations hereunder and thereunder

and to consummate all of the transactions contemplated hereby and thereby. The

execution, delivery and performance by Seller of this Agreement and the

Ancillary Agreements, and the sale of the Acquired Assets to Buyer and

consummation of all the transactions contemplated hereby and thereby on the

terms and conditions set forth herein and therein, have been duly and validly

authorized by Seller by all necessary corporate action of Seller's Board of

Directors. No action on the part of Seller's stockholders is necessary to

consummate the transactions contemplated hereby or pursuant to the Ancillary

Agreements. This Agreement has been, and at the Closing the Ancillary Agreements

will be, duly and validly executed and delivered by Seller, and (assuming due

authorization, execution and delivery by Buyer) this Agreement constitutes and,

upon the execution of each of the Ancillary Agreements by the parties thereto,

the Ancillary Agreements will constitute, legal, valid and binding obligations

of Seller enforceable against Seller in accordance with their respective terms,

except to the extent that enforceability may be limited by bankruptcy,

moratorium, and other laws affecting the enforcement of creditors' rights

generally and by principles of equity. Notwithstanding the forgoing, Seller

makes no representation nor warranty regarding Buyer's ability to require Seller

to provide Vendor Finance as set forth in Section 2(d)(iii).

(b) Non-contravention; Consents; and Approvals. Except as set

forth on Schedule 3(b) of the Seller Disclosure Letter, the execution, delivery

and performance of this Agreement and the Ancillary Agreements by Seller, do not

and will not: (i) conflict with or violate the Certificate of Incorporation or

By-laws of Seller; (ii) conflict with or violate any law, rule, regulation,

order, writ, judgment, injunction, decree, determination or award applicable to

the Acquired Assets or Assumed Liabilities; (iii) result in any breach of, or

constitute a default (or event which with the giving of notice or lapse of time,

or both, would become a default) under, or give to others any rights of

termination, rescission, amendment, acceleration or cancellation of, any of the

Assigned Agreements or any note, bond, mortgage, indenture, contract, agreement,

lease, license, permit, franchise or other instrument relating to any of the

Acquired Assets to which Seller is a party or is bound or by which any of the

Acquired Assets are bound or affected; or (iv) result in the creation of any

Lien on any of the Acquired Assets. Except as set forth on Schedule 3(b), the

execution and delivery of this Agreement and the Ancillary Agreements by Seller

do not, and the performance of this Agreement and the Ancillary Agreements by

Seller (including Seller's assignment of any Assigned Agreements to Buyer) will

not, require any consent, approval, authorization or other action by, or filing

with or notification to, any third party, including but not limited to any

governmental or regulatory authority.

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(c) Title to and Condition of Acquired Assets. Seller legally and

beneficially owns all the Acquired Assets and Seller has good and marketable

title in and to all the Acquired Assets, and will transfer the Acquired Assets

to Buyer at the Closing free and clear of all Liens whatsoever. Except as set

forth in Schedule 3(c) of the Sellers Disclosure Letter, none of the Acquired

Assets is licensed from any third party and none of the Acquired Assets is

licensed to any third party or the subject of any agreements or arrangements to

dispose or not to dispose or which otherwise restrict their use or disposal.

Except as set forth in Schedule 3(c), the Acquired Assets are sufficient for the

continued conduct of the Division Business after the Closing in substantially

the same manner as conducted prior to the Closing. Seller will not own or have

the right to use any of the Acquired Assets after the Closing. No third party

has claimed to be entitled to a Lien in relation to any of the Acquired Assets.

All of the tangible personal property included in the tangible Acquired Assets

is in good working condition and repair, ordinary wear and tear excepted.

(d) Division Inventory. The Division Inventory was created in

accordance with the Seller's past practices and consists of items of

merchantable quality and quantity usable or saleable in the ordinary course of

the Division Business, and is saleable in the usual course of business in

accordance with Seller's current price list, and are not obsolete, damaged,

slow-moving or defective and have been regularly and properly serviced and

maintained in a manner that would not void, limit or otherwise adversely affect

the coverage of any warranty thereon.

(e) Plant and equipment. All plant, machinery, vehicles, furniture

and equipment owned or used by Seller in the Division Business and included in

the Acquired Assets: (i) are listed on part 1 of EXHIBIT C, (ii) to Seller's

Knowledge are in good working order subject to ordinary wear and tear and have

been regularly and properly maintained; (iii) are capable of performing the

functions for which they are used; (iv) are properly recorded in the books of

the Division Business in accordance with GAAP; (v) to the Seller's Knowledge

comply and conform in all material respects with all applicable laws and all

standards, and have not been repaired, altered, modified, operated or maintained

in a way that would void, limit or otherwise adversely affect any warranty

provided thereon; and (vi) are not dangerous, inefficient, out-of-date,

unsuitable or in need of renewal or replacement.

(f) Legal Compliance.

(i) Seller has complied in all material respects with

By-laws of Seller and has complied in all material respects with, is

not in material violation of, and has not received any notices of

violation with respect to, any Legal Requirement, with respect to

the Division Business. To Seller's Knowledge, no event has occurred

or circumstance exists that (with or without notice or lapse of

time) (A) may constitute or result in a violation by Seller or a

failure on the part of Seller to comply with, any Legal Requirement,

or (B) may give rise to any obligation on the part of Seller to

undertake, or to bear all or any portion of the cost of, any

remedial action of any nature relating to a Legal Requirement.

Neither Seller nor, to the Knowledge of Seller, any director,

officer, Affiliate or employee of Seller (in their capacities as

such or relating to their employment, services or relationship with

Seller), has given, offered, paid, promised to pay or authorized

payment of any money, any gift or anything of value, with the

purpose of influencing any act or decision of the recipient in his

or her official capacity or inducing the recipient to use his or her

influence to affect an act or decision of a government official or

employee, to any (i) governmental official or employee, (ii)

political party or candidate thereof, or (iii) Person while knowing

that all or a portion of such money or thing of value would be given

or offered to a governmental official or employee or political party

or candidate thereof.

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(ii) Seller has obtained each federal, state, county,

local or foreign governmental consent, license, permit, grant, or

other authorization of a Governmental Entity (i) pursuant to which

Seller currently operates or holds any interest in any of the

Acquired Assets or (ii) that is required for the operation of the

Division Business or the holding of any such interest in the

Acquired Assets (all of the foregoing consents, licenses, permits,

grants, and other authorizations, collectively, the "Seller

Authorizations"), and all of the Seller Authorizations are in full

force and effect (except where a failure would have no Material

Adverse Effect). Seller has not received any written notice from any

Governmental Entity regarding (i) any actual or possible violation

of law or any Seller Authorization or any failure to comply with any

term or requirement of any Seller Authorization, (ii) any actual or

possible revocation, withdrawal, suspension, cancellation,

termination or modification of any Seller Authorization. To Seller's

Knowledge, Seller has materially complied with all of the terms of

the Seller Authorizations. Seller has not undertaken any

investigation of whether any thing would adversely and materially

affect the continuance, renewal or extension of the Seller

Authorizations in favor of Buyer, but has no Knowledge that any

thing would adversely and materially affect the continuance, renewal

or extension of the Seller Authorizations in favor of Buyer.

(g) Full Force and Effect. Each permit, franchise or other

instrument assigned to or assumed by Buyer pursuant to this Agreement or any of

the Ancillary Agreements is in full force and to the Knowledge of Seller is not

subject to any breach or default thereunder by any party thereto.

(h) Litigation. Except as set forth on Schedule 3(h) of the Seller

Disclosure Letter, there is no private or governmental action, suit, proceeding,

claim, arbitration, mediation or investigation pending before any Governmental

Entity, or, to Seller's Knowledge, Threatened against Seller with respect to the

Division or any of the Acquired Assets or to Seller's Knowledge any of Seller's

directors, officers or employees (in their capacities as such or relating to

their employment, services or relationship with the Division) nor has Seller

been involved in any such action or been Threatened with such action in the

preceding 3 years. There is no judgment, decree, injunction, rule or order

against Seller, any of the Acquired Assets or, to Seller's Knowledge, any of

Seller's directors, officers or employees (in their capacities as such or

relating to their employment, services or relationship with the Division). To

Seller's Knowledge, there is no basis for any Person to assert a claim against

Seller or any of the Acquired Assets based upon: (a) Seller entering into this

Agreement or any of the other transactions or agreements contemplated hereby;

(b) any confidentiality or similar agreement entered into by Seller regarding

the Acquired Assets; or (c) any claim that Seller has agreed to sell or dispose

of the Acquired Assets to any party other than Buyer, whether by way of merger,

consolidation, sale of assets or otherwise. Seller has no action, suit,

proceeding, arbitration, mediation or claim pending or Threatened by it against

any other Person relating to the Acquired Assets.

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(i) Brokers. Except as set forth on Schedule 3(i) of the Seller

Disclosure Letter, no broker, finder or investment banker is entitled to any

brokerage, finder's or other fee or commission in connection with the

transactions contemplated by this Agreement based upon arrangements made by or

on behalf of Seller or its Affiliates.

(j) Real Property. Seller does not own fee title to any real

property used in the Division, nor has Seller ever owned fee title to any real

property used in the Division. Part 2 of EXHIBIT C sets forth the address of

each parcel of Leased Real Property, and a true and complete list of all Leases

for each such parcel of Leased Real Property. Seller has provided Buyer true,

correct and complete copies of all Leases for each Leased Real Property. All

such Leases are currently, and will at the Closing remain, valid and effective

in accordance with their respective terms, and there is not now nor at the

Closing will there be, under any of such Lease agreements, any existing default

or event of default (or event which with notice or lapse of time, or both, would

constitute a default). Seller has not received any written notice of a default,

alleged failure to perform, or any offset or counterclaim with respect to any

such Leases, which has not been fully remedied and withdrawn. Except as

explicitly set forth on Section 3(j)-1 of the Seller Disclosure Letter, (A) the

contracts governing each Leased Real Property permit the Seller to freely enter

into subleases and licenses (subject to any consents or approvals required by

such Leases) with respect to the properties; and (B) the Closing will not affect

the enforceability against any Person of any such Leases or the rights of Seller

to the continued use and possession of any of the Leased Real Property for the

conduct of business as presently conducted, and (C) there are no other Persons

occupying, and Seller has not granted any other Persons a right to occupy any of

the Leased Real Property.

(i) To Seller's Knowledge (A) the Leased Real Property

is in good operating condition and repair and is reasonably

sufficient and otherwise suitable for the conduct of the business as

presently conducted therein, (B) there are no structural,

electrical, mechanical, plumbing, roof, paving or other defects in

any improvements located on the Leased Real Property that could,

either individually or in the aggregate, have an adverse effect on

the use, occupancy or operation thereof as presently contemplated,

(C) there are no Laws, covenants or restrictions, or any change

contemplated therein, or any judicial or administrative action, or

action by adjacent landowners, or natural or artificial conditions

upon any Leased Real Property or any other facts or conditions which

could, in the aggregate, have an adverse effect on the licensing,

subleasing, use, occupancy or operation of any such real property,

(D) all utilities required for the conduct of the business as

presently conducted are installed and legally available for use at

Leased Real Property upon payment at market rate consumption

charges, and (E) Seller has obtained all licenses, permits,

variances, approvals, authorizations, easements and rights of way,

required from all Governmental Entities having jurisdiction over any

of the Leased Real Property, or from private parties, for the

intended use, operation and occupancy of such Leased Real Property.

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(ii) To Seller's Knowledge there are no circumstances

which would entitle any landlord, licensor or other Person to

currently terminate any such Lease of the Leased Real Property or

would otherwise restrict or terminate the continued possession or

occupation of the Leased Real Property.

(iii) To Seller's Knowledge there are no: (A)

outstanding disputes with, or complaints by, third parties relating

to the Leased Real Property or likely to affect the present or any

other proposed use or enjoyment of the Leased Real Property; or (B)

notices, orders or planning proposals which have been served on the

Seller or otherwise notified by any local or territorial authority

which affects adversely or is likely to affect adversely the Leased

Real Property directly or indirectly; or (C) covenants,

restrictions, stipulations or conditions affecting the Leased Real

Property which are of an unusual or onerous nature or which

adversely affect the value or the present or any other proposed use

of the Leased Real Property; or (D) conditions affecting the Leased

Real Property or the operation of the Seller which might give rise

to any liability or obligation on the part of the Buyer under any

Environmental and Safety Laws. Seller has valid leasehold and

subleasehold estates and license agreements, as applicable, in all

of the Leased Real Property, free and clear of any Liens on account

of Seller, except (E) Liens on account of Seller that will be

removed at or prior to Closing, (F) Liens on account of Seller for

Taxes not yet due and payable, and (G) such imperfections of title

and encumbrances on account of Seller, if any, which do not detract

from the value or interfere with the present access to and use of

the property subject thereto or affected thereby.

(k) Intellectual Property.

(i) Seller has fully disclosed in the Disclosure

Materials all Division Intellectual Property Rights and all

arrangements relating to any Third Party Intellectual Property

owned, licensed or used by Seller in connection with the Division

Business.

(ii) The Acquired Assets include all Intellectual

Property Rights necessary to enable Buyer to conduct the Division

Business in the manner in which such business has been and is

currently conducted without the need for any license from any Person

(other than for Third Party Intellectual Property or permits which

Buyer may need to operate under applicable law).

(iii) Seller has an enforceable right to use all Third

Party Intellectual Property and these rights are comprised in the

Assigned Agreements. Upon consummation of the Asset Purchase, except

as set forth in the Disclosure Letter, Buyer will be entitled to use

all Third Party Intellectual Property on terms no less favorable

than those which applied to Seller immediately prior to the Closing.

The Acquired Assets and the conduct of the Division Business, as

currently conducted, do not infringe upon any Intellectual Property

Rights of any third party to Seller's Knowledge and no third party

has asserted or Threatened to assert against Seller any claim of

infringement of Intellectual Property Rights. Seller has not

received any opinion of counsel that any Division Products (as

defined below) or the operation of the Division Business infringes

or misappropriates any Intellectual Property Rights of any third

party.

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(iv) To Seller's Knowledge, there is no unauthorized

use, unauthorized disclosure, infringement or misappropriation of

any Intellectual Property Rights included in the Acquired Assets, by

any employee of Seller or to Seller's Knowledge by any former

employee of Seller or by any other third party. Seller has not

brought any action, suit or proceeding for infringement or

misappropriation of any Intellectual Property Rights included in the

Acquired Assets.

(v) Seller is sole legal and beneficial owner of,

possesses, has the exclusive right to make, use, sell, license, has

the right to bring actions for the infringement of, and where it has

deemed necessary, has made timely and proper applications for, the

Intellectual Property Rights that are included in the Acquired

Assets, free and clear of all Liens and third party interests.

(vi) Except as set forth in Section 3(k)(vi) of the

Seller Disclosure Letter, Seller has not granted any third party any

licenses or other rights to any of the Acquired Assets.

(vii) EXHIBIT P lists all products and services

produced, marketed, licensed, sold, distributed or performed by or

on behalf of the Division and all products and services currently

under development by the Division by name, and if applicable, by

version number (collectively, the "Division Products") and each

Division Product performs its intended functions (as set out in

Exhibit P), and is designed and manufactured in accordance with the

Seller's standard procedure.

(viii) Part 1(C) of EXHIBIT O lists all Division

Registered Intellectual Property (as defined below) including the

jurisdictions in which each such item of Division Registered

Intellectual Property has been issued or registered or in which any

application for such issuance and registration has been filed, or in

which any other filing or recordation has been made. For purposes

hereof "Division Registered Intellectual Property" means all United

States, international and foreign: (A) patents and patent

applications (including provisional applications); (B) registered

trademarks, applications to register trademarks, intent-to-use

applications, or other registrations or applications related to

trademarks; (C) registered Internet domain names including

www.islandpacific.com and any other domain names used by the

Division; (D) registered copyrights and applications for copyright

registration; and (E) any other Intellectual Property Right that is

the subject of an application, certificate, filing, registration or

other document issued, filed with, or recorded by any Governmental

Entity owned by, registered or filed in the name of, Seller (or any

Affiliate of Seller) and that is part of the Acquired Assets.

(ix) Each item of Division Registered Intellectual

Property is valid (or in the case of applications, applied for), all

registration, maintenance and renewal fees currently due in

connection with such Division Registered Intellectual Property have

been paid and all documents, recordations and certificates in

connection with such Division Registered Intellectual Property

currently required to be filed have been filed with the relevant

patent, copyright, trademark or other authorities in the United

States or foreign jurisdictions, as the case may be, for the

purposes of prosecuting, maintaining and perfecting such Division

Registered Intellectual Property and recording Sellers's ownership

interests therein, except where a failure to do so would not have a

Material Adverse Effect.

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(x) Seller has not transferred ownership of any

Intellectual Property Right that is included in the Acquired Assets

to any third party, or permitted Seller's rights in any such

Intellectual Property Right that is included in the Acquired Assets

to enter the public domain.

(xi) Seller has held the source code for the Division

Software and Division Products as confidential and except as

disclosed in Section 3(k)(xi) of the Seller's Disclosure Letter, has

not given any third party access to or a copy of any source code for

any part of the Division Products or Division Software.

(xii) The source code and documentation for the Division

Software and Division Products is: (A) in the possession of Seller

and all versions thereof (including the latest version) will be

delivered to Buyer pursuant to this Agreement; and (B) will be

sufficient to enable Buyer to use, modify and develop the Division

Software and Division Products in a manner consistent with the

Seller's past use, modification, and development.

(xiii) None of the Acquired Assets is held or used

pursuant to a license or similar grant of rights from any third

party other than "off-the-shelf" software.

(xiv) No agreement or contract with respect to any of

the Acquired Assets grants any third party rights to or under any

Intellectual Property Right included in the Acquired Assets (other

than the sale or nonexclusive license of products to Division

customers in the ordinary course of business) or grants any third

party the right to sublicense any Intellectual Property Right

included in the Acquired Assets.

(xv) Neither Seller nor any of its Affiliates is liable

for, nor has made any contract or arrangement whereby it may become

liable to, any Person for any royalty, fee or other compensation for

the ownership, use, license, lease, sale, distribution, manufacture,

reproduction or disposition of any Acquired Asset.

(xvi) All employees and consultants of Seller, and any

other third parties who have been involved in the product

development of the Division or Division Software or who were

otherwise involved in the creation and/or development of any

Division Software, the Division Documentation, the Division

Intellectual Property Rights and/or the Division Technology

Deliverables, have executed (or will execute prior to the Closing)

Seller's standard form invention assignment agreements (the

"Invention Assignment Agreements") or other agreement addressing

such matter, all of which have been delivered to Buyer's counsel

prior to Closing and all employees and consultants of Seller who

have access to confidential information or trade secrets of the

Division and/or which relate to Acquired Assets or the Seller's

Confidential Information have executed appropriate nondisclosure

agreements which have been delivered to Buyer's counsel prior to

Closing.

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(xvii) Part 2(A) of Exhibit O lists all software or

other material that is distributed as "free software", "open source

software" or under similar licensing or distribution terms

(including but not limited to the GNU General Public License (GPL),

GNU Lesser General Public License (LGPL), Mozilla Public License

(MPL), BSD licenses, the Artistic License, the Netscape Public

License, the Sun Community Source License (SCSL) the Sun Industry

Standards License (SISL) and the Apache License) ("Open Source

Materials") used by Seller in the Division in any way, and describes

the manner in which such Open Source Materials were used (such

description shall include whether (and, if so, how) the Open Source

Materials were modified and/or distributed by Seller). Seller is in

compliance with the terms and conditions of all licenses for the

Open Source Materials.

(xviii) Seller has not (i) incorporated Open Source

Materials into, or combined Open Source Materials with, the Division

Intellectual Property Rights or any of the Division Products; (ii)

distributed Open Source Materials in conjunction with any Division

Intellectual Property Rights or any of the Division Products; or

(iii) used Open Source Materials, in such a way that, with respect

to (i), (ii), or (iii), creates, or purports to create obligations

for Seller with respect to any Division Intellectual Property Rights

or grant, or purport to grant, to any third party, any rights or

immunities under any Division Intellectual Property Rights

(including using any Open Source Materials that require, as a

condition of use, modification and/or distribution of such Open

Source Materials that other software incorporated into, derived from

or distributed with such Open Source Materials be (A) disclosed or

distributed in source code form, (B) be licensed for the purpose of

making derivative works, or (C) be redistributable at no charge).

(xix) Seller has not entered into any settlement,

release, co-existence or other agreement, and to Seller's Knowledge

there are no other circumstances that would adversely affect the

Seller's right to use, enforce or assign any of the Division IP and

Technology or Third Party Intellectual Property.

(xx) To Seller's Knowledge no trade secret or other

confidential information included in the Division IP and Technology

has been disclosed or made available to any third party or Seller's

Affiliate except in the ordinary course of business and subject to a

binding obligation of confidentiality on the part of the recipient.

(xxi) Seller does not carry on the Division Business

under any name other than its corporate name or the business names

listed in Part 1 of Exhibit O. Seller is validly licensed to use

each of the domain names which are the subject of the Division

Domain Names. The Division Domain Names are freely transferable to

Buyer and are in good standing. All domain names used in the

Business are listed in Part 1 of Exhibit O.

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(l) Information Technology.

(i) Seller owns or is licensed to use all the

information technology and telecommunications systems, hardware and

Division Software used in or reasonably necessary for the conduct of

the Division Business as conducted prior to and at Closing.

(ii) All Division Software used by Seller is not wholly

or partly dependent on any facilities that are not under the

ownership, operation and control of Seller.

(iii) Seller creates and maintains accurate back-ups of

all data stored on or processed by the Division Software used by

Seller at least as frequently as every 24 hours.

(iv) Seller has up to date disaster recovery plans for

the Division Software which are designed to minimise the impact of

any loss of, damage to or material interruption in use of any

Division Software on the conduct of the Division Business and which

comply with best information technology industry practice.

(m) Product Warranties; Defects. Each Division Product has been in

substantial conformity with all applicable contractual commitments and all

express warranties made by the Seller and there is, to Seller's Knowledge, no

basis for any present or future action, suit, proceeding, hearing,

investigation, charge, complaint, claim, or demand against any such contractual

commitments or express warranties for replacement or repair thereof or other

damages in connection therewith. No Division Product is subject to any guaranty,

warranty, or other indemnity beyond the Seller's applicable standard terms and

conditions of sale, lease or licensing (as set forth in written agreements that

Seller has delivered to Buyer) or beyond that imposed by applicable law.

(n) Financial Statements of the Division; Accounts Receivable.

(i) Seller has delivered to Buyer unaudited balance

sheets of the Division as of March 31, 2007 and as of August 31,

2007 (the "Unaudited Balance Sheet") and an unaudited statement of

operations of the Division for the fiscal years ended March 31,

2005, March 31, 2006, March 31, 2007 and in respect of the period

from March 31, 2007 to the last day of August, 2007 (collectively,

the "Unaudited Financial Statements"), a copy of each of which is

included in Section 3(n)(i)-1 of the Seller Disclosure Letter.

(ii) The Financial Statements: The Unaudited Financial

Statements (A) are derived from and in accordance with the books and

records of the Division, (B) comply in all material respects with

applicable accounting requirements with respect thereto as of their

respective dates, (C) have been prepared in accordance with GAAP

applied on a consistent basis throughout the periods indicated and

consistent with each other, and (D) give a true and fair view of the

financial condition of the Division at the dates therein indicated

and the results of operations of the Division for the periods

therein specified, including and as adjusted for all costs that

would be incurred as if the Division would have operated independent

of the Seller and all appropriate adjusted allocations for all costs

and obligations shared or conducted jointly with the Seller and its

other businesses and the Division. Seller does not have any

obligations or Liabilities with respect to the Division of any

nature other than (i) those set forth or adequately provided for in

the Unaudited Financial Statements, and (ii) those incurred in the

conduct of Seller's operation of the Division since the Balance

Sheet Date in the ordinary course of business, which are of the type

that ordinarily recur and, individually or in the aggregate, are not

material in nature or amount. Seller has delivered to Buyer and has

included as Schedule 3(n) of the Seller Disclosure Letter a detailed

list (the "Liabilities List") of (i) Seller's outstanding

Liabilities with respect to the Division as of the Agreement Date

and (ii) Seller's best good faith estimate of its Liabilities with

respect to the Division as of, and giving effect to, the Closing.

Seller has no Liabilities that are, individually or in the

aggregate, material to the Division, the Acquired Assets, or the

results of operations of Seller or the financial condition of

Seller, except for Liabilities set forth on the Liabilities List.

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(1) The earnings of the Division as shown in the

Unaudited Financial Statements: (A) were generated in the ordinary course of

carrying on the Division Business; and (B) do not contain any exceptional or

extraordinary items or items of which the Seller is aware is of a one-off

nature.

(2) In the Unaudited Financial Statements, Division

Inventory was valued on a consistent basis with the two (2) preceding financial

years and on the basis of the lower of cost and net realizable value and all

redundant and obsolete stock was written off or written down as appropriate and

full provision was made for all slow-moving and damaged stock.

(3) The rate of depreciation applied in the Unaudited

Financial Statements for each fixed asset has been consistently applied over the

preceding 5 financial years of the Division Business and is adequate to write

down the value of each fixed asset to its net realizable value at the end of its

useful working life.

(4) All of the fixed assets of the Seller as shown in

the Unaudited Financial Statements are valued at cost less depreciation deducted

from time to time in a consistent manner and there has been no revaluation of

those fixed assets since their acquisition. The Accounts Receivable shown on the

Division Net Tangible Assets Certificate arose in the ordinary course of

business, consistent with past practice, and have been collected or are

collectible in the book amounts thereof, less an amount not in excess of the

allowance for doubtful accounts provided for on the Division Net Tangible Assets

Certificate. Allowances for doubtful accounts and warranty returns are adequate

and have been prepared in accordance with GAAP consistently applied and in

accordance with Seller's past practices. The Accounts Receivable of the Division

arising after the Balance Sheet Date and before the Closing Date arose or will

arise in the ordinary course of business, consistent with past practice, and

have been collected or are collectible in the book amounts thereof, less

allowances for doubtful accounts and warranty returns determined in accordance

with GAAP consistently applied and in accordance with Seller's past practices.

None of the accounts receivable of the Division is subject to any material claim

of offset, recoupment, setoff or counterclaim, and Seller has no Knowledge of

any specific facts or circumstances (whether asserted or unasserted) that could

give rise to any such claim. The Accounts Receivable of the Division are not

contingent upon the performance by Seller or Buyer of any obligation or contract

other than normal warranty repair and replacement. Except as set forth on

Schedule 3(n)(iii) of the Seller Disclosure Letter, no Person has any Lien on

any of such Accounts Receivable, and no agreement for deduction or discount has

been made with respect to any of such accounts receivable. Schedule 3(n) of the

Seller Disclosure Letter sets forth the amounts of Accounts Receivable of the

Division which are subject to asserted warranty claims by customers and

reasonably detailed information regarding asserted warranty claims made during

the twelve (12) months preceding the Agreement Date, including the type and

amounts of such claims. No Accounts Receivable has been factored, sold or agreed

to be sold by Seller to