ASSET PURCHASE AGREEMENT

Exhibit 2.1

ASSET PURCHASE AGREEMENT

among

PEERLESS SYSTEMS CORPORATION,

PEERLESS DOCUMENT MANAGEMENT CORPORATION,

PRISM SOFTWARE CORPORATION

and

CERTAIN STOCKHOLDERS OF PRISM SOFTWARE CORPORATION

February 22, 2008

Table of Contents

		Tab
ARTICLE 1: DEFINITIONS			1
1.1 Definitions			1
1.2 Accounting Terms			1
ARTICLE 2: PURCHASE AND SALE			1
2.1 Purchase and Sale of Assets			1
2.2 Assumption and Retention of Liabilities			3
2.3 Purchase Price; Deliveries; Escrow			5
2.4 Earnout Consideration			6
2.5 Allocation to Seller of the Purchase Price			9
2.6 Sale of Buyer.			9
2.7 Good Faith Obligations of Parent			10
ARTICLE 3: REPRESENTATIONS AND WARRANTIES CONCERNING SELLER AND THE KEY STOCKHOLDERS			10
3.1 Authority and Capacity			10
3.2 Execution and Delivery; Enforceability			10
3.3 Noncontravention			10
3.4 Legal Proceedings			11
3.5 Organization and Good Standing			11
3.6 Other Ventures			11
3.7 Financial Statements			12
3.8 Absence of Undisclosed Liabilities			12
3.9 Absence of Certain Changes or Events			12
3.10 Taxes			14
3.11 Employees			15
3.12 Employee Benefit Plans and Other Compensation Arrangements			16
3.13 Environmental Matters			17
3.14 Permits; Compliance with Laws			18
3.15 Real and Personal Properties			18
3.16 Intellectual Property			20
3.17 Business Contracts			23
3.18 Litigation			24
3.19 Product Warranty and Product Liability			24
3.20 Customers			24
3.21 Insurance			25
3.22 Indebtedness			25
3.23 Related Party Transactions			25
3.24 Sufficiency of Assets			25
3.25 Brokerage			25

		Tab
3.26 Acquisition Entirely for Own Account			26
3.27 Disclosure of Information			26
3.28 Investment Experience			26
3.29 Representations Complete			26
3.30 Representations of the Key Stockholders			26
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER			27
4.1 Authority and Capacity			27
4.2 Execution and Delivery; Enforceability			27
4.3 Noncontravention			27
4.4 Organization, Standing and Power			28
4.5 SEC Reports; Financial Statements			28
4.6 Parent Common Stock			28
ARTICLE 5: CLOSING CONDITIONS; DELIVERIES			28
5.1 Conditions to the Buying Parties’ Obligations			28
5.2 Conditions to Seller’s Obligations			30
ARTICLE 6: THE CLOSING			31
ARTICLE 7: COVENANTS AND AGREEMENTS			31
7.1 Miscellaneous Covenants			31
7.2 Restrictive Covenants			32
7.3 Discharge of Liabilities			34
7.4 Maintenance of Corporate Existence; Restriction on Distribution			34
7.5 Employee Matters			35
7.6 Notification; Updates to Seller Schedules			36
7.7 Management Fee			37
7.8 Management of Buyer			37
7.9 Line of Credit			37
7.10 Registration Matters, etc			38
7.11 Pre-Closing Loans			39
7.12 Tax Clearance Certificates and Releases			39
7.13 Bulk Sales Compliance			39
7.14 Transfer of Software			39
ARTICLE 8: INDEMNIFICATION			39
8.1 Indemnification of Buyer			39
8.2 Indemnification of Seller and Key Stockholders			40
8.3 Limitations on Indemnification			40
8.4 Procedures Relating to Indemnification of the Buyer Indemnitees			42
8.5 Procedures Relating to Indemnification of the Seller Indemnitees			43
8.6 Exclusive Remedy			43

		Tab
ARTICLE 9: TERMINATION			44
9.1 Termination			44
9.2 Effect of Termination			44
ARTICLE 10: CERTAIN DEFINITIONS			45
ARTICLE 11: CONSTRUCTION; MISCELLANEOUS PROVISIONS			54
11.1 Notices			54
11.2 Entire Agreement			55
11.3 Modification			55
11.4 Binding Effect			55
11.5 Headings			55
11.6 Number and Gender; Inclusion			55
11.7 Counterparts			55
11.8 Third Parties			56
11.9 Time Periods			56
11.10 Governing Law			56
11.11 Dispute Resolution			56

Exhibits
Exhibit A		Escrow Agreement
Exhibit B		Bill of Sale
Exhibit C		Assignment and Assumption Agreement
Exhibit D		Legal Opinion

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into on February 22, 2008, by and among (a) Peerless Systems Corporation, a Delaware corporation (“ Parent ”), (b) Peerless Document Management Corporation, a Delaware corporation and wholly owned subsidiary of Parent (“ Buyer ,” and together with Parent, the “ Buying Parties ”), (c) Prism Software Corporation, a Delaware corporation (“ Seller ”) and (d) solely for purposes of Sections 3.30 and 7.2 of this Agreement, Conrad von Bibra and Carl von Bibra (the “ Key Stockholders ”).

RECITALS

      WHEREAS , Seller develops and sells products, and provides services related to electronic document formation, document management, and print stream conversion solutions (the “ Business ”); and

      WHEREAS , except for the Excluded Assets, the Buying Parties wish to purchase from Seller, and Seller wish to sell to the Buying Parties, substantially all of the assets of Seller related to the Business, upon and subject to the terms and conditions set forth in this Agreement.

AGREEMENT

      NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

ARTICLE 1: DEFINITIONS

      1.1 Definitions . Certain terms used in this Agreement shall have the meanings set forth in Article 10, or elsewhere herein as indicated in Article 10.

      1.2 Accounting Terms . Accounting terms used in this Agreement and not otherwise defined herein shall have the meanings attributed to them under GAAP except as may otherwise be specified herein.

ARTICLE 2: PURCHASE AND SALE

      2.1 Purchase and Sale of Assets .

          (a) Purchased Assets . Seller hereby sells, transfers, conveys, assigns and delivers to Buyer, and Buyer hereby purchases and acquires from Seller (the “ Sale ”), free and clear of all Liens, all of Seller’s right, title and interest in and to all of the assets and properties of the Business as of the Closing Date (whether personal or mixed, used, owned or leased, tangible or intangible, of every kind and description), wherever located and whether or not such assets and properties are reflected on the books and records of Seller or the Business (collectively, the “ Purchased Assets ”); provided , however , that the Purchased Assets do not and shall not include those assets and properties expressly identified in Section 2.1(b) (the “ Excluded Assets ”).

Except to the extent constituting an Excluded Asset, the Purchased Assets shall include, but not be limited to, all of Seller’s right, title and interest in and to the following:

          (i) all Intellectual Property Rights of Seller, including all Seller Owned IP and Seller Licensed IP; including all of the following with respect to Software, which shall be delivered in accordance with Section 7.14 , (i) the full Source Code thereto, (ii) all versions and releases thereof, and all full or partial copies of any thereof, including all backup or archival copies;

          (ii) [intentionally omitted]

          (iii) all manuals, notes, reports, documentation, flow charts, specifications, templates, files (whether electronic or otherwise but excluding any software-related files), diagrams, work papers, programmers’ notes or other data, information or materials necessary for the proper use of any of the Purchased Assets (including with respect to developing, maintaining, testing, enhancing, supporting or correcting defects in any of the Purchased Assets);

          (iv) all machinery, apparatus, furniture and fixtures, materials, supplies, tools and other equipment or property of every type whether now owned, leased, used or held for use or hereafter owned, leased, used or held for use by Seller in connection with operation of the Business;

          (v) all inventory, including all merchandise, raw materials, work in progress, finished products and other tangible personal property held for sale by Seller (the “ Inventory ”);

          (vi) all of the rights and interests arising under or in connection with any Assumed Contracts, plus all rights of Seller under all Contracts, licenses, instruments or other rights to use the Intellectual Property Rights of third parties that are held by Seller;

          (vii) all prepaid expenses of the Business as of the Closing Date;

          (viii) all of the rights and interests in any sales data, customer lists, information relating to customers, suppliers’ names, mailing lists, and, if any, advertising matter and all rights thereto, of the Business;

          (ix) all of the books and records of the Business relating to the Purchased Assets, suppliers, vendors or customers of the Business;

          (x) all of the rights and interests of Seller in any Permits, unemployment compensation, workers’ compensation and other credits, reserves or deposits with applicable Governmental Authorities;

          (xi) all of the rights and interests of the Business in, to and under any third party warranties;

          (xii) all goodwill associated with the Business as a going concern, including, but not limited to all informal relationships with the Business’ suppliers; and

          (xiii) any other assets (whether owned, leased, licensed, etc.) of Seller currently used in the operation of the Business.

          (b) Excluded Assets . The Excluded Assets shall include only the following:

          (i) all cash, cash equivalents and short-term investments of Seller;

          (ii) all of the accounts receivable of Seller as of the Closing Date, a full and final summary of which shall be provided by Seller to the Buying Parties two Business Days prior to the Closing Date;

          (iii) all of Seller’s rights pursuant to this Agreement;

          (iv) Seller’s articles of incorporation, corporate charter and all accompanying corporate documents filed with the California Secretary of State, corporate seals, minute books, stock books and other corporate records having to do with the corporate organization and capitalization of Seller and all Tax Returns; provided , however , that copies of such Tax Returns shall be provided to Buyer at the Closing (if not already provided prior thereto) (the “ Excluded Records ”);

          (v) All bank and other depository accounts and safe deposit boxes of Seller;

          (vi) All refunds of Taxes with respect to real or personal property used or owned by Seller with respect to all tax period or portions thereof ending on or prior to the Closing Date, and all refunds of any other Taxes;

          (vii) all claims, deposits, prepayments, guarantees, refunds, causes of action, rights of recovery, rights of set off and rights of recoupment of every kind and nature arising before, on or after the Closing Date which are not included as a Purchased Asset pursuant to Section 2.1(a) ;

          (viii) all actions, demands, rights and privileges against third parties that relate to any of the Excluded Assets or Excluded Liabilities, including actions and rights under insurance policies related thereto;

          (ix) assets of Seller related to any Company Plan, except and to the extent expressly assumed by Buyer under Section 2.2(a)(iii) ; and

          (x) all shares of capital stock of Seller or any subsidiary of Seller.

      2.2 Assumption and Retention of Liabilities .

          (a) Assumed Liabilities . In connection with the purchase and sale of the Purchased Assets, Buyer shall only assume the following obligations and liabilities of Seller (the

“ Assumed Liabilities ”), provided , however , that the Assumed Liabilities do not and shall not include those obligations and liabilities of Seller set forth in Section 2.2(b) (the “ Retained Liabilities ”):

          (i) all liabilities and obligations of Seller arising on and after the Closing Date under the Assumed Contracts; provided , however , that the Assumed Liabilities shall not include any liabilities or obligations arising out of any breach by Seller on or prior to the Closing of any provision of any such Contract, including but not limited to, liabilities or obligations arising out of Seller’s failure to perform under any such Contract in accordance with its terms prior to the Closing;

          (ii) all product warranty obligations disclosed on Schedule 3.19 of the Seller Schedules as of the date hereof; and

          (iii) all vacation time accrued as of the Closing Date by the Transferred Employees to the extent included in the Acquisition Balance Sheet or accrued in the ordinary course, consistent with past practice, since the date of the Acquisition Balance Sheet.

          (b) Retained Liabilities . Notwithstanding anything in this Agreement to the contrary, any disclosure contained herein or made pursuant hereto, anything otherwise known to Buyer, Buyer does not assume and will not become responsible for any liability or obligation (whether known or unknown) of Seller except the Assumed Liabilities. Without limiting the generality of the foregoing, the following are included among the liabilities of Seller which Buyer does not expressly or impliedly assume:

          (i) all accounts payable of Seller;

          (ii) all Indebtedness of Seller;

          (iii) all liabilities of Seller with respect to any expenses relating to the transactions contemplated by this Agreement;

          (iv) all liabilities of Seller with respect to all Taxes for all periods, whether arising before the Closing Date, including, but not limited to, all Transfer Taxes resulting from or payable in connection with the sale of the Purchased Assets pursuant to this Agreement;

          (v) all liabilities of Seller with respect to any pending, threatened or unasserted litigation, claim, demand, investigation or proceeding including, without limitation, liabilities relating to the Leased Real Property or to the Excluded Assets, and liabilities relating to any Tax owed or alleged to be owed to any Governmental Authority with respect to matters which occurred prior to the Closing Date;

          (vi) any liability or obligation to or in respect of any employees or former employees of Seller except as specifically set forth in Section 2.2(a)(iii) ;

          (vii) any obligation or liability of Seller incurred in connection with the execution, delivery or performance of this Agreement; and

          (viii) all liabilities of Seller which are attributable to non-compliance with applicable Laws.

      2.3 Purchase Price; Deliveries; Escrow . As consideration for the Purchased Assets (the “ Consideration ”), in addition to any Earnout Consideration payable to Seller pursuant to Section 2.4 , the following payments and distributions will be made at Closing by Parent:

          (a) $1,750,000 in immediately available funds (the “ Closing Cash ”) will be delivered via wire transfer to Seller’s Account, (x) less an amount equal to the Indebtedness evidenced by the Payoff Letters, plus (y) an amount equal to the proceeds from the Pre-Closing Loan Reimbursable Proceeds.

          (b) A number of shares of Parent Common Stock equal to either (x) 526,000 shares, if the Closing Market Price is $2.85 or less or (y) the amount determined by dividing $1,499,100 by the Closing Market Price if the Closing Market Price is greater than $2.85, rounded up or down to the nearest whole share (in either case, the “ Closing Shares ”) will be placed into an escrow account (the “ Escrow Fund ”) with LaSalle Bank National Association, as escrow agent (the “ Escrow Agent ”) pursuant to an Escrow Agreement signed by Buyer, Seller and Escrow Agent in substantially the form attached hereto as Exhibit A (the “ Escrow Agreement ”), in order to secure payment of the Buying Parties’ right to indemnification under Article 8 of this Agreement. Subject to the last sentence of this paragraph, the Closing Shares shall remain in the Escrow Fund until the later to occur of (i) thirty (30) days following the end of the calendar month in which Total Net Income (as defined in Section 2.4 ), calculated on a monthly basis, first exceeds $275,000 and (ii) the 12 month anniversary of the Closing Date (in either case, the “ Escrow Period ”). For avoidance of doubt, Total Net Income shall be calculated on a cumulative basis beginning on the first day of the Measurement Period (as defined in Section 2.4 ), and any losses incurred during the Measurement Period (before the date that cumulative Total Net Income has exceeded $275,000) shall be deducted from Total Net Income. If Total Net Income calculated on a cumulative basis does not exceed $275,000 by the end of the Measurement Period, the Closing Shares shall be released from the Escrow Fund to Parent. At any time during the Escrow Period, Buyer may, in its sole discretion, instruct the Escrow Agent to release all of the Closing Shares then remaining in the Escrow Fund to Seller, provided , that all Closing Shares released to Seller shall, on the date of such release (the “ Escrow Release Date ”) be Unrestricted Shares.

          (i) If the Closing Shares on the Escrow Release Date have a value less than $1,499,100 (based on the Thirty Day VWAP as of the Trading Day immediately preceding the Escrow Release Date), then Parent shall pay the difference between such value and $1,499,100 (minus the value of any indemnification claims made by Buyer pursuant to Article 8 hereof, whether settled or pending, as of the Escrow Release Date) in immediately available funds via wire transfer to Seller’s Account. Any such payment shall be made within two (2) Trading Days following the Escrow Release Date.

          (ii) If the Closing Shares on the Escrow Release Date have a value greater than $1,499,100 (based on the Thirty Day VWAP as of the Trading Day immediately preceding the Escrow Release Date), then the difference between such value and $1,499,100 shall decrease the Earnout Consideration, if any, pursuant to Section 2.4(c) .

          (c) The Closing Cash, plus the value of the Closing Shares released to Seller (as determined on the date or dates of release thereof to the Seller) are collectively referred to herein as the “ Net Closing Consideration .”

          (d) At the Closing, Buyer shall, on behalf of Seller, cause the Indebtedness evidenced by the Payoff Letters to be repaid in full to the party or parties entitled thereto pursuant to the Payoff Letters.

      2.4 Earnout Consideration .

          (a) Seller shall be entitled to additional consideration for the Purchased Assets if Buyer meets certain targets, as set forth below (the “ Earnout Consideration ”).

          (b) For purposes of this Section 2.4 , the following terms shall have the following respective meanings:

          (i) “ Allocated Expenses ” means the costs and expenses of Parent allocated to Buyer during the Measurement Period within the following categories: legal, finance, engineering, sales and marketing and senior management, inclusive of any fees for services performed by Parent employees on behalf of Buyer that exceed the aggregate Annual Management Fees for the Measurement Period. Parent shall only allocate to Buyer those expenses that, in its reasonable judgment, are related to the business and operations of Buyer.

          (ii) “ Applicable Multiplier ” shall be the number in the second column of Table 2.4 that corresponds to Total Net Income.

          (iii) “ Measurement Period ” shall mean the three year period beginning on the first day of the full calendar month following the Closing Date.

          (iv) “ Measurement Year ” means each consecutive twelve month period beginning on the first day of the Measurement Period and each anniversary thereof.

          (v) “ Total Net Income ” shall mean Buyer’s total net income for the Measurement Period. Total Net Income shall be determined in accordance with GAAP, but shall exclude all non-cash charges, including, without limitation, depreciation, amortization and accounting charges, and charges relating to equity compensation.

          (c) The Earnout Consideration shall be equal to an amount determined by multiplying Total Net Income by the Applicable Multiplier, and subtracting from the resulting product the Net Closing Consideration. Notwithstanding anything to the contrary herein, if Total Net Income is less than $4,337,000, the Earnout Consideration shall be zero, and if Total Net

Income is greater than $10,842,500, then the Earnout Consideration shall be reduced on a dollar for dollar basis by Allocated Expenses.

Table 2.4 :

Total Net Income		Multiplier
(in dollars)
Equal to or greater than 4,337,000 and less than 4,770,700			1.0
Equal to or greater than 4,770,700 and less than 5,204,400			1.2
Equal to or greater than 5,204,400 and less than 5,638,100			1.4
Equal to or greater than 5,638,100 and less than 6,071,800			1.6
Equal to or greater than 6,071,800 and less than 6,505,500			1.8
Equal to or greater than 6,505,500 and less than 6,939,200			2.0
Equal to or greater than 6,939,200 and less than 7,372,900			2.2
Equal to or greater than 7,372,900 and less than 7,806,600			2.4
Equal to or greater than 7,806,600 and less than 8,240,300			2.6
Equal to or greater than 8,240,300 and less than 8,674,000			2.8
Equal to or greater than 8,674,000			3.0

Examples of the calculation of the Earnout Consideration are set forth on Schedule 2.4 attached hereto.

          (d) Any Earnout Consideration payable hereunder shall be paid, at the option of the Buying Parties, in immediately available funds by wire transfer to Seller’s Account, shares of Parent Common Stock or any combination thereof, provided , that the total number of shares of Parent Common Stock issued to Seller pursuant to this Agreement may not exceed 14.99% of the total number of outstanding shares of Parent Common Stock as of the Closing Date. Any shares of Parent Common Stock issued pursuant to this Section 2.4 are referred to herein as “ Earnout Shares .” Earnout Shares shall be Unrestricted Shares, and shall be valued based on the Thirty Day VWAP as of the Trading Day immediately preceding the issuance of the Earnout Shares.

          (e) Seller acknowledges (i) that as the sole stockholder of Buyer after the Closing, Parent and its designees to the board of directors of Buyer will have the power and right to control all aspects of the business and operations of Buyer, including without limitation, hiring, firing and compensation of employees, the pricing and terms of sale of all products and

services, whether and to what extent to advertise or promote such products and services, the making or not of capital expenditures, the settlement or not of claims and the management of all litigation and disputes with third parties (including suppliers, customers, competitors, employees, consultants and agents); (ii) that Parent and its designees to the board of directors of Buyer, will have the power and the right to determine if Buyer should be sold to a third-party, subject to Section 2.6 below; (iii) that Parent and its designees to the board of directors of Buyer intend to exercise or refrain from exercising such power and right as they may deem appropriate and in the best overall interests of Buyer and its Subsidiaries as a whole taking into account their respective conditions and prospects from time to time (rather than the best interest of Buyer as a separate entity); and (iv) that any of the above actions may materially reduce Seller’s ability to receive any payment pursuant to this Section 2.4 ; provided , that in each case Parent covenants and agrees from the Closing Date through the end of the Measurement Period (A) not to take any action the purpose of which is to reduce or eliminate either the payment obligations provided for by this Section 2.4 or the obligation to release the Closing Shares to Seller , (B) to refrain from any action or omission a purpose of which is to divert sales from Buyer to Parent or another Affiliate of Parent, (C) to maintain the separate legal existence of Buyer, (D) to maintain separate books and records of Buyer such that the parties can accurately calculate Total Net Income, (E) to provide access to such books and records to Seller, its accountants and other representatives during normal business hours and upon reasonable notice and (F) to use commercially reasonable efforts to conduct the Business in substantially the same manner in which the Business was conducted by Seller.

          (f) The Buying Parties shall provide, or cause its independent auditors to provide, Seller with the amount of Total Net Income, Allocated Expenses and Earnout Consideration together with all financial statements and reports prepared by the Buying Parties and their independent auditors supporting such calculation for the Measurement Period (the “ Final Supporting Statements ”). The Final Supporting Statements shall be provided to Seller as soon as practicable after the end of the Measurement Period, but in no event later than one hundred twenty (120) days after the end of the Measurement Period. In addition, the Buying Parties shall provide, or cause their independent auditors to provide Seller, (x) for each Measurement Year in the Measurement Period, the amount of Total Net Income and Allocated Expenses, together with an analysis in reasonable detail supporting such calculation as soon as practicable, but in no event later than one hundred twenty (120) days after the end of each Measurement Period; and (y) for each calendar month of the Measurement Period, an estimate of the amount of the Total Net Income earned to date, as soon as practicable, but in no event later than thirty (30) days after the end of each such calendar month (collectively, the “Interim Supporting Statements”). If after receipt of the Final Supporting Statements, Seller wishes to dispute the amount of Total Net Income, Allocated Expenses or Earnout Consideration, Seller shall notify Parent and Buyer in writing with a reasonable description of the basis for such disagreement, together with its calculation of the Earnout Consideration, within sixty (60) days of receipt of the Supporting Statements (an “ Earnout Dispute Notice ”). If Seller does not provide an Earnout Dispute Notice by the end of such period with respect to the Final Supporting Statements, or notifies Parent that it accepts the calculation, the Buying Parties shall pay Seller the Earnout Consideration within ten (10) days thereafter. If, after receipt of an Interim Supporting Statement, Seller wishes to dispute the amount of Total Net Income (for the purpose of determining whether cumulative Total Net Income has exceeded $275 million), Seller shall notify Parent and Buyer in writing with a reasonable description of the basis for such

disagreement, together with its calculation of cumulative Total Net Income, within sixty (60) days of receipt of such Supporting Statement (a “ Cumulative Total Net Income Dispute Notice ”).

          (g) For a period of thirty (30) days following receipt of an Earnout Dispute Notice or a Cumulative Total Net Income Dispute Notice, Buying Parties and Seller shall in good faith attempt to resolve the dispute. If Buying Parties and Seller are unable to resolve the applicable dispute within thirty (30) days after Seller delivers such notice, either Buying Parties or Seller may, by written notice to the other, demand that such dispute be resolved by a nationally recognized firm of independent public accountants that is independent from Buying Parties and Seller, selected by Buying Parties and reasonably acceptable to Seller (the “ Independent Firm ”). The Independent Firm shall deliver to Buying Parties and Seller a written determination of the Total Net Income, Earnout Consideration and if applicable, the Allocated Expenses for the Measurement Period, (or in the case of a Cumulative Total Net Income Dispute Notice, a written determination of the cumulative Total Net Income), such determination shall be deemed final, binding and conclusive (absent fraud or mathematical error).

          (h) The costs and expenses for the services of the Independent Firm shall be borne by the party or parties whose calculation of Earnout Consideration (or cumulative Total Net Income, as the case may be) is furthest from the determination of Earnout Consideration (or cumulative Total Net Income, as the case may be) made by the Independent Firm.

          (i) For avoidance of doubt, all covenants and obligations of Buyer in this Section 2.4 shall expire at either the end of the Measurement Period if there is no Earnout Consideration, or upon final determination and payment of such amount in accordance with Sections 2.4(f) through 2.4(h) , as applicable.

      2.5 Allocation to Seller of the Purchase Price . On or before the Closing Date, Buyer shall deliver to Seller a schedule setting forth the allocation of consideration among the Purchased Assets consistent with the provisions of Section 1060 of the Code and the Treasury Regulations thereunder (and any similar provision of state and local law, as appropriate) (the “Allocation Schedule”). The Allocation Schedule will be prepared based on appraisals of the Purchased Assets conducted by an independent third party appraiser selected by Buyer and reasonably acceptable to Seller, copies of which will be delivered to Seller together with the Allocation Schedule. To the extent the consideration for the Purchased Assets is adjusted, Buyer shall deliver to Seller, an amended Allocation Schedule to reflect such adjustments. Buyer and Seller shall each timely prepare and file their Tax Returns (including, but not limited to IRS Form 8594 and auxiliary schedules thereto, or any successor form) on the basis of such Allocation Schedule, as it may be amended, and neither Buyer nor Seller shall take a Tax Return position inconsistent with such Allocation Schedule unless required to do so by applicable law.

      2.6 Sale of Buyer . In the event that, during the Measurement Period, (i) Parent sells all or substantially all the capital stock of Buyer, (ii) Buyer disposes of all or substantially all of the assets of Buyer, or (iii) Buyer merges or consolidates with another entity, in which Buyer is not the surviving entity, then the party purchasing such stock or assets, or surviving such merger shall, as a condition precedent to such purchase or merger, assume all obligations of the Buying Parties set forth in Section 2.4 and 2.7; provided, however, that neither Parent nor Buyer may effect any such sale or merger transaction unless the acquirer has the ability (from a financial

perspective) to make any and all payments of Earnout Consideration when and if due. In the event of a sale or merger involving less than all or substantially all the assets of Buyer, and such sale or merger interferes with the Business in a manner reasonably likely to reduce or diminish Earnout Consideration, the parties shall make an equitable adjustment to preserve Seller’s rights in the Earnout Consideration. In the event that, during the Measurement Period, (i) Parent sells all or substantially all the capital stock of Buyer, (ii) Buyer disposes of all or substantially all of the assets of Buyer, or (iii) Buyer merges or consolidates with another entity (other than an Affiliate of Peerless), in which Buyer is not the surviving entity, then the Closing Shares, if not theretofore released from escrow, shall be immediately released to Seller.

      2.7 Good Faith Obligations of Parent . Parent acknowledges that the Earnout Consideration is a significant factor in the decision of Seller to enter into this Agreement, and it shall at all times act in good faith with respect to its obligations set forth herein.

ARTICLE 3: REPRESENTATIONS AND WARRANTIES CONCERNING SELLER AND THE KEY STOCKHOLDERS

          Except as otherwise specifically set forth in the disclosure schedules delivered to the Buying Parties contemporaneously with the execution and delivery of this Agreement (the “ Seller Schedules ”), Seller represents and warrants to the Buying Parties (as to the matters set forth in Sections 3.1 through 3.29 ) as follows:

      3.1 Authority and Capacity . Seller possesses all requisite legal right, power, authority and capacity to execute, deliver and perform this Agreement, and each other agreement, instrument and document to be executed and delivered by Seller, and consummate the transactions contemplated herein and therein. The execution, delivery and performance of this Agreement has been duly authorized by all requisite corporate action of Seller.

      3.2 Execution and Delivery; Enforceability . This Agreement has been, and each other document, instrument or agreement to be executed and delivered by Seller in connection herewith will upon such delivery be, duly executed and delivered by Seller, and constitutes, or will upon such delivery constitute, the legal, valid and binding obligation of Seller, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights or by principles of equity (collectively, the “ Enforceability Exceptions ”). Seller is not a party to, subject to, or bound by any Order of any Governmental Authority, or any agreement which would prevent (a) the execution or delivery of this Agreement by Seller, or (b) the sale of Purchased Assets to Buyer.

      3.3 Noncontravention .

          (a) Except as set forth on Schedule 3.3 of the Seller Schedules: (i) Seller is not required to submit any notice, report or other filing with any Governmental Authority in connection with its execution, delivery or performance of this Agreement or any other document, instrument or agreement to be executed and delivered by Seller, in connection herewith, (ii) such execution, delivery and performance will not result in a breach or violation of, or constitute a

default (or an event that, with notice or lapse of time, or both, would constitute a default) under, or give rise to a right of any party to accelerate, amend, modify or terminate, or require payments under, or require the authorization, consent or approval from any third party or result in the creation of any Lien upon the Purchased Assets pursuant to any agreement to which Seller is a party, and (iii) no consent, approval or authorization of any Governmental Authority or any other Person is required to be obtained by Seller in connection with its execution, delivery and performance of this Agreement or any other document, instrument or agreement to be executed and delivered by Seller, in connection herewith or the consummation of the transactions contemplated hereby or thereby.

          (b) The execution and delivery by Seller of this Agreement and any other document, instrument or agreement to be executed and delivered by Seller in connection herewith and the consummation by Seller of the transactions contemplated hereby and thereby will not (i) conflict with or violate the Organizational Documents of Seller, or (ii) conflict with or violate any Laws applicable to Seller or the operation of the Business, as applicable, or by which any of its properties or assets, including, without limitation the Purchased Assets, are bound or are subject.

      3.4 Legal Proceedings . There is no Order and no action, suit, arbitration, proceeding, investigation or claim of any kind whatsoever, at Law or in equity, pending or, to Seller’s Knowledge, threatened against Seller, which would give a third party the right to enjoin or rescind the transactions contemplated by this Agreement or otherwise prevent Seller from complying with the terms and provisions of this Agreement.

      3.5 Organization and Good Standing . Seller is a corporation organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated. Seller has all requisite power and authority to own and lease its assets and to operate the Business as the same are now being owned, leased and operated. Seller is duly qualified or licensed to do business as a foreign corporation or foreign entity in, and is in good corporate standing in, each jurisdiction in which the nature of the Business or its ownership of its properties requires it to be so qualified or licensed, except where failure to be so qualified or licensed would not reasonably be expected to result in a Material Adverse Effect. Schedule 3.5 of the Seller Schedules sets forth a true and complete list of (a) all jurisdictions in which Seller is qualified or licensed to do business as a foreign corporation or foreign entity, and (b) all powers of attorney granted by Seller to any third party that are currently in effect. All necessary corporate action on the part of Seller with respect to the consummation of the transactions contemplated hereby has been taken. Seller has delivered to Buyer a true, complete and correct copy of its Organizational Documents, each as currently in effect and reflecting any and all amendments thereto, for Seller. Each of the Organizational Documents of Seller is in full force and effect, and Seller is not in violation of any provision thereof.

      3.6 Other Ventures . Immediately after Closing, Seller will not own of record or beneficially any equity interest in any other Person engaged directly or indirectly in the Business (other than up to 1% of the outstanding shares of any publicly traded entity), whether as a partner, member or record or beneficial owner of any partnership, limited liability company, foreign entity, joint venture or similar entity, arrangement or agreement.

      3.7 Financial Statements . Attached to Schedule 3.7 of the Seller Schedules are true and complete copies of (i) the audited financial statements of Seller as of and for the fiscal year ended December 31, 2005, (ii) the unaudited financial statements of Seller as of and for the fiscal year ended December 31, 2006 and (iii) the unaudited financial statements of Seller as of and for the fiscal year ended December 31, 2007 (collectively, the “Seller Financial Statements”). The Seller Financial Statements have been prepared in accordance with GAAP and present fairly, in all material respects, the assets, liabilities and financial position of Seller as of the dates indicated and the results of operations for the periods then ended, except, with respect to the interim financial statements, (A) normal year end adjustments or adjustments which are not material, individually or in the aggregate, and (B) the absence of disclosures normally made in footnotes. The Seller Financial Statements are true, correct, and complete in all material respects.

      3.8 Absence of Undisclosed Liabilities . Seller’s balance sheet, dated as of December 31, 2007, is herein referred to as the “Acquisition Balance Sheet.” Seller does not have any debt, liabilities or obligations whatsoever (whether or not accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due and regardless of when asserted) arising out of transactions entered into prior to the Closing Date, any action or inaction on the part of Seller prior to the Closing Date, or any state of facts existing prior to the Closing Date other than those: (i) specifically reflected on and fully reserved against in the Acquisition Balance Sheet; or (ii) incurred in the ordinary course of business since the date thereof.

      3.9 Absence of Certain Changes or Events . Except as set forth on Schedule 3.9 of the Seller Schedule, since January 1, 2006: (i) Seller has conducted the Business only in the ordinary course consistent with past practice and has used commercially reasonable efforts to keep available the services of Seller’s employees and preserve its relationship with suppliers and customers of the Business; and (ii) there has not been any event, occurrence, circumstance or development that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, since January 1, 2006, except as set forth in any disclosure schedule, including, without limitation, Schedule 3.9 of the Seller Schedules:

          (a) Seller has not incurred any liabilities, other than liabilities incurred in the ordinary course of business consistent with past practice, or discharged or satisfied any Lien, or paid any liabilities, other than in the ordinary course of business consistent with past practice, or failed to pay or discharge when due any liabilities of which the failure to pay or discharge has had or is reasonably likely to have a Material Adverse Effect;

          (b) there has not been any change in the Tax reporting or accounting policies or practices of the Business, including practices with respect to (i) depreciation or amortization polices or rates, or (ii) the payment of accounts payable or the collection of accounts receivable and Seller has not settled or compromised any Tax liability or made or rescinded any Tax election;

          (c) Seller has not (i) created or incurred any Indebtedness other than pursuant to the agreements, notes and instruments described on Schedule 3.22 of the Seller Schedules, (ii) assumed, guaranteed, or endorsed the Indebtedness of any other Person, or (iii) canceled any

debt owed to it or released any claim possessed by it, other than in the ordinary course of business;

          (d) Seller has not suffered any theft, damage, destruction or loss (without regard to any insurance) of or to any tangible asset of Seller used in the Business which had or may have a Material Adverse Effect on the Business, or its operations, assets, or properties used in the Business, including an item or items having a value in excess of Twenty Five Thousand Dollars ($25,000) individually or Fifty Thousand Dollars ($50,000) in the aggregate;

          (e) Seller has not (i) made, granted, or committed to make or grant: (A) any bonus or any wage, salary or compensation increase to any (y) director or officer, or (z) employee (other than in the ordinary course of business consistent with past practice), independent contractor or consultant, or (B) an increase of any benefit provided under any Company Plan, (ii) adopted, amended or terminated any employee benefit plan, program or arrangement, or (iii) entered into, amended or terminated any employment agreement, deferred compensation arrangement, collective bargaining agreement or other similar arrangement with any of its current or prospective directors, officers, employees or independent contractors, consultants;

          (f) Seller has not sold, assigned, transferred, licensed, mortgaged, pledged or subjected to any Lien, or has committed to sell, assign, transfer, license, mortgage, pledge or subject to any Lien, any tangible or intangible assets which would have been included in the Purchased Assets, except for sales of inventory in the ordinary course of business;

          (g) Seller has not purchased or leased, or has committed to purchase or lease, any asset for an amount in excess of Twenty Five Thousand Dollars ($25,000) alone or in the aggregate, except purchases of inventory and supplies in the ordinary course of business, consistent with past practice;

          (h) Seller has not made or authorized any capital expenditures or commitment for capital expenditures in an amount more than Twenty Five Thousand Dollars ($25,000) individually or Fifty Thousand Dollars ($50,000) in the aggregate for additions to properties, plant, equipment, or intangible capital assets or aggregate capital expenditures and commitments, other than those capital expenditures or commitments therefore made or authorized in the ordinary course of business;

          (i) Seller has not engaged in any transactions with, or entered into any Contract with, any Affiliates of Seller, except to the extent required by Law or any then existing agreements;

          (j) Seller has not made any loans, advances or capital contributions to, or investments in, any Person or paid any fees or expenses to any stockholder, or any director, officer, partner, or Affiliate of Seller, except with respect to payments to, and reimbursement of, fees and expenses of employees, directors and officers of Seller in the ordinary course of business;

          (k) Seller has not amended, canceled, terminated, relinquished, waived or released any Contract or right, except in the ordinary course of business or which would not be material to Seller taken as a whole;

          (l) Seller has not granted any license or sublicense of any rights under or with respect to any Seller IP, other than in the ordinary course of business;

          (m) Seller has not instituted or settled any action, claim, suit or proceeding that involved more than Ten Thousand Dollars ($10,000);

          (n) Seller has not entered into any transaction which could reasonably be expected to have a Material Adverse Effect; or

          (o) Seller has not agreed to take any of the actions described in sub-clauses (a) through (n) above.

      3.10 Taxes (i) .

          (a) All Tax Returns required to be filed in connection with the operations, income or assets of Seller in all jurisdictions in which such Tax Returns are required to be filed (after giving effect to any duly obtained extensions of time in which to make such filings) have been duly and timely filed and are true and complete in all material respects and all such Taxes have been paid.

          (b) Except as set forth on Schedule 3.10(b) of the Seller Schedules, no deficiency, delinquency or default for any Taxes relating to the Seller or Seller’s receipts, income, sales, transactions or other business activities has been claimed, proposed or assessed against Seller, nor has Seller received notice of any such deficiency, delinquency or default; and there is no audit, examination, investigation, claim, assessment, action, suit, proceeding, lien or encumbrance in effect, pending or, to the Knowledge of Seller, proposed by any tax authority with respect to any such Taxes or with respect to any Tax Return of Seller.

          (c) Seller has properly and timely withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any Person and has complied with the rules and regulations relating to the withholding and remittance of Taxes.

          (d) No extension or waiver of any statute of limitations has been requested of or granted by Seller with respect to any Tax for any period, and no extension or waiver of time within which to file any Tax Return has been requested by or granted to Seller.

          (e) No claim has been made by any Taxing Authority in a jurisdiction where Seller does not file Tax Returns that it is or may be subject to taxation by, or required to file any Tax Return in, that jurisdiction.

          (f) Seller has not executed or entered into any written agreement with, or obtained or applied for any written consents or written clearances or any other Tax rulings from, nor has there been any written agreement executed or entered into on behalf of any of them with, any Taxing Authority, relating to material Taxes, including any IRS private letter rulings or

comparable rulings of any Taxing Authority and closing agreements pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of any Law.

          (g) Seller has not been a member of an affiliated group filing a consolidated federal income Tax Return, or incurred any liability for the Taxes of any Person under Treasury Regulation §1.1502-6; under any provision of state, local or foreign law similar to Treasury Regulation §1.1502-6; as a transferee or successor, by contract, or otherwise.

          (h) Seller is not obligated to make any payments, nor is a party to any agreement that under any circumstances could obligate Seller to make any payments, that are not or would not be deductible under IRC § 162(n) or IRC §280G.

          (i) None of the assets of Seller consists of or secures any indebtedness the interest on which is exempt from Income Tax; is “tax-exempt use property” within the meaning of IRC §168(h); or will as of the Closing Date be subject to any “safe harbor lease” within the meaning of former Section 168(f)(8) of the Internal Revenue Code of 1954.

          (j) Seller is an accrual method taxpayer.

          (k) Schedule 3.10(k) lists all section 197 intangibles (as defined in Code Section 197) held or used by Seller at any time during the period beginning July 25, 1991 and ending August 10, 1993 (“ Schedule 3.10 Intangibles ”). The user of all Schedule 3.10 Intangibles will change on the Closing Date as part of the transaction contemplated hereby. None of the Schedule 3.10 Intangibles were held or used by any person on or before July 25, 1991. Seller is not related to Buyer within the meaning of Code Section 197(f)(9).

          (l) Seller is not a foreign person within the meaning of Section 1445 of the Code.

      3.11 Employees . Except as set forth in Schedule 3.11 of the Seller Schedules, there are no pending or, to Seller’s Knowledge, threatened controversies, grievances or claims by any employee or former employee of Seller or the Business with respect to his or her employment, termination of employment or compensation and benefits. Except as set forth in Schedule 3.11 of the Seller Schedules, there has not been, since January 1, 2006, any controversies, grievances or claims by any employee or former employee of the Business in writing with respect to his or her employment, termination of employment or any compensation and benefits. Since January 1, 2004, Seller has not been a party to, or bound by, any collective bargaining agreement with any labor organization. Since January 1, 2004, Seller has not experienced any strike, work stoppage, lock-up, slow-down or other material labor dispute or any attempt by organized labor or employees to cause Seller to comply with or conform to demands of organized labor relating to its employees or recognize any union or collective bargaining units. Schedule 3.11 of the Seller Schedules sets forth a true and complete list of all employees of Seller, including date of hire, years of service, compensation and status. No labor strike or stoppage is pending or, to Seller’s Knowledge, threatened against Seller. Seller is in compliance with all Laws relating to the employment of labor, including all such Laws relating to wages, hours, the WARN Act (except with respect to the transaction contemplated by this Agreement), collective bargaining, discrimination, civil rights, safety and health, workers’ compensation and the collection and

payment of withholding or social security Taxes and any similar Tax, where failure of compliance would have a Material Adverse Effect. There has been no “mass layoff” or “plant closing” as defined by the WARN Act with respect to Seller since January 1, 2006.

      3.12 Employee Benefit Plans and Other Compensation Arrangements .

          (a) Set forth on Schedule 3.12(a) of the Seller Schedules is a true and complete list of all Company Plans. Correct and complete copies of the following documents with respect to each Company Plan have been made available to Buyer, as applicable: (i) plans and related trust documents, insurance contracts or other funding arrangements and all amendments thereto; (ii) the Forms 5500 annual reports and all schedules thereto filed for the three most recent plan years; (iii) the most recent valuation report; (iv) the most recent IRS determination letter and the three most recent annual nondiscrimination testing results for each Company Plan intended to meet the requirements of Section 401(a) of the Code ; (v) the most recent summary plan description and subsequent summaries of material modifications; (vi) the most recent audited financial statements; and (vii) written summaries of all non-written Plans.

          (b) Except as set forth on Schedule 3.12(b) of the Seller Schedules:

          (i) Neither Seller has nor any ERISA Affiliate has, at any time during the six (6) years preceding the date hereof, sponsored, maintained, been liable under, terminated, participated in, been required to contribute to, or incurred withdrawal liability with respect of, a “multiemployer plan” within the meaning of Sections 3(37) or 4001(a)(3) of ERISA) or a plan subject to Section 412 of the Code or Section 302 or Title IV of ERISA and no Seller nor any ERISA Affiliate has any accumulated funding deficiency (within the meaning of Section 302(a)(2) of ERISA and Section 412(a) the Code), whether or not waived, with respect to any such plan;

          (ii) each of the Company Plans and any related trusts currently satisfy in all material respects, and for all prior periods have satisfied in all material respects, in form and operation, all requirements for any Tax-favored treatment intended for such plan or trust or applicable to plans or trusts of its type, including, as applicable, requirements under Sections 105, 106, 125, 401(a), 401(k) and 501 of the Code, and no event, transaction or condition has occurred or exists that is reasonably likely to result in the loss or limitation of such Tax-favored treatment;

          (iii) neither Seller nor any employee of Seller (i) who is a “disqualified person” (as defined in Section 4975 of the Code), has entered into any “prohibited transaction” (as defined in Section 4975 of the Code or Section 406 of ERISA) for which a statutory or administrative exemption does not exist with respect to any Company Plan, or (ii) that is a fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary duty in connection with the administration or investment of the assets of the Company Plans;

          (iv) all of the Company Plans have been operated in compliance in all material respects with their respective terms and all Laws, and all contributions required under the terms of the Company Plans or applicable Law have been timely made;

          (v) Seller has no liability of any nature with respect to any Plan other than for contributions, payments or benefits due in the ordinary course under the current Company Plans, none of which are overdue;

          (vi) neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, will now or at any time in the future: (i) result in any payment becoming due to any director, officer, employee, former employee, independent contractor, consultant or agent of Seller from Seller under any Company Plan or otherwise; (ii) increase any benefits otherwise payable under any Company Plan; (iii) result in any acceleration of the time of payment or vesting of any such benefits; or (iv) give rise to an obligation to pay any amount by Seller or Buyer (or any Affiliate of Buyer) or any Company Plan that would not be deductible by Seller or Buyer (or Affiliates of Buyer) by reason of Section 280G of the Code and that would subject the recipient of any such amount to the excise Tax imposed under Section 4999 of the Code;

          (vii) none of the Company Plans provide life, medical, dental, vision or other welfare benefits to Persons who are not current employees of Seller or their dependents or for periods longer than one month after termination of employment, except as required by Part 6 of Subtitle B of Title I of ERISA or any similar state Law;

          (viii) Seller can terminate each Company Plan without further material liability to Seller (except for benefits accrued through the date of termination); and

          (ix) each Company Plan which is a “nonqualified deferred compensation plan” within the meaning of Code Section 409A(d)(1) complies in form and operation with the provisions of Code Section 409A and the regulations promulgated thereunder.

      3.13 Environmental Matters . Seller has not received any notice, demand letter or claim (and is not aware of any facts that would form a reasonable basis for any claim), or entered into any negotiations or agreements with any other Person, and Seller is not the subject of any investigation by any governmental or regulatory authority, domestic or foreign, relating to any material or potentially material liability or remedial action under any Environmental Laws. There are no pending or, to Seller’s Knowledge, threatened, actions, suits or proceedings against Seller or any of its properties, assets or operations asserting any such material liability or seeking any material remedial action in connection with any Environmental Laws. The Business is being and has been conducted in compliance with all Environmental Laws, (b) the real property leased, occupied by or operated by Seller at any time (including soil, groundwater or surface water on, under or, to Seller’s Knowledge, adjacent to the properties and buildings thereon) (the “ Affected Property ”) do not contain any Regulated Substance other than as permitted under applicable Environmental Laws, (c) Seller has all permits, licenses and other approvals and authorizations required under applicable Environmental Laws for the operation of the Business, (d) Seller has not received any notice from any Governmental Authority that Seller may be a potentially responsible party in connection with any waste disposal site or facility used, directly or indirectly, by or otherwise related to Seller, (e) no reports have been filed, or have been required to be filed, by Seller concerning the release of any Regulated Substance or the violation of any

Environmental Law on or at the properties used at any time in the business of Seller, (f) no Regulated Substance has been disposed of, transferred, released or transported from the Affected Property in a manner which violated any Environmental Law, (g) there have been no environmental investigations, studies, audits, tests, reviews, or other analyses conducted by or which are in the possession of Seller relating to the Business and (h) Seller has not incurred any liabilities (fixed or contingent) relating to any suit, settlement, judgment or claim asserted or arising under any Environmental Law. The transactions contemplated hereby do not require any filing or registration with, notice to, or approval or consent by, any Governmental Authority under any Environmental Law.

      3.14 Permits; Compliance with Laws . Except as set forth on Schedule 3.14(a) of the Seller Schedules, the Business has at all times prior to the date hereof been operated in compliance with all applicable Laws, and Seller possesses and is in compliance with all Permits required to operate the Business at the current levels of production. Except as set forth on Schedule 3.14(b) of the Seller Schedules, since January 1, 2005, Seller has not received any written notice from any Person alleging any noncompliance with any applicable Law or Permit. Each Permit is valid and in full force and effect, and none of the Permits will lapse, terminate, expire or otherwise be impaired (as they related to the right or authorization of Seller) as a result of the performance of this Agreement by Seller, or the consummation of the transactions contemplated hereby. Each Permit is listed on Schedule 3.14(c) of the Seller Schedules. There are no inquiries or investigations with respect to the violation of any Law by Seller in connection with the operation of the Business currently being conducted by any Governmental Authority.

      3.15 Real and Personal Properties .

          (a) Real Property .

          (i) Seller has never owned any real property.

          (ii) Schedule 3.15(a) of the Seller Schedules identifies the parcels of Leased Real Property and lists the leases relating to such Leased Real Property (the “ Leases ”). Seller has a valid and subsisting leasehold interest in the Leased Real Property. With respect to each Lease: (A) such Lease is in full force and effect and all rents, required deposits and additional rents due to date pursuant to each Lease have been paid in full; (B) there is no existing default by Seller or, to Seller’s Knowledge, by the lessor of such Lease; (C) Seller has not received any written notice that it is in default under any of the Leases; and (D) there exists no event, occurrence, condition or act (including the transactions contemplated by this Agreement), that with the giving of notice, the lapse of time or the happening of any further event or condition, would constitute a default by Seller under any Lease. The Leases delivered to Buyer are all of the leases and rental agreements, together with all amendments, that constitute the Leased Real Property and no Leases have been amended, modified or terminated since such delivery.

          (iii) Neither the whole nor any portion of the Leased Real Property has been condemned, requisitioned, or otherwise taken by any public authority, and no written notice of any such condemnation, requisition, or taking has been received by

Seller. Seller has not received any written notice from a Governmental Authority or any lessor of Leaser Real Property that there are any public improvements proposed or in progress that will result in special assessments against or otherwise adversely affect any of the Leased Real Property.

          (iv) The zoning of each parcel of Leased Real Property permits the existing improvements and uses of Seller (including any variances, conditional use permits and other special use restrictions).

          (v) (i) Seller’s leased portion of each of the buildings, structures and improvements situated on the Leased Real Property is in good condition and repair, reasonable wear and tear excepted, (ii) none of the buildings, structures and improvements situated on the Leased Real Property, during the period of time during which such Leased Real Property has been leased by Seller, has been damaged by fire or other casualty except for such damage as has been fully repaired and restored prior to the date of this Agreement, and (iii) each of the buildings, structures and improvements situated on the Leased Real Property are located within the required set back, side yard and other conditions and requirements imposed by applicable Law with respect to such buildings, structures and improvements.

          (vi) The Leased Real Property is supplied with utilities (including without limitation water, sewage, disposal, electricity, gas and telephone) and other services necessary for the operation of such Leased Real Property as currently operated.

          (vii) Other than Seller, no Person will be leasing, using or occupying any portion of the land, property, structures, fixtures and improvements covered by the Leases as of the Closing Date.

          (viii) Seller has the right to quiet enjoyment of each parcel of the Leased Real Property for the full term of the applicable Lease (and any renewal option related thereto), and Buyer will continue to have such rights upon consummation of the transactions contemplated hereby conditioned on consent of the landlord and on Buyer after the Closing Date continuing to fulfill all the terms of each said Lease, and the leasehold or other interest of Seller in such Leased Real Property is not subject to any Lien.

          (b) Personal Property . Schedule 3.15(b) of the Seller Schedules lists each material item of machinery, equipment, furniture, vehicles or other personal property owned by Seller having an original cost of $2,000 or more. Except as set forth on Schedule 3.15(b) , the assets and properties owned or leased by Seller constitute all of the material assets and properties used by Seller in the operation of its business (including all books, records, computers and computer programs and data processing systems) and are in good and serviceable condition (subject, in each case, to normal wear and tear). Except for the personal property leases indicated on Schedule 3.15(b) of the Seller Schedules, no Person, other than Seller, owns or utilizes any material equipment used by Seller in the operation of the Business.

      3.16 Intellectual Property .

          (a) Owned Intellectual Property Rights . Schedule 3.16(a) of the Seller Schedules sets forth a true and complete list of all Intellectual Property Rights owned (in whole or in part) by Seller (such owned Intellectual Property Rights collectively, the “ Seller Owned IP ”) including: (i) for each registered Trademark and Trademark application, the registration number or the Trademark application serial number, as applicable, and the class of goods covered; and (ii) for each Copyright, the registration number or the Copyright application number, as applicable; provided that Schedule 3.16(a) of the Seller Schedules is not required to set forth trade secrets, know-how, goodwill and other Intellectual Property Rights that may constitute Seller Owned IP but are not reducible to schedule form.

          (b) Licensed Intellectual Property Rights . Schedule 3.16(b) of the Seller Schedules sets forth a list of all Intellectual Property Rights, other than Seller Owned IP, licensed to or used by Seller (the “ Seller Licensed IP ”). Seller has made available to Buyer true and complete copies of all licenses, license agreements and other Contracts governing Seller Licensed IP (the “ Seller Licenses ”) as they are maintained by Seller in its ordinary course of business.

          (c) Licensed-Out Rights . Schedule 3.16(c) of the Seller Schedules contains a true and complete list of all licenses, license agreements or other Contracts in which Seller has licensed or granted rights to any Seller Owned IP or Seller Licensed IP to any third parties (collectively, “ Third-Party Licenses ”) and, with respect to each Third-Party License, all Intellectual Property Rights licensed thereby. Except as described in Schedule 3.16(c) of the Seller Schedules, (i) Seller has not sold, transferred, assigned, licensed, sub-licensed, restricted or encumbered any Seller Owned IP or Seller Licensed IP, whether orally or in writing, and (ii) no licensing fees, royalties or payments are due or payable by Seller in connection with Seller Owned IP or Seller Licensed IP, other than maintenance fees. Seller made available to Buyer true and complete copies of all Third Party Licenses.

          (d) No Infringement / Misappropriation of Third Party Rights . Seller has not interfered with, infringed upon, violated or misappropriated any Intellectual Property Rights of any third party. To the Knowledge of Seller, no respective current or former Representative of Seller has interfered with, infringed upon, violated or misappropriated or is interfering with, infringing upon, violating or misappropriating or has made or is making unlawful use of any Intellectual Property Rights of any Person for the benefit of Seller. Except as described on Schedule 3.16(d) of the Seller Schedules, Seller has not received any charge, complaint, claim, demand, notice or other communication alleging any such interference, infringement, misappropriation or violation (including any demand or claim that Seller must license or refrain from using any Intellectual Property Rights of any third party). To the Knowledge of Seller, no third party (including its current or former Representatives) has interfered with, infringed upon or misappropriated any Intellectual Property Rights of Seller.

          (e) No Encumbrances on Seller Rights . Except as set forth on Schedule 3.16(e) of the Seller Schedules:

          (i) Seller owns all right, title and interest in and to, or has a valid, binding, unexpired and subsisting right and license to use, all of the Seller Owned IP or Seller Licensed IP (collectively, “ Seller IP ”) and to make, have made, use, sell, import and export, distribute, have distributed, publicly perform, publicly display, reproduce and prepare derivative works of the Seller IP;

          (ii) the rights of Seller to the Seller IP are free and clear of all Encumbrances;

          (iii) all registrations with and applications to Governmental Authorities in respect of the Seller IP are valid, subsisting and in full force and effect and Seller has taken all action required to maintain their validity and effectiveness;

          (iv) there are no restrictions (other than those which have been complied with or waived) on the direct or indirect transfer of any Third Party Licenses, or any interest therein;

          (v) Seller has delivered to Buyer prior to the execution of this Agreement documentation with respect to any invention, process, design, Software or other know-how or trade secret included in the Intellectual Property Rights, which documentation is accurate in all material respects and reasonably sufficient in detail and content to identify and explain such invention, process, design, Software or other know-how or trade secret and to facilitate its use and further improvement and development without reliance on the special knowledge or memory of any individual; and

          (vi) Seller has taken reasonable measures to protect the secrecy, confidentiality and value of their Proprietary Information.

          (f) No Default; No Required Approvals or Consents . Except as set forth on Schedule 3.16(f) of the Seller Schedules:

          (i) Seller and all third parties are, and upon the consummation of the purchase and other transactions contemplated by this Agreement will be, in compliance in all material respects with the Third Party Licenses and Seller Licenses (collectively, the “ Licenses ”);

          (ii) the rights of Seller or any successors to the respective Seller IP will not be affected by the execution, delivery or performance of this Agreement or the consummation of the purchase or other transactions contemplated by this Agreement;

          (iii) Seller is not, and as a result of the execution, delivery or performance of this Agreement or the consummation of the purchase or other transactions contemplated by this Agreement will not be, in material Breach of any Licenses, and Seller has not received any notice or other communication to the contrary;

          (iv) no approval or consent of any Person is needed so that the interest of Buyer in the Seller IP will continue to be in full force and effect upon the consummation of the purchase and other transactions contemplated by this Agreement;

          (v) Seller has not entered into any Contract under which it is restricted from selling, licensing or otherwise distributing any of its Intellectual Property Rights, technology or products to, or providing services to, customers or potential customers or any class of customers, in any geographic area, during any period of time or in any segment of any market; and

          (vi) Seller is not subject to any Order, Contract or Law pertaining to the Seller IP which would be Breached by the consummation of the purchase or other transactions contemplated by this Agreement.

          (g) No Claims or Actions . There are no claims or written demands of any Person, including any interferences, oppositions, cancellations or other contested proceedings, nor, to Seller’s Knowledge, is there any valid basis for the same, which challenge the rights of Seller in respect of any Seller IP.

          (h) Confidential Treatment . All Intellectual Property Rights of Seller for which confidentiality is appropriate has been maintained in confidence in accordance with protection procedures believed by Seller to be adequate for protection and customarily used in the industry to protect rights of like importance or in accordance with the applicable Third Party Licenses, as the case may be. All commercially reasonable measures have been taken to maintain the confidentiality of the Proprietary Information of Seller, and of all other information the value of which to Seller is contingent upon maintenance of the confidentiality thereof.

          (i) Assignment of Inventions . Except as described in Schedule 3.16(i) of the Seller Schedules, all former and current Representatives who have contributed in any material way to or participated in any material way in the conception and development of the Seller Owned IP, or who have had access to the Proprietary Information of Seller, have executed and delivered to Seller an agreement suitable to vest ownership rights to any inventions, discoveries, innovations, improvements, creations, developments, results and works in Seller and have entered into an agreement for maintaining the confidential information of Seller, true and complete copies of which have heretofore been delivered to Buyer and all of which are now in full force and effect and enforceable in accordance with their respective terms. No former or current employees of Seller has filed, asserted in writing or, to the Knowledge of Seller, threatened in writing any claim against Seller in connection with such employee’s involvement in the conception and development of any