EMPLOYMENT AGREEMENT

Exhibit 10.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (“ Agreement ”) is made and entered into as of February 26, 2008 (the “ Effective Date ”), by and among Peerless Systems Corporation (“ Peerless ”), T1 Delaware Corporation, a Delaware corporation and wholly owned subsidiary of Peerless (the “ Company ”), and Andrew Lombard (“ Executive ”).

     WHEREAS, the Company desires to employ Executive, and Executive is willing to be employed by the Company, in each case on the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, Peerless, the Company and Executive agree as follows:

     The term of this Agreement shall commence on the Effective Date, and shall continue as long as the Executive is employed by the Company.

     As of the Effective Date, Executive shall be employed by the Company as its President. Executive shall report directly to the Chief Executive Officer of the Company, and at any time there is no Chief Executive Officer, to the Board of Directors of the Company (the “ Board ”).

     3.1 Base Compensation .

	(a)		Executive shall be paid a salary at the annual rate of $225,000 (the “ Base Compensation ”) during the Term, in accordance with the Company’s normal payroll practices. The Base Compensation shall be subject to a potential increase of $25,000 at the end of each fiscal quarter during the fiscal year ending January 31, 2009, based on the achievement of the Performance Milestones set forth on Exhibit B hereto and otherwise subject to the terms and conditions listed therein (the “Performance Milestones”).
	(b)		The determination as to achievement of Performance Milestones and any increase in the base salary at the conclusion of each quarter shall be made solely and in good faith by the Chief Executive Officer of the Company, and at any time there is no Chief Executive Officer, by the Board of Directors of the Company (the “ Board ”). Any such determination further requires the formal approval of the Compensation Committee and Board of Directors of Peerless. The Executive shall be notified of the determination in writing within thirty (30) business days subsequent to the last day of the previous fiscal quarter.

     3.2 Incentive Compensation .

(a) In addition to the Base Compensation set forth in Section 3.1 above, Executive shall be eligible for bonus compensation of up to $25,000 per quarter during the fiscal year ending January 31, 2009 based on the achievement of the Performance Milestones.

(b) At the end of any fiscal year of employment ending thirty (30) days subsequent to the last day of that fiscal year the Company shall set new Performance Milestones and bonus amounts for the subsequent fiscal year after consultation with the Executive. The final determination of the new Performance Milestones, bonus amounts, qualification criteria, and payment terms shall be at the sole and good faith discretion of the Chief Executive Officer of the Company, and at any time there is no Chief Executive Officer, by the Board of Directors of the Company (the “ Board ”). Any such determination further requires the formal approval of the Compensation Committee and Board of Directors of Peerless. The Executive shall be notified of the determination in writing within sixty (60) business days subsequent to the last day of the previous fiscal year.

(c) Any quarterly bonus payable during the first year of this Agreement hereunder shall be paid as herein defined during the first year of the Agreement after determination by the Chief Executive Officer of the Company, and at any time there is no Chief Executive Officer, by the Board of Directors of the Company (the “ Board ”) that the Performance Milestones were achieved and that a bonus is payable. Any such determination further requires the formal approval of the Compensation Committee and Board of Directors of Peerless. The Executive shall be notified of the determination in writing within thirty (30) business days subsequent to the last day of the previous fiscal quarter.

(d) Any bonus payable during subsequent years shall be paid after determination by the Chief Executive Officer of the Company, and at any time there is no Chief Executive Officer, by the Board of Directors of the Company (the “Board”) that the assigned Performance Milestones were achieved and that a bonus is payable. Any such determination further requires the formal approval of the Compensation Committee and Board of Directors of Peerless. The Executive shall be notified of the determination in writing within thirty (30) business days subsequent to the last day of the specific bonus period.

     3.3 Equity .

     (a) The Compensation Committee of the Board of Directors of Peerless has granted Executive Incentive Stock Options to purchase 200,000 shares of common stock of Peerless under the terms and conditions set forth in that certain Stock Option Agreement executed by Peerless and Executive on January 10, 2008, which shares are registered on a Form S-8 Registration Statement filed with the Securities and Exchange Commission on November 2, 2005. The Stock Option Agreement is incorporated herein by reference.

     (b) Concurrently with the execution of this Agreement, Executive shall have the right to purchase at Fair Market Value (FMV) restricted shares of common stock of the Company equal to 8% of the total outstanding shares of capital stock of the Company on the date hereof, under the terms and conditions set forth in that certain Restricted Stock and Repurchase Agreement executed by the Company and Executive concurrently with this Agreement. Fair Market Value (FMV) shall be determined and approved by the Compensation Committee and Board of Directors of Peerless. The Executive shall be notified of the FMV, in writing, within ten (10) business days subsequent to the first Board Meeting following the effective date of this Agreement. Executive shall have the subsequent thirty (30) days from this written notice to present his check to the Company for the purchase of the stock.

The Restricted Stock Purchase Agreement dated February 26, 2008 is incorporated herein by reference.

     3.4 Benefits. Executive shall be entitled to participate in any 401(k) and other employee plans and benefits of Peerless, including without limitation, medical, dental, vision, disability and life insurance plans, in accordance with the terms of such plans or policies as they may be in effect from time to time, on the same basis as other executive-level employees of Peerless. Additionally, Peerless shall obtain and maintain one or more life insurance policies of the type of policy as decided by the Company and Peerless on the life of the Executive with an aggregate death benefit of $225,000, with beneficiaries as designated by the Executive. Executive shall submit to any application process, including medical testing, requested by Peerless or any applicable insurance provider. Should Executive not qualify for any such policies by reason of any medical condition then the Company and Peerless shall have no further obligation to provide such insurance to the Executive.

     3.5 Method of Payment . The monetary compensation payable and any benefits due to Executive hereunder may be paid or provided in whole or in part, from time to time, by the Company and/or its respective parents, subsidiaries and affiliates. Peerless shall be jointly and severally liable hereunder for payment of Executive’s compensation, (including, but not limited to, bonuses and severance) as and when due.

     3.6 Vacation . In addition to national and state designated holidays observed by the Company, Executive shall be entitled to four (4) weeks vacation per calendar year, with full pay to Executive, which shall accrue ratably during each calendar year of employment. Executive’s vacation shall be taken and expire in accordance with and shall be subject to the terms of the plans and policies in effect generally as to other senior executives of the Company.

     3.7 Business Expenses . Executive shall be entitled to reimbursement of reasonable business expenses in accordance with Company policies, as they may be in effect from time to time. The submission of such business expenses to the CEO or the Board is expected within two (2) working weeks of incurrence.

     4.1 Executive Roles .

Executive shall perform all services appropriate to and consistent with his position as President and any other appropriate services, such as Corporate Business Development activities for Peerless, as may be assigned by the Chief Executive Officer of the Company from time to time, and in the absence of a Chief Executive Officer, by the Board of Directors of the company and/or Peerless. Executive, in such capacities, shall faithfully perform for the Company the duties of said office. Executive shall devote 100% (except as provided below) of his time and effort during the normal work week to the performance of his duties hereunder, and shall perform his duties with the good faith and integrity and shall promote the interests of the Company at all times.

     4.2 Other Activity .

(a) During Executive’s employment, the Executive may continue current investment and/or business and/or charitable activities provided they do not require in-person engagement without the Chief Executive Officer’s prior consent, whether or not for pecuniary advantage, and so long as such other activities (A) do not interfere with the business of the Company or any Related Entity (B) do not materially interfere with the performance of his duties to the Company, (C) are not competitive with the Company or any Related Entity and (D) do not create a conflict of interest with the Company or any Related Entity. “Related Entity” means Peerless and all entities that are controlled affiliates of Peerless.

However, in the event that Executive should have any infrequent, unscheduled or informal meeting related to non-Company business at the Company location, such in-person engagement shall not be a breach of this Section or require the Chief Executive Officer’s prior consent.

(b) The Company acknowledges and agrees that Executive does have these additional interests to which he will continue to devote time and effort. The parties agree that those interests, if conducted in accordance with the provisions of Section 4.2(a), do not interfere or conflict with Executive’s duties hereunder and include providing services, including the provision of advisory, and consulting services (in each case, as an independent contractor) and participation at the board of directors level with companies engaged in internet, communications media, telecommunications, medical services and sports sales and marketing of instructional and self help guides and videos, to which he may continue to devote time and effort. Executive may make, from time to time, personal phone calls and personal e-mails during the normal work week provided it does not conflict (A), (B), (C), and/or (D) above.

(c) Exhibit C is the list of Executive’s current investment and/or business and/or charitable activities. No further activities shall be agreed to or incurred by Executive without the prior written consent of the Chief Executive of the Company.

     4.3 Representations . Executive represents and warrants that his execution of this Agreement, and the performance of his duties under this Agreement do not violate any obligations the Executive may have to any other person or entity, including any obligations with respect to proprietary or confidential information of any other person or entity.

     5.1 Due to Death . Executive’s employment shall terminate as of the date of his death.

     5.2 Due to Disability . The Company may terminate Executive’s employment if he experiences a Disability, as defined below, upon thirty (30) days’ written notice to Executive. For purposes of this Agreement, the term “ Disability ” shall mean a physical or mental incapacity as a result of which Executive becomes unable to continue to perform the essential functions of his job with or without accommodation hereunder for three (3) consecutive calendar months or for shorter periods aggregating sixty (60) business days in any twelve month period, or, if this provision is inconsistent with any applicable law, to the extent not prohibited by law.

     5.3 By the Company Without “Cause” . The Company may terminate Executive’s employment without “Cause”, “Cause” as defined in Section 5.5 below, at any time upon thirty (30) days’ written notice to Executive.

     5.4 By Executive Without “Good Reason” . Executive may terminate his employment hereunder without Good Reason, as defined in Section 5.6 below, at any time upon thirty (30) days’ written notice to the Company.

     5.5 By The Company For “Cause” . The Company may terminate Executive’s Executive’s employment for “ Cause ”. Not less than thirty (30) days prior to the date of termination, Executive shall be notified in writing of the Company’s intention to terminate, the grounds for doing so and the date of the termination. The notice shall specify a date within thirty (30) days of the notice on which Executive shall have an opportunity to address the Board as to the grounds for termination. The Company may relieve Executive of his duties between the date of the notice and the proposed date of termination provided Executive’s compensation and benefits remain in force during that time, and such action shall not constitute “Good Reason” for Executive to terminate under Section 5.6. For purposes of this Agreement, “ Cause ” shall mean the Board’s reasonable determination that one or more of the following conditions exist:

(a) Executive has been convicted of or pled guilty or nolo contendere to any felony or one or more acts of theft, embezzlement, or misappropriation against the Company or any Related Entity;

(b) Executive has materially breached his obligations under this Agreement, including without limitation those of Sections 4, 6 and 7, which breach, if curable, has not been cured within thirty (30) days following receipt of written notice by the Company to Executive of such breach by Executive; or

(c) If Executive fails, in the sole and good faith discretion of the Chief Executive Officer, to achieve one or more of the assigned Performance Milestones in each of two consecutive quarters, by the applicable Deadlines as set forth in Exhibit B.

     5.6 By Executive For “Good Reason .”

     Executive may terminate his employment for good reason upon at least thirty (30) days prior written notice to the Company. For purposes of this Agreement, “ Good Reason ” shall mean:

     (a) th