EXHIBIT 99(A)
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("Agreement") is dated as of
April 27, 2001 (the "Effective Date"), and is entered into among the State of
Wisconsin Investment Board ("SWIB"), Peerless Systems Corporation ("Peerless"),
and Xxxxxx X. Xxxxxxxx ("Xxxxxxxx" and, collectively with SWIB and Peerless,
"the Parties").
Recitals
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WHEREAS, SWIB filed a lawsuit captioned State of Wisconsin Investment Board
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v. Peerless Systems Corporation and Xxxxxx X. Xxxxxxxx, C.A. No. 17637, which
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is pending in the Court of Chancery of the State of Delaware, asserting claims
against Peerless and Xxxxxxxx related to the 1999 Annual Meeting of Stockholders
of Peerless ("the Complaint");
WHEREAS, Peerless and Xxxxxxxx filed an answer to the complaint that
included affirmative defenses ("Answer") and asserted a counterclaim in the same
proceeding that also related to the 1999 Annual Meeting of Stockholders of
Peerless ("Counterclaim" and collectively with the Complaint and Answer, "the
Lawsuit");
WHEREAS, the Lawsuit concerned in part the proposal at the 1999 Annual
Meeting of Stockholders of Peerless to increase by 1,000,000 shares the
aggregate number of shares of common stock of Peerless authorized for issuance
under the 1996 Equity Incentive Plan ("Share Increase");
WHEREAS, the Parties desire to settle the Lawsuit by entering into this
Agreement.
Agreement
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NOW THEREFORE, the Parties agree as follows:
1. Peerless, on behalf of itself and Xx. Xxxxxxxx, shall pay SWIB the sum of
$375,000 (three hundred seventy-five thousand dollars). Peerless shall transmit
the payment to SWIB within seven business days after the Agreement is signed by
all the Parties by wire transfer in immediately available funds to an account
specified by SWIB.
2. SWIB, Peerless, and Xxxxxxxx shall jointly file a dismissal of the Lawsuit
(Complaint and Counterclaim) with prejudice ("Stipulation and (Proposed) Order
of Dismissal With Prejudice") in a form substantially similar to the one
attached. The filing shall occur within three business days of written
notification by SWIB to all counsel for the Parties of SWIB's receipt of the
payment described in paragraph 1.
3. The stipulation dated August 25, 2000 between Peerless and SWIB shall not
survive the dismissal of the Lawsuit.
4. As of the date of SWIB's receipt of the payment described in paragraph 1,
except for the obligations arising out of this Agreement, SWIB fully and finally
releases, waives, and forever discharges Xxxxxxxx and Peerless, its parent,
subsidiary, and affiliate companies, and their past and current officers,
directors, shareholders, employees, agents, successors, assigns, attorneys,
and other representatives of and from any and all causes of action, suits,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, promises, damages, liabilities,
demands, or claims of any nature whatsoever, whether known or unknown, asserted
or unasserted, that it has, has had, or may hereafter have, arising out of or
related to the Lawsuit.
5. As of the date of SWIB's receipt of the payment described in paragraph 1,
except for the obligations arising out of this Agreement, Peerless and Xxxxxxxx
fully and finally release, waive, and forever discharge SWIB and its past and
current officers, trustees, directors, employees, agents, successors, assigns,
attorneys, beneficiaries, constituent trusts, and other representatives of and
from any and all causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, damages, liabilities, demands, or claims of any nature
whatsoever, whether known or unknown, asserted or unasserted, that it has, has
had, or may hereafter have, arising out of or related to the Lawsuit.
6. If any fact relating to any matter covered by this Agreement is found to be
other than or different from the facts now believed by any Party to be true,
each Party fully understands and expressly accepts and assumes the risk of such
possible differences in fact and agrees that this Agreement shall nevertheless
remain in effect. Each Party further expressly understands that Section 1542 of
the Civil Code of the State of California provides that a general release does
not extend to claims that a creditor does not know or suspect to exist in his
favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor. To the extent that
California or other law may be applicable, each Party hereby agrees that the
provisions of Section 1542 and all similar federal or state laws, fights, rules,
or legal principles of any other jurisdiction which may be applicable, are
hereby knowingly and voluntarily waived and relinquished by each Party, and each
Party hereby agrees and acknowledges that this is an essential term of this
Agreement.
7. SWIB withdraws its objection to 750,000 shares of the Share Increase and
consents to issuance of the 750,000 shares under the 1996 Equity Incentive Plan.
8. At the 2001 Annual Meeting of Stockholders of Peerless, Peerless shall hold
a separate shareholder vote on whether to ratify or reject the increase to the
aggregate number of shares of common stock of Peerless authorized for issuance
under the 1996 Equity Incentive Plan by the remaining 250,000 shares of the
Share Increase. SWIB shall vote in favor of ratification.
9. At the 2001 Annual Meeting of Stockholders of Peerless, Peerless may hold a
separate shareholder vote on a proposal to approve an additional increase of
500,000 shares to the aggregate number of shares of common stock of Peerless
authorized for issuance under the 1996 Equity Incentive Plan. If Peerless
proposes such a separate shareholder vote, SWIB shall vote in favor of passage
of the proposal.
10. After the 2001 Annual Meeting of Stockholders of Peerless, Peerless may
seek shareholder approval for additional increases to the aggregate number of
shares of common stock of Peerless authorized for issuance under the 1996 Equity
Incentive Plan. SWIB, at its sole discretion, may support, oppose, or remain
neutral on any such future proposal.
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11. Peerless shall enact the following bylaws within twenty business days of
the Effective Date and shall not amend or create a stock option plan or issue or
re-price stock options prior to enactment of the bylaw set forth in paragraph
(e):
a) From the date upon which the next director is added after March 15,
2001, a majority of the Board of Directors shall be independent
directors. This Bylaw may not be altered, amended, or repealed, and a
new bylaw may not be adopted that has the effect of altering,
amending, or repealing this Bylaw, without the affirmative vote of a
majority of the voting power of all the shares of the voting stock
that are present, by proxy or in person, and voting.
b) The Board of Directors shall appoint a Nominating Committee consisting
of two (2) or more members of the Board of Directors. All members of
the Nominating Committee shall be independent directors. The
Nominating Committee shall have exclusive authority to nominate
persons to stand for election to the Board of Directors. This Bylaw
may not be altered, amended, or repealed, and a new bylaw may not be
adopted that has the effect of altering, amending, or repealing this
Bylaw, without the affirmative vote of a majority of the voting power
of all the shares of the voting stock that are present, by proxy or in
person, and voting.
c) The Board of Directors shall appoint a Compensation Committee
consisting of two (2) or more members of the Board of Directors. All
members of the Compensation Committee shall be independent directors.
The Compensation Committee shall set the compensation and benefits of
the executive officers of the corporation and shall have the authority
to retain its own advisor on compensation matters. The Compensation
Committee shall have the power and authority vested in the Board of
Directors by any benefit or compensation plan of the corporation. The
Compensation Committee shall also set the compensation and benefits of
Board of Directors and its committees, with the exception of the
Compensation Committee. The Board of Directors shall set the
compensation and benefits of the Compensation Committee. This Bylaw
may not be altered, amended, or repealed, and a new bylaw may not be
adopted that has the effect of altering, amending, or repealing this
Bylaw, without the affirmative vote of a majority of the voting power
of all the shares of the voting stock that are present, by proxy or in
person, and voting.
d) A director is an independent director if his or her only nontrivial
professional, familial, or financial connection to the corporation or
its Chief Executive Officer is his or her directorship. For example, a
director is not independent if he or she (1) has been employed by the
corporation or an affiliate in an executive capacity; (2) is, or in
the past two years has been, an employee or owner of a firm that is
one of the corporation's or its affiliate's paid advisers or
consultants; (3) is employed by or has a five percent or greater
ownership in a supplier or customer where the sales to or by the
corporation represent more than one percent of the sales of the
customer or supplier or more than one percent of the sales of the
corporation; (4) is employed by or has a five percent or greater
ownership in one of the corporation's debtors or creditors where the
amount owed exceeds one
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percent of the corporation's or the third party's assets; (5) has, or
in the past two years has had, a personal service contract with the
Chief Executive Officer, the corporation, or one of its affiliates;
(6) is an employee, officer, or director of a foundation, university,
or other non-profit organization that receives more than $100,000 from
the corporation or one of its affiliates; (7) is a relative of an
executive of the corporation or one of its affiliates; or (8) is
employed by a corporation that has an executive officer of the
corporation on its board. This Bylaw may not be altered, amended, or
repealed, and a new bylaw may not be adopted that has the effect of
altering, amending, or repealing this Bylaw, without the affirmative
vote of a majority of the voting power of all the shares of the voting
stock that are present, by proxy or in person, and voting.
e) The exercise price of any stock option granted by the corporation
shall be not less than one hundred percent (100%) of the fair market
value of the stock subject to the option on the date the option is
granted. The exercise price of outstanding stock options may not be
lowered, and outstanding stock options may not be cancelled and new
stock options with a lower exercise price substituted therefore,
without the approval of a majority of the voting power of all the
shares of the voting stock that are present, by proxy or in person,
and voting. This Bylaw may not be altered, amended, or repealed, and a
new bylaw may not be adopted that has the effect of altering,
amending, or repealing this Bylaw, without the affirmative vote of a
majority of the voting power of all the shares of the voting stock
that are present, by proxy or in person, and voting.
f) If, because of the departure of an independent director from the Board
or because a formerly independent director is no longer independent,
there are insufficient independent directors to constitute a majority
of the directors or to constitute the Nominating and/or Compensation
Committees, the Board shall undertake diligent efforts to ensure that,
within a reasonable amount of time, the Board has a majority of
independent directors or a sufficient number of independent directors
to constitute those Committees, as the case may be. A departure of an
independent director shall be deemed to have occurred under this Bylaw
in the case of the death, removal, or resignation of any independent
director. So long as the Board is acting diligently to meet the
independent director requirements in these Bylaws, the Board's actions
will be valid if it does not have a majority of independent directors,
and said Committees and each of them shall comprise all the remaining
directors if there are not a sufficient number of independent
directors to constitute those Committees. This Bylaw may not be
altered, amended, or repealed, and a new bylaw may not be adopted that
has the effect of altering, amending, or repealing this Bylaw, without
the affirmative vote of a majority of the voting power of all the
shares of the voting stock that are present, by proxy or in person,
and voting.
12. Peerless agrees to amend Section 17 of the Bylaws to read as follows:
Unless otherwise provided in the Certificate of Incorporation, any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal
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or other causes and any newly created directorships resulting from any
increase in the number of directors shall unless the Board of
Directors determines by resolution that any such vacancies or newly
created directorships shall be filled by a vote of the stockholders,
be filled only by the Nominating Committee. Any director elected in
accordance with the preceding sentence shall hold office for the
remainder of the full term of the director for which the vacancy was
created or occurred and until such director's success shall have been
elected and qualified. A vacancy in the Board of Directors shall be
deemed to exist under this Bylaw in the case of the death, removal, or
resignation of any director.
13. Peerless shall amend the current bylaws to avoid inconsistencies, if any,
with the bylaws enacted pursuant to this Agreement.
14. Peerless shall make commercially reasonable and diligent efforts to add one
additional independent director to the Board of Directors by December 31, 2001.
15. SWIB shall not encourage other shareholders of Peerless to pursue
litigation on claims related to the Lawsuit.
16. If SWIB, Peerless, or Xxxxxxxx prevail in an action establishing a breach
by another party or parties of any provision of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees and other litigation costs
and expenses in addition to any other relief available.
17. This Agreement and the terms of it are not evidence or an admission by
SWIB, Peerless, or Xxxxxxxx as to any issue of act or law and are not admissible
into evidence for any purpose except to enforce the terms of the Agreement.
This Agreement is a settlement and discharge of disputed claims, and, by
entering into this Agreement (or any particular provision of the Agreement), no
party admits or acknowledges the existence of liability, fault, or wrongdoing,
and each party expressly denies all such liability, fault, or wrongdoing.
18. Nothing in this Agreement, express or implied, is intended or shall be
construed to give any person other than the Parties any right, remedy, or claim.
19. This Agreement shall be binding upon the successors, heirs, administrators,
and executors of the Parties to this Agreement and each of them.
20. This Agreement constitutes the entire agreement between the Parties related
to the subject matter of this Agreement and supersedes all prior written and
oral negotiations, representations, understandings, and agreements between the
Parties. This Agreement may not be modified other than by a writing executed by
SWIB, Peerless, and Xxxxxxxx.
21. All claims, controversies, or disputes arising out of or related to this
Agreement, including those related to the validity, enforcement, or
interpretation of it, shall be governed by the law of the state of Delaware
(excluding conflict of laws principles).
22. If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remainder of the
provisions of this Agreement shall remain in
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full force and effect and shall in no way be affected, impaired, or invalidated.
The intention of the Parties is that they would have executed the remaining
provisions without including any that are invalid, void, or unenforceable.
23. This Agreement may be executed and delivered in counterparts or copies by
the Parties to this Agreement ("Counterpart"). When each party has signed and
delivered at least one counterpart to the other Parties to this Agreement, each
counterpart shall be deemed an original and, taken together, the counterparts
shall constitute one and the same Agreement, which shall be binding and
effective.
State of Wisconsin Investment Board Peerless Systems Corporation
/s/ Xxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxx
___________________________________________ ________________________________
By: Xxxx X. Xxxxxx By: Xxxxxx X. Xxxxxx
Investment Director, Small Cap Portfolio President, Chief Executive
Officer
May 2, 2001
April 27, 2001
___________________________________________
Date
/s/ Xxxxxx X. Xxxxxxxx
________________________________
Xxxxxx X. Xxxxxxxx
________________________________
May 7, 2001
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