SETTLEMENT AGREEMENT
This
Settlement Agreement (this "Agreement") is made as of June 4, 2007, by and
among
Peerless Systems Corporation, a Delaware corporation (the "Company"), on the
one
hand, Xxxxxxx X. Xxxx, an individual ("Xx. Xxxx"), Pembridge Value Opportunity
Fund LP, a Delaware limited partnership (“Pembridge Value”), Pembridge Capital
Management LLC, a Delaware limited liability company (“Pembridge Capital”),
Pembridge Value Advisors LLC, a Delaware limited liability company (“PVA”),
Sherwood Advisors LLC, a Delaware limited liability company (“Sherwood”), Rahul
Xxxxx Xxxxxxxx, an individual ("Xx. Xxxxxxxx"), Xxxx X. Xxxxxx, an individual
("Xx. Xxxxxx"), Xxxxxx Xxxxxxxx, an individual ("Xx. Xxxxxxxx"), Xxxx Xxxxxxxx,
an individual ("Xx. X. Xxxxxxxx"), Xxxxxxx Xxxxxxxx, an individual ("Xx. X.
Xxxxxxxx"), Xxxxxxxx Xxxxxxxx, an individual ("Xx. X. Xxxxxxxx"), Xxxxxxx
Xxxxxxxx, an individual ("Xx. X. Xxxxxxxx"), Xxxxxxxx Xxxxxxxx, an individual
("Xx. X. Xxxxxxxx"), Bathgate Family Partnership II, Ltd ("Bathgate
Partnership"), Whitehall Capital Investors IV, LLC, a Delaware limited liability
company (“Whitehall”) and E2
Investment Partners LLC, a Delaware limited liability company (“E2”
and,
together with Xx. Xxxx, Pembridge Value, Pembridge Capital, PVA, Sherwood,
Xx.
Xxxxxxxx, Xx. Xxxxxx, Xx. Xxxxxxxx, Xx. X. Xxxxxxxx, Xx. X. Xxxxxxxx, Xx. X.
Xxxxxxxx, Xx. X. Xxxxxxxx, Xx. X. Xxxxxxxx, Bathgate Partnership and Whitehall,
the "Committee", and each individually, a "Committee Party"), on the other
hand.
RECITALS:
WHEREAS,
the Company has scheduled its 2007 annual meeting of stockholders for June
11,
2007 (as the same may be adjourned or postponed from time to time, the "2007
Annual Meeting");
WHEREAS,
the Company has issued a definitive Proxy Statement nominating Xxxxxx X.
Xxxxxxx, Xxxxx X. Xxxx, Xxxxxxx X. Xxxxxx Xx. and Xxxxxxx X. Roll for election
to the Company's Board of Directors (the "Company Board") by the Company's
common stockholders at the 2007 Annual Meeting;
WHEREAS,
the Committee has issued a definitive Proxy Statement in connection with a
proxy
contest in which the Committee is nominating (the "Nomination") Xx. Xxxx,
Xx. Xxxxxxxx, and Xx. Xxxxxx (the
"Committee Nominees") for election to the Company Board by the Company's common
stockholders at the 2007 Annual Meeting, in place of three out of four of the
following: Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxx, Xxxxxxx X. Xxxxxx Xx. and Xxxxxxx
X. Roll (the "Proxy Contest"); and
WHEREAS,
the parties to this Agreement (the "Parties") wish to avoid the costs and
expenses of a protracted proxy contest, and wish to enter into certain
agreements related thereto, upon the terms and conditions set forth in this
Agreement.
NOW,
THEREFORE, in consideration of the mutual promises of the Parties contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereby agree as
follows:
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1. DEFINITIONS
In
addition to the other definitions contained elsewhere in this Agreement, the
following terms shall have the meanings specified below for the purposes
hereof:
"Affiliate"
has the meaning set forth in the 1934 Act.
"Associate"
has the meaning set forth in the 1934 Act, except that no person will be deemed
to be an associate of another person solely because the first person is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities of the other person unless such ownership causes the first
person to be an affiliate of the other person (provided that such beneficial
ownership resulted from the first person's ordinary course investing
activities).
"Beneficially
own" has the meaning set forth in the regulations included in Rule 13d-3 of
the
1934 Act; provided, however, that during the Term, any option, warrant, right,
conversion privilege or arrangement to purchase, acquire or vote Company Voting
Securities, regardless of the time period during or the time at which it may
be
exercised and regardless of the consideration paid, shall be deemed to give
the
holder thereof beneficial ownership of the Company Voting Securities to which
it
relates. Any Company Voting Securities which are subject to such options,
warrants, rights, conversion privileges or other arrangements shall be deemed
to
be outstanding for purposes of computing the percentage of outstanding
securities owned by such Person but shall not be deemed to be outstanding for
purposes of computing the percentage of outstanding securities owned by any
other Person.
"Company
Voting Securities" means the Company's Common Stock, $.001 par value, and any
securities convertible into or exchangeable or exercisable for such class of
capital stock. For purposes of determining the amount or percentage of
outstanding Company Voting Securities Beneficially owned by a Person, and for
purposes of calculating the aggregate voting power relating to such Company
Voting Securities, securities that are deemed to be outstanding shall be
included to the extent provided in the definition of "Beneficially
own."
"Extended
Term" means the period commencing on the day following the 2007 Annual Meeting
and continuing until October 31, 2007.
"1933
Act" means the Securities Act of 1933, as amended, and the rules and regulations
promulgated under such statute.
"1934
Act" means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated under such statute.
"Person"
means a natural person or any legal, commercial or governmental entity,
including, but not limited to, a corporation, partnership, joint venture, trust,
limited liability company, group acting in concert or any person acting in
a
representative capacity.
"Representatives"
of a Party means: (a) the officers, directors, partners, managers or other
authorized representatives of such Party; (b) the employees or agents of such
Party but only to the extent that they act on behalf of such Party; and (c)
the
outside professional advisors of such Party but only to the extent that they
act
in concert with such Party and not solely in their capacities as professional
advisors.
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"SEC"
means the Securities and Exchange Commission.
"Securities
Acts" means the 1933 Act and the 1934 Act.
"Term"
means the period commencing on the date of this Agreement and continuing through
the date of the 2007 Annual Meeting, but in no event beyond August 30,
2007.
2. WITHDRAWAL
OF THE NOMINATION AND DISBANDING OF THE COMMITTEE
2.1 The
Committee hereby irrevocably withdraws the Nomination of the Committee
Nominees.
2.2 Each
of
the Committee Parties shall forthwith discontinue, and shall cause its
Affiliates, Associates and Representatives to discontinue, all efforts (direct
and indirect) to solicit votes for the Committee Nominees as to the Nomination
and shall not engage in any further solicitation activity (whether by press
release, SEC filings, mailings to the stockholders of the Company,
communications with individual stockholders of the Company, contacts with the
media or otherwise) to solicit votes for the Committee Nominees or otherwise
to
pursue the Nomination in connection with the 2007 Annual Meeting.
2.3 The
Committee shall disband effective as of the day following the 2007 Annual
Meeting, and shall promptly file an amendment to its Schedule 13D, as well
as
any other required SEC filings, disclosing that the Committee had disbanded
effective as of the day following the 2007 Annual Meeting.
3. ADDITION
OF XX. XXXX AS A COMPANY BOARD NOMINEE AND EXPANSION OF THE COMPANY
BOARD
3.1 The
Company Board will take all action necessary to expand the number of seats
on
the Company Board to five and to cause Xx. Xxxx to become a nominee of the
Company Board for election to the Company Board at the 2007 Annual Meeting.
If
he is elected and chooses to serve, Xx. Xxxx will serve as a member of the
Company Board, and serve on the Compensation and such other Committees as Xx.
Xxxx and a majority of the other members of the Company Board may agree, for
the
same term as all other nominees elected to the Company Board at the 2007 Annual
Meeting, which term shall expire when his successor is duly elected at the
2008
Annual Meeting and qualified or upon his death, resignation or removal, all
as
provided in the Company's Certificate of Incorporation and Bylaws. As a result
of the addition of Xx. Xxxx as a nominee of the Company Board for election
to
the Company Board at the 2007 Annual Meeting, the total number of Board nominees
presented to the Company's common stockholders for election at the 2007 Annual
Meeting shall be five and the Company Board shall recommend to the Company's
common stockholders the election of all five nominees. As soon as practicable
after the 2007 Annual Meeting, the newly elected Board will select a Chairman
by
majority approval.
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3.2 Subject
to the next sentence, promptly following the 2007 Annual Meeting, the Nominating
and Corporate Governance Committee of the Company Board will use commercially
reasonable efforts to identify, as soon as reasonably practicable and no later
than the end of the Extended Term, two candidates for recommendation to the
Company Board, each of whom: (i) is considered "independent" as defined in
Nasdaq Marketplace Rule 4200(a)(15) and any applicable rules of the SEC, (ii)
is
not an Affiliate of the Company or any of the Committee Parties, (iii) is
knowledgeable about the industry in which the Company operates and (iv)
otherwise is qualified in accordance with the factors set forth for Board
membership in the Company's Corporate Governance Guidelines and such other
factors as the Nominating and Corporate Governance Committee shall deem
appropriate. The Parties agree that (i) Xxxxxxx Xxxxxx ("Xxxxxx") shall have
the
sole right to identify candidates to fill one of the independent board seats
and
(ii) Diker Management LLC ("Diker") shall have the sole right to identify
candidates to fill the other independent board seat. Upon identification of
such
candidates by each of Xxxxxx and Xxxxx, the Nominating and Corporate Governance
Committee shall determine whether to recommend such candidates to the Company
Board for approval. If approved by the Nominating and Corporate Governance
Committee and the Company Board, the Company Board will take all action
necessary to expand the number of seats on the Company Board by two and to
fill
the newly created directorships created by the expansion of the Company Board
with such candidates. If such candidates are not approved by either the
Nominating and Corporate Governance Committee or the Company Board, each of
Xxxxxx and Diker shall be entitled to continue to identify candidates until
one
of their candidates has been elected. Xx. Xxxx agrees not to object to the
expansion of the Board or the filling of the two seats on the Board in
accordance with this Section.
3.3 (a)
If,
at any time, whether before the vote is taken on the election of directors
at
the 2007 Annual Meeting or thereafter (assuming Xx. Xxxx is elected thereat),
Xx. Xxxx becomes unable or unwilling to serve as a member of the Company Board,
or (b) if, at any time before the vote is taken on the election of directors
at
the 2007 Annual Meeting, the Brog Entities (as defined below) own, in the
aggregate, less than 600,000 shares of the outstanding Company Voting
Securities, the Company Board shall have no obligation to nominate, elect or
appoint a successor or replacement to Xx. Xxxx.
3.4 Xx.
Xxxx
hereby confirms to the Company his consent to stand for election as a nominee
of
the Company Board at the 2007 Annual Meeting. In addition to the information
that Xx. Xxxx has provided to the Company in connection with the nomination,
and
the negotiation and execution of this Agreement, Xx. Xxxx shall provide to
the
Company such additional information as the Company may from time to time
reasonably request for inclusion in materials to be disseminated in connection
with the 2007 Annual Meeting or otherwise in order for it to comply with the
Company's disclosure requirements under the Securities Acts. In addition, Xx.
Xxxx agrees from time to time to sign any agreements, including non-disclosure
agreements, and to abide by any xxxxxxx xxxxxxx policies or other policies
of
the Company that have been historically signed by and agreed to by members
of
the Company Board acting in their capacities as directors; provided, however,
solely with respect to the Company's existing (as of May 1, 2007) written
corporate communications policy, Xx. Xxxx hereby agrees as follows: (a) Xx.
Xxxx
shall not initiate any contacts with analysts or stockholders of Peerless
relating to Peerless and if contacted by a stockholder or analyst relating
to
Peerless, then Xx. Xxxx shall not discuss the business, operations or prospects
of the Company with such stockholders or analysts or issue any statements
outside the presence (in person or by telephone) of the Chief Executive
Officer/President or Chief Financial Officer of the Company (and the
CEO/President and CFO shall use their best efforts to make themselves available
for any such conversation upon the reasonable request of Xx. Xxxx), (b)
notwithstanding the foregoing in clause (a), Xx. Xxxx shall be entitled to
discuss with third parties or issue statements with respect to extraordinary
transactions (e.g., material acquisitions and/or sale of the Company) following
a vote of the Company Board and a public announcement by the Company with
respect to such transaction, and (c) notwithstanding the foregoing in clause
(a), beginning on January 1, 2008, Xx. Xxxx shall be entitled to discuss with
third parties or issue statements in contemplation of or in connection with
any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
SEC) or written consent of the stockholders, in each case, in compliance with
applicable law, including Regulation FD.
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3.5 If
Xx.
Xxxx is elected to the Company Board at the 2007 Annual Meeting and one or
more
other Board members resigns, dies or is unable to carry on his duties as a
Board
member, the Nominating and Corporate Governance Committee may recommend and
the
Board may fill the position according to the Company's Certificate of
Incorporation and Bylaws without the consent or approval of Xx.
Xxxx.
4. ANNOUNCEMENTS
4.1 As
soon
as practicable following the execution of this Agreement: (a) the Company and
the Committee shall issue a joint press release in the form of Exhibit 4.1
hereto (the "Joint Press Release"), which the Company (but not the Committee)
shall file with the SEC as additional definitive proxy materials under the
1934
Act; (b) the Company shall file with the SEC, and disseminate to its
stockholders, a letter to its stockholders and a supplement to its Proxy
Statement for the 2007 Annual Meeting disclosing, in a manner consistent with
the Joint Press Release, the terms of this Agreement and Xx. Xxxx'x nomination
pursuant to Section 3.1, together with the information provided by Xx. Xxxx,
for
inclusion in such supplement pursuant to Section 3.4; and (c) the Company shall
file with the SEC a Current Report on Form 8-K to disclose this Agreement in
a
manner consistent with the Joint Press Release.
4.2 From
the
date of this Agreement until the expiration of the Term, none of the Parties
shall make any public statement (including any statement in any filing with
the
SEC or any other governmental agency) regarding this Agreement or any event
occurring prior to the date hereof that is inconsistent with, or otherwise
contrary to, the Joint Press Release or that is critical of or disparages any
other Party or its prior actions, and any public statement so made shall
otherwise comply with applicable laws
4.3 Any
public statement (including any statement in any filing with the SEC or any
other governmental agency) by any Party regarding this Agreement or any event
occurring prior to the date hereof which would otherwise be prohibited by
Section 4.2 may be made by such Party without violating Section 4.2 if such
statement by such Party is either required by applicable law or is required
in
order to comply with the fiduciary duties of such Party to the Company or its
stockholders, in each case as reasonably determined by such Party after
conferring with outside counsel (other than a Brog Entity, it being acknowledged
that Xx. Xxxx is himself an attorney).
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5. STANDSTILL
PROVISIONS
5.1 Each
of
the Committee Parties agrees that during the Term, and with respect solely
to
Xx. Xxxx, Pembridge Value, Pembridge Capital, PVA, Whitehall and E2
(collectively,
the "Brog Entities"), during the Extended Term, unless such shall have been
specifically invited in writing by the Company, and except as otherwise provided
in Section 5.2, none of the Committee Parties nor any of their Affiliates,
Associates or Representatives shall in any manner, directly or
indirectly:
(a) effect
or
seek, offer or propose (whether publicly or otherwise) to effect, or cause
or
participate in or in any way assist any other person to effect or seek, offer
or
propose (whether publicly or otherwise) to effect or participate in (i) any
acquisition, issuance or disposition of any securities (or Beneficial ownership
thereof) or assets of the Company or any of its subsidiaries (except as
otherwise expressly provided by Section 6.4 or Section 6.5), (ii) any tender
or
exchange offer, merger or other business combination involving the Company
or
any of its subsidiaries, (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company
or
any of its subsidiaries, (iv) any acquisition of the securities or assets of
any
other business enterprise by the Company or any of its subsidiaries, or (v)
any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
SEC) or written consent of the stockholders; provided, however, that the
foregoing subparagraph (a) shall not prevent Xx. Xxxx, acting in his capacity
as
a member of the Company Board, from promptly presenting to the Company Board
any
unsolicited proposals with respect to any of clauses (i) -(iv) he personally
receives from any third person, so long as neither he nor any of the Committee
Parties or their respective Affiliates, Associates or Representatives
instigated, knowingly encouraged, proposed, participated in or otherwise has
any
interest in any such unsolicited proposal;
(b) form,
join or in any way participate in a "group" (as defined under the 0000 Xxx)
with
respect to the Company, or enter into negotiations, arrangements or
understandings with any third parties in connection with becoming a
"group";
(c) otherwise
act, alone or in concert with others, to seek to control the management, the
Company Board or the policies of the Company, including, without limitation,
by
(i) initiating or instituting a stockholder solicitation for any such purpose,
or (ii) nominating or causing others to nominate or otherwise seeking to elect
directors of the Company other than those nominated by the Board;
(d) take
any
action which might force the Company to make a public announcement regarding
any
of the types of matters set forth in this Section 5.1;
(e) initiate
or propose or otherwise solicit or participate in the solicitation of
stockholders for the approval of one or more stockholder proposals relating
to
the Company (whether pursuant to Rule 14a-8 under the 1934 Act or
otherwise);
(f) initiate,
participate in or encourage the calling of a special meeting of stockholders
of
the Company; or
(g) knowingly
instigate or encourage any third party (including any members or former members
of the Committee) to take any of the actions enumerated in this Section 5 or
announce an intention to, or enter into any discussion, negotiations,
arrangements or understandings with any third party with respect to any of
the
actions enumerated in this Section 5.
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5.2 Notwithstanding
anything to the contrary in Section 5.1: (a) the mere act of tendering or
selling or (except as expressly restricted by Section 6) voting any Company
Voting Securities Beneficially owned by any of the Committee Parties shall
not
by itself be deemed to constitute the participation in or assistance by any
of
the Committee Parties with respect to any of the foregoing provided such act
is
consistent with Section 6.5; (b) Xx. Xxxx'x exercise of his rights, or
fulfillment of his obligations, as a member of the Company Board while he is
serving thereon shall not be a violation of Section 5.1; and (c) Xx. Xxxx may
make a proposal that would otherwise be prohibited by Section 5.1 provided
it is
made confidentially to the Company Board.
6. CERTAIN
AGREEMENTS RELATING TO COMPANY VOTING SECURITIES
Each
of
the Committee Parties agrees as follows:
6.1 At
any
meeting of the stockholders of the Company held at any time between the date
of
this Agreement and the expiration of the Term, they shall, and shall cause
their
respective Affiliates, Associates or Representatives to: (a) vote, or cause
to
be voted, all Company Voting Securities Beneficially owned (including, without
limitation, all Company Voting Securities Beneficially owned by PVA pursuant
to
the proxies granted to PVA as described in the Schedule 13D filed by the
Committee on May 10, 2007) by any of them as of the applicable record date
for
such meeting in favor of the election to the Company Board of the Persons
nominated by the Company Board for election to the Company Board at such
meeting; and (b) except as otherwise instructed by a vote of at least a majority
of the members of the Company Board, not vote, or cause to be voted, any such
Company Voting Securities in favor of the removal from the Company Board of
any
director or in favor of any candidate or slate of candidates for election to
the
Company Board not nominated by the Company Board. PVA represents to the Company
that each of Xxxxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxxxx Xxxxxxxx, Xxxxxx X. Xxxxxxxx
Trust, Xxxxx Xxxxxxxx, Xxxxx X. Xxxxxxxx Trust, Xxxxxx XxXxxxxx, Bathgate Family
Partnership II, Ltd. has granted an irrevocable proxy to PVA to vote the Company
Voting Securities Beneficially owned by such person at the 2007 Annual Meeting
and at all adjournments and postponements thereof.
6.2 At
any
meeting of the stockholders of the Company held at any time between the date
of
this Agreement and the expiration of the Term, the Committee Parties shall,
and
shall cause their respective Affiliates, Associates or Representatives, with
respect to any proposal to be voted upon at such meeting other than the election
of candidates to the Company Board or the removal of any member of the Company
Board, vote, or cause to be voted, all Company Voting Securities Beneficially
owned by any of them as of the applicable record date for such meeting in
accordance with the recommendation of at least a majority of the Company Board
with respect to such proposal; provided, however, that so long as the Committee
Parties do not make any public or private statements regarding their position,
or otherwise solicit or encourage any votes against such proposals (other than
the election of candidates addressed in Section 6.1) that have been recommended
by at least a majority of the Company Board, the Committee Parties may vote
against such proposals.
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6.3 At
any
meeting of the stockholders of the Company held at any time between the date
of
this Agreement and the expiration of the Term, the Committee Parties shall
cause
all Company Voting Securities Beneficially owned by any of them or any of their
respective Affiliates, Associates or Representatives to be present, in person
or
by proxy, so that all such Company Voting Securities can be counted for the
purpose of determining the presence of a quorum at each such
meeting.
6.4 From
the
date of this Agreement until the expiration of the Term, none of the Committee
Parties, nor any of their Affiliates, Associates or Representatives, shall,
directly or indirectly, Beneficially own any Company Voting Securities
exceeding, in the aggregate among all of the Committee Parties and their
respective Affiliates, Associates and Representatives the amount of Company
Voting Securities set forth in the Committee's definitive Proxy Statement filed
with the SEC on May 24, 2007; provided, however, that nothing in this Agreement
shall prevent the Committee Parties and their respective Affiliates, Associates
and Representatives from acquiring additional shares of Company Voting
Securities so long as the total ownership of such parties does not exceed 9.9%
of the Company Voting Securities. Any acquisitions of Company Voting Securities
by any of the Committee Parties, or their respective Affiliates, Associates
or
Representatives, during the period referred to in the immediately preceding
sentence shall be made in compliance with all applicable laws.
6.5 From
the
date of this Agreement until the expiration of the Term, none of the Committee
Parties shall dispose of any Company Voting Securities they currently
Beneficially own unless the Company Board receives 2 business days prior written
notice of the applicable Committee Party's intention with respect to the
disposition, including the details thereof (by way of example only, the number
of Company Voting Securities to be disposed of, and the proposed price and
buyer
or other transferee or a statement of its intention to engage in open market
sale); provided, however, that the foregoing notice requirement shall not apply
to open-market sales by the Committee Parties of less than 1% of the outstanding
Company Voting Securities in the aggregate in any 90-day period provided such
sales are effected in accordance with the Company Policies. Any disposition
of
Beneficial ownership of Company Voting Securities by any of the Committee
Parties during the period referred to in the immediately preceding sentence
shall be made in compliance with all applicable laws.
7. SPECIAL
RELEASES AND COVENANTS NOT TO XXX
7.1 The
Company: (a) fully releases, remises, exonerates forever and unconditionally
discharges each of the Committee Parties and their respective Affiliates,
Associates, Representatives, employees, agents and advisors (each, a "Committee
Releasee") from any and all liability and responsibility for any and all Company
Claims (as hereinafter defined); and (b) covenants and agrees not to participate
in, commence or permit (to the extent within its control) the assertion or
commencement of any demand, allegation, litigation, proceeding or action
relating to any Company Claim, and not to encourage, assist or cooperate with
any Person in pursuing or asserting any Company Claim, against any Committee
Releasee. As used in this agreement, "Company Claim" means any actual or alleged
liability, claim, action, suit, cause of action, obligation, debt, controversy,
promise, contract, lien, judgment, account, reckoning, xxxx, xxxx, covenant,
agreement, demand, of any kind or nature, loss, cost, damage, penalty or expense
(including, without limitation, reasonable attorneys' fees and expenses, and
the
cost of investigation and litigation), whether in law or in equity, whether
known or unknown, whether matured or unmatured and whether foreseen or
unforeseen, that the Company may or could have had or now or hereafter may
have,
for, upon, or by reason of, any matter, cause or thing whatsoever, resulting
from, arising out of, relating to, connected in any way with, or alleged,
suggested or mentioned in connection with, (i) the Proxy Contest or any part
or
aspect thereof, (ii) any action taken, or statement made, in connection with
the
Proxy Contest, or (iii) any action, failure to act, representation, event,
transaction, occurrence or other subject matter resulting from, arising out
of,
relating to, connected in any way with, or alleged, suggested or mentioned,
in
connection with the Proxy Contest; provided, however, that Company Claim shall
not include any claim arising out of the performance of this
Agreement.
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7.2 Each
of
the Committee Parties: (a) fully release, remise, exonerate and forever and
unconditionally discharge the Company and each of its Affiliates, Associates,
Representatives, employees, agents and advisors (each, a "Company Releasee")
from any and all liability and responsibility for any and all Committee Claims
(as hereinafter defined); and (b) covenant and agree not to participate in,
commence or permit (to the extent within its respective control) the assertion
or commencement of any demand, allegation, litigation, proceeding or action
relating to any Committee Claim, and not to encourage, assist or cooperate
with
any Person in pursuing or asserting any Committee Claim against any Company
Releasee. As used in this Agreement, "Committee Claim" means any actual or
alleged liability, claim, action, suit, cause of action, obligation, debt,
controversy, promise, contract, lien, judgment, account, reckoning, xxxx, xxxx,
covenant, agreement, demand of any kind or nature, loss, cost, damage, penalty
or expense (including, without limitation, reasonable attorneys' fees and
expenses, and the costs of investigation and litigation, but excluding any
class
action not instituted, encouraged or facilitated, directly or indirectly, by
any
of the Committee Parties and which includes the Committee Parties or any of
them
as class members (provided that, in order to participate in such class action,
none of the Committee Parties shall have been members of the Company Board
for
the preceding 90 days)), whether in law or in equity, whether known or unknown,
whether matured or unmatured and whether foreseen or unforeseen, that any
Committee Party may or could have had or now or hereafter may have, for, upon,
or by reason of, any matter, cause or thing whatsoever, resulting from, arising
out of, relating to, connected in any way with, or alleged, suggested or
mentioned in connection with, (i) the Proxy Contest or any part or aspect
thereof, (ii) any action taken, or statement made, in connection with the Proxy
Contest, or (iii) any action, failure to act, representation, event,
transaction, occurrence or other subject matter resulting from, arising out
of,
relating to, connected in any way with, or alleged, suggested or mentioned
in
connection with the Proxy Contest or with the actions, omissions, decisions
and
conduct of the Company, the Company Board or any of its committees or any other
Company Releasee prior to the execution of this Agreement relating to the Proxy
Contest; provided, however, that Committee Claim shall not include any claim
arising out of the performance of this Agreement.
7.3 The
Company, in connection with the release and covenant contained in Section 7.1,
and each of the Committee Parties, in connection with the release and covenant
contained in Section 7.2, each hereby waive the provisions of 1542 of the
California Civil Code and any corresponding provision of the applicable laws
of
any other jurisdiction but only to the extent it applies to their respective
releases contained in the applicable Section. Section 1542 of the California
Civil Code provides as follows:
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A
GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
TO
EXIST IN HIS FAVOR OR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN
BY
HIM MUST HAVE MATERIALLY AFFECTED SETTLEMENT WITH THE DEBTOR.
7.4 The
Company expressly acknowledges that each Committee Releasee that is not a
Committee Party is an intended third party beneficiary of the release and
covenant contained in Section 7.1 and the Committee Parties jointly and
severally acknowledge that each Company Releasee other than the Company is
an
intended third party beneficiary of the release and covenant contained in
Section 7.2. Each Party acknowledges that any claim determined, in a final
nonappealable judgment or order of a court of competent jurisdiction, to have
been based primarily on intentional fraud shall not be released under this
Section 7.
7.5 Until
the
later of (a) the date that is 12 months from the date hereof and (b) the date
that Xx. Xxxx ceases to be a member of the Company Board, except for the
purposes of pursuing remedies for a breach of this Agreement, Xx. Xxxx, for
himself, his successors and assigns, and his Affiliates and Associates,
covenants and agrees that he will not commence any action, suit or proceeding,
or assert any claim, regardless of the form of relief requested, before any
court, arbitration panel or other tribunal against the Company or any member
of
the Company Board or any Affiliate or Associate of the Company with respect
to
any claim, act, transaction, occurrence or subject matter, suspected or
unsuspected, known or unknown. In the event any such action, suit, proceeding,
or claim shall be commenced or asserted, the Company and any other intended
beneficiary may plead or otherwise assert this covenant not to xxx in complete
bar of such proceeding. Xx. Xxxx represents and warrants that he has not sold,
assigned, transferred or otherwise disposed of any claim, demand or cause of
action relating to any matter covered by this covenant not to xxx, and Xx.
Xxxx
covenants that he will not knowingly instigate or encourage any third party
(including any members or former members of the Committee) to take any of the
actions enumerated in this Section 7.5 or announce an intention to, or enter
into any discussions, negotiations, arrangements or understandings with any
third party with respect to any of the actions enumerated in this Section 7.5.
7.6 Until
the
later of (a) the date that is 12 months from the date hereof and (b) the date
that Xx. Xxxx ceases to be a member of the Company Board, except for the
purposes of pursuing remedies for a breach of this Agreement, the Company,
for
itself, its successors and assigns, and the Company's Affiliates and Associates,
covenants and agrees that it will not commence any action, suit or proceeding,
or assert any claim, regardless of the form of relief requested, before any
court, arbitration panel or other tribunal against Xx. Xxxx or his Affiliates
or
Associates with respect to any claim, act, transaction, occurrence or subject
matter, suspected or unsuspected, known or unknown. In the event any such
action, suit, proceeding, or claim shall be commenced or asserted, Xx. Xxxx
or
any other intended beneficiary may plead or otherwise assert this covenant
not
to xxx in complete bar of such proceeding. The Company represents and warrants
that it has not sold, assigned, transferred or otherwise disposed of any claim,
demand or cause of action relating to any matter covered by this covenant not
to
xxx, and the Company covenants that it will not knowingly instigate or encourage
any third party to take any of the actions enumerated in this Section 7.6 or
announce an intention to, or enter into any discussions, negotiations,
arrangements or understandings with any third party with respect to any of
the
actions enumerated in this Section 7.6.
-10-
8. CERTAIN
REPRESENTATIONS AND WARRANTIES
8.1 The
Company represents and warrants to each of the Committee Parties that: (a)
this
Agreement has been duly executed and delivered and its execution, delivery
and
performance have been approved by the Company Board and does not violate its
Certificate of Incorporation, Bylaws or any agreement to which it is a party;
and (b) this Agreement constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
as
such enforcement may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
8.2 Each
of
the Committee Parties represents to the Company that: (a) this Agreement has
been duly executed and delivered and the execution, delivery and performance
of
this Agreement by such Committee Party has been approved by its respective
managers, members, administrators, partners, or other governing bodies or
authorities, as the case may be, and does not violate its respective
organizational or constituent document, (b) its execution, delivery and
performance of this Agreement does not violate any agreement to which it is
a
party; (c) this Agreement constitutes a valid and binding obligation of such
Committee Party, enforceable against it in accordance with its terms, except
as
such enforcement may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally; (d) such Committee
Party has consulted with counsel of its choice in connection with its decision
to enter into and be bound by this Agreement. As of May 18, 2007 (the date
of
the filing of Amendment No. 1 to Schedule 13D by the Committee Parties), the
Committee Parties Beneficially owned in the aggregate, a total of 1,515,152
shares of the Company's common stock, and no other Company Voting Securities,
and each Committee Party Beneficially owned as of such date the number of shares
ascribed to such Committee Party in Amendment No. 1 to Schedule 13D filed by
the
Committee Parties with the SEC on May 18, 2007.
9. REMEDIES
The
Company and each of the Committee Parties acknowledge and agree that the
covenants and agreements set forth in this Agreement are an essential inducement
for the Company and the Committee Parties to have entered into this Agreement,
and the restrictions imposed herein are not greater than are fair and reasonable
and necessary for the protection of the Company and the Committee Parties in
light of the substantial harm that the Company and the Committee Parties will
suffer in the event of a breach of any of the provisions of said covenants
or
agreements. The Company and the Committee Parties further acknowledge and agree
that the parties would not have an adequate remedy at law and would be
irreparably harmed in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that, in the event of an actual breach of
this Agreement by the Company, or the Committee Parties (or any of their
Affiliates, Associates or Representatives), each party hereto shall be entitled
to injunctive or other equitable remedy or relief to enjoin, restrain, prohibit
and/or prevent breaches or violations of this Agreement and to specifically
enforce the terms and provisions hereof (including, without limitation,
requiring the Committee Parties and any nominee, broker or other Person acting
on their behalf, to dispose of shares of Common Stock in order to be in
compliance with the terms of this Agreement), in addition to any other remedy
at
law or in equity to which such party may be entitled.
-11-
10. MISCELLANEOUS
10.1 This
Agreement constitutes the entire agreement of the parties with respect to its
subject matter and supersedes any and all prior representations, agreements
or
understandings, whether written or oral, between or among any of them with
respect to such subject matter. This Agreement may be amended only by a written
agreement duly executed by the parties.
10.2 This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Delaware without regard to its conflict of law principles.
Exclusive jurisdiction to resolve any dispute arising under or in connection
with this Agreement is hereby conferred on the Delaware Court of Chancery and
any state appellate court therefrom within the State of Delaware (or, if such
Court determines that it lacks jurisdiction over the particular dispute, any
other applicable court of the State of Delaware) or, if the dispute involves
issues of federal law or over which the Delaware Court of Chancery (or such
other court of the State of Delaware) lacks or declines jurisdiction, on the
United States District Court for the District of Delaware. The Parties hereby
submit to the exclusive jurisdiction of each of such courts. The Parties hereby
consent to the service of process in connection with any action by registered
or
certified mail.
10.3 This
Agreement may not be assigned by any Party without the prior written consent
of
the other Parties. This Agreement shall be binding upon, and inure to the
benefit of, the respective successors and permitted assigns of the Parties.
Except as expressly set forth in Section 7.4, this Agreement shall confer no
rights or benefits upon any Person other than the Parties.
10.4 Any
waiver by any Party of a breach of any provision of this Agreement shall not
be
deemed to be a waiver of any other breach of such provision or of any breach
of
any other provision of this Agreement.
10.5 This
Agreement may be executed in counterparts, each of which shall constitute an
original but all of which shall together constitute a single
instrument.
10.6 The
Company shall reimburse the Committee Parties for their reasonable, actual
documented out-of-pocket costs in respect of fees and expenses, incurred through
the date hereof, not to exceed an aggregate of $40,000 plus actual mailing
costs
incurred prior to May 31, 2007 paid and payable by them, in connection with
the
Proxy Contest. Any amounts due to the Committee Parties will be paid promptly
after the 2007 Annual Meeting.
-12-
10.7 If
at any
time subsequent to the date hereof, any provision of this Agreement shall be
held by any court of competent jurisdiction to be illegal, void or
unenforceable, such provision shall be of no force and effect, but the
illegality or unenforceability of such provision shall have no effect upon
the
legality or enforceability of any other provision of this
Agreement.
-13-
IN
WITNESS WHEREOF, this Agreement has been executed by each of the parties as
of
the date first above written.
Peerless
Systems Corporation
| By: /s/ Xxxxxxx X. Roll | /s/ Xxxxxxx X. Xxxx | |
|
Xxxxxxx
X. Roll
CEO
and President
|
Xxxxxxx X. Xxxx | |
| Pembridge Value Opportunity Fund LP | ||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxx | |
|
Xxxxxxx
X. Xxxx
Portfolio
Manager
|
||
| Pembridge Value Advisors LLC | ||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxx | |
|
Xxxxxxx
X. Xxxx
Manager
|
||
| Pembridge Capital Management LLC | ||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxx | |
|
Xxxxxxx
X. Xxxx
Manager
|
||
| Sherwood Advisors LLC | ||
| |
|
|
| By: | /s/ Rahul Xxxxx Xxxxxxxx | |
|
Rahul
Xxxxx Xxxxxxxx
Managing
Member
|
||
| Managed Account I | ||
| |
|
|
| By: | /s/ Rahul Xxxxx Xxxxxxxx | |
|
Rahul
Xxxxx Xxxxxxxx
|
||
|
Managed
Account II
|
||
| |
|
|
| By: | /s/ Rahul Xxxxx Xxxxxxxx | |
| Rahul Xxxxx Xxxxxxxx | ||
-14-
| Whitehall Capital Investors IV, LLC | ||
| |
|
|
| By: | /s/ Xxxxxxxx X. Xxxxx | |
|
Xxxxxxxx
X. Xxxxx
Manager
|
||
| E2 Investment Partners LLC | ||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxx | |
|
Xxxxxxx
X. Xxxx
Manager
|
||
| /s/ Xxxx X. Xxxxxx | ||
|
|
Xx. Xxxx X. Xxxxxx | |
| /s/ Rahul Xxxxx Xxxxxxxx | ||
|
|
Mr. Rahul Xxxxx Xxxxxxxx | |
| /s/ Xxxx Xxxxxxxx | ||
|
|
Xx. Xxxx Xxxxxxxx (Individually and as attorney-in-fact for each of Xxxxxxx Xxxxxxxx, Xxxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxxxx Xxxxxxxx, and Bathgate Family Partnership II, Ltd) | |
| /s/ Xxxxxx Xxxxxxxx | ||
|
|
Xx. Xxxxxx Xxxxxxxx | |
-15-
Agreed
to
solely with respect to Section 7.6:
/s/
Xxxxxx X.
Xxxxxxx
Xxxxxx
X.
Xxxxxxx
/s/
Xxxxx X.
Xxxx
Xxxxx
X.
Xxxx
/s/
Xxxxxxx X. Xxxxxx,
Xx.
Xxxxxxx
X. Xxxxxx, Xx.
/s/
Xxxxxxx X.
Roll
Xxxxxxx
X. Roll
-16-
