EMPLOYMENT AGREEMENT
 
Peerless Systems Corporation, a Delaware Corporation, (the “Company”) and its
successors and assigns, and Timothy E. Brog, a natural person (“Executive”)
(collectively, the “Parties”), make this EMPLOYMENT AGREEMENT (“Agreement”) as
of August 26, 2010.
 
RECITALS
 
WHEREAS, the Executive has been instrumental to the Company since he joined its
Company’s Board of Directors in 2007; and
 
WHEREAS, the Company wishes to employ Executive and Executive wishes to be
employed as the Company’s Chief Executive Officer.
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Executive agree as follows:
 
AGREEMENT
 
1.             Term.  The Company hereby agrees to employ Executive as Chief
Executive Officer commencing on the date hereof and continuing for a period of
one (1) year.  On each of the first and second anniversaries hereof, Executive’s
employment and this Agreement shall be automatically extended for an additional
one (1) year period unless terminated by either party to this Agreement by
written notice given to the other party not less than one hundred and twenty
(120) days prior to such anniversary.  From and after the third anniversary
hereof, this Agreement may be terminated by either party upon ninety (90) days’
notice to the Executive.


 
2.             Duties.
 
(a)           Duties and Responsibilities. The Executive will report to the
Board of Directors (the “Board”).  Executive shall be employed as Chief
Executive Officer and shall perform and discharge the duties which may be
assigned to him from time to time by the Board in connection with the conduct of
the Company’s business as well as those duties which are normally and
customarily vested in a Chief Executive Officer of a corporation.  Executive’s
job responsibilities shall include, but not be limited to, anything reasonably
requested or required of Executive on behalf of the Company.
 
(b)           Extent of Services and Business Activities.  Executive shall
devote his full-time efforts to the business of the Company and shall not devote
material time to other activities except (i) for serving on the Board of
Directors of Eco-Bat Technologies Ltd or (ii) with the prior written consent of
the Board.  Executive covenants and agrees that for so long as he is employed by
the Company, Executive shall not, whether as an executive, employee, employer,
consultant, agent, principal, partner, member, stockholder, corporate officer or
director, or in any other individual or representative capacity, for
compensation, engage in or participate in or render material services to any
other person or entity, provided, however, that, notwithstanding the foregoing,
Executive (a) may invest in securities of any entity, solely for investment
purposes, if (x) such securities are traded on any national securities exchange
or the National Association of Securities Dealers, Inc. Automated Quotation
System, and (y) Executive does not, directly or indirectly, own 4.9% or more of
any class of securities of such entity.
 
 
 

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(c)           Location.  Executive shall regularly perform his duties from a
newly established Peerless office (the “Office”) at such location as reasonably
determined by the Executive and agreed to by the Board.  In addition to spending
time at the Office, Executive may be required to travel from time to time in
order to perform his duties hereunder.
 
3.             Compensation.


(a)                 Base Salary.  From and after the date hereof until the
termination of his employment, Executive shall be paid an annual base salary
(“Base Salary”) of three hundred forty thousand dollars ($340,000).  Executive’s
Base Salary shall be payable in installments consistent with the payroll
practices established by the Company with respect to its senior executive
employees.


(b)                 Equity and Incentive Compensation.  On the date hereof, the
Company shall issue to the Executive a total of 200,000 restricted shares (the
“Restricted Shares”) of common stock, par value $0.001 per share, of the Company
(the “Common Stock”) pursuant to the agreement attached hereto as Exhibit A,
which shall vest in accordance with the schedule set forth below.  Such
Restricted Shares shall vest as follows:
 
Number of Restricted Shares Vested
Target Price
50,000
$3.75
50,000
$4.00
50,000
$4.25
50,000
$4.50



The Restricted Shares shall vest on the first date before the third anniversary
hereof, if any, that the average closing price of the Common Stock as reported
on the Nasdaq Capital Market for any fifteen consecutive trading days
immediately prior to the such date (“Average Price”) is greater than or equal to
the Target Price for such Restricted Shares set forth in the table above,
provided that Executive remains employed by the Company i as of the vesting
date.  Notwithstanding the foregoing, if the Executive’s employment pursuant to
this Agreement is terminated without Cause: (i) if 150,000 of the Restricted
Shares have vested on or before the date of such termination (the “Termination
Date”), then the remaining 50,000 Restricted Shares shall vest; and (ii) if less
than 150,000 of the Restricted Shares have vested on or before the Termination
Date, then 100,000 Restricted Shares shall vest and any other unvested
Restricted Shares shall expire and have no further effect.  Notwithstanding
anything to the contrary in this Agreement, all Restricted Shares that have not
vested on or before the third anniversary hereof shall expire and shall have no
further effect.
 
 
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(c)                 Options and Bonus.  Executive is eligible to receive
semi-annual incentive options and bonus payments at the sole discretion of the
Board.  All equity awards shall be subject to the terms and conditions set forth
in the Peerless 2005 Incentive Award Plan (the “Plan”) and such other terms
approved by the Board.


(d)                 Payment.  Payment of all compensation to Executive hereunder
shall be made in accordance with the relevant written Company policies in effect
from time to time, including normal payroll practices, and shall be subject to
all applicable employment and withholding taxes.  This provision shall survive
the termination of Executive’s employment with the Company, for any reason.
 
4.             Other Employment Benefits.
 
(a)           Business Expenses.  Upon submission of itemized expense
statements, in the manner as shall be specified by the Company, Executive shall
be entitled to reimbursement for reasonable business and travel expenses duly
incurred by Executive in the performance of his duties under this Agreement,
pursuant to written Company policy and any relevant written policies established
by the Board and provided to Executive.
 
(b)           Benefit Plans.  To the extent offered by the Company, Executive
shall be entitled to participate, on a basis commensurate with his position, in
the Company’s medical insurance, retirement (e.g., non-matching 401(k) plan) and
other benefit plans pursuant to their terms and conditions during the term of
this Agreement. Nothing in this Agreement shall preclude the Company or any
affiliate of the Company from terminating or amending any employee benefit plan
or program from time to time.
 
(c)           No Other Benefits.  Executive understands and acknowledges that
the compensation and benefits specified in Paragraphs 3, 4 and 5 of this
Agreement are the only compensation and benefits he is entitled to receive under
this Agreement.
 
5.             Termination of Employment.
 
(a)           Payments Upon Termination.  If Executive’s employment is
terminated for any reason by either party, the Company shall promptly pay or
provide to the Executive, or his estate, (i) the Executive’s earned but unpaid
Base Salary accrued through the date of termination, (ii) accrued, but unpaid,
vacation time through such date of termination, (iii) reimbursement of any
business expenses incurred by the Executive prior to the Date of Termination
that are reimbursable under Paragraph 4(a) above, and (iv) any vested benefits
and other amounts due to Executive under any plan, program, policy of, or other
agreement with, the Company (subsections (i) to (iv), above, are referred to
together as the “Accrued Obligations”).  If Executive’s employment is terminated
by the Company without Cause (as Cause is defined below) for any reason prior to
the end of this agreement, the Company shall pay Executive in a lump sum payment
any remaining payments owed through the end of this Agreement.
 
(b)           Severance Payments.  In addition to the payments set forth in
Section 5(a), in the event Executive’s employment is terminated by the Company
without Cause (as Cause is defined below) or resulting from a non-renewal of
this Agreement without Cause and Executive executes a general release in favor
of the Company in the form attached hereto as Exhibit B, the Company shall pay
(i) Executive his Base Salary for a period of six months (the “Severance
Period”) and (ii) Executive’s health insurance (i.e., medical, dental and
vision) for the Severance Period (collectively, the “Severance Payment”).  The
Severance Payment, if any, would be payable in a lump sum at the termination of
Executive’s employment.
 
 
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(c)           Benefits.  Executive shall have one year from his last day of
employment to exercise any vested but unexercised stock options.
 
(d)           Definition of Cause.  For purposes of this Agreement, Cause shall
be defined as (i) Executive’s conviction, pleading guilty or no contest with
respect to a felony involving dishonesty or moral turpitude, (ii) Executive’s
commission of any act of theft, fraud, dishonesty, or falsification of any
employment or Company records (iii) Executive’s refusal without proper legal
reason to substantially perform the duties and responsibilities required of
Executive, or (iv) any material breach by Executive of any material term of this
Agreement and/or of Executive’s fiduciary duties to the Company.
 
6.           Executive’s Duties Upon Termination.


(a)         Cooperation.  After notice of termination, Executive shall, at the
Company’s expense and subject to Executive’s professional availability,
cooperate with the Company, as reasonably requested by the Company, to effect a
transition of Executive’s responsibilities and to ensure that the Company is
aware of all matters being handled by Executive.


(b)         Return of Company Property.  Within seven days of the termination of
Executive’s employment under this Agreement for any reason, Executive will
return all Company property in Executive’s possession to the Company.
 
7.           Assignment and Transfer.  Executive’s rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, and any
purported assignment, transfer or delegation thereof shall be void.  This
Agreement shall be assignable by the Company and inure to the benefit of, and be
binding upon and enforceable by, any purchaser of substantially all of Company’s
assets, any corporate successor to Company or any assignee thereof; provided
however that such assignee assumes in writing the Company’s obligations
thereunder.
 
8.           No Inconsistent Obligations.  This Agreement shall represent the
sole agreement with Company as to the subject matter herein, and Executive has
no material obligations, legal or otherwise, inconsistent with the terms of this
Agreement or with Executive undertaking employment with the Company.  Executive
represents and warrants that Executive has the right and power to enter into
this Agreement, to perform Executive’s obligations hereunder and by entering
into this Agreement and performing Executive’s obligations hereunder Executive
is not in conflict with any agreement with any third party.  The Company
represents and warrants that the Company has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder.
 
 
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9.           Miscellaneous.
 
(a)           Survival.  The provisions of this Agreement, including, without
limitation Paragraphs 9(c) (Arbitration), contained herein shall survive the
termination of employment.
 
(b)           Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to conflict
of law principles.
 
(c)           Arbitration .  With the exception of any claims for workers
compensation, unemployment insurance, claims before any governmental
administrative agencies or claims related to the National Labor Relations Act,
any controversy relating to this Agreement or Executive’s employment shall be
settled by binding arbitration according to the American Arbitration
Association’s Employment Arbitration Rules and Mediation Procedures (available
at http://www.adr.org) and subject to the Federal Arbitration Act and the
Federal Rules of Civil Procedure (including their mandatory and permission
rights to discovery.)  This provision to arbitrate applies to both Company and
Executive.  Such arbitration shall be presided over by a single arbitrator in
Delaware.  Such binding arbitration is applicable to any and all claims under
state and federal employment related statutes including, without limitation, the
Fair Employment and Housing Act, the Age Discrimination in Employment Act, the
Family Medical Leave Act, the Title VII of the Civil Rights Act and any similar
statute law or regulation of the state of Delaware, as well as any claims
related to a claimed breach of this Agreement.  The Company shall bear all costs
uniquely associated with the arbitration process, including the arbitrator’s
fees where required by law.  The arbitrator shall have the authority to award
any damages authorized by law, including, without limitation, costs and
attorneys’ fees.  The Parties agree to execute all documents necessary to keep
the documents, findings, and award, if any, of the arbitration confidential,
including, without limitation, execution of a protective order.
 
(d)           Amendment. This Agreement may be amended only by a writing signed
by Executive and by a duly authorized representative of the Company (other than
Executive) as approved by the Board.
 
(e)            Severability. If any term, provision, covenant or condition of
this Agreement, or the application thereof to any person, place or circumstance,
shall be held to be invalid, unenforceable or void, the remainder of this
Agreement and such term, provision, covenant or condition as applied to other
persons, places and circumstances shall remain in full force and effect,
provided however, that any such provision found invalid, unenforceable or void
shall be deemed amended only to the extent necessary and shall preserve the
intent of the parties hereto.
 
(f)              Construction. The headings and captions of this Agreement are
provided for convenience only and are intended to have no effect in construing
or interpreting this Agreement.  The language in all parts of this Agreement
shall be in all cases construed according to its fair meaning and not strictly
for or against the Company or Executive.
 
(g)              Nonwaiver. No failure or neglect of either party hereto in any
instance to exercise any right, power or privilege hereunder or under law shall
constitute a waiver of any other right, power or privilege or of the same right,
power or privilege in any other instance. All waivers by either party hereto
must be contained in a written instrument signed by the party to be charged and,
in the case of the Company, by an officer of the Company (other than Executive)
or other person duly authorized by the Company.
 
 
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(h)              I.R.C. 409A.  Unless otherwise expressly provided, any payment
of compensation by Company to Executive, whether pursuant to this Agreement or
otherwise, shall be made within two and one-half months (2½ months) after the
later of the end of the calendar year of the Company’s fiscal year in which
Executive’s right to such payment vests (i.e., is not subject to a “substantial
risk of forfeiture” for purposes of Code Section 409A of the Internal Revenue
Code of 1986, as amended (“Code”)).  To the extent that any severance payments
come within the definition of “involuntary severance” under Code Section 409A,
such amounts up to the lesser of two times the Executive’s annual compensation
for the year preceding the year of termination or two times the 401(a)(17) limit
for the year of termination, shall be excluded from “deferred compensation” as
allowed under Code Section 409A, and shall not be subject to the following Code
Section 409A compliance requirements.  All payments of “nonqualified deferred
compensation” (within the meaning of Section 409A) are intended to comply with
the requirements of Code Section 409A, and shall be interpreted in accordance
therewith. Neither party individually or in combination may accelerate any such
deferred payment, except in compliance with Code Section 409A, and no amount
shall be paid prior to the earliest date on which it is permitted to be paid
under Code Section 409A.  In the event that Executive is determined to be a “key
employee” (as defined in Code Section 416(i) (without regard to paragraph (5)
thereof)) of Company at a time when its stock is deemed to be publicly traded on
an established securities market, payments determined to be “nonqualified
deferred compensation” payable following termination of employment shall be made
no earlier than the earlier of (i) the last day of the sixth (6th) complete
calendar month following such termination of employment, or (ii) Executive’s
death, consistent with the provisions of Code Section 409A.  Any payment delayed
by reason of the prior sentence shall be paid out in a single lump sum at the
end of such required delay period in order to catch up to the original payment
schedule.   Notwithstanding anything herein to the contrary, no amendment may be
made to this Agreement if it would cause the Agreement or any payment hereunder
not to be in compliance with Code Section 409A.
 
(i)              Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing.  Any notice, request, demand, claim
or other communication hereunder will be deemed duly given as of the day such
information is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:


If to Executive to the address set forth on Exhibit C hereto.


With a copy to:


If to Company:
Peerless Systems Corporation
Attn:  Chairman of the Compensation Committee
2361 Rosecrans Avenue, Suite 440
El Segundo, CA 90245
Tel: 850.983.5317
 
 
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With a copy to:
Peerless Systems Corporation
Attn:  General Counsel
2361 Rosecrans Avenue, Suite 440
El Segundo, CA 90245
Tel: 850.983.5317


Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery with receipt acknowledged, expedited
courier, messenger service, telecopy, telex, or electronic mail), but no such
notice, request, demand, claim, or other communication will be deemed to have
been duly given unless and until it is received by the intended recipient (which
shall be evidenced by fax or e-mail confirmation, or registered receipt, or
declaration via a messenger).  Any Party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
 
(i)           Assistance in Litigation. Executive shall, during and after
termination of employment, upon reasonable notice, furnish such information and
proper assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become a party; provided, however, that such assistance
following termination shall be furnished at mutually agreeable times and for
mutually agreeable compensation.
 
(j)           Executive Acknowledgment. The undersigned Executive hereby
acknowledges that he has had the option to consult legal counsel in regard to
this Agreement, that he has read and understands this Agreement, that he is
fully aware of its legal effect, and that he has entered into it freely and
voluntarily and based on his own judgment and not on any representations or
promises other than those contained in this Agreement (k)Counterparts. This
Agreement may be executed in two (2) or more counterparts, each of which will be
deemed an original and all of which together will constitute one and the same
instrument.
 
(l)           Entire Agreement. This Agreement and the documents referenced
herein and executed herewith contain the entire agreement and understanding
between the Parties hereto and supersede any prior or contemporaneous written or
oral agreements, representations and warranties between them respecting the
subject matter hereof.
 
 
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date set forth above.
 
Peerless Systems Corporation, Inc. (“Company”)
 
By:  /s/ Steven M. Bathgate
Name:  Steven M. Bathgate
Title: Director and Authorized Signatory
   
Dated:  August 26, 2010
 
Timothy Brog (“Executive”)
 
Dated:  August 26, 2010

 
 
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