EMPLOYMENT AGREEMENT
 
Peerless Systems Corporation, a Delaware Corporation, (the “Company”) and its
successors and assigns, and William Neil, a natural person (“Executive”)
(collectively, the “Parties”), make this EMPLOYMENT AGREEMENT (“Agreement”) as
of May 26, 2009 (“Commencement Date”).
 
RECITALS
 
1.           WHEREAS, Executive is currently employed by the Company as the
Chief Financial Officer and Acting Chief Executive Officer.
 
2.           WHEREAS, the Company wishes to employ Executive and Executive
wishes to be employed by Company in said position.
 
3.           WHEREAS, the Company and Executive thus enter into this Agreement
to outline the terms and conditions of Executive’s new position with Company and
except as set forth herein, simultaneously wish to extinguish any and all
obligations owed by each Party to the other arising out of their prior
employment relationship, including that certain Employment Agreement dated June
14, 2006 between Executive and the Company and any amendments, addendums or
modifications thereto (the “Former Employment Agreement”).
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Executive agree as follows:
 
AGREEMENT
 
1.           Employment.
 
(a)           At-Will.  The Term of this Agreement shall begin on the
Commencement Date and shall continue “at-will” until either party elects to
terminate this Agreement pursuant to Paragraph 5 (the “Term”).
 
(b)           Duties and Responsibilities.  The Executive will report to the
Board of Directors (the “Board”) or an appointee of the Board.  Executive shall
be employed as Chief Financial Officer and Acting Chief Executive Officer and
shall perform and discharge well and faithfully 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 Financial Officer and Acting 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.
 
(c)           Extent of Services and Business Activities.  Executive shall
devote his full-time efforts to the business of the Company and shall not devote
time to other activities except with the prior consent of the Board of the
Company.  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, whether or not
for compensation, engage in or participate in or render services to any other,
provided, however, that, notwithstanding the foregoing, Executive (a) may invest
in securities of any entity, solely for investment purposes and without
participating in the business thereof, 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 two percent (2%) or more of any class of securities of such
entity.
 

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(d)           Location.  During the Term, Executive shall regularly perform his
duties from the Company’s principal location (the “Headquarters”).  In addition
to spending time at the Headquarters, Executive may be required to travel from
time to time in order to perform his duties hereunder.
 
2.           Compensation.
 
(a)           Base Salary.  Executive shall be paid an annual base salary (“Base
Salary”) during the Term of two hundred and twenty-five thousand dollars
($225,000.00).  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.  Executive’s Base Salary shall be effective
retroactively from September 16, 2008.  Executive shall be paid any retroactive
amounts as soon as practicable.
 
(b)           Retention Bonus.  Executive shall be entitled to receive a
retention bonus provided Executive remains employed by the Company in good
standing as of the applicable payment date:

Payment Date
Amount
   
February 1, 2010
$20,000
   
February 1, 2011
$20,000

 
(c)           Incentive Compensation.  Executive is also eligible to receive
annual incentive payments at the sole discretion of the Board of the Company.
 
(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.
 
3.           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.  The Company shall also be responsible
for reimbursement at the rate of $.48 per mile in travel expenses for travel
between Executive’s home and the Company’s facility in El Segundo, California.
 
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(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 2 and 3 of this Agreement
are the only compensation and benefits he is entitled to receive under this
Agreement.
 
4.           Confidentiality; Unfair Competition; Non-Solicitation
Agreement.  Concurrent with Executive’s execution of this Agreement, Executive
shall execute and deliver to the Company a non-disclosure and confidentiality
agreement in the form attached hereto as Exhibit A (the “Non-Disclosure
Agreement”).  The terms of the Non-Disclosure Agreement are incorporated by this
reference as if set forth in full.
 
5.           Termination of Employment.
 
(a)           Termination of At-Will Employment.  Either the Company or
Executive may terminate Executive’s employment at any time with or without
advance notice or cause.  In such an event, Executive will only be entitled to
the Accrued Obligations as set forth below.
 
(b)           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 3(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”).
 
(c)           Severance Payments.  In addition to the Accrued Obligations, in
the event Executive’s employment is terminated by the Company without Cause (as
Cause is defined below) and Executive executes a general release in favor of the
Company in the form attached hereto as Exhibit “B”, Executive shall receive (i)
a lump sum payment of $25,000 and (ii) monthly consulting payments of $2,100
less deductions required by law for a thirty-six (36) month period.
 
(d)           Benefits.   Executive and his covered dependents shall also
receive healthcare coverage through June 15, 2012 similar to the coverage
provided to the other Company’s employees provided that Executive elects and is
eligible to continue healthcare benefits under COBRA and/or CAL COBRA.
 
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(e)           Definition of Cause.  For purposes of Section 5(c) only, 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 engagement in misconduct
that is detrimental to the Company’s reputation or business, (iv) Executive’s
refusal without proper legal reason to substantially perform the duties and
responsibilities required of Executive, or (v) any breach by Executive of any
material term of this Agreement (including without limitation the Non-Disclosure
Agreement) and/or of Executive’s fiduciary duties to the Company.
 
(f)           Exercise of Options.   Executive shall be entitled to exercise any
vested options in the Company’s common stock through the term of the consulting
agreement as set forth above subject to the terms and conditions of the relevant
governing option plan.
 
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.
 
(c)           Resignation of Office.  On the termination of Executive’s
employment for whatever reason, Executive agrees that Executive shall resign any
directorship or any other offices held by Executive in the Company or any
subsidiary of 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 and the Accompanying
Non-Disclosure Agreement shall represent the sole agreement with Company as to
the subject matter herein, and Executive has no other employment relationship
and is not subject to any other employment agreement with the Company or any
other affiliate of the Company and Executive has no 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.           Mutual Release of Claims Under Prior Employment Arrangement.  In
exchange and as consideration for each Party entering into this Agreement, each
Party agrees to release the other from any claims they may have against the
other, as stated below:
 
(a)           Each Party hereby voluntarily, knowingly and willingly releases,
acquits and forever discharges the other Party including, without limitation,
each of their former, current and future parents, subsidiaries, divisions,
affiliates, predecessors, successors and assigns and all of their current,
former and future agents, employees, officers, directors, shareholders, members,
joint ventures, attorneys, representatives, predecessors, successors, assigns,
owners and servants) from any and all claims, costs or expenses of any kind or
nature whatsoever, whether known or unknown, foreseen or unforeseen, which
against any or all of them any Party ever had, now has or hereinafter may have,
against the other Party, up to and including the date of the Parties’ execution
of this Agreement, including but not limited to the Former Employment Agreement.
 
(b)           It is a condition hereof, and it is the Parties intention in the
execution of the General Release in subparagraph 9(a), above, that the same
shall be effective as a bar to each and every claim hereinabove specified, and
in furtherance of this intention, the Parties hereby expressly waive any and all
rights and benefits conferred upon them by Section 1542 of the California Civil
Code, which provides:
 
A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which
if known by him or her must have materially affected his or her settlement with
the debtor.
 
(c)           Executive further acknowledges and agrees that he is not owed any
wages, commissions, bonuses, MBO’s, accrued but unused vacation pay or
unreimbursed business expenses except as set forth herein arising out of or
relating to Executive’s prior employment with the Company.
 
10.           Miscellaneous.
 
(a)           Survival.  The provisions of this Agreement, including, without
limitation Paragraphs 10(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 California without regard to
conflict of law principles.
 
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(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 California, 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:

William R. Neil
44000 Lake View Road
Lake Hughes, California  93532
 
If to Company:
 
Peerless Systems Corporation,
a Delaware corporation
Attn:  Chairman of the Board
2381 Rosecrans Avenue, Suite 400
El Segundo, CA 90245
Tel: (310) 297-3146
 
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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, expedited courier, messenger service,
telecopy, telex, ordinary mail, 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.  Further, Executive
hereby agrees to abide by all federal, state, and local laws, ordinances and
regulations.
 
(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.
 
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/ Timothy Brog
Name:  Timothy Brog
Title: Chairman of the Board
 
Dated: 5/26/09
 
/s/ William Neil
Mr. William Neil (“Executive”)
 
Dated: 5/27/09

 
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