EXHIBIT 10.88

CONFIDENTIAL

CONFIDENTIAL SEPARATION AGREEMENT
AND MUTUAL RELEASE

           THIS CONFIDENTIAL SEPARATION AGREEMENT AND MUTUAL RELEASE
(“Agreement”) is entered into as of this 4th day of June 2004, (“Date of this
Agreement”) by and between Peerless Systems Corporation (the “Company”), on the
one hand, and Denis W. Retoske (the “Executive”), on the other hand.

     WHEREAS, the employment relationship between the Company and Executive is
being terminated;

     WHEREAS, Executive and the Company desire to specify the terms of the
separation. For and in consideration of the foregoing recitals and the mutual
covenants and agreements set forth herein, the Company and the Executive agree
as follows:

           1.       Employment Status. Executive hereby resigns from all
positions as an employee and officer of the Company and any affiliates effective
June 4, 2004, (the “Resignation Date”). Executive has received all compensation
earned through the Resignation Date, including without limitation, any accrued,
unused vacation pay. Executive understands that he will not be entitled to any
compensation or benefits of employment beyond the Resignation Date, except as
set forth below. Executive further understands that he is giving up all rights
and benefits of employment with the Company except as set forth below.

           2.       Return of Company Property. Executive will return to the
Company, all files, records, reports, data, correspondence, memoranda and other
documents (including handwritten notes regarding, and drafts of same),
equipment, pager, keys and all other physical, intellectual or personal property
which Executive received from the Company and which are the property of the
Company on or before the Resignation Date. Executive shall be entitled to retain
his laptop computer and his office chair until the completion of consulting
support to the Board of Directors, or as otherwise determined.

           3.       Severance Payments to Executive. In consideration of the
release of all claims, the Company agrees to pay the Executive (“the Payments”)
wages equal to his regular base pay of $157,500.00 for a period of six
(6) months beginning June 7, 2004 and ending December 7, 2004 in approximately
equal installments over that period, less withholding required by law and/or
elected by Executive.

     The Payments hereunder be made in accordance with the Company’s payroll
schedule; provided however, that the first payment hereunder shall be made on
the first regular pay date that falls not less than eight (8) days after
Executive’s execution of the Agreement, provided that Executive does not revoke
it in accordance with its terms. In the event that one or more pay dates

      

(06-03-04)   I   Initials: Company ___Executive ___

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL

have passed between June 7, 2004 and the date on which the first payment is due,
the first payment shall include payment for the entire period between June 7,
2004 and the first payment. Payments shall be direct deposited to a bank account
designate by the Executive and the notice of payment to the Executive shall be
sent by regular mail to the Executive at 1850 Capri Circle, Costa Mesa, CA
92626, or to a further address provided to the Company by the Executive.

     Except as otherwise set out herein, the Payments shall be in lieu of any
other compensation or benefit, including, without limitation, any further bonus,
payments arising out of the Transaction Incentive Plan, oral and/or written
agreements between the Executive and Company as referenced in the 2002 Proxy and
the 2003 Proxy, or other severance pay plan or policy of the Company. This
represents the Company’s sole financial obligation to Executive under this
Agreement.

     Provided that Executive timely elects to continue his and his dependents’
health care coverage in accordance with COBRA, an estimated dependent health
insurance premium shall be calculated and deducted from the Payments, and shall
be applied to Executive’s COBRA premium, and the Company shall pay any
additional COBRA premium for Executive and his dependent’s COBRA coverage
beginning July 1, 2004 and continuing through and including June 30, 2005.
Thereafter, Executive shall be eligible to continue health care benefits at his
own expense in accordance with COBRA.

           4.       Vested Stock Options. The Company agrees that the
Executive’s stock options granted to the Executive prior to this June 4, 2004
and unvested as of June 4, 2004, shall and have become immediately vested to the
benefit of the Executive, and in consideration of Executive’s designation by the
Company during employment as a Section 16 officer, said Executive shall have
until and including June 4, 2005 to exercise those employee stock options that
are vested to Executive as of the Date of this Agreement.

           5.       Release of the Company by Executive.

                 a.       General Release. Executive hereby releases and forever
discharges the Company, its parents, subsidiaries, affiliates, predecessors,
successors and each of it their associates, owners, stockholders, members,
assigns, employees, agents, directors, officers, partners, representatives,
lawyers, donors or contributors and all persons acting by, through, under, or in
concert with them, or any of them, (collectively the “Releasees”) of and from
any and all manner of action or actions, causes or causes of action, in law or
in equity, suits, debts, liens, contracts, agreements, promises, liabilities,
claims, demands, damages, losses, costs or expenses, of any nature whatsoever,
known or unknown, fixed or contingent (hereinafter called “Claims”), which they
now have or may hereafter have against the Releasees by reason of any and all
acts,

      

(06-03-04)   2   Initials: Company ___Executive ___

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL

omissions, events or facts occurring or existing prior to the date hereof,
except as expressly provided herein. The Claims released hereunder include,
without limitation, any alleged breach of any employment agreement; any alleged
breach of any covenant of good faith and fair dealing, express or implied; any
alleged torts or other alleged legal restrictions relating to the Executive’s
employment and the termination thereof; and any alleged violation of any
federal, state or local statute or ordinance including, without limitation,
Title VII of the Civil Rights Act of 1964, as amended, the Federal Age
Discrimination in Employment Act, the Americans With Disabilities Act, and any
state or local laws of similar effect. This Release shall not apply to
Executive‘s right to receive the benefits provided for in the Agreement, or to
retirement and/or employee welfare benefits, if any, that have vested and
accrued prior to his separation from employment with the Company.

           EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE IS FAMILIAR WITH THE PROVISIONS
OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE 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.”

           EXECUTIVE BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES
ANY RIGHTS EXECUTIVE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR
COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

                 b.       Release of Age Discrimination Claims. Executive agrees
and expressly acknowledges that this Agreement includes a waiver and release of
all claims which Executive has or may have under the Age Discrimination in
Employment Act of 1967, as amended, 29 U.S.C. § 621, et seq. (“ADEA”). Executive
understands and agrees that:

                       (1)       This paragraph, this release and this Agreement
are written in a manner calculated to be understood by Executive.

      

(06-03-04)   3   Initials: Company ___Executive ___

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL

                       (2)       The waiver and release of claims under the ADEA
contained in this Agreement does not cover rights or claims that may arise after
the date on which Executive signs this Agreement.

                       (3)       This Agreement provides for consideration in
addition to anything of value to which Executive is already entitled.

                       (4)       Executive is advised to consult an attorney
before signing this Agreement.

                       (5)       Executive is granted twenty-one (21) days after
Executive is presented with this Agreement to decide whether or not to sign this
Agreement. If Executive executes this Agreement prior to the expiration of such
period, Executive does so voluntarily and after having had the opportunity to
consult with an attorney, and waives the remainder of the twenty-one (21) day
period.

                       (6)       Executive will have the right to revoke this
Agreement under the ADEA within seven (7) days of signing this Agreement.

                 c.       Manner of Revocation. In the event that Executive
elects to revoke this Agreement, he shall deliver within the time period
prescribed above to Howard J. Nellor a writing stating that he is revoking this
Agreement and subscribed by the Executive.

                 d.       Consequences of Revocation. In the event that
Executive should elect to revoke this Agreement as described in the paragraph
above, this Agreement shall be null and void in its entirety.

                 e.       No Assignment of Claims. Executive represents and
warrants to the Releasees that there has been no assignment or other transfer of
any interest in any Claim which Executive may have against the Releasees, or any
of them, and Executive agrees to indemnify and hold the Releasees harmless from
any liability, claims, demands, damages, costs, expenses and attorneys’ fees
incurred as a result of any person asserting any such assignment or transfer of
any rights or Claims under any such assignment or transfer from such Party.

                 f.       No Suits or Actions. Executive agrees that if he
hereafter commences, joins in, or in any manner seeks relief through any suit
arising out of, based upon, or relating to any of the Claims released hereunder
or in any manner asserts against the Releasees any of the Claims released
hereunder, then he will pay to the Releasees against whom such claim(s) is
asserted, in addition to any other damages caused thereby, all attorneys’ fees
incurred by such Releasees in defending or otherwise responding to said suit or
Claim. Provided, however, that this subsection (f) shall not apply to any
challenge to the release under the Older

      

(06-03-04)   4   Initials: Company ___Executive ___

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL

Workers Benefit Protection Act, or claim under the Federal Age Discrimination in
Employment Act.

                 g.       No Admission. The Parties further understand and agree
that neither the payment of money nor the execution of this Release shall
constitute or be construed as an admission of any liability whatsoever by the
Releasees.

           6.       Release of the Executive by Company.

                 a.       General Release. Company hereby releases and forever
discharges the Executive of and from any and all manner of action or actions,
causes or causes of action, in law or in equity, suits, debts, liens, contracts,
agreements, promises, liabilities, claims, demands, damages, losses, costs or
expenses, of any nature whatsoever, known or unknown, fixed or contingent
(hereinafter called “Claims”), which they now have or may hereafter have against
the Executive by reason of any and all acts, omissions, events or facts
occurring or existing prior to the date hereof, except as expressly provided
herein. The Claims released hereunder include, without limitation, any alleged
breach of any employment agreement; any alleged breach of any covenant of good
faith and fair dealing, express or implied; and any other alleged legal matters
relating to the Executive’s employment and the termination thereof; and any
alleged violation of any federal, state or local statute or ordinance.

                 b.       Indemnification. The Executive shall have the benefit
of indemnification by the Company to the fullest extent permitted by applicable
law, which indemnification shall continue after the execution of this Agreement
for such period as may be necessary to continue to indemnify Executive for his
acts during his employment to the fullest extent permitted by applicable law.

           7.       Non-Disparagement. The Company and the Executive each agrees
to refrain from any disparagement, false light, defamation, slander of the
other, or tortious interference with the contracts and relationships of the
other.

           8.       Intellectual Property. Confidential Information and Trade
secrets/Nonsolicitation. Executive acknowledges that the provisions of any
agreements he has entered with the Company concerning the assignment of any
rights to intellectual property, the solicitation of customers and/or employees,
and/or nondisclosure of the confidential information of the Company, its
customers, business partners, parents, subsidiaries and affiliates remain in
full force and effect and are not modified or superseded by this Agreement.
Copies of Executive’s agreements concerning intellectual property, confidential
information and solicitation of customers and employees are attached hereto as
Exhibit “A”.

      

(06-03-04)   5   Initials: Company ___Executive ___

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL

           9.       Confidentiality of Terms. Executive expressly acknowledges
that this Agreement and all matters relating to or leading up to the negotiation
and effectuation of this Agreement, are confidential and shall be accorded the
utmost confidentiality and shall not be disclosed to any third party except to
Executive’s spouse, his legal, actuarial, pension, accounting and tax advisors
to the extent necessary to perform services or as required by law, rule or
regulation. In addition, Executive may disclose the provisions of paragraph 7 to
any prospective employer. Executive agrees that if any disclosure is made as
permitted under this paragraph, then such persons or entities shall be cautioned
about the confidentiality obligations imposed by this Agreement and required to
abide by the terms of this confidential undertaking.

           10.       Further Services. Executive and Company agree that, solely
at the discretion of the Company, the Company may engage Executive as a
Consultant for services within his professional areas of expertise, which
services do not arise out of this Agreement and are completely independent of
this Agreement, at compensation to be agreed upon by the parties.

           11.       Advice of Counsel. Executive represents and warrants that
he has read this Agreement, that he has had adequate time to consider it, that
he had been advised by the Company to consult with an attorney and has had the
opportunity to consult with an attorney prior to executing this Agreement.
Executive understands the meaning and application of this Agreement and he has
signed this Agreement knowingly, voluntarily and of his own free will with the
intent of being bound by it.

           12.       Severability: Modification of Agreement. If any provision
of this Agreement shall be found invalid or unenforceable in whole or in part,
then such provisions shall be deemed to be modified or restricted to the extent
and in the manner necessary to render the same valid and enforceable or shall be
deemed excised from this Agreement as such circumstances may require, and this
Agreement shall be construed and enforced to the maximum extent permitted by law
as if such provision had been originally incorporated herein as so modified or
restricted or as if such provision had not been originally incorporated herein,
as the case may be.

           13.       Arbitration; Waiver of Jury Trial. Except for claims for
emergency equitable or injunctive relief which cannot be timely addressed
through arbitration, the parties hereby agree to submit any claim or dispute
arising out of the terms of this Agreement (including exhibits) and/or any
dispute arising out of or relating to Executive’s employment with the Company in
any way, to private and confidential arbitration by a single neutral arbitrator
through the American Arbitration Association (“AAA”). Subject to the terms of
this paragraph, the arbitration proceedings shall be governed by the then
current AAA rules governing employment disputes, and shall take place in

      

(06-03-04)   6   Initials: Company ___Executive ___

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL

Orange County, California, provided, however, that this Agreement shall be
interpreted to comply with applicable law if there is any conflict between
applicable law and such rules that would otherwise render this agreement to
arbitrate invalid. The decision of the arbitrator shall be final and binding on
all parties to this Agreement, rendered in writing, and judgment thereon may be
entered in any court having jurisdiction. Except if otherwise required by
applicable law, the party initiating arbitration shall advance the arbitrator’s
fee; however, all costs of the arbitration proceeding or litigation to enforce
this Agreement, including attorneys’ fees and witness expenses, shall be paid as
the arbitrator or court order in accordance with applicable law. Except for
claims for emergency equitable or injunctive relief that cannot be timely
addressed through arbitration, this arbitration procedure is intended to be the
exclusive method of resolving any claim relating to the obligations set forth in
this Agreement. The Parties understand and agree that they are waiving their
right to a jury trial as to any claim subject to this provision.

           14.       Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors and assigns. Notwithstanding the foregoing, neither
this Agreement nor any rights hereunder may be assigned to any party by the
Company or Executive without the prior written consent of the other party
hereto, which shall not be unreasonably withheld.

           15.       Litigation by Others. Executive agrees to cooperate with
the Company and its agents and attorneys in the event that Executive is called
as a witness under subpoena or otherwise in any litigation, government
investigation or other proceeding involving the Company; provided, however, that
the Company shall pay for Executive’s reasonable and actual costs and expenses
(including lost wages) incurred in connection with such participation. Executive
agrees not to aid in, assist in, or encourage the pursuit of, litigation against
the Company by any other person or entity, except as required by applicable law.

           16.       Entire Agreement/No Oral Modification. Executive and the
Company each represent and warrant that this Agreement is the entire agreement
between the parties with respect to the subject matter herein, and that no
promise or inducement has been offered, made or relied upon, except as set forth
herein and that the consideration stated herein is the sole consideration for
this Agreement. This Agreement does not modify or supersede the provisions of
any agreements Executive has entered with the Company concerning the assignment
of any rights to intellectual property, solicitation of customers and/or
employees, nondisclosure of the confidential information of the Company, its
customers, business partners, parents, subsidiaries and affiliates, or governing
stock options, stock grants or restricted stock owned by the Executive.

      

(06-03-04)   7   Initials: Company ___Executive ___

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL

           17.       Warranty. The Company represents and warrants that that it
has disclosed all material facts to the Executive that are relevant to the
Executive’s decision, and has not omitted or failed to disclose any material
fact that would cause the Executive to decline to enter into this Agreement.

           18.       Headings. Headings contained in this Agreement are used for
convenience only, and shall not supplement or modify the terms of this
Agreement.

           19.       Choice of Law. The parties agree that this Agreement shall
be construed and enforced in accordance with the laws of the State of
California.

     
Executive
  Peerless Systems
 
   
 
   
/s/ Denis W. Retoske
  /w/ Howard J. Nellor
 
   
 
   
Denis W. Retoske
  Howard J. Nellor
 
   
Date: June 4, 2004
  Title: President & CEO
 
   
 
  Date: June 4, 2004

      

(06-03-04)   8   Initials: Company ___ Executive ___