Peerless disagrees with hedge funds' assessment of company, board nominations

By Lisa Kerner

Charlotte, N.C., May 8 - Peerless Systems Corp. responded to "two dissident hedge funds'" - Pembridge Value Opportunity Fund LP's and Whitehall Capital Investors IV's - attempt to nominate three directors for election to the company's board at the June 11 annual meeting by reiterating its corporate strategy.

The company plans to appoint William B. Patton, "a seasoned technology and business executive," to its board of four directors.

Peerless, after a review of its operations, said it plans to streamline its business, re-evaluate research and development programs, terminate programs not delivering adequate return and executive agreements with Kyocera Mita Corp.

"We believe that these efforts will improve our financial and operational performance and will ensure our increased competitiveness," president and chief executive officer Richard L. Roll stated in a company news release.

"Our board of directors, together with our industry seasoned management, is actively engaged and recognizes its duty to continually explore all strategic alternatives to maximize shareholder value. That is why, as part of a comprehensive review of our business, Peerless' board of directors and management, who are extremely knowledgeable about the industry in which Peerless operates, have continued to consider and evaluate various strategic alternatives."

"The principals of Pembridge, who to our understanding only very recently acquired shares in Peerless, are not privy to the details of our strategic plans or the status thereof," Roll said in the news release. "We have requested that they execute a non-disclosure agreement so that we might provide them with important information regarding our industry, strategy and opportunities. Unfortunately, they have thus far refused our offer."

Roll said an expected reduction in cash flow in the second and possibly the third quarter of this fiscal year "would be exacerbated by Pembridge's proposals of a dividend or stock repurchase."

"In summary, contrary to Pembridge's claims, since my arrival last December, Peerless' board of directors and management have aggressively sought opportunities to maximize shareholder value and have affirmatively implemented strategies that we believe have the best chance of doing so," Roll stated.

On May 2, Pembridge Capital nominated Timothy Brog, Rimmy Malhotra and Eric S. Newman for election to the Peerless board.

"We are obviously troubled by the massive destruction of shareholder value during a time of tremendous expansion in Peerless' core markets," Brog, Pembridge's portfolio manager, said in a company news release.

"For too long the company's board of directors has failed to maximize shareholder value."

Pembridge also formed the Peerless Full Value Committee to file preliminary proxy statements with the Securities and Exchange Commission and to solicit support from other shareholders.

The company's common stock reached $11.00 per share 10 years ago and sank 83% to a 52-week low of $1.86 on March 14. During the same time, the company's book value per share dropped 65% to $0.94 from $2.68, according to the release.

Peerless is based in El Segundo, Calif., and provides software-based imaging systems for digital document products.

New York-based Pembridge is the management company for Pembridge Value Opportunity Fund LP, a Delaware limited partnership.

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