Perle Announces Debt to Equity Conversion Agreement, Details of Share Consolidation and Privatization

Business Wire, Oct 17, 2003

Business Editors/High-Tech Writers

TORONTO--(BUSINESS WIRE)--Oct. 17, 2003

Perle Systems Limited ("Perle"); (OTCBB: PERL), a leading provider of networking products for Internet Protocol ("IP") and e-business access, today announced that it has entered into a debt for equity subscription and share consolidation agreement with Royal Capital Management Inc. ("Royal"), its senior secured lender. The Board of Directors of Perle approved the agreement with Royal after receiving a recommendation in favour of the agreement by a special committee of independent members of the Board, based on, among other things, advice from Crosbie & Company (a respected investment bank) as to the fairness of the transaction and the current value of Perle's common shares, and after consultation with its independent legal counsel.

Joseph E. Perle, Chairman, President and CEO of Perle, said "Following the recent period of financial constraints, this transaction will convert all of Perle's long term debt and part of its current debt to equity, which will allow us to serve our customers from a position of financial strength, while providing shareholders with the opportunity to recover some of their investment." Jean Noelting, Managing Director of Royal, said "We are satisfied with the outcome of the debt and equity restructuring and look forward to supporting Perle as the company takes advantage of its strong market position to expand in the improving networking marketplace."

As per the agreement, Royal will subscribe for 500 million common shares of Perle at C$0.04 per share and will satisfy the subscription price by releasing Perle from C$20M of its total outstanding secured long term and current debt of approximately C$25.7M. Thereafter, subject to shareholder approval, Perle intends to consolidate its common shares on the basis of 2 million existing common shares for one new common share. Shareholders who do not receive at least one full new common share as a result of this consolidation will be compensated at C$0.04 per share in cash for the number of common shares held prior to the consolidation.

A special meeting of Perle shareholders has been called for November 28, 2003 to consider and approve the proposed consolidation. If the consolidation is approved at this meeting Perle will amend its articles to implement the proposed consolidation and will subsequently apply for deregistration as a Securities Exchange Commission registrant in the United States, and as a reporting issuer in Canada, reverting to private company status.

As part of this transaction, Perle's existing forbearance agreement with Royal will be extended to October 27, 2003 to allow for the debt conversion to be completed, at which time Royal will enter into a new credit agreement with Perle whereby the company will have no long term debt or principal payment obligations.

Details of the fairness opinion and valuation of Perle's shares and its current financial position will be provided in the information circular for the special meeting of shareholders and accordingly Perle will not release or file with Canadian securities regulators financial statements for the fiscal year ended May 31, 2003 and the quarter ended August 31, 2003.

About Perle Systems

Perle Systems is a leading developer, manufacturer and vendor of high-reliability and richly featured networking products. These products are used to connect remote users reliably and securely to central servers for a wide variety of business applications. Perle specializes in Internet Protocol (IP) connectivity applications, including a focus on mid-size IP routing solutions. Product lines include routers, remote access servers, serial/console servers, emulation adapters, multi-port serial cards, multi-modem cards, print servers and network controllers. Perle distinguishes through extensive networking technology, depth of experience in major real-world network environments and long-term distribution and VAR channel relationships in major world markets. Perle has offices and representative offices in 12 countries in North America, Europe and Asia and sells its products through distribution channels worldwide. Its stock is traded on the OTCBB (symbol PERL). For more information about Perle and its products, access the Company's Web site at http://www.perle.com.

Forward-looking statements in this release, including statements relating to the Company's future growth prospects, future profits, anticipated revenue and earnings results and the success of the Company's growth and restructuring initiatives are made pursuant to the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, without limitation, risks relating to the Company's ability to successfully implement its debt to equity conversion agreement with Royal, its share consolidation and privatization plan, the Company's ability to maintain compliance with the covenants contained in its credit agreement or any new credit agreement entered into with Royal, early termination of the Forbearance Agreement with Royal, the Company's ability to meet its sales forecasts while maintaining control over its costs, to continue to operate as a going concern, the Company's ability to manage growth, the Company's ability to successfully implement any restructuring plan, the impact of FASB 141 and FASB 142 on the Company's results of operations and financial condition, continued acceptance of the Company's products, increased levels of competition for the Company, new products and technological changes, the Company's dependence upon third party suppliers, intellectual property rights and other risks detailed from time to time in the Company's periodic reports filed with the United States Securities and Exchange Commission.