Peerless Systems Takes Key Step in Growth Strategy; Signs Definitive Agreement to Acquire Substantially All Assets of Prism Software Corporation

Market Wire, February, 2008

Peerless Systems Corporation (NASDAQ: PRLS) today announced it has signed a definitive agreement to acquire substantially all of the assets of Prism Software Corporation, an emerging player in the rapidly growing document solutions software market. The acquisition represents a key initial step in Peerless' previously announced strategy of expanding its business into new high-growth segments of the broader digital content management industry.

"In March of 2007, we embarked upon a board-approved strategy designed to leverage the value of our core technologies and diversify our revenue stream into faster growing sectors," said Rick Roll, president and CEO of Peerless. "We believe this acquisition represents another important step in the implementation of that strategy, and is a logical follow-up transaction to our recently announced agreement with Kyocera Mita."

"Document solutions is one of our industry's fastest growing segments," Roll added. "We believe our acquisition of Prism's extensive product suite and the addition of its talented staff positions us to effectively address a very large market opportunity."

According to independent market research firm InfoTrends, the U.S. office document solutions market, which includes the document output management, document capture/routing, and document management/workflow segments, is expected to grow at a compound annual rate of more than 25 percent from 2008-2011. Sales from this market are expected to exceed $1 billion in 2008.

The initial purchase price of the Prism assets will consist of $1.75 million in cash upon closing and the right to receive up to $1.5 million in Peerless common stock, provided certain conditions are met. In addition, the agreement also features an earn-out provision subject to cumulative achievements measured over a three-year period under which the shareholders of Prism may receive an additional payment based on the earnings generated from the acquired assets. Details related to the transaction and earn-out provisions can be found in a Form 8-K filing being made today by Peerless with the Securities and Exchange Commission. The closing is subject to customary conditions and is anticipated to occur within the next 90 days.

Prism's suite of software products is designed to improve customers' work processes, document flow, and enhance document creation and distribution. The company's products are used by a broad range of small to mid-sized businesses, departments within large enterprises, and government organizations.

Prism recently completed a four-year product development effort designed to address all major segments of the document solutions market. The result of this effort is a feature-rich suite of both stand-alone and integrated applications for document-management, variable data, workflow and data-stream conversion.

"This transaction combines Peerless' expertise in embedded software, networking and security applications, with the application software expertise of Prism's development team, and we believe this combination meets the needs of Peerless' current customer base," Roll said. "These blended skill sets represent a powerful combination that positions Peerless to more effectively address a major new market segment. It also should be noted that Prism's management has expressed confidence in its long-term expansion strategy, and has tied much of the potential acquisition value to future performance."

Based in Irvine, Calif., Prism's products are sold through a network of MFP resellers and systems integrators, as well as many of the same distribution channels Peerless has worked with in the past.

"In addition to application software, Peerless is acquiring distribution agreements with some of the world's leading digital imaging manufacturers, which include a number of our longtime customers," Roll said. "We believe Prism's product offering and MFP distribution model represent an ideal fit with our core business."

David Ayres, president and CEO of Prism Software, said, "We're excited about the opportunity to expand and grow our business, and to join forces with Peerless' excellent management team. Prism and Peerless are aligned in both perspective and strategy on how to develop market-leading applications that best serve our customers."

Roll said, "The Prism management team will be joining Peerless and will continue to advance the products within a wholly owned subsidiary of Peerless. The Prism team brings a wealth of experience and a deep understanding of the solution software application industry to Peerless' newly formed subsidiary. We are pleased to have the Prism team on board, and look forward to their contributions."

Prism's four primary software applications address a wide spectrum of customer needs in the document solutions market. The software offerings include: 1) DocRecord, for electronic document management, such as capture, archiving search and access; 2) DocSystem, for rules-based print and electronic document workflow functions; 3) DocForm, for personalized business document generation; and 4) DocTransform, for enabling, configuring and adapting print data from any host or application.