Exhibit 10.34

 

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SEVERANCE AND RELEASE AGREEMENT

 

This Severance and Release Agreement (“Agreement”) is entered into by and
between Gary Testa (“Employee” or “Testa”) and Ditech Networks, Inc., as well as
any of its past or present parent, subsidiary, related, affiliated, predecessor,
and/or successor corporations and entities, insurers, officers, directors,
shareholders, representatives, agents, and employees (collectively “Company” or
“Ditech”), for the following purposes and with reference to the following facts:

 

RECITALS

 

A.           WHEREAS, Employee’s last day of employment with the Company is
effective as of April 30, 2008;

 

B.           WHEREAS, Employee and the Company desire to settle fully and
finally all differences between them, including, but in no way limited to, any
differences that might arise out of the Employee’s employment with the Company,
and the termination thereof;

 

C.           WHEREAS, without any admission of any liability, fact, allegation,
claim or defense by the parties, it is now the desire of the parties to amicably
compromise, settle and release all claims of whatever kind or description and to
effect a total resolution and compromise of all such disputes including, without
limitation, disputes constituting, relating to, or arising from Employee’s
application to, employment with, and termination from Ditech and/or any matters
encompassed by any allegations of unlawful conduct or violations of company
policy or practice;

 

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NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties do hereby agree as follows:

 

AGREEMENTS

 

1.             Denial of Liability

 

Employee expressly recognizes that this Agreement shall not in any way be
construed as an admission of any unlawful or wrongful acts whatsoever against
Employee or any other person. Ditech, including any of its insurers, officers,
directors, shareholders, representatives, agents, and employees, specifically
denies any liability to, or wrongful acts against, Employee or any other person.

 

2.             Consideration by Ditech

 

a.             Severance Pay In consideration of the covenants and undertakings
set forth in this Agreement, after this Agreement becomes legally effective and
enforceable as defined under Paragraph 15 herein, and provided that Employee has
provided, or at such time thereafter that Employee does provide the following to
the satisfaction of Ditech, Ditech shall pay to Employee the sum of One hundred
twenty five thousand and no cents ($125,000.00) (hereinafter the “Severance
Amount”). The Severance Amount shall be reduced by authorized deductions and
deductions or withholdings required by law.

 

Employee acknowledges that he is solely responsible for all tax reporting
obligations, if any, with respect to the Severance Amount. Employee agrees to
indemnify and hold Ditech harmless from any and all losses, interest, payments
or penalties, if any, incurred by Ditech as a result of Ditech not making
deductions from the Severance Amount or as a result of Ditech not reporting

 

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a portion of the Severance Amount as wages or income to any taxing authority, in
the event the Severance Amount should be deemed to be taxable to Employee.

 

3.             Employee’s Warranty

 

Employee represents that, other than the allegations described in this
Agreement, Employee has no other pending claims, complaints, charges or appeals
against or involving Ditech, as well as any of its past or present parent,
subsidiary, related, affiliated, predecessor, and/or successor corporations and
entities, insurers, officers, managers, directors, shareholders, agents, and
employees associated with Ditech, with any state or federal court, or any local,
state, federal or administrative agency. Employee agrees to cause to be
withdrawn any such claim, complaint or charge should one be found in fact to be
pending. Employee further specifically represents that Employee will not in the
future file, participate in, encourage, instigate or assist in the prosecution
of any claim, complaints, charges or in any lawsuit by any party in any state or
federal court or any proceeding before any local, state, federal or
administrative agency against Ditech or any of its past or present parent,
subsidiary, related, affiliated, predecessor, and/or successor corporations and
entities, insurers, officers, managers, directors, shareholders,
representatives, agents, and employees associated with Ditech (unless such aid
or assistance is ordered by a court or sought by a government agency or by
compulsory legal process) claiming that Ditech or any of its past or present
parent, subsidiary, related, affiliated, predecessor, and/or successor
corporations and entities, insurers, officers, managers, directors,
shareholders, representatives, agents, and employees have violated any local,
state or federal laws, statutes, ordinances or regulations, or committed
tortious conduct and/or violations of contractual relationships of any kind,
including, but not limited to: breach of contract or implied contract; breach of
the implied covenant of good faith and fair dealing; inducement of breach;
wrongful or

 

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unlawful discharge or demotion; violation of public policy, retaliation;
intentional or negligent infliction of emotional distress; assault; battery;
intentional or negligent misrepresentation; conspiracy; tortious denial of a
contract; interference with proprietary interests; failure to pay wages,
bonuses, benefits, vacation pay, severance pay or other compensation of any
sort; negligence; negligent hiring, retention or supervision; defamation;
unlawful effort to prevent employment; violation of constitutional rights;
discrimination or harassment on the basis of race, color, sex, national origin,
religion, age, marital status, pregnancy, disability or medical condition;
wrongful termination in violation of public policy; retaliation; or other
wrongful conduct, based upon events occurring prior to the date this Agreement
is executed by Employee. Employee acknowledges that this warranty is a material
inducement for Ditech’s consideration described in this Agreement.

 

4.                                      Complete and General Release of Claims

 

a.             In consideration of the covenants and undertakings set forth in
this Agreement, Employee waives, releases and forever discharges Ditech and each
of its current and former affiliates, subsidiaries, parents, divisions,
investors, successors, insurers, predecessors and assigns, as well as each of
their respective past and present representatives, agents, directors, officers,
shareholders, partners, insurers, representatives, consultants, attorneys, and
employees, (collectively, “Ditech Releasees”), and each of them, from any and
all claims of any kind or nature, whether known or unknown or suspected or
unsuspected, which Employee now owns or holds, or has at any time before the
date this Agreement is fully executed by Employee, owned or held against any of
the Ditech Releasees, and each of them. In addition, Employee acknowledges that
Employee has received the entirety of all wages, sums, and other monies that
were ever due to Employee by Ditech or any of the Ditech Releasees, other than
related to this

 

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separation agreement, which funds will be paid upon finalization (eight days
after signature, if not rescinded).

 

b.             The phrase “any and all claims” as used in this Agreement
includes, but is not limited to, all claims, demands, causes of action,
complaints, or actions of any kind, whether known or unknown, anticipated or
unanticipated, suspected or unsuspected, past or present, contingent or fixed
including, but not limited to: (i) any and all claims constituting, relating to,
or arising out of Employee’s employment with Ditech, including any charges or
complaints filed with any administrative agency, including, without limitation,
the U.S. Equal Employment Opportunity Commission or the Department of Fair
Employment and Housing; (ii) any and all claims based on tort or contract;
(iii) any and all claims arising under federal, state or local law or statute,
including, but not limited to any and all claims of age discrimination arising
under the Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621, et
seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e,
et seq., the Civil Rights Act of 1866, 42 U.S.C. § 1981, the Americans with
Disabilities Act, 42 U.S.C. § 12101, et seq., the Family and Medical Leave Act
of 1993, 29 U.S.C., § 2601, et seq., the United States Constitution, the
Employee Retirement Income Security Act of 1974, 29 U.S.C., § 1001, et seq., and
any other federal, state or local fair employment practices or civil rights law,
ordinance, regulation, executive order and/or other law or regulation governing
the terms and conditions of employment; (iv) any and all claims arising out of,
related to or connected with the application to, employment of, or termination
of Employee by Ditech, the terms and conditions of Employee’s employment, the
termination of such employment, and/or the failure to employ Employee in the
future, and any employment practice, procedure, policy or decision of, or
omission or action taken by, the Ditech Releasees, and each of them, including,
but not limited to, any claims for wrongful discharge, retaliation,
misrepresentation, defamation, harassment,

 

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denial of promotion, fraud, fraudulent inducement, emotional distress, or
negligent hiring or retention; and (v) any and all claims arising out of,
related to, or connected with any legal restrictions on Ditech’s right to
terminate Employee’s employment, and whether for compensatory, punitive,
equitable or other relief, including attorneys’ fees, all to the fullest extent
permitted by law.

 

5.             Waiver of California Civil Code Section 1542

 

Employee does hereby, and for his heirs, legal representatives, agents,
successors-in-interest and assigns, expressly waive and relinquish all rights
and benefits afforded by Section 1542 of the Civil Code of California or any
other state laws, and does so understanding and acknowledging the significance
and consequences of such specific waiver of Section 1542. Employee acknowledges
that he is being represented in this matter by counsel, and acknowledges that he
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 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.

 

Thus, notwithstanding the provisions of Section 1542, and for the purpose of
implementing a full and complete release and discharge of all claims, Employee
expressly acknowledges that this Agreement is also intended to include in its
effect, without limitation, all

 

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claims which he does not know or expect to exist in his favor at the time of
execution hereof, and that this Agreement contemplates the extinguishment of any
such claim or claims.

 

6.             No Assignment or Transfer of Released Matters

 

Employee represents and warrants that Employee has full and exclusive authority
to release and discharge those matters released by this Agreement and that no
portion of any of the matters released pursuant to Paragraph 4 above has been
assigned or transferred to any other person, firm or corporation who is not a
party to this Agreement, in any manner, including by way of subrogation or
operation of law or otherwise. If any claim, action, demand, or suit should be
made or instituted against any of the mutual released parties because of any
such purported assignment, subrogation, or transfer, each party agrees to
indemnify and hold harmless the other released part(ies) against such claim,
action, suit or demand, including necessary expenses of investigation,
attorneys’ fees and costs.

 

7.             No Future Employment With Ditech

 

Employee expressly waives, releases and relinquishes any and all rights to apply
again to or become reinstated to Ditech and shall not seek further employment
with Ditech and each of its current and former affiliates, Subsidiaries,
parents, and divisions (“Ditech Affiliates”).. If Employee inadvertently seeks
such employment, Employee shall immediately withdraw any application for
employment upon being informed or otherwise learning that the employer or
prospective employer is an entity described in this Agreement. Any such
employment application submitted by Employee shall be null and void and Employee
accordingly waives all rights to employment or further consideration for
employment thereunder. Employee further agrees that, in the event Employee
inadvertently seeks such employment, none

 

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of the Ditech Affiliates shall have any obligation to consider such application
for employment from Employee or hire Employee for any position that may become
available and that this Agreement shall constitute good cause for Ditech or any
of the Ditech’s Affiliates refusal to offer any such employment to Employee,
irrespective of Employee’s qualifications for any such position or the number or
qualifications of any other applicants for the same position. Employee further
agrees that if Employee obtains employment through a temporary services or other
employment placement agency, Employee will not accept employment with Ditech or
any of the Ditech Affiliates. Employee further agrees that, in the event that
any of the Ditech Affiliates inadvertently hires and employs Employee, this
Agreement shall constitute good cause for Ditech to immediately terminate
Employee’s employment, irrespective of Employee’s qualifications for any such
position or the number or qualifications of any other applicants for the same
position.

 

8.             Non-Solicitation

 

Non-Solicitation of Employees: In consideration of the Severance Amount provided
in paragraph 2 of this Agreement, Employee agrees that for a period of one year
after the effective date of this Agreement, he will not, directly or indirectly,
induce, solicit, recruit or encourage any employee of Company to leave the
employ of Company, which means that he/she will not: (i) disclose to any third
party the names, backgrounds or qualifications of any employees or otherwise
identify them as potential candidates for employment; or (ii) personally or
through any other person approach, recruit, interview or otherwise solicit
employees to work for Employee or any other employer as an employee, agent, or
independent contractor.

 

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9.             Confidentiality

 

Employee represents and warrants that, with the exception of Employee’s
immediate family, Employee shall not disclose, disseminate and/or publicize, or
cause or permit to be disclosed, disseminated or publicized, directly or
indirectly, specifically or generally, to any person, corporation, association,
agency or entity any of the events (including any negotiations) which led to the
execution of this Agreement, except (i) that Employee may reveal to Employee’s
attorneys and/or accountants such information but only to the extent such a
disclosure is necessary to assist and give Employee appropriate legal and/or
financial advice, or (ii) to the extent that Employee must comply with, or
respond to, a valid order, demand or regulation by a court or an administrative
or governmental agency.

 

10.          Non-Disclosure of Confidential Information

 

a.             Confidential Information: Employee understands and agrees that
while employed by Ditech, Employee may have had access to, learned of, acquired
or otherwise became informed of Ditech’s proprietary and/or confidential
information that is not generally known to the public or the competitors of
Ditech, including without limitation, Company information regarding
(i) marketing, development, financial and sales data and strategies, including
any contained in any Company computer systems, (ii) lists of any customers,
suppliers, employees or agents, (iii) any business, marketing or sales reports,
plans, or similar analysis, (iv) terms of any contracts or agreements with any
customers, suppliers, employees or agents, (v) pricing and other financial
information, (vi) methods of operating any of its businesses, (vii) volumes of
business and profit margins, (viii) technical, technological and production
know-how, (ix) future plans and methods of doing business, (x) products,
inventions, applications, designs, programs, patents and other processes or
documentation, whether developed or in development, (xi) policies and procedures
relating to its customers, suppliers, employees or

 

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agents; (xii) Company customers’ contact information, volumes of business and
profit margins, business operations and methods, preferences and special needs,
pricings and other financial information, and terms of any contracts or
agreements with the Company; (xiii) Company employees’ salaries, commissions and
other benefits, levels of knowledge, performance, experience and expertise,
strengths and weaknesses, and special talents; and, (xiv) all non-public
personal, financial and/or health information regarding employees, agents,
clients or other individuals otherwise associated with Ditech (collectively
“Confidential Information”).

 

b.             Non-Disclosure: Employee understands and agrees that such
Confidential Information constitutes private information subject to privacy
rights under the California Constitution, and/or other applicable statutes,
rules and the common law. Ditech’s Confidential Information is a competitive
asset of Ditech that is and shall remain the exclusive property of the Company
and, to that end, Employee covenants and warrants that Employee shall never
directly or indirectly make known, divulge, reveal, furnish, make available,
disclose, or use any Confidential Information until and unless any such
Confidential Information shall have become, through no fault of Employee,
generally known to the public.

 

c.             Obligations: Employee understands and agrees that Employee’s
obligations of confidentiality hereunder are in addition to, and not in
limitation of or preemption of, all other obligations of confidentiality
Employee has to the Company in any agreements signed during Employee’s
employment with Ditech and/or under any general legal or equitable principles.

 

11.          Return of Company Property and Confidential Information

 

Employee represents and warrants that Employee has returned to Ditech, and does
not have in Employee’s possession, any and all Company property and Confidential
Information

 

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(defined above in Paragraph 9) which were provided to Employee by Ditech or were
otherwise in Employee’s possession, custody or control as a result of Employee’s
employment with Ditech. Company property includes the original and all copies of
any documents, photographs, mechanical or electronic recordings, audio and video
tape recordings, computer disks or printouts, reports, drafts, memoranda, notes,
correspondence, analysis, calendars, appointment books, and all other writings
or recordings of any means, that constitute, contain, concern or relate to any
Confidential Information, including without limitation all documents Employee
produced to Ditech with respect to Employee’s allegations.

 

12.          Non-Disparagement

 

Employee and Ditech agree to not make any negative, disparaging, detrimental or
derogatory comments to any third party concerning one another, or any of their
current and former officers, directors, managers, employees or agents, or
concerning its or their products, methods of doing business, or employment
practices.

 

13.          No Cooperation Regarding Other Potential Claims

 

Employee shall not assist or aid any person, corporation, firm, partnership, or
other entity, with any legal action, legal proceeding, or litigation against
Ditech, unless such aid or assistance is ordered by a court or sought by a
government agency or by compulsory legal process. Employee also shall not
(either orally or in writing, or in any other manner whatsoever) voluntarily
initiate communications with, or respond to communications from, any person,
corporation, partnership, or other entity, about any action, cause of action, or
other matter against Ditech, unless such aid or assistance is ordered by a court
or sought by a government agency or by compulsory legal process. In the event
such assistance, aid or communication is legally

 

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compelled, Employee shall immediately provide Ditech copies thereof and all
relevant information available to Employee including copies of all relevant,
non-privileged documents to permit Ditech to intervene to quash, narrow, or
otherwise limit the scope of the order or legal process. Employee shall not
respond to the order or legal process or communicate with third parties
regarding matters addressed by the order or legal process until the date
prescribed for performance or, if Ditech has made opposition, until the court or
agency has ruled on Ditech’s opposition and Ditech has exhausted and waived all
opportunities for appeal.

 

14.          Remedies for Breach of this Agreement

 

If Employee breaches paragraphs 8, 9, 10, 11 and/or 12 of this Agreement, then
Ditech shall have, in addition to and without limiting any other remedy or right
it may have at law or in equity, the right to a temporary and permanent
injunction restraining any such breach, without any bond or security being
required. In any such proceeding, Employee shall waive any defense that the
Company has an adequate remedy at law or that the injury suffered as a
consequence of such breach is not irreparable. Employee further agrees that
should Employee engage in conduct or make disclosures forbidden by paragraphs 8,
9, 10, 11 and/or 12, it may be difficult or impossible to specify or prove
damages as a result of breach of these provisions and therefore agrees that
Employee shall be liable for, in addition to the injunctive and other relief set
forth herein, FIVE THOUSAND DOLLARS AND ZERO CENTS ($5,000.00) in liquidated
damages for each instance of such violation.

 

15.          Review and Consideration of Agreement

 

Employee understands that Employee has been given a period of 21 days to review
and consider this Agreement before signing it. Employee further understands that

 

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Employee may use as much, or as little, of this 21-day period as Employee wishes
prior to signing this Agreement.

 

16.          Right to Revoke Agreement

 

Employee may revoke this Agreement within seven (7) calendar days following
Employee’s execution of this Agreement. Revocation may be made only by
delivering a written notice of revocation to John C. Fox, Esq., counsel for
Ditech, at MANATT, PHELPS & PHILLIPS, LLP, 1001 Page Mill Road, Building 2, Palo
Alto, CA 94304. This Agreement shall become legally effective and enforceable
after the expiration of the seven-day revocation period. However, if Employee
revokes this Agreement within the seven-day revocation period, the Agreement
shall not be effective or enforceable and Employee shall not receive the payment
or benefits described in this Agreement, including that which is set forth in
Paragraph 2 above.

 

17.          Older Worker Benefit Protection Act

 

To comply with the Older Worker Benefit Protection Act of 1990 (“OWBPA”),
Employee has been advised of Employee’s right to consult an attorney and of the
legal requirements of OWBPA, including Employee’s right to consider this
Agreement for 21 days before signing and Employee’s right to revoke the
Agreement within seven days after signing it, and fully incorporates the legal
requirements by reference into this Agreement.

 

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18.          Miscellaneous Provisions

 

a.             Governing Law

 

This Agreement shall be governed by the laws of the State of California, both
procedural and substantive, without regard to its conflict of law provisions.

 

b.             Attorneys’ Fees and Costs

 

Except as provided herein, each party shall bear its own attorneys’ fees and
costs. In the event of any dispute arising out of this Agreement, the prevailing
party shall be entitled to recover all of their costs and reasonable attorneys’
fees.

 

c.             Joint Preparation of Agreement

 

The parties have cooperated in the preparation of this Agreement and, hence, it
shall not be interpreted or construed against or in favor of any party by virtue
of the identity, interest or affiliation of its preparer.

 

d.             Severability

 

In the event that any portion of this Agreement shall be held to be void,
voidable, illegal or unenforceable, the remaining portions shall remain in force
and effect.

 

e.             Entire and Final Agreement; No Modification

 

This Agreement is the entire agreement between Employee and Ditech and they
supersede any previous negotiations, agreements and understandings concerning
the subject matters of this Agreement. This Agreement is intended to be and is
final and binding, regardless of any claims of misrepresentation, concealment of
fact, or mistake of law or fact. Employee and Ditech acknowledge that
Employee/Ditech has not relied on any oral or written representation by the
other parties to induce the other to sign this Agreement, other than the terms
of this Agreement. No modifications of this Agreement can be made except in
writing signed by Employee and an authorized representative of Ditech.

 

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f.              Execution and Counterparts

 

This Agreement may be executed in counterparts, each of which shall be deemed
the original, all of which together shall constitute one and the same
instrument. A faxed copy shall be deemed as an original, but the parties agree
to forward a hard copy of their respective signatures to the other party
promptly thereafter.

 

EACH PARTY ACKNOWLEDGES THAT EMPLOYEE OR DITECH HAS BEEN PROVIDED WITH
SUFFICIENT TIME AND OPPORTUNITY TO CONSIDER THIS AGREEMENT AND TIME TO CONSULT
WITH COUNSEL. EACH PARTY ACKNOWLEDGES AND REPRESENTS THAT EMPLOYEE AND DITECH
ENTER INTO THIS AGREEMENT FREELY, KNOWINGLY, VOLUNTARILY AND WITHOUT COERCION
AND BASED ON EMPLOYEE’S OR DITECH’S OWN JUDGMENT AND NOT RELIANCE UPON ANY
REPRESENTATION OR PROMISES MADE BY ANY OTHER PARTY.

 

 

DATED:

4/30/08

 

/s/ Gary Testa

 

 

 

Gary Testa

 

 

 

 

 

 

 

 

DATED:

4/30/08

 

/s/ Lowell Trangsrud

 

 

 

Lowell Trangsrud, EVP & COO

 

 

 

On Behalf of Ditech Networks

 

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April 30, 2008

 

Todd Simpson

President & CEO

Ditech Networks

825 E. Middlefield Rd.

Mountain View, CA 94043

 

RE: ACKNOWLEDGEMENT OF RETURN OF COMPANY PROPERTY BY GARY TESTA

 

The purpose of this letter is to document that Ditech acknowledges that I, Gary
D. Testa, have returned all Company Property in my possession to Ditech pursuant
to Article 11 Return of Company Property and Confidential Information of the
Severance and Release Agreement.

 

 

Acknowledged and Agreed:

 

Acknowledged and Agreed:

 

 

 

 

 

 

/s/ Gary D. Testa

 

/s/ Todd Simpson

 

 

 

Gary D. Testa

 

Todd Simpson

 

 

President & CEO

 

 

Ditech Networks

 

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