Exhibit 10.1

 

September 24, 2007

 

Mr. Todd Simpson

c/o Ditech Networks, Inc.

 

Re:          Employment Terms

 

Dear Todd:

 

This letter sets forth the terms and conditions of your position with Ditech
Networks, Inc. (the “Company”) as its President and Chief Executive Officer.

 

Title/Duties

 

As President and CEO, you shall perform such duties as are required by the
Company’s Board of Directors (the “Board”), to whom you shall report. In this
position, you agree to devote your best efforts and substantially all of your
business time and attention to the business of the Company, except for vacation
periods and reasonable periods of illness or other incapacities permitted by the
Company’s general employment policies.

 

Compensation

 

Your base salary will be $325,000 per year, less applicable payroll taxes and
withholdings, payable on the Company’s regular payroll schedule. You will also
be eligible for an annual bonus of up to seventy-five percent (75%) of your
annual base salary under the terms of the FY 2008 Executive Bonus Program, as
may be amended by the Compensation Committee, pro rated in accordance with the
time you have served in this position, with the remainder of your bonus governed
by the bonus arrangements in place prior to execution of this agreement, also
pro rated for the portion of the year served under that prior arrangement. You
will also be eligible for all of the Company’s standard benefit programs,
subject to the terms and conditions of those plans.

 

Relocation

 

The obligations of the Company under the seventh bullet point entitled
“Relocation Assistance” in the letter agreement between you and the Company
dated May 9, 2007, together with the sub-bullets thereunder specifying the
dollar amounts set forth therein (the “Moving Expenses”), shall continue
uninterrupted by this letter agreement; provided, however, that (1) if your
employment with the Company is terminated without Cause (as defined herein)
between now and July 31, 2008, then the Company will continue to pay the Moving
Expenses through July 31, 2008, and (2) if your employment is terminated for any
other reason, either by you or by the Company, between now and July 31, 2008,
then the Moving Expenses shall cease as of your last day of employment.

 

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Equity

 

Subject to approval by the Compensation Committee of the Board, you will receive
an option (the “Option”) to purchase 450,000 shares of the Company’s Common
Stock under the Company’s 2006 Equity Incentive Plan (the “Plan”). The Option
will be subject to the terms and conditions of the Plan and your grant
agreement. The Option will have an exercise price equal to the closing price of
the Company’s common stock on the Nasdaq Global Market on the date of grant.
Your grant agreement will include a four year vesting schedule, under which 25%
of the shares subject to the Option will vest after 12 months and 1/48th of the
total will vest at the end of each month thereafter, until either the Option is
fully vested or your employment ends, whichever occurs first. Further, subject
to Board approval, you will be granted an additional option to purchase 100,000
shares of the Company’s Common Stock under the Plan, which shall vest upon
achievement of Company performance milestones to be determined by the
Compensation Committee.

 

Severance

 

Subject to approval by the Compensation Committee, you will be added as a
Participant under the Ditech Networks, Inc. Amended and Restated Change in
Control Severance Benefit Plan (the “Severance Plan”), which will make you
eligible for severance benefits under the terms and conditions of the Severance
Plan, at the same level as the other two current executive officers of the
Company.

 

Additionally, if the Company terminates your employment without Cause (as
defined herein) anytime between now and September 30, 2009, and such termination
is not in connection with a Change in Control (as defined in the Severance
Plan), then the Company will provide you with the following severance benefits:

 

•                  The Company shall pay you severance pay in the form of
continuation of your base salary in effect on the effective date of termination
for a period of twelve (12) months after the date of such termination.

 

•                  If you timely elect continued coverage under COBRA, then the
Company shall pay the COBRA premiums necessary to continue your medical
insurance coverage in effect for yourself and your eligible dependents on the
termination date for a period of twelve (12) months after your termination
(provided that such COBRA reimbursement shall terminate upon your commencement
of new employment by an employer that offers health care coverage to its
employees or such earlier date as you are no longer eligible for COBRA
coverage).

 

Such severance benefits are conditional upon you delivering to the Company an
effective, general release of claims in favor of the Company in a form
acceptable to the Company within the period required by the Company. Your salary
continuation payments described above will be paid in substantially equal
installments on the Company’s regular payroll schedule and subject to standard
deductions and withholdings over the twelve (12) month period following
termination; provided, however, that no payments will be made prior to the
effective date of the release. On the first payroll pay day following the
effective date of the release, the Company will pay you the cash severance you
would have received on or prior to such date in a lump sum, with the balance of
the cash severance being paid as originally scheduled. Each such installment
will be deemed a separate “payment” for purposes of Section 409A of the Internal
Revenue Code.

 

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In the event your employment terminates for any reason in connection with a
Change in Control, then your entitlement to severance benefits shall be as set
forth in the Severance Plan, and the provisions set forth herein with respect to
severance shall have no force or effect.

 

Definitions

 

For purposes of this letter agreement, Cause shall mean: (i) your violation of
any material provision of your Employee Proprietary Information and Inventions
Agreement; (ii) any act of theft or dishonesty by you; (iii) your participation
in any immoral or illegal act that has had or could reasonably be expected to
have or had a detrimental effect on the business or reputation of the Company;
or (iv) your material failure to use reasonable efforts to perform reasonably
requested tasks after written notice and a reasonable opportunity to comply with
such notice.

 

Miscellaneous

 

As a condition of your employment, you will be required to abide by the
Company’s policies and procedures, including but not limited to the policies set
forth in the Company’s Employee Handbook, as may be in effect from time to time.
You also agree to comply with the Company’s Employee Proprietary Information and
Inventions Agreement (“Proprietary Information Agreement”), which you have
already executed in connection with your employment with the Company.

 

Your employment relationship is at-will. Accordingly, you may terminate your
employment with the Company at any time and for any reason whatsoever simply by
notifying the Company. Likewise, the Company may terminate your employment at
any time, with or without cause or advance notice.

 

To ensure the rapid and economical resolution of disputes that may arise in
connection with your employment, you and the Company agree that any and all
disputes, claims, or causes of action, in law or equity, arising from or
relating to the enforcement, breach, performance, execution, or interpretation
of this agreement, your employment, or the termination of your employment, shall
be resolved, to the fullest extent permitted by law, by final, binding and
confidential arbitration in San Jose, California conducted before a single
arbitrator by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) or its
successor, under the then applicable JAMS rules. By agreeing to this arbitration
procedure, both you and the Company waive the right to resolve any such dispute
through a trial by jury or judge or by administrative proceeding. The arbitrator
shall:  (a) have the authority to compel adequate discovery for the resolution
of the dispute and to award such relief as would otherwise be permitted by law;
and (b) issue a written arbitration decision including the arbitrator’s
essential findings and conclusions and a statement of the award. The Company
shall pay all of JAMS’ arbitration fees. Nothing in this letter agreement shall
prevent either you or the Company from obtaining injunctive relief in court if
necessary to prevent irreparable harm pending the conclusion of any arbitration.

 

This letter, together with your Proprietary Information Agreement, forms the
complete and exclusive statement of your agreement with the Company concerning
the subject matter hereof. The terms in this letter supersede any other
representations or agreements made to you by any party, whether oral or written,
concerning the terms and conditions of your employment, including (without
limitation) your letter agreement with the Company dated May 9, 2007, other than
as set forth under “Relocation” above. The terms of this agreement cannot be
changed (except with respect to those changes expressly reserved

 

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to the Company’s discretion in this letter) without a written agreement signed
by you and a duly authorized officer of the Company. This agreement is to be
governed by the laws of the state of California without reference to conflicts
of law principles. In case any provision contained in this agreement shall, for
any reason, be held invalid or unenforceable in any respect, such invalidity or
unenforceability shall not affect the other provisions of this agreement, and
such provision will be construed and enforced so as to render it valid and
enforceable consistent with the general intent of the parties insofar as
possible under applicable law. With respect to the enforcement of this
agreement, no waiver of any right hereunder shall be effective unless it is in
writing. This agreement may be executed in more than one counterpart, and
signatures transmitted via facsimile shall be deemed equivalent to originals. As
required by law, this offer is subject to satisfactory proof of your identity
and right to work in the United States.

 

If you wish to accept employment at the Company under the terms described above,
please sign and date this letter and return them to me.

 

Sincerely,

 

 

/s/ Edwin L. Harper

 

Edwin L. Harper

 

Chairman of the Board

 

 

 

Understood and Accepted:

 

 

 

 

 

/s/ Todd Simpson

 

  September 24, 2007

 

Todd Simpson

Date

 

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