Exhibit 10.2

 

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

RESELLER AGREEMENT

 

This Reseller Agreement (this “Agreement”) is entered into as of September 10,
2009 (the “Effective Date”), by and between Ditech Networks, Inc., a Delaware
corporation doing business at 825 East Middlefield Road, Mountain View, CA 94043
(“Ditech”), and Simulscribe LLC, with offices at 110 East 59th Street, New York,
NY 10022 (“Simulscribe”).

 

AGREEMENT

 

IN CONSIDERATION OF THE PREMISES, MUTUAL COVENANTS, CONDITIONS, PROMISES AND
AGREEMENTS CONTAINED HEREIN, THE PARTIES HERETO AGREE AS FOLLOWS:

 

1.                                       DEFINITIONS

 

a.                                       “Assigned Customers” shall mean those
customers who are the counter parties to the Assigned Customer Agreements.

 

b.                                      “Assigned Customer Agreements” shall
mean those agreements listed in Schedule C.

 

c.                                       “Assignment Date” means September 10,
2009.

 

d.                                      “Change of Control” shall have the
meaning as defined in Section 12.1.

 

e.                                       “Services” shall mean any and all
(i) current services offered, provided, or made available through or by
Simulscribe, including services offered, provided, or made available to the
Assigned Customers, (ii) services described in Schedule A, as modified by the
parties from time to time upon mutual consent, and (iii) future services
offered, provided, or made available through or by Simulscribe not at the
direction, instruction or request of Ditech.

 

f.                                         “Marks” shall mean the “PhoneTag” and
“Simulscribe” brand name, logos, domain names, services marks and trademarks
rights owned by Simulscribe.

 

g.                                      “Territory” shall mean worldwide.

 

h.                                      “Wholesale Customers” shall mean (i) any
and all customers who do not purchase or receive any of the Services for its own
personal consumption or use, including, without limitation the Assigned
Customers and (ii) any and all customers, originated by Ditech, who purchase or
receive any of the Services for its own personal consumption together with any
other bundled services of Ditech (a “Bundled Wholesale Customer”).

 

i.                                          “Retail Customers” shall mean
(i) any and all customers, originated by Simulscribe, who purchase or receive
any of the Services for its own personal consumption or use and (ii) any and all
customers, originated by Simulscribe, who purchase or receive any of the
Services for its own personal consumption together with any other bundled
services of Ditech (“Bundled Retail Customer”).

 

2.                                       APPOINTMENT

 

2.1                               Exclusivity.

 

Simulscribe hereby appoints Ditech as its exclusive seller of the Services for
Wholesale Customers in the Territory, and Ditech hereby accepts such
appointment.  Simulscribe

 

Confidential Information

 

1

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

may not add additional distributors, independent sales representatives, sellers
or resellers in the Territory for Wholesale Customers without the consent of
Ditech.  Simulscribe will not provide or make available any of the Services to
any Wholesale Customers other than to or through Ditech and will not authorize
any other party to provide any Services to any Wholesale Customer.  Simulscribe
shall promptly forward any Wholesale Customers’, and after the Assignment Date
any Assigned Customers’, orders or inquiries it may receive to Ditech and shall
inform its Wholesale Customers, and after the Assignment Date any Assigned
Customers, that the Services shall be ordered directly from Ditech. All Services
will be provided by Simulscribe to the Wholesale Customers, and Ditech will have
no right to itself provide any Services. Ditech may only sell the Services under
the applicable Marks, and at the option of Ditech, together with the name
“Ditech” and, upon the mutual agreement of the parties, any other tradename. 
Ditech agrees during the term of this Agreement that it shall not directly or
indirectly compete with the business of the sale of the voicemail—to-text
Service provided by Simulscribe under this Agreement.  Without limiting the
generality of the foregoing, Ditech shall not during the term of this Agreement
directly or indirectly market, sell, license or distribute any voicemail-to-text
service or product to any Wholesale Customer or non Wholesale Customer other
than the voicemail-to-text Service provided by Simulscribe under this Agreement.

 

2.2                               Services.

 

Simulscribe will provide Services to all Wholesale Customers in a sufficient
volume to fulfill all of the business needs of the Wholesale Customers. 
Promptly after the Effective Date, Simulscribe will advise Ditech of all
information Simulscribe needs in order to provide the Services to the Wholesale
Customers) and will keep Ditech informed of any changes to the information
needed.  Simulscribe will work with Ditech regarding the process to provide the
Services to the Wholesale Customers.  Simulscribe will provide Ditech with sales
and technical information regarding the Services and a reasonable amount of
literature and other marketing materials pertaining to Simulscribe and to the
Services.  Simulscribe will perform the Services in conformance with the Service
Levels specified in Schedule B. Ditech shall have the right to request the
provision of speech recognition services other than the Services as part of the
Services provided under this Agreement, but the decision whether to provide such
future services and the scope of such future services shall be subject to the
agreement of Simulscribe.

 

3.                                       PRICES, ORDERS, AND PAYMENT

 

3.1          Prices.

 

a.               Assigned Customer Agreements.  Ditech agrees to pay Simulscribe
a one-time fee of Four Million US Dollars ($4,000,000) for the assignment of the
Assigned Customer Agreements and the sole right to receive any fees due under
such agreements after the Assignment Date as described in Section 4.   This fee
shall be payable (i) by the payment of Two Million US Dollars ($2,000,000) on
the day this Agreement is executed (or the next business day if executed after
the wire deadline) and (ii) by the issuance of a convertible promissory note in
the principal amount of Two Million US Dollars ($2,000,000) with a maturity date
two (2) years from this Agreement’s Effective Date (subject to acceleration and
conversion rights as provided therein), in the form attached hereto as Schedule
D.

 

b.              Services Exclusivity.  Ditech agrees to pay Simulscribe a one
time fee of Three Million US Dollars ($3,000,000) for the exclusive rights to
sell the Services to Wholesale Customers as described in Section 2.1. This fee
shall be payable (i) by the payment of One Million Five Hundred Thousand US
Dollars ($1,500,000) on the day this Agreement is executed (or the next business
day if executed after the wire

 

Confidential Information

 

2

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

deadline) and (ii) by the issuance of a convertible promissory note in the
principal amount of One Million Five Hundred Thousand US Dollars ($1,500,000)
with a maturity date two (2) years from this Agreement’s Effective Date (subject
to acceleration and conversion rights as provided therein) in the form attached
hereto as Schedule D.

 

c.               Services Fee.  For up to [*] after the Effective Date, Ditech
agrees to pay Simulscribe an ongoing services fee in an amount equal to [*]
(“Services Fee”) for Services in conformance with the Service Levels specified
in Schedule B.  After the just-ended month, Simulscribe shall send Ditech a
detailed invoice for the Services provided to Wholesale Customers during the
just-ended month.  Ditech may set off any amount owed by Simulscribe to Ditech
against the Service Fee owed by Ditech to Simulscribe under this Agreement upon
mutual agreement by Ditech and Simulscribe.  Unless otherwise stated on this
Agreement, payment terms of the Service Fee shall be net forty five (45)
calendar days after receipt of valid invoice.  If any aspect of any item on an
invoice is disputed, such dispute shall be resolved upon mutual agreement by
Ditech and Simulscribe.

 

d.              Prices.  Ditech is free to determine its own prices for sale of
the Services to the Wholesale Customers, and nothing expressed or implied herein
shall in any way limit Ditech’s ability to set such prices in its sole
discretion.  Except for Retail Customers, Ditech shall bill all Wholesale
Customers directly and, except as is set forth below, retain all payments made
by the Wholesale Customers.  Simulscribe shall bill all Retail Customers
directly and, except as is set forth below, retain all payments made by the
Retail Customers.  In addition to the Service Fees, in the event that
Simulscribe sells the Service to a Bundled Retail Customer then Simulscribe
shall remit to Ditech on a monthly basis a portion of the fee paid by the
Bundled Retail Customer which the parties agree should be allocated to the
Ditech service based on market prices of the bundled services if sold on a stand
alone basis.  In the event that Ditech sells the Service to a Bundled Wholesale
Customer then Ditech shall remit to Simulscribe on a monthly basis a portion of
the fee paid by the Bundled Wholesale Customer which the parties agree should be
allocated to the Simulscribe service based on market prices of the bundled
services if sold on a stand alone basis.  To the extent that the parties cannot
agree on of the above allocations any such dispute shall be resolved by the
Independent Auditor (as defined in Section 3.2(b) hereof).  The cost of the
Independent Auditor shall be borne equally by the parties.

 

e.               Taxes.  Ditech will not be responsible for payment of any taxes
(including taxes based on Simulscribe’s income), fees, duties, and other
governmental charges, and any related penalties and interest, arising from the
payment of fees to Simulscribe under this Agreement or the provision of the
Services under this Agreement.

 

3.2          Incremental Revenue.

 

a.               “Incremental Revenue” shall mean the sum of (i) all amounts
paid by Wholesale Customers to Ditech for the Service (not bundled with a Ditech
product), and (ii) when bundled with a Ditech product to a Bundled Wholesale
Customer or Bundled Retail Customer, only the prorated recognized revenue of the
Services which the parties agree should be allocated to the Service based on
market prices of the bundled services if sold on a stand alone basis which
allocation shall be consistent with the allocation set forth in
Section 3.1(e) (to the extent that the parties cannot agree on such allocation
any such dispute shall be resolved by the Independent Auditor (as defined in
Section 3.2(b) hereof) and the cost of the Independent Auditor shall be borne
equally by the parties), and (iii) all amounts paid by Retail Customers for the
Service (not bundled with a Ditech product).

 

Confidential Information

 

3

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

b.              Simulscribe shall be paid annually for the period ending
October 31, 2012, a portion of the total Accumulated Incremental Revenue on a
sliding scale based on the schedule set forth in Section 3.2(c) below (the
“Incremental Payments”).  For the purpose of the first year of the Incremental
Payments, the first year shall be from the Effective Date until October 31,
2010.  The second year of the Incremental Payments shall be based from
November 1, 2010 until October 31, 2011.  The final year of the Incremental
Payments shall be based from November 1, 2011 until October 31, 2012.  Thus, the
Incremental Payments shall be calculated on November 1, 2010, November 1, 2011
and November 1, 2012 (each, an “Incremental Payments Calculation Date”). The
Incremental Payment shall be paid within twenty (21) calendar days after the
applicable Incremental Payments Calculation Date.  No Incremental Payment shall
be made after the third year payment.  Incremental Revenue shall be calculated
in accordance with generally accepted accounting principles as all such amounts
are set forth in the audited financial statements of Ditech and the books and
records of Simulscribe.  Together with the payment of each the Incremental
Payment, Ditech shall deliver to Simulscribe a detailed statement calculating
Incremental Revenue for the prior fiscal year and the calculation of the
Incremental Payment, if any.  Within thirty (30) days after the delivery of the
statement of Incremental Revenue and Incremental Payment calculation,
Simulscribe may notify Ditech of any objections or changes thereto, specifying
in reasonable detail any such objections or changes.  If Simulscribe does not
notify Ditech of any objections or changes thereto or if within twenty (20) days
of the delivery of an objection notice Simulscribe and Ditech agree on the
resolution of all objections or changes, then such statements delivered by
Ditech, with such changes as are agreed upon, shall be final and binding.  If
the parties shall fail to reach an agreement with respect to all objections or
changes within such twenty (20) day period, then all disputed objections or
changes shall, not later than ten (10) days after the expiration of such twenty
(20) day period, be submitted for resolution to an impartial certified public
accounting firm of national standing which is reasonably acceptable to the
parties (the “Independent Auditor”).  All of the parties shall use reasonable
efforts to cause such Independent Auditor, within twenty (20) days of its
appointment, to use its best judgment in resolving the disputes submitted to
it.  The statements delivered by Ditech, as adjusted by the parties or the
Independent Auditor, shall be final and binding.  The fees and costs of such
Independent Auditor shall be paid by Simulscribe if the adjustment to the amount
of the Incremental Payment by the Independent Auditor is less than a five (5%)
percent increase of the Incremental Payment and by Ditech if the adjustment to
the amount of the Incremental Payment by the Independent Auditor is greater than
a five (5%) percent increase.  Ditech agrees to permit Simulscribe and its legal
counsel and accounting firm and the Independent Auditor, if any, to have
reasonable access upon prior notice during normal business hours to Ditech’s
books and records (including, without limitation, the work papers of its
accountants) and its representatives and accountants relating to the Services,
in each case solely in connection with Simulscribe’s review of the statement
calculating the Incremental Payment and Incremental Revenue.

 

c.               Incremental Payment Schedule.

 

i.                  No Incremental Payment will be made until $[*] of
Incremental Revenue is recognized by Ditech or Simulscribe, as applicable.

 

ii.             Payout of $[*] per million of aggregate Incremental Revenue
between $[*] and $[*] recognized by Ditech ([*] calculations, totaling a maximum
of $[*]).

 

iii.          Payout of $[*] per million of aggregate Incremental Revenue
between $[*] and $[*] recognized by Ditech ([*} calculations, totaling a maximum
of $[*]).

 

Confidential Information

 

4

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

No Incremental Payment shall be made with respect to Incremental Revenue upon
which a previous Incremental Payment had been made (and thus, a maximum of
$10,000,000 in the aggregate of Incremental Payments may be made)

 

Incremental Payments will only be made for each [*] dollar Incremental Revenue
threshold reached.  No prorated Incremental Payment shall be made for
Incremental Revenue amounts lower than the [*] dollar thresholds.

 

d.              Incremental Conversion Option.  Subject to Section 3.3, each
Incremental Payment may be converted in whole but not in part, at Simulscribe’s
option, into shares of Ditech common stock (“Ditech Stock”) at $5.00 per share
of Ditech Stock.  Subject to Section 3.3, if Incremental Revenue of $[*] is
exceeded, up to $5,000,000 of unpaid Incremental Payments may, at Simulscribe’s
option, be converted into shares of Ditech Stock at $4.00 per share of Ditech
Stock.  The election to convert must be made by Simulscribe within five
(5) business days after the later of the Incremental Payments Calculation Date
to which the Incremental Payment relates and the date upon which the Independent
Auditor (as defined in Section 3.2(b) hereof) resolves any dispute with respect
to such Incremental Payment.

 

e.               Acceleration.  Within three (3) years of the Effective Date, in
the event that [*] then a Trigger Event shall be deemed to have occurred.  Upon
the occurrence of a Trigger Event the Incremental Revenue shall be deemed to be
$[*] and, subject to the conversion rights set forth in Section 3.2(d) and 3.3,
the payment of the entire unpaid balance of the $10,000,000 Incremental Payment
shall be immediately due and payable.

 

[*]

 

[*]

 

Confidential Information

 

5

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

3.3          Convertibility Rules.

 

A.                                       IN THE EVENT DITECH SHOULD AT ANY TIME
OR FROM TIME TO TIME AFTER THE EFFECTIVE DATE FIX A RECORD DATE FOR THE
EFFECTUATION OF A SPLIT OR SUBDIVISION OF THE THEN OUTSTANDING DITECH STOCK, OR
A STOCK DIVIDEND OR DISTRIBUTION ON THE THEN OUTSTANDING DITECH STOCK, THEN, AS
OF SUCH RECORD DATE (OR THE DATE OF SUCH DISTRIBUTION, SPLIT OR SUBDIVISION IF
NO RECORD DATE IS FIXED), THE CONVERSION PRICES SET FORTH IN
SECTION 3.2(D) SHALL BE APPROPRIATELY DECREASED SO THAT THE NUMBER OF SHARES OF
DITECH STOCK ISSUABLE UPON CONVERSION AS SET FORTH IN SECTION 3.2(D) SHALL BE
INCREASED IN PROPORTION TO SUCH INCREASE OF OUTSTANDING SHARES OF DITECH STOCK.

 

B.                                      IF THE NUMBER OF SHARES OF DITECH STOCK
OUTSTANDING AT ANY TIME AFTER THE EFFECTIVE DATE IS DECREASED BY A COMBINATION
OF THE OUTSTANDING SHARES OF DITECH STOCK, THEN, FOLLOWING THE RECORD DATE OF
SUCH COMBINATION, THE CONVERSION PRICES SET FORTH IN SECTION 3.2(D) SHALL BE
APPROPRIATELY INCREASED SO THAT THE NUMBER OF SHARES OF DITECH STOCK ISSUABLE ON
CONVERSION HEREOF SHALL BE DECREASED IN PROPORTION TO SUCH DECREASE IN
OUTSTANDING SHARES OF DITECH STOCK.

 

c.                                       In case of any consolidation of Ditech
with, or merger of Ditech into, any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of Ditech, then as a
condition of such consolidation, merger or sale or conveyance, adequate
provision in escrow will be made whereby Simulscribe will have the right to
acquire and receive upon conversion of the amounts, if any, payable pursuant to
Section 3.2(d) in lieu of the shares of Ditech Stock immediately theretofore
acquirable upon the conversion, such shares of stock, securities, cash or assets
as may be issued or payable with respect to or in exchange for the number of
shares of Ditech Stock immediately theretofore acquirable and receivable upon
conversion had such consolidation, merger or sale or conveyance not taken
place.  Ditech will not effect any consolidation, merger or sale or conveyance
unless prior to the consummation thereof, the successor corporation (if other
than Ditech) assumes by written instrument the obligations under
Section 3.2(d) and the obligations to deliver to Simulscribe such shares of
stock, securities, cash or assets as, in accordance with the foregoing
provisions, Simulscribe may be entitled to acquire.

 

D.                                      DITECH SHALL AT ALL TIMES RESERVE AND
KEEP AVAILABLE OUT OF ITS AUTHORIZED BUT UNISSUED SHARES OF DITECH STOCK SOLELY
FOR THE PURPOSE OF EFFECTING THE CONVERSION PURSUANT TO SECTION 3.2(D) SUCH
NUMBER OF SHARES AS SHALL FROM TIME TO TIME BE SUFFICIENT TO EFFECT THE
CONVERSION PURSUANT TO SECTION 3.2(D); AND IF AT ANY TIME THE NUMBER OF
AUTHORIZED BUT UNISSUED SHARES OF  DITECH STOCK SHALL NOT BE SUFFICIENT TO
EFFECT THE CONVERSION OF THE ENTIRE AMOUNT PURSUANT TO SECTION 3.2(D), IN
ADDITION TO SUCH OTHER REMEDIES AS SHALL BE AVAILABLE TO SIMULSCRIBE, DITECH
WILL USE ITS COMMERCIALLY REASONABLE EFFORTS TO TAKE SUCH ACTION AS MAY, IN THE
OPINION OF DITECH’S COUNSEL, BE NECESSARY TO INCREASE ITS AUTHORIZED BUT
UNISSUED SHARES OF DITECH STOCK TO SUCH NUMBER OF SHARES OF DITECH STOCK AS
SHALL BE SUFFICIENT FOR SUCH PURPOSES.

 

E.                                       UNTIL CONVERSION PURSUANT TO
SECTION 3.2(D), SIMULSCRIBE SHALL NOT HAVE ANY RIGHTS AS A STOCKHOLDER OF
DITECH.

 

f.                                         Incremental Payment Acceleration
Option.

 

If an event described in Section 3.3(c) shall occur, Ditech, at its sole option,
may accelerate the payment of the Incremental Payments by giving thirty (30)
days prior written notice of the determination to accelerate the payment of the
Incremental Payments.  Simulscribe shall then give notice, within twenty (20)
days following such notice given by Ditech, whether it elects to receive the
Incremental Payments in cash or Ditech Stock.  The payment of the Incremental
Payments, whether in cash or Ditech Stock, shall be made immediately prior to
the event described in Section 3.3(c).

 

Confidential Information

 

6

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

3.4          Investment Representations and Warranties of Simulscribe.

 

Simulscribe hereby represents and warrants with respect to the promissory notes
issued or issuable pursuant to Section 3.1(a) and 3.1(b), and the conversion
right set forth in Section 3.2(d), as well as with respect to the issuance of
any common stock issued upon conversion of such promissory notes or conversion
rights (collectively, the “Securities”):

 

a.                                       Simulscribe is an “accredited investor”
as such term is defined in Regulation D under the Securities Act of 1933, as
amended (the “Securities Act”).

 

b.                                      Simulscribe is acquiring the Securities
solely for investment and not with a view to or for sale or distribution of the
Securities, or any part thereof.

 

c.                                       Simulscribe understands that the
Securities have not been registered under the Securities Act of 1933, as
amended, (the “Securities Act”) and must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available.

 

d.                                      Simulscribe is aware that the Securities
may not be sold pursuant to Rule 144 adopted under the Securities Act
(“Rule 144”) unless certain conditions are met, and further agrees not to make
any disposition of all or any part of the Shares in any event unless and until:

 

(i)                                   The Securities are transferred pursuant to
Rule 144 and Ditech shall have received documentation reasonably acceptable to
Ditech that a sale of the Securities has occurred in accordance with the
provisions of Rule 144; or

 

(ii)                                Ditech shall have received a letter from the
Securities and Exchange Commission stating that no action will be recommended to
the Commission with respect to the proposed disposition; or

 

(iii)                             There is then in effect a registration
statement under the Securities Act covering such proposed disposition and such
disposition is made in accordance with said registration statement; or

 

(iv)                              Simulscribe has provided Ditech with a notice
detailing the circumstances of the proposed disposition together with an opinion
of counsel in form and substance reasonably satisfactory to the Company to the
effect that such disposition will not require registration of such Shares under
the Securities Act.

 

e.                                       Simulscribe understands and agrees that
all certificates evidencing the Securities may bear the following legend:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.”

 

f.                                         The representations in this letter
are made with the knowledge that Ditech and its counsel will rely upon such
representations in connection with instructions to Ditech’s transfer agent to
effect the contemplated issuance of the Securities.

 

Confidential Information

 

7

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

4.                                       ASSIGNED CUSTOMERS

 

Effective on the Assignment Date, Simulscribe shall transfer and assign to
Ditech the Assigned Customer Agreements and after the Assignment Date the
Assigned Customers shall be Wholesale Customers and Simulscribe will continue to
perform Services directly for the Assigned Customers.  Such assignment shall not
relieve Simulscribe of any liability or obligations under the Assigned Customer
Agreements prior to or after the Assignment Date, Simulscribe will be
responsible for all such liability and obligations, and Ditech will have no
liabilities for and will not assume and such liability or obligations.  In the
event Ditech is required to pay to any Assigned Customer after the Assignment
Date any valid lien, debt, or expense incurred by Simulscribe prior to or after
the Assignment Date, Ditech shall have the right to offset any such lien, debt,
or expense actually paid by Ditech, which is the valid and legal obligation of
Simulscribe, against any payment owed to Simulscribe by Ditech. Simulscribe
shall provide Ditech with a full copy of the sales history for each Assigned
Customer.

 

5.                                       TRADEMARKS

 

Simulscribe hereby grants to Ditech a non-exclusive and non-transferable license
to use the Marks solely to promote the Services in a manner consistent with this
Agreement.  Ditech will use the Marks in the form provided and in conformance
with any trademark usage policies provided, from time to time, by Simulscribe to
Ditech.  Ditech acknowledges Simulscribe’s exclusive ownership of the Marks, and
Ditech agrees not to take any action inconsistent with such ownership and will
cooperate, at Simulscribe’s reasonable request and expense, in any action
(including the conduct of legal proceedings) which Simulscribe deems necessary
or desirable to establish or preserve Simulscribe’s exclusive rights in and to
the Marks. Ditech will not adopt, use, or attempt to register any trademarks or
trade names that are confusingly similar to the Marks or use the Marks in such a
way as to create combination marks with the Simulscribe Marks. Simulscribe may
terminate this trademark license if, in Simulscribe’s reasonable discretion,
Ditech’s use of the Marks tarnishes, blurs or dilutes the quality associated
with the Marks or the associated goodwill and such unauthorized use is not cured
within thirty (30) days of notice of breach.

 

6.                                       WARRANTY AND DISCLAIMER

 

6.1          Warranty.

 

a.               Representations by Simulscribe.  Simulscribe hereby represents
and warrants to Ditech that (i) Simulscribe owns or has all rights necessary to
grant the rights and licenses provided under this Agreement and the performance
of the Services do not infringe any copyright, patent, trademark, trade secret
or other intellectual property right of a third party, and (ii) Simulscribe
possesses the full power and authority to enter into and perform its obligations
under this Agreement.

 

b.              Representations by Ditech.  Ditech hereby represents and
warrants to Simulscribe that Ditech possesses the full power and authority to
enter into and perform its obligations under this Agreement.

 

c.               Simulscribe represents and warrants that it has informed Ditech
in writing of all of its current Wholesale Customers and related agreements in
the Territory entered into with respect to the Services and this Agreement does
not violate any such agreements.

 

Confidential Information

 

8

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

7.                                      AUDIT

 

Simulscribe agrees to promptly furnish, when requested by Ditech, no more
frequently than once per calendar quarter, a full and detailed statement of the
Services and related costs provided under this Agreement. Ditech or its
authorized representative shall have the right once per calendar quarter during
normal business hours and upon five (5) days prior written notice to audit
Simulscribe’s records and verify any statement, reports, or invoices sent to
Ditech.  Any such audit will be paid for by Ditech; provided however, that if
the audit reveals that Simulscribe has underpaid or overcharged Ditech at a rate
of five percent (5%) or greater, then Simulscribe shall pay the cost of the
audit.

 

8.                                      DURATION OF AGREEMENT AND TERMINATION

 

8.1                               Duration of Agreement.

 

a.               Subject to the termination rights of the parties, this
Agreement shall continue in force indefinitely unless terminated or canceled as
provided herein; provided, that Ditech may terminate this Agreement in the event
that [*].

 

b.              For material breach of any provision of this Agreement, the
non-breaching party may immediately terminate this Agreement provided that a
written notice has been given to the breaching party and such breaching party
failed to cure said breach within sixty (60) days after receipt of such notice.

 

c.               This Agreement shall automatically terminate if [*].

 

d.              After three (3) years from the Effective Date, Ditech will have
the right to terminate this Agreement at any time, for its convenience, upon
ninety (90) days written notice to Simulscribe.

 

8.2                               Loss of Exclusivity.

 

a.               If at any time after the Assignment Date Simulscribe provides
the Services to any Wholesale Customer other than the Assigned Customers or any
other Wholesale Customer to which Ditech has sold Simulscribe’s Services or
Simulscribe collects any revenue directly from a Wholesale Customer, Ditech
shall be entitled to receive and Simulscribe shall immediately pay to Ditech, as
liquidated damages, [*].

 

b.              If at any time after the Assignment Date Simulscribe appoints
any third party a reseller of the services to Wholesale Customers, Ditech shall
be entitled to receive and Simulscribe shall immediately pay to Ditech, as
liquidated damages, [*].

 

The parties understand that Ditech will invest significant resources in building
its business related to the exclusive use of the Services, which the parties
anticipate will result in significant future revenue streams to Ditech, which if
lost would result not only in lost revenue but also in the loss of the value of
Ditech’s investment in the business.  Accordingly, the parties acknowledge that
it is impractical and extremely difficult to determine the actual damages or
lost revenues that may result from a violation of the exclusivity described in
Section 2.1.  Accordingly, the amounts payable to Ditech as “liquidated damages”
under this Section 8.2 are (y) liquidated damages, and not a penalty, and
(z) reasonable and not disproportionate to the presumed damages to Ditech,
including through a loss of profits.

 

Confidential Information

 

9

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

8.3                               Loss of Services.

 

a.               Simulscribe agrees to indemnify, defend and hold harmless
Ditech in respect of any losses suffered by Ditech up to the fourth anniversary
of the Effective Date in the event that prior to the fourth anniversary of the
Effective Date [*].

 

b.              In the event that at any time up to the fourth anniversary of
the Effective Date Simulscribe intentionally fails to provide the Services as
described in this Agreement which failure is not cured within thirty (30) days
of written notice thereof stating in detail the Services that are not being
provided, Ditech shall be entitled to receive and Simulscribe shall immediately
pay to Ditech, as liquidated damages, [*].  The parties understand that Ditech
will invest significant resources in building its business related to the
exclusive use of the Services, which the parties anticipate will result in
significant future revenue streams to Ditech, which if lost would result not
only in lost revenue but also in the loss of the value of Ditech’s investment in
the business.  Accordingly, the parties acknowledge that it is impractical and
extremely difficult to determine the actual damages or lost revenues that may
result from Simulscribe’s failure to provide the Services.  Accordingly, the
amounts payable to Ditech as “liquidated damages” under this Section 8.3 are
(y) liquidated damages, and not a penalty, and (z) reasonable and not
disproportionate to f the presumed damages to Ditech.  including through a loss
of profits.

 

8.4                               Effects of Termination.

 

Upon termination of this Agreement for any reasons, Sections 3.1, 3.2, 3.3 and 6
through 13 shall survive termination of this Agreement.  The total amount of
payments made by Simulscribe to Ditech for indemnification or damages with
respect to any matter set forth in Section 8.2(b) or 8.3(b) shall not exceed, in
the aggregate, $[*], except for a breach of the obligation by Simulscribe to
make a payment to Ditech under such Sections and a claim for indemnity under
Section 10.1 with respect to a Claim brought by a third party against Ditech.

 

9.                                      CONFIDENTIAL INFORMATION.

 

9.1                               Definition of Confidential Information.

 

Each party (the “Disclosing Party”) may from time to time during the term of
this Agreement disclose to the other party (the “Receiving Party”) certain
information regarding the Disclosing Party’s business, including technical,
marketing, financial, employee, planning, and other confidential or proprietary
information, marked, if in tangible form, as “confidential” or “proprietary” or
with a similar legend or, if disclosed orally or visually, identified as
confidential at the time of disclosure and summarized in a writing sent to the
Receiving Party within thirty (30) days after such oral disclosure
(“Confidential Information”).  Regardless of whether so marked or identified,
however, any information that the Receiving Party knew or should have known,
under the circumstances, was considered confidential or proprietary by the
Disclosing Party, will be considered Confidential Information of the Disclosing
Party.

 

9.2                               Protection of Confidential Information.

 

Subject to section 9.3, Receiving Party agrees that it will (i) hold in
confidence and not disclose to any third party any Confidential Information of
Disclosing Party, except as approved in writing by Disclosing Party;
(ii) protect such Confidential Information with at least the same degree of care
that Receiving Party uses to protect its own Confidential Information, but in no
case, less than reasonable care; (iii) use the Disclosing Party’s Confidential
Information for no purpose other than that expressly permitted under this
Agreement; (iv) limit access to Disclosing Party’s Confidential Information to
those of Receiving Party’s employees or authorized representatives having a need
to know who have signed confidentiality agreements containing, or are otherwise
bound by, confidentiality obligations at least as restrictive as those contained
herein; and (v) 

 

Confidential Information

 

10

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

immediately notify Disclosing Party upon discovery of any loss or unauthorized
disclosure of Disclosing Party’s Confidential Information.  The Parties agree
that neither Party will communicate any information to the other Party in
violation of the proprietary rights of any third party.

 

9.3                               Exceptions to Confidentiality.

 

Confidential Information does not include any information that the Receiving
Party can demonstrate with competent evidence (i) was in the public domain at
the time it was communicated to Receiving Party by Disclosing Party;
(ii) entered the public domain subsequent to the time it was communicated to
Receiving Party by Disclosing Party, through no fault of Receiving Party;
(iii) was in Receiving Party’s possession free of any obligation of confidence
prior to the time it was communicated to Receiving Party by Disclosing Party;
(iv) was rightfully communicated to Receiving Party free of any obligation of
confidence subsequent to the time it was communicated by Disclosing Party;
(v) was developed by employees or agents of Receiving Party independently of and
without reference to any information communicated to Receiving Party by
Disclosing Party; or (vi) was communicated by Disclosing Party to an
unaffiliated third party free of any obligation of confidence.  Notwithstanding
the above, Receiving Party may disclose Disclosing Party’s Confidential
Information, without violating the obligations of this Agreement, to the extent
such disclosure is required by a valid order of a court or other governmental
body having jurisdiction, provided that Receiving Party gives Disclosing Party
reasonable prior written notice of such disclosure and makes a reasonable effort
to obtain, or to assist Disclosing Party in obtaining, a protective order
preventing or limiting the disclosure and/or requiring that the Confidential
Information so disclosed be used only for the purposes for which the law or
regulation required, or for which the order was issued.

 

9.4                               Return of Confidential Information.

 

Upon the written request of the Disclosing Party or the expiration or
termination of this Agreement, the Receiving Party will promptly return to the
Disclosing Party or destroy, at the Disclosing Party’s option, all Confidential
Information of the Disclosing Party in the Receiving Party’s possession or
control and permanently erase all electronic copies of such Confidential
Information.  At the Disclosing Party’s request, the Receiving Party will
certify in a writing signed by an officer of the Receiving Party that it has
fully complied with its obligations under this section 9.4.

 

9.5                               Remedies for Breach of Confidentiality.

 

Each party recognizes and agrees that in the event of a breach or threatened
breach of a party’s obligations under this Section 9, irreparable damage may be
caused to the non-breaching party for which monetary damages alone would not
adequately compensate such party.  Therefore, each party agrees that, in
addition to all other remedies available at law or in equity, the non-breaching
party is entitled to seek an injunction or other equitable relief for the
enforcement of any such obligation.

 

10.                                INDEMNIFICATION

 

10.1                        Indemnification by Simulscribe.

 

Simulscribe agrees to indemnify, defend and hold harmless Ditech, its
affiliates, customers, employees, successors and assigns (all referred to in
this Section 10.1 as “Ditech”) from and against any Claims that arise out of or
result from:  (a) any third party claim that the Services infringe a third
party’s intellectual property rights; (b) any breach of any representation,
covenant or warranty by Simulscribe or failure of Simulscribe to perform its
obligations under this Agreement; (c) any obligations or liabilities under any
of the Assigned Customer Agreements arising or relating to any acts or
obligations of Simulscribe prior to or after the Assignment Date, (d) violation
of any applicable law, in

 

Confidential Information

 

11

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

any way arising out of or relating to the Services, and/or (e) any Ditech
Excluded Infringement Claims.  Notwithstanding any of the foregoing, Simulscribe
shall have the right, in its absolute discretion and at its sole cost, to employ
attorneys of its own choice and to institute or defend any such Claim.  Ditech
will promptly notify Simulscribe of any Claims where Simulscribe is responsible
to indemnify Ditech, and will cooperate in the defense and settlement of the
Claim and agree to any settlement of the Claim by Simulscribe; provided that any
such settlement includes a general release of Ditech by the party bringing the
Claim, and will tender control of the defense to Simulscribe.  “Claim,” as used
in this Section 10, means any losses, liabilities, costs, damages, claims,
fines, penalties and expenses (including, without limitation, costs of defense
or settlement and reasonable attorneys’, consultants’ and experts’ fees).  The
foregoing indemnity shall not apply to any such Claim that arises out of or
results from (i) any breach by Ditech of this Agreement, (ii) any combination or
use of the Services provided by Simulscribe with any other products or services
(whether combined or used by Ditech, its customers or any other person),
(iii) any third party software or services provided by Ditech used to provide
the Services, (iv) any modification to the Services made or requested by or on
behalf of Ditech or (v) Ditech’s manufacture, use, sale, or offer for sale of
the Services after Simulscribe’s written notice that Ditech should cease
manufacture, use, sale, or offer for sale of such Services due to such Claim
((clauses (i) through (v) collectively, the “Simulscribe Excluded Infringement
Claims”).

 

10.2                        Indemnification by Ditech.

 

Ditech agrees to defend, indemnify, and hold Simulscribe harmless (including but
not limited to paying all reasonable attorneys’ fees and costs of litigation)
from (a) any Claims brought by any third party arising from any misstatements or
misrepresentation of the Services by Ditech, its agents, employees, and its
contractors, (b) activities relating to Ditech’s sales, marketing, distribution,
and support of the Services not authorized by Simulscribe, (c) any breach of any
representation, warranty or covenant by Ditech or failure of Ditech to perform
its obligations under this Agreement, (d) any obligations or liabilities under
any of the Assigned Customer Agreements arising or relating to any acts or
obligations of Ditech on or after the Assignment Date, (d) violation of any
applicable law by Ditech, in any way arising out of or relating to the Services
and/or (e) any Simulscribe Excluded Infringement Claims.  Simulscribe will
promptly notify Ditech of any Claims where Ditech is responsible to indemnify
Simulscribe, will cooperate in the defense and settlement of the Claim and agree
to any settlement of the Claim by Ditech; provided that any such settlement
includes a general release of Simulscribe by the party bringing the Claim, and
will tender control of the defense to Ditech. The foregoing indemnity shall not
apply to any such Claim that arises out of or results from Simulscribe’s
manufacture, use, sale, or offer for sale of the Services after Ditech’s written
notice that Simulscribe should cease manufacture, use, sale, or offer for sale
of such Services due to such Claim, collectively, the “Ditech Excluded
Infringement Claims.

 

11.                                LIMITATION OF LIABILITY

 

Notwithstanding anything to the contrary set forth in this Agreement, the total
liability of Simulscribe to Ditech under Sections [*] hereof in the aggregate
shall not exceed [*], except to the extent that any such liability is due to the
fraud or intentional misrepresentation of Simulscribe or infringement claims
under Section 10. Ditech’s total liability under this Agreement is limited to
and shall not exceed [*].  Except for claims with respect to [*] or with respect
to any matter set forth in [*], in no event will either party be liable for any
consequential, indirect, exemplary, special, or incidental damages, including
any lost data and lost profits, arising from or relating to this Agreement;
provided, however, that Simulscribe shall not be liable for consequential,
indirect, exemplary, special, or incidental damages, including any lost data and
lost profits, arising from or relating to this Agreement for matters set forth
in [*] in excess of [*], or for matters set forth in [*] in excess of $[*].

 

Confidential Information

 

12

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

12.                                CHANGE OF CONTROL

 

12.1                        Definition.

 

“Change of Control” as to a party shall mean the occurrence of one or more of
the following with respect to that party: (i) the acquisition by any person (or
related group of persons), whether by tender or exchange offer made directly to
that party’s stockholders, open market purchases or any other transaction or
series of transactions, of common stock possessing sufficient voting power in
the aggregate to elect an absolute majority of the members of that party’s Board
of Directors; (ii) a merger or consolidation in which that party is not the
surviving entity, except for a transaction in which securities representing more
than fifty percent (50%) of the total combined voting power of the surviving
entity are held by persons who held common stock immediately prior to such
merger or consolidation; (iii) any reverse merger in which that party is the
surviving entity but in which securities representing more than fifty percent
(50%) of the total combined voting power of that party’s outstanding securities
are transferred to holders different from those who held such securities
immediately prior to such merger; or (iv) the sale, transfer or other
disposition of all or substantially all of the assets of that party.

 

12.2                        Effect.

 

a.               In the event of a Change of Control of Simulscribe, (a) Ditech
shall be entitled to receive, and Simulscribe shall pay to Ditech as liquidated
damages within thirty (30) days of such Change of Control notice, the total of
[*] and (b) [*].  The parties understand that Ditech will invest significant
resources in building its business related to the exclusive use of the Services,
which the parties anticipate will result in significant future revenue streams
to Ditech, which the parties believe would be lost if Simulscribe were to
undergo a Change of Control of Simulscribe, which would result not only in lost
revenue but also in the loss of the value of Ditech’s investment in the
business.  Accordingly, the parties acknowledge that it is impractical and
extremely difficult to determine the actual damages or lost revenues that may
result from a Change of Control of Simulscribe.  Accordingly, the amounts
payable to Ditech as “liquidated damages” under this Section 12.2(a) are
(a) liquidated damages, and not a penalty, and (b) reasonable and not
disproportionate to the presumed damages to Ditech, including through a loss of
profits.

 

b.              Additionally, in the event of a Change of Control of
Simulscribe, Ditech shall be entitled to [*].  The parties understand that
Ditech will invest significant resources in building its business related to the
exclusive use of the Services, which the parties anticipate will result in
significant future revenue streams to Ditech, which the parties believe would be
lost if Simulscribe were to undergo a Change of Control of Simulscribe, which
would result not only in lost revenue but also in the loss of the value of
Ditech’s investment in the business.  Accordingly, the parties acknowledge that
it is impractical and extremely difficult to determine the actual damages or
lost revenues that may result from a Change of Control of Simulscribe. 
Accordingly, the amounts payable to Ditech as “liquidated damages” under this
Section 12(b) are (a) liquidated damages, and not a penalty, and (b) reasonable
and not disproportionate to the presumed damages to Ditech, including through a
loss of profits.

 

13.                                MISCELLANEOUS

 

13.1                        Independent Contractors.

 

The relationship of Simulscribe and Ditech established by this Agreement is that
of independent contractors, and nothing contained in this Agreement shall be
construed to

 

Confidential Information

 

13

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

(i) give either party the power to direct and control the day-to-day activities
of the other, or (ii) allow Ditech to create or assume any obligation on behalf
of Simulscribe.

 

13.2                        Force Majeure.

 

Except for the payment of monies, neither party shall be liable to the other for
its failure to perform any obligations hereunder during any period in which
performance is delayed on account of shortages, riots, insurrection, fires,
flood, storm, explosions, acts of terrorism, acts of God, war, governmental
action, labor conditions, earthquakes, material shortages or any other cause
which is beyond the reasonable control of such party.

 

13.3                        Severability.

 

In the event that any provision of this Agreement, or the application of any
such provision to any person or set of circumstances, will be determined to be
invalid, unlawful, void or unenforceable to any extent, the remainder of this
Agreement, and the application of such provision to persons or circumstances
other than those as to which it is determined to be invalid, unlawful, void or
unenforceable, will not be impaired or otherwise affected and will continue to
be valid and enforceable to the fullest extent permitted by law

 

13.4                        Assignment.

 

This Agreement may not be assigned by Simulscribe without Ditech’s prior written
consent, except that Simulscribe may assign its rights to receive payment due
under the promissory notes and payment of the Incremental Payment and the
conversion and related rights with respect thereto.  Except as is set forth
below, this Agreement may not be assigned by Ditech without Simulscribe’s prior
written consent.  Any such assignment by Simulscribe or Ditech shall be null and
void. For purposes of this section, a Change of Control of Simulscribe shall be
considered an assignment of Simulscribe’s rights.  Ditech may (without the prior
written consent of Simulscribe) assign this Agreement, together with all of its
rights and obligations hereunder, in connection with a merger, consolidation, or
sale of all or substantially all of its assets of the business to which this
Agreement relates; provided that the assignee assumes all of Ditech’s
obligations under this Agreement.

 

13.5                        Notices.

 

Any notices required or permitted hereunder shall be given to the appropriate
party at the address specified below or at such other address as the party shall
specify in writing and shall be by personal delivery, facsimile transmission or
certified or registered mail.  Such notice shall be deemed given upon personal
delivery to the appropriate address or upon receipt of electronic transmission
or, if sent by certified or registered mail, three (3) days after the date of
the mailing.

 

Notice to Ditech:

Ditech Networks, Inc.

Attn: William J. Tamblyn, CFO/ Executive Vice President

825 E. Middlefield Rd.

Mountain View, CA 94043

Phone: (650) 623-1309

Fax: (650) 564-9591

Email: btamblyn@ditechnetworks.com

 

Notice to Simulscribe:

Company Name: Simulscribe LLC

Name of Representative: William Wachtel

Address: 110 E. 59th Street

Address: New York, NY 10022

Phone: (212) 909-9595

Fax: (212) 909-9450

Email: wachtel@wmllp.com

 

Confidential Information

 

14

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

13.6                        Governing Law.

 

This Agreement shall be governed by the laws of the United States and the State
of California irrespective of its conflict of laws provisions requiring
application of laws of any other jurisdiction and as applied to transactions
taking place wholly within California between California residents.  The United
Nations Convention on Contracts for the International Sale of Goods does not
apply to this Agreement.

 

13.7                        Choice of Forum and Venue.

 

The parties hereby expressly submit, and hereby waive any objections they may
have, to the personal jurisdiction and venue of the state and federal courts
located in Santa Clara County, California and in the Northern District of
California, for any claim, dispute, or lawsuit arising from or related to this
Agreement.

 

13.8                        Language.

 

This Agreement is in the English language only, which language shall be
controlling in all respects.  All communications and notices hereunder shall be
in the English language. Ditech waives any right it may have under the law of
Ditech’s country to have this Agreement written in the language of Ditech’s
country or in the language of any country in the Territory. If a copy of this
Agreement is provided in another language, both parties agree that such copy
shall have no legal effect, even if signed by the parties.

 

13.9                        Publicity.

 

Except as may be required by law or the rules of any stock exchange or
governmental or other regulatory authority, whether or not having the force of
law, no announcement or circular in connection with the subject matter or
existence of this Agreement shall be made or issued by or on behalf of a party
without the prior written approval of the other party; provided, that (i) the
initial press release of Ditech (even if required by law or the rules of any
stock exchange or governmental or other regulatory authority) must be approved
by Simulscribe and (ii) any future press release or other announcement or
circular, in connection with the subject matter or existence of this Agreement,
required by law or the rules of any stock exchange or governmental or other
regulatory authority must be furnished to Simulscribe before it is issued.

 

13.10                 Modification.

 

No alteration, amendment, waiver, cancellation or any other change in any term
or condition of this Agreement shall be valid or binding on either party unless
it shall have been mutually assented to in writing by both parties by its duly
authorized representatives.

 

13.11                 Counterparts.

 

This Agreement may be executed in one or more counterparts, all of which taken
together, shall constitute a single instrument and agreement.

 

13.12                 Effect of Cancellation of Note.

 

In the event that Simulscribe owes Ditech an amount under Section 8.2(b) or
8.3(b) of this Agreement and a note described in Section 3.1 shall be cancelled,
the cancellation of the note shall be treated as a dollar for dollar credit in
respect of the amount thereof.

 

13.13                 Entire Agreement.

 

The terms and conditions of this Agreement constitute the entire agreement
between the parties and supersede all contemporaneous or previous agreements and
understandings, whether oral or written, between the parties with respect to the
subject matter hereof.

 

Confidential Information

 

15

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date last written below.

 

 

Ditech Networks, Inc.

 

Simulscribe LLC

 

 

 

 

 

 

Signed:

/s/ Todd Simpson

 

Signed:

/s/ William B. Wachtel

 

 

 

 

 

 

 

 

 

 

Print Name:

Todd Simpson

 

Print Name:

William B. Wachtel

 

 

 

 

 

Title:

CEO

 

Title:

Chairman

 

 

 

 

 

Date:

9/10/2009

 

Date:

9/10/2009

 

Confidential Information

 

16

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

Schedule A

 

Services, Prices and Payment Terms

 

FEATURES

 

·                  Online voicemail management

·                  Unlimited voicemail box storage

·                  Voicemail delivery options include e-mail and/or text
messages

·                  Dial-in voicemail management

·                  24/7 customer service and support

 

BENEFITS

 

·                  Read voicemail on your mobile phone, portable device and/or
e-mail

·                  Whether you are in a meeting, traveling, or on the golf
course, you can instantly see who called, what they said, and you won’t have to
listen to all of your messages to find out about an important missed call

·                  Use the PhoneTag online user interface to search, sort,
archive and delete voicemail like email

·                  You won’t have to write down the information from a
voicemail; important numbers, names and addresses are easy to find, easy to
access and will never get lost

·                  Respond in text by forwarding the message to another person

·                  Voicemails delivered as text when you are roaming saves you
money

·                  You can still listen to the message as an audio file that is
sent direct to your e-mail or dial in to the voicemail system

·                  Keep the same voicemail functionality that you are used to;
all dial-in voicemail functionality stays the same

 

CORPORATE VOICEMAIL INTEGRATION

 

Confidential Information

 

17

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

Schedule B

 

Support; Service Levels

 

Simulscribe agrees to meet the Service Level Requirements specified in the
Assigned Customer Agreements in Schedule C.  Simulscribe shall meet the
requirements in this Schedule B while providing services for new Customers under
this Agreement.

[*]

 

Confidential Information

 

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

Schedule C

 

Assigned Customer Agreements

 

[*]

 

Confidential Information

 

19

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

Schedule D

 

Promissory Note Sample

 

THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

CONVERTIBLE PROMISSORY NOTE

 

$3,500,000

 

September 10, 2009

 

DITECH NETWORKS, INC., a Delaware corporation (the “Company”), for value
received, hereby promises to pay to SIMULSCRIBE, LLC (the “Holder”), the
principal sum of THREE MILLION FIVE HUNDRED THOUSAND DOLLARS ($3,500,000).

 

1.                                       PRINCIPAL.  THE PRINCIPAL AMOUNT DUE
UNDER THIS NOTE SHALL BE DUE AND PAYABLE IN A SINGLE INSTALLMENT ON THE EARLIER
OF (A) SEPTEMBER 10, 2011 AND (B) THE EFFECTIVE DATE OF A CHANGE IN CONTROL (AS
DEFINED BELOW), UNLESS SOONER ACCELERATED IN ACCORDANCE WITH THE TERMS HEREOF
(THE “MATURITY DATE”).  THE COMPANY SHALL GIVE THE HOLDER AT LEAST SEVENTEEN
(17) DAYS PRIOR WRITTEN NOTICE OF THE CLOSING OF A CHANGE IN CONTROL UNDER
SECTION 1(B).  NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS NOTE SHALL
BE NULL AND VOID, AND THE COMPANY SHALL NOT HAVE ANY OBLIGATION TO HEREUNDER, IN
THE EVENT THAT ANY EVENT OCCURS REFERENCED IN SECTIONS 8.2(B), 8.3(B) OR 12.2 OF
THE RESELLER AGREEMENT, DATED SEPTEMBER [  ], 2009, BETWEEN THE COMPANY AND
SIMULSCRIBE LLC, PURSUANT TO WHICH ONE OR MORE OF SUCH SECTIONS PROVIDE THAT THE
COMPANY WOULD BE ENTITLED TO LIQUIDATED DAMAGES PURSUANT TO THE PROVISIONS OF
ONE OR MORE OF SUCH SECTIONS.    A “CHANGE IN CONTROL” SHALL MEAN THE OCCURRENCE
OF ONE OR MORE OF THE FOLLOWING WITH RESPECT TO THE COMPANY: (I) THE ACQUISITION
BY ANY PERSON (OR RELATED GROUP OF PERSONS), WHETHER BY TENDER OR EXCHANGE OFFER
MADE DIRECTLY TO THE COMPANY’S STOCKHOLDERS, OPEN MARKET PURCHASES OR ANY OTHER
TRANSACTION OR SERIES OF TRANSACTIONS, OF COMMON STOCK POSSESSING SUFFICIENT
VOTING POWER IN THE AGGREGATE TO ELECT AN ABSOLUTE MAJORITY OF THE MEMBERS OF
THAT PARTY’S BOARD OF DIRECTORS; (II) A MERGER OR CONSOLIDATION IN WHICH THE
COMPANY IS NOT THE SURVIVING ENTITY, EXCEPT FOR A TRANSACTION IN WHICH
SECURITIES REPRESENTING MORE THAN FIFTY PERCENT (50%) OF THE TOTAL COMBINED
VOTING POWER OF THE SURVIVING ENTITY ARE HELD BY PERSONS WHO HELD THE COMPANY’S
COMMON STOCK IMMEDIATELY PRIOR TO SUCH MERGER OR CONSOLIDATION; (III) ANY
REVERSE MERGER IN WHICH THE COMPANY IS THE SURVIVING ENTITY BUT IN WHICH
SECURITIES REPRESENTING MORE THAN FIFTY PERCENT (50%) OF THE TOTAL COMBINED
VOTING POWER OF THE COMPANY’S OUTSTANDING SECURITIES ARE TRANSFERRED TO HOLDERS
DIFFERENT FROM THOSE WHO HELD SUCH SECURITIES IMMEDIATELY PRIOR TO SUCH MERGER;
OR (IV) THE SALE, TRANSFER OR OTHER DISPOSITION OF ALL OR SUBSTANTIALLY ALL OF
THE ASSETS OF THE COMPANY.

 

2.                                       INTEREST.  THERE SHALL BE NO INTEREST
DUE UNDER THIS NOTE.

 

Confidential Information

 

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

3.                                       PAYMENTS.  FINAL PAYMENT IN FULL OF THE
PRINCIPAL OF THIS NOTE WILL BE MADE AT THE PRINCIPAL OFFICE OF THE HOLDER, UPON
PRESENTATION AND SURRENDER OF THIS NOTE.

 

4.                                       NO PREPAYMENT AT THE OPTION OF THE
COMPANY.  THE COMPANY MAY NOT PREPAY THIS NOTE IN WHOLE OR IN PART, AT ANY TIME,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE HOLDER.

 

5.                                       CONVERSION.

 

(A)                                  IN ACCORDANCE WITH THE PROVISIONS OF THIS
SECTION 5, AT THE OPTION OF THE HOLDER, THE OUTSTANDING PRINCIPAL AMOUNT DUE
HEREUNDER SHALL BE CONVERTED ON THE MATURITY DATE, IN WHOLE BUT NOT IN PART,
INTO SHARES (INDIVIDUALLY, A “SHARE” AND COLLECTIVELY, THE “SHARES”) OF THE
COMPANY’S COMMON STOCK, $0.001 PAR VALUE PER SHARE (THE “COMMON STOCK”).  THE
INITIAL CONVERSION PRICE IS $3.50 PER SHARE OF THE COMMON STOCK (THE “CONVERSION
PRICE”).

 

(B)                                 NO FRACTIONAL SHARES SHALL BE ISSUED UPON
CONVERSION OF THIS NOTE.  IN LIEU OF THE COMPANY ISSUING ANY FRACTIONAL SHARES
TO THE HOLDER UPON CONVERSION OF THIS NOTE, THE COMPANY SHALL PAY THE CASH NOT
CONVERTED IN LIEU OF A FRACTIONAL SHARE.  TO CONVERT THIS NOTE PURSUANT TO THIS
SECTION 5, THE HOLDER SHALL PROVIDE TO THE COMPANY WRITTEN NOTICE OF SUCH
CONVERSION AT LEAST TEN (10) DAYS PRIOR TO THE MATURITY DATE, AND SURRENDER THIS
NOTE ON OR BEFORE THE MATURITY DATE, DULY ENDORSED, AT THE PRINCIPAL OFFICE OF
THE HOLDER.  AT ITS EXPENSE, THE COMPANY SHALL, AS SOON AS PRACTICABLE
THEREAFTER, DELIVER TO SUCH HOLDER AT THE ADDRESS IN THE COMPANY’S RECORDS FOR
THE HOLDER, A STOCK CERTIFICATE ENDORSED TO THE HOLDER REFLECTING THE NUMBER OF
SHARES TO WHICH THE HOLDER SHALL BE ENTITLED UPON SUCH CONVERSION, TOGETHER WITH
ANY OTHER SECURITIES AND PROPERTY TO WHICH THE HOLDER IS ENTITLED UPON SUCH
CONVERSION UNDER THE TERMS OF THIS NOTE.  SUCH CERTIFICATE SHALL BEAR A LEGEND
IN PROPER FORM, STATING SUBSTANTIALLY AS FOLLOWS:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.”

 

IN THE EVENT OF ANY CONVERSION OF THIS NOTE PURSUANT TO THIS SECTION 5, SUCH
CONVERSION SHALL BE DEEMED TO HAVE BEEN MADE ON THE MATURITY DATE AND ON AND
AFTER SUCH DATE THE HOLDER OF THIS NOTE ENTITLED TO RECEIVE THE SHARES ISSUABLE
UPON SUCH CONVERSION SHALL BE TREATED FOR ALL PURPOSES AS THE RECORD HOLDER OF
SUCH SHARES.

 

(C)                                  IN THE EVENT THE COMPANY SHOULD AT ANY TIME
OR FROM TIME TO TIME AFTER THE DATE OF ISSUANCE HEREOF FIX A RECORD DATE FOR THE
EFFECTUATION OF A SPLIT OR SUBDIVISION OF THE THEN OUTSTANDING COMMON STOCK, OR
A STOCK DIVIDEND OR DISTRIBUTION ON THE THEN OUTSTANDING COMMON STOCK, THEN, AS
OF SUCH RECORD DATE (OR THE DATE OF SUCH DISTRIBUTION, SPLIT OR SUBDIVISION IF
NO RECORD DATE IS FIXED), THE CONVERSION PRICE OF THIS NOTE SHALL BE
APPROPRIATELY DECREASED SO THAT THE NUMBER OF SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE SHALL BE INCREASED IN PROPORTION TO SUCH INCREASE OF OUTSTANDING
SHARES OF COMMON STOCK.

 

Confidential Information

 

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

(D)                                 IF THE NUMBER OF SHARES OF THE COMMON STOCK
OUTSTANDING AT ANY TIME AFTER THE DATE HEREOF IS DECREASED BY A COMBINATION OF
THE OUTSTANDING SHARES OF COMMON STOCK, THEN, FOLLOWING THE RECORD DATE OF SUCH
COMBINATION, THE CONVERSION PRICE FOR THIS NOTE SHALL BE APPROPRIATELY INCREASED
SO THAT THE NUMBER OF SHARES OF THE COMMON STOCK ISSUABLE ON CONVERSION HEREOF
SHALL BE DECREASED IN PROPORTION TO SUCH DECREASE IN OUTSTANDING SHARES OF THE
COMMON STOCK.

 

(E)                                  IN CASE OF ANY CONSOLIDATION OF THE COMPANY
WITH, OR MERGER OF THE COMPANY INTO, ANY OTHER CORPORATION, OR IN CASE OF ANY
SALE OR CONVEYANCE OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY,
THEN AS A CONDITION OF SUCH CONSOLIDATION, MERGER OR SALE OR CONVEYANCE,
ADEQUATE PROVISION WILL BE MADE WHEREBY THE HOLDER WILL HAVE THE RIGHT TO
ACQUIRE AND RECEIVE UPON CONVERSION OF THIS NOTE IN LIEU OF THE SHARES
IMMEDIATELY THERETOFORE ACQUIRABLE UPON THE CONVERSION OF THIS NOTE, SUCH SHARES
OF STOCK, SECURITIES, CASH OR ASSETS AS MAY BE ISSUED OR PAYABLE WITH RESPECT TO
OR IN EXCHANGE FOR THE NUMBER OF SHARES OF THE COMMON STOCK IMMEDIATELY
THERETOFORE ACQUIRABLE AND RECEIVABLE UPON CONVERSION OF THIS NOTE HAD SUCH
CONSOLIDATION, MERGER OR SALE OR CONVEYANCE NOT TAKEN PLACE.  THE COMPANY WILL
NOT EFFECT ANY CONSOLIDATION, MERGER OR SALE OR CONVEYANCE UNLESS PRIOR TO THE
CONSUMMATION THEREOF, THE SUCCESSOR CORPORATION (IF OTHER THAN THE COMPANY)
ASSUMES BY WRITTEN INSTRUMENT THE OBLIGATIONS UNDER THIS NOTE AND THE
OBLIGATIONS TO DELIVER TO THE HOLDER SUCH SHARES OF STOCK, SECURITIES OR ASSETS
AS, IN ACCORDANCE WITH THE FOREGOING PROVISIONS, THE HOLDER MAY BE ENTITLED TO
ACQUIRE.

 

(F)                                    THE COMPANY SHALL AT ALL TIMES RESERVE
AND KEEP AVAILABLE OUT OF ITS AUTHORIZED BUT UNISSUED SHARES OF ITS COMMON STOCK
SOLELY FOR THE PURPOSE OF EFFECTING THE CONVERSION OF THIS NOTE SUCH NUMBER OF
SHARES AS SHALL FROM TIME TO TIME BE SUFFICIENT TO EFFECT THE CONVERSION OF THIS
NOTE; AND IF AT ANY TIME THE NUMBER OF AUTHORIZED BUT UNISSUED SHARES OF ITS
COMMON STOCK SHALL NOT BE SUFFICIENT TO EFFECT THE CONVERSION OF THE ENTIRE
OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE, IN ADDITION TO SUCH OTHER REMEDIES AS
SHALL BE AVAILABLE TO THE HOLDER, THE COMPANY WILL USE ITS COMMERCIALLY
REASONABLE EFFORTS TO TAKE SUCH COMPANY ACTION AS MAY, IN THE OPINION OF THE
COMPANY’S COUNSEL, BE NECESSARY TO INCREASE ITS AUTHORIZED BUT UNISSUED COMMON
STOCK TO SUCH NUMBER OF SHARES OF COMMON STOCK AS SHALL BE SUFFICIENT FOR SUCH
PURPOSES.

 

(g)                                 Until conversion of this Note the Holder
shall not have any rights as a stockholder of the Company.

 

6.                                       EVENTS OF DEFAULT AND RIGHT TO CURE.

 

“Event of Default,” whenever used herein, means any one of the following
(regardless of the reason or cause of such Event of Default):

 

(A)                                  THE COMPANY FAILS TO MAKE A PAYMENT, WHEN
DUE, OF ANY PRINCIPAL DUE ON THIS NOTE;

 

(B)                                 THE ENTRY OF ANY DECREE OR ORDER BY A COURT
HAVING JURISDICTION ADJUDGING THE COMPANY A DEBTOR OR INSOLVENT, ORDERING THE
WIND-UP OR LIQUIDATION OF THE COMPANY, OR APPROVING AS PROPERLY FILED A PETITION
SEEKING REORGANIZATION, ARRANGEMENT, ADJUSTMENT, OR COMPOSITION OF OR IN RESPECT
OF THE COMPANY UNDER THE FEDERAL BANKRUPTCY CODE (“BANKRUPTCY

 

Confidential Information

 

22

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

CODE”) OR ANY OTHER APPLICABLE FEDERAL OR STATE LAW, THE APPOINTMENT OF A
RECEIVER, LIQUIDATION, ASSIGNEE, TRUSTEE, SEQUESTRATOR, OR OTHER SIMILAR
OFFICIAL OF THE COMPANY, OR OF ANY SUBSTANTIAL PART OF THE PROPERTY OF THE
COMPANY, AND THE CONTINUANCE OF ANY SUCH DECREE OR ORDER UNSTAYED, UNDISCHARGED,
OR UNDISMISSED AND IN EFFECT FOR MORE THAN SIXTY (60) CONSECUTIVE DAYS; OR

 

(C)                                  INSTITUTION BY THE COMPANY OF PROCEEDINGS,
UNDER THE BANKRUPTCY CODE OR ANY OTHER APPLICABLE FEDERAL OR STATE LAW, SEEKING
AN ORDER FOR RELIEF, OR THE CONSENT OF THE COMPANY TO THE INSTITUTION OF
BANKRUPTCY OR INSOLVENCY PROCEEDINGS AGAINST THE COMPANY, OR THE CONSENT BY THE
COMPANY TO THE FILING OF ANY SUCH PETITION OR TO THE APPOINTMENT OF A RECEIVER,
LIQUIDATOR, ASSIGNEE, TRUSTEE, SEQUESTRATOR, OR OTHER SIMILAR OFFICIAL OF OR FOR
THE COMPANY OR ANY SUBSTANTIAL PART OF THE PROPERTY OF THE COMPANY, OR THE
MAKING BY THE COMPANY OF ANY ASSIGNMENT FOR THE BENEFIT OF CREDITORS, OR THE
ADMISSION BY THE COMPANY OF THE COMPANY’S INABILITY TO PAY ITS DEBTS GENERALLY
AS THEY BECOME DUE, OR THE TAKING OF ANY ACTION BY THE COMPANY IN FURTHERANCE OF
ANY SUCH ACTION;

 

(D)                                 THE ISSUANCE OF ANY INJUNCTION OR
RESTRAINING ORDER WITH RESPECT TO ANY MATERIAL ASPECT OF THE BUSINESS OR ASSETS
OF THE COMPANY, OR LEVY ON OR ATTACHMENT OF ANY FUNDS OR OTHER PROPERTY, REAL OR
PERSONAL, OF THE COMPANY, IN AN AMOUNT IN EXCESS OF ONE MILLION DOLLARS
($1,000,000), IF, IN EACH CASE, THE SAME IS NOT DISMISSED, DISCHARGED, RELEASED,
SATISFIED OR VACATED WITHIN A PERIOD OF SIXTY (60) DAYS;

 

(E)                                  THE ENTRY OF ANY JUDGMENT OR ORDER AGAINST
THE COMPANY FOR THE PAYMENT OF MONEY IN AN AMOUNT IN EXCESS OF ONE MILLION
DOLLARS ($1,000,000) IN EXCESS OF INSURANCE COVERAGE, IF THE SAME IS NOT
SATISFIED OR ENFORCEMENT PROCEEDINGS ARE NOT STAYED WITHIN SIXTY (60) DAYS OR
IF, WITHIN NINETY (90) DAYS AFTER THE EXPIRATION OF ANY SUCH STAY, THE JUDGMENT
OR ORDER IS NOT DISMISSED, DISCHARGED OR SATISFIED;

 

(f)                                    The occurrence of a “Trigger Event” under
Section 3.2(e) of the Services Agreement, of even date herewith, between the
Company and the Holder.

 

If any Event of Default occurs, the Holder by written notice to the Company,
may:

 

(I)                                     DECLARE THE ENTIRE UNPAID PRINCIPAL OF
THIS NOTE DUE AND PAYABLE AND SUCH PRINCIPAL SHALL THEREUPON BECOME DUE AND
PAYABLE WITHOUT PRESENTMENT, NOTICE, PROTEST, OR DEMAND OF ANY KIND (ALL OF
WHICH ARE EXPRESSLY WAIVED BY THE COMPANY); AND

 

(II)                                  TAKE ALL ACTIONS AVAILABLE TO THEM, AT LAW
OR IN EQUITY, TO COLLECT AND OTHERWISE ENFORCE THIS NOTE;

 

provided however, in any event with respect to the Company described in
paragraph (b) or (c) above, the entire unpaid principal amount of this Note
shall automatically become due and payable, without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived by the
Company, anything contained herein to the contrary notwithstanding.

 

Confidential Information

 

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

7.                                       AMENDMENT.  THIS NOTE MAY NOT BE
AMENDED OR MODIFIED EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY THE COMPANY AND THE
HOLDER.

 

8.                                       ADDITIONAL TERMS AND CONDITIONS.  THE
COMPANY: (I) WAIVES PRESENTMENT, DEMAND, NOTICE OF DEMAND, PROTEST, NOTICE OF
PROTEST, AND NOTICE OF NONPAYMENT AND ANY OTHER NOTICE REQUIRED TO BE GIVEN
UNDER THE LAW TO THE COMPANY, IN CONNECTION WITH THE DELIVERY, ACCEPTANCE,
PERFORMANCE, DEFAULT OR ENFORCEMENT OF THIS NOTE; AND (II) AGREES THAT ANY
FAILURE TO ACT OR FAILURE TO EXERCISE ANY RIGHT OR REMEDY ON THE PART OF THE
REGISTERED OWNER SHALL NOT IN ANY WAY AFFECT OR IMPAIR THE OBLIGATIONS OF THE
COMPANY OR BE CONSTRUED AS A WAIVER BY THE OWNER OF, OR OTHERWISE AFFECT, ANY OF
ITS RIGHTS UNDER THIS NOTE.  IN ANY LITIGATION, ARBITRATION, OR OTHER PROCEEDING
BY WHICH ONE PARTY EITHER SEEKS TO ENFORCE ITS RIGHTS UNDER THIS NOTE (WHETHER
IN CONTRACT, TORT, OR BOTH) OR SEEKS A DECLARATION OF ANY RIGHTS OR OBLIGATIONS
UNDER THIS NOTE, THE PREVAILING PARTY SHALL BE AWARDED ITS REASONABLE ATTORNEY
FEES, AND COSTS AND EXPENSES INCURRED.

 

9.                                       INVALIDITY.  IN THE EVENT ANY ONE OR
MORE OF THE PROVISIONS OF THIS NOTE SHALL FOR ANY REASON BE HELD TO BE INVALID,
ILLEGAL OR UNENFORCEABLE, IN WHOLE OR IN PART OR IN ANY RESPECT, OR IN THE EVENT
THAT ANY ONE OR MORE OF THE PROVISIONS OF THIS NOTE OPERATE OR WOULD
PROSPECTIVELY OPERATE TO INVALIDATE THIS NOTE, THEN AND IN EITHER OF THOSE
EVENTS, SUCH PROVISION OR PROVISIONS ONLY SHALL BE DEEMED NULL AND VOID AND
SHALL NOT AFFECT ANY OTHER PROVISION OF THIS NOTE AND THE REMAINING PROVISIONS
OF THIS NOTE SHALL REMAIN OPERATIVE AND IN FULL FORCE AND EFFECT AND SHALL IN NO
WAY BE AFFECTED, PREJUDICED AND DISTURBED THEREBY.  NOTWITHSTANDING THE
FOREGOING, IF SUCH PROVISION COULD BE MORE NARROWLY DRAWN SO AS NOT TO BE
INVALID, PROHIBITED OR UNENFORCEABLE IN SUCH JURISDICTION, IT SHALL, AS TO SUCH
JURISDICTION, BE SO NARROWLY DRAWN, WITHOUT INVALIDATING THE REMAINING
PROVISIONS OF THIS AGREEMENT OR AFFECTING THE VALIDITY OR ENFORCEABILITY OF SUCH
PROVISION IN ANY OTHER JURISDICTION.

 

10.                                 GOVERNING LAW.  THIS NOTE SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.

 

11.                                 NOTICES.  ALL NOTICES, REQUESTS, CONSENTS,
AND OTHER COMMUNICATIONS UNDER THIS NOTE SHALL BE IN WRITING AND SHALL BE
DELIVERED BY HAND OR MAILED BY FIRST CLASS CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, POSTAGE PREPAID:

 

If to the Holder:

 

SIMULSCRIBE, LLC

 

 

110 E. 59th Street

 

 

New York, New York 10022

 

 

Attention: William B. Wachtel

 

 

 

With a required copy

 

Wachtel & Masyr, LLP

(which shall not constitute

 

110 E. 59th Street

notice) to:

 

New York, New York 10022

 

 

Attention: William B. Wachtel

 

 

 

If to the Company:

 

825 East Middlefield Road

 

 

Mountain View, CA 94043

 

 

Attention: Chief Financial Officer

 

Confidential Information

 

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

Notices provided in accordance with this Section 11 shall be deemed delivered
upon personal delivery or, on the same day when transmitted if transmitted by
facsimile transmission, email or telecopier (with oral confirmation of receipt)
or three (3) business days after deposit in the mail.

 

12.                                 BROKERAGE. THE COMPANY AGREES TO INDEMNIFY
AND HOLD HARMLESS THE HOLDER AGAINST AND IN RESPECT OF ANY CLAIM FOR BROKERAGE
OR OTHER COMMISSION RELATIVE TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED BY
THIS NOTE, BASED IN ANY WAY ON AGREEMENTS, ARRANGEMENTS OR UNDERSTANDING MADE OR
CLAIMED TO HAVE BEEN MADE BY SUCH PARTY WITH ANY THIRD PARTY.

 

13.                                 JURISDICTION AND WAIVER.  THE COMPANY HEREBY
IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, OVER ALL SUITS,
ACTIONS OR OTHER PROCEEDINGS ARISING OUT OF OR IN RELATION TO THIS NOTE.  THE
COMPANY COVENANTS THAT IT SHALL NOT OBJECT TO THE VENUE OF ANY SUCH COURT OVER
SUCH SUIT, ACTION OR OTHER PROCEEDING ON FORUM NON CONVENIENS OR OTHER GROUNDS.

 

14.                                 WAIVER OF JURY TRIAL.  AS A SPECIFICALLY
BARGAINED INDUCEMENT FOR THE HOLDER TO ACCEPT THIS NOTE, AND AFTER HAVING THE
OPPORTUNITY TO CONSULT COUNSEL, THE COMPANY HEREBY EXPRESSLY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO THIS NOTE OR THE LOAN
DOCUMENTS OR ARISING IN ANY WAY FROM THIS NOTE.

 

15.                                 Successors and Assigns.  This Note will be
binding upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all of the Company’s assets.

 

IN WITNESS WHEREOF, this Note has been duly executed and delivered by the
Company as of the date first written above.

 

 

DITECH NETWORKS, INC.

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

Confidential Information

 

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

Schedule E

 

[*]

 

[*]

 

Confidential Information

 

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