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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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
















 


[*] = 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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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

















 


[*] = 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


 


18

















 


[*] = 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
















 


[*] = 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


 


20

















 


[*] = 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


 


21

















 


[*] = 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

















 


[*] = 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


 


23

















 


[*] = 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


 


24

















 


[*] = 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


 


25

















 


[*] = 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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