Document:

WWW.EXFILE.COM, INC. -- 888-775-4789 -- ZAP -- EXHIBIT 10.52 TO FORM 10-Q

    

    

    

    

    EXHIBIT
10.52

     

    Senior
Note Payable to Al Yousuf LLC

    

    THIS
SENIOR CONVERTIBLE NOTE (THIS “NOTE”) AND THE SECURITIES ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY
NOT BE OFFERED FOR SALE OR SOLD UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER OR SALE. THIS NOTE
AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF (I) MAY BE PLEDGED OR
HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN LOAN OR OTHER FINANCING
SECURED BY SUCH SECURITIES AND (II) MAY BE TRANSFERRED OR ASSIGNED TO AN
AFFILIATE OF THE HOLDER HEREOF WITHOUT THE NECESSITY OF AN OPINION OF COUNSEL OR
THE CONSENT OF THE ISSUER HEREOF.

    

    THIS
NOTE DOES NOT REQUIRE PHYSICAL SURRENDER HEREOF IN ORDER TO EFFECT A PARTIAL
PAYMENT, REDEMPTION OR CONVERSION HEREOF. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT SHOWN
BELOW.

    

    ZAP

    

    SENIOR
CONVERTIBLE NOTE

    

    Issue
Date: May 8, 2008 US$475,000

    

    FOR VALUE RECEIVED, ZAP, a
California corporation (the “Company”),
hereby promises to pay to the order of AL YOUSUF LLC, a United Arab Emirates
limited liability company, or its permitted successors or assigns (the “Holder”),
the sum of Four Hundred Seventy-Five Thousand U.S. Dollars (US$475,000.00) in
same day funds (the “Principal”,
on or before the date that is the six (6) month anniversary of the Issue Date
(the “Maturity
Date”).  The Holder may convert the principal of and interest
accrued on this Senior Convertible Note (the “Note”)
into shares (the “Conversion
Shares”) of the Company’s common stock, no par value (the “Common
Stock”), on the terms set forth herein.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    The Company has issued this Note
pursuant to a Note Purchase Agreement, dated as of the date hereof (the “Note Purchase
Agreement”).

    

    The following terms shall apply to this
Note:

    

    1.    DEFINITIONS.  All
terms not specifically defined in this Section 1, shall have the respective meanings set
forth in this Note.

    

    “Business
Day” means any day other than a Saturday, a Sunday or a day on which the
Principal Market is closed or on which banks in the City of New York are
required or authorized by law to be closed.

    

    “Change of
Control” means the existence or occurrence of any of the following: (a)
the sale, conveyance or disposition of all or substantially all of the assets of
the Company; (b) the effectuation of a transaction or series of transactions in
which more than fifty percent (50%) of the voting power of the Company is
disposed of; (c) the consolidation, merger or other business combination of the
Company with or into any other entity, immediately following which the prior
stockholders of the Company fail to own, directly or indirectly, at least fifty
percent (50%) of the surviving entity; (d) a transaction or series of
transactions in which any Person or group acquires more than fifty percent (50%)
of the voting equity of the Company; or (e) the Continuing Directors do not at
any time constitute at least a majority of the Board of Directors of the
Company.

    

    “Continuing
Director” means, at any date, a member of the Company’s Board of
Directors (i) who was a member of such board on the date of the Note Purchase
Agreement or (ii) who was nominated or elected by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election or whose election to the Company’s Board of Directors was recommended
or endorsed by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election or such lesser number
comprising a majority of a nominating committee if authority for such
nominations or elections has been delegated to a nominating committee whose
authority and composition have been approved by at least a majority of the
directors who were Continuing Directors at the time such committee was
formed.

    

    “Conversion
Price” means, as of any date, an amount in U.S. dollars equal to ninety
percent (90.00%) of the VWAP on such date (or, if such date is not a Trading
Day, the Trading Day immediately preceding such date).

    

    “Default Interest
Rate” means the lower of twelve (12%) and the maximum rate permitted by
applicable law or by the applicable rules or regulations of any governmental
agency or of any stock exchange or other self-regulatory organization having
jurisdiction over the Company or the trading of its securities.

    

    “Event of
Default” means the occurrence of any of the following
events:

    

    
      	
               
      

            	
              (i)

            	
              a
      Liquidation Event occurs or is publicly
  announced;

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (ii)

            	
              the
      Company fails to make any payment of principal or interest on this Note in
      full as and when such payment is due, and such payment remains unpaid for
      five (5) Business Days following written notice thereof from the
      Holder;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              other
      than a breach described in clause (ii) above, the Company breaches any
      material term or condition of this Note, and such breach continues for a
      period of five (5) Business Days following written notice thereof to the
      Company from the Holder (for purposes of this clause (iii), the Company’s
      failure to convert this Note and deliver the shares due upon conversion in
      accordance herewith shall, without limitation, be deemed to be a breach of
      a material term or condition of this
Note);

            

    

    

    
      	
               
      

            	
              (iv)

            	
              any
      representation or warranty made by the Company in this Note or the Note
      Purchase Agreement was inaccurate or misleading in any material respect as
      of the date such representation or warranty was made;
  or

            

    

    

    
      	
               
      

            	
              (v)

            	
              a
      default occurs or is declared, or any amounts are accelerated, under or
      with respect to any instrument that evidences debt of the Company or any
      of its Subsidiaries in a principal amount exceeding Twenty Five Thousand
      U.S. Dollars (US$25,000).

            

    

    

    “Issue
Date” means the date first set forth above, and the same date as the Note
Purchase Agreement.

    

    “Liquidation
Event” means the (i) institution of any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, relative to the Company or any Subsidiary
of the Company; or (ii) the dissolution or other winding up of the Company or
any Subsidiary of the Company, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy proceedings; or (iii) any assignment for
the benefit of creditors or any marshalling of the material assets or material
liabilities of the Company or any Subsidiary of the Company.

    

    “Mandatory
Redemption Price” means one hundred and twenty percent (120%) of (A) the
unpaid principal amount of this Note being redeemed plus (B) all accrued and
unpaid Interest (including default interest).

    

    “Principal
Market” means the principal exchange, market or quotation system on which
the Common Stock is listed, traded or quoted.

    

    “Securities
Act” means the Securities Act of 1933, as amended.

    

    “Subsidiary”
of a Person means (i) a corporation a majority of whose capital stock with
voting power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by one or more subsidiaries of
such Person or by such 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Person
and one or more of its subsidiaries or (ii) any other form of business
organization (other than a corporation) in which such Person, one or more of its
subsidiaries, or such Person and one or more of its subsidiaries, directly or
indirectly, at the date of determination thereof, own at least a majority
ownership interest.

    

    “Trading
Day” means a Business Day on which shares of Common Stock are purchased
and sold on the Principal Market.

    

    “VWAP” on a
Trading Day means the volume weighted average price of the Common Stock for such
Trading Day on the Principal Market as reported by Bloomberg Financial Markets
or, if Bloomberg Financial Markets is not then reporting such prices, by a
comparable reporting service of national reputation selected by the Holder and
reasonably satisfactory to the Company.  If VWAP cannot be calculated
for the Common Stock on such Trading Day on the foregoing bases, then the
Company shall submit such calculation to an independent investment banking firm
of national reputation reasonably acceptable to the Holder and shall cause such
investment banking firm to perform such determination and notify the Company and
the Holder of the results of determination no later than two (2) Business Days
from the time such calculation was submitted to it by the
Company.  All such determinations shall be appropriately adjusted for
any stock dividend, stock split, reverse stock split or other similar
transaction during such period.

    

    All definitions contained in this Note
are equally applicable to the singular and plural forms of the terms
defined.  The words “hereof,” “herein” and “hereunder” and words of
similar import refer to this Note as a whole and not to any particular provision
of this Note.  Any capitalized term used but not defined herein has
the meaning specified in the Note Purchase Agreement.

    

    2.    PAYMENT OF PRINCIPAL AND
INTEREST.  On the Maturity Date, the Company shall pay to the
Holder an amount in cash representing all outstanding Principal, accrued and
unpaid Interest, if any, and accrued and unpaid Late Charges, if any, on such
Principal and Interest.  The Company may prepay in cash, in whole, or
from time to time, in part any Principal, Interest or Late Charges.

    

                          During
the term of this Note, Interest shall accrue, commencing on the Issue Date, on
outstanding Principal at an interest rate equal to the greater of (i) six
percent (6%) per annum (the “Interest”)
and (ii) 6 month LIBOR plus two hundred and fifty (250) basis points per
annum.  Interest shall be calculated on the basis of a 365-day year
and the actual number of days elapsed, to the extent permitted by applicable
law.

    

    If the Company shall fail to make any
payment of Principal or Interest on this Note in accordance herewith, additional
interest (a “Late
Charge”) shall accrue on such unpaid Principal and Interest at a rate per
annum equal to the lesser of twelve percent (12%) and the maximum rate permitted
by applicable law.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.    CONVERSION.

    

    (a) Right to
Convert.  The Holder shall have the right, at any time, and
from time to time to convert all or any part of the outstanding and unpaid
principal and interest accrued but unpaid hereon amount of this Note, into such
number of duly authorized, validly issued, fully paid and non-assessable
Conversion Shares as is determined in accordance with the terms hereof (a “Conversion”).  The
Company may not refuse any conversion request by the Holder for any reason or no
reason unless and until the Company obtains an injunction and posts bond with
respect thereto.

    

    (b) Conversion
Notice.  In order to convert principal of (and, if the Holder
so elects, Interest accrued on) this Note, the Holder shall send by facsimile
transmission (followed by a telephonic or email confirmation that such facsimile
was sent), at any time prior to 5:00 p.m., New York City time, on the Business
Day on which the Holder wishes to effect such Conversion (the “Conversion
Date”), a properly completed notice of conversion to the Company, in the
form set forth on Annex
I hereto, stating the amount of principal (and accrued Interest and any
other amounts, if applicable) to be converted and a calculation of the number of
shares of Common Stock issuable upon such Conversion (a “Conversion
Notice”).  Subject to Section 5(d), the Conversion Notice shall also
state the name or names (with address) in which the shares of Common Stock that
are issuable on such Conversion shall be issued.  The Holder shall not
be required to physically surrender this Note to the Company in order to effect
a Conversion for less than the Principal then outstanding.  The
Company shall maintain a record showing, at any given time, the unpaid principal
amount of this Note and the date of each Conversion or other payment of
principal hereof.  In the case of a dispute as to the number of
Conversion Shares issuable upon a Conversion, the Company shall promptly issue
to the Holder the number of Conversion Shares that are not disputed, the Company
and the Holder shall provide each other with their respective calculations, and
the Company shall submit the disputed calculations to a certified public
accounting firm of national recognition (other than the Company’s independent
accountants) within two (2) Business Days following the later of the date on
which the Holder delivers its calculations to the Company and the receipt of the
Holder’s Conversion Notice.  The Company shall use its best efforts to
cause such accountants to calculate the Conversion Price as provided herein and
to notify the Company and the Holder of the results in writing no later than two
(2) Business Days following the day on which such accountant received the
disputed calculations (the “Dispute
Procedure”).  Such accountant’s calculation shall be deemed
conclusive absent manifest error.  The fees of any such accountant
shall be borne by the party whose calculations are most at variance with those
of such accountant.

    

    (c) Number of Conversion Shares;
Reduction of Principal and Interest.  The number of Conversion
Shares to be delivered by the Company pursuant to a Conversion shall be equal to
the principal amount of this Note being converted (together, if the Holder so
elects, with accrued and unpaid Interest and any other accrued and unpaid
amounts on this Note), divided by the Conversion Price in effect on the
Conversion Date.  Upon the valid delivery of the Conversion Shares by
the Company, the amounts subject to such Conversion shall be credited towards
the principal amount of this Note (and, if the Holder has so elected, such
Interest and amounts).

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (d) Delivery of Common Stock
Upon Conversion.  Upon receipt of a Conversion Notice, the
Company shall, no later than the close of business on the sixth (6th) Business
Day following the Conversion Date set forth in such Conversion Notice (the
“Delivery
Date”), issue and deliver or cause to be delivered to the Holder the
number of Conversion Shares determined pursuant to Section 3(c) above, provided, however, that any Conversion
Shares that are the subject of a Dispute Procedure shall be delivered no later
than the close of business on the sixth (6th) Business Day following the
determination made pursuant thereto.  The Company shall effect
delivery of Conversion Shares to the Holder no later than the close of business
on such Delivery Date, by delivering to the Holder or its nominee physical
certificates representing such Conversion Shares.  If any Conversion
would result in a fractional Conversion Share being issuable, such fractional
Conversion Share shall be disregarded and the number of Conversion Shares
issuable upon such Conversion, in the aggregate, shall be the nearest whole
number of Conversion Shares.  Conversion Shares delivered to the
Holder shall not contain any restrictive legend, except that in the event the
Conversion Shares constitute “restricted securities” within the meaning of Rule
144 under the Securities Act, the Conversion shares may, until such shares
qualify for resale pursuant to Rule144(b) under the Securities Act, contain a
legend stating that the Conversion Shares have not been registered under the
Securities Act.

    

    4.    EVENTS OF DEFAULT; MANDATORY
REDEMPTION.

    

    (a) Mandatory
Redemption.  In the event that an Event of Default or a Change
of Control occurs, the Holder shall have the right, upon written notice to the
Company (a “Mandatory
Redemption Notice”), to have all or any portion of the unpaid principal
amount of this Note, plus all accrued and unpaid Interest (including default
interest, if any), redeemed by the Company (a “Mandatory
Redemption”) at the Mandatory Redemption Price in same day
funds.  The Mandatory Redemption Notice shall specify the effective
date of such Mandatory Redemption (the “Mandatory
Redemption Date”), which date must be at least two (2) Business Days
following the Business Day on which the Mandatory Redemption Notice is delivered
to the Company, and the amount of principal and interest (and other amounts, if
any) to be redeemed.  In order to effect a Mandatory Redemption
hereunder, the Holder must deliver a Mandatory Redemption Notice no later than,
in the case of an Event of Default, the close of business on the third (3rd)
Business Day following the date on which an Event of Default is no longer
continuing and, with respect to a Change of Control, the close of business on
the third (3rd) Business Day following the date on which the Change of Control
is completed.  The Company agrees to provide prompt notice of each
Event of Default and Change of Control to the Holder.

    

    (b) Payment of Mandatory
Redemption Price.

    

    (i) The
Company shall pay the Mandatory Redemption Price to the Holder on the Mandatory
Redemption Date.  In the event that the Company redeems the entire
remaining unpaid principal amount of this Note, all accrued and unpaid Interest
and any other amounts due hereunder, and pays such amount 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    to the
Holder in cash, the Holder shall return this Note to the Company for
cancellation.

    

    (ii) If the
Company fails to pay the Mandatory Redemption Price to the Holder on Mandatory
Redemption Date, the Holder shall be entitled to interest thereon at the Default
Interest Rate from the Mandatory Redemption Date until the date on which
Mandatory Redemption Price has been paid in full.

    

    5.    MISCELLANEOUS.

    

    (a) Failure to Exercise Rights
not Waiver.  No failure or delay on the part of the Company or
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude any other or further exercise
thereof.  All rights and remedies of the Company and the Holder
hereunder are cumulative and not exclusive of any rights or remedies otherwise
available.  In the event that the Company does not pay any amount
under this Note when such amount becomes due, the Company shall bear all costs
incurred by the Holder in collecting such amount, including without limitation
reasonable legal fees and expenses.

    

    (b) Notices.  Any
notice, demand or request required or permitted to be given by the Company or
the Holder pursuant to the terms of this Note shall be in writing and shall be
deemed delivered (i) when delivered personally or by verifiable facsimile
transmission, unless such delivery is made on a day that is not a Business Day,
in which case such delivery will be deemed to be made on the next succeeding
Business Day, (ii) on the next Business Day after timely delivery to an
overnight courier and (iii) on the Business Day actually received if deposited
in the U.S. mail (certified or registered mail, return receipt requested,
postage prepaid), addressed as follows:

    

    If to the Company:

    

    ZAP

    501 Fourth Street

    Santa Rosa, California
95401

    Attn:  Steven
Schneider

    Tel:     (707)
525-8658

    Fax:     (707)
525-8692

    

    with a copy (which shall not
constitute notice) to:

    

    Richardson & Patel,
LLP

    Murdock Plaza

    10900 Wilshire Blvd.

    Suite 500

    Los Angeles, CA 90024

    Attn:   Mark Y.
Abdou

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Tel:     (310)
208-1182

    Fax:     (310)
208-1154

    

    If to the Holder:

    

    Al Yousuf, LLC

    Mezzanine Floor

    Yamaha Showroom

    Sheikh Zayed Road

    Dubai, United Arab
Emirates

    Attention: Iqbal al
Yousuf

    Tel:     +971.4.339.0000

    Fax:     +971.4.339.5544

    

    with a copy (which shall not
constitute notice) to:

    

    Dewey & LeBoeuf LLP

    Suites 102-104, Level 1

    The Gate Village Building
4

    Dubai International Financial
Centre

    PO Box 506675

    Dubai, United Arab
Emirates

    Attn:   John Eric
Podgore

    Tel:     +971.4.425.6323

    Fax:     +971.4.425.6301

    

    or as
shall be designated by the Company or the Holder in writing to the other parties
hereto in accordance this Section 5(b).

    

    (c) Amendments and
Waivers.  No amendment, modification or other change to, or
waiver of any provision of, this Note or any other Note may be made unless such
amendment, modification or change, or request for waiver, is (A) set forth in
writing and is signed by the Company and (B) consented to in writing signed by
the parties identified herein.  Upon the satisfaction of the
conditions described in (A) and (B) above, this Note shall be deemed to
incorporate any amendment, modification, change or waiver effected thereby as of
the effective date thereof.

    

    (d) Transfer of
Note.  The Holder may sell, transfer or otherwise dispose of
all or any part of this Note (including without limitation pursuant to a pledge)
to any person or entity as long as such sale, transfer or disposition is the
subject of an effective registration statement under the Securities Act and
applicable state securities laws, or is exempt from registration thereunder, and
is otherwise made in accordance with the applicable provisions of the Note
Purchase Agreement.  From and after the date of any such sale,
transfer or disposition, the transferee hereof shall be deemed to be the holder
of a Note in the principal amount acquired by such transferee, and the Company
shall, as promptly as practicable, issue and deliver to such transferee a new
Note identical in all 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    respects
to this Note, in the name of such transferee.  The Company shall be
entitled to treat the original Holder as the holder of this entire Note unless
and until it receives written notice of the sale, transfer or disposition
hereof.

    

    (e) Lost or Stolen
Note.  Upon receipt by the Company of evidence of the loss,
theft, destruction or mutilation of this Note, and (in the case of loss, theft
or destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of the Note, if mutilated, the Company shall
execute and deliver to the Holder a new Note identical in all respects to this
Note.

    

    (f) Governing
Law.  This Note shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts made
and to be performed entirely within the State of California.

    

    (g) Successors and
Assigns.  The terms and conditions of this Note shall inure to
the benefit of and be binding upon the respective successors (whether by merger
or otherwise) and permitted assigns of the Company and the
Holder.  The Company may not assign its rights or obligations under
this Note except as specifically required or permitted pursuant to the terms
hereof.

    

    (h) Usury. This Note is
subject to the express condition that at no time shall the Company be obligated
or required to pay interest hereunder at a rate which could subject the Holder
to either civil or criminal liability as a result of being in excess of the
maximum interest rate which the Company is permitted by applicable law to
contract or agree to pay.  If by the terms of this Note, the Company
is at any time required or obligated to pay interest hereunder at a rate in
excess of such maximum rate, the rate of interest under this Note shall be
deemed to be immediately reduced to such maximum rate and the interest payable
shall be computed at such maximum rate and all prior interest payments in excess
of such maximum rate shall be applied and shall be deemed to have been payments
in reduction of the principal balance of this Note.

    

    

    [The Remainder of
This Page Intentionally Left Blank; Signature Page Follows]

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
Company has caused this Note to be signed in its name by its duly authorized
officer on the date first above written.

    

    
      
        	 	ZAP	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/  Steven
      Schneider	 
	 	 	Name:  Steven
      Schneider 	 
	 	 	Title:
      Chief Executive Officer 	 
	 	 	 	 

      

     

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ANNEX
I

    

    NOTICE
OF CONVERSION

    

    The
undersigned hereby elects to convert certain amounts of the Senior Convertible
Note (the “Note”)
issued by ZAP (the “Company”)
into shares of common stock (“Common
Stock”) of the Company according to the terms and conditions of the
Note.  Capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Note.

    

    

     

    
      	
                                                         Date
      of Conversion:

            	 	 	 
	 	 	 	 
	      
               Principal
      Amount of

              Note
      to be Converted:

            	 	 	 
	 	 	 	 
	      
               Amount
      of Interest

               and
      Other Amounts

              to
      be Converted (if any):

            	 	 	 
	 	 	 	 
	      
               Number
      of Shares of

              Common
      Stock to be Issued:

            	 	 	 
	 	 	 	 
	
              Name of
      Holder:

            	 	 	 
	 	 	 	 
	
              Address:

            	 	 	 
	 	 	
               

               

            	 
	 	 	
               

               

            	 
	 	 	 	 
	
              Signature:

            	 	 	 
	 	 	      
              Name:

              Title: 

            	 

     

     

    Holder
Requests Delivery to be made: (check one)

    

    □           By
Delivery of Physical Certificates to the Above AddressEXHIBIT 10.1
                                                                    ------------

                              CONSULTING AGREEMENT

     THIS CONSULTING AGREEMENT (this "Agreement") is dated this 1st day of
February 2008 by and between SpeechSwitch, Inc., a New Jersey corporation, with
an address of 750 Highway 34, Matawan, NJ 07747504 (the "Company"), and Jerome
Mahoney, with offices at 750 Highway 34, Matawan, NJ 07747504 ("Consultant").

                                 R E C I T A L S

     A. WHEREAS, Consultant has training, expertise, and prior experience in
areas related to the business or needs of the Company,

     B. WHEREAS, the Company desires to retain the services of Consultant.

     C. WHEREAS, Consultant desires to furnish his services to the Company on
the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:

1. CONSULTING SERVICES.

     1.1 Commencing on the date of this Agreement (the "Effective Date") and
continuing (unless terminated earlier pursuant to Section 4 hereof) until five
(5) years from the Effective Date, Consultant shall consult with the Company
regarding the tasks set forth in Exhibit A attached hereto and such tasks and
assignments as directed by the Chief Executive Officer, the President or the
Board of Directors (the "Executive Officer"). This Agreement shall renew
automatically for additional one (1)-year terms unless either party shall
deliver written notice of termination to the other no later than 90 days prior
to the end of the then-current term.

     1.2 Consultant shall have exclusive control over the means and manner by
which the services called for by this Agreement are performed.

     1.3 Consultant shall devote so much of his productive time, ability and
attention as is necessary to perform consulting services as requested or
assigned by the Executive Officer. Consultant may render services of a business
or commercial nature to other persons or entities during the term of this
Agreement.

2. COMPENSATION. In consideration of the services to be rendered by Consultant
hereunder, the Company agrees to compensate Consultant as follows. During the
term hereof, the Company will pay Consultant annual compensation of Ninety-two
Thousand Four Hundred and Twenty-eight Dollars and Eleven Cents ($92,428.11) and
upon every annual anniversary thereafter, at the rate based on the increase in
the Consumer Price Index for All Urban Consumers (New York-Northern N.J.-Long
Island). The foregoing fees shall be Consultant's sole compensation for all
services rendered by Consultant hereunder. The Consultant hereby agrees to
accept compensation pursuant to this Consulting Agreement in the form of Class B
Common Stock, par value $.01 per share, in lieu of cash, for as long as the
Board of Directors decides in its sole discretion that the Company does not have
the financial resources to pay the Consultant in cash. The number of Class B
Common Stock shares to be issued to the Consultant pursuant to this Paragraph 2
shall be equal to one share of Class B common stock for every dollar of
compensation due and owing the Consultant.

3. EXPENSES. The Company shall reimburse Consultant for expenses incurred by him
during the term of this Agreement in the performance of his duties as a
consultant for the Company; provided,

<PAGE>

however, that the Company shall not be obligated to reimburse Consultant for any
expenses which have not been approved in advance by the Company.

4. TERMINATION.

     4.1 TERMINATION FOR CAUSE. Consultant understands and agrees that this
Agreement may be terminated by the Company for "cause" upon written notice to
Consultant in the manner set forth in Section 7.3 below. "Cause" shall mean a
finding by the Board in good faith that such Consultant has (i) been engaged in
an act or acts of dishonesty that resulted directly or indirectly in more than
an aggregate of $5,000 in gain or personal enrichment to Consultant at the
expense of the Company; (ii) breached this Agreement in any material respect;
(iii) been convicted of any felony offense involving fraud, theft or dishonesty
at any time; (iv) been incarcerated for more than 10 days during the term of
this Agreement, or (v) failed to substantially perform duties persisting for a
reasonable period following written notice. Any other provision in this
paragraph to the contrary notwithstanding, the Consultant shall not be deemed to
have been terminated for Termination for Cause unless and until the Board duly
adopts a resolution by the affirmative vote of no less than three-quarters (3/4)
of the disinterested members of the Board, excluding the Consultant, at a
meeting of the Board called and held for such purpose (after reasonable notice
to the Consultant and an opportunity for the Consultant, together with the
Consultant's counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, the Consultant was guilty of conduct described in
subparagraphs (i), (ii), (iv) or (v) of this paragraph and specifying the
particulars thereof in detail and a certified copy of such resolution is
delivered to the Consultant."

     4.2 DEATH. In the event of the death of Consultant during the term of this
Agreement, the Company shall pay, or cause to be paid, to any one or more
beneficiaries designated by Consultant pursuant to notice to the Company or,
failing such designation, to Consultant's estate, the fees earned provided for
herein through the date on which Consultant's death occurs,

     4.3 DISABILITY. In the event that Consultant shall become, by reason of
physical or mental disability, incapable of performing his duties and services
in accordance with the provisions of this Agreement, and such incapacity(ies)
shall continue for more than 60 days out of any consecutive 120-day period, the
Company shall have the right to terminate this Agreement by giving Consultant
written notice of such termination and, thereafter, this Agreement shall
immediately terminate. Upon such termination, all compensation shall cease
immediately, and the Company shall owe Consultant only the amount of
Consultant's fees earned as of the date of such termination.

     4.4 EFFECT OF TERMINATION. Upon termination or expiration of this
Agreement, Consultant shall immediately surrender to the Company all lists,
books, records, materials and documents, together with all copies thereof, and
all other property in Consultant's possession or under Consultant's control,
relating to or used in connection with the past or present business of the
Company, or any affiliate or subsidiary of the Company, Consultant acknowledges
and agrees that all such lists, books, records, materials and documents,
including, but not limited to, compilations or collections of suppliers',
contractors', employees' and customers' names and addresses, are the sole and
exclusive property of the Company.

5. NONDISCLOSURE; OWNERSHIP AND PROTECTION OF PROPRIETARY RIGHTS.

     5.1 NONDISCLOSURE. Consultant understands and agrees that, in the course of
Consultant's relationship with the Company, Consultant may acquire confidential
information and trade secrets concerning the Company's operations, future plans,
methods of doing business, marketing, costs,

                                        2
<PAGE>

and that it would be extremely damaging to the Company if such information were
disclosed or made available to any other person or corporation. In view of the
nature of the consulting relationship with the Company contemplated herein,
Consultant agrees that, during the term of this Agreement and thereafter, any
and all confidential information, including, without limitation, any customer
lists, customer information or addresses, trade secrets, information relating to
governmental relations, discoveries, practices, processes, methods or products,
whether patentable or not, concerning the business of the Company or any
confidential information concerning or relating to any former or existing
suppliers, contractors, employees or customers of the Company or any corporation
or business entity that is controlling, controlled by, under common control with
or otherwise affiliated with the Company (collectively, the " Customers "), with
respect to the past, present or future business of the Company, or any affiliate
or subsidiary of the Company or any secret, proprietary or confidential
information concerning or relating to the past, present or future business of
the Company, or any affiliate or subsidiary of the Company (collectively, "
Confidential Information ") that Consultant has acquired or may acquire from any
such corporation or business entity or the Company, shall be maintained by
Consultant in confidence and shall not be disclosed or divulged to any third
party without the prior written consent of the Executive Officer. Consultant
further agrees that Consultant will not utilize such Confidential Information on
Consultant's own behalf or on behalf of others at any time during the term of
this Agreement or thereafter. Consultant agrees that he will not divert or
attempt to divert any of the customers or do any act to impair, prejudice or
destroy the goodwill of the Company with the Customers.

     5.2 OWNERSHIP OF INTELLECTUAL PROPERTY. Consultant acknowledges and agrees
that all intellectual property (including without limitation all ideas,
concepts, inventions, plans, developments, software, data, configurations,
materials (whether written or machine-readable), designs, drawings,
illustrations and photographs, which may be protectable, in whole or in part,
under any patent, copyright, trademark, trade secret or other intellectual
property law), developed, created, conceived, made or reduced to practice during
the term of this Agreement which (a) relate to the current, future or potential
business of the Company, (b) result from the duties or work performed by
Consultant hereunder, or (c) are developed during working time or using the
Company's equipment, supplies, facilities, resources, materials or information,
shall be the sole and exclusive property of the Company and Consultant shall and
hereby does assign all right, title and interest in and to such intellectual
property to the Company.

     5.3 NON-SOLICITATION. Because Consultant's solicitation of the Customers of
the Company, or any affiliate of the Company, under certain circumstances would
necessarily involve the use or disclosure of Confidential Information,
Consultant shall not, either directly or indirectly, at any time during the term
of this Agreement and for a period of two (2) years from the date of termination
or expiration of this Agreement (a) call on, solicit or take away, or attempt to
call on, solicit or take away, any past or present Customers of the Company, or
any affiliate of the Company, (b) employ, hire or solicit the employment of any
person employed by the Company, or any affiliate of the Company, (c) do any act
to impair, prejudice or destroy the goodwill of the Company, or any affiliate of
the Company, or to prejudice or impair the relationship or dealing between the
Company, or any affiliate of the Company, and the Customers or (d) assist any
other person, firm or corporation in any such acts.

     5.4 SURVIVAL. Subject to the following provisions, the provisions of this
Section 5 shall survive the termination of this Agreement, irrespective of the
reason therefor.

6. RELIEF. Consultant acknowledges that (a) the services to be rendered by him
are of a special, unique and extraordinary character and it would be very
difficult or impossible to replace such services, (b) the provisions of Section
5 are reasonable and necessary to protect the legitimate

                                        3
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interests of the Company, (c) the restrictions contained in Section 5 will not
prevent Consultant from earning or seeking a livelihood, (d) the restrictions
contained in Section 5 shall apply in all areas where such application is
permitted by law and (e) any violation of this Agreement by Consultant would
result in irreparable harm to the Company, Accordingly, Consultant consents and
agrees that, if Consultant violates any of the provisions of this Agreement, the
Company shall be entitled to, in addition to other remedies available to it, an
injunction to be issued by any court of competent jurisdiction restraining him
from committing or continuing any violation of this Agreement, without the need
to post any bond or for any other undertaking, including, without limitation,
proving the inadequacy of money damages.

     In the event that the whole or any part of the provisions of Section 5
hereof shall be determined to be invalid by reason of the extent, duration,
scope or other provision set forth therein, the extent, duration, scope or other
provision of that section shall be reduced so as to cure such invalidity and in
its reduced form the provisions of Section 5 shall be enforceable in the manner
contemplated hereby. The provisions of this Section 6 shall survive the
termination of this Agreement, irrespective of the reason therefor.

7. MISCELLANEOUS.

     7.1 WAIVER OF BREACH. Neither party's failure to enforce any provision or
provisions of this Agreement shall be deemed or in any way construed as a waiver
of any such provision or provisions, nor prevent that party thereafter from
enforcing each and every provision of this Agreement. The rights granted the
parties herein are cumulative and shall not constitute a waiver of any party's
right to assert all other legal remedies available to it under the
circumstances.

     7.2 SUCCESSORS, ASSIGNS. The Company shall not assign its rights and
obligations hereunder without the prior written consent of Consultant; provided,
however, that the Company shall be entitled to assign its rights hereunder to
any acquirer, affiliate or successor to the Company without the prior written
consent of Consultant. Consultant shall not assign any of his rights or
obligations hereunder without the prior written consent of the Executive
Officer. Subject to the foregoing, the provisions of this Agreement shall be
binding upon and inure to the benefit of the heirs, legal representatives,
executors, successors and assigns of Consultant and the Company.

     7.3 NOTICES. All notices and other communications which are required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to be sufficiently given (a) if delivered personally, upon delivery and
(b) if delivered by registered or certified mail (return receipt requested),
postage prepaid, upon the earlier of actual delivery or upon three (3) days
after being mailed, in each case to Consultant or the Company at the address set
forth at the beginning of this Agreement. Either party may, by notice given
hereunder, designate any further or different address to which subsequent
notices or other communications shall be sent.

     7.4 SEVERABILITY. If any term or provision of this Agreement is held to be
void or unenforceable by any court of competent jurisdiction, only that
objectionable term or provision shall be deleted herefrom while the remainder of
the term, provision and agreement shall be enforceable.

     7.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey without regard to conflicts
of laws principles.

     7.6 AGREEMENT TO ARBITRATE.

          7.6.1 Except for the remedies available to the Company pursuant to
Section 6 hereof,

                                        4
<PAGE>

any controversy, dispute or claim under, arising out of, in connection with or
in relation to this Agreement, including but not limited to the negotiation,
execution, interpretation, construction, coverage, scope, performance,
nonperformance, breach, termination, validity or enforceability of this
Agreement or any alleged fraud in connection therewith or this Section 7.6,
shall be settled, at the request of either party, by arbitration conducted in
accordance with the Commercial Arbitration Rules or then existing rules for
commercial arbitration of the American Arbitration Association before a single
arbitrator. The arbitration of such issues, including the determination of any
amount of damages suffered by any party hereto by reason of the acts or
omissions of any party, shall be binding upon the parties after confirmation of
the award by a court of competent jurisdiction; provided, however, that the
parties may attack or appeal any arbitration award in accordance with applicable
law. The parties intend that this Section 7.6 shall be valid, binding,
enforceable and irrevocable and shall survive the termination of this Agreement.

          7.6.2 Any arbitration proceedings hereunder shall be held in Newark,
New Jersey.

          7.6.3 Judgment upon any award rendered by the arbitrator may be
entered by any court having jurisdiction thereof.

          7.6.4 The prevailing party shall be entitled to an award of its costs,
attorneys' and other fees and other expenses as part of the arbitrator's award
in connection with each arbitration, and the non-prevailing party shall bear the
costs, fees and expenses incurred by and payable to the arbitrator, and court
reporter.

     7.7 COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one (1) and the same instrument. Facsimiles
of signatures may be taken as the actual signatures, and each party agrees to
furnish the other with documents bearing the original signatures within ten (10)
days of the facsimile transmission.

     7.8 COMPLETE AGREEMENT AMENDMENTS. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and supersedes any prior agreements and understandings relating thereto,
This Agreement may not be waived, changed, modified, extended or discharged
orally, but only by a written instrument signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
day and year first above written,

SPEECHSWITCH, INC.                            CONSULTANT

By:                                           By:
    -------------------------------               ------------------------------
    Bruce Kneff                                   Jerome Mahoney
    President and Chief Executive Officer

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                                    EXHIBIT A

                                CONSULTANT TASKS

1.  Consultation regarding strategic business plans, long range plans, goals and
    objectives
2.  Consultation regarding policies and procedures of the Company
3.  Consultation regarding major operations decisions
4.  Consultation regarding corporate finance transactions
5.  Consultation regarding acquisitions
6.  Consultation regarding vendor and customer relationships
7.  Consultation regarding personnel matters

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