September 14, 1998
Mr. Pong Lim
C/O Ditech Corporation
000 Xxxxx Xxxxxxxxxxx
Xxxxxxxxx, XX 00000
Re: Employment Agreement
Dear Pong:
Congratulations on your election as Chairman of the Board for Ditech Corporation
("Ditech" or the "Company"). Ditech is also pleased to continue your
employment with the Company on the following terms (the "Agreement").
As an employee and Chairman of the Board for Ditech, your office will be based
in the Company's headquarters and you will perform the duties customarily
performed by the Chairman. In addition to being part of the IPO team, you will
also cooperate to perform other executive duties as may be assigned to you by
Ditech's Board of Directors (the "Board") or the Company's Chief Executive
Officer. You will be expected to work the hours required by the nature of your
work assignments.
For the one-year period following the date of this letter, you will be paid one
hundred and seventy-five thousand dollars ($175,000) per year ("Base Salary"),
less standard deductions and withholdings, paid on the Company's normal payroll
dates. You will remain eligible for a bonus based upon the achievement of
fiscal 1999 financial goals and individual objectives as set and approved by the
Board in your Management Bonus Plan dated on or about June 12, 1998 (attached
and incorporated by reference as Exhibit A). The bonus is considered earned by
the end of April 1999, the fiscal year end, and it will be paid soon after the
audited financial statement for FY99 is complete but no later than July 1999.
In addition, one year from the date of this letter, any remaining unvested
shares of all of your current outstanding incentive stock options (attached and
incorporated by reference as Exhibit B) with the Company will become fully
vested provided you cooperate to perform the duties described above. Within
thirty (30) days of the date of this Agreement all such incentive stock options
will be amended to reflect this change.
In addition to your salary and bonus compensation, you continue to be eligible
for the Company benefits consistent with Company policy. Details about these
benefits are available for your review. The Company reserves the right to
modify its benefits from time to time as it deems necessary.
You acknowledge your continuing obligation to abide by all the Company's
policies and procedures and your continuing obligation under the Company's
Proprietary Information Agreement that you signed on May 31, 1994 (attached and
incorporated by reference Exhibit C). You also represent and warrant that you
are not a party to any agreement with any third party or prior employer that
would conflict with or inhibit your performance of your duties with the Company.
Either you or the Board may terminate your employment relationship or your
membership on the Board at any time for any reason whatsoever, with or without
cause or advance notice. This at-will relationship cannot be changed except in
writing signed by a duly authorized officer of the Company. However, if you are
terminated by the Company within a year from the date of the letter your
compensation package will be paid in full, including bonus, and the stock option
vesting schedule described in this Agreement will not be affected whatsoever.
In the event that a change in control of the Company occurs within a year from
the date of this letter, all remaining stock option will become vested
immediately.
You agree that, for one year following the termination of your employment with
the Company, you will not personally initiate or participle in the solicitation
of any employee of the Company, or that of any of its affiliates, to terminate
his or her relationship with the Company, or with any of its affiliates, in
order to become an employee or consultant for any other person or business
entity.
To ensure rapid and economical resolution of any disputes that may arise under
this Agreement, you and the Company agree that any and all disputes or
controversies, whether of law or fact of any nature whatsoever (including, but
not limited to, all state and federal statutory and discrimination claims), with
the sole exception of those disputes that may arise from any Company Proprietary
Information Agreement, arising from or regarding the interpretation,
performance, enforcement or breach of this Agreement will, to the extent
provided by law, be resolved by confidential, final and binding arbitration
(rather than trial by jury or court or resolution in some other forum) under the
then-existing Rules of Practice and Procedure of Judicial Arbitration and
Mediation Services ("JAMS").
This letter Agreement constitutes the complete, final and exclusive
embodiment of the entire agreement between you and Ditech with respect to the
terms and conditions of your employment. This agreement is entered into
without reliance upon any promise, warranty or representation, written or
oral, other than those expressly contained herein, and it supersedes any
other such promises, warranties, representations or agreements. It may not
be amended or modified except by a written instrument signed by you and a
duly authorized officer of the Company. If any provision of this Agreement
is determined to be invalid or unenforceable, in whole or in part, this
determination will not affect any other provision of this Agreement. This
Agreement will be construed and interpreted in accordance with the laws of
the State of California and will be deemed drafted by both parties.
I trust that the points outlined above fully clarify the terms of Ditech's
offer. If you choose to accept our offer under the terms described above,
please sign below and return this letter to me. We look forward to a continued
productive and enjoyable work relationship helping Ditech grow.
Very truly yours,
DITECH CORPORATION
By: /s/ Xxxxxxx Xxxxx
-----------------------------------
Xxxxxxx Xxxxx for the
Ditech Board of Directors and a
Duly Authorized Officer
ACKNOWLEDGED AND ACCEPTED
/s/ Pong Lim
----------------------------------------
Pong Lim
Exhibit A - Management Bonus Plan
Exhibit B - Outstanding Incentive Stock Option Plan
Exhibit C - Proprietary Information Agreement
EXHIBIT A
PONG LIM
FY 99 MANAGEMENT BONUS PLAN
AT PLAN
BONUS REVENUE TARGET
------------------------------------------------------- --------------
Financial Goals Actual Revenue X Actual EBITDA = 1.0 75,000
------------------------------
Plan Revenue Plan EBITDA
Individual Objectives 25,000
-------
100,000
BASE
-------------------------------------------------------
Salary 175,000
TOTAL BASE + BONUS 275,000
PROJECTED
BONUS FORMULA FOR FINANCIAL GOALS FACTOR BONUS
----------------- --------------- ------ -----
20.8/20.8 X 1.09/1.09 = 1 = 75,000
24/20.8 X 2/1.09 = 2.1171 = 158,783
23/20.8 X 1.69/1.09 = 1.7144 = 128,580
18/20.8 X .5/1.09 = 0.397 = 29,775
EXHIBIT B
OUTSTANDING STOCK OPTION SUMMARY
AS OF SEPTEMBER 1998
OPTION SHARES VESTED UNVESTED
GRANT DATE GRANTED SHARES PRICE AT END OF SEPT 98 SHARES
---------- -------------- ----- ----------------- ------
5/1/96 80,000 $0.10 48,335 31,665
5/1/97 20,000 $0.55 7,085 12,915
Sep 97 75,000 $0.55 0 75,000
Sep 97 75,000 $0.55 0 75,000
Pcl employment agreement September 1998
EXHIBIT A1
FY99 OBJECTIVES
PONG LIM, PRESIDENT & CEO
1. Meet or exceed revenues and EBITDA plan:
Revenues - $20.8M
EBITDA - $1.09M
2. Increase Ditech market share by:
- Winning 4 new end-user customers in international markets
- Establishing 2 OEM relationships (1 for Echo and 1 for Fiber comm.)
3. Be 1st to market with key new products:
- Ensure DS3 Echo Cancellers introduction to market in Q3 and start
shipping for revenues by Q4
- Ensure OTS System introduction to market in Q1 and start shipping for
revenues by Q4
- Ensure DWDM Monitor introduction to market in Q2 and start shipping for
revenues by Q4
4. Establish operations capability to support a $30M business:
- Transition to full turn-key manufacturing for EDFA and OTS modules
- Develop test capabilities for broadband (DS3) echo cancellers
- Develop test capabilities for system level products
5. Visit 5 major customers to ensure customer satisfaction, understand their
future needs and continue to strengthen our relationships.
6. Visit 5 key suppliers to ensure Ditech is receiving quality product,
service, and cost savings benefits while continuing to strengthen our
relationships.
7. Begin establishing Ditech presence in the financial community by:
- Attending and/or presenting at analyst conferences
- Presenting Ditech at AEA conference in early 1999
8. Begin dialogue with a minimum of 10 investment bankers, identify the three
(3) leading candidates for recommendation to the Board
