Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On September 2, 2009, Ditech Networks, Inc. and Lamassu Holdings L.L.C. and certain of its affiliates (collectively, "Lamassu"), entered into a letter agreement pursuant to which each of Alan Howe and Frank J. Sansone will be nominated to be elected to the Ditech Networks board of directors (the "Board") at the upcoming Ditech Networks, Inc. 2009 Annual Meeting of Stockholders. Mr. Howe and Mr. Sansone will replace Mr. Gregory Avis and Dr. Andrei Manoliu, who will not be standing for reelection at the upcoming 2009 Annual Meeting of Stockholders.

In addition to the nomination of each of Mr. Howe and Mr. Sansone for election to the Board, the letter agreement also provides that:

† If Mr. Sansone is unable to serve as a director at a time when Lamassu owns at least 5% of the Ditech Networks common stock, Ditech Networks will appoint a replacement director designated by Lamassu and reasonably acceptable to Ditech Networks (which replacement director shall not be Timothy Leehealey);

† Mr. Sansone and any replacement director will sign a conditional resignation from the Board, which may be accepted by the Board in the event that Lamassu's beneficial ownership of Ditech Networks common stock falls below 5% of the outstanding Ditech Networks common stock;

† Lamassu will vote all of the shares it beneficially owns in support of the slate of directors nominated by the Board for the 2009 Annual Meeting (and will not support or participate in any "withhold the vote" or similar campaign, or support any other nominees other than the slate of directors nominated by the Board);

† Lamassu withdrew its previously announced notice of its intent to nominate directors with respect to the Ditech Networks 2009 Annual Meeting of Stockholders;

† For a period ending 90 days from the date of the Ditech Networks 2009 Annual Meeting, Lamassu will not (i) make any public statement regarding Ditech Networks, the Board or any of Ditech Networks' officers, directors or employees, except for the press release attached to the agreement or as may be required by law, or (ii) disparage Ditech Networks, the Board, or any of Ditech Networks' officers, directors or employees, in any manner, including in any manner which could be harmful to Ditech or its business, the Board or its reputation, or the business reputation or personal reputation of any officer, director or employee of Ditech.

A copy of the letter agreement is attached as Exhibit 10.1 hereto, and the description above is qualified by reference to the full agreement as attached. On September 2, 2009, Ditech Networks released a press release relating to the letter agreement, the form of which is attached as Schedule B to the letter agreement.

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As a director, each of Mr. Howe and Mr. Sansone will be eligible to receive cash compensation paid to all non-management directors of Ditech Networks, and to receive the automatic grant of equity awards.

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Item 9.01 Financial Statements and Exhibits

Exhibit No. Description 10.1 Settlement Agreement, dated September 2, 2009, between Ditech Networks, Inc. and Lamassu Holdings L.L.C and affiliates

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