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RESTRICTED STOCK AWARDS Presented by: Kimberly Canigiula Equity Manager Equity Manager

Before we get started…. Please understand that the information being provided today is an overview of the benefit and an opportunity to ask questions. It does not take the place of reading the Plan documents. Please visit our intranet or ask me to obtain copies. Ditech does not provide tax guidance so you should work with your own personal tax or financial advisor.

What is a Restricted Stock Award (RSA)? An award usually granted to an individual at par value or $0. The shares are issued as common stock in the name of the employee and held in escrow until contractual restrictions lapse. The individual has the rights of a stockholder and is entitled to vote and receive dividends. An award usually granted to an individual at par value or $0. The shares are issued as common stock in the name of the employee and held in escrow until contractual restrictions lapse. The individual has the rights of a stockholder and is entitled to vote and receive dividends.

How are awards different from my options? Awards are granted as common stock, options are granted as a agreement to purchase stock later. Awards are granted as common stock, options are granted as a agreement to purchase stock later. Because awards cost the employee nothing, they are always in-the- money regardless of current FMV. Because awards cost the employee nothing, they are always in-the- money regardless of current FMV. Timing/taxes is not as flexible as options. Timing/taxes is not as flexible as options. Incremental vest dates are fewer. Incremental vest dates are fewer.

What is the vest schedule for RSAs? For Ditech employees, the award grant typically vest over a four year period. For Ditech employees, the award grant typically vest over a four year period. 25% will vest approximately after one year, and the remainder will vest semi-annually (2x each year) over the next three years. 25% will vest approximately after one year, and the remainder will vest semi-annually (2x each year) over the next three years. As the stock vest, the restrictions are lifted and the shares are released to the employee. As the stock vest, the restrictions are lifted and the shares are released to the employee.

When are the release dates? The are four pre-set release dates in the calendar year: The are four pre-set release dates in the calendar year: March 15 th March 15 th June 15 th June 15 th September 15 September 15 December 15 December 15 Should these dates fall on a weekend, the release will be the following Monday morning. FVM for tax calculation will be based on prior business day’s closing price.

Why this particular schedule? We have chosen these four dates because they are expected to fall in an open window period. This allows employees to sell some of their shares to cover the taxes due at release and avoid any financial hardships. We have chosen these four dates because they are expected to fall in an open window period. This allows employees to sell some of their shares to cover the taxes due at release and avoid any financial hardships. Our Plan permits that should the window be closed on the vest /release date, the release will be delayed until the window re-opens. Our Plan permits that should the window be closed on the vest /release date, the release will be delayed until the window re-opens. Also, because the release process is quite cumbersome we needed to limit the dates. Also, because the release process is quite cumbersome we needed to limit the dates.

So I have to pay taxes now? MESSAGE FROM YOUR EMPLOYER Ditech Networks must collect or withhold compensatory taxes before releasing your restricted stock for sale. Select one of the tax payment choice below, then click SUBMIT. If you do not make a tax payment selection by the deadline, we will use the default of Sell-to-Cover. MESSAGE FROM YOUR EMPLOYER ( as stated on the E*Trade site) Ditech Networks must collect or withhold compensatory taxes before releasing your restricted stock for sale. Select one of the tax payment choice below, then click SUBMIT. If you do not make a tax payment selection by the deadline, we will use the default of Sell-to-Cover.

What happens when shares vest and are released to me? You will be notified in advance via an E*Trade SmartAlert that a portion of your award grant will vest and be due for release. You will be notified in advance via an E*Trade SmartAlert that a portion of your award grant will vest and be due for release. In advance of, make sure E*Trade Action Items have been taken care of…i.e…. In advance of, make sure E*Trade Action Items have been taken care of…i.e…. The original grant agreement has been accepted. The original grant agreement has been accepted. You accepted the term and conditions of your release. You accepted the term and conditions of your release. Elect how you want to handle your tax payment. Elect how you want to handle your tax payment.

Where are my action items? xxx XXX

What are my payment choices? Check – employee writes a check payable to Ditech Networks within two days of the release date for the amount of the taxes due. All of their released shares are deposited into their E*Trade account to trade at a later time. No shares are automatically sold. Same-day sale – in advance of the release, you instruct E*Trade to sell all of the released shares. The amount due for taxes will be directed back to Ditech and the remaining cash funds will be deposited into your account. Sell-to-cover (default) – E*Trade will sell only a portion of the shares of the whole lot released to cover the taxes due back to Ditech. The remaining unsold shares are available in your account to trade at a later time.

When do I need to make the tax election? You may make and change your election within your E*Trade account the 7 days prior to the release date. You may make and change your election within your E*Trade account the 7 days prior to the release date. A week before the release your election is locked in and you may not change it. A week before the release your election is locked in and you may not change it. Also, you cannot change your election while the release is in process. For example you elect sell-to-cover and on day of release you want to sell all, you will need to wait three more days until settlement (T+3) to sell the remaining shares. Also, you cannot change your election while the release is in process. For example you elect sell-to-cover and on day of release you want to sell all, you will need to wait three more days until settlement (T+3) to sell the remaining shares.

How are taxes calculated? The amount of taxes due each release will be the difference between your grant price, ($0.00) and the FMV at release. Example: 100 shares are released on Dec 15, 2007 (which happens to be a Saturday this year). If the prior closing price on Friday the 14 th is $5.00, your taxable gain would be $ (100 shares X $5.00). Example: 100 shares are released on Dec 15, 2007 (which happens to be a Saturday this year). If the prior closing price on Friday the 14 th is $5.00, your taxable gain would be $ (100 shares X $5.00).

Applicable Taxes and Withholding Rates Federal 25.0 % Federal 25.0 % CA State 9.3 % CA State 9.3 % Social Security6.2 % (’07 limit $6,045. ) Social Security6.2 % (’07 limit $6,045. ) Medicare1.45% Medicare1.45% SDI.60 % ( ’07 limit $ ) SDI.60 % ( ’07 limit $ ) Depending on if your limits have been met, total tax rate would be between 35-42%. These are supplemental rates, your actual tax rate could be higher or lower. CA State and SDI only apply to employees residing in California. Out-of- state employee taxes have differing taxes and rates that would be applied accordingly.

When do I get my shares/money? It takes about four days total for the whole release to process. On release date I calculate and upload to E*trade the taxes due back to Ditech for each employee. E*Trade has three days to trade some/all your vested shares. As the shares sell, I begin depositing the shares to E*Trade for settlement. Once the transaction settles (T+3) your cash profit or remaining shares become available to you. Shares can be traded from then on, so long as the trading window is open.

What happens when I sell the shares? Remember the taxes Ditech withholds and reports on your W-2 is calculated simply on the value on release. (# of shares x closing FMV at release.) Remember the taxes Ditech withholds and reports on your W-2 is calculated simply on the value on release. (# of shares x closing FMV at release.) Once the shares are sold, whether it be on release date or later, you need to report the difference to the IRS when you pay taxes for the calendar year in which the shares are sold. Once the shares are sold, whether it be on release date or later, you need to report the difference to the IRS when you pay taxes for the calendar year in which the shares are sold.

Can you give me some examples of the tax calculations when I sell? Sale Date12/17/073/27/0810/1/09 Sale Price$5.20$4.50$9.00 Additional Gain / Loss (Grant date 2/15/07) Short term gain of $20.00 (100x.20) Long term loss of (100 x -.50) Long term gain of $ (100 x 4.00) Tax Year to Report Assuming 100 shares are released on December 15, 2007 and the tax value is based on $5.00/per share, Ditech will withhold for and report to the IRS on your 2007 W-2 the gain of $ You will need to report the difference when you sell to capture the true profit realized.

Any Questions…??? Any Questions…???

Purchase is November 30 th. Beginning price with discount was $5.797 $6.60 for those who joined mid-purchase on 5/1/07 New 1 year offering begins 12/1/07 Opportunity to enroll, if not participating. Time to review contribution amount, if currently participating. Reminder ESPP Activity