Exhibit 10.1

August 16, 2007

Mr. Edwin L. Harper

c/o Ditech Networks, Inc.

Re:          Employment Terms

Dear Ed:

This letter sets forth the terms and conditions of your position with Ditech
Networks, Inc. (the “Company”) as its Interim Chief Executive Officer.

As Interim CEO, you shall perform such duties as required by the Company’s Board
of Directors (the “Board”), to whom you shall report.  This position shall be
your principal business activity and you shall devote your best efforts and as
much time as is necessary to provide leadership for the Company.  Your position
is interim in nature, and therefore your employment will be terminated upon the
Company’s hiring of a new CEO (unless your employment is earlier terminated by
the Board).

Your compensation will be at the rate of $2,000 per day (or $10,000 per week),
less applicable payroll taxes and withholdings, and payable on the Company’s
regular payroll schedule.  You will also be eligible for all of the Company’s
standard benefit programs (subject to the terms and conditions of those plans). 
In addition, the Company shall pay all of your expenses associated with the
performance of your duties as Interim CEO, including commuting expenses (which
for air travel shall be in coach class).  In the event that you are required to
travel internationally in the performance of your duties as Interim CEO, the
Company will pay for business class travel.

Effective August 17, 2007 (the “Grant Date”), the Company shall grant you a
nonqualified option (the “Option”) to purchase 25,000 shares of the Company’s
Common Stock under the Company’s 2006 Equity Incentive Plan (the “Plan”).  The
Option will be subject to the terms and conditions of the Plan and your grant
agreement.  The Option will have an exercise price equal to the closing price of
the Company’s common stock on the Nasdaq Global Market on the Grant Date.  All
of the shares subject to the Option shall vest on the earlier of: (i) October
15, 2007; or (ii) such date as the Company hires a new Chief Executive Officer.

As a condition of your employment, you will be required to abide by the
Company’s policies and procedures, including but not limited to the policies set
forth in the Company’s Employee Handbook, as may be in effect from time to
time.  You also agree to read, sign and comply with the Company’s Employee
Proprietary Information and Inventions Agreement (“Proprietary Information
Agreement”), attached hereto as Exhibit A.

Your employment relationship is at-will.  Accordingly, you may terminate your
employment with the Company at any time and for any reason whatsoever simply by
notifying the Company.  Likewise, the Company may terminate your employment at
any time, with or without cause or advance notice.

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To ensure the rapid and economical resolution of disputes that may arise in
connection with your employment, you and the Company agree that any and all
disputes, claims, or causes of action, in law or equity, arising from or
relating to the enforcement, breach, performance, execution, or interpretation
of this agreement, your employment, or the termination of your employment, shall
be resolved, to the fullest extent permitted by law, by final, binding and
confidential arbitration in San Jose, California conducted before a single
arbitrator by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) or its
successor, under the then applicable JAMS rules.  By agreeing to this
arbitration procedure, both you and the Company waive the right to resolve any
such dispute through a trial by jury or judge or by administrative proceeding. 
The arbitrator shall:  (a) have the authority to compel adequate discovery for
the resolution of the dispute and to award such relief as would otherwise be
permitted by law; and (b) issue a written arbitration decision including the
arbitrator’s essential findings and conclusions and a statement of the award. 
The Company shall pay all of JAMS’ arbitration fees.  Nothing in this letter
agreement shall prevent either you or the Company from obtaining injunctive
relief in court if necessary to prevent irreparable harm pending the conclusion
of any arbitration.

This letter, together with your Proprietary Information Agreement, forms the
complete and exclusive statement of your agreement with the Company concerning
the subject matter hereof.  The terms in this letter supersede any other
representations or agreements made to you by any party, whether oral or
written.  The terms of this agreement cannot be changed (except with respect to
those changes expressly reserved to the Company’s discretion in this letter)
without a written agreement signed by you and a duly authorized officer of the
Company.  This agreement is to be governed by the laws of the state of
California without reference to conflicts of law principles.  In case any
provision contained in this agreement shall, for any reason, be held invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
affect the other provisions of this agreement, and such provision will be
construed and enforced so as to render it valid and enforceable consistent with
the general intent of the parties insofar as possible under applicable law. 
With respect to the enforcement of this agreement, no waiver of any right
hereunder shall be effective unless it is in writing.  This agreement may be
executed in more than one counterpart, and signatures transmitted via facsimile
shall be deemed equivalent to originals.  As required by law, this offer is
subject to satisfactory proof of your identity and right to work in the United
States.

If you wish to accept employment at the Company under the terms described above,
please sign and date this letter and the Proprietary Information Agreement, and
return them to me.

Sincerely,

/s/ William J. Tamblyn

 

William Tamblyn, Chief Financial Officer

 

Exhibit A – Employee Proprietary Information and Inventions Agreement

 

Understood and Accepted:

 

 

/s/ Edwin L. Harper

 

8/31/07

 

Edwin L. Harper

Date

 

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DITECH NETWORKS, INC.

EMPLOYEE PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT

In consideration of my employment or continued employment by DITECH NETWORKS,
INC. (the “Company”), and the compensation now and hereafter paid to me, I
hereby agree as follows:

1.             NONDISCLOSURE.

1.1          Recognition of Company’s Rights; Nondisclosure.  At all times
during my employment and thereafter, I will hold in strictest confidence and
will not disclose, use, lecture upon or publish any of the Company’s Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing.  I will obtain Company’s
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information.  I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.

1.2          Proprietary Information.  The term “Proprietary Information” shall
mean any and all confidential and/or proprietary knowledge, data or information
of the Company.  By way of illustration but not limitation, “Proprietary
Information” includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as “Inventions”); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.

1.3          Third Party Information.  I understand, in addition, that the
Company has received and in the future will receive from third parties
confidential or proprietary information (“Third Party Information”) subject to a
duty on the Company’s part to maintain the confidentiality of such information
and to use it only for certain limited purposes.  During the term of my
employment and thereafter, I will hold Third Party Information in the strictest
confidence and will not disclose to anyone (other than Company personnel who
need to know such information in connection with their work for the Company) or
use, except in connection with my work for the Company, Third Party Information
unless expressly authorized by an officer of the Company in writing.

1.4          No Improper Use of Information of Prior Employers and Others. 
During my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or any property
belonging to any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by that former
employer or person.  I will use in the performance of my duties only information
which is generally known and used by persons with training and experience
comparable to my own, which is common knowledge in the industry or otherwise
legally in the public domain, or which is otherwise provided or developed by the
Company.

2.             ASSIGNMENT OF INVENTIONS.

2.1          Proprietary Rights.  The term “Proprietary Rights” shall mean all
trade secret, patent, copyright, mask work and other intellectual property
rights throughout the world.

2.2          Prior Inventions.  Inventions, if any, patented or unpatented,
which I made prior to the commencement of my employment with the Company are
excluded from the scope of this Agreement.  To preclude any possible
uncertainty, I have set forth on Exhibit B (Previous Inventions) attached hereto
a complete list of all Inventions that I have, alone or jointly with others,
conceived, developed or reduced to practice or caused to be conceived, developed
or reduced to practice prior to the commencement of my employment with the
Company, that I consider to be my property or the property of third parties and
that I wish to have excluded from the scope of this Agreement (collectively
referred to as “Prior Inventions”).  If disclosure of any such Prior Invention
would cause me to violate any prior confidentiality agreement, I understand that
I am not to list such Prior Inventions in Exhibit B but am only to disclose a
cursory name for each such invention, a listing of the party(ies) to

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whom it belongs and the fact that full disclosure as to such inventions has not
been made for that reason. A space is provided on Exhibit B for such purpose. 
If no such disclosure is attached, I represent that there are no Prior
Inventions.  If, in the course of my employment with the Company, I incorporate
a Prior Invention into a Company product, process or machine, the Company is
hereby granted and shall have a nonexclusive, royalty-free, irrevocable,
perpetual, worldwide license (with rights to sublicense through multiple tiers
of sublicensees) to make, have made, modify, use and sell such Prior Invention. 
Notwithstanding the foregoing, I agree that I will not incorporate, or permit to
be incorporated, Prior Inventions in any Company Inventions without the
Company’s prior written consent.

2.3          Assignment of Inventions. Subject to Sections 2.4, and 2.6, I
hereby assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company.  Inventions
assigned to the Company, or to a third party as directed by the Company pursuant
to this Section 2, are hereinafter referred to as “Company Inventions.”

2.4          Nonassignable Inventions.  This Agreement does not apply to an
Invention which qualifies fully as a nonassignable Invention under Section 2870
of the California Labor Code (hereinafter “Section 2870”).  I have reviewed the
notification on Exhibit A (Limited Exclusion Notification) and agree that my
signature acknowledges receipt of the notification.

2.5          Obligation to Keep Company Informed.  During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others.  In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment.  At the time of each such disclosure, I will advise the Company
in writing of any Inventions that I believe fully qualify for protection under
Section 2870; and I will at that time provide to the Company in writing all
evidence necessary to substantiate that belief.  The Company will keep in
confidence and will not use for any purpose or disclose to third parties without
my consent any confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify fully for
protection under the provisions of Section 2870.  I will preserve the
confidentiality of any Invention that does not fully qualify for protection
under Section 2870.

2.6          Government or Third Party.  I also agree to assign all my right,
title and interest in and to any particular Company Invention to a third party,
including without limitation the United States, as directed by the Company.

2.7          Works for Hire.  I acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the scope
of my employment and which are protectable by copyright are “works made for
hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101).

2.8          Enforcement of Proprietary Rights.  I will assist the Company in
every proper way to obtain, and from time to time enforce, United States and
foreign Proprietary Rights relating to Company Inventions in any and all
countries.  To that end I will execute, verify and deliver such documents and
perform such other acts (including appearances as a witness) as the Company may
reasonably request for use in applying for, obtaining, perfecting, evidencing,
sustaining and enforcing such Proprietary Rights and the assignment thereof.  In
addition, I will execute, verify and deliver assignments of such Proprietary
Rights to the Company or its designee.  My obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any and all
countries shall continue beyond the termination of my employment, but the
Company shall compensate me at a reasonable rate after my termination for the
time actually spent by me at the Company’s request on such assistance.

In the event the Company is unable for any reason, after reasonable effort, to
secure my signature on any document needed in connection with the actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact, which appointment is coupled with an interest, to act for and in my
behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me.  I hereby waive and
quitclaim to the Company

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any and all claims, of any nature whatsoever, which I now or may hereafter have
for infringement of any Proprietary Rights assigned hereunder to the Company.

3.             RECORDS.  I agree to keep and maintain adequate and current
records (in the form of notes, sketches, drawings and in any other form that may
be required by the Company) of all Proprietary Information developed by me and
all Inventions made by me during the period of my employment at the Company,
which records shall be available to and remain the sole property of the Company
at all times.

4.             ADDITIONAL ACTIVITIES.  I agree that during the period of my
employment by the Company I will not, without the Company’s express written
consent, engage in any employment or business activity which is competitive
with, or would otherwise conflict with, my employment by the Company.  I agree
further that for the period of my employment by the Company and for one (l) year
after the date of termination of my employment by the Company I will not, either
directly or through others, solicit or attempt to solicit any employee,
independent contractor or consultant of the Company to terminate his or her
relationship with the Company in order to become an employee, consultant or
independent contractor to or for any other person or entity.

5.             NO CONFLICTING OBLIGATION.  I represent that my performance of
all the terms of this Agreement and as an employee of the Company does not and
will not breach any agreement to keep in confidence information acquired by me
in confidence or in trust prior to my employment by the Company.  I have not
entered into, and I agree I will not enter into, any agreement either written or
oral in conflict herewith.

6.             RETURN OF COMPANY DOCUMENTS.  When I leave the employ of the
Company, I will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company Inventions,
Third Party Information or Proprietary Information of the Company.  I further
agree that any property situated on the Company’s premises and owned by the
Company, including disks and other storage media, filing cabinets or other work
areas, is subject to inspection by Company personnel at any time with or without
notice.  Prior to leaving, I will cooperate with the Company in completing and
signing the Company’s termination statement.

7.             LEGAL AND EQUITABLE REMEDIES.  Because my services are personal
and unique and because I may have access to and become acquainted with the
Proprietary Information of the Company, the Company shall have the right to
enforce this Agreement and any of its provisions by injunction, specific
performance or other equitable relief, without bond and without prejudice to any
other rights and remedies that the Company may have for a breach of this
Agreement.

8.             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.  Such notice shall be deemed
given upon personal delivery to the appropriate address or if sent by certified
or registered mail, three (3) days after the date of mailing.

9.             NOTIFICATION OF NEW EMPLOYER.  In the event that I leave the
employ of the Company, I hereby consent to the notification of my new employer
of my rights and obligations under this Agreement.

10.          GENERAL PROVISIONS.

10.1        Compliance with Laws.  I shall under every circumstance comply with
current legislation, in the United States as well as in any other country that I
visit as an effect of my employ­ment, and I shall in every respect comply with
the Company rules and policies.   Without limiting the foregoing, I specifically
agree to comply with the export controls of the United States, the anti-bribery
regulations of the United States, the regulations of the United States’ Office
of Foreign Asset Control (“OFAC”) and the anti-boycott laws of the United
States, all as in effect from time to time.  In the event that I seek to or have
any dealing with countries on the OFAC list of restricted countries, which as of
the date hereof include the Balkans, Burma, Cuba, Iran, Iraq, Liberia, Libya,
North Korea, Sudan and Zimbabwe, or on the OFAC list of restricted individuals,
I will seek the prior written permission of an officer or director of the
Company.

10.2        Governing Law; Consent to Personal Jurisdiction.  This Agreement
will be governed by and construed according to the laws of the State of
California, as such laws are applied to agreements entered into and to be
performed entirely within California between California residents.  I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in Santa Clara County, California for any lawsuit filed there against me
by Company arising from or related to this Agreement.

10.3        Severability.  In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and

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this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.  If moreover, any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, it
shall be construed by limiting and reducing it, so as to be enforceable to the
extent compatible with the applicable law as it shall then appear.

10.4        Successors and Assigns.  This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.

10.5        Survival.  The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.

10.6        Employment. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company’s right
to terminate my employment at any time, with or without cause.

10.7        Waiver. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach.  No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right.  The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.

10.8        Entire Agreement.  The obligations pursuant to Sections 1 and 2 of
this Agreement shall apply to any time during which I was previously employed,
or am in the future employed, by the Company as a consultant if no other
agreement governs nondisclosure and assignment of inventions during such
period.  This Agreement is the final, complete and exclusive agreement of the
parties with respect to the subject matter hereof and supersedes and merges all
prior discussions between us.  No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, will be effective
unless in writing and signed by the party to be charged.  Any subsequent change
or changes in my duties, salary or compensation will not affect the validity or
scope of this Agreement.

This Agreement shall be effective as of the first day of my employment with the
Company, namely:                     , 20  .

I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.  I HAVE
COMPLETELY FILLED OUT EXHIBIT B TO THIS AGREEMENT.

Dated:

 

 

 

 

 

 

 

 

 

 

(Signature)

 

 

 

 

 

(Printed Name)

 

 

 

 

 

Accepted And Agreed To:

 

 

 

 

 

Ditech Networks, INC.

 

 

 

 

 

By:

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

(Address)

 

 

 

 

 

 

 

 

Dated:

 

 

 

 

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EXHIBIT A

LIMITED EXCLUSION NOTIFICATION

THIS IS TO NOTIFY you in accordance with Section 2872 of the California Labor
Code that the foregoing Agreement between you and the Company does not require
you to assign or offer to assign to the Company any invention that you developed
entirely on your own time without using the Company’s equipment, supplies,
facilities or trade secret information except for those inventions that either:

1.             Relate at the time of conception or reduction to practice of the
invention to the Company’s business, or actual or demonstrably anticipated
research or development of the Company; or

2.             Result from any work performed by you for the Company.

To the extent a provision in the foregoing Agreement purports to require you to
assign an invention otherwise excluded from the preceding paragraph, the
provision is against the public policy of this state and is unenforceable.

This limited exclusion does not apply to any patent or invention covered by a
contract between the Company and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.

I ACKNOWLEDGE RECEIPT of a copy of this notification.

By:

 

 

(Printed Name Of Employee)

 

 

Date:

 

 

Witnessed By:

 

 

 

(Printed Name Of Representative)

 

A-1

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EXHIBIT B

TO:     Ditech Networks, INC .

 

 

 

 

 

FROM:

 

 

 

 

 

 

 

DATE:

 

 

 

SUBJECT:            Previous Inventions

1.             Except as listed in Section 2 below, the following is a complete
list of all inventions or improvements relevant to the subject matter of my
employment by Ditech Networks, INC. (the “Company”) that have been made or
conceived or first reduced to practice by me alone or jointly with others prior
to my engagement by the Company:

o            No inventions or improvements.

o            See below:

 

 

 

 

 

 

 

 

 

 

 

 

o            Additional sheets attached.

2.             Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):

Invention or Improvement   Party(ies)

 

Relationship

 

 

 

 

 

 

 

 

1.

 

 

 

 

 

 

 

 

 

 

 

 

 

2.

 

 

 

 

 

 

 

 

 

 

 

 

 

3.

 

 

 

 

 

 

o            Additional sheets attached.

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