EXHIBIT 10.3


 


DITECH
NETWORKS, INC.


2006 EQUITY INCENTIVE PLAN


 


OPTION GRANT NOTICE


 


Ditech Networks, Inc. (the “Company”), pursuant to its 2006 Equity Incentive Plan
(the “Plan”),
hereby grants to Optionholder an option to purchase the number of shares of the
Company’s Common Stock set forth below. 
This option is subject to all of the terms and conditions as set forth
herein and in the Option Agreement, the Plan, and the Notice of Exercise, all
of which are attached hereto and incorporated herein in their entirety.


 


	
  Optionholder:

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  
	
  Vesting
  Commencement Date:

  	
   

  	
   

  
	
  Number of Shares
  Subject to Option:

  	
   

  	
  [If
  Initial Grant, insert: 35,000]

  [If Annual Grant, insert: 10,000]

  
	
  Exercise Price
  (Per Share):

  	
   

  	
   

  
	
  Total Exercise
  Price:

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  



 


	
  Type of
  Grant:

  	
  Nonstatutory
  Stock Option

  
	
   

  	
   

  
	
  Exercise
  Schedule:

  	
  [If
  Initial Grant, insert: 1/4th of the
  shares vest and become exercisable on the first anniversary of the Vesting
  Commencement Date, and 1/4th of the
  shares vest and become exercisable annually thereafter on the next three
  anniversaries of the Vesting Commencement Date. Notwithstanding the
  foregoing, in the event of a Change in Control (as defined in the Plan), the
  vesting and exercisability of this option shall (contingent upon the effectiveness
  of the Change in Control) be accelerated in full as of a date prior to the
  effective time of the Change in Control as the Company’s Board of Directors
  shall determine (or, if the Board shall not determine such a date, the date
  that is five days prior to the effective time of the Change in Control).]

  
	
   

  	
   

  
	
   

  	
  [If
  Annual Grant, insert: 100% of the shares are fully vested and exercisable on
  the Vesting Commencement Date.]

  
	
   

  	
   

  
	
  Payment:

  	
  By one or a
  combination of the following items (described in the Option Agreement):

  
	
   

  	
   

  
	
   

  	
  x

  	
  By cash or check

  
	
   

  	
  x

  	
  Pursuant to a
  Regulation T Program if the Shares are publicly traded

  
	
   

  	
  x

  	
  By delivery of
  already-owned shares if the Shares are publicly traded

  
	
   

  	
  x

  	
  By deferred
  payment

  



 


Additional
Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands
and agrees to, this Option Grant Notice, the Option Agreement, and the
Plan.  Optionholder further acknowledges
that as of the Date of Grant, this Option Grant Notice, the Option Agreement,
and the Plan set forth the entire understanding between Optionholder and the
Company regarding the acquisition of stock in the Company and supersede all
prior oral and written agreements on that subject with the exception of (i) options
previously granted and delivered to Optionholder under the Plan, and (ii) the
following agreements only:


 


	
  OTHER
  AGREEMENTS:

  	
   

  
	
   

  	
   

  



 

















 


	
  DITECH NETWORKS, INC.

  	
   

  	
  OPTIONHOLDER:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
						



 


ATTACHMENTS: Option  Agreement, 2006 Equity
Incentive Plan and Notice of Exercise


 

















 


ATTACHMENT I


 


OPTION AGREEMENT


 


DITECH
NETWORKS, INC.


2006
EQUITY INCENTIVE PLAN


 


OPTION
AGREEMENT


(NONSTATUTORY
STOCK OPTION)


 


Pursuant to your Option Grant
Notice (“Grant Notice”)
and this Option Agreement, Ditech Networks, Inc. (the “Company”) has granted
you an option under its 2006 Equity Incentive Plan (the “Plan”) to purchase
the number of shares of the Company’s Common Stock indicated in your Grant
Notice at the exercise price indicated in your Grant Notice. Defined terms not
explicitly defined in this Option Agreement but defined in the Plan shall have
the same definitions as in the Plan.


 


The details of your option are
as follows:


 


1.             VESTING. Subject to the limitations contained
herein, your option will vest as provided in your Grant Notice, [provided that vesting will cease upon the termination of your
Continuous Service]. [Note: Insert
bracketed language for Initial Grants only.]


 


2.             NUMBER OF SHARES AND EXERCISE
PRICE. The number
of shares of Common Stock subject to your option and your exercise price per
share referenced in your Grant Notice may be adjusted from time to time for
capitalization adjustments as set forth in Section 11(a) of the Plan.


 


3.             METHOD OF PAYMENT. Payment of the exercise price is due in
full upon exercise of all or any part of your option. You may elect to make
payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice,
which may include one or more of the following:


 


(a)           Provided that at the time of exercise the Common Stock
is publicly traded and quoted regularly in The Wall Street Journal,
pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of Common Stock, results in
either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds.


 


(b)           In the Company’s sole discretion at the time your
option is exercised and provided that at the time of exercise the Common Stock
is publicly traded and quoted regularly in The Wall Street Journal,
by delivery to the Company (either by actual delivery or attestation) of
already-owned shares of Common Stock either that you have held for the period
required to avoid classification of your option as a liability for financial
accounting purposes or that you did


 

















 


not acquire, directly or
indirectly from the Company, that are owned free and clear of any liens,
claims, encumbrances or security interests, and that are valued at Fair Market
Value on the date of exercise. “Delivery” for these purposes, in the sole
discretion of the Company at the time you exercise your option, shall include
delivery to the Company of your attestation of ownership of such shares of
Common Stock in a form approved by the Company. Notwithstanding the foregoing,
you may not exercise your option by tender to the Company of Common Stock to
the extent such tender would violate the provisions of any law, regulation or
agreement restricting the redemption of the Company’s stock.


 


4.             WHOLE SHARES. You may exercise your option only for
whole shares of Common Stock.


 


5.             SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the
registration requirements of the Securities Act. The exercise of your option
also must comply with other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that
such exercise would not be in material compliance with such laws and
regulations.


 


6.             TERM. You may not exercise your option before
the commencement or after the expiration of its term. The term of your option
commences on the Date of Grant and expires upon the earliest of the following:


 


(a)           three (3) months after the termination of your
Continuous Service for any reason other than your Disability or death; provided, however, that (i) if during
any part of such three (3) month period your option is not exercisable solely
because of the condition set forth in Section 5, your option shall not
expire until the earlier of the Expiration Date or until it shall have been
exercisable for an aggregate period of three (3) months after the
termination of your Continuous Service;


 


(b)           twelve (12) months after the termination of your
Continuous Service due to your Disability;


 


(c)           eighteen (18) months after your death if you die
either during your Continuous Service or within three (3) months after
your Continuous Service terminates;


 


(d)           the Expiration Date indicated in your Grant Notice; or


 


(e)           the day before the tenth (10th) anniversary of the
Date of Grant.


 


7.             EXERCISE.


 


(a)           You may exercise the vested portion of your option
during its term by delivering a Notice of Exercise (in a form designated by the
Company) together with the exercise price to the Secretary of the Company, or
to such other person as the Company may designate,


 

















 


during regular business
hours, together with such additional documents as the Company may then require.


 


(b)           By exercising your option you agree that, as a
condition to any exercise of your option, the Company may require you to enter
into an arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (i) the
exercise of your option, or (ii) the disposition of shares of Common Stock
acquired upon such exercise.


 


8.             TRANSFERABILITY. Your option is not transferable, except
by will or by the laws of descent and distribution, and is exercisable during
your life only by you. Notwithstanding the foregoing, by delivering written
notice to the Company, in a form satisfactory to the Company, you may designate
a third party who, in the event of your death, shall thereafter be entitled to
exercise your option. In addition, you may transfer your option to a trust if
you are considered to be the sole beneficial owner (determined under Section 671
of the Code and applicable state law) while the option is held in the trust,
provided that you and the trustee enter into transfer and other agreements
required by the Company.


 


9.             OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the service of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
service. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective stockholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.


 


10.          WITHHOLDING OBLIGATIONS.


 


(a)           At the time you exercise your option, in whole or in
part, or at any time thereafter as requested by the Company, you hereby
authorize withholding from any amounts payable to you, and otherwise agree to
make adequate provision for (including by means of a “cashless exercise”
pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with the exercise of your option.


 


(b)           Upon your request and subject to approval by the
Company, in its sole discretion, and compliance with any applicable legal
conditions or restrictions, the Company may withhold from fully vested shares
of Common Stock otherwise issuable to you upon the exercise of your option a
number of whole shares of Common Stock having a Fair Market Value, determined
by the Company as of the date of exercise, not in excess of the minimum amount
of tax required to be withheld by law (or such lower amount as may be necessary
to avoid classification of your option as a liability for financial accounting
purposes). Any adverse consequences to you arising in connection with such
share withholding procedure shall be your sole responsibility.


 

















 


(c)                                  You may not exercise your option unless
the tax withholding obligations of the Company and/or any Affiliate, if any,
are satisfied. Accordingly, you may not be able to exercise your option when
desired even though your option is vested, and the Company shall have no
obligation to issue a certificate for such shares of Common Stock or release
such shares of Common Stock from any escrow provided for herein unless such
obligations are satisfied.


 


11.          NOTICES. Any
notices provided for in your option or the Plan shall be given in writing and
shall be deemed effectively given upon receipt or, in the case of notices
delivered by mail by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the last address
you provided to the Company.


 


12.          GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions of the
Plan, the provisions of which are hereby made a part of your option, and is
further subject to all interpretations, amendments, rules and regulations,
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of
the Plan, the provisions of the Plan shall control.


 

















 


ATTACHMENT II


 


2006 EQUITY INCENTIVE PLAN


 


(Incorporated by reference from such plan
filed with Ditech’s Proxy Statement filed August 2, 2006 (Commission File No. 000-26209).


 

















 


ATTACHMENT III


 


NOTICE OF EXERCISE


 


	
  Ditech Networks, Inc.

  	
   

  	
   

  
	
  825 East
  Middlefield Rd.

  	
   

  	
   

  
	
  Mountain View,
  CA 94043

  	
   

  	
  Date of Exercise:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Ladies and
  Gentlemen:

  	
   

  	
   

  



 


This constitutes notice under my stock option that I
elect to purchase the number of shares for the price set forth below.


 


	
  Type of option:

  	
   

  	
  Nonstatutory

  
	
   

  	
   

  	
   

  
	
  Stock option
  dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of shares
  as to which option is exercised:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Certificates to
  be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total exercise
  price:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cash payment
  delivered herewith:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Value of
                  
  shares of Ditech Networks, Inc. Common
  Stock delivered herewith(1):

  	
   

  	
  $

  	
   

  



 


By this exercise, I agree (i) to provide such
additional documents as you may require pursuant to the terms of the Ditech
Networks, Inc. 2006 Equity Incentive
Plan, and (ii) to provide for the payment by me to you (in the
manner designated by you) of your withholding obligation, if any, relating to
the exercise of this option.


 


Very truly yours,


 






(1)           Shares must meet the public trading requirements set
forth in the option. Shares must be valued in accordance with the terms of the
option being exercised and must be owned free and clear of any liens, claims,
encumbrances or security interests. Certificates must be endorsed or
accompanied by an executed assignment separate from certificate.