WelcomeWelcomePlease be sure to sign the attendance Please be sure to sign the attendance

sheet in the back of the room so you sheet in the back of the room so you receive training credit. receive training credit.

And in being courteous, please silence And in being courteous, please silence your communication devices. your communication devices.

RESTRICTEDRESTRICTED STOCK STOCKAWARDSAWARDS

Presented by: Presented by: Kimberly CanigiulaKimberly Canigiula Equity ManagerEquity Manager

Before we get started….Before we get started….Please understand that the information Please understand that the information

being provided today is an overview of being provided today is an overview of the benefit and an opportunity to ask the benefit and an opportunity to ask questions. questions.

It does not take the place of reading the It does not take the place of reading the Plan documents. Please visit our Plan documents. Please visit our intranet or ask me to obtain copies.intranet or ask me to obtain copies.

Ditech does not provide tax guidance so Ditech does not provide tax guidance so you should work with your own you should work with your own personal tax or financial advisor.personal tax or financial advisor.

What is a Restricted What is a Restricted Stock Award (RSA)?Stock Award (RSA)?

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

How are awards different How are awards different from my options?from my options?

Awards are granted as common Awards are granted as common stock, options are granted as a stock, options are granted as a agreement to purchase stock agreement to purchase stock later.later.

Because awards cost the Because awards cost the employee nothing, they are employee nothing, they are always in-the-money regardless always in-the-money regardless of current FMV.of current FMV.

Timing/taxes is not as flexible as Timing/taxes is not as flexible as options.options.

Incremental vest dates are fewer.Incremental vest dates are fewer.

What is the vest schedule What is the vest schedule for RSAs?for RSAs?

For Ditech employees, the award grant For Ditech employees, the award grant typically vest over a four year period. typically vest over a four year period.

25% will vest approximately after one year, 25% will vest approximately after one year, and the remainder will vest semi-annually and the remainder will vest semi-annually (2x each year) over the next three years. (2x each year) over the next three years.

As the stock vest, the restrictions are lifted As the stock vest, the restrictions are lifted and the shares are released to the and the shares are released to the employee.employee.

When are the release When are the release dates?dates?

The are four pre-set release dates in the The are four pre-set release dates in the calendar year:calendar year:

March 15March 15thth

June 15June 15thth

September 15September 15

December 15December 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 Why this particular schedule?schedule?

We have chosen these four dates because We have chosen these four dates because they are expected to fall in an open window they are expected to fall in an open window period. This allows employees to sell some period. This allows employees to sell some of their shares to cover the taxes due at of their shares to cover the taxes due at release and avoid any financial hardships. release and avoid any financial hardships. Our Plan permits that should the window be closed on the Our Plan permits that should the window be closed on the

vest /release date, the release will be delayed until the window vest /release date, the release will be delayed until the window re-opens.re-opens.

Also, because the release process is quite Also, because the release process is quite cumbersome we needed to limit the dates.cumbersome we needed to limit the dates.

So I have to pay taxes So I have to pay taxes now?now?

MESSAGE FROM YOUR EMPLOYERMESSAGE FROM YOUR EMPLOYER(as stated on the E*Trade site)

Ditech Networks must collect or withhold Ditech Networks must collect or withhold compensatory taxes before releasing your compensatory taxes before releasing your restricted stock for sale. Select one of the restricted stock for sale. Select one of the

tax payment choice below, then click tax payment choice below, then click SUBMIT. If you do not make a tax SUBMIT. If you do not make a tax

payment selection by the deadline, we will payment selection by the deadline, we will use the default of Sell-to-Cover. use the default of Sell-to-Cover.

What happens when shares What happens when shares vest and are released to vest and are released to

me?me? You will be notified in advance via an You will be notified in advance via an

E*Trade SmartAlert that a portion of E*Trade SmartAlert that a portion of your award grant will vest and be due your award grant will vest and be due for release. for release.

In advance of, make sure E*Trade Action In advance of, make sure E*Trade Action Items have been taken care of…i.e….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 You accepted the term and conditions of your

release.release. Elect how you want to handle your tax payment.Elect how you want to handle your tax payment.

Where are my action Where are my action items?items?

xxx

XXX

What are my payment What are my payment choices?choices?

CheckCheck – – employee writes a check payable to Ditech employee writes a check payable to Ditech Networks within two days of the release date for the Networks within two days of the release date for the amount of the taxes due. All of their released shares amount of the taxes due. All of their released shares are deposited into their E*Trade account to trade at a are deposited into their E*Trade account to trade at a later time. later time. No shares are automatically soldNo shares are automatically sold..

Same-day saleSame-day sale – in advance of the release, you – in advance of the release, you instruct E*Trade to instruct E*Trade to sell all of the released sharessell all of the released shares. . The amount due for taxes will be directed back to The amount due for taxes will be directed back to Ditech and the remaining cash funds will be Ditech and the remaining cash funds will be deposited into your account.deposited into your account.

Sell-to-coverSell-to-cover (default) – E*Trade will (default) – E*Trade will sell only a sell only a portion of the sharesportion of the shares of the whole lot released to of the whole lot released to cover the taxes due back to Ditech. The remaining cover the taxes due back to Ditech. The remaining unsold shares are available in your account to trade unsold shares are available in your account to trade at a later time.at a later time.

When do I need to make the When do I need to make the tax election?tax election?

You may make and change your You may make and change your election within your E*Trade election within your E*Trade account the 7 days prior to the account the 7 days prior to the release date. release date.

A week before the release your A week before the release your election is locked in and you may election is locked in and you may not change it. not change it.

Also, you cannot change your Also, you cannot change your election while the release is in election while the release is in process. For example you elect sell-process. For example you elect sell-to-cover and on day of release you to-cover and on day of release you want to sell all, you will need to wait want to sell all, you will need to wait three more days until settlement three more days until settlement (T+3) to sell the remaining shares.(T+3) to sell the remaining shares.

How are taxes How are taxes calculated?calculated?

The amount of taxes due each The amount of taxes due each release will be the difference release will be the difference between your grant price, between your grant price, ($0.00) and the FMV at release. ($0.00) and the FMV at release.

Example: 100 shares are Example: 100 shares are released on Dec 15, 2007 (which released on Dec 15, 2007 (which happens to be a Saturday this year). happens to be a Saturday this year). If the prior closing price on Friday the If the prior closing price on Friday the 1414thth is $5.00, your taxable gain would is $5.00, your taxable gain would be $500.00 (100 shares X $5.00).be $500.00 (100 shares X $5.00).

Applicable Taxes Applicable Taxes and Withholding Rates and Withholding Rates

Federal Federal 2 2 5.0 %5.0 % CA State CA State 9.3 %9.3 % Social SecuritySocial Security 6.2 % (’07 limit $6,045. )6.2 % (’07 limit $6,045. ) MedicareMedicare 1.45%1.45% SDISDI .60 % ( ’07 limit $500.33 ) .60 % ( ’07 limit $500.33 )

Depending on if your limits have been met, Depending on if your limits have been met, total tax rate total tax rate would be between 35-42%. would be between 35-42%. These are supplemental These are supplemental rates, your rates, your actual tax rate could be higher or lower. 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 When do I get my shares/money?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 What happens when I sell the shares?the shares?

Remember the taxes Ditech withholds Remember the taxes Ditech withholds and reports on your W-2 is calculated and reports on your W-2 is calculated simply on the value on release. (# of simply on the value on release. (# of shares x closing FMV at release.)shares x closing FMV at release.)

Once the shares are sold, whether it Once the shares are sold, whether it be on release date or later, you need be on release date or later, you need to report the difference to the IRS to report the difference to the IRS when you pay taxes for the calendar when you pay taxes for the calendar year in which the shares are sold. year in which the shares are sold.

Can you give me some Can you give me some examples of the tax examples of the tax

calculations when I sell?calculations when I sell?

Sale Date 12/17/07 3/27/08 10/1/09Sale Price $5.20 $4.50 $9.00AdditionalGain / Loss(Grant date 2/15/07)

Short term gain of $20.00

(100x .20)

Long term loss of

<$50.00>(100 x -.50)

Long termgain of $400.00

(100 x 4.00)

Tax Year to Report 2007 2008 2009

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 $500.00. You will need to report the difference when you sell to capture the true profit realized.

Any Any Questions…???Questions…???

Purchase is November 30th.

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