sc13da407646002_09022009.htm

1 See Item 5.

CUSIP NO. 25500T108

The following constitutes Amendment No. 4 (“Amendment No. 4”) to the Schedule 13D filed by the undersigned. This Amendment No. 4 amends the Schedule 13D as specifically set forth.

Item 2.

Identity and Background.

Item 2 is hereby amended to add the following:

In connection with the Settlement Agreement described and defined in Item 4, the Issuer agreed to nominate Alan Howe and Frank J. Sansone to its Board of Directors at the Issuer’s 2009 annual meeting of stockholders (the “2009 Annual Meeting”). As a result, Mr. Sansone terminated his obligation to act in concert with the other Reporting Persons with respect to the Issuer, effective September 2, 2009. Accordingly, Mr. Sansone is no longer a member of the Section 13(d) group and will cease to be a Reporting Person immediately after the filing of this statement. The remaining Reporting Persons will continue filing as a group statements on Schedule 13D with respect to their beneficial ownership of securities of the Issuer, to the extent required by applicable law.

Item 4.

Purpose of Transaction.

Item 4 is hereby amended to add the following:

On September 2, 2009, the Issuer and Lamassu Holdings L.L.C. and certain of its affiliates (collectively, “Lamassu”) entered into a settlement agreement (the “Settlement Agreement”). Pursuant to the terms of the Settlement Agreement, the Issuer agreed (i) to nominate each of Mr. Alan Howe and Mr. Frank J. Sansone to be elected to the Board at the 2009 Annual Meeting, to the class of directors the term of office of which will expire at the 2012 annual meeting of stockholders, (ii) to recommend that the Issuer’s stockholders vote in favor of Messrs. Howe and Sansone at the 2009 Annual Meeting and (iii) to solicit proxies for the election of Messrs. Howe and Sansone at the 2009 Annual Meeting.

In addition, the Issuer agreed that if Mr. Sansone is unable to serve on the Board at a time when Lamassu owns at least 5% of the Common Stock outstanding, the Issuer will appoint a replacement director designated by Lamassu who is reasonably acceptable to the Issuer and whose acceptance by the Board shall not be unreasonably withheld (any such person, a “Replacement Director”).

Lamassu agreed to use its best efforts to cause Mr. Sansone and any Replacement Director to sign a conditional resignation from the Board, which may be accepted by the Board in the event that Lamassu’s beneficial ownership of the Common Stock falls below 5% of the Common Stock outstanding. In addition, the Board may determine, in its sole discretion, that a Replacement Director is not reasonably acceptable if such Replacement Director has not signed such a conditional resignation.

Lamassu further agreed to vote all of its shares of Common Stock in support of the slate of directors nominated by the Board for the 2009 Annual Meeting (and not to 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 also agreed to withdraw its previously announced notice of intent to nominate directors with respect to the 2009 Annual Meeting.

Lamassu also agreed, for a period ending 90 days from the date of the 2009 Annual Meeting, to not (i) make any public statement regarding the Issuer, the Board or any of Issuer’s officers, directors or employees, except for the press release issued in accordance with the Settlement Agreement or as may be required by law, or (ii) disparage the Issuer, the Board, or any of Issuer’s officers, directors or employees, in any manner, including in any manner which could be harmful to the Issuer or its business, the Board or its reputation, or the business reputation or personal reputation of any officer, director or employee of the Issuer.

CUSIP NO. 25500T108

The foregoing description of the Settlement Agreement is qualified in its entirety by reference to the Settlement Agreement, which is attached as Exhibit 99.1 hereto and is incorporated herein by reference.

Item 5.

Interest in Securities of the Issuer.

Item 5 is hereby amended and restated to read as follows:

The aggregate percentage of shares of Common Stock reported owned by each person named herein is based upon 26,307,406 shares of Common Stock outstanding, as of August 31, 2009, which is the total number of shares of Common Stock outstanding as reported in the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on September 2, 2009.

A. Lamassu

(a)

As of the close of business on September 21, 2009, Lamassu beneficially owned 2,399,845 shares of Common Stock.

Percentage: Approximately 9.1%

(b)

1. Sole power to vote or direct vote: 2,399,845

2. Shared power to vote or direct vote: 0

3. Sole power to dispose or direct the disposition: 2,399,845

4. Shared power to dispose or direct the disposition: 0

(c)

Lamassu has not entered into any transactions in the shares of Common Stock during the past 60 days.

B.	Messrs. Leehealey and Healey

(a)

As the managing members of Lamassu, each of Mr. Leehealey and Mr. Healey may be deemed the beneficial owner of the 2,399,845 shares of Common Stock owned by Lamassu. Each of Messrs. Leehealey and Healey share voting and dispositive power with respect to the shares of Common Stock owned by Lamassu by virtue of their shared authority to vote and dispose of such shares of Common Stock.

Percentage: Approximately 9.1%

(b)

1. Sole power to vote or direct vote: 0

2. Shared power to vote or direct vote: 2,399,845

3. Sole power to dispose or direct the disposition: 0

4. Shared power to dispose or direct the disposition: 2,399,845

(c)

Neither Mr. Leehealey nor Mr. Healey has entered into any transactions in the shares of Common Stock during the past 60 days.

CUSIP NO. 25500T108

C.	Mr. Sansone

(a)	As of the date hereof, Mr. Sansone does own any shares of Common Stock.

Percentage: 0%.

(b)	1. Sole power to vote or direct vote: 0

2. Shared power to vote or direct vote: 0

3. Sole power to dispose or direct the disposition: 0

4. Shared power to dispose or direct the disposition: 0

(c)	Mr. Sansone has not entered into any transactions in the shares of Common Stock during the past 60 days.

(d)	No person other than the Reporting Persons is known to have the right to receive, or the power to direct the receipt of dividends from, or proceeds from the sale of, such shares of the Common Stock.

(e)	Not applicable.

Item 6.

Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.

Item 6 is hereby amended to add the following:

On September 2, 2009, the Issuer and the Reporting Persons entered into the Settlement Agreement as discussed in further detail in Item 4.

On September 22, 2009, the Reporting Persons entered into a Joint Filing Agreement in which the parties agreed to the joint filing on behalf of each of them of this Amendment No. 4 to the Schedule 13D originally filed on December 1, 2008 (including additional amendments thereto) with respect to the securities of the Issuer. A copy of the Joint Filing Agreement is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

Item 7.

Material to be Filed as Exhibits.

Item 7 is hereby amended to include the following exhibits:

Exhibit 99.1	Settlement Agreement, dated September 2, 2009, by and among Ditech Networks, Inc., Lamassu Holdings L.L.C., Timothy Leehealey, Samuel Healey and Frank J. Sansone.

Exhibit 99.2	Joint Filing Agreement, dated September 22, 2009, by and among Lamassu Holdings L.L.C., Timothy Leehealey and Samuel Healey.

CUSIP NO. 25500T108

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: September 22, 2009

LAMASSU HOLDINGS L.L.C.

By:	/s/ Timothy Leehealey
	Name:	Timothy Leehealey
	Title:	Managing Member

	/s/ Timothy Leehealey
	TIMOTHY LEEHEALEY

	/s/ Samuel Healey
	SAMUEL HEALEY

	/s/ Frank J. Sansone
	FRANK J. SANSONE

DITECH NETWORKS, INC.

825 E. MIDDLEFIELD ROAD

MOUNTAIN VIEW, CA. 94043

September 2, 2009

Lamassu Holdings, LLC

21 Whitesands Drive

Newport Coast, CA 92657

Attn: Timothy Leehealey

Samuel Healey

21 Whitesands Drive

Newport Coast, CA 92657

Frank J. Sansone

2933 Arboridge Court

Fullerton, CA 92835

The following sets forth the agreement (the “Agreement”) between Lamassu Holdings L.L.C. and each of its affiliates listed in the signature blocks below (collectively, “Lamassu”), and Ditech Networks, Inc. (“Ditech”):

Ditech hereby covenants and agrees that each of Mr. Alan Howe and Mr. Frank J. Sansone will be nominated by the Ditech Board of Directors (the “Board”) for election at the 2009 annual meeting of stockholders (the “2009 Annual Meeting”), to the class the term of office of which will expire at the 2012 annual meeting of stockholders. Mr. Howe and Mr. Sansone will replace Mr. Avis and Mr. Manoliu, each of whom will cease to be members of the Board at such time.

Prior to the 2009 Annual Meeting, (i) the Board shall recommend that Ditech’ stockholders vote in favor of Mr. Howe and Mr. Sansone at the 2009 Annual Meeting and (ii) Ditech shall solicit proxies for the election of Mr. Howe and Mr. Sansone at the 2009 Annual Meeting.

For so long as Lamassu continues to beneficially own not less than 5% of the outstanding shares of Ditech common stock: if the Lamassu Designee (as defined below) is unable or unwilling to continue to serve on the Board and as a result there is a vacancy created on the Board, the Board shall, consistent with its fiduciary duties, appoint a replacement director designated by Lamassu Holdings L.L.C. (other than Timothy Leehealey, who shall not be designated by Lamassu Holdings L.L.C.) to fill the resulting vacancy, provided that such replacement director is reasonably acceptable to Ditech (and the Board will not unreasonably withhold acceptance of any such replacement director); and Ditech will use its commercially reasonable efforts to secure the election to the Board of such replacement director; provided, however, that the Board may determine, in its sole discretion, that a replacement director is not reasonably acceptable if such replacement director shall not have signed a conditional resignation as a director of Ditech in the form attached here to as Schedule A. Ditech hereby confirms that Mr. Sansone is reasonably acceptable to the Nominating and Corporate Governance Committee (“NCGC”) and the Board (provided that he has signed a conditional resignation as a director of Ditech in the form attached here to as Schedule A), and his nomination to the Board in satisfaction of the requirement of paragraph 1 meets the requirements of this paragraph 3. For purposes of this Agreement, Mr. Sansone and any replacement director for Mr. Sansone shall each be deemed a “Lamassu Designee”.

Lamassu shall use its best efforts to cause each Lamassu Designee to tender to Ditech a conditional resignation as a director of Ditech in the form attached here to as Schedule A. If Lamassu shall cease to beneficially own at least 5% of the outstanding shares of Ditech common stock, the Board may accept the Lamassu Designee conditional resignation as a director of Ditech referred to above.

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).

For a period beginning on the date of this letter agreement and continuing until 90 days from the date of the 2009 Annual Meeting, Lamassu will not (i) make any public statement regarding Ditech, the Board or any of Ditech’s officers, directors or employees, except for the press release attached hereto as Schedule A, or as may be required by law, or (ii) disparage Ditech, the Board, or any of Ditech’s 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.

Subject to the nominations of Mr. Howe and Mr. Sansone as specified in paragraph 1 as directors of Ditech, Lamassu hereby withdraws its previously announced notice of its intent to nominate directors with respect to the 2009 Annual Meeting.

Promptly after the execution of this Agreement, Ditech and Lamassu will issue a joint press release in the form attached hereto as Schedule B.

Each of Lamassu Holdings L.L.C. and the other entities included within Lamassu agrees that it will cause its controlled affiliates, current and future, to comply with the terms of this Agreement as if a party hereto.

10.

This Agreement may only be modified through a written agreement signed by Ditech and by Lamassu Holdings L.L.C. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and thereof and supersedes all prior and contemplated arrangements and understandings with respect thereto. This Agreement may be signed in counterparts, each of which shall constitute an original and all of which together shall constitute one and the same Agreement.

11.

This Agreement and the legal relations hereunder between the parties hereto shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and performed therein, without giving effect to the principles of conflicts of law thereof. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Delaware and of the United States of America, in each case located in the County of New Castle, for any action, proceeding or investigation in any court or before any governmental authority arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any action, proceeding or investigation relating thereto except in such courts), and further agrees that service of any process, summons, notice or document by registered mail to its respective address set forth in this Agreement shall be effective service of process for any action, proceeding or investigation brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, proceeding or investigation arising out of this Agreement or the transactions contemplated hereby in the courts of the State of Delaware or the United States of America, in each case located in the County of New Castle, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, proceeding or investigation brought in any such court has been brought in an inconvenient forum.

12.

Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

If you are in agreement please sign below.

Very truly yours,

DITECH NETWORKS, INC.


By:	/s/ Todd Simpson
	Todd Simpson
	Chief Executive Officer and President

	Address:	825 E. Middlefield Road
		Mountain View, CA 94043
	Telephone:
	Facsimile:

Accepted and agreed as of the date set forth above.

LAMASSU HOLDINGS L.L.C.

By:	/s/ Timothy Leehealey
	Timothy Leehealey
	Managing Member
	Address:	21 Whitesands Dr.
		Newport Coast, CA 92657
	Telephone:
	Facsimile:


	/s/ Timothy Leehealey
	Timothy Leehealey
	Address:	21 Whitesands Dr.
		Newport Coast, CA 92657
	Telephone:
	Facsimile:


	/s/ Samuel Leehealey
	Samuel Healey
	Address:	21 Whitesands Dr.
		Newport Coast, CA 92657
	Telephone:
	Facsimile:

	/s/ Frank J. Sansone
	Frank J. Sansone
	Address:	2933 Arboridge Court
		Fullerton, CA 92835
	Telephone:
	Facsimile:

SCHEDULE A

CONDITIONAL RESIGNATION

September 2, 2009

Secretary

Ditech Networks, Inc.

825 E. Middlefield Road

Mountain View, CA 94043

Dear Secretary:

I hereby tender my resignation as a member of the Board of Directors of Ditech Networks, Inc., which shall be effective only in the event that both (a) Lamassu Holdings L.L.C. and its affiliates shall cease to beneficially own, collectively, at least 5% of the outstanding shares of Ditech Networks, Inc., and (b) the Board of Directors of Ditech Networks, Inc. accepts this resignation.

Very truly yours,


[Name]

SCHEDULE B

PRESS RELEASE

Ditech Networks and Lamassu Holdings LLC Settle Proxy Contest

Parties Reach an Agreement Related to Board Nominees for Ditech’s 2009 Annual Meeting

Mountain View, CA – (BusinessWire – September 2, 2009) - Ditech Networks (NASDAQ: DITC), a global leader in mobile voice processing solutions, today announced that it has settled with Lamassu Holdings LLC on nominees to the company’s Board of Directors. Under the terms of the settlement, the company has agreed to nominate Frank Sansone, Lamassu Holding’s candidate and Alan B. Howe, an experienced industry veteran as new directors.

In view of the settlement agreement with Lamassu and the termination of the proxy contest, Mr. Greg Avis, who has served on the company’s board of directors since 1997, and Mr. Andrei Manoliu, who has served on the company’s board of directors since 2000, have announced they will retire from the board of directors and will not stand for re-election.

About Ditech Networks

Ditech Networks is revolutionizing modern communications with advanced voice processing solutions that perform tasks spanning from voice-enabled Web 2.0 and unified communications services to voice quality enhancement. Ditech believes in the power and simplicity of human speech; its solutions deliver high-quality voice communication and will enable compelling voice capabilities to new communications methods like social networking and text messaging, allowing consumers to use voice in ways that make sense in today’s Web 2.0-savvy world.

Press Contact:	Investor Contact:
Rob Adler	Bill Tamblyn
415 984 1970	650-623-1309

Ditech Networks, Voice Quality Assurance, Quad Voice Processor, and Broadband Voice Processor are trademarks or registered trademarks of Ditech Networks, Inc. All other trademarks are the property of their respective owners.

# # #

1	NAME OF REPORTING PERSON Lamassu Holdings L.L.C.
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP		(a) x (b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS WC
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)		¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH	7	SOLE VOTING POWER 2,399,845
	8	SHARED VOTING POWER - 0 -
	9	SOLE DISPOSITIVE POWER 2,399,845
	10	SHARED DISPOSITIVE POWER - 0 -
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,399,845
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES		o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.1%
14	TYPE OF REPORTING PERSON OO

1	NAME OF REPORTING PERSON Timothy Leehealey
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP		(a) x (b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)		¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH	7	SOLE VOTING POWER - 0 -
	8	SHARED VOTING POWER 2,399,845
	9	SOLE DISPOSITIVE POWER - 0 -
	10	SHARED DISPOSITIVE POWER 2,399,845
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,399,845
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES		o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.1%
14	TYPE OF REPORTING PERSON IN

1	NAME OF REPORTING PERSON Samuel Healey
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP		(a) x (b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)		¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH	7	SOLE VOTING POWER - 0 -
	8	SHARED VOTING POWER 2,399,845
	9	SOLE DISPOSITIVE POWER - 0 -
	10	SHARED DISPOSITIVE POWER 2,399,845
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,399,845
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES		o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.1%
14	TYPE OF REPORTING PERSON IN

1	NAME OF REPORTING PERSON Frank J. Sansone
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP		(a) x (b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)		¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH	7	SOLE VOTING POWER - 0 -
	8	SHARED VOTING POWER - 0 -
	9	SOLE DISPOSITIVE POWER - 0 -
	10	SHARED DISPOSITIVE POWER - 0 -
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON - 0 - 1
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES		o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0%
14	TYPE OF REPORTING PERSON IN