AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE BENEFIT PLAN

Exhibit 10.2

DITECH NETWORKS, INC.

AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE BENEFIT PLAN

SECTION 1.          INTRODUCTION.

The Ditech Networks, Inc. Amended and Restated Change in Control Severance Benefit Plan (the “Plan” ) is hereby established effective September 24, 2007 (the “Effective Date” ), which Plan amends and restates the Ditech Networks, Inc. Change in Control Severance Benefit Plan adopted August 18, 2006 (the “Prior Plan” ), which Prior Plan is hereby superseded by this Plan. The purpose of the Plan is to provide for the payment of severance benefits to certain eligible employees of Ditech Networks, Inc. and its wholly owned subsidiaries (the “Company” ) in the event that such employees are subject to qualifying employment terminations in connection with a Change in Control. This Plan shall supersede any severance benefit plan, policy or practice previously maintained by the Company, other than an individually negotiated written contract or written agreement with the Company relating to severance or change in control benefits that is in effect on an employee’s termination date, in which case such employee’s severance benefit, if any, shall be governed by the terms of such individually negotiated written contract or written agreement and shall be governed by this Plan only to the extent that the reduction pursuant to Section 6(b) below does not entirely eliminate benefits under this Plan. This document also is the Summary Plan Description for the Plan.

SECTION 2.          DEFINITIONS.

For purposes of the Plan, the following terms are defined as follows:

(a)            “Base Salary” means the Participant’s annual base pay (excluding incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation), at the rate in effect during the last regularly scheduled payroll period immediately preceding the date of the Participant’s Covered Termination.

(b)            “Board” means the Board of Directors of Ditech Networks, Inc.

(c)            “Change in Control” means one of the following events or a series of more than one of the following events that are related, wherein the stockholders of the Company immediately before the transaction do not retain immediately after the transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company, the resulting entity in a merger or, in the case of an asset sale, the corporation or corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)” ), as the case may be:

(i)             the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company;

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(ii)            a merger or consolidation in which the Company is a party; or

(iii)          the sale, exchange, or transfer of all or substantially all of the assets of the Company.

For purposes of this Section 2(c), indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations, which as a result of the transaction, own the Company, the resulting entity or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. Prior to the Change In Control, the Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or more than one of the preceding events are related, and its determination shall be final, binding and conclusive.

(d)            “Code” means the Internal Revenue Code of 1986, as amended.

(e)            “Company” means Ditech Networks, Inc. and its wholly owned subsidiaries or, following a Change in Control, the surviving entity resulting from such transaction.

(f)             “Constructive Termination” means a resignation by a Participant of employment with the Company after one of the following is undertaken without the Participant’s express written consent:

(i)             a substantial reduction in the Participant’s duties or responsibilities (and not simply a change in title or reporting relationships) in effect immediately prior to the effective date of the Change in Control; provided, however, that it shall not be a “Constructive Termination” if, following the effective date of the Change in Control, either (a) the Company is retained as a separate legal entity or business unit and the Participant holds the same position in such legal entity or business unit as the Participant held before such effective date, or (b) the Participant holds a position with duties and responsibilities comparable (though not necessarily identical, in view of the relative sizes of the Company and the entity involved in the Change in Control) to the duties and responsibilities of the Participant prior to the effective date of the Change in Control;

(ii)            a material reduction in the Participant’s base salary (except for salary decreases generally applicable to the Company’s other similarly situated employees);

(iii)          a change in the Participant’s business location of more than 40 miles from the business location prior to such change, except for required travel for the Company’s business to an extent substantially consistent with Participant’s prior business travel obligations;

(iv)           a material breach by the Company of any provisions of the Plan or any enforceable written agreement between the Company and the Participant, and the Company fails to rescind or cure the conduct giving rise to the event constituting such material breach within thirty (30) days of receipt by the Company of written notice from the Participant informing the Company of such material breach; or

(v)             any failure by the Company to obtain assumption of the Plan by any successor or assign of the Company.

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Notwithstanding the foregoing, a resignation shall not be deemed a Constructive Termination unless (x) the Participant provides the Company with written notice (the “Constructive Termination Notice” ) that the Participant believes that an event described in this Section 2(f) has occurred, (y) the Constructive Termination Notice is given within ninty (90) days of the date the event occurred, and (z) the Company does not rescind or cure the conduct giving rise to the event described in this Section 2(f) within fifteen (15) days of receipt by the Company of the Constructive Termination Notice.

(g)            “Covered Termination” means an Involuntary Termination Without Cause or a Constructive Termination, either of which occurs within one (1) month prior to the effective date of a Change in Control or within twelve (12) months following the effective date of a Change in Control. Termination of employment of a Participant due to death or disability shall not constitute a Covered Termination unless (i) a resignation of employment by the Participant immediately prior to the Participant’s death or disability would have qualified as a Constructive Termination, and (ii) Participant shall have given the Company written notice, prior to such resignation, of the event(s) that occurred or circumstance(s) that existed that would have qualified as a Constructive Termination.

(h)            “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

(i)             “Involuntary Termination Without Cause” means an involuntary termination of employment by the Company other than for one of the following reasons:

(i)             the Participant’s violation of any material provision of the Company’s standard agreement relating to proprietary rights;

(ii)            the Participant participates in any act of theft or dishonesty; or

(iii)          the Participant participates in any immoral or illegal act which has had or could reasonably be expected to have or had a detrimental effect on the business or reputation of the Company; or

(iv)           any material failure by the Participant to use reasonable efforts to perform reasonably requested tasks after written notice and a reasonable opportunity to comply with such notice.

(j)             “Participant” means each of: Todd Simpson, the Company’s President and Chief Executive Officer; William J. Tamblyn, the Company’s Executive Vice President and Chief Financial Officer; and Lowell B. Trangsrud, the Company’s Executive Vice President and Chief Operating Officer.

(k)            “Plan Administrator” means the Board or any committee duly authorized by the Board to administer the Plan. The Plan Administrator may, but is not required to be, the Compensation Committee of the Board. The Board may at any time administer the Plan, in whole or in part, notwithstanding that the Board has previously appointed a committee to act as the Plan Administrator.

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SECTION 3.          ELIGIBILITY FOR BENEFITS.

(a)            General Rules. Subject to the provisions set forth in this Section and Section 6, in the event of a Covered Termination, the Company will provide the severance benefits described in Section 4 of the Plan to the affected Participant. Nothing in the Plan is intended to convey any benefit on a Participant prior to the occurrence of a Change in Control.

(b)            Exceptions to Benefit Entitlement. A Participant, will not receive benefits under the Plan (or will receive reduced benefits under the Plan) in the following circumstances, as determined by the Company in its sole discretion:

(i)             The Participant has executed an individually negotiated written contract or written agreement with the Company relating to severance or change in control benefits that is in effect on his termination date, in which case such Participant’s severance benefit, if any, shall be governed by the terms of such individually negotiated written contract or written agreement, whether or not such individually negotiated written contract or written agreement expressly states that it is meant to supersede the Plan, and shall be governed by this Plan only to the extent that the reduction pursuant to Section 6(b) or Section 6(d) below does not entirely eliminate benefits under this Plan.

(ii)            The Participant is offered immediate reemployment by a successor to the Company or by a purchaser of its assets, as the case may be, following a change in ownership of the Company or a sale of all or substantially all the assets of a division or business unit of the Company. For purposes of the foregoing, “immediate reemployment” means that the Participant’s employment with the successor to the Company or the purchaser of its assets, as the case may be, results in uninterrupted employment such that the Participant does not suffer a lapse in pay as a result of the change in ownership of the Company or the sale of its assets; provided, however, that reemployment in a role that would constitute a Constructive Termination shall not constitute “immediate reemployment” for purposes hereof.

(iii)          The Participant does not confirm in writing that he or she shall be subject to the proprietary information or confidentiality agreement previously entered into between Participant and the Company.

(c)            Termination of Benefits. A Participant’s right to receive the payment of benefits under this Plan shall terminate immediately if, at any time prior to or during the period for which the Participant is receiving benefits hereunder, the Participant, without the prior written approval of the Company:

(i)             willfully breaches a material provision of the Participant’s proprietary information or confidentiality agreement with the Company, as referenced in Section 3(b)(iii);

(ii)            owns, manages, operates, joins, controls or participates in the ownership, management, operation or control of, is employed by or connected in any manner with, any person, enterprise or entity which is engaged in any business competitive with that of the Company; provided, however, that such restriction will not apply to any passive investment representing an interest of less than two percent (2%) of an outstanding class of publicly-traded securities of any corporation or other entity or enterprise;

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(iii)          encourages or solicits any of the Company’s then current employees to leave the Company’s employ for any reason or interferes in any other manner with employment relationships at the time existing between the Company and its then current employees; or

(iv)           induces any of the Company’s then current clients, customers, suppliers, vendors, distributors, licensors, licensees or other third party to terminate their existing business relationship with the Company or interferes in any other manner with any existing business relationship between the Company and any then current client, customer, supplier, vendor, distributor, licensor, licensee or other third party.

SECTION 4.          AMOUNT OF BENEFITS.

(a)            Cash Severance Benefits. Each Participant who incurs a Covered Termination and was employed by the Company at the position or level set forth below within one (1) month immediately prior to such Covered Termination shall be entitled to receive, subject to Section 6(c), a cash severance benefit equal to the number of months of Base Salary plus the Pro Rata Portion of Expected Executive Bonus set forth below. Any cash severance benefits provided under this Section 4(a) shall be paid pursuant to the provisions of Section 5.

“Pro Rata Portion of Expected Executive Bonus” shall mean, with respect to a Participant, the pro rata portion, calculated based upon the fraction obtained by subtracting from 365 the number of days remaining in the fiscal year and dividing that amount by 365, of the expected variable cash bonus for such Participant, as determined by the Compensation Committee of the Board, pursuant to the Company’s variable cash compensation plan established by the Compensation Committee of the Board for the fiscal year in which the Covered Termination occurs, based upon the Participant’s and the Company’s performance during such fiscal year up to the date of the Covered Termination.

(b)            Accelerated Stock Award Vesting of Stock Options. If a Participant incurs a Covered Termination, then effective as of the date of the Participant’s Covered Termination, (i)

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the vesting and exercisability of all outstanding options to purchase the Company’s common stock and other stock awards that were granted to the Participant on or after September 1, 2003 but before a Change in Control, and are held by the Participant on such date shall be accelerated in full, and (ii) any reacquisition or repurchase rights held by the Company in respect of common stock issued pursuant to any other stock award granted to the Participant by the Company on or after September 1, 2003 but before a Change in Control shall lapse.

(c)            Continued Medical Benefits . If a Participant incurs a Covered Termination and the Participant was enrolled in a health, dental, or vision plan sponsored by the Company immediately prior to such Covered Termination, the Participant may be eligible to continue coverage under such health, dental, or vision plan (or to convert to an individual policy), at the time of the Participant’s termination of employment, under the Consolidated Omnibus Budget Reconciliation Act of 1985 ( “COBRA” ). The Company will notify the Participant of any such right to continue such coverage at the time of termination pursuant to COBRA. No provision of this Plan will affect the continuation coverage rules under COBRA, except that the Company’s payment, if any, of applicable insurance premiums will be credited as payment by the Participant for purposes of the Participant’s payment required under COBRA. Therefore, the period during which a Participant may elect to continue the Company’s health, dental, or vision plan coverage at his or her own expense under COBRA, the length of time during which COBRA coverage will be made available to the Participant, and all other rights and obligations of the Participant under COBRA (except the obligation to pay insurance premiums that the Company pays, if any) will be applied in the same manner that such rules would apply in the absence of this Plan.

If a Participant timely elects continued coverage under COBRA, the Company shall pay the full amount of the Participant’s COBRA premiums on behalf of the Participant for the Participant’s continued coverage under the Company’s health, dental and vision plans, including coverage for the Participant’s eligible dependents, during the twelve (12) months following a Covered Termination (the “Severance Period” ); provided, however, that if the Severance Period exceeds the length of time that the Participant is entitled to coverage under COBRA (including any additional period under analogous provisions of state law), the resulting or acquiring entity or Transferee Corporation involved in the Change in Control, as applicable, shall be required to provide health, dental and vision insurance coverage for the Participant and his or her eligible dependents for any portion of the Severance Period that exceeds the length of time that the Participant is entitled to coverage under COBRA (including any additional period under analogous provisions of state law), at a level of coverage that is substantially similar to the continued coverage that the Participant and his or her eligible dependents received under the Company’s health, dental and vision plans; provided, further, however, that no such premium payments (or any other payments for medical, dental or vision coverage by the Company) shall be made following the Participant’s death or the effective date of the Participant’s coverage by a medical, dental or vision insurance plan of a subsequent employer. Each Participant shall be required to notify the Company immediately if the Participant becomes covered by a medical, dental or vision insurance plan of a subsequent employer. Upon the conclusion of such period of insurance premium payments made by the Company, the Participant will be responsible for the entire payment of premiums required under COBRA for the duration of the COBRA period.

(d)            Other Employee Benefits. All other benefits (such as health coverage, dental coverage, vision coverage, life insurance, disability coverage, and 401(k) plan coverage) shall

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terminate as of the Participant’s termination date (except to the extent that a conversion privilege may be available thereunder).

SECTION 5.          TIME AND FORM OF SEVERANCE PAYMENTS .

(a)            General Rules. Subject to Section 5(b), any cash severance benefit provided under Section 4(a) shall be paid ratably over 12 months in installments pursuant to the Company’s regularly scheduled payroll periods commencing as soon as practicable following the effective date of a Participant’s Covered Termination and shall be subject to all applicable withholding for federal, state and local taxes. In the event of a Participant’s death prior to receiving all installment payments of his or her cash severance benefit under Section 4(a), any remaining installment payments shall be made to the Participant’s estate on the same payment schedule as would have occurred absent the Participant’s death. In no event shall payment of any Plan benefit be made prior to the effective date of the Participant’s Covered Termination or prior to the effective date of the release described in Section 6(a).

(b)            Application of Section 409A. In the event that any cash severance benefit provided under Section 4(a) shall fail to satisfy the distribution requirement of Section 409A(a)(2)(A) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, the payment of such benefit shall be accelerated to the minimum extent necessary so that the benefit is not subject to the provisions of Section 409A(a)(1) of the Code. (The payment schedule as revised after the application of the preceding sentence shall be referred to as the “Revised Payment Schedule.” )  In the event the payment of benefits pursuant to the Revised Payment Schedule would be subject to Section 409A(a)(1) of the Code, the payment of such benefits shall not be paid pursuant to the Revised Payment Schedule and instead the payment of such benefits shall be delayed to the minimum extent necessary so that such benefits are not subject to the provisions of Section 409A(a)(1) of the Code. The Board may attach conditions to or adjust the amounts paid pursuant to this Section 5(b) to preserve, as closely as possible, the economic consequences that would have applied in the absence of this Section 5(b); provided, howeve