Exhibit 10.5    CONFIDENTIAL SEVERANCE AND RELEASE AGREEMENT  This
Confidential Severance and Release Agreement (Agreement) is entered into by
and between Lowell Trangsrud (Employee or Trangsrud) and Ditech Networks, Inc.,
as well as any of its past or present parent, subsidiary, related, affiliated,
predecessor, and/or successor corporations and entities, insurers, officers,
directors, shareholders, representatives, agents, and employees (collectively Company
or Ditech), for the following purposes and with reference to the following
facts:  RECITALS  A.WHEREAS, Employees
last day of employment with the Company is effective as of January 4,
2010;  B.WHEREAS, Employee and
the Company desire to settle fully and finally all differences between them,
including, but in no way limited to, any differences that might arise out of
the Employees employment with the Company, and the termination thereof;  C.WHEREAS, without any
admission of any liability, fact, allegation, claim or defense by the parties,
it is now the desire of the parties to amicably compromise, settle and release
all claims of whatever kind or description and to effect a total resolution and
compromise of all such disputes including, without limitation, disputes
constituting, relating to, or arising from Employees application to,
employment with, and termination from Ditech and/or any matters encompassed by
any allegations of unlawful conduct or violations of company policy or
practice;  1


NOW,
THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties do hereby agree as follows:  AGREEMENTS  1.Denial
of Liability  Employee
expressly recognizes that this Agreement shall not in any way be construed as
an admission of any unlawful or wrongful acts whatsoever against Employee or
any other person.  Ditech, including any
of its insurers, officers, directors, shareholders, representatives, agents,
and employees, specifically denies any liability to, or wrongful acts against,
Employee or any other person.  2.Consideration
by Ditech  a.Severance Pay.In
consideration of the covenants and undertakings set forth in this Agreement,
after this Agreement becomes legally effective and enforceable as defined under
Paragraph 15 herein, Ditech shall pay to Employee the sum of One hundred
thirty-three thousand two hundred and no cents ($133,200.00) (hereinafter the Severance
Amount) no later than 14 calendar days after the legally effective date of
this Agreement or with the next regularly scheduled payroll period after the
legally effective date of this Agreement as provided in Paragraph 16 of this
Agreement.  The Severance Amount shall be
reduced by authorized deductions and deductions or withholdings required by
law.  b.Continuation of Health
Insurance.Until the
earlier of the date Trangsrud finds employment providing health insurance
coverage, or eight (8) months after the effective date of his termination
(the Termination Date), Ditech will continue Trangsruds existing health
coverage by paying the Trangsruds COBRA premiums for that period of time.  2


Ditechs obligation is conditioned upon Trangsruds
continued eligibility under COBRA and the health insurance plan, and Trangsrud
having timely elected COBRA coverage.  c.Stock Options.  During Trangsruds employment with Company,
Company granted Trangsrud certain options to purchase shares of Companys
common stock subject to a vesting schedule (Options).  If the applicable exercise price of any
Option is higher than the closing trading price of Companys common stock as
reported on the NASDAQ Stock Market on the Termination Date (Underwater
Options) the Company will amend each such Underwater Option to permit
Trangsrud to exercise any vested shares subject to such Underwater Options at
any time on or before the earlier of (i) six (6) months from the date
of the Termination Date, or (ii) the expiration date of such Underwater
Options.  Should the Termination Date
fall on a weekend or holiday, closing trading price will be the preceding
Fridays closing price.  Except as set
forth in this Section 2(C), all Underwater Options will continue to be
governed by the applicable stock option agreements and plan documents.  Trangsrud is advised by Company to seek
independent legal advice with respect to tax issues regarding the Underwater
Options.  Company makes no representation
regarding any such tax issues.  d.Retention Bonus:  Trangsrud remains entitled to the time based
cash retention bonus established by the Board of Directors on May 19, 2009
of ninety thousand dollars and no cents ($90,000.00).  The Retention Bonus Amount shall be reduced
by authorized deductions and other deductions or withholdings required by law.  e.Additional Consideration.Upon the Termination Date, The Company will
provide Trangsrud with a Final Severance and Release Agreement attached as Exhibit A.  Once the Final Severance and Release
Agreement becomes legally effective, Ditech will provide Trangsrud with the
following: 1)  Outplacement Services:
Outplacement Services  3


with Lee Hecht Harrison.  a) The Outplacement Services will be valued
at up to three thousand five hundred ($3,500) dollars (paid directly to Lee
Hecht Harrison) and b) The Outplacement Services will also include one thousand
five hundred dollars ($1,500) to be used at Trangsruds discretion for
outplacement services and will either be paid directly to a provider or paid directly
to Trangsrud as income. The Outplacement Services must be initiated prior to February 28,
2010.  2) 
Additional Extension of Exercise Period for Vested, Underwater
Options:  The Company will amend each
such Underwater Option to permit Trangsrud to exercise any vested shares
subject to such Underwater Options at any time on or before the earlier of (i) twelve
(12) months from the date of the Termination Date, or (ii) the expiration
date of such Underwater Options.  Should
the Termination Date fall on a weekend or holiday, closing trading price will
be the preceding Fridays closing price. 
Except as set forth in this Section 2(E), all Underwater Options
will continue to be governed by the applicable stock option agreements and plan
documents.  Trangsrud is advised by
Company to seek independent legal advice with respect to tax issues regarding
the Underwater Options.  Company makes no
representation regarding any such tax issues.  3.Employees
Warranty  Employee
represents that, other than the allegations described in this Agreement,
Employee has no other pending claims, complaints, charges or appeals against or
involving Ditech, as well as any of its past or present parent, subsidiary,
related, affiliated, predecessor, and/or successor corporations and entities,
insurers, officers, managers, directors, shareholders, agents, and employees
associated with Ditech, with any state or federal court, or any local, state,
federal or administrative agency. 
Employee agrees to cause to be withdrawn any such claim, complaint or
charge should one be found in fact to be pending.  Employee further specifically represents that
Employee will not in the future file, participate in, encourage, instigate or
assist in  4


the
prosecution of any claim, complaints, charges or in any lawsuit by any party in
any state or federal court or any proceeding before any local, state, federal
or administrative agency against Ditech or any of its past or present parent,
subsidiary, related, affiliated, predecessor, and/or successor corporations and
entities, insurers, officers, managers, directors, shareholders,
representatives, agents, and employees associated with Ditech (unless such aid
or assistance is ordered by a court or sought by a government agency) claiming
that Ditech or any of its past or present parent, subsidiary, related,
affiliated, predecessor, and/or successor corporations and entities, insurers,
officers, managers, directors, shareholders, representatives, agents, and employees
have violated any local, state or federal laws, statutes, ordinances or
regulations, or committed tortious conduct and/or violations of contractual
relationships of any kind, including, but not limited to: breach of contract or
implied contract; breach of the implied covenant of good faith and fair
dealing; inducement of breach; wrongful or unlawful discharge or demotion;
violation of public policy, retaliation; intentional or negligent infliction of
emotional distress; assault; battery; intentional or negligent
misrepresentation; conspiracy; tortious denial of a contract; interference with
proprietary interests; failure to pay wages, bonuses, benefits, vacation pay,
severance pay or other compensation of any sort; negligence; negligent hiring,
retention or supervision; defamation; unlawful effort to prevent employment;
violation of constitutional rights; discrimination or harassment on the basis
of race, color, sex, national origin, religion, age, marital status, pregnancy,
disability or medical condition; wrongful termination in violation of public
policy; retaliation; or other wrongful conduct, based upon events occurring
prior to the date this Agreement is executed by Employee.  Employee acknowledges that this warranty is a
material inducement for Ditechs consideration described in this Agreement.  5


4.Complete
and General Release of Claims  a.In consideration of the
covenants and undertakings set forth in this Agreement, Employee waives,
releases and forever discharges Ditech and each of its current and former
affiliates, subsidiaries, parents, divisions, investors, successors, insurers,
predecessors and assigns, as well as each of their respective past and present
representatives, agents, directors, officers, shareholders, partners, insurers,
representatives, consultants, attorneys, and employees, (collectively, Ditech
Releasees), and each of them, from any and all claims of any kind or nature,
whether known or unknown or suspected or unsuspected, which Employee now owns
or holds, or has at any time before the date this Agreement is fully executed
by Employee, owned or held against any of the Ditech Releasees, and each of
them.  In addition, Employee acknowledges
that Employee has received the entirety of all wages, sums, and other monies
that were ever due to Employee by Ditech or any of the Ditech Releasees.  b.The phrase any and all
claims as used in this Agreement includes, but is not limited to, all claims,
demands, causes of action, complaints, or actions of any kind, whether known or
unknown, anticipated or unanticipated, suspected or unsuspected, past or
present, contingent or fixed including, but not limited to: (i) any and
all claims constituting, relating to, or arising out of Employees employment
with Ditech, including any charges or complaints filed with any administrative
agency, including, without limitation, the U.S. Equal Employment Opportunity
Commission or the Department of Fair Employment and Housing; (ii) any and
all claims based on tort or contract; (iii) any and all claims arising
under federal, state or local law or statute, including, but not limited to any
and all claims of age discrimination arising under the Age Discrimination in
Employment Act, as amended, 29 U.S.C. § 621, et seq., Title VII of
the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e, et seq.,
the Civil Rights Act of 1866, 42 U.S.C. § 1981, the Americans with Disabilities
Act, 42 U.S.C. § 12101, et seq., the Family and Medical Leave Act
of 1993, 29 U.S.C., § 2601, et seq., the  6


United States Constitution, the Employee Retirement
Income Security Act of 1974, 29 U.S.C., § 1001, et seq., and any other
federal, state or local fair employment practices or civil rights law,
ordinance, regulation, executive order and/or other law or regulation governing
the terms and conditions of employment; (iv) any and all claims arising
out of, related to or connected with the application to, employment of, or
termination of Employee by Ditech, the terms and conditions of Employees
employment, the termination of such employment, and/or the failure to employ
Employee in the future, and any employment practice, procedure, policy or
decision of, or omission or action taken by, the Ditech Releasees, and each of
them, including, but not limited to, any claims for wrongful discharge,
retaliation, misrepresentation, defamation, harassment, denial of promotion,
fraud, fraudulent inducement, emotional distress, or negligent hiring or
retention; and (v) any and all claims arising out of, related to, or
connected with any legal restrictions on Ditechs right to terminate Employees
employment, and whether for compensatory, punitive, equitable or other relief,
including attorneys fees, all to the fullest extent permitted by law.  5.Waiver of California Civil Code Section 1542  Employee does hereby, and for his heirs, legal
representatives, agents, successors-in-interest and assigns, expressly waive
and relinquish all rights and benefits afforded by Section 1542 of the
Civil Code of California or any other state laws, and does so understanding and
acknowledging the significance and consequences of such specific waiver of Section 1542.  Employee acknowledges that he is being
represented in this matter by counsel, and acknowledges that he is familiar
with the provisions of California Civil Code Section 1542, which provides
as follows:  7


A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.  Thus, notwithstanding the provisions of Section 1542,
and for the purpose of implementing a full and complete release and discharge
of all claims, Employee expressly acknowledges that this Agreement is also
intended to include in its effect, without limitation, all claims which he does
not know or expect to exist in his favor at the time of execution hereof, and
that this Agreement contemplates the extinguishment of any such claim or
claims.  6.No
Assignment or Transfer of Released Matters  Employee
represents and warrants that Employee has full and exclusive authority to
release and discharge those matters released by this Agreement and that no
portion of any of the matters released pursuant to Paragraph 4 above has been
assigned or transferred to any other person, firm or corporation who is not a
party to this Agreement, in any manner, including by way of subrogation or
operation of law or otherwise.  If any
claim, action, demand, or suit should be made or instituted against any of the
mutual released parties because of any such purported assignment, subrogation,
or transfer, each party agrees to indemnify and hold harmless the other
released part(ies) against such claim, action, suit or demand, including
necessary expenses of investigation, attorneys fees and costs.  8


7.Non-Solicitation  Non-Solicitation of Employees:In
consideration of the Severance Amount provided in paragraph 2 of this
Agreement, Employee agrees that for a period of one year after the effective
date of this Agreement, he will not, directly or indirectly, induce, solicit,
recruit or encourage any employee of Company to leave the employ of Company,
which means that he/she will not: (i) disclose to any third party the
names, backgrounds or qualifications of any employees or otherwise identify them
as potential candidates for employment; or (ii) personally or through any
other person approach, recruit, interview or otherwise solicit employees to
work for Employee or any other employer as an employee, agent, or independent
contractor.  8.Confidentiality  Employee represents and warrants that, with the
exception of Employees immediate family, Employee shall not disclose,
disseminate and/or publicize, or cause or permit to be disclosed, disseminated
or publicized, directly or indirectly, specifically or generally, to any
person, corporation, association, agency or entity any of the events (including
any negotiations) which led to the execution of this Agreement and the
execution and the terms and conditions of this Agreement, except (i) that
Employee may reveal to Employees attorneys and/or accountants such information
but only to the extent such a disclosure is necessary to assist and give
Employee appropriate legal and/or financial advice, or (ii) to the extent
that Employee must comply with, or respond to, a valid order, demand or
regulation by a court or an administrative or governmental agency.  9.Non-Disclosure
of Confidential Information  a.Confidential Information:  Employee understands and agrees that while
employed by Ditech, Employee may have had access to, learned of, acquired or
otherwise  9


became informed of Ditechs proprietary and/or
confidential information that is not generally known to the public or the
competitors of Ditech, including without limitation, Company information
regarding (i) marketing, development, financial and sales data and
strategies, including any contained in any Company computer systems, (ii) lists
of any customers, suppliers, employees or agents, (iii) any business,
marketing or sales reports, plans, or similar analysis, (iv) terms of any
contracts or agreements with any customers, suppliers, employees or agents, (v) pricing
and other financial information, (vi) methods of operating any of its
businesses, (vii) volumes of business and profit margins, (viii) technical,
technological and production know-how, (ix) future plans and methods of
doing business, (x) products, inventions, applications, designs, programs,
patents and other processes or documentation, whether developed or in
development, (xi) policies and procedures relating to its customers,
suppliers, employees or agents; (xii) Company customers contact
information, volumes of business and profit margins, business operations and
methods, preferences and special needs, pricings and other financial
information, and terms of any contracts or agreements with the Company; (xiii) Company
employees salaries, commissions and other benefits, levels of knowledge,
performance, experience and expertise, 
strengths and weaknesses, and special talents; and, (xiv) all
non-public personal, financial and/or health information regarding employees,
agents, clients or other individuals otherwise associated with Ditech
(collectively Confidential Information).  b.Non-Disclosure:  Employee understands and agrees that such
Confidential Information constitutes private information subject to privacy
rights under the California Constitution, and/or other applicable statutes, rules and
the common law.  Ditechs Confidential
Information is a competitive asset of Ditech that is and shall remain the
exclusive property of the Company and, to that end, Employee covenants and
warrants that Employee shall never directly or indirectly make known, divulge,
reveal, furnish, make available, disclose, or  10


use any Confidential Information until and unless
any such Confidential Information shall have become, through no fault of
Employee, generally known to the public.  c.Obligations:  Employee understands and agrees that Employees
obligations of confidentiality hereunder are in addition to, and not in
limitation of or preemption of, all other obligations of confidentiality
Employee has to the Company as established in the Employee Invention Assignment
and Confidentiality Agreement signed by Trangsrud and effective July 9,
2001.  10.Return
of Company Property and Confidential Information  Employee represents and warrants that Employee has
returned to Ditech, and does not have in Employees possession, any and all
Company property and Confidential Information (defined above in Paragraph 9)
which were provided to Employee by Ditech or were otherwise in Employees
possession, custody or control as a result of Employees employment with
Ditech.  Company property includes the
original and all copiesofany documents, photographs, mechanical or electronic
recordings, audio and video tape recordings, computer disks or printouts,
reports, drafts, memoranda, notes, correspondence, analysis, calendars, appointment
books, and all other writings or recordings of any means, that constitute,
contain, concern or relate to any Confidential Information, including without
limitation all documents Employee produced to Ditech with respect to Employees
allegations.  11.Non-Disparagement  Employee and Ditech agree to not make any negative,
disparaging, detrimental or derogatory comments to any third party concerning
one another, or any of their current and  11


former officers, directors, managers, employees or agents, or
concerning its or their products, methods of doing business, or employment
practices.  12.          No Cooperation Regarding Other Potential Claims  Employee shall not assist or aid any person,
corporation, firm, partnership, or other entity, with any legal action, legal
proceeding, or litigation against Ditech, unless such aid or assistance is
ordered by a court or sought by a government agency or by compulsory legal
process.  Employee also shall not (either
orally or in writing, or in any other manner whatsoever) voluntarily initiate
communications with, or respond to communications from, any person,
corporation, partnership, or other entity, about any action, cause of action,
or other matter against Ditech, unless such aid or assistance is ordered by a
court or sought by a government agency or by compulsory legal process.  In the event such assistance, aid or
communication is legally compelled, Employee shall immediately provide Ditech
copies thereof and all relevant information available to Employee including
copies of all relevant, non-privileged documents to permit Ditech to intervene
to quash, narrow, or otherwise limit the scope of the order or legal
process.  Employee shall not respond to
the order or legal process or communicate with third parties regarding matters
addressed by the order or legal process until the date prescribed for
performance or, if Ditech has made opposition, until the court or agency has
ruled on Ditechs opposition and Ditech has exhausted and waived all
opportunities for appeal.  13.          Remedies for Breach of this Agreement  If
Employee breaches paragraphs 8, 9, 10, 11 and/or 12 of this Agreement, then
Ditech shall have, in addition to and without limiting any other remedy or right
it may have at law or in equity, the right to a temporary and permanent
injunction restraining any such breach,  12


without
any bond or security being required.  In
any such proceeding, Employee shall waive any defense that the Company has an
adequate remedy at law or that the injury suffered as a consequence of such
breach is not irreparable.  14.          Review and Consideration of Agreement  Employee
understands that Employee has been given a period of 21 days to review and
consider this Agreement before signing it. 
Employee further understands that Employee may use as much, or as
little, of this 21-day period as Employee wishes prior to signing this
Agreement.  15.          Right to Revoke Agreement  Employee
may revoke this Agreement within seven (7) calendar days following
Employees execution of this Agreement. 
Revocation may be made only by delivering a written notice of revocation
to John C. Fox, Esq., counsel for Ditech, at MANATT, PHELPS &
PHILLIPS, LLP, 1001 Page Mill Road, Building 2, Palo Alto, CA 94304.  This Agreement shall become legally effective
and enforceable after the expiration of the seven-day revocation period.  However, if Employee revokes this Agreement
within the seven-day revocation period, the Agreement shall not be effective or
enforceable and Employee shall not receive the payment or benefits described in
this Agreement, including that which is set forth in Paragraph 2 above.  16.          Older Worker Benefit Protection Act  To
comply with the Older Worker Benefit Protection Act of 1990 (OWBPA), Employee
has been advised of Employees right to consult an attorney and of the legal
requirements of OWBPA, including Employees right to consider this Agreement
for up to 21  13


days
before signing and Employees right to revoke the Agreement within seven days
after signing it, and fully incorporates the legal requirements by reference
into this Agreement.  17.          Miscellaneous Provisions  a.             Governing Law  This
Agreement shall be governed by the laws of the State of California, both
procedural and substantive, without regard to its conflict of law provisions.  b.             Attorneys Fees and Costs  Except
as provided herein, each party shall bear its own attorneys fees and
costs.  In the event of any dispute
arising out of this Agreement, the prevailing party shall be entitled to
recover all of their costs and reasonable attorneys fees.  c.             Joint Preparation of Agreement  The
parties have cooperated in the preparation of this Agreement and, hence, it
shall not be interpreted or construed against or in favor of any party by
virtue of the identity, interest or affiliation of its preparer.  d.             Severability  In
the event that any portion of this Agreement shall be held to be void,
voidable, illegal or unenforceable, the remaining portions shall remain in
force and effect.  e.             Entire and Final Agreement; No Modification  This
Agreement is the entire agreement between Employee and Ditech and they
supersede any previous negotiations, agreements and understandings concerning
the subject matters of this Agreement. 
This Agreement is intended to be and is final and binding, regardless of
any claims of misrepresentation, concealment of fact, or mistake of law or
fact.  Employee and Ditech acknowledge
that Employee/Ditech has not relied on any oral or written  14


representation
by the other parties to induce the other to sign this Agreement, other than the
terms of this Agreement.  No
modifications of this Agreement can be made except in writing signed by
Employee and an authorized representative of Ditech.  f.              Execution and Counterparts  This
Agreement may be executed in counterparts, each of which shall be deemed the
original, all of which together shall constitute one and the same
instrument.  A faxed copy shall be deemed
as an original, but the parties agree to forward a hard copy of their
respective signatures to the other party promptly thereafter.  EACH
PARTY ACKNOWLEDGES THAT EMPLOYEE OR DITECH HAS BEEN PROVIDED WITH SUFFICIENT
TIME AND OPPORTUNITY TO CONSIDER THIS AGREEMENT AND TIME TO CONSULT WITH
COUNSEL.  EACH PARTY ACKNOWLEDGES AND
REPRESENTS THAT EMPLOYEE AND DITECH ENTER INTO THIS AGREEMENT FREELY,
KNOWINGLY, VOLUNTARILY AND WITHOUT COERCION AND BASED ON EMPLOYEES OR DITECHS
OWN JUDGMENT AND NOT RELIANCE UPON ANY REPRESENTATION OR PROMISES MADE BY ANY
OTHER PARTY.   DATED:
  November 16, 2009
  /s/
  Lowell TrangsrudLowell
  TrangsrudDATED: November 13,
  2009
  /s/ Todd SimpsonTodd Simpson
  President & CEO
  On Behalf of Ditech
  Networks  15


EXHIBIT A  FINAL SEVERANCE AND RELEASE AGREEMENT  For the period of November 16, 2009 through January 4,
2010, Trangsrud and Ditech agree to the same terms and conditions as described
in theCONFIDENTIAL SEVERANCE AND RELEASE AGREEMENTdated November 16, 2009.  In exchange for thisFINAL
SEVERANCE AND RELEASE AGREEMENT,
upon the legally effective date of this agreement, Trangsrud will receive the
consideration outlined in Section 2(E).  EACH
PARTY ACKNOWLEDGES THAT EMPLOYEE OR DITECH HAS BEEN PROVIDED WITH SUFFICIENT
TIME AND OPPORTUNITY TO CONSIDER THIS AGREEMENT AND TIME TO CONSULT WITH
COUNSEL.  EACH PARTY ACKNOWLEDGES AND
REPRESENTS THAT EMPLOYEE AND DITECH ENTER INTO THIS AGREEMENT FREELY,
KNOWINGLY, VOLUNTARILY AND WITHOUT COERCION AND BASED ON EMPLOYEES OR DITECHS
OWN JUDGMENT AND NOT RELIANCE UPON ANY REPRESENTATION OR PROMISES MADE BY ANY
OTHER PARTY.   DATED:
  January 4, 2010
  /s/
  Lowell TrangsrudLowell
  TrangsrudDATED: January 4,
  2010
  /s/ Todd SimpsonTodd Simpson
  President & CEO
  On Behalf of Ditech
  Networks  16