**Exhibit 10.70**

**Option Agreement**

This OPTION AGREEMENT (this **“*Agreement*”**) is made and entered into as of August8, 2006 (the **“*EffectiveDate*”**), by and between DTS, Inc., a Delaware corporation(together with its Affiliates and permitted assigns, **“*DTS*”**), and Avica TechnologyCorporation, a California corporation (**“*Avica*”**). Capitalized terms used without definition shall have the meanings setforth in Section 8.2 hereof.

**Whereas**, DTS and Avica have entered into anExclusive License Agreement, dated as of the date hereof (the “***Exclusive License Agreement***”);

**Whereas,** DTS may, in its sole discretion, deliver aPurchase Election Notice (as such term is defined below) to cause Avica to (i)sell all or substantially all of its assets to DTS and (ii) assign to or causeto be assumed by DTS any of Avica’s contracts, in accordance with their terms,as DTS shall select in its sole discretion (the “***AssetPurchase***”), upon the terms and subject to the conditions setforth in this Agreement;

**Whereas**, the board of directors of Avica (the “***Avica Board***”) has approved andadopted the consummation of the transactions contemplated hereby, and hasdetermined to submit the performance of transactions contemplated by thisagreement and the Exclusive License Agreement to the holders (the “***Avica Stockholders***”) of the sharesof Avica’s Common Stock, no par value per share (the “***AvicaCommon Stock***”), for their approval by written consent; and

**Whereas**, the Avica Board has carefully consideredthe terms of this Agreement and the Exclusive License Agreement and hasdetermined that the terms and conditions of the transactions contemplatedhereby and thereby, including the Asset Purchase, are fair and in the bestinterests of, and are advisable to, Avica and the Avica Stockholders, and theAvica Board recommends that the Avica Stockholders vote for the approval ofthis Agreement, the Exclusive License Agreement, the Asset Purchase and thetransactions contemplated hereby and thereby.

**Now, Therefore**, in consideration of the foregoing and themutual covenants and agreements herein contained and intending to be legallybound hereby, DTS and Avica hereby agree as follows:

**ARTICLE1**THE ASSET PURCHASE

1.1           The Asset Purchase.  Subject to the other terms and conditions ofthis Agreement and the Asset Purchase Agreement (as defined below), the AssetPurchase may be consummated under the following circumstances:

(a)           Form of AssetPurchase Agreement.  Withinforty-five (45) days after the date of this Agreement, DTS and Avica shall haveprepared and agreed to the form of asset purchase agreement, together with suchrelated agreements as shall be referenced therein (collectively, the “***Asset Purchase Agreement***”), pursuantto which the Asset Purchase shall be consummated in DTS’ sole discretion as setforth in this Agreement.  At such time asDTS and Avica shall have agreed to the final form of the Asset PurchaseAgreement (the “***Form Agreement Date***”), DTSand Avica shall evidence such agreement in writing, Avica shall confirm inwriting its representations and warranties thereunder as of the Form AgreementDate and the Asset Purchase Agreement shall be deemed attached as Exhibit Ahereto.  The Asset Purchase Agreementshall, among other things, contain representations and warranties to be made byAvica, and shall contemplate a schedule of disclosures and exceptions to suchrepresentations and warranties (the “***Avica Disclosure Schedule***”).  The Asset Purchase Agreement shall alsocontain other schedules, including schedules that list all assets of theCompany (the “***Asset Schedules***”).  Avica shall 

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complete and, on the Form Agreement Date, deliver toDTS the Avica Disclosure Schedule, the Asset Schedules and such other schedulesas are contemplated by the Asset Purchase Agreement, each of which shall betrue, accurate and complete as of the Form Agreement Date.

(b)           Disclosure Schedules.  At any time during the Option Period (but notmore than twice in any 12-month period), DTS may, upon notice to Avica (a “***Disclosure Schedule Request***”),require Avica to prepare an updated schedule of disclosures and exceptions tothe representations and warranties of Avica contained in the Asset PurchaseAgreement, together with updated Asset Schedules and updates to such otherschedules as are contemplated by the Asset Purchase Agreement (collectively, an“***Updated Avica Disclosure Schedule***”),as if such representations, warranties and disclosures were made as of the dateof such Updated Avica Disclosure Schedule, except to the extent any suchrepresentations and warranties refer expressly to an earlier date, provided,that in no event shall DTS be entitled to deliver a Disclosure Schedule Requestafter the Option Expiration Date.  Avicashall prepare and deliver to DTS an Updated Avica Disclosure Schedule withinthirty (30) days of receipt of a Disclosure Schedule Request.  An Updated Avica Disclosure Scheduledelivered pursuant to this Section 1.1(b) shall refer only to(i) disclosures of actual facts contained in the Avica Disclosure Scheduleattached to the Asset Purchase Agreement as of the Form Agreement Date, and(ii) disclosures of actual facts in existence on the date of such UpdatedAvica Disclosure Schedule that have occurred or been discovered since the FormAgreement Date, and the Updated Avica Disclosure Schedule shall not otherwiselimit or modify any of the representations and warranties made in the AssetPurchase Agreement.  No disclosure of afact or event on an Updated Avica Disclosure Schedule shall be deemed to cureany failure to disclose such fact or event on the Avica Disclosure Schedule, orotherwise amend the Avica Disclosure Schedule.

(c)           Election by DTS toCause The Asset Purchase.

(i)            At any time during theOption Period, DTS shall have the right to elect, in its sole discretion, tocause Avica to close the Asset Purchase (the “***Option***”)by delivery to Avica of a written notice of such election (a “***Purchase Election Notice***”) in theform of Exhibit B hereto. The Purchase Election Notice shall also set forth the proposed closingdate of the Asset Purchase (which shall, unless otherwise mutually agreed to bythe parties, be no less than ten (10) days nor more than sixty (60) days afterthe date of the Purchase Election Notice). In the event that Avica does not deliver an Updated Avica DisclosureSchedule to DTS within the time period specified in Section 1.1(b), the AvicaDisclosure Schedule originally attached to the Asset Purchase Agreement, shallbe deemed to be the final Avica Disclosure Schedule for all purposes of thisAgreement and the Asset Purchase Agreement and all references to AvicaDisclosure Schedule and the Updated Avica Disclosure Schedule in Article 2hereof shall be deemed to refer to such original Avica DisclosureSchedule.  The Purchase Election Notice, whenduly signed and delivered by DTS in its sole discretion, shall be deemed theirrevocable commitment of DTS and Avica to consummate the Asset Acquisition,subject to the terms and conditions of the Asset Purchase Agreement, on theclosing date specified in the Purchaser Election Notice.

(ii)           Notwithstandinganything to the contrary in this Agreement but subject to Section 1.3, (A) noneof the parties hereto shall have any obligation to consummate the AssetPurchase unless and until DTS delivers a Purchase Election Notice and (B) DTSis under no obligation to deliver any Purchase Election Notice or a DisclosureSchedule Request at any time.

(d)           Consummation of theAsset Purchase.  The obligations ofAvica and DTS to consummate the Asset Purchase shall be subject to thesatisfaction of such conditions as shall be set forth in the Asset PurchaseAgreement.  Subject to the fulfillment orwaiver of all of such conditions, as soon as is reasonably practicable on orafter the closing date specified in the Purchase Election Notice, a closing(the “***Asset Closing***”) will be heldat the offices of Heller Ehrman LLP in San Diego, California (or such otherplace as the parties may agree).  Thedate on which the Asset Closing is actually held is 

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referred to herein as the “***Asset******Closing Date***.”  On the Asset Closing Date, DTS and Avicashall cause the Asset Purchase to be consummated.

(e)           Payment of PurchasePrice.  In the event DTS elects, inits sole discretion, to consummate the Asset Purchase, and subject to thefulfillment or waiver of all of the conditions contained in the Asset PurchaseAgreement, at the Asset Closing, DTS shall deliver to Avica the Asset PurchasePrice, which shall be payable as set forth below. ***

(i)            ***

(A)          ***

(B)           ***

(C)           ***

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(D)          ***

(E)           ***

(ii)           ***

(A)          ***

(B)           ***

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·      ***

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(C)           In no event shall the number of [***] Shares deliveredor deliverable to Avica in payment of the Asset Purchase Price exceed fivepercent (5%) of the aggregate number of shares of common stock of [***]outstanding immediately prior to the Asset Closing (assuming conversion of anythen-outstanding securities that are convertible into shares of capital stockof [***]) (the “***Five Percent Limit***”).  If the number of [***] Shares otherwisedeliverable in full payment of the Asset Purchase Price would otherwise exceedthe Five Percent Limit, then [***] shall pay any remaining unpaid balance ofthe Asset Purchase Price in cash.

(D)          The issuance of [***] Shares in payment of the AssetPurchase Price is subject to the availability of and compliance with a validexemption from the registration or qualification provisions of U.S. federal andany applicable state or other securities laws.

(E)           Any [***] Shares issued in payment of the AssetPurchase Price shall be “restricted securities” under the U.S. federalsecurities laws and shall contain an appropriate legend relating thereto.

1.2           Other ProvisionsRelating to the Issuance of Shares.

(a)           RestrictedSecurities; Legend.  Any *** Shares ***issued in payment of the Asset Purchase Price shall be “restricted securities”under the U.S. federal securities laws (the “***RestrictedSecurities***”).  Anycertificate representing the Restricted Securities shall be imprinted with thefollowing legend (or the substantial equivalent thereof):

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THESECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSEDOF, IN WHOLE OR IN PART, OTHER THAN PURSUANT TO REGISTRATION UNDER SAID ACT ORIN CONFORMITY WITH THE LIMITATIONS OF RULE 144 OR OTHER SIMILAR RULE OREXEMPTION AS THEN IN EFFECT, WITHOUT FIRST OBTAINING (I) IF REASONABLY REQUIREDBY THE COMPANY, A WRITTEN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THECOMPANY, TO THE EFFECT THAT THE CONTEMPLATED SALE, TRANSFER OR OTHERDISPOSITION WILL NOT BE IN VIOLATION OF SAID ACT, OR (II) A ‘NO-ACTION’ ORINTERPRETIVE LETTER FROM THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION TOTHE EFFECT THAT SUCH STAFF WILL TAKE NO ACTION IN RESPECT OF THE CONTEMPLATEDSALE, TRANSFER OR OTHER DISPOSITION.”

In the event that any certificate representing *** Shares *** isimprinted with the foregoing legend (or a similar legend), DTS *** shall causesuch legends to be removed in connection with any resale of such *** Shares ***that is made in compliance with, or pursuant to a valid exemption from, theregistration provisions of the Securities Act.

(b)           Notice of ProposedTransfers.  Avica hereby agrees, andany other holder of any certificate representing Restricted Securities, byacceptance thereof, agrees to comply in all respects with 

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the provisions of this Section 1.2(b).  Prior to any proposed sale, assignment,transfer or pledge of any Restricted Securities, unless there is in effect aregistration statement under the Securities Act covering the proposed transfer,the holder thereof shall give written notice ***, of such holder’s intention toeffect such transfer, sale, assignment or pledge.  Each such notice shall describe the mannerand circumstances of the proposed transfer, sale, assignment or pledge insufficient detail, and shall be accompanied at such holder’s expense by either(i) a written opinion of legal counsel who shall, and whose legal opinion shallbe, reasonably satisfactory to the Company, addressed to the Company, to theeffect that the proposed transfer of the Restricted Securities may be effectedwithout registration under the Securities Act, or (ii) a “*no action*” letter from the SEC to theeffect that the transfer of such securities without registration will notresult in a recommendation by the staff of the SEC that action be taken withrespect thereto, or (iii) any other evidence reasonably satisfactory to counselto the Company, whereupon the holder of such Restricted Securities shall beentitled to transfer such Restricted Securities in accordance with the terms ofthe notice delivered by the holder to the Company.  The Company will not require such a legalopinion or “*no action*”letter in any transaction in compliance with Rule 144.  Each certificate evidencing the RestrictedSecurities transferred as above provided shall bear, except if such transfer ismade pursuant to Rule 144, the appropriate restrictive legend set forth inSection 1.2(a) above, except that such certificate shall not bear suchrestrictive legend if, in the opinion of counsel for such holder and theCompany, such legend is not required in order to establish compliance with anyprovisions of the Securities Act.

(c)           No Fractional Shares.  In the event that all or any portion of theAsset Purchase Price is paid in the form of *** Shares, no certificates orscrip representing fractional shares of *** Shares shall be issued, but anamount in cash equal to the aggregate value of any such fractional shares ***shall instead be paid to Avica.

1.3           Payment uponUnexercised Expiration of the Option Period.

(a)           In the event that DTSshall not have consummated the Asset Purchase on or before the OptionExpiration Date, then DTS shall pay to Avica the Unexercised Option ExpirationAmount on the next business day following the Option Expiration Date.  Such payment shall be made by wire transferin same day funds to Avica’s account at*** as follows:

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or at such other account as Avica may provide to DTS in a writtennotice pursuant to Section 8.1.

(b)           For purposes ofclarity, in no event shall the Unexercised Option Expiration Amount be payableif DTS has consummated the Asset Purchase. DTS shall not, in any event, pay both the Asset Purchase Price and theUnexercised Option Expiration Amount.

1.4           No Obligation orLiability to Avica Stockholders.  TheAsset Purchase Price or the Unexercised Option Expiration Amount, in eithercase as applicable, shall be paid by DTS to Avica and not to the AvicaStockholders, or any of them.  Avicahereby acknowledges and confirms, and each Avica 

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Stockholder, by his, her or its approval of thisAgreement, acknowledges and confirms, that DTS has no obligation to and shallhave no liability with respect to any or all of the Avica Stockholders withrespect to the Asset Purchase Price or the Unexercised Option Expiration Amountafter either such payment has been made to Avica in accordance with thisAgreement.  In addition, Avica herebycovenants, and each Avica Stockholder, by his, her or its approval of this Agreement,covenants not to take or participate in any action or institute or participatein any proceeding against DTS with respect to the Asset Purchase Price or theUnexercised Option Expiration Amount after either such payment has been made toAvica in accordance with this Agreement.

1.5           ***

**ARTICLE 2**REPRESENTATIONS AND WARRANTIES OF AVICA

Avica hereby representsand warrants to DTS as of the Effective Date that, except as set forth on theSchedule of Exceptions to this Agreement delivered to DTS on the EffectiveDate, each of the representations and warranties set forth in this Article 2below are true and correct as of the Effective Date.

In addition, Avica shallrepresent and warrant to DTS as of each of (a) the Form Agreement Date and (b)the Asset Closing Date, that each of the representations and warranties thatshall be set forth in the Asset Purchase Agreement are true and correct as ofsuch dates; provided, that the representations and warranties made as ofthe Form Agreement Date shall be qualified by the Avica Disclosure Schedule,and the representations and warranties as of the Asset Closing Date shall bequalified by the Updated Avica Disclosure Schedule delivered by Avica mostrecently prior to the delivery of the Purchase Election Notice by DTS, and thereferences below to Avica Disclosure Schedule shall be deemed, for purposes ofdetermining the accuracy of such representations and warranties as of the AssetClosing Date, to be references to such Updated Avica Disclosure Schedule.

Information contained incertain sections or subsections of the Schedule of Exceptions, Avica DisclosureSchedule or Updated Avica Disclosure Schedule may be applicable to other of itssections and/or subsections and Avica shall use its commercially reasonableefforts to cross-reference the exceptions to all applicable representations andwarranties.  Any document, agreement,matter, or other information referenced in one section or subsection of theSchedule of Exceptions, Avica Disclosure Schedule or Updated Avica DisclosureSchedule shall be deemed referenced in all other sections or subsectionstherein for all purposes of this Agreement or the Asset Purchase Agreement, asapplicable, if and to the extent it appears from the face of the Schedule ofExceptions, Avica Disclosure Schedule or Updated Avica Disclosure Schedule thatsuch information would reasonably be so appropriate.  The Schedule of Exceptions, Avica DisclosureSchedule or Updated Avica Disclosure Schedule shall set forth all exceptions tothe representations and warranties being made by Avica to DTS pursuant to thisAgreement or the Asset Purchase Agreement, as applicable.

2.1           Organization, GoodStanding and Qualification.  Avica isa corporation duly organized, validly existing and in good standing under thelaws of the State of California and has all requisite corporate power andauthority to carry on its business as now conducted.  Avica is duly qualified or licensed totransact business and is in good standing in each jurisdiction in which thefailure to so qualify would have a Material Adverse Effect.  Avica has all requisite corporate power andauthority to own and operate its properties and assets, to execute and deliverthis Agreement and the Related Agreements, and to perform its obligationsunder, and carry out the provisions of, this Agreement and the RelatedAgreements, and to carry on its business as presently conducted.

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2.2           Capitalization andVoting Rights.

(a)           The authorized capitalof Avica consists of (except as otherwise disclosed in the Avica DisclosureSchedule) 40,000,000 shares of common stock, no par value per share (the “***Avica Common Stock***”).

(b)           The number of shares ofAvica Common Stock issued and outstanding is set forth in Section 2.2(b) ofAvica Disclosure Schedule.  Section2.2(b) of the Avica Disclosure Schedule sets forth the name and address of eachSecurityholder and the Securities owned by each Securityholder, including inthe case of instruments, options, warrants, convertible debt or otherinstruments and other rights to acquire capital stock of Avica, the number ofshares of Avica’s capital stock each option, warrant, instrument or other rightis vested or exercisable for as of the Effective Date, the Form Agreement Dateor the Asset Closing Date, as applicable.

(c)           Except as set forth inSection 2.2(c) of Avica Disclosure Schedule or as expressly contemplated bythis Agreement and the Related Agreements, there are not outstanding anyoptions, warrants, instruments, rights (including conversion or preemptiverights and rights of first refusal), proxy or stockholder agreements, or otheragreements or instruments of any kind, including convertible debt instruments,for the purchase or acquisition from Avica of any of its Securities.  Avica is not a party or subject to anyagreement or understanding and, to Avica’s knowledge, there is no agreement orunderstanding between any other persons, that affects or relates to the votingor giving of written consents with respect to any security or by a director ofAvica.

(d)           All of the issued andoutstanding shares of Avica Common Stock (i) have been duly authorized andvalidly issued and are fully paid and nonassessable, and (ii) were issued incompliance with all applicable state and federal laws concerning the issuanceof securities.

2.3           Authorization; Binding Obligations;Governmental Consents.

(a)           All corporate action on the part of Avica,its officers, directors and stockholders necessary for the authorization,execution and delivery of this Agreement and the Related Agreements, and theperformance of all obligations of Avica hereunder and thereunder, have beentaken prior to the Effective Date.  ThisAgreement and the Related Agreements will be valid and legally bindingobligations of Avica, enforceable against Avica in accordance with theirrespective terms, except as such enforcement may be limited by (a) theeffect of bankruptcy, insolvency, reorganization, receivership,conservatorship, arrangement, moratorium or other laws affecting or relating tothe rights of creditors generally, or (b) the rules governing theavailability of specific performance, injunctive relief or other equitableremedies and general principles of equity, regardless of whether considered ina proceeding in law or equity.  Theoption with respect to the Asset Purchase granted to DTS pursuant to thisAgreement is not and the Asset Purchase will not be subject to any preemptiverights or rights of first refusal relating thereto.

(b)           No consent, approval,permit, order or authorization of, or registration, qualification, designation,declaration or filing with, any federal, state or local governmental authorityor any other person on the part of Avica is required in connection with theexecution and delivery of this Agreement or the Related Agreements and theconsummation of the transactions contemplated hereby or thereby, except as explicitlyset forth in this Agreement and the Related Agreements.

2.4           Litigation.  There is no action, suit, proceeding orinvestigation pending or, to the knowledge of Avica, currently threatenedagainst Avica and its Subsidiaries or any of its officers or directors.  The foregoing includes, without limitation,actions, suits, proceedings or investigations pending or, to the knowledge ofAvica, threatened involving the prior employment of any of Avica’s employees,their use in connection with Avica’s business of any information or techniquesallegedly proprietary to any of their former employers, or their obligationsunder any agreements with prior employers. Avica and its Subsidiaries are not a party or subject to the provisionsof any order, writ, injunction, judgment or decree of any court or governmentagency or instrumentality.  There is noaction, 

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suit, proceeding or investigation by Avica or any ofits Subsidiaries currently pending or that Avica or any of its Subsidiariesintends to initiate.

2.5           No Conflicts withOther Instruments.  The execution,delivery and performance of this Agreement and the Related Agreements will notresult in violation or default of any provision of Avica’s or any of itSubsidiaries’ Articles of Incorporation or bylaws, or of any material mortgage,indenture, contract, agreement, instrument, judgment, order, writ or decree bywhich it is bound or, to Avica’s knowledge, of any provision of any federal orstate statute, rule or regulation applicable to Avica or any of itsSubsidiaries, or be in conflict with or constitute, with or without the passageof time or giving of notice, a default under any such provision, instrument,judgment, order, writ or decree, or result in the creation of any materialmortgage, pledge, lien, charge or encumbrance upon any of the properties orassets of Avica or any of its Subsidiaries or the suspension, revocation,impairment, forfeiture, or nonrenewal of any material permit, license,authorization or approval applicable to the business, operations or any of theassets or properties of Avica or any of its Subsidiaries.

2.6           Disclosure.  Avica has provided DTS or counsel to DTS withall material information that DTS has requested in connection with its duediligence investigation relating to this Agreement and the RelatedAgreements.  Except as set forth in this Agreement, to the knowledge of Avica, thereis no material fact relating to Avica that Avica or any of its Subsidiaries, asthe case may be, has not disclosed to DTS or counsel to DTS and of which any of its officers, directors orexecutive employees is aware that could reasonably be expected to resultin a Material Adverse Effect on Avica.

2.7           Brokers; Expenses.  No finder, broker, agent or other similarintermediary has acted for or on behalf of Avica in connection with thenegotiation of this Agreement or the Related Agreements or the consummation ofthe transactions contemplated hereby or thereby and no finder, broker, agent orsimilar intermediary shall be owed any amount as a result of or in connectionwith this Agreement, the Related Agreements or upon any consummation of theAsset Purchase.

**ARTICLE 3**REPRESENTATIONS AND WARRANTIES OF DTS

DTS hereby represents and warrants to Avica as of the Effective Date,as follows, subject in each case to such exceptions as are specificallycontemplated by this Agreement.

3.1           Organization, GoodStanding and Qualification. DTS is a corporation duly organized, validlyexisting and in good standing under the laws of the State of Delaware.  DTS has all requisite corporate power andauthority to own and operate its properties and assets, to execute and deliverthis Agreement and the Related Agreements to which it is a party, to carry outthe provisions of this Agreement and those of the Related Agreements to whichit is party, and to perform its obligations under, and carry out the provisionsof, this Agreement and such Related Agreements, and to carry on its business aspresently conducted and as presently proposed to be conducted.  DTS is duly qualified to transact businessand is in good standing in each jurisdiction where such qualification isrequired and in which failure to so qualify would have a Material AdverseEffect on DTS.

3.2           Authorization;Binding Obligations; Governmental Consents. All corporate actions on the part of DTS, and its officers, directorsand stockholders necessary for the authorization, execution and delivery ofthis Agreement and those of the Related Agreements to which it is a party andthe performance of all obligations of DTS hereunder and thereunder have beentaken; provided, that as of the Effective Date, the board of directorsof DTS has not authorized any consummation of the Asset Purchase or delivery ofa Purchase Election Notice.  ThisAgreement and the those of the Related Agreements to which DTS is a party arethe valid and legally binding obligations of DTS, enforceable against DTS inaccordance with their respective terms, except as such enforcement may belimited by (a) the effect of bankruptcy, insolvency, reorganization,receivership, conservatorship, arrangement, moratorium or other laws affectingor relating to the rights of creditors generally, or (b) the rulesgoverning the availability of 

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specific performance, injunctive relief or otherequitable remedies and general principles of equity, regardless of whetherconsidered in a proceeding in law or equity.

3.3           Compliance withOther Instruments.  The execution,delivery and performance of this Agreement and the Related Agreements to whichit is party, and the performance by DTS of each such agreement in accordancewith their respective terms will not (a) violate the Certificate ofIncorporation or bylaws of DTS, (b) breach or result in a violation of any law,rule or regulation applicable to DTS, or (c) constitute a material breach ofthe terms, conditions, provisions of, or constitute a default under, anyjudgment, order, writ or decree of any court or arbitrator to which DTS is aparty or any material mortgage, indenture, agreement, contract or instrument towhich DTS is a party or by which it is bound, to the extent that such breach ordefault could reasonably be expected to prevent DTS from consummating thetransactions contemplated hereby or (d) result in the suspension, revocation,impairment, forfeiture or nonrenewal of any permit, license, authorization, orapproval applicable to the business, operations or any of the assets orproperties of DTS, to the extent that such breach or default could reasonablybe expected to prevent DTS from consummating the transactions contemplatedhereby.

3.4           Available Resources.  At the times required, if any, pursuant tothis Agreement and the Related Agreements, DTS shall have sufficient funds,debt borrowing capacity or shares of authorized and unissued capital stock tosatisfy its obligations hereunder and thereunder.

3.5           Brokers; Expenses.  No finder, broker, agent or other similarintermediary has acted for or on behalf of DTS in connection with thenegotiation of this Agreement or the Related Agreements or the consummation ofthe transactions contemplated hereby or thereby and no finder, broker, agent orsimilar intermediary shall be owed any amount as a result of or in connectionwith this Agreement, the Related Agreements or upon any consummation of theAsset Purchase.

**ARTICLE 4**CONDUCT OF BUSINESS PENDING THE ASSET PURCHASEAND RELATED COVENANTS

4.1           Conduct of Businessof Avica.  Avica covenants and agreesthat, during the Option Period, unless DTSshall otherwise agree in writing, Avica shall use commercially reasonableefforts to preserve the current relationships of Avica with customers,suppliers and other persons with which Avica has significant businessrelations.  Avica shall use itscommercially reasonable efforts to satisfy and extinguish, promptly followingthe License Closing and to the extent funds are reasonably available for suchpurpose, all of its liabilities as of the License Closing.  Avica further covenants and agrees that,during the Option Period, Avica shall use its commercially reasonable effortsto (i) avoid incurring additional liabilities during the Option Period beyondAvica’s ability to satisfy such obligations as they come due and (ii) tosatisfy and extinguish all liabilities incurred during the Option Period asthey come due.

4.2           Negative Covenants.  Duringthe Option Period, Avica shall not, without the prior written consent of DTS:

(a)           declare or pay anydividends on, or make any other distributions (whether in cash, stock orproperty) in respect of, any of its capital stock;

(b)           pay any bonus, increased salary or special remuneration to any officer,director, employee or consultant of Avica in such capacity, or enter into anynew employment or consulting agreement with any such person;

(c)           grant any Encumbrances on any of the Licensed IP;

(d)           guarantee or act as a surety for any obligation of any third party;

(e)           initiate any voluntary bankruptcy or insolvency proceeding;

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(f)            repurchase orotherwise acquire, directly or indirectly, any shares of its capital stock;

(g)           incur any Indebtednessfor borrowed money or guarantee any such Indebtedness or issue or sell any debtsecurities or guarantee any debt securities of others;

(h)           enter into any materialcontract or commitment, or violate, amend or otherwise modify or waive any ofthe terms of any agreements, understandings, instruments or contracts which arematerial to the business of Avica as currently conducted and as proposed to beconducted.  For purposes of this Section4.2(g), the parties hereto acknowledge that any such actions with respect toany contract or commitment, or series of related contracts or commitments,having a value in excess of $10,000 shall be deemed to be material and outsidethe ordinary course of business.  Anycontact or commitment of any size entered into, or extended, by Avica duringthe Option Period shall explicitly provide that the consummation of the AssetPurchase shall not result in a breach or violation of such contract orotherwise require the payment of any fees or expenses in connection therewith,or give the other party the right to accelerate any obligations of Avicathereunder or to cause the termination of such contract;

(i)            except for the sale ofAvica’s inventory, sell, lease, license or otherwise dispose of or encumber anyof its properties or assets which are material, individually or in theaggregate, taken as a whole;

(j)            cause or permit anyamendments to its Restated Articles or bylaws;

(k)           terminate or waive anyright that has material value to Avica;

(l)            commence any lawsuitor other legal proceeding, except as may be required or permitted pursuant toAvica’s indemnification obligations to DTS under the Exclusive LicenseAgreement;

(m)          acquire oragree to acquire by merging or consolidating with, or by purchasing asubstantial portion of the assets of, or by any other manner, any business orany corporation, partnership, association or other business organization ordivision thereof which are material, individually or in the aggregate, to Avica’sbusiness, taken as a whole;

(n)           merge or consolidatewith any entity or initiate or consummate any voluntary liquidation ordissolution, or effect a recapitalization or reorganization in any form oftransaction;

(o)           hire or retain, orcontinue to retain or employ, any employee or consultant having access toconfidential or proprietary information of Avica unless such employee orconsultant enters into, or has entered into, a proprietary information andinventions agreement, a confidentiality agreement, or a mutual confidentialityagreement with Avica in a form reasonably agreed to by DTS, or amend orotherwise modify, or grant a waiver under, any such confidentiality orproprietary information agreement with any such person;

(p)           enter into anytransaction outside the ordinary course of business with any director, officer,employee, significant stockholder or family member of or consultant to any suchperson, corporation or other entity of which any such person beneficially owns10% or more of the equity interests or has 10% or more of the voting power, orSubsidiary or Affiliate of Avica, except as approved by a majority of thedisinterested directors of the Avica Board on terms and conditions which arefair and reasonable to Avica and no less favorable to Avica as could beobtained from a third party on an arms-length basis;

(q)           knowingly engage in anyother activity which could reasonably be expected to materially impair theability of DTS or Avica to consummate the Asset Purchase; or

(r)            permit any Subsidiaryof Avica to take any action from which Avica would be prohibited pursuant tothis Section.

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4.3           Notice to DTS of Certain Proceedings.  Inaddition, during the Option Period, Avica shall deliver prompt notice to DTS of(a) the initiation or institution (or any threat thereof) of any bankruptcy orinsolvency proceeding; and (b) any litigation or other legal or administrativeproceeding (or threat thereof), in either case known to Avica.

4.4           Payment of Taxes,Etc.  Avica shall, and shall causeeach of its Subsidiaries to, use its commercially reasonable efforts, promptlyfollowing the License Closing, to file all of its Tax Returns that are overdueor delinquent as of the License Closing (taking all timely filed properextension requests into account).  Avicashall, and shall cause each of its Subsidiaries to, use its commerciallyreasonable efforts, promptly following the License Closing and to the extentfunds are reasonably available for such purpose, timely pay and discharge allTaxes (other than Taxes contested in good faith by Avica or its Subsidiaries inappropriate proceedings), assessments and other governmental charges or leviesimposed upon it or its income or any of its property as well as all claims ofany kind (including claims for labor, materials and supplies), in each case,that are due and payable as of the License Closing.  In addition, Avica shall, and shall causeeach of its Subsidiaries to, timely file all of its Tax Returns as they becomedue after the License Closing (taking all timely filed proper extensionrequests into account).  Avica shall, andshall cause each of its Subsidiaries to, timely pay and discharge (to theextent funds are reasonably available for such purpose) as they become due andpayable following the License Closing all Taxes (other than Taxes contested ingood faith by Avica or its Subsidiaries in appropriate proceedings),assessments and other governmental charges or levies imposed upon it or itsincome or any of its property as well as all claims of any kind (includingclaims for labor, materials and supplies) that, if unpaid, may by law become alien or charge upon its properties.  AllTax Returns referenced above, shall be true, correct and complete.

4.5           Board ObservationRights.  During the Option Period,Avica shall permit one (1) representative of DTS, who shall initially be ***, toattend all formal meetings of the Avica Board at which minutes are kept in anonvoting observer capacity and, in this respect, shall give suchrepresentatives copies of all notices, minutes, consents and other materialsthat Avica provides to its directors in such capacity; provided, however,that Avica shall be entitled to exclude such representatives from access to anymaterial or meeting or portion thereof to the extent that Avica reasonablybelieves (a) that such exclusion is necessary to maintain the attorney-clientprivilege with respect to any material fact or advice or (b) that such materialor meeting or portion thereof presents a clear conflict between Avica and DTSrelating to the relationship represented by this Agreement and the RelatedAgreements, or otherwise.  Allinformation obtained by DTS or such representatives pursuant to this Section4.5 shall be kept confidential in accordance with Article 7 of this Agreement,to the extent it constitutes Confidential Information.

**ARTICLE 5**ADDITIONAL AGREEMENTS

5.1           Notices; Consents;Filings.  From and after the deliveryof a Purchase Election Notice, Avica shall use its commercially reasonableefforts, at Avica’s expense, to obtain all necessary third party consentsrequired in connection with the Asset Purchase. In the event that Avica shall fail to obtain any third party consentnecessary for the consummation of the Asset Purchase, Avica shall usecommercially reasonable efforts, and take any such actions reasonably requestedby DTS, to minimize any adverse effect upon DTS and its Subsidiaries, and itsbusiness resulting, or which could reasonably be expected to result after theAsset Closing, from the failure to obtain such consent.

5.2           StockholdersMeeting; Written Consent. Subject to the fiduciary duties of the AvicaBoard under applicable law, in addition to the solicitation of stockholderapproval required under Section 5.4, if requested by DTS in writing (a “***Meeting Request***”) at any time duringthe Option Period, Avica shall, at its option, (a) cause a meeting of theAvica Stockholders (a “***Stockholders Meeting***”),to be called for purposes of approving, reapproving or ratifying the AssetPurchase and this Agreement, or 

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(b) circulate a solicitation for written consentin lieu of such Stockholders Meeting for the same purposes (a “***Written Consent***”).  In the event that DTS delivers a MeetingRequest pursuant to this Section 5.2, Avica shall cause a StockholdersMeeting to be held, or a solicitation for Written Consent to be delivered toeach of its stockholders, on such date as may be reasonably requested by DTSand set forth in the Meeting Request and is consistent with Avica’s bylaws andapplicable law, and shall distribute on a timely basis to all stockholders ofAvica any soliciting materials relating to such meeting or solicitation forWritten Consent (including any information prepared by DTS and, to the extentsuch information statement or proxy statement relates to Avica or the AssetPurchase, reasonably approved by Avica). Subject to the fiduciary duties of the Avica Board under applicable law,any such information statement, proxy statement or prospectus shall be distributedtogether with a copy of the recommendation of the Avica Board that the AvicaStockholders vote “FOR” the approval and adoption of the Asset Purchase andthis Agreement.

5.3           Further Assurances.

(a)           Following the deliveryof a Purchase Election Notice, each of DTS and Avica will:

(i)            use its commerciallyreasonable efforts to take, or cause to be taken, all appropriate action, andto do, or cause to be done, all things necessary, proper or advisable underapplicable laws and regulations to consummate the Asset Purchase and thetransactions contemplated hereby, including using its commercially reasonableefforts to obtain all permits, consents, approvals, authorizations,qualifications and orders of governmental authorities (if any) as are necessaryfor the consummation of the Asset Purchase and the other transactionscontemplated hereby and to fulfill the conditions set forth in the AssetPurchase Agreement.  In case, at any timeafter the Asset Closing, any further action is necessary or desirable to carryout the purposes of this Agreement, the proper officers and directors of eachparty to this Agreement shall use their commercially reasonable efforts to takeall such action; and

(ii)           cooperate and use itscommercially reasonable efforts to vigorously contest and resist any action,including administrative or judicial action, and to have vacated, lifted,reversed or overturned any decree, judgment, injunction or other order (whethertemporary, preliminary or permanent) that is in effect and that restricts,prevents or prohibits consummation of the Asset Purchase and the othertransactions contemplated hereby, including by vigorously pursuing allavailable avenues of administrative and judicial appeal.

(b)           From the Effective Dateuntil the Asset Closing, Avica will take all further action that is necessaryor desirable to carry out the purposes of this Agreement, and the properofficers and directors of Avica shall use their commercially reasonable effortsto take all such action and shall refrain from taking any actions which wouldbe contrary to, inconsistent with or against, or would frustrate the essentialpurposes of, the transactions contemplated by this Agreement, if DTS were todeliver a Purchase Election Notice.

5.4           Stockholder Approval.  Following the execution of this Agreement,Avica will promptly solicit and obtain the approval by written consent of theexecution and delivery by Avica of this Agreement, the Exclusive LicenseAgreement, the Escrow Agreement and the Asset Purchase Agreement and theconsummation of the transactions contemplated hereby and thereby, by AvicaStockholders holding at least 90% of the outstanding shares of Avica CommonStock (the “***Stockholder Ratification***”).  Such solicitation shall be in form andsubstance reasonably approved by DTS, and distributed to the Avica Stockholdersno later than 3 business days after the Form Agreement Date.  Avica shall take all other action necessaryor advisable to secure the Stockholder Ratification, by vote or writtenconsent, consistent with California Law.

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5.5           Voting Agreement.  Avica shall use reasonable efforts to causeAvica Shareholders holding at least two-thirds (2/3) of all outstanding sharesof Avica’s common stock to enter into and deliver the Voting Agreement to DTSon or prior to the date hereof.

5.6           Notice ofDevelopments.  Avica shall usereasonable efforts to give prompt written notice to DTS of any materialdevelopment causing a breach of any of its representations and warranties inthis Agreement or the Exclusive License Agreement.

5.7           Exclusivity.

(a)           From and after the dateof this Agreement until the Asset Closing or termination of this Agreementpursuant to Article 8, Avica will not, nor will it authorize or permit any ofits officers, directors, Affiliates or employees or any investment banker,attorney or other advisor or representative retained by it to, directly orindirectly, (i) solicit, initiate or induce the making, submission orannouncement of any Alternative Proposal, (ii) participate in any discussions ornegotiations regarding, or furnish to any person any non-public informationwith respect to, or take any other action to facilitate any inquiries or themaking of any proposal that constitutes or may reasonably be expected to leadto, any Alternative Proposal, (iii) engage in discussions with any person withrespect to any Alternative Proposal, except as to disclose the existence ofthese provisions, (iv) endorse or recommend any Alternative Proposal (except ifrequired pursuant to the exercise of such person’s fiduciary duty), or (v)enter into any letter of intent or similar document or any contract, agreementor commitment contemplating or otherwise relating to any AlternativeProposal.  Avica and its Subsidiarieswill, and will cause their respective officers, directors, Affiliates,employees, investment bankers, attorneys and other advisors and representativesto, immediately cease any and all existing activities, discussions ornegotiations with any parties conducted heretofore with respect to any AlternativeProposal.  Without limiting theforegoing, it is understood that any violation of the restrictions set forth inthe preceding two sentences by any officer, director or employee of Avica orany of its Subsidiaries or any investment banker, attorney or other advisor orrepresentative of Avica or any of its Subsidiaries shall be deemed to be abreach of this Section 5.7 by Avica.

(b)           In addition to theobligations of Avica set forth in Section 5.7(a), Avica as promptly aspracticable shall advise DTS in writing of any Alternative Proposal or of anyrequest for nonpublic information or other inquiry which Avica reasonablybelieves could lead to an Alternative Proposal, the material terms andconditions of such Alternative Proposal (to the extent known), and the identityof the person or group making any such request, inquiry or AlternativeProposal.  Avica agrees to keep DTSinformed on a current basis of the status and details (including any materialamendments or proposed amendments) of any such request, inquiry or AlternativeProposal.

5.8           Access to Propertiesand Information.  At all times untilthe expiration of the Option Period, Avica will afford to DTS and itsauthorized representatives, upon reasonable notice, reasonable access duringnormal business hours to all properties, books, records, contracts anddocuments of Avica as DTS and such authorized representatives may reasonablyrequest and a complete opportunity to make such investigations as DTS and suchauthorized representatives reasonably request, and Avica will furnish or causeto be furnished to DTS and its authorized representatives all such informationwith respect to the affairs and businesses of Avica as they may reasonablyrequest.  All information obtained by DTSpursuant to this Section 5.8 shall be kept confidential in accordance withArticle 7 of this Agreement, to the extent it constitutes ConfidentialInformation.  No investigation pursuantto this Section 5.8 shall affect any representation or warranty in thisAgreement, the Asset Purchase Agreement or the Related Agreements of any partyhereto or thereto or any condition to the obligations of the parties hereto orthereto.

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5.9           Public Announcements.

(a)           On or after theEffective Date, DTS and Avica shall issue a joint press release, reasonablyacceptable to both parties, regarding the transactions contemplated by theExclusive License Agreement and this Agreement.

(b)           Following the EffectiveDate, DTS shall be permitted to make such public disclosure regarding thecontent of this Agreement and the Related Agreements if it is advised in goodfaith by outside legal counsel that such disclosure may reasonably be requiredunder or by any applicable law, regulatory or securities exchange listingagreement.  Nothing herein express orimplied shall require DTS to consult with Avica following the Asset Closing.

(c)           Except as providedunder Section 5.9(a), Avica shall not, nor shall any Avica Stockholder oremployee, officer, director, consultant or advisor of Avica, without the priorwritten consent of DTS, issue any press release or otherwise make any publicstatements with respect to this Agreement, the Related Agreements or thetransactions contemplated hereby or thereby at any time, other than as may berequired by law or legal process, and then only in compliance with the noticeprovisions of Article 7.

(d)           Notwithstandinganything herein to the contrary, DTS may in its reasonable discretion issuepress releases and make public announcements relating to its products andservices, including any Avica products or services sold and/or licensed by DTS,or any other disclosure that is consistent with prior press releases or publicannouncements that are permitted under this Section 5.9.

(e)           ***

**ARTICLE 6**TERMINATION

ThisAgreement may be terminated and the Asset Purchase may be abandoned at any timeprior to the Asset Closing, notwithstanding any requisite approval and adoptionof this Agreement and the transactions contemplated hereby by the AvicaStockholders:

(a)           by the mutual writtenconsent of the parties;

(b)           by DTS at any time inits sole discretion upon written notice to Avica, which will be deemed toinclude any written notice to Avica delivered by DTS that DTS will not exercisethe Option (the “***Termination Notice***”);provided, that in the event DTS exercises its rights under this Article 6, thenDTS shall pay to Avica the Unexercised Option Expiration Amount on the nextbusiness day following effectiveness of the Termination Notice.  Upon the effectiveness of any termination ofthis Agreement as a result of delivery by DTS of a Termination Notice, theExclusive License Agreement shall also be terminated.  The obligation of DTS to pay Avica theUnexercised Option Expiration Amount shall survive the termination of thisAgreement.

**ARTICLE 7**CONFIDENTIALITY

A party receiving or having access toDisclosing Party’s Confidential Information (each, a “***Recipient***”)will not use Disclosing Party’s Confidential Information except as permittedherein, and will 

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not disclose, except as expressly permitted herein, suchConfidential Information to any third party except to Recipient’s employees andconsultants as is reasonably required in connection with the exercise ofRecipient’s rights and obligations under this Agreement (“***AuthorizedRepresentatives***”).  EachRecipient will ensure that each of its Authorized Representatives, beforeobtaining access to the Disclosing Party’s Confidential Information, is boundby a written confidentiality agreement, with provisions to protect suchConfidential Information at least as restrictive as those containedherein.  Each Recipient shall beresponsible for any breach of this Section 8 by its Authorized Representatives.  Each Recipient agrees that it shall take allreasonable measures to protect the secrecy of and avoid disclosure or use ofConfidential Information of the Disclosing Party in order to prevent it fromfalling into the public domain or the possession of persons other than thosepersons authorized under this Agreement to have any such information.  Such measures shall include the highestdegree of care that Recipient utilizes to protect its own ConfidentialInformation of a similar nature, which shall be no less than reasonable care.  However, each Recipient may discloseConfidential Information of Disclosing Party: (i) pursuant to the order or requirement of a court, administrativeagency or other governmental body, provided that Disclosing Party givesreasonable notice to the other party to contest such order or requirement; and(ii) on a confidential basis to legal or financial advisors, who shall bedeemed to be Authorized Representatives hereunder.  Whether or not a protective order or othersuch remedy is obtained, or whether the Disclosing Party waives compliance withthe provisions hereof, Recipient agrees to (a) furnish only that portion of theConfidential Information that Recipient is legally required to furnish ordisclose and (b) exercise Recipient’s reasonable efforts to obtain assurancethat confidential treatment was accorded such Confidential Information.  Upon expiration or termination of thisAgreement for any reason, Recipient shall, as reasonably instructed by theDisclosing Party, promptly destroy or return to the Disclosing Party alldocuments and other tangible materials representing the Disclosing Party’sConfidential Information and all copies thereof, and purge all electroniccopies or other representations thereof that are under Recipient’s direct orindirect control.  Notwithstanding theforegoing, Avica or its legal counsel and DTS’ legal counsel, respectively,shall be permitted to retain one (1) copy of all such Confidential Informationin its records for archival purposes, provided such Confidential Informationremains subject to the terms and conditions set forth in this Article 7.

**ARTICLE 8**GENERAL PROVISIONS

8.1           Notices.  Allnotices, claims and demands hereunder, and all other communications which arerequired to be given in writing pursuant to this Agreement, shall be in writingand shall be given (and shall be deemed to have been duly given upon receipt)by delivery in person or by express mail courier or by facsimile withconfirmation copy sent by first class mail (received at the facsimile machineto which it is transmitted prior to 5 p.m., local time, on a business dayfor the party to which it is sent, or if received after 5 p.m., local time, asof the next business day) or by registered or certified mail (postage prepaid,return receipt requested) to the respective parties at the following addresses(or at such other address for a party as shall be specified in a notice givenin accordance with this Section 8.1):

if to DTS:

DTS, Inc.

5171 Clareton Drive

Agoura Hills,California  91301

Attention:  GeneralCounsel

Telephone:  (818) 706-3525

Facsimile:  (818)827-2470

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with a copy to:

Heller Ehrman LLP

4350 La Jolla VillageDrive

San Diego, CA 92122

Attention:  Kirt Shuldberg, Esq.

Telephone:  (858) 450-8400

Facsimile:  (858) 450-8499

 

if to Avica:

Avica TechnologyCorporation

1202 Olympic Blvd.

Santa Monica, CA  90404

Attention:  President

Telephone: (310) 985-9840

 

with a copy to:

MitchellSilberberg & Knupp LLP

11377West Olympic Blvd.,

LosAngeles, CA 90064

Attention:Jan Powers, Esq.

Telephone:  (310) 312-3257

Facsimile:  (310) 231-8357

 

8.2           Certain Definitions.  For purposes of this Agreement, the term:

“***Affiliate***” means, with respect toany person, any person that, directly or indirectly, through one or moreintermediaries, controls, is controlled by, or is under common control with,such person.  Until the consummation ofthe Asset Purchase, Avica shall not be deemed for any purposes of thisAgreement to be an Affiliate of DTS.

“***Alternative Proposal***” means any bonafide offer or proposal (other than an offer or proposal by DTS) relating to anyProhibited Transaction.

“***Asset Purchase Price***” means$1,500,000 minus (i) the aggregate amount of all liabilities of Avicaoutstanding as of the Asset Closing Date that are expressly assumed by DTS(excluding future ongoing obligations under executory contracts); (ii) theaggregate amount of the sum of (a) the accounts receivable balance and (b) 30%of the inventory balance, in each case, on Avica’s balance sheet dated as ofthe date of the License Closing; and (iii) all DTS Direct Liability Paymentswhich have not been reimbursed to DTS out of the Liability Escrow.

“***business day***” (whether such term iscapitalized or not) means any day other than Saturday, Sunday or a legalholiday that banks located in Los Angeles, California are closed for business.

“***California Law***” means the CaliforniaCorporations Code of the State of California, as amended.

“***Confidentiality Information***” meanswith respect to a party hereto (the “***Disclosing Party***”),collectively:  (i) all technical,financial and/or business information of any kind whatsoever, including alldata, compilations, blueprints, plans, audio and/or video recordings and/ordevices, information on computer disks, software, source code, object code,tapes, printouts and other printed, typewritten or handwritten documents,specifications, systems, schemas, methods (including delivery, storage,receipt, transmission, presentation and manufacture of audio, video,informational or other data or content), strategies, business or marketingdevelopment plans, customer lists, research projections, processes,

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techniques, designs,sequences, components, programs, technology, ideas, know-how, improvements,inventions (whether or not patentable or copyrightable), information aboutoperations and maintenance, trade secrets, formulae, models, patentdisclosures, information regarding the skills and compensation of theDisclosing Party’s employees, information concerning the actual or anticipatedbusiness, research or development of the Disclosing Party or its actual orpotential customers or partners, information which is or has been generated orreceived in confidence by or for the Disclosing Party by or from any person;(ii) any and all tangible and intangible embodiments thereof of any kindwhatsoever including all compositions, machinery, apparatus, records, reports,drawings, copyright applications, patent applications, documents, samples,prototypes, models, products and the like; and (iii) any extensions orderivatives thereof of any kind whatsoever. Confidential Information does not include information that the Recipientproves:  (a) is or becomes generallyknown to the public through no fault or breach of this Agreement by theRecipient; (b) is known to the Recipient at the time of disclosure without anobligation of confidentiality; (c) is entirely independently developed by theRecipient without any access or reference to or use of the Disclosing Party’sConfidential Information; (d) the Recipient rightfully obtains from a thirdparty without restriction on use or disclosure; or (e) is disclosed with theprior written approval of the Disclosing Party. Information shall not be deemed to be in the public domain as a resultof the individual elements being separately found in the public domain.

“***DTS Direct Liability Payments***” meansany amount DTS pays to any third party to satisfy any liability of or claimagainst Avica pursuant to the terms and conditions of the Escrow Agreement.

“***Encumbrance***” shall have the meaning set forth in the Exclusive License Agreement.

“***Escrow Agreement***” shall have themeaning set forth in the Exclusive License Agreement.

“***Exchange***” means the applicableprincipal public market, exchange or trading system on which *** Shares *** aretraded.

“***Exchange Act***” means the SecuritiesExchange Act of 1934, as amended, and the rules and regulations promulgatedthereunder.

“***GAAP***” means United States generallyaccepted accounting principles consistently applied.

“***Governmental Authority***” (whethersuch term is capitalized or not) means any United States (federal, state orlocal) or foreign government, or governmental, regulatory or administrativeauthority, agency or commission.

“***Indebtedness***” means, as applied to any person, (a) allindebtedness for borrowed money, whether current or funded, or secured orunsecured, (b) all indebtedness for the deferred purchase price of property orservices represented by a note or other security, (c) all indebtedness createdor arising under any conditional sale or other title retention agreement withrespect to property acquired (even though the rights and remedies of the selleror lender under such agreement in the event of default are limited torepossession or sale of such property), (d) all indebtedness secured by apurchase money mortgage or other lien to secure all or part of the purchaseprice of property subject to such mortgage or lien, (e) all obligations underleases which shall have been or must be, in accordance with GAAP, recorded ascapital leases in respect of which such person is liable as lessee, (f) anyliability in respect of banker’s acceptances or letters of credit, and (g) allindebtedness referred to in clauses (a), (b), (c), (d), (e) or (f) above whichis directly or indirectly guaranteed by or which such person has agreed(contingently or otherwise) to purchase or otherwise acquire or in respect ofwhich it has otherwise assured a creditor against loss.

“***Liability Escrow***” shall have themeaning set forth in the Exclusive License Agreement.

“***License Closing***” means theclosing under the Exclusive License Agreement.

“***License Term***” shall have the meaning set forth in the ExclusiveLicense Agreement.

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“***Licensed IP***” shall have the meaningset forth in the Exclusive License Agreement.

“***Material Adverse Effect***” means withrespect to Avica or DTS, as the case may be, any change or effect that, whentaken individually or together with all other adverse changes or effects, is oris reasonably likely to be materially adverse to the business, results ofoperations and financial condition of Avica or DTS, as the case may be, andtheir respective Subsidiaries, taken as a whole.

“***Option Expiration Date***” means thelast day of the Option Period.

“***Option Period***” means the periodbeginning upon the License Closing and ending on expiration or earliertermination of the License Term.

“***person***” means an individual,corporation, partnership, limited partnership, limited liability company,syndicate, person (including a “person” as defined in Section 13(d)(3) of theExchange Act), trust, association or entity or government, politicalsubdivision, agency or instrumentality of a government.

“***Prohibited Transaction***” means (a)any transaction or series of related transactions other than the transactionscontemplated by this Agreement involving the purchase of all or any significantportion of the capital stock or assets of Avica, (b) any agreement to enterinto a business combination with Avica, (c) any agreement made, other than inthe ordinary course of business, with regard to the Intellectual Property ownedor licensed by Avica, and (d) any other extraordinary business transactioninvolving the license of all or substantially all of the Intellectual Propertyowned or licensed by Avica.

“***Related Agreements***” means theExclusive License Agreement, the Voting Agreement and all other agreementsentered into in connection therewith.

“***SEC***” means the United StatesSecurities and Exchange Commission.

“***Securities***” means all shares ofAvica Common Stock, all outstanding options, warrants, convertible notes,rights of conversion and other rights to acquire capital stock of Avica, andall shares issuable upon exercise or conversion of all options, warrants,convertible notes, rights of conversion and other rights to acquire stock ofAvica, outstanding from time to time, whether or not then currently vested,exercisable or convertible.

“***Securities Act***” means the SecuritiesAct of 1933, as amended, and the rules and regulations promulgated thereunder.

“***Securityholder***” means any holder ofSecurities.

“***Subsidiary or Subsidiaries***” (whetheror not capitalized) of any person means (i) any corporation of which suchperson (either alone or through or together with any other Subsidiary), owns,directly or indirectly, more than 50% of the stock the holders of which aregenerally entitled to vote for the election of the board of directors of suchcorporation, or (ii) any partnership, limited liability company, association,trust, joint venture, or other non-corporate entity in which such person(either alone or through or together with any other Subsidiary) holds, directlyor indirectly, an equity interest.

“***Unexercised Option Expiration Amount***”shall mean a one time payment equal to $500,000, which shall be payable solelyas described in Sections 1.3 and 6(b).

“***Voting Agreement***” means that certainVoting Agreement in substantially the form of Exhibit C attached hereto.

8.3           Severability.  If any term or other provision of thisAgreement is invalid, illegal or incapable of being enforced by any rule ofapplicable law, or public policy, all other conditions and provisions of thisAgreement shall nevertheless remain in full force and effect so long as theeconomic or legal substance of the matters referred to herein are not affectedin any manner materially adverse to any 

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party.  Uponsuch determination that any term or other provision is invalid, illegal orincapable of being enforced, the parties hereto shall negotiate in good faithto modify this Agreement so as to effect the original intent of the parties asclosely as possible in a mutually acceptable manner in order that the mattersreferred to herein be consummated as originally contemplated to the fullestextent possible.

8.4           Entire Agreement;Assignment.  This Agreement, together with the RelatedAgreements, constitutes the entire agreement among the parties with respect tothe subject matter hereof and thereof and supersedes all prior agreements andundertakings, both written and oral, among the parties, or any of them, withrespect to the subject matter hereof and thereof.  DTS shall have the right to assign all of itsrights and obligations under this Agreement to any entity which is, at the timeof assignment, an Affiliate of DTS, notwithstanding that the assignee may notcontinue to be an Affiliate of DTS thereafter; provided, that no suchassignment to an Affiliate shall relieve the assigning party of its obligationshereunder.  In the event of such anassignment, all rights and obligations of DTS hereunder shall be deemed to berights and obligations of such assignee. DTS or its assignee shall also have the right to assign all of itsrights and obligations under this Agreement to any person that acquires amajority by voting power of all of the capital stock, or substantially all ofthe assets, of DTS or its assignee or the division or business unit of DTS orits assignee responsible for the business of Avica; provided, that suchperson assumes this Agreement, in writing, and agrees to be bound by and tocomply with all of the terms and conditions hereof.  Avica shall not assign, delegate or transferits rights and obligations under this Agreement to any third party without theprior written consent of DTS.  For purposes of this Agreement, an “assignment”by Avica under this Section 8.4 shall be deemed to include each of thefollowing: (a) a change in beneficial ownership of Avica of greater than twentypercent (20%) (whether in a single transaction or series of transactions); (b)a merger of Avica with another party, whether or not Avica is the survivingentity; (c) the acquisition of more than twenty percent (20%) of any class ofAvica’s voting stock (or any class of non-voting security convertible intovoting stock) by a person who is notcurrently a shareholder of Avica (whether in a single transaction orseries of transactions); and (d) the sale of more than twenty percent (20%) ofAvica’s assets (whether in a single transaction or series of transactions); provided, however, that an assignment shallnot be deemed to include (i) any change in beneficial ownership resultingfrom the conversion of convertible securities, outstanding as of the EffectiveDate, by existing Avica Stockholders, or (ii) any change in beneficialownership resulting from a transfer of Avica shares made in compliance withAvica’s Bylaws, as in effect on the Effective Date, to any third party who isnot in DTS’ judgment a competitor or potential competitor of DTS and so long aseach permitted transferee agrees in writing to be bound by and comply with theterms and conditions of the Voting Agreement as if such transferee were aShareholder (as defined in such Voting Agreement) and a signatory to suchVoting Agreement.  Subject to theforegoing, this Agreement shall inure to the benefit of and be binding upon therespective permitted successors and assigns of the parties.

8.5           Parties in Interest.  ThisAgreement shall be binding upon and inure solely to the benefit of each partyhereto and nothing in this Agreement, express or implied is intended to orshall confer upon any other person any right, benefit or remedy of any naturewhatsoever under or by reason of this Agreement.

8.6           Specific Performance.  Theparties hereto agree that irreparable damage would occur in the event that anyprovision of this Agreement was not performed in accordance with the termshereof and that the parties shall be entitled to specific performance of theterms hereof, in addition to any other remedy at law or equity.

8.7           Governing Law.  ThisAgreement shall be governed by, and construed in accordance with the laws ofthe State of California applicable to contracts executed in and to be performedin that state.

8.8           Consent toJurisdiction.  Avica and DTS consentto jurisdiction and venue in the state and federal courts in Los Angeles,California.

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8.9           Headings;Interpretation.  The descriptive headings contained in thisAgreement are included for convenience of reference only and shall not affectin any way the meaning or interpretation of this Agreement.  Whenever the word “include,” “includes,” or “including”appears in this Agreement, it shall be deemed in each instance to be followedby the words “without limitation.”

8.10         Counterparts.  ThisAgreement may be executed and delivered (including by facsimile or pdftransmission) in any number of counterparts, and by the different partieshereto in separate counterparts, each of which when executed and deliveredshall be deemed to be an original but all of which taken together shallconstitute one and the same agreement.

8.11         Fees and Expenses.  Allcosts and expenses incurred in connection with this Agreement and the AssetPurchase by Avica shall be paid by Avica. All costs and expenses incurred in connection with this Agreement andthe Asset Purchase by DTS shall be paid by DTS.

8.12         Amendment.  Any waiver, modification or amendment of anyprovision of this Agreement will be effective only if in writing and signed byduly authorized representatives of the parties.

8.13         Waiver.  Atany time prior to the Asset Closing, DTS and Avica may agree to (a) extendthe time for the performance of any obligation or other act of the other partyhereto, (b) waive any inaccuracy in the representations and warranties ofthe other contained herein or in any document delivered pursuant hereto, and(c) waive compliance by the other, as the case may be, with any agreementor condition contained herein.  Any suchextension or waiver shall be valid if set forth in an instrument in writingsigned by the party or parties to be bound thereby.  The failure by either party to enforce anyprovision of this Agreement will not constitute a waiver of future enforcementof that or any other provision.

8.14         Remedies.  No remedy referred to in this Agreement isintended to be exclusive, but each shall be cumulative and in addition to anyother remedy referred to herein or otherwise available at law, in equity orotherwise.

8.15         Force Majeure.  Except with respect to the payment of money,neither party will be responsible for any failure or delay in its performanceunder this Agreement due to causes beyond its reasonable control, includinglabor disputes, strikes, lockouts, shortages of or inability to obtain labor,energy, raw materials or supplies, war, riot, act of God or governmentalaction.

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20

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In Witness Whereof, DTS and Avica have dulyexecuted this Option Agreement as of the date first above written.
|            | **DTS, Inc.**                     |
|------------|-----------------------------------|
|       |                              |   |
|       |                              |   |
|       | By:                               |   | /s/ Jon E. Kirchner |   |
|       |                              | Jon Kirchner |
|       |                              | President and Chief Executive Officer |
|       |                              |   |
|       |                              |   |
| ** ** | **Avica Technology  Corporation** |
|       |                              |   |
|       |                              |   |
|       | By:                               |   | /s/ Nicholas J. Clay |   |
|       |                              | Nicholas J. Clay |
|       |                              | Chairman and Chief Executive Officer |

 

 

Signaturepage to Option Agreement

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LIST OF EXHIBITS

Exhibit A                                               Form ofAsset Purchase Agreement

Exhibit B                                                PurchaseElection Notice

Exhibit C                                                Form ofVoting Agreement

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**EXHIBIT A**

**Form of Asset Purchase Agreement**

**IntentionallyOmitted.**

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**EXHIBIT B**

**Purchase Election Notice**

**IntentionallyOmitted.**

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**EXHIBIT C**

**Form of Voting Agreement**

**IntentionallyOmitted.**

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