**EXHIBIT 10.53**

 

May 20, 2005

 

Patrick Watson

5152 Evanwood Ave

Oak Park, California 91377

Re:          Employment Agreement

Dear Patrick Watson:

Digital TheaterSystems, Inc. (“DTS” or the “Company”) is pleased to extend to you thefollowing employment Agreement.  Unlessotherwise set forth in this Agreement, you acknowledge that your employmentwith DTS is “at-will”.
| **Title:**                 |   | Senior Vice President, Strategy  & Business Development                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|----------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Duties:**                |   | You  agree to serve the Company as its Senior Vice President,  Strategy & Business Development. Your duties are  as defined in Company’s job description for the position or as otherwise  specified by the President and Chief Executive Officer of the Company. During  the Term of this Agreement, you will devote full time to, and use your best  efforts to advance, the business and welfare of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **Status:**                |   | Salary Exempt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **Effective  Date:**  |   | May 20, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **Base  Salary:**          |   | $195,000 per year payable biweekly and subject to  payroll deductions as may be necessary or customary in respect of the  Company’s salaried employees in general.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **Bonus:**                 |   | Participation in the  bonus plan will be on a level commensurate with other executives, and subject  to completion of individual and company milestone achievements per mutual  agreement on targets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **Stock  Options:**        |   | All Stock options  granted to you are conditioned on Board of Directors approval and shall vest over four consecutive 12-month periods as  per your **Stock Option Agreement** with the  Company and administered under the respective Company’s **Stock  Option Plan**.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **Vacation:**              |   | You  shall be provided with One Hundred Sixty (160) hours of vacation, which  shall be automatically replenished upon use. However, vacation hours will not be replenished during any period  where you are not actively working for the Company, until you have resumed  actively working for at least one full workweek.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Holidays:**              |   | Per  Company’s annual published schedule (commonly 12 days per year); plan is  subject to change. The salary includes holiday pay and you are not entitled  to any additional salary or compensation for work on a holiday.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **Severance:**             |   | Upon the termination of this Agreement by the Company for  other than good cause: (A) the  Company shall for a period of six (6) months, if the Employee is employed  with the Company for less than ten (10) years, and for a period of twelve  (12) months, if the Employee is employed with the Company for more than ten  (10) years; (I) pay to Employee in monthly  installments, as severance pay, Employee’s full Salary with a duty to  mitigate as set forth in this Agreement, and (II) provide Employee the same  level of benefits Employee was receiving as of the time of termination of  this Agreement, unless otherwise required by law, (B) all options granted to  you (incentive and nonstatutory) shall (I) immediately vest and (II) be  exercisable for three (3) years from such termination (but not in excess of  the specified maximum term of such option). |
| **Benefits:**              |   | The  following are the Company supplied Benefits as of the date of this Agreement. Benefit coverage is subject to  change at company election that may result in elimination of benefits or  increased co-pay. Unless otherwise set forth below, eligibility begins the  first day of the month after hire date. Please see the applicable plan  documents for additional information. In the event of any conflict between  this description and the plan document, the plan document will prevail.                                                                                                                                                                                                                                                                                                                                                                                          |

 
| Insurance: |   |                         |   | Disability                               |   |                                      |
|------------|--------|------------------------------|--------|------------------------------------------|--------|-------------------------------------------|
| Health     |   | Blue  Cross                  |   | Long  Term:                              |   | Coverage  through UNUM.                   |
| Dental:    |   | Aetna                        |   | Short Term:                              |   | Coverage through UNUM.                    |
| Vision:    |   | Coverage through VSP         |   | Section 125:                             |   | Available for dependent and health care.  |
| Life:      |   | $50,000 coverage -Blue Cross |   | 401k Plan:                               |   | Enrollment dates 1/1 4/1, 7/1 & 10/1. |
|       |   |                         |   | ESPP: Enrollment — May and November |

 

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**Death orDisability of Employee****.**  If you die orbecome disabled prior to the termination of this Agreement, your employmentunder this Agreement will automatically terminate upon your death or the determination that you are disabled.  “Disability” means any physical or mentalillness that renders you unable to perform your agreed-upon services under thisAgreement for ninety (90) consecutive days or an aggregate of one-hundredtwenty (120) days, whether or not consecutive, during any consecutive twelve(12)-month period.  Disability shall bedetermined by a licensed physician selected by the Company that is notaffiliated with you or the Company.  Inthe event of your death or disability, the amounts due you pursuant to thisAgreement through the date of your death or disability will be paid to you oryour beneficiaries.

# **Termination for Cause**.  Youremployment under this Agreement may be terminated immediately by the Companyfor “good cause”.  Upon such terminationyou will be provided notice specifying the reasons for the termination.  You shall have ten (10) business days fromthe date such termination to cure such cause, if curable.  Absent such cure within the cure period, youremployment shall be deemed terminated for good cause on the date of yourtermination.  The term “good cause” isdefined as any one or more of the following occurrences:

| (I)   |   | Negligence or a material violation by you of any  duty or any other material  or repetitive misconduct or failure on your part;                                                                  |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (II)  |   | Your  conviction by, or entry of a plea of guilty or nolo contendere in, a court of  competent and final jurisdiction for any crime punishable by imprisonment in  the jurisdiction involved; or |
| (III) |   | Your  commission of an act of fraud, prior to or subsequent to the date of this  Agreement, upon the Company.                                                                                    |
| (IV)  |   | Failure to execute and deliver to the Company any document(s) required by all employees  of the Company, or employees of a similar position, at the location you are  employed.                  |

 

Nothingin this section or the availability of termination for good cause is intendedto alter the at-will status of employment with the Company.  Either you or the company may terminate theemployment relationship at any time, with or without cause.

**Employee’s Consideration for Severance.**  As consideration for receiving severance payand benefits provided hereunder, during the period that Employee is receivingseverance pay or benefits hereunder, Employee shall:
| (I)   |   | Mitigation. (1) In good faith seek new employment at a level  commensurate with Employee’s duties and Salary hereunder, (2) report to the  Company on or before the first day of each month the status of obtaining such  subsequent employment and (3) report on a monthly basis, the amount of  compensation and benefits paid to Employee received from any such subsequent  employment/consultation with others. The Company may deduct from severance  payments due Employee hereunder, the amount of salary and benefits actually  received by Employee as a result of such subsequent employment or consultation  with others.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (II)  |   | Consulting.  Be available, in person and/or by telephone, as a consultant to the Company  on projects or task as defined by the Company’s CEO or designated  representative. It is agreed that eight (8) hours per week of consultation,  in person and/or by phone, shall be reasonable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (III) |   | Non-Compete.  You agree that for the period commencing on the date of this Agreement and  ending upon the date of the last severance payment hereunder, Employee shall  not, directly or indirectly, as employee, agent, consultant, stockholder,  director, partner or in any other individual or representative capacity, own,  operate, manage, control, engage in, invest in or participate in any manner  in, act as a consultant or advisor to, render services for (alone or in  association with any person, firm, corporation or entity), or otherwise  assist, for compensation or otherwise, any person or entity that engages in  or owns, invests in, operates, manages or controls any venture or enterprise  that is a direct competitor of DTS; provided, however, that nothing contained  in this Agreement shall be construed to prevent you from investing in the  stock of any competing corporation listed on a national securities exchange  or traded in the over-the-counter market, but only if: (1) you are not  involved in the business of said corporation, and (2) if you and your  affiliates collectively do not own more than an aggregate of 5% of the stock  of such corporation, and (3) such investment does not violate the Company’s  Insider Trading Policy. |
| (IV)  |   | Non-Solicitation. You agree that you will not interfere with or  disrupt or attempt to disrupt the Company’s business relationship with its  customers or suppliers or solicit any of the employees of the Company to  leave the employment of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (V)   |   | Severance Agreement. You shall enter into a severance agreement and  general release with the company in the form designated by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

 

**Arbitration****. **You and the Company agree thatany dispute arising under or in connection with this Agreement, including anydispute involving your employment or the termination of that employment(whether based on contract, tort or statutory duty or prohibition, includingany prohibition against discrimination or harassment), shall be submitted tobinding arbitration in accordance with California Code of Civil Procedure §§1280 - 1294.2 before a single neutral arbitrator.  You and the Company understand that each iswaiving its rights to a jury trial.

The party demandingarbitration shall submit a written claim to the other party setting out thebasis of the claim.  Demands shall bepresented in the same manner as notices under this Agreement.  You and the Company will attempt to reachagreement on an arbitrator within ten (10) business days of delivery of thearbitration demand.  After this ten (10)business day period, either you or the Company may request a list of sevenprofessional arbitrators from the American Arbitration Association or anothermutually agreed service.  You and theCompany will alternately strike names until only one person remains and thatperson shall be designated as the arbitrator. The party demanding arbitrationshall make the first strike.

Thearbitration shall take place in or within five miles of Agoura Hills,California, at a time and place determined by the arbitrator.  Each party shall be entitled to discovery ofessential documents and witnesses and to deposition discovery, as determined bythe arbitrator, taking into account the mutual desire to have a fast,cost-effective, dispute-resolution mechanism. You and company will attempt to cooperate in the discovery processbefore seeking the determination of the arbitrator.  Except as otherwise determined by thearbitrator, you and the Company will each be limited to no more than three (3)depositions.  The arbitrator shall havethe

 

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powersprovided in California Code of Civil Procedure §§ 1282.2 - 1284.2 and mayprovide all appropriate remedies at law or equity.

Thearbitrator will have the authority to entertain a motion to dismiss and/or amotion for summary judgment by either you or the Company and shall apply thestandards governing such motions under California law, unless the standards ofanother judicial forum supercede California law.  The Arbitrator shall render, within sixty(60) days of the completion of the arbitration, an award and a written,reasoned opinion in support of that award. Judgment on the award may be entered in any court having jurisdiction.

# **The Companywill pay the arbitrator’s expenses and fees, all meeting room charges and anyother expenses that would not have been incurred if the case were litigated inthe judicial forum having jurisdiction over it. Unless otherwise ordered by the arbitrator pursuant to law or thisAgreement, each party shall pay its own attorney fees, witness fees and otherexpenses incurred by the party for his or her own benefit.  Employee’s share of any filing,administration or similar fee shall be no more than the then current filing orother applicable fee in California Superior Court or, if applicable, otherappropriate tribunal with jurisdiction.**

## **Modificationand Waiver of Breach****.**  No waiver or modification of this Agreementshall be binding unless it is in writing signed by you and the Company.  No waiver of a breach of this Agreement shallbe deemed to constitute a waiver of a future breach, whether of a similar ordissimilar nature.

## **Notices****.**  All notices and other communications requiredor permitted under this Agreement shall be in writing, served personally on, ormailed by nationally recognized express mail courier.  Notices and other communications served byexpress mail courier shall be deemed given 72 hours after deposit with suchexpress mail courier duly addressed to whom such notice or communication is tobe given.  In the case of (a) theCompany, 5171 Clareton Drive, Agoura Hills, California 91301, Attention:General Counsel, or (b) to you, at the address of record provided by you to theCompany’s Human Resources department. Either party may change their address for purposes of this Section bygiving written notice, in the manner stated herein.  You agree to promptly update the Company’sHuman Resources department with any changes to your contact information.

## **Counterparts and FacsimileSignatures****.**  This instrument may be executed in one ormore counterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same Agreement.  The parties agree that a signature deliveredby facsimile transmission will be treated in all respects as having the sameeffect as an original signature.

## **Construction of Agreement****.**  This Agreement shall be construed inaccordance with, and governed by, the internal laws of the State of Californiaand both parties irrevocably agree to the exclusive jurisdiction and venue ofthe state and local courts of the County of Los Angeles, California.

## **Legal Fees****.**  If any legal action, arbitration or otherproceeding is brought for the enforcement of this Agreement, or because of anyalleged dispute, breach, default or misrepresentation in connection with thisAgreement, the successful or prevailing party shall be entitled to recoverreasonable attorneys’ fees and other costs it incurred in that action orproceeding, in addition to any other relief to which it may be entitled.

## **Severability Clause****.**  If any provision of this Agreement or theapplication thereof is held invalid, the invalidity shall not affect otherprovisions or applications of the Agreement which can be given effect withoutthe invalid provisions or applications and to this end the provisions of thisAgreement are declared to be severable.

## **Complete Agreement****.**  This instrument constitutes and contains theentire agreement and understanding concerning your employment and the othersubject matters addressed in this Agreement between you and the Company, andsupersedes and replaces all prior negotiations and all agreements proposed orotherwise, whether written or oral, concerning the subject matters hereof.  This is an integrated document.

**Third Party Beneficiaries****.**  This Agreement does not create,and shall not be construed as creating, any rights enforceable by any personnot a party to this Agreement, except as expressly contemplated herein.

**Non-transferability ofInterest****.**  None of the rights of Employee to receive anyform of compensation payable pursuant to this Agreement shall be assignable ortransferable except through a testamentary disposition or by the laws ofdescent and distribution upon the death of Employee.  Any attempted assignment, transfer,conveyance, or other disposition (other than as set forth herein) of anyinterest in the rights of Employee to receive any form of compensation to bemade by the Company pursuant to this Agreement shall be void.

**Other Agreements.**  A condition of employment with DTS is asigned Confidentiality and Non-Disclosure Agreement, Employee InventionAgreement, the DTS Worldwide Business Conduct Policy, and receivingsatisfactory confirmation of an employee background check.  Your failure to agree to these conditions andcomplete these documents in a timely manner may result in your termination forgood cause.  You also understand and agreethat, except as expressly provided in this Agreement, you are subject to all ofthe Company’s general business and human resources polices and procedures asthey presently exist or as they may exist in the future and failure to abide bysuch provisions may result in your termination for good cause.  Provided, however, that the at-will status ofemployment may only be changed as provided below.

 

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**At-Will.**  By signing this letter, you understand andagree that your employment with DTS is “**at-will**.”  Youremployment with DTS is voluntarily entered into and we recognize you are freeto resign at any time.  Similarly, it isrecognized that DTS is free to conclude an employment relationship at any timewe feel is appropriate.  While otherterms of your employment may change with or without notice, this at-willrelationship can be changed only in a written agreement signed by you and thePresident & Chief Executive Officer of DTS.

Sincerely,

 

 
| /s/ JON KIRCHNER                      |         | /s/ SUSAN R. RYAN         |
|---------------------------------------|--------------|---------------------------|
| Jon Kirchner                          |         | Susan R. Ryan             |
| President and Chief Executive Officer |         | Director, Human Resources |
|                                  |         |                      |
|                                  |         |                      |
| Acceptance:                           |         |                      |
|                                  |         |                      |
| /s/ PATRICK WATSON                    | July 8, 2005 |                      |   |
| Patrick Watson                        | Date         |                      |   |

 

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# **AGREEMENTOF AT WILL EMPLOYMENT**

 

 

I understand and agree that my employment with DTS is on an **at-will** basis.  This means that either DTS or I or mayterminate the employment relationship at any time at their sole discretionwithout cause.

 

I further understand that while other personnel policies, procedures,and benefits of DTS may change from time to time in DTS’s discretion, thisat-will employment relationship can only be changed by an express writtenemployment agreement signed by me and an officer of DTS.

 

 

 

 

 
| Patrick Watson        |         |
|-----------------------|--------------|
| Employee Name (PRINT) |         |
|                  |         |
|                  |         |
|                  |         |
|                  |         |
| /s/ PATRICK WATSON    | July 8, 2005 |   |
| Employee Signature    | Date         |   |

 

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