**EXHIBIT 10.46**

 

May 20, 2005

MelvinFlanigan

29538Ridgeway Drive

AgouraHills, California 91301

 
| Re:                                                                                                                                                                                                                                                               |   | Employment  Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
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| Dear  Mel:                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
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| Digital Theater Systems, Inc. (“DTS” or the “Company”) is pleased to  extend to you the following employment Agreement. Unless otherwise set forth  in this Agreement, you acknowledge that your employment with DTS is  “at-will”. |
|                                                                                                                                                                                                                                                              |
| **Title:**                                                                                                                                                                                                                                                        |   | Executive Vice President,  Finance, Chief Financial Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| ** **                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Duties:**                                                                                                                                                                                                                                                       |   | You  agree to serve the Company as its Executive Vice President, Finance,  Chief Financial Officer. 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:**                                                                                                                                                                                                                                                 |   | $240,000 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,  including constructive termination: (A) the Company shall for a period of  Twelve (12) months; (I) pay to Employee in monthly installments, as severance  pay, Employee’s full Salary, 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 Five (5) years from such termination (but not in excess of  the specified maximum term of such option). Constructive Termination  shall mean any material failure by the Company to fulfill its obligations  under this Agreement which is not cured within thirty (30) days after receipt  of written notice from you specifying the nature of the failure, including,  but not limited to, (a) your removal, other than removal as a result of a  termination for cause or your voluntary termination, as Executive Vice  President, Finance, Chief Financial Officer of the Company, (b) any material  change by the Company in your functions, duties or responsibilities from  those in which you were engaged under this Agreement without your consent, or  (c) a material, non-voluntary reduction in your base salary and eligibility  for bonus amounts. |
| ** **                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **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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# **Deathor Disability of Employee**.  If you die or become disabledprior to the termination of this Agreement, your employment under thisAgreement will automatically terminate upon your death or the determinationthat you are disabled.  “Disability”means any physical or mental illness that renders you unable to perform youragreed-upon services under this Agreement for ninety (90) consecutive days oran aggregate of one-hundred twenty (120) days, whether or not consecutive,during any consecutive twelve (12)-month period.  Disability shall be determined by a licensedphysician selected by the Company that is not affiliated with you or theCompany.  In the event of your death ordisability, the amounts due you pursuant to this Agreement through the date ofyour death or disability will be paid to you or your 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.                 |

 

Nothing in this section or the availability oftermination for good cause is intended to alter the at-will status ofemployment with the Company.  Either youor the company may terminate the employment relationship at any time, with orwithout cause.

**Employee’sConsideration 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)   |   | Consulting. Be reasonably available, by telephone, as a  consultant to the Company on projects or task you had previously been  involved in. It is agreed that eight (8) hours per week of consultation, by  phone, shall be reasonable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (II)  |   | 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. |
| (III) |   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (IV)  |   | 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 that any dispute arising under or inconnection with this Agreement, including any dispute involving your employmentor the termination of that employment (whether based on contract, tort orstatutory duty or prohibition, including any prohibition against discriminationor harassment), shall be submitted to binding arbitration in accordance withCalifornia Code of Civil Procedure §§ 1280 — 1294.2 before a single neutralarbitrator.  You and the Companyunderstand that each is waiving 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 powers provided in California Code of Civil Procedure §§ 1282.2 — 1284.2and may provide 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**

 

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# **applicablefee in California Superior Court or, if applicable, other appropriate tribunalwith 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 PartyBeneficiaries****.**  ThisAgreement does not create, and shall not be construed as creating, any rightsenforceable by any person not a party to this Agreement, except as expresslycontemplated herein.

**Non-transferabilityof Interest****.**  Noneof the rights of Employee to receive any form of compensation payable pursuantto this Agreement shall be assignable or transferable except through atestamentary disposition or by the laws of descent and distribution upon thedeath of Employee.  Any attemptedassignment, transfer, conveyance, or other disposition (other than as set forthherein) of any interest in the rights of Employee to receive any form ofcompensation to be made by the Company pursuant to this Agreement shall bevoid.

**OtherAgreements.**  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 andagree that, except as expressly provided in this Agreement, you are subject toall of the Company’s general business and human resources polices andprocedures as they presently exist or as they may exist in the future andfailure to abide by such provisions may result in your termination for goodcause.  Provided, however, that theat-will status of employment may only be changed as provided below.

**At-Will.**  By signing this letter, youunderstand and agree that your employment with DTS is “**at-will**.”  Your employment with DTS isvoluntarily entered into and we recognize you are free to resign at anytime.  Similarly, it is recognized thatDTS is free to conclude an employment relationship at any time we feel isappropriate.  While other terms of youremployment may change with or without notice, this at will relationship can bechanged only in a written agreement signed by you and the President & ChiefExecutive 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/ Melvin Flanigan                   | June 3, 2005 |                      |   |   |
| Melvin Flanigan                       | Date         |                      |   |   |

# ** **

 

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# **AGREEMENTOF AT WILL EMPLOYMENT**

 

 

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

 

I further understand that while otherpersonnel policies, procedures, and benefits of DTS may change from time totime in DTS’s discretion, this at-will employment relationship can only bechanged by an express written employment agreement signed by me and an officerof DTS.

 

 

 

 

 
| Melvin Flanigan       |         |
|-----------------------|--------------|
| Employee Name (PRINT) |         |   |
|                  |         |   |
| /s/ Melvin Flanigan   | June 3, 2005 |   |
| Employee Signature    | Date         |   |
|                       |              |  |  |

 

 

 

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