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                                                                   EXHIBIT 10.20

                              EMPLOYMENT AGREEMENT
                              --------------------


     This Employment Agreement (this "Agreement") is entered into as of March
28, 1997, by and between Digital Video Systems, Inc., a Delaware corporation
(the "Company"), and Thomas R. Parkinson ("Parkinson").

     1.   Employment.
          ---------- 

          1.1  Employment as President and Chief Operating Officer. The Company
               --------------------------------------------------- 
agrees to employ Parkinson, and Parkinson agrees to be employed by the Company,
as the Company's President and Chief Operating Officer for the period beginning
on April 15, 1997 or such earlier date as the Company and Parkinson may agree to
(the "Commencement Date") and ending on the second anniversary of the
Commencement Date, unless such employment is terminated earlier pursuant to
Section 3 (the "Employment Period"). The parties contemplate that Parkinson will
serve as a member of the Company's Board of Directors (the "Board") during the
Employment Period, and the Company Will nominate Parkinson for election to the
Board at the next annual shareholders meeting of the Company and will appoint
him to the Board at such earlier date, if any, at which there is any vacancy on
the Board. Upon his termination as the Company's President and Chief Operating
Officer, Parkinson shall promptly resign as a member of the Board, if so
requested by the Company.

          1.2  Duties as Employee. Parkinson agrees to serve the Company as
               ------------------                     
President and Chief Operating Officer during the Employment Period. Parkinson's
duties shall be those customary for a President and Chief Operating Officer of a
company similar to the Company and such other duties as are specified by the
Company's Board. In case of a reorganization, merger, consolidation,
liquidation, dissolution, sale of all or substantially all of the Company's
assets or similar event, the Board reserves the right, in its sole discretion,
to change or modify Parkinson's duties hereunder as it deems appropriate in good
faith. During the Employment Period, Parkinson shall devote full time to, and
use his best efforts to advance, the business and welfare of the Company.
Parkinson shall not directly or indirectly render any service of a business,
commercial, or professional nature to any other person, organization or other
entity, whether for compensation or otherwise, directly or indirectly, without
the prior written consent of a majority of the members of the Board.

          1.3  Salary and Benefits.
               ------------------- 

               (a)  Salary and Bonus. For the first year of the Employment
                    ----------------                                      
Period, the Company shall pay Parkinson a salary at the annual rate of $280,000
per year payable at least as frequently as monthly and subject to such payroll
deductions as may be necessary or customary in respect of the Company's salaried
employees in general. For the first year of the Employment Period, the Company
shall pay Parkinson a bonus (the "First Year Bonus") of a minimum of $120,000
and a maximum of $200,000, with $60,000 of the First Year Bonus being paid to
Parkinson on the Commencement Date. The balance of the First Year Bonus shall be
payable following completion of the first twelve months of the Employment
Period, with the amount of the total First Year Bonus to be based upon
performance standards to be agreed to by the Board and Parkinson. Parkinson's
salary and
<PAGE>
 
bonus for periods after the first year of the Employment Period shall be
mutually agreed to by Parkinson and the Board or, in the absence of any such
agreement, shall continue at the same rate of salary as for the first year of
the Employment Period and with a bonus to be paid at the end of the second year
and any year thereafter of the Employment Period in an amount equal to the total
bonus paid in the first year of the Employment Period.

               (b)  Incentive, Savings and Retirement Plans. Parkinson shall be
                    ---------------------------------------                 
entitled to participate at the discretion of the Board in all annual bonus,
incentive, stock option, savings and retirement plans, practices, policies and
programs applicable generally to other senior executives of the Company.

               (c)  Welfare Benefit Plans. Parkinson shall be eligible for
                    ---------------------                                 
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company to the extent
applicable generally to other senior executives of the Company.

               (d)  Vacations. Parkinson shall be entitled to three weeks paid
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vacation per year of service during the Employment Period. To the extent
vacation is not taken in any year, it shall be accrued and may be taken in
subsequent years.

               (e)  Expenses. Parkinson shall be entitled to receive prompt
                    --------                                                
reimbursement for all reasonable employment expenses incurred by him in
accordance with the policies, practices and procedures as in effect generally
with respect to other senior executives of the Company.

               (f)  Fringe Benefits. Parkinson shall be entitled to fringe
                    ---------------                                       
benefits in accordance with the plans, practices, programs and policies as in
effect generally with respect to other senior executives of the Company.

     2.   Additional Compensation.
          ----------------------- 

          2.1  1996 Plan Options.
               ----------------- 

               (a)  In further consideration for Parkinson's performance of his
obligations under this Agreement, and pursuant to an option agreement to contain
such terms as are customarily provided for by the Company's 1996 Stock Option
Plan, the Company shall grant to Parkinson options (the "1996 Options") to
purchase 500,000 shares of Company's common stock (the "1996 Shares") during
the five-year period from the date of grant, at an exercise price per share
equal to the closing price of the Company's common stock on the Nasdaq National
Market on the date of this Agreement.
               
               (b)  The 1996 Shares vested and subject to exercise shall be
2.083% of such 1996 Shares at the end of each month after the grant date during
which Parkinson continues to be employed as the Company's President and Chief
Operating Officer, so that all of the 1996 Shares

                                       2.
<PAGE>
 
may be purchased on or after the fourth anniversary of the grant date if
Parkinson has continued to be employed as the Company's President and Chief
Operating Officer through that date.  In the event that Parkinson's employment
with the Company terminates for any reason, all 1996 Options shall either be
vested or cancelled as set forth in Section 3.4 hereof.

          2.2  1993 Plan Options.
               ----------------- 

               (a)  In further consideration for Parkinson's performance of his
obligations under this Agreement, and pursuant to an option agreement to contain
such terms as are customarily provided for by the Company's 1993 Stock Option
Plan, the Company shall grant to Parkinson options (the "1993 Options," and
together with the 1996 Options, the "Options") to purchase 400,000 shares of the
Company's common stock (the "1993 Shares") during the five-year period from the
date of grant, at an exercise price per share equal to the closing price of the
Company's common stock on the date of this Agreement.

               (b)  A total of 25% of the 1993 Shares shall vest and be subject
to exercise on the first anniversary of the Commencement Date and the remaining
75% of the 1993 Shares shall thereafter vest and become subject to exercise pro
rata on a monthly basis over the 36-month period following the first anniversary
of the Commencement Date (provided that Parkinson continues to be employed as
the Company's President and Chief Operating Officer as of the end of each month
in which such vesting occurs), so that all of the 1993 Shares may be purchased
on or after the fourth anniversary of the grant date if Parkinson has continued
to be employed as the Company's President and Chief Operating Officer through
that date. In the event that Parkinson's employment with the Company terminates
for any reason, all 1993 Options shall either be vested or cancelled as set
forth in Section 3.4 hereof.

               (c)  Parkinson agrees that 1993 Options covering 266,667 of the
foregoing 1993 Shares shall be deposited into an escrow pursuant to that certain
Escrow Agreement dated as of April 23, 1996 by and among the Company, American
Stock Transfer & Trust Company, the stockholders listed on Exhibit A thereto and
optionholders listed on Exhibit B thereto (the "Escrow Agreement"). Parkinson
agrees to execute the Escrow Agreement and to become bound by its terms and
conditions and understands that the issuance of the 1993 Options is subject to
the condition that he do so and that he deposit 1993 Options covering 266,667 of
the 1993 Shares into escrow. All of the 1993 Options deposited in escrow
pursuant to the Escrow Agreement and not otherwise cancelled pursuant to Section
3.4 hereof, and any 1993 Shares issued upon exercise of such 1993 Options, shall
be subject to forfeiture and cancellation and shall not be delivered to
Parkinson unless and until certain minimum pre-tax income or stock price levels
for the Company as set forth in the Escrow Agreement are met. The 1993 Options
in escrow shall become subject to exercise pro rata at the same monthly rate as
the 1993 Options not in escrow.

          2.3  Incentive Options. The 1993 Options and 1996 Options shall all be
               -----------------                           
granted as nonqualified options, except that upon the written request of
Parkinson a portion of these Options

                                       3.
<PAGE>
 
(Up to the maximum permitted by applicable law) shall be granted as incentive
stock options.

     3.   Termination. The term of Parkinson's employment under this Agreement
          -----------                                          
may terminate as hereinafter provided, in which case (i) Parkinson shall be
entitled to the amounts set forth in Section 3.4 hereof and (ii) Parkinson shall
remain subject to the provisions of Sections 4, 5 and 6 hereof to the extent
applicable. The Employment Period shall not extend for any period beyond the
second anniversary of the Commencement Date unless agreed to in writing by
Parkinson and the Company.

          3.1  Death or Disability. If Parkinson dies or becomes disabled during
               -------------------                      
the Employment Period, Parkinson's employment under this Agreement shall
automatically terminate upon death or after three consecutive months of
disability, as the case may be. "Disability" shall mean any physical or mental
illness that renders Parkinson unable to perform his agreed-upon services under
this Agreement for any three consecutive months. Such disability shall be
determined by a licensed physician not affiliated with the parties to this
Agreement. In the event of Parkinson's death, the amounts due him pursuant to
this Agreement through the date of his death shall be paid to whomever he has
previously designated or, in the event no such designation is made, to his
estate, or to the beneficiaries of his estate.

          3.2  Good Cause. Parkinson's employment under this Agreement may be
               ----------                              
terminated by the Company for "good cause," as determined in good faith by the
Board. The term "good cause" is defined as any one or more of the following
occurrences:

               (a)  Parkinson's continuing repeated willful failure or refusal
to perform his duties as required by this Agreement or other material breach of
this Agreement, provided, that termination of Parkinson's employment pursuant to
this subsection (a) shall not constitute valid termination for cause unless
Parkinson shall have first received written notice from the Board stating with
specificity the nature of such failure or refusal and affording Parkinson at
least 15 days to correct the act or omission complained of;

               (b)  Gross negligence, material violation by Parkinson of any
duty of loyalty to the Company or any other material misconduct on the part of
Parkinson, provided that termination of Parkinson's employment pursuant to this
subsection (a) shall not constitute valid termination for cause unless Parkinson
shall have first received written notice from the Board stating with specificity
the nature of such failure or refusal and affording Parkinson at least 15 days
to fully correct the act or omission complained of and to indemnify the Company
for any damage caused to it by such act or omission;

               (c)  Parkinson's conviction by, or entry of a plea of guilty or
nolo contendere in, a court of competent and final jurisdiction for any crime
involving moral turpitude or punishable by imprisonment in excess of six months
in the jurisdiction involved; or

               (d)  Parkinson's commission of an act of fraud, whether prior to
or subsequent to the date hereof, upon the Company.

                                      4.
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          3.3  Other Termination. Either party may terminate this Agreement
               -----------------    
during the term of the Employment Period by providing the other party 90 days
prior written notice; provided, however, that any such notice may not be
delivered until at least one year after the Commencement Date. (The foregoing
notice requirements shall not apply to any termination being made pursuant to
Section 3.2 hereof.)

          3.4  Payments Upon Termination.
               ------------------------- 

               (a)  Completion of Employment Period. If at the end of the
                    -------------------------------                      
Employment Period the parties have not agreed in writing to extend the term of
Parkinson's employment with the Company, Parkinson shall receive his salary and
any guaranteed minimum bonus through the date of such termination. Options
vested at such termination date shall be exercisable in accordance with the
respective terms or the Company's 1996 Stock Option Plan and 1993 Stock Option
Plan (the "Option Plans"). Options not vested at such termination date shall be
immediately cancelled. In no event shall Parkinson be entitled to receive
additional salary, bonus, options or compensation of any other kind hereunder.

               (b)  Death or Disability. In the event of Parkinson's termination
                    -------------------                             
as set forth in Section 3.1 hereof, he shall receive his salary and the pro rata
portion of any minimum guaranteed bonus payment through the date of such
termination. Options vested at such termination date shall be exercisable in
accordance with the respective terms of the Option Plans. Options not vested at
such termination date shall be immediately cancelled. In no event shall
Parkinson be entitled to receive additional salary, bonus, options or
compensation of any other kind hereunder.

               (c)  Good Cause. In the event of Parkinson's termination as set
                    ----------                                            
forth in Section 3.2 hereof, he shall receive his salary through the date of
such termination. Options vested at such termination date shall be exercisable
in accordance with the respective terms of the Option Plans. Options not vested
at such termination date shall be immediately cancelled. In no event shall
Parkinson be entitled to receive additional salary, bonus, options or
compensation of any other kind hereunder.

               (d)  Other Termination. In the event of Parkinson's termination
                    -----------------                             
as set forth in Section 3.3 hereof, he shall receive his salary and the pro rata
portion of any minimum guaranteed bonus payment through the date of such
termination. Options vested at such termination date shall be exercisable in
accordance with the respective terms of the Option Plans. Options not vested at
such termination date shall be immediately cancelled. In no event shall
Parkinson be entitled to receive any other additional salary, bonus, options or
compensation of any other kind hereunder.

     4.   Ownership of Intangibles. Parkinson hereby grants and assigns to
          ------------------------                                        
the Company all of his right, title and interest in and to any ideas, designs,
techniques, processes, trademarks, inventions and improvements (collectively,
"Inventions") arising during the term of this Agreement, which Inventions relate
to the business of the Company or any of its affiliates, or to actual or
demonstrably anticipated research or development of the Company or any of its
affiliates, or results from work

                                      5.
<PAGE>
 
performed by Parkinson for the Company or any of its affiliates, together with
all patents that are pending or have been issued in the United States and in all
foreign countries during the term of this Agreement with respect to such
Inventions (the "Proprietary Rights"). All such Proprietary Rights shall be the
sole and exclusive property of the Company and shall remain such notwithstanding
the subsequent termination of employment under this Agreement. To the extent
that any Proprietary Rights or other ideas, designs, techniques, processes,
trademarks, inventions or improvements used by the Company during the term of
this Agreement rely upon or use patented or unpatented Inventions that Parkinson
has made or conceived prior to the date of this Agreement, Parkinson hereby
grants an exclusive, perpetual, royalty-free, worldwide license to use such
Invention.

     5.   Confidential Information. Parkinson agrees that during the Employment
          ------------------------                              
Period, he will be dealing with proprietary, nonpublic and confidential
information, including inventions and processes developed by the Company or any
of its affiliates, relating to the present and prospective business, assets and
good will of the Company or any of its affiliates (all of the foregoing referred
to as "confidential information"). Without limiting the generality of the
foregoing, it is understood that Parkinson will have access to information
regarding intellectual property of the Company or any or its affiliates,
inventions and ideas under development by them, and information regarding the
actual and prospective business and customers of the Company or any of its
affiliates. Parkinson agrees that he will not disclose to anyone, directly or
indirectly, any of such confidential matters, or use them other than in the
course of performing his obligations under this Agreement. All documents
prepared by Parkinson in connection with the services provided herein, and all
confidential information (however embodied or recorded) that might be given to
him are the exclusive property of the Company and shall be returned to the
Company at its request. After termination of Parkinson's employment with the
Company, he shall not, without the prior written consent of the Company, or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it in writing. Parkinson acknowledges that such actions could
cause irreparable harm to the Company and that the Company may obtain an
injunction or other equitable relief to enforce this provision. Furthermore,
upon termination of this Agreement, Parkinson shall promptly deliver to the
Company all books, memoranda, records and written data in original form of every
kind relating to the business and affairs of the Company that may then be in his
personal possession.

     6    Noncompetition.
          -------------- 

     6.1  No Competing Activities. Parkinson agrees that, while he is employed
          -----------------------                              
by the Company, he shall not engage or participate in any state of the United
States, directly or indirectly, either as an owner, partner, director, trustee,
officer, employee, consultant, advisor or in any other individual or
representative capacity, in any activity which is the same as, similar to or
competitive in any manner with the business of the Company or its members or
affiliates (herein, a "Competing Activity") or have any investment in a business
which is engaged in a Competing Activity (other than an ownership interest of
less than 5% of any company whose securities are listed on the New York

                                      6.
<PAGE>
 
Stock Exchange, the American Stock Exchange or the Nasdaq National Market).
Parkinson further agrees that in the event of a termination for good cause as
set forth in Section 3.2 hereof or Parkinson's election to terminate employment
pursuant to Section 3.3 hereof, he shall not, for a two-year period following
such termination of employment, engage in a Competing Activity or have any
investment in a business which is engaged in a Competing Activity (other than an
ownership interest or less than 5% of any company whose securities are listed on
the New York Stock Exchange, the American Stock Exchange or the Nasdaq National
Market).

     6.2  Reasonable Limitations. Parkinson acknowledges that, given the nature
          ----------------------                              
of the Company's business, the covenants contained in this Section 6 contain
reasonable limitations as to time, geographical area and scope of activity to be
restrained, and do not impose a greater restraint than is necessary to protect
the legitimate business interests of the Company. If, however, this Section 6 is
determined by any court of competent jurisdiction, or in any arbitration, as the
case may be, to be unenforceable by reason of its extending for too long a
period of time or over too large a geographic area or by reason of its being too
extensive in any other respect or for any other reason it will be interpreted to
extend only over the longest period of time for which it may be enforceable
and/or over the largest geographical area as to which it may be enforceable
and/or to the maximum extent in all other aspects as to which it may be
enforceable, all as determined by such court, or in such arbitration, as the
case may be.

     6.3  Acknowledgment. Parkinson understands that the restrictions in Section
          --------------                                 
6.1 hereof may limit his ability to earn a livelihood in a business similar to
the business of the Company, but he nevertheless believes that he has received
and will receive sufficient consideration hereunder and otherwise as an employee
of the Company to justify such restrictions which, in any event, given his
education, abilities and skills, Parkinson does not believe would prevent him
from earning a living.

     7.   WAIVER OF JURY. WITH RESPECT TO ANY DISPUTE ARISING UNDER OR IN
          --------------                                     
CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, EACH PARTY HEREBY
IRREVOCABLY WAIVES ALL RIGHTS IT MAY HAVE TO DEMAND A JURY TRIAL. THIS WAIVER IS
KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE AND EACH PARTY ACKNOWLEDGES THAT
NONE OF THE OTHER PARTIES NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTIES
HAS MADE ANY REPRESENTATION OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN
ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE PARTIES EACH FURTHER ACKNOWLEDGE
THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED)
IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT THEY HAVE HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THE PARTIES EACH FURTHER
ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE MEANING AND RAMIFICATIONS OF
THIS WAIVER PROVISION.

                                      7.
<PAGE>
 
     8.   Miscellaneous.
          ------------- 

          8.1  Modification and Waiver of Breach. No waiver or modification or
               ---------------------------------              
this Agreement shall be binding unless it is in writing signed by the parties
hereto. No waiver of a breach hereof shall be deemed to constitute a waiver of a
future breach, whether of a similar or dissimilar nature.

          8.2  Assignment. This Agreement shall inure to the benefit of and
               ----------                                           
shall be binding upon the Company, its successors and assigns. The obligations
and duties of Parkinson hereunder are personal and not assignable, whether
voluntarily or involuntarily or by operation of law or otherwise.

          8.3  Notices. All notices and other communications required or
               -------                                               
permitted under this Agreement shall be in writing, served personally on, or
mailed by certified or registered United States mail to, the party to be charged
with receipt thereof. Notices and other communications served by mail shall be
deemed given hereunder 72 hours after deposit of such notice or communication in
the United States Post Office as certified or registered mail with postage
prepaid and duly addressed to whom such notice or communication is to be given,
in the case of (a) the Company, 2710 Walsh Avenue, Santa Clara, California
95051. Attention: Secretary, or (b) Parkinson, to the address set forth below
his name on the signature page hereof. Any such party may change said party's
address for purposes of this Section 9.3 by giving to the party intended to be
bound thereby, in the manner provided herein, a written notice of such change.

          8.4  Counterparts. This instrument may be executed in one or more
               ------------                                         
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.

          8.5  Governing Law. This Agreement shall be construed in accordance
               -------------                
with, and governed by the internal laws of the State of California.

          8.6  Legal Fees. If any legal action or other proceeding is brought
               ----------                                            
for the enforcement of this Agreement, or because of any alleged dispute,
breach, default or misrepresentation in connection with this Agreement, the
successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs it incurred in that action or proceeding. In
addition to any other relief to which it may be entitled.

                                      8.
<PAGE>
 
          8.7  Savings Clause. If any provision of this Agreement or the
               --------------                                           
application thereof is held invalid, the invalidity shall not affect other
provisions or applications of the Agreement which can be given effect without
the invalid provisions or applications and to this end the provisions of this
Agreement are declared to be severable.

          8.8  Complete Agreement. This instrument constitutes and contains the
               ------------------                                 
entire agreement and understanding concerning Parkinson's employment and the
other subject matters addressed herein between the parties, and supersedes and
replaces all prior negotiations and all agreements proposed or otherwise,
whether written or oral, concerning the subject matters hereof. This is an
integrated document.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the day and year first above written.

PARKINSON:                          THE COMPANY:

                                    DIGITAL VIDEO SYSTEMS, INC.


____________________________        By: ___________________________
Thomas R. Parkinson


Address:

____________________________

____________________________

____________________________


                                      9.