Exhibit 10.54


 


May 20, 2005


 


William Neighbors


22243 Craggy View Street


Chatsworth, CA 91311


 


Re:                               Employment
Agreement


 


Dear Bill:


 


DTS Digital Images, Inc.
(“DDI” 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 DDI is “at-will”.


 


	
  Title:

  	
  Vice
  President, General Manager

  
	
   

  	
   

  
	
  Duties:

  	
  You agree to
  serve the Company as its Vice President,
  General Manager. Your duties are as defined in Company’s job
  description for the position or as otherwise specified by the President of
  the Company or designated representative. For the initial twelve months of
  this agreement, you shall report directly to the President. Thereafter, your
  reporting relationship may change at the President’s sole discretion to a
  designated representative. Except for your activities with
  Neighbors & Associates, Inc., V-Log Inc., and M.E.T.A., which
  collectively shall require no more than 8 hours per month, 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.

  
	
   

  	
   

  
	
  Start
  Date:

  	
  May 18,
  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 mutually agreed upon individual and company
  milestone achievements.

  
	
   

  	
   

  
	
  Stock
  Options:

  	
  You shall
  initially be granted 35,000 stock options in DTS, Inc. (“DTS”). All
  Stock options granted to you are conditioned on Board of Directors of DTS
  approval and shall vest over four consecutive 12-month periods as per
  your Stock Option Agreement with the DTS
  and administered under the respective DTS’ Stock
  Option Plan.

  
	
   

  	
   

  
	
  Vacation:

  	
  During your
  first year of employment with the Company, vacation hours will be prorated
  and credited to you as you work up to a maximum of One Hundred sixty (160)
  hours of vacation. Following completion of your first year, 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 twelve (12) months; (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.

  



 


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  Insurance:

  
	
  Health

  	
  Blue Cross

  
	
  Dental:

  	
  Aetna

  
	
  Vision:

  	
  Coverage through
  VSP

  
	
  Life:

  	
  $50,000 coverage
  -Blue Cross

  



 


	
  Disability

  	
   

  
	
  Long Term:

  	
  Coverage through UNUM.

  
	
  Short Term:

  	
  Coverage through
  UNUM.

  
	
  Section 125:

  	
  Available for
  dependent and health care.

  
	
  401k Plan:

  	
  Enrollment dates
  1/1 4/1, 7/1 & 10/1.

  
	
  ESPP:
  Enrollment – May and November

  



 


Death
or Disability of Employee.  If you die or become disabled prior to the
termination of this Agreement, your employment under this Agreement will
automatically terminate upon your death or the determination that you are
disabled.  “Disability” means any
physical or mental illness that renders you unable to perform your agreed-upon
services under this Agreement for ninety (90) consecutive days or an aggregate
of one-hundred twenty (120) days, whether or not consecutive, during any
consecutive twelve (12)-month period. 
Disability shall be determined by a licensed physician selected by the
Company that is not affiliated with you or the Company.  In the event of your death or disability, the
amounts due you pursuant to this Agreement through the date of your death or
disability will be paid to you or your beneficiaries.


 


Termination for
Cause.  Your employment under this
Agreement may be terminated immediately by the Company for “good cause”.  Upon such termination you will provided
notice specifying the reasons for the termination.  You shall have ten (10) business days
from the date such termination to cure such cause.  Absent such cure within the cure period, your
employment shall be deemed terminated for good cause on the date of your
termination.  The term “good cause” is
defined 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 of termination for good cause is
intended to alter the at-will status of employment with the Company.  Either you or the company may terminate the
employment relationship at any time, with or without cause.


 


Employee’s
Consideration for Severance.  As consideration for receiving severance pay
and benefits provided hereunder, during the period that Employee is receiving severance
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 DDI; 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.

  



 


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


 


The party demanding
arbitration shall submit a written claim to the other party setting out the
basis of the claim.  Demands shall be
presented in the same manner as notices under this Agreement.  You and the Company will attempt to reach
agreement on an arbitrator within ten (10) business days of delivery of
the arbitration demand.  After this ten (10) business
day period, either you or the Company may request a list of seven professional
arbitrators from the American Arbitration Association or another mutually
agreed service.  You and the Company will
alternately strike names until only one person remains and that person shall be
designated as the arbitrator. The party demanding arbitration shall make the
first strike.


 


The arbitration 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 of essential documents and witnesses and
to deposition discovery, as determined by the 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 process before seeking the determination of the
arbitrator.  Except as otherwise
determined by the arbitrator, you and the Company will each be limited to no
more than three (3) depositions. 
The arbitrator shall have the powers provided in California Code of
Civil Procedure §§ 1282.2 – 1284.2 and may provide all appropriate
remedies at law or equity.


 


The arbitrator will have
the authority to entertain a motion to dismiss and/or a motion for summary
judgment by either you or the Company and shall apply the standards governing
such motions under California law, unless the standards of another 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 Company will pay the arbitrator’s expenses and
fees, all meeting room charges and any other expenses that would not have been
incurred if the case were litigated in the judicial forum having jurisdiction
over it.  Unless otherwise ordered by the
arbitrator pursuant to law or this Agreement, each party shall pay its own
attorney fees, witness fees and other expenses 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 or other applicable fee in California Superior Court or, if applicable,
other appropriate tribunal with jurisdiction.


 


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


 


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


 


Counterparts
and Facsimile Signatures.  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.  The parties agree that a
signature delivered by facsimile transmission will be treated in all respects
as having the same effect as an original signature.


 


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


 


Legal
Fees.  If any legal
action, arbitration 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.


 


Severability
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.


 


Complete
Agreement.  This
instrument constitutes and contains the entire agreement and understanding
concerning your employment and the other subject matters addressed in this
Agreement between you and the Company, 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.


 


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


 


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


 


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


 


At-Will.  By
signing this letter, you understand and agree that your employment with DDI is “at-will.”  Your employment with DDI is voluntarily
entered into and we recognize you are free to resign at any time.  Similarly, it is recognized that DDI is free
to conclude an employment relationship at any time we feel is appropriate.  While other terms of your employment may
change with or without notice, this at-will relationship can be changed only in
a written agreement signed by you and the President of DDI.


 


	
  Sincerely,

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Jon Kirchner

  	
   

  	
  /s/ Susan R.
  Bauer

  	
   

  
	
  Jon Kirchner

  	
  Susan R. Bauer

  
	
  President

  	
  Director,
  Human Resources

  
				



 


 


Acceptance:


 


	
  /s/ William
  Neighbors

  	
   

  	
   

  	
   

  
	
  May 18,
  2005

  	
   

  	
   

  
	
  William
  Neighbors

  	
  Date

  	
   

  



 


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AGREEMENT
OF AT WILL EMPLOYMENT


 


I understand and agree
that my employment with DDI is on an at-will
basis.  This means that either DDI or I
or may terminate the employment relationship at any time at their sole
discretion without cause.


 


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


 


 


	
  William
  Neighbors

  	
   

  
	
  Employee Name
  (PRINT)

  



 


 


	
  /s/ William
  Neighbors

  	
   

  	
   

  	
   

  
	
  May 18,
  2005

  	
   

  	
   

  
	
  Employee
  Signature

  	
  Date

  	
   

  



 


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