Document:

Exhibit
10.2

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into as of January 3,
2005, by and between DTS Digital Images, Inc. (the “Company”), an indirect wholly owned subsidiary of Digital
Theater Systems, Inc., a Delaware corporation (“DTS”), and John Lowry (“you”
or “Employee”) with reference to
the following facts:

 

WHEREAS, concurrently with the execution and delivery
of this Agreement, DTS is acquiring from the Employee all of Employee’s shares
of common stock of Lowry Digital Images, Inc. pursuant to the terms of an
Agreement and Plan of Merger made as of the date hereof (the “Merger
Agreement”).  The Merger Agreement
requires that this Agreement be executed and delivered by each of the Company
and Employee as a condition to the consummation of the transactions
contemplated thereby.

 

NOW, THEREFORE, in consideration of the various,
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the parties hereto agree as follows:

 

1.                                       Term
of Employment.  The Company hereby
agrees to employ Employee, and Employee accepts such employment, subject to the
terms and conditions of this Agreement. 
The initial term of this Agreement shall commence as of the date hereof
and shall run for a period of 36 months, unless sooner terminated, and shall
automatically renew thereafter for one additional 12-month period, without
further action of any kind by the parties, unless notice of non-renewal is
given by either party within 30 days of the end of the initial 36-month term,
or unless this Agreement is otherwise terminated in accordance with its terms
(the “Term”). 
The phrase “term of Employee’s employment hereunder” shall mean the
period of thirty-six (36) months extending from the date of this Agreement or
the 12-month period extending from the date of the renewal period, as
applicable, unless you are terminated for “cause”, as defined herein, whereupon
the “term of Employee’s employment hereunder” shall be from the date of this
Agreement until the date of termination for cause.

 

2.                                       Duties.  You agree to serve the Company as Chief
Technologist or in such other capacity as the Company may from time to time
require.  Your duties will include such
duties as are customarily performed by chief technologists for companies
similar to the Company, and such other duties as are specified by the Chief
Executive Officer of the Company (the “CEO”).  During the Term of this Agreement, you will
devote substantially full time to, and use your best efforts to advance, the business
and welfare of the Company.  You shall
report directly to Jon Kirchner, or to his designee.

 

3.                                       Salary
and Benefits.

 

(a)                                  Salary.  The Company shall pay you a salary at the
rate of $225,000 per year during the first 12 months of the term of your employment
hereunder, $235,000 per year during the second 12 months, and $250,000 per year
during the last 12 months and the renewal term, if the term is renewed, in each
case payable biweekly and subject to payroll deductions as

 

 

may be necessary or customary in respect of the Company’s salaried
employees in general (“Base Salary”).

 

(b)                                 Vacations.  You shall be entitled to four weeks paid
vacation during each 12-month period that you are employed by the Company
pursuant to the terms of this Agreement. 
Vacation shall accrue biweekly on a pro-rata basis.  Any unused pro-rata portion (not to exceed
160 hours of accumulation) of your annual paid vacation shall be paid to you
upon termination of this Agreement for any reason.

 

(c)                                  Annual
Bonus, Incentive, Savings and Retirement Plans.  You shall be entitled to bonuses as deemed
appropriate by the CEO.  You shall also
be entitled to participate in all annual bonus, incentive, stock option,
savings and retirement plans, practices, policies and programs applicable
generally to employees of DTS of a senior staff level (“Similar Employees”).

 

(1)                                  Stock
Options.  As of the date hereof, you
shall be granted options (“Options”)
to purchase up to 25,000 shares of DTS common stock pursuant to the DTS 2003
Equity Incentive Plan.  The terms of such
options shall be set forth in a Stock Option Agreement, the form of which is
attached hereto.

 

(2)                                  Incentive
Plan.  You shall be entitled to
participate in Company Incentive Plans as applicable generally to Similar
Employees and as determined by the CEO. 
You shall be entitled to bonuses as deemed appropriate by the CEO with
respect to the realization of the Company’s Incentive Plan objectives.

 

(3)                                  Annual
Bonus.  You shall be entitled to
participate in the annual bonus plan as applicable generally to Similar
Employees and as determined by the plan and the CEO.  Although your targeted bonus each year shall
equal 25% of your Base Salary, your right to receive any bonus shall be in the
sole discretion of the Company.

 

(4)                                  Savings
and Retirement Plans.  You shall be
entitled to participate in savings and retirement plans and any other
practices, policies and programs applicable generally to Similar Employees and
as determined by the CEO.

 

(d)                                 Welfare
Benefit Plans.  You 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 Similar Employees. 
Benefit coverage is subject to change at the Company’s election,
including but not limited to changes that result in elimination of benefits or
increased co-pay requirements.

 

(e)                                  Expenses.  The Company shall promptly reimburse Employee
for reasonable out-of-pocket expenses incurred in connection with the Company’s
business and the performance of Employee’s duties hereunder, subject to (i)
such policies as the Company may from time to time establish for senior
executives of the Company, and (ii) Employee furnishing the Company with
evidence in the form of receipts satisfactory to the Company substantiating the
claimed expenditures.

 

2

 

(f)                                    Other
Benefits.  You shall be entitled to
other benefits in accordance with the plans, practices, programs and policies
as in effect generally with respect to Similar Employees.

 

4.                                       Death
or Disability of Employee.  If you
die or become disabled prior to the termination or other expiration of this
Agreement, your employment under this Agreement will automatically
terminate.  “Disability” means any
physical or mental illness that renders you unable to perform your agreed-upon
services under this Agreement for 90 consecutive days or an aggregate of 120
days, whether or not consecutive, during any consecutive 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.

 

5.                                       Termination
for Cause.  Your employment under
this Agreement may be terminated immediately by the Company for “cause” (as
such term is defined below).  If the
Company alleges cause, it will specify in writing the reasons and you shall
have ten (10) business days from the date such notice is given in which to cure
such cause.  Absent such cure within the
cure period, your employment shall be deemed terminated for cause on the date
such notice was given.  Cause shall
include, but not be limited to, the following:

 

(a)                                  Gross
negligence or a material violation by you of any duty or any other material or
repetitive misconduct or failure on your part;

 

(b)                                 Your
conviction by or entry of a plea of guilty or no contest in a court of
competent and final jurisdiction for any crime that is punished by
imprisonment; or

 

(c)                                  Your
commission of an act of fraud, whether prior to or subsequent to the date of
this Agreement, upon the Company or any of its affiliates.

 

In the event of termination for “cause,” this
Agreement will terminate, and your salary and unexercised stock options will
terminate as of the date of termination for cause, beyond which point in time
the Company shall have no further obligations to you whatsoever, unless
otherwise required by law.

 

6.                                       Other
Termination.

 

(a)                                  Severance
Pay.  The Company may terminate this
Agreement at any time and without cause at the Company’s sole discretion,
effective five (5) days after notice to you. 
Upon the termination of this Agreement for other than “cause”, or upon a
termination of this Agreement by Employee for Good Reason (as defined below),
the Company shall continue during the term of your employment hereunder to pay
to you in monthly installments, as severance pay, your full Base Salary in
effect at the time of such termination. 
Your right to severance pay shall terminate in the event you breach any
of the terms of Sections 7, 8 or 9 of this Agreement.

 

In the event of termination of this Agreement (A) by
the Company for other than “cause” and other than upon your death or
disability, or (B) by you for Good Reason,

 

3

 

each Option (a) shall immediately vest and (b) shall
be exercisable for two years from such termination (but not in excess of the
specified maximum term of such Option). 
You shall also be entitled to continue to receive such benefits as you
are receiving at the time of termination of this Agreement, e.g.  health plans, etc., until the end of the term
of your employment hereunder, unless otherwise required by law.

 

(b)                                 Termination
by Employee.  You have the right to
terminate your employment under this Agreement in the event (i) there is a
reduction in, or failure to pay, the Base Salary or any other payments or
benefits due to you hereunder, after receipt by the Company of written notice
from you giving the Company at least 30 days in which to cure such
reduction or failure; (ii) the Company commits a material breach of any of
the terms of this Agreement, provided that with respect to any breach capable
of being cured, only if such breach is not cured within 30 days of receipt
by the Company of written notice from you; or (iii) the Company has filed for
bankruptcy or is adjudged insolvent or has failed to make payments to creditors
when due.  Any such termination by you
shall be referred to as a termination for “Good Reason.”

 

(c)                                  Mitigation.  In the event of termination of this Agreement
by the Company without cause or by you for Good Reason pursuant to this Section 6,
you shall in good faith seek new employment at a level commensurate with your
duties and Base Salary hereunder. 
Employee shall report to the Company on or before the first day of each
month the status of obtaining such subsequent employment while receiving pay
and other benefits pursuant to subsection 6(a) above.  If Employee while receiving pay pursuant to
subsection 6(a) above, obtains employment with another employer or a
consulting assignment, the Company thereafter and for the remainder of the term
of Employee’s employment hereunder, may deduct from payments due Employee under
this Agreement, the amount of salary and benefits or consulting payments
actually received by Employee as a result of such subsequent employment or a
consulting assignment.  In the event
Employee obtains subsequent employment or a consulting assignment, Employee
shall report on a monthly basis, the amount of compensation paid and to be paid
to Employee during the unexpired Term and the nature and type of benefits
received.

 

(d)                                 Consulting.  During the period that Employee is receiving
severance pay pursuant to subsection 6(a) above, Employee shall be
available, subject to your other reasonable commitments or obligations made or
incurred in mitigation of the termination of your employment, by telephone,
email or fax, as a consultant to the Company and DTS, without further
compensation, to consult with their respective officers and directors regarding
projects and/or tasks as defined by the CEO or his designated representative.  It is agreed that eight (8) hours per week of
consultation, shall be reasonable.

 

7.                                       Confidential
Information.  You shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies (including but not limited to DTS), and their respective businesses,
which you shall have obtained during your employment by the Company or any of
its affiliated companies and which shall not be or become public knowledge
(other than by acts by you or your representatives in violation of this
Agreement).  After termination of your
employment with the Company, you 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

 

4

 

information, knowledge or data to anyone other than the Company and
those designated by it in writing.  You
acknowledge that such actions could cause irreparable harm to the Company and
that the Company, in addition to any other remedy, may obtain an injunction or
other equitable relief to enforce this provision.  Furthermore, upon termination of this
Agreement, you will 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 your possession,
custody or control.

 

8.                                       Non-Compete.  As an inducement for DTS to enter into the
Merger Agreement and as additional consideration for the consideration to be
paid to Employee under the Merger Agreement, you agree that for the period
commencing on the date of this Agreement and ending on the later of (i) the
36-month anniversary of the date hereof and (ii) the date on which you are no
longer employed by the Company or any of its affiliates, except on behalf of
the Company and its affiliates in accordance with this Agreement, you 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 in the United States that
engages in or owns, invests in, operates, manages or controls any venture or
enterprise that is a direct competitor of the Company or 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 you are not involved, directly or indirectly, in the business of said
corporation and if you and your affiliates collectively do not own more than an
aggregate of 5% of the stock of such corporation, and such investment does not
violate the DTS Insider Trading Policy.

 

9.                                       Non-Solicitation.  Without limiting the generality of the
provisions of Section 8 above, you agree that, for the period commencing
on the date of this Agreement and ending on the later of (i) the 36-month
anniversary of the date hereof and (ii) the date on which you are no longer
employed by the Company or any of its affiliates, except on behalf of the
Company and its affiliates in accordance with this Agreement, you will not
interfere with or disrupt or attempt to disrupt the business relationship of
the Company or any of its affiliates with their respective customers or
suppliers or solicit any of the employees of the Company or its affiliates to
leave the employment of the Company or its affiliates.

 

10.                                 Inventions.  All processes, technologies and inventions
relating to the Company’s business (collectively, “Inventions”), including new contributions, improvement, ideas,
discoveries, trademarks copyrights and trade names (“Intellectual Property”), conceived, developed, invented, made
or found by you, alone or with others, during the term of Employee’s employment
hereunder, whether or not patentable and whether or not conceived, developed,
invented, made, or found on the Company’s time or with the use of the Company’s
facilities or materials, shall be the property of the Company and shall be
promptly and fully disclosed by you to the Company.  You shall perform all necessary acts
(including, without limitation, executing and delivering any confirmatory
assignments, documents or instruments requested by the Company) to vest title
to any such Inventions or other Intellectual Property in the Company and to
enable the Company, at its expense, to secure and maintain domestic and/or
foreign patents or

 

5

 

any other rights for such Inventions an other Intellectual
Property.  The foregoing shall not apply,
however, to an Invention that you developed entirely on your own time without
using the Company’s equipment, supplies, facilities, or trade secret
information except for those Inventions that either: (i) relate at the time of
conception or reduction to practice of the Invention to the Company’s business,
or actual or demonstrably anticipated research or development of the Company;
or (ii) result from any work performed by you for the Company. You agree to
promptly disclose in writing to your immediate supervisor, with a copy to the
President of the Company, or to any persons designated by the Company, all
Inventions made or conceived or reduced to practice or developed by you, either
alone or jointly with others, during the term of your employment (whether prior
to or following the execution of this Agreement).  You will also disclose to the President of
the Company all things that would be Inventions if made during the term of your
employment, conceived, reduced to practice, or developed by you within six (6)
months of the termination of your employment with the Company.

 

11.                                 Miscellaneous.

 

11.1                           Modification
and Waiver of Breach.  No waiver or
modification of this Agreement shall be binding unless it is 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.

 

11.2                           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 120 hours (subject to weekends and
statutory holidays not included in the total 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, 5171 Clareton Drive, Agoura Hills,
California 91301, Attention: General Counsel, or (b) to you, to the address of
record provided by you to the DTS Human Resources Department.  Either party may change their address for
purpose of this Section by giving to the party intended to be bound
thereby, in the manner provided herein, a written notice of such change.  You agree to promptly update the Human
Resources Department with any changes to your contact information.

 

11.3                           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.  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.

 

11.4                           Construction
of Agreement.  This Agreement shall
be construed in accordance with, and governed by, the internal laws of the
State of California.

 

11.5                           Severability.  If for any reason any term or provision of this
Agreement is held to be invalid or unenforceable, all other valid terms and
provisions hereof shall remain in full force and effect, and all of the terms
and provisions of this Agreement shall be deemed to be severable in nature.  If for any reason any term or provision
containing a restriction set forth herein is held to cover an area or to be for
a length of time which is unreasonable, or in any other way is construed to be
too broad or to any extent invalid, such term or provision shall not be

 

6

 

determined to be null, void and of no effect, but to the extent the
same is or would be valid or enforceable under applicable law, any court of
competent jurisdiction shall construe and interpret or reform this Agreement to
provide for a restriction having the maximum enforceable area, time period and
other provisions (not greater than those contained herein) as shall be valid
and enforceable under applicable law.

 

11.6                           Complete
Agreement.  This instrument, together
with the documents referenced in this Agreement, 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.

 

11.7                           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.

 

11.8                           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.

 

11.9                           Other
Agreements.  A condition of
employment with the Company is your execution of a Confidentiality and
Non-Disclosure Agreement, an Employee Invention Agreement, and the DTS
Worldwide Business Conduct Policy.  Your
failure to agree to these conditions and complete and execute these documents
in a timely manner may result in your termination for cause.  You also understand and agree that, except as
expressly provided in this Agreement, you are subject to all of the Company’s
and DTS’s general business and human resources policies and procedures as they
presently exist or as they may exist in the future, and to the extent that such
policies and procedures are bona fide, reasonable, not contrary to law and
otherwise consistent with the terms of the Agreement including the nature of
your duties and responsibilities, and failure to abide by such provisions may
result in your termination for cause.

 

11.10                     Legal
Advice.  You acknowledge and agree
that you have obtained independent legal advice with respect to this Agreement
and that you fully understand the nature and consequences of this Agreement.

 

[Remainder of page
intentionally left blank]

 

7

 

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

 

 

	
  EMPLOYEE:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ John Lowry

  	
   

  	
   

  
	
  John Lowry

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  Address of Record with DTS

  	
   

  
	
   

  	
  Human Resources Department

  	
   

  
	
   

  	
   

  
	
  THE COMPANY:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  DTS DIGITAL IMAGES, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jon E. Kirchner

  	
   

  	
   

  
	
   

  	
  Name: Jon E. Kirchner

  	
   

  
	
   

  	
  Title: President and Chief Executive
  Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  The obligations of the Company are hereby

  	
   

  
	
  guaranteed by DTS

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  DIGITAL THEATER SYSTEMS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jon E. Kirchner 

  	
   

  	
   

  
	
   

  	
  Name: Jon E. Kirchner

  	
   

  
	
   

  	
  Title: President and Chief Executive
  Officer

  	
   

  
					

 

8Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into as of January 3,
2005, by and between DTS Digital Images, Inc. (the “Company”), an indirect wholly owned subsidiary of Digital
Theater Systems, Inc., a Delaware corporation (“DTS”), and Michael Inchalik (“you” or “Employee”)
with reference to the following facts:

 

WHEREAS, concurrently with the execution and delivery
of this Agreement, DTS is acquiring from the Employee all of Employee’s shares
of common stock of Lowry Digital Images, Inc. pursuant to the terms of an
Agreement and Plan of Merger made as of the date hereof (the “Merger
Agreement”).  The Merger Agreement
requires that this Agreement be executed and delivered by each of the Company
and Employee as a condition to the consummation of the transactions
contemplated thereby.

 

NOW, THEREFORE, in consideration of the various,
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the parties hereto agree as follows:

 

1.             Term
of Employment.  The Company hereby
agrees to employ Employee, and Employee accepts such employment, subject to the
terms and conditions of this Agreement. 
The initial term of this Agreement shall commence as of the date hereof
and shall run for a period of 36 months, unless sooner terminated, and shall
automatically renew thereafter for one additional 12-month period, without
further action of any kind by the parties, unless notice of non-renewal is
given by either party within 30 days of the end of the initial 36-month term,
or unless this Agreement is otherwise terminated in accordance with its terms
(the “Term”). 
The phrase “term of Employee’s employment hereunder” shall mean the
period of thirty-six (36) months extending from the date of this Agreement or
the 12-month period extending from the date of the renewal period, as
applicable, unless you are terminated for “cause”, as defined herein, whereupon
the “term of Employee’s employment hereunder” shall be from the date of this
Agreement until the date of termination for cause.

 

2.             Duties.  You agree to serve the Company as Vice
President-Strategy and Business Development or in such other capacity as the
Company may from time to time require. 
Your duties will include such duties as are customarily performed by
vice presidents for companies similar to the Company, and such other duties as
are specified by the Chief Executive Officer of the Company (the “CEO”).  During the
Term of this Agreement, you will devote substantially full time to, and use
your best efforts to advance, the business and welfare of the Company.  You shall report directly to Jon Kirchner, or
to his designee.

 

3.             Salary
and Benefits.

 

(a)           Salary.  For the term of your employment hereunder,
the Company shall pay you a salary at the rate of $185,000 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 (“Base Salary”).

 

(b)           Vacations.  You shall be entitled to three weeks paid
vacation during each 12-month period that you are employed by the Company
pursuant to the terms of this

 

 

Agreement.  Vacation shall accrue
biweekly on a pro-rata basis.  Any unused
pro-rata portion (not to exceed 120 hours of accumulation) of your annual paid
vacation shall be paid to you upon termination of this Agreement for any
reason.

 

(c)           Annual
Bonus, Incentive, Savings and Retirement Plans.  You shall be entitled to bonuses as deemed
appropriate by the CEO.  You shall also
be entitled to participate in all annual bonus, incentive, stock option,
savings and retirement plans, practices, policies and programs applicable
generally to employees of DTS of a senior staff level (“Similar Employees”).

 

(1)           Stock
Options.  As of the date hereof, you
shall be granted options (“Options”)
to purchase up to 20,000 shares of DTS common stock pursuant to the DTS 2003
Equity Incentive Plan.  The terms of such
options shall be set forth in a Stock Option Agreement, the form of which is
attached hereto.

 

(2)           Incentive
Plan.  You shall be entitled to
participate in Company Incentive Plans as applicable generally to Similar
Employees and as determined by the CEO. 
You shall be entitled to bonuses as deemed appropriate by the CEO with
respect to the realization of the Company’s Incentive Plan objectives.

 

(3)           Annual
Bonus.  You shall be entitled to
participate in the annual bonus plan as applicable generally to Similar
Employees and as determined by the plan and the CEO.  Although your targeted bonus each year shall
equal 25% of your Base Salary, your right to receive any bonus shall be in the
sole discretion of the Company.

 

(4)           Savings
and Retirement Plans.  You shall be
entitled to participate in savings and retirement plans and any other
practices, policies and programs applicable generally to Similar Employees and
as determined by the CEO.

 

(d)           Welfare
Benefit Plans.  You 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 Similar Employees. 
Benefit coverage is subject to change at the Company’s election,
including but not limited to changes that result in elimination of benefits or
increased co-pay requirements.

 

(e)           Expenses.  The Company shall promptly reimburse Employee
for reasonable out-of-pocket expenses incurred in connection with the Company’s
business and the performance of Employee’s duties hereunder, subject to
(i) such policies as the Company may from time to time establish for senior
executives of the Company, and (ii) Employee furnishing the Company with
evidence in the form of receipts satisfactory to the Company substantiating the
claimed expenditures.

 

(f)            Other
Benefits.  You shall be entitled to
other benefits in accordance with the plans, practices, programs and policies
as in effect generally with respect to Similar Employees.

 

4.             Death
or Disability of Employee.  If you
die or become disabled prior to the termination or other expiration of this
Agreement, your employment under this Agreement will

 

2

 

automatically terminate.  “Disability”
means any physical or mental illness that renders you unable to perform your
agreed-upon services under this Agreement for 90 consecutive days or an
aggregate of 120 days, whether or not consecutive, during any consecutive
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.

 

5.             Termination
for Cause.  Your employment under
this Agreement may be terminated immediately by the Company for “cause” (as
such term is defined below).  If the
Company alleges cause, it will specify in writing the reasons and you shall
have ten (10) business days from the date such notice is given in which to cure
such cause.  Absent such cure within the
cure period, your employment shall be deemed terminated for cause on the date
such notice was given.  Cause shall
include, but not be limited to, the following:

 

(a)           Gross
negligence or a material violation by you of any duty or any other material or
repetitive misconduct or failure on your part;

 

(b)           Your
conviction by or entry of a plea of guilty or no contest in a court of
competent and final jurisdiction for any crime that is punished by
imprisonment; or

 

(c)           Your
commission of an act of fraud, whether prior to or subsequent to the date of
this Agreement, upon the Company or any of its affiliates.

 

In the event of termination for “cause,” this
Agreement will terminate, and your salary and unexercised stock options will
terminate as of the date of termination for cause, beyond which point in time
the Company shall have no further obligations to you whatsoever, unless
otherwise required by law.

 

6.             Other
Termination.

 

(a)           Severance
Pay.  The Company may terminate this
Agreement at any time and without cause at the Company’s sole discretion,
effective five (5) days after notice to you. 
Upon the termination of this Agreement for other than “cause”, or upon a
termination of this Agreement by Employee for Good Reason (as defined below),
the Company shall continue during the term of your employment hereunder to pay
to you in monthly installments, as severance pay, your full Base Salary in
effect at the time of such termination. 
Your right to severance pay shall terminate in the event you breach any
of the terms of Sections 7, 8 or 9 of this Agreement.

 

In the event of termination of this Agreement
(A) by the Company for other than “cause” and other than upon your death
or disability, or (B) by you for Good Reason, each Option (a) shall
immediately vest and (b) shall be exercisable for two years from such
termination (but not in excess of the specified maximum term of such
Option).  You shall also be entitled to
continue to receive such benefits as you are receiving at the time of
termination of this Agreement, e.g. 
health plans, etc., until the end of the term of your employment
hereunder, unless otherwise required by law.

 

3

 

(b)           Termination
by Employee.  You have the right to
terminate your employment under this Agreement in the event (i) there is a
reduction in, or failure to pay, the Base Salary or any other payments or
benefits due to you hereunder, after receipt by the Company of written notice
from you giving the Company at least 30 days in which to cure such reduction
or failure; (ii) the Company commits a material breach of any of the terms
of this Agreement, provided that with respect to any breach capable of being
cured, only if such breach is not cured within 30 days of receipt by the
Company of written notice from you; or (iii) the Company has filed for
bankruptcy or is adjudged insolvent or has failed to make payments to creditors
when due.  Any such termination by you
shall be referred to as a termination for “Good Reason.”

 

(c)           Mitigation.  In the event of termination of this Agreement
by the Company without cause or by you for Good Reason pursuant to this Section 6,
you shall in good faith seek new employment in the Los Angeles area at a level
commensurate with your duties and Base Salary hereunder.  Employee shall report to the Company on or
before the first day of each month the status of obtaining such subsequent
employment while receiving pay and other benefits pursuant to subsection 6(a)
above.  If Employee while receiving pay
pursuant to subsection 6(a) above, obtains employment with another
employer or a consulting assignment, the Company thereafter and for the
remainder of the term of Employee’s employment hereunder, may deduct from
payments due Employee under this Agreement, the amount of salary and benefits
or a consulting payments actually received by Employee as a result of such
subsequent employment or a consulting assignment.  In the event Employee obtains subsequent
employment or a consulting assignment, Employee shall report on a monthly basis,
the amount of compensation paid and to be paid to Employee during the unexpired
Term and the nature and type of benefits received.

 

(d)           Consulting.  During the period that Employee is receiving
severance pay pursuant to subsection 6(a) above, Employee shall be
available, subject to your other reasonable commitments or obligations made or
incurred in mitigation of the termination of your employment, by telephone,
email or fax, as a consultant to the Company and DTS, without further
compensation, to consult with their respective officers and directors regarding
projects and/or tasks as defined by the CEO or his designated
representative.  It is agreed that eight
(8) hours per week of consultation, shall be reasonable.

 

7.             Confidential
Information.  You shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies (including but not limited to DTS), and their respective businesses,
which you shall have obtained during your employment by the Company or any of
its affiliated companies and which shall not be or become public knowledge
(other than by acts by you or your representatives in violation of this
Agreement).  After termination of your
employment with the Company, you 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.  You acknowledge that such actions could cause
irreparable harm to the Company and that the Company, in addition to any other
remedy, may obtain an injunction or other equitable relief to enforce this
provision.  Furthermore, upon termination
of this Agreement, you will promptly deliver to the Company all books,
memoranda, records and written data in original

 

4

 

form of every kind relating to the business and affairs of the Company
that may then be in your possession, custody or control.

 

8.             Non-Compete.  As an inducement for DTS to enter into the
Merger Agreement and as additional consideration for the consideration to be
paid to Employee under the Merger Agreement, you agree that for the period
commencing on the date of this Agreement and ending on the later of
(i) the 36-month anniversary of the date hereof and (ii) the date on
which you are no longer employed by the Company or any of its affiliates,
except on behalf of the Company and its affiliates in accordance with this
Agreement, you 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 in the United States that engages in or owns, invests in, operates,
manages or controls any venture or enterprise that is a direct competitor of
the Company or 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 you are not involved, directly or
indirectly, in the business of said corporation and if you and your affiliates
collectively do not own more than an aggregate of 5% of the stock of such
corporation, and such investment does not violate the DTS Insider Trading
Policy.

 

9.             Non-Solicitation.  Without limiting the generality of the
provisions of Section 8 above, you agree that, for the period commencing
on the date of this Agreement and ending on the later of (i) the 36-month
anniversary of the date hereof and (ii) the date on which you are no
longer employed by the Company or any of its affiliates, except on behalf of
the Company and its affiliates in accordance with this Agreement, you will not
interfere with or disrupt or attempt to disrupt the business relationship of
the Company or any of its affiliates with their respective customers or
suppliers or solicit any of the employees of the Company or its affiliates to
leave the employment of the Company or its affiliates.

 

10.           Inventions.  All processes, technologies and inventions
relating to the Company’s business (collectively, “Inventions”), including new contributions, improvement, ideas,
discoveries, trademarks copyrights and trade names (“Intellectual Property”), conceived, developed, invented, made
or found by you, alone or with others, during the term of Employee’s employment
hereunder, whether or not patentable and whether or not conceived, developed,
invented, made, or found on the Company’s time or with the use of the Company’s
facilities or materials, shall be the property of the Company and shall be
promptly and fully disclosed by you to the Company.  You shall perform all necessary acts
(including, without limitation, executing and delivering any confirmatory
assignments, documents or instruments requested by the Company) to vest title
to any such Inventions or other Intellectual Property in the Company and to
enable the Company, at its expense, to secure and maintain domestic and/or
foreign patents or any other rights for such Inventions an other Intellectual
Property.  The foregoing shall not apply,
however, to an Invention that you developed entirely on your own time without
using the Company’s equipment, supplies, facilities, or trade secret
information except for those Inventions that either:  (i) relate at the time of conception or
reduction to practice of the Invention to the Company’s business, or actual or
demonstrably anticipated research or

 

5

 

development of the Company; or (ii) result from any work performed
by you for the Company. You agree to promptly disclose in writing to your
immediate supervisor, with a copy to the President of the Company, or to any
persons designated by the Company, all Inventions made or conceived or reduced
to practice or developed by you, either alone or jointly with others, during
the term of your employment (whether prior to or following the execution of
this Agreement).  You will also disclose
to the President of the Company all things that would be Inventions if made
during the term of your employment, conceived, reduced to practice, or
developed by you within six (6) months of the termination of your employment
with the Company.

 

11.           Miscellaneous.

 

11.1         Modification
and Waiver of Breach.  No waiver or
modification of this Agreement shall be binding unless it is 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.

 

11.2         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 120 hours (subject to weekends and
statutory holidays not included in the total 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, 5171 Clareton Drive, Agoura
Hills, California 91301, Attention: General Counsel, or (b) to you, to the
address of record provided by you to the DTS Human Resources Department.  Either party may change their address for
purpose of this Section by giving to the party intended to be bound
thereby, in the manner provided herein, a written notice of such change.  You agree to promptly update the Human
Resources Department with any changes to your contact information.

 

11.3         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.  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.

 

11.4         Construction
of Agreement.  This Agreement shall
be construed in accordance with, and governed by, the internal laws of the
State of California.

 

11.5         Severability.  If for any reason any term or provision of
this Agreement is held to be invalid or unenforceable, all other valid terms
and provisions hereof shall remain in full force and effect, and all of the
terms and provisions of this Agreement shall be deemed to be severable in
nature.  If for any reason any term or
provision containing a restriction set forth herein is held to cover an area or
to be for a length of time which is unreasonable, or in any other way is
construed to be too broad or to any extent invalid, such term or provision
shall not be determined to be null, void and of no effect, but to the extent
the same is or would be valid or enforceable under applicable law, any court of
competent jurisdiction shall construe and interpret or reform this Agreement to
provide for a restriction having the maximum enforceable area, time period and
other provisions (not greater than those contained herein) as shall be valid and
enforceable under applicable law.

 

6

 

11.6         Complete
Agreement.  This instrument, together
with the documents referenced in this Agreement, 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.

 

11.7         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.

 

11.8         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.

 

11.9         Other
Agreements.  A condition of
employment with the Company is your execution of a Confidentiality and
Non-Disclosure Agreement, an Employee Invention Agreement, and the DTS
Worldwide Business Conduct Policy.  Your
failure to agree to these conditions and complete and execute these documents
in a timely manner may result in your termination for cause.  You also understand and agree that, except as
expressly provided in this Agreement, you are subject to all of the Company’s
and DTS’s general business and human resources policies and procedures as they
presently exist or as they may exist in the future, and to the extent that such
policies and procedures are bona fide, reasonable, not contrary to law and
otherwise consistent with the terms of the Agreement including the nature of
your duties and responsibilities, and failure to abide by such provisions may
result in your termination for cause.

 

11.10       Legal
Advice.  You acknowledge and agree
that you have obtained independent legal advice with respect to this Agreement
and that you fully understand the nature and consequences of this Agreement.

 

[Remainder of page
intentionally left blank]

 

7

 

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

 

 

	
  EMPLOYEE:

  
	
   

  
	
  /s/ Michael Inchalik

  	
   

  
	
  Michael Inchalik

  
	
   

  
	
   

  
	
  Address:

  	
  Address of Record with DTS

  Human Resources Department

  
	
   

  	
   

  
	
  THE COMPANY:

  
	
   

  
	
   

  
	
  DTS DIGITAL IMAGES, INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Jon E. Kirchner

  	
   

  
	
   

  	
  Name: Jon E. Kirchner

  
	
   

  	
  Title: President and Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  The obligations of the Company are hereby

  guaranteed by DTS

  
	
   

  
	
   

  
	
  DIGITAL THEATER SYSTEMS, INC.

  
	
   

  
	
  By:

  	
  /s/ Jon E. Kirchner

  	
   

  
	
   

  	
  Name: Jon E. Kirchner

  
	
   

  	
  Title: President and Chief Executive
  Officer

  
				

 

8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00076-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00076-of-00352.parquet"}]]