Document:

EXHIBIT 10.1

 

Digital Theater Systems, Inc.

2005 Performance Incentive Plan

 

EFFECTIVE
JANUARY 1, 2005

 

The Compensation
Committee (the “Compensation Committee”) of the Board of Directors of Digital
Theater Systems, Inc. (“Company”) hereby adopts this 2005 Performance
Incentive Plan (“Plan”), effective for measurement periods beginning on or
after January 1, 2005, subject to stockholder approval as described in
Item 4 above.

 

1.    Purpose.
The purpose of the Plan is to provide performance-based incentive compensation
in the form of restricted stock to executive officers and senior management of
the Company and any affiliates which might subsequently adopt the Plan. The
Plan is intended to qualify as performance-based compensation under Section 162(m) of
the Internal Revenue Code (“Section 162(m)”).

 

2.    Administration.
The Plan has been established by, and shall be administered by, the
Compensation Committee. The Compensation Committee is composed solely of 2 or
more outside directors as defined in Section 162(m) and, therefore,
qualifies as an independent compensation committee under Section 162(m).

 

3.    Stockholder
Approval. The Plan shall be effective if, and only if, the Company’s
stockholders, by a majority of the votes considered present or represented and
entitled to vote with respect to this matter, approve the material terms of the
Plan, specifically, the employees eligible to receive compensation under the
Plan; the business criteria on which the performance goals may be based; and
the maximum amount of compensation that may be paid to any employee under the
Plan in any year. No award will be paid under the Plan until after this
approval is obtained. To the extent necessary for the Plan to qualify as
performance-based compensation under Section 162(m) or its successor
under then applicable law, the material terms of the Plan shall be disclosed to
and reapproved by the stockholders no later than the first stockholder meeting
that occurs in the fifth year following the year in which stockholders
previously approved the material terms of the Plan.

 

4.    Participants. For each measurement
period (which may but need not be a fiscal year), the Compensation Committee
will choose, in its sole discretion, those eligible employees who will
participate in the Plan during that measurement period and will be eligible to
receive payment under the Plan for that measurement period.

 

Eligible
Employees. Persons who
are eligible to participate in the Plan are all members of senior management of
the Company and its affiliates. For purposes of the Plan, senior management is
defined as any officer who is subject to the reporting rules of Section 16(a) of
the Securities Exchange Act of 1934, or who is designated as eligible for the
Plan by the Compensation Committee in its discretion.

 

Employment
Criteria. In general,
to participate in the Plan an eligible employee must be continuously employed
by the Company or an affiliate for the entire measurement period. The foregoing
notwithstanding: (i) if an otherwise eligible employee joins the Company
or an affiliate during the measurement period, the Compensation Committee may,
in its discretion, add the employee to the Plan for the partial measurement
period, and (ii) if the employment of an otherwise eligible employee ends
before the end of the measurement period because of death, disability,
termination of employment (as determined in the discretion of the Compensation
Committee), the employee shall be paid a pro-rata portion of the compensation,
if any, that otherwise would have been payable under the Plan, unless the
Committee determines in its sole discretion that payment is not appropriate. If
a participant is on unpaid leave status for any portion of the measurement
period, the Compensation Committee, in its discretion, may reduce the participant’s
payment on a pro-rata basis.

 

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All determinations under
the Plan, including those related to interpretation of the Plan, eligibility or
the payment or pro-ration of any payment shall be made by the Compensation
Committee pursuant to the above terms, and those determinations shall be final
and binding on all employees.

 

5.    Awards. The Compensation
Committee shall determine the size and terms of an individual Award. Awards
shall be made in restricted “Stock Awards” from the Company’s 2003 Equity
Incentive Plan. The Stock Awards shall be granted and/or vested based upon the
attainment of performance goals as set forth in Section 6.

 

6.    Business
Criteria on Which Performance Goals Shall be Based. The grant and/or
vesting of Stock Awards under the Plan shall be based on the Company’s
attainment of performance goals based on one or more of the following business
criteria:

 

•  Return on equity, total capital, assets, sales
or invested capital.

 

•  Shareholder return.

 

•  Growth of revenue, operating income or net
income (with or without regard to impairment of goodwill).

 

•  Efficiency ratio (other expense as a
percentage of other income plus net interest income), with or without regard to
impairment of goodwill.

 

•  Net operating expense (other income less other
expense) with or without regard to impairment of goodwill.

 

•  Net income or operating income with or without
regard to impairment of goodwill, in aggregate or per share.

 

•  Earnings before interest, taxes, depreciation
and amortization (“EBITDA”).

 

•  Free cash flow generation.

 

•  Ratio of nonperforming assets to total assets.

 

•  Customer service.

 

•  Individually designed goals and objectives
that are consistent with the participant’s specific duties and responsibilities
and that are designed to improve the financial performance of the Company or a
specific division or affiliate. The goals and objectives shall also be derived
from and consistent with the operating plan of the Company, division or affiliate
for the particular year to which the participant’s performance is measured.

 

7.    Establishing
Performance Goals. The Compensation Committee shall establish, for each measurement
period: (a) the length of the measurement period; (b) the specific
business criterion or criteria, or combination thereof, that will be used; (c) the
specific performance targets that will be used for the selected business
criterion or criteria; (d) any special adjustments that will be applied in
calculating whether the performance targets have been met to factor out
extraordinary items; (e) the formula for calculating compensation eligible
for payment under the Plan in relation to the performance targets; (f) the
eligible employees who will participate in the Plan for that measurement
period; and (g) if applicable, the target amounts for each participant for
the measurement period. The Compensation Committee shall make these
determinations in writing no later than 90 days after the start of each
measurement period, on or before 25 percent of the measurement period has
elapsed, and while the outcome is substantially uncertain. The maximum award to
any one participant in any one measurement period under the Plan shall not
exceed 200,000 shares.

 

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Unless otherwise
specified by the Compensation Committee in its written determinations
establishing the criteria for the particular measurement period, if the Company
or its affiliates consummate one or more acquisitions during the measurement
period that, individually or in the aggregate, constitute a Triggering
Acquisition, the measurement period shall end early, on the last day of the
calendar quarter immediately before the consummation of the first acquisition
that constitutes a Triggering Acquisition (either individually or when
aggregated with prior acquisitions during the measurement period), and
pro-rated payments shall be paid based on the degree of attainment of the
performance goals during the shortened measurement period. For purposes of this
paragraph, a Triggering Acquisition means an acquisition (or combination of
acquisitions) in which the acquired entity’s operating earnings (earnings
before transaction-related expense) for the four quarters completed immediately
before consummation of the acquisition is equal to 10% or more of the pro-forma
operating earnings for the same four quarters for the combination of the
Company and its affiliates and the acquired entity. (If either the Company and
its affiliates or the entity being acquired had consummated other acquisitions
during the four quarters in question, the calculation described in the prior
sentence shall be done using pro-forma earnings for each combined entity.)

 

If an employee joins the
Company or an affiliate during the measurement period and becomes an eligible
employee pursuant to Paragraph 4(b), and if the employee is a “covered employee”
within the meaning of Section 162(m) (because the employee is the
chief executive officer or is among the 4 highest compensated officers for the
year other than the chief executive officer), then to the extent necessary for
the Plan to qualify as performance-based compensation under Section 162(m) or
its successor under then applicable law, all relevant elements of the
performance goals established pursuant to paragraph 6 of this plan for that
employee must be established on or before the date on which 25% of the time
from the commencement of employment to the end of the measurement period has
elapsed, and the outcome under the performance goals for the measurement period
must be substantially uncertain at the time those elements are established.

 

8.    Determination
of Attainment of Performance Goals. The Compensation Committee shall determine, pursuant to the
performance goals and other elements established pursuant to Section 6 of
the Plan, the extent to which the Stock Awards have vested. The Compensation
Committee’s determinations shall be final and binding on all participants. These
determinations must be certified in writing, which requirement may be satisfied
by approved minutes of the Compensation Committee meeting setting out the
determinations made. The Compensation Committee shall not have discretion to
increase the amount of a Stock Award or accelerate the vesting of any Stock
Award to any employee who is a “covered employee” within the meaning of Section 162(m) if
such action would cause the Stock Award or any part thereof to not be
deductible under the Internal Revenue Code.

 

9.    Amendments. The Compensation
Committee may not amend or terminate the Plan so as to increase, reduce or
eliminate Stock Awards granted under the Plan for any given measurement period
retroactively, that is, on any date later than 90 days after the start of the
measurement period. The Compensation Committee may amend or terminate the Plan
at any time on a prospective basis and/or in any fashion that does not
increase, reduce or eliminate Stock Awards retroactively. The foregoing
notwithstanding, except as required by applicable law, the Compensation
Committee shall not have the power to amend the Plan in any fashion that would
cause the Plan to fail to qualify as performance-based compensation with
respect to any “covered employee” as defined under Section 162(m) or
its successor. Without limiting the generality of the foregoing, to the extent
it would cause the Plan to fail to qualify as performance-based compensation
with respect to any “covered employee” as defined under Section 162(m) or
its successor under then applicable law, the Compensation Committee shall not
have the power to change the material terms of the performance goals unless (i) the
modified performance goals are established by the Compensation Committee no
later than 90 days after the start of the applicable measurement period, on or
before 25 percent of the measurement period has elapsed, and while the

 

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outcome is
substantially uncertain; and (ii) no Stock Awards are granted until after
the material terms of the modified performance goals are disclosed to and
approved by the Company’s stockholders.

 

10.  Rule 10b5-1
Trading Plans; Stock Withholding. It is expected that participants under the Plan will
establish or modify stock trading plans under Rule 10b5-1 of the
Securities Exchange Act of 1934, as amended, to provide for the sale of Company
shares and remit to the Company to the proceeds to meet the Company’s
withholding obligations in connection with the Stock Awards. To the extent
participants fail to establish or modify 10b5-1 plans in accordance with the
foregoing, the Company shall withhold the number of shares under a Stock Award
sufficient (based on the fair market value of the Shares) to meet such
withholding obligation.

 

11.  Effect on
Employment/Right to Receive. Employment with the Company and its affiliates is on an at-will
basis. Nothing in the Plan shall interfere with or limit in any way the right
of the Company to terminate any participant’s employment or service at any
time, with or without cause or notice. Furthermore, the Company expressly
reserves the right, which may be exercised at any time and without regard to
any measurement period, to terminate any individual’s employment with or
without cause, and to treat him or her without regard to the effect which such
treatment might have upon him or her as a participant under this Plan. For
purposes of this Plan, transfers of employment between the Company and/or its affiliates shall not be deemed a termination of
employment. No person shall have the right to be selected to receive a Stock
Award under the Plan, or, having been so selected, have the right to receive a
future award.

 

12.  Successors. All obligations of
the Company under the Plan, with respect to Stock Awards granted hereunder,
shall be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation
or otherwise, of all or substantially all the business or assets of the
Company.

 

13.  Nontransferability
or Awards. No Stock Award granted under this Plan may be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated, other than by will,
by the laws of descent and distribution, or to the extent permitted by the
Company’s 2003 Equity Incentive Plan. All rights with respect to Stock Award
granted under this Plan shall be available during his or her lifetime only to
the participant to whom the Stock Award under this Plan is granted.

 

14.  Effectiveness;
Prior Plans Superseded.
Upon stockholder approval as described in Section 3, the Plan
shall be effective for measurement periods beginning on or after January 1,
2005.

 

Executed
effective as of March 22, 2005.

 

4BP (54346) MIAD SYSTEMS, LTD. EX-10.1

Exhibit 10.1

ASSET PURCHASE AGREEMENT

THIS AGREEMENT made as of this 18th day of May , 2005.

BETWEEN:

MIAD INFORMATION SYSTEMS INC., being a corporation incorporated under the laws of the Province of Ontario,

(hereinafter called the "Purchaser")

OF THE FIRST PART;

-and-

MIAD SYSTEMS LTD., being a corporation incorporated under the laws of the Province of Ontario,

(hereinafter collectively called the "Vendor")

OF THE SECOND PART; 

-and-

MICHAEL GREEN, a person residing in the City of Toronto, in the Province of Ontario,

(hereinafter collectively called the “Purchaser Principal”)

OF THE THIRD PART

WHEREAS the Vendor is in the business (the "Business") of selling and maintaining computer systems located at 43 Riviera Drive, Unit 6, Markham, Ontario, (the "Premises");

AND WHEREAS the Purchaser wishes to purchase and the Vendor wishes to sell all of the assets and undertaking of the Business, upon the terms and conditions hereinafter set out;

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the respective covenants herein contained the parties hereto agree as follows:

1.00

PURCHASE OF PURCHASED ASSETS

1.01

Subject to the terms and conditions hereof, the Vendor hereby transfers, sells, assigns, grants and conveys to the Purchaser and the Purchaser purchases from the Vendor, the property and assets located at the Premises, as of the closing date
of the Stock Purchase Agreements between the Purchaser Principal and Adrienne Green and Joe Chetti, in trust. (which
c losing date shall be the “Closing Date” of this Agreement)
, as follows: 

(a) 

the machinery, equipment, tools, supplies, furniture, furnishings (whether or not fixtures) and accessories at the Premises;

(b) 

all inventories;

(c) 

all supplies for use in connection with the Business;

(d) 

all accounts receivables as at the date of closing of the within agreement 

(e) 

the benefits of all prepaid expenses associated with the operation of the Business;

(f) 

all of the Vendor’s right, title and interest in and to the lease (the “Lease”) of the Premises;

(g) 

all of the Vendor’s right, title and interest in and to the leasehold improvements at the Premises;

(h) 

the equipment leases, conditional sales contracts, title retention agreements and other agreements between the Vendor and third parties relating to equipment used by the Vendor in connection with the Business (the “Equipment Leases”);

(i) 

the goodwill of the Business and the right of the Vendor in the telephone and fax number or numbers, Internet web sites/addresses listed in the name of the Vendor and/or any trade name used by the Vendor in the Business; and

(j) 

all books, documents, records, files and other data and any other property and assets owned by the Vendor or to which they are entitled in connection with the Business.

2.00

PURCHASE PRICE

2.01

The purchase price for the Purchased Assets is One Million Seventy-seven Thousand Eight Hundred and Thirty-six Dollars ($1,077,836.00) (the “Purchase Price”), subject to adjustment of the actual amount of the Purchased Assets as at the Date of Closing.

2.02 

The Purchase Price shall be paid by the assumption by the Purchaser of all liabilities of every nature and kind owing by the Vendor in connection with the Business (presently estimated to be the amount of One Million Two Hundred Ninety-two Thousand Four Hundred Thirty-nine Dollars ($1,292,439.00)), subject to adjustment of actual amount as at the Date of Closing (the “Assumed Liabilities”).

2

2.03 

In the event that the Purchased Assets exceeds the Assumed Liabilities as at the Closing Date, the Purchaser shall pay to the Vendor such excess.

3.00

REPRESENTATIONS AND WARRANTIES OF THE VENDOR

The Vendor hereby jointly represents and warrants that:

3.01

The Vendor is a subsisting corporation duly and validly incorporated and organized under the laws of the Province of Ontario.

3.02

The Vendor has all requisite corporate power and authority to carry on its business and to own, lease and operate the properties and assets now-owned, leased and operated by it and is duly qualified to do business and to own, lease and operate its properties and assets and is in good standing in every jurisdiction in which the character of the business conducted or the nature of the properties owned, leased or operated by the Vendor makes such qualification necessary. 

4.00

COVENANTS OF THE VENDOR 

4.01

The Vendor hereby covenants that it will, on the Date of Closing:

(a)

execute and deliver to the Purchaser all necessary documents, necessary or reasonably required to transfer effectively to the Purchaser good and marketable title to the Purchased Assets free and clear of all mortgages, pledges, liens, charges, claims, demands, security interests or encumbrances of any nature or kind;

(b)

deliver possession of the Purchased Assets to the Purchaser.

 4.02

The Vendor covenant
s that
it will, prior to the
Closing Date , secure approval of this asset sale transaction by the Vendor’s
 s hareholders in accordance with relevant law.

5.00

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser hereby represents and warrants, and acknowledges that the Vendor is relying on the foregoing representations and warranties in completing the agreement of purchase and sale, that: 

5.01

The Purchaser is a subsisting corporation duly and validly incorporated and under the laws of the Province of Ontario.

6.00

COVENANTS OF THE PURCHASER

6.01

The Purchaser hereby covenants that, contemporaneously with the execution of this Agreement, the Purchaser will:

(a)

execute all assignments and documents delivered pursuant to this Agreement which require execution by the Purchaser; 

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(b) 

assume all employees of the Vendor upon the same terms and conditions as presently employed; and

 (c)

 guarantee payment of the Assumed Liabilities, and indemnify and hold harmless Vendor
 from any costs, expenses, damages or legal fees (other than contemplated in this Agreement) related to the Assumed Liabilities.

7.00

GENERAL CONTRACT PROVISIONS

7.01

This agreement shall be governed by the laws of Canada to the extent they apply and by the laws of the Province of Ontario. 

7.02

All words and personal pronouns relating thereto shall be read and construed as the number and gender of the party or parties referred to in each case require and the verb shall be construed as agreeing with the required word and/or pronoun. 

7.03

Time shall be of the essence of this agreement and every part herein and no extension or violation of the Agreement shall operate as a waiver of this provision. 

7.04

If the Purchaser is two or more persons, the representations, warranties and covenants on the part of the Purchaser herein made shall be deemed to be the joint and several representations, warranties and covenants of such persons.

7.05

This Agreement shall constitute the entire agreement between the parties hereto with respect to all of the matters herein and no warranty, representation, covenant or condition pertaining to any of such matters shall have any force and effect whatsoever unless contained in this Agreement. 

7.06 

This agreement constitutes the entire agreement between the parties and supersedes all prior and contemporaneous agreements, understandings and discussions, whether oral or written, and there are no warranties or representations between the parties except as expressly provided in this agreement.

7.07

This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. 

7.08 

All communications provided for herein shall be in writing and shall be personally delivered to an officer or other responsible employee of the addressee or sent by telefacsimile or other direct written electronic means, charges prepaid, at or to the applicable address or telefacsimile number, as the case may be, set opposite the party's name below or at or to such other address or addresses or telefacsimile number or numbers as any party hereto may from time to time designate to the other parties in such manner. Any communication which is personally delivered as aforesaid shall be deemed to have been validly and effectively given on the date of such delivery if such date is a Business Day (as hereinafter defined) and such delivery was made during normal business hours of the recipient; otherwise, it shall be deemed to have been validly and effectively given on the Business Day next following such date of delivery. Any communication which is transmitted by telefacsimile or other direct written electronic means as 

4

aforesaid shall be deemed to have been validly and effectively given on the date of transmission if such date is a Business Day and such transmission was made during normal business hours of the recipient; otherwise, it shall be deemed to have been validly and effectively given on the Business Day next following such date of transmission. For the purposes hereof, "Business Day" shall mean any day other than a Saturday, Sunday or statutory or civic holiday in the City of Toronto, Province of Ontario.

To the Purchaser, Vendor,

43 Riviera Drive - Unit 6

or Purchaser Principal at:

Markham, Ontario

L3R 5J6

Attention: Michael Green

Phone: (905) 479-0214

Fax: (905) 479-9472

 with a copy to:

Conway Kleinman Kornhauser, LLP

Barristers & Solicitors

390 Bay Street - Suite 1102

Toronto, Ontario

M5H 2Y2

Attention: David N. Kornhauser

Phone: (416) 862-6280

Fax: (416) 368-5454

Email: dkornhauser@ckkg.com

7.09 

This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall be but a single instrument.

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IN WITNESS WHEREOF the parties hereto have duly executed this agreement .

SIGNED, SEALED and DELIVERED

)

MIAD INFORMATION SYSTEMS INC.

 in the presence of 

) 

 

 

) 

) 

Per: _______________________c/s 

)

)

Date: May 24, 2005

)

MIAD SYSTEMS LTD.

)

)

 

)

Per: _______________________c/s

)

)

Date: May 24, 2005

)

____________________________

)

Michael Green

Date: May 24, 2005

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