DTS DEF 14A Definitive proxy

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )


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DTS, Inc.
(Name of Registrant as Specified In Its Charter)

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DTS, Inc.
5220 Las Virgenes Road
Calabasas, California 91302

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 12, 2011

To Our Stockholders:

The annual meeting of stockholders of DTS, Inc., a Delaware corporation, will be held at 10:00 a.m., local time, on May 12, 2011, at the Mediterraneo Room at the Westlake Village Inn, 32037 Agoura Road, Westlake Village, CA 91361, for the following purposes:

1.: To elect two members of the Board of Directors, whose terms are described in the Proxy Statement;
2.: To vote on an advisory (non-binding) basis on the compensation of our named executive officers;
3.: To vote on an advisory (non-binding) basis on the frequency of an advisory vote on executive compensation in the future;
4.: To ratify the appointment of Grant Thornton LLP to serve as our independent registered public accountants for the 2011 fiscal year; and
5.: To transact such other business as may properly come before the meeting or any postponement or adjournment thereof.

Holders of record of DTS, Inc. Common Stock at the close of business on April 1, 2011, are entitled to vote at the meeting.

In addition to the Proxy Statement, proxy card and voting instructions, a copy of DTS, Inc.'s annual report on Form 10-K, which is not part of the proxy soliciting materials, is enclosed.

It is important that your shares be represented and voted at the meeting. You can vote your shares by completing and returning a proxy card in the enclosed, postage-prepaid envelope. You can revoke a proxy at any time prior to its exercise at the meeting by following the instructions in the enclosed Proxy Statement.



		By Order of the Board of Directors,

		Blake A. Welcher, Executive Vice President, Legal, General Counsel, and Corporate Secretary
Calabasas, California April 4, 2011

DTS, Inc.
5220 Las Virgenes Road
Calabasas, California 91302

PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 12, 2011

This Proxy Statement is furnished on behalf of the Board of Directors of DTS, Inc., a Delaware corporation, for use at the annual meeting of stockholders to be held on May 12, 2011 at 10:00 a.m., local time, and at any postponement or adjournment thereof. The annual meeting will be held at the Mediterraneo Room at the Westlake Village Inn, 32037Agoura Road, Westlake Village, CA 91361.

These proxy solicitation materials were first mailed on or about April 4, 2011 to all stockholders entitled to vote at the annual meeting.

ABOUT THE MEETING

What is the purpose of the annual meeting?

At the annual meeting, stockholders will vote on: (1) the election of two Class II directors, (2) an advisory (non-binding) basis on the compensation of our named executive officers, (3) an advisory (non-binding) basis on the frequency that stockholders should vote on executive compensation (either every three years, two years, or one year), (4) the ratification of Grant Thornton LLP to serve as the Company's independent registered public accountants for the 2011 fiscal year and (5) any other business that may properly come before the meeting.

Who is entitled to vote?

Only stockholders of record at the close of business on the record date, April 1, 2011, are entitled to vote at the annual meeting or any postponement or adjournment of the meeting. For ten days prior to the annual meeting, a complete list of stockholders entitled to vote at the meeting will be available for examination by any stockholder for any purpose relating to the meeting during ordinary business hours at our principal offices located at 5220 Las Virgenes Road, Calabasas, California, 91302.

What are the Board of Directors' recommendations on the proposals?

The Board's recommendation is set forth together with the description of each item in this Proxy Statement. In summary, the Board unanimously recommends a vote FOR each of the nominees for director, FOR the compensation of our named executive officers, FOR a vote of stockholders every three years on the executive compensation of our named executive officers, and FOR the ratification of the appointment of Grant Thornton LLP as independent registered public accountants of the Company.

Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board of Directors. With respect to any other matter that properly comes before the annual meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, according to their own best judgment. At the date this Proxy Statement went to press, we did not know of any other matters that are to be presented at the annual meeting.

How do I vote my shares at the annual meeting?

Sign and date each proxy card you receive and return it in the postage-prepaid envelope enclosed with your proxy materials. If you are a registered stockholder and attend the annual meeting, then you may deliver your completed proxy card in person or you may vote in person at the annual meeting.

If your shares are held in "street name" by your broker or bank, you will receive a form from your broker or bank seeking instructions as to how your shares should be voted. If you do not instruct your broker or bank how to vote, your broker or bank may vote your shares if it has discretionary power to vote on a particular matter.

Can I change my vote after I return my proxy card?

Yes, you may revoke or change your proxy at any time before the annual meeting by filing with Blake Welcher, our Executive Vice President, Legal, General Counsel and Corporate Secretary, at 5220 Las Virgenes Road, Calabasas, California, 91302, a notice of revocation or another signed proxy card with a later date. You may also revoke your proxy by attending the annual meeting and voting in person.

Who will count the votes?

Our Executive Vice President, Legal, General Counsel, and Corporate Secretary will count the votes and act as the inspector of election.

What does it mean if I get more than one proxy card?

If your shares are registered differently or are in more than one account, you will receive more than one proxy card. Sign and return all proxy cards to ensure that all of your shares are voted. We encourage you to have all accounts registered in the same name and address (whenever possible). You can accomplish this by contacting our transfer agent, Computershare Trust Company, N.A. (877) 282-1168, or, if your shares are held in street name, by contacting the broker or bank that holds your shares.

How many shares can vote?

As of the record date, April 1, 2011, 17,388,131 shares of our Common Stock were outstanding. Every stockholder is entitled to one vote for each share of Common Stock held.

What is a quorum?

The presence at the meeting in person or by proxy of holders of a majority of the outstanding shares of our stock entitled to vote at the meeting will constitute a quorum. A quorum must be met in order to hold the meeting and transact any business, including voting on proposals. Proxies marked as abstaining on any matter to be acted upon by stockholders and "broker non-votes", described below, will be treated as present for purposes of determining if a quorum is present.

What vote is required to approve each proposal?

If a quorum is present: (i) the nominees for director who receive a plurality of the votes, which means that the two director nominees receiving the highest number of "For" votes, will become Class II directors, (ii) the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting is required to approve our executive compensation proposal, (iii) for purposes of the proposal regarding the frequency of the non-binding vote on executive compensation, the option of three years, two years or one year that receives the highest number of "For" votes will be the frequency for the advisory vote on executive compensation that has been selected by stockholders and (iv) the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting is required to ratify the appointment of Grant Thornton LLP as our independent registered public accountants.

What are broker non-votes?

Broker non-votes are shares held by brokers that do not have discretionary authority to vote on a matter and have not received voting instructions from their clients. If your broker holds your shares in its name (referred to as "street name") and you do not instruct your broker how to vote, your broker will not have discretion to vote your shares on any of the matters, other than the matter regarding ratification of the appointment of Grant Thornton LLP as the company's independent registered public accountants. Broker non-votes will be counted as shares present for the purpose of determining the presence of a quorum. Broker non-votes will have no effect on any of the proposals. We encourage you to provide instructions to your broker regarding the voting of your shares.

What happens if I abstain?

Proxies marked "abstain" will be counted as shares present for the purpose of determining the presence of a quorum, but for purposes of determining the outcome of a proposal, they will be treated as a "no" or "none" vote. Abstentions will have no effect on the election of directors or the advisory vote on the frequency of future votes on executive compensation.

How will DTS solicit proxies?

We have retained Computershare Trust Company, N.A. and Alliance Advisors, LLC to assist in the distribution of proxy materials. The costs and expenses of preparing and mailing proxy solicitation materials for the annual meeting and reimbursements paid to brokerage firms and others for their reasonable out-of-pocket expenses for forwarding proxy materials to stockholders will be borne by us. We have retained Alliance Advisors, LLC as our proxy solicitor to assist in soliciting proxies and we will bear these costs, which we expect will be approximately $2,500. Proxies may also be solicited in person, by telephone, or by facsimile by our directors, officers, and employees without additional compensation being paid to these persons.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 12, 2011

This is our Proxy Statement for our annual meeting of stockholders to be held on May 12, 2011. Financial and other information concerning DTS, Inc. is contained in our annual report on Form 10-K for the fiscal year ended December 31, 2010. A complete set of proxy materials relating to our annual meeting is available on the Internet. These materials, consisting of our notice of annual meeting, Proxy Statement, proxy card and annual report on Form 10-K, may be viewed at: https://materials.proxyvote.com/23335C

ITEM 1—ELECTION OF DIRECTORS

The Board of Directors currently consists of eight persons and is divided into three classes of directors with staggered three-year terms. There are three Class I directors, two Class II directors, and three Class III directors. The three Class I directors currently consist of Mr. Craig S. Andrews, Mr. L. Gregory Ballard, and Mr. Bradford D. Duea. The two Class II directors currently consist of Mr. Joerg D. Agin and Ms. C. Ann Busby. The three Class III directors currently consist of Mr. Jon E. Kirchner, Ms. V. Sue Molina and Mr. Ronald N. Stone.

The term of the Class II directors will expire at the annual meeting this year, and Ms. Busby has notified the Board that she will not run for re-election at the end of her current term. In order to help balance the number of directors among the classes, Mr. Kirchner has agreed to be moved from a Class III director to a Class II director and to run for re-election as a Class II director this year. The Nominating/Corporate Governance Committee of the Board has nominated Mr. Agin and Mr. Kirchner for election at the annual meeting to serve as Class II directors. You can find information about

Mr. Agin and Mr. Kirchner below. A director elected to Class II will serve for a term of three years, expiring at the 2014 annual meeting of stockholders, or until his successor is duly elected and qualified or his earlier death, resignation or removal.

The persons named in the proxy card will vote such proxy for the election of Mr. Agin and Mr. Kirchner unless you indicate that your vote should be withheld or abstained from voting. You cannot vote for a greater number of directors than two. If elected, Mr. Agin and Mr. Kirchner will continue in office until our 2014 annual meeting of stockholders or until their successors have been duly elected and qualified or until the earlier of their respective death, resignation or retirement. Mr. Agin and Mr. Kirchner have each indicated to the Company that they will serve if elected. We do not anticipate that Mr. Agin and Mr. Kirchner will be unable to stand for election, but, if that happens, your proxy will be voted in favor of another person nominated by the Board. We anticipate that the Board of Directors will consist of seven persons immediately following the annual meeting.

The Board of Directors recommends a vote "FOR" the election of Mr. Agin and Mr. Kirchner as directors.

Nominees and Continuing Directors

Each of our directors brings to our board extensive management and leadership experience gained through their service as executives and have diverse experience relating to strategy, operations, capital, risk and business cycles management. In addition, most current directors bring public company board experience—either significant experience on other boards or long service on our Board—that broadens their knowledge of board policies and processes, rules and regulations, and issues and solutions. The Nominating/Corporate Governance Committee's process to recommend qualified director candidates is described under the section titled "Nominating/Corporate Governance Committee" below. In the paragraphs below, we describe specific individual qualifications and skills of our directors that contribute to the overall effectiveness of our Board and its committees.

Set forth below are the names of the nominees for election to the office of director and each current director whose term does not expire at this time, along with their ages, the year first elected as a director, their present positions, principal occupations and public company directorships held in the past five or more years.

NOMINEES FOR TERM EXPIRING AT THE
ANNUAL MEETING OF STOCKHOLDERS IN 2014

Joerg D. Agin, 68, has served as a member of our Board of Directors since July 2003, and currently serves as Lead Independent Director and also serves on our Audit Committee. Since September 2001, he has been the President of Agin Consulting, a consulting business engaged for specific project work associated with hybrid and digital motion imaging systems. Mr. Agin retired in September 2001 from the Eastman Kodak Company, a manufacturer and marketer of imaging products. He first joined Kodak in 1967 as an electrical engineer, but, most recently, from 1995 through August 2001, he served as Senior Vice President and President of the company's Entertainment Imaging division. Mr. Agin also worked at MCA/Universal Studios, a motion picture studio, as Senior Vice President, New Technology and Business Development from 1992 through 1995. Mr. Agin is a Fellow of the Society of Motion Pictures & Television Engineers and the recipient of the Technicolor Herbert T. Kalmus Gold Medal Award for outstanding achievement in color motion pictures. Mr. Agin attended MIT Sloan School of Management for Senior Executives, holds a B.S. in Electrical Engineering from the University of Delaware, and an M.B.A. from Pepperdine University. Mr. Agin was selected to serve on our Board due to his extensive knowledge of digital imaging technologies, his familiarity with technology companies and key contacts within the entertainment industry, his prior experience as a senior executive with major international corporations, and his extensive training in corporate governance matters.

Jon E. Kirchner, 43, has served as our Chairman of the Board of Directors and Chief Executive Officer (or "CEO") since February 2010. From September 2001 to February 2010, he served as our President and Chief Executive Officer. He has been a member of our Board of Directors since August 2002. Since joining us in 1993, Mr. Kirchner has served in a number of capacities. From April 2000 to September 2001, he was our President and Chief Operating Officer. From September 1998 to April 2000, he served as our Executive Vice President of Operations, and from March 1996 to September 1998, he was our Vice President of Finance and Business Development. Mr. Kirchner has also served as our Director of International Operations and Controller. Prior to joining us, Mr. Kirchner worked for the Dispute Analysis and Corporate Recovery and Audit Groups of Price Waterhouse LLP (now PricewaterhouseCoopers, LLP), an international accounting firm. During his tenure at Price Waterhouse LLP, he advised clients on financial and operational restructuring, business turnaround, market positioning, and valuation issues. Mr. Kirchner has experience in a variety of industries including entertainment, high technology, manufacturing, distribution, and transportation. He is a Certified Public Accountant and received a B.A. in Economics, Cum Laude, from Claremont McKenna College. Mr. Kirchner was selected to serve on and lead our Board due to his detailed knowledge of all aspects of the operations of the Company, his accounting background and exposure to a number of industries, giving him sound, practical business judgment. We believe that given the size, scope, complexity and expected rapid growth in our business, that oversight, communication, and direction between the Board and management is best achieved by having our CEO also serve as Chairman of the Board of Directors.

CONTINUING DIRECTORS WHOSE TERMS EXPIRE AT THE
ANNUAL MEETING OF STOCKHOLDERS IN 2012

V. Sue Molina, 62, has served on our Board of Directors since January 2008, and currently serves as Chair of our Nominating/Corporate Governance Committee and serves on our Audit Committee. From November 1997 until her retirement in May 2004, she was a tax partner at Deloitte & Touche LLP, an international accounting firm, serving from 2000 until May 2004 as the national partner in charge of Deloitte's Initiative for the Retention and Advancement of Women. Prior to that, she spent twenty years with Ernst & Young LLP, an international accounting firm, the last ten years as a partner. From August 2006 to May 2009, Ms. Molina served as a member of the Board of Directors and Audit Committee, and was Chair of the Compensation Committee of Sucampo Pharmaceuticals, Inc., a pharmaceutical company. Currently, Ms. Molina is a member of the Board of Directors, Chair of the Audit Committee and a member of the Compensation Committee of Royal Neighbors of America, a fraternal insurance company. She holds a B.S.B.A. and a Masters of Accounting degree from the University of Arizona. Ms. Molina was selected to serve on our Board due to her extensive accounting and financial expertise and her experience in advising Boards and serving on Boards of public companies.

Ronald N. Stone, 66, has served as a member of our Board of Directors since April 2004, and currently serves as Chair of our Audit Committee and also serves on our Compensation Committee. Mr. Stone is currently President of Stone Consulting, Inc., a firm providing consulting services to the consumer electronics industry. Until April 2005, Mr. Stone served as an advisor to Pioneer Electronics (USA) Inc., a global consumer electronics company, a role he held after he retired from Pioneer in May 2003. At the time of his retirement, Mr. Stone served as president of Pioneer's Customer Support Division, a position he had held since March 2000. The Customer Support Division was responsible for product services, accessories, and after-sales operations for several Pioneer entities. Prior to his position as president of the Customer Support Division, Mr. Stone served as executive vice president and Chief Financial Officer of Pioneer Electronics (USA) Inc. since 1985. Mr. Stone also served on the board of directors of Pioneer and several of its North American subsidiaries. Mr. Stone began his career with Pioneer Electronics in 1975. Mr. Stone served on the executive committee of the Consumer Electronics Association (CEA), owner of the International Consumer Electronics Show® for more than 15 years,

and is a former chairman of that organization's board of directors. He also serves on the UCLA Medical Center board of advisors and on its Information Technology and Finance committees. Mr. Stone received his bachelor's degree in accounting from the University of Southern California. He is a Certified Public Accountant. Mr. Stone was selected to serve on our Board due to his broad and deep experience in the consumer electronics industry, his extensive accounting and financial expertise and his extensive experience as a senior executive.

Mr. Jon E. Kirchner's current term as a director will expire at the annual meeting of stockholders in 2012 unless he is elected a Class II director this year, in which case his term will expire at the annual meeting of stockholders in 2014 along with the other Class II directors.

CONTINUING DIRECTORS WHOSE TERMS EXPIRE AT THE
ANNUAL MEETING OF STOCKHOLDERS IN 2013

Craig S. Andrews, 58, has served as a member of our Board of Directors since June 2010, and currently serves as Chair of our Compensation Committee and also serves on our Nominating/Corporate Governance Committee. Mr. Andrews has been Of Counsel to the law firm of DLA Piper LLP (US) since January 2010, and was a partner at the firm from May 2008 through December 2009. Mr. Andrews has also been Chief Operating Officer of Renova Therapeutics, Inc., a privately held gene therapy company, since June 2008. From March 2003 to June 2008, he was a shareholder of Heller Ehrman, LLP. From March 1987 to February 2003, he was a partner in the Brobeck, Phleger & Harrison law firm, other than for the period from May 2000 to January 2002, during which he spent time as the vice-president of business development at Air Fiber, Inc., a private telecommunications company, and as a partner at the law firm of Latham & Watkins. Mr. Andrews has been advising Boards of Directors of public and private companies for over 25 years, with a focus in representing emerging-growth companies, as well as an expertise in general business and corporate law. Mr. Andrews has played an important role in the formation and development of numerous companies. From September 1999 until August 2010, he was a director of Rubio's Restaurants, Inc. (formerly a NASDAQ listed company), where he was the chairman of the nominating and corporate governance committee and a member of the company's compensation committee. He has previously served as director of numerous other public and private companies, including Encad, Inc. (formerly a NASDAQ listed company), and Collateral Therapeutics, Inc. (formerly a NASDAQ listed company). Mr. Andrews received a Bachelors of Arts degree from the University of California Los Angeles, and a J.D. from the University of Michigan. Mr. Andrews was selected to serve on our Board due to his vast experience in advising boards and companies with respect to legal and general business matters.

L. Gregory Ballard, 57, has served as a member of our Board of Directors since May 2008, and, since February 2011, has served on our Nominating/Corporate Governance Committee. He currently serves as Senior Vice President, Digital Games for Warner Bros Interactive Entertainment. From May 2010 to September 2010, Mr. Ballard served as Chief Executive Officer of Transpera, Inc. a mobile video advertising network. From October 2003 through December 2009, Mr. Ballard served as President & Chief Executive Officer of Glu Mobile Inc., a publisher of mobile video games. In recent years, Mr. Ballard served on the board of Pinnacle Systems, Inc., Imagine Games Network and THQ Inc. He has also served on the Compensation Committee of Pinnacle Systems, Inc. Prior to joining Glu Mobile in October of 2003, Mr. Ballard consulted for Virgin USA, Inc. from April 2003 to September 2003. Prior to then, he served as Chief Executive Officer at SONICblue Incorporated, a manufacturer of ReplayTV digital video recorders and Rio digital music players, from August 2002 to April 2003, when it filed for Chapter 11 bankruptcy protection. Mr. Ballard was also Executive Vice President of Marketing and Product Management at SONICblue from April 2002 to August 2002. Between July 2001 and April 2002, Mr. Ballard worked as a consultant. Mr. Ballard served as Chief Executive Officer of MyFamily.com, Inc., a subscription-based Internet service, from January 2000 to July 2001. Previously, he served as Chief Executive Officer or in another senior executive capacity with

3dfx Interactive, Inc., an advanced graphics chip manufacturer, Warner Custom Music Corp., a division of Time Warner, Inc., Capcom Entertainment, Inc., a developer and publisher of video games, and Digital Pictures, Inc., a video game developer and publisher. Mr. Ballard holds a B.A. degree in political science from the University of Redlands and a J.D. from Harvard Law School. Mr. Ballard was selected to serve on our Board due to his substantial experience as an executive and chief executive officer with a number of public and private companies in areas related to the Company's business.

Bradford D. Duea, 42, has served as a member of our Board of Directors since March 2010, and also serves on our Compensation Committee. Mr. Duea currently serves as Senior Vice President, Value Added Services for T-Mobile USA. Mr. Duea is responsible for T-Mobile USA's content business, next generation communication services, mobile portal and related discovery products, search and advertising business and its mobile broadband business, including emerging devices such as tablets. Mr. Duea initially joined T-Mobile in April 2010 as General Manager and Vice President, Communications, Applications and Media and was promoted to his current role in November 2010. From January 2004 until February 2010, Mr. Duea was the President of Napster, Inc. where he was responsible for all international activities, including acting as a board member to Napster Japan (a joint venture with Tower Records Japan) and overseeing the business development activities of the company on a worldwide basis, including Napster Mobile. From May 2003 to January 2004, Mr. Duea served as Vice President, Worldwide Business Development for Roxio, Inc. (which later became Napster, Inc.), where he was responsible for all business development efforts for the company, including those for Napster. Mr. Duea holds a B.A. in Law and Society from the University of California at Santa Barbara, an M.B.A. in Finance and International Business from the University of Southern California, and a J.D. from the University of San Diego. Mr. Duea was selected to serve on our Board due to his background as an executive in the digital media space and his finance and legal background, which will be helpful in evaluating corporate governance and financial matters.

GOVERNANCE OF THE COMPANY

Pursuant to the Delaware General Corporation Law and our by-laws, our business, property and other affairs are managed by or under the direction of the Board of Directors. Members of the Board are kept informed of our business through discussions with our Chief Executive Officer and other officers, by reviewing materials provided to them and by participating in meetings of the Board and its committees. We currently have eight members of the Board—Mr. Agin, Mr. Andrews, Mr. Ballard, Ms. Busby, Mr. Duea, Mr. Kirchner, Ms. Molina, and Mr. Stone. We currently anticipate that the Board will have seven members immediately following the annual meeting of stockholders this year.

Board Leadership

Our Corporate Governance Guidelines state that the Board is free to choose its Chair in any manner that is in the best interests of the company at the time. When the Chair of the Board also serves as the Company's Chief Executive Officer, as Mr. Kirchner does, or when the Chair is not independent, the Board, by majority vote of the Independent Directors, may designate an Independent Director to serve as the "Lead Independent Director." Mr. Agin currently serves as the Lead Independent Director. The Board believes that this leadership structure is best for the company at the current time, as it appropriately balances the need for the Chief Executive Officer to run the company on a day-to-day basis with involvement and authority vested in an outside independent Board member—the Lead Independent Director. The role of our Lead Independent Director is fundamental to our decision to combine the Chief Executive Officer and Chair of the Board positions. Our Lead Independent Director assumes many functions traditionally within the purview of a chairman of the board. Under our Corporate Governance Guidelines, our Lead Independent Director must be

independent, and the specific responsibilities of the Lead Independent Director (if so designated) are as follows:

•: Act as a principal liaison between the Independent Directors and the Chair of the Board on sensitive issues;
•: Develop the agenda for and moderate executive sessions of the Board's Independent Directors;
•: Provide feedback to the Chair of the Board regarding matters discussed in executive sessions of the Independent Directors;
•: Work in collaboration with the Chair of the Board in developing the agendas for Board meetings;
•: Consult with the Chair of the Board as to an appropriate schedule of Board meetings, seeking to ensure that the Independent Directors can perform their duties responsibly while not interfering with the flow of Company operations;
•: Consult with the Chair of the Board as to the quality, quantity, and timeliness of the flow of information from Company management that is necessary for the Independent Directors to effectively and responsibly perform their duties;
•: Preside at any meeting of the Board at which the Chair of the Board is not present; and
•: Work in collaboration with the Nominating/Corporate Governance Committee and the Chair of the Board with respect to the implementation and periodic review and, as appropriate, alteration of the Company's Corporate Governance Guidelines.

Risk Management

Pursuant to our Corporate Governance Guidelines, the Board's Risk Management Process includes reviewing and assessing business enterprise risk and other major risks facing the company, and evaluating management's approach to addressing such risks. On an ongoing basis, the Board and the Company, in the development and implementation of its strategic growth initiatives, discuss key risks facing the company, plans for addressing these risks and the company's risk management practices overall. In addition, our Board committees consider and address risk as they perform their respective committee responsibilities. For example, financial risks are overseen by our Audit Committee and our internal audit group, our Compensation Committee periodically reviews the Company's compensation programs to assure that they do not encourage excessive risk-taking, and our Nominating/Corporate Governance Committee is tasked with discussing and monitoring best practices for managing all levels of risk. All committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise risk.

Our management is responsible for day-to-day risk management and regularly reports on risks to the Board or relevant Board committee. With help from the internal audit group as to internal and disclosure control risks, management monitors and tests company-wide policies and procedures, and manages the day-to-day oversight of the risk management strategy for our ongoing business. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, and compliance reporting levels.

We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing the Company and that our Board leadership structure supports this approach.

Compensation Risk Assessment

In setting each element of executive compensation, the Compensation Committee considers the level of risk-taking that any element may promote. Our Compensation Committee believes it is important to incentivize our executive officers to achieve annual company and individual objectives, but balance promotion of such short-term interests with incentives that promote building long-term stockholder value. The Compensation Committee believes the amount of long-term equity incentives included in our executive compensation packages mitigates the potential for excessive short-term risk-taking. All of our named executive officers' equity awards vest over a period of time, generally annually over four years from the date of grant, and the Compensation Committee has historically granted additional equity awards annually.

Our Compensation Committee has conducted an internal assessment of our compensation policies and practices in response to current public and regulatory concern about the link between incentive compensation and excessive risk taking by corporations. The Committee concluded that the Company's compensation programs do not motivate excessive risk-taking and any risks involved in compensation are unlikely to have a material adverse effect on the Company. Included in the analysis were such factors as the behaviors being induced by our fixed and variable pay components, the balance of short-term and long-term performance goals in our incentive compensation system, the established limits on permissible incentive award levels, our clawback policy, the oversight of our Compensation Committee in the operation of our incentive plans and the high level of board involvement in approving material investments and capital expenditures.

Committees of the Board

The Board has three standing committees, with the following members:

Mr. Agin, Mr. Andrews, Mr. Ballard, Ms. Busby, Mr. Duea, Ms. Molina and Mr. Stone are not, and have never been, employees of our Company or any of our subsidiaries and the Board has determined that each of these directors is independent in accordance with the requirements regarding director independence set forth under applicable rules of the NASDAQ Stock Market.

The Board has adopted a charter for each of the three standing committees. The Board has also adopted a code of ethics and a code of conduct that apply to all of our employees, officers and directors. You can find links to these materials on our website atwww.dts.com under the "Investor Relations" and "Corporate Governance" links. The information on our website is not incorporated by reference in this Proxy Statement.

During 2010, the Board held nine meetings and the three standing committees held the number of meetings indicated above. Each director attended or participated in at least 75% of the aggregate of (i) the total number of meetings of the Board of Directors held during the period for which he or she was a director, and (ii) the total number of meetings of all committees of the Board on which he or she served during the period that he or she served. Although the Company has no formal policy regarding director attendance at annual meetings, it does expect all members of the Board to attend the 2011 annual meeting. All nominees for director and continuing members of our Board attended the 2010 annual meeting.

Audit Committee

Each member of the Audit Committee is independent as determined by the NASDAQ Stock Market listing standards as they apply to Audit Committee members. The Audit Committee is a standing committee of, and operates under a written charter adopted by, our Board of Directors. The Audit Committee reviews and monitors our financial statements and accounting practices, appoints, determines the independence of and funding for, and oversees our independent registered public accountants, reviews the results and scope of the Company's annual audit and other services provided by our independent registered public accountants, reviews and evaluates our audit and control functions and reviews and approves any related party transactions. Mr. Stone chairs the Audit Committee. The Audit Committee met six times during 2010.

Audit Committee Financial Expert. The Board has determined that Ms. Molina and Mr. Stone each qualify as an "audit committee financial expert" under the rules of the Securities and Exchange Commission.

Compensation Committee

Each member of the Compensation Committee is independent as determined by the NASDAQ Stock Market listing standards. The Compensation Committee makes decisions and recommendations regarding salaries, benefits, and incentive compensation for our directors and executive officers and administers our incentive compensation and benefit plans, including our 2003 Equity Incentive Plan and our 2005 Performance Incentive Plan. Mr. Andrews chairs the Compensation Committee. The Compensation Committee met seventeen times during 2010.

Nominating/Corporate Governance Committee

Each member of the Nominating/Corporate Governance Committee is independent for the purposes of the NASDAQ Stock Market listing standards. Ms. Molina chairs the Nominating/Corporate Governance Committee. The Nominating/Corporate Governance Committee met five times during 2010. The Nominating/Corporate Governance Committee assists the Board of Directors in fulfilling its responsibilities by:

•: identifying and approving individuals qualified to serve as members of our Board of Directors;
•: selecting director nominees for each election of directors;
•: overseeing and administering the Board's evaluation of its performance; and

•: developing and recommending to our Board updated Corporate Governance Guidelines and providing oversight with respect to corporate governance and ethical conduct.

While we do not have a formal diversity policy, we do seek a diversified Board. Our Nominating/Corporate Governance Committee believes it's important for our Board to have diversity and takes into account a number of the following factors when considering director nominees:

•: independence from management;
•: age, gender and ethnic background;
•: educational and professional background;
•: relevant business experience;
•: judgment, skill, integrity and reputation;
•: existing commitments to other businesses and service on other boards;
•: potential conflicts of interest with other pursuits;
•: legal considerations such as antitrust issues;
•: corporate governance background;
•: financial and accounting background, to enable the committee to determine whether the candidate would be suitable for audit committee membership;
•: executive compensation background, to enable the committee to determine whether the candidate would be suitable for Compensation Committee membership; and
•: the size and composition of the existing Board.

Before nominating a sitting director for re-election at an annual meeting, the committee will further consider:

•: the director's performance on the Board; and
•: whether the director's re-election would be consistent with the Company's governance guidelines.

The Nominating/Corporate Governance Committee discussed these factors in identifying the two nominees for our Class II directors.

The Nominating/Corporate Governance Committee will also consider candidates for director suggested by stockholders applying the criteria for candidates described above and considering the additional information referred to below. Stockholders wishing to suggest a candidate for director should write to the Company's Corporate Secretary and include the following information:

•: a statement that the writer is a stockholder and is proposing a candidate for consideration by the committee;
•: the name of and contact information for the candidate;
•: a detailed statement of the candidate's business and educational experience as well as how the candidate supports the diversity factors above;
•: information regarding the candidate, as required from time to time by the Nominating/Corporate Governance Committee, and as disclosed in the Company's annual Proxy Statement sufficient to enable the committee to evaluate the candidate;
•: a statement detailing any relationship between the candidate and any customer, supplier or competitor of the Company;

•: detailed information about any relationship or understanding between the proposing stockholder and its affiliates and associates, on the one hand, and the candidate, on the other hand;
•: a statement that the candidate is willing to be considered and willing to serve as a director if nominated and elected; and
•: any other information or other documents or agreements required of a Director nominee.

Other Committees

Our Board of Directors may establish other committees as it deems necessary or appropriate from time to time.

Stockholder Communications with Directors and Management

Any stockholder who desires to contact any member of our Board of Directors or management can write to:

DTS, Inc.
Attn: Stockholder Relations
5220 Las Virgenes Road
Calabasas, California, 91302

Your letter should indicate that you are a DTS stockholder. Depending on the subject matter, our stockholder relations personnel will:

•: forward the communication to the director or directors to whom it is addressed;
•: forward the communication to the appropriate management personnel;
•: attempt to handle the inquiry directly, for example where it is a request for information about the Company, or it is a stock-related matter; or
•: not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic.

Compensation of Directors

We currently pay each of our non-employee directors an annual retainer of $30,000, and our Lead Independent Director an annual retainer of $45,000. In addition, we pay each of our non-employee directors the following annual retainers for their service as a member, or chair, as applicable, of our Board committees:


Annual Retainers for Committee Members:
	Audit Committee	$	7,000
	Compensation Committee	$	5,000
	Nominating/Corporate Governance Committee	$	4,000
Annual Retainers for Committee Chairs:
	Audit Committee	$	20,000
	Compensation Committee	$	12,000
	Nominating/Corporate Governance Committee	$	8,000

All Board and committee retainers are paid in equal quarterly installments over the course of each year of a director's service on the Board or applicable committee. We also reimburse all non-employee directors for reasonable expenses related to our Board of Directors or committee meetings.

In addition, our 2003 Equity Incentive Plan, as amended (the "2003 Plan"), provides for automatic grants of stock options and restricted stock, awards or units, to our non-employee directors in order to provide them with additional incentives and thereby promote the success of our business. In 2010, the 2003 Plan provided for an annual grant of an option to purchase 6,000 shares of our common stock, as well as 2,000 restricted stock units of our common stock for each continuing non-employee director on the date of each annual meeting of the stockholders. In addition, the 2003 Plan also provided for each newly elected or appointed non-employee director an initial, automatic grant of an option to purchase 9,000 shares of our common stock, as well as 3,000 restricted stock units of our common stock. However, a non-employee director who receives an initial stock option grant and restricted stock units grant on, or within a period of six months prior to, the date of an annual meeting of stockholders will not receive an annual stock option grant and restricted stock units grant with respect to that annual stockholders' meeting. Each initial and annual option will have an exercise price equal to the fair market value of a share of our common stock on the date of grant and will have a term of ten years.

Since November 2006 and going forward, the vesting terms of the automatic equity awards to our non-employee directors are as follows: (i) initial restricted stock awards granted to newly elected or appointed non-employee directors vest over a period of three years in three equal installments on each anniversary of the date of grant for so long as the non-employee director continuously remains a director of, or a consultant to, the Company; (ii) initial stock option awards granted to newly elected or appointed non-employee directors vest and become exercisable in 36 equal installments on each monthly anniversary of the date of grant for so long as the non-employee director continuously remains a director of, or a consultant to, the Company; (iii) annual restricted stock units granted to non-employee directors who have served as such for at least six months prior to the annual meeting of stockholders vest in full on the one year anniversary of the date of grant as long as the non-employee director has continuously remained a director of, or consultant to, the Company through such anniversary date; and (iv) annual stock option awards granted to non-employee directors who have served as such for at least six months prior to the annual meeting of stockholders vest and become exercisable in 12 equal installments on each monthly anniversary of the date of grant for so long as the non-employee director continuously remains a director of, or a consultant to, the Company.

All automatic non-employee director options granted under the 2003 Plan will be non-statutory stock options. Options must be exercised, if at all, within three months after a non-employee director's termination of service, except in the case of death in which event the director's estate shall have one year from the date of death to exercise the option. However, in no event shall any option granted to a director be exercisable later than the expiration of the option's term. In the event of our merger with another corporation or another change of control, all outstanding options, restricted stock, awards and units, held by non-employee directors will vest in full.

The following table shows compensation information for our non-employee directors for fiscal year 2010.

2010 DIRECTOR COMPENSATION TABLE

(a)	(b)		(c)		(d)		(e)		(f)		(g)		(h)

Name(1)	Fees Earned or Paid in Cash ($)(5)		Stock Awards ($)(6)		Option Awards ($)(7)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)(8)		Total ($)
Bradford D. Duea(2)	$	25,000	$	97,740	$	119,070		—		—	$	5,810	$	247,620
Craig S. Andrews(3)	$	19,500	$	98,310	$	119,970		—		—	$	1,355	$	239,135
Joerg D. Agin	$	54,125	$	65,540	$	79,980		—		—	$	7,281	$	206,926
Ronald N. Stone	$	46,000	$	65,540	$	79,980		—		—	$	8,276	$	199,796
V. Sue Molina	$	43,000	$	65,540	$	79,980		—		—	$	6,099	$	194,619
L. Gregory Ballard	$	42,000	$	65,540	$	79,980		—		—	$	5,810	$	193,330
C. Ann Busby	$	36,500	$	65,540	$	79,980		—		—		—	$	182,020
Joseph A. Fischer(4)	$	25,000		—		—		—		—	$	11,326	$	36,326

(1): Daniel E. Slusser, our Chairman of the Board through February 12, 2010, and Jon E. Kirchner, our current Chairman and Chief Executive Officer, are not included in this table because they did not receive compensation for their service as directors. The compensation received by Mr. Kirchner is shown in the 2010 Summary Compensation Table. Mr. Slusser is not an immediate family member of any of our directors, nominees for director or executive officers and the compensation he earned for his service as an executive officer would have been reported in the Summary Compensation Table if he was one of our named executive officers for 2010. The compensation for Mr. Slusser's service as an executive officer was approved by the Compensation Committee of the Board.
(2): Mr. Duea was elected to our board of directors on March 1, 2010.
(3): Mr. Andrews was elected to our board of directors on June 4, 2010.
(4): Mr. Fischer retired from our board of directors on June 4, 2010.
(5): The Company pays each of its non-employee directors cash amounts as described above.
(6): Reflects the aggregate grant date fair value of stock awards granted by us in 2010, as determined in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Pursuant to the 2003 Plan, Mr. Duea and Mr. Andrews each received an automatic grant of 3,000 restricted stock units on their respective date of election to our board of directors. Pursuant to GAAP, the grant date fair value of each of those grants was $97,740 and $98,310, respectively, which is based on the grant date fair value per share of $32.58 and $32.77, respectively, which was the closing price of our common stock on the aforementioned dates of election for Mr. Duea and Mr. Andrews. Pursuant to the 2003 Plan, the other non-employee directors each received an automatic grant of 2,000 restricted stock units on June 4, 2010, the date of our annual meeting of stockholders. Pursuant to GAAP, the grant date fair value of each of those awards was $65,540, which is based on the grant date fair value per share of $32.77, which was the closing price of our common stock on June 4, 2010. As of December 31, 2010, Ms. Molina and Mr. Ballard each held an additional 2,500 shares of unvested stock awards. These additional shares were granted in 2008 pursuant to the 2003 Plan and in conjunction with each of their

elections to our board of directors. As of December 31, 2010, the other non-employee directors did not hold any other unvested stock awards.

(7): Reflects the aggregate grant date fair value of option awards granted by us in 2010, as determined in accordance with GAAP. Compensation expense is calculated based on the grant date fair value of the stock options, which is based on the Black Scholes option valuation method using the assumptions described in Footnote 12, "Stock Based Compensation," to our audited financial statements for the fiscal year ended December 31, 2010 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2011. Pursuant to the 2003 Plan, Mr. Duea and Mr. Andrews each received an automatic grant of an option to purchase 9,000 shares of our common stock on their respective date of election to our board of directors. Pursuant to GAAP, the grant date fair value of each of these automatic option grants determined using the Black Scholes method was $119,070 and $119,970, respectively. Pursuant to the 2003 Plan, the other non-employee directors each received an automatic grant of an option to purchase 6,000 shares of our common stock on June 4, 2010, the date of our annual meeting of stockholders. Pursuant to GAAP, the grant date fair value of each option automatically granted on June 4, 2010 determined using the Black Scholes method was $79,980. As of December 31, 2010, these non-employee directors had outstanding options to purchase the following aggregate number of shares of our common stock: Bradford D. Duea: 9,000; Craig S. Andrews: 9,000; Joerg D. Agin: 18,500; Ronald N. Stone: 28,500; V. Sue Molina: 28,500; L. Gregory Ballard: 23,500; C. Ann Busby: 18,500; Joseph A. Fischer: zero.
(8): Includes reimbursement for certain travel and other related costs in connection with our Annual Meeting of Stockholders in Ireland on June 4, 2010.

ITEM 2—ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, requires that our stockholders have the opportunity to cast an advisory (non-binding) vote on: (1) executive compensation, commonly referred to as a "Say-on-Pay" vote, and (2) the frequency of future Say-on-Pay votes—every three years, two years or one year, which is the subject of Item 3 in this Proxy Statement.

The advisory vote on executive compensation is a non-binding vote on the compensation of our "named executive officers," or "NEOs", as described in the Compensation Discussion and Analysis, or CD&A section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure, set forth in this Proxy Statement. The advisory vote is not a vote on our general compensation policies, the compensation of our directors, or our compensation policies as they relate to risk management, and is only on the compensation of our named executive officers.

Our compensation philosophy is centered on the principle of aligning pay and performance. Primary objectives of our compensation program are to:

•: Pay for performance;
•: Align the interests of our named executive officers and other employees with those of our stockholders;
•: Recruit, retain and motivate the highest quality executive officers who are critical to our success; and
•: Promote excellent corporate governance.

Highlights of our performance in 2010 include:

•: Revenues increased 12% for the year ended December 31, 2010, compared to the same prior year period;
•: Royalties from Blu-ray product markets increased 71% for the year ended December 31, 2010, compared to the same prior year period;
•: Operating income increased 34% compared to the same prior year period and was 28% of revenues for the year ended December 31, 2010;
•: Diluted earnings per share from continuing operations increased $0.24 to $0.84 for the year ended December 31, 2010, an increase of 40% compared to the same prior year period; and
•: The Company's share price increased 43% during the year as compared to the NASDAQ Composite IXIC increase of 14%.

We believe that our executive compensation program has appropriately rewarded our named executive officers and other key personnel for the significant performance of the company, and that our executive pay aligns well with our overall compensation philosophy of paying for performance. We encourage stockholders to read the CD&A section of this Proxy Statement for a more detailed discussion of our executive compensation programs, and how they reflect our philosophy and link to company performance.

The vote solicited by this Item 2 is advisory, and therefore is not binding on the company, our Board of Directors or our Compensation Committee, nor will its outcome require the company, our Board of Directors or our Compensation Committee to take any action. Moreover, the outcome of the vote will not be construed as overruling any decision by the company or our Board.

Furthermore, because this non-binding, advisory resolution primarily relates to the compensation of our NEOs that has already been paid or contractually committed, there is generally no opportunity for us to revisit these decisions. However, our Board, including our Compensation Committee, values the opinions of our stockholders and, to the extent there is any significant vote against the NEO compensation, we will consider our stockholders' concerns and evaluate what future actions, if any, may be appropriate.

Stockholders will be asked at the annual meeting to approve the following resolution pursuant to this Item 2:

"RESOLVED, that the stockholders of DTS, Inc. approve, on an advisory basis, the compensation of the company's Named Executive Officers, disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table, and the related compensation tables and narratives in the company's definitive Proxy Statement for the 2011 annual meeting of stockholders."

The Board of Directors unanimously recommends a vote "FOR" approval of the foregoing resolution.

Unless otherwise instructed, it is the intention of the persons named in the accompanying proxy card to vote shares represented by properly executed proxy cards for the approval of the foregoing resolution.

ITEM 3—ADVISORY (NON-BINDING) VOTE ON THE FREQUENCY OF
AN ADVISORY VOTE ON EXECUTIVE COMPENSATION

In connection with Item 2 above, the Dodd-Frank Act also requires that we include in this Proxy Statement a separate advisory (non-binding) stockholder vote as to the frequency of future votes on executive compensation; should they be every three years, two years or one year. You have the option to vote for any one of the three options, or to abstain on the matter.

For the reasons described below, our Board of Directors unanimously recommends that our stockholders select a frequency of every three (3) years, or a "triennial vote."

Our Board of Directors believes that our current executive compensation directly links executive compensation to our financial performance and aligns the interests of our executive officers with those of our stockholders. Our Board of Directors also believes that, of the three choices, submitting a nonbinding, advisory executive compensation resolution to stockholders every three years is the most appropriate choice.

In determining its recommendation, our Board of Directors is aware of and took into account the other alternatives. They are aware that some believe that annual advisory votes will enhance or reinforce accountability. However, as our executive compensation programs are designed to operate over the long-term and to enhance long-term performance, we believe that an annual advisory vote on executive compensation could lead to an inappropriately short-term perspective when evaluating our executives' compensation. Further, we believe that an annual vote on executive compensation would not (i) allow for changes to our executive compensation policies and practices to be in place long enough for management, the Board of Directors, or stockholders to meaningfully evaluate them, or (ii) allow us sufficient time to be responsive to stockholder views.

The triennial executive compensation vote will also provide stockholders with the ability to assess over a period of years whether the components of the compensation paid to our NEOs have achieved positive results for the company. A three-year vote cycle also gives the Board and Compensation Committee sufficient time to thoughtfully consider the results of the advisory vote, to engage with stockholders to understand and respond to the vote results and effectively implement any appropriate changes to our executive compensation policies and procedures. Finally, although we believe that holding an advisory vote on executive compensation every three years will reflect the right balance of considerations in the normal course, we will periodically reassess that view and can provide for an advisory vote on executive compensation on a more frequent basis if changes in our compensation programs or other circumstances suggest that a more frequent vote would be appropriate.

We understand that our stockholders may have different views as to what is the best approach for the company, and we look forward to hearing from our stockholders on this proposal. The Board will continue to engage with stockholders on executive compensation between stockholder votes.

You may cast your vote on your preferred voting frequency by choosing the option of three years, two years, one year, or abstain from voting when you vote in response to the resolution set forth below.

"RESOLVED, that the stockholders of DTS, Inc. determine, on an advisory basis, that the frequency with which the stockholders of the company shall have an advisory vote on executive compensation, as disclosed pursuant to the compensation disclosure rules of the SEC, is:

Choice 1—every three years;

Choice 2—every two years;

Choice 3—every one year; or

Choice 4—abstain from voting.

This vote may not be construed (1) as overruling a decision by the company or our Board of Directors or (2) to create or imply any change or addition to the fiduciary duties of the company or our board of directors. However, we are required to solicit stockholder approval on the frequency of future executive compensation proposals at least once every six years.

The Board of Directors unanimously recommends that you vote "FOR" the option of once every three (3) years as the frequency with which stockholders are provided an advisory vote on executive compensation, as disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table, and the related compensation tables and narratives in the company's definitive Proxy Statement.

ITEM 4—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

The Audit Committee appointed Grant Thornton LLP as independent registered public accountants for the Company and its subsidiaries during the year ended December 31, 2010, and has appointed such firm to serve in the same capacity for the 2011 fiscal year. We are asking the stockholders to ratify this appointment. The affirmative vote of a majority of the shares represented and voting at the annual meeting is required to ratify the selection of Grant Thornton LLP.

In the event the stockholders fail to ratify the appointment, the Audit Committee will reconsider its selection. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interests of the Company and its stockholders.

A representative of Grant Thornton LLP is expected to be present at the annual meeting and will have an opportunity to make a statement if the representative so desires. The representative is expected to be available to respond to appropriate questions.

Fees Paid to Grant Thornton LLP

The following table presents fees for professional audit services rendered by Grant Thornton LLP for the audit of the Company's annual financial statements for fiscal years 2010 and 2009, as applicable, and fees billed for other services rendered by Grant Thornton LLP for fiscal years 2010 and 2009, as applicable.

	Fiscal Year 2010		Fiscal Year 2009

(1)Audit Fees	$	583,019	$	529,210
(2)Audit-Related Fees		5,300		24,900
Tax Fees		—		—
All Other Fees		—		—

	$	588,319	$	554,110

(1): Audit fees for fiscal 2010 and 2009 include the audit of our financial statements, review of the financial statements included in Form 10-Q filed for the first quarter of 2009 through the third quarter of 2010, and audit of the Company's controls and 404 attestation.
(2): Audit related fees include fees in connection with consultation services related to technical accounting issues.

All non-audit services were reviewed with the Audit Committee, which concluded that the provision of such services by Grant Thornton LLP were compatible with the maintenance of that firm's independence in the conduct of its auditing functions.

Our Audit Committee has adopted a Pre-Approval Policy whereby certain engagements and levels of engagement, if necessary, of our independent registered public accountants by the Company have been pre-approved by the Audit Committee. The committee has also delegated to the Chairman of the committee the authority to evaluate and approve other engagements of our independent registered public accountants on behalf of the committee in the event that a need arises for pre-approval between committee meetings. If the Chairman approves any such engagements, he reports that approval to the full committee at the next committee meeting.

The Board of Directors unanimously recommends that the stockholders vote "FOR" the ratification of Grant Thornton LLP as independent registered public accountants of the Company.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee evaluates auditor performance, manages relations with the Company's independent registered public accounting firm, and evaluates policies and procedures relating to internal control systems. It operates under a written Audit Committee Charter that has been adopted by the Board of Directors, a copy of which is available on the Company's website at www.dts.com. All members of the Audit Committee currently meet the independence and qualification standards for Audit Committee membership set forth in the listing standards provided by NASDAQ and the SEC.

The Audit Committee members are not actually practicing as professional accountants or auditors. The members' functions are not intended to duplicate or to certify the activities of management or the Company's independent registered public accounting firm. The Audit Committee serves a board-level oversight role in which it provides advice, counsel and direction to management and the Company's independent registered public accounting firm on the basis of the information it receives, discussions with management and the independent registered public accountants, and its experience in business, financial and accounting matters.

The Audit Committee oversees the Company's financial reporting process on behalf of the Board of Directors. Management has primary responsibility for the Company's financial statements and the overall reporting process, including the Company's system of internal controls. Management has represented to the Audit Committee that the financial statements were prepared in accordance with accounting principles generally accepted in the United States.

In fulfilling the Audit Committee's oversight responsibilities, the Audit Committee has reviewed DTS' audited financial statements as of and for the fiscal year ended December 31, 2010, and met with both management and Grant Thornton LLP, DTS' independent registered public accounting firm ("Grant Thornton"), to discuss those financial statements. This review included a discussion on the quality and the acceptability of the Company's financial reporting, including the nature and extent of disclosures in the financial statements and the accompanying notes.

The Audit Committee discussed with Grant Thornton the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380) (Communication with Audit Committees), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has also received from and discussed with Grant Thornton the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Audit Committee concerning independence. These items relate to that firm's independence from the Company. The Audit Committee has also discussed with Grant Thornton the auditors' independence from DTS and its management.

Based on the review and discussions referred to above in this report, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in DTS' Annual Report on Form 10-K for the year ended December 31, 2010 for filing with the Securities and Exchange Commission.

In addition to the matters specified above, the Audit Committee discussed with Grant Thornton the overall scope, plans and estimated costs of its audit. The Audit Committee met with the Company's Auditors periodically, with and without management present, to discuss the results of the independent auditors' examinations, the overall quality of the Company's financial reporting and the Auditors reviews of the quarterly financial statements, and drafts of the quarterly and annual reports. The Audit Committee conducted six (6) meetings with management and the Company's Auditors in 2010.


		AUDIT COMMITTEE
		Ronald N. Stone, Chair Joerg Agin V. Sue Molina

The preceding "Report of the Audit Committee" shall not be deemed to be "soliciting material" or "filed" with the Securities and Exchange Commission, nor shall any information in this report be incorporated by reference into any past or future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the Company specifically incorporates it by reference into such filing.

EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

Set forth below are the name, age, position, and a brief account of the business experience of each of our executive officers and significant employees.

Name		Position(s)

Jon E. Kirchner	43	Chairman and Chief Executive Officer, Director
Melvin L. Flanigan	52	Executive Vice President, Finance and Chief Financial Officer
Frederick L. Kitson	59	Executive Vice President and Chief Technology Officer
Brian D. Towne	46	Executive Vice President and Chief Operating Officer
Blake A. Welcher	49	Executive Vice President, Legal, General Counsel and Corporate Secretary
Sharon K. Faltemier	55	Senior Vice President, Human Resources
Patrick J. Watson	50	Senior Vice President, Corporate Strategy and Business Development

Jon E. Kirchner has served as our Chairman of the Board of Directors and Chief Executive Officer ("CEO") since February 2010. From September 2001 to February 2010, he served as our President and Chief Executive Officer. He has been a member of our Board of Directors since August 2002. Since joining us in 1993, Mr. Kirchner has served in a number of capacities. From April 2000 to September 2001, he was our President and Chief Operating Officer. From September 1998 to April 2000, he served as our Executive Vice President of Operations, and from March 1996 to September 1998, he was our Vice President of Finance and Business Development. Mr. Kirchner has also served as our Director of International Operations and Controller. Prior to joining us, Mr. Kirchner worked for the Dispute Analysis and Corporate Recovery and Audit Groups of Price Waterhouse LLP (now PricewaterhouseCoopers LLP), an international accounting firm. During his tenure at Price Waterhouse LLP, he advised clients on financial and operational restructuring, business turnaround, market positioning, and valuation issues. Mr. Kirchner has experience in a variety of industries including entertainment, high technology, manufacturing, distribution, and transportation. He is a Certified Public Accountant and received a B.A. in Economics, Cum Laude, from Claremont McKenna College.

Melvin L. Flanigan has served as our Executive Vice President, Finance and Chief Financial Officer since September 2003. Prior to that, he served as our Vice President and Chief Financial Officer since joining us in July 1999. From March 1996 to July 1999, he served as Chief Financial Officer and Vice President, Operations at SensArray Corporation, a supplier of thermal measurement products for semiconductor, LCD, and memory-disk fabrication processes. Mr. Flanigan led SensArray's manufacturing and finance efforts. Prior to joining SensArray, Mr. Flanigan was Corporate Controller for Megatest Corporation, a manufacturer of automatic test equipment for logic and memory chips, where he was involved in international mergers and acquisitions activities. Mr. Flanigan has also previously held positions at Cooperative Solutions, Inc., a software developer in the client server transaction processing market, Hewlett-Packard Company, a provider of information technology infrastructure, personal computing and access devices, global services, and imaging and printing, and Price Waterhouse LLP (now PricewaterhouseCoopers LLP). He is a Certified Public Accountant and holds an M.B.A. and B.Sc. in Accounting from Santa Clara University.

Frederick L. Kitson has served as our Executive Vice President and Chief Technology Officer, since February 2010. From June 2008 to February 2010, he was the Corporate Vice President and Head of Corporate R&D of the Applied Research Center at Motorola, and from June 2005 to June 2008, he was the Vice President of Motorola's Global Applications and Software Research Center. From January 2000 to June 2005, he worked for Hewlett Packard as the Senior Director of the Mobile and Media Systems. His areas of expertise include multimedia digital signal processing, mobile systems, computer systems and graphics and consumer electronics. Mr. Kitson holds a Ph.D in Electrical & Computer

Engineering in Digital Signal Processing, Speech, and Adaptive Signal Processing from the University of Colorado, an M.S. in Electrical Engineering for the Georgia Institute of Technology, and a B.S. with Honors in Electrical Engineering from the University of Delaware.

Brian D. Towne has served as our Executive Vice President and Chief Operating Officer since June 2010, prior to that he served as our Executive Vice President and General Manager since February 2009. Previously, he served as our Senior Vice President and General Manager Consumer Division since August 2006 and, prior to that, as our Senior Vice President Consumer/Pro Audio since August 2003. From April 2002 to August 2003, he served as Director of Product Management at Kenwood USA Corporation, a manufacturer of mobile electronics, home entertainment, and communications equipment, where he led all home and mobile entertainment product planning and development for the North American market. From August 1995 to April 2002, Mr. Towne held various product planning, development and marketing positions at Kenwood USA. Prior to Kenwood USA, he held various research and development and marketing positions at Pioneer Electronics (USA) Inc., the sales and marketing arm of Pioneer Corporation, a manufacturer of consumer and commercial electronics. Fluent in Japanese, Mr. Towne spent part of his tenure at Pioneer living and working in Japan. He also previously served as an Electronics Specialist in the United States Marine Corps. Mr. Towne holds a B.S. in Engineering Technology, with honors, from California Polytechnic University, Pomona.

Blake A. Welcher has served as our Executive Vice President, Legal, General Counsel and Corporate Secretary since September 2003 and, prior to that, as our Vice President and General Counsel since February 2000. From April 1999 to February 2000, Mr. Welcher served as our General Counsel, Intellectual Property, where he was responsible for the Company's intellectual property assets and licensing. Prior to joining us, from April 1997 to April 1999, Mr. Welcher served as an intellectual property attorney for Koppel & Jacobs, where he provided intellectual property support and counsel for clients in the electrical, mechanical, and entertainment industries. Previously, he served in the same capacity for the Cabot Corporation, a global specialty chemicals company. Mr. Welcher holds a J.D. and Masters of Intellectual Property from Franklin Pierce Law Center and a B.S. in Aeronautical Engineering from California Polytechnic State University at San Luis Obispo.

Sharon K. Faltemier has served as our Senior Vice President, Human Resources since June 2006. Prior to joining our company, from 2003-2006, Ms. Faltemier served as Vice President, Human Resources at Capstone Turbine Corporation, a producer of low-emission microturbine systems and from 1999-2002 as Vice President, Human Resources for the Litton Guidance and Control Systems division of Northrop Grumann Corporation, a global defense and technology company. Ms. Faltemier holds a B.S. in engineering from the University of California, Berkeley.

Patrick J. Watson has served as our Senior Vice President, Corporate Strategy and Development since September 2003. From February 2000 to September 2003, Mr. Watson served as our Vice President of Business Development and, from February 1997 to January 2000, as our Director of Technical Sales, where he led the penetration of our technology in the consumer electronics home theater market, as well as the proliferation of our technology in new markets such as cars, personal computers, video games, and broadcast. Prior to joining us, Mr. Watson worked in technical sales for a number of firms focused on audio coding technology including Audio Processing Technology Ltd. and AlgoRhythmic Technology, Ltd. in Northern Ireland. He graduated from Ulster University in Northern Ireland with a degree in engineering and from Queens University in Belfast, Northern Ireland with a Masters in Electronics.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors, executive officers and holders of more than 10% of our Common Stock (the "Reporting Persons"), to file with the SEC initial reports of ownership and reports of changes in ownership of our Common Stock. Reporting Persons are required by SEC regulation to furnish us with copies of all Section 16(a) reports they file. We have identified and described the business experience of each of our directors and executive officers who are subject to Section 16(a) of the Exchange Act elsewhere in this Proxy Statement.

Based solely on our review of the copies of Section 16(a) reports received or written representations from certain Reporting Persons, with the exceptions noted below, we believe that all reporting requirements under Section 16(a) for the fiscal year ended December 31, 2010 have been complied with in a timely manner, with the exception of Sharon K. Faltemier, who filed two Form 4s late, and Melvin L. Flanigan, Jon E. Kirchner, Dan E. Slusser, Brian D. Towne, Patrick J. Watson and Blake A. Welcher, who each filed one Form 4 late.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table shows information with respect to the beneficial ownership of our Common Stock as of March 1, 2011 (or such other date as provided below), by:

•: each person, or group of affiliated persons, known by us to own beneficially 5% or more of our Common Stock;
•: each of our directors;
•: each of our named executive officers; and
•: all of our directors and executive officers as a group.

Name of Beneficial Owner(1)

Five Percent Stockholders
T. Rowe Price Associates, Inc.(3)	1,816,686	10.47	%
Eagle Asset Management, Inc.(4)	1,571,305	9.05
Brown Capital Management, LLC(5)	1,488,362	8.58
Capital Research Global Investors(6)	1,328,884	7.66
BlackRock, Inc.(7)	1,306,760	7.53
Next Century Growth Investors, LLC(8)	977,824	5.63
Waddell & Reed Financial, Inc.(9)	956,209	5.51
Directors and Executive Officers
Jon E. Kirchner(10)	486,446	2.73
Melvin L. Flanigan(11)	166,003	*
Blake A. Welcher(12)	71,345	*
Brian D. Towne(13)	60,220	*
V. Sue Molina(14)	35,000	*
L. Gregory Ballard(15)	28,500	*
Ronald N. Stone(16)	27,500	*
Joerg D. Agin(17)	22,500	*
C. Ann Busby(18)	17,500	*
Frederick L. Kitson(19)	14,587	*
Bradford D. Duea(20)	4,500	*
Craig S. Andrews(21)	3,000	*
All directors and executive officers as a group (14 persons)(22)	1,003,783	5.50	%

*: Represents beneficial ownership of less than 1% of the outstanding shares of our Common Stock.
(1): Unless otherwise indicated, the address for each individual listed on this table is: c/o DTS, Inc., 5220 Las Virgenes Road, Calabasas, California 91302.
(2): Beneficial ownership is based on information furnished by the individuals or entities. Unless otherwise indicated and subject to community property laws where applicable, the individuals and entities named in the table above have sole voting and investment power with respect to all shares of our Common Stock shown as beneficially owned by them. Beneficial ownership and percentage ownership are determined in accordance with the rules of the Securities and Exchange Commission. In calculating the number of shares beneficially owned by an individual or entity and the percentage ownership of that individual or entity, shares underlying options held by that individual or entity that are

either currently exercisable or exercisable within 60 days from March 1, 2011 are deemed outstanding. These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other individual or entity. Percentage ownership for each stockholder is based on 17,355,110 shares of our Common Stock outstanding as of March 1, 2011, together with the applicable option(s) for that stockholder or group of stockholders.

(3): Based upon a Schedule 13G/A filed February 10, 2011, containing information as of December 31, 2010. T. Rowe Price Associates, Inc. beneficially owned 1,816,686 shares, with sole voting power over 410,186 shares and sole dispositive power over 1,816,686 shares. The address for T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland, 21202.
(4): Based upon the Schedule 13G/A filed January 26, 2011, containing information as of December 31, 2010. Eagle Asset Management, Inc. beneficially owned 1,571,305 shares, with sole voting power over 1,571,305 shares and sole dispositive power over 1,571,305 shares. The address for Eagle Asset Management, Inc. is 880 Carillon Parkway, St. Petersburg, Florida, 33716.
(5): Based upon a Schedule 13G/A filed February 7, 2011, containing information as of December 31, 2010. Brown Capital Management, Inc. beneficially owned 1,488,362 shares, with sole voting power over 714,061 shares and sole dispositive power over 1,488,362 shares. The address for Brown Capital Management, Inc. is 1201 N. Calvert Street, Baltimore, Maryland, 21202.
(6): Based upon a Schedule 13G/A filed February 11, 2011 containing information as of December 31, 2010. Capital Research Global Investors beneficially owned 1,328,884 shares, with sole voting power over 1,328,884 shares and sole dispositive power over 1,328,884 shares. The address for Capital Research Global Investors is 333 South Hope Street, Los Angeles, CA, 90071.
(7): Based upon a Schedule 13G/A filed February 4, 2011 containing information as of December 31, 2010. BlackRock, Inc. beneficially owned 1,306,760 shares, with sole voting power over 1,306,760 shares and sole dispositive power over 1,306,760 shares. The address for BlackRock, Inc. is 40 East 52^nd Street, New York, NY, 10022.
(8): Based upon a Schedule 13G/A filed February 14, 2011 containing information as of December 31, 2010, the following entities and persons beneficially owned in the aggregate 977,824 shares:

Entity or Person

Next Century Growth Investors, LLC	977,824	—	977,824	—	977,824
Thomas L. Press	977,824	—	977,824	—	977,824
Donald M. Longlet	977,824	—	977,824	—	977,824

: Each of Next Century Growth Investors, LLC, Thomas L. Press and Donald M. Longlet disclaim beneficial ownership of the shares except to the extent of each of their respective pecuniary interests therein. The address for Next Century Growth Investors, LLC, Thomas L. Press and Donald M. Longlet is 5500 Wayzata Blvd., Suite 1275, Minneapolis, MN, 55416.

(9): Based upon a Schedule 13G/A filed February 8, 2011, containing information as of December 31, 2010. Waddell & Reed Financial, Inc. beneficially owned 956,209 shares, with sole voting power over 956,209 shares and sole dispositive power over 956,209. The address for Waddell & Reed Financial, Inc. is 6300 Lamar Avenue, Overland Park, KS, 66202.
(10): Includes 18,750 shares related to unvested restricted stock awards and 439,611 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(11): Includes 5,560 shares related to unvested restricted stock awards and 154,820 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(12): Includes 5,310 shares related to unvested restricted stock awards and 60,254 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(13): Includes 5,060 shares related to unvested restricted stock awards and 51,720 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(14): Includes 27,500 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(15): Includes 2,500 shares related to unvested restricted stock awards and 22,500 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(16): Includes 27,500 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(17): Includes 17,500 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(18): Includes 17,500 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(19): Includes 12,500 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(20): Includes 3,500 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(21): Includes 2,500 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.
(22): Includes 43,680 shares related to unvested restricted stock awards and 888,718 shares of Common Stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of March 1, 2011.

EXECUTIVE COMPENSATION AND RELATED INFORMATION

Compensation Discussion and Analysis

Executive Summary

Highlights of our performance in 2010 include:

•: Revenues increased 12% for the year ended December 31, 2010, compared to the same prior year period;
•: Royalties from Blu-ray product markets increased 71% for the year ended December 31, 2010, compared to the same prior year period;
•: Operating income increased 34% compared to the same prior year period and was 28% of revenues for the year ended December 31, 2010;
•: Diluted earnings per share from continuing operations increased $0.24 to $0.84 for the year ended December 31, 2010, an increase of 40% compared to the same prior year period; and
•: The Company's share price increased 43% during the year as compared to the NASDAQ Composite IXIC increase of 14%.

We believe that our financial results in 2010 demonstrate the strength of our business model and that our named executive officers were instrumental in achieving such results.

Our executive compensation program is based on an overarching pay-for-performance philosophy. We aim to provide compensation and benefit levels that will attract, retain, and motivate the highest quality executive officers, while seeking to ensure that the compensation provided to our executives is linked to shareholder value. The table below illustrates the relationship between our CEO's compensation over our last five fiscal years and our indexed total shareholder return (TSR) for those same five years.

5-Yr CEO Actual Total Direct Compensation vs. DTS TSR

Our executive compensation program is designed to pay our executives consistent with the performance of the Company and provide compensation sufficient to attract, retain and motivate the

highest quality executive officers in the highly competitive entertainment technology, consumer electronics and intellectual property licensing environment in which it operates. Our program is also designed to establish and maintain an appropriate balance between executive compensation, risk taking and the creation of stockholder value. The Compensation Committee of our Board of Directors, or the Committee, is responsible for establishing, implementing and periodically reviewing the Company's executive compensation program.

The following are the key objectives that guide our executive compensation program and an overview of how we aim to achieve those objectives:



	Objective		How our Executive Compensation Program Achieves this Objective

	Pay for Performance		• Make a significant portion of each executive's total potential compensation performance-based
			• Establish performance objectives linked to the execution of our strategy and plans which should enhance stockholder value
			• Link annual cash incentives and long-term equity incentives to the achievement of measurable company and individual performance objectives

	Provide Competitive Executive Compensation Packages		• Target total direct compensation between the 50th and 75th percentile among companies with which we compete for executive talent
			• Provide exceptional pay for exceptional performance

	Align Executives' Incentives with Creation of Stockholder Value		• Create a sense of ownership and entrepreneurship among the executive team, which we believe will encourage actions in our stockholders' best interests
			• Structure our executive compensation program to motivate and reward taking appropriate business risks, while avoiding pay practices that incentivize excessive risk-taking
			• Align executive compensation with short-term and long-term Company and individual performance

	Maintain High Corporate Governance and Compensation-Related Standards		• Provide limited executive perquisites • Prohibit engaging in hedging transactions with respect to DTS • Reflecting best pay practice trends, limiting change in control severance payments to no more than 2.0 times base salary

We urge stockholders to read this Compensation Discussion and Analysis, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the 2010 Summary Compensation Table and other related compensation tables and narratives, which provide detailed information on the compensation of our named executive officers. The Compensation Committee and the Board of Directors believe that the policies and procedures articulated below are effective in achieving our goals and that the compensation of our named executive officers has contributed to the Company's recent and long-term success.

Compensation Philosophy and Process

We believe a combination of competitive base salaries, significant annual performance-based cash incentives tied to achievement of annual operating goals, and long-term equity incentives that vest over time helps us to attract top talent, motivate short-term and long-term performance, enhance retention and align management compensation with stockholder return. A significant portion of our executive officers' potential annual compensation is paid only upon achievement of performance objectives set annually by the Committee, as we believe this incentivizes the executives to achieve set performance objectives. In general, the performance objectives set by the Committee are intended to encourage revenue and operating income growth. We believe these metrics directly correlate with stockholder value.

We periodically review and analyze market trends and the prevalence of various vehicles for compensation delivery and make adjustments as deemed appropriate. In designing and implementing our compensation structure, we consider industry practice as well as the tax efficiency of such structure and its impact on our financial statements.

In support of developing our compensation program, the Committee engaged Hewitt Associates LLC, an independent executive compensation consulting firm. Hewitt was engaged to review and provide an assessment of compensation levels for our executive officers and to provide position-specific, public company pay data for thirteen companies identified by Hewitt and management and confirmed by the Committee as comparators. These companies were selected because Hewitt, management and the Committee believe they might compete with us for executive talent and other employees, they operate in the same or similar line of business, and many have a market capitalization similar to ours. We refer to this group of companies collectively as our "Compensation Peer Group." In fiscal year 2010, the peer group consisted of the following 13 companies: DG FastChannel, Inc., Digimarc Corp., DivX, Limelight Networks, MIPS Technologies Inc., PDF Solutions Inc., Rambus, Inc., Sigma Designs, Inc., Sonic Solutions, SRS Labs, Inc., Tivo, Inc., Universal Electronics, Inc. and Virage Logic Corp. Hewitt used the compensation information reported in the public filings of these companies to make its comparisons. In addition to the Compensation Peer Group analysis, Hewitt also compared the Company's executive officer compensation with detailed information compiled from the Radford Executive Survey (Radford), a technology industry survey published by Radford, an Aon Consulting Company, regarding the cash and equity compensation practices of technology companies. The Radford survey is a total compensation survey that is used within the technology industry. The survey includes total direct compensation, including base salary, annual short-term incentive compensation and long-term incentive compensation from the survey members. Competitive data was gathered from the survey for companies with 2009 revenues between $50 million and $200 million. A list of these companies is attached hereto as Appendix A. Hewitt compiled the compensation data from both the Compensation Peer Group and the Radford survey and prepared assessments to use for benchmarking each DTS executive's compensation. Hewitt's assessments covered the following components of compensation: base salary, target bonus opportunity, target total cash compensation, estimated economic value of long-term incentives and total direct compensation.

In determining 2010 compensation recommendations for our named executive officers (other than our Chief Executive Officer), our Chief Executive Officer, or CEO, and the Chairman of the Committee analyzed the assessments prepared by Hewitt and used the data as a compensation benchmarking tool. Our Chief Executive Officer, after discussion and consultation with the Chairman of the Committee, then presented recommendations to the Committee based on the results of this benchmarking exercise and his evaluation of the performance of the named executive officers. In setting compensation for our CEO, our former Chairman of the Board of Directors and the Chairman of the Committee analyzed the assessments and formed a recommendation based upon their evaluation of our CEO's performance. The Committee then reviewed the recommendations for the named executive officers and the CEO, as well as the assessments prepared by Hewitt, to set compensation for 2010.

Executive compensation was compared to median 50^th and 75^th percentile competitive pay data gathered from the Compensation Peer Group and then separately also compared to median 50^th and 75^th percentile competitive pay data gathered from the Radford survey. The Committee utilized the data with the objective of providing executive compensation packages within the target range of the 50^th to the 75^th percentile of the benchmark data of similarly situated executives in the Compensation Peer Group and in the Radford survey. The Committee generally endeavors to provide compensation packages such that each of the three elements of executive compensation described below, in addition to total compensation, fall within the 50^th to the 75^th percentile targeted range, referred to herein as the Targeted Range. The Committee places great significance on total compensation packages within the Targeted Range because the Committee believes that this level is needed in order to attract, retain and motivate a strong team of executives with public company experience.

The 2010 Target Range of total direct compensation for our NEOs and the elements comprising actual total direct compensation, based on the annual review performed by the Committee during the first quarter of 2010, are shown in the following table:

							2010 Direct Compensation

	Targeted Range (percentile)						2010 Direct Compensation
	Targeted Range (percentile)						Adjusted Base Salary		Annual Cash Incentive(2)		Stock Awards(3)		Option Awards(3)
Name(1)	50th			75th			Adjusted Base Salary		Annual Cash Incentive(2)		Stock Awards(3)		Option Awards(3)		Total
Jon E. Kirchner	$	1,998,000		$	2,752,000		$	457,500	$	355,000	$	393,900	$	906,406	$	2,112,806
Melvin L. Flanigan	$	675,200		$	1,255,000		$	291,500	$	100,000	$	157,560	$	341,235	$	890,295
Brian D. Towne	$	428,600		$	1,596,000		$	297,000	$	115,000	$	210,080	$	426,544	$	1,048,624
Blake A. Welcher		—	(4)	$	1,074,000	(4)	$	276,000	$	100,000	$	157,560	$	341,235	$	874,795

(1): Frederick L. Kitson is not included in this table, because he began employment with the Company on February 26, 2010. Therefore, his compensation was not subject to the annual review process described herein.
(2): Reflects the annual cash incentives earned in 2009 but paid in 2010, as these amounts best represent this element of total direct compensation for the purposes of the annual review process described herein.
(3): Reflects the aggregate grant date fair value determined in accordance with generally accepted accounting principles. Additional information regarding these awards is set forth in the 2010 Summary Compensation Table and the 2010 Grants of Plan-Based Awards Table.
(4): Relfects the average target of total direct compensation for Mr. Welcher, as peer data for his position was limited.

Total 2010 compensation for each of our named executive officers fell within the Targeted Range.

Elements of Executive Compensation

The Company's executive compensation program has three primary elements: base salary, annual performance-based cash incentives and long-term equity incentives. The Committee believes that equity incentives promote long-term performance, with base salary and annual performance incentives promoting achievement of short-term objectives. The Committee uses the Compensation Peer Group data and the Radford survey discussed above when analyzing the weight given to each of these elements and, as discussed above, endeavors to align each element of executive officer compensation with the market data such that each element falls within the Targeted Range. In evaluating and setting each element, the Committee is mindful of the levels of compensation paid pursuant to the other elements in order to put total compensation within the Targeted Range.

In setting each element of executive compensation, the Committee is also mindful of the level of risk-taking that any element may promote. The Committee believes it is important to incentivize the Company's executive officers to achieve annual company and individual objectives, but balance promotion of such short-term interests with incentives that promote building long-term stockholder value. The Committee believes the amount of long-term equity incentives included in our executive compensation packages mitigates the potential for excessive risk-taking. All of the Company's named executive officers' equity awards vest over a period of time, generally annually over four years from the date of grant, and the Committee has historically granted additional equity awards annually, which incentivizes these officers to continue to focus on our long-term interest.

Base Salary

The objectives of the Company's base salary element are to allow the Company to attract and retain qualified executives and to recognize and reward individual performance. The following items are considered when determining actual base salaries and making adjustments to base salaries:

•: our past performance and expectations of future performance;
•: individual scope of responsibility, performance and experience;
•: competitive compensation data from the peer group and other market comparisons;
•: historical salary levels; and
•: the recommendations of the CEO (only with respect to other NEOs).

The Company provides its executive officers with base salaries to motivate short-term performance and compensate them for services rendered. The Committee places great significance in setting executive base salaries within the Targeted Range, with the exact level being influenced by the individual's position, responsibilities and performance.

The base salaries of executive officers are typically reviewed in our first quarter, after prior year Company and individual performance is ascertained. The Company's CEO annually reviews the performance of each of the executive officers. These performance reviews include an evaluation of the attainment of each of the goals set by the Committee in connection with the annual cash incentive plan described below, which are specific to each officers' area of responsibility, as well as leadership and management skill factors. In evaluating executive officer performance, leadership and management skill factors, which the Committee views as critical for officer roles, are weighted most heavily. In evaluating whether a year over year adjustment to salary is appropriate for a particular executive officer, the CEO presents his annual performance assessment of each executive officer together with that officer's current salary level relative to the officer's Targeted Range and makes a recommendation to the Committee as to whether a salary adjustment is appropriate and, if so, the recommended amount of the adjustment. The Committee generally gives significant weight to the CEO's recommendations as he

is most familiar with each executive's performance, but the Committee may exercise its discretion with respect to any recommended adjustment.

During the first quarter, the Committee also annually reviews the performance of the Company's Chief Executive Officer to determine his base salary. Beginning in 2011, our Lead Independent Director works with the Chairman of the Committee to form an assessment of the CEO's performance and presents to the Committee this assessment together with the CEO's current base salary relative to his Targeted Range. In addition, the Committee solicits input from all Board members with respect to the CEO's performance. The Committee's review includes an evaluation of the Company's financial performance for the most recently ended fiscal year, the CEO's individual performance based on his individual goals set by the Committee in connection with the annual cash incentive plan described below, and overall leadership and management skills as observed in this review process.

Annual Performance-Based Cash Incentives

Executive officers participate in an annual cash incentive compensation plan, which is established and administered by the Committee. The Committee believes the potential annual cash awards payable pursuant to these plans are necessary to maintain overall competitiveness and are an effective device to incentivize attainment of the Company's annual financial and individual performance goals, which are designed to lead to increased stockholder value.

The Company's annual cash incentive compensation plan, referred to herein as the "Cash Incentive Plan," ties incentive compensation to the achievement of a) revenue objectives, b) operating income objectives and c) annually pre-established individual performance objectives. The Committee establishes three levels of achievement for measurement of revenue and operating income. The levels are designated as "Threshold," "Target" and "Maximum." The amount of revenue and operating income necessary to achieve the Target level is 100% of budget, while the amounts necessary for Threshold and Maximum are 90% and 110% of budget, respectively. Achievement at the Target level of Company performance with respect to both revenue and operating income typically correlates to eligibility for 100% of the executive's target cash payout, which amount would then be adjusted by multiplying by the individual performance modifier, ranging from zero to 1.5, as determined by the Committee. The following illustration depicts how the actual amount of a cash award under our Cash Incentive Plan is calculated:

The following chart shows how Company performance at different levels for revenue and operating income typically correlates to different eligibility payment amounts, before individual modifiers. Payouts are scaled between the Threshold and the Maximum on each axis for performance between levels.

Absent the exercise of discretion by the Committee, no award would be made unless at least the Threshold level of Company performance is attained for both revenue and operating income irrespective of individual performance. Generally, the "Target" levels for the Company's financial objectives are based on the Company's annual budget as approved by the Board of Directors for the applicable fiscal year. Greater relative weight is given to achievement of operating income objectives because we believe that that financial metric is more directly correlated to increased stockholder value than revenue. The maximum amount that could be paid to the Company's CEO pursuant to the Cash Incentive Plan is capped at 187.5% of the CEO's base salary at the fiscal year end. The maximum amounts that could be paid to the Company's Chief Operating Officer is capped at 112.5% and the other named executive officers are capped at 103.1% of their respective base salaries at the fiscal year end. In addition to the individual award caps described above, the aggregate amount of awards paid pursuant to the annual cash incentive plans may not exceed the total accrual for the estimated payouts under the respective plans. The Company accrues a liability on a quarterly basis based on the Company's performance in anticipation of payouts under the annual cash incentive plans. The Committee typically establishes the terms of the annual cash incentive compensation plan in the first quarter of the year of performance under the plan at the same time it sets annual base salaries for the executive officers.

The Committee structured the 2010 Cash Incentive Plan such that awards granted under it would be based on a combination of performance relative to (1) the 2010 revenue and operating income budgets approved by the Company's Board of Directors and (2) individual performance objectives established by the Committee. The Committee establishes individual performance objectives for the named executive officers, other than the CEO, based upon the CEO's recommendations, which are prepared in consultation with the Chairman of the Committee. The Chairman of the Committee establishes the CEO's individual performance objectives based on our Lead Independent Director's recommendations, which are prepared in consultation with the Chairman of the Committee and input from all other Board members. Individual objectives are designed to hold each executive officer accountable for specific outcomes over which he or she exercises control. The Committee's assessment of whether individual objectives have been achieved is subjective and the Committee may also take into account significant individual achievements that were not included in the pre-established objectives, as

well as overall leadership and management skills, in determining the individual performance multiplier for the year. For 2010, our named executive officers were as follows:

•: Jon E. Kirchner, Chairman and Chief Executive Officer*
•: Melvin L. Flanigan, Executive Vice President, Finance and Chief Financial Officer
•: Frederick L. Kitson, Executive Vice President and Chief Technology Officer
•: Brian D. Towne, Executive Vice President and Chief Operating Officer**
•: Blake A. Welcher, Executive Vice President, Legal and General Counsel.

*: Mr. Kirchner was elected as the Chairman of the Board effective February 13, 2010 following the resignation of Daniel E. Slusser.
**: Mr. Towne was appointed Chief Operating Officer effective June 28, 2010.

Mr. Kirchner's individual performance objectives related to the development and implementation of a network-based content strategy, successfully licensing the Company's virtual technology into laptop computers and advancing the Company's initiatives in the IPTV broadcast market. Mr. Flanigan's individual performance objectives related to development of a plan and strategy to further leverage the Company's business information technology infrastructure, development and implementation of a records retention policy and program and actively working with the Irish government to improve the Company's use of its withholding tax credits. Mr. Kitson's individual performance objectives related to rapidly evaluating the Company's engineering resources, plans, projects and their status and making appropriate changes within the organization and to successfully complete and timely deliver the Company's Premium Suite Phase II SDK. Mr. Towne's individual performance objectives related to driving adoption of the Company's decoding technology by leading television and mobile phone manufacturers as well as driving the Company's virtual technology into laptop computers. Mr. Welcher's individual performance objectives related to the development and implementation of a records retention policy and program, development and implementation of a Board of Directors information portal and leading the Company's mobile initiative with mobile manufacturer's incorporating DTS' decoding technology into their products.

Under the 2010 Cash Incentive Plan, the target payout was set and described as a percentage of the executive officer's base salary as of the fiscal year end. The Company's Chief Executive Officer had a target cash payout of 100% of base salary. Target cash payout percentages for the Company's other named executive officers ranged from 55% to 60% of their 2010 base salary as of the fiscal year end. The Committee sets these target percentage levels based on the competitive market data assembled and analyzed with respect to comparative positions and responsibilities. The dollar amounts of targeted cash payouts under the 2010 Cash Incentive Plan for the Company's CEO and each of our named executive officers are reflected in the 2010 Grants of Plan Based Awards Table below.

For 2010, the Threshold, Target and Maximum levels for revenue and operating income were $77.4 million and $21.5 million; $86.0 million and $23.9 million; and $94.6 million and $26.3 million, respectively. Achievement at the Target level of performance with respect to both revenue and operating income would have correlated to payment of 100% of the executive's target cash payout, which amount would then be adjusted by multiplying by the individual performance modifier, ranging from zero to 1.5, as determined by the Committee. Absent the exercise of discretion by the Committee, no award would be made if at least the Threshold level were not attained for both revenue and operating income.

For 2010, the Company's revenue of $87.1 million met the Target level in the payout matrix. For 2010, the Company's operating income of $24.4 million met the Target level in the payout matrix. The revenue and operating income resulted in a Company Performance factor of 1.03. Actual cash payouts

under the 2010 Cash Incentive Plan were determined during the first quarter 2011 Committee meeting after the audited financial results for the year were presented to the Committee and following evaluation of each executive's individual performance.

The calculations for the actual payouts under the 2010 Cash Incentive Plan, as approved by the Committee, are shown in the following Grants of Plan Based Awards table.

Name

Jon E. Kirchner	457,500	100	%	457,500	1.03	1.3	594,750
Melvin L. Flanigan	291,500	55	%	160,325	1.03	1.0	160,345
Frederick L. Kitson	320,000	55	%	176,000	1.03	1.0	176,000
Brian D. Towne	325,000	60	%	195,000	1.03	1.0	200,000
Blake A. Welcher	276,000	55	%	151,800	1.03	1.2	180,000

(1): Reflects a rounded Individual Performance Modifier. Once the preliminary Individual Performance Modifier was determined, a more discrete calculation was performed in order to round out the ultimate Individual Cash Payout.

The Committee determined that:

•: an Individual Performance Modifier of 1.3 was appropriate for Mr. Kirchner as a result of him meeting his Individual Performance objectives and successfully managing the Company's growth strategy while simultaneously increasing profitability;
•: an Individual Performance Modifier of 1.0 was appropriate for Mr. Flanigan as a result of him meeting his Individual Performance objectives and successfully managing the Company's financial affairs during the last year;
•: an Individual Performance Modifier of 1.0 was appropriate for Mr. Kitson as a result of him meeting his Individual Performance objectives and his significant leadership contribution to advancing and expanding our R&D and Engineering capabilities;
•: an Individual Performance Modifier of 1.0 was appropriate for Mr. Towne as a result of him meeting his Individual Performance objectives and successfully managing the Company business to increased growth and profitability and developing a number of new business initiatives; and
•: an Individual Performance Modifier of 1.2 was appropriate for Mr. Welcher as a result of him meeting his Individual Performance objectives and successfully completing a number of litigation and enforcement matters for the Company.

Under our annual cash incentive compensation plans, the Committee has discretion to make adjustments, either up or down, to cash awards. However, in order to maintain the performance orientation of these plans, the Committee exercises this discretion sparingly and expects to make an adjustment only in unusual circumstances. The Committee made no such discretionary adjustments to awards paid to the named executive officers under the 2010 Cash Incentive Plan.

Cash awards paid to our named executive officers under our 2010 Cash Incentive Plan for performance in 2010 are reflected in the column titled "Non-Equity Incentive Plan Compensation" in the 2010 Summary Compensation Table, below.

In August 2010, the Compensation Committee conducted a review of its outside advisor and after a detailed request for proposal process, the Committee retained Compensia as a successor to Hewitt as the Committee's outside executive compensation consulting firm. Compensia reports directly to the Committee and is accountable to the Committee for services. While Compensia was advising the Committee in its 2010 Compensation review process in February of 2011, the data and models utilized were those developed by Hewitt.

Our 2011 cash incentive plan, which was established by the Committee in February 2011 and reviewed by Compensia, will operate in a manner similar to our 2010 Cash Incentive Plan, as discussed earlier.

Long-Term Equity Incentives

The Committee recognizes that our executive officers have a significant impact on the Company's success and, as a result, stockholder value. To align the interests of the Company's executive officers with those of its stockholders, the Committee utilizes stock options and restricted stock, awards and units, to provide long-term equity incentives under the Company's executive compensation program. The Committee also uses equity incentives as a means of keeping the Company's compensation packages attractive relative to those companies with whom the Company competes for executive talent, including those companies in the Compensation Peer Group. Accordingly, the Committee believes equity incentives are critical to the Company's ability to attract, retain and motivate the highest quality executive officers.

The Committee ordinarily grants equity incentive awards after the Company's audited annual financial statements are presented to the Committee. The Committee generally grants annual equity awards at approximately the same time as it determines the annual cash incentive awards and base salary adjustments, which usually occur during the first quarter. We believe this approach facilitates the Committee's evaluation and determination of total compensation with respect to each named executive officer.

The Committee is also mindful of potential dilution to stockholders, which was a factor in the Committee's decision to implement the use of restricted stock, awards and units. This approach enables the Company to grant long-term equity incentive awards while using fewer shares of our common stock than if options alone were granted.

The exercise price of each stock option granted to the Company's executive officers is equal to the fair market value of our stock on the date of grant, which is the closing price of the Company's common stock as reported by The NASDAQ Global Select Market on the day the option is granted by the Committee. Generally, stock option awards vest over four years in four equal annual installments and expire ten years from the date of grant. Restricted stock, awards and units, also generally vest over a four-year period in four equal annual installments. The vesting period and exercise price (for options) are intended to encourage executives to focus on long-term stockholder value and to improve long-term retention. We chose to provide a larger percentage of the overall equity compensation in the form of option grants rather than restricted stock awards because options only have value if the price of the stock increases after the date of grant, versus restricted stock awards, which can retain value even if our stock price decreases. Therefore, we believe that option grants provide a greater incentive to our NEOs to focus on the creation of long-term stockholder value. Historically, the Committee has generally granted equity awards during its regularly scheduled quarterly meetings and, with respect to annual grants to executive officers, in connection with its annual performance review process.

The Company's Chief Executive Officer, after consulting with the Chairman of the Committee, recommends to the Committee the specific number of shares to be subject to each option and restricted stock, award or unit, granted to each executive officer, adjusting within each such officer's Targeted Range, based on the same assessment of the officer's performance used in evaluating payouts

under the 2010 Cash Incentive Plan, the levels of the other components of the officers' compensation and the dilutive effects of equity grants. While the Committee utilizes the market data compiled by the Company's compensation consultant in making a determination regarding equity grants, the Committee gives significant deference to the recommendations of the Company's Chief Executive Officer, as he is most familiar with the other executive officers' performance. Our CEO, Jon E. Kirchner, our COO, Brian D. Towne, our CFO, Melvin L. Flanigan, our Executive Vice President of Legal, General Counsel and Secretary, Blake A. Welcher, and our Executive Vice President and CTO, Frederick L. Kitson, all had applicable matches in both the Compensation Peer Group and Radford survey that Hewitt used when preparing its assessment.

The Committee discusses and determines all equity grants to all employees, including the executive officers and the CEO. The same process is used to determine the specific number of shares to be subject to each option and restricted stock, award or unit, granted to the Company's CEO, with the exception that the recommendation is made by the Chairman of the Committee and our Lead Independent Director. The Company's CEO's performance is assessed by the Committee with input from the other Board members in the same manner and based upon the same criteria as was used for the purpose of making payouts pursuant to the Company's 2010 Cash Incentive Plan.

In 2010, all equity awards were granted under the Company's 2003 Equity Incentive Plan, which provides for stock option and restricted stock, awards and units. During 2010, the Committee granted equity awards to the Company's named executive officers as described in the table entitled "2010 Grants of Plan-Based Awards."

Beginning in 2011, the Committee also began to grant performance-based equity awards to our NEOs, which tie vesting of such awards to the Company's total shareholder return and such return measured against its outperformance of the NASDAQ Composite Total Return Index over a 3-year period. We believe that aligning the vesting of these equity awards with total shareholder return incentivizes our NEOs to increase shareholder value over the long-term.

Other Compensation

Benefits. Executive officers are eligible to participate in our broad-based health and welfare, life insurance, Employee Stock Purchase Plan (ESPP) and 401(k) programs in the same fashion as all other eligible employees.

Perquisites. Pursuant to the terms of his employment contract, our CEO received a car allowance of $1,000 per month in 2010. In addition, our CEO was reimbursed $2,686.57 for expenses related to spousal travel associated with the 2010 Board of Directors meeting held in Ireland. These cash payments are reflected in the "All Other Compensation" column of the 2010 Summary Compensation Table, below. The Company does not provide any other perquisites to executive officers, nor does the Company offer a deferred compensation plan.

Guidelines as to Equity Ownership

The Company has established stock ownership guidelines for its non-employee directors to better align their interests with those of our stockholders. The Company has not adopted guidelines for equity ownership by its executive officers, but the Committee considers each named executive officer's level of stock ownership in making its annual equity award decisions. With respect to its 2010 compensation decisions, the Committee considered the level of equity grants that have been made to executive officers in the past combined with the equity awards it determined to grant in 2010 to be sufficient to align the Company's executive officers' interests with those of the Company's stockholders.

Accounting and Tax Issues

In making compensation decisions, the Committee considers the extent to which the Company's compensation programs will be deductible by the Company for income tax purposes, in particular under Section 162(m) of the Internal Revenue Code of 1986, as amended. Section 162(m) generally provides that the Company may not deduct compensation paid to an individual named executive officer in excess of $1,000,000 during any year unless the compensation qualifies as "performance-based" compensation under IRS rules. Base salary and cash bonuses that the Company has paid to executive officers to date have not qualified as "performance-based" compensation for this purpose. The Company's restricted stock awards generally have not been qualified as "performance-based" compensation under section 162(m). The Committee believes that stock option awards granted to date to the Company's executive officers will qualify as "performance-based" compensation so that any compensation amounts related to such option awards will be fully deductible by the Company. Equity awards may be made from our 2003 Equity Plan and our 2005 Performance Incentive Plan.

Since late 2004, newly-enacted federal tax law governs nonqualified deferred compensation arrangements. This new law requires inclusion in income amounts arising under non-qualifying deferred compensation arrangements, even where such amounts have not been received by the employee, and imposes a 20% penalty on the employee recipient of such amounts. The Company has had its compensation agreements reviewed by outside counsel and does not believe that it has nonqualified deferred compensation arrangements in place that will fail to comply in good faith with the current guidance available under this statute.

Employment Contracts, Termination of Employment Arrangements and Change in Control Arrangements

Generally, the Company seeks to secure the services of its executive officers with employment contracts. The Company does this to clarify the terms of employment, to define the obligations of the executive and to set forth the circumstances under which he or she may become entitled to severance payments and the amounts and obligations thereof. The Committee believes that the employment agreements provide the Company with reasonable contractual protections and that making severance commitments to the Company's executives leads to stronger retention than if such benefits were not offered. The Company entered into a new employment agreement with its CEO in 2011 and with its other named executive officers in 2005, 2009 and 2010. Collectively, these agreements are referred to as the "employment agreements." The employment agreements have not been materially amended and are currently in effect.

The Committee has not used tally sheets to calculate the value of these payments, as the levels of the Company's termination and change in control arrangements have been determined by the Committee to be modest and well within competitive levels.

The employment agreements provide the Company a balance of contractual protections in exchange for severance for the executives in the case of termination without cause and, in some cases, constructive termination. The employment agreements do not contain a single trigger provision that would generally allow the executive officers to terminate their employment because of a change in control of the Company, nor do they entitle the executive officers to benefits under their employment agreements as if they were terminated without Cause. The Committee structured the employment agreements in this fashion because it believes the executives should not be entitled to such benefits absent other factors, such as a termination without cause or resignation for good reason (i.e. constructive termination).

The Committee, as plan administrator of the Company's 2003 Plan, has the authority to grant options, stock appreciation rights ("SARs") and stock awards and stock units and to structure repurchase rights under that Plan so that the shares subject to those options, SARs, and stock awards

and units will immediately vest, or the repurchase rights will terminate, in the event that they are not assumed or substituted in connection with a change in control, whether by merger, asset sale, successful tender offer for more than 50% of our outstanding voting stock or by a change in the majority of the Board by reason of one or more contested elections for Board membership. Vesting or the termination of repurchase rights will occur either at the time of the change in control or, if the options, SARs or stock awards are assumed or substituted, then vesting or the termination of repurchase rights may occur upon the subsequent involuntary termination of the individual's service within a designated period not to exceed 24 months following the change in control.

As used with respect to any given named executive officer, the definition of change in control applicable to such officer is stated in such officer's employment agreement, a copy of which has been filed with the SEC.

Chief Executive Officer Employment Agreement

The employment agreement with Jon E. Kirchner, the Company's Chief Executive Officer, has an initial term of four years, with one-year renewals thereafter, until the agreement is terminated in accordance with its terms. Mr. Kirchner's annual salary in 2010 was $457,500 and the cost of Mr. Kirchner's benefits was approximately $1,263 per month.

Under Mr. Kirchner's employment agreement, if his employment is terminated without Cause or if he resigns for Good Reason, he will be entitled to a severance package that shall include (a) a lump sum severance payment equal to 24 months of his base salary then in effect, (b) payment by the Company of premiums required to continue his group health care coverage for a period of 24 months, provided that he remains eligible for those benefits under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") and does not become eligible for health coverage through another employer, (c) full acceleration of vesting of his then-outstanding equity compensation awards (excluding any awards with performance based vesting) and an extension of the exercise period of his stock option or stock appreciation right grants until the earlier of (i) five years from the date of termination or (ii) the remaining life of the equity grants, and (d) 18 months of outplacement services. The severance package is contingent upon, among other things, Mr. Kirchner's release of claims against the Company.

If Mr. Kirchner is terminated without Cause or resigns for Good Reason within a period that is three months prior to, or 24 months following, a Change of Control of the Company (as defined in his employment agreement), then, in lieu of the severance package described above, he shall be entitled to receive a "CoC Severance Package" that includes (a) a lump sum severance payment equal to two times the sum of (i) his then current base salary plus (ii) the greater of (x) his most recently received annual bonus or (y) the average of his annual bonus of the prior three years immediately preceding the termination date, (b) payment by the Company of premiums required to continue his group health care coverage for a period of 24 months, provided that he remains eligible for those benefits under COBRA and does not become eligible for health coverage through another employer, (c) full acceleration of vesting of his then-outstanding equity compensation awards (excluding any awards with performance based vesting, except to the extent such acceleration is specifically provided for pursuant to the grant documents) and an extension of the exercise period of his stock options or stock appreciation right grants until the earlier of (i) five years from the date of termination, or (ii) the remaining life of the equity grants, and (d) 24 months of outplacement services. The CoC Severance Package is conditioned upon, among other things, Mr. Kirchner's release of claims against the Company and, to the extent he sells all of his ownership interest in the Company as part of the Change of Control transaction, that he will not compete or solicit Company customers for a period of 24 months following the change of control.

Under Mr. Kirchner's employment agreement, a termination for "Cause" occurs only in the case of (a) gross negligence, recklessness or willful misconduct on the part of Mr. Kirchner relating to the

business of the Company, (b) acts of Mr. Kirchner that are materially adverse to the Company's interests, (c) material breach by him of the employment agreement, (d) breach by him of the Company's Proprietary Information and Inventions Agreement, (e) Mr. Kirchner's conviction or entry of a plea ofnolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude or that otherwise negatively impacts his ability to effectively perform his duties, or (f) his willful neglect of duties or his inability to perform the essential functions of the position, with or without reasonable accommodation, due to a mental or physical disability or death.

Under Mr. Kirchner's employment agreement "Good Reason" means the occurrence of any of the following events or conditions, without his consent: (a) a material reduction in his duties, authority or responsibilities, (b) a material reduction in his annual base salary or annual bonus or incentive compensation opportunity as in effect as of the date hereof or as the same may be increased from time to time, (c) a material diminution in the authority, duties or responsibilities of the supervisor to whom he is required to report, including a requirement that Mr. Kirchner report to a corporate officer or employee instead of directly to the Company's Board of Directors, (d) a material diminution in the budget over which Mr. Kirchner retains authority, (e) the relocation of his principal place of employment to a location more than 30 miles from his principal place of employment immediately prior to his termination or the Company's requirement that he be based anywhere other than such principal place of employment (or permitted relocation thereof) except for required travel on the Company's business to an extent substantially consistent with his present business travel obligations, (f) any action or inaction that constitutes a material breach by the Company of the employment agreement or any other agreement between the Company and Mr. Kirchner, or any material breach by the Company of a policy relating to the benefits to which he is entitled, or (g) any material reduction in the value of any of the benefits provided to Mr. Kirchner as of the date of his 2011 employment agreement or as increased from time to time.

Employment Agreements for Other Named Executive Officers

A description of the employment agreements for each of our named executive officers other than our Chief Executive Officer is provided below. The duration of the severance obligations for these officers ranges from six months to one year, depending upon length of employment at the time of termination and position. The only exceptions to our severance obligations are terminations for good cause and voluntary resignations (in the absence of constructive termination). A termination for good cause occurs only in the case of negligence, material or repetitive misconduct or failure to perform, fraud upon the Company, conviction for (or a plea of guilty or nolo contendere with respect to) any crime punishable by imprisonment or failure to execute and deliver to the Company any documents required by all employees or by employees of a similar position.

Severance protection for most named executive officers in the event of termination (either without cause or in some cases by constructive termination) is provided in the form of salary and benefit continuation for the duration of the severance period (the periods run from between six months to one year, as discussed above) and the full vesting of all unvested equity awards. During the period that the executive receives severance pay, he or she is obligated to be available to provide up to eight hours of consulting services per week related to projects or tasks in which he or she had previously been involved.

The employment agreement with Melvin E. Flanigan is for his service as the Company's Executive Vice President, Finance and Chief Financial Officer. The agreement provides for employment until terminated in accordance with its provisions. Under the agreement, if Mr. Flanigan's employment is terminated without cause or is constructively terminated, the Company is required to pay his salary and continue his benefits for a period of 12 months. Mr. Flanigan's annual salary in 2010 was $291,500 and the cost of Mr. Flanigan's benefits was approximately $1,264 per month. In addition, in the event of termination without cause or constructive termination, all of his equity awards shall immediately vest in

full. A constructive termination includes: Mr. Flanigan's removal without cause from his position as Executive Vice President, Finance and Chief Financial Officer or any material change by the Company in his functions, duties or responsibilities, without his consent; or a material non-voluntary reduction in his base salary and eligibility for bonus amounts.

The employment agreement with Fredrick L. Kitson is for his service as the Company's Executive Vice President and Chief Technology Officer. The agreement provides for employment until terminated in accordance with its provisions. Under the agreement, if Mr. Kitson's employment is terminated without cause or is constructive terminated, the Company is required to pay his salary and continue his benefits for a period of 12 months. Mr. Kitson's annual salary in 2010 was $320,000 and the cost of Mr. Kitson's benefits was approximately $1,275 per month. In addition, in the event of termination without cause or constructive termination, all of his equity awards shall immediately vest in full. A constructive termination includes: Mr. Kitson's removal without cause from his position as Executive Vice President and Chief Technology Officer or any material change by the Company in his functions, duties or responsibilities, without his consent; or a material non-voluntary reduction in his base salary and eligibility for bonus amounts.

The employment agreement with Brian D. Towne is for his service as the Company's Executive Vice President and Chief Operating Officer. The agreement provides for employment until terminated in accordance with its provisions. Under the agreement, if Mr. Towne's employment is terminated without cause or is constructively terminated, the Company is required to pay his salary and continue his benefits for a period of 12 months. Mr. Towne's annual salary in 2010 was $325,000 and the cost of Mr. Towne's benefits was approximately $1,263 per month. In addition, in the event of termination without cause or constructive termination, all of his equity awards shall immediately vest in full. A constructive termination includes: Mr. Towne's removal without cause from his position as Executive Vice President and Chief Operating Officer or any material change by the Company in his functions, duties or responsibilities, without his consent; or a material non-voluntary reduction in his base salary and eligibility for bonus amounts.

The employment agreement with Blake A. Welcher is for his service as the Company's Executive Vice President, Legal, General Counsel, and Corporate Secretary. The agreement provides for employment until terminated in accordance with its provisions. Under the agreement, if Mr. Welcher's employment is terminated without cause or is constructively terminated, the Company is required to pay his salary and continue his benefits for a period of 12 months. Mr. Welcher's annual salary in 2010 was $276,000 and the cost of Mr. Welcher's benefits was approximately $1,263 per month. In addition, in the event of termination without cause or constructive termination, all of his equity awards shall immediately vest in full. A constructive termination includes: Mr. Welcher's removal without cause from his position as Executive Vice President, Legal, General Counsel, and Corporate Secretary or any material change by the Company in his functions, duties or responsibilities, without his consent; or a material non-voluntary reduction in his base salary and eligibility for bonus amounts.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee (the "Committee") of our Board of Directors has submitted the following report for inclusion in this Proxy Statement:

The Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and contained in this Proxy Statement. Based on the Committee's review of and the discussions with management with respect to the Compensation Discussion and Analysis, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 for filing with the Securities and Exchange Commission.

The foregoing report is provided by the following directors, who constitute the Committee:


		COMPENSATION COMMITTEE
		Craig Andrews, Chair Brad Duea Ronald Stone

The preceding "Compensation Committee Report" shall not be deemed to be "soliciting material" or "filed" with the Securities and Exchange Commission, nor shall any information in this report be incorporated by reference into any past or future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the Company specifically incorporates it by reference into such filing.

Summary Compensation Table

The following table sets forth information concerning compensation for services to us during fiscal 2010, 2009 and 2008 by the persons serving as our chief executive officer (principal executive officer), our chief financial officer (principal financial officer), and our three next most highly compensated executive officers as of December 31, 2010. The persons listed below are collectively referred to as the "named executive officers."

2010 SUMMARY COMPENSATION TABLE

(a)		(b)	(c)		(d)		(e)		(f)		(g)		(h)		(i)		(j)

Name and Principal Position		Year	Salary ($)		Bonus ($)		Stock Awards ($)(1)		Option Awards ($)(2)		Non-Equity Incentive Plan Compensation ($)(3)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)(4)		Total ($)
Jon E. Kirchner(5)		2010		454,210		—		393,900		906,406		594,750		—		14,773		2,364,039
	Chairman and Chief	2009		443,731		—		392,750		925,185		355,000		—		37,849		2,154,515
	Executive Officer	2008		400,192		—		561,250		804,330		440,211		—		12,114		2,218,097
Melvin L. Flanigan		2010		287,692		—		157,560		341,235		160,345		—		86		946,918
	Executive Vice President,	2009		282,885		—		96,145		219,824		100,000		—		472		699,326
	Finance and Chief Financial	2008		262,308		—		134,700		193,039		132,500		—		114		722,661
	Officer
Frederick L. Kitson(6)		2010		265,846		—		432,000		649,725		176,000		—		46,675		1,570,246
	Executive Vice President and
	Chief Technology Officer
Brian D. Towne(7)		2010		307,077		—		210,080		426,544		200,000		—		86		1,143,787
	Executive Vice President and	2009		285,385		—		96,145		277,556		115,000		—		472		774,558
	Chief Operating Officer	2008		254,615		—		134,700		241,299		130,000		—		114		760,728
Blake A. Welcher		2010		272,308		—		157,560		341,235		180,000		—		86		951,189
	Executive Vice President,	2009		267,308		—		96,145		219,824		100,000		—		472		683,749
	Legal and General Counsel	2008		248,654		—		112,250		160,866		125,000		—		13,614		660,384

(1): The amounts in column (e) reflect the aggregate grant date fair value of stock awards granted by us in 2010, 2009 and 2008, as applicable, determined in accordance with generally accepted accounting principles in the United States of America ("GAAP"). The grant date fair values of these shares are based on the fair value of our common stock on the date of grant, which is determined as the closing market price per share of our common stock on the date of grant. All stock awards to the named executive officers have been in the form of restricted stock awards or restricted stock units granted under the 2003 Plan on February 18, 2010 (February 26, 2010 for Mr. Kitson), February 18, 2009 and February 20, 2008. The closing prices of our common stock on February 18, 2010 (February 26, 2010 for Mr. Kitson), February 18, 2009 and February 20, 2008 were $26.26 ($32.00 for Mr. Kitson), $15.71 and $22.45 per share, respectively. Additional information regarding these restricted stock awards and restricted stock units is set forth in the "Grants of Plan-Based Awards," "Outstanding Equity Awards at Fiscal Year End" and "Option Exercises and Stock Vested" tables.
(2): The amounts in column (f) reflect the aggregate grant date fair value of option awards granted by us in 2010, 2009 and 2008, as applicable, determined in accordance with GAAP. The actual value of the options to the executive, if any, will depend on the excess of our stock price over the exercise price on the date the option is exercised. The actual value realized by the executive upon exercise of the options may be higher or lower than the value shown in column (f). Additional information regarding these options is set forth in the "Grants of Plan-Based Awards," "Outstanding Equity Awards at Fiscal Year End" and "Option Exercises and Stock Vested" tables. The fair values of awards granted in 2010, 2009 and 2008 have been determined based on the assumptions set forth in Footnote 12, "Stock-Based Compensation," to our audited financial statements for the fiscal year ended December 31, 2010 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2011.
(3): The amounts in column (g) reflect the cash awards earned under our 2010 Annual Cash Incentive Compensation Plan, which is discussed under the heading "Annual Performance-Based Cash Incentives" of our Compensation Discussion and Analysis, above.
(4): The amounts shown in column (i) represent, for each named executive officer, the premiums paid by us for life insurance policies for the benefit of the officers. In addition, Mr. Kirchner received a $12,000 annual automobile allowance in 2010, and Mr. Kitson was reimbursed $46,604 for relocation expenses. Mr. Kirchner also received a $12,462 annual automobile allowance in 2009, and he was reimbursed $25,000 for out-of-pocket expenses related to the airfare and boarding costs for his wife and young child to accompany him on his approximately five (5) weeks overseas assignment. Mr. Kirchner also received a $12,000 annual automobile

allowance in 2008, and Mr. Welcher was reimbursed $13,500 for out-of-pocket expenses related to the airfare, ground transportation and boarding costs for his wife and two young children to accompany him on his two-month overseas assignment.

(5): Mr. Kirchner served as our President and Chief Executive Officer during 2009 and 2008. In February 2010, our board of directors appointed him Chairman and Chief Executive Officer.
(6): Mr. Kitson began employment with us as our Executive Vice President and Chief Technology Officer on February 26, 2010.
(7): Mr. Towne served as our Senior Vice President and General Manager, Consumer Division during 2008. In February 2009, our board of directors appointed him Executive Vice President and General Manager. In June 2010, our board of directors appointed him Executive Vice President and Chief Operating Officer.

Plan-Based Awards Granted in Last Fiscal Year

The following table provides information relating to plan-based awards granted to the named executive officers during the fiscal year ended December 31, 2010.

2010 GRANTS OF PLAN-BASED AWARDS TABLE

(a)	(b)	(c)		(d)		(e)		(f)		(g)		(h)		(i)		(j)		(k)		(l)

														All Other Stock Awards: Number of Shares of Stock or Units (#)		All Other Option Awards: Number of Securities Underlying Options (#)				Grant Date Fair Value of Stock and Option Awards ($)(3)
		Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1)						Estimated Future Payouts Under Equity Incentive Plan Awards										Exercise or Base Price of Option Awards ($/Sh)
Name	Grant Date	Threshold ($)(2)		Target ($)		Maximum ($)		Threshold (#)		Target (#)		Maximum (#)						Exercise or Base Price of Option Awards ($/Sh)
Jon E. Kirchner	N/A	$	22,875		457,500	$	857,813		—		—		—		—		—		—		—
	2/18/2010		—		—		—		—		—		—		15,000				—	$	393,900
	2/18/2010		—		—		—		—		—		—				85,000	$	26.26	$	906,406
Melvin L. Flanigan	N/A	$	8,016	$	160,325	$	300,609		—		—		—		—		—		—		—
	2/18/2010		—		—		—		—		—		—		6,000		—		—	$	157,560
	2/18/2010		—		—		—		—		—		—		—		32,000	$	26.26	$	341,235
Frederick L. Kitson	N/A	$	8,800	$	176,000	$	330,000		—		—		—		—		—		—		—
	2/26/2010		—		—		—		—		—		—		13,500		—		—	$	432,000
	2/26/2010		—		—		—		—		—		—		—		50,000	$	32.00	$	649,725
Brian D. Towne	N/A	$	9,750	$	195,000	$	365,625		—		—		—		—		—		—		—
	2/18/2010		—		—		—		—		—		—		8,000		—		—	$	210,080
	2/18/2010		—		—		—		—		—		—		—		40,000	$	26.26	$	426,544
Blake A. Welcher	N/A	$	7,590	$	151,800	$	284,625		—		—		—		—		—		—		—
	2/18/2010		—		—		—		—		—		—		6,000		—		—	$	157,560
	2/18/2010		—		—		—		—		—		—		—		32,000	$	26.26	$	341,235

(1): Amounts in columns (c), (d) and (e) represent the potential threshold, target and maximum payouts under our 2010 Annual Cash Incentive Compensation Plan. For actual amounts earned under the 2010 Annual Cash Incentive Compensation Plan in 2010, see column (g) of the Summary Compensation Table. Additional information regarding the design of this plan, including the criteria applied to determine actual awards, is set forth under "Annual Performance-Based Cash Incentives" in our Compensation Discussion and Analysis, above. The amounts in columns (c), (d) and (e) are calculated as discussed in our Compensation Discussion and Analysis based on a pro rata blend of the base salary in effect for each officer prior to March 22, 2010 and the adjusted base salary of $457,500 for Mr. Kirchner, $291,500 for Mr. Flanigan, $297,000 for Mr. Towne and $276,000 for Mr. Welcher. Mr. Kitson began employment with us as our Executive Vice President and Chief Technology Officer on February 26, 2010 with a base salary of $320,000.
(2): If the threshold amounts of revenue and operating income are not met, no award would be made. Additional information regarding the design of this plan, including the criteria applied to determine actual awards, is set forth under "Annual Performance-Based Cash Incentives" in our Compensation Discussion and Analysis, above.
(3): Amounts in column (l) represent the aggregate grant date fair values of the equity awards set forth in columns (i) and (j) determined in accordance with GAAP. All equity awards were granted under the 2003 Plan. All stock awards were restricted stock units. The aggregate grant date fair value for the restricted stock units is based on the grant date fair value of the underlying shares, which is $26.26 per share ($32.00 for Mr. Kitson), the closing price of our common stock on the grant date. The aggregate grant date fair value for the stock options is based on the Black-Scholes option valuation method. The actual value, if any, an executive may realize will depend on the excess of the stock price over the exercise price on the date the option is exercised. The actual value realized by the executive upon exercise of the options may be higher or lower than the value shown in column (l). Assumptions used in the calculation of the grant date fair values are included in Footnote 12, "Stock-Based Compensation," to our audited financial statements for the fiscal year ended December 31, 2010 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2011.

Outstanding Equity Awards at Fiscal Year-End

The following table provides information relating to outstanding equity awards held by the named executive officers at fiscal year end, December 31, 2010.

2010 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

(a)	(b)			(c)			(d)		(e)		(f)		(g)			(h)		(i)		(j)

	Option Awards												Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable			Number of Securities Underlying Unexercised Options (#) Unexercisable			Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested ($)(1)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Jon E. Kirchner		—			85,000	(2)		—	$	26.26		02/18/2020		15,000	(11)	$	735,750
		37,500	(4)		112,500	(4)		—	$	15.71		02/18/2019		18,750	(13)	$	919,688		—		—
		50,000	(5)		50,000	(5)		—	$	22.45		02/20/2018		12,500	(14)	$	613,125		—		—
		67,000	(7)		—			—	$	18.32		02/23/2016		—			—		—		—
		100,000	(8)		—			—	$	16.55		05/19/2015		—			—		—		—
		50,000	(9)		—			—	$	23.55		01/06/2014		—			—		—		—
		51,361	(10)		—			—	$	1.02		09/16/2012		—			—		—		—
Melvin L. Flanigan		—			32,000	(2)		—	$	26.26		02/18/2020		6,000	(11)	$	294,300
		8,910	(4)		26,730	(4)		—	$	15.71		02/18/2019		4,590	(13)	$	225,140		—		—
		12,000	(5)		12,000	(5)		—	$	22.45		02/20/2018		3,000	(14)	$	147,150		—		—
		12,000	(6)		4,000	(6)		—	$	23.99		03/06/2017		1,000	(15)	$	49,050		—		—
		20,000	(7)		—			—	$	18.32		02/23/2016		—			—		—		—
		30,000	(8)		—			—	$	16.55		05/19/2015		—			—		—		—
		30,000	(9)		—			—	$	23.55		01/06/2014		—			—		—		—
		15,000	(10)		—			—	$	1.02		09/16/2012		—			—		—		—
Frederick L. Kitson		—			50,000	(3)		—	$	32.00		02/26/2020		13,500	(12)	$	662,175
Brian D. Towne		—			40,000	(2)		—	$	26.26		02/18/2020		8,000	(11)	$	392,400
		—			33,750	(4)		—	$	15.71		02/18/2019		4,590	(13)	$	225,140		—		—
		15,000	(5)		15,000	(5)		—	$	22.45		02/20/2018		3,000	(14)	$	147,150		—		—
		6,000	(6)		2,000	(6)		—	$	23.99		03/06/2017		500	(15)	$	24,525		—		—
Blake A. Welcher		—			32,000	(2)		—	$	26.26		02/18/2020		6,000	(11)	$	294,300
		8,910	(4)		26,730	(4)			$	15.71		02/18/2019		4,590	(13)	$	225,140
		10,000	(5)		10,000	(5)			$	22.45		02/20/2018		2,500	(14)	$	122,625		—		—
		12,000	(6)		4,000	(6)		—	$	23.99		03/06/2017		1,000	(15)	$	49,050		—		—
		3,434	(9)		—			—	$	23.55		01/06/2014		—			—		—		—

(1): Reflects the value as calculated based on the closing price of our common stock on December 31, 2010 of $49.05 per share.
(2): The option was granted on February 18, 2010 and vests and becomes exercisable at a rate of 25% per year on each of the first four anniversaries of the grant date.
(3): The option was granted on February 26, 2010 and vests and becomes exercisable at a rate of 25% per year on each of the first four anniversaries of the grant date.
(4): The option was granted on February 18, 2009 and vests and becomes exercisable at a rate of 25% per year on each of the first four anniversaries of the grant date.
(5): The option was granted on February 20, 2008 and vests and becomes exercisable at a rate of 25% per year on each of the first four anniversaries of the grant date.

(6): The option was granted on March 6, 2007 and vests and becomes exercisable at a rate of 25% per year on each of the first four anniversaries of the grant date.
(7): The option was granted on February 23, 2006 and vests and becomes exercisable at a rate of 25% per year on each of the first four anniversaries of the grant date.
(8): The option was granted on May 19, 2005 and vests and becomes exercisable at a rate of 25% per year on each of the first four anniversaries of the grant date.
(9): The option was vested and exercisable in full as of November 17, 2005.
(10): The option was vested and exercisable in full as of September 16, 2006.
(11): The vesting schedule of these restricted stock units is 25% per year on each of the first four anniversaries of February 15, 2010. One-fourth of these units vested on February 15, 2011, and the remaining three-fourths will vest in equal installments on February 15, 2012, February 15, 2013 and February 15, 2014.
(12): The vesting schedule of these restricted stock units is 25% per year on each of the first four anniversaries of February 26, 2010. One-fourth of these units vested on February 26, 2011, and the remaining three-fourths will vest in equal installments on February 26, 2012, February 26, 2013 and February 26, 2014.
(13): The vesting schedule of the restricted stock award pursuant to which these shares were issued is 25% per year on each of the first four anniversaries of February 15, 2009. One-third of these shares vested on February 15, 2011, and the remaining two-thirds will vest in equal installments on February 15, 2012 and February 15, 2013.
(14): The vesting schedule of the restricted stock award pursuant to which these shares were issued is 25% per year on each of the first four anniversaries of February 15, 2008. One-half of these shares vested on February 15, 2011, and the remaining shares will vest on February 15, 2012.
(15): The vesting schedule of the restricted stock award pursuant to which these shares were issued is 25% per year on each of the first four anniversaries of March 6, 2007. All of these shares vested on March 6, 2011.

Option Exercises and Stock Vested

The following table summarizes the option exercises and restricted stock awards that vested during the fiscal year ended, December 31, 2010.

2010 OPTION EXERCISES AND STOCK VESTED TABLE

(a)	(b)		(c)		(d)		(e)

	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)(1)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
Jon E. Kirchner		79,000	$	3,190,194		16,625	$	438,235
Melvin L. Flanigan		13,829	$	564,082		5,280	$	147,741
Frederick L. Kitson		—		—		—		—
Brian D. Towne		49,500	$	1,084,278		4,405	$	120,396
Blake A. Welcher		76,566		1,483,976		5,030	$	141,151

(1): All of the shares reported in column (b) were sold upon exercise of the options. The value realized reported in this column (c) is based upon the price at which the shares acquired upon exercise were sold net of the exercise price for acquiring such shares.

Payments upon Termination or Change in Control

The following table describes the potential payments and benefits upon termination of our Named Executive Officers' employment for other than cause, death or disability or as a result of constructive termination before or after a change in control of the Company, as if each officer's employment terminated as of December 31, 2010, except in the case of Jon E. Kirchner, our Chief Executive Officer, giving effect to the employment agreement he entered into with the Company in February of 2011. For purposes of valuing the severance and vacation payout payments in the table below, we used each officer's base salary rate currently in effect and the number of accrued but unused vacation days on December 31, 2010. For purposes of valuing the unvested stock awards and units, we used the closing stock price on December 31, 2010, which was $49.05, multiplied by the number of unvested stock awards and units. For purposes of valuing the option awards, we used the closing stock price on December 31, 2010 less the exercise price per option multiplied by the number of unvested options. There can be no assurance that a triggering event would produce the same or similar results as those estimated if such event were to occur on any other date, when our stock price was different, or if any other assumption used to estimate potential payments and benefits differed from those used herein. Due to the number of factors that affect the nature and amount of any potential payments or benefits, actual payments and benefits may differ from those presented in the table below. Additionally, pursuant to the terms of our 2003 Equity Incentive Plan, in the event that outstanding equity awards are not assumed or substituted in connection with certain fundamental transactions, or in the event that within eighteen months following certain fundamental transactions or changes in control an award recipient is terminated for any reason other than death, disability or cause (in each case as described in the Plan), then such equity awards shall accelerate fully.

Name	Termination Scenario(1)

Jon E. Kirchner	For Cause	48,389	—		—	48,389	—		—	—
	Not for Cause/Death/Disability or
	Constructive Termination	10,365,157	1,000,000	(2)	—	48,389	30,305	(4)	2,268,563	7,017,900
	Change in Control	11,554,657	2,189,500	(3)	—	48,389	30,305	(4)	2,268,563	7,017,900
Melvin L. Flanigan	For Cause	25,226	—		—	25,226	—		—	—
	Not for Cause/Death/Disability or
	Constructive Termination	3,107,926	312,000	(5)	—	25,226	15,162	(6)	715,640	2,039,898
	Change in Control	—	—		—	—	—		—	—
Frederick L. Kitson	For Cause	26,062	—		—	26,062	—		—	—
	Not for Cause/Death/Disability or
	Constructive Termination	1,886,035	330,000	(5)	—	26,062	15,298	(6)	662,175	852,500
	Change in Control	—	—		—	—	—		—	—
Brian D. Towne	For Cause	28,125	—		—	28,125	—		—	—
	Not for Cause/Death/Disability or
	Constructive Termination	3,653,443	335,000	(5)	—	28,125	15,158	(6)	789,215	2,485,945
	Change in Control	—	—		—	—	—		—	—
Blake A. Welcher	For Cause	23,885	—		—	23,885	—		—	—
	Not for Cause/Death/Disability or
	Constructive Termination	3,034,849	318,000	(5)	—	23,885	15,151	(6)	691,115	1,986,698
	Change in Control	—	—		—	—	—		—	—

(1): For events and circumstances that constitute "cause", "constructive termination" and "change in control" with respect to the named executive officers, see "Employment Contracts, Termination of Employment Arrangements and Change in Control Arrangements" in our Compensation Discussion and Analysis, above. For the purposes of the "Change in Control" scenarios other than with respect to our CEO, we assume that in the event of a change in control, the acquirer or surviving entity assumes or substitutes the named executive officers' stock options and restricted stock awards. If such equity awards are not assumed or substituted, any unvested awards would vest in full upon the change in control. The value of such accelerated vesting, assuming the change in control took place on December 31, 2010, is as set forth in the "Not for Cause/Death/Disability or Constructive Termination" scenarios.

(2): Consists of a payment equivalent to 24 months of the base salary, payable in a lump sum 60 days following the termination date.
(3): Consists of a payment equivalent to 24 months of the base salary plus an amount equal to twice the most recently received annual bonus, payable in a lump sum 60 days following the termination date.
(4): Consists of continuation of employer paid benefits for 24 months.
(5): Consists of salary continuation for 12 months, payable monthly.
(6): Consists of continuation of employer paid benefits for 12 months.

Pension Benefits

We do not offer any plans that provide for specified retirement payments and benefits other than a tax-qualified 401(k) plan generally available to all employees.

Nonqualified Deferred Compensation

We do not offer nonqualified deferred compensation.

EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes information as of December 31, 2010 about our equity compensation plans, including our 1997 Stock Option Plan, 2002 Stock Option Plan, 2003 Equity Incentive Plan, 2003 Employee Stock Purchase Plan and 2005 Performance Incentive Plan.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights(1)		Weighted-average exercise price of outstanding options, warrants and rights(1)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(2)

	(a)		(b)		(c)
Equity compensation plans approved by security holders		2,124,794	$	20.87		1,533,243
Equity compensation plans not approved by security holders		—		—		—

Totals		2,124,794	$	20.87		1,533,243

(1): The number under column (a) includes 1,816,781 shares issuable upon the exercise of outstanding options with a weighted average exercise price of $20.87 and 308,013 shares issuable upon the vesting of outstanding restricted stock awards and restricted stock units. Restricted stock awards and restricted stock units do not require a payment by the recipient to us at the time of vesting. Accordingly, the weighted-average exercise price in column (b) does not take these awards into account.
(2): Consists of shares available for future issuance under our 2003 Equity Incentive Plan, 2003 Employee Stock Purchase Plan and 2005 Performance Incentive Plan. As of December 31, 2010, an aggregate of 1,160,599 shares of Common Stock were available for issuance under the 2003 Equity Incentive and 2005 Performance Incentive Plans and 372,644 shares of Common Stock were available for issuance under the 2003 Employee Stock Purchase Plan. The 2003 Equity Incentive Plan contains a provision for an automatic increase in the number of shares available for grant each January until and including January 1, 2013, subject to certain limitations, by a number of shares equal to the least of: 1) four percent of the number of shares issued and outstanding on the immediately preceding December 31, 2) 1,500,000 shares or 3) a number of shares set by the Board of Directors. The 2003 Employee Stock Purchase Plan contains a provision for an automatic increase in the number of shares available for grant each January until and including January 1,

2013, subject to certain limitations, by a number of shares equal to the least of: 1) 500,000 shares, 2) one percent of the number of shares of all classes of Common Stock of the Company outstanding on that date or 3) an amount determined by the Board of Directors. Awards under the 2005 Performance Incentive Plan shall be made in restricted "Stock Awards" from the 2003 Equity Incentive Plan.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Audit Committee Charter requires the approval or ratification by the Audit Committee of any transaction or series of transactions exceeding $120,000 in any calendar year, in which the Company is a participant and any related person has a direct or indirect material interest. Related persons include our directors, nominees for election as a director, persons controlling over 5% of our common stock and executive officers and the immediate family members of each of these individuals.

Once a transaction has been identified as requiring such approval, the Audit Committee will review all of the relevant facts and circumstances and approve or disapprove of the transaction. The Audit Committee will take into account such factors as it considers appropriate, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances, the extent of the related person's interest in the transaction and whether the transaction would be likely to impair (or create an appearance of impairing) the judgment of a director or executive officer to act in the best interests of the Company.

Company Relationships with Law Firms

Craig S. Andrews, one of our directors, is Of Counsel at the law firm of DLA Piper LLP (US) and was a partner at this firm for fiscal year 2010. During fiscal year 2010, we paid DLA Piper LLP (US) $706,132 for rendering general corporate and other legal services.

Compensation Committee Interlocks and Insider Participation

The members of our Compensation Committee are L. Gregory Ballard, Bradford D. Duea and Craig S. Andrews. None of these individuals has at any time been an officer or employee of ours or any of our subsidiaries. There are no interlocking relationships between any of our executive officers and Compensation Committee members, on the one hand, and the executive officers and compensation committee members of any other companies, on the other hand, nor have any such interlocking relationships existed in the past.

STOCKHOLDER PROPOSALS FOR THE 2012 ANNUAL MEETING OF STOCKHOLDERS

Stockholder proposals may be included in our proxy materials for an annual meeting so long as they are provided to us on a timely basis and satisfy the other conditions set forth in the applicable rules of the Securities and Exchange Commission. For a stockholder proposal to be included in our proxy materials for the 2012 annual meeting, the proposal must be received at our principal executive offices, addressed to the Secretary, not later than December 12, 2011. Stockholder business that is not intended for inclusion in our proxy materials may be brought before the annual meeting so long as we receive notice of the proposal as specified by our Bylaws, addressed to the Secretary at our principal executive offices, not earlier than the one hundred twentieth (120^th) day, nor later than the close of business on the ninetieth (90^th) day prior to the anniversary of the previous year's annual meeting of stockholders. However, the Bylaws also provide that in the event that no annual meeting was held in the previous year or the date of the annual meeting is changed by more than 30 days from the previous year's annual meeting as specified in our notice of meeting, this advance notice must be given not earlier than the one hundred twentieth (120^th) day, nor later than the close of business on the later of the ninetieth (90^th) day prior to the date of such annual meeting or, if the first public announcement of

the date of such annual meeting is less than one hundred (100) days prior to the date of such annual meeting, the tenth (10^th) day following the day on which public announcement of the date of such annual meeting is first made by us.

In addition to meeting the advance notice provisions mentioned above, the stockholder in its notice must provide the information required by our Bylaws to bring a stockholder proposal or nominate an individual to serve as a director of the Board.

A copy of the full text of the provisions of our Bylaws dealing with stockholder nominations and proposals is available to stockholders from the Secretary upon written request.

OTHER MATTERS

We know of no other matters to be submitted to the stockholders at the annual meeting. If any other matters properly come before the stockholders at the annual meeting, it is the intention of the persons named on the enclosed proxy card to vote the shares they represent as the Board may recommend or, if no recommendation is given, according to their best judgment.

Appendix A
Radford Executive Survey Companies


3PAR		KANA SOFTWARE
ACTUATE		KEY TECHNOLOGY
ADAPTEC		KEYNOTE SYSTEMS
ADVANCED ANALOGIC TECHNOLOGIES		LIMELIGHT NETWORKS
AIRVANA		MICROTUNE
AMICAS		MINDSPEED TECHNOLOGIES
APPLIED SIGNAL TECHNOLOGY		NETLOGIC MICROSYSTEMS
ARCSIGHT		NETSCOUT SYSTEMS
BIGBAND NETWORKS		NETSUITE
CALLIDUS SOFTWARE		NEUTRAL TANDEM
CHORDIANT SOFTWARE		OCCAM NETWORKS
CIRRUS LOGIC		OPEN TV
DEMANDTEC		PDF SOLUTIONS
DIGI INTERNATIONAL		PERICOM SEMICONDUCTOR
DIVX		PHOENIX TECHNOLOGIES
ECHELON		PLX TECHNOLOGY
EHEALTH		RAMBUS
ENDWAVE		RIGHTNOW TECHNOLOGIES
ENTROPIC COMMUNICATIONS		SABA
EXAR		SHORETEL
FSI INTERNATIONAL		SONICWALL
GLU MOBILE		SUMTOTAL SYSTEMS
IKANOS COMMUNICATIONS		SUPPORTSOFT
INFOSPACE		TALEO
INTEVAC		ULTRATECH
IXIA

A-1

000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 1 1 3 6 7 8 1 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND C 1234567890 J N T C123456789 000004 MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 ENDORSEMENT_LINE SACKPACK 3 Yrs 2 Yrs 1 Yr Abstain Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. X 01AS5F 1 U P X + PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Annual Meeting Proxy Card Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below C THIS PROXY MUST BE SIGNED EXACTLY AS NAME APPEARS HEREIN. If shares are held jointly, both or all of such persons should sign. Executors, Administrators, Trustees, etc. should give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. Date (mm/dd/yyyy) — Please print date below. + B Non-Voting Items A Proposals — The Board of Directors recommends a vote FOR all the director nominees listed, FOR Proposal 2, every 3 YRS for Proposal 3 and FOR Proposal 4. Change of Address — Please print new address below. 01 - Joerg D. Agin 02 - Jon E. Kirchner 1. Election of Directors: For Withhold For Withhold IMPORTANT ANNUAL MEETING INFORMATION For Against Abstain 2. Say on Pay - An advisory vote on the approval of executive compensation. 4. To ratify and approve Grant Thornton, LLP as the independent registered public accountants of the Company for fiscal year 2011. 3. Say When on Pay - An advisory vote on the approval of the frequency of shareholder votes on executive compensation. 5. In their discretion, the proxies are authorized to vote upon all matters incidental to the conduct of the meeting and upon such other business as may properly come before the meeting.

PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. This Proxy is Solicited on Behalf of the Board of Directors Proxy for Annual Meeting of Stockholders, Thursday, May 12, 2011 The undersigned hereby appoints Melvin L. Flanigan and Blake A. Welcher or any one of them acting singly in the absence of the other, with full power of substitution, the proxy or proxies of the undersigned, to attend the Annual Meeting of Stockholders of DTS, Inc., to be held at the Mediterraneo Room at the Westlake Village Inn, 32037 Agoura Road, Westlake Village, California 91361, United States, at 10:00 a.m. PST, on Thursday, May 12, 2011 and any postponement or adjournment thereof, and, with all powers the undersigned would possess, if present, to vote all shares of Common Stock of the undersigned in DTS, Inc. as designated on the reverse side. The undersigned revokes all previous proxies and acknowledges receipt of the Notice of Annual Meeting of Stockholders to be held on May 12, 2011 and the proxy statement. The Proxy when properly executed will be voted in the manner directed herein by the undersigned. This Proxy confers on the proxyholder discretionary authority to vote on any matter as to which a choice is not specified by the undersigned. If the Proxy is signed, but no vote is specified, this Proxy will be voted: FOR all the director nominees listed in Proposal 1 on the reverse side, FOR Proposal 2, every 3 YRS for Proposal 3 and FOR Proposal 4, and in accordance with the proxies’ best judgment upon all other matters as may properly come before the meeting and any postponement or adjournment thereof. (Continued and to be signed on the reverse side.) . Proxy — DTS, Inc.

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DTS, Inc. 5220 Las Virgenes Road Calabasas, California 91302
ABOUT THE MEETING
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 12, 2011
ITEM 1—ELECTION OF DIRECTORS
NOMINEES FOR TERM EXPIRING AT THE ANNUAL MEETING OF STOCKHOLDERS IN 2014
CONTINUING DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING OF STOCKHOLDERS IN 2012
CONTINUING DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING OF STOCKHOLDERS IN 2013
GOVERNANCE OF THE COMPANY
2010 DIRECTOR COMPENSATION TABLE
ITEM 2—ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
ITEM 3—ADVISORY (NON-BINDING) VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
ITEM 4—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
REPORT OF THE AUDIT COMMITTEE
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
EXECUTIVE COMPENSATION AND RELATED INFORMATION Compensation Discussion and Analysis
5-Yr CEO Actual Total Direct Compensation vs. DTS TSR
REPORT OF THE COMPENSATION COMMITTEE
2010 SUMMARY COMPENSATION TABLE
2010 GRANTS OF PLAN-BASED AWARDS TABLE
2010 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
2010 OPTION EXERCISES AND STOCK VESTED TABLE
EQUITY COMPENSATION PLAN INFORMATION
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDER PROPOSALS FOR THE 2012 ANNUAL MEETING OF STOCKHOLDERS
OTHER MATTERS
Appendix A Radford Executive Survey Companies

DTS Inactive DEF 14ADefinitive proxy