Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 30, 2016
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From              To             
Commission File Number: 001-32431

IMAGE0A07.JPG
DOLBY LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
90-0199783
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1275 Market Street
San Francisco, CA
94103-1410
(415) 558-0200
(Address of principal executive offices)
(Zip Code)
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act .
Large accelerated filer    ý
 
Accelerated filer    ¨
Non-accelerated filer    ¨   (Do not check if a smaller reporting company)
 
Smaller reporting company    ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    ¨      No    ý
On January 27, 2017 , the registrant had 57,867,086 shares of Class A common stock, par value $0.001 per share, and 44,073,597 shares of Class B common stock, par value $0.001 per share, outstanding.

Table of Contents


DOLBY LABORATORIES, INC.
FORM 10-Q
For the Fiscal Quarter Ended December 30, 2016
TABLE OF CONTENTS
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 


2
Table of Contents


GLOSSARY OF TERMS
The following table summarizes certain terms and abbreviations that may be used within the text of this report:
Abbreviation
 
Term
AAC
 
Advanced Audio Coding
AFS
 
Available-For-Sale (Securities)
AOCI
 
Accumulated Other Comprehensive Income
APIC
 
Additional-Paid In-Capital
ASP
 
Average Selling Price
ASU
 
Accounting Standards Update
ATSC
 
Advanced Television Systems Committee
AVR
 
Audio/Video Receiver
CE
 
Consumer Electronics
CODM
 
Chief Operating Decision Maker
COGS
 
Cost Of Goods Sold
COSO
 
Committee Of Sponsoring Organizations (Of The Treadway Commission)
DCI
 
Digital Cinema Initiative
DD
 
Dolby Digital®
DD+
 
Dolby Digital Plus™
DMA
 
Digital Media Adapter
DTV
 
Digital Television
DVB
 
Digital Video Broadcasting
DVD
 
Digital Versatile Disc
EPS
 
Earnings Per Share
ESP
 
Estimated Selling Price
ESPP
 
Employee Stock Purchase Plan
FASB
 
Financial Accounting Standards Board
FCPA
 
Foreign Corrupt Practices Act
G&A
 
General & Administrative
HDR
 
High-Dynamic Range
HDTV
 
High Definition Television
HE AAC
 
High Efficiency Advanced Audio Coding
HEVC
 
High Efficiency Video Coding
HFR
 
High Frame Rate
HTIB
 
Home Theater In-A-Box
IC
 
Integrated Circuit
IMB
 
Integrated Media Block
IP
 
Intellectual Property
IPO
 
Initial Public Offering
IPTV
 
Internet Protocol Television
ISO
 
Incentive Stock Option
ISV
 
Independent Software Vendor
IT
 
Information Technology
LCD
 
Liquid Crystal Display
LP
 
Limited Partner/Partnership
ME
 
Multiple Element
NATO
 
North American Theatre Owners
NOL
 
Net Operating Loss
NQ
 
Non-Qualified/Non-Statutory Stock Option
OCI
 
Other Comprehensive Income
ODD
 
Optical Disc Drive
OECD
 
Organization For Economic Co-Operation & Development
OEM
 
Original Equipment Manufacturer
OLED
 
Organic Light-Emitting Diode
OTT
 
Over-The-Top
PC
 
Personal Computer
PCS
 
Post-Contract Support
PP&E
 
Property, Plant And Equipment
PSO
 
Performance-Based Stock Option
R&D
 
Research & Development
RSU
 
Restricted Stock Unit
S&M
 
Sales & Marketing
SAR
 
Stock Appreciation Rights
SERP
 
Supplemental Executive Retirement Plan
SoC
 
System(s)-On-A-Chip
STB
 
Set-Top Box
TAM
 
Total Available Market
TPE
 
Third Party Evidence
TSR
 
Total Stockholder Return
UHD
 
Ultra High Definition
U.S. GAAP
 
Generally Accepted Accounting Principles In The United States
VSOE
 
Vendor Specific Objective Evidence

3
Table of Contents


PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
( in thousands, except share and per share amounts )


 
December 30,
2016
September 30,
2016
ASSETS
(unaudited)
 
Current assets:
 
 
Cash and cash equivalents
$
512,838

$
516,112

Restricted cash
5,075

3,645

Short-term investments
164,818

121,629

Accounts receivable, net of allowance for doubtful accounts of $2,394 and $2,370
81,393

75,688

Inventories
14,773

16,354

Prepaid expenses and other current assets
32,119

26,302

Total current assets
811,016

759,730

Long-term investments
350,360

393,904

Property, plant and equipment, net
459,709

443,656

Intangible assets, net
206,862

215,342

Goodwill
307,121

309,616

Deferred taxes
171,388

166,790

Other non-current assets
24,247

21,068

Total assets
$
2,330,703

$
2,310,106

 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
Current liabilities:
 
 
Accounts payable
$
11,541

$
17,544

Accrued liabilities
169,711

169,055

Income taxes payable
1,514

2,304

Deferred revenue
24,405

24,180

Total current liabilities
207,171

213,083

Long-term deferred revenue
34,603

35,366

Other non-current liabilities
88,271

82,922

Total liabilities
330,045

331,371

 
 
 
Stockholders’ equity:
 
 
Class A, $0.001 par value, one vote per share, 500,000,000 shares authorized: 57,808,525 shares issued and outstanding at December 30, 2016 and 57,018,362 at September 30, 2016
56

57

Class B, $0.001 par value, ten votes per share, 500,000,000 shares authorized: 44,073,597 shares issued and outstanding at December 30, 2016 and 44,403,847 at September 30, 2016
44

44

Additional paid-in capital
36,435

42,032

Retained earnings
1,977,478

1,938,320

Accumulated other comprehensive (loss)
(19,679
)
(10,197
)
Total stockholders’ equity – Dolby Laboratories, Inc.
1,994,334

1,970,256

Controlling interest
6,324

8,479

Total stockholders’ equity
2,000,658

1,978,735

Total liabilities and stockholders’ equity
$
2,330,703

$
2,310,106


 






See accompanying notes to unaudited interim condensed consolidated financial statements

4
Table of Contents


DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
( in thousands, except per share amounts )
(unaudited)
 
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Revenue:
 
 
Licensing
$
232,699

$
211,129

Products
28,211

24,809

Services
5,357

4,876

Total revenue
266,267

240,814

 
 
 
Cost of revenue:
 
 
Cost of licensing
8,121

6,533

Cost of products
17,720

19,038

Cost of services
4,126

4,195

Total cost of revenue
29,967

29,766

 
 
 
Gross margin
236,300

211,048

 
 
 
Operating expenses:
 
 
Research and development
57,518

53,328

Sales and marketing
71,175

74,454

General and administrative
41,540

44,078

Total operating expenses
170,233

171,860

 
 
 
Operating income
66,067

39,188

 
 
 
Other income/expense:
 
 
Interest income
1,814

1,297

Interest expense
(26
)
(29
)
Other income/(expense), net
(199
)
(972
)
Total other income
1,589

296

 
 
 
Income before income taxes
67,656

39,484

Provision for income taxes
(14,082
)
(8,473
)
Net income including controlling interest
53,574

31,011

Less: net (income) attributable to controlling interest
(200
)
(110
)
Net income attributable to Dolby Laboratories, Inc.
$
53,374

$
30,901

 
 
 
Net income per share:
 
 
Basic
$
0.53

$
0.31

Diluted
$
0.51

$
0.30

Weighted-average shares outstanding:
 
 
Basic
101,483

100,734

Diluted
103,876

101,931

 
 
 
Related party rent expense:
 
 
Included in operating expenses
$
782

$
781

Included in net income attributable to controlling interest
$
175

$
176

 
 
 
Cash dividend declared per common share
$
0.14

$
0.12

Cash dividend paid per common share
$
0.14

$
0.12





See accompanying notes to unaudited interim condensed consolidated financial statements

5
Table of Contents


DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
( in thousands)
(unaudited)
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Net income including controlling interest
$
53,574

$
31,011

Other comprehensive income:
 
 
Foreign currency translation adjustments, net of tax
(7,724
)
(750
)
Unrealized (losses) on available-for-sale securities, net of tax
(2,019
)
(860
)
Comprehensive income
43,831

29,401

Less: comprehensive loss attributable to controlling interest
61

39

Comprehensive income attributable to Dolby Laboratories, Inc.
$
43,892

$
29,440
















See accompanying notes to unaudited interim condensed consolidated financial statements

6
Table of Contents


DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
( in thousands )
(unaudited)

 
Dolby Laboratories, Inc.
 
 
 
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)
Total Dolby
Laboratories,
Inc.
Controlling
Interest
Total
Balance at September 30, 2016
$
101

$
42,032

$
1,938,320

$
(10,197
)
$
1,970,256

$
8,479

$
1,978,735

Net income
—

—

53,374

—

53,374

200

53,574

Currency translation adjustments, net of tax of $1,265
—

—

—

(7,463
)
(7,463
)
(261
)
(7,724
)
Unrealized (losses) on investments, net of tax of $95
—

—

—

(2,019
)
(2,019
)
—

(2,019
)
Distributions to controlling interest
—

—

—

—

—

(2,094
)
(2,094
)
Stock-based compensation expense
—

17,215

—

—

17,215

—

17,215

Repurchase of common stock
(1
)
(25,000
)
—

—

(25,001
)
—

(25,001
)
Cash dividends declared and paid on common stock
—

—

(14,216
)
—

(14,216
)
—

(14,216
)
Tax benefit from employee stock plans
—

2,853

—

—

2,853

—

2,853

Common stock issued under employee stock plans
1

13,990

—

—

13,991

—

13,991

Tax withholdings on vesting of restricted stock
(1
)
(14,655
)
—

—

(14,656
)
—

(14,656
)
Balance at December 30, 2016
$
100

$
36,435

$
1,977,478

$
(19,679
)
$
1,994,334

$
6,324

$
2,000,658


 
Dolby Laboratories, Inc.
 
 
 
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)
Total Dolby
Laboratories,
Inc.
Controlling
Interest
Total
Balance at September 25, 2015
$
102

$
17,571

$
1,800,857

$
(11,462
)
$
1,807,068

$
8,939

$
1,816,007

Net income
—

—

30,901

—

30,901

110

31,011

Currency translation adjustments, net of tax of $343
—

—

—

(601
)
(601
)
(149
)
(750
)
Unrealized (losses) on investments, net of tax of $168
—

—

—

(860
)
(860
)
—

(860
)
Distributions to controlling interest
—

—

—

—

—

(214
)
(214
)
Stock-based compensation expense
—

19,380

—

—

19,380

—

19,380

Repurchase of common stock
(2
)
(36,121
)
(3,326
)
—

(39,449
)
—

(39,449
)
Cash dividends declared and paid on common stock
—

—

(12,114
)
—

(12,114
)
—

(12,114
)
Tax (deficiency) from employee stock plans
—

(976
)
—

—

(976
)
—

(976
)
Common stock issued under employee stock plans
—

9,986

—

—

9,986

—

9,986

Tax withholdings on vesting of restricted stock
1

(9,840
)
—

—

(9,839
)
—

(9,839
)
Balance at January 1, 2016
$
101

$
—

$
1,816,318

$
(12,923
)
$
1,803,496

$
8,686

$
1,812,182





















See accompanying notes to unaudited interim condensed consolidated financial statements

7
Table of Contents


DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
( in thousands )
(unaudited)
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Operating activities:
 
 
Net income including controlling interest
$
53,574

$
31,011

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
21,810

21,814

Stock-based compensation
17,215

19,380

Amortization of premium on investments
662

1,605

Excess tax benefit from exercise of stock options
(2,962
)
(300
)
Provision for doubtful accounts
67

(322
)
Deferred income taxes
(3,275
)
(10,488
)
Other non-cash items affecting net income
(376
)
445

Changes in operating assets and liabilities:
 
 
Accounts receivable
(5,782
)
11,961

Inventories
878

(877
)
Prepaid expenses and other assets
(8,705
)
(3,567
)
Accounts payable and other liabilities
(11,528
)
(14,574
)
Income taxes, net
6,245

5,014

Deferred revenue
(479
)
6,319

Other non-current liabilities
417

(26
)
Net cash provided by operating activities
67,761

67,395

 
 
 
Investing activities:
 
 
Purchase of investments
(37,073
)
(85,299
)
Proceeds from sales of investment securities
7,524

121,770

Proceeds from maturities of investment securities
26,902

14,610

Purchases of PP&E
(22,576
)
(24,368
)
Purchase of intangible assets
—

(105,270
)
Change in restricted cash
(1,430
)
(1,395
)
Net cash used in investing activities
(26,653
)
(79,952
)
 
 
 
Financing activities:
 
 
Proceeds from issuance of common stock
13,991

9,986

Repurchase of common stock
(25,001
)
(39,449
)
Payment of cash dividend
(14,216
)
(12,114
)
Distribution to controlling interest
(2,094
)
(214
)
Excess tax benefit from exercise of stock options
2,962

300

Shares repurchased for tax withholdings on vesting of restricted stock
(14,656
)
(9,839
)
Net cash used in financing activities
(39,014
)
(51,330
)
 
 
 
Effect of foreign exchange rate changes on cash and cash equivalents
(5,368
)
(940
)
Net decrease in cash and cash equivalents
(3,274
)
(64,827
)
Cash and cash equivalents at beginning of period
516,112

531,926

Cash and cash equivalents at end of period
$
512,838

$
467,099

 
 
 
Supplemental disclosure:
 
 
Cash paid for income taxes, net of refunds received
$
13,792

$
13,973

 
 
 
Non-cash investing and financing activities:
 
 
Change in PP&E purchased and unpaid at period-end
$
6,901

$
(3,636
)
Purchase consideration payable for acquisition
$
—

$
95





See accompanying notes to unaudited interim condensed consolidated financial statements

8
Table of Contents


DOLBY LABORATORIES, INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 . Basis of Presentation
Unaudited Interim Condensed Consolidated Financial Statements
We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with U.S. GAAP, and with SEC rules and regulations, which allow for certain information and footnote disclosures that are normally included in annual financial statements prepared in accordance with U.S. GAAP to be condensed or omitted. In our opinion, these unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements for the fiscal year ended September 30, 2016 and include all adjustments necessary for fair presentation. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements for the fiscal year ended September 30, 2016 , which are included in our Annual Report on Form 10-K filed with the SEC.
The results for the fiscal quarter ended December 30, 2016 are not necessarily indicative of the results to be expected for any subsequent quarterly or annual financial period, including the fiscal year ending September 29, 2017 .
Principles of Consolidation
The unaudited interim condensed consolidated financial statements include the accounts of Dolby Laboratories, Inc. and our wholly owned subsidiaries. In addition, we have consolidated the financial results of jointly owned affiliated companies in which our principal stockholder has a controlling interest. We report these controlling interests as a separate line in our consolidated statements of operations as net income attributable to controlling interest and in our consolidated balance sheets as a controlling interest. We eliminate all intercompany accounts and transactions upon consolidation.
Operating Segments
We operate as a single reportable segment. During the fiscal quarter ended December 30, 2016, we reorganized certain aspects of our internal business infrastructure primarily to integrate and align sales support more directly with our business units. Following the reorganization, we reassessed our business units and concluded that the composition of our reportable segments remains unchanged and that we continue to operate as a single reportable segment. This reflects the fact that our CODM, our Chief Executive Officer, continues to evaluate our financial information and resources, and continues to assess the performance of these resources, on a consolidated basis. All required financial segment information is therefore included in our unaudited interim condensed consolidated financial statements.
Use of Estimates
The preparation of our financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported and disclosed in our unaudited interim condensed consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include estimated selling prices for elements sold in ME revenue arrangements; valuation allowances for accounts receivable; carrying values of inventories and certain property, plant, and equipment, goodwill and intangible assets; fair values of investments; accrued liabilities including liabilities for unrecognized tax benefits, deferred income tax assets and liabilities and stock-based compensation. Actual results could differ from our estimates.
Fiscal Year
Our fiscal year is a 52 or 53 week period ending on the last Friday in September. The fiscal periods presented herein include the 13 week period ended December 30, 2016 and the 14 week period ended January 1, 2016 . Our fiscal year ended September 30, 2016 (fiscal 2016 ) consisted of 53 weeks while our fiscal year ending September 29, 2017 (fiscal 2017 ) will consist of 52 weeks.

9



2 . Summary of Significant Accounting Policies
We continually assess any ASUs or other new accounting pronouncements issued by the FASB to determine their applicability and impact on us. Where it is determined that a new accounting pronouncement will result in a change to our financial reporting, we take the appropriate steps to ensure that such changes are properly reflected in our consolidated financial statements or notes thereto.
Recently Issued Accounting Standards
Adopted Standards
Consolidation.   During the first quarter of fiscal 2017, we adopted ASU 2015-02, Consolidation: Amendments to the Consolidation Analysis , which amended the consolidation requirements in ASC 810 and significantly changed the consolidation analysis required under U.S. GAAP. The ASU significantly amended how variable interests held by a reporting entity’s related parties or de facto agents affect its consolidation conclusion. Adoption of this new standard did not result in any changes to the entities we currently consolidate and did not otherwise have any impact on our consolidated financial statements or notes thereto.
There have been no new accounting standards made effective or otherwise adopted during the current interim period that caused any changes to our significant accounting policies from those that were described in our Form 10-K for the prior fiscal year ended September 30, 2016 .
Standards Not Yet Effective
Inventory.   In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory , which affects reporting entities that measure inventory using first-in, first-out (FIFO) or average cost. Specifically, ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The ASU is effective for us beginning no later than the first day of our fiscal 2018, or September 30, 2017. Early adoption is permitted, and we are currently evaluating the timing and impact of the standard on our consolidated financial statements.
Revenue Recognition.   In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This new revenue recognition standard will replace existing guidance in U.S. GAAP when it becomes effective, and may also impact the accounting for certain direct costs associated with revenues and contract acquisition costs such as sales commissions. The new standard permits the use of either the retrospective or cumulative effect transition method.
In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing , which clarifies guidance related to identifying performance obligations and licensing implementation guidance contained in the new revenue recognition standard. The effective date for this ASU coincides with the effective date for ASU 2014-09.
In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue From Contracts With Customers , which amends certain provisions from ASU 2014-09. The effective date for this ASU coincides with the effective date for ASU 2014-09.
In the first fiscal quarter of 2017, we initiated an assessment project to evaluate the impact on all of our revenue streams and we are currently evaluating our transition options. Accordingly, we have not yet determined the effect of the standard on our ongoing financial reporting. Although permitted, we do not intend to early-adopt the new standard, but we will adopt it beginning September 29, 2018.
Leases.   In February 2016, the FASB issued ASU 2016-02, Leases, which amends the existing accounting standards for leases. Under the new guidance, a lessee will be required to recognize a lease liability and right-of-use asset for all long-term leases, which are those with terms in excess of twelve months. The new guidance also modifies the classification criteria and accounting for sales-type and direct financing leases, and requires additional disclosures to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. Consistent with current guidance, a lessee's recognition, measurement, and presentation of

10


expenses and cash flows arising from a lease will continue to depend primarily on its classification. The ASU is effective for us beginning September 28, 2019, and must be applied using a modified retrospective approach. Early adoption is permitted, including adoption in an interim period. Upon adoption, we will recognize a lease liability and right-of-use asset for each of our long-term lease arrangements which approximates 40 as of the end of the first quarter of fiscal 2017, and we are currently evaluating the timing of adoption and impact of the standard on our consolidated financial statements.
Share-Based Compensation .  In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory withholding requirements, as well as classification in the statement of cash flows. Although permitted, we do not intend to early-adopt the new standard, but we will adopt it beginning September 30, 2017. We are currently evaluating the impact of the standard on our consolidated financial statements.
Cash Flow Classification.   In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . The new guidance addresses eight specific cash flow issues, with the objective of reducing an existing diversity in practices regarding the manner in which certain cash receipts and payments are presented and classified in the statement of cash flows. The ASU is effective for us beginning September 29, 2018. Early adoption is permitted, including adoption in an interim period, and we are currently evaluating the timing and impact of the standard on our consolidated financial statements.
Income Taxes: Intra-Entity Asset Transfers.   In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory . The new guidance requires the recognition of the income tax consequences of an intercompany asset transfer, other than transfers of inventory, when the transfer occurs. For intercompany transfers of inventory, the income tax effects will continue to be deferred until the inventory has been sold to a third party. The ASU is effective for us beginning September 29, 2018. Early adoption is permitted, including adoption in an interim period, and we are currently evaluating the timing and impact of the standard on our consolidated financial statements.
Restricted Cash.   In November 2016, the FASB issued ASU 2016-18, Restricted Cash — a consensus of the FASB Emerging Issues Task Force , which clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. The new guidance requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The ASU is effective for us beginning September 29, 2018. Early adoption is permitted, including adoption in an interim period. Aside from conforming to new cash flow presentation and restricted cash disclosure requirements, we do not anticipate that the new standard will impact our consolidated financial statements.

3 . Composition of Certain Financial Statement Captions
The following tables present detailed information from our consolidated balance sheets as of December 30, 2016 and September 30, 2016 (amounts displayed in thousands, except as otherwise noted).
Accounts Receivable
 
December 30,
2016
 
September 30,
2016
Trade accounts receivable
$
77,663

 
$
66,229

Accounts receivable from patent administration program customers
6,124

 
11,829

Accounts receivable, gross
83,787

 
78,058

Less: allowance for doubtful accounts
(2,394
)
 
(2,370
)
Total
$
81,393

 
$
75,688

Inventories
 
December 30,
2016
 
September 30,
2016
Raw materials
$
3,709

 
$
3,526

Work in process
4,290

 
4,020

Finished goods
6,774

 
8,808

Total
$
14,773

 
$
16,354



11


Inventories are stated at the lower of cost or market. Inventory with a consumption period expected to exceed twelve months is recorded within other non-current assets in our consolidated balance sheets. In addition to the amounts shown in the table above, we have included $1.5 million and $1.6 million of raw materials inventory within other non-current assets in our consolidated balance sheets as of December 30, 2016 and September 30, 2016 , respectively. Based on anticipated inventory consumption rates, and aside from existing write-downs due to excess and obsolete inventory, we do not believe that material risk of obsolescence exists prior to ultimate sale.
Prepaid Expenses And Other Current Assets
 
December 30,
2016
 
September 30,
2016
Prepaid expenses
$
17,424

 
$
13,440

Other current assets
12,363

 
11,578

Income tax receivable
2,332

 
1,284

Total
$
32,119

 
$
26,302

Accrued Liabilities
 
December 30,
2016
 
September 30,
2016
Accrued royalties
$
2,145

 
$
1,939

Amounts payable to patent administration program partners
51,216

 
34,472

Accrued compensation and benefits
50,580

 
71,261

Accrued professional fees
7,829

 
6,528

Other accrued liabilities
57,941

 
54,855

Total
$
169,711

 
$
169,055

Other accrued liabilities include amounts accrued for unpaid PP&E additions of $23.9 million and $17.1 million as of December 30, 2016 and September 30, 2016 , respectively.
Other Non-Current Liabilities
 
December 30,
2016
 
September 30,
2016
Supplemental retirement plan obligations
$
2,523

 
$
2,540

Non-current tax liabilities
73,472

 
68,254

Other liabilities
12,276

 
12,128

Total
$
88,271

 
$
82,922


4 . Investments & Fair Value Measurements
We use cash holdings to purchase investment grade securities diversified among security types, industries and issuers. All investments are measured at fair value, and are recorded within cash equivalents and both short-term and long-term investments in our consolidated balance sheets. With the exception of our mutual fund investments held in our SERP and classified as trading securities, all of our investments are classified as AFS securities.

12


Our investments primarily consist of municipal debt securities, corporate bonds, U.S. agency securities and commercial paper. In addition, our cash and cash equivalents also consist of highly-liquid money market funds. Consistent with our investment policy, none of our held municipal debt investments are supported by letters of credit or standby purchase agreements. Our cash and investment portfolio consists of the following (in thousands):
 
December 30, 2016
 
Cost
Unrealized
 
 
Estimated Fair Value
 
Gains
Losses
Total
 
Level 1
Level 2
Level 3
Cash and cash equivalents:
 
 
 
 
 
 
 
 
Cash
$
499,113

 
 
$
499,113

 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
13,500

—

—

13,500

 
13,500

 
 
Corporate bonds
225

—

—

225

 
 
225

 
Cash and cash equivalents
512,838

—

—

512,838


13,500

225

—

 
 
 
 
 
 
 
 
 
Short-term investments:
 
 
 
 
 
 
 
 
Certificate of deposit  (1)
20,779

3

(6
)
20,776

 
 
20,776

 
U.S. agency securities
2,582

1

(1
)
2,582

 
2,582

 
 
Commercial paper
18,950

2

(4
)
18,948

 
 
18,948

 
Corporate bonds
102,856

28

(65
)
102,819

 
 
102,819

 
Municipal debt securities
19,707

—

(14
)
19,693

 
 
19,693

 
Short-term investments
164,874

34

(90
)
164,818


2,582

162,236

—

 
 
 
 
 
 
 
 
 
Long-term investments:
 
 
 
 
 
 
 
 
Certificate of deposit  (1)
4,500

9

—

4,509

 
 
4,509

 
U.S. agency securities
24,948

—

(246
)
24,702

 
24,702

 
 
Government bonds
31,977

7

(241
)
31,743

 
31,743

 
 
Corporate bonds
250,688

227

(1,060
)
249,855

 
 
249,855

 
Municipal debt securities
36,684

7

(213
)
36,478

 
 
36,478

 
Other long-term investments  (2)
2,754

319

—

3,073

 
319

 


Long-term investments
351,551

569

(1,760
)
350,360


56,764

290,842

—

 
 
 
 
 
 
 
 
 
Total cash, cash equivalents, and investments
$
1,029,263

$
603

$
(1,850
)
$
1,028,016

 
$
72,846

$
453,303

$
—

 
 
 
 
 
 
 
 
 
Investments held in supplemental retirement plan:
 
 
 
 
 
 
 
 
Assets
2,621

 
 
2,621

 
2,621

 
 
Included in prepaid expenses and other current assets & other non-current assets
 
 
 
 
 
Liabilities
2,621

 
 
2,621

 
2,621

 
 
Included in accrued liabilities & other non-current liabilities
 
 
 
 
 
(1)
Certificates of deposit include marketable securities, while those with a maturity in excess of one year as of December 30, 2016 are classified within long-term investments.
(2)
Other long-term investments as of December 30, 2016 include a marketable equity security of $0.3 million , and other investments that are not carried at fair value including an equity method investment of $0.3 million and two cost method investments of $2.0 million and $0.5 million .

13


 
September 30, 2016
 
Cost
Unrealized
 
 
Estimated Fair Value
 
Gains
Losses
Total
 
Level 1
Level 2
Level 3
Cash and cash equivalents:
 
 
 
 
 
 
 
 
Cash
$
501,863

 
 
$
501,863

 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Commercial paper
1,099

—

—

1,099

 
 
1,099

 
Corporate bonds
2,240

—

—

2,240

 
 
2,240

 
Money market funds
10,910

—

—

10,910

 
10,910

 
 
Cash and cash equivalents
516,112

—

—

516,112

 
10,910

3,339

—

 
 
 
 
 
 
 
 
 
Short-term investments:
 
 
 
 
 
 
 
 
Certificate of deposit (1)
13,912

6

—

13,918

 
 
13,918

 
Commercial paper
19,629

1

(10
)
19,620

 
 
19,620

 
Corporate bonds
63,762

24

(14
)
63,772

 
 
63,772

 
Municipal debt securities
24,334

—

(15
)
24,319

 
 
24,319

 
Short-term investments
121,637

31

(39
)
121,629

 
—

121,629

—

 
 
 
 
 
 
 
 
 
Long-term investments:
 
 
 
 
 
 
 
 
Certificate of deposit (1)
4,500

10

—

4,510

 
 
4,510

 
U.S. agency securities
27,536

24

(26
)
27,534

 
27,534

 
 
Government bonds
31,971

77

(12
)
32,036

 
32,036

 
 
Corporate bonds
295,921

715

(266
)
296,370

 
 
296,370

 
Municipal debt securities
30,090

28

(32
)
30,086

 
 
30,086

 
Other long-term investments  (2)
3,002

366

—

3,368

 
366

 
 
Long-term investments
393,020

1,220

(336
)
393,904

 
59,936

330,966

—

 
 
 
 
 
 
 
 
 
Total cash, cash equivalents, and investments
$
1,030,769

$
1,251

$
(375
)
$
1,031,645

 
$
70,846

$
455,934

$
—

 
 
 
 
 
 
 
 
 
Investments held in supplemental retirement plan:
 
 
 
 
 
 
 
Assets
2,638

 
 
2,638

 
2,638

 
 
Included in prepaid expenses and other current assets & other non-current assets
 
 
 
 
 
Liabilities
2,638

 
 
2,638

 
2,638

 
 
Included in accrued liabilities & other non-current liabilities
 
 
 
 
 

(1)
Certificates of deposit include marketable securities, while those with a maturity in excess of one year as of September 30, 2016 are classified within long-term investments.
(2)
Other long-term investments as of September 30, 2016 include a marketable equity security of $0.4 million , and other investments that are not carried at fair value including an equity method investment of $0.5 million and two cost method investments of $2.0 million and $0.5 million .
Fair Value Hierarchy.     Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. We minimize the use of unobservable inputs and use observable market data, if available, when determining fair value. We classify our inputs to measure fair value using the following three-level hierarchy:
Level 1: Quoted prices in active markets at the measurement date for identical assets and liabilities. We base the fair value of our Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.
Level 2: Prices may be based upon quoted prices in active markets or inputs not quoted on active markets but are corroborated by market data. We obtain the fair value of our Level 2 financial instruments from a professional pricing service, which may use quoted market prices for identical or comparable instruments, or model driven valuations using observable market data or inputs corroborated by observable market data. To validate the fair value determination provided by our primary pricing service, we perform quality controls over values received which include comparing our pricing service provider’s assessment of the fair values of our investment securities against the fair values of our investment securities obtained from another independent source, reviewing the pricing movement in the context of overall market trends, and reviewing trading information from our investment managers. In addition, we assess the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.
Level 3: Unobservable inputs are used when little or no market data is available and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

14


Securities In Gross Unrealized Loss Position.     We periodically evaluate our investments for other-than- temporary declines in fair value. The unrealized losses on our AFS securities were primarily the result of unfavorable changes in interest rates subsequent to the initial purchase of these securities. The following table presents the gross unrealized losses and fair value for those AFS securities that were in an unrealized loss position for less than twelve months and for twelve months or greater as of December 30, 2016 and September 30, 2016 (in thousands):
 
December 30, 2016
 
September 30, 2016
 
Less Than 12 Months
12 Months Or Greater
 
Less Than 12 Months
12 Months Or Greater
Investment Type
Fair Value
Gross Unrealized Losses
Fair Value
Gross Unrealized Losses
 
Fair Value
Gross Unrealized Losses
Fair Value
Gross Unrealized Losses
Certificate of deposit
$
8,494

$
(6
)
$
—

$
—

 
$
—

$
—

$
—

$
—

U.S. agency securities
26,707

(247
)
—

—

 
22,988

(38
)
—

—

Government bonds
27,740

(241
)
—

—

 
—

—

—

—

Commercial paper
4,817

(4
)
—

—

 
11,479

(10
)
—

—

Corporate bonds
232,767

(1,125
)
—

—

 
153,491

(280
)
1,000

—

Municipal debt securities
46,219

(226
)
1,751

(1
)
 
35,625

(42
)
4,615

(5
)
Total
$
346,744

$
(1,849
)
$
1,751

$
(1
)
 
$
223,583

$
(370
)
$
5,615

$
(5
)
Although we had certain securities that were in an unrealized loss position as of December 30, 2016 , we expect to recover the full carrying value of these securities as we do not intend to, nor do we currently anticipate a need to sell these securities prior to recovering the associated unrealized losses. As a result, we do not consider any portion of the unrealized losses at either December 30, 2016 or September 30, 2016 to represent an other-than-temporary impairment, nor do we consider any of the unrealized losses to be credit losses.
Investment Maturities.     The following table summarizes the amortized cost and estimated fair value of the AFS securities within our investment portfolio based on stated maturities as of December 30, 2016 and September 30, 2016 , which are recorded within cash equivalents and both short and long-term investments in our consolidated balance sheets (in thousands):
 
December 30, 2016
 
September 30, 2016
Range of maturity
Amortized Cost
Fair Value
 
Amortized Cost
Fair Value
Due within 1 year
$
178,598

$
178,543

 
$
135,886

$
135,884

Due in 1 to 2 years
215,450

215,047

 
225,679

225,953

Due in 2 to 3 years
133,348

132,240

 
164,339

164,583

Total
$
527,396

$
525,830

 
$
525,904

$
526,420


5 . Property, Plant & Equipment
Property, plant and equipment are recorded at cost, with depreciation expense included in cost of licensing, cost of products, cost of services, R&D, S&M and G&A expenses in our consolidated statements of operations. PP&E consist of the following (in thousands):
 
December 30,
2016
 
September 30,
2016
Land
$
43,252

 
$
43,325

Buildings and building improvements
275,881

 
251,700

Leasehold improvements
60,520

 
60,480

Machinery and equipment
90,182

 
88,943

Computer equipment and software
157,754

 
154,291

Furniture and fixtures
27,309

 
26,900

Equipment provided under operating leases
59,907

 
35,968

Construction-in-progress
6,042

 
32,576

Property, plant and equipment, gross
720,847

 
694,183

Less: accumulated depreciation
(261,138
)
 
(250,527
)
Property, plant and equipment, net
$
459,709

 
$
443,656


15



6 . Goodwill & Intangible Assets
Goodwill
The following table outlines changes to the carrying amount of goodwill (in thousands):
 
Goodwill
Balance at September 30, 2016
$
309,616

Translation adjustments
(2,495
)
Balance at December 30, 2016
$
307,121

During the fiscal quarter ended December 30, 2016, we reorganized certain aspects of our internal business infrastructure primarily to integrate and align sales support more directly with our business units. In accordance with ASC Topic 350, we are required to review and reassign our goodwill amongst our reporting units using a relative fair value allocation approach. Before doing so, we performed a “Step Zero” qualitative assessment during the quarter ended September 30, 2016 and determined that there was no risk of goodwill impairment in our pre-reorganization reporting units. Immediately after the reorganization, we performed a “Step One” assessment during the quarter ended December 30, 2016 whereby the estimated fair value of each reporting unit was compared to its carrying value. We initiated the "Step One" assessment using a market approach and an income approach to value our reporting units. Based on our preliminary procedures, the fair value of each of our reporting units significantly exceeded their carrying values. However, due to the complexity of this assessment, we have not finalized our procedures as of December 30, 2016. We currently expect to finalize our Step One assessment during our second fiscal quarter ending March 31, 2017.
Intangible Assets
Our intangible assets are stated at their original cost less accumulated amortization, and principally consist of acquired technology, patents, trademarks, customer relationships and contracts. Intangible assets subject to amortization consist of the following (in thousands):
 
December 30, 2016
 
September 30, 2016
Intangible Assets, Net
Cost
Accumulated
Amortization
Net
 
Cost
Accumulated
Amortization
Net
Acquired patents and technology
$
292,889

$
(107,789
)
$
185,100

 
$
293,824

$
(101,711
)
$
192,113

Customer relationships
56,789

(35,536
)
21,253

 
56,821

(34,113
)
22,708

Other intangibles
22,677

(22,168
)
509

 
22,716

(22,195
)
521

Total
$
372,355

$
(165,493
)
$
206,862

 
$
373,361

$
(158,019
)
$
215,342

We purchase various patents and developed technologies that enable us to further develop our audio, imaging and potential product offerings.
Patent Portfolio Acquisition.     In the first quarter of fiscal 2016, we completed an asset purchase of a patent portfolio that fits within our existing patent licensing programs for consideration of $105.0 million . These assets are categorized within the "Acquired patents and technology" intangible asset class, and will be amortized over their weighted-average useful life of 9.0 years .
With regard to our purchase of intangible assets during the periods presented, the following table summarizes the consideration paid, the weighted-average useful lives over which the acquired assets will be amortized using the greater of either the straight-line basis or a ratio-to-revenue method, and the classification of their amortized expense in our consolidated statements of operations:
Fiscal Period
Total Purchase Consideration (1)
Weighted-Average Useful Life
 
(in millions)
(in years)
Fiscal 2016
 
 
Q1 - Quarter ended January 1, 2016
$105.3
9.0
 
 
 
Fiscal 2017
 
 
Q1 - Quarter ended December 30, 2016
None
(1) Amortization expense on the intangible assets from patent portfolio acquisitions is included within cost of revenue in our consolidated statements of operations.

16


Amortization expense for our intangible assets is included in cost of licensing, cost of products, R&D and S&M expenses in our consolidated statements of operations. Amortization expense was $8.4 million and $8.5 million in the first quarter of fiscal 2017 and 2016 , respectively. As of December 30, 2016 , estimated amortization expense in future fiscal periods was as follows (in thousands):
Fiscal Year
 Amortization Expense
Remainder of 2017
$
22,245

2018
25,300

2019
24,717

2020
24,253

2021
24,227

Thereafter
86,120

Total
$
206,862


7 . Stockholders' Equity & Stock-Based Compensation
We provide stock-based awards as a form of compensation for employees, officers and directors. We have issued stock-based awards in the form of stock options and RSUs under our equity incentive plans, as well as shares under our ESPP.
Common Stock - Class A and Class B
Our Board of Directors has authorized two classes of common stock, Class A and Class B. At December 30, 2016 , we had authorized 500,000,000 Class A shares and 500,000,000 Class B shares. At December 30, 2016 , we had 57,808,525 shares of Class A common stock and 44,073,597 shares of Class B common stock issued and outstanding. Holders of our Class A and Class B common stock have identical rights, except that holders of our Class A common stock are entitled to one vote per share and holders of our Class B common stock are entitled to ten votes per share. Shares of Class B common stock can be converted to shares of Class A common stock at any time at the option of the stockholder and automatically convert upon sale or transfer, except for certain transfers specified in our amended and restated certificate of incorporation.
Stock Incentive Plans
2005 Stock Plan.     In January 2005, our stockholders approved our 2005 Stock Plan, which our Board of Directors adopted in November 2004. The 2005 Stock Plan became effective on February 16, 2005, the day prior to the completion of our initial public offering. Our 2005 Stock Plan, as amended and restated, provides for the ability to grant ISOs, NQs, restricted stock, RSUs, SARs, deferred stock units, performance units, performance bonus awards and performance shares. A total of 38.0 million shares of our Class A common stock is authorized for issuance under the 2005 Stock Plan. For awards granted prior to February 2011, any shares subject to an award with a per share price less than the fair market value of our Class A common stock on the date of grant and any shares subject to an outstanding RSU award will be counted against the authorized share reserve as two shares for every one share subject to the award, and if returned to the 2005 Stock Plan, such shares will be counted as two shares for every one share returned. For those awards granted from February 2011 onward, any shares subject to an award with a per share price less than the fair market value of our Class A common stock on the date of grant and any shares subject to an outstanding RSU award will be counted against the authorized share reserve as 1.6 shares for every one share subject to the award, and if returned to the 2005 Stock Plan, such shares will be counted as 1.6 for every one share returned.
Stock Options.     Stock options are granted at fair market value on the date of grant. Options granted to employees and officers prior to June 2008 generally vested over four years , with equal annual cliff-vesting and expire on the earlier of ten years after the date of grant or three months after termination of service. Options granted to employees and officers from June 2008 onward generally vest over four years, with 25% of the shares subject to the option becoming exercisable on the one-year anniversary of the date of grant and the balance of the shares vesting in equal monthly installments over the following 36 months . These options expire on the earlier of ten years after the date of grant or three months after termination of service. All options granted vest over the requisite service period and upon the exercise of stock options, we issue new shares of Class A common stock under the 2005 Stock Plan. Our 2005 Stock Plan also allows us to grant stock awards which vest based on the satisfaction of specific performance criteria.
Performance-Based Stock Options (PSOs).     In fiscal 2016, we began granting PSOs to our executive officers with shares of our Class A common stock underlying such options. The contractual term for the PSOs is seven years,

17


with vesting contingent upon market-based performance conditions, representing the achievement of specified Dolby annualized TSR targets at the end of a three-year measurement period following the date of grant. If the minimum conditions are met, the PSOs earned will cliff vest on the third anniversary of the grant date, upon certification of achievement of the performance conditions by our Compensation Committee. Anywhere from 0% to 125% of the shares subject to a PSO may vest based on achievement of the performance conditions at the end of the three-year performance period.
In valuing the PSOs which will be recognized as compensation cost, we used a Monte Carlo valuation model. Aside from the use of an expected term for the PSOs commensurate with their shorter contractual term, the nature of the valuation inputs used in the Monte Carlo valuation model were consistent with those used to value our non-performance based options granted under the 2005 Plan. Compensation cost is being amortized on a straight-line basis over the requisite service period.
On December 15, 2016, we granted PSOs exercisable for an aggregate of up to 276,199 shares to our executive officers, all of which were outstanding as of December 30, 2016 . On December 15, 2015, we granted PSOs exercisable for an aggregate of up to 419,623 shares to our executive officers, of which 397,748 were outstanding as of December 30, 2016 .
The following table summarizes information about all stock options issued under our 2005 Stock Plan:
 
Shares
Weighted-Average
Exercise Price
Weighted-Average
Remaining
Contractual Life
Aggregate
Intrinsic
Value (1)
 
(in thousands)
 
(in years)
(in thousands)
Options outstanding at September 30, 2016
8,690

$
35.98

 
 
Grants
1,788

45.89

 
 
Exercises
(259
)
32.94

 
 
Forfeitures and cancellations
(11
)
39.89

 
 
Options outstanding at December 30, 2016
10,208

37.79

7.3
$
77,363

Options vested and expected to vest at December 30, 2016
9,386

37.51

7.2
73,574

Options exercisable at December 30, 2016
5,138

$
35.22

6.1
50,760

(1)
Aggregate intrinsic value is based on the closing price of our Class A common stock on December 30, 2016 of $45.19 and excludes the impact of options that were not in-the-money.
Restricted Stock Units.     Beginning in fiscal 2008, we began granting RSUs to certain directors, officers and employees under our 2005 Stock Plan. Awards granted to employees and officers generally vest over four years, with equal annual cliff-vesting. Awards granted to directors prior to November 2010 generally vest over three years, with equal annual cliff-vesting. Awards granted after November 2010 and prior to fiscal 2014 to new directors vest over approximately two years, with 50% vesting per year, while awards granted from November 2010 onward to ongoing directors generally vest over approximately one year. Awards granted to new directors from fiscal 2014 onward vest on the earlier of the first anniversary of the award’s date of grant, or the day immediately preceding the date of the next annual meeting of stockholders that occurs after the award’s date of grant. Our 2005 Stock Plan also allows us to grant RSUs that vest based on the satisfaction of specific performance criteria, although no such awards had been granted as of December 30, 2016 . At each vesting date, the holder of the award is issued shares of our Class A common stock. Compensation expense from these awards is equal to the fair market value of our Class A common stock on the date of grant and is recognized on a straight-line basis over the requisite service period.
The following table summarizes information about RSUs issued under our 2005 Stock Plan:
 
Shares
Weighted-Average
Grant Date
Fair Value 
 
(in thousands)
 
Non-vested at September 30, 2016
2,872

$
40.16

Granted
985

45.87

Vested
(871
)
36.08

Forfeitures
(19
)
38.82

Non-vested at December   30, 2016
2,967

$
43.26

Employee Stock Purchase Plan .   Our plan allows eligible employees to have up to 10 percent of their eligible compensation withheld and used to purchase Class A common stock, subject to a maximum of $25,000 worth of stock

18


purchased in a calendar year or no more than 1,000 shares in an offering period, whichever is less. An offering period consists of successive six -month purchase periods, with a look back feature to our stock price at the commencement of a one -year offering period. The plan provides for a discount equal to 15 percent of the lower of the closing price of our Class A common stock on the New York Stock Exchange on the first and last day of the offering periods. The plan also includes an automatic reset feature that provides for an offering period to be reset and recommenced to a new lower-priced offering if the offering price of a new offering period is less than that of the immediately preceding offering period.
Stock Option Valuation Assumptions
We use the Black-Scholes option pricing model to determine the estimated fair value of employee stock options at the date of the grant. The Black-Scholes model includes inputs that require us to make certain estimates and assumptions regarding the expected term of the award, as well as the risk-free interest rate, and the volatility of our stock price over the expected term of the award.
Expected Term.     The expected term of an award represents the estimated period of time that options granted will remain outstanding, and is measured from the grant date to the date at which the option is either exercised or canceled. Our determination of the expected term involves an evaluation of historical terms and other factors such as the exercise and termination patterns of our employees who hold options to acquire our Class A common stock, and is based on certain assumptions made regarding the future exercise and termination behavior.
Risk-Free Interest Rate.     The risk-free interest rate is based on the yield curve of United States Treasury instruments in effect on the date of grant. In determining an estimate for the risk-free interest rate, we use average interest rates based on these instruments’ constant maturities with a term that approximates and corresponds with the expected term of our awards.
Expected Stock Price Volatility.     The expected volatility represents the estimated volatility in the price of our Class A common stock over a time period that approximates the expected term of the awards, and is determined using a blended combination of historical and implied volatility. Historical volatility is representative of the historical trends in our stock price for periods preceding the measurement date for a period that is commensurate with the expected term. Implied volatility is based upon externally traded option contracts of our Class A common stock.
Dividend Yield.     The dividend yield is based on our anticipated dividend payout over the expected term of our option awards. Dividend declarations and the establishment of future record and payment dates are subject to the Board of Directors’ continuing determination that the dividend policy is in the best interests of our stockholders. The dividend policy may be changed or canceled at the discretion of the Board of Directors at any time.
The weighted-average assumptions used in the determination of the fair value of our stock options were as follows:
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Expected term (in years)
5.13

5.24

Risk-free interest rate
2.1
%
1.8
%
Expected stock price volatility
27.6
%
29.8
%
Dividend yield
1.1
%
1.4
%
Stock-Based Compensation Expense
Stock-based compensation expense for equity awards granted to employees is determined by estimating their fair value on the date of grant, and recognizing that value as an expense on a straight-line basis over the requisite service period in which our employees earn the awards. Compensation expense related to these equity awards is recognized net of estimated forfeitures, which reduce the expense recorded in the consolidated statements of operations. The selection of applicable estimated forfeiture rates is based on an evaluation of trends in our historical forfeiture data with consideration for other potential driving factors. If in subsequent periods actual forfeitures significantly differ from our initial estimates, we will revise such estimates accordingly.
The following two tables separately present stock-based compensation expense both by award type and classification in our consolidated statements of operations (in thousands):

19


Expense - By Award Type
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Compensation Expense - By Type
 
 
Stock options
$
4,803

$
6,366

Restricted stock units
11,583

12,076

Employee stock purchase plan
829

938

Total stock-based compensation
17,215

19,380

Benefit from income taxes
(5,028
)
(5,706
)
Total stock-based compensation, net of tax
$
12,187

$
13,674


Expense - By Income Statement Line Item Classification
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Compensation Expense - By Classification
 
 
Cost of products
$
258

$
280

Cost of services
134

129

Research and development
4,930

5,107

Sales and marketing
6,867

7,710

General and administrative
5,026

6,154

Total stock-based compensation
17,215

19,380

Benefit from income taxes
(5,028
)
(5,706
)
Total stock-based compensation, net of tax
$
12,187

$
13,674

The tax benefit that we recognize from certain exercises of ISOs and shares issued under our ESPP are excluded from the tables above. This benefit was as follows (in thousands):
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Tax benefit - stock option exercises & shares issued under ESPP
$
324

$
95

Unrecognized Compensation Expense.     At December 30, 2016 , total unrecorded compensation expense associated with employee stock options expected to vest was approximately $43.5 million , which is expected to be recognized over a weighted-average period of 2.7 years. At December 30, 2016 , total unrecorded compensation expense associated with RSUs expected to vest was approximately $95.2 million , which is expected to be recognized over a weighted-average period of 3.0 years.
Common Stock Repurchase Program
In November 2009, we announced a stock repurchase program ("program"), providing for the repurchase of up to $250.0 million of our Class A common stock. The following table summarizes the initial amount of authorized repurchases as well as additional repurchases approved by our Board of Directors as of December 30, 2016 (in thousands):
Authorization Period
Authorization Amount
Fiscal 2010: November 2009
$
250,000

Fiscal 2010: July 2010
300,000

Fiscal 2011: July 2011
250,000

Fiscal 2012: February 2012
100,000

Fiscal 2015: October 2014
200,000

Total
$
1,100,000


20


Stock repurchases under the program may be made through open market transactions, negotiated purchases, or otherwise, at times and in amounts that we consider appropriate. The timing of repurchases and the number of shares repurchased depend upon a variety of factors, including price, regulatory requirements, the rate of dilution from our equity compensation plans and other market conditions. The program does not have a specified expiration date, and can be limited, suspended or terminated at our discretion at any time without prior notice. Shares repurchased under the program will be returned to the status of authorized but unissued shares of Class A common stock. As of December 30, 2016 , the remaining authorization to purchase additional shares is approximately $26.9 million .
The following table provides information regarding share repurchase activity under the program during fiscal 2017 :
Quarterly Repurchase Activity
Shares
Repurchased
Cost (1)
Average Price Paid Per Share (2)
 
 
(in thousands)
 
Q1 - Quarter ended December 30, 2016
531,465

$
25,001

$
47.02

(1)
Cost of share repurchases includes the price paid per share and applicable commissions.
(2)
Average price paid per share excludes commission costs.
On January 25, 2017, we announced that our Board of Directors approved an increase to the size of our stock repurchase program by $200 million . Refer to Note 13 “ Subsequent Events " for additional information.
Dividend
In October 2014, our Board of Directors initiated a recurring quarterly dividend program for our stockholders. The following table summarizes dividend payments to be made under the program in relation to fiscal 2017 :
Fiscal Period
Declaration Date
Record Date
Payment Date
Cash Dividend Per Common Share
Dividend Payment
 
Fiscal 2017
 
 
 
 
 
 
Q1 - Quarter ended December 30, 2016
January 25, 2017
February 6, 2017
February 15, 2017
$
0.14

$14.3 million
(1)
(1)
The amount of the dividend payment is estimated based on the number of shares of our Class A and Class B common stock that we estimate will be outstanding as of the Record Date.

8 . Accumulated Other Comprehensive Income
Other comprehensive income consists of two components: unrealized gains or losses on our AFS marketable investment securities and the gain or loss from foreign currency translation adjustments. Until realized and reported as a component of net income, these comprehensive income items accumulate and are included within accumulated other comprehensive income, a subsection within stockholders’ equity in our consolidated balance sheet. Unrealized gains and losses on our investment securities are reclassified from AOCI into earnings when realized upon sale, and are determined based on specific identification of securities sold. Gains and losses from the translation of assets and liabilities denominated in non-U.S. dollar functional currencies are included in AOCI.

21


The following table summarizes the changes in the accumulated balances during the period, and includes information regarding the manner in which the reclassifications out of AOCI into earnings affect our consolidated statements of operations (in thousands):
 
Fiscal Quarter Ended
December 30, 2016
 
Investment Securities
Currency Translation Adjustments
Total
Beginning Balance
$
742

$
(10,939
)
$
(10,197
)
Other comprehensive income/(loss) before reclassifications:
 
 
 
Unrealized (losses) - investment securities
(2,160
)
 
(2,160
)
Foreign currency translation (losses)  (1)
 
(8,728
)
(8,728
)
Income tax effect - benefit
102

1,265

1,367

Net of tax
(2,058
)
(7,463
)
(9,521
)
Amounts reclassified from AOCI into earnings:
 
 
 
Realized gains - investment securities  (1)
46

 
46

Income tax effect - (expense)  (2)
(7
)
 
(7
)
Net of tax
39

—

39

Net current-period other comprehensive (loss)
(2,019
)
(7,463
)
(9,482
)
Ending Balance
$
(1,277
)
$
(18,402
)
$
(19,679
)
 
Fiscal Quarter Ended
January 1, 2016
 
Investment Securities
Currency Translation Adjustments
Total
Beginning Balance
$
350

$
(11,812
)
$
(11,462
)
Other comprehensive income/(loss) before reclassifications:
 
 
 
Unrealized (losses) - investment securities
(1,159
)
 
(1,159
)
Foreign currency translation (losses)  (1)
 
(944
)
(944
)
Income tax effect - benefit
199

343

542

Net of tax
(960
)
(601
)
(1,561
)
Amounts reclassified from AOCI into earnings:
 
 
 
Realized gains - investment securities  (1)
131

 
131

Income tax effect - (expense)  (2)
(31
)
 
(31
)
Net of tax
100

—

100

Net current-period other comprehensive (loss)
(860
)
(601
)
(1,461
)
Ending Balance
$
(510
)
$
(12,413
)
$
(12,923
)
(1)
Realized gains or losses from the sale of our AFS investment securities or from foreign currency translation adjustments are included within other income/expense, net in our consolidated statements of operations.
(2)
The income tax benefit or expense is included within provision for income taxes in our consolidated statements of operations.

22


9 . Earnings Per Share
Basic EPS is computed by dividing net income attributable to Dolby Laboratories, Inc. by the number of weighted-average shares of Class A and Class B common stock outstanding during the period. Through application of the treasury stock method, diluted EPS is computed in the same manner, except that the number of weighted-average shares outstanding is increased by the number of potentially dilutive shares from employee incentive plans during the period.
Potentially dilutive shares represent the hypothetical number of incremental shares issuable under the assumed exercise of outstanding stock options (both vested and non-vested), vesting of outstanding RSUs, and shares issued under our employee stock purchase plan. The calculation of dilutive shares outstanding excludes out-of-the-money stock options (e.g., such options' exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive.
The following table sets forth the computation of basic and diluted EPS attributable to Dolby Laboratories, Inc. (in thousands, except per share amounts):
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Numerator:
 
 
Net income attributable to Dolby Laboratories, Inc.
$
53,374

$
30,901

 
 
 
Denominator:
 
 
Weighted-average shares outstanding—basic
101,483

100,734

Potential common shares from options to purchase common stock
1,385

599

Potential common shares from restricted stock units
1,008

598

Weighted-average shares outstanding—diluted
103,876

101,931

 
 
 
Net income per share attributable to Dolby Laboratories, Inc.:
 
 
Basic
$
0.53

$
0.31

Diluted
$
0.51

$
0.30

 
 
 
Antidilutive awards excluded from calculation:
 
 
Stock options
739

5,698

Restricted stock units
42

215

 
10 . Income Taxes
Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management's best assessment of estimated current and future taxes to be paid. We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense.
Unrecognized Tax Benefit
As of December 30, 2016 , the total amount of gross unrecognized tax benefits was $80.2 million , of which $66.6 million , if recognized, would reduce our effective tax rate. As of September 30, 2016 , the total amount of gross unrecognized tax benefits was $75.2 million , of which $62.1 million , if recognized, would reduce our effective tax rate. Our net liability for unrecognized tax benefits is classified within other non-current liabilities in our consolidated balance sheets.
Withholding Taxes
We recognize licensing revenue gross of withholding taxes, which our licensees remit directly to their local tax authorities, and for which we receive a partial foreign tax credit in our income tax provision. The foreign current tax includes this withholding tax expense while the appropriate foreign tax credit benefit is included in current federal and foreign taxes. Withholding taxes were as follows (in thousands):

23


 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Withholding taxes
$
8,991

$
9,782

Effective Tax Rate
Each period, the combination of different factors can impact our effective tax rate. These factors include both recurring items such as tax rates and the relative amount of income earned in foreign jurisdictions, as well as discrete items such as changes to our uncertain tax positions, that may occur in, but are not necessarily consistent between periods.
Our effective tax rate in the first quarter of fiscal 2017 was 20.8% , compared to 21.5% in the first quarter of fiscal 2016 . The decrease in our effective tax rate reflects increased benefit from a relative change in foreign earned income and discrete benefits from the settlement of a multi–year state audit, partially offset by a decrease in discrete benefits from federal R&D credits.

11 . Legal Matters
We are involved in various legal proceedings that occasionally arise in the normal course of business. These can include claims of alleged infringement of IP rights, commercial, employment and other matters. In our opinion, resolution of these proceedings is not expected to have a material adverse impact on our operating results or financial condition. Given the unpredictable nature of legal proceedings, it is possible that an unfavorable resolution of one or more such proceedings could materially affect our future operating results or financial condition in a particular period, including as a result of required changes to our licensing terms, monetary penalties and other potential consequences. However, based on the information known by us as of the date of this filing and the rules and regulations applicable to the preparation of our consolidated financial statements, any such amounts are either immaterial, or it is not possible to provide an estimated amount of any such potential losses.

12 . Commitments & Contingencies
In the ordinary course of business, we enter into contractual agreements with third parties that include non-cancelable payment obligations, for which we are liable in future periods. These arrangements can include terms binding us to minimum payments and/or penalties if we terminate the agreement for any reason other than an event of default as described by the agreement. The following table presents a summary of our contractual obligations and commitments as of December 30, 2016 (in thousands):
 
Payments Due By Fiscal Period
 
Remainder Of
Fiscal 2017
Fiscal
2018
Fiscal
2019
Fiscal
2020
Fiscal
2021
Thereafter
Total
Naming rights
$
3,810

$
7,715

$
7,811

$
7,909

$
8,008

$
94,972

$
130,225

Donation commitments
200

6,300

322

322

122

1,013

8,279

Operating leases
10,755

12,324

10,169

9,635

8,411

31,162

82,456

Purchase obligations
17,595

5,898

24,119

21,010

—

—

68,622

Total
$
32,360

$
32,237

$
42,421

$
38,876

$
16,541

$
127,147

$
289,582

Naming Rights.     We are party to an agreement for naming rights and related benefits with respect to the Dolby Theatre in Hollywood, California, the location of the Academy Awards®. The term of the agreement is 20 years, over which we will make payments on a semi-annual basis until fiscal 2032. Our payment obligations are conditioned in part on the Academy Awards® being held and broadcast from the Dolby Theatre.
Donation Commitments.     Donation commitments primarily relate to a non-cancelable obligation entered into during fiscal 2014 to install and donate imaging and audio products to the Museum of the Academy of Motion Picture Arts and Sciences in Los Angeles, California, and to provide maintenance services for fifteen years from its expected opening date in fiscal 2018, in exchange for various marketing, branding and publicity benefits.
Operating Leases .     Operating lease payments represent our commitments for future minimum rent made under non-cancelable leases for office space, including those payable to our principal stockholder and portions attributable to the controlling interests in our wholly owned subsidiaries.

24


Purchase Obligations.     Purchase obligations primarily consist of our commitments made under agreements to purchase goods and services related to Dolby Cinema and for purposes that include IT and telecommunications, marketing and professional services, and manufacturing and other R&D activities.
Indemnification Clauses.     On a limited basis, our contractual agreements contain a clause under which we agree to provide indemnification to the counterparty, most commonly to licensees in connection with licensing arrangements that include our IP property. Additionally, and although not a contractual requirement, we have at times elected to defend our licensees from third party IP infringement claims. Since the terms and conditions of our contractual indemnification clauses do not explicitly specify our obligations, we are unable to reasonably estimate the maximum potential exposure for which we could be liable. Furthermore, we have not historically made any payments in connection with any such obligation and believe there to be a remote likelihood that any potential exposure in future periods would be of a material amount. As a result, no amounts have been accrued in our consolidated financial statements with respect to the contingent aspect of these indemnities.

13 . Subsequent Events
Share Repurchase Program.     On January 25, 2017, we announced that our Board of Directors approved an
increase to the size of our stock repurchase program by $200 million , bringing the amount available for
future repurchases of the Company’s Class A Common Stock to $227 million . Stock repurchases under the program may be made through open market transactions, negotiated purchases, or otherwise, at times and in amounts that we consider appropriate. The timing of repurchases and the number of shares repurchased depend upon a variety of factors, including price, regulatory requirements, the rate of dilution from our equity compensation plans and other market conditions. The program does not have a specified expiration date, and can be limited, suspended or terminated at our discretion at any time without prior notice. Any shares repurchased under the program will be returned to the status of authorized, but unissued shares of Class A Common Stock.

25



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations and are subject to risks and uncertainties, including, but not limited to statements regarding: operating results and underlying measures; demand and acceptance for our technologies and products; market growth opportunities and trends; our plans, strategies and expected opportunities; future competition; our stock repurchase plan; and our dividend policy. Use of words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or similar expressions indicates a forward-looking statement. Actual results may differ materially from those discussed in these forward-looking statements due to a number of factors, including the risks set forth in Part II, Item 1A, “Risk Factors.” Such forward-looking statements are based on management’s reasonable current assumptions and expectations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our prior statements to new developments or actual results.
Investors and others should note that we disseminate information to the public about our company, our products, services and other matters through various channels, including our website (www.dolby.com), our investor relations website (http://investor.dolby.com), SEC filings, press releases, public conference calls and webcasts, in order to achieve broad, non-exclusionary distribution of information to the public. We encourage investors and others to review the information we make public through these channels, as such information could be deemed to be material information.
OVERVIEW
Dolby Laboratories creates audio and imaging technologies that transform entertainment and communications at the cinema, at home, at work and on mobile devices. Founded in 1965, our strengths stem from expertise in digital signal processing and compression technologies that have transformed the ability of artists to convey entertainment experiences to their audiences through recorded media. Such technologies led to the development of our noise-reduction systems for analog tape recordings, and have since evolved into multiple offerings that enable more immersive sound for cinema, digital television transmissions and devices, OTT video services, DVD and Blu-ray Discs, gaming consoles, and mobile devices. Today, we derive the majority of our revenue from licensing our audio technologies. We also derive revenue from licensing our consumer imaging and communication technologies, as well as audio and imaging technologies for premium cinema offerings in collaboration with exhibitors. Finally, we provide products and services for a variety of applications in the cinema, broadcast and communications markets.
OUR STRATEGY
Key elements of our strategy include:
Advancing the Science of Sight and Sound. We apply our understanding of the human senses, audio and imaging engineering to develop technologies aimed at improving how people experience and interact with their entertainment and communications content.
Providing Creative Solutions. We promote the use of our solutions as creative tools, and provide our products, services and technologies to filmmakers, sound mixers and other production teams in their creative processes. Our tools help showcase the quality and impact of their efforts and intent, and this may generate market demand.
Delivering Superior Experiences. Our technologies and solutions optimize playback and communications so that users may enjoy sound and sight in Dolby, which results in a more rich, clear, and immersive experience.

26
Table of Contents


REVENUE GENERATION
The following table presents a summary of the composition of our revenue for all periods presented:
 
Fiscal Quarter Ended
Revenue
December 30,
2016
January 1,
2016
   Licensing
87%
88%
   Products
11%
10%
   Services
2%
2%
Total
100%
100%
We license our technologies in approximately 50 countries, and our licensees distribute products that incorporate our technologies throughout the world. As shown in the table below, we generate a significant portion of our revenue from outside the United States. Geographic data for our licensing revenue is based on the location of our licensees’ headquarters, products revenue is based on the destination to which we ship our products, and services revenue is based on the location where services are performed.
 
Fiscal Quarter Ended
Revenue By Geographic Location
December 30,
2016
January 1,
2016
United States
32%
27%
International
68%
73%
We have active licensing arrangements with over 550 electronics product OEMs and software developer licensees. As of December 30, 2016 , we had approximately 6,500 issued patents relating to technologies from which we derive a significant portion of our licensing revenue. We have approximately 1,000 trademark registrations throughout the world for a variety of wordmarks, logos, and slogans. These trademarks are an integral part of our technology licensing program as licensees typically place them on their products which incorporate our technologies to inform consumers that they have met our quality specifications.
Licensing
We license our technologies and IP to a range of customers who incorporate them into their products for enhanced audio and imaging functionality whether it be at home, at work, on mobile devices, or at the cinema. Our key technologies and IP are as follows:
Technology
Description
AAC & HE-AAC
An advanced digital audio codec solution with higher bandwidth efficiency used for a wide range of media applications such as TVs, STBs, PCs, gaming consoles, mobile devices and digital radio.
Dolby® AC-4
A next-generation digital audio coding technology that is aimed at maximizing transmission efficiency while delivering new audio experiences to a wide range of playback devices, including TVs, STBs, PCs, and mobile devices.
Dolby Atmos®
An object-oriented audio technology for home theaters, cinema, device speakers, and headphones that allows sound to be precisely placed and moved anywhere in the listening environment including the overhead dimension. The Dolby Atmos experience can be provided via multiple Dolby audio coding technologies.
Dolby Digital®
A digital audio coding technology that provides multichannel sound to applications such as DVD players, TVs and STBs.
Dolby Digital Plus™
An advanced digital audio coding technology that offers more efficient audio transmission for a wide range of media applications such as TVs, STBs, Blu-ray Discs, PCs, and mobile devices.
Dolby® TrueHD
A digital audio coding technology providing lossless encoding for premium quality media applications such as Blu-ray Discs and home theaters.
Dolby Vision™
An imaging technology combining HDR and an expanded color spectrum to deliver higher contrast, brighter highlights, and improved details for TV, cinema, and other consumer devices.
Dolby Voice®
An audio conferencing technology with superior spatial perception, voice clarity and background noise reduction that emulates the in-person meeting experience.
HEVC
An advanced digital video codec with higher bandwidth efficiency used in a wide range of media devices.

27
Table of Contents


The following table presents the composition of our licensing business and revenues for all periods presented:
 
Fiscal Quarter Ended
 
Market
December 30,
2016
January 1,
2016
Main Offerings Incorporating Our Technologies
Broadcast
46%
48%
STBs & Televisions
PC
15%
15%
Windows and macOS operating systems
CE
12%
13%
DMAs, Blu-ray Disc devices, AVRs, soundbars, DVDs & HTIBs
Mobile
10%
10%
Smartphones & tablets
Other
17%
14%
Gaming consoles, Auto DVD, Dolby Cinema, Dolby Voice
Total
100%
100%
 
We have various licensing models: a two-tier model, an integrated licensing model, a patent licensing model, and more recently, collaboration arrangements.
Two-Tier Licensing Model .   Most of our consumer entertainment licensing business consists of a two-tier licensing model whereby our decoding technologies, included in reference software and firmware code, are first provided under license to semiconductor manufacturers whom we refer to as “implementation licensees.” Implementation licensees incorporate our technologies in ICs which they sell to OEMs of consumer entertainment products, whom we refer to as “system licensees.” System licensees separately obtain licenses from us that allow them to make and sell end-user products using ICs that incorporate our technologies.
Implementation licensees pay us a one-time, up-front fee per license. In exchange, the licensee receives a licensing package which includes information useful in implementing our technologies into their chipsets. Once implemented, the licensee sends us a sample chipset for quality control evaluation, and following our validation of the design, the licensee is permitted to sell the chipset for use solely to our network of system licensees.
System licensees provide us with prototypes of products, or self-test results of products that incorporate our technologies. Upon our confirmation that our technologies are optimally and consistently incorporated, the system licensee may buy ICs under a license for the same Dolby technology from our network of implementation licensees, and may further sell approved products to retailers, distributors, and consumers. For the use of our technologies, our system licensees pay an initial licensing fee as well as royalties, which represent the majority of the revenue recognized from these arrangements. The amount of royalties we collect on a particular product depends on several factors including the nature of the implementations, the mix of Dolby technologies used, and the volume of products using our technologies that are shipped by the system licensee.
Integrated Licensing Model .    We also license our technologies to software operating system vendors and ISVs, and to certain other OEMs that act as combined implementation and system licensees. These licensees incorporate our technologies in their software used on PCs, in mobile applications, or in ICs they manufacture and incorporate into their products. As with the two-tier licensing model, the combined implementation and system licensee pays us an initial licensing fee in addition to royalties as determined by the mix of Dolby technologies used, the nature of the implementations, and the volume of products using our technologies that are shipped, and is subject to the same quality control evaluation process.
Patent Licensing Model.     We license our patents through patent pools which are arrangements between multiple patent owners to jointly offer and license pooled patents to licensees. We also license our patents directly to manufacturers that use our IP in their products. Finally, we generate service fees for managing patent pools on behalf of third party patent owners through our wholly-owned subsidiary, Via Licensing Corporation. By aggregating and offering pooled IP, patent pools deliver efficiencies that reduce transactional costs for both IP owners and licensees. The Via Licensing patent pools enable product manufacturers to efficiently and transparently secure patent licenses for audio coding, interactive television, digital radio and wireless technologies. We offer our AAC, AVC, HE-AAC, HEVC and other IP through patent licensing. Currently, most of our revenue earned from patent licensing relates to the licensing of AAC and HE-AAC technologies.

28
Table of Contents


Collaboration Arrangements.     
Dolby Cinema: We partner with exhibitors to create a premium cinema offering with Dolby Vision and Dolby Atmos at new and pre-existing venues that are optimized for an immersive entertainment experience. We receive a portion of box-office receipts from the installed theaters.
Dolby Voice: We enter into arrangements with audio and video conferencing providers where, in return for licensing our IP and know-how, we earn revenue based on access to our technology and services as well as on sales of the Dolby Voice Conference Phone (see "Products" below).
Settlements & Back Payments From Licensees: Licensing revenue recognized in any given quarter may include back payments and/or settlements with licensees. Within the Results of Operations section of Item 7 " Management’s Discussion and Analysis of Financial Condition and Results of Operations, " settlements and back payments are collectively referred to as "recoveries." Such recoveries have become a recurring element of our business and are particularly subject to fluctuation and uncertainty.
Products
We design and manufacture audio and imaging products for the cinema, television, broadcast, and entertainment industries. Distributed in over 80 countries, these products are used in content creation, distribution, and playback to enhance image and sound quality, and improve transmission and playback. We also market and sell the Dolby Conference Phone which optimizes the conference call experience when using Dolby Voice.
Products revenue is derived primarily from sales of the following:
Product
Description
Cinema
Digital Cinema Servers
Servers used to load, store, decrypt, decode and watermark digital film files for presentation on digital cinema projectors, and also encrypt, encode and package digital film data for distribution.
Cinema Audio Products
Cinema Processors used to decode and render digital cinema soundtracks including those using Dolby Atmos and products that author, encrypt, encode and package Dolby Atmos soundtracks.
Other
Dolby Conference Phone
An integral hardware component of the Dolby Voice conferencing solution that enhances productivity through superior sound, full-room voice capture, spatial voice separation and touch-screen interface.
Other Products
3-D glasses and kits, broadcast hardware and software used to encode, transmit, and decode multiple channels of high quality audio for DTV and HDTV distribution, monitors, and accessibility solutions for hearing and visually impaired consumers.
Services
We offer various services to support theatrical and television production for cinema exhibition, broadcast, and home entertainment, including equipment training and maintenance, mixing room alignment, equalization, as well as audio, color and light image calibration.

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EXECUTIVE SUMMARY

We are focused on expanding our leadership in solutions for entertainment content and delivering dynamic new audio and visual technologies to the market. The increasing availability of Dolby Atmos in multiple markets coupled by the convergent uses of Dolby Atmos and Dolby Vision beyond Dolby Cinema and into consumer electronics create potential opportunities for further increases in our consumer base and revenues.

The following are highlights of our first quarter of fiscal 2017 as well as challenges in key areas:
AUDIO LICENSING
Broadcast
Highlights: Our broadcast revenues experienced growth of five percent in the current fiscal quarter, primarily from our established presence in developed markets. We are focused on greater adoption of our technologies in emerging markets by working with country-specific operators and standards bodies to drive longer term growth.
Challenges : To achieve growth and further adoption in emerging markets where conversion to digital television is still underway, our success will be impacted by a number of factors such as regional fragmentation of operators and regulators, and the pace of their decision-making and implementation. Further, in some emerging growth countries such as China, we face difficulties enforcing our contractual and IP rights, including instances in which our licensees fail to accurately report the shipment of products using our technologies.
Consumer Electronics
Highlights : Dolby Atmos is being adopted in an increasing range of devices including DMAs, AVRs, speakers and soundbars, as consumer interest in this premium audio technology continues to grow. Whereas the first Dolby Atmos soundbar came to market a year ago, there are now four soundbars in the market including two models from Samsung. At CES in January 2017, Dolby Atmos soundbars were announced by LG, Sony, Onkyo, Pioneer and Xiaomi. These hardware offerings are paired with a growing amount of content via Blu-ray Discs and OTT services. Beginning January 2017, BT in the UK will deliver all of its Premiere Football League coverage in Dolby Atmos, while Comcast in the US has begun to deliver content in Dolby Atmos. We will continue to work with OEMs to expand the range of Dolby Audio-enabled hardware, and with content developers and distributors to expand the range of entertainment offerings that utilize our audio technologies.
Challenges : We must continue to present compelling reasons for consumers to demand our audio technologies wherever they enjoy premium content. To the extent that OEMs do not incorporate our technologies in current and forthcoming products, our future revenue could be impacted.
Mobile
Highlights: Our mobile market experienced growth of 16 percent in the current fiscal quarter, primarily driven by expansion of our patent licensing programs from both existing and new customers. Aside from Apple in whose ecosystem we are now fully incorporated, we continue to focus on driving further adoption of our technologies across other major mobile ecosystems - Android, Windows and Amazon. Collectively, these platforms facilitate delivery and enhanced consumption of Dolby-enabled content from a multitude of streaming services.
Challenges: Growth in this market is dependent on several factors, including our success in collaborating with manufacturers of mobile devices to incorporate our technologies, the development of and availability of Dolby content via various ecosystems, and the performance of the mobile device market as a whole.
Personal Computers
Highlights : At CES in January 2017, Lenovo announced a Legion gaming PC, which will be the first PC to support Dolby Atmos. And in December 2016, Microsoft announced support for Dolby Atmos on the Xbox One and Windows 10.
In the broader context, our technologies continue to enhance playback in both Mac and Windows operating systems including native support in their respective Safari and Microsoft Edge browsers. Dolby's presence in

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these browsers enables us to reach more users through new types of content, including streaming video entertainment.
Challenges : In recent years, unit demand for PCs has experienced secular decline as consumer choices have shifted towards other devices such as tablets and mobile phones. This has caused downward pressure on our PC revenues. Furthermore, a decline in the portion of PCs that have optical disc functionality will have a negative impact on our ASPs.
PRODUCTS
Highlights: We offer servers and audio processors to enable the playback of content in cinemas. Our most advanced audio for the cinema is Dolby Atmos. As of the end of our current fiscal quarter, there were over 2,700 Dolby Atmos-enabled screens installed or committed to be installed, an increase of approximately 1,100 screens from the first quarter of fiscal 2016, and over 600 Dolby Atmos theatrical titles announced or released, an increase of approximately 200 titles from the first quarter of fiscal 2016.
Challenges: Demand for our cinema products is dependent upon industry and economic cycles along with our ability to develop and introduce new technologies, further our relationships with content creators, and promote new consumer audio and imaging experiences. To the extent that we do not make progress in these areas, and are faced with pricing pressures or competing technologies, our revenue may be adversely affected.

NEW GROWTH INITIATIVES

Dolby Cinema™
Highlights : Launched in partnership with established movie theater exhibitors, Dolby Cinema is our premium cinema offering for moviegoers that combines Dolby Vision and Dolby Atmos at new or pre-existing venues. In total, 70 Dolby Cinema locations are now operational with locations projected to number 140 by the end of fiscal 2017. Of these, our largest partnership is with AMC which has opened 50 Dolby Cinema at AMC locations with plans to open 100 locations by the end of calendar 2017. In addition to AMC, exhibitors who feature Dolby Cinema include Wanda, the largest exhibitor in China, Cineplexx in Austria, and Vue (previously JT Bioscopen) in the Netherlands.
Dolby Cinema has also attracted strong interest from the creative community. Over 60 theatrical titles with Dolby Vision and Dolby Atmos have been announced or released with participation from every major studio. During the 2016 calendar year, the first full year for the Dolby Cinema program, nine of the ten highest-grossing films were optimized for Dolby Cinema.
Challenges: Although the premium large format sector of the cinema industry is currently growing, Dolby Cinema is in competition with other existing solutions. Our success with this initiative depends on our ability to differentiate our offering, deploy new sites in accordance with plans, and attract and retain a global viewing audience.

Dolby Vision™
Highlights: Dolby Vision TVs are now available globally, and the number of products using our technologies is growing. While Dolby Vision was available from only one partner a year ago, we now have ten TV OEM partners who have released or announced TVs with Dolby Vision. At CES in January 2017, Sony announced that its 2017 premium 4K HDR TVs will support Dolby Vision. In addition, LG, the world’s second largest TV manufacturer, announced that their 2017 OLED TVs will feature both Dolby Vision and Dolby Atmos which marks the first time that users can enjoy our premium audio and visual experience from a single product. LG's 2017 UHD TVs will also include Dolby Vision which complements their existing offerings that incorporate the imaging technology.
Other TV OEM partners include Vizio, the second largest TV manufacturer in the U.S. which includes Dolby Vision on three of their five lines, and TCL, the world’s third largest TV manufacturer, which supports Dolby Vision on four of their lines.

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The availability of entertainment content in Dolby Vision continues to expand. At CES in January 2017, the first UHD Blu-ray players that will support Dolby Vision were on display from LG, Phillips and Oppo. Three major studios - Lionsgate, Universal and Warner Bros. - have committed to release Dolby Vision titles on Blu-ray. Additionally, we now have more than 90 movie titles and over 100 hours of original TV content available in Dolby Vision through our OTT streaming partners, which include Netflix and Amazon.
Challenges : The success of Dolby Vision will depend on the expansion of content in the key categories of theatrical releases, episodic and live content as well as gaming. This will drive the broad adoption of the technology into consumer devices, including mobile.

Dolby Voice®
Highlights : BT MeetMe with Dolby Voice, the premium audio conferencing solution we launched in global partnership with BT, continues to gain traction. Dolby Voice has been incorporated into Highfive, a cloud-based collaboration and video conferencing solution that is easy to install and use. And PGi, one of the largest providers of audio conferencing software and services, offers Dolby Voice on its iMeet offering, a full video and screen sharing chat solution. In concert with these partners, we are focused on driving adoption of Dolby Voice and the Dolby Conference Phone.
Challenges : Our success in this market will depend on the number of service providers and enterprise customers we are able to attract from competing solutions, and on the volume of usage and Dolby Conference Phones that we are able to sell.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
For a description of the critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements, refer to Item 7 on Management Discussion and Analysis in our Fiscal 2016 Annual Report on Form 10-K filed with the SEC.

RESULTS OF OPERATIONS
For each line item included on our consolidated statements of operations described and analyzed below, the significant factors identified as the leading drivers contributing to the overall fluctuation are presented in descending order according to the quantitative magnitude of their impact on the overall change (from an absolute value perspective). Note that recovery payments received from licensees either in the form of back payments or settlements are collectively referred to as "recoveries."
Our fiscal quarterly and annual reporting periods generally consist of 13 weeks and 52 weeks, respectively. However, our fiscal quarter-to-date period ended January 1, 2016 consisted of 14 weeks and our fiscal year ended September 30, 2016 consisted of 53 weeks. The occurrence of an additional week during the prior fiscal period resulted in proportionately higher operating expenses relative to the current fiscal period for compensation, depreciation and amortization.
Revenue and Gross Margin
Licensing
Licensing revenue consists of fees earned from licensing our technologies to customers who incorporate them into their products and services to enable and enhance audio, imaging and voice capabilities. The technologies that we license are either internally developed, acquired, or licensed from third parties. Our cost of licensing consists mainly of amortization of purchased intangible assets and intangible assets acquired in business combinations as well as third party royalty obligations paid to license IP that we then sublicense to our customers.
 
Fiscal Quarter Ended
Change
Licensing
December 30,
2016
January 1,
2016
$
%
Revenue
$232,699
$211,129
$21,570
10%
Percentage of total revenue
87%
88%
 
 
Cost of licensing
8,121
6,533
1,588
24%
Gross margin
224,578
204,596
19,982
10%
Gross margin percentage
97%
97%
 
 

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Quarter-To-Date: Q1 2017 vs. Q1 2016
Factor
Revenue
Gross Margin
Other
á
Higher revenues from Automotive recoveries, Voice Licensing, Dolby Cinema, and increased shipments of gaming consoles
ßà
No significant fluctuations
Broadcast
á
Higher volume of STBs, partially offset by lower recoveries
Mobile
á
Primarily due to higher revenue from patent licensing programs, including new customers
PC
á
Higher recoveries and higher volumes, partially offset by decreases due to timing of revenue under contractual arrangements
CE
â
Lower units of DVD players, HTIBs and Blu-ray units, partially offset by higher units of DMAs and soundbars

Products
Products revenue is generated from the sale of audio, imaging and voice products for the cinema, television broadcast, and communications industries. Cost of products consists of materials, labor and manufacturing overhead, amortization of certain intangible assets as well as third party royalty obligations paid to license IP.
 
Fiscal Quarter Ended
Change
Products
December 30,
2016
January 1,
2016
$
%
Revenue
$28,211
$24,809
$3,402
14%
Percentage of total revenue
11%
10%
 
 
Cost of products
17,720
19,038
(1,318)
(7)%
Gross margin
10,491
5,771
4,720
82%
Gross margin percentage
37%
23%
 
 

Quarter-To-Date: Q1 2017 vs. Q1 2016
Factor
Revenue
Gross Margin
Cinema
á
Higher units of digital server and audio products and higher sales from extended warranty programs
á
Improved mix of products combined with lower charges from excess & obsolete inventory

Services
Services revenue consists of fees for production services, maintenance and support, mixing room alignment, equalization, as well as audio, color and light image calibration. Cost of services consists of personnel and personnel-related costs for providing our professional services, software maintenance and support, external consultants, and other direct expenses incurred on behalf of customers.
 
Fiscal Quarter Ended
Change
Services
December 30,
2016
January 1,
2016
$
%
Revenue
$5,357
$4,876
$481
10%
Percentage of total revenue
2%
2%
 
 
Cost of services
4,126
4,195
(69)
(2)%
Gross margin
1,231
681
550
81%
Gross margin percentage
23%
14%
 
 

Quarter-To-Date: Q1 2017 vs. Q1 2016
Factor
Revenue
Gross Margin
Configuration & Post-Production
á
Primarily due to higher film mastering
á
Higher utilization of fixed costs due to higher production activities


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Operating Expenses
Research & Development
R&D expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, consulting and contract labor costs, depreciation and amortization, facilities costs, costs for outside materials and services, and information technology expenses.
 
Fiscal Quarter Ended
Change
 
December 30,
2016
January 1,
2016
$
%
Research and development
$57,518
$53,328
$4,190
8%
Percentage of total revenue
22%
22%
 
 

Quarter-To-Date: Q1 2017 vs. Q1 2016
Category
Key Drivers
Compensation & Benefits
á
Higher headcount on new or existing R&D projects along with merit increases across the employee base



Sales & Marketing
S&M expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, marketing and promotional expenses for events such as trade shows and conferences, marketing campaigns, travel-related expenses, consulting fees, facilities costs, depreciation and amortization, information technology expenses, and legal costs associated with the protection of our IP.
 
Fiscal Quarter Ended
Change
 
December 30,
2016
January 1,
2016
$
%
Sales and marketing
$71,175
$74,454
$(3,279)
(4)%
Percentage of total revenue
27%
31%
 
 

Quarter-To-Date: Q1 2017 vs. Q1 2016
Category
Key Drivers
Marketing Programs
â
Impacted by the timing of promotional events and other marketing activities supporting our growth initiatives and lower costs associated with industry trade shows
Compensation & Benefits
á
Higher headcount and merit increases across the existing employee base
Stock-Based Compensation
â
Decrease in award grants

General & Administrative
G&A expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, depreciation, facilities and information technology costs, as well as professional fees and other costs associated with external consulting and contract labor.
 
Fiscal Quarter Ended
Change
 
December 30,
2016
January 1,
2016
$
%
General and administrative
$41,540
$44,078
$(2,538)
(6)%
Percentage of total revenue
16%
18%
 
 


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Quarter-To-Date: Q1 2017 vs. Q1 2016
Category
Key Drivers
Stock-Based Compensation
â
Decrease in award grants
Technology & Communications
á
Higher costs associated with IT-related projects
Depreciation & Amortization
â
Lower depreciation as assets that became fully-depreciated were only partially offset by new assets placed in service

Other Income/Expense
Other income/(expense) primarily consists of interest income earned on cash and investments and the net gains/(losses) from foreign currency transactions, derivative instruments, and sales of marketable securities from our investment portfolio.
 
Fiscal Quarter Ended
Change
Other Income/Expense
December 30,
2016
January 1,
2016
$
%
Interest income
$1,814
$1,297
$517
40%
Interest expense
(26)
(29)
3
(10)%
Other income/(expense), net
(199)
(972)
773
(80)%
Total
$1,589
$296
$1,293
437%

Quarter-To-Date: Q1 2017 vs. Q1 2016
Category
Key Drivers
Other Income/(Expense)
á
Decrease in other expense due primarily to lower currency translation losses and other expenses
Interest Income
á
Increase due to higher yields on our investment balances
Income Taxes
Our effective tax rate is based on a projection of our annual fiscal year results, and is affected each quarter-end by several factors. These include changes in our projected fiscal year results, recurring items such as tax rates and relative income earned in foreign jurisdictions, as well as discrete items such as changes to our uncertain tax positions that may occur in, but are not necessarily consistent between periods. For additional information related to effective tax rates, see Note 10 “ Income Taxes ” to our consolidated financial statements.
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Provision for income taxes
$(14,082)
$(8,473)
Effective tax rate
20.8%
21.5%

Quarter-To-Date: Q1 2017 vs. Q1 2016
Factor
Impact On Effective Tax Rate
Foreign Operations
â
Increased benefit from foreign earned income
Tax Contingencies
â
Increased benefit from the settlement of a California state audit for the fiscal years 2008 through 2011
Federal R&D Credits
á
Decrease in discrete benefits from federal R&D credits

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LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
Our principal sources of liquidity are cash, cash equivalents, and investments, as well as cash flows from operations. We believe that these sources will be sufficient to satisfy our currently anticipated cash requirements through at least the next twelve months. As of December 30, 2016 , we had cash and cash equivalents of $512.8 million , which consisted of cash and highly-liquid money market funds. In addition, we had short and long-term investments of $515.2 million , which consisted primarily of municipal debt securities, commercial paper, corporate bonds, and U.S. agency securities.
Our policy is to indefinitely reinvest a portion of our undistributed earnings in certain foreign subsidiaries to support the operations and growth of these subsidiaries. Of our total cash, cash equivalents, and investments held as of December 30, 2016 , approximately $688 million , or 67% , was held by our foreign subsidiaries. This represented a $34 million increase from the $654 million that was held by our foreign subsidiaries as of September 30, 2016 . If these undistributed earnings held by foreign subsidiaries are repatriated to the U.S., they may be subject to U.S. federal income taxes and foreign withholding taxes, less the applicable foreign tax credits.
The following table presents selected financial information as of December 30, 2016 and September 30, 2016 (amounts displayed are in thousands):
 
December 30,
2016
September 30,
2016
Cash and cash equivalents
$
512,838

$
516,112

Short-term investments
164,818

121,629

Long-term investments
350,360

393,904

Accounts receivable, net
81,393

75,688

Accounts payable and accrued liabilities
181,252

186,599

Working capital
603,845

546,647

Capital Expenditures and Uses of Capital
Our capital expenditures consist of purchases of land, building, building fixtures, laboratory equipment, office equipment, computer hardware and software, leasehold improvements, and production and test equipment. We continue to invest in sales and marketing, and R&D that contribute to the overall growth of our business and technological innovation.
Asset Acquisition . During the first quarter of fiscal 2016, we completed an asset purchase of a patent portfolio that fits within our existing patent licensing programs for total consideration of $105.0 million.
We retain sufficient cash holdings to support our operations and we also purchase investment grade securities diversified among security types, industries, and issuers. We have used cash generated from our operations to fund a variety of activities related to our business in addition to our ongoing operations, including business expansion and growth, acquisitions, and repurchases of our Class A common stock. We have historically generated significant cash from operations, however these cash flows and the value of our investment portfolio could be affected by various risks and uncertainties, as described in Part I, Item 1A “ Risk Factors .”
Shareholder Return
Since fiscal 2010, we have returned cash to stockholders through repurchases of Class A common stock under our repurchase program, a special one-time dividend, and our quarterly dividend program initiated in fiscal 2015. Refer to Note 7 " Stockholders' Equity & Stock-Based Compensation " to our interim condensed consolidated financial statements for a summary of dividend payments made under the program during fiscal 2016 and additional information regarding our stock repurchase program.
Stock Repurchase Program. Our stock repurchase program was initiated in fiscal 2009, and since then we have completed approximately $1.1 billion of our stock repurchases.
Quarterly Dividend Program. During the first quarter of fiscal 2015, we initiated a recurring quarterly cash dividend program for our stockholders. Under the program, current quarterly dividends of $0.14 per share are paid on our Class A and Class B common stock to eligible stockholders of record for each respective dividend record date.
Cash Flows Analysis

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For the following comparative analysis performed for each of the sections of the statement of cash flows, the significant factors identified as the leading drivers contributing to the fluctuation are presented in descending order according to the magnitude of their impact relative to the overall change (amounts displayed in thousands, except as otherwise noted).
Operating Activities
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Net cash provided by operating activities
$
67,761

$
67,395

Net cash provided by operating activities increased $0.4 million in the fiscal quarter-to-date period ended December 30, 2016 as compared to the fiscal quarter-to-date period ended January 1, 2016 , primarily due to the following:
Factor
Impact On Cash Flows
Net Income
á
Increase in total revenue
Working Capital
â
Net overall decrease primarily attributed to an increase in accounts receivable
Investing Activities
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Net cash used in investing activities
$
(26,653
)
$
(79,952
)
Capital expenditures
(22,576
)
(24,368
)
Net cash used in investing activities was $53.3 million lower in the fiscal quarter-to-date period ended December 30, 2016 as compared to the fiscal quarter-to-date period ended January 1, 2016 , primarily due to the following:
Factor
Impact On Cash Flows
Acquisition Of Intangible Assets
â
Significant outflows in the first quarter of fiscal 2016 for the purchase of a patent portfolio
Proceeds From Investments
â
Lower inflows from the sale & maturity of marketable investment securities
Purchase Of Investments
á
Lower cash outflows for the purchase of marketable investment securities
Financing Activities
 
Fiscal Quarter Ended
 
December 30,
2016
January 1,
2016
Net cash used in financing activities
$
(39,014
)
$
(51,330
)
Repurchase of common stock
(25,001
)
(39,449
)
Net cash used in financing activities was $12.3 million lower in the fiscal quarter-to-date period ended December 30, 2016 as compared to the fiscal quarter-to-date period ended January 1, 2016 , primarily due to the following:
Factor
Impact On Cash Flows
Share Repurchases
á
Lower outflows resulting from a decrease in the volume of common stock repurchases

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Off-Balance Sheet Arrangements and Contractual Obligations
Our liquidity is not dependent upon the use of off-balance sheet financing arrangements, and we have not entered into any arrangements that are expected to have a material effect on liquidity or the availability of capital resources. Since the end of our most recent fiscal year ended September 30, 2016 , there have been no material changes in either our off-balance sheet financing arrangements or contractual obligations outside the ordinary course of business. For additional details regarding our contractual obligations, see Note 12 “ Commitments & Contingencies ” to our unaudited interim condensed consolidated financial statements.
Indemnification Clauses
We are party to certain contractual agreements under which we have agreed to provide indemnification of varying scope and duration to the other party relating to our licensed IP. Historically, we have not made any payments for these indemnification obligations and no amounts have been accrued in our consolidated financial statements with respect to these obligations. Since the terms and conditions of the indemnification clauses do not explicitly specify our obligations, we are unable to reasonably estimate the maximum potential exposure for which we could be liable. For additional details regarding indemnification clauses within our contractual agreements, see Note 12 “ Commitments & Contingencies ” to our interim condensed consolidated financial statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity
As of December 30, 2016 , we had cash and cash equivalents of $512.8 million , which consisted of cash and highly liquid money market funds. In addition, we had both short and long-term investments of $515.2 million , which consisted primarily of municipal debt securities, corporate bonds, commercial paper and U.S. agency securities. Our investment policy is focused on the preservation of capital and support for our liquidity requirements. Under the policy, we invest in highly rated securities with a minimum credit rating of A- while limiting the amount of credit exposure to any one issuer other than the U.S. government. At December 30, 2016 , the weighted-average credit quality of our investment portfolio was AA , with a weighted-average maturity of approximately sixteen months . We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial instruments. We utilize external investment managers who adhere to the guidelines of our investment policy.
The investments within our fixed-income portfolio are subject to fluctuations in interest rates, which could affect our financial position, and to a lesser extent, results of operations. Based on our investment portfolio balance as of December 30, 2016 , hypothetical changes in interest rates of 1% and 0.5% would have an impact on the carrying value of our portfolio of approximately $6.1 million and $3.1 million , respectively.
Foreign Currency Exchange Risk
We maintain business operations in foreign countries, most significantly in Australia, China, Germany, the Netherlands, Poland and the United Kingdom. Additionally, a growing portion of our business is conducted outside of the U.S. through subsidiaries with functional currencies other than the U.S. dollar, most notably:
•
Australian Dollar
•
British Pound
•
Chinese Yuan
•
Euro
•
Indian Rupee
•
Japanese Yen
•
Korean Won
•
Polish Zloty
•
Russian Ruble
•
Swedish Krona
As a result, we face exposure to adverse movements in currency exchange rates as the financial results of our international operations are translated from local currency into U.S. dollars upon consolidation. The majority of our revenue generated from international markets is denominated in U.S. dollars, while the operating expenses of our foreign subsidiaries are predominantly denominated in local currencies. Therefore, our operating expenses will increase when the U.S. dollar weakens against the local currency and decrease when the U.S. dollar strengthens against the local currency. Additionally, foreign exchange rate fluctuations on transactions denominated in currencies other than the functional currency result in gains or losses that are reflected in our consolidated statements of operations. Our foreign operations are subject to the same risks present when conducting business internationally, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, foreign exchange rate volatility and other regulations and restrictions.
In an effort to reduce the risk that our earnings will be adversely affected by foreign currency exchange rate fluctuations, we enter into foreign currency forward contracts to hedge against assets and liabilities for which we have foreign currency exchange rate exposure. These derivative instruments are carried at fair value with changes in the fair value recorded to other income, net, in our consolidated statements of operations. While not designated as hedging instruments, these foreign currency forward contracts are used to reduce the exchange rate risk associated primarily with intercompany receivables and payables. These contracts do not subject us to material balance sheet risk due to exchange rate movements as gains and losses on these derivatives are intended to offset gains and losses on the related receivables and payables for which we have foreign currency exchange rate exposure. As of December 30, 2016 and September 30, 2016 , the outstanding derivative instruments had maturities of equal to or less than 31 and 38 days, respectively, and the total notional amounts of outstanding contracts were $24.0 million and $18.3 million , respectively. The fair values of these contracts were nominal as of December 30, 2016 and September 30, 2016 , and were included within prepaid expenses and other current assets and within accrued

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liabilities in our consolidated balance sheets. For additional information related to our foreign currency forward contracts, see Note 2 " Summary of Significant Accounting Policies " to our consolidated financial statements.
A sensitivity analysis was performed on all of our foreign currency forward contracts as of December 30, 2016 . This sensitivity analysis was based on a modeling technique that measures the hypothetical market value resulting from a 10% shift in the value of exchange rates relative to the U.S. dollar. For these forward contracts, duration modeling was used where hypothetical changes are made to the spot rates of the currency. A 10% increase in the value of the U.S. dollar would lead to an increase in the fair value of our financial instruments by $1.0 million . Conversely, a 10% decrease in the value of the U.S. dollar would result in a decrease in the fair value of these financial instruments by $1.0 million .

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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Subject to the limitations noted above, our management, with the participation of our CEO and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the CEO and CFO have concluded that, as of such date, our disclosure controls and procedures were effective to meet the objective for which they were designed and operate at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended December 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in various legal proceedings from time to time arising from the normal course of business activities, including claims of alleged infringement of IP rights, commercial, employment, and other matters. In our opinion, resolution of these pending matters is not expected to have a material adverse impact on our operating results or financial condition. Given the unpredictable nature of legal proceedings, it is possible that an unfavorable resolution of one or more such proceedings could materially affect our future operating results or financial condition in a particular period; however, based on the information known by us as of the date of this filing and the rules and regulations applicable to the preparation of our consolidated financial statements, any such amounts are either immaterial or it is not possible to provide an estimated amount of any such potential losses.
ITEM 1A. RISK FACTORS
The following risk factors and other information included in this Quarterly Report on Form 10-Q should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not currently known to us or that we currently deem less significant may also affect our business operations or financial results. If any of the following risks actually occur, our business, operating results and financial condition could be materially adversely affected.

REVENUE GENERATION
    
Markets We Target
Dependence on Sales by Licensees . Our licensing businesses depend on OEMs and other licensees to incorporate our technologies and IP into their products. Our license agreements generally do not have minimum purchase commitments, are typically non-exclusive, and frequently do not require incorporation or use of our technologies. Our revenue will decline if our licensees choose not to incorporate our technologies in their products or they sell fewer products incorporating our technologies.
Impact of PC Sales . Revenue from our PC market depends on several factors, including underlying PC unit shipment growth, the extent to which our technologies are included on computers, through operating systems or otherwise, and the terms of any royalties or other payments we receive. We face challenges in the PC market, including:
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Purchasing trends away from traditional PCs and toward computing devices without optical disc drives, such as ultrabooks and tablets;
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Because PC OEMs are required to pay us a higher per-unit royalty for Windows 8 and Windows 10 PCs that include optical disc playback functionality than Windows 8 or Windows 10 PCs that do not include such functionality, the continued decreasing inclusion of optical disc drives in Windows 8 or Windows 10 PCs will result in lower per-unit royalties;
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PC software that includes our technologies on an unauthorized and infringing basis, for which we receive no royalty payments; and
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Continued decreasing inclusion of independent software vendor media applications by PC OEMs.
Declines in Optical Disc Media . For many years, movies have been distributed, purchased, and consumed through optical disc media, such as DVD and Blu-ray Disc. However, the rapid advancement of online and mobile content delivery has resulted in a trend toward movie downloading and streaming services. We expect the shift away from optical disc media to online and mobile media content consumption to continue, resulting in decreased revenue from DVD and Blu-ray Disc players.
Mobile Industry Risks . Successful penetration of the mobile device market is important to our future growth. The mobile device market, particularly smartphones and tablets, is characterized by rapidly changing market conditions, frequent product introductions and intense competition based on features and price. Our DD and DD+ technologies are not mandated as an industry standard for mobile devices. We must continually convince mobile device OEMs and end users of mobile devices of the value of our technologies. With shorter product lifecycles, it is easier for mobile device OEMs to add or remove our technologies from mobile devices than it was for PC OEMs.
In order to increase the value of our technologies in the mobile market, we have worked with online and mobile media content service providers to encode their content with our technologies, which could affect OEM and software

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vendor demand for our decoding technologies. However, the online and mobile media content services markets are also characterized by intense competition, evolving industry standards and business and distribution models, disruptive software and hardware technology developments, frequent product and service introductions and short life cycles, and price sensitivity on the part of consumers, all of which may result in downward pressure on pricing or the removal of our technologies by these providers.
Cinema Industry Risks . Revenue from Dolby Cinema and cinema product sales is subject to the pace of construction or upgrade of screens, the advent of new or competing technologies, consumer trends, and events or conditions in the cinema industry. Although we have invested, and expect to continue to invest, a substantial amount of time and resources developing Dolby Cinema and building our partnerships in connection with the launch of Dolby Cinema locations, this is a new market for us and we may not recognize a meaningful amount of revenue from these efforts in the near future, or at all, if Dolby Cinema is not ultimately successful. Additionally, we have a collaboration with Wanda Cinema Line to open 100 Dolby Cinema locations in China, and we may face a number of risks in expanding Dolby Cinema in China and other new international markets. The royalties we receive from Dolby Cinema exhibitors are based on a portion of box-office receipts from the installed theaters, and the timing of such theater installations is dependent upon a number of factors beyond our control. In addition, the success of our Dolby Cinema offering will be tied to the pipeline and success of motion pictures available at Dolby Cinema locations generally. The success of Dolby Cinema depends in large part on our ability to differentiate our offering, deploy new sites in accordance with plans, provide a compelling experience, and attract and retain a viewing audience. In addition, a decrease in our ability to develop and introduce new cinema products and services successfully could affect licensing of our consumer technologies, because the strength of our brand and our ability to use professional product developments to introduce new consumer technologies would be negatively impacted.
Our revenue from cinema product sales is also tied to the number of movies produced and distributed by studios and independent filmmakers. A number of factors outside of our control can affect the number of movies that are produced, including strikes and work stoppages within the cinema industry and budgetary constraints and changes in cinema industry business models.
Maturity of Digital Cinema Market . The industry transition to digital cinema is essentially complete, and the demand for new digital cinema screens has dropped significantly, leading to lower sales volumes of our cinema products. Future cinema product growth depends on a number of factors, including new theater construction, the introduction of new technologies, such as Dolby Atmos and Dolby Vision, and entering into a replacement cycle where previously purchased cinema products are upgraded or replaced. We face a number of challenges relating to the maturity of the digital cinema market, including:
•
Exhibitors may choose competing products with different features or lower prices; and
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Pricing and other competitive pressures have caused us to implement pricing strategies which have adversely affected gross margins of our cinema products.

Customers and Distributors
Loss of Key Licensee or Customer . A small number of our licensees or customers may represent a significant percentage of our licensing, products, or services revenue. Although we generally have agreements with these licensees or customers, these agreements typically do not require any minimum purchases or minimum royalty fees and do not prohibit licensees from using competing technologies or customers from purchasing products and services from competitors. Because many of our markets are rapidly evolving, customer demand for our technologies and products can shift quickly. Because of our increased presence in the mobile market where our DD and DD+ technologies are not mandated as industry standards, the risk that a large licensee may reduce or eliminate its use of our technologies has increased.
Reliance on Semiconductor Manufacturers . Our licensing revenue from system licensees depends in large part upon the availability of ICs that implement our technologies. IC manufacturers incorporate our technologies into these ICs, which are then incorporated in consumer entertainment products. We do not manufacture these ICs, but rather depend on IC manufacturers to develop, produce, and then sell them to system licensees in accordance with their agreements. We do not control the IC manufacturers’ decisions whether or not to incorporate our technologies into their ICs, and we do not control their product development or commercialization efforts.

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Consumer Spending Weakness . Weakness in general economic conditions may suppress consumer demand in our markets. Many of the products in which our technologies are incorporated are discretionary goods, such as PCs, televisions, STBs, Blu-ray Disc players, video game consoles, AVRs, mobile devices, in-car entertainment systems, and home-theater systems. Weakness in general economic conditions may also lead to licensees and customers becoming delinquent on their obligations to us or being unable to pay, resulting in a higher level of write-offs. Economic conditions may increase underreporting and non-reporting of royalty-bearing revenue by our licensees as well as increase the unauthorized use of our technologies.
Reliance on Distributors . We rely significantly on a global network of independent, regional distributors to market and distribute our cinema and broadcast products. Our distributor arrangements are non-exclusive and our distributors are not obligated to buy our products and can represent competing products, and they may be unwilling or unable to dedicate the resources necessary to promote our portfolio of products. Our distributors could retain product channel inventory levels that exceed future anticipated sales, which could affect future sales to those distributors. In addition, failure of our distributors to adhere to our policies designed to promote compliance with global anticorruption laws, export controls, and local laws, could subject us to criminal or civil penalties and stockholder litigation.
Marketing and Branding
Importance of Brand Strength . Maintaining and strengthening the Dolby brand is critical to maintaining and expanding our licensing, products, and services business, as well as our ability to offer technologies for new markets, including Dolby Voice for the communications market, Dolby Cinema, Dolby Vision and other imaging offerings for the consumer market, and others. Our continued success depends on our reputation for providing high quality technologies, products, and services across a wide range of entertainment markets, including the consumer entertainment, PC, broadcast, and gaming markets. If we fail to promote and maintain the Dolby brand successfully in licensing, products or services, our business will suffer. Furthermore, we believe that the strength of our brand may affect the likelihood that our technologies are adopted as industry standards in various markets and for various applications. Our ability to maintain and strengthen our brand will depend heavily on our ability to develop innovative technologies for the entertainment industry, to enter into new markets successfully, and to provide high quality products and services in these new markets.

Industry Standards
The entertainment industry depends upon industry standards to ensure compatibility across delivery platforms and a wide variety of consumer entertainment products. We make significant efforts to design our products and technologies to address capability, quality, and cost considerations so that they either meet, or more importantly, are adopted as industry standards across the broad range of entertainment industry markets in which we participate, as well as the markets in which we hope to compete in the future. To have our products and technologies adopted as industry standards, we must convince a broad spectrum of standards-setting organizations throughout the world, as well as our major customers and licensees who are members of such organizations, to adopt them as such. The market for broadcast technologies has traditionally been heavily based on industry standards, often mandated by governments choosing from among alternative standards, and we expect this to be the case in the future.
Difficulty Becoming Incorporated in an Industry Standard . Standards-setting organizations establish technology standards for use in a wide range of consumer entertainment products. It can be difficult for companies to have their technologies adopted as an industry standard, as multiple companies, including ones that typically compete against one another, are involved in the development of new technology standards for use in entertainment-oriented products. Furthermore, some standards-setting organizations choose to adopt a set of optional standards or a combination of mandatory and optional standards; in such cases, our technologies may be adopted only as an optional standard and not a mandatory standard. Standards may also change in ways that are unfavorable to Dolby.
Participants May Choose Among Alternative Technologies within Standards . Even when a standards-setting organization incorporates our technologies in an industry standard for a particular market, our technologies may not be the sole technologies adopted for that market. Furthermore, different standards may be adopted for different markets . Our operating results depend upon participants in that market choosing to adopt our technologies instead of competitive technologies that also may be acceptable under such standard. For example, the continued growth of our revenue from the broadcast market will depend upon both the continued global adoption of digital television generally, including in emerging markets, and the choice to use our technologies where it is one of several accepted industry standards.

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Being Part of a Standard May Limit Our Licensing Practices . When a standards-setting organization mandates our technologies, we generally must agree to license such technologies on a fair, reasonable, and non-discriminatory basis, which could limit our control over the use of these technologies. In these situations, we must often limit the royalty rates we charge for these technologies and we may be unable to limit to whom we license such technologies or to restrict many terms of the license. We have in the past, and may in the future, be subject to claims that our licensing of industry standard technologies may not conform to the requirements of the standards-setting organization. Allegations such as these could be asserted in private actions seeking monetary damages and injunctive relief, or in regulatory actions. Claimants in such cases could seek to restrict or change our licensing practices or our ability to license our technologies.

Royalty Reporting
Our operating results fluctuate based on the risks set forth in this section, as well as on:
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Timing of royalty reports from our licensees and meeting revenue recognition criteria;
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Royalty reports including positive or negative corrective adjustments;
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Retroactive royalties that cover extended periods of time; and
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Timing of revenue recognition under licensing agreements and other contractual arrangements, including recognition of unusually large amounts of revenue in any given quarter because not all of our revenue recognition criteria were met in prior periods.
Inaccurate Licensee Royalty Reporting . We generate licensing revenue primarily from OEMs who license our technologies and incorporate those technologies in their products. Our license agreements generally obligate our licensees to pay us a specified royalty for every product they ship that incorporates our technologies, and we rely on our licensees to report their shipments accurately. However, we have difficulty independently determining whether our licensees are reporting shipments accurately, particularly with respect to software incorporating our technologies because unauthorized copies of such software can be made relatively easily. A third party may disagree with our interpretation of the terms of a license agreement or, as a result of an audit, a third party could challenge the accuracy of our calculation. We are regularly involved in discussions with third party technology licensees regarding license terms. Most of our license agreements permit us to audit our licensees’ records, and we routinely exercise these rights, but audits are generally expensive, time-consuming, and potentially detrimental to our ongoing business relationships with our licensees. In the past, licensees have understated or failed to report the number of products incorporating our technologies that they shipped, and we have not been able to collect and recognize revenue to which we were entitled. We expect that we will continue to experience understatement and non-reporting of royalties by our licensees. We have been able to obtain certain recovery payments from licensees (either in the form of back payments or settlements), and such recoveries have become a recurring element of our business; however, we are unable to predict with certainty the revenue that we may recover in the future or if we will be able to continue to obtain such recoveries at all.
Royalties We Owe Others . In some cases, the products we sell and the technologies we license to our customers include IP that we have licensed from third parties. Our agreements with these third parties generally require us to pay them royalties for that use, and give the third parties the right to audit our calculation of those royalties. A third party may disagree with our interpretation of the terms of a license agreement or, as a result of an audit, a third party could challenge the accuracy of our calculation. We are regularly involved in discussions with third party technology licensors regarding license terms. A successful challenge by a third party could result in the termination of a license agreement or an increase in the amount of royalties we have to pay to the third party.

TECHNOLOGY TRENDS AND DEVELOPMENTS
Technology Innovation . Our revenue growth will depend upon our success in new and existing markets for our technologies, such as digital broadcast, mobile devices, online and mobile media distribution, cinema, consumer imaging and communications. The markets for our technologies and products are defined by:  
•
Rapid technological change;
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New and improved technology and frequent product introductions;
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Changing consumer and licensee demands;
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Evolving industry standards; and
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Technology and product obsolescence.
Our future success depends on our ability to enhance our technologies and products and to develop new

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technologies and products that address the market needs in a timely manner. Technology development is a complex, uncertain process requiring high levels of innovation, highly-skilled engineering and development personnel, and the accurate anticipation of technological and market trends. We may not be able to identify, develop, acquire, market, or support new or enhanced technologies or products on a timely basis, if at all.
Experience with New Markets and Business Models . Our future growth will depend, in part, upon our expansion into areas beyond our audio licensing business. Over the past few years, we have introduced Dolby Voice technology for the communications market, Dolby Vision for the home and cinema markets, and our branded-theater experience, Dolby Cinema. In connection with entering into these new markets, we face new sources of competition, new business models, and new customer relationships. In order to be successful in these markets, we will need to cultivate new industry relationships to bring our products, services, and technologies to market. Our inexperience in one or more of these markets could limit our ability to successfully execute on our growth strategy.
Incorporation of Dolby Formats into New Products & Availability of Content in Dolby Formats . The success of many of our newer initiatives, such as Dolby Atmos, Dolby Vision, and Dolby Cinema, is dependent upon the availability and success of (i) products that incorporate Dolby formats and (ii) content produced in Dolby formats. However, there is no guarantee that device makers will continue to incorporate Dolby formats into their products, that content creators will continue to release content in Dolby formats, or that either those products or that content will be commercially successful.
For instance, to successfully establish Dolby Vision and Dolby Atmos, we will need to continue to expand the array of products and consumer devices that incorporate Dolby Atmos and Dolby Vision, expand the pipeline of Dolby Atmos and Dolby Vision content available from content creators, and encourage consumer adoption in the face of competing products and technologies. Similarly, the success of Dolby Cinema is dependent upon our ability to partner with movie theater exhibitors to launch new Dolby Cinema sites and deploy new sites in accordance with plans, as well as the continued release and box-office success of new films in the Dolby Vision and Dolby Atmos formats released through Dolby Cinemas.
Further, the commercial success of products incorporating Dolby formats, content released in Dolby formats, and Dolby Cinemas generally, depends upon a number of factors outside of our control, including, but not limited to, consumer preferences, critical reception, timing of release, marketing efforts of third-parties, and general market conditions. Moreover, release and distribution of such products and content can be subject to delays in production or changes in release schedule, which can negatively impact the quantity, timing and quality of such products and content released in Dolby formats and available at Dolby Cinema theaters.
INTELLECTUAL PROPERTY
Our business is dependent upon protecting our patents, trademarks, trade secrets, copyrights, and other IP rights. Effective IP rights protection, however, may not be available under the laws of every country in which our products and services and those of our licensees are distributed. The efforts we have taken to protect our proprietary rights may not be sufficient or effective. We also seek to maintain select IP as trade secrets, and third parties or our employees could intentionally or accidentally compromise the IP that we maintain as trade secrets. In addition, protecting our IP rights is costly and time consuming. We have taken steps in the past to enforce our IP rights and expect to do so in the future. However, it may not be practicable or cost effective for us to enforce our IP rights fully, particularly in some countries or where the initiation of a claim might harm our business relationships.
We generally seek patent protection for our innovations. However, our patent program faces a number of challenges, including:
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Possibility that innovations may not be protectable;
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Failure to protect innovations that later turn out to be important;
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Insufficient patent protection to prevent third parties from designing around our patent claims;
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Our pending patent applications may not be approved; and
•
Possibility that an issued patent may later be found to be invalid or unenforceable.

Patent Royalties and Expiration . Many of the technologies that we license to our system licensees are covered by patents, and the licensing revenue that we receive from those licenses depends in large part upon the life of such patents. In general, our agreements with our licensees require them to pay us a full royalty with respect to a particular technology only until the last patent covering that technology expires in a particular country. As of December 30, 2016 , we had approximately 6,500 issued patents in addition to approximately 4,000 pending patent applications in more

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than 90 jurisdictions throughout the world. Our currently issued patents expire at various times through September 2040 .
We seek to mitigate this risk in a variety of ways. We regularly look for opportunities to expand our patent portfolio through organic development and acquisitions. We develop proprietary technologies to replace licensing revenue from technologies covered by expiring patents with licensing revenue supported by patents with a longer remaining life. And we develop and license our technologies in a manner designed to minimize the chance that a system licensee would develop competing technologies that do not include any Dolby IP.
Some of our patents relating to DD technologies, from which we derive a significant, but declining portion of our licensing revenue, have expired and others will expire over the next several years. The primary products that incorporate DD include DVD players (but not Blu-ray players) and some TVs, STBs and soundbars. We have transitioned a number of our DD licensees, and continue to make progress in transitioning other DD licensees, to DD+ technologies, an extension of our DD technologies, whose patents generally expire later than the DD patents. To be successful, we must continue to transition licensees to DD+, and discourage licensees of DD+ to transition back to DD as our original patents covering this technology expire.
Unauthorized Use of Our Intellectual Property . We have often experienced, and expect to continue to experience, problems with non-licensee OEMs and software vendors, particularly in China and certain emerging economies, incorporating our technologies and trademarks into their products without our authorization and without paying us any licensing fees. Manufacturers of ICs containing our technologies occasionally sell these ICs to third parties who are not our system licensees. These sales, and the failure of such manufacturers to report the sales, facilitate the unauthorized use of our IP. As emerging economies transition from analog to digital content, such as the transition from analog to digital broadcast, we expect to experience increased problems with this form of piracy.
Intellectual Property Litigation . Companies in the technology and entertainment industries frequently engage in litigation based on allegations of infringement or other violations of IP rights. We have faced such claims in the past, and we expect to face similar claims in the future. Any IP claims, with or without merit, could be time-consuming, expensive to litigate or settle, and could divert management resources and attention. In the past, we have settled claims relating to infringement allegations and agreed to make payments in connection with such settlements. An adverse determination in any IP claim could require that we pay damages or stop using technologies found to be in violation of a third party’s rights and could prevent us from offering our products and services to others. In order to avoid these restrictions, we may have to seek a license for the technology, which may not be available on reasonable terms or at all. Licensors could also require us to pay significant royalties. As a result, we may be required to develop alternative non-infringing technologies, which could require significant effort and expense. If we cannot license or develop technologies for any aspects of our business found to be infringing, we may be forced to limit our product and service offerings and may be unable to compete effectively.
In some instances, we have contractually agreed to provide indemnifications to licensees relating to our IP. Additionally, at times we have chosen to defend our licensees from third party IP infringement claims even where such defense was not contractually required, and we may choose to take on such defense in the future.
Licensee Disputes . At times, we are engaged in disputes regarding the licensing of our IP rights, including matters related to our royalty rates and other terms of our licensing arrangements. These types of disputes can be asserted by our customers or prospective customers or by other third parties as part of negotiations with us or in private actions seeking monetary damages or injunctive relief, or in regulatory actions. In the past, licensees have threatened to initiate litigation against us based on potential antitrust claims or regarding our licensing royalty rate practices. Damages and requests for injunctive relief asserted in claims like these could be significant, and could be disruptive to our business.
U.S. and Foreign Patent Rights . Our licensing business depends in part on the uniform and consistent treatment of patent rights in the U.S. and abroad. Changes to the patent laws and regulations in the U.S. and abroad may limit our ability to obtain, license, and enforce our rights. Additionally, court and administrative rulings may interpret existing patent laws and regulations in ways that hurt our ability to obtain, license, and enforce our patents. We face challenges protecting our IP in foreign jurisdictions, including:
•
Our ability to enforce our contractual and IP rights, especially in countries that do not recognize and enforce IP rights to the same extent as the U.S., Japan, Korea, and European countries do, which increases the risk of unauthorized use of our technologies;
•
Limited or no patent protection for our DD technologies in countries such as China, Taiwan, and India, which may require us to obtain patent rights for new and existing technologies in order to grow or

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maintain our revenue; and
•
Because of limitations in the legal systems in many countries, our ability to obtain and enforce patents in many countries is uncertain, and we must strengthen and develop relationships with entertainment industry participants worldwide to increase our ability to enforce our IP and contractual rights without relying solely on the legal systems in the countries in which we operate.

OPERATIONS
Reliance on Key Suppliers . Our reliance on suppliers for some of the key materials and components we use in manufacturing our products involves risks, including limited control over the price, timely delivery, and quality of such components. We generally have no formal agreements in place with our suppliers for the continued supply of materials and components. Although we have identified alternate suppliers for most of our key materials and components, any required changes in our suppliers could cause delays in our operations and increase our production costs. In addition, our suppliers may not be able to meet our production demands as to volume, quality, or timeliness.
Moreover, we rely on sole source suppliers for some of the components that we use to manufacture our products, including specific charged coupled devices, light emitting diodes, and digital signal processors. These sole source suppliers may become unable or unwilling to deliver these components to us at an acceptable cost or at all, which could force us to redesign those specific products. Our inability to obtain timely delivery of key components of acceptable quality, any significant increases in the prices of components, or the redesign of our products could result in production delays, increased costs, and reductions in shipments of our products.
Product Quality . Our products, and products that incorporate our technologies, are complex and sometimes contain undetected software or hardware errors, particularly when first introduced or when new versions are released. In addition, we have limited control over manufacturing performed by contract manufacturers, which could result in quality problems. Furthermore, our products and technologies are sometimes combined with or incorporated into products from other vendors, sometimes making it difficult to identify the source of a problem. Any negative publicity or impact relating to these product problems could affect the perception of our brand and market acceptance of our products or technologies. These errors could result in a loss of or delay in market acceptance of our products or cause delays in delivering them and meeting customer demands, any of which could reduce our revenue and raise significant customer relations issues. In addition, if our products or technologies contain errors we could be required to replace or reengineer them, which would increase our costs. Moreover, if any such errors cause unintended consequences, we could incur substantial costs in defending and settling product liability claims. Although we generally attempt to contractually limit our liability, if these contract provisions are not enforced, or are unenforceable for any reason, or if liabilities arise that are not effectively limited, we could incur substantial costs in defending and settling product liability claims.
Production Processes and Production . Production difficulties or inefficiencies can interrupt production, resulting in our inability to deliver products on time in a cost effective manner, which could harm our competitive position. While we have three production facilities, we increasingly use contract manufacturers for a significant portion of our production capacity. Our reliance on contract manufacturers for the manufacture of our products involves risks, including limited control over timely delivery and quality of such products. If production of our products is interrupted, we may not be able to manufacture products on a timely basis. A shortage of manufacturing capacity for our products could reduce our operating results and damage our customer relationships. We may be unable to quickly adapt our manufacturing capacity to rapidly changing market conditions and a contract manufacturer may encounter similar difficulties. Likewise, we may be unable to quickly respond to fluctuations in customer demand or contract manufacturer interruptions. At times we underutilize our manufacturing facilities as a result of reduced demand for some of our products.
Data Security . We rely on information technology systems in the conduct of our business, including systems designed and managed by third parties. Many of these systems contain sensitive and confidential information, including our trade secrets and proprietary business information, personal data, and information of or pertaining to our customers, suppliers and business partners. The secure maintenance of this information is critical to our operations and business strategy. Increasingly, companies are subject to a wide variety of attacks on their networks and systems on an ongoing basis. Our information technology and infrastructure may be vulnerable to penetration or attacks by computer programmers and hackers, software bugs or other technical malfunctions, or other disruptions.
While we have taken a number of steps to protect our information technology systems, the number and sophistication of malicious attacks that companies have experienced from third parties has increased over the past few years. In addition, because techniques used by computer programmers and hackers (many of whom are highly

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sophisticated and well-funded) to access or sabotage networks and computer systems change frequently and often are not recognized until after they are used, we may be unable to anticipate or immediately detect these techniques. This could delay our response or the effectiveness of our response and impede our operations and ability to limit our exposure to third-party claims and potential liability. Attacks on our systems are sometimes successful, and, in some instances, we might be unaware of an incident or its magnitude and effects. We also may suffer data security breaches and the unauthorized access to, misuse or acquisition of, personal data or other sensitive and confidential information as the result of intentional or inadvertent breaches by our employees or service providers. Any data security breach, whether external or internal in origin, could compromise our networks and systems, creating system disruptions or slowdowns and exploiting security vulnerabilities of our products. Any such breach can result in the information stored on our networks and systems being improperly accessed, publicly disclosed, lost, or stolen, which could subject us to liability to our customers, suppliers, business partners and others. We seek to detect and investigate such attempts and incidents and to prevent their recurrence where practicable through changes to our internal processes and tools, but in some cases preventive and remedial action might not be successful. In addition, despite the implementation of network security measures, our networks also may be vulnerable to computer viruses, break-ins, denial of service attacks, and similar other disruptions.
Disruptions to our information technology systems, due to outages, security breaches or other causes, can have severe consequences to our business, including financial loss and reputational damage.
Recent Political Developments in the United Kingdom . On June 23, 2016, a referendum was held on the U.K.'s membership in the European Union, the outcome of which was a vote in favor of leaving the European Union. The U.K.'s vote to leave the European Union creates an uncertain political and economic environment in the U.K. and potentially across other European Union member states, which may last for a number of months or years. As a result, there is a risk of instability for both the U.K. and the European Union, which could adversely affect our results, financial condition and prospects.
Further, it is uncertain what the effect of the referendum will be on immigration and employment rules, including the right of European Union nationals to remain in the U.K., or the ability of companies with operations in the U.K. to hire or retain European Union nationals (or conversely, the right of U.K. nationals to remain in European Union member states, or the ability of companies with operations in the European Union to hire or retain U.K. nationals).
The political and economic instability created by the U.K.'s vote to leave the European Union has caused and may continue to cause significant volatility in global financial markets and the value of the Pound Sterling currency or other currencies, including the Euro. Depending on the terms reached regarding any exit from the European Union, it is possible that there may be adverse practical and/or operational implications on our business. The outcome of the referendum has also created uncertainty with regard to the regulation of data protection in the U.K. In particular, it is unclear whether following the exit of the U.K. from the European Union, the U.K. will enact its own form of the pending European General Data Protection Regulation that will apply to the personal data of U.K. citizens. In addition, it is unclear how data transfers to and from the U.K. will be regulated.

COMPETITION
The markets for our technologies are highly competitive, and we face competitive threats and pricing pressure in our markets. Consumers may perceive the quality of the visual and audio experiences produced by some of our competitors’ technologies to be equivalent or superior to the sight and sound experiences produced by our technologies. Some of our current or future competitors may have significantly greater financial, technical, marketing, and other resources than we do, or may have more experience or advantages in the markets in which they compete. These competitors may also be able to offer integrated systems in markets for entertainment technologies on a royalty-free basis or at a lower price than our technologies, including audio, imaging, and other technologies, which could make competing technologies that we develop less attractive.
Pricing Pressures . The markets for the consumer entertainment products in which our technologies are incorporated are intensely competitive and price sensitive. We expect to face increased royalty pricing pressure for our technologies as we seek to drive the adoption of our technologies into online content and portable devices, such as tablets and smartphones. Retail prices for consumer entertainment products that include our sound technologies, such as DVD and Blu-ray players and home theater systems, have decreased significantly, and we expect prices to decrease for the foreseeable future. In response, OEMs have sought to reduce their product costs, which can result in downward pressure on the licensing fees we charge.

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Customers as Competitors . We face competitive risks in situations where our customers are also current or potential competitors. For example, Sony and Technicolor are significant licensee customers, but are also competitors with respect to some of our consumer, broadcast, and cinema technologies. Our customers may choose to use competing technologies they have developed or in which they have an interest rather than use our technologies. The existence of important customer relationships may influence which strategic opportunities we pursue, as we may forgo some opportunities in the interests of preserving a critical customer relationship.
Competition from Other Audio Formats and Imaging Solutions . We believe that the success we have had licensing our audio technologies to system licensees is due, in part, to the strength of our brand and the perception that our technologies provide a high quality solution for multichannel audio. However, both free and proprietary sound technologies are becoming increasingly prevalent, and we expect competitors to continue to enter this field with other offerings. Furthermore, to the extent that customers perceive our competitors’ products as providing the same advantages as our technologies at a lower or comparable price, there is a risk that these customers may treat sound encoding technologies as commodities, resulting in loss of status of our technologies, decline in their use, and significant pricing pressure. In addition, more recently we introduced our HDR imaging technology, Dolby Vision, and we expect to face intense competition from existing and more well-established competitors. Moreover, there can be no assurance that consumers will adopt Dolby Vision in the near future, or at all.
Competition for Employees . In order to be successful, we must attract, develop, and retain employees, including employees to work on our growth initiatives where our current employees may lack experience with the business models and markets we are pursuing. Competition for experienced employees in our markets can be intense. In order to attract and retain employees, we must provide a competitive compensation package, including cash and equity compensation. Our equity awards include stock options and restricted stock units. The future value of these awards is uncertain, and depends on our stock price performance over time. In order for our compensation packages to be viewed as competitive, prospective employees must perceive our equity awards to be a valuable benefit.

STRATEGIC ACTIVITIES
Importance of Relationships with Entertainment Industry . To be successful, we must maintain and grow our relationships with a broad range of entertainment industry participants, including:
•
Content creators, such as film directors, studios, music producers and mobile and online content producers;
•
Content distributors, such as film exhibitors, broadcasters, operators, and OTT video service providers and video game publishers; and
•
Device manufacturers.
Relationships have historically played an important role in the entertainment markets that we serve. For example, sales of our products and services are particularly dependent upon our relationships with major film studios and broadcasters, and licensing of our technologies is particularly dependent upon our relationships with system licensees and IC manufacturers. If we fail to maintain and strengthen these relationships, these entertainment industry participants may be less likely to purchase and use our technologies, products, and services, or create content incorporating our technologies.

Consequences of M&A Activity . We evaluate a wide array of possible strategic transactions, including acquisitions. We consider these types of transactions in connection with, among other things, our efforts to strengthen our audio and cinema businesses and expand beyond sound technologies. Although we cannot predict whether or not we will complete any such acquisitions or other transactions in the future, any of these transactions could be significant in relation to our market capitalization, financial condition, or results of operations. The process of integrating an acquired company, business, or technology may create unforeseen difficulties and expenditures. Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different geographies, cultures, and languages; currency risks; and risks associated with the economic, political, and regulatory environment in specific countries. Future acquisitions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses, and write-offs of goodwill. Future acquisitions may also require us to obtain additional equity or debt financing, which may not be available on favorable terms or at all. Also, the anticipated benefits of our acquisitions may not materialize.
We face various risks in integrating acquired businesses, including:  
•
Diversion of management time and focus from operating our business to acquisition integration

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challenges;
•
Cultural and logistical challenges associated with integrating employees from acquired businesses into our organization;
•
Retaining employees, suppliers and customers from businesses we acquire;
•
The need to implement or improve internal controls, procedures, and policies appropriate for a public company at businesses that prior to the acquisition may have lacked effective controls, procedures, and policies;
•
Possible write-offs or impairment charges resulting from acquisitions;
•
Unanticipated or unknown liabilities relating to acquired businesses; and
•
The need to integrate acquired businesses’ accounting, management information, manufacturing, human resources, and other administrative systems to permit effective management.

LEGAL AND REGULATORY COMPLIANCE
International Business and Compliance . We are dependent on international sales for a substantial amount of our total revenue. Approximately 68% and 73% of our revenue was derived outside of the U.S. in the fiscal quarter ended December 30, 2016 and January 1, 2016 , respectively. We are subject to a number of risks related to conducting business internationally, including: 
•
U.S. and foreign government trade restrictions, including those which may impose restrictions on importation of programming, technology, or components to or from the U.S.;
•
Compliance with applicable international laws and regulations, including antitrust laws, that may change unexpectedly, differ, or conflict with laws in other countries where we conduct business, or are otherwise not harmonized with one another;
•
Foreign government taxes, regulations, and permit requirements, including foreign taxes that we may not be able to offset against taxes imposed upon us in the U.S., and other laws limiting our ability to repatriate funds to the U.S.;
•
Changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers;
•
Difficulty in establishing, staffing, and managing foreign operations;
•
Adverse fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or other hedging activities we undertake;
•
Poor recognition of IP rights;
•
Difficulties in enforcing contractual rights;
•
Political or social instability, natural disasters, war or events of terrorism; and
•
The strength of international economies.
Certain foreign governments, particularly in China, have advanced arguments under their competition laws that exert downward pressure on royalties for IP. The regulatory enforcement activities in such jurisdictions can be unpredictable, in some cases because these jurisdictions have only recently implemented competition laws. For instance, in March 2014, the National Development and Reform Commission of China (“NDRC”) initiated a review of our business practices under the Chinese competition laws and requested information relating to our business practices in China. In early May 2015, the NDRC confirmed that the matters under review have been resolved on mutually agreeable terms. The implementation of these terms remains ongoing. Additionally, in December 2013, the Korean Fair Trade Commission (“KFTC”) initiated a review of the Company under Korean competition law. The KFTC requested information relating to our business practices in Korea and we cooperated during its review. As a result of this review, in July 2015, the KFTC issued an order and we agreed to modify certain terms in our standard licensing agreements going forward without admitting to any liability or wrongdoing.
In many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by U.S. regulations applicable to us such as the FCPA and U.S. export controls. Although we implement policies and procedures designed to ensure compliance with the FCPA and U.S. export controls, there can be no assurance that all of our employees, distributors, dealers, and agents will not take actions in violation of our policies or these regulations.
Costs of Environmental Laws and Regulation . Our operations use substances regulated under federal, state, local, and international laws governing the environment, including those governing the discharge of pollutants into the air and water, the management, disposal, and labeling of hazardous substances and wastes, and the cleanup of contaminated sites. In addition, future environmental laws and regulations have the potential to affect our operations, increase our costs, decrease our revenue, or change the way we design or manufacture our products. We face

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increasing complexity in our product design as we adjust to requirements relating to the materials composition of our products. For some products, substituting particular components containing regulated hazardous substances is more difficult or costly, and additional redesign efforts could result in production delays. We could incur costs, fines, and civil or criminal sanctions, third party property damage or personal injury claims, or could be required to incur substantial investigation or remediation costs, if we were to violate or become liable under environmental laws.
Conflict Minerals . The SEC has adopted rules regarding disclosure of the use of conflict minerals (commonly referred to as tantalum, tin, tungsten, and gold), which are sourced from the Democratic Republic of the Congo and surrounding countries. This requirement could affect the sourcing, availability and pricing of materials used in our products as well as the companies we use to manufacture our products. In circumstances where sources of conflict minerals from the Democratic Republic of the Congo or surrounding countries are not validated as conflict free, Dolby may take actions to change materials, designs or manufacturers to reduce the possibility that Dolby's contracts to manufacture products that contain conflict minerals finance or benefit local armed groups in the region. The implementation of these rules could adversely affect the sourcing, supply and pricing of materials used in our products. As there may be only a limited number of suppliers that can certify to us that they are offering “conflict free” conflict minerals, we cannot be sure that we will be able to obtain necessary conflict minerals from such suppliers in sufficient quantities or at competitive prices. These actions could also add engineering and other costs in connection with the manufacturing of our products.
We may not be able to sufficiently verify the origins for the minerals used in our products. Our reputation may suffer if we determine that our products contain conflict minerals that are not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products. In addition, some customers may require that all of our products are certified to be conflict free and if we cannot satisfy these customers, they may choose a competitor's products.
Tax Rates and Liabilities . Changes in the valuation of our deferred tax assets and liabilities, the geographic mix of our revenue, or changes in tax laws or their interpretation could affect our future effective tax rates. We file income tax returns in the U.S. and in several U.S. state and foreign jurisdictions, and must use judgment in determining our worldwide provision for income taxes. For example, the following could affect our income taxes:  
•
Earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates;
•
Changes in the valuation of our deferred tax assets and liabilities;
•
Transfer pricing adjustments;
•
Tax effects of nondeductible compensation;
•
Tax costs related to intercompany realignments;
•
Any obligations or decisions to repatriate earnings from abroad earlier than anticipated;
•
Changes in accounting principles; or
•
Changes in tax laws and regulations in the countries in which we operate, including U.S. legislative changes.

A number of international legislative and regulatory bodies have proposed draft legislation and begun investigations on the tax practices of multinational companies. One of these efforts has been led by the OECD, an international association of 34 countries including the United States, which has finalized recommendations to revise many corporate taxes, transfer pricing, and tax treaty provisions in member countries. In addition, the European Union and its European Commission has begun to review and opine on the appropriateness of agreements between various member countries and companies that might be in violation of European Union competition rules against unjustified state aid. In addition, the OECD, European Union and European Commission could conceivably make competing jurisdictional claims over the taxes owed on earnings of multinational companies in their respective countries or regions. While none of these bodies has identified Dolby as a potential target of its actions, it is possible that these efforts may in the future have an adverse impact on our income tax liabilities.
We are subject to the periodic examination of our income tax returns by tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes, but an adverse decision by tax authorities could significantly impact our financial results. Additionally, due to the evolving nature of tax rules combined with the large number of jurisdictions in which we operate, it is possible that our estimates of our tax liability and the realizability of our deferred tax assets could change in the future, which may result in additional tax liabilities.


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STOCK-RELATED ISSUES
Controlling Stockholder . At December 30, 2016 , the Dolby family and their affiliates owned 2,995,415 shares of our Class A common stock and 43,972,210 shares of our Class B common stock. As of December 30, 2016 , the Dolby family and their affiliates had voting power of 99.8% of our outstanding Class B common stock, which combined with their shares of our Class A common stock, represented 88.8% of the combined voting power of our outstanding Class A and Class B common stock. Under our certificate of incorporation, holders of Class B common stock are entitled to ten votes per share while holders of Class A common stock are entitled to one vote per share. Generally, shares of Class B common stock automatically convert into shares of Class A common stock upon transfer of such Class B common stock, other than transfers to certain specified persons and entities, including the spouse and descendants of Ray Dolby and the spouses and domestic partners of such descendants.
Because of this dual class structure, the Dolby family and their affiliates will, for the foreseeable future, have significant influence over our management and affairs, and will be able to control virtually all matters requiring stockholder approval, including the election of directors and significant corporate transactions such as mergers or other sales of our company or assets, even if they come to own considerably less than 50% of the total number of outstanding shares of our Class A and Class B common stock.
Moreover, these persons may take actions in their own interests that our other stockholders do not view as beneficial. Absent a transfer of Class B common stock that would trigger an automatic conversion as described above, there is no threshold or time deadline at which the shares of Class B common stock will automatically convert into shares of Class A common stock.
Insider Sales of Common Stock . If our large shareholders, officers, directors or employees sell, or indicate an intention to sell, substantial amounts of our Class A common stock in the public market, including shares of Class A common stock issuable upon conversion of shares of Class B common stock, the trading price of our Class A common stock could decline.
Stock Repurchase Program . Our stock repurchase program may reduce the public float of shares available for trading on a daily basis. Such purchases may be limited, suspended, or terminated at any time without prior notice. There can be no assurance that we will buy additional shares of our Class A common stock under our stock repurchase program or that any future repurchases will have a positive impact on our stock price or earnings per share. Important factors that could cause us to discontinue or decrease our share repurchases include, among others, unfavorable market conditions, the market price of our Class A common stock, the nature of other investment or strategic opportunities presented to us, the rate of dilution of our equity compensation programs, our ability to make appropriate, timely, and beneficial decisions as to when, how, and whether to purchase shares under the stock repurchase program, and the availability of funds necessary to continue purchasing stock. If we curtail our repurchase program, our stock price may be negatively affected.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Our Board of Directors announced a $250.0 million stock repurchase program on November 3, 2009 . The program, which has no expiration date, approved the repurchase of shares of our Class A common stock, $0.001 par value per share. The authorized maximum was subsequently increased by $300.0 million , $250.0 million , $100.0 million , and $200.0 million as announced on July 27, 2010 , August 4, 2011 , February 8, 2012 , and October 23, 2014 , respectively. Stock repurchases under this program may be made through open market transactions, negotiated purchases, or otherwise, at times and in such amounts as we consider appropriate. For additional details on the increase announced on January 25, 2017, refer to Note 13 “ Subsequent Events ” to our interim condensed consolidated financial statements.
The following table provides information regarding our share repurchases made under program during the first quarter of fiscal 2017 :
Repurchase Activity
Total Shares Repurchased
Average Price
Paid Per Share  (1)
Total Shares Purchased As Part Of Publicly Announced Programs
Remaining Authorized Share Repurchases (2)
October 1, 2016 - October 28, 2016
—
$—
—
$51.9 million
October 29, 2016 - November 25, 2016
425,500
47.04
425,500
$31.9 million
November 26, 2016 - December 30, 2016
105,965
46.95
105,965
$26.9 million
Total
531,465
 
531,465
 
(1)
Average price paid per share excludes commission costs.
(2)
Amounts represent the approximate dollar value of the maximum remaining number of shares that may yet be purchased under the stock repurchase program, and excludes commission costs.

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ITEM 6. EXHIBITS
Exhibit
Number
 
Description
 
Incorporated By Reference Herein
 
 
 
Form
 
File Number
 
Date
 
Provided Herewith
10.1*
 
Form of Global Stock Option Agreement under the 2005 Stock Plan
 
 
 
 
 
 
 
X
10.2*
 
Form of Executive Global Stock Option Agreement under the 2005 Stock Plan
 
 
 
 
 
 
 
X
10.3*
 
Form of Global Restricted Stock Unit Agreement under the 2005 Stock Plan
 
 
 
 
 
 
 
X
10.4*
 
Form of Executive Global Restricted Stock Unit Agreement under the 2005 Stock Plan
 
 
 
 
 
 
 
X
31.1
 
Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
 
 
 
 
 
 
 
X
31.2
 
Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
 
 
 
 
 
 
 
X
32.1+
 
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
 
 
 
 
 
 
 
X
101.INS
 
XBRL Instance Document
 
 
 
 
 
 
 
X
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
 
 
 
 
X
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
 
 
X
101.DEF
 
XBRL Extension Definition
 
 
 
 
 
 
 
X
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
 
 
 
X
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
 
 
X

*    Denotes a management contract or compensatory plan or arrangement.
+    Furnished herewith.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 1, 2017
 
DOLBY LABORATORIES, INC.
By:
/ S /   LEWIS CHEW
 
Lewis Chew
 
Executive Vice President and Chief Financial Officer
 
(Principal Financial and Accounting Officer)


56
Exhibit 10.1

DOLBY LABORATORIES, INC.
2005 STOCK PLAN
GLOBAL STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Dolby Laboratories, Inc. 2005 Stock Plan as amended from time to time (the “Plan”) shall have the same defined meanings in this Global Stock Option Agreement (the “Option Agreement”) , including any special terms and conditions for participants outside the U.S. in Appendix A.
I. NOTICE OF STOCK OPTION GRANT
Participant:    [insert name of record]
Participant ID:     [insert ID]
Participant has been granted an Option, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
Grant Number         [insert option number]    
Date of Grant         [insert option date]    
Vesting Commencement Date         [insert vest base date]    
Exercise Price per Share         [insert option price]    
Total Number of Shares Granted         [insert shares granted]    
Total Exercise Price         [insert total option price]    
Type of Option:          [insert long type]    
Term/Expiration Date:          [insert expiration date]    
Vesting Schedule :
[Subject to Participant continuing to be a Service Provider and other limitations set forth in the Plan, this Option Agreement and country-specific provisions for Non-U.S. Participants as set forth in Appendix A to this Option Agreement becomes exercisable with respect to the first 25% of the Shares subject to this Option on the first anniversary of the Date of Grant. Thereafter, this Option becomes exercisable monthly with respect to an additional 1/36 th of the remaining Shares subject to this Option. To the extent the foregoing schedule would result in the vesting of fractional Shares, Shares will be rounded down to the nearest whole Share.]


Termination Period :
This Option will be exercisable for three (3) months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death or Disability, in which case this Option will be exercisable for one (1) year after Participant ceases to be Service Provider. Notwithstanding the foregoing, in no event may this Option be exercised after the Term/Expiration Date as provided above.
II.      AGREEMENT
A.      Grant of Option .
The Administrator hereby grants to Participant named in the Notice of Stock Option Grant (the “Notice of Grant”) an Option to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), subject to the terms and conditions of the Plan, which is incorporated herein by reference, and this Option Agreement and country-specific provisions for Non-U.S. Participants as set forth in Appendix A to this Option Agreement (collectively, the “Option Agreement”). Subject to Section 20(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Option Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option, this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d), or otherwise does not qualify as an Incentive Stock Option, it shall be treated as a Nonstatutory Stock Option. Further, if for any reason this Option (or portion thereof) will not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a Nonstatutory Stock Option granted under the Plan. In no event will the Administrator, Company or a Relaed Entity of the Company, or any of their respective employees or directors, have any liability to Participant (or any other person) due to the failure of the Option to qualify for any reason as an Incentive Stock Option.
B.      Exercise of Option .
1.     Right to Exercise . This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the Plan and this Option Agreement.
2.     Method of Exercise . This Option is exercisable by (i) delivery of an exercise notice, in the form and manner determined by the Administrator, or (ii) following an electronic or other exercise procedure prescribed by the Administrator , which in either case shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. Participant shall provide payment of the aggregate Exercise Price as to all Exercised Shares at the time of exercise, together with any applicable Tax-Related Items (as defined in section II.F below) withholding arising in connection with such exercise. This Option shall be deemed to be exercised upon receipt by the Company of a fully executed exercise notice or completion of such exercise procedure, as the Administrator may determine in its sole discretion, accompanied by such aggregate Exercise Price and any applicable Tax-Related Items withholding.
No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes, the Exercised Shares shall be considered transferred to Participant on the date the Option is exercised with respect to such Exercised Shares.
C.      Method of Payment .
Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of Participant:
1.      to the extent permitted by Applicable Law, by cash, check or cash equivalent;
2.      consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan;
3.      for United States taxpayers only, other Shares which meet the conditions established by the Administrator to avoid adverse accounting consequences (as determined by the Administrator); or
4.      any other methods approved by the Administrator and permitted by Applicable Laws.
D.      Non-Transferability of Option .
This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Participant.
E.      Term of Option .
This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.
F.      Tax Obligations .
1.      Withholding Taxes . Regardless of any action the Company or the Related Entity that is Participant’s employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding items related to Participant’s participation in the Plan and legally applicable to Participant, or deemed by the Company or the Employer to be an appropriate charge to Participant even if technically due by the Company of the Employer (“Tax-Related Items”), Participant hereby acknowledges that the ultimate liability for all Tax-Related Items is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Participant further acknowledges that the Company and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option grant, including, but not limited to, the grant, vesting or exercise of the Option, the issuance of Shares pursuant to such exercise, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate Participant’s liability for Tax-Related Items or achieve a particular tax result. Further, if Participant is subject to tax in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to any relevant taxable or tax withholding event, Participant shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer or their respective agents, in their sole discretion and without any notice or authorization by Participant, to satisfy any applicable witholding obligations with regard to all Tax-Related Items by one or a combination of the following:
(1)    withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or

(2)     withholding from proceeds of the sale of Shares acquired upon exercise of the Option, either through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization without further consent); or
(3)    withholding in Shares to be issued upon exercise of the Option.
Depending upon the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent Shares. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes Participant is deemed to have been issued the full number of Exercised Shares, notwithstanding that a number of the Exercised Shares is held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of Participant’s participation in the Plan. No fractional Shares will be withheld or issued pursuant to the exercise of an Option and the issuance of Shares thereunder. Finally, Participant shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan or Participant’s purchase of Shares that cannot be satisfied by the means previously described. Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver Shares or the proceeds from the sale of Shares if Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items as described in this section F.
2.      Notice of Disqualifying Disposition of Incentive Stock Option Shares . If Participant is a United States taxpayer and the Option granted to Participant herein is an Incentive Stock Option, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the Incentive Stock Option on or before the later of (1) the date two years after the date the Option is granted, or (2) the date one year after the date of exercise, Participant will immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.
G.      Acknowledgements .
1.      Participant acknowledges receipt of a copy of the Plan (including any applicable appendixes or sub-plans thereunder) and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option Agreement subject to all of the terms and provisions thereof. Participant has reviewed the Plan (including any applicable appendixes or sub-plans thereunder) and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of this Option Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option Agreement. Participant further agrees to notify the Company upon any change in the residence address in the Notice of Grant.
2.      The Company (and not the Employer) is granting the Option. The Company will administer the Plan from outside Participant’s country of residence.
3.      The Plan is established voluntarily by the Company, is wholly discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time.
4.      The grant of the Option is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of Options, or benefits in lieu of options, even if Options have been granted in the past.
5.      All decisions with respect to future Option grants, if any, will be at the sole discretion of the Company.
6.      The Option and the Shares subject to the Option, and the income and value of same, are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and which are outside the scope of Participant’s employment or service contract, if any.
7.      The Option and the Shares subject to the Option, and the income and value of same, are not intended to replace any pension rights or compensation.
8.      Although provided by the Company, the Option and the Shares subject to the Option, and the income and value of same, are not part of Participant’s normal or expected salary or compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long service awards, pension, retirement or welfare benefits, or any other similar payments.
9.      The Option grant and Participant’s participation in the Plan will not be interpreted to form an employment contract or relationship with the Company or any Related Entity and the Company will not incur any liability of any kind to Participant as a result of any change or amendment, or any cancellation, of the Plan at any time.
10.      Unless otherwise agreed with the Company, the Option and the Shares subject to the Option, and the income and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director of a Related Entity.
11.      The future value of the underlying Shares is unknown and cannot be predicted with certainty.
12.      If the underlying Shares do not increase in value, the Option will have no value.
13.      If Participant exercises his or her Option and obtains Shares, the value of those Shares acquired upon exercise may increase or decrease in value, even below the Exercise Price.
14.      Participant has received the terms and conditions of this Option Agreement and any other related communications in English, and Participant consents to having received these documents in English. If Participant has received this Option Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
15.      Participant is voluntarily participating in the Plan.
16.      In the event of termination of Participant’s status as a Service Provider (whether or not in breach of any employment laws in the country where Participant resides, even if otherwise applicable to Participant’s employment benefits from the Employer, and/or whether later found to be invalid), Participant’s right to vest in the Option under the Plan, if any, will terminate effective as of the date that Participant is no longer actively employed and will not be extended by any notice period mandated under local law ( e.g. , active employment would not include a period of “garden leave” or similar period pursuant to local law). Further, in the event of termination of Participant’s status as a Service Provider (whether or not in breach of local labor laws), Participant’s right to exercise the Option after termination of status as a Service Provider will be measured by the date of termination of Participant’s active employment and will not be extended by any notice period mandated under local law. The Administrator shall have the exclusive discretion to determine when Participant is no longer actively employed for purposes of his or her Option grant (including whether Participant may still be considered actively employed while on an approved leave of absence).
17.      The Option and the benefits under the Plan, if any, will not automatically transfer to another company in the case of a merger or a Change in Control.
18.      If Participant is providing services outside the United States:
(a)      The Option and the Shares subject to the Option are not part of Participant’s normal or expected compensation or salary for any purpose.
(b)      Neither the Company, the Employer nor any other Related Entity of shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Participant pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise.
(c)      No claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from termination of Participant’s status as a Service Provider by the Company or the Employer (for any reason whatsoever and whether or not in breach of any employment laws in the country where Participant resides, even if otherwise applicable to Participant’s employment benefits from the Employer, and/or whether later found to be invalid).
H.      No Advice Regarding Grant .    
The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.
I.      DATA PRIVACY .
By entering into this Option Agreement, and as a condition of the grant of the Option, Participant explicitly and unambiguously consents to the collection, use, and transfer, in electronic or other form, Participant’s personal data as described in this Option Agreement and any other Option grant materials by and among, as applicable, the Employer, the Company and its Related Entities for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan
Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, name, home address and telephone number, e-mail address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any Shares or directorships held in the Company or any Related Entity, details of all Options or other entitlement to Shares awarded, canceled, exercised, vested, unvested, or outstanding in Participant’s favor (“Data”), for the purpose of implementing, managing and administering the Plan.
Participant further understands that Data will be transferred to UBS Financial Services, Inc. or such other stock plan service provider as may be selected by the Company in the future which is assisting the Company with the implementation, administration, and management of the Plan. Participant understands that data recipients may be located in Participant’s country of residence or elsewhere, such as the United States and that that country may have different data privacy laws and protections than Participant’s country. Participant understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting the local human resources representative. Participant authorizes the Company, UBS Financial Services, Inc. and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing Participant’s participation in the Plan to receive, possess, use, retain, and transfer Data in electronic or other form, for the purposes of implementing, administering, and managing Participant’s participation in the Plan, including any transfer of such Data, as may be required for the administration of the Plan and/or the subsequent holding of Shares on Participant’s behalf, to a broker or third party with whom the Shares acquired on exercise may be deposited.
Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing Participant’s local human resources representative, or if there is no local human resources representative, the human resources department of the Company. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service with the Employer will not be affected; the only consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant Options or other equity awards or administer or maintain such awards. Participant understands, however, that refusal or withdrawal of consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative, or if there is no local human resources representative, the human resources department of the Company.
J.      Entire Agreement; Governing Law .
The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to Participant’s interest except by means of a writing signed by the Company and Participant.
This Option Agreement is governed by the internal substantive laws, but not the choice of law rules, of California. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or the Option Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of San Francisco County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.
K.      NO GUARANTEE OF CONTINUED SERVICE .
PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUED ENGAGEMENT AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY OR ANY RELATED ENTITY EMPLOYING OR RETAINING PARTICIPANT (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH IN THE NOTICE OF GRANT DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR ANY RELATED ENTITY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
L.      Severability .
The provisions of this Option Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
M.      Electronic Delivery and Acceptance .
The Company may, in its sole discretion, decide to deliver any documents related to Participant’s current or future participation in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
By Participant’s electronic signature and the electronic signature of the Company’s representative, Participant and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Participant has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Option Agreement.
N.      Appendix .
Notwithstanding any provisions in this Option Agreement, the Option grant shall be subject to any special terms and conditions set forth in any Appendix to this Option Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable under Applicable Laws with regard to the issuance or sale of Shares or facilitate the administration of the Plan. The Appendix constitutes part of this Option Agreement.
O.      Imposition of Other Requirements .    
The Company reserves the right to impose other requirements on Participant ’s participation in the Plan, on the Option and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable under Applicable Laws with regard to the issuance or sale of Shares to facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
P.      Insider Trading/Market Abuse Restrictions .
Depending on Participant ’s country, Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, which may affect Participant ’s ability to, directly or indirectly, acquire, sell or attempt to sell Shares or rights to Shares ( e.g. , Options) under the Plan during such times as Participant is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdiction or Participant ’s country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under the Company’s Insider Trading Policy. Participant is responsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter.
Q.      Foreign Asset/Account Reporting
Participant acknowledges that there may be certain foreign asset and/or account reporting requirements which may affect Participant’s ability to acquire or hold Shares acquired under the Plan or cash received from participating in the Plan (including from any dividends paid on Shares acquired under the Plan) in a brokerage or bank account outside Participant’s country. Participant may be required to report such accounts, assets or transactions to the tax or other authorities in Participant’s country. Participant also may be required to repatriate sale proceeds or other funds received as a result of participation in the Plan to Participant’s country through a designated bank or broker within a certain time after receipt. Participant acknowledges that it is his or her responsibility to be compliant with such regulations, and is advised to consult his or her personal legal advisor for any details.
R.      Waiver .
Participant acknowledges that a waiver by the Company of breach of any provision of this Option Agreement shall not operate or be construed as a waiver of any other provision of this Option Agreement, or of any subsequent breach by Participant or any other participant.

You acknowledge and agree that this Option Agreement and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as a Service Provider for the vesting period, for any period, or at all, and shall not interfere with your right or the right of the Company or Related Entity that is your employer to terminate your relationship as a Service Provider at any time, with or without cause.
You hereby agree to accept as binding, conclusive, and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this Option Agreement.
By Participant’s electronic signature and the electronic signature of the Company’s representative, Participant and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Participant has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Option Agreement.
You must execute and deliver or electronically accept the terms set forth in this Option Agreement, in the manner specified by the Administrator prior to the date you first exercise any portion of the Option.


GLOBAL STOCK OPTION AGREEMENT

APPENDIX A FOR NON-U.S. PARTICIPANTS

DOLBY LABORATORIES, INC. 2005 STOCK PLAN


Special Terms and Conditions for Participants Outside the U.S.

This Appendix includes additional country-specific terms and conditions that apply to Participants resident in countries listed below. This Appendix is part of the Option Agreement and contains terms and conditions material to participation in the Plan. Unless otherwise provided below, capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan and the Option Agreement.
The information is based on the securities and other laws in effect in the respective countries as of October 2016. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information in this Appendix as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date when the Option is exercised or when Participant sells Shares acquired upon exercise of the Option.
In addition, the information contained herein is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of a particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to his or her situation.
Finally, if Participant is a citizen or resident of a country other than the one in which he or she is currently working or Participant transfers employment or residency after the Date of Grant, or if Participant is considered resident of another country for local law purposes, then the provisions contained herein may not be applicable to Participant. The Company shall, in its sole discretion, determine to what extent the terms and conditions included herein will apply under these circumstances.

Australia

Securities Law Notice .

If Participant exercises the Option and subsequently offers the Shares purchased upon exercise for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law and Participant should obtain legal advice regarding any applicable disclosure obligations prior to making any such offer.

Tax Information .

The Plan is a plan to which subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) applies (subject to conditions in the Act).

Exchange Control Information

Exchange control reporting is required for cash transactions exceeding AUD 10,000 and for international fund transfers. Participant understands if an Australian bank is assisting with the transaction, the bank will file the report on Participant’s behalf. Participant further understands if there is no Australian bank involved in the transfer, Participant will have to file the exchange control report on his or her own behalf.

Canada

Method of Payment .

Notwithstanding section 7(d) of the Plan, Participant acknowledges that due to regulatory requirements, Participant is prohibited from surrendering Shares that Participant owns and from attesting to the ownership of Shares to pay the Exercise Price and any Tax-Related Items under the Option.

Termination of Service Provider Relationship .

The following provision replaces section II.G.16 of the Option Agreement:

For purposes of the Option, Participant’s status as a Service Provider will be considered terminated, vesting will terminate and the period remaining to exercise the Option will be measured effective as of the date that is the earliest of: (i) the date Participant’s employment with the Company or Related Entity is terminated; (ii) the date Participant receives written notice of termination of employment or service from the Company or Related Entity; or (iii) the date Participant is no longer actively providing services to the Company or Related Entity and, in any case, will not be extended by any notice period mandated under local law ( e.g. , Participant’s period of employment or service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws or the terms of Participant’s employment or service agreement, if any). The Administrator shall have the exclusive discretion to determine when Participant is no longer actively employed or providing services for purposes of his or her Option grant (including whether Participant may still be considered actively providing services while on an approved leave of absence).

Sale of Shares .

Participant acknowledges that he or she is permitted to sell the Shares acquired under the Plan through UBS Financial Services, Inc. or such other broker as may be selected by the Company in the future , provided the sale of the Shares takes place outside of Canada through facilities of a stock exchange on which the Shares are listed. The Shares are currently listed on the New York Stock Exchange.

Consent to Receive Information in English for Quebec Service Providers .

Participant acknowledges that it is the express wish of the parties that this Option Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be written in English.
    
Le participant reconnaît que c’est son souhait exprès d’avoir exigé la rédaction en anglais de cette convention, ainsi que de tous documents exécutés, avis donnés et procédures judiciaries intentées, directement ou indirectement, relativement à ou suite à la présente convention.

Authorization to Release and Transfer Necessary Personal Information for Quebec Service Providers .

The following provision supplements section II.I of the Option Agreement:

Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. Participant further authorizes the Company, any Related Entity and the Administrator of the Plan to disclose and discuss the Plan with their advisors. Participant further authorizes the Company and any Related Entity to record such information and to keep such information in Participant’s employee file.

Foreign Asset/Account Reporting Notice .

Canadian residents may be required to report foreign property on form T1135 (Foreign Income Verification Statement) if the total cost of the foreign property exceeds C$100,000 at any time in the year. Foreign property includes Shares acquired under the Plan and may include the Option. The Option must be reported - generally at a nil cost - if the C$100,000 cost threshold is exceeded because of other foreign property Participant holds. The cost of the Shares generally is the adjusted cost base (“ACB”) of the Shares. The ACB ordinarily would equal the fair market value of the Shares at the time of acquisition, but if the Canadian resident owns other shares of the Company, this ACB may have to be leveraged with the ACB of the other Shares. The form T1135 generally must be filed by April 30 of the following year. Canadian residents should consult with a personal advisor to ensure compliance with the applicable reporting requirements.

China
Method of Payment .
Notwithstanding anything in section II.C of the Option Agreement to the contrary, Participant agrees to pay the Exercise Price and any Tax-Related Items solely by means of a cashless sell-all method of exercise. To complete a cashless sell-all exercise, Participant must provide irrevocable instructions to the broker to: (i) sell all of the Shares to be issued upon exercise; (ii) use the proceeds to pay the Exercise Price, brokerage fees and any applicable Tax-Related Items; and (iii) remit the balance in cash to Participant. Such delivery of the sales proceeds shall be subject to any obligation to satisfy Tax-Related Items. Participant acknowledges that UBS Financial Services, Inc. or such other broker as may be selected by the Company in the future is under no obligation to arrange for the sale of the Shares at any particular price. To the extent that regulatory requirements in China change, the Company reserves the right to permit Participant to exercise the Option and pay the Exercise Price with cash, check, cash equivalent or cashless sell-to-cover exercise.
Exchange Control Acknowledgment .

Participant understands and agrees that participation in the Plan is subject to the Company or the Employer obtaining any required approval from the China State Administration of Foreign Exchange (“SAFE”), as determined by the Company in its sole and absolute discretion. If the Company or the Employer is unable to obtain such approval, Participant may not be entitled to receive any benefit in connection with the Plan without any liability to the Company, the Employer or any Related Entity.

Participant understands and agrees that, pursuant to local exchange control requirements, Participant will be required to repatriate the cash proceeds from the immediate sale of Shares issued upon exercise to China. Participant understands that, under local law, such repatriation of the cash proceeds may need to be effected through a special exchange control account established by the Company or one of its Related Entities and Participant hereby consents and agrees that any proceeds from the sale of any Shares Participant acquires may be transferred to such special account prior to being delivered to Participant. If the proceeds from the sale of Participant’s Shares are converted to local currency, Participant acknowledges that the Company is under no obligation to secure any exchange conversion rate, and the Company may face delays in converting the proceeds to local currency due to exchange control restrictions in China. Participant agrees to bear the risk of any exchange conversion rate fluctuation between the time the Shares are purchased and the time the cash proceeds are distributed to Participant. Participant further agrees to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.

Foreign Asset/Account Reporting Notice .

Chinese residents are required to report to the SAFE all details of his or her foreign financial assets and liabilities, as well as details of any economic transactions conducted with non-Chinese residents, either directly or through financial institutions.

France

Consent to Receive Information in English .

By signing and returning this document providing for the terms and conditions of Participant’s Option grant, Participant confirms having read and understood the documents relating to this grant (the Plan and this Option Agreement) which were provided in English language. Participant accepts the terms of those documents accordingly.

En signant et renvoyant le présent document décrivant les termes et conditions de l’attribution d’options, le participant confirme ainsi avoir lu et compris les documents relatifs à cette attribution (le Plan U.S. et ce contrat d’options) qui ont été communiqués en langue anglaise. Le participant accepte les termes en connaissance de cause.

Notifications
Foreign Asset/Account Reporting Notice
French residents may hold Shares outside France, provided that they declare all foreign accounts, whether open, current or closed, on their annual income tax return. Failure to comply could trigger significant penalties. Further, French residents with foreign account balances exceeding €1,000,000 may have additional monthly reporting obligations.

Germany

Exchange Control Notice .

Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). In case of payments in connection with securities (including proceeds realized upon the sale of Shares or the receipt of dividends), the report must be made by the 5th day of the month following the month in which the payment is received. The report must be filed electronically. The form of report (“Allgemeine Meldeportal Statistik”) can be accessed via the Bundesbank’s website (www.bundesbank.de) and is available in both German and English.

Hong Kong

Securities Law Notice .
Warning: None of the documents related to the Plan have been reviewed by any regulatory authority in Hong Kong. If Participant is in any doubt about any of the contents of the Option Agreement, including this Appendix A, the Plan, or any other communication materials, Participant understands that he or she should obtain independent professional advice. The Option and Shares issued at exercise do not constitute a public offering of securities under Hong Kong law and are available only to employees of the Company and its Related Entities. The Option Agreement, including this Appendix, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong. The Option is intended only for the personal use of each eligible employee of the Employer, the Company or any Related Entity and may not be distributed to any other person.
Participant agrees, and Participant’s heirs and assigns agree, not to sell any Shares within six months of the Date of Grant.

Occupational Retirement Schemes Ordinance Alert .

The Company specifically intends that neither the Option nor the Plan will be an occupational retirement scheme for purposes of the Occupational Retirement Schemes Ordinance (“ORSO”).

India

Method of Payment .

Notwithstanding section 7(d) of the Plan or sections II.B and II.C of the Option Agreement, due to legal restrictions in India, Participant will not be permitted to pay the Exercise Price and any Tax-Related Items by a partial cashless exercise (also called a “sell to cover” exercise) such that a certain number of Shares subject to the exercised Options are sold immediately upon exercise to cover the aggregate Exercise Price, brokers’ fees and any Tax-Related Items and the remaining Shares are delivered to Participant. The Company reserves the right to provide Participant with this method of payment depending on the development of local law.

Exchange Control Notification .

If Participant remits funds out of India to exercise this Option, it is Participant’s responsibility to comply with applicable exchange control requirements of the Reserve Bank of India. Regardless of the method of exercise used to purchase the Shares, Participant understands that Participant must repatriate any proceeds from the sale of Shares acquired under the Plan or the receipt of any dividends to India within (90) days of the sale of Shares and within one-hundred eighty (180) days from the receipt of dividends. Participant must obtain a foreign inward remittance certificate (“FIRC”) from the bank where Participant deposits the funds and must maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Employer requests proof of repatriation.

Foreign Asset/Account Reporting Notice .

Indian residents are required to declare the following items in their annual tax return: (i) any foreign assets held by them (including Shares acquired under the Plan), and (ii) any foreign bank accounts for which they have signing authority. Indian residents should consult with their personal tax advisor to ensure that they are properly reporting foreign assets and bank accounts.

Japan
    
Exchange Control Notice .
Japanese residents acquiring Shares valued at more than ¥100,000,000 in a single transaction, must file a Securities Acquisition Report with the Ministry of Finance through the Bank of Japan within twenty (20) days of the acquisition of the Shares.

In addition, if Participant is a Japanese resident and pays more than ¥30,000,000 in a single transaction for the purchase of Shares upon the exercise of the Option, Participant must file a Payment Report with the Ministry of Finance through the Bank of Japan by the 20th day of the month following the month in which the payment was made. The precise reporting requirements vary depending on whether or not the relevant payment is made through a bank in Japan.

A Payment Report is required independently from a Securities Acquisition Report. Therefore, if the total amount that Participant pays upon a one-time transaction for exercising the Option and purchasing Shares exceeds ¥100,000,000, then Participant must file both a Payment Report and a Securities Acquisition Report.
Foreign Asset/Account Reporting Notice .
Japanese residents are required to report details of any assets held outside of Japan as of December 31, including Shares acquired under the Plan, to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15 each year. Japanese residents are responsible for complying with this reporting obligation.

Korea
Exchange Control Notice .
Exchange control laws require Korean residents who realize US$500,000 or more from the sale of Shares or the receipt of dividends paid on such shares in a single transaction to repatriate the proceeds from such sale to Korea within 36 months of receipt.
If Participant remits funds out of Korea to pay the Exercise Price, the remittance of funds must be confirmed by a foreign exchange bank in Korea. This confirmation is not necessary if Participant pays the Exercise Price through an arrangement with a broker approved by the Company whereby payment of the Exercise Price is accomplished with the proceeds of the sale of Shares, because in this case there is no remittance of funds out of Korea.

Foreign Asset/Account Reporting Notice .
Korean residents must declare all foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authority and file a report with respect to such accounts if the value of such accounts exceeds KRW 1 billion (or an equivalent amount in foreign currency). Korea residents should consult with their personal tax advisor for additional information about this reporting obligation.
Netherlands

No special provisions.

Poland

Exchange Control Notice .
If Participant maintains bank or brokerage accounts holding cash and foreign securities (including Shares) outside of Poland, Participant will be required to report information to the National Bank of Poland on transactions and balances in such accounts if the value of such cash and securities exceeds PLN 7 million. If required, such reports must be filed on special forms available on the website of the National Bank of Poland. Participant should consult with his or her personal legal advisor to determine whether he or she will be required to submit reports to the National Bank of Poland.
Further, Polish residents transferring funds in excess of €15,000 into or out of Poland must be do so through a bank account in Poland. In such case, the resident is required to store all documents connected with any foreign exchange transactions engaged in for a period of five years, as measured from the end of the year in which such transaction occurred.

Singapore

Securities Law Notice .
The Options are being granted pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. Participant should note that such Option grant is subject to section 257 of the SFA and Participant will not be able to make any subsequent sale in Singapore, or any offer of such subsequent sale of the Shares in Singapore, or any offer of the Shares underlying the Options unless such sale or offer in Singapore is made (a) after six months of the Date of Grant, or (b) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.

Chief Executive Officer and Director Reporting Notice .

If Participant is the Chief Executive Officer (“CEO”), director, associate director or shadow director of a Singapore Related Entity of the Company, as the terms are used in the Singapore Companies Act (the “SCA”), Participant agrees to comply with notification requirements under the SCA. Among these requirements is an obligation to notify the Singapore Related Entity in writing when Participant receives an interest (e.g., Options, Shares) in the Company or any related companies (including when Participant sells Shares acquired through exercise of the Option). In addition, Participant must notify the Singapore Related Entity when Participant sells or receives Shares of the Company or any related company (including when Participant sells or receives Shares acquired under the Plan). These notifications must be made within two business days of acquiring or disposing of any interest in the Company or any related company. In addition, a notification must be made of Participant’s interests in the Company or any related company within two business days of becoming CEO or a director, associate director or shadow director.

Spain
No Entitlement for Claims or Compensation .
The following provisions supplement section II.G of the Option Agreement:
By accepting the Option, Participant consents to participation in the Plan and acknowledges that Participant has received a copy of the Plan document.
Participant understands and agrees that, as a condition of the grant of the Option, termination of Participant’s status as a Service Provider for any reason (including for the reasons listed below) prior to the vesting date will automatically result in the loss of the unvested Options that may have been granted to Participant. In particular, Participant understands and agrees that any unvested Options shall be forfeited without entitlement to the underlying Shares or to any amount as indemnification in the event of a termination of status as a Service Provider, including, but not limited to: resignation, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without cause ( i.e ., subject to a “despido improcedente”) , individual or collective layoff on objective grounds, whether adjudged to be with cause or adjudged or recognized to be without cause, material modification of the terms of employment under Article 41 of the Workers’ Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by the Employer, and under Article 10.3 of Royal Decree 1382/1985.

Participant understands that the Company has unilaterally, gratuitously and in its sole discretion decided to grant Options under the Plan to individuals who may be Employees, Directors or Consultants throughout the world. The decision is limited and entered into based upon the express assumption and condition that any Options will not economically or otherwise bind the Company or any Related Entity , including the Employer, on an ongoing basis, other than as expressly set forth in the Option Agreement. Consequently, Participant understands that the Options are granted on the assumption and condition that the Option shall not become part of any employment contract (whether with the Company or any Related Entity , including the Employer) and shall not be considered a mandatory benefit, salary for any purpose (including severance compensation) or any other right whatsoever. Furthermore, Participant understands and freely accepts that there is no guarantee that any benefit whatsoever shall arise from the grant of the Option, which is gratuitous and discretionary, since the future value of the Option and the underlying Shares is unknown and unpredictable. Participant also understands that the grant of the Option would not be made but for the assumptions and conditions set forth hereinabove; thus, Participant understands, acknowledges and freely accepts that, should any or all of the assumptions be mistaken or any of the conditions not be met for any reason, the Option and any right to the underlying Shares shall be null and void.

Securities Law Notice .

No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory in connection with the grant of the Option. The Option Agreement, the Appendix and the Plan have not been registered with the Comisión Nacional del Mercado de Valores (Spanish Securities Exchange Commission) and do not constitute a public offering prospectus.

Exchange Control Notice .

Spanish taxpayers must declare the acquisition, ownership and disposition of Shares in a foreign company (including Shares acquired under the Plan) to the Spanish Dirección General de Comercio e Inversiones (the “DGCI”), which is a department of the Ministry of Economy and Competitiveness. Generally, the declaration must be filed in January for Shares acquired or disposed of during the prior year and/or for Shares owned as of December 31 of the prior year; however, if the value of the Shares acquired under the Plan and/or the amount of the sale proceeds exceeds €1,502,530, the declaration must be filed within one month of the acquisition or disposition, as applicable.

In addition, Spanish taxpayers may be required to declare electronically to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including any Shares acquired under the Plan) and any transactions with non-Spanish residents (including any payments of Shares made by the Company) depending on the value of such accounts and instruments and the amount of the transactions during the relevant year as of December 31 of the relevant year. This reporting requirement will apply if the balances in such accounts together with the value of such instruments as of December 31, or the volume of transactions with non-Spanish residents during the prior or current year, exceed €1,000,000. Once the €1,000,000 threshold has been surpassed in either respect, a report is required on all foreign accounts, foreign instruments and transactions with non-Spanish residents, even if the relevant threshold has not been crossed for an individudal item. Generally, the report is required on an annual basis (by January 20 of each year); however, if the balances in Participant’s foreign accounts together with value of foreign instruments or the volume of transactions with non-Spanish residents exceed €100,000,000, more frequent reporting will be required.

Foreign Asset/Account Reporting Notice .

Spanish residents are required to report rights or assets deposited or held outside of Spain (including Shares acquired under the Plan or cash proceeds from the sale of such Shares) as of December 31 of each year, if the value of such rights or assets exceeds €50,000 per type of right or asset. After such rights and/or assets are initially reported, the reporting obligation will only apply for subsequent years if the value of any previously-reported rights or assets increases by more than €20,000. If reporting is required, the report must be filed on form 720 by March 31 following the end of the relevant year.
Sweden

No special provisions.

Taiwan

Securities Law Notice .

The offer of participation in the Plan is available only for employees of the Company. The offer of participation in the Plan is not a public offer of securities by a Taiwanese company.

Data Privacy Acknowledgement .

Participant hereby acknowledges that he or she has read and understood the terms regarding collection, processing and transfer of Data contained in section II.I of the Option Agreement and by participating in the Plan, Participant agrees to such terms. In this regard, upon request of the Company or the Employer, Participant agrees to provide an executed data privacy consent form to the Employer or the Company (or any other agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in Participant’s country, either now or in the future. Participant understands he or she will not be able to participate in the Plan if Participant fails to execute any such consent or agreement.

Exchange Control Notice .

Taiwanese residents may acquire and remit foreign currency (including proceeds from the sale of Shares) into Taiwan up to US$5,000,000 per year. If the transaction amount is TWD$500,000 or more in a single transaction, residents must submit a Foreign Exchange Transaction Form and also provide supporting documentation to the satisfaction of the remitting bank. If the transaction amount is US$500,000 or more, Taiwanese residents may be required to provide additional supporting documentation to the satisfaction of the remitting bank. Taiwanese residents should consult their personal legal advisor to ensure compliance with applicable exchange control laws in Taiwan.

United Arab Emirates (“UAE”)

Securities Law Notice .

The offer of participation in the Plan is available only for select employees of the Company and its affiliates and is in the nature of providing employee incentives in the UAE. This Option Agreement, the Appendix, the Plan and other incidental communication materials are intended for distribution only to Service Providers for the purposes of an employee compensation or reward scheme, and must not be delivered to, or relied on, by any other person.

The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any documents in connection with the Option or this Option Agreement. Further, neither the Ministry of Economy nor the Dubai Department of Economic Development have approved this Option Agreement nor taken steps to verify the information set out in it, and have no responsibility for it.

The securities to which this Option Agreement relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities.

Residents of the UAE who do not understand or have questions regarding this Option Agreement, the Appendix or the Plan should consult an authorized financial adviser.

United Kingdom

Joint Election .

As a condition of the purchase of Shares under the Plan, Participant agrees to accept any liability for secondary Class 1 NICs (“Employer NICs”) which may be payable by the Company or the Employer with respect to the purchase of the Shares or otherwise payable in connection with the Option and the right to acquire Shares. Without prejudice to the foregoing, Participant agrees to execute a joint election with the Company and/or the Employer (the “Election”), the form of such Election being formally approved by HM Revenue and Customs (“HMRC”), and any other consent or elections required to accomplish the transfer of the Employer NICs to Participant. Participant further agrees to execute such other joint elections as may be required between Participant and any successor to the Company and/or the Employer. Participant agrees to enter into an Election prior to the exercise of any Options. Participant further agrees that the Company and/or the Employer may collect the Employer NICs by any of the means set forth in Section II.F of the Option Agreement.

Tax Withholding Obligations .

The following supplements section II.F of the Option Agreement:

Participant shall pay to the Company or the Employer any amount of income tax that the Company or the Employer may be required to account to HMRC with respect to the event giving rise to the income tax (the “Taxable Event”) that cannot be satisfied by the means described in Section II.F of the Option Agreement. If payment or withholding of the income tax (including Employer NICs) due is not made within ninety (90) days of the end of the U.K. tax year (April 6 - April 5) in which the Taxable Event occurs or such other period as required under U.K. law (the “Due Date”), Participant agrees that the amount of any uncollected income tax shall constitute a loan owed by Participant to the Employer, effective on the Due Date. Participant agrees that the loan will bear interest at the then-current HMRC Official Rate, it will be immediately due and repayable, and the Company or the Employer may recover it at any time thereafter by any of the means referred to in the Option Agreement. If Participant fails to comply with his or her obligations in connection with the income tax as described in this section, the Company may refuse to deliver the Shares acquired under the Plan.

Notwithstanding the foregoing, if Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), Participant shall not be eligible for a loan from the Company to cover Tax-Related Items. In the event that Participant is a director or executive officer and Tax-Related Items are not collected from or paid by Participant by the Due Date, the amount of any uncollected Tax-Related Items may constitute a benefit to Participant on which additional income tax and National Insurance Contributions may be payable. Participant will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime, and for reimbursing the Company or the Employer (as appropriate) for the value of any employee National Insurance Contributions due on this additional benefit which the Company or the Employer may recover from Participant any time thereafter by any of the means referred to in the Option Agreement.



1

 
Exhibit 10.2

DOLBY LABORATORIES, INC.
2005 STOCK PLAN
EXECUTIVE GLOBAL STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Dolby Laboratories, Inc. 2005 Stock Plan as amended from time to time (the “Plan”) shall have the same defined meanings in this Global Stock Option Agreement (the “Option Agreement”) , including any special terms and conditions for participants outside the U.S. in Appendix A.
I. NOTICE OF STOCK OPTION GRANT
Participant:    [insert name of record]
Participant ID:     [insert ID]
Participant has been granted an Option, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
Grant Number         [insert option number]    
Date of Grant         [insert option date]    
Vesting Commencement Date         [insert vest base date]    
Exercise Price per Share         [insert option price]    
Total Number of Shares Granted         [insert shares granted]    
Total Exercise Price         [insert total option price]    
Type of Option:          [insert long type]    
Term/Expiration Date:          [insert expiration date]    
Vesting Schedule :
[Subject to Participant continuing to be a Service Provider and other limitations set forth in the Plan, this Option Agreement and country-specific provisions for Non-U.S. Participants as set forth in Appendix A to this Option Agreement becomes exercisable with respect to the first 25% of the Shares subject to this Option on the first anniversary of the Date of Grant. Thereafter, this Option becomes exercisable monthly with respect to an additional 1/36 th of the remaining Shares subject to this Option. To the extent the foregoing schedule would result in the vesting of fractional Shares, Shares will be rounded down to the nearest whole Share.]

Termination Period :
This Option will be exercisable for three (3) months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death or Disability, in which case this Option will be exercisable for one (1) year after Participant ceases to be Service Provider. Notwithstanding the foregoing, in no event may this Option be exercised after the Term/Expiration Date as provided above.
II.      AGREEMENT
A.      Grant of Option .
The Administrator hereby grants to Participant named in the Notice of Stock Option Grant (the “Notice of Grant”) an Option to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), subject to the terms and conditions of the Plan, which is incorporated herein by reference, and this Option Agreement and country-specific provisions for Non-U.S. Participants as set forth in Appendix A to this Option Agreement (collectively, the “Option Agreement”). Subject to Section 20(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Option Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option, this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d), or otherwise does not qualify as an Incentive Stock Option, it shall be treated as a Nonstatutory Stock Option. Further, if for any reason this Option (or portion thereof) will not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a Nonstatutory Stock Option granted under the Plan. In no event will the Administrator, Company or a Relaed Entity of the Company, or any of their respective employees or directors, have any liability to Participant (or any other person) due to the failure of the Option to qualify for any reason as an Incentive Stock Option.
B.      Exercise of Option .
1.     Right to Exercise . This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the Plan and this Option Agreement.
2.     Method of Exercise . This Option is exercisable by (i) delivery of an exercise notice, in the form and manner determined by the Administrator, or (ii) following an electronic or other exercise procedure prescribed by the Administrator , which in either case shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. Participant shall provide payment of the aggregate Exercise Price as to all Exercised Shares at the time of exercise, together with any applicable Tax-Related Items (as defined in section II.F below) withholding arising in connection with such exercise. This Option shall be deemed to be exercised upon receipt by the Company of a fully executed exercise notice or completion of such exercise procedure, as the Administrator may determine in its sole discretion, accompanied by such aggregate Exercise Price and any applicable Tax-Related Items withholding.
No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes, the Exercised Shares shall be considered transferred to Participant on the date the Option is exercised with respect to such Exercised Shares.
C.      Method of Payment .
Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of Participant:
1.      to the extent permitted by Applicable Law, by cash, check or cash equivalent;
2.      consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan;
3.      for United States taxpayers only, other Shares which meet the conditions established by the Administrator to avoid adverse accounting consequences (as determined by the Administrator); or
4.      any other methods approved by the Administrator and permitted by Applicable Laws.
D.      Transferability of Option .

An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom the Incentive Stock Option is granted only by such person. A Nonstatutory Stock Option shall not be transferable in any manner (including without limitation, sale, alienation, anticipation, pledge, encumbrance, or assignment) other than, (i) by will or by the laws of descent and distribution, (ii) by written designation of a beneficiary, in a form acceptable to the Company, with such designation taking effect upon the death of the Participant, (iii) by delivering written notice to the Company, in a form acceptable to the Company (including such representations, warranties and indemnifications as the Company shall require the Participant to make to protect the Company’s interests and ensure that this Nonstatutory Stock Option has been transferred under the circumstances approved by the Company), by gift to a Participant’s spouse, former spouse, children, stepchildren, grandchildren, parent, stepparent, grandparent, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, persons having one of the foregoing types of relationship with the Participant due to adoption, any person sharing the Participant’s household (other than a tenant or employee), a foundation in which these persons or the Participant control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty percent of the voting interests. A transfer to an entity in which more than fifty percent of the voting interests are owned by these persons (or the Participant) in exchange for an interest in that entity is specifically included as a permissible type of transfer. In addition, a transfer to a trust created solely for the benefit (i.e., the Participant and/or any or all of the foregoing persons hold more than 50 percent of the beneficial interest in the trust) of the Participant and/or any or all of the foregoing persons is also a permissible transferee, or (iv) such other transferees as may be authorized by the Board in its sole and absolute discretion. During the Participant’s life this Nonstatutory Stock Option is exercisable only by the Participant or a transferee satisfying the above conditions. Except in the event of the Participant’s death, upon transfer of a Nonstatutory Stock Option to any or all of the foregoing persons, the Participant is liable for any and all taxes due upon exercise of those transferred Nonstatutory Stock Options. At no time will a transferee who is considered an affiliate under Rule 144(a)(1) be able to sell any or all such Stock without complying with Rule 144. The right of a transferee to exercise the transferred portion of this Nonstatutory Stock Option shall terminate in accordance with the Participant’s right of exercise under this Nonstatutory Stock Option and is further subject to such representations, warranties and indemnifications from the transferee that the Company requires the transferee to make to protect the Company's interests and ensure that this Nonstatutory Stock Option has been transferred under the circumstances approved by the Company. Once a portion of a Nonstatutory Stock Option is transferred, no further transfer may be made of that portion of the Nonstatutory Stock Option.
E.      Term of Option .
This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.
F.      Tax Obligations .
1.      Withholding Taxes . Regardless of any action the Company or the Related Entity that is Participant’s employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding items related to Participant’s participation in the Plan and legally applicable to Participant, or deemed by the Company or the Employer to be an appropriate charge to Participant even if technically due by the Company of the Employer (“Tax-Related Items”), Participant hereby acknowledges that the ultimate liability for all Tax-Related Items is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Participant further acknowledges that the Company and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option grant, including, but not limited to, the grant, vesting or exercise of the Option, the issuance of Shares pursuant to such exercise, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate Participant’s liability for Tax-Related Items or achieve a particular tax result. Further, if Participant is subject to tax in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to any relevant taxable or tax withholding event, Participant shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer or their respective agents, in their sole discretion and without any notice or authorization by Participant, to satisfy any applicable witholding obligations with regard to all Tax-Related Items by one or a combination of the following:
(1)    withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or

(2)     withholding from proceeds of the sale of Shares acquired upon exercise of the Option, either through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization without further consent); or
(3)    withholding in Shares to be issued upon exercise of the Option.
Depending upon the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent Shares. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes Participant is deemed to have been issued the full number of Exercised Shares, notwithstanding that a number of the Exercised Shares is held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of Participant’s participation in the Plan. No fractional Shares will be withheld or issued pursuant to the exercise of an Option and the issuance of Shares thereunder. Finally, Participant shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan or Participant’s purchase of Shares that cannot be satisfied by the means previously described. Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver Shares or the proceeds from the sale of Shares if Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items as described in this section F.
2.      Notice of Disqualifying Disposition of Incentive Stock Option Shares . If Participant is a United States taxpayer and the Option granted to Participant herein is an Incentive Stock Option, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the Incentive Stock Option on or before the later of (1) the date two years after the date the Option is granted, or (2) the date one year after the date of exercise, Participant will immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.
G.      Acknowledgements .
1.      Participant acknowledges receipt of a copy of the Plan (including any applicable appendixes or sub-plans thereunder) and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option Agreement subject to all of the terms and provisions thereof. Participant has reviewed the Plan (including any applicable appendixes or sub-plans thereunder) and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of this Option Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option Agreement. Participant further agrees to notify the Company upon any change in the residence address in the Notice of Grant.
2.      The Company (and not the Employer) is granting the Option. The Company will administer the Plan from outside Participant’s country of residence.
3.      The Plan is established voluntarily by the Company, is wholly discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time.
4.      The grant of the Option is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of Options, or benefits in lieu of options, even if Options have been granted in the past.
5.      All decisions with respect to future Option grants, if any, will be at the sole discretion of the Company.
6.      The Option and the Shares subject to the Option, and the income and value of same, are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and which are outside the scope of Participant’s employment or service contract, if any.
7.      The Option and the Shares subject to the Option, and the income and value of same, are not intended to replace any pension rights or compensation.
8.      Although provided by the Company, the Option and the Shares subject to the Option, and the income and value of same, are not part of Participant’s normal or expected salary or compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long service awards, pension, retirement or welfare benefits, or any other similar payments.
9.      The Option grant and Participant’s participation in the Plan will not be interpreted to form an employment contract or relationship with the Company or any Related Entity and the Company will not incur any liability of any kind to Participant as a result of any change or amendment, or any cancellation, of the Plan at any time.
10.      Unless otherwise agreed with the Company, the Option and the Shares subject to the Option, and the income and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director of a Related Entity.
11.      The future value of the underlying Shares is unknown and cannot be predicted with certainty.
12.      If the underlying Shares do not increase in value, the Option will have no value.
13.      If Participant exercises his or her Option and obtains Shares, the value of those Shares acquired upon exercise may increase or decrease in value, even below the Exercise Price.
14.      Participant has received the terms and conditions of this Option Agreement and any other related communications in English, and Participant consents to having received these documents in English. If Participant has received this Option Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
15.      Participant is voluntarily participating in the Plan.
16.      In the event of termination of Participant’s status as a Service Provider (whether or not in breach of any employment laws in the country where Participant resides, even if otherwise applicable to Participant’s employment benefits from the Employer, and/or whether later found to be invalid), Participant’s right to vest in the Option under the Plan, if any, will terminate effective as of the date that Participant is no longer actively employed and will not be extended by any notice period mandated under local law ( e.g. , active employment would not include a period of “garden leave” or similar period pursuant to local law). Further, in the event of termination of Participant’s status as a Service Provider (whether or not in breach of local labor laws), Participant’s right to exercise the Option after termination of status as a Service Provider will be measured by the date of termination of Participant’s active employment and will not be extended by any notice period mandated under local law. The Administrator shall have the exclusive discretion to determine when Participant is no longer actively employed for purposes of his or her Option grant (including whether Participant may still be considered actively employed while on an approved leave of absence).
17.      The Option and the benefits under the Plan, if any, will not automatically transfer to another company in the case of a merger or a Change in Control.
18.      If Participant is providing services outside the United States:
(a)      The Option and the Shares subject to the Option are not part of Participant’s normal or expected compensation or salary for any purpose.
(b)      Neither the Company, the Employer nor any other Related Entity of shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Participant pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise.
(c)      No claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from termination of Participant’s status as a Service Provider by the Company or the Employer (for any reason whatsoever and whether or not in breach of any employment laws in the country where Participant resides, even if otherwise applicable to Participant’s employment benefits from the Employer, and/or whether later found to be invalid).
H.      No Advice Regarding Grant .    
The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.
I.      DATA PRIVACY .
By entering into this Option Agreement, and as a condition of the grant of the Option, Participant explicitly and unambiguously consents to the collection, use, and transfer, in electronic or other form, Participant’s personal data as described in this Option Agreement and any other Option grant materials by and among, as applicable, the Employer, the Company and its Related Entities for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan
Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, name, home address and telephone number, e-mail address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any Shares or directorships held in the Company or any Related Entity, details of all Options or other entitlement to Shares awarded, canceled, exercised, vested, unvested, or outstanding in Participant’s favor (“Data”), for the purpose of implementing, managing and administering the Plan.
Participant further understands that Data will be transferred to UBS Financial Services, Inc. or such other stock plan service provider as may be selected by the Company in the future which is assisting the Company with the implementation, administration, and management of the Plan. Participant understands that data recipients may be located in Participant’s country of residence or elsewhere, such as the United States and that that country may have different data privacy laws and protections than Participant’s country. Participant understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting the local human resources representative. Participant authorizes the Company, UBS Financial Services, Inc. and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing Participant’s participation in the Plan to receive, possess, use, retain, and transfer Data in electronic or other form, for the purposes of implementing, administering, and managing Participant’s participation in the Plan, including any transfer of such Data, as may be required for the administration of the Plan and/or the subsequent holding of Shares on Participant’s behalf, to a broker or third party with whom the Shares acquired on exercise may be deposited.
Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing Participant’s local human resources representative, or if there is no local human resources representative, the human resources department of the Company. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service with the Employer will not be affected; the only consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant Options or other equity awards or administer or maintain such awards. Participant understands, however, that refusal or withdrawal of consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative, or if there is no local human resources representative, the human resources department of the Company.
J.      Entire Agreement; Governing Law .
The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to Participant’s interest except by means of a writing signed by the Company and Participant.
This Option Agreement is governed by the internal substantive laws, but not the choice of law rules, of California. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or the Option Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of San Francisco County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.
K.      NO GUARANTEE OF CONTINUED SERVICE .
PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUED ENGAGEMENT AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY OR ANY RELATED ENTITY EMPLOYING OR RETAINING PARTICIPANT (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH IN THE NOTICE OF GRANT DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR ANY RELATED ENTITY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
L.      Severability .
The provisions of this Option Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
M.      Electronic Delivery and Acceptance .
The Company may, in its sole discretion, decide to deliver any documents related to Participant’s current or future participation in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
By Participant’s electronic signature and the electronic signature of the Company’s representative, Participant and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Participant has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Option Agreement.
N.      Appendix .
Notwithstanding any provisions in this Option Agreement, the Option grant shall be subject to any special terms and conditions set forth in any Appendix to this Option Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable under Applicable Laws with regard to the issuance or sale of Shares or facilitate the administration of the Plan. The Appendix constitutes part of this Option Agreement.
O.      Imposition of Other Requirements .    
The Company reserves the right to impose other requirements on Participant ’s participation in the Plan, on the Option and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable under Applicable Laws with regard to the issuance or sale of Shares to facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
P.      Insider Trading/Market Abuse Restrictions .
Depending on Participant ’s country, Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, which may affect Participant ’s ability to, directly or indirectly, acquire, sell or attempt to sell Shares or rights to Shares ( e.g. , Options) under the Plan during such times as Participant is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdiction or Participant ’s country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under the Company’s Insider Trading Policy. Participant is responsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter.
Q.      Foreign Asset/Account Reporting
Participant acknowledges that there may be certain foreign asset and/or account reporting requirements which may affect Participant’s ability to acquire or hold Shares acquired under the Plan or cash received from participating in the Plan (including from any dividends paid on Shares acquired under the Plan) in a brokerage or bank account outside Participant’s country. Participant may be required to report such accounts, assets or transactions to the tax or other authorities in Participant’s country. Participant also may be required to repatriate sale proceeds or other funds received as a result of participation in the Plan to Participant’s country through a designated bank or broker within a certain time after receipt. Participant acknowledges that it is his or her responsibility to be compliant with such regulations, and is advised to consult his or her personal legal advisor for any details.
R.      Waiver .
Participant acknowledges that a waiver by the Company of breach of any provision of this Option Agreement shall not operate or be construed as a waiver of any other provision of this Option Agreement, or of any subsequent breach by Participant or any other participant.
You acknowledge and agree that this Option Agreement and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as a Service Provider for the vesting period, for any period, or at all, and shall not interfere with your right or the right of the Company or Related Entity that is your employer to terminate your relationship as a Service Provider at any time, with or without cause.
You hereby agree to accept as binding, conclusive, and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this Option
By Participant’s signature and the signature of the Company’s representative below, Participant and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement, Participant has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Option Agreement.
You must execute and deliver or electronically accept the terms set forth in this Option Agreement, in the manner specified by the Administrator prior to the date you first exercise any portion of the Option.

PARTICIPANT                DOLBY LABORATORIES, INC.


                                          
Exec Name    By:    




GLOBAL STOCK OPTION AGREEMENT

APPENDIX A FOR NON-U.S. PARTICIPANTS

DOLBY LABORATORIES, INC. 2005 STOCK PLAN


Special Terms and Conditions for Participants Outside the U.S.

This Appendix includes additional country-specific terms and conditions that apply to Participants resident in countries listed below. This Appendix is part of the Option Agreement and contains terms and conditions material to participation in the Plan. Unless otherwise provided below, capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan and the Option Agreement.
The information is based on the securities and other laws in effect in the respective countries as of October 2016. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information in this Appendix as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date when the Option is exercised or when Participant sells Shares acquired upon exercise of the Option.
In addition, the information contained herein is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of a particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to his or her situation.
Finally, if Participant is a citizen or resident of a country other than the one in which he or she is currently working or Participant transfers employment or residency after the Date of Grant, or if Participant is considered resident of another country for local law purposes, then the provisions contained herein may not be applicable to Participant. The Company shall, in its sole discretion, determine to what extent the terms and conditions included herein will apply under these circumstances.

Australia

Securities Law Notice .

If Participant exercises the Option and subsequently offers the Shares purchased upon exercise for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law and Participant should obtain legal advice regarding any applicable disclosure obligations prior to making any such offer.

Tax Information .

The Plan is a plan to which subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) applies (subject to conditions in the Act).

Exchange Control Information

Exchange control reporting is required for cash transactions exceeding AUD 10,000 and for international fund transfers. Participant understands if an Australian bank is assisting with the transaction, the bank will file the report on Participant’s behalf. Participant further understands if there is no Australian bank involved in the transfer, Participant will have to file the exchange control report on his or her own behalf.

Canada

Method of Payment .

Notwithstanding section 7(d) of the Plan, Participant acknowledges that due to regulatory requirements, Participant is prohibited from surrendering Shares that Participant owns and from attesting to the ownership of Shares to pay the Exercise Price and any Tax-Related Items under the Option.

Termination of Service Provider Relationship .

The following provision replaces section II.G.16 of the Option Agreement:

For purposes of the Option, Participant’s status as a Service Provider will be considered terminated, vesting will terminate and the period remaining to exercise the Option will be measured effective as of the date that is the earliest of: (i) the date Participant’s employment with the Company or Related Entity is terminated; (ii) the date Participant receives written notice of termination of employment or service from the Company or Related Entity; or (iii) the date Participant is no longer actively providing services to the Company or Related Entity and, in any case, will not be extended by any notice period mandated under local law ( e.g. , Participant’s period of employment or service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws or the terms of Participant’s employment or service agreement, if any). The Administrator shall have the exclusive discretion to determine when Participant is no longer actively employed or providing services for purposes of his or her Option grant (including whether Participant may still be considered actively providing services while on an approved leave of absence).

Sale of Shares .

Participant acknowledges that he or she is permitted to sell the Shares acquired under the Plan through UBS Financial Services, Inc. or such other broker as may be selected by the Company in the future , provided the sale of the Shares takes place outside of Canada through facilities of a stock exchange on which the Shares are listed. The Shares are currently listed on the New York Stock Exchange.

Consent to Receive Information in English for Quebec Service Providers .

Participant acknowledges that it is the express wish of the parties that this Option Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be written in English.
    
Le participant reconnaît que c’est son souhait exprès d’avoir exigé la rédaction en anglais de cette convention, ainsi que de tous documents exécutés, avis donnés et procédures judiciaries intentées, directement ou indirectement, relativement à ou suite à la présente convention.

Authorization to Release and Transfer Necessary Personal Information for Quebec Service Providers .

The following provision supplements section II.I of the Option Agreement:

Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. Participant further authorizes the Company, any Related Entity and the Administrator of the Plan to disclose and discuss the Plan with their advisors. Participant further authorizes the Company and any Related Entity to record such information and to keep such information in Participant’s employee file.

Foreign Asset/Account Reporting Notice .

Canadian residents may be required to report foreign property on form T1135 (Foreign Income Verification Statement) if the total cost of the foreign property exceeds C$100,000 at any time in the year. Foreign property includes Shares acquired under the Plan and may include the Option. The Option must be reported - generally at a nil cost - if the C$100,000 cost threshold is exceeded because of other foreign property Participant holds. The cost of the Shares generally is the adjusted cost base (“ACB”) of the Shares. The ACB ordinarily would equal the fair market value of the Shares at the time of acquisition, but if the Canadian resident owns other shares of the Company, this ACB may have to be leveraged with the ACB of the other Shares. The form T1135 generally must be filed by April 30 of the following year. Canadian residents should consult with a personal advisor to ensure compliance with the applicable reporting requirements.

China
Method of Payment .
Notwithstanding anything in section II.C of the Option Agreement to the contrary, Participant agrees to pay the Exercise Price and any Tax-Related Items solely by means of a cashless sell-all method of exercise. To complete a cashless sell-all exercise, Participant must provide irrevocable instructions to the broker to: (i) sell all of the Shares to be issued upon exercise; (ii) use the proceeds to pay the Exercise Price, brokerage fees and any applicable Tax-Related Items; and (iii) remit the balance in cash to Participant. Such delivery of the sales proceeds shall be subject to any obligation to satisfy Tax-Related Items. Participant acknowledges that UBS Financial Services, Inc. or such other broker as may be selected by the Company in the future is under no obligation to arrange for the sale of the Shares at any particular price. To the extent that regulatory requirements in China change, the Company reserves the right to permit Participant to exercise the Option and pay the Exercise Price with cash, check, cash equivalent or cashless sell-to-cover exercise.
Exchange Control Acknowledgment .

Participant understands and agrees that participation in the Plan is subject to the Company or the Employer obtaining any required approval from the China State Administration of Foreign Exchange (“SAFE”), as determined by the Company in its sole and absolute discretion. If the Company or the Employer is unable to obtain such approval, Participant may not be entitled to receive any benefit in connection with the Plan without any liability to the Company, the Employer or any Related Entity.

Participant understands and agrees that, pursuant to local exchange control requirements, Participant will be required to repatriate the cash proceeds from the immediate sale of Shares issued upon exercise to China. Participant understands that, under local law, such repatriation of the cash proceeds may need to be effected through a special exchange control account established by the Company or one of its Related Entities and Participant hereby consents and agrees that any proceeds from the sale of any Shares Participant acquires may be transferred to such special account prior to being delivered to Participant. If the proceeds from the sale of Participant’s Shares are converted to local currency, Participant acknowledges that the Company is under no obligation to secure any exchange conversion rate, and the Company may face delays in converting the proceeds to local currency due to exchange control restrictions in China. Participant agrees to bear the risk of any exchange conversion rate fluctuation between the time the Shares are purchased and the time the cash proceeds are distributed to Participant. Participant further agrees to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.

Foreign Asset/Account Reporting Notice .

Chinese residents are required to report to the SAFE all details of his or her foreign financial assets and liabilities, as well as details of any economic transactions conducted with non-Chinese residents, either directly or through financial institutions.

France

Consent to Receive Information in English .

By signing and returning this document providing for the terms and conditions of Participant’s Option grant, Participant confirms having read and understood the documents relating to this grant (the Plan and this Option Agreement) which were provided in English language. Participant accepts the terms of those documents accordingly.

En signant et renvoyant le présent document décrivant les termes et conditions de l’attribution d’options, le participant confirme ainsi avoir lu et compris les documents relatifs à cette attribution (le Plan U.S. et ce contrat d’options) qui ont été communiqués en langue anglaise. Le participant accepte les termes en connaissance de cause.

Notifications
Foreign Asset/Account Reporting Notice
French residents may hold Shares outside France, provided that they declare all foreign accounts, whether open, current or closed, on their annual income tax return. Failure to comply could trigger significant penalties. Further, French residents with foreign account balances exceeding €1,000,000 may have additional monthly reporting obligations.

Germany

Exchange Control Notice .

Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). In case of payments in connection with securities (including proceeds realized upon the sale of Shares or the receipt of dividends), the report must be made by the 5th day of the month following the month in which the payment is received. The report must be filed electronically. The form of report (“Allgemeine Meldeportal Statistik”) can be accessed via the Bundesbank’s website (www.bundesbank.de) and is available in both German and English.

Hong Kong

Securities Law Notice .
Warning: None of the documents related to the Plan have been reviewed by any regulatory authority in Hong Kong. If Participant is in any doubt about any of the contents of the Option Agreement, including this Appendix A, the Plan, or any other communication materials, Participant understands that he or she should obtain independent professional advice. The Option and Shares issued at exercise do not constitute a public offering of securities under Hong Kong law and are available only to employees of the Company and its Related Entities. The Option Agreement, including this Appendix, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong. The Option is intended only for the personal use of each eligible employee of the Employer, the Company or any Related Entity and may not be distributed to any other person.
Participant agrees, and Participant’s heirs and assigns agree, not to sell any Shares within six months of the Date of Grant.

Occupational Retirement Schemes Ordinance Alert .

The Company specifically intends that neither the Option nor the Plan will be an occupational retirement scheme for purposes of the Occupational Retirement Schemes Ordinance (“ORSO”).

India

Method of Payment .

Notwithstanding section 7(d) of the Plan or sections II.B and II.C of the Option Agreement, due to legal restrictions in India, Participant will not be permitted to pay the Exercise Price and any Tax-Related Items by a partial cashless exercise (also called a “sell to cover” exercise) such that a certain number of Shares subject to the exercised Options are sold immediately upon exercise to cover the aggregate Exercise Price, brokers’ fees and any Tax-Related Items and the remaining Shares are delivered to Participant. The Company reserves the right to provide Participant with this method of payment depending on the development of local law.

Exchange Control Notification .

If Participant remits funds out of India to exercise this Option, it is Participant’s responsibility to comply with applicable exchange control requirements of the Reserve Bank of India. Regardless of the method of exercise used to purchase the Shares, Participant understands that Participant must repatriate any proceeds from the sale of Shares acquired under the Plan or the receipt of any dividends to India within (90) days of the sale of Shares and within one-hundred eighty (180) days from the receipt of dividends. Participant must obtain a foreign inward remittance certificate (“FIRC”) from the bank where Participant deposits the funds and must maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Employer requests proof of repatriation.

Foreign Asset/Account Reporting Notice .

Indian residents are required to declare the following items in their annual tax return: (i) any foreign assets held by them (including Shares acquired under the Plan), and (ii) any foreign bank accounts for which they have signing authority. Indian residents should consult with their personal tax advisor to ensure that they are properly reporting foreign assets and bank accounts.

Japan
    
Exchange Control Notice .
Japanese residents acquiring Shares valued at more than ¥100,000,000 in a single transaction, must file a Securities Acquisition Report with the Ministry of Finance through the Bank of Japan within twenty (20) days of the acquisition of the Shares.

In addition, if Participant is a Japanese resident and pays more than ¥30,000,000 in a single transaction for the purchase of Shares upon the exercise of the Option, Participant must file a Payment Report with the Ministry of Finance through the Bank of Japan by the 20th day of the month following the month in which the payment was made. The precise reporting requirements vary depending on whether or not the relevant payment is made through a bank in Japan.

A Payment Report is required independently from a Securities Acquisition Report. Therefore, if the total amount that Participant pays upon a one-time transaction for exercising the Option and purchasing Shares exceeds ¥100,000,000, then Participant must file both a Payment Report and a Securities Acquisition Report.
Foreign Asset/Account Reporting Notice .
Japanese residents are required to report details of any assets held outside of Japan as of December 31, including Shares acquired under the Plan, to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15 each year. Japanese residents are responsible for complying with this reporting obligation.

Korea
Exchange Control Notice .
Exchange control laws require Korean residents who realize US$500,000 or more from the sale of Shares or the receipt of dividends paid on such shares in a single transaction to repatriate the proceeds from such sale to Korea within 36 months of receipt.
If Participant remits funds out of Korea to pay the Exercise Price, the remittance of funds must be confirmed by a foreign exchange bank in Korea. This confirmation is not necessary if Participant pays the Exercise Price through an arrangement with a broker approved by the Company whereby payment of the Exercise Price is accomplished with the proceeds of the sale of Shares, because in this case there is no remittance of funds out of Korea.

Foreign Asset/Account Reporting Notice .
Korean residents must declare all foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authority and file a report with respect to such accounts if the value of such accounts exceeds KRW 1 billion (or an equivalent amount in foreign currency). Korea residents should consult with their personal tax advisor for additional information about this reporting obligation.
Netherlands

No special provisions.

Poland

Exchange Control Notice .
If Participant maintains bank or brokerage accounts holding cash and foreign securities (including Shares) outside of Poland, Participant will be required to report information to the National Bank of Poland on transactions and balances in such accounts if the value of such cash and securities exceeds PLN 7 million. If required, such reports must be filed on special forms available on the website of the National Bank of Poland. Participant should consult with his or her personal legal advisor to determine whether he or she will be required to submit reports to the National Bank of Poland.
Further, Polish residents transferring funds in excess of €15,000 into or out of Poland must be do so through a bank account in Poland. In such case, the resident is required to store all documents connected with any foreign exchange transactions engaged in for a period of five years, as measured from the end of the year in which such transaction occurred.

Singapore

Securities Law Notice .
The Options are being granted pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. Participant should note that such Option grant is subject to section 257 of the SFA and Participant will not be able to make any subsequent sale in Singapore, or any offer of such subsequent sale of the Shares in Singapore, or any offer of the Shares underlying the Options unless such sale or offer in Singapore is made (a) after six months of the Date of Grant, or (b) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.

Chief Executive Officer and Director Reporting Notice .

If Participant is the Chief Executive Officer (“CEO”), director, associate director or shadow director of a Singapore Related Entity of the Company, as the terms are used in the Singapore Companies Act (the “SCA”), Participant agrees to comply with notification requirements under the SCA. Among these requirements is an obligation to notify the Singapore Related Entity in writing when Participant receives an interest (e.g., Options, Shares) in the Company or any related companies (including when Participant sells Shares acquired through exercise of the Option). In addition, Participant must notify the Singapore Related Entity when Participant sells or receives Shares of the Company or any related company (including when Participant sells or receives Shares acquired under the Plan). These notifications must be made within two business days of acquiring or disposing of any interest in the Company or any related company. In addition, a notification must be made of Participant’s interests in the Company or any related company within two business days of becoming CEO or a director, associate director or shadow director.

Spain
No Entitlement for Claims or Compensation .
The following provisions supplement section II.G of the Option Agreement:
By accepting the Option, Participant consents to participation in the Plan and acknowledges that Participant has received a copy of the Plan document.
Participant understands and agrees that, as a condition of the grant of the Option, termination of Participant’s status as a Service Provider for any reason (including for the reasons listed below) prior to the vesting date will automatically result in the loss of the unvested Options that may have been granted to Participant. In particular, Participant understands and agrees that any unvested Options shall be forfeited without entitlement to the underlying Shares or to any amount as indemnification in the event of a termination of status as a Service Provider, including, but not limited to: resignation, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without cause ( i.e ., subject to a “despido improcedente”) , individual or collective layoff on objective grounds, whether adjudged to be with cause or adjudged or recognized to be without cause, material modification of the terms of employment under Article 41 of the Workers’ Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by the Employer, and under Article 10.3 of Royal Decree 1382/1985.

Participant understands that the Company has unilaterally, gratuitously and in its sole discretion decided to grant Options under the Plan to individuals who may be Employees, Directors or Consultants throughout the world. The decision is limited and entered into based upon the express assumption and condition that any Options will not economically or otherwise bind the Company or any Related Entity , including the Employer, on an ongoing basis, other than as expressly set forth in the Option Agreement. Consequently, Participant understands that the Options are granted on the assumption and condition that the Option shall not become part of any employment contract (whether with the Company or any Related Entity , including the Employer) and shall not be considered a mandatory benefit, salary for any purpose (including severance compensation) or any other right whatsoever. Furthermore, Participant understands and freely accepts that there is no guarantee that any benefit whatsoever shall arise from the grant of the Option, which is gratuitous and discretionary, since the future value of the Option and the underlying Shares is unknown and unpredictable. Participant also understands that the grant of the Option would not be made but for the assumptions and conditions set forth hereinabove; thus, Participant understands, acknowledges and freely accepts that, should any or all of the assumptions be mistaken or any of the conditions not be met for any reason, the Option and any right to the underlying Shares shall be null and void.

Securities Law Notice .

No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory in connection with the grant of the Option. The Option Agreement, the Appendix and the Plan have not been registered with the Comisión Nacional del Mercado de Valores (Spanish Securities Exchange Commission) and do not constitute a public offering prospectus.

Exchange Control Notice .

Spanish taxpayers must declare the acquisition, ownership and disposition of Shares in a foreign company (including Shares acquired under the Plan) to the Spanish Dirección General de Comercio e Inversiones (the “DGCI”), which is a department of the Ministry of Economy and Competitiveness. Generally, the declaration must be filed in January for Shares acquired or disposed of during the prior year and/or for Shares owned as of December 31 of the prior year; however, if the value of the Shares acquired under the Plan and/or the amount of the sale proceeds exceeds €1,502,530, the declaration must be filed within one month of the acquisition or disposition, as applicable.

In addition, Spanish taxpayers may be required to declare electronically to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including any Shares acquired under the Plan) and any transactions with non-Spanish residents (including any payments of Shares made by the Company) depending on the value of such accounts and instruments and the amount of the transactions during the relevant year as of December 31 of the relevant year. This reporting requirement will apply if the balances in such accounts together with the value of such instruments as of December 31, or the volume of transactions with non-Spanish residents during the prior or current year, exceed €1,000,000. Once the €1,000,000 threshold has been surpassed in either respect, a report is required on all foreign accounts, foreign instruments and transactions with non-Spanish residents, even if the relevant threshold has not been crossed for an individudal item. Generally, the report is required on an annual basis (by January 20 of each year); however, if the balances in Participant’s foreign accounts together with value of foreign instruments or the volume of transactions with non-Spanish residents exceed €100,000,000, more frequent reporting will be required.

Foreign Asset/Account Reporting Notice .

Spanish residents are required to report rights or assets deposited or held outside of Spain (including Shares acquired under the Plan or cash proceeds from the sale of such Shares) as of December 31 of each year, if the value of such rights or assets exceeds €50,000 per type of right or asset. After such rights and/or assets are initially reported, the reporting obligation will only apply for subsequent years if the value of any previously-reported rights or assets increases by more than €20,000. If reporting is required, the report must be filed on form 720 by March 31 following the end of the relevant year.
Sweden

No special provisions.

Taiwan

Securities Law Notice .

The offer of participation in the Plan is available only for employees of the Company. The offer of participation in the Plan is not a public offer of securities by a Taiwanese company.

Data Privacy Acknowledgement .

Participant hereby acknowledges that he or she has read and understood the terms regarding collection, processing and transfer of Data contained in section II.I of the Option Agreement and by participating in the Plan, Participant agrees to such terms. In this regard, upon request of the Company or the Employer, Participant agrees to provide an executed data privacy consent form to the Employer or the Company (or any other agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in Participant’s country, either now or in the future. Participant understands he or she will not be able to participate in the Plan if Participant fails to execute any such consent or agreement.

Exchange Control Notice .

Taiwanese residents may acquire and remit foreign currency (including proceeds from the sale of Shares) into Taiwan up to US$5,000,000 per year. If the transaction amount is TWD$500,000 or more in a single transaction, residents must submit a Foreign Exchange Transaction Form and also provide supporting documentation to the satisfaction of the remitting bank. If the transaction amount is US$500,000 or more, Taiwanese residents may be required to provide additional supporting documentation to the satisfaction of the remitting bank. Taiwanese residents should consult their personal legal advisor to ensure compliance with applicable exchange control laws in Taiwan.

United Arab Emirates (“UAE”)

Securities Law Notice .

The offer of participation in the Plan is available only for select employees of the Company and its affiliates and is in the nature of providing employee incentives in the UAE. This Option Agreement, the Appendix, the Plan and other incidental communication materials are intended for distribution only to Service Providers for the purposes of an employee compensation or reward scheme, and must not be delivered to, or relied on, by any other person.

The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any documents in connection with the Option or this Option Agreement. Further, neither the Ministry of Economy nor the Dubai Department of Economic Development have approved this Option Agreement nor taken steps to verify the information set out in it, and have no responsibility for it.

The securities to which this Option Agreement relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities.

Residents of the UAE who do not understand or have questions regarding this Option Agreement, the Appendix or the Plan should consult an authorized financial adviser.

United Kingdom

Joint Election .

As a condition of the purchase of Shares under the Plan, Participant agrees to accept any liability for secondary Class 1 NICs (“Employer NICs”) which may be payable by the Company or the Employer with respect to the purchase of the Shares or otherwise payable in connection with the Option and the right to acquire Shares. Without prejudice to the foregoing, Participant agrees to execute a joint election with the Company and/or the Employer (the “Election”), the form of such Election being formally approved by HM Revenue and Customs (“HMRC”), and any other consent or elections required to accomplish the transfer of the Employer NICs to Participant. Participant further agrees to execute such other joint elections as may be required between Participant and any successor to the Company and/or the Employer. Participant agrees to enter into an Election prior to the exercise of any Options. Participant further agrees that the Company and/or the Employer may collect the Employer NICs by any of the means set forth in Section II.F of the Option Agreement.

Tax Withholding Obligations .

The following supplements section II.F of the Option Agreement:

Participant shall pay to the Company or the Employer any amount of income tax that the Company or the Employer may be required to account to HMRC with respect to the event giving rise to the income tax (the “Taxable Event”) that cannot be satisfied by the means described in Section II.F of the Option Agreement. If payment or withholding of the income tax (including Employer NICs) due is not made within ninety (90) days of the end of the U.K. tax year (April 6 - April 5) in which the Taxable Event occurs or such other period as required under U.K. law (the “Due Date”), Participant agrees that the amount of any uncollected income tax shall constitute a loan owed by Participant to the Employer, effective on the Due Date. Participant agrees that the loan will bear interest at the then-current HMRC Official Rate, it will be immediately due and repayable, and the Company or the Employer may recover it at any time thereafter by any of the means referred to in the Option Agreement. If Participant fails to comply with his or her obligations in connection with the income tax as described in this section, the Company may refuse to deliver the Shares acquired under the Plan.

Notwithstanding the foregoing, if Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), Participant shall not be eligible for a loan from the Company to cover Tax-Related Items. In the event that Participant is a director or executive officer and Tax-Related Items are not collected from or paid by Participant by the Due Date, the amount of any uncollected Tax-Related Items may constitute a benefit to Participant on which additional income tax and National Insurance Contributions may be payable. Participant will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime, and for reimbursing the Company or the Employer (as appropriate) for the value of any employee National Insurance Contributions due on this additional benefit which the Company or the Employer may recover from Participant any time thereafter by any of the means referred to in the Option Agreement.



1

 
Exhibit 10.3

DOLBY LABORATORIES, INC.
2005 STOCK PLAN
NOTICE OF GRANT OF RESTRICTED STOCK UNITS


Unless otherwise defined herein, the terms defined in the Dolby Laboratories, Inc. 2005 Stock Plan, as amended from time to time (the “Plan”) shall have the same defined meanings in this Notice of Grant of Restricted Stock Units (the “Notice of Grant”) and the Global Restricted Stock Unit Agreement attached hereto as Exhibit A (collectively, the “Restricted Stock Unit Agreement” or the “Agreement”), including any special terms and conditions for participants outside the U.S. in the Appendix.
    
Participant: [_______________________]
You have been granted [_________] Restricted Stock Units (the “Award”). Each such Restricted Stock Unit is equivalent to one share of the Company’s Class A Common Stock for purposes of determining the number of shares subject to this award. None of the Restricted Stock Units will be issued (nor will you have the rights of a stockholder with respect to the underlying shares) until the vesting conditions described below are satisfied. Additional terms of this grant are as follows:

Date of Grant:         [___________________, ____]

Vesting Schedule:     
[Subject to Participant continuing to be a Service Provider and other limitations set forth in the Plan and the Global Restricted Stock Unit Agreement and country-specific provisions for Non-U.S. Participants as set forth in the Appendix to this Global Restricted Stock Unit Agreement, this Award will vest annually for four years at the rate of 25% per year on each anniversary of the Date of Grant. To the extent the amount vesting would result in the vesting of fractional Shares, Shares will be rounded down to the nearest whole Share.]
You acknowledge and agree that this Agreement and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as a Service Provider for the vesting period, for any period, or at all, and shall not interfere with your right or the right of the Company or the Related Entity that is your employer to terminate your relationship as a Service Provider at any time, with or without cause.
You hereby agree to accept as binding, conclusive, and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this Agreement.
By Participant’s electronic signature and the electronic signature of the Company’s representative, Participant and the Company agree that this Award is granted under and governed by the terms and conditions of the Plan and this Agreement. Participant has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of the Plan and Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Agreement.
You must execute and deliver or electronically accept the terms set forth in this Agreement, in the manner specified by the Administrator. The Administrator may, in its sole discretion, cancel the Award if you fail to execute and deliver or electronically accept this Agreement and related documents by the first scheduled vesting date.


EXHIBIT A
DOLBY LABORATORIES, INC.
2005 STOCK PLAN
GLOBAL RESTRICTED STOCK UNIT AGREEMENT
1. Grant . Dolby Laboratories, Inc. (the “Company”) hereby grants to the individual set forth in the Notice of Grant of Restricted Stock Units (the “Participant”) an award of Restricted Stock Units (“RSUs”) pursuant to Section 8 of the Dolby Laboratories, Inc. 2005 Stock Plan, as set forth in the Notice of Grant of Restricted Stock Units (the “Notice of Grant”) and subject to the terms and conditions in this Global Restricted Stock Unit Agreement, including any special terms and conditions for participants outside the U.S. in the attached Appendix (collectively, the “Agreement”), and the Dolby Laboratories, Inc. 2005 Stock Plan as may be amended from time to time (the “Plan”). Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement.
2. Company’s Obligation . Each RSU represents the right to receive a Share after satisfying the applicable vesting conditions set forth in the Notice of Grant. Unless and until the RSUs vest, Participant will have no right to receive Shares under such RSUs. Prior to actual distribution of any Shares pursuant to the vesting of any RSUs, such RSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.
3. Vesting Schedule . Subject to paragraph 4, and to relevant Plan provisions, the RSUs awarded by this Agreement will vest in Participant according to the vesting schedule specified in the Notice of Grant.
4. Forfeiture upon Termination of Service . Notwithstanding any contrary provision of this Agreement or the Notice of Grant, if Participant ceases to be a Service Provider, for any or no reason prior to vesting, the unvested RSUs awarded by this Agreement will thereupon be forfeited at no cost to the Company.
5. Payment after Vesting . Any RSUs that vest in accordance with this Agreement will be paid to Participant (or in the event of Participant’s death, to his or her estate) in Shares. Payment upon vesting will be subject to Participant (or his or her estate) satisfying the applicable Tax-Related Items (defined below) withholding obligations set forth in paragraph 11.
6. Payments after Death . Any distribution or delivery to be made to Participant under this Agreement will, if Participant is then deceased, be made to the administrator or executor of Participant’s estate. Any such administrator or executor must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.
7. Rights as Stockholder . Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until Shares (in certificated or uncertificated form in the Company’s sole discretion) have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant or Participant’s broker.
8. No Guarantee of Continued Service . PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF RSUS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUED ENGAGEMENT AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR ANY RELATED ENTITY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR ANY RELATED ENTITY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
9. Address for Notices . Any notice to be given to the Company under the terms of this Agreement will be addressed to the Company at 1275 Market Street , San Francisco, CA 94103, U.S.A., Attn : Stock Administration, or at such other address as the Company may hereafter designate in writing or electronically.
10. Code Section 409A . Notwithstanding anything in this Agreement to the contrary, if any Participant would be considered a “specified employee” within the meaning of Section 409A of the Code and the regulations thereunder at the time of such Participant’s ceases to be a Service Provider, the RSUs (and/or at the election of Participant the cash received from the sale of the Shares underlying the vested RSUs) will not be paid to Participant until the date that is six (6) months and one (1) day following the date of Participant’s ceases to be a Service Provider.
11. Withholding of Taxes .
Regardless of any action the Company or the Related Entity that is Participant’s employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related items related to Participant’s participation in the Plan and legally applicable to Participant (“Tax-Related Items”), Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including, but not limited to, the grant, vesting or settlement of the RSUs, the issuance of Shares in settlement of the RSUs, the subsequent sale of Shares acquired at vesting and the receipt of any dividends and/or any dividend equivalents; and (ii) do not commit to and are under no obligation to structure the terms of the Award or any aspect of the RSUs to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant is subject to tax in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to the relevant taxable or tax withholding event, as applicable, Participant shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes and directs the Company and any brokerage firm determined acceptable to the Company to satisfy the obligations with regard to all Tax-Related Items by withholding in Shares to be issued upon settlement of the RSUs. In the event that such withholding in Shares is problematic under applicable tax or securities law or has materially adverse accounting consequences, by Participant’s acceptance of the RSUs, Participant authorizes the Company and any brokerage firm to satisfy the obligations with regard to all Tax-Related Items by withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or to sell on Participant’s behalf a whole number of Shares from those Shares issued to Participant as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the obligation for Tax-Related Items.
Depending upon the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent Shares. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of Participant’s participation in the Plan. No fractional Shares will be withheld or issued pursuant to the grant of RSUs and the issuance of Shares thereunder.
Finally, Participant shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items. Participant shall have no further rights with respect to any Shares that are retained by the Company pursuant to this provision, and under no circumstances will the Company be required to issue any fractional Shares.
12. Nature of Grant . In accepting the RSUs, Participant acknowledges, understands and agrees that:
(a)      Participant acknowledges receipt of a copy of the Plan (including any applicable appendixes or sub-plans thereunder) and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Agreement subject to all of the terms and provisions thereof. Participant has reviewed the Plan (including any applicable appendixes or sub-plans thereunder) and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Agreement. Participant further agrees to notify the Company upon any change in the residence address in the Notice of Grant;
(b)      the Company (and not the Employer) is granting the RSU. The Company will administer the Plan from outside Participant’s country of residence;
(c)      the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time;
(d)      the grant of the RSUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted in the past;
(e)      all decisions with respect to future awards of RSUs, if any, will be at the sole discretion of the Company;
(f)      Participant is voluntarily participating in the Plan;
(g)      the RSUs and the Shares subject to the RSUs, and the income and value of same, are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and which are outside the scope of the employment contract, if any;
(h)      unless otherwise agreed with the Company, the RSUs and the Shares subject to the RSUs, and the income and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director of a Related Entity;
(i)      the RSUs and the Shares subject to the RSUs, and the income and value of same, are not intended to replace any pension rights or compensation;
(j)      the RSUs and the Shares subject to the RSUs, and the income and value of same, are not part of normal or expected compensation or salary for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or any other similar payments;
(k)      the RSU grant and Participant’s participation in the Plan will not be interpreted to form an employment contract or relationship with the Company or any Related Entity of the Company and the Company will not incur any liability of any kind to Participant as a result of any change or amendment, or any cancellation, of the Plan at any time;
(l)      the future value of the underlying Shares is unknown and cannot be predicted with certainty;
(m)      in the event of termination of Participant’s status as a Service Provider (whether or not in breach of any employment laws in the country where Participant resides, even if otherwise applicable to Participant’s employment benefits from the Employer, and/or whether later found to be invalid), Participant’s right to vest in the RSUs under the Plan, if any, will terminate effective as of the date that Participant is no longer actively employed and will not be extended by any notice period mandated under local law ( e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); the Administrator shall have the exclusive discretion to determine when Participant is no longer actively employed for purposes of the Award (including whether Participant may still be considered actively employed while on an approved leave of absence);
(n)      the RSUs and the benefits under the Plan, if any, will not automatically transfer to another company in the case of a merger or a Change in Control; and
(o)      if Participant is providing services to Employer outside the United States:
(i)      the RSUs and the Shares subject to the RSUs are not part of Participant’s normal or expected compensation or salary for any purpose; and
(ii)      neither the Company, the Employer nor any other Related Entity of shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to Participant pursuant to the settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement; and
(iii)      no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from termination of Participant’s status as a Service Provider by the Company or the Employer (for any reason whatsoever and whether or not in breach of any employment laws in the country where Participant resides, even if otherwise applicable to Participant’s employment benefits from the Employer, and/or whether later found to be invalid).
13. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan
14. Data Privacy . Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Agreement and any other RSU materials by and among, as applicable, the Employer, the Company, and its Related Entities for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.
Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, e-mail address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or any Related Entity, details of all RSUs or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the purpose of implementing, administering and managing the Plan.
Participant understands that Data may be transferred to the UBS Financial Services, Inc., or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company in the implementation, administration and management of the Plan. Participant understands that the recipients may be located in the United States, or elsewhere, and that the recipient’s country (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting Participant’s local human resources representative. Participant authorizes the Company, UBS Financial Services, Inc. and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing Participant’s participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case, without cost, by contacting in writing Participant’s local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service with the Employer will not be affected; the only consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant RSUs or other equity awards or administer or maintain such awards. Participant understands, however, that refusal or withdrawal of consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.
15. Grant is Not Transferable . Except to the limited extent provided in paragraph 6, this grant and the rights and privileges conferred hereby will not be transferred, assigned, pledged, or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment, or similar process. Upon any attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of this grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment, or similar process, this grant and the rights and privileges conferred hereby immediately will become null and void.
16. Binding Agreement . Subject to the limitation on the transferability of this grant contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors, and assigns of the parties hereto.
17. Additional Conditions to Issuance of Stock . If at any time the Company will determine, in its discretion, that the listing, registration, or qualification of the Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory authority is necessary or desirable as a condition to the issuance of Shares to Participant (or his or her estate), such issuance will not occur unless and until such listing, registration, qualification, consent, or approval will have been effected or obtained free of any conditions not acceptable to the Company. The Company will make all reasonable efforts to meet the requirements of any such state or federal law or securities exchange and to obtain any such consent or approval of any such governmental authority.
18. Plan Governs . This Agreement and the Notice of Grant are subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement or the Notice of Grant and one or more provisions of the Plan, the provisions of the Plan will govern.
19. Governing Law and Venue . This Award will be governed by, and construed in accordance with, the laws of the State of California, U.S.A. without regard to principles of conflict of laws. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by the Award or this Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of San Francisco County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this Award is made and/or to be performed.
(a)      Language . Participant has received the terms and conditions of this Agreement and any other related communications in English, and Participant consents to having received these documents in English. If Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
(b)      Electronic Delivery and Acceptance . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or any third party designated by the Company. By Participant’s electronic signature and the electronic signature of the Company’s representative, Participant and the Company agree that this RSU is granted under and governed by the terms and conditions of the Plan and this Agreement.
20. Administrator Authority . The Administrator will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any RSUs have vested and whether Participant is actively employed). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company, and all other interested persons. No member of the Administrator will be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or this Agreement.
21. Severability . The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
22. Appendix . Notwithstanding any provisions in this Agreement, the Award shall be subject to any special terms and conditions set forth in any Appendix to this Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable under Applicable Laws with regard to the issuance or sale of Shares or facilitate the administration of the Plan. The Appendix constitutes part of this Agreement.
23. Imposition of Other Requirements . The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable under Applicable Laws with regard to the issuance or sale of Shares or facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
24. Insider Trading/Market Abuse Restrictions . Depending on Participant’s country, Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, which may affect Participant’s ability to, directly or indirectly, acquire, sell or attempt to sell Shares or rights to Shares (e.g., RSUs) under the Plan during such times as Participant is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdiction or Participant’s country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under the Company’s Insider Trading Policy. Participant is responsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter.
25. Foreign Asset/Account Reporting . Participant acknowledges that there may be certain foreign asset and/or account reporting requirements which may affect Participant’s ability to acquire or hold Shares acquired under the Plan or cash received from participating in the Plan (including from any dividends paid on Shares acquired under the Plan) in a brokerage or bank account outside Participant’s country. Participant may be required to report such accounts, assets or transactions to the tax or other authorities in Participant’s country. Participant also may be required to repatriate sale proceeds or other funds received as a result of participation in the Plan to Participant’s country through a designated bank or broker within a certain time after receipt. Participant acknowledges that it is his or her responsibility to be compliant with such regulations, and is advised to consult his or her personal legal advisor for any details.
26. Waiver . Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Participant or any other participant.
APPENDIX TO DOLBY LABORATORIES, INC.
2005 STOCK PLAN
GLOBAL RESTRICTED STOCK UNIT AGREEMENT

Special Terms and Conditions for Participants Outside the U.S.
This Appendix includes additional country-specific terms and conditions that apply to Participants resident in countries listed below. This Appendix is part of the Agreement and contains terms and conditions material to participation in the Plan. Unless otherwise provided below, capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan and the Agreement.
The information is based on the securities and other laws in effect in the respective countries as of October 2016. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information in this Appendix as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date when Participant vests in the RSUs or Shares acquired under the Plan are sold.
In addition, the information contained herein is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of a particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to his or her situation.
Finally, if Participant is a citizen or resident of a country other than the one in which he or she is currently working or Participant transfers employment or residency after the Date of Grant, or if Participant is considered resident of another country for local law purposes, then the provisions contained herein may not be applicable to Participant. The Company shall, in its sole discretion, determine to what extent the terms and conditions included herein will apply under these circumstances.
Australia
Securities Law Notice .
If Participant acquires Shares under the Plan and offers such Shares for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law. Participant should obtain legal advice on disclosure obligations prior to making any such offer.
Australian Specific Relief Instrument .
Participant understands and agrees that the RSUs are offered subject to and in accordance with the terms of the Plan and the specific relief instrument granted by the Australian Securities and Investments Commission (as published in the ASIC Gazette). Participant further agrees to be bound by the terms of the Plan as supplemented for implementation in Australia by the specific relief instrument and the terms of the Award as set forth in the Agreement.
Tax Information
The Plan is a plan to which subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) applies (subject to conditions in the Act).
Exchange Control Information
Exchange control reporting is required for cash transaction exceeding AUD 10,000 and for international fund transfers. Participant understands that if an Australian bank is assisting with the transaction, the bank will file the report on Participant’s behalf. Participant understands that if there is no Australian bank involved in the transfer, Participant will have to file the exchange control report on his or her own behalf.
Canada
Form of Settlement .
RSUs granted to employees resident in Canada shall be paid in Shares only.
Termination of Service Provider Relationship .

The following provision replaces paragraph 12(m) of the Agreement:

For purposes of the Award, Participant’s status as a Service Provider will be considered terminated and vesting of the RSUs will cease as of the date that is the earliest of: (i) the date Participant’s employment with the Company or Related Entity is terminated; (ii) the date Participant receives written notice of termination of employment or service from the Company or Related Entity; or (iii) date Participant is no longer actively providing services to the Company or Related Entity and, in any case, will not be extended by any notice period mandated under local law ( e.g. , Participant’s period of employment or service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws or the terms of Participant’s employment or service agreement, if any). The Administrator shall have the exclusive discretion to determine when Participant is no longer actively employed or providing services for purposes of the Award (including whether Participant may still be considered actively providing services while on an approved leave of absence).

Sale of Shares .

Participant acknowledges that he or she is permitted to sell the Shares acquired under the Plan through UBS Financial Services, Inc. or other such stock plan service provider as may be selected by the Company in the future, provided the sale of the Shares takes place outside of Canada through facilities of a stock exchange on which the Shares are listed. The Shares are currently listed on the New York Stock Exchange.

Consent to Receive Information in English for Quebec Service Providers .

Participant acknowledges that it is the express wish of the parties that this Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be written in English.
    
Le participant reconnaît que c’est son souhait exprès d’avoir exigé la rédaction en anglais de cette convention, ainsi que de tous documents exécutés, avis donnés et procédures judiciaries intentées, directement ou indirectement, relativement à ou suite à la présente convention.

Authorization to Release and Transfer Necessary Personal Information for Quebec Service Providers .

The following provision supplements paragraph 14 of the Agreement:

Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. Participant further authorizes the Company, any Related Entity and the Administrator of the Plan to disclose and discuss the Plan with their advisors. Participant further authorizes the Company and any Related Entity to record such information and to keep such information in Participant’s employee file.

Foreign Asset/Account Reporting Notice .

Canadian residents may be required to report foreign property on Form T1135 (Foreign Income Verification Statement) if the total cost of the foreign property exceeds C$100,000 at any time in the year. Foreign property includes Shares acquired under the Plan and may include RSUs, their cost generally is the adjusted cost base (“ACB”) of the Shares. The ACB ordinarily would equal the fair market value of the Shares at the time of acquisition, but if the Canadian resident owns other shares of the Company, this ACB may have to be leveraged with the ACB of the other shares. The Form T1135 generally must be filed by April 30 of the following year. Canadian residents should consult with a personal advisor to ensure compliance with the applicable reporting requirements.

China
The following provisions govern Participant’s participation in the Plan if Participant is subject to exchange control regulations in the People’s Republic of China (“China”), as determined by the Company in its sole discretion:
Settlement of RSUs and Sale of Shares .
This provision supplements paragraph 5 of the Agreement.
Due to local regulatory requirements, Participant agrees that the Company may force the sale of any Shares to be issued upon settlement of the Award. The sale may occur (i) immediately upon vesting, (ii) following Participant’s termination as a Service Provider, or (iii) or within any other time frame as the Company determines to be necessary or recommended to comply with local regulatory requirements. Participant agrees that Participant must maintain any Shares acquired under the Plan in an account maintained by UBS Financial Services, Inc. or such other stock plan service provider as may be selected by the Company .
Participant further agrees that the Company is authorized t o instruct UBS Financial Services, Inc. or such other stock plan service provider as may be selected by the Company in the future to assist with the mandatory sale of such Shares (on Participant’s behalf pursuant to this authorization) and Participant expressly authorizes UBS Financial Services, Inc. or such other stock plan service provider as may be selected by the Company in the future to complete the sale of such Shares. Participant acknowledges that UBS Financial Services, Inc. or such other stock plan service provider as may be selected by the Company in the future is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Company agrees to pay Participant t he cash proceeds from the sale of the Shares, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items.
Exchange Control Requirements.   
Participant understands and agrees that participation in the Plan is subject to the Company or the Employer obtaining any required approval from the China State Administration of Foreign Exchange (“SAFE”), as determined by the Company in its sole and absolute discretion. If the Company or the Employer is unable to obtain such approval, Participant may not be entitled to receive any benefit in connection with the Plan without any liability to the Company, the Employer or any Related Entity.
Participant understands and agrees that, to facilitate compliance with local exchange control requirements, Participant will be required to repatriate the cash proceeds from the sale of the Shares issued upon the vesting of the RSUs as well as any cash dividends paid on such Shares to China. Participant further understands that, under local law, such repatriation of Participant’s cash proceeds may need to be effectuated through a special exchange control account established by the Company, or one of its Related Entities, and Participant hereby consents and agrees that any proceeds from the sale of any Shares issued upon the vesting of the RSUs as well as any cash dividends paid on such Shares may be transferred to such special account prior to being delivered to Participant. If the proceeds from the sale of Participant’s Shares or cash dividends are converted to local currency, Participant acknowledges that the Company is under no obligation to secure any exchange conversion rate, and the Company may face delays in converting the proceeds to local currency due to exchange control restrictions in China. Participant agrees to bear the risk of any exchange conversion rate fluctuation between the date the RSUs vest and the date of conversion of the proceeds from the sale of the Shares issued upon vesting to local currency. Participant further agrees to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.
Foreign Asset/Account Reporting Notice .
Chinese residents are required to report to the SAFE all details of his or her foreign financial assets and liabilities, as well as details of any economic transactions conducted with non-Chinese residents, either directly or through financial institutions.
France

Consent to Receive Information in English .

By accepting the grant of the RSUs, Participant confirms having read and understood the Plan and the Agreement, which were provided in English language. Participant accepts the terms of those documents accordingly.

En acceptant cette attribution gratuite d’actions, le Participant confirme avoir lu et compris le Plan et ce Contrat, incluant tous leurs termes et conditions, qui ont été transmis en langue anglaise. Le Participant accepte les dispositions de ces documents en connaissance de cause.

Foreign Asset/Account Reporting Notice .

French residents may hold Shares outside France, provided that they declare all foreign accounts, whether open, current or closed, on their annual income tax return. Failure to comply could trigger significant penalties. Further, French residents with foreign account balances exceeding €1,000,000 may have additional monthly reporting obligations.

Germany
Exchange Control Notice .
Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). In case of payments in connection with securities (including proceeds realized upon the sale of Shares or the receipt of dividends), the report must be made by the 5th day of the month following the month in which the payment is received. The report must be filed electronically. The form of report (“Allgemeine Meldeportal Statistik”) can be accessed via the Bundesbank’s website (www.bundesbank.de) and is available in both German and English.
Hong Kong
Form of Settlement .
RSUs granted to Participants resident in Hong Kong shall be paid in Shares only.
Securities Law Notice .
Warning: None of the documents related to the Plan have been reviewed by any regulatory authority in Hong Kong. If Participant is in any doubt about any of the contents of the Agreement, including this Appendix, or the Plan, Participant should obtain independent professional advice. The RSUs and Shares issued at vesting do not constitute a public offering of securities under Hong Kong law and are available only to employees of the Company and its Related Entities. The Agreement, including this Appendix, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong. The RSUs are intended only for the personal use of each eligible employee of the Employer, the Company or any Related Entity and may not be distributed to any other person.
Participant agrees, and Participant’s heirs and assigns agree, not to sell any Shares within six months of the Date of Grant.
Occupational Retirement Schemes Ordinance Alert .
The Company specifically intends that neither the Award nor the Plan will be an occupational retirement scheme for purposes of the Occupational Retirement Schemes Ordinance (“ORSO”).
India
Exchange Control Notice .

Participant understands that the RSUs are subject to compliance with the exchange control requirements of the Reserve Bank of India. Participant understands that Participant must repatriate any proceeds from the sale of Shares acquired under the Plan within (90) days of the receipt of proceeds and dividends within one-hundred eighty (180) days of the receipt of dividends. Participant must obtain a foreign inward remittance certificate (“FIRC”) from the bank where Participant deposits the funds and must maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Employer requests proof of repatriation.

Foreign Asset/Account Reporting Notice .

Indian residents are required to declare the following items in their annual tax return: (i) any foreign assets held by them (including Shares acquired under the Plan), and (ii) any foreign bank accounts for which they have signing authority. Indian residents should consult with their personal tax advisor to ensure that they are properly reporting foreign assets and bank accounts.

Japan
Foreign Asset/Account Reporting Notice .
Japanese residents are required to report details of any assets held outside of Japan as of December 31, including Shares acquired under the Plan, to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15 each year. Japanese residents are responsible for complying with this reporting obligation.
Korea
Exchange Control Notice .
Exchange control laws require Korean residents who realize US$500,000 or more from the sale of Shares or the receipt of any dividends paid on such Shares in a single transaction to repatriate the proceeds to Korea within 36 months of receipt.
Foreign Asset/Account Reporting Notice .
Korean residents must declare all foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authority and file a report with respect to such accounts if the value of such accounts exceeds KRW 1 billion (or an equivalent amount in foreign currency). Korea residents should consult with their personal tax advisor for additional information about this reporting obligation.
Netherlands
No special provisions.

Poland
    
Exchange Control Notice .
If Participant maintains bank or brokerage accounts holding cash and foreign securities (including Shares) outside of Poland, Participant will be required to report information to the National Bank of Poland on transactions and balances in such accounts if the value of such cash and securities exceeds PLN 7 million. If required, such reports must be filed on special forms available on the website of the National Bank of Poland. Participant should consult with his or her personal legal advisor to determine whether Participant will be required to submit reports to the National Bank of Poland.

Further, Polish residents transferring funds in excess of €15,000 into or out of Poland must be do so through a bank account in Poland. In such case, the resident is required to store all documents connected with any foreign exchange transactions engaged in for a period of five years, as measured from the end of the year in which such transaction occurred.

Singapore

Securities Law Notice .
The RSUs are being granted pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. Participant should note that such RSU grant is subject to section 257 of the SFA and Participant will not be able to make any subsequent sale in Singapore, or any offer of such subsequent sale of the Shares in Singapore, or any offer of the Shares underlying the RSUs unless such sale or offer in Singapore is made (a) after six months of the Date of Grant, or (b) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.

Chief Executive Officer and Director Reporting Notice .

If Participant is the Chief Executive Officer (“CEO”), director, associate director or shadow director of a Singapore Related Entity of the Company, as the terms are used in the Singapore Companies Act (the “SCA”), Participant agrees to comply with notification requirements under the SCA. Among these requirements is an obligation to notify the Singapore Related Entity in writing when Participant receives an interest ( e.g., Awards, Shares) in the Company or any related companies (including when Participant sells Shares acquired through an Award). In addition, Participant must notify the Singapore Related Entity when Participant sells or receives Shares of the Company or any related company (including when Participant sells or receives Shares acquired under the Plan). These notifications must be made within two business days of acquiring or disposing of any interest in the Company or any related company. In addition, a notification must be made of Participant’s interests in the Company or any related company within two business days of becoming CEO or a director, associate director or shadow director. Participant should consult with his or her personal legal advisor regarding his or her notification obligations under the SCA.

Spain
No Entitlement for Claims or Compensation .
The following provisions supplement paragraphs 4 and 12 of the Agreement:
By accepting the RSUs, Participant consents to participation in the Plan and acknowledges that Participant has received a copy of the Plan document.
Participant understands and agrees that, as a condition of the grant of the RSUs, the termination of Participant’s status as a Service Provider for any reason (including for the reasons listed below) prior to the vesting date will automatically result in the loss of the unvested RSUs that may have been granted to Participant. In particular, Participant understands and agrees that any unvested RSUs shall be forfeited without entitlement to the underlying Shares or to any amount as indemnification in the event of a termination of status as a Service Provider, including, but not limited to: resignation, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without good cause ( i.e ., subject to a “despido improcedente”), individual or collective layoff on objective grounds, whether adjudged to be with cause or adjudged or recognized to be without cause, material modification of the terms of employment under Article 41 of the Workers’ Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by the Employer, and under Article 10.3 of Royal Decree 1382/1985.
Participant understands that the Company has unilaterally, gratuitously and in its sole discretion decided to grant RSUs under the Plan to individuals who may be Employees, Directors or Consultants throughout the world. The decision is limited and entered into based upon the express assumption and condition that any RSUs will not economically or otherwise bind the Company or any Related Entity, including the Employer, on an ongoing basis, other than as expressly set forth in the Agreement. Consequently, Participant understands that the RSUs are granted on the assumption and condition that the RSUs shall not become part of any employment contract (whether with the Company or any Related Entity, including the Employer) and shall not be considered a mandatory benefit, salary for any purpose (including severance compensation) or any other right whatsoever. Furthermore, Participant understands and freely accepts that there is no guarantee that any benefit whatsoever shall arise from the grant of RSUs, which is gratuitous and discretionary, since the future value of the RSUs and the underlying Shares is unknown and unpredictable. Participant also understands that the grant of RSUs would not be made but for the assumptions and conditions set forth hereinabove; thus, Participant understands, acknowledges and freely accepts that, should any or all of the assumptions be mistaken or any of the conditions not be met for any reason, the RSUs and any right to the underlying Shares shall be null and void.
Securities Law Notice .
No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory in connection with the grant of RSUs. The Agreement, the Appendix and the Plan have not been registered with the Comisión Nacional del Mercado de Valores (Spanish Securities Exchange Commission) and do not constitute a public offering prospectus.
Exchange Control Notice .
Spanish taxpayers must declare the acquisition, ownership and disposition of Shares in a foreign company (including Shares acquired under the Plan) to the Spanish Dirección General de Comercio e Inversiones (the “DGCI”), which is a department of the Ministry of Economy and Competitiveness. Generally, the declaration must be filed in January for Shares acquired or disposed of during the prior year and/or for Shares owned as of December 31 of the prior year; however, if the value of the Shares acquired under the Plan and/or the amount of the sale proceeds exceeds €1,502,530, the declaration must be filed within one month of the acquisition or disposition, as applicable.
In addition, Spanish taxpayers may be required to declare electronically to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including any Shares acquired under the Plan) and any transactions with non-Spanish residents (including any payments of Shares made by the Company) depending on the value of such accounts and instruments and the amount of the transactions during the relevant year as of December 31 of the relevant year. This reporting requirement will apply if the balances in such accounts together with the value of such instruments as of December 31, or the volume of transactions with non-Spanish residents during the prior or current year, exceed €1,000,000. Once the €1,000,000 threshold has been surpassed in either respect, a report is required on all foreign accounts, foreign instruments and transactions with non-Spanish residents, even if the relevant threshold has not been crossed for an individual item. Generally, the report is required on an annual basis (by January 20 of each year); however, if the balances in Participant’s foreign accounts together with value of foreign instruments or the volume of transactions with non-Spanish residents exceed €100,000,000, more frequent reporting will be required.
Foreign Asset/Account Reporting Notice .
Spanish residents are required to report rights or assets deposited or held outside of Spain (including Shares acquired under the Plan or cash proceeds from the sale of such Shares) as of December 31 of each year, if the value of such rights or assets exceeds €50,000 per type of right or asset. After such rights and/or assets are initially reported, the reporting obligation will only apply for subsequent years if the value of any previously-reported rights or assets increases by more than €20,000. If reporting is required, the report must be filed on Form 720 by March 31 following the end of the relevant year.
Sweden
No special provisions.
Taiwan
Securities Law Notice .
The offer of participation in the Plan is available only for Service Providers of the Company. The offer of participation in the Plan is not a public offer of securities by a Taiwanese company.     
Data Privacy Acknowledgement .
Participant hereby acknowledges that he or she has read and understood the terms regarding collection, processing and transfer of Data contained in paragraph 14 of the Agreement and by participating in the Plan, Participant agrees to such terms. In this regard, upon request of the Company or the Employer, Participant agrees to provide an executed data privacy consent form to the Employer or the Company (or any other agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in Participant’s country, either now or in the future. Participant understands he or she will not be able to participate in the Plan if Participant fails to execute any such consent or agreement.
Exchange Control Notice .
Taiwanese residents may acquire and remit foreign currency (including proceeds from the sale of Shares) into Taiwan up to US$5,000,000 per year. If the transaction amount is TWD$500,000 or more in a single transaction, residents must submit a Foreign Exchange Transaction Form and also provide supporting documentation to the satisfaction of the remitting bank. If the transaction amount is US$500,000 or more, Taiwanese residents may be required to provide additional supporting documentation to the satisfaction of the remitting bank. Taiwanese residents should consult their personal legal advisor to ensure compliance with applicable exchange control laws in Taiwan.
United Arab Emirates (“UAE”)
Securities Law Notice .
The RSUs are available only for select employees of the Company and its affiliates and is in the nature of providing employee incentives in the UAE. This Agreement, the Appendix, the Plan and other incidental communication materials are intended for distribution only to Service Providers for the purposes of an employee compensation or reward scheme, and must not be delivered to, or relied on, by any other person.
The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any documents in connection with the RSUs or this Agreement. Further, neither the Ministry of Economy nor the Dubai Department of Economic Development have approved this Agreement nor taken steps to verify the information set out in it, and have no responsibility for it.
The securities to which this Agreement relates may be illiquid and/or subject to restrictions on their resale. Individuals should conduct their own due diligence on the securities.
Residents of the UAE who do not understand or have questions regarding this Agreement, the Appendix or the Plan should consult an authorized financial adviser.
United Kingdom
Form of Settlement .
RSUs granted to Service Providers resident in the United Kingdom shall be paid in Shares only.
Joint Election .

As a condition of the vesting of the RSUs under the Plan, Participant agrees to accept any liability for secondary Class 1 NICs (“Employer NICs”) which may be payable by the Company or the Employer with respect to the vesting of the RSUs or otherwise payable in connection with the RSUs and the issuance of Shares. Without prejudice to the foregoing, Participant agrees to execute a joint election with the Company and/or the Employer (the “Election”), the form of such Election being formally approved by HM Revenue and Customs (“HMRC”), and any other consent or elections required to accomplish the transfer of the Employer NICs to Participant. Participant further agrees to execute such other joint elections as may be required between Participant and any successor to the Company and/or the Employer. Participant agrees to enter into an Election prior to the vesting of the RSUs. Participant further agrees that the Company and/or the Employer may collect the Employer NICs by any of the means set forth in paragraph 11 of the Agreement.

Tax Withholding Obligations .

The following supplements paragraph 11 of the Agreement:

Participant shall pay to the Company or the Employer any amount of income tax that the Company or the Employer may be required to account to HMRC with respect to the event giving rise to the income tax (the “Taxable Event”) that cannot be satisfied by the means described in paragraph 11 of the Agreement. If payment or withholding of the income tax due is not made within ninety (90) days of the end of the U.K. tax year (April 6 - April 5) in which the Taxable Event occurs or such other period as required under U.K. law (the “Due Date”), Participant agrees that the amount of any uncollected income tax shall constitute a loan owed by Participant to the Employer, effective on the Due Date. Participant agrees that the loan will bear interest at the then-current HMRC Official Rate, it will be immediately due and repayable, and the Company or the Employer may recover it at any time thereafter by any of the means referred to in paragraph 11 of the Agreement. If Participant fails to comply with his or her obligations in connection with the income tax as described in this section, the Company may refuse to deliver the Shares acquired under the Plan.

Notwithstanding the foregoing, if Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), Participant shall not be eligible for a loan from the Company to cover income tax. In the event that Participant is a director or executive officer and income tax is not collected from or paid by Participant by the Due Date, the amount of any uncollected income tax may constitute a benefit to Participant on which additional income tax and National Insurance Contributions may be payable. Participant will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime, and for reimbursing the Company or the Employer (as appropriate) for the value of any employee National Insurance Contributions due on this additional benefit which the Company or the Employer may recover from Participant any time thereafter by any of the means referred to in paragraph 11 of the Agreement.


6652430-v6\GESDMS    1    
Exhibit 10.4

DOLBY LABORATORIES, INC.
2005 STOCK PLAN
NOTICE OF GRANT OF RESTRICTED STOCK UNITS


Unless otherwise defined herein, the terms defined in the Dolby Laboratories, Inc. 2005 Stock Plan, as amended from time to time (the “Plan”) shall have the same defined meanings in this Notice of Grant of Restricted Stock Units (the “Notice of Grant”) and the Global Restricted Stock Unit Agreement attached hereto as Exhibit A (collectively, the “Restricted Stock Unit Agreement” or the “Agreement”), including any special terms and conditions for participants outside the U.S. in the Appendix.
    
Participant: [_______________________]
You have been granted [_________] Restricted Stock Units (the “Award”). Each such Restricted Stock Unit is equivalent to one share of the Company’s Class A Common Stock for purposes of determining the number of shares subject to this award. None of the Restricted Stock Units will be issued (nor will you have the rights of a stockholder with respect to the underlying shares) until the vesting conditions described below are satisfied. Additional terms of this grant are as follows:

Date of Grant:         [___________________, ____]

Vesting Schedule:     
[Subject to Participant continuing to be a Service Provider and other limitations set forth in the Plan and the Global Restricted Stock Unit Agreement and country-specific provisions for Non-U.S. Participants as set forth in the Appendix to this Global Restricted Stock Unit Agreement, this Award will vest annually for four years at the rate of 25% per year on each anniversary of the Date of Grant. To the extent the amount vesting would result in the vesting of fractional Shares, Shares will be rounded down to the nearest whole Share.]
You acknowledge and agree that this Agreement and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as a Service Provider for the vesting period, for any period, or at all, and shall not interfere with your right or the right of the Company or the Related Entity that is your employer to terminate your relationship as a Service Provider at any time, with or without cause.
You hereby agree to accept as binding, conclusive, and final all decisions or interpretations of the Administrator upon any questions relating to the Plan, the Recoupment Policy (as defined in Exhibit A hereto) and this Agreement.
By Participant’s signature and the signature of the Company’s representative below, Participant and the Company agree that this Award is granted under and governed by the terms and conditions of the Plan, the Recoupment Policy and this Agreement, Participant has reviewed the Plan, the Recoupment Policy and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of the Plan, the Recoupment Policy and Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan, the Recoupment Policy and Agreement.
You must execute and deliver or electronically accept the terms set forth in this Agreement, in the manner specified by the Administrator. The Administrator may, in its sole discretion, cancel the Award if you fail to execute and deliver or electronically accept this Agreement and related documents by the first scheduled vesting date.

PARTICIPANT                DOLBY LABORATORIES, INC.

                                              
Exec Name    By:    


EXHIBIT A
DOLBY LABORATORIES, INC.
2005 STOCK PLAN
GLOBAL RESTRICTED STOCK UNIT AGREEMENT (EXECUTIVE)
1. Grant . Dolby Laboratories, Inc. (the “Company”) hereby grants to the individual set forth in the Notice of Grant of Restricted Stock Units (the “Participant”) an award of Restricted Stock Units (“RSUs”) pursuant to Section 8 of the Dolby Laboratories, Inc. 2005 Stock Plan, as set forth in the Notice of Grant of Restricted Stock Units (the “Notice of Grant”) and subject to the terms and conditions in this Global Restricted Stock Unit Agreement, including any special terms and conditions for participants outside the U.S. in the attached Appendix (collectively, the “Agreement”), and the Dolby Laboratories, Inc. 2005 Stock Plan as may be amended from time to time (the “Plan”). Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement.
2. Company’s Obligation . Each RSU represents the right to receive a Share after satisfying the applicable vesting conditions set forth in the Notice of Grant. Unless and until the RSUs vest, Participant will have no right to receive Shares under such RSUs. Prior to actual distribution of any Shares pursuant to the vesting of any RSUs, such RSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.
3. Vesting Schedule . Subject to paragraph 4, and to relevant Plan provisions, the RSUs awarded by this Agreement will vest in Participant according to the vesting schedule specified in the Notice of Grant.
4. Forfeiture upon Termination of Service . Notwithstanding any contrary provision of this Agreement or the Notice of Grant, if Participant ceases to be a Service Provider, for any or no reason prior to vesting, the unvested RSUs awarded by this Agreement will thereupon be forfeited at no cost to the Company.
5. Payment after Vesting . Any RSUs that vest in accordance with this Agreement will be paid to Participant (or in the event of Participant’s death, to his or her estate) in Shares. Payment upon vesting will be subject to Participant (or his or her estate) satisfying the applicable Tax-Related Items (defined below) withholding obligations set forth in paragraph 11.
6. Payments after Death . Any distribution or delivery to be made to Participant under this Agreement will, if Participant is then deceased, be made to the administrator or executor of Participant’s estate. Any such administrator or executor must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.
7. Rights as Stockholder . Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until Shares (in certificated or uncertificated form in the Company’s sole discretion) have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant or Participant’s broker.
8. No Guarantee of Continued Service . PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF RSUS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUED ENGAGEMENT AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR ANY RELATED ENTITY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR ANY RELATED ENTITY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
9. Address for Notices . Any notice to be given to the Company under the terms of this Agreement will be addressed to the Company at 1275 Market Street , San Francisco, CA 94103, U.S.A., Attn : Stock Administration, or at such other address as the Company may hereafter designate in writing or electronically.
10. Code Section 409A . Notwithstanding anything in this Agreement to the contrary, if any Participant would be considered a “specified employee” within the meaning of Section 409A of the Code and the regulations thereunder at the time of such Participant’s ceases to be a Service Provider, the RSUs (and/or at the election of Participant the cash received from the sale of the Shares underlying the vested RSUs) will not be paid to Participant until the date that is six (6) months and one (1) day following the date of Participant’s ceases to be a Service Provider.
11. Withholding of Taxes .
Regardless of any action the Company or the Related Entity that is Participant’s employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related items related to Participant’s participation in the Plan and legally applicable to Participant (“Tax-Related Items”), Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including, but not limited to, the grant, vesting or settlement of the RSUs, the issuance of Shares in settlement of the RSUs, the subsequent sale of Shares acquired at vesting and the receipt of any dividends and/or any dividend equivalents; and (ii) do not commit to and are under no obligation to structure the terms of the Award or any aspect of the RSUs to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant is subject to tax in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to the relevant taxable or tax withholding event, as applicable, Participant shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes and directs the Company and any brokerage firm determined acceptable to the Company to satisfy the obligations with regard to all Tax-Related Items by withholding in Shares to be issued upon settlement of the RSUs. In the event that such withholding in Shares is problematic under applicable tax or securities law or has materially adverse accounting consequences, by Participant’s acceptance of the RSUs, Participant authorizes the Company and any brokerage firm to satisfy the obligations with regard to all Tax-Related Items by withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or to sell on Participant’s behalf a whole number of Shares from those Shares issued to Participant as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the obligation for Tax-Related Items.
Depending upon the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent Shares. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of Participant’s participation in the Plan. No fractional Shares will be withheld or issued pursuant to the grant of RSUs and the issuance of Shares thereunder.
Finally, Participant shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items. Participant shall have no further rights with respect to any Shares that are retained by the Company pursuant to this provision, and under no circumstances will the Company be required to issue any fractional Shares.
12. Nature of Grant . In accepting the RSUs, Participant acknowledges, understands and agrees that:
(a)      Participant acknowledges receipt of a copy of the Plan (including any applicable appendixes or sub-plans thereunder) and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Agreement subject to all of the terms and provisions thereof. Participant has reviewed the Plan (including any applicable appendixes or sub-plans thereunder), the Recoupment Policy and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Recoupment Policy or this Agreement. Participant further agrees to notify the Company upon any change in the residence address in the Notice of Grant;
(b)      the Company (and not the Employer) is granting the RSU. The Company will administer the Plan from outside Participant’s country of residence;
(c)      the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time;
(d)      the grant of the RSUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted in the past;
(e)      all decisions with respect to future awards of RSUs, if any, will be at the sole discretion of the Company;
(f)      Participant is voluntarily participating in the Plan;
(g)      the RSUs and the Shares subject to the RSUs, and the income and value of same, are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and which are outside the scope of the employment contract, if any;
(h)      unless otherwise agreed with the Company, the RSUs and the Shares subject to the RSUs, and the income and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director of a Related Entity;
(i)      the RSUs and the Shares subject to the RSUs, and the income and value of same, are not intended to replace any pension rights or compensation;
(j)      the RSUs and the Shares subject to the RSUs, and the income and value of same, are not part of normal or expected compensation or salary for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or any other similar payments;
(k)      the RSU grant and Participant’s participation in the Plan will not be interpreted to form an employment contract or relationship with the Company or any Related Entity of the Company and the Company will not incur any liability of any kind to Participant as a result of any change or amendment, or any cancellation, of the Plan at any time;
(l)      the future value of the underlying Shares is unknown and cannot be predicted with certainty;
(m)      in the event of termination of Participant’s status as a Service Provider (whether or not in breach of any employment laws in the country where Participant resides, even if otherwise applicable to Participant’s employment benefits from the Employer, and/or whether later found to be invalid), Participant’s right to vest in the RSUs under the Plan, if any, will terminate effective as of the date that Participant is no longer actively employed and will not be extended by any notice period mandated under local law ( e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); the Administrator shall have the exclusive discretion to determine when Participant is no longer actively employed for purposes of the Award (including whether Participant may still be considered actively employed while on an approved leave of absence);
(n)      the RSUs and the benefits under the Plan, if any, will not automatically transfer to another company in the case of a merger or a Change in Control; and
(o)      if Participant is providing services to Employer outside the United States:
(i)      the RSUs and the Shares subject to the RSUs are not part of Participant’s normal or expected compensation or salary for any purpose; and
(ii)      neither the Company, the Employer nor any other Related Entity of shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to Participant pursuant to the settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement; and
(iii)      no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from termination of Participant’s status as a Service Provider by the Company or the Employer (for any reason whatsoever and whether or not in breach of any employment laws in the country where Participant resides, even if otherwise applicable to Participant’s employment benefits from the Employer, and/or whether later found to be invalid).
13. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan
14. Data Privacy . Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Agreement and any other RSU materials by and among, as applicable, the Employer, the Company, and its Related Entities for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.
Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, e-mail address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or any Related Entity, details of all RSUs or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the purpose of implementing, administering and managing the Plan.
Participant understands that Data may be transferred to the UBS Financial Services, Inc., or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company in the implementation, administration and management of the Plan. Participant understands that the recipients may be located in the United States, or elsewhere, and that the recipient’s country (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting Participant’s local human resources representative. Participant authorizes the Company, UBS Financial Services, Inc. and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing Participant’s participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case, without cost, by contacting in writing Participant’s local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service with the Employer will not be affected; the only consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant RSUs or other equity awards or administer or maintain such awards. Participant understands, however, that refusal or withdrawal of consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.
15. Grant is Not Transferable . Except to the limited extent provided in paragraph 6, this grant and the rights and privileges conferred hereby will not be transferred, assigned, pledged, or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment, or similar process. Upon any attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of this grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment, or similar process, this grant and the rights and privileges conferred hereby immediately will become null and void.
16. Binding Agreement . Subject to the limitation on the transferability of this grant contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors, and assigns of the parties hereto.
17. Additional Conditions to Issuance of Stock . If at any time the Company will determine, in its discretion, that the listing, registration, or qualification of the Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory authority is necessary or desirable as a condition to the issuance of Shares to Participant (or his or her estate), such issuance will not occur unless and until such listing, registration, qualification, consent, or approval will have been effected or obtained free of any conditions not acceptable to the Company. The Company will make all reasonable efforts to meet the requirements of any such state or federal law or securities exchange and to obtain any such consent or approval of any such governmental authority.
18. Plan Governs . This Agreement and the Notice of Grant are subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement or the Notice of Grant and one or more provisions of the Plan, the provisions of the Plan will govern.
19. Governing Law and Venue . This Award will be governed by, and construed in accordance with, the laws of the State of California, U.S.A. without regard to principles of conflict of laws. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by the Award or this Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of San Francisco County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this Award is made and/or to be performed.
(a)      Language . Participant has received the terms and conditions of this Agreement and any other related communications in English, and Participant consents to having received these documents in English. If Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
(b)      Electronic Delivery and Acceptance . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or any third party designated by the Company. By Participant’s electronic signature and the electronic signature of the Company’s representative, Participant and the Company agree that this RSU is granted under and governed by the terms and conditions of the Plan and this Agreement.
20. Administrator Authority . The Administrator will have the power to interpret the Plan, the Recoupment Policy and this Agreement and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any RSUs have vested and whether Participant is actively employed). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company, and all other interested persons. No member of the Administrator will be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan, the Recoupment Policy or this Agreement.
21. Severability . The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
22. Appendix . Notwithstanding any provisions in this Agreement, the Award shall be subject to any special terms and conditions set forth in any Appendix to this Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable under Applicable Laws with regard to the issuance or sale of Shares or facilitate the administration of the Plan. The Appendix constitutes part of this Agreement.
23. Imposition of Other Requirements . The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable under Applicable Laws with regard to the issuance or sale of Shares or facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
24. Insider Trading/Market Abuse Restrictions . Depending on Participant’s country, Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, which may affect Participant’s ability to, directly or indirectly, acquire, sell or attempt to sell Shares or rights to Shares (e.g., RSUs) under the Plan during such times as Participant is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdiction or Participant’s country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under the Company’s Insider Trading Policy. Participant is responsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter.
25. Foreign Asset/Account Reporting . Participant acknowledges that there may be certain foreign asset and/or account reporting requirements which may affect Participant’s ability to acquire or hold Shares acquired under the Plan or cash received from participating in the Plan (including from any dividends paid on Shares acquired under the Plan) in a brokerage or bank account outside Participant’s country. Participant may be required to report such accounts, assets or transactions to the tax or other authorities in Participant’s country. Participant also may be required to repatriate sale proceeds or other funds received as a result of participation in the Plan to Participant’s country through a designated bank or broker within a certain time after receipt. Participant acknowledges that it is his or her responsibility to be compliant with such regulations, and is advised to consult his or her personal legal advisor for any details.
26. Waiver . Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Participant or any other participant.
27. Reduction, Cancellation, Forfeiture or Recoupment . This Award, any Shares issued in payment for vested RSUs pursuant to this Award and any other rights, payments and benefits with respect to this Award shall be subject to reduction, cancellation, forfeiture or recoupment pursuant to the Company’s Policy on Recoupment of Incentive Compensation, as in effect on the Date of Grant or as may be amended to the extent required to comply with applicable law (the “Recoupment Policy”)
APPENDIX TO DOLBY LABORATORIES, INC.
2005 STOCK PLAN
GLOBAL RESTRICTED STOCK UNIT AGREEMENT

Special Terms and Conditions for Participants Outside the U.S.
This Appendix includes additional country-specific terms and conditions that apply to Participants resident in countries listed below. This Appendix is part of the Agreement and contains terms and conditions material to participation in the Plan. Unless otherwise provided below, capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan and the Agreement.
The information is based on the securities and other laws in effect in the respective countries as of October 2016. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information in this Appendix as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date when Participant vests in the RSUs or Shares acquired under the Plan are sold.
In addition, the information contained herein is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of a particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to his or her situation.
Finally, if Participant is a citizen or resident of a country other than the one in which he or she is currently working or Participant transfers employment or residency after the Date of Grant, or if Participant is considered resident of another country for local law purposes, then the provisions contained herein may not be applicable to Participant. The Company shall, in its sole discretion, determine to what extent the terms and conditions included herein will apply under these circumstances.
Australia
Securities Law Notice .
If Participant acquires Shares under the Plan and offers such Shares for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law. Participant should obtain legal advice on disclosure obligations prior to making any such offer.
Australian Specific Relief Instrument .
Participant understands and agrees that the RSUs are offered subject to and in accordance with the terms of the Plan and the specific relief instrument granted by the Australian Securities and Investments Commission (as published in the ASIC Gazette). Participant further agrees to be bound by the terms of the Plan as supplemented for implementation in Australia by the specific relief instrument and the terms of the Award as set forth in the Agreement.
Tax Information
The Plan is a plan to which subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) applies (subject to conditions in the Act).
Exchange Control Information
Exchange control reporting is required for cash transaction exceeding AUD 10,000 and for international fund transfers. Participant understands that if an Australian bank is assisting with the transaction, the bank will file the report on Participant’s behalf. Participant understands that if there is no Australian bank involved in the transfer, Participant will have to file the exchange control report on his or her own behalf.
Canada
Form of Settlement .
RSUs granted to employees resident in Canada shall be paid in Shares only.
Termination of Service Provider Relationship .

The following provision replaces paragraph 12(m) of the Agreement:

For purposes of the Award, Participant’s status as a Service Provider will be considered terminated and vesting of the RSUs will cease as of the date that is the earliest of: (i) the date Participant’s employment with the Company or Related Entity is terminated; (ii) the date Participant receives written notice of termination of employment or service from the Company or Related Entity; or (iii) date Participant is no longer actively providing services to the Company or Related Entity and, in any case, will not be extended by any notice period mandated under local law ( e.g. , Participant’s period of employment or service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws or the terms of Participant’s employment or service agreement, if any). The Administrator shall have the exclusive discretion to determine when Participant is no longer actively employed or providing services for purposes of the Award (including whether Participant may still be considered actively providing services while on an approved leave of absence).

Sale of Shares .

Participant acknowledges that he or she is permitted to sell the Shares acquired under the Plan through UBS Financial Services, Inc. or other such stock plan service provider as may be selected by the Company in the future, provided the sale of the Shares takes place outside of Canada through facilities of a stock exchange on which the Shares are listed. The Shares are currently listed on the New York Stock Exchange.

Consent to Receive Information in English for Quebec Service Providers .

Participant acknowledges that it is the express wish of the parties that this Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be written in English.
    
Le participant reconnaît que c’est son souhait exprès d’avoir exigé la rédaction en anglais de cette convention, ainsi que de tous documents exécutés, avis donnés et procédures judiciaries intentées, directement ou indirectement, relativement à ou suite à la présente convention.

Authorization to Release and Transfer Necessary Personal Information for Quebec Service Providers .

The following provision supplements paragraph 14 of the Agreement:

Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. Participant further authorizes the Company, any Related Entity and the Administrator of the Plan to disclose and discuss the Plan with their advisors. Participant further authorizes the Company and any Related Entity to record such information and to keep such information in Participant’s employee file.

Foreign Asset/Account Reporting Notice .

Canadian residents may be required to report foreign property on Form T1135 (Foreign Income Verification Statement) if the total cost of the foreign property exceeds C$100,000 at any time in the year. Foreign property includes Shares acquired under the Plan and may include RSUs, their cost generally is the adjusted cost base (“ACB”) of the Shares. The ACB ordinarily would equal the fair market value of the Shares at the time of acquisition, but if the Canadian resident owns other shares of the Company, this ACB may have to be leveraged with the ACB of the other shares. The Form T1135 generally must be filed by April 30 of the following year. Canadian residents should consult with a personal advisor to ensure compliance with the applicable reporting requirements.

China
The following provisions govern Participant’s participation in the Plan if Participant is subject to exchange control regulations in the People’s Republic of China (“China”), as determined by the Company in its sole discretion:
Settlement of RSUs and Sale of Shares .
This provision supplements paragraph 5 of the Agreement.
Due to local regulatory requirements, Participant agrees that the Company may force the sale of any Shares to be issued upon settlement of the Award. The sale may occur (i) immediately upon vesting, (ii) following Participant’s termination as a Service Provider, or (iii) or within any other time frame as the Company determines to be necessary or recommended to comply with local regulatory requirements. Participant agrees that Participant must maintain any Shares acquired under the Plan in an account maintained by UBS Financial Services, Inc. or such other stock plan service provider as may be selected by the Company .
Participant further agrees that the Company is authorized t o instruct UBS Financial Services, Inc. or such other stock plan service provider as may be selected by the Company in the future to assist with the mandatory sale of such Shares (on Participant’s behalf pursuant to this authorization) and Participant expressly authorizes UBS Financial Services, Inc. or such other stock plan service provider as may be selected by the Company in the future to complete the sale of such Shares. Participant acknowledges that UBS Financial Services, Inc. or such other stock plan service provider as may be selected by the Company in the future is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Company agrees to pay Participant t he cash proceeds from the sale of the Shares, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items.
Exchange Control Requirements.   
Participant understands and agrees that participation in the Plan is subject to the Company or the Employer obtaining any required approval from the China State Administration of Foreign Exchange (“SAFE”), as determined by the Company in its sole and absolute discretion. If the Company or the Employer is unable to obtain such approval, Participant may not be entitled to receive any benefit in connection with the Plan without any liability to the Company, the Employer or any Related Entity.
Participant understands and agrees that, to facilitate compliance with local exchange control requirements, Participant will be required to repatriate the cash proceeds from the sale of the Shares issued upon the vesting of the RSUs as well as any cash dividends paid on such Shares to China. Participant further understands that, under local law, such repatriation of Participant’s cash proceeds may need to be effectuated through a special exchange control account established by the Company, or one of its Related Entities, and Participant hereby consents and agrees that any proceeds from the sale of any Shares issued upon the vesting of the RSUs as well as any cash dividends paid on such Shares may be transferred to such special account prior to being delivered to Participant. If the proceeds from the sale of Participant’s Shares or cash dividends are converted to local currency, Participant acknowledges that the Company is under no obligation to secure any exchange conversion rate, and the Company may face delays in converting the proceeds to local currency due to exchange control restrictions in China. Participant agrees to bear the risk of any exchange conversion rate fluctuation between the date the RSUs vest and the date of conversion of the proceeds from the sale of the Shares issued upon vesting to local currency. Participant further agrees to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.
Foreign Asset/Account Reporting Notice .
Chinese residents are required to report to the SAFE all details of his or her foreign financial assets and liabilities, as well as details of any economic transactions conducted with non-Chinese residents, either directly or through financial institutions.
France

Consent to Receive Information in English .

By accepting the grant of the RSUs, Participant confirms having read and understood the Plan and the Agreement, which were provided in English language. Participant accepts the terms of those documents accordingly.

En acceptant cette attribution gratuite d’actions, le Participant confirme avoir lu et compris le Plan et ce Contrat, incluant tous leurs termes et conditions, qui ont été transmis en langue anglaise. Le Participant accepte les dispositions de ces documents en connaissance de cause.

Foreign Asset/Account Reporting Notice .

French residents may hold Shares outside France, provided that they declare all foreign accounts, whether open, current or closed, on their annual income tax return. Failure to comply could trigger significant penalties. Further, French residents with foreign account balances exceeding €1,000,000 may have additional monthly reporting obligations.

Germany
Exchange Control Notice .
Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). In case of payments in connection with securities (including proceeds realized upon the sale of Shares or the receipt of dividends), the report must be made by the 5th day of the month following the month in which the payment is received. The report must be filed electronically. The form of report (“Allgemeine Meldeportal Statistik”) can be accessed via the Bundesbank’s website (www.bundesbank.de) and is available in both German and English.
Hong Kong
Form of Settlement .
RSUs granted to Participants resident in Hong Kong shall be paid in Shares only.
Securities Law Notice .
Warning: None of the documents related to the Plan have been reviewed by any regulatory authority in Hong Kong. If Participant is in any doubt about any of the contents of the Agreement, including this Appendix, or the Plan, Participant should obtain independent professional advice. The RSUs and Shares issued at vesting do not constitute a public offering of securities under Hong Kong law and are available only to employees of the Company and its Related Entities. The Agreement, including this Appendix, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong. The RSUs are intended only for the personal use of each eligible employee of the Employer, the Company or any Related Entity and may not be distributed to any other person.
Participant agrees, and Participant’s heirs and assigns agree, not to sell any Shares within six months of the Date of Grant.
Occupational Retirement Schemes Ordinance Alert .
The Company specifically intends that neither the Award nor the Plan will be an occupational retirement scheme for purposes of the Occupational Retirement Schemes Ordinance (“ORSO”).
India
Exchange Control Notice .

Participant understands that the RSUs are subject to compliance with the exchange control requirements of the Reserve Bank of India. Participant understands that Participant must repatriate any proceeds from the sale of Shares acquired under the Plan within (90) days of the receipt of proceeds and dividends within one-hundred eighty (180) days of the receipt of dividends. Participant must obtain a foreign inward remittance certificate (“FIRC”) from the bank where Participant deposits the funds and must maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Employer requests proof of repatriation.

Foreign Asset/Account Reporting Notice .

Indian residents are required to declare the following items in their annual tax return: (i) any foreign assets held by them (including Shares acquired under the Plan), and (ii) any foreign bank accounts for which they have signing authority. Indian residents should consult with their personal tax advisor to ensure that they are properly reporting foreign assets and bank accounts.

Japan
Foreign Asset/Account Reporting Notice .
Japanese residents are required to report details of any assets held outside of Japan as of December 31, including Shares acquired under the Plan, to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15 each year. Japanese residents are responsible for complying with this reporting obligation.
Korea
Exchange Control Notice .
Exchange control laws require Korean residents who realize US$500,000 or more from the sale of Shares or the receipt of any dividends paid on such Shares in a single transaction to repatriate the proceeds to Korea within 36 months of receipt.
Foreign Asset/Account Reporting Notice .
Korean residents must declare all foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authority and file a report with respect to such accounts if the value of such accounts exceeds KRW 1 billion (or an equivalent amount in foreign currency). Korea residents should consult with their personal tax advisor for additional information about this reporting obligation.
Netherlands
No special provisions.

Poland
    
Exchange Control Notice .
If Participant maintains bank or brokerage accounts holding cash and foreign securities (including Shares) outside of Poland, Participant will be required to report information to the National Bank of Poland on transactions and balances in such accounts if the value of such cash and securities exceeds PLN 7 million. If required, such reports must be filed on special forms available on the website of the National Bank of Poland. Participant should consult with his or her personal legal advisor to determine whether Participant will be required to submit reports to the National Bank of Poland.

Further, Polish residents transferring funds in excess of €15,000 into or out of Poland must be do so through a bank account in Poland. In such case, the resident is required to store all documents connected with any foreign exchange transactions engaged in for a period of five years, as measured from the end of the year in which such transaction occurred.

Singapore

Securities Law Notice .
The RSUs are being granted pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. Participant should note that such RSU grant is subject to section 257 of the SFA and Participant will not be able to make any subsequent sale in Singapore, or any offer of such subsequent sale of the Shares in Singapore, or any offer of the Shares underlying the RSUs unless such sale or offer in Singapore is made (a) after six months of the Date of Grant, or (b) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.

Chief Executive Officer and Director Reporting Notice .

If Participant is the Chief Executive Officer (“CEO”), director, associate director or shadow director of a Singapore Related Entity of the Company, as the terms are used in the Singapore Companies Act (the “SCA”), Participant agrees to comply with notification requirements under the SCA. Among these requirements is an obligation to notify the Singapore Related Entity in writing when Participant receives an interest ( e.g., Awards, Shares) in the Company or any related companies (including when Participant sells Shares acquired through an Award). In addition, Participant must notify the Singapore Related Entity when Participant sells or receives Shares of the Company or any related company (including when Participant sells or receives Shares acquired under the Plan). These notifications must be made within two business days of acquiring or disposing of any interest in the Company or any related company. In addition, a notification must be made of Participant’s interests in the Company or any related company within two business days of becoming CEO or a director, associate director or shadow director. Participant should consult with his or her personal legal advisor regarding his or her notification obligations under the SCA.

Spain
No Entitlement for Claims or Compensation .
The following provisions supplement paragraphs 4 and 12 of the Agreement:
By accepting the RSUs, Participant consents to participation in the Plan and acknowledges that Participant has received a copy of the Plan document.
Participant understands and agrees that, as a condition of the grant of the RSUs, the termination of Participant’s status as a Service Provider for any reason (including for the reasons listed below) prior to the vesting date will automatically result in the loss of the unvested RSUs that may have been granted to Participant. In particular, Participant understands and agrees that any unvested RSUs shall be forfeited without entitlement to the underlying Shares or to any amount as indemnification in the event of a termination of status as a Service Provider, including, but not limited to: resignation, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without good cause ( i.e ., subject to a “despido improcedente”), individual or collective layoff on objective grounds, whether adjudged to be with cause or adjudged or recognized to be without cause, material modification of the terms of employment under Article 41 of the Workers’ Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by the Employer, and under Article 10.3 of Royal Decree 1382/1985.
Participant understands that the Company has unilaterally, gratuitously and in its sole discretion decided to grant RSUs under the Plan to individuals who may be Employees, Directors or Consultants throughout the world. The decision is limited and entered into based upon the express assumption and condition that any RSUs will not economically or otherwise bind the Company or any Related Entity, including the Employer, on an ongoing basis, other than as expressly set forth in the Agreement. Consequently, Participant understands that the RSUs are granted on the assumption and condition that the RSUs shall not become part of any employment contract (whether with the Company or any Related Entity, including the Employer) and shall not be considered a mandatory benefit, salary for any purpose (including severance compensation) or any other right whatsoever. Furthermore, Participant understands and freely accepts that there is no guarantee that any benefit whatsoever shall arise from the grant of RSUs, which is gratuitous and discretionary, since the future value of the RSUs and the underlying Shares is unknown and unpredictable. Participant also understands that the grant of RSUs would not be made but for the assumptions and conditions set forth hereinabove; thus, Participant understands, acknowledges and freely accepts that, should any or all of the assumptions be mistaken or any of the conditions not be met for any reason, the RSUs and any right to the underlying Shares shall be null and void.
Securities Law Notice .
No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory in connection with the grant of RSUs. The Agreement, the Appendix and the Plan have not been registered with the Comisión Nacional del Mercado de Valores (Spanish Securities Exchange Commission) and do not constitute a public offering prospectus.
Exchange Control Notice .
Spanish taxpayers must declare the acquisition, ownership and disposition of Shares in a foreign company (including Shares acquired under the Plan) to the Spanish Dirección General de Comercio e Inversiones (the “DGCI”), which is a department of the Ministry of Economy and Competitiveness. Generally, the declaration must be filed in January for Shares acquired or disposed of during the prior year and/or for Shares owned as of December 31 of the prior year; however, if the value of the Shares acquired under the Plan and/or the amount of the sale proceeds exceeds €1,502,530, the declaration must be filed within one month of the acquisition or disposition, as applicable.
In addition, Spanish taxpayers may be required to declare electronically to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including any Shares acquired under the Plan) and any transactions with non-Spanish residents (including any payments of Shares made by the Company) depending on the value of such accounts and instruments and the amount of the transactions during the relevant year as of December 31 of the relevant year. This reporting requirement will apply if the balances in such accounts together with the value of such instruments as of December 31, or the volume of transactions with non-Spanish residents during the prior or current year, exceed €1,000,000. Once the €1,000,000 threshold has been surpassed in either respect, a report is required on all foreign accounts, foreign instruments and transactions with non-Spanish residents, even if the relevant threshold has not been crossed for an individual item. Generally, the report is required on an annual basis (by January 20 of each year); however, if the balances in Participant’s foreign accounts together with value of foreign instruments or the volume of transactions with non-Spanish residents exceed €100,000,000, more frequent reporting will be required.
Foreign Asset/Account Reporting Notice .
Spanish residents are required to report rights or assets deposited or held outside of Spain (including Shares acquired under the Plan or cash proceeds from the sale of such Shares) as of December 31 of each year, if the value of such rights or assets exceeds €50,000 per type of right or asset. After such rights and/or assets are initially reported, the reporting obligation will only apply for subsequent years if the value of any previously-reported rights or assets increases by more than €20,000. If reporting is required, the report must be filed on Form 720 by March 31 following the end of the relevant year.
Sweden
No special provisions.
Taiwan
Securities Law Notice .
The offer of participation in the Plan is available only for Service Providers of the Company. The offer of participation in the Plan is not a public offer of securities by a Taiwanese company.     
Data Privacy Acknowledgement .
Participant hereby acknowledges that he or she has read and understood the terms regarding collection, processing and transfer of Data contained in paragraph 14 of the Agreement and by participating in the Plan, Participant agrees to such terms. In this regard, upon request of the Company or the Employer, Participant agrees to provide an executed data privacy consent form to the Employer or the Company (or any other agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in Participant’s country, either now or in the future. Participant understands he or she will not be able to participate in the Plan if Participant fails to execute any such consent or agreement.
Exchange Control Notice .
Taiwanese residents may acquire and remit foreign currency (including proceeds from the sale of Shares) into Taiwan up to US$5,000,000 per year. If the transaction amount is TWD$500,000 or more in a single transaction, residents must submit a Foreign Exchange Transaction Form and also provide supporting documentation to the satisfaction of the remitting bank. If the transaction amount is US$500,000 or more, Taiwanese residents may be required to provide additional supporting documentation to the satisfaction of the remitting bank. Taiwanese residents should consult their personal legal advisor to ensure compliance with applicable exchange control laws in Taiwan.
United Arab Emirates (“UAE”)
Securities Law Notice .
The RSUs are available only for select employees of the Company and its affiliates and is in the nature of providing employee incentives in the UAE. This Agreement, the Appendix, the Plan and other incidental communication materials are intended for distribution only to Service Providers for the purposes of an employee compensation or reward scheme, and must not be delivered to, or relied on, by any other person.
The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any documents in connection with the RSUs or this Agreement. Further, neither the Ministry of Economy nor the Dubai Department of Economic Development have approved this Agreement nor taken steps to verify the information set out in it, and have no responsibility for it.
The securities to which this Agreement relates may be illiquid and/or subject to restrictions on their resale. Individuals should conduct their own due diligence on the securities.
Residents of the UAE who do not understand or have questions regarding this Agreement, the Appendix or the Plan should consult an authorized financial adviser.
United Kingdom
Form of Settlement .
RSUs granted to Service Providers resident in the United Kingdom shall be paid in Shares only.
Joint Election .

As a condition of the vesting of the RSUs under the Plan, Participant agrees to accept any liability for secondary Class 1 NICs (“Employer NICs”) which may be payable by the Company or the Employer with respect to the vesting of the RSUs or otherwise payable in connection with the RSUs and the issuance of Shares. Without prejudice to the foregoing, Participant agrees to execute a joint election with the Company and/or the Employer (the “Election”), the form of such Election being formally approved by HM Revenue and Customs (“HMRC”), and any other consent or elections required to accomplish the transfer of the Employer NICs to Participant. Participant further agrees to execute such other joint elections as may be required between Participant and any successor to the Company and/or the Employer. Participant agrees to enter into an Election prior to the vesting of the RSUs. Participant further agrees that the Company and/or the Employer may collect the Employer NICs by any of the means set forth in paragraph 11 of the Agreement.

Tax Withholding Obligations .

The following supplements paragraph 11 of the Agreement:

Participant shall pay to the Company or the Employer any amount of income tax that the Company or the Employer may be required to account to HMRC with respect to the event giving rise to the income tax (the “Taxable Event”) that cannot be satisfied by the means described in paragraph 11 of the Agreement. If payment or withholding of the income tax due is not made within ninety (90) days of the end of the U.K. tax year (April 6 - April 5) in which the Taxable Event occurs or such other period as required under U.K. law (the “Due Date”), Participant agrees that the amount of any uncollected income tax shall constitute a loan owed by Participant to the Employer, effective on the Due Date. Participant agrees that the loan will bear interest at the then-current HMRC Official Rate, it will be immediately due and repayable, and the Company or the Employer may recover it at any time thereafter by any of the means referred to in paragraph 11 of the Agreement. If Participant fails to comply with his or her obligations in connection with the income tax as described in this section, the Company may refuse to deliver the Shares acquired under the Plan.

Notwithstanding the foregoing, if Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), Participant shall not be eligible for a loan from the Company to cover income tax. In the event that Participant is a director or executive officer and income tax is not collected from or paid by Participant by the Due Date, the amount of any uncollected income tax may constitute a benefit to Participant on which additional income tax and National Insurance Contributions may be payable. Participant will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime, and for reimbursing the Company or the Employer (as appropriate) for the value of any employee National Insurance Contributions due on this additional benefit which the Company or the Employer may recover from Participant any time thereafter by any of the means referred to in paragraph 11 of the Agreement.


6652430-v6\GESDMS    1    


Exhibit 31.1
CERTIFICATION
I, Kevin J. Yeaman, certify that:
 
1.
I have reviewed this Quarterly Report on Form 10-Q of Dolby Laboratories, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 1, 2017
 
/s/    KEVIN J. YEAMAN
Kevin J. Yeaman
President and Chief Executive Officer
(Principal Executive Officer)





Exhibit 31.2
CERTIFICATION
I, Lewis Chew, certify that:
 
1.
I have reviewed this Quarterly Report on Form 10-Q of Dolby Laboratories, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 1, 2017
 
/s/    LEWIS CHEW
Lewis Chew
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)





Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Dolby Laboratories, Inc. (the “Company”), on Form 10-Q for the fiscal quarter ended December 30, 2016 , as filed with the Securities and Exchange Commission (the “Report”), Kevin J. Yeaman, President and Chief Executive Officer of the Company and Lewis Chew, Executive Vice President and Chief Financial Officer of the Company, respectively, do each hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
•
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
•
The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 1, 2017
 
/s/    KEVIN J. YEAMAN
Kevin J. Yeaman
President and Chief Executive Officer
(Principal Executive Officer)
 
/s/    LEWIS CHEW
Lewis Chew
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)