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                                                                   EXHIBIT 10.12

                          DIGITAL THEATER SYSTEMS, INC.
                      NON-QUALIFIED STOCK OPTION AGREEMENT

         THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Agreement"), is made
as of the ________ day of ___________, 200_ by and between Digital Theater
Systems, Inc., a Delaware corporation (the "Company"), and _______________
("Optionee").

                                  R E C I T A L

         Pursuant to the 2002 Stock Option Plan (the "Plan") of the Company, the
Board of Directors of the Company or a committee to which administration of the
Plan is delegated by the Board of Directors (in either case, the
"Administrator") has authorized the granting to Optionee as an employee,
director, consultant or adviser of the Company of a non-qualified stock option
to purchase the number of shares of common stock of the Company specified in
Section 1 hereof, at the price specified therein, such option to be for the term
and upon the terms and conditions hereinafter stated. Capitalized terms used in
this Agreement and not defined shall have the meanings given such terms in the
Plan.

                                A G R E E M E N T

         NOW, THEREFORE, in consideration of the promises and of the
undertakings of the parties hereto contained herein, it is hereby agreed as
follows:

         1.       Number of Shares; Option Price. Pursuant to said action of the
Administrator, the Company hereby grants to Optionee the option ("Option") to
purchase, upon and subject to the terms and conditions of the Plan, ________
shares of common stock of the Company ("Shares") at the price of $________ per
share.

         2.       Term. This Option shall expire on the day before the tenth
(10th) anniversary of the date of grant of the Option (the "Expiration Date"),
unless such Option shall have been terminated prior to that date in accordance
with the provisions of the Plan or this Agreement.

         3.       Shares Subject to Exercise. This Option shall be exercisable
in equal installments of twenty-five percent (25%) of the Shares on and after
each of the first four anniversaries of the date hereof, provided, however, that
an installment shall not become exercisable if the Optionee is not employed as
an employee, director, consultant or adviser of the Company, or its Affiliate,
as of such anniversary date (except as otherwise provided for in Section 6
hereof). Once exercisable, the Option shall thereafter remain exercisable as to
such Shares for the term specified in Section 2 hereof, unless Optionee's
employment is terminated pursuant to Section 6 hereof or the Option is
terminated pursuant to a Corporate Transaction. The Administrator may condition
the exercise of the Option on the Optionee's entering into a stockholders
agreement with the Company and/or other stockholders which will restrict the
transferability of the Shares and contain other customary provisions including
rights of repurchase or first refusal on the part of the Company and may include
"drag along" rights.

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         4.       Method and Time of Exercise. The Option may be exercised by
written notice delivered to the Company at its principal executive office
stating (i) that Optionee is in compliance with the non-compete provisions of
Section 16 hereof, (ii) that Optionee has no plan to violate Section 16 in the
future, (iii) that Optionee agrees to notify the Company within ten (10) days of
a violation of Section 16 hereof, and (iv) the number of shares with respect to
which the Option is being exercised, together with:

                  (A)      a check or money order made payable to the Company in
the amount of the exercise price and any withholding tax, as provided under
Section 5 hereof; or

                  (B)      if expressly authorized in writing by the
Administrator, in its sole discretion, at the time of the Option exercise, the
tender to the Company of shares of the Company's common stock owned by Optionee
having a fair market value not less than the exercise price, plus the amount of
applicable federal, state and local withholding taxes; or

                  (C)      if expressly authorized in writing by the
Administrator, in its sole discretion, at the time of the Option exercise, the
Optionee's full recourse promissory note in a form approved by the Company; or

                  (D)      if any other method such as cashless exercise is
expressly authorized in writing by the Administrator, in its sole discretion, at
the time of the Option exercise, the tender of such consideration having a fair
market value not less than the exercise price, plus the amount of applicable
federal, state and local withholding taxes.

Only whole shares may be purchased.

         5.       Tax Withholding. As a condition to exercise of this Option,
the Company may require Optionee to pay over to the Company all applicable
federal, state and local taxes which the Company is required to withhold with
respect to the exercise of this Option. At the discretion of the Administrator
and upon the request of Optionee, the minimum statutory withholding tax
requirements may be satisfied by the withholding of Shares otherwise issuable to
Optionee upon the exercise of this Option.

         6.       Exercise on Termination of Employment. If for any reason other
than death, permanent and total disability or retirement past the age of 60,
Optionee ceases to be employed by the Company or any of its Affiliates (such
event being called a "Termination"), other than For Cause (as such term is
defined below), this Option (to the extent then exercisable) may be exercised in
whole or in part at any time within three months of the date of such
Termination, or such other period after the date of such Termination as is
specified in an amendment to this Agreement (but in no event after the earlier
of the Expiration Date or a Corporate Transaction which terminates this Option);
provided, however, that if such exercise of this Option would result in
liability for the Optionee under Section 16(b) of the Exchange Act, then such
three-month period automatically shall be extended until the tenth day following
the last date upon which Optionee has any liability under Section 16(b) (but in
no event after the earlier of the Expiration Date and a Corporate Transaction
which terminates this Option). If Optionee dies or

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becomes permanently and totally disabled (within the meaning of Section 22(e)(3)
of the Code) while employed by the Company or an Affiliate or within the period
that this Option remains exercisable after Termination, this Option (to the
extent then exercisable) may be exercised, in whole or in part, by the Optionee,
by the Optionee's personal representative or by the person to whom this Option
is transferred by devise or the laws of descent and distribution, at any time
within six months after the death or six months after the permanent and total
disability of the Optionee or any longer period specified in an amendment hereto
(but in no event after the earlier of the Expiration Date or a Corporate
Transaction which terminates this Option). If the Optionee retires past the age
of 60 while employed by the Company or an Affiliate, this Option (to the extent
then exercisable) may be exercised, in whole or in part, by the Optionee at any
time prior to the earlier of the Expiration Date and a Corporate Transaction
which terminates this Option. Further, upon such retirement, this Option shall
continue to vest in accordance with its terms as if the Optionee remained
employed by the Company. For purposes of this Agreement, "employment" includes
service as an employee, director, consultant or adviser. For purposes of this
Agreement, Optionee's employment shall not be deemed to terminate by reason of a
transfer to or from the Company or an Affiliate or among such entities, or sick
leave, military leave or other leave of absence approved by the Administrator,
if the period of any such leave does not exceed ninety (90) days or, if longer,
if Optionee's right to reemployment by the Company or any Affiliate is
guaranteed either contractually or by statute. For purposes of this Agreement,
"For Cause" shall mean Optionee's loss of employment by the Company or any of
its Affiliates due to Optionee's (a) willful breach or habitual failure to
perform Optionee's required duties, (b) commission of acts of dishonesty, fraud,
misrepresentation or other acts of moral turpitude as would prevent the
effective performance of Optionee's duties or (c) termination for cause under
any employment agreement between the Company and Optionee (as defined therein).
In the event Optionee's employment by the Company or any of its Affiliates is
Terminated For Cause, then the Option shall cease to be exercisable as of the
date of such Termination.

         7.       Non-Transferability. Except with the express written approval
of the Administrator, this Option may not be assigned or transferred except by
will or by the laws of descent and distribution, and may be exercised only by
Optionee during the Optionee's lifetime and after the Optionee's death, by the
Optionee's personal representative or by the person entitled thereto under the
Optionee's will or the laws of intestate succession.

         8.       Optionee Not a Stockholder. Optionee shall have no rights as a
stockholder with respect to the Shares covered by this Option until the date of
issuance of a stock certificate or stock certificates to the Optionee upon
exercise of this Option. No adjustment will be made for dividends or other
rights for which the record date is prior to the date such stock certificate or
certificates are issued.

         9.       No Right to Employment. Nothing in the Option granted hereby
shall interfere with or limit in any way the right of the Company or of any of
its Affiliates to terminate Optionee's employment, consulting or advising
relationship with the Company or any of its Affiliates at any time, nor confer
upon Optionee any right to continue in the employ of the Company or any of its
Affiliates, or continue to consult or advise the Company or any of its
Affiliates.

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         10.      Modification and Termination. The rights of Optionee are
subject to modification and termination in certain events as provided in
Sections 6.1 and 6.2 of the Plan.

         11.      Restrictions on Sale of Shares. Optionee represents and agrees
that upon the Optionee's exercise of this Option, in whole or in part, unless
there is in effect at that time under the Securities Act of 1933 a registration
statement relating to the Shares issued to the Optionee, the Optionee will
acquire the Shares issuable upon exercise of this Option for the purpose of
investment and not with a view to their resale or further distribution, and that
upon such exercise thereof the Optionee will furnish to the Company a written
statement to such effect, satisfactory to the Company in form and substance.
Optionee agrees that any certificates issued upon exercise of this Option may
bear a legend indicating that their transferability is restricted in accordance
with applicable state and federal securities law. Any person or persons entitled
to exercise this Option under the provisions of Sections 6 and 7 hereof shall,
upon each exercise of this Option under circumstances in which Optionee would be
required to furnish such a written statement, also furnish to the Company a
written statement to the same effect, satisfactory to the Company in form and
substance.

         12.      Plan Governs. This Agreement and the Option evidenced hereby
are made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan, as it may be construed
by the Administrator. Optionee hereby acknowledges receipt of a copy of the
Plan.

         13.      Notices. All notices to the Company shall be addressed to the
Corporate Secretary at the principal executive office of the Company at Digital
Theater Systems, Inc., 5171 Clareton Dr., Agoura Hills, California 91301, and
all notices to Optionee shall be addressed to Optionee at the address of
Optionee on file with the Company, or to such other address as either may
designate to the other in writing. A notice shall be deemed to be duly given if
and when enclosed in a properly addressed sealed envelope deposited, postage
prepaid, with the United States Postal Service. In lieu of giving notice by mail
as aforesaid, written notices under this Agreement may be given by personal
delivery to Optionee or to the Corporate Secretary (as the case may be).

         14.      Sale or Other Disposition. If Optionee at any time
contemplates the disposition (whether by sale, gift, exchange, or other form of
transfer) of any Shares acquired by exercise of this Option, the Optionee shall
first notify the Company in writing of such proposed disposition and cooperate
with the Company in complying with all applicable requirements of law, which, in
the judgment of the Company, must be satisfied prior to such disposition.

         15.      Repurchase of Stock by Company. In the event of a Termination
of Optionee such that Optionee is no longer a director, officer, employee or
consultant of the Company or any of its Affiliates(other than a Termination as a
result of Optionee's death, permanent and total disability, or retirement past
the age of 60), the Company shall have the right, upon such Termination and for
a period of 120 days thereafter (the "Repurchase Period"), to repurchase all or
any part of the Shares acquired or to be acquired by Optionee upon exercise of
this Option and held or to be held of record by Optionee at a price equal to the
greater of (A) the fair market value of the Shares as of the date of

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Termination and (B) the exercise price paid by Optionee for such Shares. The
Company shall exercise the foregoing repurchase right by delivering a notice to
Optionee during the Repurchase Period indicating the total number of Shares the
Company is repurchasing, together with a check in an amount equal to the
repurchase price per share multiplied by the number of shares to be repurchased
(reduced by the amount of taxes (if any) which the Company is required to
withhold under federal and/or state law with respect to such Shares). The
determination by the Administrator of the repurchase price shall be conclusive.
Upon delivery of such notice and payment of the repurchase price, Optionee shall
promptly surrender the certificate(s) representing the Shares repurchased by the
Company. Whether or not Optionee surrenders such certificates, upon payment in
full by the Company of the repurchase price for the Shares on or prior to the
last day of the Repurchase Period, all Shares subject to the foregoing
repurchase notice shall automatically be cancelled on the books and records of
the Company without any further action by the Company or Optionee. Stock
certificates issued pursuant to the exercise of this Option shall bear a legend
indicating the foregoing right of the Company to repurchase the Shares held by
Optionee which legend shall state:

                  The shares evidenced by this certificate are subject to the
                  right of Digital Theater Systems, Inc. (the "Issuer") under
                  certain circumstances to repurchase all or any part of such
                  shares upon notice by Digital Theater Systems, Inc. to the
                  holder of this certificate as set forth in that certain
                  Digital Theater Systems, Inc. Incentive Stock Option
                  Agreement, a copy of which is on file at the offices of the
                  Issuer.

         16.      Forfeiture of Shares. Notwithstanding anything to the contrary
provided herein, as a condition to the receipt of Shares pursuant to the
exercise of this Option, at any time during which this Option is outstanding and
for six (6) months after any exercise of this Option or the receipt of Shares
pursuant to the exercise of this Option, Optionee agrees that Optionee's Option
and the exercise or issuance of Shares hereunder shall be rescinded, forfeited
and repaid to the Company within ten (10) days of notification by the Company,
if Optionee directly or indirectly, as agent, employee, consultant, stockholder,
partner or in any other capacity, owns, operates, manages, controls, engages in,
invests in or participates in any manner in, acts as a consultant or advisor to,
renders services for (alone or in association with any person, firm, corporation
or entity), or otherwise assists, for compensation or otherwise, any person or
entity that engages in or owns, invests in, operates, manages or controls, any
venture or enterprise that engages in any activity, involving the research,
development, licensing or sale of multi-channel (surround sound) digital audio
encoding technology for consumer applications, or involving the research,
development, licensing, manufacture or sale of multi-channel (surround sound)
digital audio coding equipment for theatrical applications (any of the
foregoing, a "Restricted Business"). The foregoing shall not apply, however, in
the event that the Optionee's responsibilities as an employee or consultant do
not involve any aspects of a Restricted Business, even if the entity itself is
engaged in a Restricted Business. Nothing contained herein shall be construed to
result in a rescinding, forfeiture or repayment of Optionee's Option or the
exercise or issuance of Shares hereunder upon Optionee's investing in the stock
of any corporation listed on a national securities exchange or traded in the
over-the-counter market that is engaged in a Restricted Business, but only if
Optionee's responsibilities at such corporation as an employee or consultant

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do not involve any aspects of a Restricted Business and if Optionee (together
with Optionee's spouse, parents, siblings, and children) does not own more than
an aggregate of five percent (5%) of the stock of such corporation. Optionee
agrees to notify the Company within ten (10) days of any action by Optionee
falling within this Section 16. The Administrator may, in its sole and absolute
discretion, waive the provisions of this Section 16.

         17.      Automatic Acceleration Upon Corporate Transaction. This Option
shall be subject to termination immediately prior to the consummation of a
Corporate Transaction as provided for in Section 6.1.2 of the Plan, provided
that the Optionee shall have the right to exercise all or any portion of this
Option prior to such termination, whether or not this Option is then fully
vested.

         18.      Employment Agreement. Any provisions of this Option Agreement
may be amended pursuant to a written employment agreement entered into between
the Company and the Optionee, so long as such employment agreement is approved
by the Administrator and is not inconsistent with any provisions of the Plan.

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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.

                                             DIGITAL THEATER SYSTEMS, INC.

                                             By: _______________________________
                                                 Name:__________________________
                                                 Title:_________________________

                                             OPTIONEE:

                                             By:________________________________

                                             Address:

                                             ___________________________________
                                             ___________________________________
                                             ___________________________________

                                             ___________________________________
                                             Social Security Number

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