Document:

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                                                                   EXHIBIT 10.16

                          DIGITAL THEATER SYSTEMS, INC.
                          RESTRICTED STOCK GRANT NOTICE
                          (2003 EQUITY INCENTIVE PLAN)

Digital Theater Systems, Inc. (the "Company"), pursuant to its 2003 Equity
Incentive Plan (the "Plan"), hereby grants to the participant under the Plan
(the "Participant") the right to purchase the number of shares of the Company's
common stock (the "Common Stock") set forth below (the "Award"). This Award is
subject to all of the terms and conditions as set forth in this Restricted Stock
Grant Notice (the "Grant Notice"), the Restricted Stock Agreement, the Plan, the
form of Assignment Separate from Certificate and the form of Joint Escrow
Instructions, all of which are attached hereto and incorporated herein in their
entirety.

Participant:

Date of Grant:

Vesting Commencement Date:

Number of Shares Subject to Award:

Purchase Price per Share:

Total Purchase Price:

Vesting Schedule:

Payment:                                     As described in the Restricted
                                             Stock Agreement, par value for the
                                             shares must be paid in cash or by
                                             check.

Additional Terms/Acknowledgements: The undersigned Participant acknowledges
receipt of, and understands and agrees to the terms and conditions of this Grant
Notice, the Restricted Stock Agreement, the Plan, the form of Assignment
Separate from Certificate and the form of Joint Escrow Instructions. Participant
further acknowledges that as of the Date of Grant, this Grant Notice, the
Restricted Stock Agreement, the Joint Escrow Instructions and the Plan set forth
the entire understanding between Participant and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements relating thereto, with the exception of other awards previously
granted and delivered to Participant under the Plan.

DIGITAL THEATER SYSTEMS, INC.                  PARTICIPANT:

By:_____________________________               By:______________________________
         Signature                                       Signature

Title:                                         Date:

Date:

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         Attachment I: Restricted Stock Agreement

         Attachment II: 2003 Equity Incentive Plan

         Attachment III: Form of Assignment Separate from Certificate

         Attachment IV: Form of Joint Escrow Instructions

         Attachment V: Election under Section 83(b) of the Code

         Attachment VI: Spousal Consent

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                                  ATTACHMENT I

                          DIGITAL THEATER SYSTEMS, INC.
                           2003 EQUITY INCENTIVE PLAN
                           RESTRICTED STOCK AGREEMENT

         THIS RESTRICTED STOCK AGREEMENT (the "Agreement"), dated ____________,
200_, is entered into by and between [Name] ("Participant") and Digital Theater
Systems, Inc., a Delaware corporation (the "Company").

                                    RECITALS

         WHEREAS, the Company has adopted the Digital Theater Systems, Inc. 2003
Equity Incentive Plan (the "Plan"), which provides for awards of restricted
stock to the Company's Employees, Consultants and Directors; and

         WHEREAS, Participant is currently serving as an Employee or Director
of, or a Consultant to, the Company; and

         WHEREAS, the Company desires to issue to Participant, and Participant
desires to acquire from the Company, shares of Common Stock, $0.0001 par value,
of the Company (the "Common Stock"), pursuant to the provisions of the Plan.

         NOW THEREFORE, in consideration of the foregoing, and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:

1.       DEFINITIONS.

         Capitalized terms not explicitly defined in this Agreement but defined
in the Plan shall have the same meanings ascribed to them in the Plan.

2.       GRANT OF AWARD.

         The Company hereby grants to Participant, pursuant to the terms of the
Restricted Stock Grant Notice (the "Grant Notice") and this Agreement
(collectively, the "Award"), the right to acquire the number of shares of Common
Stock indicated in the Grant Notice (the "Shares").

3.       AGREEMENT TO PURCHASE.

         Participant hereby agrees to purchase from the Company, and the Company
hereby agrees to sell to Participant, the aggregate number of Shares of Common
Stock specified in the Grant Notice at the specified Purchase Price per Share.
Participant may not purchase less than the aggregate number of Shares specified
in the Grant Notice.

4.       PAYMENT.

         Payment of the Total Purchase Price shall be made as follows:

                  Cash or check................................. $__________

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5.       DELIVERY OF TOTAL PURCHASE PRICE AND DOCUMENTS.

         The purchase and sale of the Shares shall be consummated as follows:

         5.1      Participant may purchase the Shares by delivering the cash for
the Total Purchase Price referenced in the Grant Notice to the Secretary of the
Company, or to such other person as the Company may designate, during regular
business hours, on the date Participant executes the Grant Notice (or at such
other time and place as Participant and the Company may mutually agree upon in
writing), along with such additional documents as the Company may then require.

         5.2      Participant agrees to execute three (3) copies of the
Assignment Separate from Certificate (with date and number of shares blank)
substantially in the form attached to the Grant Notice as Attachment III and to
execute Joint Escrow Instructions substantially in the form attached to the
Grant Notice as Attachment IV and to deliver the same in accordance with Section
10 below. Participant shall also deliver to the Company a signed spousal consent
substantially in the form attached hereto as Attachment VI if he or she is
married on the Date of Grant set forth in the Grant Notice.

6.       VESTING.

         Subject to the limitations contained herein, the Shares purchased by
Participant shall vest as provided in the Grant Notice, provided, however, that
vesting shall cease upon the Termination of Participant's service as an
Employee, Director or Consultant.

7.       SECURITIES LAW COMPLIANCE.

         Notwithstanding anything to the contrary contained herein, Participant
may not purchase any Shares under the Award unless the Shares are then
registered under the Securities Act or, if such Shares are not then so
registered, the Company has determined that such purchase and issuance would be
exempt from the registration requirements of the Securities Act. The purchase of
Shares also must comply with other applicable laws and regulations governing
such Award, and Participant may purchase such Shares if the Company determines
that such purchase would not be in material compliance with such laws and
regulations.

8.       RIGHT OF REACQUISITION.

         In the event of the Termination of Participant's service as an Employee
or Director of, or a Consultant to, the Company, the Company shall have a right
to reacquire (the "Reacquisition Rights") the Shares received pursuant to an
Award that have not yet vested in accordance with the Vesting Schedule in the
Grant Notice (the "Unvested Shares"). The Company shall, simultaneously with
Participant's Termination of service, as an Employee, Director or Consultant,
automatically reacquire all of the Unvested Shares for the original purchase
price thereof paid by the Participant unless the Company agrees to waive its
Reacquisition Rights to any or all of the Unvested Shares. Any such waiver shall
be exercised by the Company by written notice to Participant or his or her
representative (with a copy to the Escrow Agent) within 30 days after
Participant's Termination. If the Company does not waive its Reacquisition
Rights to any or all of the Unvested Shares, the Escrow Agent shall be notified
accordingly and instructed to return the Unvested Shares to the Company for
cancellation.

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9.       CORPORATE TRANSACTIONS.

         In the event of a Fundamental Transaction or Change in Control pursuant
to Section 10.3 or Section 10.4 of the Plan, the Reacquisition Rights may be
assigned by the Company to the successor of the Company (or such successor's
parent company), if any, in connection with such corporate transaction. To the
extent the Reacquisition Rights remains in effect following such corporate
transaction, it shall apply to the new capital stock or other property received
in exchange for the Common Stock in consummation of the corporate transaction,
but only to the extent the Common Stock was at the time covered by such right.

10.      ESCROW OF UNVESTED COMMON STOCK.

         As security for Participant's faithful performance of the terms of this
Agreement and to insure the availability for delivery of Participant's Common
Stock upon execution of the Reacquisition Rights herein provided for,
Participant agrees, concurrently herewith, to deliver to and deposit with the
Secretary of the Company or the Secretary's designee (the "Escrow Agent"), as
Escrow Agent in this transaction, the certificate or certificates evidencing the
Shares and three (3) executed blank forms of Assignment Separate from
Certificate in the form attached to the Grant Notice as Attachment III. Such
documents will be held by the Escrow Agent and delivered by the Escrow Agent
pursuant to the Joint Escrow Instructions delivered to the Escrow Agent
concurrently herewith.

11.      RIGHTS AS STOCKHOLDER.

         Subject to the provisions of this Agreement, Participant shall exercise
all rights and privileges of a stockholder of the Company with respect to the
Shares deposited in escrow. Participant shall be deemed to be the holder of the
Shares for purposes of receiving any dividends that may be paid with respect to
such Shares and for purposes of exercising any voting rights relating to such
Shares, even if some or all of the Shares have not yet vested and been released
from the Company's Reacquisition Rights.

12.      LIMITATIONS ON TRANSFER.

         In addition to any other limitation on transfer created by applicable
securities laws, Participant agrees not to sell, assign, hypothecate, donate,
encumber or otherwise dispose of any interest in the Shares, except by will or
by the laws of descent and distribution, while the Shares are subject to the
Reacquisition Rights.

13.      RESTRICTIVE LEGENDS.

         The stock certificates evidencing the Shares issued under the Award
shall bear appropriate legends determined by the Company.

14.      AWARD NOT A SERVICE CONTRACT.

         The Award is not an employment or service contract, and nothing in the
Award shall be deemed to create in any way whatsoever any obligation on the
Company or an Affiliate to continue Participant's employment or service. In
addition, nothing in the Award shall obligate

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the Company or an Affiliate, their respective stockholders, Boards of Directors,
officers or Employees to continue any relationship that Participant may have as
an Employee or Director of, or a Consultant to, the Company or an Affiliate.

15.      WITHHOLDING OBLIGATIONS.

         15.1     At the time the Award is granted, or at any time thereafter as
requested by the Company, Participant authorizes withholding from payroll and
any other amounts payable to Participant, and otherwise agrees to make adequate
provision for, any sums required to satisfy the federal, state, local and
foreign tax withholding obligations of the Company or an Affiliate, if any,
which arise in connection with the Award.

         15.2     Unless the tax withholding obligations of the Company or any
Affiliate are satisfied, the Company shall have no obligation to issue a
certificate for any of the Shares or release the Shares from any escrow provided
for herein.

16.      SECTION 83(b) ELECTION.

         Participant hereby acknowledges that he or she has been informed that,
with respect to the grant of the Shares, an election may be filed by Participant
with the Internal Revenue Service, within 30 days of the Date of Grant, electing
pursuant to Section 83(b) of the Code to be taxed currently on the fair market
value of the unvested Shares on the Date of Grant. A form of such election is
attached hereto as Attachment V.

PARTICIPANT ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY AND NOT
THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN
IF PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON
PARTICIPANT'S BEHALF.

17.      REPRESENTATIONS.

         Participant has reviewed with his or her own tax advisors the federal,
state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. Participant is relying solely on
such advisors and not on any statements or representations of the Company or any
of its agents. Participant understands that he or she (and not the Company)
shall be responsible for any tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.

18.      NOTICES.

         Any notices provided for in the Award or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by mail by the Company to Participant, five (5) days after
deposit in the United States mail, postage prepaid, addressed to Participant at
the last address provided by Participant to the Company.

19.      SURVIVAL OF TERMS.

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         This Agreement shall apply to and bind Participant and the Company and
their respective permitted assignees and transferees, heirs, legatees,
executors, administrators and legal successors.

20.      FAILURE TO ENFORCE NOT A WAIVER.

         The failure of the Company to enforce at any time any provision of this
Agreement shall in no way be construed to be a waiver of such provision or of
any other provision hereof.

21.      AMENDMENTS.

         This Agreement may be amended or modified at any time only by an
instrument in writing signed by each of the parties hereto.

22.      AUTHORITY OF THE COMMITTEE.

         The Committee shall have full authority to interpret and construe the
terms of this Agreement. The determination of the Committee as to any such
matter of interpretation or construction shall be final, binding and conclusive.

23.      MISCELLANEOUS.

         23.1     The rights and obligations of the Company under Participant's
Award shall be transferable to any one or more persons or entities, and all
covenants and agreements hereunder shall inure to the benefit of, and be
enforceable by the Company's successors and assigns.

         23.2     Participant agrees upon request to execute any further
documents or instruments necessary or desirable in the sole determination of the
Company to carry out the purposes or intent of the Award.

         23.3     Participant acknowledges and agrees that he or she has
reviewed the Award in its entirety, has had an opportunity to obtain the advice
of counsel prior to executing and accepting the Award and fully understands all
provisions of the Award.

         23.4     This Agreement may be signed in counterparts, each of which
shall be deemed an original, and all of which together shall constitute one and
the same instrument.

24.      GOVERNING PLAN DOCUMENT.

         The Award is subject to all the provisions of the Plan, the provisions
of which are hereby made a part of Participant's Award, and is further subject
to all interpretations, amendments, rules and regulations which may from time to
time be promulgated and adopted pursuant to the Plan. In the event of any
conflict between the provisions of the Award and those of the Plan, the
provisions of the Plan shall control. Participant represents that he or she has
read this Agreement, the Grant Notice and the Plan, and is familiar with their
terms and provisions. Participant hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Committee upon any questions
arising under this Agreement.

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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.

DIGITAL THEATER SYSTEMS, INC.                [PARTICIPANT'S NAME]

By: _____________________________            By:________________________________
            Signature                                     Signature

Name: ___________________________

Title: __________________________

                 [SIGNATURE PAGE TO RESTRICTED STOCK AGREEMENT]

<PAGE>

                                  ATTACHMENT II
                           2003 EQUITY INCENTIVE PLAN

<PAGE>

                                 ATTACHMENT III
                      ASSIGNMENT SEPARATE FROM CERTIFICATE

         For Value Received and pursuant to that certain Restricted Stock Grant
Notice and Restricted Stock Agreement (the "Award"), _____________ hereby sells,
assigns and transfers unto Digital Theater Systems, Inc., a Delaware corporation
("Assignee") ________________________ (__________) shares of the Common Stock of
the Assignee, standing in the undersigned's name on the books of said
corporation represented by Certificate No. _____ herewith and do hereby
irrevocably constitute and appoint the Company's Secretary as attorney-in-fact
to transfer the said stock on the books of the within named Company with full
power of substitution in the premises. This Assignment may be used only in
accordance with and subject to the terms and conditions of the Award, in
connection with the reacquisition of shares of Common Stock of the Corporation
issued to the undersigned pursuant to the Award, and only to the extent that
such shares remain subject to the Corporation's Reacquisition Rights under the
Award.

Dated:____________________________

       Signature:_________________

       ________________, Recipient

Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this Assignment is to enable execution of the Company's Reacquisition
Rights set forth in the Award without requiring additional signatures on your
part.

<PAGE>

                                  ATTACHMENT IV
                            JOINT ESCROW INSTRUCTIONS

Date:_________________

Secretary
Digital Theater Systems, Inc.
5171 Clarenton Drive
Angoura Hills, CA 91301

Dear Sir/Madam:

         As Escrow Agent for both Digital Theater Systems, Inc., a Delaware
corporation (the "Company"), and the undersigned recipient of stock of the
Company ("Recipient"), you are hereby authorized and directed to hold the
certificate or certificates evidencing the shares of the Company's Common Stock
(the "Shares"), granted under an Award issued pursuant to the Company's 2003
Equity Incentive Plan (the "Plan") and the documents delivered to you pursuant
to that certain Restricted Stock Grant Notice (the "Grant Notice"), dated
_______________, 20___ and Restricted Stock Agreement (the "Agreement") of the
same date, in accordance with the following instructions:

1.       In the event Recipient's service as an employee or director of, or a
consultant to, the Company is terminated, under circumstances set forth in
Section 8 of the Agreement, the Company or its assignee will deliver to
Recipient and you a written notice specifying that the certificate or
certificates evidencing the Shares shall be transferred to the Company for
cancellation or further transfer pursuant to any waiver of Reacquisition Rights
pursuant to Section 8 of the Agreement. Recipient and the Company hereby
irrevocably authorize and direct you to complete such transfer in accordance
with the terms of such notice.

2.       In order to complete the share transfer, you are specifically directed
(a) to date any forms of Assignments Separate from Certificate in your
possession necessary for the transfer, (b) to insert the number of Shares being
transferred in such forms, and (c) to deliver same, together with the
certificate or certificates evidencing the Shares to the Company.

3.       Recipient irrevocably authorizes the Company to deposit with you any
certificates registered in his/her name evidencing the Shares and any additions
to and substitutions for the Shares as specified in the Grant Notice. Recipient
hereby irrevocably constitutes and appoints you as Recipient's attorney-in-fact
and agent for the term of this escrow to execute with respect to such securities
and other property all documents of assignment and/or transfer and all stock
certificates necessary or appropriate to make all securities negotiable and
complete any transaction herein contemplated.

4.       This escrow shall terminate upon vesting of the Shares or upon the
earlier return of the Shares to the Company.

5.       If at the time of termination of this escrow you have in your
possession any documents, securities, or other property belonging to Recipient,
you shall deliver all of same to Recipient or

<PAGE>

his or her permitted assigns or representatives and shall be discharged of all
further obligations hereunder.

6.       Your duties hereunder may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.

7.       You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties or
their assignees. You shall not be personally liable for any act you may do or
omit to do hereunder as Escrow Agent or as attorney-in-fact for Recipient while
acting in good faith and any act done or omitted by you pursuant to the advice
of your own attorneys shall be conclusive evidence of such good faith.

8.       You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.

9.       You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Grant Notice or any documents or papers deposited or
called for hereunder.

10.      You shall not be liable for the loss of any rights under any statute of
limitations with respect to these Joint Escrow Instructions or any documents
deposited with you.

11.      You shall be entitled to employ such legal counsel, including but not
limited to the Company's counsel, and other experts as you may deem necessary to
advise you in connection with your obligations hereunder, may rely upon the
advice of such counsel, and may pay such counsel reasonable compensation
therefor.

12.      Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an employee of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the Company may
appoint any officer or assistant officer of the Company as successor Escrow
Agent and Recipient hereby confirms the appointment of such successor or
successors as his attorney-in-fact and agent to the full extent of your
appointment.

13.      If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

14.      It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the Shares, you may
(but are not obligated to) retain in your possession without liability to anyone
all or any part of such securities until such dispute

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shall have been settled either by mutual written agreement of the parties
concerned or by a final order, decree or judgment of a court of competent
jurisdiction after the time for appeal has expired and no appeal has been
perfected, but you shall be under no duty whatsoever to institute or defend any
such proceedings.

15.      Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
any United States Post Box, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties hereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
(10) days' written notice to each of the other parties hereto:

  Company:                 Digital Theater Systems, Inc.
                           5171 Clarenton Drive
                           Angoura Hills, CA 91301
                           Attn: President & Chief Executive Officer

  Recipient:               [Insert Recipient's Name]
                           Insert Address
                           Insert Address

  Escrow Agent:            Digital Theater Systems, Inc.
                           5171 Clarenton Drive
                           Angoura Hills, CA 91301

16.      By signing these Joint Escrow Instructions you become a party hereto
only for the purpose of the Joint Escrow Instructions; you do not become a party
to the Grant Notice.

17.      All of your costs and expenses, including without limitation attorneys
fees and disbursements and the fees and expenses of other advisors, incurred in
performing your duties as Escrow Agent hereunder should be promptly paid by the
Company upon submission of appropriate documentation.

18.      This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns. It is
understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Company may at any time or from time to time
assign its rights under the Grant Notice and these Joint Escrow Instructions in
whole or in part.

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<PAGE>

Very truly yours,

       DIGITAL THEATER SYSTEMS, INC.             RECIPIENT _____________________

       By: _________________________             By: ___________________________

       Print Name:__________________             Print Name:____________________

       Title: ______________________             Title: ________________________

       ESCROW AGENT:________________

       By:__________________________

       Print Name:__________________

       Title:_______________________

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<PAGE>

                                  ATTACHMENT V

                          ELECTION UNDER SECTION 83(b)
                      OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with taxpayer's receipt of the property described below:

1. The name address, taxpayer identification number and taxable year of the
undersigned are as follows:

NAME OF TAXPAYER: ___________________________________________________

NAME OF SPOUSE: _____________________________________________________

ADDRESS: ____________________________________________________________

IDENTIFICATION NO. OF TAXPAYER: _____________________________________

IDENTIFICATION NO. OF SPOUSE: _______________________________________

TAXABLE YEAR: _______________________

2. The property with respect to which the election is made is described as
follows: _______ shares (the "Shares") of the Common Stock of Digital Theater
Systems, Inc. (the "Company").

3. The date on which the property was transferred is: __________, 200_.

4. The property is subject to the following restrictions:

The Shares may not be transferred and are subject to forfeiture under the terms
of an agreement between the taxpayer and the Company. These restrictions lapse
upon the satisfaction of certain conditions in such agreement.

5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never lapse, of
such property is: $ ______________.

6. The amount paid for such property is: $ ______________.

The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.

<PAGE>

THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.

Dated: _________________, 200_ _______________________________
                                           Taxpayer

The undersigned spouse of taxpayer joins in this election.

Dated: _________________, 200_ _______________________________
                                       Spouse of Taxpayer

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                                  ATTACHMENT VI
                                 SPOUSAL CONSENT

                                CONSENT OF SPOUSE

         I, _____________________, spouse of ____________________, have read and
hereby approve the Digital Theater Systems, Inc. (the "Company") Restricted
Stock Grant Notice, dated _____________, and all attachments thereto (the
"Agreement"). In consideration of the granting of securities to my spouse as set
forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact with
respect to the exercise of any rights under the Agreement and agree to be bound
by the provisions of the Agreement insofar as I may have any rights in said
Agreement, or any securities issued thereunder, under the community property
laws or similar laws relating to marital property in effect in our state of
residence as of the date of execution of the Agreement.

Dated:______________________                   Signature:_______________________<PAGE>

                                                                   EXHIBIT 10.17

                          DIGITAL THEATER SYSTEMS, INC.
                        2003 EMPLOYEE STOCK PURCHASE PLAN

                            As Adopted April 17, 2003

         1.       ESTABLISHMENT OF PLAN.

         Digital Theater Systems, Inc. (the "COMPANY") proposes to grant options
for purchase of the Company's Common Stock (the "COMMON STOCK") to eligible
employees of the Company and its Participating Subsidiaries (as hereinafter
defined) pursuant to this 2003 Employee Stock Purchase Plan (this "PLAN"). For
the purposes of this Plan, "Parent Corporation" and "Subsidiary" shall have the
same meanings as "parent corporation" and "subsidiary corporation" in Sections
424(e) and 424(f), respectively, of the Internal Revenue Code of 1986, as
amended (the "CODE"). "Participating Subsidiaries" are Parent Corporations or
Subsidiaries that the Board of Directors of the Company (the "BOARD") designates
from time to time as corporations that shall participate in this Plan. The
Company intends this Plan to qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments to or replacements of such
Section), and this Plan shall be so construed. Any term not expressly defined in
this Plan but defined for purposes of Section 423 of the Code shall have the
same definition herein.

         2.       NUMBER OF SHARES.

         The total number of shares of Common Stock initially reserved and
available for issuance pursuant to this Plan shall be 500,000 (the "SHARE
LIMIT"), subject to adjustments effected in accordance with Section 15 of this
Plan. Notwithstanding the foregoing and subject to Section 15, the Share Limit
shall automatically increase on January 1, 2004 and January 1 of each year
thereafter until and including January 1, 2013 (unless the Plan is terminated
earlier in accordance with the provisions hereof) by the "ANNUAL INCREASE" which
shall consist of a number of shares equal to the least of (i) 500,000, (ii) one
percent (1%) of the number of shares of all classes of common stock of the
Company outstanding on that date, or (iii) a lesser number determined by the
Committee, (as hereinafter defined) prior to such January 1, provided, however,
that the total number of shares available for issuance under the Plan shall not
exceed the initial Share Limit plus the maximum potential cumulative Annual
Increase. The Share Limit shall be reduced by the number of shares issued under
the Digital Theater Systems, Inc. 2003 Foreign Subsidiary Employee Stock
Purchase Plan (the "FOREIGN PLAN"). Shares issued under this Plan may consist,
in whole or in part, of authorized and unissued shares or treasury shares
reacquired in private transactions or open market purchases, but all shares
issued under this Plan and the Foreign Plan shall be counted against the Share
Limit.

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<PAGE>

         3.       PURPOSE.

         The purpose of this Plan is to provide eligible employees of the
Company and Participating Subsidiaries with a convenient means of acquiring an
equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment. For the purposes of this Plan, "employee" shall mean any individual
who is an employee of the Company or a Participating Subsidiary. Whether an
individual qualifies as an employee shall be determined by the Committee, in its
sole discretion. The Committee shall be guided by the provisions of Treasury
Regulation Section 1.421-7 and Section 3401(c) of the Code and the Treasury
Regulations thereunder, with the intent that the Plan cover all "employees"
within the meaning of those provisions other than those who are not eligible to
participate in the Plan, provided, however, that any determinations regarding
whether an individual is an "employee" shall be prospective only, unless
otherwise determined by the Committee (as hereinafter defined). Unless the
Committee makes a contrary determination, the employees of the Company shall,
for all purposes of this Plan, be those individuals who are carried as employees
of the Company or a Participating Subsidiary for regular payroll purposes or are
on a leave of absence for not more than 90 days. Any inquiries regarding
eligibility to participate in the Plan shall be directed to the Committee, whose
decision shall be final.

         4.       ADMINISTRATION.

         This Plan shall be administered by the Compensation Committee of the
Board (the "COMMITTEE"). Subject to the provisions of this Plan and the
limitations of Section 423 of the Code or any successor provision in the Code,
all questions of interpretation or application of this Plan shall be determined
by the Committee and its decisions shall be final and binding upon all
participants. Members of the Committee shall receive no compensation for their
services in connection with the administration of this Plan, other than standard
fees as established from time to time by the Board for services rendered by
Board members serving on Board committees. All expenses incurred in connection
with the administration of this Plan shall be paid by the Company.

         5.       ELIGIBILITY.

         Any employee of the Company or the Participating Subsidiaries is
eligible to participate in an Offering Period (as hereinafter defined) under
this Plan except the following:

                  (a)      employees who are not employed by the Company or a
Participating Subsidiary prior to the beginning of such Offering Period or prior
to such other time period as specified by the Committee, except that employees
who are employed on the effective date of the registration statement filed by
the Company with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the

<PAGE>

"SECURITIES ACT") registering the initial public offering of the Company's
Common Stock shall be eligible to participate in the first Offering Period under
the Plan;

                  (b)      employees who are customarily employed for twenty
(20) hours or less per week;

                  (c)      employees who are customarily employed for five (5)
months or less in a calendar year;

                  (d)      employees who, together with any other person whose
stock would be attributed to such employee pursuant to Section 424(d) of the
Code, own stock or hold options to purchase stock possessing five percent (5%)
or more of the total combined voting power or value of all classes of stock of
the Company or any of its Participating Subsidiaries or who, as a result of
being granted an option under this Plan with respect to such Offering Period,
would own stock or hold options to purchase stock possessing five percent (5%)
or more of the total combined voting power or value of all classes of stock of
the Company or any of its Participating Subsidiaries;

                  (e)      individuals who provide services to the Company or
any of its Participating Subsidiaries as independent contractors who are
reclassified as common law employees for any reason except for federal income
and employment tax purposes; and

                  (f)      employees who reside in countries for whom such
employees' participation in the Plan would result in a violation under any
corporate or securities laws of such country of residence.

         6.       OFFERING DATES.

         The offering periods of this Plan (each, an "OFFERING PERIOD") shall be
of twenty-four (24) months duration commencing on May 10 and November 10 of each
year and ending on May 9 and November 9 of each year; provided, however, that
the first such Offering Period shall commence on the first business day on which
price quotations for the Company's Common Stock are available on the Nasdaq
National Market (the "FIRST OFFERING DATE") and shall end on [______], 2004 (the
"FIRST OFFERING PERIOD"). Except for the First Offering Period, each Offering
Period shall consist of four (4) six month purchase periods (individually, a
"PURCHASE PERIOD") during which payroll deductions of the participants are
accumulated under this Plan. The First Offering Period shall consist of no more
than five and no fewer than three Purchase Periods, any of which may be greater
or less than six months as determined by the Committee. The first business day
of each Offering Period is referred to as the "OFFERING DATE." The last business
day of each Purchase Period is referred to as the "PURCHASE DATE." The Committee
shall have the power to change the Offering Dates, the Purchase Dates and the
duration of Offering Periods or Purchase Periods without stockholder approval if
such change is announced

<PAGE>

prior to the relevant Offering Period or prior to such other time period as
specified by the Committee.

         7.       PARTICIPATION IN THIS PLAN.

         Eligible employees may become participants in an Offering Period under
this Plan on the Offering Date, after satisfying the eligibility requirements,
by delivering a subscription agreement to the Company prior to such Offering
Date, or such other time period as specified by the Committee, provided,
however, that all eligible employees employed on or before the First Offering
Date shall be automatically enrolled in the First Offering Period.
Notwithstanding the foregoing, (i) an eligible employee may elect to decrease
the number of shares of Common Stock that such employee would otherwise be
permitted to purchase pursuant to Section 8 below for the First Offering Period
and/or purchase shares of Common Stock for the First Offering Period through
payroll deductions by delivering a subscription agreement to the Company within
thirty (30) days following the First Offering Date after the filing of an
effective registration statement pursuant to Form S-8, and (ii) the Committee
may set a later time for filing the subscription agreement authorizing payroll
deductions for all eligible employees with respect to a given Offering Period.
Except as provided above with respect to the First Offering Period, an eligible
employee who does not deliver a subscription agreement to the Company after
becoming eligible to participate in an Offering Period shall not participate in
that Offering Period or any subsequent Offering Period unless such employee
enrolls in this Plan by filing a subscription agreement with the Company prior
to such Offering Period, or such other time period as specified by the
Committee. Once an employee becomes a participant in an Offering Period by
filing a subscription agreement, such employee shall automatically participate
in the Offering Period commencing immediately following the last day of the
prior Offering Period unless the employee withdraws or is deemed to withdraw
from this Plan or terminates further participation in the Offering Period as set
forth in Section 12 below. Such participant is not required to file any
additional subscription agreement in order to continue participation in this
Plan.

         8.       GRANT OF OPTION ON ENROLLMENT.

         Enrollment by an eligible employee in this Plan with respect to an
Offering Period shall constitute the grant (as of the Offering Date) by the
Company to such employee of an option to purchase on the Purchase Date up to
that number of shares of Common Stock determined by a fraction, the numerator of
which is the amount accumulated in such employee's payroll deduction account
during such Purchase Period and the denominator of which is the lower of (i)
eighty-five percent (85%) of the fair market value of a share of the Company's
Common Stock on the Offering Date (but in no event less than the par value of a
share Common Stock), or (ii) eighty-five percent (85%) of the fair market value
of a share of Common Stock on the Purchase Date (but in no event less than the
par value of a share of the Company's Common Stock), provided, however, that

<PAGE>

for each Purchase Period within the First Offering Period the numerator shall be
fifteen percent (15%) of the eligible employee's compensation for such Purchase
Period, unless the employee otherwise elected to decrease the percentage of such
employee's compensation, and provided, further, that the number of shares of
Common Stock subject to any option granted pursuant to this Plan shall not
exceed the lesser of (x) the maximum number of shares set by the Committee
pursuant to Section 11(c) below with respect to the applicable Purchase Date, or
(y) the maximum number of shares which may be purchased pursuant to Section
11(b) below with respect to the applicable Purchase Date. The fair market value
of a share of the Company's Common Stock shall be determined as provided in
Section 9 below.

         9.       PURCHASE PRICE.

         The purchase price per share at which a share of Common Stock shall be
sold in any Offering Period shall be eighty-five percent (85%) of the lesser of:

                  (a)      the fair market value on the Offering Date; or

                  (b)      the fair market value on the Purchase Date.

         For the purposes of this Plan, the term "FAIR MARKET VALUE" means, as
of any date, the value of a share of the Company's Common Stock determined as
follows:

                  (a)      if such Common Stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;

                  (b)      if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing price on the date of
determination on the principal national securities exchange on which the Common
Stock is listed or admitted to trading as reported in The Wall Street Journal;
or

                  (c)      if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and asked prices on
the date of determination as reported in The Wall Street Journal.

         Notwithstanding the foregoing, for purposes of the First Offering Date,
fair market value shall be the price per share at which shares of the Company's
Common Stock are initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's Common Stock
pursuant to a registration statement filed with the SEC under the Securities
Act.

<PAGE>

         10.      PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS;
ISSUANCE OF SHARES.

                  (a)      The purchase price of the shares is accumulated by
regular payroll deductions made during each Offering Period, provided, however,
that for the First Offering Period, the purchase price of the shares shall be
paid by the eligible employee in cash on each Purchase Date within the First
Offering Period unless the eligible employee elects to purchase such shares
through payroll deductions, after the filing of an effective Form S-8
registration statement pursuant to the second sentence of Section 7 above,
within thirty (30) days following the First Offering Period. The deductions are
made as a percentage of the participant's compensation in one percent (1%)
increments, not less than one percent (1%), nor greater than fifteen percent
(15%), or such lower limit set by the Committee. Compensation shall mean all W-2
cash compensation, including, but not limited to, base salary, wages, bonuses,
incentive compensation, commissions, overtime, shift premiums, plus draws
against commissions, provided, however that compensation shall not include any
long term disability or workmens compensation payments, car allowances,
relocation payments or expense reimbursements and further provided, however,
that for purposes of determining a participant's compensation, any election by
such participant to reduce his or her regular cash remuneration under Sections
125 or 401(k) of the Code shall be treated as if the participant did not make
such election. Payroll deductions shall commence on the first payday of the
Offering Period and shall continue to the end of the Offering Period unless
sooner altered or terminated as provided in this Plan.

                  (b)      A participant may increase or decrease the rate of
payroll deductions during an Offering Period by filing with the Company a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing after the Company's receipt of
the authorization and shall continue for the remainder of the Offering Period
unless changed as described below. Such change in the rate of payroll deductions
may be made at any time during an Offering Period, but not more than one (1)
change may be made effective during any Purchase Period. A participant may
increase or decrease the rate of payroll deductions for any subsequent Offering
Period by filing with the Company a new authorization for payroll deductions
prior to the beginning of such Offering Period, or such other time period as
specified by the Committee.

                  (c)      A participant may reduce his or her payroll deduction
percentage to zero during an Offering Period by filing with the Company a
request for cessation of payroll deductions. Such reduction shall be effective
beginning with the next payroll period after the Company's receipt of the
request and no further payroll deductions shall be made for the duration of the
Offering Period. Payroll deductions credited to the participant's account prior
to the effective date of the request shall be used to purchase shares of Common
Stock of the Company in accordance with Section (e) below. A

<PAGE>

participant may not resume making payroll deductions during the Offering Period
in which he or she reduced his or her payroll deductions to zero.

                  (d)      All payroll deductions made for a participant are
credited to his or her account under this Plan and are deposited with the
general funds of the Company. No interest accrues on the payroll deductions. All
payroll deductions received or held by the Company may be used by the Company
for any corporate purpose, and the Company shall not be obligated to segregate
such payroll deductions.

                  (e)      On each Purchase Date, for so long as this Plan
remains in effect and provided that the participant has not submitted a signed
and completed withdrawal form before that date, which notifies the Company that
the participant wishes to withdraw from that Offering Period under this Plan and
have all payroll deductions accumulated in the account maintained on behalf of
the participant, as of that date returned to the participant, the Company shall
apply the funds then in the participant's account to the purchase of whole
shares of Common Stock reserved under the option granted to such participant
with respect to the Offering Period to the extent that such option is
exercisable on the Purchase Date. The purchase price per share shall be as
specified in Section 9 of this Plan. Any cash remaining in a participant's
account after such purchase of shares shall be refunded to such participant in
cash, without interest, provided, however, that any amount remaining in such
participant's account on a Purchase Date which is less than the amount necessary
to purchase a full share of Common Stock shall be carried forward, without
interest, into the next Purchase Period or Offering Period, as the case may be.
In the event that this Plan has been oversubscribed, all funds not used to
purchase shares on the Purchase Date shall be returned to the participant,
without interest. No Common Stock shall be purchased on a Purchase Date on
behalf of any employee whose participation in this Plan has terminated prior to
such Purchase Date.

                  (f)      As soon as practicable after the Purchase Date, the
Company shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.

                  (g)      During a participant's lifetime, his or her option to
purchase shares hereunder is exercisable only by him or her. The participant
shall have no interest or voting rights in shares covered by his or her option
until such option has been exercised.

         11.      LIMITATIONS ON SHARES TO BE PURCHASED.

                  (a)      No participant shall be entitled to purchase stock
under this Plan at a rate which, when aggregated with his or her rights to
purchase stock under all other employee stock purchase plans of the Company or
any Subsidiary, exceeds $25,000 in fair market value, determined as of the
Offering Date (or such other limit as may be imposed by the Code) for each
calendar year in which the employee participates in this Plan. The Company shall
automatically suspend the payroll deductions of any participant

<PAGE>

as necessary to enforce such limit provided that when the Company automatically
resumes such payroll deductions, the Company must apply the rate in effect
immediately prior to such suspension.

                  (b)      No participant shall be entitled to purchase more
than the Maximum Share Amount (as defined below) on any single Purchase Date.
Prior to the commencement of any Offering Period or prior to such time period as
specified by the Committee, the Committee may, in its sole discretion, set a
maximum number of shares which may be purchased by any employee at any single
Purchase Date (hereinafter the "MAXIMUM SHARE AMOUNT"). The Maximum Share Amount
shall be 2,500 shares. If a new Maximum Share Amount is set, then all
participants must be notified of such Maximum Share Amount prior to the
commencement of the next Offering Period. The Maximum Share Amount shall
continue to apply with respect to all succeeding Purchase Dates and Offering
Periods unless revised by the Committee as set forth above.

                  (c)      If the number of shares to be purchased on a Purchase
Date by all employees participating in this Plan exceeds the number of shares
then available for issuance under this Plan, then the Company shall make a pro
rata allocation of the remaining shares in as uniform a manner as shall be
reasonably practicable and as the Committee shall determine to be equitable. In
such event, the Company shall give written notice of such reduction of the
number of shares to be purchased under a participant's option to each
participant affected.

                  (d)      Any payroll deductions accumulated in a participant's
account which are not used to purchase stock due to the limitations in this
Section 11 shall be returned to the participant as soon as practicable after the
end of the applicable Purchase Period, without interest.

         12.      WITHDRAWAL.

                  (a)      Each participant may withdraw from an Offering Period
under this Plan by signing and delivering to the Company a written notice to
that effect on a form provided for such purpose. Such withdrawal may be elected
at any time prior to the end of an Offering Period, or such other time period as
specified by the Committee.

                  (b)      Upon withdrawal from this Plan, the accumulated
payroll deductions shall be returned to the withdrawn participant, without
interest, and his or her interest in this Plan shall terminate. In the event a
participant voluntarily elects to withdraw from this Plan, he or she may not
resume his or her participation in this Plan during the same Offering Period,
but he or she may participate in any Offering Period under this Plan which
commences on a date subsequent to such withdrawal by filing a new authorization
for payroll deductions in the same manner as set forth in Section 7 above for
initial participation in this Plan.

<PAGE>

                  (c)      If the Fair Market Value on the first day of the
current Offering Period in which a participant is enrolled is higher than the
Fair Market Value on the first day of any subsequent Offering Period, the
Company shall automatically enroll such participant in the subsequent Offering
Period. Any funds accumulated in a participant's account prior to the first day
of such subsequent Offering Period shall be applied to the purchase of shares on
the Purchase Date immediately prior to the first day of such subsequent Offering
Period, if any.

         13.      TERMINATION OF EMPLOYMENT.

         Termination of a participant's employment for any reason, including
retirement, death or the failure of a participant to remain an eligible employee
of the Company or of a Participating Subsidiary, shall immediately terminate his
or her participation in this Plan. In such event, the payroll deductions
credited to the participant's account shall be returned to him or her or, in the
case of his or her death, to his or her legal representative, without interest.
For purposes of this Section 13, an employee shall not be deemed to have
terminated employment or failed to remain in the continuous employ of the
Company or of a Participating Subsidiary in the case of sick leave, military
leave, or any other leave of absence approved by the Board, provided, however
that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.

         14.      RETURN OF PAYROLL DEDUCTIONS.

         In the event a participant's interest in this Plan is terminated by
withdrawal, termination of employment or otherwise, or in the event this Plan is
terminated by the Board, the Company shall deliver to the participant all
payroll deductions credited to such participant's account. No interest shall
accrue on the payroll deductions of a participant in this Plan.

         15.      CAPITAL CHANGES.

         Subject to any required action by the stockholders of the Company, the
number and type of shares of Common Stock covered by each option under this Plan
which has not yet been exercised and the number and type of shares of Common
Stock which have been authorized for issuance under this Plan, including the
Annual Increase, but have not yet been placed under option (collectively, the
"RESERVES"), as well as the price per share of Common Stock covered by each
option under this Plan which has not yet been exercised, shall be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock of the Company resulting from a stock
split or the payment of a stock dividend (but only on the Common Stock), any
other increase or decrease in the number of issued and outstanding shares of
Common Stock effected without receipt of any consideration by the Company or
other change in the corporate structure or capitalization affecting the
Company's present Common Stock,

<PAGE>

provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Committee, whose determination shall be
final, binding and conclusive. Except as expressly provided herein, no issue by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.

         In the event of the proposed dissolution or liquidation of the Company,
the Offering Period shall terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Committee. The Committee
may, in the exercise of its sole discretion in such instances, declare that this
Plan shall terminate as of a date fixed by the Committee and give each
participant the right to purchase shares under this Plan prior to such
termination. In the event of (i) a merger or consolidation in which the Company
is not the surviving corporation (other than a merger or consolidation with a
wholly-owned subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial change in
the stockholders of the Company or their relative stock holdings and the options
under this Plan are assumed, converted or replaced by the successor corporation,
which assumption shall be binding on all participants), (ii) a merger in which
the Company is the surviving corporation but after which the stockholders of the
Company immediately prior to such merger (other than any stockholder that
merges, or which owns or controls another corporation that merges, with the
Company in such merger) cease to own their shares or other equity interest in
the Company, (iii) the sale of all or substantially all of the assets of the
Company, or (iv) the acquisition, sale, or transfer of more than 50% of the
outstanding shares of the Company by tender offer or similar transaction, the
Plan shall continue with regard to Offering Periods that commenced prior to the
closing of the proposed transaction and shares shall be purchased based on the
Fair Market Value of the surviving corporation's stock on each Purchase Date,
unless otherwise provided by the Committee.

         The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation.

         16.      NONASSIGNABILITY.

         Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive shares under this
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
(other than by shall, the laws of descent and distribution or as provided in
Section 23 below) by the participant. Any such

<PAGE>

attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.

         17.      REPORTS.

         Individual accounts shall be maintained for each participant in this
Plan. Each participant shall receive, as soon as practicable after the end of
each Purchase Period, a report of his or her account setting forth the total
payroll deductions accumulated, the number of shares purchased, the per share
price thereof and the remaining cash balance, if any, carried forward to the
next Purchase Period or Offering Period, as the case may be.

         18.      NOTICE OF DISPOSITION.

         Each participant shall notify the Company in writing if the participant
disposes of any of the shares purchased in any Offering Period pursuant to this
Plan if such disposition occurs within two (2) years from the Offering Date or
within one (1) year from the Purchase Date on which such shares were purchased
(the "NOTICE PERIOD"). The Company may, at any time during the Notice Period,
place a legend or legends on any certificate representing shares acquired
pursuant to this Plan requesting the Company's transfer agent to notify the
Company of any transfer of the shares. The obligation of the participant to
provide such notice shall continue notwithstanding the placement of any such
legend on the certificates.

         19.      NO RIGHTS TO CONTINUED EMPLOYMENT.

         Neither this Plan nor the grant of any option hereunder shall confer
any right on any employee to remain in the employ of the Company or any
Participating Subsidiary, or restrict the right of the Company or any
Participating Subsidiary to terminate such employee's employment.

         20.      EQUAL RIGHTS AND PRIVILEGES.

         All eligible employees shall have equal rights and privileges with
respect to this Plan so that this Plan qualifies as an "employee stock purchase
plan" within the meaning of Section 423 or any successor provision of the Code
and the related regulations. Any provision of this Plan which is inconsistent
with Section 423 or any successor provision of the Code shall, without further
act or amendment by the Company, the Committee or the Board, be reformed to
comply with the requirements of Section 423. This Section 20 shall take
precedence over all other provisions in this Plan.

         21.      NOTICES.

         All notices or other communications by a participant to the Company
under or in connection with this Plan shall be deemed to have been duly given
when received in the

<PAGE>

form specified by the Company at the location, or by the person, designated by
the Company for the receipt thereof.

         22.      TERM; STOCKHOLDER APPROVAL.

         After this Plan is adopted by the Board, this Plan shall become
effective on the First Offering Date (as defined above). This Plan shall be
approved by the stockholders of the Company, in any manner permitted by
applicable corporate law, within twelve (12) months before or after the date
this Plan is adopted by the Board. No purchase of shares pursuant to this Plan
shall occur prior to such stockholder approval. This Plan shall continue until
the earlier to occur of (a) termination of this Plan by the Board (which
termination may be effected by the Board at any time), (b) issuance of all of
the shares of Common Stock reserved for issuance under this Plan, or (c) ten
(10) years from the adoption of this Plan by the Board.

         23.      DESIGNATION OF BENEFICIARY.

                  (a)      A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under this Plan in the event of such participant's death
subsequent to the end of an Purchase Period but prior to delivery to him of such
shares and cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under this
Plan in the event of such participant's death prior to a Purchase Date.

                  (b)      Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

         24.      CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF
SHARES.

         Shares shall not be issued with respect to an option unless the
exercise of such option and the issuance and delivery of such shares pursuant
thereto shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange or automated quotation system upon which the
shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

<PAGE>

         25.      APPLICABLE LAW.

         The Plan shall be governed by the substantive laws (excluding the
conflict of laws rules) of the State of Delaware.

         26.      AMENDMENT OR TERMINATION.

         The Board may at any time amend, terminate or extend the term of this
Plan, except that any such termination cannot affect options previously granted
under this Plan, nor may any amendment make any change in an option previously
granted which would adversely affect the right of any participant, nor may any
amendment be made without approval of the stockholders of the Company obtained
in accordance with Section 22 above within twelve (12) months of the adoption of
such amendment (or earlier if required by Section 22) if such amendment would:

                  (a)      increase the number of shares that may be issued
under this Plan; or

                  (b)      change the designation of the employees (or class of
employees) eligible for participation in this Plan.

         Notwithstanding the foregoing, the Board may make such amendments to
the Plan as the Board determines to be advisable, if the continuation of the
Plan or any Offering Period would result in financial accounting treatment for
the Plan that is different from the financial accounting treatment in effect on
the date this Plan is adopted by the Board.

()

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