EXHIBIT
10.1


 


SRS LABS,
INC.


 


NON-EMPLOYEE
DIRECTOR COMPENSATION POLICY


 


On January 28, 2005, the
Board of Directors of SRS Labs, Inc. (the “Company”) approved the following
compensation policies with respect to the Company’s non-employee
directors.  These policies were adopted
by the Board and may be changed from time-to-time by the Board.


 


Cash
Compensation.   
Directors who also are employees of the Company are not paid any fees or
remuneration, as such, for their service on the Board or on any Board committee.  Each non-employee director of the Company
will receive an annual retainer of $12,000. 
In addition, the chairs and members of the standing committees of the
Board will receive the following supplemental annual retainers:


 


	
  Committee

  	
   

  	
  Chair

  	
   

  	
  Members

  	
   

  
	
  Audit

  	
   

  	
  $

  	
  12,000

  	
   

  	
  $

  	
  9,000

  	
   

  
	
  Compensation

  	
   

  	
  $

  	
  11,000

  	
   

  	
  $

  	
  8,000

  	
   

  
	
  Nomination &
  Corporate Governance

  	
   

  	
  $

  	
  8,000

  	
   

  	
  $

  	
  6,000

  	
   

  



 


The lead director will
also receive a supplemental annual retainer of $4,000. All non-employee
directors of the Company will also receive a $1,000 fee per meeting for each
Board meeting attended, and all non-employee director committee members will
also receive a $500 fee per meeting for each committee meeting attended. In
addition, each non-employee director who resides outside the Southern
California area is entitled to receive reimbursement for reasonable travel
expenses in accordance with the Company’s travel expense policy, with respect
to each Board or Board committee meeting held in Southern California that such
non-employee director attends in person.  
For Board or Board Committee meetings held outside the Southern
California area, each non-employee director is entitled to receive
reimbursement for reasonable travel expenses in accordance with the Company’s
travel policy for meetings such non-employee director attends in person.


 


Non-employee Directors’ Plan.    Each non-employee director is eligible to
receive stock options under the SRS Labs, Inc. Amended and Restated 1996
Non-employee Directors’ Stock Option Plan (the “Non-employee Directors’ Plan”),
a non-discretionary, formula stock option plan. 
Under the Non-employee Directors’ Plan, (a) each non-employee director
who first becomes a member of the Board is granted an option to purchase 10,000
shares of Common Stock automatically upon election to the Board of Directors
which vests upon the date of grant, and (b) each non-employee director is
granted an option to purchase 15,000 shares of Common Stock automatically
effective at the close of business on the date of each of the Company’s annual
meeting of stockholders at which such non-employee director is elected which
vests in three equal annual installments commencing on the first anniversary of
the applicable date of grant.


 


Incentive Plan.    Each non-employee director also is eligible
to receive awards under the Company’s Amended and Restated 1996 Long-Term
Incentive Plan (the “Incentive Plan”), a discretionary plan currently
administered by the Compensation Committee. 
Under the Board’s policy, each non-employee member of the Board of
Directors will be granted an option to purchase 30,000 shares of the Company’s
Common Stock pursuant to the Incentive Plan, effective as of the close of
business on the date of each annual meeting of stockholders at which such
non-employee director is re-elected as a non-employee director or continues in
office as an incumbent director, with the following terms and conditions: (a)
the options shall be subject to all terms and conditions of the Incentive Plan;
(b) the options shall vest as follows: 1/4th to vest one year after the date of
grant; and 1/16th every three months during the next three successive years
thereafter; (c) the options shall have a term of 10 years from the date of
grant; and (d) the exercise price shall be the fair market value of the Company’s
Common Stock on the date of grant.