**EXHIBIT 10.1**

 

**SRS LABS, INC.**

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**AMENDED AND RESTATEDCHANGE IN CONTROL PROTECTION PLAN(also functioning as a Summary Plan Description)**

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As Amended and Restatedon August 3, 2009

 

 

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**SRS LABS, INC.**

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**AMENDED AND RESTATEDCHANGE IN CONTROL PROTECTION PLAN(also functioning as a Summary Plan Description)**

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Table of Contents

 

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| ** ** | ** **                                                                                                                          |   | **PAGE** |
|------------|-------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
|       |                                                                                                                                |   |     |
| 1.         | BENEFITS PAYABLE UNDER  THE PLAN                                                                                                    |   | 1        |
|       |                                                                                                                                |   |     |
|       | (a)           Change in Control  Severance Benefit                                |   | 1        |
|       |                                                                                                                                |   |     |
|       | (b)           Paid Leave in Lieu of  Notice                                       |   | 1        |
|       |                                                                                                                                |   |     |
|       | (c)           Definition of Change  in Control                                    |   | 2        |
|       |                                                                                                                                |   |     |
| 2.         | PLAN ELIGIBILITY                                                                                                                    |   | 3        |
|       |                                                                                                                                |   |     |
| 3.         | VESTING AND ELIGIBILITY  RULES FOR BENEFITS                                                                                         |   | 3        |
|       |                                                                                                                                |   |     |
|       | (a)           Covered Terminations                                                |   | 3        |
|       |                                                                                                                                |   |     |
|       | (b)           Definitions                                                         |   | 4        |
|       |                                                                                                                                |   |     |
|       | (c)           Agreements Precedent  to Collecting Benefits; Recapture of Benefits |   | 5        |
|       |                                                                                                                                |   |     |
| 4.         | ADDITIONAL BENEFITS                                                                                                                 |   | 6        |
|       |                                                                                                                                |   |     |
| 5.         | TAXES, AND  AUTHORIZATIONS FOR TAX LAW COMPLIANCE                                                                                   |   | 7        |
|       |                                                                                                                                |   |     |
| 6.         | RELATION TO OTHER PLANS  AND AGREEMENTS                                                                                             |   | 7        |
|       |                                                                                                                                |   |     |
| 7.         | CLAIMS PROCEDURES                                                                                                                   |   | 8        |
|       |                                                                                                                                |   |     |
|       | (a)           Claims Normally Not  Required                                       |   | 8        |
|       |                                                                                                                                |   |     |
|       | (b)           Disputes                                                            |   | 9        |
|       |                                                                                                                                |   |     |
|       | (c)           Time for Filing  Claims                                             |   | 9        |
|       |                                                                                                                                |   |     |
|       | (d)           Procedures                                                          |   | 9        |
|       |                                                                                                                                |   |     |
| 8.         | PLAN ADMINISTRATION                                                                                                                 |   | 11       |
|       |                                                                                                                                |   |     |
|       | (a)           Discretion                                                          |   | 11       |
|       |                                                                                                                                |   |     |
|       | (b)           Finality of  Determinations                                         |   | 11       |
|       |                                                                                                                                |   |     |
|       | (c)           Drafting Errors                                                     |   | 11       |
|       |                                                                                                                                |   |     |
|       | (d)           Scope                                                               |   | 11       |
|       |                                                                                                                                |   |     |
| 9.         | COSTS, INDEMNIFICATION,  AND REIMBURSEMENT FOR LITIGATION EXPENSES                                                                  |   | 12       |
|       |                                                                                                                                |   |     |
| 10.        | PLAN AMENDMENT  AND TERMINATION; LIMITATION ON EMPLOYEE RIGHTS; CONDITIONS OF RECEIPT OF  BENEFITS                                  |   | 12       |
|       |                                                                                                                                |   |     |
|       | (a)           Sponsor  May Amend or Terminate the Plan                       |   | 12       |

 

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|               | (b)           Application of  Amendment or Termination of the Plan                                                   |   | 12         |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|
|               |                                                                                                                                                                   |   |       |
|               | (c)           No Right to Continued  Employment                                                                      |   | 13         |
|               |                                                                                                                                                                   |   |       |
| 11.                | PLAN FUNDING                                                                                                                                                           |   | 13         |
|               |                                                                                                                                                                   |   |       |
| 12.                | GOVERNING LAW                                                                                                                                                          |   | 13         |
|               |                                                                                                                                                                   |   |       |
| 13.                | MISCELLANEOUS                                                                                                                                                          |   | 13         |
|               |                                                                                                                                                                   |   |       |
| 14.                | OTHER INFORMATION                                                                                                                                                      |   | 13         |
|               |                                                                                                                                                                   |   |       |
|               | (a)           Type of Plan                                                                                           |   | 13         |
|               |                                                                                                                                                                   |   |       |
|               | (b)           Addresses, etc.                                                                                        |   | 13         |
|               |                                                                                                                                                                   |   |       |
|               | (c)           Agent for Service of  Legal Process                                                                    |   | 14         |
|               |                                                                                                                                                                   |   |       |
|               | (d)           Funding                                                                                                |   | 14         |
|               |                                                                                                                                                                   |   |       |
|               | (e)           Plan Amendment or  Termination                                                                         |   | 14         |
|               |                                                                                                                                                                   |   |       |
|               | (f)            Statement of ERISA  Rights                                                                       |   | 14         |
|               |                                                                                                                                                                   |   |       |
|               | (g)           Whom to Call for  Additional Information                                                               |   | 15         |
|               |                                                                                                                                                                   |   |       |
| Exhibit A     | Form of  Participation Agreement – Version 1 (Persons with Employment/Severance  Agreements) and Version 2 (Persons without Employment/Severance Agreements) |   |       |
|               |                                                                                                                                                                   |   |       |
| **Exhibit B** | **Grantor Trust Agreement**                                                                                                                                            |   | ** ** |
|                    |                                                                                                                                                                        |        |            |  |

 

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**SRS LABS, INC.**

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**AMENDED AND RESTATEDCHANGE IN CONTROL PROTECTION PLAN**

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Plan Document and SummaryPlan Description

 

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SRS Labs, Inc. (the “**Company**”) recognizes that a corporatechange in control may adversely affect certain employees.  To treat these employees in a fair andcompassionate manner, the Company has adopted this Amended and Restated Changein Control Protection Plan (the “**Plan**”).

 

This document is the Plan’s plan document, and alsofunctions as its summary plan description. This Plan will control in case of conflict with any other document.  Throughout this Plan, the term “**Sponsor**” is used when the Companyis acting in its non-fiduciary capacity as Plan sponsor and settlor.  The term “**PlanAdministrator**” is used when the Company is acting in the limitedcapacity of interpreting the Plan and determining eligibility for benefits (seeSection 8 below for detailed information).

 

The Plan became effective on April 27, 2005 andwas amended and restated on August 3, 2009.   Even if the Plan expires or is terminated,the Sponsor will thereafter honor any vested but unpaid benefits under the Plan(subject to Section 10 below). References to Sponsor, the Company, and their affiliates also refer toany successor to their interests.

 

**1.**             Benefits Payable Under the Plan

 

***(a)******          *****Change in Control SeveranceBenefit**

 

You will become entitled to severancebenefits pursuant to this Plan if, while this Plan is in effect and while youare eligible under Section 2 for Plan participation, your employmentterminates under the circumstances described in Section 3(a).  The severance benefits (“**Change in Control Benefits**”) to be paidto you after your termination date shall be determined pursuant to anagreement, substantially in the form attached as Exhibit A (the “**Participation Agreement**”), that yousign pursuant to Section 2 as a condition for becoming a Plan participant.The Sponsor will make all decisions relating to who is offered a ParticipationAgreement and the terms, conditions, and benefits promised under theParticipation Agreement.

 

***(b)******          *****Paid Leave in Lieu of Notice**

 

To the extent that the Federal WorkerAdjustment and Retraining Notification Act applies to you, if you becomeentitled to Change in Control Benefits under the Plan, to the extent you havebeen given less than sixty (60) days’ advance written notice of the dateyour active services actually terminate, you will be given a Paid Leave in Lieuof Notice for the balance of that 60-day period, as follows:

 

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(i)            Duringyour Paid Leave in Lieu of Notice, you will be an inactive employee but youwill be entitled to the same employee benefits and participation rights towhich you would have been entitled under our company-wide employee benefitplans had your active employment continued.

 

(ii)           If youresign or die during a paid leave, your paid leave will end and the Change inControl Benefits that you would have received during the balance of the paidleave will be paid to you (or, if you have died, to your estate) in a lumpsum.  All other paid leave benefits willstop on the day you resigned or died, except for any group insurancecoverage that by its terms continues until the end of the calendar month inwhich you terminate.

 

(iii)          ThisPaid Leave in Lieu of Notice runs concurrently with the Change in ControlBenefits provided for in Section 1(a) hereof and is not in additionto Change in Control Benefits provided for in this Plan.

 

***(c)******          *****Definition of Change inControl**

 

The term “**Change in Control**” shall mean the occurrence of any of thefollowing events, subject to the Plan Administrator’s absolute discretion tointerpret this definition in a manner that conforms with the requirements of Section 409Aof the Internal Revenue Code of 1986, as amended (the “**Code**”)and associated regulations:

 

(i)            TheCompany is merged, consolidated or reorganized into or with another corporationor other legal person and as a result of such merger, consolidation orreorganization less than a majority of the combined voting power of the thenoutstanding securities of such corporation or person immediately after such transactionare held in the aggregate by the holders of Voting Stock (as that term isdefined in subsection (iii) hereof) of the Company immediately prior tosuch transaction;

 

(ii)           TheCompany sells all or substantially all of its assets to any other corporationor other legal person, less than a majority of the combined voting power of thethen-outstanding voting securities of which are held directly or indirectly inthe aggregate by the holders of Voting Stock of the Company immediately priorto such sale;

 

(iii)          Anyperson (as the term “**person**” isused in Section 13(d)(3) or Section 14(d)(2) of theSecurities Exchange Act of 1934, as amended (the “**ExchangeAct**”), has become the beneficial owner (as the term “**beneficial owner**” is defined under Rule 13d-3or any successor rule or regulation promulgated under the Exchange Act) ofsecurities representing more than 50%  ofthe combined voting power of the then-outstanding securities of the Companyentitled to vote generally in the election of directors of the Company (“**Voting Stock**”); or

 

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(iv)          TheCompany files a report or proxy statement with the Securities and ExchangeCommission pursuant to the Exchange Act disclosing in, or in response to, Form 8-Kor Schedule 14A (or any successor schedule, form or report or item therein)that a  Change in Control of the Companyhas occurred.

 

Notwithstanding the foregoing provisions of (a) subsections (iii) or(iv) hereof, a “Change in Control” shall not be deemed to have occurredfor purposes of this Agreement solely because the Company, an entity in whichthe Company directly or indirectly beneficially owns 50% or more of the votingsecurities of such entity (an “**Affiliate**”),any Company-sponsored employee stock ownership plan or any other employeebenefit plan of the Company either files or becomes obligated to file a reportor a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-Kor Schedule 14A (or any successor schedule, form or report or item therein)under the Exchange Act, disclosing beneficial ownership by it of shares ofvoting securities of the Company, whether in excess of 50% or otherwise, orbecause the Company reports that a Change in Control of the Company has or mayhave occurred or will or may occur in the future by reason of such beneficialownership; or (b) Subsection (iii) hereof, a “Change in Control”shall not be deemed to have occurred for purposes of this Agreement solelybecause a person who is a holder of five percent (5%) or more of the VotingStock and who also is an officer and director of the Company on the date ofthis Agreement acquires more than 50% of the Voting Stock.

 

Notwithstanding the foregoing provisions of subsections (i) and (ii) hereof,a “Change in Control” shall not be deemed to have occurred for purposes of thisAgreement solely because the Company engages in an internal reorganization,which may include a transfer of assets to one or more Affiliates, providedthat such transaction has been approved by at least two-thirds of theDirectors of the Company and as a result of such transaction or transactions,at least 80% of the combined voting power of the then-outstanding securities ofthe Company or its successor are held in the aggregate by the holders of VotingStock immediately prior to such transactions.

 

**2.**             PlanEligibility

 

You are eligible for this Plan only if the Sponsorhas provided you with a Participation Agreement signed by a duly authorizedofficer of the Company confirming your eligibility for the Plan.  If you execute the Participation Agreementand return it to the Company within thirty (30) days after receiving it,you will be a “**Participant**”.  If your Participation Agreement expires forany reason before you become vested in the right to collect Change in ControlBenefits, you will immediately cease to be a Participant.

 

**3.**             Vestingand Eligibility Rules for Benefits

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***(a)******          *****CoveredTerminations**

 

If you are aParticipant, incur a Covered Termination (as defined below), and satisfy theconditions set forth in Section 3(c) below, you will become vested inyour right to receive the Change in Control Benefits set forth in yourParticipation Agreement.  If youterminate employment for any other reason, you will not be eligible for any benefitsunder this Plan.  For example, you willnot be eligible for Change in Control Benefits under the

 

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Planif the Plan Administrator determines, in its sole discretion, that yourEmployment (as defined below) has either (i) terminated before a Change inControl occurs, or (ii) terminated on or after a Change in Control byreason of —

 

(i)            yourresignation without Good Reason (as defined below);

 

(ii)           yourdeath; or

 

(iii)          yourdischarge for Cause (as defined below), as determined by the Sponsor in itssole discretion.

 

***(b)******          *****Definitions**

 

(i)            Forpurposes of this Plan, a “**CoveredTermination**” shall mean that, at a time on or two (2) yearsafter a Change in Control either (I) you have resigned fromEmployment for Good Reason (as defined below), or (II) your Employment isinvoluntarily terminated by the Company without Cause (as defined below).  A Covered Termination shall not include atransfer of your Employment to the parent of the Company, if any, or anaffiliate of the parent, or an affiliate of the Company, or any successor tothe Company’s obligations under this Plan, whether through a merger,acquisition of the Company or any related entity or their assets, or acontractual assumption of the Plan or its liabilities in anticipation of orafter a Change in Control, in which case you shall continue to be a Participantunder the Plan and any reference herein to “Company” shall refer to the entitythat is your employer.

 

(ii)           For  purposes of this Plan, “**Employment**”shall mean your employment (I) with the Company, (II) the parent ofthe Company, if any, or an affiliate of the parent, or an affiliate of theCompany, or (III) any successor to the Company’s obligations under thisPlan, whether through a merger, an acquisition of the Company or any relatedentity, or a contractual assumption of the Plan or its liabilities.

 

(iii)          Forpurposes of this Plan, “**Cause**”shall mean (I) your engagement in fraud, misappropriation or a materialbreach of the Company’s code of ethics; (II) your engagement inintentional conduct which is materially injurious, monetarily or otherwise, tothe Company or its affiliates, (III) your commission of an act ofdeliberate and material dishonesty; (IV) your failure to follow a lawfuland material directive related to your job responsibilities or otherwiserelated to your position at the Company; (V) your commission of a crime orcausing the Company to commit a crime; or (VI) your conviction, guiltyplea or plea of nolo contendere either to any felony, or to any misdemeanorinvolving dishonesty or moral turpitude, provided however, in case of (II) and(IV), such events shall not constitute “Cause” until after you have been givenwritten notice of such and have failed to cure such within thirty (30)days following such notice.

 

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(iv)          Forpurposes of this Plan, and unless otherwise stated in a Participant’sParticipation Agreement, “**GoodReason**” shall mean (I) any material reduction by theCompany in your base salary below the amount in effect immediately prior to theChange in Control; (II) therequirement that you change your principal location of work to any locationthat is in excess of forty (40) miles from your location of work as of theeffective time of the Change in Control; (III) the substantial curtailmentof your rights, duties and responsibilities as an Employee as compared to thoseyou were performing before the Change in Control.  In addition, Good Reason shall mean theliquidation, dissolution, merger, consolidation or reorganization of theCompany, or the transfer of all or substantially all of the Company’s assets,unless the successor (by liquidation, dissolution, merger, consolidation,reorganization, transfer or otherwise) to which all or substantially all of itsassets have been transferred (directly or by operation of law) assumes theduties and obligations of the Company under this Plan.  Notwithstanding the foregoing, “Good Reason”shall only be found to exist if prior to your resignation for Good Reason, youhave provided written notice to the Company within ninety (90) days followingthe existence of such Good Reason event indicating and describing the eventresulting in such Good Reason, and the Company does not cure such event within thirty(30) days following the receipt of such notice. In the event the Company fails to timely cure, you must resign withinninety (90) days following the expiration of the cure period in order for theresignation to constitute Good Reason.

 

***(c)******          *ConditionsPrecedent to Collecting Benefits; Recapture of Benefits**

 

As a condition precedent to your vestingin the right to collect any benefits pursuant to this Plan, the Sponsor may inits discretion require that you execute any one or more of the following agreementsin a form satisfactory to the Sponsor (provided such agreements if requiredmust be executed and delivered to the Company within 21 days following yourreceipt of such agreements) and comply with the following obligations:

 

(i)            Ageneral release of any and all past, present, or future claims (whether or notsuch claims relate to the Plan) that you may have against the Company, itssubsidiaries and affiliates, and their officers, directors, employees andagents, and a covenant not to bring any action in respect of any claim soreleased.

 

(ii)           Anagreement not to make disparaging comments (whether orally or in writing)regarding the Company or its subsidiaries and affiliates, its officers andemployees, its products and services, or any other aspect of the Company’sbusiness either during or following termination of your employment with theCompany.

 

(iii)          Anagreement that you will not, without the prior written consent of the Company,disclose to any entity or person any information which is treated asconfidential by the Company (“**Confidential Information**”),and is not generally known or available to the public, provided, that you maymake disclosures of such Confidential Information to the extent required by lawor legal process.  The term “ConfidentialInformation” shall include:

 

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(A)                              information regarding the businessmethods, business policies, procedures, techniques, business or strategicplans, trade secrets, pricing policies, or other processes of or developed bythe Company;

 

(B)                                any names and addresses of customers orclients, and any data on or relating to past, present or prospective customersor clients;

 

(C)                                formulae, inventions, research ordevelopment projects or results, or other knowledge developed by the Company;and

 

(D)                               any other confidential informationrelating to or dealing with the business operations or activities of theCompany; made known to you or learned or acquired by you while in the employ ofthe Company, which is not generally known to others outside the Company,whether written or otherwise, regarding earnings, plans, strategies,prospective and executed contracts and other business arrangements.

 

(iv)                              Upon termination of your employment, youmust return all property of the Company and reimburse the Company for anypersonal telephone calls, credit card charges and other expenses, and pay allamounts due to the Company.

 

Notwithstanding any other provision of the Plan, youwill not be treated as having satisfied the requirements of this Section 3(c) unless(I) you execute any one or more of the above agreements that the Sponsormay for any reason require, (II) you deliver such agreements to theperson, and within the time period above and prescribed in such agreement, and (III) youdo not make a legally valid revocation of such agreement.  In the event the Sponsor determines that youhave breached any of the conditions set forth in this Subsection 3(c) orany agreement referenced hereunder, the Company shall (in addition to any otherremedies it may have) not be required to provide any of Change in Control Benefitspursuant to the Plan, and you shall be obligated to return to the Company, upondemand, an amount (plus simple interest) equal to all of the Change in ControlBenefits that you have received under this Plan.

 

**4.**                                      AdditionalBenefits

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***(a)******                                ***If you become entitled to Change inControl Benefits under this Plan, you will also be reimbursed for COBRAcontinuation premiums you pay for yourself, your spouse, and your dependentsfor the period, if any, set forth in your Participation Agreement.  For COBRA purposes, however, the date onwhich you terminate employment will commence the period for which you areentitled to continuation coverage under COBRA (meaning that the Company’spayment of COBRA premiums may not extend the duration of your COBRAeligibility).  The regular COBRAprocedures and rules will apply.

 

***(b)******                                ***Upon the deathof a Participant receiving Change in Control Benefits, the beneficiary(ies) ofthe Participant (whom he or she designated for purposes of group life insurancebenefits) shall be entitled to receive such Change in Control Benefits onthe same terms that would have applied if the Participant had survived tocollect all benefits.

 

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**5.**                                      Taxes, andAuthorizations for Tax Law Compliance

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Taxes will be withheld from your Change in ControlBenefits to the extent the Plan Administrator, it its sole discretion,determines that this is appropriate or is required by law.  You are solely responsible and liable for thesatisfaction of all taxes and penalties, including any taxes arising under Section 409Aof the Code  that may arise in connection with your Planparticipation or your receipt of Change in Control Benefits.  Accordingly, neither the Sponsor, the PlanAdministrator, nor any person associated with them has any obligation orauthority to provide you with tax planning advice, or to take actions thatminimize or eliminate any or all of the taxes or penalties which you incur ormay incur pursuant to the Plan.  The PlanAdministrator shall nevertheless have the discretion to unilaterally modifyyour rights under this Plan (including your rights under any ParticipationAgreement) in a manner that —

 

(a) voidsor modifies any terms of the Plan or your Participation Agreement to the extentit would violate Section 409A of the Code, and

 

(b) forany payment that would otherwise violate Section 409A of the Code, toprovide Change in Control Benefits only in connection with a distribution eventthat is allowable under Section 409A of the Code.  For example, the Plan Administrator may delaypaying your Change in Control Benefits for up to six months and one day if thePlan Administrator reasonably determines that an earlier payment will violate Section 409A(a)(2)(B)(i) ofthe Code.

 

ThePlan Administrator has the sole discretion to interpret the requirements of theCode, including Section 409A, for purposes of determining your rightsunder the Plan and your Participation Agreement.

 

**6.**                                      Relation toOther Plans and Agreements; 280G Limitations

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By signing your Participation Agreement, yourecognize and agree that any prior severance or similar plan of the Company(including a prior version of this Plan or a related Participation Agreement)that might apply to you is hereby revoked and ineffective as to you;provided that, unless specifically provided in your Participation Agreement,neither this Plan nor your Participation Agreement will affect any outstandingemployment, equity award,  or otherwritten agreement between you and the Company.  No Change in Control Benefits that youreceive will be taken into account for purposes of determining benefits underother benefit plans, retirement or pension plans, 401(k) plans, or similarretirement arrangements.  All suchretirement-related plans or similar arrangements, to the extent inconsistentwith this Plan, are hereby so amended.

 

Theamount of any cash payment to be received by Participant  pursuant to this Plan shall be reduced (butnot below zero) to the extent required so that no portion of any payment or benefitin the nature of compensation received or to be received by Participant(whether payable pursuant to the terms of this Plan or pursuant to any otherplan, contract, agreement or arrangement with the Employer or any other person)(such payments or benefits are referred to collectively as the “**Total Payments**”) shall be treatedas an “excess parachute payment” within the meaning of section 280G(b)(1) ofthe Code. Only amounts

 

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payable under this Plan, and no other payments orbenefits included in the Total Payments, shall be reduced pursuant to this Section 6.  Notwithstanding the foregoing, Participantmay elect in writing to reduce other benefits payable by the Company toParticipant outside of the Plan (in lieu of reducing all or some of thebenefits payable hereunder) in order to avoid having any such “excess payments;”provided that the written notice of such election must be received by theCompany’s Chief Executive Officer prior to the date on which any payments arerequired to be made under the Plan.

 

Thedetermination of whether any reduction in payments is required pursuant to  Section 6 of this Plan shall be made inwriting by the Company’s independent public accountants, or such otherindependent accounting firm or tax advisors selected by the Plan Administratorin its sole discretion (the “**Accountants**”),whose determination shall be conclusive and binding upon Participant and theCompany for all purposes under this Plan. For the purposes of making the calculations required by this Section 6,the Accountants may make reasonable assumptions and approximations regardingapplicable taxes and applicable tax rates and may rely on reasonable, goodfaith interpretations concerning the application of Sections 280G and 4999 ofthe Code, applicable regulations and other authority.  The Plan Administrator and the Participantshall furnish to the Accountants such information and documents as theAccountants may reasonably request in order to make a determination under thisSection.  The Accountants shall providedetailed supporting calculations, in writing, to both the Plan Administratorand the Participant of determinations made pursuant to this Section 6.  The Company shall bear all costs theAccountants may reasonably incur in connection with any calculationscontemplated by this Section.

 

In theevent of any uncertainty as to whether a reduction in payments to a Participantis required pursuant to Section 6 of this Plan, the Company shallinitially make the payment to Participant, and Participant shall be required torefund to the Company any amounts ultimately determined not to have beenpayable under the terms of this Plan.

 

TheCompany and the Participant shall promptly deliver to each other copies of anywritten communications, and summaries of any verbal communications, with anytaxing authority regarding the applicability of Section 280G or 4999 ofthe Code to any portion of the Total Payments. In the event of any controversy with the Internal Revenue Service orother taxing authority with regard to the applicability of Section 280G or4999 of the Code to any portion of the Total Payments, the Company shall havethe right, exercisable in its sole discretion, to control the resolution ofsuch controversy at its own expense. Participant and the Company shall in good faith cooperate in theresolution of such controversy.

 

**7.**                                      ClaimsProcedures

** **

***(a)******                                *****ClaimsNormally Not Required**

 

Normally, youdo not need to present a formal claim to receive the Change in Control Benefitspayable under this Plan.

 

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***(b)******                                *****Disputes**

 

If any person(claimant) believes that benefits are being denied improperly, that the Plan isnot being operated properly, that fiduciaries of the Plan have breached theirduties, or that the claimant’s legal rights are being violated with respect tothe Plan, the claimant must file a formal claim with the Plan Administrator within the time period set forth in Section 7(c).  The Plan Administrator will handle all suchclaims in accordance with the procedures set forth in Section 7(d). This requirement applies to all claims that any claimant has withrespect to the Plan, including claims against fiduciaries and formerfiduciaries, except to the extent the Plan Administrator determines, in itssole discretion, that it does not have the power to grant all relief reasonablybeing sought by the claimant.  ***See***Section 14(f) for information about your rights in the event theAdministrator denies your claim.

 

***(c)******                                 *****Timefor Filing Claims**

 

A formal claimmust be filed within ninety (90) days after the date the claimant firstknew or should have known of the facts on which the claim is based (or, if earlier, the date that is 120 daysafter your employment terminates for any reason), unless the Sponsor in writing consentsotherwise.  The Plan Administrator willprovide a claimant, on request, with a copy of the claims proceduresestablished under subsection 7(d). **If a claimant files anuntimely claim, no benefits of any kind shall be payable under the Plan**.

 

***(d)******                                *****Procedures**

 

The PlanAdministrator will adopt procedures for considering claims, which it may amendfrom time to time, as it sees fit.  Ifthe Plan Administrator does not offer a Participant the payment of Plan benefitswithin 10 days after such benefits are due and payable, the Participant must file a claim for benefits on a formprescribed by the Plan Administrator and within the time frame set forth insubsection (c) above.  If theclaimant’s claim for a benefit is wholly or partially denied, the PlanAdministrator will furnish the claimant with a written notice of thedenial.  This written notice must beprovided to the claimant within a reasonable period of time (generally withinninety (90) days, unless special circumstances require an extension oftime for processing the claim, in which case a period not to exceed one hundredand eighty (180) days) after the receipt of the claimant’s claim by the PlanAdministrator.  (If such an extension oftime is required, written notice of the extension will be furnished to theclaimant prior to the termination of the initial 90-day period, and willindicate the special circumstances requiring the extension.)  Written notice of denial of the claimant’sclaim must contain the following information:

 

(i)                                     the specific reason orreasons for the denial;

 

(ii)                                  a specific reference tothose provisions of the Plan on which such denial is based;

 

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(iii)                               a description of anyadditional information or material necessary to perfect the claimant’s claim,and an explanation of why such material or information is necessary; and

 

(iv)                              a copy of the appealsprocedures under the Plan and the time limits applicable to such procedures,including a statement of the claimant’s right to bring a civil action under Section 502(a) ofthe Employee Retirement Income Security Act of 1974, as amended (“**ERISA**”) following an adversedetermination of the claimant’s claim.

 

If theclaimant’s claim has been denied, and the claimant wishes to submit his or herrequest for a review of his or her claim, the claimant must follow thefollowing Claims Review Procedure:

 

1.                                       Upon the denial of his or her claim forbenefits, the claimant may file his or her request for review of his or herclaim, in writing, with the Plan Administrator or claims processor;

 

2.                                       The claimant must file the claim forreview not later than sixty (60) days after he or she has received writtennotification of the denial of his or her claim for benefits.

 

3.                                       The claimant has the right to review andobtain copies of all relevant documents relating to the denial of his or herclaim and to submit any issues and comments, in writing, to the PlanAdministrator;

 

4.                                       If the claimant’s claim is denied, thePlan Administrator must provide the claimant with written notice of this denialwithin sixty (60) days after the Plan Administrator’s receipt of theclaimant’s written claim for review. There may be times when this 60-day period may be extended.  This extension may only be made, however,where there are special circumstances which are communicated to the claimant inwriting within the 60-day period.  Ifthere is an extension, a decision will be made as soon as possible, but notlater than one hundred and twenty (120) days after receipt by the PlanAdministrator of the claimant’s claim for review; and

 

5.                                       The Plan Administrator’s decisionregarding the claimant’s claim for review will be communicated to the claimantin writing, and if the claimant’s claim for review is denied in whole or part,the decision will include:

 

(B)                                the specific reason or reasons for thedenial;

 

(C)                                specificreferences to the pertinent provisions of the Plan on which the decision wasbased;

 

(D)                               a statementthat the claimant may receive, upon request and free of charge, reasonableaccess to and copies of, all documents, records and other information relevantto the claimant’s claim for benefits; and

 

10

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(E)                                 a statement ofthe claimant’s right to bring a civil action under Section 502(a) ofERISA.

 

**8.**                                      PlanAdministration

** **

***(a)******                                *****Discretion**

 

The PlanAdministrator is responsible for the general administration and management ofthe Plan and shall have all powers and duties that the Plan Administrator, inits sole discretion, deems necessary to fulfill its responsibilities,including, but not limited to, the discretion to interpret and apply the Planand to determine all questions relating to eligibility for benefits.  The Plan Administrator and all Planfiduciaries shall have the discretion to interpret or construe ambiguous,unclear, or implied (but omitted) terms in any fashion they deem to beappropriate in their sole and absolute discretion, and to make any findings offact needed in the administration of the Plan. The validity of any such interpretation, construction, decision, orfinding of fact shall not be given de novo review if challenged in court, byarbitration, or in any other forum, and shall be upheld unless clearlyarbitrary or capricious.

 

***(b)******                                *****Finalityof Determinations**

 

Unlessarbitrary and capricious, all actions taken and all determinations by the PlanAdministrator or by Plan fiduciaries will be final and binding on all personsclaiming any interest in or under the Plan.  To the extent the Plan Administrator or anyPlan fiduciary has been granted discretionary authority under the Plan, thePlan Administrator’s or Plan fiduciary’s prior exercise of such authority shallnot obligate it to exercise its authority in a like fashion thereafter.

 

***(c)******                                 *****DraftingErrors**

 

If,due to errors in drafting, any provision of the Plan or any ParticipationAgreement does not accurately reflect its intended meaning, as demonstrated byconsistent interpretations or other evidence of intent (by the Sponsor or thePlan Administrator, as the case may be), or as determined by the PlanAdministrator in its sole and absolute discretion, the provision shall beconsidered ambiguous and shall be interpreted by the Plan Administrator and allPlan fiduciaries in a fashion consistent with its intent, as determined in thesole and absolute discretion of the Plan Administrator (but with regard to theintent of the Sponsor as settlor).

 

***(d)******                                *****Scope**

 

This Section maynot be invoked by any person to require the Plan to be interpreted in a mannerinconsistent with its interpretation by the Plan Administrator or other Planfiduciaries.

 

11

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**9.**                                      Costs, Indemnification, and Reimbursementfor Litigation Expenses

** **

***(a)******                                ***All costs ofadministering the Plan and providing Plan benefits will be paid by the Company.

 

***(b)******                                ***To the extentpermitted by applicable law and in addition to any other indemnities orinsurance provided by the Company, the Company shall indemnify and holdharmless its (and its affiliates’) current and former officers, directors,employees, and agents against all expenses, liabilities, and claims (includinglegal fees incurred to defend against such liabilities and claims) arising outof their discharge in good faith of their administrative and fiduciaryresponsibilities with respect to the Plan. Expenses and liabilities arising out of willful misconduct will not becovered under this indemnity.

 

***(c)******                                 ***In the eventthat, at any time on or after the date three (3) months before aChange in Control, a Participant substantially prevails over the Company or anysuccessor to its interests in any dispute that arises between the Participantand the Company with respect to the terms or interpretation of the Plan,whether instituted by formal legal proceeding or otherwise (including anyaction that the Participant takes to enforce the terms of his or herParticipation Agreement or to defend against any action taken by the Company),the Company shall reimburse the Participant for all costs and expenses, includereasonable attorney’s fees, arising from such dispute, proceedings, oractions.  Such reimbursement will howeverbe subject to proof of such costs.

 

**10.**                               Plan Amendmentand Termination; Limitation on Employee Rights; Conditions of Receipt ofBenefits

** **

***(a)******                                *****SponsorMay Amend or Terminate the Plan**

 

The Sponsor, acting through its Board ofDirectors or its delegate, has the right in its sole and absolute discretion toamend the Plan, to extend its term, or to terminate the Plan, prospectively.

 

***(b)******                                *****Applicationof Amendment or Termination of the Plan**

 

Notwithstandingthe foregoing, any amendment or termination of the Plan that occurs within thethree-month period before a Change in Control, in connection with a Change inControl, or within two years after a Change in Control shall only apply tothose Participants:

 

(i)                                     who consentindividually and in writing to the amendment or termination; or

 

(ii)                                  whose vestedChange in Control Benefits, or rights under the Plan to become entitled to theChange in Control Benefits set forth in his or her Participation Agreement arenot adversely affected by such amendment or termination.

 

12

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Any decision orinterpretation that is made either after a Change in Control or pursuant tothis subparagraph (b) shall be subject to judicial review under a de novostandard, and not under the arbitrary and capricious standard that is generallyintended to apply (and shall apply) to all other Plan determinations andinterpretations.

 

***(c)******                                 *****NoRight to Continued Employment**

 

This Plan shall not give any employee theright to be retained in the service of the Company, and shall not interferewith or restrict the right of the Company to terminate or retire the employee forany lawful reason.

 

**11.**                               Plan Funding

** **

The Company shall pay any Change in Control Benefitsfrom its general assets.  Notwithstandingthe foregoing, in the event of a Change in Control, the Company shall establishand fund an irrevocable grantor (a/k/a rabbi) trust from which all Change inControl Benefits shall be paid.  Theagreement which shall be used to establish such trust is attached hereto as Exhibit B.

 

**12.**                               Governing Law

** **

This Plan is a welfare plan subject to ERISA, and itshall be interpreted, administered, and enforced in accordance with thatlaw.  To the extent that state law isapplicable, the statutes and common law of the State of Delaware (excluding itschoice of laws principles) shall apply.

 

**13.**                               Miscellaneous

** **

Where the context so indicates, the singular willinclude the plural and vice versa. Titles are provided herein for convenience only and are not to serve asa basis for interpretation or construction of the Plan.  Unless the context clearly indicates to thecontrary, a reference to a statute or document shall be construed as referringto any subsequently enacted, adopted, or executed counterpart.

** **

**14.**                               OtherInformation

** **

***(a)******                                *****Type ofPlan**

 

This is awelfare plan.

 

***(b)******                                *****Addresses,etc**.

 

The Company’saddress, telephone number, and employer identification number are as follows:

 

SRS Labs, Inc.

2909 Daimler Street

Santa Ana, California  92705

Attention: Chair, Compensation Committee of theBoard of Directors

Telephone: 949.442.1070

EIN: 33-0714264

 

13

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The Plan’s Plan Year is as follows:

 

Plan Year:                                           Calendar

 

The address forthe Plan Administrator shall be the address of the Company set forth above.

 

***(c)******                                 *****Agentfor Service of Legal Process**

 

The PlanAdministrator is the Plan’s agent for service of legal process.

 

***(d)******                                *****Funding**

 

The Plan isfunded out of the Company’s general assets.

 

***(e)******                                 *****PlanAmendment or Termination**

 

The Sponsor hasreserved the right to amend and terminate the Plan as set forth in Section 10herein.

 

***(f)******                                   *****Statementof ERISA Rights**

 

As aparticipant in this Plan, you are entitled to certain rights and protectionsunder a federal law called the Employee Retirement Income Security Act of 1974(as noted above, “ERISA”).  ERISAprovides that all plan participants shall be entitled to:

 

·                                          Examine, without charge, at the PlanAdministrator’s office and other specified locations, all documents governingthe Plan, including insurance contracts, and a copy of the latest annual report(Form 5500 Series) filed by the Plan with the U.S. Department of Labor.

 

·                                          Obtain, upon written request to the PlanAdministrator, copies of documents governing the operation of the Plan,including copies of the latest annual report (Form 5500 Series) andupdated summary plan description. The administrator may make a reasonablecharge for the copies.

 

·                                          Receive a summary of the Plan’s annualfinancial report. The Plan Administrator is required by law to furnish eachparticipant with a copy of this summary annual report.

 

In addition tocreating rights for Plan participants ERISA imposes duties on the people whoare responsible for the operation of this Plan. The people who operate thisPlan are called “**fiduciaries,**” and have a duty tooperate this Plan prudently and in the interest of you and other Planparticipants and beneficiaries. No one, including your

 

14

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employeror any other person, may fire you or otherwise discriminate against you in anyway to prevent you from obtaining a benefit or exercising your rights underERISA. If your claim for a benefit is denied in whole or in part, you mustreceive a written explanation of the reason for this denial. You have the rightto have the Plan Administrator review and reconsider your claim, as describedelsewhere in this Summary Plan Description. Under ERISA, there are steps youcan take to enforce the above rights. For instance, if you request certainmaterials required to be furnished by the Plan and do not receive them within30 days, or if you have any other claim with respect to the Plan, you may filesuit in a federal court. In such a case, the court may require the PlanAdministrator to provide the materials you have requested and that you be paidup to $110 a day until you receive them, unless the materials were not sentbecause of reasons beyond the Plan Administrator’s control.  If you have a claim for benefits which isdenied or ignored, in whole or in part, you should file a claim under the Plan’sclaims procedures or you may file suit in a state or federal court. Inaddition, if you disagree with the Plan’s decision or lack thereof concerningthe qualified status of a domestic relations order or a medical child supportorder, you may file suit in Federal court. If it should happen that Planfiduciaries misuse the Plan’s money, or if you are discriminated against forasserting your rights, you may seek assistance from the U.S. Department ofLabor, or you may file suit in a federal court. The court will decide whoshould pay the court costs and legal fees. If you are successful the court mayorder the person you have sued to pay these costs and fees. If you lose, thecourt may order you to pay these costs and fees, for example, if it finds thatyou should have used the Plan’s claims procedures or that your claim is frivolous.   If you have any questions about your Plan,you should contact the Plan Administrator. If you have any questions about thisstatement or about your rights under ERISA, you should contact the nearestoffice of the Pension and Welfare Benefits Administration, U.S. Department ofLabor, listed in your telephone directory or the Division of TechnicalAssistance and Inquiries, Pension and Welfare Benefits Administration, U.S.Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.  You may also obtain certain publicationsabout your rights and responsibilities under ERISA by calling the publicationshotline of the Employee Benefits Security Administration or by visiting itswebsite (http://www.dol.gov/ebsa/).

 

***(g)******                                *****Whom toCall for Additional Information**

 

If you have any questions, please contactthe Plan Administrator.

 

15

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Exhibit A/Version1

(Personswith Employment/

SeveranceAgreements)

 

**SRS LABS, INC.**

 

**AMENDED AND RESTATED**

**CHANGE IN CONTROL PROTECTION PLAN**

 

**Participation Agreement**

 

WHEREAS,SRS Labs, Inc. (the “**Company**”)sponsors and maintains the SRS Labs, Inc. Amended and Restated Change inControl Protection Plan (the “**Plan**”),and has executed this agreement (the “**Participation Agreement**”)in order to offer                              (the “**Officer**”) theopportunity to participate in the Plan;

 

WHEREAS,the Officer has received a copy of the Plan (which also serves as its summaryplan description); and

 

WHEREAS,the parties acknowledge that capitalized terms not defined in thisParticipation Agreement shall have the meaning assigned to them in the Plan;and

 

WHEREAS,the Officer understands that participation in the Plan requires that theParticipant to agree irrevocably to the terms of the Plan and the terms setforth below; and

 

WHEREAS,the Employee has had the opportunity to carefully evaluate this opportunity, anddesires to become a “Participant” in the Plan under the conditions set forthherein.

 

NOW,THEREFORE, the parties hereby AGREE as follows:

 

1.                                       If the Officer incurs a CoveredTermination while the Plan is in effect and the Officer has satisfied all otherconditions precedent to collecting benefits under the Plan, the Officer shall withinsixty (60) days thereafter (subject to Section 5 of the Plan and to Section 2of this Participation Agreement) receive the following benefits (the “**Change in Control Benefits**”):

 

(i)                                     A lump sum payment in cash equal to         times the Officer’s “baseamount.”  The term “**baseamount**” refers to (A) the Officer’s base salary in effectimmediately preceding the Change in Control; plus (B) the Officer’s cashbonus and cash commissions paid by the Company (before deductions for taxes andother withholdings) during the last completed calendar year immediatelypreceding the year in which a Change in Control occurred.  The base amount shall not includeperquisites, allowances, per diem payments, stock options or other equitycompensation or fringe benefits.

 

----

 

(ii)                                  In the event Officer elects COBRAcontinuation coverage on a timely basis, and makes the premium paymentstherefor, the Company’s shall promptly reimburse the Officer for such premiumsfor the Officer’s COBRA coverage for a period of            (    ) months following the Officer’s Covered Termination.

 

Each of the Officer’s benefits provided under this Section shallbe subject to any reduction or withholding required or permitted under thePlan.

 

2.                                       Notwithstanding Section 1 of thisParticipation Agreement, the Officer shall not receive the Change in ControlBenefits set forth in Section 1 above if the Officer is entitled tocollect severance-related benefits (the “**Contract Benefits**”)pursuant to a separate written employment agreement or severance agreement thatthe Officer has entered into with the Company or any of its affiliates, unlessthe Officer waives any and all Contract Benefits in writing within five businessdays after the Covered Termination.  Ifthe Officer waives the Contract Benefits, the Officer shall become entitled toreceive the Change in Control Benefits in accordance with the terms andconditions of the Plan and this Participation Agreement.

 

3.

 

(a)  Inconsideration of becoming eligible to receive the benefits provided under theterms and conditions of the Plan, the Officer hereby waives any and all rights,benefits, and privileges (other than the Contract Benefits defined in Section 2above) to which the Officer is or would otherwise be entitled to receive underany plan, program, or arrangement under which the Company or any of itsaffiliates provides severance benefits (excluding any retirement plan, stockoption or other equity-based plan or agreement, or other plan that is not a “welfareplan” within the meaning of ERISA).

 

(b)  Subject to Section 2of this Participation Agreement, the Officer’s collection of the Change inControl Benefits pursuant to this Participation Agreement shall be absolutelycontingent on the Officer’s agreement in the Release (i) to waive any andall rights (including, but not limited to, any Contract Benefits) under anyemployment agreement or severance agreement that the Officer has entered intowith the Company or any of its affiliates, and (ii) that all suchagreements shall be terminated and become null and void upon the Officer’scollection of any portion of the Change in Control Benefits.  The terms of the Release will be open foracceptance for a period of 21 days, during which time you may consider whetheror not to accept the Release.

 

4.                                       The Officer understands that the waiverset forth in Section 3(a) above is irrevocable for so long as thisParticipation Agreement is in effect. The Officer further understands that this Participation Agreement andthe Plan set forth the entire agreement between the parties with respect to anysubject matter covered herein.

 

5.                                       This Participation Agreement shallterminate, and the Officer’s status as a “Participant” in the Plan shall end,on the first to occur of (i) if before a Change in Control occurs, theOfficer’s termination of employment with the Company and its affiliates, (ii) if

 

2

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after a Change in Control occurs, the Officer’stermination of employment for a reason other than a “Covered Termination” asdefined in Section 3(b)(i) of the Plan, (iii) the date two yearsafter a Change in Control, and (iv) if before a Change in Control occurs,the date twelve (12) months after the Company provides the Officer with writtennotice that this Participation Agreement is being terminated by the Company inits discretion as employer and Sponsor.

 

6.                                       The Officer agrees that thisParticipation Agreement shall supersede in its entirety any prior ParticipationAgreement executed by the Officer under the Plan.  The Officer hereby consents to the amendmentand restatement of the Plan in August 2009, and agrees to be bound by allof the terms and conditions of the Plan, as amended and restated.

 

7.                                       The Officer recognizes and agrees thatexecution of this Participation Agreement results in enrollment andparticipation in the Plan, agrees to be bound by the terms and conditions ofthe Plan and this Participation Agreement, and understands that thisParticipation Agreement may not be amended or modified except pursuant to Section 10of the Plan.  The Officer further agreesthat to the extent there is any conflict or ambiguity between the Plan and theParticipation Agreement, the Plan prevails.

 

 

ACCEPTEDAND AGREED TO this                day of                            ,20      .

 

 
| The “**Officer**”: |   | The “**Company**”: |
|------------------------------|--------|------------------------------|
|                         |   |                         |
|                         |   |                         |
|                         |   | By                           |   |
|                         |   |                         | A Duly Authorized  Officer |

 

3

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Exhibit A/Version2

(Personswithout severance 

Agreements)

 

**SRS LABS, INC.**

**AMENDED AND RESTATED**

**CHANGE IN CONTROL PROTECTION PLAN**

 

**Participation Agreement**

 

WHEREAS, SRS Labs, Inc. (the “**Company**”) sponsors and maintains theSRS Labs, Inc. Amended and Restated Change in Control Protection Plan (the“**Plan**”), and has executedthis agreement (the “**Participation Agreement**”)in order to offer                              (the “**Employee**”) theopportunity to participate in the Plan;

 

WHEREAS, the Employee has received a copy of the Plan(which also serves as its summary plan description); and

 

WHEREAS, the parties acknowledge that capitalizedterms not defined in this Participation Agreement shall have the meaningassigned to them in the Plan; and

 

WHEREAS, the Employee understands that participationin the Plan requires that the Employee agree irrevocably to the terms of thePlan and the terms set forth below; and

 

WHEREAS, the Employee has had the opportunity tocarefully evaluate this opportunity, and desires to become a “Participant” inthe Plan under the conditions set forth herein.

 

NOW, THEREFORE, the parties hereby AGREE as follows:

 

1.                                       If the Employee incurs a CoveredTermination while the Plan is in effect, the Employee shall withinsixty (60) days thereafter (but subject to Section 5 of the Plan) receivea lump sum payment in cash (the “**Change in Control Benefits**”) equal to         times the Employee’s “baseamount” as determined by the Administrator, subject to any reduction orwithholding required or permitted under the Plan.  The term “**baseamount**” refers to (A) the Employee’s base salary in effectimmediately preceding the Change in Control; plus (B) the Employee’s cashbonus and cash commissions paid by the Company (before deductions for taxes andother withholdings) during the last completed calendar year immediatelypreceding the year in which a Change in Control occurred.  The base amount shall not includeperquisites, allowances, per diem payments, stock options or other equitycompensation or fringe benefits.  Inaddition, in the event Employee elects COBRA continuation coverage on a timelybasis, and makes the premium payments therefor, the Company shall reimburseEmployee’s premiums payable for such COBRA coverage for a period of              (    ) months following the Employee’s CoveredTermination.  All of the Employee’sbenefits provided under this Section shall be subject to any reduction orwithholding that is required or permitted under the Plan.

 

----

 

2.                                       In consideration of becoming eligible toreceive the benefits provided under the terms and conditions of the Plan, theEmployee hereby waives any and all rights, benefits, and privileges to whichthe Employee is or would otherwise be entitled to receive under —

 

(a)                                  any employment agreement or severanceagreement that the Employee has entered into with the Company or any of itsaffiliates; and

 

(b)                                 any plan, program, or arrangement underwhich the Company or any of its affiliates provides severance benefits(excluding any retirement plan, stock option or other equity-based plan oragreement, or other plan that is not a “welfare plan” within the meaning ofERISA).

 

3.                                       The Employee understands that the waiverset forth in Section 2 above is irrevocable for so long as thisParticipation Agreement is in effect, and that this Participation Agreement andthe Plan set forth the entire agreement between the parties with respect to anysubject matter covered herein.

 

4.                                       This Participation Agreement shallterminate, and the Employee’s status as a “Participant” in the Plan shall end,on the first to occur of (i) if before a Change in Control occurs, theEmployee’s termination of employment with the Company and its affiliates, (ii) ifafter a Change in Control occurs, the Employee’s termination of employment fora reason other than a “Covered Termination” as defined in Section 3(b)(i) ofthe Plan, (iii) the date two years after a Change in Control, and (iv) ifbefore a Change in Control occurs, the date twelve (12) months after theCompany provides the Employee with written notice that this ParticipationAgreement is being terminated by the Company in its discretion as employer andSponsor.

 

5.                                       The Employee agrees that thisParticipation Agreement shall supersede in its entirety any prior ParticipationAgreement executed by Employee under the Plan. The Employee hereby consents to the amendment and restatement of thePlan in August 2009, and agrees to be bound by all of the terms andconditions of the Plan, as amended and restated.

 

6.                                       The Employee recognizes and agrees thatexecution of this Participation Agreement results in enrollment andparticipation in the Plan, agrees to be bound by the terms and conditions ofthe Plan and this Participation Agreement, and understands that thisParticipation Agreement may not be amended or modified except pursuant to Section 10of the Plan.  The Employeefurther agrees that to the extent there is any conflict or ambiguity betweenthe Plan and the Participation Agreement, the Plan prevails.

 

2

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ACCEPTED AND AGREED TOthis                day of                            ,20      .

 
| The “**Employee**”: |   | The “**Company**”: |
|-------------------------------|--------|------------------------------|
|                          |   |                         |
|                          |   |                         |
|                          |   | By                           |   |
|                          |   |                         | A Duly Authorized  Officer |

 

3

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**Exhibit B**

** **

**SRS LABS, INC.**

**GRANTOR TRUST AGREEMENT**

** **

*PREAMBLE*. This Grantor Trust Agreement (the “**Trust Agreement**”) made this           day of                      ,20       (the “**Effective Date**”), by andbetween SRS Labs, Inc. and any successor to its interest (the “**Company**”) ascreator and grantor, and                                    as trust (the “**Trustee**”).

 

WHEREAS,the Company has adopted the SRS Labs, Inc. Amended and Restated Change inControl Protection Plan attached as Exhibit A******(the “**Plan**”) underwhich the Company has current or potential liability to individuals (the “**Beneficiaries**”)who are either Participants in the Plan or are the designated beneficiary forany benefits payable under the Plan in the event of the death of an individualwho is a participant in the Plan;

 

WHEREAS,it is the intention of the Company to establish, upon a Change in Control asdefined in Section 1(c) of the Plan (a “**Change inControl**”), this trust (the “**Trust**”) and to contribute assets tothe Trust that shall be held therein, subject to the claims of the Company’sgeneral creditors in the event of the Company’s Insolvency, as defined in Section 3(a) hereof,until paid to Beneficiaries of this Trust in such manner and at such times asspecified in the Plan;

 

WHEREAS,it is the intention of the parties hereto that this Trust shall constitute anunfunded arrangement and shall not affect the status of the Plan as beingunfunded for purposes of Title I of the Employee Retirement Income Security Actof 1974; and

 

WHEREAS,it is the intention of the Company to make contributions to the Trust followinga Change in Control to enable the Trust to fully fund its liabilities under thePlan.

 

NOW,THEREFORE, the parties do hereby establish this Trust and agree that the Trustshall be established and administered as set forth herein:

 

**15.**                               Establishment of Trust

** **

***(a)******                                ***Upon a Change in Control, the Companyshall, as soon as possible but in no event later than ten business days afterthe Change in Control, make an irrevocable contribution to this Trust in anamount that is projected to provide the Trust with sufficient liquidassets (meaning assets readily convertible into cash) to pay (i) each Beneficiary thebenefits to which he or she is entitled pursuant to the Plan as in effect onthe date of the Change in Control, and (ii) all fees associated withmaintaining the Trust for the maximum period over which Beneficiaries arereasonably expected to be receiving payments from the Trust.  Any amendment to the Plan’s definition ofChange in Control shall be deemed to apply with equal force, effect, and timingto the definition of Change in Control for purposes of this Trust, except thata modification that does or may adversely affect a Beneficiary shall beineffectual as to the Beneficiary unless he or she consents in writing to bebound by the modification.

 

----

 

***(b)******                                ***Within 75 days following each December 31stafter a Change in Control occurs, the Company shall, if the Trustee deemsnecessary, be required to irrevocably deposit additional cash or other liquidassets to the Trust in an amount sufficient to pay each Beneficiary thebenefits to which he or she is entitled pursuant to the Plan.  The Trustee shall have the right to monitor,enforce and/or collect any amounts due and owing from the Company or to givenotice of any default in the payment of benefits to Participants.

 

***(c)******                                 ***The Trust hereby established shall beirrevocable.

 

***(d)******                                ***The Trust is intended to be a grantortrust, of which the Company is the grantor, within the meaning of subpart E,part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of1986, as amended (the “**Code**”), and shall be construed accordingly.

 

***(e)******                                 ***The principal of the Trust, and anyearnings thereon, shall be held separate and apart from other funds of theCompany, and shall be used exclusively for the uses and purposes ofBeneficiaries and general creditors as herein set forth.  Beneficiaries shall have no preferred claimon, or any beneficial ownership interest in, any Trust assets.  Any rights created under the Plan and thisTrust Agreement shall be unsecured contractual rights of the Beneficiaries, asprovided for in this Trust Agreement. Any assets held by the Trust will be subject to the claims of theCompany’s general creditors under federal and state law in the event ofInsolvency, as defined in Section 3(a) herein.

 

**16.**                               Payments to Beneficiaries

** **

***(a)******                                ***Upon a Change in Control, the Companyshall, as soon as possible but in no event later than ten business days afterthe Change in Control, deliver to the Trustee a schedule (the “**Payment Schedule**”) which reflectsthe benefits payable with respect to each Beneficiary on account of the Changein Control.  Except as otherwise providedherein, the Trustee shall make payments to Beneficiaries in accordance withsuch Payment Schedule.  The Trustee shallmake provisions for the reporting and withholding of any federal, state orlocal taxes that may be required to be withheld with respect to the payment ofbenefits pursuant to the terms of the Plan and shall pay amounts withheld tothe appropriate taxing authorities or determine that such amounts have beenreported, withheld, and paid by the Company.

 

***(b)******                                ***The entitlement of a Beneficiary tobenefits under the Plan shall be determined by the Company or such party as maybe designated under the Plan, and any claim for such benefits shall beconsidered and reviewed under the procedures set forth in the Plan.

 

***(c)******                                 ***The Company may make payment of benefitsdirectly to Beneficiaries as such benefits become due under the terms of thePlan.  The Company shall notify theTrustee of its decision to make such payment of benefits prior to the timebenefits are payable to Beneficiaries. In addition, if the principal of the Trust, and any earnings thereon,are not sufficient to make payments of benefits in accordance with the terms ofthe Plan, the Company shall make the balance of each such payment as due.  The Trustee shall notify the Company whenexisting principal and earnings are insufficient under the Payment Schedule.

 

2

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***(d)******                                ***The Trustee shall make distributions fromthe Trust in a manner reasonably intended to provide each Beneficiary with allof his or her benefits payable under the Plan.

** **

**17.**                               Trustee Responsibility Regarding Paymentsto Trust Beneficiary When the Company Is Insolvent

** **

***(a)******                                ***The Trustee shall cease payment ofbenefits to Beneficiaries if the Company is Insolvent.  The Company shall be considered “**Insolvent**” for purposes of thisTrust Agreement if (i) the Company is unable to pay its debts when thesame become due, or (ii) the Company files a voluntary petition underChapter 11 of the Federal Bankruptcy Code, or (iii) an involuntarypetition under Chapter 11 of the Federal Bankruptcy Code is filed with respectto the Company.

 

***(b)******                                ***At all times during the existence of thisTrust, as provided in Section 1(d) hereof, the principal and incomeof the Trust shall be subject to claims of general creditors of the Companyunder federal and state law as set forth below.

 

***(c)******                                 ***The Board of Directors and the ChiefExecutive Officer of the Company shall have the duty to inform the Trustee inwriting of the Company’s Insolvency.  Ifa person claiming to be a creditor of the Company alleges in writing to theTrustee that the Company has become Insolvent, the Trustee shall determinewhether the Company is Insolvent and, pending such determination, the Trusteeshall discontinue payment of benefits to Beneficiaries.

 

(i)                                     Unless the Trustee has actual knowledgeof the Company’s Insolvency, or has received notice from the Company or aperson claiming to be a creditor alleging that the Company is Insolvent, theTrustee shall have no duty to inquire whether the Company is Insolvent.  The Trustee may in all events rely on suchevidence concerning the Company’s solvency as may be furnished to the Trusteeand that provides the Trustee with a reasonable basis for making adetermination concerning the Company’s solvency.

 

(ii)                                  If at any time the Trustee has determinedthat the Company is Insolvent, the Trustee shall discontinue payments toBeneficiaries, shall liquidate the Trust’s investment, if any, in common stock(“Common Stock”) of the Company, and shall hold the assets of the Trust for thebenefit of the Company’s general creditors. Nothing in this Trust Agreement shall in any way diminish any rights ofBeneficiaries as general creditors of the Company with respect to benefits dueunder the Plan or otherwise.

 

(iii)                               The Trustee shall resume the payment ofbenefits to Beneficiaries in accordance with Section 2 of this TrustAgreement only after the Trustee has determined that the Company is notInsolvent or is no longer Insolvent.

 

***(d)******                                ***If the Trustee discontinues the paymentof benefits from the Trust pursuant to Section 3(a) hereof andsubsequently resumes such payments, the first payment following suchdiscontinuance shall include the aggregate amount of all payments due toBeneficiaries under the terms of the Plan for the period of suchdiscontinuance, provided that there are sufficient assets to make suchpayments.  The aggregate amount of anypayments to Beneficiaries by the Company, in lieu of the payments provided forhereunder during any such period of discontinuance, shall be deducted from anypayments made by the Trustee hereunder.

 

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**18.**                               Payments to the Company

** **

Afterthe Trust has become irrevocable, the Company shall have no right or power todirect the Trustee to return to the Company or to divert to others any of the Trustassets before all payment of benefits have been made to Beneficiaries pursuantto the terms of the Plan, except as provided for in Section 3 hereof.

 

**19.**                               Investment Authority

** **

***(a)******                                ***The Trustee shall have the solediscretion as to the investment of Trust assets, provided that the Trusteeshall invest Trust assets in a manner reasonably anticipated to provide theTrust with assets sufficient to fund the Company’s obligations under the Plan.

 

***(b)******                                ***All rights associated with assets of theTrust shall be exercised by the Trustee or the person designated by theTrustee, and shall in no event be exercisable by or through Beneficiaries.  The Company shall have the continuingobligation to substitute liquid assets of equal fair market value for anyilliquid assets held by the Trust, and the Trusteeshall have full authority to convert any illiquid assets into liquid assets.

 

**20.**                               Disposition of Income

** **

Duringthe term of this Trust, all income received by the Trust, net of expenses andtaxes, shall be reinvested.

** **

**21.**                               Accounting by Trustee

** **

TheTrustee shall keep accurate and detailed records of all investments, receipts,disbursements of all transactions, including such specific records as shall beagreed upon in writing between the Company and the Trustee.  Within 75 days following each December 31after the execution of this Agreement, and within 20 days after the removal orresignation of the Trustee, the Trustee shall deliver to the Company a writtenaccount of its administration of the Trust during such year or during theperiod from the close of the last preceding year to the date of such removal orresignation, reflecting all investments, receipts, disbursements and othertransactions effected by it, including a description of all securities andinvestments purchased and sold with the cost or net proceeds of such purchasesor sales (accrued interest paid or receivable recorded separately), andreflecting all cash, securities and other property held in the Trust at the endof such year or as of the date of such removal or resignation, as applicable.

 

**22.**                               Responsibility of Trustee

** **

***(a)******                                ***The Trustee shall act with the care,skill, prudence and diligence under the circumstances then prevailing that aprudent person acting in like capacity and familiar with such matters would usein the conduct of an enterprise of a like character and with like objectives,

 

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provided, however,that the Trustee shall incur no liability to any person for any action takenpursuant to a direction, request or approval given by the Company which iscontemplated by, and in conformity with, the terms of the Plan or this TrustAgreement and is given in writing by the Company.  In the event of a dispute between the Companyand a party, the Trustee may apply to a court of competent jurisdiction toresolve the dispute.

 

***(b)******                                ***If the Trustee undertakes or defends anylitigation arising in connection with this Trust, the Company agrees toindemnify the Trustee against Trustee’s costs, expense and liabilities(including, without limitation, attorneys’ fees and expenses) relating theretoand to be primarily liable for such payments, except in those cases where theTrustee shall have been found by a court of competent jurisdiction to haveacted with negligence or willful misconduct. If the Company does not pay such costs, expenses and liabilities in areasonably timely manner, the Trustee may obtain payment from the Trust.

 

***(c)******                                 ***The Trustee may consult with legalcounsel with respect to any of its duties or obligations hereunder.

 

***(d)******                                ***The Trustee may hire agents, accountants,actuaries, investment advisors, financial consultants or other professionals toassist it in performing any of its duties or obligations hereunder.

 

***(e)******                                 ***The Trustee shall have, without exclusion,all powers conferred on trustees by applicable law, unless expressly providedotherwise herein, provided, however, that if an insurance policy is held as anasset of the Trust, the Trustee shall have no power to name a beneficiary ofthe policy other than the Trust, to assign the policy (as distinct fromconversion of the policy to a different form) other than to a successorTrustee, or to loan to any person the proceeds of any borrowing against suchpolicy.

 

***(f)******                                   ***Notwithstanding any powers granted to theTrustee pursuant to this Trust Agreement or to applicable law, the Trusteeshall not have any power that may accord the Trust the authority to engage in abusiness and to receive the gains therefrom, within the meaning of section301.7701-2 of the Procedure and Administrative Regulations promulgated pursuantto the Code.

 

**23.**                               Compensation and Expenses of Trustee

** **

TheCompany shall pay all administrative expenses and the Trustee’s fees andexpenses relating to the Plan and this Trust. If not so paid, the fees and expenses shall be paid from the Trust.

 

**24.**                               Resignation and Removal of Trustee

** **

TheTrustee may resign at any time by written notice to the Company, whichresignation shall be effective 30 days after the Company receives such notice(unless the Company and the Trustee agree otherwise).  The Trustee may be removed by the Company on30 days notice, or upon shorter notice accepted by the Trustee; provided thatif such removal occurs on or after a Change in Control, or within 90 daysbeforehand, the removal will be ineffective unless it is done with the writtenconsent of Beneficiaries who are entitled to at least 75% of the Trust’sassets.

 

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If theTrustee resigns or is removed, a successor shall be appointed, in accordancewith Section 11 hereof, by the effective date or resignation or removalunder this section.  If no suchappointment has been made, the Trustee may apply to a court of competentjurisdiction for appointment of a successor or for instructions.  All expenses of the Trustee in connectionwith the proceeding shall be allowed as administrative expenses of theTrust.  Upon resignation or removal ofthe Trustee and appointment of a Successor Trustee, all assets shallsubsequently be transferred to the Successor Trustee.  The transfer shall be completed within 60days after receipt of a notice of resignation, removal or transfer, unless theCompany extends the time for such transfer.

 

**25.**                               Appointment of Successor

** **

If theTrustee resigns or is removed in accordance with Section 10 hereof, theCompany may appoint any other party as a successor to replace the Trustee uponsuch resignation or removal.  Theappointment shall be effective when accepted in writing by the new trustee, whoshall have all of the rights and powers of the former trustee, includingownership rights in the Trust assets. The former trustee shall execute any instrument necessary or reasonablyrequested by the Company or the Successor Trustee to evidence thetransfer.  Notwithstanding the foregoing,if the Trustee resigns or is removed in connection with or following a Changein Control, the Trustee that has resigned or is being removed shall appoint asits successor a third party financial institution that has trust powers, isindependent of and unrelated to the Company, its affiliates, or theirsuccessors, and is agreed to in writing by Beneficiaries who are entitled to atleast 75% of the Trust’s assets.

 

ASuccessor Trustee need not examine the records and acts of any prior trusteeand may retain or dispose of existing Trust assets, subject to Sections 7 and 8hereof.  The Successor Trustee shall notbe responsible for, and the Company shall indemnify and defend the SuccessorTrustee from, any claim or liability resulting from any action or inaction ofany prior trustee or from any other past event, or any condition existing atthe time it becomes Successor Trustee.

 

**26.**                               Amendment or Termination

** **

***(a)******                                ***This Trust Agreement may be amended by awritten instrument executed by the Trustee and the Company, provided that nosuch amendment shall either conflict with the terms of the Plan.

 

***(b)******                                ***Notwithstanding subsection (a) hereof,the provisions of this Trust Agreement and the Trust created thereby may not beamended, within six months before or at any time on or after a Change inControl occurs, without the written consent of Beneficiaries who are entitledto at least 75% of the Trust’s assets.

 

***(c)******                                 ***The Trust shall not terminate until thedate on which no Beneficiary is entitled to benefits pursuant to the termshereof or of the Plan.  Upon terminationof the Trust, the Trustee shall return any assets remaining in the Trust to theCompany.

 

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***(d)******                                ***The Company may terminate this Trust priorto the payment of all benefits under the Plan only upon written approval of allBeneficiaries entitled to payment of such benefits.

 

**27.**                               Miscellaneous

** **

***(a)******                                ***Any provision of this Trust Agreementprohibited by law shall be ineffective to the extent of any such prohibition,without invalidating the remaining provisions hereof.

 

***(b)******                                ***Benefits payable to Beneficiaries underthis Trust Agreement may not be anticipated, assigned (either at law or inequity), alienated, pledged, encumbered or subjected to attachment,garnishment, levy, execution or other legal or equitable process, exceptpursuant to the terms of the Plan and this Trust Agreement.

 

***(c)******                                 ***This Trust Agreement shall be governed byand construed in accordance with the laws of the State of Delaware withoutreference to the principles of conflicts of laws.

 

***(d)******                                ***The Trustee agrees to be bound by theterms of the Plan, as in effect from time to time.

 

**28.**                               Effective Date

** **

TheEffective Date of this Trust Agreement shall be the date referenced in thePreamble.

 

IN WITNESS WHEREOF, the Company, by its dulyauthorized officer, has caused this Trust Agreement to be executed, and itscorporate seal affixed, and the Trustee has executed this Trust Agreement, onthe date referenced in the Preamble.

 

 
| Witnessed by: |   | **SRS LABS, INC.** |
|---------------|--------|--------------------|
|          |   | ** **         |
|          |   | ** **         |
|          |   | By                 |   |
|          |   |               |   |
|          |   |               | Its |   |
|          |   |               |
|          |   |               |
| Witnessed by: |   | **TRUSTEE**        |
|          |   | ** **         |
|          |   | ** **         |
|          |   | ** **         |

 

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