8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  June 30, 2006

SRS LABS, INC.

(Exact Name of registrant as specified in its charter)

Delaware	0-21123	33-0714264
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2909 Daimler Street Santa Ana, California	92705
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 442-1070

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01  Entry into a Material Definitive Agreement.

Divestiture of Interest in CHS/SRS LLC

On June 30, 2006, SRS Labs, Inc. (“SRS”) completed the sale of its interest in the CHS/SRS LLC joint venture (the “joint venture”) to Coming Home Studios, LLC (“CHS”) in exchange for $200,000, the rights to all cash assets of the joint venture, and a promissory note in the amount of $175,000. The joint venture involved the production and distribution of six concert videos featuring SRS’s Circle Surround Technology. As of the close of business on June 30, 2006, SRS had received $150,000 from CHS and had transferred the cash assets of the joint venture to SRS. The remaining $50,000 was received from CHS on July 5, 2006. SRS will record a gain on disposal of its interest in the LLC of approximately $370,000. Any amounts related to the promissory note will be recorded at the time the cash is received by SRS.

SRS and CHS have also amended the Strategic Alliance Agreement between the two companies, extending the term of that agreement through July 9, 2011. Under the terms of the First Amendment to the Strategic Alliance Agreement (the “First Amendment”), SRS is entitled to, on a non-exclusive basis,  promote the sale, licensing or distribution of any of the concert DVDs in the CHS library, with SRS to be paid a commission on any revenues generated from the sale of such DVDs by SRS marketing efforts. Additionally, the First Amendment provides that SRS will retain a non-exclusive, royalty-free license to use all or any part of the content of certain concert DVDs in SRS’ promotional marketing efforts for its technology or business.

Incorporation by Reference

The foregoing descriptions of the Termination Agreement, Promissory Note, Security Agreement, Assignment, and First Amendment to the Strategic Alliance Agreement are not complete and are qualified in their entirety be reference to the full text of the agreements, which are filed as exhibits to this Form 8-K.

Item 9.01 Financial Statements and Exhibits

(d)Exhibits

Exhibit No.	Description
10.1	Termination Agreement dated June 30, 2006 between SRS Labs, Inc. and Coming Home Studios, LLC.
10.2	Promissory Note dated June 30, 2006 between SRS Labs, Inc. and Coming Home Studios, LLC.
10.3	Security Agreement dated June 30, 2006 between SRS Labs, Inc. and Coming Home Studios, LLC.
10.4	Assignment dated June 30, 2006 between SRS Labs, Inc. and Coming Home Studios, LLC.
10.5	First Amendment to the Strategic Alliance Agreement dated June 30, 2006 between SRS Labs, Inc. and Coming Home Studios, LLC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		SRS LABS, INC., a Delaware corporation
Date: July 6, 2006	By:	/s/ ULRICH GOTTSCHLING
		Ulrich Gottschling
		Chief Financial Officer

EX-10.1

Exhibit 10.1

TERMINATION AGREEMENT

This Termination Agreement is entered into as of June 30, 2006 by and between Coming Home Studios, LLC (“CHS”) located at 5540 Hollywood Boulevard, Hollywood, California 90028 and SRS Labs, Inc. (“SRS”) located at 2909 Daimler Street, Santa Ana, CA. 92705 with reference to the following:

A.            On June 16, 2004, CHS and SRS formed CHS/SRS, LLC as a limited liability company (the “Company”) to produce and distribute six concert DVDs by Duran Duran, Godsmack, Boz Scaggs and All Access (the “Concert Videos”).

B.            Pursuant to the Operating Agreement of the Company dated as of September 23, 2004 between CHS and SRS (the “Operating Agreement”), CHS was appointed Manager of the Company.

C.            CHS was removed as Manager of the Company and SRS was appointed Manager pursuant to unanimous written consent of the Members dated July 18, 2005, and SRS has been acting as Manager since such date.

D.            SRS is willing to sell and CHS is willing to purchase all of SRS Membership Interest in the Company representing a 50% equity interest in the Company (the “Membership Interest”) upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions contained herein the parties agree as follows:

I.
PURCHASE OF MEMBERSHIP INTEREST

Section 1.01.          Terms of the Purchase.

On the basis of the representations, warranties, covenants, and agreements contained in this Agreement and subject to the terms and conditions of this Agreement:

(a)           At the Closing (as defined in Section 1.02), SRS will sell, assign, transfer, and convey to CHS the Membership Interest for the following consideration:

(i)            $200,000 cash, $50,000 (the “Deposit”) of which shall be paid upon execution of this Agreement and $150,000 to be paid on the Closing;

(ii)           All cash held in the Company’s accounts as of the Closing;

(iii)          All proceeds, including accounts receivable, accrued from the sale of the Duran Duran Live in London Concert Video (the “Duran Duran Payments”) through December 31, 2005; and

(iv)          All proceeds, including accounts receivable, accrued from the sale of the Godsmack Changes DVD through December 31, 2005 and payable to the Company as of the Closing Date, but not received by the Company (the “Godsmack Payments”) because such proceeds are (i) not yet due to be paid to the Company; or (ii) have been withheld by Rounder Records because of the CHS cross-collateralization arrangement with Rounder.

(b)           CHS will pay the Duran Duran Payments and the Godsmack Payments to SRS on the Closing by delivery of a promissory note in the total amount of One Hundred and Seventy Five Thousand Dollars ($175,000) (the “Note”) to be secured by the Concert Videos. The Note shall be due on the sixth month anniversary of the Closing and be payable as follows::

(i)            20% of the proceeds from the sale of all of the Concert Videos from January 1, 2006 through the Maturity Date will be paid directly by the distributors to SRS in respect of the Note, with the remaining 80% to be paid to CHS;

(ii)           If the Note has not been repaid in full by the Maturity Date, all of the proceeds from the sale of the Concert Videos will be paid directly to SRS by distributors from the Maturity Date until the Note is paid in full; and

(iii)          If any investor makes an equity investment into CHS or an affiliate thereof while any obligations under the Note are outstanding, all of the proceeds of the equity investment will be used to pay the outstanding obligations under the Note until it is paid in full.

The Note shall be in form and substance acceptable to SRS.

(c)           Notwithstanding anything herein to the contrary, CHS shall be entitled to all payments from the liquidation of reserves with respect to the Concert Videos.

Section 1.02.          The Closing. The closing of the transactions contemplated hereby  (the “Closing”) shall take place at a location mutually agreeable to both the CHS and SRS no later than June 30, 2006. If the Closing does not occur by June 30, 2006 (unless such date is extended by mutual agreement) through no fault of SRS, SRS shall have the right to terminate this Agreement and retain the Deposit as liquidated damages. If SRS is unable to close through no fault of CHS, SRS shall return the Deposit to CHS. Effective as of the Closing, SRS will resign as manager of the Company.

Section 1.03.          Deliveries. At the Closing, SRS shall deliver to CHS all documentation in its possession or under its control relating to the Company and transfer all accounts of the Company to CHS.

II.
REPRESENTATIONS AND WARRANTIES

A.            SRS represents and warrants to CHS as follows:

Section 2.01.          Authority. SRS has all requisite power and authority to execute, deliver, and perform this Agreement. All necessary proceedings of SRS have been duly taken to authorize the execution, delivery, and performance of this Agreement thereby. This Agreement has been duly authorized, executed, and delivered by SRS, constitutes the legal, valid, and binding obligation of SRS, and is enforceable as to SRS in accordance with its terms. No

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consent, authorization, approval, order, license, certificate, or permit of or from, or declaration or filing with, any federal, state, local, or other governmental authority or any court or other tribunal is required by SRS for the execution, delivery, or performance of this Agreement thereby. No consent of any party to any material contract, agreement, instrument, lease, license, arrangement, or understanding to which SRS is a party, or to which it or any of its businesses, properties, or assets are subject, is required for the execution, delivery, or performance of this Agreement; and the execution, delivery, and performance of this Agreement will not violate, result in a breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under, entitle any party to receive rights or privileges that such party was not entitled to receive before this Agreement was executed under, or create any obligation on the part of SRS to which it was not subject immediately before this Agreement was executed under, any term of any such material contract, agreement, instrument, lease, license, arrangement, or understanding, or violate or result in a breach of any term of the limited partnership agreement (or other governing document) of SRS or any subsidiary thereof, or (if the provisions of this Agreement are satisfied) violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment, or decree binding on SRS or any subsidiary thereof or to which any of their respective businesses, properties, or assets are subject, which violation or breach would have a material adverse effect on SRS and its subsidiaries taken as a whole.

Section 2.02.          Ownership. The Membership Interest is owned of record and beneficially by SRS free and clear of any security interest, pledge, mortgage, lien (including, without limitation, tax liens), charge, encumbrance, adverse claim, preferential arrangement or similar restriction of any kind, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.  The Membership Interest is not subject to any options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to interests therein.

B.            CHS represents and warrants to SRS as follows:

Section 2.03.          Authority. CHS has all requisite power and authority to execute, deliver, and perform this Agreement. All necessary proceedings of CHS have been duly taken to authorize the execution, delivery, and performance of this Agreement thereby. This Agreement has been duly authorized, executed, and delivered by CHS, constitutes the legal, valid, and binding obligation of CHS, and is enforceable as to CHS in accordance with its terms. No consent, authorization, approval, order, license, certificate, or permit of or from, or declaration or filing with, any federal, state, local, or other governmental authority or any court or other tribunal is required by CHS for the execution, delivery, or performance of this Agreement thereby. No consent of any party to any material contract, agreement, instrument, lease, license, arrangement, or understanding to which CHS is a party, or to which it or any of its businesses, properties, or assets are subject, is required for the execution, delivery, or performance of this Agreement; and the execution, delivery, and performance of this Agreement will not violate, result in a breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under, entitle any party to receive rights or privileges that such party was not entitled to receive before this Agreement was executed under, or create any obligation on the part of CHS to which it was not subject immediately before this Agreement was executed under, any term of any such material contract, agreement, instrument, lease, license, arrangement, or understanding, or violate or result in a breach of any term of the

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limited partnership agreement (or other governing document) of CHS or any subsidiary thereof, or (if the provisions of this Agreement are satisfied) violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment, or decree binding on CHS or any subsidiary thereof or to which any of their respective businesses, properties, or assets are subject, which violation or breach would have a material adverse effect on CHS and its subsidiaries taken as a whole.

Section 2.04.          Nature of Membership Interest. CHS understands that the Membership Interest is a “restricted security” and has not been registered under the Securities Act or any applicable state securities law. CHS is acquiring the Membership Interest as principal for its own account and not with a view to or for distributing or reselling such Membership Interest or any part thereof in violation of the Securities Act of 1933, as amended or any applicable state securities law.

III.
INDEMNIFICATION

CHS shall indemnify SRS from any and all liabilities of any kind in respect of SRS’ service as Manager of the Company, consistent with and only to the extent of the Company’s indemnification obligations under Section 10.1 of the Operating Agreement.

IV.
MISCELLANEOUS

Section 4.01.          Further Actions. At any time and from time to time, each party agrees, at its or his expense, to take such actions and to execute and deliver such documents as may be reasonably necessary to effectuate the purposes of this Agreement.

Section 4.02.          Availability of Equitable Remedies.  Since a breach of the provisions of this Agreement could not adequately be compensated by money damages, any party shall be entitled, either before or after the date of the execution and delivery hereof, in addition to any other right or remedy available to it, to an injunction restraining such breach or a threatened breach and to specific performance of any such provision of this Agreement, and in either case no bond or other security shall be required in connection therewith, and the parties hereby consent to the issuance of such an injunction and to the ordering of specific performance.

Section 4.03.          Survival. The covenants, agreements, representations, and warranties contained in or made pursuant to this Agreement shall survive the Closing and any transfer of the Membership Interest to CHS, irrespective of any investigation made by or on behalf of any party.

Section 4.04.          Modification. This Agreement set forth the entire understanding of the parties with respect to the subject matter hereof supersede all existing agreements among them concerning such subject matter, and may be modified only by a written instrument duly executed by each party.

Section 4.05.          Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested (or by the most nearly comparable method if mailed from or to a location outside of the United States) or by Federal Express, Express Mail, or similar overnight delivery or courier service or

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delivered (in person or by telecopy, telex, or similar telecommunications equipment) against receipt to the party to whom it is to be given at the address of such party set forth in the preamble to this Agreement (or to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 4.05) with a copy to each of the other parties hereto. Any notice given to any corporate party shall be addressed to the attention of the Corporate Secretary. Notice to the estate of any party shall be sufficient if addressed to the party as provided in this Section 4.05. Any notice or other communication given by certified mail (or by such comparable method) shall be deemed given at the time of certification thereof (or comparable act), except for a notice changing a party’s address which will be deemed given at the time of receipt thereof. Any notice given by other means permitted by this Section 3.05 shall be deemed given at the time of receipt thereof. A copy of any and all notices to CHS shall be delivered in accordance with this section to Troy & Gould, 1801 Century Park East, 16th Floor, Los Angeles, California 90078, Attention: David Ficksman.

Section 4.06.          Waiver. Any waiver by any party of a breach of any term of this Agreement shall not operate as or be construed to be a waiver of any other breach of that term or of any breach of any other term of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions will not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing.

Section 4.07.          Binding Effect. The provisions of this Agreement shall be binding upon and inure to the benefit of CHS and SRS and their respective successors and assigns.

Section 4.08.          No Third Party Beneficiaries. This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement.

Section 4.09.          Separability. If any provision of this Agreement is invalid, illegal, or unenforceable, the balance of this Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

Section 4.10.          Headings. The headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.

Section 4.11.          Counterparts; Governing Law. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be governed by, and construed in accordance with, the laws of California, without giving effect to conflict of laws.  Each of the parties hereto hereby irrevocably submits to the jurisdiction of any court of the State of California or the United States District Court located in Los Angeles or Orange County, California for the purpose of any suit, action, or other proceeding arising out of this Agreement, or any of the agreements or transactions contemplated hereby, which is brought by or against any party hereto and (i) hereby irrevocably agrees that all claims in respect of any such suit, action, or proceeding may be heard and determined in any such court and (ii) to the extent that any party has acquired, or hereafter may acquire, any immunity from jurisdiction of any such court or from

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any legal process therein, such party hereby waives, to the fullest extent permitted by law, such immunity. Each party hereto hereby waives, and agrees not to assert in any such suit, action, or proceeding, in each case, to the fullest extent permitted by applicable law, any claim that (a) such party is not personally subject to the jurisdiction of any such court, (b) such party is immune from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution, or otherwise) with respect to such party’s property or (c) any such suit, action, or proceeding is brought in an inconvenient forum.

Section 4.12.          Marketing Agreement. The Strategic Alliance Agreement between SRS and CHS will be amended to provide:

·extension to July 9, 2011;

·that SRS, on a non-exclusive basis, promote the sale, licensing or distribution of any of the DVDs in the CHS library, including without limitation the Concert Videos, with SRS to be paid an 18% commission on any revenues generated in respect of such DVDs by SRS marketing efforts; and

·SRS will retain a non-exclusive, no-fee license to use all or any part of the content of any of the Concert Videos in SRS’ promotional marketing efforts for its technology or business.

The amendment shall be in form and substance acceptable to the parties.

Section 4.13.          Dissolution. Within thirty days of the Closing, CHS will take all necessary steps to dissolve the Company and will provide SRS with copies of the documentation confirming such dissolution.

Section 4.14.          Disclosure. The parties agree that no press release or other public disclosure concerning the subject matter of this Agreement shall  be made without advance written approval of SRS. Notwithstanding the above, SRS shall have the right to make any public disclosures required by law or deemed necessary by SRS in its sole discretion and in such event will use reasonable efforts to allow CHS an opportunity to provide comments to any  press release.

Section 4.15.          IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above.

SRS LABS, INC.
By:
	Name:
	Title:
COMING HOME STUDIOS, LLC
By:
	Name:
	Title:

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EX-10.2

Exhibit 10.2

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS AND THUS MAY NOT BE TRANSFERRED UNLESS REGISTERED UNDER THAT ACT AND SUCH LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

PROMISSORY NOTE

Due December 30, 2006

FOR VALUE RECEIVED, Coming Home Studios, LLC, a California limited liability company (“Company”), hereby promises to pay to SRS Labs, Inc., a Delaware corporation (“Holder”), or its registered assigns, the sum of One Hundred Seventy Five Thousand Dollars ($175,000). Upon default, the note will bear interest at the rate of 8% per annum from the date of such default.

In no event shall Holder be entitled to interest exceeding the maximum rate permitted by law. If any excess interest is provided for or shall be adjudicated to be so provided for in this Note, then in such event: (i) the provisions of this paragraph shall govern and control; (ii) Company shall not be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount permitted by law, and the same shall be construed as a mutual mistake of the parties; and (iii) any such excess which may have been collected or attributed shall be subtracted from the then unpaid principal amount hereof, or refunded to Company.

Both principal hereof and interest thereon are payable in lawful money of the United States of America at the offices of Holder as indicated in the official records of Company. Interest hereunder shall be computed on the basis of a year of three hundred sixty (360) days for the actual number of days elapsed.

This Note is secured by a certain Security Agreement of even date herewith executed by Company, as such document may be amended, restated, supplemented or otherwise modified from time to time.

Principal and any accrued but unpaid interest thereon shall be due and payable on December 30, 2006 (the “Due Date”); provided, however, (i) 20% of the proceeds from the sale of all of the Concert Videos from January 1, 2006 through the Maturity Date will be paid directly by the distributors to SRS in respect of the Note, with the remaining 80%

to be paid to CHS; (ii) If the Note has not been repaid in full by the Maturity Date, all of the proceeds from the sale of the Concert Videos will be paid directly to SRS by distributors from the Maturity Date until the Note is paid in full; and (iii) If any investor makes an equity investment into CHS or an affiliate thereof while any obligations under the Note are outstanding, all of the proceeds of the equity investment will be used to pay the outstanding obligations under the Note until it is paid in full.

This Note is subject to the terms and conditions set forth below:

1.             Definitions. As used in this Note, the following terms shall mean:

1.1           “Event of Default” — shall have the meaning given such term in Section 4 below.

1.2           “Loan Documents” — shall refer to this Note and the Security Agreement described above.

1.3           “Note” — shall mean this Note and any notes delivered in substitution or exchange therefor as provided herein, as they may hereafter be amended, restated, supplemented or otherwise modified from time to time.

2.             Optional Prepayment of Note. Company, at its option, may make payments in reduction of the principal outstanding on this Note at any time.

3.             Replacement of Note. Upon receipt of evidence reasonably satisfactory to Company of the ownership of and the loss, theft, destruction or mutilation of this Note and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement in an amount reasonably satisfactory to Company, or (in the case of mutilation) upon surrender and cancellation of the mutilated Note, Company will execute and deliver, in lieu thereof, a new Note of like tenor.

4.             Events of Default.

The occurrence and continuation of any of the events or conditions described in Section 4.1 or Section 4.2 shall be an “Event of Default”.

4.1           Holder Action. The occurrence of any of the following Events of Default shall, at the option of the Holder, entitle Holder to declare all sums of principal and interest then remaining unpaid, and all other amounts payable hereon, due and payable, all without demand, presentment, notice or protest, all of which hereby are expressly waived, and permit Holder to exercise any other right available to it at law or in equity, all of which rights and powers may be exercised cumulatively and not alternatively.

(a)           Failure to Pay Principal or Interest. Failure to pay any installment of interest or principal hereon when due.

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(b)           Breach of Covenants. The breach by Company of any of the material covenants contained in the Loan Documents and the continuance thereof for a period of thirty (30) days after written notice thereof to Company.

(c)           Breach of Representations and Warranties. Any of Company’s representations or warranties made in the Loan Documents shall prove to have been false or misleading in any material respect as of the date such representations and warranties were made.

4.2           Acceleration Without Specific Action. The occurrence of any of the following Events of Default shall make all sums of principal and interest then remaining unpaid and all other amounts payable hereon due and payable, all without demand, presentment, notice or protest, all of which hereby are expressly waived, and permit Holder to exercise any other right available to it at law or in equity, all of which rights and powers may be exercised cumulatively and not alternatively.

(a)           Bankruptcy. The voluntary institution of bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors by Company or the institution of any such proceedings against Company, which involuntary proceedings shall not have been vacated by appropriate court order within thirty (30) days of such institution.

(b)           Dissolution. Any order, judgment or decree shall have been entered against Company decreeing the dissolution or liquidation of Company and such order shall remain undischarged or unstayed for a period of thirty (30) days.

(c)           Insolvency, Receiver or Trustee. The making by Company of an assignment for the benefit of creditors; or the making by Company of an offer of settlement, composition or extension to the claims of all or substantially all of Company’s creditors or the application for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or the appointment otherwise of such a receiver or trustee or a committee of Company’s creditors.

5.             Transfer of Securities. This Note and all rights hereunder are transferable on the books of Company maintained for such purpose at its principal office referred to above by Holder in person or by duly authorized attorney, upon surrender of this Note properly endorsed and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer; provided, however, that this Note shall not be transferred without prior written notice to the Company. Each taker and holder of this Note, by taking or holding the same, consents and agrees that this Note when endorsed in blank shall be deemed negotiable and agrees that when this Note shall have been so endorsed, Holder hereof may be treated by Company and all other persons dealing with this Note, as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby, or to the transfer hereof on the books of Company,

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any notice to the contrary notwithstanding; but until such transfer on such books, Company may treat Holder hereof as the owner for all purposes.

6.             Notices. All notices and other communications under or in connection with this Note shall be in writing and shall be deemed given (a) if delivered personally, upon delivery, (b) if delivered by registered or certified mail (return receipt requested), upon the earlier of actual delivery or three days after being mailed, or (c) if given by telecopy, upon confirmation of transmission by telecopy, in each case to the parties at the following addresses:

(a)           If to Company, addressed to:

Coming Home Studios, LLC
5540 Hollywood Blvd.
Hollywood, California  90028
Attention:   Daniel E. Catullo III

                   Manager

Facsimile:  (323) 467-6400

With an additional copy to:

Troy & Gould PC
1801 Century Park East, Suite 1600
Los Angeles, CA 90067-2367

Attention:  David L. Ficksman
Facsimile:  (310) 789-1490

(b)           If to Holder, addressed to:

SRS Labs, Inc.
2909 Daimler Street
Santa Ana, California 92705
Attention:  Ulrich Gottschling
                 Chief Financial Officer
Facsimile:  (949) 852-1099

7.             Miscellaneous.

7.1           Survival of Covenants. All agreements and covenants made herein shall survive the execution and delivery hereof.

7.2           Failure or Indulgence Not Waiver. No failure or delay on the part of Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any one or more of such failures or delays constitute a course of

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performance or dealing on which Company is entitled to rely, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercises thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

7.3           Cost of Collection. If any default is made in the payment of this Note, Company shall pay Holder all costs of collection, including, without limitation, reasonable attorneys’ and accountants’ fees and costs of appeals and interest on any sums actually disbursed at the rate set forth herein.

7.4           Governing Law. This Note shall be governed by and construed in accordance with the internal laws (and not the law of conflicts) of the State of California.

7.5           Arbitration. Any unresolved controversy or claim arising from or relating to this Note or breach thereof shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, then in effect. The decision of arbitration unless clearly erroneous, shall be final and conclusive upon the parties, and judgment upon the award rendered by the arbitrator may be entered in any court having competent jurisdiction. The arbitration proceedings shall be held in Santa Ana, California. The arbitration proceedings shall be conducted before one (1) neutral arbitrator who shall be a member of the California Bar who has been actively engaged in the practice of corporate and business law for at least fifteen (15) years, and shall proceed under any expedited procedures of the Commercial Arbitration Rules. The arbitrator shall have authority to award only (i) money damages, (ii) attorneys’ fees, costs and expert witness fees to the prevailing party, and (iii) sanctions for abuse or frustration of the arbitration process. The arbitrator’s compensation, and the administrative costs of the arbitration, shall be borne by the parties in the manner set forth in the arbitration award, as determined by the arbitrator. Notwithstanding the foregoing provisions of this Section 7.5, the parties are not required to arbitrate any issue for which injunctive relief is sought by any party hereto and both parties may seek injunctive relief in any federal or state court having jurisdiction.

7.6           Modification. Neither this Note nor any provision hereof may be amended, modified, waived, discharged or terminated without the consent of Holder.

7.7           Severability. Whenever possible, each provision of this Note will be interpreted in such manner as to be effective and valid under applicable law, but, if any provision of this Note is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Note.

7.8           Successors. All the covenants, agreements, representations and warranties contained in this Note shall bind the parties hereto and their respective heirs, executors, administrators, distributees, successors and assigns.

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7.9           Headings. The section headings in this Note are inserted for purposes of convenience only and shall have no substantive effect.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, Company has caused this Note to be signed by its duly authorized officer and to be dated June 30, 2006.

COMING HOME STUDIOS, LLC

By:                                                                                         
Name:                                                                                    
Its:                                                                                         

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EX-10.3

Exhibit 10.3

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Security Agreement”) is made and entered into effective as of June 30, 2006, by and between Coming Home Studios, LLC, a California limited liability company (“Debtor”), and SRS Labs, Inc., a Delaware corporation (“Secured Party”).

R E C I T A L S:

A.            Debtor has issued a promissory note in the principal amount of One Hundred and Seventy Five Thousand Dollars ($175,000) (the “Note,” and together with this Security Agreement, the “Loan Documents”) executed by Debtor in favor of Secured Party.

B.            It is a condition precedent to the consummation of the transactions contemplated by the Note that Debtor execute this Security Agreement, granting to Secured Party a security interest in certain collateral of Debtor.

C.            The loan evidenced by the Note and Loan Documents is a part of a Termination Agreement in which SRS is willing to sell and CHS is willing to purchase all of SRS Membership Interest in the CHC/SRS, LLC (the “Company”) representing a 50% equity interest in the Company (the “Membership Interest”).

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of where are hereby acknowledged, the parties hereby agree as follows:

1.             Uniform Commercial Code. Any terms used in this Security Agreement that are defined in the Uniform Commercial Code (the “Code”) shall be construed and defined as set forth in the Code unless otherwise defined herein, provided, however, that to the extent that the Code is used to define any term herein and such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 shall govern.

2.             Security Interest. Debtor hereby grants to Secured Party a continuing security interest in and to and a lien upon, the following personal property and other assets and interests in property of Debtor (the “Collateral”) in order to secure prompt repayment of any and all of the Obligations in accordance with the terms and conditions of the Loan Documents and in order to secure prompt performance by Debtor of its covenants and duties under the Loan Documents:

(a)           (i)            All of Debtor’s now owned or hereafter acquired right, title and interest in and to each of the following:

(1)           Production agreement between Coming Home Studios, LLC and Duran Duran Ltd. dated March 1, 2004;

(2)           Production agreement between Coming Home Studios, LLC and Godsmack Partnership dated March 18, 2004;

(3)           Production agreement between Coming Home Studios, LLC and Gray Cat Records, Inc. dated as of April 11, 2003 and executed August 18, 2003; and

(4)           Distribution Agreement between Coming Home Studios, LLC and Ideal Entertainment dated May 21, 2004 (collectively, the “Designated Contracts”); and [Insert other production and distribution agreements]

(ii)        All of Debtor’s now owned or hereafter acquired right, title and interest in and to any Accounts, Books, Deposit Accounts, Equipment, General Intangibles, Inventory, Investment Property, Negotiable Collateral, and Supporting Obligations (all as defined in the Code) with respect to the Designated Contracts, including present and future inventory and merchandise, all present and future goods held for sale or lease or to be furnished under a contract of service, all raw materials, work in process and finished goods, all packing materials, supplies and containers  relating to or used in connection with any of the foregoing, and all bills of lading, warehouse receipts or documents of title relating to any of the following; and

(b)           all proceeds and products, whether tangible or intangible, of any of the foregoing, including, without limitation, the proceeds of insurance covering any or all of the foregoing, and any proceeds resulting from the sale, exchange, collection, or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds and products thereof. As used in this Security Agreement, “proceeds” means: whatever is acquired upon the sale, lease, license, exchange or other disposition of Collateral; whatever is collected on, or distributed on account of Collateral; and any rights arising out of Collateral.

3.             Obligations Secured. This Security Agreement secures the prompt payment and performance of all obligations of Debtor now or hereafter existing under the Note, whether for principal, interest (including any interest that, but for the commencement of an insolvency proceeding, would have accrued), fees, expenses or otherwise, and all obligations, covenants and duties of any kind or description of Debtor now or hereafter existing under this Security Agreement, in each case, irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent,  due or to become due, now existing or hereinafter arising (“Obligations”). Any reference in this Agreement or in the Loan Documents to the Obligations shall include all extensions, modifications, renewals, or alterations thereof, both prior and subsequent to any insolvency proceeding.

4.             Representations and Warranties. To induce the Secured Party to make its extension of credit to the Debtor pursuant to the Note, the Debtor hereby represents and warrants to the Secured Party that:

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(a)           The Debtor (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization as set forth in Schedule 1, (ii) has the power and authority, and the legal right, to conduct the business in which it is currently engaged, (iii) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, and (d) is in compliance with all requirements of law applicable to the conduct of its business.

(b)           The description of the Designated Contracts set forth in this Security Agreement  completely and accurately describes all of Debtor’s right, title and interest in and to the Designated Contracts and any related agreements, rights and understandings with respect thereto.

(c)           The Debtor has the requisite legal capacity to own its assets, to borrow money, to execute, deliver and perform each of the Loan Documents and all other documents, certificates and instruments delivered in connection therewith, and to effect and carry out the transactions contemplated herein and therein. Each Loan Document has been duly authorized and, when executed and delivered, will be a valid and legally binding instrument enforceable against Debtor in accordance with its terms. The execution and delivery of the Loan Documents and the consummation of the transactions contemplated thereby (a) will not (immediately or with the passage of time, or the giving of notice) violate (i) any law, order, rule or regulation or determination of an arbitrator, a court, or other governmental agency, applicable or binding upon the Debtor or any of the Debtor’s property or as to which the Debtor or any of the Debtor’s property is subject; or (ii) any provision of any agreement, instrument, or undertaking to which the Debtor is a party or by which the Debtor or any of the Debtor’s property is bound and (b) will not result in the creation or imposition of any lien upon any of the property of the Debtor, other than those in favor of the Secured Party pursuant to the Loan Documents.

(d)           No consents, approvals or other authorizations or notices, other than those which have been obtained and are in full force and effect, are required by any state or federal regulatory authority or other person or entity in connection with the execution and delivery of the Loan Documents, the perfection of the security interest of Secured Party, and the performance of any obligations contemplated thereby.

(e)           The grant of the security interest in the Collateral by the Debtor pursuant to the Security Agreement creates a valid and perfected first priority security interest in the Collateral in favor of the Secured Party. The Debtor is the owner of, or has contractual rights to, the Collateral subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option, or other encumbrance whatsoever, except the liens and security interests created by the Loan Documents.

(f)            The Debtor is not subject to any contractual obligation restricting or limiting the ability of the Debtor to grant the security interest in the Collateral pursuant to the Security Agreement.

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5.             Further Assurances.

(a)           Debtor agrees that from time to time, at the expense of Debtor, Debtor will promptly execute and deliver all further instruments and documents, and take all further action, that Secured Party may reasonably deem necessary or desirable, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral.

(b)           Debtor hereby authorizes Secured Party to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral. A carbon, photographic or other reproduction of this Security Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

(c)           Debtor will furnish to Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Secured Party may reasonably request, all in reasonable detail.

6.             Additional Agreements.

(a)           Debtor shall not enter any additional agreements, arrangements or understandings in respect of the Designated Contracts with any party other than Secured Party without the prior written consent of Secured Party. If Secured Party consents to Debtor’s formation of a limited liability company or other entity in respect of any Designated Contract, Debtor shall pledge its entire interest in such entity to Secured Party within seven days of the formation of such entity by means of a pledge agreement substantially in the form of Schedule 3.

7.             Default. An “Event of Default” under the Note, Debtor’s failure to perform the obligations set forth under Sections 4, 5 and 6 of this Security Agreement shall be deemed an Event of Default for purposes of this Security Agreement.

8.             Remedies of the Secured Party in the Event of Default. Upon the occurrence and during the continuance of an Event of Default, Secured Party shall have the following rights and remedies:

(a)           In addition to any other rights and remedies contained in this Security Agreement, all of the rights and remedies of a secured party under the Uniform Commercial Code or other similar applicable law, all of which rights and remedies shall be cumulative and nonexclusive, to the extent permitted by law;

(b)           The right to collect any and all amounts due Debtor from any account debtor to the extent such account is included in the definition of Collateral;

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(c)           Require Debtor to assign any copyright interest it has under the Designated Contracts to the Secured Party;

(d)           The right to:  (i) do all acts and things necessary, in Secured Party’s sole discretion, to fulfill Debtor’s obligations under this Security Agreement; (ii) endorse the name of Debtor upon any chattel paper, documents, instrument, invoice, freight bill, bill of lading or similar document or agreement relating to the Collateral; and (iii) use the information recorded on or contained in any data processing equipment and computer hardware and software relating to the Collateral to which Debtor has access; and

(e)           The right to:  (i) sell or to otherwise dispose of all or any Collateral in its then condition, or after any further manufacturing or processing thereof, at public or private sale or sales, with such notice as may be required by law, in lots or in bulk, for cash or on credit, all as Secured Party, in its sole discretion, may deem advisable; (ii) adjourn such sales from time to time with or without notice; and (iii) conduct such sales on Debtor’s premises or elsewhere and use Debtor’s premises without charge for such sales for such time or times as Secured Party may see fit. Secured Party is hereby granted a license or other right to use, without charge, Debtor’s labels, copyrights, right of use of any name, trade secrets, patents, trade names, trademarks and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in advertising for sale and selling of Collateral and Debtor’s rights under all licenses and all franchise agreements shall inure to Secured Party’s benefit. Secured Party shall have the right to sell, lease or otherwise dispose of the Collateral, or any part thereof, for cash, credit or any combination thereof, and Secured Party may purchase all or any part of the Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of such purchase price, may set off the amount of such price against the Obligations. The proceeds realized from the sale of any Collateral shall be applied first to the reasonable costs, expenses and attorneys’ fees and expenses incurred by Secured Party for collection and for acquisition, completion, protection, removal, storage, sale and delivery of the Collateral; second to interest due upon any of the Obligations; and third to the principal of the Obligations. If any deficiency shall arise, Debtor shall remain liable to Secured Party therefor.

9.             Waiver by Debtor. Debtor hereby waives presentment, notice of dishonor and protest of any instrument at any time held by Secured Party on which Debtor is in any way liable, and waives notice of action taken by Secured Party except where required hereby.

10.           Discretionary Rights of Secured Party. Exercise of or omission to exercise any right of Secured Party shall not affect any other subsequent right of Secured Party to exercise the same and the waiver of any Event of Default by Secured Party shall not be deemed a waiver of any subsequent Event of Default.

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11.           Waiver by Secured Party. Upon the occurrence of an Event of Default, Secured Party may waive in writing its right to receive the benefits of the remedies to which Secured Party is entitled pursuant to this Security Agreement.

12.           Secured Party Appointed Attorney-In-Fact. Debtor hereby irrevocably nominates and appoints Secured Party as its attorney-in-fact for the following purposes: (a) to do all acts and things which Secured Party may deem necessary or advisable to perfect and continue perfected the security interests created by this Agreement and, upon the occurrence and during the continuance of an Event of Default, to preserve, process, develop, maintain and protect the Collateral, provided, however, that Debtor has failed to do so promptly after demand by Secured Party; (b) upon the occurrence and during the continuance of an Event of Default, to do any and every act which Debtor is obligated to do under this Security Agreement, at the expense of Debtor so obligated and without any obligation to do so, provided, however, that Debtor has failed to do so promptly after demand by Secured Party; (c) to prepare, sign, file and/or record, for Debtor in the name of Debtor, any financing statement, application for registration, and like papers and to take any other action deemed by Secured Party necessary or desirable in order to perfect the security interests granted hereby, provided, however, that Debtor has failed to do so promptly after demand by Secured Party; and (d) upon the occurrence and during the continuance of an Event of Default to execute any and all papers and instruments and do all other things necessary or desirable to preserve and protect the Collateral and to protect Secured Party’s security interests therein, provided however, that Debtor has failed to do so promptly after demand by Secured Party. Secured Party shall notify Debtor of any action taken pursuant to this Paragraph 16.

13.           Duties of Secured Party. The powers conferred on Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon Secured Party to exercise any such powers. Except for the safe custody of any Collateral in Secured Party’s possession and the accounting for monies actually received by Secured Party hereunder, Secured Party shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.

14.           Miscellaneous.

(a)           Descriptive Headings. The descriptive headings of this Security Agreement are inserted for convenience only and do not affect the meaning of any provisions herein.

(b)           Governing Law. This Security Agreement shall be governed by and construed in accordance with the internal laws (and not the law of conflicts) of the State of California.

(c)           Arbitration. Any unresolved controversy or claim arising from or relating to this Security Agreement or breach thereof shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial

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Arbitration Rules, then in effect. The decision of arbitration unless clearly erroneous, shall be final and conclusive upon the parties, and judgment upon the award rendered by the arbitrator may be entered in any court having competent jurisdiction. The arbitration proceedings shall be held in Santa Ana, California. The arbitration proceedings shall be conducted before one (1) neutral arbitrator who shall be a member of the California Bar who has been actively engaged in the practice of corporate and business law for at least fifteen (15) years, and shall proceed under any expedited procedures of the Commercial Arbitration Rules. The arbitrator shall have authority to award only (i) money damages, (ii) attorneys’ fees, costs and expert witness fees to the prevailing party, and (iii) sanctions for abuse or frustration of the arbitration process. The arbitrator’s compensation, and the administrative costs of the arbitration, shall be borne by the parties in the manner set forth in the arbitration award, as determined by the arbitrator. Notwithstanding the foregoing provisions of this Section 18(c), the parties are not required to arbitrate any issue for which injunctive relief is sought by any party hereto and both parties may seek injunctive relief in any federal or state court having jurisdiction.

(d)           Notices. All notices and other communications under or in connection with this Security Agreement shall be in writing and shall be deemed given (a) if delivered personally, upon delivery, (b) if delivered by registered or certified mail (return receipt requested), upon the earlier of actual delivery or three days after being mailed, or (c) if given by telecopy, upon confirmation of transmission by telecopy, in each case to the parties at the following addresses:

(a)           If to Secured Party, addressed to:

SRS Labs, Inc.
2909 Daimler Street
Santa Ana, California 92705
Attention:  Ulrich Gottschling
                  Chief Financial Officer
Facsimile:  (949) 852-1099

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(b)           If to Debtor, addressed to:

Coming Home Studios, LLC,
5540 Hollywood Blvd.
Hollywood, California  90028
Attention:  Daniel E. Catullo III
                 Manager
Facsimile:  (323) 467-6400

With an additional copy to:

Troy & Gould PC
1801 Century Park East, Suite 1600
Los Angeles, California  90067
Attn:  David L. Ficksman
Facsimile:  (310) 789-1490

(e)           Costs. If any action or other proceeding is brought for the enforcement of this Security Agreement, or for Secured Party to perfect or enforce its rights hereunder, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Security Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable fees, including attorneys’ fees, and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled.

(f)            Final Agreement. This Security Agreement, the Note and the other documents executed in connection therewith constitute the final agreement of the parties concerning the matters herein, and supersede all prior and contemporaneous agreements and understandings.

(g)           Amendment. This Security Agreement may be amended by an instrument in writing executed by Debtor and Secured Party.

(h)           Counterparts. This Security Agreement may be executed in two counterparts, either one of which need not contain the signatures of both parties, but both of which counterparts when taken together shall constitute one and the same Security Agreement.

[SIGNATURES ON FOLLOWING PAGE]

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[SIGNATURE PAGE TO SECURITY AGREEMENT]

IN WITNESS WHEREOF, the parties have executed this Security Agreement to be effective as of the date first above written.

“Debtor”
COMING HOME STUDIOS, LLC
By:
Name:	Daniel E. Catullo III
Title:	Manager
“Secured Party”
SRS LABS, INC.
By:
Name:
Title:

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Schedule 1

Name:                     Coming Home Studios, LLC

Type:                      Limited Liability Company

Number:                 200108710092

State:                      California

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EX-10.4

Exhibit 10.4

ASSIGNMENT

For valuable consideration, receipt of which is hereby acknowledged, SRS Labs, Inc. (“SRS”) hereby assigns, transfers and conveys to Coming Home Studios LLC (“CHS”) all of the membership interest of SRS in CHS/SRS, LLC (the “Company”) representing a 50% equity interest in the Company (the “Membership Interest”).

Coming Home Studios LLC	SRS Labs, Inc.
By:	By

EX-10.5

Exhibit 10.5

FIRST AMENDMENT
to the Strategic Alliance Agreement

This First Amendment to the Strategic Alliance Agreement (“the First Amendment”) is made and entered into as of the 30th day of June, 2006, by and between SRS Labs, Inc., a Delaware corporation (“SRS”) and Coming Home Studios, LLC, a California corporation (“CHS”).

RECITALS:

SRS and CHS have previously entered into a “Strategic Alliance Agreement” effective as of September 23, 2004 (the “Agreement”), and now desire to amend the Agreement to include the terms of this First Amendment.

NOW THEREFORE, SRS and CHS hereby agree to modify the Agreement as follows:

1.    The term of the Agreement shall be extended to July 9, 2011.

2.    The Agreement will now provide that SRS, on a non-exclusive basis, promote the sale, licensing or distribution of any of the DVDs in the CHS library, including without limitation the Concert DVDs, with SRS to be paid an 18% commission on any revenues generated in respect of such DVDs by SRS marketing efforts.

3.    The Agreement will now provide that SRS will retain a non-exclusive, no-fee license to use all or any part of the content of any of the Concert DVDs in SRS’ promotional marketing efforts for its technology or business.

4.    Except as provided in this First Amendment the Agreement is hereby reaffirmed and remains in full force and effect.

IN WITNESS WHEREOF, the parties have executed this First Amendment as the day and year first above written.

SRS Labs, Inc.	Coming Home Studios, LLC
Dated:	Dated:
By:	By:
Name:	Name:
Title:	Title:

Address: 2909 Daimler Street
Santa Ana, CA 92705 Address: 6161 Santa Monica Boulevard
Hollywood, CA  90038