EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of
February 3, 2011, by and between KLIPSCH GROUP, INC., an Indiana corporation,
and FRED S. KLIPSCH, an individual (the “Executive”).
Recitals
WHEREAS, Audiovox Corporation (“Audiovox”) intends to purchase all of the issued
and outstanding shares of Klipsch Group, Inc. (referred to herein as “KGI” or
the “Employer”) pursuant to a Share Purchase Agreement and;
WHEREAS, Audiovox wishes to continue uninterrupted service by and to continue
the employment of the Executive following the closing of the share purchase by
Soundtech LLC on the terms and conditions set out herein and;
WHEREAS, in addition to the consideration set forth in this Agreement, Audiovox,
through its subsidiary, will also be purchasing the Executive's shares in KGI
for a considerable sum; and
WHEREAS, Audiovox would not purchase all the shares of KGI and in particular the
shares owned by the Executive unless the Executive enters this Agreement and
thereby agrees to abide with its terms.
Statement of Agreement
This Agreement is conditioned on the successful completion of the share purchase
agreement (the “Share Purchase Agreement”) by Audiovox through its subsidiary of
all of the issued and outstanding shares by KGI. In the event the share
acquisition is not accomplished this Agreement shall for all purposes be null
and void. This Agreement shall not commence until the signing of this Agreement
and the successful completion of the Share Purchase Agreement by Audiovox
through its subsidiary.
Subject to the foregoing paragraph, the parties, intending to be legally bound,
agree as follows:
§ 1     Definitions.
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this § 1.
“Affiliate” means a corporation or other entity controlling, controlled by or
under common control with the Employer.
“Agreement” has the meaning set forth in the preamble.
“Audiovox” the sole owner of Soundtech LLC, which is the sole shareholder of the
Employer.
“Base Compensation” has the meaning set forth in § 3(a).
“Benefits” has the meaning set forth in § 3(c).
“Board of Directors” means the Board of Directors of the Employer.
“Business” means the (i) the speaker and sound business, and (ii) any other
consumer electronics business as engaged in from time to time by the Employer
and its Affiliates.
“Cause” means: (i) while the Executive is serving as the Chief Executive
Officer, the Executive's continued willful failure to perform in a material
respect (other than any such failure resulting from incapacity due to
Disability) the explicitly stated duties to be performed by the Executive under
this Agreement for a period of 10 days following delivery of written notice to
the Executive from the Chief Executive Officer of Audiovox specifying in
reasonable detail key elements of such failure; (ii) the appropriation (or
attempted appropriation) of a material business opportunity of the Employer or
Audiovox or their Affiliates, including attempting to secure or securing any
personal profit in connection with any transaction entered into on behalf of the
Employer or Audiovox or any Affiliate; (iii) the willful disclosure by the
Executive of Confidential Information of the Employer or Audiovox or any of
their Affiliates, other than in the ordinary course of business in connection
with the performance of the Executive's duties in accordance

1

--------------------------------------------------------------------------------

 

with this Agreement; (iv) the misappropriation (or attempted misappropriation)
of any of the Employer's or Audiovox's or any of their Affiliates funds or
property; or (v) the conviction of, or the entering of a guilty plea or plea of
no contest with respect to, any offense that is a felony.
“Confidential Information” means any and all information concerning the business
and affairs of the Employer and Audiovox and their Affiliates including, but not
limited to, customer lists, supplier lists, Inventions, Works, Proprietary
Items, trade secrets, financial statements, business and financial projections
and budgets, historical and projected sales, capital spending budgets and plans,
business and marketing plans, strategic plans, product plans, the names and
backgrounds of key personnel, personnel training and techniques and materials,
however documented and all notes, analysis, compilations, studies, summaries and
other material prepared by or for the Employer and Audiovox or their Affiliates
containing or based, in whole or in part, on any information included in the
foregoing.
“Disability” means a condition where for physical or mental reasons the
Executive is unable to perform the Executive's duties (as determined in
accordance with the procedures set forth in the next sentence) and such
condition in the reasonable judgment of the Employer, as substantiated by a
medical doctor in the manner provided below, is expected to continue for such
period of time as to require replacement of the Executive in order to carry out
the business of the Employer. The determination that the physical or mental
state of the Executive constitutes a Disability shall be made by a medical
doctor who is not an employee of the Employer and who is reasonably selected by
the Employer and reasonably acceptable to the Executive (unless the Employer and
the Executive reach mutual agreement regarding the existence of a Disability)
and such determination shall be binding on both parties. The Executive must
submit to a reasonable number of examinations by the designated medical doctor
and the Executive hereby authorizes the disclosure and release to the Employer
of such determination and all supporting medical records. Any and all out of
pocket expenses incurred by the Executive in connection with the determination
by the designated medical doctor of a Disability shall be paid for or reimbursed
by the Employer. Action on behalf of the Executive may be taken by the
Executive's guardian or duly authorized attorney-in-fact for purposes of
submitting the Executive to medical examinations and approving authorization of
disclosure. The Executive shall be deemed to have a Disability if the Executive
for any reason is unable to perform the Executive's duties for 120 consecutive
days or for 180 days during any 12-month period.
“Effective Date” means the date first written above in this Agreement.
“Employer” means Klipsch Group Inc.
“Employment Period” means the term of the Executive's employment under this
Agreement, namely, five (5) years.
“Executive” has the meaning set forth in the preamble.
“Good Reason” means (a) a material reduction in the Executive's Base
Compensation opportunity below the amount specified in Section 3 of this
Agreement (other than a reduction applicable to all other similarly situated
participants), (b) a requirement to move more than 35 miles from Indianapolis;
(c) a material reduction in the Executive's level of responsibility, or (d) an
assignment of duties inconsistent with the Executive's position as a key
executive.
“Inventions” has the meaning set forth in § 6(d).
“Notice of Termination” has the meaning set forth in § 5(b).
“Person” means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization or governmental body.
“Proprietary Items” has the meaning set forth in § 6(b)(iv).
“Termination Date” has the meaning set forth in § 2(b).
“Works” has the meaning set forth in § 6(e).
§ 2     Employment Terms and Duties.
(a)Employment. The Employer hereby employs the Executive, and the Executive
hereby accepts employment by the Employer, upon the terms and conditions set
forth in this Agreement.
(b)Term. The Executive's employment under this Agreement shall begin on the
Effective Date and shall

2

--------------------------------------------------------------------------------

 

continue thereafter for a period of five (5) years or, if earlier, the
Executive's death or Disability (the “Termination Date”).
(c)Rights and Powers; Duties. The Executive shall at all times during the first
two (2) years, serve as the Chairman of the Board of the Employer and on a
transitional basis (not longer than June 30, 2011) shall serve as the Employer's
Chief Executive Officer. The Executive shall provide services to the Employer
consistent with such position and this Agreement. The site of the Executive's
employment shall be Indianapolis, Indiana. During the period that the Executive
is serving transitionally as the Employer's Chief Executive Officer, the
Executive shall devote full time and attention, skill and energy exclusively to
the business of the Employer, shall use best efforts to promote the success of
the Employer's and its Affiliate's business, shall cooperate fully with the
Board of Directors in the advancement of the best interests of the Employer and
its Affiliates, and shall have such duties and powers as are prescribed by the
Chief Executive Officer of Audiovox. Thereafter, the Executive shall have no
daily management or operational responsibilities and will make himself
available, in person or telephonically, on reasonable request, for advice and
consultation with respect to the Employer or Audiovox. Nothing in this § 2(c),
however, shall prevent the Executive from engaging in other business activities,
including in connection with personal investments, advisory activities and
community affairs, or from serving on boards of directors of businesses, as long
as such activities are not in competition with the Employer or its Affiliates
and/or do not create a conflict of interest and as long as such additional
activities or services are not inconsistent with or intrusive on the Executive's
duties under this Agreement.
(d)Key Man Insurance. If requested by the Employer, the Executive shall
cooperate with the Employer in establishing and maintaining “key man” insurance
with respect to the Executive's services, including submitting to any medical
examinations reasonably necessary or advisable to establish or maintain such
insurance. The “key man” insurance to be established and maintained under this
§2(d) shall be paid for by the Employer.
 
§ 3    Compensation.
(a)Base Compensation. The Executive shall, during the first two years of the
Employment Period, be paid by the Employer and/or its Affiliates base salary at
an annual rate of $830,000.00 (the “Base Compensation”) which will be payable
according to the Employer's customary payroll practices. During the remainder of
the Employment Period, the Executive's Base Compensation shall be at an annual
rate of $50,000.00.
(b)Bonuses. During the first two years of the Employment Period, the Executive
will receive a bonus equal to a maximum of 60% of his base salary. With respect
to fiscal year 2011, the bonus will be based on the achievement of the criteria
set forth on Exhibit A. The bonus for 2012 will be exactly on the same bonus
criteria as the Employer's successor Chief Executive Officer.
(c)Benefits. The Executive shall, during the first two (2) years of the
Employment Period, be permitted to participate in such Code Section 401(k),
pension; profit sharing, bonus, life insurance, disability insurance,
hospitalization, dental, major medical and other employee benefit plans of the
Employer that may be in effect from time to time, to the extent the Executive is
eligible under the terms of those plans, but not less favorable to the Executive
than currently in effect (collectively, the “Benefits”). After two (2) years,
the Executive will receive disability insurance, hospitalization, dental and
major medical Benefits.
(d)Vacation. The Executive shall, during the Employment Period, be entitled to
the number of weeks of paid vacation for the full calendar year as set forth in
the Employer's then current vacation policy. Vacation time may not be carried
over.
(e)Suite Lease Costs. The Employer shall pay the Executive or his designee in
advance 50% of the suite lease costs (up to a maximum of $39,000.00 annually)
associated with the suite located in the Lucas Oil Stadium through the 2013/14
Season. The Company will be able to use this suite.
 
§ 4    Expenses. The Employer shall reimburse the Executive for all reasonable
and necessary out-of-pocket expenses incurred by the Executive in accordance
with the then Company policy, subject to any recordkeeping, reporting or similar
requirements imposed pursuant to the policies and procedures of the Employer in
effect from time to time.
 
§ 5    Termination.
(a)    Events of Termination. The Employment Period and the Executive's rights
under this Agreement or otherwise as an employee of the Employer shall terminate
(except as otherwise provided in this § 5):
(i)on February 1, 2016;

3

--------------------------------------------------------------------------------

 

(ii)automatically upon the death of the Executive;
(iii)if for Cause, immediately upon delivery of a Notice of Termination from the
Chief Executive Officer of Audiovox to the Executive.
(b)Notice of Termination. Any termination by the Employer for Cause shall be
communicated by a Notice of Termination to the Executive. For purposes of this
Agreement, a “Notice of Termination” means a written notice which (1) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated, and (iii) the date of termination. The failure by
the Executive to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Cause shall not waive any right of the
Employer hereunder or preclude the Employer from asserting any fact or
circumstance in enforcing the Employer's rights hereunder.
(c)Termination Pay. Subject to the terms of § 7 below, effective upon
termination of employment of the Executive for any reason, except as required
under applicable law, the Employer shall be obligated to pay to the Executive
(or, in the event of the Executive's death, the Executive's designated
beneficiary) only such compensation as is specified in this § 5(c). The
Executive's designated beneficiary will be such individual or trust, located at
such address, as the Executive may designate by notice in writing to the
Employer from time to time or, if the Executive fails to give notice to the
Employer of such a beneficiary, the Executive's estate. Notwithstanding the
preceding sentence, the Employer shall have no duty under any circumstances to
determine whether any Person holding herself, himself or itself out as the
beneficiary is in fact entitled to any termination payment but may rely upon the
representations of such Person.
(i)Termination on Death. If the Executive's employment is terminated because of
the Executive's death, the Employer shall pay to the beneficiary of the
Executive any earned but unpaid Base Compensation and bonus for the period
ending on the date of the Executive's death. In addition, the Employer, in
accordance with the Employer's past practice, shall reimburse the Executive or
the Executive's heirs or estate for expenses incurred in accordance with § 4.
(ii)Termination by the Employer for Cause. If the Executive's employment is
terminated by the Employer for Cause, the Executive shall be entitled only to
receive the Executive's earned but unpaid Base Compensation and bonus through
the date of termination. In addition, the Employer, in accordance with the
Employer's past practice, shall reimburse the Executive for expenses incurred in
accordance with § 4.
(d)    Suspension of Pay upon Disability. If the Executive suffers a Disability
during the Employment Period, all his compensation will be suspended, but the
Employer shall (A) pay the Executive an amount equal to any disability payments
provided pursuant to the benefits package available to the Executive; (B) pay to
the Executive at the same time paid to other employees any earned but unpaid
Base Compensation and bonus for the period ending on termination; (C) in
accordance with the Employer's past practice, reimburse the Executive for
expenses incurred in accordance with § 4; and (D) provide disability insurance,
hospitalization, dental and major medical Benefits.
§ 6    Non-Disclosure and Intellectual Property Covenant
(a)    Acknowledgments by the Executive. The Executive acknowledges that (i)
during the Employment Period and as a part of the Executive's employment, the
Executive will be afforded access to Confidential Information; (ii) public
disclosure of such Confidential Information could have an adverse effect on the
Employer and Audiovox and their business; and (iii) the provisions of this § 5
are reasonable and necessary to prevent the improper use or disclosure of
Confidential Information.
(b)    Agreements of the Executive. In consideration of the compensation and
benefits to be paid or provided to the Executive by the Employer and Audiovox
under this Agreement, the Executive covenants that:
(i)During and indefinitely following the Employment Period, except in the
performance of the Executive's duties in accordance with this Agreement in the
ordinary course of business, the Executive shall hold in confidence the
Confidential Information and shall not use or disclose it to any Person except
with the specific prior written consent of the Chief Executive Officer of
Audiovox.
(ii)Any trade secrets of the Employer and Audiovox and their Affiliates will be
entitled to all of the protections and benefits under the Uniform Trade Secrets
Act as adopted by the State of Indiana, the State where the Executive is
located, if different than the State of Indiana, and any other applicable law.
If any information that the Employer or Audiovox deems to be a trade secret is
found by a court of competent

4

--------------------------------------------------------------------------------

 

jurisdiction not to be a trade secret for purposes of this Agreement, such
information will, nevertheless, be considered Confidential Information for
purposes of this Agreement.
(iii)None of the obligations and restrictions set forth in (i) or (ii), above,
applies to any part of the Confidential Information that the Executive
demonstrates (A) was or becomes generally available to the public other than as
a result of a direct or indirect disclosure by the Executive; (B) is required to
be disclosed pursuant to an enforceable court order; or (C) is required to be
disclosed by applicable law.
(iv)The Executive shall not remove from the Employer's or Audiovox's premises
(except to the extent such removal is for purposes of the performance of the
Executive's duties at home or while traveling, or except as otherwise
specifically authorized by the Chief Executive Officer of Audiovox) any
document, record, notebook, plan, model, component, device or computer software
or code, whether embodied in a disk or in any other form (collectively, the
“Proprietary Items”). The Executive recognizes that, as between the Employer and
Audiovox and the Executive, all of the Proprietary Items, whether or not
developed by the Executive, are the exclusive property of the Employer and
Audiovox. Upon termination of this Agreement by either party, or upon the
request of the Employer during the Employment Period, the Executive shall return
to the Employer and Audiovox all of the Proprietary Items in the Executive's
possession or subject to the Executive's control, and the Executive shall not
retain any copies, abstracts, sketches or other physical embodiment of any of
the Proprietary Items.
(c)Disputes or Controversies. The Executive recognizes that should a dispute or
controversy arising from or relating to this Agreement be submitted for
adjudication to any court, arbitration panel or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Employer and Audiovox, the Executive and their respective attorneys and experts,
who will agree, in advance and in writing, to receive and maintain all such
information in secrecy.
(d)Inventions. The Executive agrees that all discoveries, concepts, and ideas,
whether patentable or not relating to any activities of the Employer or Audiovox
including, but not limited to, apparatus, processes, methods, compositions of
matter, techniques, and formulas, as well as related improvements or know-how
(“Inventions”) made or conceived by the Executive, either solely or jointly with
others (i) during the Executive's employment by the Employer or (ii) within one
(1) year after termination of such employment, whether or not such Inventions
are made or conceived during the hours of the Executive's employment or with the
use of the Employer's facilities, materials, or personnel, shall be and shall
remain the property of the Employer, whether patentable or not, and the
Executive will, without royalty or any other consideration: (a) inform the
Employer promptly and fully of such Inventions by written reports, setting forth
in detail the Invention, the procedures employed, and the results achieved; (b)
assign to the Employer all of the Executive's rights, title, and interests in
and to any Inventions, any applications for United States and foreign Letters
Patent covering the Inventions, any United States and foreign Letters Patent
granted upon the applications, and any renewals thereof; (c) assist the Employer
or its nominees, at the expense of the Employer, to obtain any United States and
foreign Letters Patent for any Inventions as the Employer may elect; and (d)
execute, acknowledge, and deliver to the Employer at its expense any written
documents and instruments, and do any other acts, such as giving testimony in
support of the Executive's inventorship, as may be necessary in the opinion of
the Employer to obtain and maintain United States and foreign Letters Patent
upon any Inventions and to vest the entire rights, title and interests in the
Employer and to confirm the complete ownership by the Employer of any
Inventions, patent applications, and patents.
(e)Works. The Executive agrees that all works of authorship fixed in a tangible
medium of expression relating to any activities of the Employer or Audiovox
including, but not limited to, flow charts and computer program source code and
object code, regardless of the medium in which it is fixed, as well as notes,
drawings, memoranda, correspondence, records, notebooks, instructions, and text
(“Works”) created or conceived by the Executive, either solely or jointly with
others (i) during the Executive's employment by the Employer or (ii) within one
(1) year after termination of such employment, whether or not such, Works are
made or conceived during the hours of the Executive's employment or with use of
the Employer's facilities, materials, or personnel, shall be and shall remain
the property of the Employer, and the Executive will, without royalty or any
other consideration, promptly disclose in writing to the Employer all Works. The
Executive shall cooperate fully with the Employer and its officers and counsel,
at the Employer's direction and expense, in obtaining, maintaining, and
enforcing worldwide copyright protection on such Works. Any such Works created
by the Executive is a “work made for hire” under the copyright law, and the
Employer may file applications to register copyright in such Works as author and
copyright owner thereof. If, for any reason, a

5

--------------------------------------------------------------------------------

 

Work created by the Executive is excluded from the definition of a “work made
for hire” under the copyright law, then the Executive shall assign, and does
hereby assign, to the Employer the entire rights, title, and interests in and to
such Work, including the copyright therein. The Executive shall take whatever
steps and do whatever acts the Employer requests including, but not limited to,
placement of the Employer proper copyright notice on Works created by the
Executive to secure or aid in securing copyright protection in such Works, and
shall assist the Employer or its nominees in filing applications to register
claims of copyright in such Works.
(f) 
§ 7    General Provisions.
(a)    Injunctive Relief and Additional Remedy. The Executive acknowledges that
the injury that would be suffered by the Employer and Audiovox as a result of a
breach of the provisions of this Agreement (including any provision of §§ 6 and
7) would be irreparable and that an award of monetary damages to the Employer or
Audiovox for such a breach would be an inadequate remedy. Consequently, the
Employer or Audiovox will have the right, in addition to any other rights, at
law or in equity, it may have to obtain injunctive relief to restrain any breach
or threatened breach or otherwise to specifically enforce any provision of this
Agreement, and the Employer or Audiovox will not be obligated to post bond or
other security in seeking such relief. Without limiting the Employer's or
Audiovox's rights under this § 7(a) or any other remedies of the Employer or
Audiovox, if the Executive has breached or violated or threatens to breach of
violate any of the provisions of §§ 6 or 7 the Employer or Audiovox will have
the right to cease making any payments otherwise due to the Executive under this
Agreement and recover payments previously made to the Executive under this
Agreement. Further, if any term, provision or covenant in §§ 6 or 7 is held to
be unreasonable, arbitrary, against public policy, or otherwise unenforceable,
Executive acknowledges and agrees that the payments required to be made to the
Executive shall be waived and that the Executive relinquishes any rights to such
payment or any other forms of payment post-dating the Executive's separation
from the Employer.
(b)    Covenants Which Are Essential and Independent Covenants. The covenants by
the Executive in § 6 and the Share Purchase Agreement are essential elements of
this Agreement, and without the Executive's agreement to comply with such
covenants, Audiovox would not have purchased any shares in Employer and the
Employer would not have entered into this Agreement or employed or continued the
employment of the Executive. The Employer, Audiovox and the Executive have been
advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by the
Employer and Audiovox. Such covenants are independent covenants and the
existence of any claim by the Executive against the Employer or Audiovox under
this Agreement or otherwise will not excuse the Executive's breach of any such
covenants. If the Executive's employment hereunder expires or is terminated,
this Agreement will continue in full force and effect as is necessary or
appropriate to enforce the covenants and agreements of the Executive in
accordance with their terms and conditions.
(c)    Representations and Warranties by the Executive. The Executive represents
and warrants to the Employer and Audiovox that the execution and delivery by the
Executive of this Agreement do not, and the performance by the Executive of the
Executive's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: (i) violate any judgment, writ, injunction or
order of any court, arbitrator or governmental agency applicable to the
Executive; or (ii) conflict with, result in the breach of any provisions of or
the termination of or constitute a default under any agreement to which the
Executive is a party or by which the Executive is or may be bound. The Executive
acknowledges that the Executive has had a full and complete opportunity to
consult with counsel of the Executive's choosing concerning this Agreement and
that the Employer has not made any representations or warranties to the
Executive concerning this Agreement other than those specifically stated in this
Agreement, if any.
(d)    Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power or privilege under this Agreement will
operate as a waiver of such right, power or privilege, and no single or partial
exercise of any such right, power or privilege will preclude any other or
further exercise of such right, power or privilege or the exercise of any other
right, power or privilege. To the maximum extent permitted by applicable law,
(i) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party (ii) no waiver that may be given by
a party will be applicable except in the specific instance for which it is given
and (iii) no notice to or demand on one party will be deemed to be a waiver of
any obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement.

6

--------------------------------------------------------------------------------

 

(e)Binding Effect. This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective successors, assigns, heirs
and legal representatives.
(f)Notices. All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (i)
delivered by hand (with written confirmation of receipt), or (ii) when received
by the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses set forth below
(or to such other addresses as a party may designate by notice to the other
party):
    
If to Employer:
Klipsch Group, Inc.
 
 
3502 Woodview Trace
 
 
Suite 200
 
 
Indianapolis, IN 46268
 
 
Attn: Chairman of the Board of Directors
 
 
 
 
 
Copy to:
Audiovox Corporation
 
 
150 Marcus Blvd.
 
 
Hauppauge, NY 11788
 
 
Attn: Chief Operating Officer
 
 
 
 
 
Robert S. Levy
 
 
Levy, Stopol & Camelo, LLP
 
 
1425 RXR Plaza
 
 
Uniondale, NY 11556
 
 
 
 
 
 
If to the Executive:
Fred S. Klipsch
 
 
3510 Sedgemoor Circle
 
 
Carmel, Indiana 46032
 
 
Telephone: (317) 860-8211
 
 
Facsimile: (317) 860-9128
 

 
(g)Entire Agreement: Amendments. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral or written, between the parties hereto
with respect to the subject matter hereof. This Agreement may not be amended
orally, but only by an agreement in writing signed by the parties hereto.
(h)Governing Law and Forum. This Agreement will be governed by the laws of the
State of New York without regard to conflicts of laws principles. Any
controversy, dispute or claim arising out of or in connection with this
Agreement or the breach hereof shall be resolved by arbitration in the City and
State of New York in accordance with the rules of the American Arbitration
Association. Judgment upon the award reached by the Arbitrator(s) may be
enforced in any court having jurisdiction thereof.
(i)Section Headings, Construction. The headings of Sections in this Agreement
are provided for convenience only and will not affect its construction or
interpretation. All references to "§" refer to sections in this Agreement. All
words used in this Agreement will be construed to be of such gender or number as
the circumstances require. Unless otherwise expressly. provided, the word
"including" does not limit the preceding words or terms.
(j)    Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
(k)    Counterparts. This Agreement may be executed in counterparts, which when
taken together shall

7

--------------------------------------------------------------------------------

 

constitute one and the same Agreement.
(1)    Attorneys' Fees. In the event any dispute or controversy arising from or
relating to this Agreement is submitted to any court, arbitration panel or other
party, the prevailing party in such dispute or controversy shall be entitled to
reimbursement from the non-prevailing party for the actual fees and expenses
incurred by the prevailing party in connection with such dispute or controversy
(including, but not limited to, reasonable attorney's fees, costs and
disbursements).
(m)    Klipsch Products. The Executive shall be entitled to purchase any
products sold by the Employer or its Affiliates in the Business for personal use
and at standard landed cost. This subsection shall survive any expiration or
termination of this Agreement.
[signature page immediately following]

8

--------------------------------------------------------------------------------

 

 
IN WITNESS WHEREOF, the parties have executed and delivered this Employment
Agreement as of the date first written above.
 
EMPLOYER:
KLIPSCH GROUP, INC.
 
By: /s/ T. Paul Jacobs
T. Paul Jacobs
Chief Operating Officer
 
 
EXECUTIVE:
 
/s/ Fred S. Klipsch
Fred S. Klipsch, individually
 

9

--------------------------------------------------------------------------------

 

 
Exhibit A
 
Bonus Criteria
 
1.
EBITDA Goal for July 1, 2010 through June 30, 2011 is $27,143,000 (weighted
60%).

2.Senior Management FY11 Objectives (weighted 40%)
a.     The Company will be on target to complete by September 30, 2011 the
Navision 2009 ERP installation to include Europe and Asia so that the Company is
operating off a single global system for FY12.
b.     Complete the installation of Shopatron to complete the upgrade of the
Company's capability to increase direct sales to consumers and implement a more
aggressive web marketing effort.
c.     Continue the execution of the Forte logistics study to include
outsourcing of domestic freight management, reduction of inventory in both
America and European warehouses and potentially opening an additional warehouse
on the U.S. east coast.
d.     Complete a three year strategic plan that specifically details the
following:
i.
A product and technology position paper identifying potential changes, direction
and internal gaps if they exist.

ii.
Updated brand, marketing and product strategy by brand and by category.

iii.
A non U.S. growth plan by major market that ultimately transitions the revenue
balance 60/40 US vs. ROW in fiscal 2011 to 50/50 by 2014. This growth has to
come from ROW.

e.     Continue successful operation of the Company while completing the process
of closing with a new investor for the Company.
 
 
 
 

10