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 MICHAEL 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
“Employer”) pursuant to a Share Purchase Agreement and;
WHEREAS, Executive is employed by the Employer and wishes to continue
uninterrupted service and to continue employment by the Employer following the
closing of the share purchase by Soundtech LLC, the subsidiary of Audiovox 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 Executives 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 Executive unless 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
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 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) 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 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

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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.
“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).
“Market Jurisdictions” means the jurisdictions set forth in Exhibit A, the
United States of America and any other country where the Employer sells speakers
and sound products or otherwise engages in the Business.
“Non-Compete Period” has the meaning set forth in § 7(b)(i).
“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).
“Stock Purchase Non-Competition Period” means the 30 month period following the
Closing of the Stock Purchase Agreement among the Employer, the Executive and
others, dated as of February 3, 2011.
“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

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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 continue thereafter until terminated pursuant to § 5
below (the “Termination Date”).
(c)Rights and Powers; Duties. The Executive shall initially serve as the
President Global Operations, Chief Counsel and Assistant Secretary of the
Employer. The Executive shall provide executive, administrative, and managerial
services to the Employer and shall have such duties and powers as are prescribed
by the Chief Executive Officer of Audiovox. 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 and shall cooperate fully with the Board of Directors in
the advancement of the best interests of the Employer and its Affiliates.
Nothing in this § 2(c), however, shall prevent the Executive from engaging in
additional activities in connection with personal investments and community
affairs, 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 Employment Period, be paid
by the Employer and/or its Affiliates base salary at an annual rate of
$325,000.00 (the “Base Compensation”), subject to review and potential upward
adjustment annually thereafter, which will be payable according to the
Employer's customary payroll practices.
(b)Bonuses. Executive will receive a bonus equal to a maximum of 35% of his base
salary based on achievement of EBITDA goals and other goals established at the
beginning of each year that will promote the growth of the Employer. Goals will
be established by the Chief Executive Officer of Audiovox and discussed with
Management at the beginning of each new fiscal year. The Executive's bonus
criteria for fiscal year 2011 are set forth on Exhibit B.
(c)Benefits. The Executive shall, during 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”).
(d)Vacation. The Executive shall, during the Employment Period, be entitled to
the number of weeks of paid vacation per full calendar year as set forth in the
Employer's then current vacation policy. Vacation time may not be carried over.
(e)Life Insurance. The Executive shall, during the Employment Period, be
provided a term life policy in the amount of $250,000 paid for by the Employer
with the beneficiary selected by the Executive.
(f)Executive Put Option. Exhibit “C” annexed.
 
§ 4.    Expenses. The Employer shall reimburse the Executive for all reasonable
and necessary out-of-pocket expenses incurred by the Executive in connection
with the performance of services under this Agreement, subject to any
recordkeeping, reporting or similar requirements imposed pursuant to 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)automatically upon the death of the Executive;
(ii)upon the Disability of the Executive immediately upon written notice from
either party to the other party;
(iii)if for Cause, immediately upon delivery of a Notice of Termination from the
Chief Executive Officer of Audiovox to the Executive, or at such later time as
such notice may specify;

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(iv)if without Cause, upon 30 days prior written notice from the Chief Executive
Officer of Audiovox to the Executive, or at such later time as such notice may
specify;
(v)if by the Executive other than for Good Reason, upon the Executive's
resignation 30 days following written notice from the Executive to the Board of
Directors; or
(vi)if by the Executive for Good Reason, upon and in accordance with the
following conditions. In order to terminate for Good Reason, the Executive must
give the Board of Directors a Notice of Termination at least 60 calendar days in
advance of the Executive's intent to terminate employment for Good Reason
setting forth the specific actions by the Employer which triggered the notice
and the Notice of Termination must be received by the Chief Executive Officer of
Audiovox no more than ninety (90) calendar days after the
complained-of-action(s) occurred which constitute the basis for Good Reason.
Upon receipt of the Notice of Termination and for a period of fifteen (15)
calendar days thereafter, the Board of Directors shall consider the
complained-of-action(s) set forth therein and if such complained-of-action(s)
constitute Good Reason shall cure or remedy the actions set forth therein. If
the Employer adequately remedies or cures the actions giving rise to the Notice
of Termination within such 15-day period, then the resignation by the Executive
shall not be for Good Reason.
(b)Notice of Termination. Any termination by the Employer for Cause or by the
Executive for Good Reason shall be communicated by a Notice of Termination to
the Executive or the Board of Directors, as applicable. 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 or the Employer to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Cause or Good Reason shall not
waive any right of the Executive or the Employer, respectively, hereunder or
preclude the Executive or the Employer, respectively, from asserting any fact or
circumstance in enforcing the Executive's or the Employer's rights hereunder.
(c)Termination Pay. Subject to the terms of §§ 7 and 8 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 by the Employer Without Cause or by the Executive for Good
Reason. Subject to Subparagraph 5(c)(ii), if the Executive's employment is
terminated by the Employer without Cause or by the Executive for Good Reason,
the Employer shall pay to the Executive in accordance with the Employer's then
current payroll practices: (A) Base Compensation, at the annual rate in effect
immediately prior to termination, plus an amount equal to the average annual
bonus paid to the Executive in the preceding two (2) fiscal years, payable in
equal monthly installments over a period of 12 months; plus (B) any earned and
unpaid Base Compensation and bonus for the period ending on termination. In
addition, the Employer shall (A) pay for and continue disability insurance and
health insurance benefits provided to the Executive and the Executive's
dependents immediately prior to the termination of the Executive's employment
for a period of 12 months, and (B) in accordance with past practice, reimburse
the Executive for expenses incurred in accordance with § 4. The Executive's
entitlement to the compensation and benefits described in this subsection (i) is
specifically subject to the execution and delivery by the Executive of a release
agreement in form and substance reasonably acceptable to the Employer.
(ii)Termination During the Stock Purchase Non-Competition Period.
Notwithstanding Subparagraph 5(c)(i) above, if the Executive's employment is
terminated by the Employer with cause or by the Executive for any reason
whatsoever, except for 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) or a
requirement to move more than 35 miles from Indianapolis, during the Stock
Purchase Non-Competition Period, Executive will receive no compensation or any
of the Benefits provided in Subparagraph 5(c)(i) above from the Employer during
the Stock Purchase Non-Competition Period.

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If the Executive's employment is terminated by the Employer without cause or by
the Executive because of 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), or a requirement to move more than 35 miles from Indianapolis
during the Stock Purchase Non-Competition Period, the Executive will receive:
(A) Base Compensation at the annual rate in effect immediately prior to
termination, plus an amount equal to the average annual bonus paid to the
Executive in the preceding two (2) fiscal years, payable in equal monthly
installments over the greater of (i) the remaining period of the Stock Purchase
Non-Competition Period or (ii) twelve (12) months; (B) any earned unpaid Base
Compensation and bonus for the period ending on termination; and (C) in
accordance with past practice, reimburse the Executive for expenses incurred in
accordance with § 4. The Executive's entitlement to the compensation and
benefits described in this subsection (ii) is specifically subject to the
execution and delivery by the Executive of a release agreement in form and
substance reasonably acceptable to the Employer.
(iii)Termination upon Disability. If the Executive's employment is terminated
(iv)as a result of the Executive's Disability, 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; and (C) in accordance with the
Employer's past practice, reimburse the Executive for expenses incurred in
accordance with § 4.
(v)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.
(vi)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.
(vii)Termination by the Executive without Good Reason. If the Executive's
employment is terminated by the Executive for any reason (other than for Good
Reason), the Executive shall be entitled to receive the Executive's earned but
unpaid Base Compensation and bonus through the date of such termination. In
addition, the Employer, in accordance with the Employer's past practice, shall
reimburse the Executive for expenses incurred in accordance with § 4.
 
§ 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 § 6
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 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

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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 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

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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.     Non-Competition and Non-Interference.
(a)Acknowledgements by the Executive. The Executive acknowledges that: (i)
Audiovox would not purchase stock of the Employer or from Executive unless
Executive agrees to the terms of this Section 7; (ii) the information to be
disclosed to the Executive and the services to be performed by the Executive
under this Agreement are of a special, unique, extraordinary and intellectual
character; (iii) the Employer and Audiovox competes with other businesses that
are located in the Market Jurisdictions; (iv) the restricted period of time and
the geographic limitations set forth below are reasonable in view of the nature
of the business in which the Employer and Audiovox are engaged and the
Executive's knowledge of the Employer's and Audiovox's operations the Executive
has gained and will gain by virtue of the Executive's position; (v) this limited
restriction is not an attempt to prevent the Executive from obtaining other
employment in violation of Indiana Code § 22-5-3-1; and (vi) the provisions of
this § 7 are reasonable and necessary to protect the Employer's and Audiovox's
business.
(b)Covenants of the Executive. In consideration of the acknowledgments by the
Executive, and in consideration of the payments, compensation and benefits to be
paid or provided to the Executive by the Employer and Audiovox, the Executive
covenants that the Executive will not, directly or indirectly:
(i)    during (A) the Employment Period and for 12 months thereafter (the
“Non-Compete Period”); (B) the Stock Purchase Non-Competition Period and (C) the
period Executive may be receiving payments under Section 5(c)(ii), except in the
course of the Executive's employment hereunder, directly or indirectly, in a
competitive capacity, engage or invest in, own, manage, operate, finance,
control or participate in the ownership, management, operation, financing or
control of, be employed by, associated with or in any manner connected with,
lend the Executive's name or any similar name to, lend Executive's credit to or
render services or advice to, or plan or prepare to do any of the foregoing with
any business whose products or activities compete in whole or in part with the
Business in any Market Jurisdiction; provided, however, that the Executive may
purchase or otherwise acquire up to (but not more than) two percent (2%) of any
class of securities of any entity (but without otherwise participating in the
activities of such entity) if such securities are listed on any national or
regional securities exchange or have been registered under § 12(g) of the
Securities Exchange Act of 1934, as amended. For purposes of this Section
7(b)(i), the word “Subsidiaries” is substituted for the word “Affiliates” in the
definition of “Business” in Section 1.
(i)whether for the Executive's own account or the account of any other Person:
(A) at any time during the Employment Period and for 2 years thereafter and
during the Stock Purchase Non-Competition Period, directly or indirectly,
interfere with, solicit, employ or otherwise engage, as an employee, independent
contractor or otherwise, any Person who is or was an employee of the Employer or
its Affiliate at any time during the last 2 years of the Employment Period or in
any manner induce or attempt to induce any employee of the Employer or its
Affiliate to terminate his or her employment with the Employer or its Affiliate;
or (B) at any time during the Employment Period and in a competitive capacity
for 12 months thereafter and during the Stock Purchase Non-Competition Period,
interfere with the Employer's or its Affiliate's relationship with any Person,
including, but not limited to, any Person who at any time during the Employment
Period was a customer, contractor or supplier of the Employer or its Affiliate;
or
(ii)at any time during or after the Employment Period, disparage the Employer or
Audiovox or its Affiliates or their respective shareholders, board of directors,
members, managers, officers, employees or agents.
If any term, provision or covenant in this § 7(b) is held to be unreasonable,
arbitrary or against public policy, a court may limit the application of such
term, provision or covenant or modify such term, provision or covenant and
proceed to enforce this § 7(b) as so limited or modified, which limited or
modified term, provision or covenant will be effective, binding and enforceable
against the Executive.
The period of time applicable to any covenant in this § 7(b) shall be extended
by the duration of any actual or threatened violation by the Executive of such
covenant.
The Executive shall, while the covenant under this § 7(b) is in effect, give
notice to the Employer and Audiovox,

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within ten (10) days after accepting any other employment, of the identity of
the Executive's new employer. The Employer and Audiovox may notify such employer
that the Executive is bound by this Agreement and, at the Employer's or
Audiovox's election, furnish such employer with a copy of this Agreement or
relevant portions thereof.
§ 8.    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 § 8(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 of §§ 6 and 7 Are Essential and Independent Covenants. The
covenants by the Executive in §§ 6 and 7 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. The Executive's covenants in §§ 6 and 7 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
covenant in §§ 6 or 7. 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 §§ 6 and 7 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.
(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

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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:
Michael Klipsch
 
 
14041 Staghorn Drive
 
 
Carmel, IN 46032
 

 
(g)Entire Agreement: Amendments. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes 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 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

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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).
 
[signature page immediately following]

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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/ Fred S. Klipsch
Printed: Fred S. Klipsch
Title: Chairman of the Board of Directors
 
 
EXECUTIVE:
 
 
/s/ Michael Klipsch
Michael Klipsch, individually
 

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Exhibit A
 
Market Jurisdictions
Alabama
New York
Alaska
North Carolina
Arizona
North Dakota
Arkansas
Ohio
California
Oklahoma
Colorado
Oregon
Connecticut
Pennsylvania
Delaware
Rhode Island
Florida
South Carolina
Georgia
South Dakota
Hawaii
Tennessee
Idaho
Texas
Illinois
Utah
Indiana
Vermont
Iowa
Virginia
Kansas
Washington
Kentucky
West Virginia
Louisiana
Wisconsin
Maine
Wyoming
Maryland
District of Columbia
Massachusetts
 
Michigan
 
Minnesota
 
Mississippi
 
Missouri
 
Montana
 
Nebraska
 
Nevada
 
New Hampshire
 
New Jersey
 
New Mexico
 

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Exhibit B
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.

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Exhibit C
Executive Put Options
 
Executive shall have the following described Put Option:
Commencing on March 1, 2011, the cumulative after tax net profit or loss of the
Employer will be calculated on a monthly basis according to GAAP and will bear
interest at the same per annum rate that Audiovox is receiving from its lead
bank.
Executive may at the end of any month following the 30 month anniversary of this
Agreement request the Employer to pay him in one lump sum up to 80% of .65% of
the aggregate cumulative after tax net profit or loss of the Employer (the “Put
Price”), and the Employer will pay such amount to Executive. Such a request may
not be made within 60 months of Executive's previous request.
Any unpaid Put Price will be paid promptly to Executive or his heirs as the case
may be if Executive's employment is terminated for any reason.
Illustration (not accounting for interest):
Commencement value
-0-
 
Net profits after 12 months
$
10,000,000
 
Put Price (.65%)
$
65,000
 
Net loss in 13th month
$
1,000,000
 
Put Price (.65%)
$
58,500
 

 
 
 
 

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