Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into as of the 20th day
of December, 2011, by and between Conn-Selmer, Inc., a Delaware corporation (the
“Company”), and John M. Stoner, Jr. (the “Executive”).

 

WHEREAS, the Executive and the Company entered into an employment agreement
dated as of May 1st, 2011, and

 

WHEREAS, the Company and Executive wish to make certain modifications to the
agreement as set forth herein.

 

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

 

1.                                       Term of Employment.  The Company agrees
to continue to employ the Executive, and the Executive hereby agrees to continue
performing his duties and responsibilities until December 31, 2012, unless
otherwise terminated in accordance with the terms set forth in paragraph 7 of
this Agreement or extended in accordance with the terms sets forth in paragraph
8 (including any extensions, the “Term”).

 

2.                                       Duties and Responsibilities.  The
Executive shall be employed as the President of the Company, and shall perform
such duties as are from time to time assigned to him by the Board of Directors
of the Company (the “Board”) and that are normally associated with such
position.

 

3.                                       Compensation.

 

a.                                       For all services to be performed by the
Executive during the Term, the Company shall pay to him, together with other
compensation as hereinafter provided, an annual salary of $460,000 (subject to
such deductions and withholdings as may be required by law or by further
agreement with the Executive), payable in arrears biweekly.

 

b.                                      Without limiting and in addition to the
foregoing, each year the Executive shall be eligible to receive an annual bonus
determined in the sole and absolute discretion of the Board.

 

c.                                       On his annual review date, the
Executive shall be eligible to receive salary increases, based on his
performance of his duties, but any such increases shall be in the sole and
absolute discretion of the Board.

 

4.                                       Benefits.  In addition to any other
items of compensation provided for in this Agreement, the Executive shall be
entitled to the following benefits (the “Benefits”):

 

a.                                       The Executive shall be entitled to
participate in all employee benefit plans and programs, including, but not
limited to any retirement (including the Company’s Supplemental Executive
Retirement Plan), life insurance, health, medical, disability or other plans or
benefits, whether insured or self-insured, maintained by the Company that

 

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are generally available, and on terms no less favorable than those applicable,
to its senior executives, in accordance with the general eligibility and
participation provisions of such plans or programs may be in effect from time to
time.  The Company shall pay the premium for additional life insurance up to the
maximum coverage available under the Company’s policy.

 

b.                                      The Executive shall be entitled to four
weeks paid vacation during each year of this Agreement.

 

c.                                       In accordance with the terms
established by the Board, the Executive shall be entitled to a leased
automobile, up to a maximum lease payment of $800/month, and all out-of-pocket
expenses for the upkeep and maintenance of the automobile. The Executive’s
personal use thereof shall be deemed additional compensation and, therefore,
subject to income tax to him.  Any such income taxes shall be the sole
responsibility of the Executive.

 

5.                                       Reimbursement of Expenses.  The
Executive shall be entitled to be reimbursed for all reasonable travel and
entertainment expenses that are (a) incurred by him in the performance of his
duties hereunder and (b) evidenced by appropriate documentation.  In addition,
the Executive shall be entitled to an annual, non-accountable expense allowance
of $10,000.

 

6.                                       Restrictive Covenants.  The Executive
acknowledges that certain of the Company’s products and services are proprietary
in nature and have been manufactured, assembled and marketed through the use of
customer lists, supplier lists, trade secrets, methods of operation and other
confidential information possessed by the Company and disclosed in confidence to
the Executive (the “Trade Secrets”), which may not be easily accessible to other
persons in the trade.  The Executive also acknowledges that he will have
substantial and ongoing contact with the Company’s customers and suppliers and
will thereby gain knowledge of customer needs and references, sources of equity
funding, sources of supply, methods of assembly and other valuable information
necessary for the success of the Company’s business.  Therefore, except as
provided in subparagraphs (a), (d) and (e) below, during the time the Executive
is employed under the provisions of this Agreement and until the date of the
first anniversary of the termination of the Executive’s employment, the
Executive shall not, without the prior written consent of the Company:

 

a.                                       During the Term, engage in any business
activity that competes with the Company in the manufacturing of musical
instruments or other business in which the Company is engaged, or exploits or
utilizes any of the Trade Secrets; provided, however, that the Executive may
invest in any publicly-traded company that is similar in nature to the business
in which the Company is engaged, provided that such investment shall not exceed
5% of the equity interest in such company on a fully diluted basis;

 

b.                                      Solicit any person employed by the
Company or any affiliate of the Company, appointed as a representative of the
Company, or any affiliate of the Company, to join him as a partner, co-venturer,
employee, investor or otherwise, in any substantial business activity
whatsoever;

 

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c.                                       Intentionally disclose or reveal any
Trade Secrets or other confidential information of the Company to anyone which
disclosure results in harm to the Company;

 

d.                                      Become employed by or associated with
any entity that owns, operates, manages or has a substantial interest in any
business activity that competes with the Company in the manufacturing of musical
instruments or other significant business in which the Company is engaged, or
exploits or utilizes any of the Trade Secrets; or

 

e.                                       For a period of one year after the date
of non-renewal pursuant to paragraph 8 below, become employed by or associated
with any entity that owns, operates, manages or has a substantial interest in
any business activity that competes with the Company as a manufacturer of
musical instruments.

 

7.                                       Termination.

 

a.                                       Termination of Employment.  Either the
Executive or the Company may terminate the employment relationship at any time,
for any reasons, subject to the terms and conditions contained in this
Agreement.

 

b.                                      Termination by the Company without
Cause.  In the event the Executive’s employment is terminated without Cause, the
Company shall, in lieu of any other payment due pursuant to this Agreement:

 

i.                                          Pay and/or provide to the Executive
all accrued but unpaid salary, any earned but unpaid annual bonus in respect of
the year prior to the year of termination, any earned but unpaid bonus in
respect of the year of termination to the extent earned pro rata through the
date of termination, reimbursement for all unreimbursed business expenses,
accrued and unpaid vacation days, and all accrued or vested compensation and
benefits payable to the Executive under all benefit plans and all compensation
plans, programs or arrangements in which the Executive participates
(collectively, the “Accrued Benefits”) within ten (10) days after the date of
termination (except in the case of compensation and benefits under plans,
programs and arrangements, at such other time and in such manner as determined
under the terms and conditions of such plans, programs and arrangements); and

 

ii.                                       Within ten (10) days following the
date of termination, pay the Executive a lump sum cash amount equal to the sum
of his then-current annual salary and the greater of his annual bonus in respect
of the year prior to the year of termination and his target bonus, if any,
established by the Board in respect of the year of termination provided,
however, if such termination occurs within twelve (12) months after a Change of
Control ( as defined below) then the lump sum payment shall be two (2) times
that amount.

 

iii.                                        A “Change in Control” shall mean: 
(a) a merger, reorganization, consolidation or similar event, whether in a
single transaction or in a series of transactions (collectively the
“Transaction”) unless immediately following such Transaction (and after giving
effect to such Transaction) the Company’s stockholders immediately prior to the
Transaction own at least 50% of the total combined voting power

 

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of the surviving or acquiring entity in substantially the same proportions as
their ownership of the voting power of the Company’s outstanding securities
immediately before such Transaction; (b) any person (having the meaning ascribed
to such term in the Securities Exchange Act of 1934, as amended (“1934 Act”),
including a “group” within the meaning of Section 13(d)(3)) has or acquires
beneficial ownership (within the meaning of Rule 13d-3 under the 1934 Act) of at
least 50% of the total combined voting power of the Company’s outstanding
securities; or (c) the sale, transfer or other disposition of all or
substantially all of the Company’s assets, provided, however, that if Executive
is a member of the group acquiring the stock or assets under (a) through
(c) above, then for purposes of this Agreement, there shall not be a Change of
Control.

 

c.                                       Termination by the Company for Cause.

 

i.                                          The Company may terminate the
Executive’s employment with the Company for Cause determined as described below
upon written notice to the Executive.  If the Company terminates the Executive’s
employment for Cause, the Company shall, in lieu of any other payment due
pursuant to this Agreement, pay and/or provide all Accrued Benefits to the
Executive within ten (10) days after the date of termination (except in the case
of compensation and benefits under plans, programs and arrangements, at such
other time and in such manner as determined under the terms and conditions of
such plans, programs and arrangements).  In the event of termination of the
Executive’s employment for Cause, any obligation of the Company to provide any
compensation and Benefits to him, as herein set forth, shall cease immediately
except as provided in this paragraph and in paragraph 10.

 

ii.                                       “Cause” shall be defined as follows: 
(A) any felony committed by the Executive in connection with the performance of
the Executive’s duties to the Company that causes damage to the Company or any
of its properties, assets or businesses; (B) any fraud, misappropriation or
embezzlement by the Executive involving properties, assets or funds of the
Company; (C) a conviction of the Executive, or plea of nolo contendere by the
Executive, to any crime or offense involving monies or other property of the
Company; or (D) the violation by the Executive of any non-competition or
confidentiality agreement with the Company.

 

d.                                      Termination by the Executive for Good
Reason.

 

i.                                          The Executive may voluntarily
terminate his employment for “Good Reason” by notifying the Company in writing,
within ninety (90) days after the Executive first obtains knowledge of the
occurrence of one of the events below, that the Executive is terminating his
employment for Good Reason, provided that the Company shall have forty-five (45)
days to cure.  If such Good Reason is not cured, the Executive must actually
terminate employment no later than six months following the initial existence of
such Good Reason.

 

ii.                                       “Good Reason” means the occurrence of
any of the following events: (A) any reduction of the Executive’s annual salary,
(B) any adverse change in the Executive’s title or reporting relationship as
provided herein, (C) any material adverse change in the Executive’s duties or
authority as provided herein, (D) any

 

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relocation of the Executive’s principal place of business by more than 25 miles
from Elkhart, Indiana, or (D) any other material breach by the Company of any of
the provisions of this Agreement.

 

iii.                                    In the event the Executive terminates
his employment for Good Reason, the Company shall, in lieu of any other payment
due pursuant to this Agreement, pay and provide to the Executive the payments,
benefits and rights set forth, and at the times provided, in paragraph 7.b.
above as if the Executive’s employment was terminated without Cause.

 

e.                                       Resignation by Executive without Good
Reason.  In the event of termination of the Executive’s employment by reason of
his resignation, written notice of which shall be given by him to the Company at
least sixty days prior thereto, the Company shall pay and/or provide all Accrued
Benefits to the Executive within ten (10) days after the date of termination
(except in the case of compensation and benefits under plans, programs and
arrangements, at such other time and in such manner as determined under the
terms and conditions of such plans, programs and arrangements).

 

f.                                         Termination by Reason of Death or
Disability.  In the event of termination of the Executive’s employment by reason
of death or permanent disability, the Company shall, in lieu of any other
payment due pursuant to this Agreement, pay and/or provide Executive or his
estate (A) all Accrued Benefits within ten (10) days after the date of
termination (except in the case of compensation and benefits under plans,
programs and arrangements, at such other time and in such manner as determined
under the terms and conditions of such plans, programs and arrangements) and
(B) continued payment of the annual salary for a period of six months following
the date of his death or the date upon which he becomes permanently disabled, in
addition to any other benefits provided by the Company.

 

8.                                       Renewal.

 

a.                                       The Term shall automatically renew on
an annual basis unless the Company provides the Executive with written notice of
its intent not to renew at least sixty (60) days prior to the expiration of the
then current Term.

 

b.                                      If this Agreement is not renewed by the
Company, the Company shall, in lieu of any other payment due pursuant to this
Agreement, pay and/or provide to the Executive the payments, benefits and rights
set forth, and at the times provided, in paragraph 7.b. above as if the
Executive’s employment was terminated without Cause.

 

9.                                       Indemnification.  The Company shall
maintain an adequate level of directors’ and officers’ liability insurance to
protect the Executive from liability related to his employment with the
Company.  The Company agrees to indemnify the Executive for liability related to
his employment with the Company to the extent Executive is not indemnified by
such insurance to the maximum extent permitted by applicable law.  The Company
further agrees that such indemnification shall survive the Executive’s
resignation, termination or expiration of this Agreement, with respect to
actions taken by

 

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him during his employment with the Company, unless such actions could have been
grounds for termination for Cause.

 

10.                                 Employment Benefits to Continue After
Termination.  If the Executive’s employment is terminated for any reason he
shall be entitled to continue to participate in any health and medical plans
maintained by the Company at his employee rate if he so elects and pays the
premium cost of such insurer in advance to the Company until such time as he
becomes a participant in another plan or for an additional period of time in
accordance with governmental laws and regulations.  The Company is not obligated
to maintain any such benefit plans under this Agreement.

 

11.                                 Section 409A.  The parties intend that any
compensation, benefits and other amounts payable or provided to the Executive
under this Agreement be paid or provided in compliance with Section 409A of the
Internal Revenue Code of 1986 and all regulations, guidance, and other
interpretative authority issued thereunder (collectively, “Section 409A”) such
that there will be no adverse tax consequences, interest or penalties for the
Executive under Section 409A as a result of the payments and benefits so paid or
provided to him. The parties agree to modify this Agreement, or the timing (but
not the amount) of the payment of the severance or other compensation, or both,
to the extent necessary to comply with Section 409A.  In addition,
notwithstanding anything to the contrary contained in any other provision of
this Agreement, the payments and benefits to be provided to the Executive under
this Agreement shall be subject to the provisions set forth below.

 

a.                                       Any payment subject to Section 409A
that is triggered by a termination from employment shall be triggered by a
“separation from service,” as defined in the regulations issued under
Section 409A.

 

b.                                      Each payment under this Agreement will
be considered a “separate payment” and not one of a series of payments for
purposes of Section 409A of the Code.

 

c.                                       It is intended that the payments to be
made to the Executive under this Agreement upon a termination of employment
shall be exempt from Section 409A as a “short-term deferral” under applicable
Treasury regulations.  In the event that such exemption does not apply, and any
payment (or portion thereof) is not otherwise exempt from Section 409A, if the
Executive is then a “specified employee” within the meaning of
Section 409A(a)(2)(B) of the Code (as determined by the Company), then any such
non-exempt payment otherwise due to the Executive during the first six months
following the Executive’s termination of employment will be held until and paid
on the day following the expiration of such six-month period.

 

d.                                      All expenses eligible for reimbursement
hereunder that are taxable to the Executive shall be paid to the Executive no
earlier than in the seventh month after separation from service and no later
than December 31 of the calendar year following the calendar year in which such
expenses were incurred.  The expenses incurred by the Executive in any calendar
year that are eligible for reimbursement under this Agreement shall not affect
the expenses incurred by the Executive in any other calendar year that are

 

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eligible for reimbursement hereunder.  The Executive’s right to receive any
reimbursement hereunder shall not be subject to liquidation or exchange for any
other benefit.

 

12.                                 Limitation on Assignment.  No rights or
obligations of the Company under this Agreement may be assigned or transferred
by the Company without the Executive’s prior written consent, except that such
rights or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or, with the
consent of the Executive, a sale, liquidation or other disposition of all or
substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of such
Company and assumes the liabilities, obligations and duties of the Company under
this Agreement, either contractually or by operation of law.

 

13.                                 Entire Agreement.  This Agreement
constitutes the entire understanding between the parties in connection with the
subject matter hereof and supersedes any and all prior agreements or
understandings between the parties.   This Agreement may only be changed by a
written instrument duly executed by each party.

 

14.                                 Binding Nature of Agreement Assignment. 
This Agreement shall be binding upon the parties hereto, the heirs and legal
representatives of the Executive and the successors and assigns of the Company.

 

15.                                 Governing Law.  This Agreement shall be
construed and enforced in accordance with the laws of the state of Indiana,
without giving effect to the conflict of laws principles thereof.

 

16.                                 Construction and Jurisdiction.

 

a.                                       If any legal action relating to or
other proceeding is brought by any party for the enforcement of this Agreement,
or because of an alleged dispute, breach or default in connection with any
provisions of this Agreement, such action shall be commenced in the state of
Indiana, and the parties hereto agree that such state shall have exclusive
jurisdiction thereof; provided, however, if any court in said state shall
decline to afford injunctive relief to the Company on account of the breach or
threatened breach of this Agreement by the Executive, the Company shall be
entitled to seek such relief from any other court of competent jurisdiction,
wherever located.

 

b.                                      The prevailing party shall be entitled
to recover reasonable attorney’s fees and other reasonable costs incurred in
such action or proceeding in addition to any other relief to which it may be
entitled.

 

c.                                       The parties hereby further agree that,
in connection therewith, service of process by registered or certified mail or
in person shall confer jurisdiction over them.

 

17.                                 Severability.  The invalidity or
unenforceability of any provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be

 

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construed in all respects as if such invalid or unenforceable provision or
provisions were omitted.

 

18.                                 Section Headings.  The section headings
herein have been inserted for convenience of reference only and shall in no way
modify or restrict any of the terms or provisions hereof.

 

19.                                 Waiver of Breach.  The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver by said party of any other or subsequent breach.

 

20.                                 Notices.  All notices and other
communications required or permitted to be given under the terms of this
Agreement shall be given in writing and shall be deemed to have been duly given
(a) when delivered personally, (b) if sent by telecopy, when receipt thereof is
acknowledged at the telecopy number listed below for the receiving party,
(c) the day following the day on which the same has been delivered prepaid for
overnight delivery to a national air courier service or (d) three days following
deposit in the United States mail, registered or certified, postage prepaid, in
each case addressed as follows (or to such other addresses that may have been
designated by the respective parties hereto for this purpose):

 

If to the Company:

 

Conn-Selmer, Inc.

800 South Street, Suite 305

Waltham, Massachusetts 02453-1472

Fax: (781) 894-9803

Attention:      Dennis M. Hanson

 

If to the Executive:

 

John M. Stoner, Jr.

51251 Pebble Beach Drive

Granger, IN  46530

 

[SIGNATURE PAGE FOLLOWS]

 

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

 

 

COMPANY

 

Conn-Selmer, Inc.

 

 

 

 

 

/s/ Dennis M. Hanson

 

Dennis M. Hanson

 

Executive Vice President

 

 

 

EXECUTIVE

 

 

 

/s/ John M. Stoner, Jr.

 

John M. Stoner, Jr.

 

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