Exhibit 10.12


 


EMPLOYMENT AGREEMENT OF JOHN STONER


 


This Employment Agreement (this “Agreement”) is entered into on this 17th
of October, 2002, by and between The Selmer Company, Inc., a Delaware
corporation d/b/a as CONN-SELMER (the “Company”) with a principal place of business at 600 Industrial Parkway, Elkhart
IN 46516  and John M. Stoner Jr., an individual residing at 804
Nissley Drive, Middletown, PA  17057
(the “Executive”).


 


RECITALS


 


WHEREAS, the Company
desires to retain the services and employment of the Executive with the Company
and the Executive wishes to provide such services and to become employed by the
Company, all in accordance with the terms and conditions provided herein.


 


NOW THEREFORE, in
consideration of the foregoing and of mutual covenants, agreements, and representations herein  contained,
the parties hereto agree as follows:


 


AGREEMENT


 


1.             Term of
Employment     The Company agrees to
employ the Executive and the Executive hereby agrees to accept employment, for
an initial term commencing on the 11th day of November, 2002  (the “Commencement
Date”), and ending on December 31, 2003 (the “Term”). 
Such Term is subject to termination and extension in accordance with paragraphs 8 and 9 hereunder.


 


2.             Duties and
Responsibilities


 


a.             The Executive shall
be employed as the President and C.E.O. of the Company, and shall perform such
duties as are from time to time assigned to him by the Steinway Musical
Instruments, Inc. (“SMI”) Board
of Directors  (the “Board”) and that are normally associated with
such positions. If the Executive serves as a member of the Board, the Executive
shall serve in such capacity without any additional compensation.


 


b.             In addition, the
Executive’s duties and responsibilities shall include those ordinarily and
customarily performed by a person holding such position, and shall include
primary responsibility for hiring of and management of all personnel and
supervising all operations of the Company. The Executive shall be entitled to
office and support staff consistent with such position.


 


c.             During the period
of his employment hereunder, the Executive agrees to devote his entire business
time, attention, energies and his best efforts to the performance of his
duties.


 


3.             Place of
Performance and Relocation Expenses   
In connection with the Executive’s employment by the Company, the
Executive shall be based at the principal executive offices of the Company in
Elkhart, Indiana.  The Executive shall
relocate his primary residence from Middletown, Pennsylvania to Indiana within
three (3) months from the Commencement Date. 
The Company shall either pay for or reimburse the Executive for
relocation expenses in accordance with Exhibit A attached hereto.


 


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4.             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
$310,000 (subject to such deductions and withholdings as may be required by law
or by further agreement with the Executive), commencing on the Commencement
Date.


 


b.             Without limiting
and in addition to the foregoing, commencing with the 2003 fiscal year the
Executive shall be eligible to receive an annual bonus with a target of 35% of
base salary as determined in accordance with the Company’s bonus plan, a copy
of which is attached hereto as Exhibit B.


 


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


 


5.             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 any retirement, life  insurance, health, medical, disability or
other plans of benefits, whether
insured or self-insured, which  the
Company in its sole and absolute discretion may make available generally from
time to time for its executives.


 


b.             The Executive shall
be entitled to four weeks paid vacation per year.


 


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.


 


d.             Executive shall be
eligible to receive option grants under SMI’s 1996 Amended and Restated Stock
Plan (the “Plan”).  Upon the Commencement Date, Executive shall
be granted incentive stock options to purchase 40,000 shares of SMI Common
Stock in accordance with the terms of the Plan.  Additional grants shall be determined in the sole and absolute
discretion of the Board.


 


6.             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 accordance with Company’s expense
reporting procedures.


 


7.             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 preferences,
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) and (d) below, and except as provided in paragraph 8; during the time the Executive
is employed  under the provisions of this
Agreement and until  the
date of the third anniversary of the termination of the Executive’s employment,
the Executive shall not, without the
prior written consent of the Company:


 


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a.              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;


 


c.             Disclose or reveal
any Trade Secrets or other confidential information of the Company to anyone;
or


 


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; provided, however, if the Executive’s employment is terminated
by the Company other than for Cause (as defined herein), said period for the purposes of this subparagraph d shall be
reduced to one year after the termination of his employment.


 


8.             Termination


 


a.    The Company shall have the
option to terminate the Executive’s employment for “Cause”, which shall be  defined as follows: (i) any  criminal
act  or criminal omission by the
Executive that causes damage to the Company or  any of its
properties, assets, business, officers, directors,
stockholders or employees including but not limited to any violation of S.E.C.
regulations; (ii) any fraud, misappropriation or embezzlement by the Executive
involving properties, assets or funds of the Company; (iii) 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 any other felony or criminal act involving moral
turpitude; (iv) the violation by the Executive of any non-competition or
confidentiality agreement with the Company; or (v) the Executive’s intoxication
or drug addiction while engaged in the performance of his duties to the
Company. 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 paragraph 11.


 


b.   
Notwithstanding any other provisions of this Agreement the Company  may,
in its sole and absolute discretion, elect
to terminate the Executive’s employment at any time upon 10 days written
notice, provided, however, if
such should happen, the Company shall continue to pay the Executive his base
salary for a period of twelve (12) months after the date of termination (less
deductions for applicable taxes) and continue his benefits as outlined under paragraph 11, in full satisfaction of all
its obligations to him under the provisions of this Agreement and any other severance
or other benefit plan of the Company. In the event of a breach of paragraph 7
of this Agreement by the Executive after his receipt of this payment
in addition to any other remedies at law or in equity, the Executive,
recognizing that the harm to the Company caused by a breach of paragraph 7
hereof may not be remediable in damages and consents to injunctive relief in
respect of such breach.


 


c.    In the event of
termination of the Executive’s employment by reason of death or permanent disability, he  and/or his estate  shall be entitled to his salary and
Benefits under the terms of this Agreement 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.


 


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d.    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, he shall be entitled to his salary and Benefits hereunder up to the
date of such termination, subject to extension of Benefits required by any
governmental laws and regulations.


 


9.             Renewal   
This Agreement shall automatically renew on an annual basis until and
unless one party provides written notice to the other of its intent not to
renew at least sixty (60) days prior to the expiration of the then current
term.


 


 


10.           Indemnification    The Company agrees to indemnify the
Executive to the same extent that the Company agrees to indemnify other
officers and directors of the Company in their capacity as such. 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 him during his
employment with the Company, unless such actions could have been grounds for
termination for Cause.


 


11.           Employment
Benefits to Continue After Termination   
If the Executive is terminated by the Company without Cause, the Company
shall continue to provide the Executive with a leased vehicle for a period of
three (3) months and all health and medical benefits then in effect for a
period of twelve (12) months.  In
addition, the Executive will be entitled to receive a bonus computed in
accordance with the Company’s bonus plan, pro-rated for the period of
employment up to the Termination date. 
If the Executive’s employment is terminated by the Company with Cause,
or by resignation, he shall be entitled to continue to participate in any such
plans 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.


 


12.           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
facsimile, when receipt thereof is acknowledged at the facsimile 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 lot 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:


 


	
  Steinway Musical Instruments, Inc.

  
	
  Attention: Dennis M. Hanson

  
	
  800 South Street, Suite 305

  
	
  Waltham, Massachusetts 02453

  
	
  Facsimile: (781) 894-9803

  
	
   

  
	
  If to the Executive:

  
	
   

  
	
  John M. Stoner

  
	
  C/O Conn-Selmer

  
	
  600 Industrial Parkway

  
	
  Elkhart, IN  46516

  



 


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13.           Entire Agreement
This Agreement constitutes the entire agreement between the parties in
connection with the subject matter hereof, supersedes any and all prior
agreements or understandings between the parties and may only be changed by
agreement in writing between the parties.


 


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 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 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.


 


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


 


	
  The Selmer Company, Inc.

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Dennis M. Hanson

  	
   

  	
  /s/ John M. Stoner, Jr.

  
	
   

  	
   

  
	
  Title:

  	
  /s/
  Executive Vice President

  	
   

  
					



 


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Exhibit A


 


The Selmer Company L.P.


P.O. Box 310 Elkhart, Indianan 46515-0310 U.S.A


 


SUBJECT MATTER


RELOCATION POLICY


 


	
  FORM # 100.3

  	
  Date Effective  8/19/94

  	
  Revision Date 9/21/93

  



 


PURPOSE


 


The Company may assist certain employees at the discretion of the Company
when the Company asks them to move from one location to another in order to
minimize any financial burden they might experience.


 


ELIGIBILITY


 


All full-time salaried employees who are required to move more than fifty
(50) miles.


 


PAID RELOCATION EXPENSES


 


House Hunting


 


The employee and his/her spouse may take a maximum of two trips (for no
more than a total of five days).  The
employee will be reimbursed for:


 


•                  Transportation – car
tolls and mileage or airline tickets and car rental at new location during house
hunting


 


•                  The lesser of actual
expenses or $200 per diem for food and lodging


 


Transporting Household and Personal Property


 


The Company pays for the transportation of household and personal property
to an employee’s new home.  All items
are subject to prior Company approval. 
The Company also pays for packing, unpacking, insurance, and temporary
storage for up to sixty (60) days.


 


The employee must notify the Personnel Department when he/she establishes
a new address and the date of his/her move. 
The Company will then select the mover and make arrangements for the
move.


 


Temporary Living Expenses


 


If an employee experiences a delay in gaining access to his/her new home,
the Company will reimburse the employee for the cost of meals and lodging
(subject to a maximum of $150 per day) for his/her family at the new location
for up to sixty (60) days.


 


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Moving the Employee’s Family


 


The employee will be reimbursed for the cost of moving his/her family from
his/her former residence to his/her new one. 
Tolls and mileage for a maximum of two cars will be paid.  Meals and lodging are subject to a maximum
reimbursement of $200 per day or actual expenses, whichever is less.


 


Other Expenses


 


The employee will be reimbursed for other reasonable and necessary
expenses directly related to the move (e.g. closing costs for new home)
provided such expense have been approved in advance and supported by
appropriate documentation.


 


TAXES


 


The employee will be responsible for any additional taxes incurred due to
the Company’s reimbursement of relocation expenses.  Receipts for relocation expenses should be saved by the employee
in order that he/she may take proper income tax deductions.


 


IF YOU LEAVE THE COMPANY


 


If you voluntarily terminate your employment within twelve (12) months
from the date you assume your new duties, you will be required to repay all
relocation expenses.


 


TERMINATION OR CHANGE OF POLICY


 


This program can be withdrawn or changed at any time by the Company.


 


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