EXHIBIT 10.2

 

Execution Copy

 

THIRD AMENDMENT TO

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

THIRD AMENDMENT AND WAIVER TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated
as of July 10, 2009 (this “Amendment”), to the Existing Credit Agreement (as
hereinafter defined), by and among (i) CONN-SELMER, INC., a Delaware
corporation, and (ii) STEINWAY, INC., a Delaware corporation (“Steinway” and
together with Conn-Selmer, the “Borrowers”), (iii) those signatories hereto and
identified on Schedule I (as may be amended from time to time) as Guarantors
(the “Guarantors”), (iv) the lenders (the “Lenders”) from time to time party to
the Agreement (defined below) and (v) GMAC COMMERCIAL FINANCE LLC, a Delaware
limited liability company (the “Administrative Agent”), as administrative agent
for the Lenders hereunder.

 

RECITALS

 

A.          The Borrowers, Guarantors, the Administrative Agent and the Lenders
have entered into the Existing Credit Agreement, pursuant to which the Lenders
are providing to the Borrowers an $110,000,000 revolving credit facility, which
is secured by certain accounts receivable, and other collateral of the Borrowers
and guaranteed by the Guarantors.

 

B.          Borrowers have requested certain amendments to the Existing Credit
Agreement in order to increase the amount of the Senior Notes that SMI may
redeem.

 

C.          This Amendment memorializes certain amendments agreed to by the
Borrowers and the Lenders.

 

In consideration of the foregoing and of the mutual covenants and undertakings
herein contained, the parties hereto hereby agree that the Existing Credit
Agreement is amended as hereinafter provided.

 

ARTICLE I

Definitions

 

1.             Definitions.           (a)  In addition to the definitions set
forth in the heading and the recitals to this Amendment, the following
definitions shall apply hereto:

 

“Agreement”:  the Existing Credit Agreement as amended, supplemented or
otherwise modified from time to time up to and including this Amendment.

 

“Existing Credit Agreement”: the Third Amended and Restated Credit Agreement,
dated as of September 29, 2006, among (i) Conn-Selmer, (ii) Steinway, (iii) the

 

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

 

Guarantors, (iv) the Lenders and (v) the Administrative Agents, as amended or
otherwise modified from time to time prior to the Third Amendment Effective
Date.

 

(b)           Unless otherwise indicated, capitalized terms that are used but
not defined herein shall have the meanings ascribed to them in the Existing
Credit Agreement.

 

ARTICLE II

Representations

 

1.             Representations.  Each of the Borrowers and Guarantors hereby
represents and warrants as follows:

 

(a)           It has full power, authority and legal right to enter into this
Amendment and perform all of its respective obligations hereunder. The
execution, delivery and performance hereof is within its powers and has been
duly authorized, is not in contravention of any Requirement of Law which might
have a material adverse effect upon it, the Collateral, its operations,
financial condition or prospects, or in contravention of the terms of its
by-laws, certificate of incorporation, declaration of trust or other documents
relating to its formation, as applicable, or to the conduct of its business or
of any material agreement or undertaking to which it is a party or by which it
is bound, and will not conflict with or result in any breach of any of the
provisions of, or constitute a default under, or result in the creation of any
Lien upon any of its assets under, the provisions of any agreement, charter,
instrument, by-law, declaration of trust or other instrument to which it is a
party or by which it or its assets may be bound.

 

(b)           It is duly organized and in good standing under the laws of its
respective state of organization and it is qualified to do business and is in
good standing in each jurisdiction where qualification and good standing are
necessary for it to conduct its businesses and own its properties and where the
failure to so qualify would have a Material Adverse Effect.

 

(c)           This Amendment has been duly executed and delivered on its behalf
and this Amendment constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).

 

(d)           The conditions contained in Article IV hereof have been satisfied.

 

(e)           Each of the Loan Documents is on the date hereof in full force and
effect.

 

(f)            No Default or Event of Default has occurred and is continuing.

 

2

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

 

ARTICLE III

Amendments to Existing Credit Agreement

 

1.             Section 1.1.  The definition of “Consolidated Cash Flow” in
Section 1.1 of the Credit Agreement is amended in its entirety to read as
follows:

 

“CONSOLIDATED CASH FLOW”:  FOR SMI AND ITS CONSOLIDATED SUBSIDIARIES,
CONSOLIDATED NET INCOME DETERMINED IN ACCORDANCE WITH GAAP (A) BEFORE DEDUCTING
THE FOLLOWING ITEMS (WITHOUT ANY DUPLICATION): (I) INTEREST EXPENSES AND
FINANCING CHARGES, (II) INCOME TAXES, (III) DEPRECIATION, (IV) AMORTIZATION,
(V) GAINS OR LOSSES FROM EARLY EXTINGUISHMENT OF DEBT OR OTHER INFREQUENT AND
UNUSUAL ITEMS, (VI) COST OF SALES ASSOCIATED WITH THE STEP-UP OF INVENTORY UPON
ACQUISITION, (VII) STOCK BASED COMPENSATION AND ALL OTHER NON-CASH CHARGES; AND
(B) MINUS CAPITAL EXPENDITURES, IN EACH CASE DETERMINED IN ACCORDANCE WITH
GAAP.  NOTWITHSTANDING THE FOREGOING, INTEREST INCOME AND INCOME DERIVED BY SMI
AS A RESULT OF SMI REPURCHASING THE SENIOR NOTES AT A DISCOUNT SHALL NOT BE
INCLUDED IN CONSOLIDATED CASH FLOW.

 

2.             Section 9.9(c).  Section 9.9(c) of the Existing Credit Agreement
is hereby amended in its entirety to read as follows:

 

“(C)         REDEEM, REPURCHASE, RETIRE OR OTHERWISE ACQUIRE OR DISTRIBUTE
DIVIDENDS IN RESPECT OF THE STOCK OF ANY LOAN PARTY, OR REDEEM OR REPURCHASE THE
SENIOR NOTES IN AN AGGREGATE AMOUNT NOT TO EXCEED (A) $35,000,000 PLUS (B) FIFTY
PERCENT (50%) OF THE CUMULATIVE CONSOLIDATED SMI NET INCOME EARNED (EXCLUSIVE OF
ANY INCOME DERIVED BY SMI AS A RESULT OF SMI REPURCHASING THE SENIOR NOTES AT A
DISCOUNT) AFTER JANUARY 1, 2006 THROUGH THE TERMINATION DATE (THE “ALLOWED
INVESTMENT AMOUNT”); PROVIDED THAT, IMMEDIATELY AFTER GIVING EFFECT TO ANY SUCH
TRANSACTION, EXCESS AVAILABILITY SHALL NOT BE LESS THAN $25,000,000.”

 

3.             Section 9.11.  Section 9.11(a)(ii) is amended in its entirety to
read as follows:

 

“(II) THE REPURCHASE OR REDEMPTION BY SMI OF SENIOR NOTES IN AN AGGREGATE AMOUNT
NOT TO EXCEED $15,000,000 (CASH PAID AMOUNT) IN ANY CALENDAR YEAR (FOR CLARITY
THE AMOUNT OF SENIOR NOTES ALLOWED TO BE REPURCHASED PURSUANT TO THIS
SECTION 9.11(A)(II) IS IN ADDITION TO THE AMOUNTS ALLOWED TO BE REPURCHASED
PURSUANT TO SECTION 9.9(C) ABOVE), PROVIDED THAT (A) NO DEFAULT OR EVENT OF
DEFAULT HAS OCCURRED AND IS CONTINUING OR WOULD RESULT THEREFROM,
(B) IMMEDIATELY AFTER GIVING EFFECT TO ANY SUCH REPURCHASE OR REDEMPTION, EXCESS
AVAILABILITY SHALL NOT BE LESS THAN $25,000,000 AND (C) ANY AMOUNTS USED BY SMI
TO REPURCHASE OR REDEEM THE SENIOR NOTES MUST FIRST BE APPLIED TOWARDS THE
AMOUNTS ALLOWED UNDER SECTION 9.11 AND, SECOND TO THE AMOUNTS ALLOWED PURSUANT
TO THIS SECTION 9.9(C). “

 

3

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

 

ARTICLE IV

 

Conditions to Effectiveness

 

This Amendment, and the modifications to the Existing Credit Agreement provided
for herein, shall become effective on the date (the “Third Amendment Effective
Date”) on which all of the following conditions have been (or are concurrently
being) satisfied:

 

1.             This Amendment shall have been duly executed and delivered by
each party thereto.

 

2.             Each of the representations and warranties made by the Borrowers
and Guarantors in or pursuant to the Loan Documents shall be true and correct in
all material respects on and as of the Third Amendment Effective Date as if made
on and as of such date (except to the extent the same relate to another, earlier
date, in which case they shall be true and correct in all material respects as
of such earlier date).

 

3.             No Default or Event of Default shall have occurred and be
continuing.

 

ARTICLE V

Miscellaneous

 

1.             Payment of Expenses. Without limiting its obligations under
Section 12.8 of the Agreement, the Borrowers jointly and severally agree to pay
or reimburse the Administrative Agent for all of its reasonable costs and
expenses incurred in connection with this Amendment, including, without
limitation, the reasonable costs and expenses of counsel to the Administrative
Agent and expressly acknowledge that their obligations hereunder constitute
“Obligations” within the meaning of the Existing Credit Agreement.

 

2.             No Other Amendments; Confirmation.  Except as expressly amended,
modified and supplemented hereby and by the documents related hereto, the
provisions of the Existing Credit Agreement and the other Loan Documents shall
remain in full force and effect.

 

3.             Reaffirmation by Loan Parties. Each Loan Party hereby reaffirms
its obligations under the Loan Documents executed by such Loan Party.

 

4.             Governing Law; Counterparts. (a) This Amendment and the rights
and obligations of the parties hereto shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York.

 

(b)           This Amendment may be executed by one or more of the parties
hereto on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Amendment signed by all the parties shall be lodged with
each of the Borrowers and the Administrative Agent, as the

 

4

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

 

Administrative Agent. This Amendment may be delivered by facsimile transmission
of the relevant signature pages hereof.

 

[Signature page follows]

 

5

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

 

[Signature page to Third Amendment to Steinway Inc. and Conn-Selmer Inc.’s Third
Amended and Restated Credit Agreement]

 

 

CONN-SELMER, INC., Borrower

 

 

 

 

 

By

/s/ Dennis M. Hanson

 

 

Name:

Dennis M. Hanson

 

 

Title:

E.V.P.

 

 

 

 

 

 

 

 

 

STEINWAY, INC., Borrower

 

 

 

 

 

By

/s/ Dennis M. Hanson

 

 

Name:

Dennis M. Hanson

 

 

Title:

E.V.P.

 

 

 

 

 

 

 

 

 

GMAC COMMERCIAL FINANCE LLC,

 

as Administrative Agent and Lender

 

 

 

 

 

By

/s/ Joseph Skaferowsky

 

 

Name:

Joseph Skaferowsky

 

 

Title:

Director

 

 

 

 

 

 

BANK OF AMERICA, N.A.,

 

as Lender

 

 

 

 

 

 

By

/s/ Christopher M. Halloran

 

 

Name:

Christopher M. Halloran

 

 

Title:

Vice President

 

 

 

 

 

 

JPMORGAN CHASE BANK, N.A.,

 

as Lender

 

 

 

 

 

 

By

/s/ Kim Nguyen

 

 

Name:

Kim Nguyen

 

 

Title:

V.P.

 

 

 

 

 

 

[Signatures continue on following page]

 

6

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

 

 

[Signatures continued from prior page]

 

 

 

 

 

 

TD BANKNORTH, N.A.,

 

as Lender

 

 

 

 

 

By

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

LASALLE BUSINESS CREDIT, LLC,
as Lender

 

 

 

 

 

By

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

ISRAEL DISCOUNT BANK OF NEW YORK,
as Lender

 

 

 

 

 

By

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

By

 

 

 

Name:

 

 

 

Title:

 

 

7

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

 

SCHEDULE I

 

GUARANTORS

 

 

STEINWAY MUSICAL INSTRUMENTS, INC.,

 

 

 

Guarantor

 

 

 

 

 

 

 

By:

/s/ Dennis M. Hanson

 

 

 

 

Name:

Dennis M. Hanson

 

 

 

 

Title:

Sr. E.V.P.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE O.S. KELLY COMPANY,

 

 

 

Guarantor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Dennis M. Hanson

 

 

 

 

Name:

Dennis M. Hanson

 

 

 

 

Title:

E.V.P.

 

 

 

 

8

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