**EXHIBIT 10.2**

 

**Execution Copy**

 

**THIRD AMENDMENT TO**

**THIRD AMENDED AND RESTATED CREDITAGREEMENT**

 

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

 

RECITALS

 

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

 

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

 

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

 

Inconsideration of the foregoing and of the mutual covenants and undertakingsherein contained, the parties hereto hereby agree that the Existing CreditAgreement is amended as hereinafter provided.

 

ARTICLE I

Definitions

 

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

 

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

 

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

 

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Guarantors,(iv) the Lenders and (v) the Administrative Agents, as amended orotherwise modified from time to time prior to the Third Amendment EffectiveDate.

 

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

 

ARTICLE II

Representations

 

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

 

(a)           It has full power, authority andlegal right to enter into this Amendment and perform all of its respectiveobligations hereunder. The execution, delivery and performance hereof is withinits powers and has been duly authorized, is not in contravention of anyRequirement of Law which might have a material adverse effect upon it, theCollateral, its operations, financial condition or prospects, or incontravention of the terms of its by-laws, certificate of incorporation,declaration of trust or other documents relating to its formation, asapplicable, or to the conduct of its business or of any material agreement orundertaking to which it is a party or by which it is bound, and will notconflict with or result in any breach of any of the provisions of, orconstitute a default under, or result in the creation of any Lien upon any ofits 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 itor its assets may be bound.

 

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

 

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

 

(d)**          **Theconditions contained in Article IV hereof have been satisfied.

 

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

 

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

 

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ARTICLE III

Amendments to Existing Credit Agreement

 

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

 

### “ConsolidatedCash Flow”:  for SMI and its consolidated Subsidiaries, consolidatednet income determined in accordance with GAAP (A) before deducting thefollowing items (without any duplication): (i) Interest Expenses andfinancing charges, (ii) income taxes, (iii) depreciation, (iv) amortization,(v) gains or losses from early extinguishment of debt or other infrequentand unusual items, (vi) cost of sales associated with the step-up ofinventory upon acquisition, (vii) stock based compensation and all othernon-cash charges; and (B) minus Capital Expenditures, in each casedetermined in accordance with GAAP.  Notwithstanding the foregoing,Interest Income and income derived by SMI as a result of SMI repurchasing theSenior Notes at a discount shall not be included in Consolidated Cash Flow.

###  

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

 

### “(c)         Redeem, repurchase, retire or otherwiseacquire or distribute dividends in respect of the stock of any Loan Party, orredeem or repurchase the Senior Notes in an aggregate amount not to exceed (A) $35,000,000plus (B) fifty percent (50%) of the cumulative consolidated SMI netincome earned (exclusive of any income derived by SMI as a result of SMIrepurchasing the Senior Notes at a discount) after January 1, 2006through the Termination Date (the “Allowed Investment Amount”); providedthat, immediately after giving effect to any such transaction, ExcessAvailability shall not be less than $25,000,000.”

###  

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

 

### “(ii) the repurchaseor 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 Notesallowed to be repurchased pursuant to this Section 9.11(a)(ii) is inaddition 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 iscontinuing or would result therefrom, (B) immediately after giving effect to any such repurchaseor redemption, Excess Availability shall not be less than $25,000,000 and (C) anyamounts used by SMI to repurchase or redeem the Senior Notes must first beapplied towards the amounts allowed under Section 9.11 and, second to theamounts allowed pursuant to this Section 9.9(c). “

 

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ARTICLE IV

 

Conditions to Effectiveness

 

ThisAmendment, and the modifications to the Existing Credit Agreement provided forherein, shall become effective on the date (the “Third Amendment EffectiveDate”)on which all of the following conditions have been (or areconcurrently being) satisfied:

 

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

 

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

 

3.             No Default or Eventof Default shall have occurred and be continuing.

 

ARTICLE V

Miscellaneous

 

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

 

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

 

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

 

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

 

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

 

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AdministrativeAgent. This Amendment may be delivered by facsimile transmission of therelevant signature pages hereof.

 

***[Signature page follows]***

 

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**[Signature page to ThirdAmendment to Steinway Inc. and Conn-Selmer Inc.’s Third Amended and RestatedCredit 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]** |

 

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|   | **[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: |   |

 

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**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.            |   |   |   |

 

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