Document:

Exhibit
10.1

FIRST
AMENDMENT TO STOCK PURCHASE AGREEMENT

THIS
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT (“First Amendment”) is made
effective as of September 30, 2006, by and among (i) Federal Services
Acquisition Corporation, a Delaware corporation (“FSAC”); (ii) Advanced
Technology Systems, Inc., a Virginia corporation (“ATS”); (iii) Delmar
Lewis, Claude Rumsey and Harry Katrivanos as all of the shareholders of ATS
(collectively, the “Shareholders”); and (iv) Claude Rumsey in his
capacity as the Shareholders’ Representative (the “Shareholders’
Representative”).

RECITALS:

R-1.  By the terms of a Stock Purchase Agreement
dated April 19, 2006 by and among FSAC, ATS, the Shareholders and the
Shareholders’ Representative (the “Stock Purchase Agreement”), FSAC
agreed to purchase from the Shareholders and the Shareholders agreed to sell to
FSAC all of the Shareholders respective shares of ATS “Capital Stock” (as
defined in the Stock Purchase Agreement) pursuant to the terms and conditions
contained therein.

R-2.  Section 10.1(b) of the Stock Purchase
Agreement provides that either party may terminate the Stock Purchase Agreement
if the “Closing” (as defined in the Stock Purchase Agreement) has not occurred
by September 30, 2006 for any reason other than a breach of the Stock Purchase
Agreement by the terminating party.

R-3.  The undersigned wish to amend the Stock
Purchase Agreement by this First Amendment to extend from September 30, 2006 to
November 30, 2006, the date specified in Section 10.1(b) of the Stock Purchase
Agreement.

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the undersigned do hereby agree as follows:

1.  The reference to “September 30, 2006” in
Section 10.1(b) of the Stock Purchase Agreement is hereby deleted and replaced
with “November 30, 2006.”

2.  This First Amendment shall in all respects be
governed by, and construed in accordance with, the laws (excluding conflict of
laws, rules and principles) of the Commonwealth of Virginia applicable to
agreements made and to be performed entirely within the Commonwealth of
Virginia, including all matters of construction, validity and performance.

3.  Except as specifically amended by this First
Amendment, the Stock Purchase Agreement is unmodified and in full force and
effect and is hereby ratified and affirmed by the undersigned.

This
First Amendment may be executed in several counterparts, all of which taken
together shall be deemed one and constitute a single instrument.  Any manual signature upon this First
Amendment that is faxed, scanned or photocopied shall for all purposes have the
same validity, effect and admissibility in evidence as an original signature
and the parties hereby waive any objection to the contrary.

 1
 

 

IN
WITNESS WHEREOF, each of the parties hereto has caused this First Amendment to
be duly executed and delivered in its name and on its behalf, all as of the day
and year first above written.

	
  

  	
   

  	
  FEDERAL SERVICES

  
	
   

  	
   

  	
  ACQUISITION CORPORATION,

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Peter M. Schulte

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Peter M. Schulte

  
	
   

  	
   

  	
  Title:

  	
   

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ADVANCED TECHNOLOGY

  
	
   

  	
   

  	
  SYSTEMS, INC.,

  
	
   

  	
   

  	
  a Virginia corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Claude Rumsey

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Claude Rumsey

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Vice-Chairman

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SHAREHOLDERS:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Delmar Lewis

  
	
   

  	
   

  	
  Delmar Lewis

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Claude Rumsey

  
	
   

  	
   

  	
  Claude Rumsey

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Harry Katrivanos

  
	
   

  	
   

  	
  Harry Katrivanos

  

 

 2
 

 

 

	
  

  	
   

  	
  SHAREHOLDERS’ REPRESENTATIVE:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Claude Rumsey

  
	
   

  	
   

  	
  Claude Rumsey

  

 

 3EXHIBIT
10.1

EXECUTION
COPY

 

THIRD
AMENDED AND RESTATED CREDIT AGREEMENT

among

CONN- SELMER, INC.

STEINWAY, INC.

BOSTON PIANO COMPANY, INC.,

Borrowers,

Those Signatories

Party Hereto and Identified

on Schedule I (as may be amended
from time to time),

Guarantors,

The Several Lenders

from Time
to Time Parties Hereto,

and

GMAC COMMERCIAL FINANCE LLC

as
Administrative Agent

Dated as of September 29, 2006

 

 

 

 

	
  SECTION 1.

  	
  DEFINITIONS

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Defined Terms

  	
  2

  
	
  1.2

  	
  Other Definitional Provisions

  	
  21

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  [RESERVED]

  	
  21

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  AMOUNT AND TERMS OF
  REVOLVING CREDIT COMMITMENTS

  	
  21

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Revolving Credit Commitments

  	
  21

  
	
  3.2

  	
  Revolving Credit Notes

  	
  23

  
	
  3.3

  	
  Procedure for Revolving Credit Borrowing

  	
  23

  
	
  3.4

  	
  Commitment Fee

  	
  24

  
	
  3.5

  	
  Termination or Reduction of Revolving Credit
  Commitments; Early Termination Fee

  	
  24

  
	
  3.6

  	
  All Revolving Credit Loans by the Lenders to
  Constitute One Loan

  	
  24

  
	
  3.7

  	
  Repayment of Loans

  	
  24

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  LETTERS OF CREDIT

  	
  25

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Letter of Credit Facility

  	
  25

  
	
  4.2

  	
  L/C Participations

  	
  28

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  GENERAL PROVISIONS
  APPLICABLE TO LOANS

  	
  29

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Interest Rates and Payment Dates

  	
  29

  
	
  5.2

  	
  Conversion

  	
  30

  
	
  5.3

  	
  [Reserved]

  	
  30

  
	
  5.4

  	
  Mandatory Prepayments

  	
  30

  
	
  5.5

  	
  Computation of Interest and Fees

  	
  30

  
	
  5.6

  	
  Agent’s Advances; Settlement; Pro Rata Treatment and
  Payments

  	
  31

  
	
  5.7

  	
  Taxes

  	
  32

  
	
  5.8

  	
  [Reserved]

  	
  33

  
	
  5.9

  	
  Changes to Advance Rates, Standards of Eligibility
  and Reserves

  	
  35

  
	
  5.10

  	
  Increased Costs

  	
  35

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
  35

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Financial Condition

  	
  36

  
	
  6.2

  	
  No Change

  	
  36

  
	
  6.3

  	
  Existence; Compliance with Law

  	
  36

  
	
  6.4

  	
  Power; Authorization; Enforceable Obligations

  	
  37

  
	
  6.5

  	
  No Legal Bar

  	
  37

  
	
  6.6

  	
  No Material Litigation

  	
  37

  
	
  6.7

  	
  No Default

  	
  37

  

 i
 

 

 

	
  6.8

  	
  No Burdensome Restrictions

  	
  37

  
	
  6.9

  	
  Taxes

  	
  38

  
	
  6.10

  	
  Federal Regulations

  	
  38

  
	
  6.11

  	
  ERISA

  	
  38

  
	
  6.12

  	
  Investment Company Act; Other Regulations

  	
  38

  
	
  6.13

  	
  Subsidiaries

  	
  39

  
	
  6.14

  	
  Accuracy and Completeness of Information

  	
  39

  
	
  6.15

  	
  No Labor Disputes

  	
  39

  
	
  6.16

  	
  Solvency

  	
  39

  
	
  6.17

  	
  Indebtedness

  	
  39

  
	
  6.18

  	
  [Reserved]

  	
  40

  
	
  6.19

  	
  First Priority Security Interest

  	
  40

  
	
  6.20

  	
  O.S.H.A. and Environmental Compliance

  	
  40

  
	
  6.21

  	
  Accounts

  	
  41

  
	
  6.22

  	
  Documents

  	
  41

  
	
  6.23

  	
  Securities Laws

  	
  41

  
	
  6.24

  	
  Survival of Representations and Warranties

  	
  41

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  CONDITIONS PRECEDENT

  	
  41

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Conditions to Effectiveness of Agreement

  	
  41

  
	
  7.2

  	
  Conditions to Each Loan

  	
  44

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  AFFIRMATIVE COVENANTS

  	
  45

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Financial Statements

  	
  45

  
	
  8.2

  	
  Certificates; Other Information

  	
  47

  
	
  8.3

  	
  Payment of Indebtedness

  	
  49

  
	
  8.4

  	
  Conduct of Business and Maintenance of Existence and
  Assets

  	
  49

  
	
  8.5

  	
  Perfection of Security Interest/Intercreditor
  Agreements

  	
  50

  
	
  8.6

  	
  Collateral

  	
  52

  
	
  8.7

  	
  Defense of Lenders’ Interests

  	
  52

  
	
  8.8

  	
  Books and Records

  	
  52

  
	
  8.9

  	
  Financial Disclosure

  	
  53

  
	
  8.10

  	
  Compliance with Laws

  	
  53

  
	
  8.11

  	
  Inspection of Premises; Audits and Examinations

  	
  54

  
	
  8.12

  	
  Payment of Taxes

  	
  54

  
	
  8.13

  	
  Payment of Leasehold Obligations

  	
  55

  
	
  8.14

  	
  Government Receivables

  	
  55

  
	
  8.15

  	
  Guarantees/General Security Agreements

  	
  55

  
	
  8.16

  	
  Purpose of Loans

  	
  55

  
	
  8.17

  	
  Additional Notes and Refinancing Documents

  	
  55

  
	
  8.18

  	
  Environmental Laws

  	
  55

  
	
  8.19

  	
  Additional Assurances

  	
  56

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  NEGATIVE COVENANTS

  	
  56

  

 ii
 

 

 

	
  9.1

  	
  Fixed Charge Coverage

  	
  56

  
	
  9.2

  	
  Limitation on Indebtedness

  	
  56

  
	
  9.3

  	
  Limitation on Liens

  	
  57

  
	
  9.4

  	
  Limitation on Guarantee Obligations

  	
  57

  
	
  9.5

  	
  Limitation on Fundamental Changes

  	
  58

  
	
  9.6

  	
  Limitation on Leases

  	
  58

  
	
  9.7

  	
  Limitation on Dividends

  	
  58

  
	
  9.8

  	
  [Reserved]

  	
  58

  
	
  9.9

  	
  Limitation on Investments; Acquisitions

  	
  58

  
	
  9.10

  	
  Loans

  	
  59

  
	
  9.11

  	
  Limitation on Optional Payments and Modifications of
  Debt Instruments

  	
  59

  
	
  9.12

  	
  [Reserved]

  	
  60

  
	
  9.13

  	
  Limitation on Transactions with Affiliates

  	
  60

  
	
  9.14

  	
  Fiscal Year and Accounting Changes

  	
  60

  
	
  9.15

  	
  Limitation on Negative Pledge Clauses

  	
  60

  
	
  9.16

  	
  Nature or Location(s) of Business

  	
  60

  
	
  9.17

  	
  Partnership, Etc

  	
  61

  
	
  9.18

  	
  [Reserved]

  	
  61

  
	
  9.19

  	
  Pledge of Credit

  	
  61

  
	
  9.20

  	
  Amendments to Documents

  	
  61

  
	
  9.21

  	
  Limitations Applicable to SMI

  	
  61

  
	
  9.22

  	
  Governing Documents

  	
  61

  
	
  9.23

  	
  Limitation on Securities Issuances by Subsidiaries

  	
  61

  
	
  9.24

  	
  Disposition of Collateral

  	
  61

  
	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
  EVENTS OF DEFAULT

  	
  62

  
	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
  THE ADMINISTRATIVE
  AGENT

  	
  65

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Appointment

  	
  65

  
	
  11.2

  	
  Delegation of Duties

  	
  65

  
	
  11.3

  	
  Exculpatory Provisions

  	
  65

  
	
  11.4

  	
  Reliance by Administrative Agent

  	
  66

  
	
  11.5

  	
  Notice of Default

  	
  66

  
	
  11.6

  	
  Non-Reliance on Administrative Agent and Other
  Lenders

  	
  66

  
	
  11.7

  	
  Indemnification

  	
  67

  
	
  11.8

  	
  Administrative Agent in Its Individual Capacity

  	
  67

  
	
  11.9

  	
  Successor Administrative Agent

  	
  67

  
	
   

  	
   

  	
   

  
	
  SECTION 12.

  	
  MISCELLANEOUS

  	
  68

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Amendments and Waivers

  	
  68

  
	
  12.2

  	
  Term

  	
  69

  
	
  12.3

  	
  [Reserved]

  	
  69

  
	
  12.4

  	
  Application of Payments

  	
  69

  
	
  12.5

  	
  Limitation on Guarantee

  	
  70

  

 iii
 

 

 

	
  12.6

  	
  Notices

  	
  70

  
	
  12.7

  	
  No Waiver; Cumulative Remedies

  	
  71

  
	
  12.8

  	
  Payment of Expenses and Taxes

  	
  71

  
	
  12.9

  	
  Additional Indemnity

  	
  73

  
	
  12.10

  	
  Successors and Assigns; Participations and
  Assignments

  	
  73

  
	
  12.11

  	
  Adjustments; Set-off

  	
  75

  
	
  12.12

  	
  Counterparts

  	
  76

  
	
  12.13

  	
  Severability

  	
  76

  
	
  12.14

  	
  Amendment and Restatement; Integration

  	
  76

  
	
  12.15

  	
  GOVERNING LAW

  	
  77

  
	
  12.16

  	
  Submission To Jurisdiction; Waivers

  	
  77

  
	
  12.17

  	
  Acknowledgements

  	
  77

  
	
  12.18

  	
  WAIVERS OF JURY TRIAL

  	
  78

  
	
  12.19

  	
  Confidentiality

  	
  78

  

 

 iv

 

THIRD
AMENDED AND RESTATED CREDIT AGREEMENT

THIRD
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of September 29, 2006,
among (i) CONN-SELMER, INC., f/k/a THE SELMER COMPANY, INC., a Delaware
corporation, and the surviving corporation of the merger of United Musical
Instruments USA, Inc., United Musical Instruments Holdings, Inc. and The SMI
Trust with and into Conn-Selmer, Inc. (“Conn-Selmer”), (ii) STEINWAY,
INC., a Delaware corporation (“Steinway”), (iii) BOSTON PIANO COMPANY,
INC., a Massachusetts corporation (“Boston Piano Co.”, and together with
Conn-Selmer and Steinway, the “Borrowers”), (iv) those signatories
hereto and identified on Schedule I (as may be amended from time to time) as “Guarantors”
(the “Guarantors”), (v) the lenders from time to time parties to this Agreement
(the “Lenders”), and (vi) GMAC COMMERCIAL FINANCE LLC (successor by
merger to GMAC Commercial Credit, LLC), a Delaware limited liability company,
as administrative agent for the Lenders hereunder (in such capacity, the “Administrative
Agent”).

BACKGROUND

This
Agreement is based on the following background facts which are incorporated
into and made a part of this Agreement:

A.            Conn-Selmer, Steinway, Boston Piano Co., Steinway Musical
Instruments, Inc. (“SMI”), The Steinway Piano Company, Inc. (“SPC”),
S&B Retail, Inc. (“S&B Retail”), The O.S. Kelly Company (“O.S.
Kelly”), the Administrative Agent and the Lender’s Party thereto, are
parties to the Second Amended and Restated Credit Agreement, dated as of
September 14, 2000 (as amended, supplemented or otherwise modified from time to
time, the “Existing Credit Agreement”) and related documents and
agreements (collectively, with the Existing Credit Agreement, the “Existing
Loan Documents”).

B.            As part of the Existing Credit Agreement, the Lenders
made available to Borrowers a term loan under the Existing Credit Agreement in
the principal amount of $22,500,000 (the “Term Loan”).

C.            Borrowers have requested certain amendments to the
Existing Credit Agreement, including among other things, increasing the maximum
amount of Revolving Credit Loans (as defined below) that may be outstanding at
any one time hereunder to $110,000,000, with a Revolving Credit Loan, to be
made upon execution of this Agreement, with a portion of the proceeds to be used
to repay the Term Loan in full.

D.            Lenders have agreed to make such amendments, subject to
amending and restating the Existing Credit Agreement as set forth in this
Agreement

NOW, THEREFORE, the
parties hereto hereby agree that the Existing Credit Agreement shall be amended
and restated in its entirety as provided above and as follows:

DEFINITIONS

Defined Terms.

As used in this
Agreement, the following terms shall have the following meanings:

“Account”:  all of the accounts, contract rights,
instruments, documents, chattel paper, general intangibles relating to
accounts, drafts and acceptances, and all other forms of obligations owing to
the Loan Parties, arising out of or in connection with the sale or lease of
Inventory or the rendition of services, all guarantees and other security
therefor, whether secured or unsecured, 

 2
 

 

now existing or hereafter
created, and whether or not specifically sold or assigned to the Administrative
Agent on behalf of the Lenders hereunder.

“Accountants”:  as set forth in Section 8.1(a) hereof.

“Additional Notes”:  unsecured or subordinated secured notes (and
if such notes are subordinated secured notes, subject to an Intercreditor
Agreement, in form and substance reasonably acceptable to the Administrative
Agent) issued by a Loan Party for the purpose of financing Permitted
Acquisitions in an aggregate principal amount not to exceed $25,000,000 and any
guarantees of such Additional Notes by any of the Loan Parties, any Refinancing
of the same and any subsequent refinancing thereof that complies with the terms
hereof, provided that (i) such Refinancing is on such customary terms and
conditions as are then available in the market for issuers of similar credit
profile and (ii) the amount of such Refinancing is in a principal amount not to
exceed (1) the principal amount of indebtedness so Refinanced plus (2) unpaid
accrued interest on such indebtedness being Refinanced plus (3) premiums,
penalties, fees and expenses actually incurred by such Loan Party or the
guarantors in connection with the repayment and refinancing thereof.  Such Additional Notes shall be issued
pursuant to separate documentation on customary terms and conditions.  For the avoidance of doubt, the issuance of
any Additional Notes shall not decrease the amount of any Senior Notes that may
be issued by SMI.

“Administrative Agent”:  as set forth in the preamble of this
Agreement.

“Affiliate”:  of any specified Person means any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, “control” (including, with correlative meanings, the terms “controlled
by” and “under common control with”), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities or by agreement or
otherwise.

“Agent’s
Advance”:  the making or deemed
making by the Administrative Agent of any advance to the Borrowers in connection with the borrowing of a Revolving
Credit Loan (including, without limitation, Deemed Borrowings).

“Aggregate Maximum
Revolving Credit Commitment Amount”: 
$110,000,000; subject to reduction by the Borrowers in accordance with Section
3.5 hereof.

“Agreement”:  this Credit Agreement, as amended,
supplemented or otherwise-modified from time to time.

“Alternate Base Rate”:  for any day, a rate per annum equal to the
higher of: (a) the Prime Rate in effect on such day; or (b) the Federal Funds
Effective Rate in effect on such day plus one-half of one percent (0.5%).

“Alternate Base Rate
Loans”:  Loans the rate of interest
with respect to which is based upon the Alternate Base Rate.

“Alternate Settlement Date”:  as
defined in Section 5.6(c).

“Applicable Margin”: for any Revolving Credit Loan of any Type, the applicable
interest rates per annum (prior to an Event of Default) are set forth below
based on the applicable Average Excess Availability:

	
   

  	
   

  	
  Level I

  	
   

  	
  Level II

  	
   

  	
  Level III

  
	
  Average Excess Availability

  	
   

  	
  >$50,000,000

  	
   

  	
  >$25,000,000 <$50,000,000

  	
   

  	
  <$25,000,000

  
	
  Alternate Base Rate Margin

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  0.25%

  
	
  LIBOR Rate Margin

  	
   

  	
  1.25%

  	
   

  	
  1.50%

  	
   

  	
  1.75%

  

 

“Application”:  an application, in such form as the Issuing
Lender may specify from time to time, requesting the Issuing Lender to issue a Letter
of Credit.

 3
 

 

“Assignee”:  as defined in Section 12.11(c).

“Assignment and
Acceptance”: as defined in Section 12.10(c).

“Available RC
Commitment”:  as to any Lender at any
time, an amount equal to the excess, if any, of (a) the amount of such Lender’s
Revolving Credit Commitment at such time less (b) the Outstanding RC Extensions
of Credit by such Lender at such time.

“Average Excess
Availability” as to the Borrowers, for any calendar quarter, the average
Excess Availability for such calendar quarter.

“Basic Documents”:  the collective reference to the Loan
Documents and the Other Documents.

“Borrowers’’:  as defined in the heading to this Agreement;
each Borrower is referred to individually as a “Borrower”.

“Borrowing Base
Certificate”:  with respect to each
Borrower a certificate, substantially in the form of Exhibit B-1, with
appropriate insertions, reporting the status of such Borrower’s Eligible
Inventory and Eligible Accounts as of the date set forth therein, and executed
on behalf of such Borrower by a duly authorized officer thereof.

“Borrowing Date”:  any Business Day specified in a notice
pursuant to Sections 2.3 or 3.3 as a date on which the Borrower requests the
Lenders to make Loans hereunder.

“Boston Piano Co.”:  as set forth in the preamble to this
Agreement.

“Boston Pianos”:  pianos designed by Steinway, manufactured by
an OEM and marketed under the Boston piano line.

“Business Day”:  a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by
law to close, and, if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, or
an Interest Period for, a LIBOR Loan or a notice by a Borrower with respect to
any such borrowing, payment, prepayment, Interest Period, which is also a day
on which dealings in Dollar deposits are carried out in the London interbank
market.

“Capital Expenditure”:  for any period, each expenditure made or
committed to be made by a Loan
Party during such period which, in conformity with GAAP, is included in “additions
to property, plant and equipment” or comparable items reflected in the
consolidated statement of cash flows of SMI and its consolidated Subsidiaries,
excluding expenditures made or committed to be made in respect of Concert and
Artist Bank Pianos.

“Capital Stock”:  any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a corporation,
any and all similar ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.

“Cash Management
Agreement”:  the Cash Management and
Distribution Agreement dated as of March 30, 1999 by and among 111 West 57th
Street Associates, L.P., Steinway, GMAC Commercial Credit, LLC and The
Prudential Insurance Company of America.

“CERCLA”:  the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601 et seq.

“Change in Control”:  any time that (i) a Borrower fails to be a
wholly-owned Subsidiary of a Loan Party, (ii) any Person or “group” (within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended) shall have acquired after the Closing Date the voting power to elect a
majority of the Board of Directors of a Loan Party; or (iii) any event or
condition that would constitute a “Change of Control” as defined in the Senior
Notes Indenture.

“Closing Date”:  the date on which the conditions precedent
set forth in Section 7.1 shall be satisfied.

“Code”:  the Internal Revenue Code of 1986, as amended
from time to time.

“Collateral”:  all property and interests in property of the
Loan Parties, now owned or hereinafter acquired, upon which a Lien is purported
to be created by any Security Document, 

 4
 

 

notwithstanding the
foregoing, Steinway Hall shall not constitute Collateral even though it is
subject to the Steinway Hall Mortgage and the Steinway Hall ALR.

“Commercial Letter of
Credit”: a commercial letter of credit issued in respect of the purchase of
goods or services by the Borrowers in the ordinary course of business.

“Commitments”:  the collective reference to the Revolving
Credit Commitments.

“Concert and Artist
Bank Pianos”:  all pianos held by
Steinway, or a Steinway dealer, which are available for rental by performers.

“Conn-Selmer”:  as set forth in the preamble hereto.

“Conn-Selmer Dealer
Notes”:  notes made by Conn-Selmer
dealers in favor of Conn-Selmer,
that evidence indebtedness owing by such dealers to Conn-Selmer for extensions
of credit made by Conn-Selmer to dealers to acquire Conn-Selmer’s musical
instruments.

“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 shall not be included in Consolidated Cash Flow.

“Contractual
Obligation”:  as to any Person, any
provision of any security issued by such
Person or of any agreement, instrument or other undertaking to which such
Person is a party or by which it or any of its property is bound.

“Convert”, “Conversion”
and “Converted”:  a conversion of
Alternate Base Rate Loans into LIBOR Loans or of LIBOR Loans into Alternate
Base Rate Loans.

“Credit Exposure”:  as to any Lender at any time, its Revolving
Credit Commitment (or, if the Revolving Credit Commitments shall have expired
or been terminated, the sum of (i) the aggregate unpaid principal amount of its
Revolving Credit Loans and (ii) its Revolving Credit Commitment Percentage of
the aggregate outstanding L/C Obligations).

“Credit Exposure
Percentage”:  as to any Lender at any
time, the fraction (expressed as a percentage), the numerator of which is the
Credit Exposure of such Lender at such time and the denominator of which is the aggregate Credit
Exposures of all of the Lenders at such time.

“Current Wholesale
Value”:  for any piano at any time,
the wholesale price of such piano as published in good faith by SMI or its
Subsidiaries at such time, or if such price is not so published, the wholesale
price of such piano as reasonably determined by the Administrative Agent.

“Customer”:  the account debtor with respect to any
Account and/or the prospective purchaser of goods, services or both or with
respect to any contract or other arrangement with a Loan Party pursuant to
which such Loan Party is to deliver any personal property or perform any
services in the ordinary course of business.

“Dealer Note Purchase
Party”:  any entity that purchases
any of the Dealer Notes from Conn-Selmer or Steinway pursuant to a Dealer Note
Purchase Agreement, and its successors assigns or any replacement party for
such entity pursuant to Section 6.17 of this Agreement.

“Dealer Note Purchase
Agreement”:  any note purchase and
repurchase agreements, or similar agreements entered into between a Dealer Note
Purchase Party and Conn-Selmer or Steinway, in form and substance acceptable to
the Administrative Agent (which consent shall not be unreasonably withheld),
which provide for principal Indebtedness in an amount not to exceed $15,000,000,
in the aggregate.

 5
 

 

“Dealer
Notes”: the collective reference to the Conn-Selmer Dealer Notes and the
Steinway Dealer Notes.

“Deemed
Borrowing”:  a Revolving Credit Loan
deemed to have been requested by a Borrower in connection with the charging of an Obligation (including, without
limitation, interest, principal, fees or other amounts owed by the Borrowers
hereunder) to an account of the Borrowers by the Administrative Agent pursuant
to Section 3.7 hereof.

“Default”:  any of the events specified in Section 10,
whether or not any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.

“Documents”  as defined in Section 4.1(c)(v) of this
Agreement.

“Dollars” and “$”:  dollars in lawful currency of the United
States of America.

“Eligible Accounts”:  all Accounts of a Loan Party, arising in the
ordinary course of its business, evidencing the sale of goods and services by
such Loan Party and which the Administrative Agent, in its sole discretion exercised
in good faith, shall deem to be an Eligible Account, based upon such
considerations as the Administrative Agent may from time to time deem
appropriate. Without in any way limiting the foregoing, (i) in general, unless
otherwise determined by the Administrative Agent as aforesaid, an Account shall
not constitute an Eligible Account unless it is subject to a perfected, first
priority Lien in favor of the Administrative Agent for the ratable benefit of
the Lenders, is free and clear of all Liens other than Permitted Encumbrances
and is evidenced by an invoice or other document satisfactory to the
Administrative Agent, and (ii) no Account
of a Customer shall be an Eligible Account if:

(a)                                  such
Account arises out of a sale made by a Loan Party to an Affiliate of such Loan
Party or to a Person controlled by an Affiliate of such Loan Party or such
Customer is such Loan Party’s creditor or supplier;

(b)                                 more
than sixty (60) days have elapsed from the due date of such Account;

(c)                                  more
than three hundred and five (305) days have elapsed from the invoice date of
such Account;

(d)                                 fifty
percent (50%) or more of the aggregate account balance of Accounts due from
such Customer is more than sixty (60) days past due;

(e)                                  any
covenant, representation or warranty contained in this Agreement with respect
to such Account has been breached in a material manner;

(f)                                    the
Administrative Agent is not and continues not to be satisfied with the credit
standing of such Customer, or the Administrative Agent otherwise believes, in its
sole judgment exercised in good faith, that collection of such Account is
insecure or that such Account may not be paid by reason of such Customer’s
financial inability to pay (and in the absence of an Event of Default which is
continuing, at the related Loan Party’s request therefor, the Administrative
Agent agrees to make a good faith effort to advise such Loan Party of the
reasons for its making any such judgment);

(g)                                 such
Customer has asserted any dispute, offset or counterclaim against the related
Loan Party, such Account or any other Account due from such Customer to such
Loan Party, or such Account is or could reasonably be expected to become
subject to any offset, deduction, defense, dispute, or 

 6
 

 

counterclaim, or
is contingent in any respect or for any reason, but only to the extent of the
amount in dispute;

(h)                                 such
Customer resides outside the continental United States, Alaska, Hawaii, the
U.S. Virgin Islands and/or Puerto Rico, unless the sale is covered by a letter
of credit or credit insurance in form and substance acceptable to the
Administrative Agent in its sole discretion exercised in good faith, or unless
such Account (in U.S. Dollars) is due from an entity located in Canada or a
territory of the United States;

(i)                                     the
sale to such Customer is on a bill-and-hold, guaranteed sale, sale-and-return,
sale on approval, consignment or any other repurchase or return basis or is
evidenced by chattel paper;

(j)                                     such
Customer is the United States of America, any state or any department, agency or instrumentality of any of them, unless the related Loan Party
assigns its right to payment of such Account to the Administrative Agent for
the ratable benefit of the Lenders pursuant to the Federal Assignment of Claims
Act of 1940, as amended, or has otherwise complied with all other applicable
statutes or ordinances;

(k)                                  any
of the following events occur or conditions exist with respect to the goods
giving rise to such Account: (i) if such goods have not been shipped to such Customer, or (ii) if so shipped, have
subsequently not been delivered to such Customer, or (iii) if so delivered,
have not been accepted by such Customer, or (iv) if such Account otherwise does
not represent a final sale, or (v) such goods have been repossessed;

(l)                                     the
amount of all Accounts of such Customer exceeds any credit limit determined by
the Administrative Agent, in its sole discretion exercised in good faith, to
the extent that the amount of such Account exceeds such limit;

(m)                               such
Customer has commenced or has had commenced against it a case under any
federal, state or other bankruptcy or insolvency laws, as now constituted or
hereafter amended, or made an assignment for the benefit of creditors, or if a
decree or order for relief has been entered by a court having jurisdiction in
the premises in respect of such Customer in an involuntary case under any state
or federal bankruptcy laws, as now constituted or hereafter amended, or if any other petition or other
application for relief under any state or federal bankruptcy law has been filed
against such Customer, or if such Customer has failed, suspended business,
ceased to be solvent, called a meeting of its creditors (in order to discuss
financial insolvency or lack of liquidity), or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or for all or
a significant portion of its assets or affairs;

(n)                                 the
related Loan Party has made any agreement with such Customer for any deduction
therefrom, except for discounts or allowances made in the 

 7
 

 

ordinary course of
business for prompt payment, all of which discounts or allowances shall be
reflected in the calculation of the face value of each respective invoice
related thereto; or

(o)                                 such Account is not payable to the related
Loan Party;

notwithstanding the
foregoing, Eligible Accounts may include in addition to any Account of any
Borrower constituting an Eligible Account hereunder, Dealer Notes pledged to
the Administrative Agent, satisfactory to the Administrative Agent in its sole
discretion, and otherwise qualifying as Eligible Accounts hereunder having an
aggregate outstanding principal amount at any time of up to $20,000,000, that
mature up to two years from the execution thereof.  Notwithstanding anything to the contrary
herein, the Steinway Dealer Notes shall not constitute Eligible Accounts until
such time that such notes are deemed Eligible Accounts by the Administrative
Agent, in its sole reasonable discretion. 
The Administrative Agent shall require that the Steinway Dealer Notes,
among other things, be subject to a field examination and audit (and such
examination and audit be reasonably acceptable to the Required Lenders) in
order to determine whether such notes shall be considered Eligible Accounts.

“Eligible Inventory”:  all Inventory of a Loan Party consisting of
(i) Boston Pianos, Essex Pianos, Steinway Pianos, Factory Returns, Concert and
Artist Bank Pianos, Near-Finished Pianos, raw materials of Steinway, (ii) raw
materials, work-in-process and finished goods of Conn-Selmer in each case which
is in good and saleable condition and which is not, in the Administrative Agent’s
opinion, obsolete, damaged, slow moving or unmerchantable, located at such Loan
Party’s places of business or at the Collateral locations described on Schedule
4.5 (except when in transit to or from such locations) and which the
Administrative Agent, in its sole discretion, exercised in good faith, shall
deem Eligible Inventory, based upon such considerations as the Administrative
Agent may from time to time deem appropriate. In general, unless otherwise
determined by the Administrative Agent as referenced above, Inventory shall not
constitute Eligible Inventory unless it is subject to a perfected, first
priority Lien in favor of the Administrative Agent for the ratable benefit of
the Lenders, is free and clear of all Liens other than Permitted Encumbrances
and conforms to all standards imposed by any governmental agency, division or
department thereof which has regulatory authority over such goods or the use or
sale thereof.

“Eligible Person”:  (i) any commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $250,000,000, (ii) a commercial bank organized under
the laws of any other country that is a member of the Organization for Economic
Cooperation and Development (the “OECD”), or a political subdivision of any
such country, and having a combined capital and surplus in a dollar equivalent
amount of at least $250,000,000; provided  however, that such bank
is acting through a branch or agency located in the United States; (iii) an
insurance company, mutual fund or bank fund which is regularly engaged in the
making, purchasing or investing in loans or securities, or other financial
institution organized under the laws of the United States, any state thereof,
any other country that is a member of the OECD or a political subdivision of
any such country with assets, or assets under management, in a dollar
equivalent amount of at least $250,000,000; and (iv) any affiliate of any
Lender.

“Environmental Law”:  any federal, state or local law, statute,
ordinance or code now in effect or hereafter enacted, governing or regulating
in any way the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous
Waste, and the rules, 

 8
 

 

regulations, policies,
guidelines, interpretations, decisions, orders and directives of federal, state
and local governmental agencies and authorities with respect thereto.

“Equipment”:  all of the equipment, machinery and goods
(excluding Inventory) of the Loan Parties, wherever located whether now owned
or hereafter acquired, including, without limitation, all apparatus, motor
vehicles, fittings, furniture, furnishings, fixtures, pans, accessories and all
replacements and substitutions therefor or accessions thereto.

“ERISA”:  the Employee Retirement Income Security Act
of 1974, as amended from time to time.

“ERISA Affiliate”:  each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which any Borrower is a member and which, together with
any Borrower, is treated as a single-employer under ERISA 4001(b)(1) or IRC
Section 414.

“Essex Pianos”  pianos designed by Steinway, manufactured by
an OEM and marketed under the Essex piano line all of which are finished goods
or Factory Returns.

“Event of Default”:  any of
the events specified in Section 10; provided that any requirement
for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied.

“Excess Availability”:  at any time, the amount equal to the Revolver
Borrowing Base minus the amount of the aggregate of all Outstanding RC
Extensions of Credit.

“Existing Credit Agreement”:  as set forth in the recitals to this
Agreement.

“Factory Returns”:  pianos bearing the Steinway, Steinway &
Sons, Essex or Boston name brands that have been returned to Steinway or Boston
Piano Co. and are in near-new, good and merchantable condition.

“Federal Funds
Effective Rate”:  for any day, the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day (or if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by it.

“Fee Letter”:  the Fee Letter, dated September 29, 2006 between the Loan Parties and the
Administrative Agent.

“Financing Lease”:  any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.

“Fixed Charges”:  for any period, with respect to SMI and its
Subsidiaries on a consolidated basis, an amount equal to the sum of (i)
Interest Expenses for such period, plus (ii) taxes paid by any of them
during such period, plus (iii) all regularly scheduled payments of
principal on any Indebtedness of the Loan Parties existing on or after the
Closing Date, excluding, to the extent that the Senior Notes or Additional
Notes are redeemed or repurchased pursuant to Section 9.2(f) of 9.2(g), all
payments of principal on the Senior Notes and any Financing Leases, payable by
any of them during such period.

“Fixed Charge Coverage
Ratio”:  for any period, with respect
to SMI and its Subsidiaries on a consolidated basis, the ratio of Consolidated
Cash Flow for such period to Fixed Charges for such period.

“Funds Transfer
Agreements”:  those certain
agreements, dated as of September 29, 2006, among the Borrowers and the Lender
pertaining to the transfer of funds for the Borrowers’ account, substantially
in the form attached hereto as Exhibits C-1, and C-2, as amended
supplemented or otherwise modified from time to time.

 9
 

 

“GAAP”:  generally accepted accounting principles in
the United States of America in effect from time to time.

“GMAC/CF”:  GMAC Commercial Finance LLC, a Delaware
limited liability company.

“Goods” as defined
in Section 4.1(c)(v) of this Agreement.

“Governing Documents”:  as to any Person, its articles or certificate
of incorporation and by-laws, its partnership agreement, its certificate of
formation and operating agreement, and/or the other organizational or governing
documents of such Person.

“Governmental Authority”:  any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.

“Guarantee”:  the Third Amended and Restated Guarantee to
be executed and delivered by the Loan Parties other than the Borrowers,
substantially in the form of Exhibit D, as the same may be amended,
supplemented or otherwise modified from time to time.

“Guarantee Obligation”:  as to any Person (the “guaranteeing person”),
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity
or similar obligation, in either case guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends or other obligations (the “primary
obligations”) of any other third Person (the “primary obligor”) in
any manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the
purchase or payment of any such primary obligation or (2) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
tangible net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation
shall not include (i) guarantees by any Loan Party of an obligation of another
Loan Party or (ii) endorsements of instruments for deposit or collection in the
ordinary course of business. The terms “Guarantee” and “Guaranteed”
used as a verb shall have a correlative meaning. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person’s maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.

“Guarantor”:  any Person delivering a Guarantee pursuant to
this Agreement.

“Hazardous Waste”:  any toxic or hazardous substances, materials,
emissions or waste including, without limitation, any PCB, radioactive
substance, methane, volatile hydrocarbons, industrial solvents or any other
materials, substance or waste identified as toxic or hazardous under any
Environmental Law now in effect or hereafter enacted.

“Indebtedness”:  of any person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any 

 10
 

 

other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such Person under Financing Leases, (d) all
obligations of such Person in respect of letters of credit, acceptances or
similar instruments issued or created for the account of such Person and (e)
all liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the payment
thereof.

“Insolvency”:  with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.

“Insolvent”:  pertaining to a condition of Insolvency.

“Intercompany
Indebtedness”:  Indebtedness of any
Loan Party to any other Loan Party at any time, and any Refinancing of the same
and any subsequent refinancing thereof between the Loan Parties.

“Intercreditor
Agreements”:  any intercreditor
agreements which the Administrative Agent may at any time and from time to time
require, with any Person(s) who has (have) or who the Administrative Agent, in
its sole discretion exercised in good faith, believes may have or assert any
Claims, or who may impede or interfere with, or be in a position to impede or
interfere with, any of the Administrative Agent’s or the Lenders’ rights or
remedies under or in connection with this Agreement and/or any of the Loan
Documents, or the Administrative Agent’s ability to deal with the Collateral in
the manner permitted under this Agreement.

“Interest Expenses”:  for the relevant period(s) of time, any and
all interest expenses and finance charges which SMI and its Subsidiaries, on a
consolidated basis has, in accordance with GAAP, paid in cash or cash
equivalents or is obligated to pay in cash or cash equivalents during any
future period, including without limitation any such amounts under this
Agreement, and less Interest Income and service charge income; provided,
that as to this last category the Administrative Agent in its sole discretion
exercised in good faith is satisfied with the accounting treatment afforded to
such interest income and service charge income thereof and that such treatment
is consistent with SMI’s prior practices.

“Interest Income”:  for the relevant period(s) of time, any
interest income as recognized by a Loan Party in accordance with GAAP.

“Interest Payment Date”:  the last Business Day of each month or such
LIBOR Maturity Date.

“Inventory”:  all now owned or hereafter acquired goods,
merchandise and other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease, all raw materials,
work in process, finished goods and materials and supplies of any and every
kind, nature or description which are or might be used or consumed in a Loan
Party’s business or used in selling or furnishing such goods, merchandise and
other personal property, and all documents of title or other documents
representing them, used or which might be used in connection with the
manufacture, packing, shipping, advertising, selling, leasing or furnishing of
such goods or otherwise used or consumed in a Loan Party’s business.

“Investments”:
with respect to any Person (a) any purchase or other acquisition by that Person
of (i) Capital Stock issued by, or (ii) a beneficial interest in any Capital
Stock issued by, any other Person (b) any purchase by that Person, outside the
ordinary course of business, of any of the assets of a business conducted by
another Person and (c) any loan or advance, outside the ordinary course of
business, or capital contribution by that Person to any other Person, including
all Indebtedness of any other Person to that Person arising from a sale of property
by that Person other than in the ordinary course of business and (d) any
Guarantee Obligation incurred by that Person in respect of Indebtedness of any
other Person.

“Issuing Bank”:  any bank issuing a Letter of Credit in accordance with Section
4.

 11
 

 

“Issuing Lender”:  GMAC/CF or any successor thereto and any
other Lender approved by the Required Lenders who agree to issue one or more
Letters of Credit.

“ITT”:  Deutsche Financial Services, as successor to
ITT Commercial Finance, Inc., a Delaware corporation.

“ITT Guarantees”:  guarantees in favor of ITT by Steinway on
behalf of certain dealers to permit such dealers to obtain inventory floor
financing from ITT.

“Lenders”:  as defined in the heading hereto, which shall
include in any event the Issuing Lender.

“L/C Obligations”:  at any time, an amount equal to the sum of
(a) the aggregate then undrawn amount of the then outstanding Letters of Credit
and (b) the aggregate amount of drawings under Letters of Credit which have not
then been reimbursed.

“L/C Participants”:  the collective reference to all the Lenders
other than the bank issuing the Letter of Credit.

“Letter of Credit”:
as defined in Section 4.1(a) of this Agreement.

“Letters of Credit
Documents”:  the collective reference
to each Letter of Credit and any other agreements, instruments, guarantees or
other documents (whether general in application or applicable only to such
Letter of Credit) governing or providing for (a) the rights and obligations of
the parties concerned or at risk with respect to such Letter of Credit or (b)
any collateral security for any such obligations, as each may be modified and
supplemented and in effect from time to time.

“Letter of Credit
Facility”:  at any time, the
obligation of the Lender to join in applications for a Letter of Credit and/or
guarantee payment or performance thereunder in an aggregate principal amount at
any one time outstanding not to exceed $10,000,000, as such obligation may be
reduced from time to time in accordance with the provisions of this Agreement.

“Letter of Credit
Liability”:  in respect of any Letter
of Credit at any time, the sum, without duplication at any time, of (a) the
undrawn face amount of such Letter of Credit at such time, plus (b) the
aggregate unpaid principal amount of all obligations of the Borrowers at such
time due and payable in respect of all drawings made under such Letter of
Credit.

“LIBOR
Interest Period” is defined as
a 30, 60 or 90 day period.

“LIBOR Loan
Tranches” a particular portion of the
LIBOR Loans for a particular LIBOR Interest Period.

“LIBOR Loans” that portion of the Revolving Loans on which interest
accrues at the LIBOR Rate.

“LIBOR
Maturity Date” the end of the LIBOR Interest Period or such alternative
Business Day as determined in accordance with Section 5.6(b)

“LIBOR Rate” means an annual rate of interest determined by the
Administrative Agent as being the rate available at approximately 11:00 a.m.
London time in the London Interbank Market, as referenced by Reuters Screen “LIBOR”,
in accordance with the usual practice in such market, for a particular LIBOR
Interest Period in effect two Business Days prior to the first day of a
particular LIBOR Interest Period.  LIBOR
Loans (including those requested in connection with the conversion of a
Alternate Base Rate Loan to a LIBOR Loan or in accordance with Section  5.2), or for a LIBOR Loan which Borrower has
elected to continue as a LIBOR Based Loan beyond the expiration of the
then-current LIBOR Interest Period with respect thereto, for deposits of
dollars in amounts equal (as nearly as may be estimated) to the amount of the
LIBOR Based Loan which shall then be loaned by the Lenders to Borrowers as of
the time of such determination, as such rate may be adjusted by the reserve
percentage applicable during the LIBOR Interest Period in effect (or if more
than one such percentage shall be applicable, the daily average of such
percentages for those days in such LIBOR Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to time
by the 

 12
 

 

Board of Governors of the
Federal Reserve System (or an successor) for determining the maximum reserve
requirement (including without limitation, any emergency, supplemental or other
marginal reserve requirement) for a national bank with respect to liabilities
or assets consisting of or including “Eurocurrency Liabilities” as such term is
defined in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time, having a term equal to such LIBOR Interest
Period (“Eurocurrency Reserve Requirement”), as reasonably applied to
loans of this type.  Such adjustment
shall be effectuated by calculating, and the LIBOR Rate shall be equal to, the
quotient of (i) the offered rate divided by (ii) one minus the Eurocurrency
Reserve Requirement.

“Lien”:  any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), charge or other security interest or any preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement and any Financing Lease having substantially the same economic effect
as any of the foregoing), and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction in respect of any
of the foregoing.

“Loan”:  the Revolving Credit Loans, together with any
loan made by any Lender to any Borrower pursuant to this Agreement, including
any Agent’s Advances.

“Loan Documents”:  this Agreement, the Notes, the Guarantee and
the Security Documents.

“Loan
Parties”:  the Borrowers, the Parent and each
Subsidiary of the Borrowers which is a party to a Loan Document.

“Material Adverse
Effect”:  (a) a material adverse
effect on the business, operations, results in operations, assets, liabilities,
property, condition (financial or otherwise) of SMI and its Subsidiaries taken
as a whole on a consolidated basis, including, without limitation, a material
adverse change in the business, operations, results of operations, assets, or
liabilities since December 31, 2005, (b) a material impairment of Loan Parties’
ability to perform their obligations under the Loan Documents, or (c) a material
adverse effect on the validity or enforceability of this or any of the other
Loan Documents or the rights or remedies of the Administrative Agent or the
Lenders hereunder or thereunder, in each case except as disclosed in writing after December 31, 2005 in
(i) any publicly available document filed by SMI or any of its Subsidiaries
with the Securities Exchange Commission on or before the Closing Date, or (ii)
any notice given by Borrowers under the Existing Credit Agreement, or (iii) the
Schedules to this Agreement on the Closing Date

“Multiemployer Plan”:  a Plan which is a multiemployer plan as
defined in Sections 3 (37) or 4001(a)(3) of ERISA or IRC Section 414(f) which
covers employees of Borrowers or any ERISA Affiliate.

“Non-Guarantor
Subsidiaries”:  Vincent Bach,
Steinway & Sons and its subsidiaries, and Boston Piano GmbH and its
Subsidiaries, and any other Subsidiary of Conn-Selmer or Steinway that is not
required to become a Guarantor pursuant to Section 8.15 hereof.

“Non-Excluded Taxes”:  as defined in Section 5.7(a).

“Notes”:  the Revolving Credit Notes.

“NYCIDA”: the New
York City Industrial Development Agency.

“Obligations”:  the unpaid principal amount of, and interest
(including, without limitation, interest accruing after the maturity of the
Loans and interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to the Borrowers, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) on the Loans, and all other obligations
and liabilities of the Loan Parties to the Administrative Agent and the
Lenders, whether direct or indirect, 

 13
 

 

absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, or out of or in connection with this Agreement, the Notes, the
Guarantees, the Security Documents and any other Loan Documents and any other
document made, delivered or given in connection therewith or herewith, whether
on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders that are
required to be paid by a Loan Party pursuant to the terms of the Loan
Documents) or otherwise.

“OEM”: an original
equipment manufacturer.

“Other Documents”:  the collective reference to the Accountant
Access Letters executed by the Borrowers and their accountants substantially in
the form of Exhibit A attached hereto, the Tradestyle/Division Agreements, the
Funds Transfer Agreement, the Senior Notes Documents, and any and all other
agreements, instruments and documents, including, without limitation, powers of
attorney, consents, and all other writings heretofore, now or hereafter
executed by any Loan Party and delivered to the Lender in respect of the
transactions contemplated by this Agreement.

“Outstanding RC
Extensions of Credit”:  as to any
Lender at any time, an amount equal to the sum of (i) the aggregate principal
amount of all Revolving Credit Loans made by such Lender then outstanding
(including any Agent’s Advances) and (ii) such Lender’s Revolving Credit
Commitment Percentage of the L/C Obligations then outstanding.

“O.S. Kelly”:  The O.S. Kelly Company, Inc., an Ohio
corporation.

“Overadvance”  if at any time and for any reason, the
aggregate Outstanding RC Extensions of Credit exceed the Revolver Borrowing
Base.

“Parent”:  any of the Parents.

“Parents”:  the collective reference to SMI and SPC.

“Participant”:  as defined in Section 12.10(b).

“PBGC”:  the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.

“Permitted
Acquisitions”:  any Proposed
Acquisition (a) subject to each of the following conditions:

(i)          the Administrative Agent shall receive at least thirty (30)
days prior written notice of such Proposed Acquisition, which notice shall
include, without limitation, a reasonably detailed description of such Proposed
Acquisition;

(ii)         such Proposed Acquisition shall comprise
a business, or those assets of a business, of the type engaged in by SMI and
its subsidiaries as of the Closing Date;

(iii)        the
sum of all amounts payable in connection with each consummated Proposed
Acquisition shall not exceed $15,000,000, and the sum of all amounts payable
(including without limitation or duplication, any Additional Notes executed in
connection therewith) in connection with all Proposed Acquisitions under this
subsection (a) which have been consummated, from and after the date of this
Agreement shall not exceed (x) $50,000,000 in the aggregate less (y) the
amount of all Investments made pursuant to Section 9.9(b)(y) of this Agreement;

 14
 

 

(iv)       at
or prior to the closing of any Proposed Acquisition, the applicable Loan Party
and the Proposed Acquisition
Target shall have executed such documents and taken such actions as may be
required under Section 8.15;

(v)        on
or prior to the date of such Proposed Acquisition, the Administrative Agent
shall have received copies of the Acquisition Agreement, related agreements and
instruments and all opinions and certificates;

(vi)       at
the time of such Proposed
Acquisition and after giving effect thereto (A) no Default of Event of Default
shall have occurred and be continuing; and (B) all conditions precedent set
forth in Section 7.2 shall have been met; and

(vii)      the
Excess Availability (after giving effect to such Proposed Transaction) shall
not be less than $25,000,000; or

(b)           approved in advance by the
Administrative Agent with the consent of the Required Lenders.

“Permitted Encumbrances”: 
the following only:

Liens (other
than any Lien imposed under ERISA or any Environmental Laws) for taxes,
assessments or governmental charges or levies not yet delinquent, or thereafter
payable without penalty or interest not in excess of $500,000 in the aggregate,
if being contested in good faith and by appropriate proceedings promptly
initiated and diligently conducted, if such reserve or other appropriate
provision, if any, as shall be required by GAAP, shall have been made therefor
and enforcement thereof is stayed;

Liens (other
than any Lien imposed under ERISA) of carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of business for sums not yet due or
being contested in good faith and by appropriate proceedings promptly initiated
and diligently conducted, if such reserve or other appropriate provision, if
any, as shall be required by GAAP shall have been made therefor and enforcement
thereof is stayed;

Liens (other
than any Lien imposed under ERISA) incurred or deposits made in the ordinary
course of business (including without limitation surety bonds and appeal
bonds), in connection with workers’ compensation, unemployment insurance and
other types of social security benefits, or to secure the performance of
tenders, bids, leases, contracts, statutory obligations, surety and appeal
bonds, performance and return-of-money bonds and similar obligations (exclusive
of Indebtedness for money borrowed) or arising as a result of progress payments
under government contracts;

Subject to all
of the pertinent limitations contained in this Agreement, Liens first arising
subsequent to the Closing Date of this Agreement, on assets existing at the
time of a Loan Party’s acquisition of such assets, to secure the payment of all
or any part of the purchase price of such assets, provided that any such Lien
does not extend to any other asset;

Easements
(including without limitation reciprocal easement agreements and utility
agreements), rights of way, covenants, consents, reservations, encroachments,
variations and other similar restrictions, charges and encumbrances (whether or
not recorded), building restrictions, zoning laws and other statutes, laws,
rules, regulations, ordinances and restrictions and other similar encumbrances
incurred in the ordinary course of business, which do not secure 

 15
 

 

Indebtedness or the deferred purchase price
of any asset and which do not interfere with the ordinary conduct of the
business of any of the Loan Parties or any of their Subsidiaries and which do
not materially detract, in the Administrative Agent’s sole discretion exercised
in good faith, from the value of the property to which they attach or
materially impair the utility or use thereof by a Loan Party or its
Subsidiaries;

Liens on file
in the Uniform Commercial Code records to the limited extent and to those
Persons specifically listed on Schedule 1.1 hereto, each of which are to
be limited to securing only obligations of a Loan Party to the pertinent lienholder
outstanding as of the Closing Date, in an amount in each instance not to exceed
the dollar limitation also set forth on said Schedule;

Liens in favor
of the Administrative Agent for the ratable benefit of the Lenders;

The rights of
any Dealer Note Purchase Party with respect to any accounts financed by it
pursuant to any Dealer Note Purchase Agreement; and

the right,
title and interest of NYCIDA to the property located at 19th and Steinway Place pursuant to (i) the
Guaranty Agreement, dated as of June 1, 1999 from Steinway to the NYCIDA, (ii)
the PILOT Escrow Agreement, dated as of June 1, 1999, by and among Steinway,
the NYCIDA and the United States Trust Company and (iii) the Lease Agreement,
dated as of June 1, 1999 between Steinway and the NYCIDA.

Nothing contained in this
definition, in this Agreement or elsewhere, however, shall or shall be deemed,
however, to recognize or establish any Lien priority or any other right or
entitlement of any Person claiming or entitled to a Permitted Encumbrance
hereunder. Wherever it appears, the term “Permitted Encumbrances” shall only
signify that the existence thereof does not breach this Agreement.
Notwithstanding any such permitted item(s), the Administrative Agent for the
ratable benefit of the Lenders shall therefore at all times have a first and
paramount Lien in all Collateral.

“Person”:  an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity of whatever nature.

“Plan”:  any employee benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA, Section 412
of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if each plan were terminated would under Section
4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.

“Pledge Agreement”:  the Third Amended and Restated Pledge
Agreement to be executed and delivered by the Loan Parties, substantially in
the form of Exhibit E, as the same may be amended, supplemented or otherwise
modified from time to time.

“Prime Rate”:   means the variable rate of interest, per
annum, which is quoted from time to time in The Wall Street Journal
as the base “prime rate” on corporate loans posted as of such time by at least
75% of the nation’s 30 largest banks, adjusted daily.  The Prime Rate is nothing more nor less than
an index for determining the interest rate payable under the terms of this
Agreement.  The Prime Rate is not
necessarily the rate, or any other definitions of rates, offered by Lenders.

“Proposed Acquisition”:  the proposed acquisition by any Loan Party of
a portion of, all, or substantially all of the assets or a portion of, all, or
substantially all of the stock of any Proposed Acquisition Target, or the
merger of any Proposed Acquisition Target with or into any Loan 

 16
 

 

Party with the Loan Party
being the surviving corporation or such surviving corporation becoming a Loan
Party.

“Proposed Acquisition
Target”:  any Person, other than a
Loan Party, the proposed assets to be acquired or any operating division
thereof subject to a Proposed Acquisition.

“Qualified Appraiser”:  a generally-recognized appraisal company
selected by the Borrowers which is unaffiliated with the parties hereto and
acceptable to the Administrative Agent in its sole discretion.

“RCRA”:  the Resource Conservation and Recovery Act of
1976, 42 U.S.C. Section 6901 et. seq., as same may be amended from time to
time.

“Real Estate”: with respect to each Loan Party, each parcel of real property and
all rights in real property, whether owned or leased by such Loan Party,
including without limitation, Steinway Hall.

“Refinance”:
means, in respect of any indebtedness, to refinance, extend, renew, defease,
redeem, amend, modify, supplement, restructure, replace, refund, prepay or
repay, or to issue other indebtedness, in exchange or replacement for, such
indebtedness in whole or in part.  “Refinanced”
and “Refinancing” shall have correlative meanings.

“Register”:  as defined in Section 12.10(d).

“Regulation U:  Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.

“Reimbursement
Obligation”:  the obligation of the
Borrowers to reimburse amounts paid by the Administrative Agent in respect of
the Letter of Credit, including without limitation all amounts due or which may
become due under the Letters of Credit, guarantees or any drafts or acceptances
thereunder, all amounts charged or chargeable to the Borrowers or to the
Administrative Agent by any bank, other financial institution or correspondent
bank which opens, issues or is involved with such Letter of Credit; any other
bank charges, fees and commissions, duties and taxes, costs of insurance; all
such other charges and expenses which may pertain either directly or indirectly
to such Letter of Credit, drafts, acceptances, guarantees or to the goods or
documents relating thereto, and the Administrative Agent’s charges as herein
provided.

“Reportable Event”:  any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty day notice
period is waived that could reasonably be expected to have a Material Adverse
Effect.

“Required Lenders”:  (i) at any time there are three (3) or fewer
Lenders, all of the Lenders, and (ii) at any time there are four (4) or more
Lenders, three (3) or more Lenders holding in aggregate at least 66-2/3% Credit
Exposure Percentage.

“Requirement of Law”:  as to any Person, the Governing Documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person
or any of its property is subject.

“Reserves”:  shall mean reserves for Collateral chargeable
to a Borrower’s account, as determined by the Administrative Agent in its sole
judgment exercised in good faith, representing the ability of the Administrative
Agent to effectively lower the advance rate for Loans under Section 5.9 in the
sole discretion of the Administrative Agent exercised in good faith.

“Responsible Officer”:  the Chief Executive Officer, President or
Executive Vice President of a Loan Party or additionally, with respect to
financial maters the Chief Financial Officer or Controller.

 17
 

 

“Revolver
Borrowing Base”:  at any time, an amount equal to the lesser of
(I) Aggregate Maximum Revolving Credit Commitment Amount and (II) the sum of:

up to eighty percent (80%) of the
then Eligible Accounts of Conn-Selmer, Boston Piano Co. and Steinway, other
than Accounts constituting Dealer Notes;

up to 50% of the then Eligible Accounts of Conn-Selmer and Steinway,
constituting Dealer Notes;

up to the sum of (A) in the case of Steinway grand pianos, the sum of
(1) eighty-five percent (85%) of the Current Wholesale Value of all finished
and near-finished pianos, (2) seventy-five percent (75%) of the Current
Wholesale Value of Concert and Artist Bank Pianos, and (3) seventy percent
(70%) of the Current Wholesale Value of all Factory Returns; (B) in the case of
Steinway upright pianos, the sum of (1) sixty-five percent (65%) of the Current
Wholesale Value of all finished and near-finished pianos, and (2) fifty percent
(50%) of the Current Wholesale Value of all Factory Returns; (C) in the case of
Boston and Essex grand pianos, the sum of (1) sixty-five percent (65%) of the
Standard Cost Value of all finished pianos, and (2) fifty percent (50%) of the
Standard Cost Value of all Factory Returns; and (D) in the case of Boston and
Essex upright pianos, the sum of (1) fifty percent (50%) of Standard Cost Value
of all finished pianos, and (2) forty percent (40%) of the Standard Cost Value
of all Factory Returns;

up to fifty percent (50%) of the cost of the Eligible Inventory of
Steinway constituting raw materials;

up to sixty-five percent (65%) of the cost of Eligible Inventory of
Conn-Selmer constituting finished goods;

up to twenty-five percent (25%) of the cost of Eligible Inventory of
Conn-Selmer constituting raw materials; and

up to the lesser of $7,500,000 and twenty-five percent (25%) of the
cost of Eligible Inventory of Conn-Selmer constituting work-in-process.

In each instance less
such Reserves as the Administrative Agent may reasonably deem proper and
necessary in accordance with Section 5.9. The Revolver Borrowing Base in effect
at any time shall be the Revolver Borrowing Base as shown on the Borrowing Base
Certificate and the reconciliation reports delivered by the Borrower pursuant
to Section 8.2(a) of this Agreement; provided, however, that (i) if a
Borrower shall fail to deliver a Borrowing Base Certificate when required
pursuant to Section 8.2(a), the amounts calculated with respect to the Eligible
Inventory of such Borrower shall be zero until such Borrowing Base Certificate
is delivered.

“Revolving Credit
Commitment”:  as to any Lender, the
obligation of such Lender to make Revolving Credit Loans to the Borrowers
pursuant to Section 3.1 and/or to issue or participate in Letters of Credit
issued on behalf of the Borrowers hereunder in an aggregate principal amount at
any one time outstanding not to exceed the amount set forth opposite such
Lender’s name on Schedule 2.1 under the caption “Revolving Credit Commitment”
or in an Assignment and 

 18
 

 

Acceptance, as such
amount may be reduced from time to time in accordance with the provisions of
this Agreement.

“Revolving Credit
Commitment Percentage”:  as to any
Lender at any time, the percentage which such Lender’s Revolving Credit
Commitment then constitutes of the aggregate Revolving Credit Commitments (or,
at any time after the Revolving Credit Commitment shall have expired or
terminated, the percentage which the aggregate principal amount of such Lender’s
Revolving Credit Loans then outstanding constitutes of the aggregate principal
amount of the Revolving Credit Loans then outstanding).

“Revolving Credit
Commitment Period”:  the period from
and including the date hereof to
but not including the Termination Date or such earlier date on which the
Revolving Credit Commitments shall terminate as provided herein.

“Revolving
Credit Loans”:  as defined in Section
3.1(a); for greater certainty, such term includes any Agent’s Advances made
pursuant to Section 5.6(a).

“Revolving Credit Note”:  as defined in Section 3.2.

“Security Agreement”:  the Third Amended and Restated General
Security Agreement to be executed and delivered by the Loan Parties,
substantially in the form of Exhibit H, as the same may be amended, supplemented
or otherwise modified from time to time.

“Security Documents”:  the collective reference to the Steinway Hall
Mortgage, the Steinway Hall ALR, the Pledge Agreement, the Security Agreement,
the Cash Management Agreement, any other mortgage, pledge agreement, security
agreement or other security document executed and delivered by a Subsidiary of
SMI which becomes a Loan Party pursuant to Section 8.15 of this Agreement, and
all other security documents hereafter delivered to the Administrative Agent
granting a Lien on any asset or assets of any Person to secure any of the
Obligations or to secure any
guarantee of any such Obligations.

“Senior Notes”:  those certain unsecured senior notes issued
by SMI in the aggregate principal face amount of  $175,000,000 pursuant to the Senior Notes
Indenture, and any guarantees of the Senior Notes and any Refinancing of the
same with senior notes or subordinated notes that are issued by SMI, and any
subsequent Refinancings thereof that comply with the terms hereof, provided
that (i) such Refinancing is on such customary terms and conditions as are then
available in the market for issuers of similar credit profile, (ii) the amount
of such Refinancing is in a principal amount not to exceed (A) $306,000,000
plus (B) unpaid accrued interest on such indebtedness being Refinanced plus (C)
premiums, penalties, fees and expenses actually incurred by SMI or the
guarantors in connection with the Refinancing thereof, and (iii) such
Refinanced notes shall have a final stated maturity, that is no earlier than
the date that is twelve (12) months after the Termination Date of this
Agreement.

“Senior Notes
Documents”:  the collective reference
to the Senior Notes and the Senior Notes Indenture.

“Senior Notes Holders”:  the holders of the Senior Notes.

“Senior Notes
Indenture”:  that certain Indenture,
dated as of February 23, 2006, among the Senior Notes Parties and the Senior
Notes Trustee, as amended, supplemented or otherwise modified from time to
time, including any Indenture executed in connection with a Refinancing of the
Senior Notes issued thereunder.

“Senior Notes Parties”  SMI, Conn-Selmer, SPC, Steinway, S&B
Retail, Boston Piano Co. and O.S. Kelly.

“Senior Notes Trustee”:
The Bank of New York Trust Company, N.A., as Trustee for the Senior Note
Holders pursuant to the Senior Indenture, and any successors or assigns of such
Trustee.

“Settlement
Date”:  with respect to (i) each
Agent’s Advance, (ii) each repayment (including any prepayment) of any Revolving Credit Loan, and (iii) each payment
by the Borrowers to the 

 19
 

 

Administrative
Agent for the account of the Lenders of interest on the Loans, commitment fees
or other amounts due the Lenders hereunder, the first Friday occurring after
the date of such Agent’s Advance, repayment or payment (or, if such Friday
shall not be a Business Day, then the Business Day next succeeding such Friday)
and any Alternate Settlement Date.

“SMI”:  as set forth in the heading hereto.

“SPC” as set forth
in the heading hereto.

“Standby Letter of
Credit”: a standby letter of credit issued to support obligations of any or
all of the Loan Parties, contingent or otherwise, in respect of insurance
obligations, to workman’s compensation board or similar Governmental Authority
for workman’s compensation liabilities of a Loan Parties, and for such other
purposes as may be approved by the Administrative Agent (such consent not to be
unreasonably withheld).

“Standard Cost Value”:  shall mean, the standard invoice cost paid by
SPC or its Subsidiaries to an OEM for a Boston Piano and/or an Essex Piano,
excluding (a) inventory revaluation, if any, and (b) freight and delivery
charges.

“Steinway”:  shall have the meaning set forth in the
heading hereto.

“Steinway & Sons”:  Steinway and Sons, a New York corporation.

“Steinway Dealer Loans”
Loans made by Steinway to Steinway dealers for start-up costs or for other
purposes (other than those of the type evidenced by the Steinway Dealer Notes)
in an aggregate amount not to exceed $5,000,000 in the aggregate for all
Steinway dealers

“Steinway Dealer Notes”:
notes made by Steinway dealers in favor of Steinway, that evidence the
indebtedness owing by such dealer to Steinway, for extensions of credit made by
Steinway to dealers in an amount not to exceed $10,000,000 in the aggregate for
all such Steinway dealers, to acquire Steinway’s pianos and other musical
instruments.

“Steinway Hall”:  any and all buildings, structures, fixtures,
additions, enlargements, extensions, modifications, repairs, replacements and
improvements now or hereafter located on the real property encumbered by the
Steinway Hall Mortgage or any part thereof.

“Steinway Hall ALR”:  the Assignment of Leases and Rents, dated as
of April 1, 1999, from Steinway to GMAC/CF.

“Steinway Hall
Mortgage”:  the Mortgage, Leasehold
Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of
April 1, 1999 from Steinway to GMAC/CF, as amended by that certain First
Amendment to Mortgage, Leasehold Mortgage, Assignment of Leases and Rents and
Security Agreement dated September 14, 2000.

“Steinway Pianos”:  all finished and near-finished Steinway
pianos, which term shall exclude Factory Returns, Concert and Artist Bank
Pianos, Boston Pianos and Essex Pianos.

“Subsidiary”:  as to any Person, a corporation, partnership
or other entity of which shares of stock or other ownership interests having ordinary voting power (other
than stock or such other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity
are at the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by such
Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries”
in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrowers.

“Term Loan”:  as defined in the recitals to this Agreement.

“Termination Date”:  as defined in Section 12.2.

“Tradestyle/Division
Agreements”:  those certain letter
agreement(s) between each of Steinway and Conn-Selmer, and the Administrative
Agent, pertaining to the utilization of divisions and/or tradestyles in the
operation of the business of the Loan Parties, substantially in the form of

 20
 

 

Exhibits G-1
and G-2, to this Agreement, as amended, supplemented or otherwise
modified from time to time.

“Transferee”:  as defined in Section 12.10(f).

“Trigger
Event”: the occurrence of any of the following (i) Excess Availability is
less than $20,000,000 or (ii) an Event of Default.

“Trustee”:  the Senior Notes Trustee.

“Type”:  as to any Loan, its nature as a Alternate
Base Rate Loan or a LIBOR Loan.

““Vincent Bach” shall mean Vincent Bach International, Ltd., an English
corporation.

Other Definitional Provisions.

Unless
otherwise specified therein, all terms defined in this Agreement shall have the
defined meanings when used in any Notes or any certificate or other document
made or delivered pursuant hereto.

As used herein
and in any Notes, and any certificate or other document made or delivered
pursuant hereto, accounting terms relating to each Borrower and its
Subsidiaries not defined in Section 1.1 and accounting terms partly defined in
Section 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP.

The words “hereof”,
“herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section, Schedule and Exhibit references are
to this Agreement unless otherwise specified.

All terms used
herein and defined in the Uniform Commercial Code as adopted in the State of
New York shall have the meaning given therein unless otherwise defined herein.

The meanings given to terms
defined herein shall be equally applicable to both the singular and plural
forms of such terms.

[RESERVED].

AMOUNT
AND TERMS OF REVOLVING CREDIT COMMITMENTS

Revolving Credit Commitments.

Subject to the terms and conditions hereof, each Lender severally
agrees to make revolving credit loans (“Revolving Credit Loans”) to the
Borrowers from time to time during the Revolving Credit Commitment Period in an
aggregate principal amount at any one time outstanding as to all Borrowers,
together with such Lender’s Revolving Credit Commitment Percentage of any L/C
Obligations then outstanding, not to exceed the lesser of (A) the amount of
such Lender’s Revolving Credit Commitment then in effect and (B) such Lender’s
Revolving Credit Commitment Percentage of the Revolver Borrowing Base then in
effect. During the Revolving Credit Commitment Period the Borrowers may use the
Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans
in whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof.

 21
 

 

The Borrowers have the
option to elect the LIBOR Rate or the Alternate Base Rate for all or a portion
of the Loans.

If Borrowers
elect any portion of the Loans to bear interest at the LIBOR Rate (each a LIBOR
Loan Tranche), each such Loan shall not be in a principal amount less than
$1,000,000.  Borrowers shall not have
more than five (5) LIBOR Loan Tranches outstanding at any time.

Borrowers
shall indemnify, defend and hold harmless Administrative Agents and the Lenders
against any and all loss, liability, cost or expense which Administrative Agent
or Lenders may sustain or incur as a consequence of any payment, prepayment,
termination or conversion of a LIBOR Loan made for any reason on a date other
than the last day of the applicable LIBOR Interest Period and Borrowers shall
pay the full amount thereof to Administrative Agent or Lender, as applicable,
on demand.  Such statement shall set
forth a brief explanation of the amount and the Administrative Agent’s or
Lender’s, as applicable,  calculation of
the amount (in determining such amount such party may use any reasonable
averaging and attribution methods), which statement shall be conclusively
deemed correct absent manifest error.

The Borrowers
may, at any time, request the Lenders to provide additional Revolving Credit
Commitments in an aggregate amount of up to $25,000,000 (the “Facility
Increase”); provided, however, that (i) the Borrowers shall have given the
Administrative Agent at least 60 days prior written notice of its intention to
effect a Facility Increase and the desired amount of such Facility Increase,
(ii) the conditions precedent to a Loan set forth in Section 7.2 are satisfied as of the Facility Increase Effective Date
and (iii) an opinion of counsel to the Loan Parties in form and substance and
from counsel reasonably satisfactory to the Administrative Agent and addressed
to the Administrative Agent, the Issuers and the Lenders and addressing such
matters as any Lender through the Administrative Agent may reasonably request
shall be delivered to the Administrative Agent. 
The Borrowers shall have the right to offer such increase to the
Lenders, and each Lender will have the right, but not the obligation, to commit
to all or a portion of the proposed Facility Increase and such Lender executes
an amendment to this Agreement pursuant to which such Lender agrees to commit
to all or a portion of such Facility Increase. 
In the event the existing Lenders do not subscribe to the full amount of
the requested Facility Increase, the Borrowers and the Administrative Agent
shall have the right to cause the unsubscribed portion to be assigned to a new
Lender identified by the Borrowers or the Administrative Agent, provided that
(A) such new Lender is acceptable to each of the Borrowers and the
Administrative Agreement, and (B) such new Lender complies in all respects with
Section 12.10(c) of the this Agreement. 
On the effective date provided for in the amendment providing for a
Facility Increase (the “Facility Increase Effective Date”), the
Revolving Credit Commitments shall be increased by the amount committed to by
each Lender on the Facility Increase Date. 
In the event there are Lenders that have committed to a Facility
Increase in excess of the maximum amount requested (or permitted), then the
Administrative Agent shall have the right to allocate such commitments, on
whatever basis the Administrative Agent determines is appropriate in
consultation with the Borrowers.  Only
one Facility Increase may be effected pursuant to this clause (e).

 22
 

 

Revolving
Credit Notes.

The Revolving Credit
Loans made by each Lender shall be evidenced by a promissory note of the
Borrowers, substantially in the form of Exhibit J with appropriate insertions
as to payee, date and principal amount (a “Revolving Credit Note”),
payable to the order of such Lender and evidencing the obligation of the
Borrowers to pay a principal amount equal to the lesser of (a) the amount of
the Revolving Credit Commitment of such Lender and (b) the aggregate unpaid
principal amount of all Revolving Credit Loans made by such Lender. Each Lender
is hereby authorized to record the date, Type and amount of each Revolving
Credit Loan made or Converted by such Lender, the date and amount of each
payment or prepayment of principal thereof, and, in the case of LIBOR Loans,
the Interest Period with respect thereto, on the schedule annexed to and
constituting a part of its Revolving Credit Note, and any such recordation
shall constitute prima facie evidence of the accuracy of the information so
recorded. Each Revolving Credit Note shall (x) be dated the Closing Date, (y)
be stated to mature on the Revolving Credit Termination Date and (z) bear
interest on the unpaid principal amount thereof from time to time outstanding
at the applicable interest rate per annum determined as provided in Section
5.1. Interest on each Revolving Credit Note shall be payable on the dates
specified in Section 5.1(e).

Procedure for Revolving Credit Borrowing.

The Borrowers may borrow under the Revolving Credit Commitments during
the Revolving Credit Commitment Period on any Business Day in an aggregate
principal amount not exceeding the lesser of (A) the aggregate Available RC
Commitments then in effect and (B) the Revolver Borrowing Base then in effect
minus the aggregate Outstanding RC Extensions of Credit; provided, that the
Borrowers shall give the Administrative Agent irrevocable notice (which notice
must be received by the Administrative Agent prior to 1:00 P.M., New York City
time, (i) on the requested Borrowing Date, in the case of Alternate Base Rate
Loans, or (ii) three (3) Business Days prior to the requested Borrowing Date,
in the case of LIBOR Rate Loans specifying (A) the amount to be borrowed, and (B) the date of such
proposed Borrowing, (C) what portion of the proposed Borrowing will consist of
Alternate Base Rate Loans and what portion of the proposed Borrowing will
consist of LIBOR Loans and (D) the Interest Period, if applicable.  Upon receipt of any such notice from the
Borrowers, the Administrative Agent may elect, in the Administrative Agent’s
discretion, (i) to have the terms of Section 3.3(b) apply to such requested
Borrowing or (ii) make an Agent’s Advance under Section 5.6(a) in the amount of
the requested Borrowing on behalf of the Lenders.

In the event Agent elects to have the terms of this Section 3.3(b)
apply to a requested Borrowing, then promptly after receipt of any Borrowing
notice made pursuant to Section 3.3(a) above, the Agent will promptly notify
the Lenders.  Each Lender will make the
amount of its pro rata share of such borrowing available to the Administrative
Agent for the account of the Borrowers at the office of the Administrative
Agent specified in Section 12.6 prior to 2:00 P.M, New York City time, on the
Borrowing Date requested by the Borrowers in funds immediately available to the
Administrative Agent.

In either case, such borrowing will then be made available to the
Borrowers on the day so requested by way of credit to the Borrowers’ operating
account at such bank as the Borrowers may designate following a notice to the
Administrative Agent in immediately available funds.  Deemed Borrowings shall be made available to
the Borrowers by disbursement of the proceeds thereof to the obligees of the
Obligations giving rise to such borrowings.

 23
 

 

Commitment Fee.

Borrowers agree to pay to
the Administrative Agent for the account of the Lenders a commitment fee for
the period from and including the first day of the Revolving Credit Commitment Period
to the Termination Date, computed at the rate of 1/4 of 1% (0.25%) per annum on
the average daily amount of the Aggregate Maximum Revolving Credit Commitment
Amount less (i) the outstanding principal amount of the Revolving Credit
Loans and (ii) the outstanding principal amount of the L/C Obligations, during
the period for which payment is made, payable on the last Business Day of each
month in arrears and on the Termination Date or such earlier date as the
Revolving Credit Commitments shall terminate as provided herein, commencing on
the first of such dates to occur after the date hereof.

Termination or Reduction of Revolving Credit Commitments; Early Termination
Fee.

(a)           The Borrowers shall have the right,
upon not less than five Business Days’ notice to the Administrative Agent, to
terminate or reduce the Aggregate Maximum Revolving Credit Commitment Amount
provided, that no such termination or reduction shall be permitted if, after
giving effect thereto and to any prepayments of the Revolving Credit Loans made
on the effective date thereof, the aggregate Outstanding RC Extensions of
Credit would exceed the Revolving Credit Commitments then in effect. Any such
reduction shall be in an amount equal to $100,000 or a whole multiple thereof
and shall reduce permanently the Revolving Credit Commitments then in effect.
Any reductions of the Aggregate Maximum Revolving Credit Commitment Amount by
the Borrowers pursuant to this Section 3.5 shall be without penalty or charge.

(b)           Notwithstanding anything to the
contrary in Section 3.5(a) above, if Borrowers voluntarily terminate this
Agreement in accordance with Section 12.2 prior to the first anniversary of the
Closing Date, Borrowers must pay an early termination fee in an amount equal to
$1,100,000 (the product of 1% and the Aggregate Maximum Revolving Credit
Commitment Amount existing on the date of this Agreement) (the “Early
Termination Fee”).  The Early
Termination Fee is presumed to be a reasonable estimate of the amount of
damages sustained by the Lenders as a result of the early termination of this
Agreement and the Loan Parties agree that such amount is reasonable under the
circumstances currently existing.  The
Early Termination Fee shall be part of the Obligations and shall be secured by
the Collateral.

All Revolving Credit Loans by the Lenders to Constitute One Loan.

All Revolving Credit
Loans to the Borrowers under this Agreement shall constitute a single, joint
and several obligation of the Borrowers secured by the Administrative Agent’s
Lien for the ratable benefit of the Lenders in all the Collateral granted under
the Security Documents and by all other Liens heretofore, now or at any time or
times hereafter granted by the Loan Parties to the Administrative Agent for the
ratable benefit of the Lenders.

Repayment of
Loans.

The Administrative Agent may charge to a
Borrower’s account any and all Obligations. Unless otherwise specified, all
Obligations, including all Revolving Credit Loans under Section 3.1 of this
Agreement and any debit balance(s) in the applicable Borrowers’ Account, shall
be payable on the effective termination date of this Agreement. Recourse to
Collateral will not be required at any time. All credit balances or other sums
at any time outstanding to the Borrowers’ credit and all Reserves on the
Administrative Agent’s books, and all of the Loan Parties’ property in the
Administrative Agent’s possession at any time or in the 

 24
 

 

possession of any parent, Affiliate or Subsidiary of the Administrative
Agent, or in which the Administrative Agent or any of them have a Lien or
security interest, may be held and reserved by Administrative Agent as security
for all Obligations.

Each of the
Borrowers recognize that the amounts evidenced by checks, notes, drafts or any
other items of payment relating to and/or proceeds of Collateral may not be
collectible by the Lender on the date received. The Administrative Agent shall
conditionally credit the applicable Borrowers’ Account on the Administrative
Agent’s books at such time as the Administrative Agent receives such payment;
provided that such items of payment have been collected in good funds and
finally credited to the Administrative Agent account. The Administrative Agent
shall not, however, be required to credit the Borrowers’ Account for the amount
of any item of payment which is unsatisfactory to the Administrative Agent and
the Administrative Agent may charge the Borrowers’ Account for the amount of
any item of payment which is returned to the Administrative Agent unpaid. The
parties hereto hereby agree that the Borrowers will not be charged for any
collection days with respect to such amounts received.

LETTERS OF CREDIT

Letter of Credit Facility.

Subject to the
terms and conditions hereof, and in the Administrative Agent’s sole and
absolute discretion, the Administrative Agent, upon the request of a Borrower,
may from time to time apply for, join
in the application for, or guarantee payment or performance of, one or more
letters of credit (each, a “Letter of Credit”) and any drafts or
acceptances thereunder; provided, however, without in any way
limiting the discretion of the Administrative Agent, that in no event shall (i)
the aggregate amount of the Letter of Credit Liabilities exceed $10,000,000
(ii) the aggregate amount of the Letter of Credit Liabilities, plus the
aggregate principal amount of the Revolving Credit Loans then outstanding
exceed at any time the lesser of the Aggregate Maximum Revolving Credit
Commitment Amount and the Revolver Borrowing Base as in effect at such time,
(iii) the face amount of any Letter of Credit be less than $50,000, or (iv) the
expiration date of any Letter of Credit extend beyond the earlier of (x) the
fifth Business Day preceding the Termination Date and (y) the date 364 days
from the date of issuance following the date of such issuance, unless the
Administrative Agent has approved such expiry date in writing (but never beyond
the fifth Business Day prior to the Termination Date), provided, however,
that each Letter of Credit may be automatically extendible for periods of up to
one year (but never beyond the fifth Business Day preceding the Termination
Date) so long as such Letter of Credit provides that the Lenders retain an
option satisfactory to the Lenders to refuse to extend such Letter of Credit
prior to such automatic extension.

Each Letter of
Credit shall be denominated in Dollars and shall be either (A) a Standby Letter
of Credit or (B) a Commercial Letter of Credit.

The following additional
provisions shall apply to each Letter of Credit:

(i)          The amount and extent
of each Letter of Credit and the terms and conditions thereof and of any drafts
or acceptances thereunder, shall in all respects be determined solely by or
with the consent of the Administrative Agent (which consent shall not be
unreasonably withheld) and shall be subject to 

 25
 

 

change, modification and revision by the Administrative Agent, at any
time and from time to time.

(ii)         Each Borrower hereby
jointly, severally and unconditionally agrees to pay and reimburse the
Administrative Agent on demand for the amount of each payment made by the
Administrative Agent to the Issuing Bank or otherwise constituting a
Reimbursement Obligation, together with interest thereon at the LIBOR Rate from
the date payment was made to the date on which payment is demanded by the
Administrative Agent. Any such payment due from the Borrowers and not paid on
the required date shall bear interest at rates specified in Section 5.1(d). The
Administrative Agent is hereby authorized, but shall not be obligated, to make
any such payment to itself on behalf of the Borrowers in whole or in part by
making a Revolving Credit Loan or by otherwise charging the account of a
Borrower.

(iii)        The requesting
Borrower shall pay to the Administrative Agent for the benefit of the Lenders,
with respect to each Letter of Credit issued for the account of such Borrower,
letter of credit commissions in an amount equal to the product of
(i) the Applicable Margin for Revolving Credit Loans that are LIBOR
Rate Loans and (ii) the maximum available from time to time to be drawn under
such Letter of Credit, payable on the last Business Day of each month in
arrears and on the Termination Date or such earlier date as the Revolving
Credit Commitments shall terminate as provided herein.

(iv)        All Reimbursement
Obligations shall be repaid to the Administrative Agent for the benefit of the
Lenders solely in Dollars.

(v)         In addition to any
indemnification hereunder each Borrower jointly, severally and unconditionally
agrees to indemnify the Administrative Agent and each Lender and hold the
Administrative Agent and each Lender harmless from and against any and all
loss, claim or liability arising from any transactions, occurrences, errors or
omissions relating to any Letter of Credit; the goods acquired thereunder (the “Goods”);
the documents evidencing the Goods (the “Documents”); any discrepant or
nonconforming provisions thereof; steamship or airway guaranties, releases,
indemnities or delivery orders or similar documents; any drafts or acceptances;
and all Reimbursement Obligations hereunder, including, but not limited to, any
such loss, claim or liability due to any action, errors or omissions
attributable to the issuer, the Administrative Agent or any Lender, any other
entity, or any other cause, each Borrower’s unconditional obligation to the
Administrative Agent and each Lender hereunder shall not be modified or
diminished for any reason or in any manner whatsoever. Each Borrower agrees
that any charges made by the Administrative Agent and each Lender for such
Borrower’s account shall be conclusive on the Administrative Agent and each
Lender and may be repaid by the creation by the Administrative Agent of a
Revolving Credit Loan otherwise charged to such Borrower’s account.

(vi)        The Administrative Agent shall
not be responsible for: the existence, character, quality, quantity, condition,
packing, value or delivery of the goods purporting to be represented by any
Documents; any difference or variation 

 26
 

 

in the character, quality, quantity, condition, packing, value or
delivery of the goods from that expressed in the Documents; the validity,
sufficiency, or genuineness of any Documents or of any endorsements thereon,
even if such Documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; any discrepant or nonconforming provisions
in any Documents; the time, place, manner or order in which shipment is made;
partial or incomplete shipment, or failure or omission to ship any or all of
the goods referred to in any Letter of Credit or Documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else in
connection with the Goods or the shipping thereof; or any breach of contract
between the shipper or vendors and such Borrower. Furthermore, without being
limited by the foregoing, the Administrative
Agent shall not be responsible for any act or omission taken or made in good
faith with respect to or in connection with any of the Goods or the Documents.

(vii)       Each Borrower agrees
that any action taken by the Administrative Agent, or any action taken by the
issuer if taken in good faith, under or in connection with any Letter of
Credit, the guarantees, the drafts or acceptances, or the Goods or the
Documents, shall be binding on the Borrowers and shall not put the
Administrative Agent in any resulting liability to the Borrowers. In
furtherance thereof, the Administrative Agent shall have the full right and
authority to take any of the following actions in the name of the
Administrative Agent or any Borrower (and such Borrower agrees that it shall
not have the right to take any such action without the Administrative Agent’s
express endorsement in writing): to clear and resolve any questions of
non-compliance of Documents; to give any instructions as to acceptance or
rejection of any Documents or Goods; to execute any and all applications for
steamship or airways guarantees, releases, indemnities or delivery orders or
similar documents; to grant any extensions of the maturity of, time of payment for,
or time of presentation of, any drafts, acceptances, or documents; and to agree
to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances, all in the Administrative Agent’s
sole name; and the issuer shall be entitled to comply with and honor any and
all such documents or instructions executed by or received solely from the
Administrative Agent, all without any notice to or any consent from the
Borrowers.

(viii)      Each Borrower agrees
that any necessary import, export or other licenses or certificates for the
import or handling of the Goods will have been promptly procured; all foreign
and domestic governmental laws and regulations in regard to the shipment and
importation of the Goods, or the financing thereof will have been promptly and
fully compiled with; and any certificates in that regard that the
Administrative Agent may at any time request will be promptly furnished. In
this connection, each Borrower warrants and represents that all shipments made
under any such Letter of Credit will be in accordance with the governmental
laws and regulations of the countries in which the shipments originate and
terminate, and are not prohibited by any such laws and regulations. Each
Borrower assumes all risk and liability for, and agrees to pay and discharge,
all present and future 

 27
 

 

local, state, federal or foreign taxes, duties or levies. Any embargo,
restriction, laws, customs or regulations of any country, state, city or other
political subdivision, where the Goods are or may be located, or wherein
payments are to be made, or wherein drafts may be drawn, negotiated, accepted,
or paid, shall be solely such Borrower’s risk, liability and responsibility.

(ix)         Any rights, remedies,
duties or obligations granted or undertaken by each Borrower to the issuer in
any application for any Letter of Credit, or any standing agreement relating to
any Letter of Credit or otherwise, shall be deemed to have been granted to the
Administrative Agent and apply in all respects to the Administrative Agent and
shall be in addition to any rights, remedies, duties or obligations contained herein.

(x)          The obligations of each
Borrower under this Agreement and any Letter of Credit Document to reimburse
the Administrative Agent or any L/C Participant for a payment made by the
Administrative Agent or an L/C Participant to the issuer of a Letter of Credit or otherwise constituting a
Reimbursement Obligation, and to repay any Revolving Credit Loan made in
respect thereof, shall be unconditional and irrevocable, and shall be paid strictly in accordance
with the terms of this Agreement and each such other Letter of Credit Document
under all circumstances, including the following: (i) any lack of validity or
enforceability of this Agreement or any Letter of Credit Document; (ii) the
existence of any claim, setoff, defense or other right that such Borrower may
have at any time against any issuer, beneficiary, or any transferee of the
Letter of Credit (or any Person for whom any such issuer, beneficiary or any
such transferee may be acting), the Administrative Agent or any other Person,
whether in connection with this Agreement, the transactions contemplated hereby
or by the Letter of Credit Documents or any unrelated transaction; (iii) any
draft, demand, certificate or other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect, or any loss
or delay in the transmission or otherwise of any document required in order to
make a drawing under the Letter of Credit, or any defense based upon the
failure of any drawing under the Letter of Credit to conform to the terms of
the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such drawing; or (iv) any
other circumstance or happening whatsoever, whether or not similar to any of
the foregoing, including any other circumstance that might otherwise constitute
a defense available to, or a discharge of, the Borrowers. To the extent that
any provision of any Letter of Credit Document is inconsistent with the
provisions of this Section 4, the provisions of this Section 4 shall control.

L/C
Participations.

Each L/C Participant irrevocably agrees to accept and purchase and
hereby accepts and purchases from the Issuing Bank, on the terms and conditions
hereinafter stated, for such L/C Participant’s own account and risk, an
undivided interest equal to such L/C Participant’s Revolving Credit Commitment
Percentage in the Issuing Bank’s obligations and rights under each Letter of
Credit issued hereunder and the amount of each draft paid by the Issuing Bank
thereunder. Each L/C Participant unconditionally and irrevocably agrees that,
if a draft is paid

 28

 

under any Letter of Credit for which the Issuing Bank is not reimbursed
in full by the Borrower in accordance with the terms of this Agreement, such
L/C Participant shall pay to the Administrative Agent for forwarding to the
Issuing Bank upon demand an amount equal to such L/C Participant’s Revolving
Credit Commitment Percentage of the amount of such draft, or any part thereof,
which is not so reimbursed.

If any amount
required to be paid by any L/C Participant to the Issuing Bank pursuant to
Section 4.2(a) in respect of any unreimbursed portion of any payment made by the Issuing Bank under any
Letter of Credit is paid to the Administrative Agent within three Business Days
after the date such payment is due, such L/C Participant shall pay to the
Administrative Agent on demand an amount equal to the product of (i) such
amount, times (ii) the daily average Federal funds rate, as quoted by the
Issuing Bank, during the period from and including the date such payment is
required to the date on which such payment is immediately available to the
Issuing Lender, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any L/C Participant pursuant to Section
4.4(a) is not in fact made available to the Issuing Bank such L/C Participant within three
Business Days after the date such payment is due, the Administrative Agent
shall be entitled to recover from such L/C Participant, on demand, such amount
with interest thereon calculated from such due date at the rate per annum
applicable to Alternate Base Rate Loans hereunder. A certificate of the
Administrative Agent submitted to any L/C Participant with respect to any
amounts owing under this Section shall be conclusive in the absence of manifest
error.

Whenever, at
any time after the Issuing Bank has made payment under any Letter of Credit and
the Administrative Agent has received from any L/C Participant its pro rata
share of such payment in accordance with Section 4.4(a), the Administrative
Agent or the Issuing Bank receives any payment related to such Letter of Credit
(whether directly from the Borrowers or otherwise, including proceeds of
collateral applied thereto by the Administrative Agent or Issuing Bank), or any
payment of interest on account thereof, the Issuing Bank will distribute to
such L/C Participant its pro rata share thereof; provided, however,
that in the event that any such payment received by the Issuing Bank shall be
required to be returned by the Issuing Bank, such L/C Participant shall return
to the Issuing Bank the portion thereof previously distributed by the
Administrative Agent or Issuing Bank to it.

GENERAL
PROVISIONS APPLICABLE TO LOANS

Interest Rates
and Payment Dates.

Each LIBOR Loan shall bear interest for each
day at a rate per annum equal to the LIBOR Rate determined for such day plus
the Applicable Margin.

Each Alternate
Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate
plus the Applicable Margin.

If all or a
portion of (i) any principal of any Loan, (ii) any interest payable thereon,
(iii) any commitment fee or (iv) any other amount payable hereunder shall not
be paid when due (whether at the stated maturity, by acceleration or
otherwise), the principal of the Loans and any such overdue interest,
commitment fee or other amount shall bear interest at a rate per annum which is
(x) in the case of principal, the rate that would otherwise be applicable 

 29
 

 

thereto pursuant to the foregoing provisions
of this Section plus 2% or (y) in the case of any such overdue interest,
commitment fee or other amount, the rate described in paragraph (b) of this
Section plus 2%, in each case from the date of such non-payment until such
overdue principal, interest, commitment fee or other amount is paid in full (as
well after as before judgment).

Interest shall
be payable in arrears on each Interest Payment Date, provided that interest
accruing pursuant to paragraph (d) of this Section shall be payable from time
to time on demand.

Conversion.

In the event
that the Administrative Agent shall have reasonably determined (which
determination shall be conclusive and binding upon the Borrowers) that adequate
and reasonable means do not exist for ascertaining the LIBOR Rate, the Administrative
Agent shall promptly notify the Borrowers (by telephone or otherwise) of such
determination.  If the Administrative
Agent shall give such notice to the Borrowers, then, at the reasonable
discretion of the Administrative Agent, the LIBOR Rate may be terminated and
thereafter all Loans shall be Alternate Base Rate Loans.

If Borrowers
fail to timely continue a LIBOR Loan Tranche that is expiring, such tranche
shall be converted to an Alternate Base Rate Loan and shall accrue interest at
the rates applicable for Alternate Base Rate Loans unless and until Borrowers
subsequently elect that such Loans be LIBOR Loans.

[Reserved].

Mandatory Prepayments.

If on any date
on which a Borrowing Base Certificate is delivered pursuant to Section 8.2(a),
an Overadvance exists, the Borrowers shall prepay the Revolving Credit Loans
and/or cash collateralize or replace Letters of Credit in an amount equal to
the amount of such excess no later than the Business Day immediately following
the date of delivery of such Borrowing Base Certificate.

If on any date
the aggregate Outstanding RC Extensions of Credit exceeds the Revolving Credit
Commitments, the Borrower shall immediately prepay the Revolving Credit Loans
and/or cash collateralize or replace Letters of Credit in an amount equal to
the amount of such excess no later than the next Business Day.

Computation of Interest and Fees.

Commitment
fees and, whenever it is calculated on the basis of the Prime Rate, interest
shall be calculated on the basis of a 365- (or 366-, as the case may be) day
year for the actual days elapsed; and, otherwise, interest shall be calculated
on the basis of a 360-day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a LIBOR Rate.
Any change in the interest rate on a Loan resulting from a change in the
Alternate Base Rate or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the 

 30
 

 

Borrower and the Lenders of the effective
date and the amount of each such change in interest rate.

Each
determination of an interest rate by the Administrative Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower and
the Lenders in the absence of manifest error. 
The Administrative Agent shall, at the request of a Borrower, deliver to such Borrower a
statement showing the quotations used by Administrative Agent in determining
any interest rate pursuant to Section 5.1(a).

Agent’s Advances; Settlement; Pro Rata Treatment and Payments.

The Administrative Agent may (but shall be under no obligation to) make
available to the Borrowers on any Borrowing Date or the date of a Deemed
Borrowing an Agent’s Advance in the amount of the borrowing requested, provided
that the conditions set forth in Section 7.2 have been satisfied, or deemed to
have been requested by the Borrowers on such date, provided however, that in no
event shall any Agent’s advance be made in excess of Borrowers’ Excess
Availability, which Agent’s Advance shall be settled with the Lenders on the
related Settlement Date.  Prior to 2:00
p.m. on such Settlement Date, each Lender shall make the amount of its
Revolving Credit Commitment Percentage of such Agent’s Advance available to the
Administrative Agent at its office specified in Section 12.6 in funds
immediately available to the Administrative Agent. Such amounts shall be
applied by the Administrative Agent, first to the repayment in full of the
outstanding principal amount of all Agent’s Advances made on behalf of the
Lender delivering such amounts, if any, and second to the funding of any then
unfunded Loans to the Borrowers required to be made by such Lender.  If a Lender has not made any part of its
Revolving Credit Commitment Percentage of any Agent’s Advance available to the
Administrative Agent in accordance with the provisions of this Section 5.6(a),
the Administrative Agent shall be entitled to retain for its own account, out
of payments made by the Borrowers (whether on, before or after any Settlement
Date) and otherwise payable to such Lender hereunder, the outstanding principal
amount of any Agent’s Advance made on behalf of such Lender plus interest
thereon, at the rate per annum applicable to the Loans in respect of which such
Agent’s Advance was made from the Borrowing Date or date of a Deemed Borrowing,
as the case may be, to the date of such payment.  If the Borrowers fail to pay in full any
amount when due and the result of such failure is that there are insufficient
funds available to the Administrative Agent for the payment of such interest
then each Lender shall pay to the Administrative Agent on the applicable
Settlement Date its pro rata share of the amount of any deficiency and such
amount shall constitute a Revolving Credit Loan (whether or not, after giving
effect to such Revolving Credit Loan, the aggregate outstanding amount of the
Revolving Credit Loans shall exceed the Revolver Borrowing Base).  Anything contained in this Agreement or
otherwise to the contrary notwithstanding, each Lender’s obligation to make its
Revolving Credit Commitment Percentage of each borrowing available to the
Administrative Agent as provided in this paragraph shall be absolute and
unconditional and shall not be affected by any circumstances, including,
without limitation, (A) any setoff, counterclaim, recoupment, defense or other
right which such Lender may now or hereafter have against the Administrative
Agent, the Borrowers, any other Loan Party or any other Person for any reason
whatsoever, (B) the occurrence or continuation of a Default or an Event of
Default, (C) any material adverse change in the condition of the Borrowers or
any other Loan Party, (D) any breach or default of this Agreement or any of the
other Loan Documents by any Person, or (E) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.  If such amount is 

 31
 

 

not made available to the
Administrative Agent by the required time on the related Settlement Date, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective Rate
for the period until such Lender makes such amount immediately available to the
Administrative Agent.  A certificate of
the Administrative Agent submitted to any Lender with respect to any amounts
owing under this Section shall be conclusive in the absence of manifest
error.  If such Lender’s Revolving Credit
Commitment Percentage of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such
Settlement Date, the Administrative Agent shall also be entitled to recover
such amount with interest thereon at the rate per annum applicable to Alternate
Base Rate Loans hereunder, on demand, from the Borrowers.

Each borrowing by the Borrowers from the Lenders hereunder, each
settlement with the Lenders of an Agent’s Advance, each payment by the
Borrowers on account of any commitment fee hereunder and any reduction of the
Revolving Credit Commitments of the Lenders shall be made pro rata according to
the respective Revolving Credit Commitment Percentages of the Lenders. On each
Settlement Date, each payment (including each prepayment) by the Borrowers on
account of principal and interest on the Revolving Credit Loans shall be
applied pro rata according to the respective outstanding principal amounts of
the Revolving Credit Loans then held by the Lenders. All payments (including
prepayments) to be made by the Borrowers hereunder, whether on account of
principal, interest, fees or otherwise, shall be made without set-off or
counterclaim and shall be made prior to 12:00 noon, New York City time, on the
due date thereof to the Administrative Agent, for the account of the
Administrative Agent and the Lenders, as applicable, at the Administrative
Agent’s office specified in Section 12.6, in Dollars and in immediately available
funds. The Administrative Agent shall distribute such payments to the Lenders
on the related Settlement Date in like funds as received. If any payment
hereunder becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day, and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. 
If any payment on a LIBOR Loan becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such extension would be to extend
such payment into another calendar month in which event such payment shall be
made on the immediately preceding Business Day.

Notwithstanding anything herein to the contrary, the Administrative
Agent shall have the right in its discretion applied in good faith to designate
a date on which (i) in the case of the settlement of an Agent’s Advance, each
Lender shall make its Revolving Credit Commitment Percentage of the Loan
available to the Administrative Agent in accordance with the terms hereof, and
(ii) in the case of a repayment, prepayment or other payment by the Borrowers,
the Administrative Agent shall distribute such repayment, prepayment or other
payment to the Lenders in accordance with the terms hereof (each such date, an “Alternate
Settlement Date”), in each such case as the Administrative Agent deems
appropriate (including, without limitation, the date of any such Agent’s
Advance, repayment, prepayment or other payment). In such event, the
Administrative Agent shall notify the Lenders in writing of such Alternate
Settlement Date as soon as practicable after such designation.

Taxes.

All payments
made by the Borrowers under this Agreement and any Notes shall be made free and
clear of, and without deduction or withholding for or on account of, any 

 32
 

 

present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding net income taxes
and franchise taxes (imposed in lieu of net income taxes) imposed on the
Administrative Agent or any Lender as a result of a present or former
connection between the Administrative Agent or such Lender and the jurisdiction
of the Governmental Authority imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such connection arising
solely from the Administrative Agent or such Lender having executed, delivered
or performed its obligations or received a payment under, or enforced, this
Agreement or any Note).  If any such
non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings
(“Non-Excluded Taxes”) are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under any Note,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrowers shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof if such Lender fails to
comply with the requirements of clause (b) of this Section. Whenever any Non-Excluded
Taxes are payable by the Borrowers, as promptly as possible thereafter the
Borrowers shall send to the Administrative Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Borrowers showing payment thereof. If any
Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts
or other required documentary evidence, the Borrowers shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as
a result of any such failure. The agreements in this Section shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.

Each Lender
that is not formed under the laws of the United States of America or a state
thereof ( each a “Non-U.S. Lender”) shall:

(i) 
not more than ten (10) Business Days after the Closing Date, (a) deliver
to the Administrative Agent two duly completed copies of the applicable United
States Internal Revenue Service Form W-8, including but not limited to United
States Internal Revenue Service Form W-8BEN or W-8ECI or (ii) the case of a
Non-U.S. Lender claiming exemption from the withholding of United States
federal income tax under Section 871(h) or 881(c) of the Code with respect to
payments of “portfolio interest,” deliver two (2) duly completed copies of the
applicable United States Internal Revenue Service Form W-8, including but not
limited to a United States Internal Revenue Service Form W-8BEN and a
certificate representing that such Lender is not a “bank” for purposes of
Section 881(c) of the Code and certifying that such Lender is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes.  Each
Non-U.S. Lender further undertakes to deliver to each of the Borrowers and the
Administrative Agent (x) renewals or additional copies of such form (or any
successor form) on or before the date that such form expires or becomes
obsolete, and (y) after the occurrence of any event requiring a change in the
most recent forms so delivered by it, such additional forms or amendments
thereto as may be reasonably requested by the 

 33
 

 

Borrowers or the Administrative Agent.  All forms or amendments described in the
preceding sentence shall certify that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes, unless
an event (including without limitation any change in treaty, law or regulation)
has occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form or amendment with
respect to it and such Lender advises the Borrowers and the Administrative
Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.

(ii)           For
any period during which a Non-U.S. Lender has failed to provide the Borrowers
with an appropriate form pursuant to clause (i) above (unless such
failure is due to a change in treaty, law or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to the increased payments
referred to in the second sentence of this Section 5.7(a) or to any other
indemnification under this Section 5.7 with respect to Taxes imposed by
the United States; provided that, should a Non-U.S.
Lender which is otherwise exempt from or subject to a reduced rate of
withholding tax become subject to Taxes because of its failure to deliver a
form required under clause (i) above, the Borrowers shall take such
steps as such Non-U.S. Lender shall reasonably request (at the Non-U.S. Lender’s
expense) to assist such Non-U.S. Lender to recover such Taxes.

(iii)         Any
Lender that is entitled to an exemption from or reduction of withholding tax
with respect to payments under this Agreement pursuant to the law of any
relevant jurisdiction or any treaty shall deliver to the Borrowers (with a copy
to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without withholding or
at a reduced rate.

(iv)          If
the U.S. Internal Revenue Service or any other governmental authority of the
United States or any other country or any political subdivision thereof asserts
a claim that the Administrative Agent did not properly withhold tax from
amounts paid to or for the account of any Lender (because the appropriate form
was not delivered or properly completed, because such Lender failed to notify
the Administrative Agent of a change in circumstances which rendered its
exemption from withholding ineffective, or for any other reason), such Lender
shall indemnify the Administrative Agent fully for all amounts paid, directly
or indirectly, by the Administrative Agent as tax, withholding therefor, or
otherwise, including penalties and interest, and including taxes imposed by any
jurisdiction on amounts payable to the Administrative Agent under this
subsection, together with all costs and expenses related thereto (including
attorneys fees and time charges of attorneys for the Administrative Agent,
which attorneys may be employees of the Administrative Agent).  The obligations of the Lenders under this clause
(iv) shall survive the payment of the Obligations and termination of this
Agreement.

(v)          Notwithstanding the above, if any
change in treaty, law or regulation has occurred after the date such Person
becomes a Lender hereunder which renders all such forms (or successor forms)
inapplicable or which would prevent such Lender from duly completing and delivering
any such form with respect to it and such Lender so advises the Borrowers and
the Administrative Agent, then such Lender shall be exempt from such
requirements.  Each Person that shall
become a Lender or a participant of a Lender pursuant 

 34
 

 

to Section 12.11
shall, upon the effectiveness of the related transfer, be required to provide
all of the forms, certifications and statements required pursuant to this
subsection (b); provided that in the case of a participant of a Lender,
the obligations of such participant of a Lender pursuant to this subsection
(b) shall be determined as if the participant of a Lender were a Lender
except that such participant of a Lender shall furnish all such required forms,
certifications and statements to the Lender from which the related
participation shall have been purchased.

[Reserved].

Changes to Advance Rates, Standards of Eligibility and Reserves.

The Required Lenders
shall be entitled to (a) reduce the advance rates, increase the standards of
eligibility and establish or increase any reserves under this Agreement on
thirty days’ prior written notice to the Borrowers in the event that the most
recent audit of accounts receivable and/or inventory of the Borrowers and their
Subsidiaries conducted pursuant to Section 8.11 was, in the commercially
reasonable judgment of the Required Lenders, materially different from
historical performance, and (b) with the prior written consent of the Lenders,
increase the advance rates, reduce the standards of eligibility and reduce any
reserves under this Agreement, in each case in its reasonable judgment.

Increased
Costs.

If any Lender
shall have determined that the adoption of or any change in any Requirement of
Law regarding capital adequacy or in the interpretation or application thereof
or compliance by such Lender or any corporation controlling such Lender with
any request or directive regarding capital adequacy (whether or not having the
force of law) from any Governmental Authority made subsequent to the date
hereof shall have the effect of reducing the rate of return on such Lender’s or
such corporation’s capital as a consequence of its obligations hereunder to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance (taking into consideration such Lender’s
or such corporation’s policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the Borrowers
shall promptly pay to such Lender such additional amount or amounts as will
compensate such Lender or such corporation for such reduction.

If any Lender
becomes entitled to claim any additional amounts pursuant to this Section, it
shall promptly notify the Borrowers (with a copy to the Administrative Agent)
of the event by reason of which it has become so entitled.  A certificate as to any additional amounts
payable pursuant to this Section submitted by such Lender to the Borrowers
(with a copy to the Administrative Agent) shall be conclusive in the absence of
manifest error.  The agreements in this
Section shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder. 
Notwithstanding the preceding provisions of this Section, no Lender
shall be entitled to receive any additional amount as compensation for any such
reduction in return on capital experienced more than 180 days prior to the date
that such Lender notified the Borrowers thereof.

 35
 

 

REPRESENTATIONS AND WARRANTIES

To induce the
Administrative Agent and the Lenders to enter into this Agreement and to make
the Loans, each Loan Party hereby represents and warrants to the Administrative
Agent and each Lender that:

Financial Condition.

The
consolidated balance sheet of the SMI and its consolidated Subsidiaries as at
December 31, 2005 and the related consolidated statements of income
and of cash flows for the fiscal year ended on such date, reported on by
Deloitte & Touche LLP, copies of which have heretofore been furnished to
each Lender, are complete and correct and present fairly in all
material respects the consolidated financial condition of SMI and its
consolidated Subsidiaries as at such date, and the consolidated results of
their operations and their consolidated cash flows for the fiscal year then
ended. The unaudited consolidated balance sheet of SMI and its consolidated
Subsidiaries as at June 30, 2006 and the related unaudited consolidated
statements of income and of cash flows for the six-month period ended on such
date, certified by a Responsible Officer, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly in all
material respects the consolidated financial condition of SMI and its
consolidated Subsidiaries as at such date, and the consolidated results of
their operations and their consolidated cash flows for the six-month period
then ended (subject to normal year-end audit adjustments). All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or Responsible Officer, as the
case may be, and as disclosed therein). 
Neither SMI nor any of its consolidated Subsidiaries had, at the date of
the most recent balance sheet referred to above, any material Guarantee
Obligation, contingent liability or liability for taxes, or any long-term lease
or unusual forward or long-term commitment, including, without limitation, any
interest rate or foreign currency swap or exchange transaction or other
financial derivative, which is not reflected in the foregoing statements or in
the notes thereto.  During the period
from June 30, 2006 to and including the Closing Date there has been no sale,
transfer or other disposition by SMI or any of its consolidated Subsidiaries of
any material part of its business or property and no purchase or other
acquisition of any business or property (including any Capital Stock of any
other Person) material in relation to the consolidated financial condition of
SMI and its consolidated Subsidiaries at June 30, 2006.

No Change.

Since June 30,
2006 there has been no development or event which has had or could reasonably
be expected to have a Material Adverse Effect, and (b) during the period from
June 30, 2006 to and including the Closing Date no dividends or other
distributions have been declared, paid or made upon the Capital Stock of the
Borrowers nor has any of the Capital Stock of any Borrower been redeemed,
retired, purchased or otherwise acquired for value by the Borrower or any of
its Subsidiaries.

Existence; Compliance with Law.

Each Loan Party (a) is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the power and authority, and the
legal right, to own and operate its property, to lease the property it operates
as lessee and to conduct the business in which it is currently engaged, (c) is
duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction in which qualification and good standing are necessary for
each of them to conduct their respective businesses and own their respective
properties and 

 36
 

 

where the failure to so
qualify would have a Material Adverse Effect and (d) is in compliance in all
material respects with all Requirements of Law except to the extent that the
failure to comply therewith could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.

Power; Authorization; Enforceable Obligations.

Each Loan Party has the
power and authority, and the legal right, to execute and deliver and to perform
its obligations under the Loan Documents to which it is a party. Each Borrower
has the power and authority, and the legal right to borrow hereunder and has
taken all necessary corporate action to authorize the borrowings on the terms
and conditions of this Agreement and any Notes. No consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents to which the Borrower is a party. This
Agreement has been, and each other Loan Document to which it is a party will
be, duly executed and delivered on behalf of each Loan Party. This Agreement
constitutes, and each other Loan Document to which it is a party when executed
and delivered will constitute (and the Notes when executed and delivered for value
will be), a legal, valid and binding obligation of each Loan Party enforceable
against each such Loan Party in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.

No Legal Bar.

The execution and
delivery and performance of the obligations of the Loan Parties under, the Loan
Documents to which each Loan Party is a party, the borrowings hereunder and the
use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of any Loan Party and will not result in, or require,
the creation or imposition of any Lien on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation (other than Liens created by
the Security Documents in favor of the Administrative Agent).

No Material Litigation.

Except as
disclosed on Schedule 6.6, no litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of any Loan Party, threatened by or against any Loan Party or against
any of its respective properties or revenues (a) with respect to any of the
Loan Documents or any of the transactions contemplated hereby or thereby, or
(b) which could have a Material Adverse Effect.

No Default.

No Loan Party is in
default in the payment of the principal of, or interest on, any Indebtedness in
excess of $500,000 in the aggregate or under any instrument or agreement under
or subject to which any Indebtedness in excess of $500,000 in the aggregate has
been issued and no event has occurred under the provisions of any such
instrument or agreement which with or without the lapse of time or the giving
of notice, or both, constitutes or would constitute an event of default
thereunder. No Loan Party is in default under or with respect to any of its
Contractual Obligations other than with respect to the payment of principal and
interest on any Indebtedness which involves a total of more than $500,000 in
the aggregate. No Default or Event of Default has occurred and is continuing.

 37
 

 

No Burdensome Restrictions.

No Loan Party is party to
any contract or agreement the performance of which would materially adversely
affect its respective businesses, assets, operations or condition (financial or
otherwise), as determined by the Administrative Agent in its sole discretion,
exercised in good faith. No Loan Party has agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of
their respective properties, whether now owned or hereafter acquired, to be
subject to a Lien which is not a Permitted Encumbrance.

Taxes.

Each Loan Party
has filed or caused to be filed
all tax returns which, to the knowledge of such Loan Party, are required to be
filed and has paid all taxes shown to be due and payable on said returns or on
any assessments made against it or any of its property and all other taxes,
fees or other charges imposed on it or any of its property by any Governmental
Authority, except only for any such items (i) which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of such Loan
Party and (ii) which in any single instance and in the aggregate for all Loan
Parties do not exceed $100,000, inclusive of any interest and penalties that
have been or may be asserted or claimed thereon. The provisions for taxes on
its books are adequate for all years not closed by applicable statutes, and for
its current fiscal year, and no Loan Party has knowledge of any deficiency or
additional assessment in connection therewith not provided for on its books.

Federal Regulations.

No part of the proceeds
of any Loans will be used for “purchasing” or “carrying” any “margin stock”
within the respective meanings of each of the quoted terms under Regulation U
of the Board of Governors of the Federal Reserve System as now and from time to
time hereafter in effect, or for any purpose which violates, or which would be
inconsistent with, the provisions of the regulations of such Board of
Governors. If requested by any Lender or the Administrative Agent, the Loan
Parties will furnish to the Administrative Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form G-3 or FR
Form U-1 referred to in said Regulation U.

ERISA.

Except as disclosed on Schedule
6.11 attached hereto and made a part hereof, no Loan Party has any
Plan.  No Loan Party has received any
notice within the last three months of the Closing Date to the effect that it
is not in full compliance with any of the requirements of ERISA, and its
regulations and, in respect of a Plan, (i) no Loan Party has engaged in any
non-exempt Prohibited Transactions as defined in Section 406 of ERISA and
Section 4975 of the Internal Revenue Code as amended, (ii) each Loan Party has
met all applicable minimum funding requirements under Section 302 of ERISA in
respect of its plans and no funding requirements have been postponed or
delayed, (iii) there exists no Reportable Event, and (iv) no Loan Party has
withdrawn, completely or partially, from any Multiemployer Plans so as to incur
liability under the Multi-Employer Pension Plan Amendments Act of 1980 that
could reasonably be expected to result in a Material Adverse Effect.

Investment Company Act; Other Regulations.

No Loan Party is an “investment
company”, or a company “controlled” by an “investment company”, within the
meaning of the Investment Company Act of 1940, as amended. No Loan Party is
subject to regulation under any Federal or State statute or regulation (other
than 

 38
 

 

Regulation X of the Board
of Governors of the Federal Reserve System) which limits its ability to incur
Indebtedness.

Subsidiaries.

On the Closing Date, no
Loan Party has any Subsidiaries except to the extent set forth on Schedule
6.13.

Accuracy and Completeness of Information.

No representation or
warranty made by any Loan Party, or in any financial statement, report,
certificate or any other document furnished in connection herewith, contains any
untrue statement of fact or omits
to state any fact necessary to make the statements herein or therein not
misleading. There is no fact known to any Loan Party or which reasonably should
be known to it which it has not disclosed to the Lender in writing with respect
to any transactions contemplated by this Agreement, which would have a Material
Adverse Effect.

No Labor Disputes.

Other than as set forth
on Schedule 6.15 hereto (as the same may be updated from time to time)
or disclosed in writing to the Administrative Agent after the Closing Date (i)
no Loan Party is involved in any labor dispute; there are no strikes or
walkouts; and (ii) there are no union organization of any of their respective
employees threatened, to the best of its knowledge, or in existence that in
respect of either subsection (i) or subsection (ii)  hereof could reasonably be expected to have a
Material Adverse Effect.

Solvency.

After giving effect to
this Agreement, each Loan Party is and will be, solvent, able to pay its debts
as they mature, has capital sufficient to carry on its business and all
businesses in which it is about to engage, and (i) as of the Closing Date, the
fair present saleable value of the assets of each Loan Party, calculated on a
going concern basis, is in excess of the amount of its liabilities and (ii)
subsequent to the Closing Date, the fair saleable value of its assets
(calculated on a going concern basis) will be in excess of the amount
of its liabilities.

Indebtedness.

As of the Closing Date,
the aggregate accounts payable and/or accrued expenses of it are not materially
different from its Interim Balance Sheet, dated June 30, 2006, supplied to the
Administrative Agent and the Lenders. Without limiting the foregoing, (a) in
the case of Conn-Selmer, it additionally represents that as of the Closing Date
the only Indebtedness which may become
due from Conn-Selmer (as well as from any other Loan Party) to a Dealer
Note Purchase Party or its assignees shall arise under or in connection with
the Dealer Note Purchase Agreement; and (b) in the case of SMI, it additionally
represents that as of the Closing Date, the only Indebtedness due or which may
become due from SMI (as well as from any other Loan Party) to the holders of
the Senior Notes are evidenced by the Senior Notes in an aggregate principal
amount of $175,000,000, which are in substantially the form heretofore provided
to the Administrative Agent. Except for the Indebtedness referred to in
subsections (a) and (b) immediately set forth above, Intercompany Indebtedness,
Additional Notes, Refinancings permitted pursuant to the terms of this
Agreement, the capital expenditures, Financing Leases and purchase money
obligations permitted under Section 9.2 of this Agreement and the Obligations
to the Lenders arising from time to time under this Agreement, no Loan Party
has or shall have during the term of this Agreement, any long term Indebtedness
with a maturity of one year or more.

 39
 

 

[Reserved].

First Priority Security Interest.

The UCC financing
statements filed and upon the filing of any additional UCC financing statements
by the Administrative Agent, if any, as set forth in the Security Agreement,
the Administrative Agent, for the ratable benefit of the Lenders (i) continues
to have, in the case of filed UCC financing statements and (ii) shall have, in
the case of any UCC financing statements to be filed, a perfected first
priority security interest in all Collateral, subject only to Permitted
Encumbrances.

O.S.H.A. and Environmental Compliance.

Each Loan
Party has duly complied in all material respects with, and its facilities,
business assets, property, leaseholds and equipment are in compliance in all
material respects
with the provisions, of the Federal Occupational Safety and Health Act, the
Environmental Protection Act, RCRA and all other Environmental Laws. There have
been no outstanding citations, notices or orders of non-compliance issued to it
or relating to its business, assets, property, leaseholds or Equipment under
any such laws, rules or regulations.

Each Loan
Party has been issued all required federal, state and local licenses,
certificates or permits relating to, and it and its facilities, businesses,
assets, property, leaseholds and equipment are in compliance in all material
respects with, all applicable Environmental Laws.

(i) Except as
set forth on Schedule 6.20 hereto, concerning which no litigation is
outstanding and no Liens against any Loan Party or any of its assets has been
filed, there are no visible signs of releases, spills, discharges, leaks or
disposal of Hazardous Waste at, upon, under or within any Real Estate; (ii)
there are no underground storage tanks or polychlorinated biphenyls on the Real
Estate; (iii) to their actual knowledge, the Real Estate has never been used as
a treatment, storage or disposal facility of Hazardous Waste; and (iv) no
Hazardous Substances are present on the Real Estate, excepting such quantities
as are handled in accordance with all applicable manufacturer’s instructions
and governmental regulations and in proper storage containers and as are
necessary for the operation of its commercial business.

Each of the
Loan Parties hereby, jointly and severally, indemnifies and holds the
Administrative Agent and each Lender harmless from and against any liability,
loss, damage, suit, action or proceeding pertaining to Hazardous Wastes,
including, but not limited to, claims of any federal, state or municipal
government or quasi-governmental agency or any third person, whether arising
under CERCLA, RCRA, or any other federal, sate or municipal law or regulation,
or tort, contract or common law, in respect of any Loan Party.

 40
 

 

Accounts.

All Accounts constitute a bona fide, enforceable and
valid obligation representing a bona fide indebtedness created by an absolute
sale or lease and delivery of goods in the ordinary course of business and upon
stated terms of the related Loan Party, or work, labor or services rendered by
such Loan Party and, as of the date each Account is created, the same shall be
due and owing in accordance with such Loan Party’s standard terms of sale.

Documents.

The Administrative Agent has received complete copies
in all material respects of the Intercreditor Agreements, if any, (including
all exhibits, schedules and disclosure letters referred to therein or delivered
pursuant thereto) and all amendments thereto, waivers relating thereto and
other side letters and agreements affecting the terms thereof.  None of such documents and agreements has
been amended or supplemented, nor have any of the provisions thereof been
waived, in any material respect, except pursuant to a written agreement or
instrument which has heretofore been consented to by the Lenders. Each of this
Agreement and the Basic Documents has been duly executed and delivered by the
applicable Loan Party and is in full force and effect.

Securities Laws.

The execution and
delivery of this Agreement and the other Basic Documents to which any Loan
Party is a party by it will not directly or indirectly violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto.

Survival of Representations and Warranties.

All representations and
warranties of each Loan Party contained in this Agreement and the other Basic
Documents shall be true at the time of execution of this Agreement and the
other Basic Documents, and shall survive the execution, delivery and acceptance
thereof by the Lenders and the parties thereto, the closing of the transactions
described herein and therein or related hereto or thereto. Each Loan Party and
the Lenders expressly agrees that any misrepresentation or breach of any
representation or warranty whatsoever contained in this Agreement or the other
Basic Documents shall be deemed material if it has a Material Adverse Effect,
as determined by the Administrative Agent in its reasonable discretion.

CONDITIONS PRECEDENT

Conditions to Effectiveness of Agreement.

The agreement of each
Lender to make the Loans requested to be made by it and the agreement of the
Issuing Lender to issue the Letters of Credit shall not become effective until
all of the following conditions precedent are satisfied:

Loan Documents.  The Administrative Agent shall have received:

(i)            this
Agreement, executed and delivered by a duly authorized officer of each
Borrower, with a counterpart for each initial Lender,

(ii)           for
the account of each Lender, a Revolving Credit Note of the Borrowers conforming
to the requirements hereof and executed by a duly authorized officer of each
Borrower,

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(iii)          the
Pledge Agreement, executed and delivered by a duly authorized officer of the
parties thereto,

(iv)          the
Guarantee, executed and delivered by a duly authorized officer of the parties
thereto, and

(v)           the
Security Agreement, executed and delivered by a duly authorized officer of the parties thereto.

Related
Agreements. The Administrative Agent shall have
received true and correct copies, certified as to authenticity by the Borrower,
of the other Basic Documents and such other documents or instruments as may be
reasonably requested by the Administrative Agent, including, without
limitation, a copy of any debt instrument, security agreement or other material
contract to which the any Loan Party may be a party.

Secretary’s
Certificates. The Administrative Agent shall have received a certificate of
each Loan Party, dated the Closing Date, substantially in the form of Exhibit
P, with appropriate insertions and attachments, satisfactory in form and
substance to the Administrative Agent, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of such Loan Party which
certificate shall attach and/or address the following:

(vi)          Corporate
Proceedings of the Loan Parties.  A
copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of
Directors of each Loan Party authorizing (i) the execution, delivery and
performance of this Agreement and the other Loan Documents to which it is a party, (ii) the borrowings
contemplated hereunder and (iii) the granting by it of the Liens created pursuant to the Security Documents,
certified by the Secretary or an Assistant Secretary of such Loan Party as of
the Closing Date, which certificate shall be in form and substance satisfactory
to the Administrative Agent and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded;

(vii)         Incumbency.  The incumbency and signature of the officers
of such Loan Party executing any Loan Document satisfactory in form and substance
to the Administrative Agent, executed by the President or any Vice President
and the Secretary or any Assistant Secretary of such Loan Party;

(viii)        Corporate
Documents.  True and complete copies
of organizational documents of each Loan Party, certified as of the Closing
Date as complete and correct copies thereof by the Secretary or an Assistant
Secretary of such Loan Party; and

(ix)           Good
Standing Certificates. Certificates dated as of a recent date from the
Secretary of State or other appropriate authority, evidencing the good standing
of each Loan Party (i) in the jurisdiction of its organization and (ii) in each
other jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires it to qualify as a foreign Person except, as
to this sub-clause (ii), where the failure to so qualify would not have a
Material Adverse Effect.

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Borrowing Base
Certificate. 
The Administrative Agent shall have received a Borrowing Base
Certificate for each Borrower as of August
31, 2006, with appropriate insertions and dated the Closing Date,
satisfactory in form and substance to the Administrative Agent, executed by the
President or any Vice President of the Borrower.

Third Party
Documentation and Arrangements. The Administrative
Agent shall have received, with a copy for each Lender, complete and accurate
copies of all material agreements, instruments and other documentation of each
of the Loan Parties and SMI with or concerning any of them with the following
Persons: the Senior Notes Trustee, the Senior Notes Holders, or any arrangement
with or concerning any third parties which survive the Closing Date, including
without limitation all Schedules and Exhibits thereto, including without
limitation with or concerning any of the Senior Notes Holders, and/or the
Senior Notes Trustee, and the Administrative Agent and each Lender shall have
reviewed such documentation and found each and all of the foregoing items
acceptable in its sole discretion exercised in good faith.  Should the Administrative Agent at any time
and from time to time after the Closing Date consider any agreement,
instrument, other document, of any type or nature referred to above, and/or any
notice(s) or communication(s) in relation
thereto, to be material, the relevant Loan Party shall promptly provide a copy
thereof to the Administrative Agent, at the Administrative Agent’s request.

Fees.
The Administrative Agent shall have received the fees to be received on the
Closing Date referred to in the Fee Letter.

Legal
Opinions. The Administrative Agent shall have
received, with a counterpart for each Lender, the following executed legal
opinions:

(i)            the
executed legal opinion of Milbank, Tweed, Hadley & McCloy LLP, counsel
to the Borrowers and the other Loan Parties, in form and substance reasonably
acceptable to Administrative Agent; and

(ii)           the executed legal opinion of Dennis
Hanson, General Counsel to the Borrowers and the Loan Parties, in form and
substance reasonably acceptable to Administrative Agent.

Pledged Stock;
Stock Powers; Pledged Interests; Pledged Notes. The
Administrative Agent shall have received:

(i)            the
certificates representing the shares or interests pledged pursuant to the
Pledge Agreement, together with an undated stock power for each such
certificate executed in blank by a duly authorized officer of the pledgor
thereof,

(ii)           the
notes, including without limitation, any instruments evidencing Intercompany
Indebtedness,  pledged pursuant to the
Pledge Agreement, each endorsed in blank by a duly authorized officer of the
pledgor thereof.

Each
issuer referred to in the Pledge Agreement shall have delivered an acknowledgement of and consent to such Pledge
Agreement, executed by a duly authorized officer of such issuer, in
substantially the form appended to such Pledge Agreement.

Actions to
Perfect Liens. The Administrative Agent shall have
received evidence in form and substance satisfactory to it that all filings,
recordings, registrations and other actions, including, without limitation, the
filing of duly executed financing statements on form UCC-1, 

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necessary or, in the opinion of the
Administrative Agent, desirable to perfect the Liens created by the Security
Documents shall have been completed.

Lien Searches.
The Administrative Agent shall have received the results of a recent search by
a Person satisfactory to the Administrative Agent, of the Uniform Commercial
Code, judgment and tax lien filings which may have been filed with respect to
personal property of each Loan Party, and the results of such search shall be
satisfactory to the Administrative Agent.

Insurance.
The Administrative Agent shall have received evidence in form and substance
satisfactory to it that all of the requirements of Section 5(j) of the Security
Agreement shall have been satisfied.

No Litigation.
(i)  No litigation, investigation or
proceeding before or by any arbitrator or Government Authority shall be
continuing or threatened against the Loan Parties or against the officers or
directors of the Loan Parties (A) in connection with this Agreement or the
other Basic Documents or any of the other transactions contemplated thereby and
which, in the reasonable opinion of the Administrative Agent, is deemed
material or (B) which, if adversely determined, would, in the reasonable
opinion of the Administrative Agent, have a material adverse effect on the
business, assets, operations or condition (financial or otherwise) of any
Borrower or the Loan Parties taken as a whole; and (ii) no injunction, writ,
restraining order or other order of any nature materially adverse to any
Borrower or the Loan Parties taken as a whole or to the conduct of its or their
business or inconsistent with the due consummation of this Agreement shall have
been issued by any Governmental Authority.

Conditions to Each Loan.

The agreement of each
Lender to make any Loan requested to be made by it on any date (including,
without limitation, its initial Loan) and the agreement of the Issuing Lender
to issue any Letter of Credit (including, without limitation, its initial Letter
of Credit) is subject to the satisfaction of the following conditions
precedent:

Representations,
Warranties and Covenants. Each of the representations,
warranties and covenants made by each of the Loan Parties in or pursuant to the
Loan Documents and each of the representations, warranties and covenants
contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement or any Loan
Documents shall be true and correct in all material respects on and as of such
date as if made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date or are no
longer true and correct as a result of an activity permitted by this Agreement.

No Default.
No Default or Event of Default shall have occurred and be continuing on such
date or after giving effect to the Loans requested to be made on such date;
provided, however, that the Required Lenders may agree to continue to make
Revolving Credit Loans notwithstanding the existence of a Default or an Event
of Default.

Maximum
Revolving Credit Loans, In the case of Revolving
Credit Loans requested to be made or Letters of Credit to be issued, after
giving effect thereto, the aggregate Outstanding RC Extensions of Credit shall
not exceed the Revolver Borrowing Base,

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Borrowing
Base. In the case of any Revolving Credit Loans
requested to be made or Letters of Credit to be issued, the Administrative
Agent shall have timely received a Borrowing Base Certificate (with all
appropriate reports) for the most recent period for which such Borrowing Base Certificate (and all reports)
are required to be delivered, in accordance with Section 8.2(a).

Additional
Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, the other Loan Documents, the
Transaction Documents and the Other Documents shall be satisfactory in form and
substance to the Administrative Agent, and the Administrative Agent shall have
received such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it shall
reasonably request.

Each borrowing by the
Borrower hereunder shall constitute a representation and warranty by the
Borrower as of the date thereof that the conditions contained in this Section
7.2 have been satisfied.

AFFIRMATIVE COVENANTS

Each of the Borrowers
hereby agrees that, so long as any of the Commitments remain in effect or any
amount is owing to any Lender or the Administrative Agent hereunder or under
any other Loan Document, such Borrower shall (and in the case of Sections 8.1,
8.4, 8.14, 8.15 and 8.19 each other Loan Party shall):

Financial Statements.

Furnish to the
Administrative Agent:

as soon as
available, but in any event within ninety (90) days after the end of each
fiscal year of SMI, a copy of the consolidated balance sheet of SMI and its
consolidated Subsidiaries as at the end of such year and the related
consolidated statements of income and retained earnings and of cash flows for
such year, including, but not limited to, statements of income and stockholders’
equity and changes in financial position of SMI and its consolidated
Subsidiaries from the beginning of the current fiscal year to the end of such
fiscal year and the balance sheet as at the end of such fiscal year, all
prepared in accordance with GAAP applied on a basis consistent with prior
practices, and in reasonable detail and certified without any material
qualification by an independent certified public accounting firm of recognized
standing selected by SMI and satisfactory to the Administrative Agent and the
Lenders (the “Accountants”).  The
report of such Accountants shall be accompanied by a statement of such
Accountants certifying that, in making the examination upon which such report
was based, either no information came to their attention which to their
knowledge constituted an Event of Default or a Default under this Agreement or any
related agreement or, if such information came to their attention, specifying
any such default, and such report shall also contain or have appended thereto
the following information: (i) Fixed Charge Coverage Ratio calculations, (ii)
all Permitted Acquisitions, (iii) all Capital Stock repurchases, and (iv) all
debt redemptions.  The financial
statements shall be accompanied by a certificate of SMI, signed by a
Responsible Officer, certifying (a) the accuracy of such financial statements
and (b) that the list of Investments attached to such certificate is a complete
list and that all such Investments are permitted under this Agreement and
stating whether a Default or an Event of Default has occurred;

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as soon as
available, but in any event not later than forty-five (45) days after the end
of each of the first three quarterly periods of each fiscal year of SMI, the
unaudited balance sheet of SMI and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated statements of income and
retained earnings and of cash flows of SMI and its consolidated Subsidiaries
reflecting results of operations
from the beginning of the fiscal year to the end of such quarter and for such
quarter, prepared on a basis consistent with prior practices and complete and correct in all material respects,
subject to normal year end adjustments;

as soon as
available, but in any event not later than thirty (30) days after the end of
each calendar month (except (i) if such calendar month is the end of a quarterly
period referenced in Section 8.1(b) above, not later than the time period
provided for in such section; or (ii) for the month of December (the end of the
fiscal year), not later than the time period provided for in Section 8.1(a)
above, provided that the draft reports described below for December are
provided to the Administrative Agent, not later than forty-five (45) days after
the end of such month), the unaudited balance sheets of SMI and its
consolidated Subsidiaries as at the end of such month and the related unaudited
statement of income and
retained earnings and of cash flows of SMI and its consolidated Subsidiaries
reflecting results of operations from the beginning of the fiscal year to the
end of such month and for such month, prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject to normal
year end adjustments and on a consolidated basis; and

upon the
Administrative Agent’s request promptly furnish all internal financial reports,
and such other reports as the Administrative Agent may from time to time
reasonably request, including any reports prepared for the internal use of any
Loan Party or any of their respective Subsidiaries, or otherwise made available
or sent to any of their respective stockholders. Without limiting the
foregoing, or any of the Administrative Agent’s rights to pursue any of its
rights or remedies under this Agreement, should any Collateral certification(s)
or reports (including without limitation accounts receivable and accounts
payable agings and Accounts and Inventory reports, each together with the
reconciliations required under Section 8.2) (collectively, the “Collateral
Certifications”) to which the Lender is entitled under this Agreement not
be received by the Administrative Agent within fifteen (15) days of the end of
any month, or within fifteen (15) days of the date that any other Collateral
Certification is to be provided hereunder, any and all Revolving Credit Loans
based upon such Collateral under this Agreement shall then be made only in the
Administrative Agent’s sole discretion exercised in good faith, and said
Revolving Credit Loans will only be reinstated in accordance with this
Agreement in the event the necessary certification(s) is (are) provided to the
Administrative Agent by no later than the thirtieth (30th) day following the
date(s) such certification(s) was (were) to have been furnished pursuant to
this Agreement. However, should such failure continue following said thirtieth
(30th) day, any and all Revolving Credit Loans based upon Eligible Inventory
shall then no longer be included under this Agreement within the Borrowing Base
and the maximum amount of Revolving Credit Loans shall be reduced accordingly.

All such financial
statements shall be complete and correct in all material respects and shall be
prepared in reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except as approved by such accountants or
officer, as the case may be, and disclosed therein).

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Certificates;
Other Information.

Furnish to the
Administrative Agent:

within fifteen
(15) days of the last Business Day of each fiscal month: (i) a Borrowing Base
Certificate for each Borrower, (ii) an aging of accounts payable and accounts receivable as of
the last day of the prior month and in such form and detail as the
Administrative Agent may reasonably request that is consistent with the
Borrower’s accounting practices as in effect as of the Closing Date, provided
that such accounting practices remain in conformance with GAAP, together with a
report reconciling Accounts to such Borrowers’ general ledger, the last
Borrowing Base Certificate and financial statements of the applicable month;
and (iii) an updated listing of all Inventory of each Borrower, including
details of all Inventory not in Borrower’s possession, together with report
reconciling Inventory to such Borrower’s general ledger on an aggregated basis
(versus a location by location basis), the last Borrowing Base Certificate and
financial statements of the applicable month.

promptly after
the end of each calendar quarter and together with the unaudited balance sheets
required to be delivered under Section 8.1(b), a certificate of a Responsible
Officer certifying that, (i) such unaudited balance sheets are accurate and
complete, (ii) as at the end of such calendar quarter, if applicable, it was in
compliance with all of the covenants set forth in Section 9.1 hereof, and (iii)
no Event of Default has occurred under the Senior Notes Indenture and (iv) that
no other Default or Event of Default has occurred, which certificate shall be
in the form of Exhibit S hereto, and shall be accompanied by a schedule
which sets forth in reasonable detail (as determined in good faith by the
Administrative Agent) the following information: (A) Fixed Charge Coverage
Ratio calculations, (B) all Permitted Acquisitions, (C) all Capital Stock
repurchases, (D) all Investments permitted under this Agreement, and  (E) all debt redemptions.

no more than
ninety (90) days after the beginning of each of SMI and its consolidated
subsidiaries’ fiscal years beginning with its next fiscal year, a quarter by
quarter projected operating budget and cash flow of SMI and its consolidated Subsidiaries
for such fiscal year (including an income statement for each month and a
balance sheet as at the end of the last month in each fiscal quarter), together
with a schedule which sets forth each of SMI and its consolidated subsidiaries
projected Fixed Charge Coverage Ratio calculations for each quarter, such
projections to be accompanied by a certificate signed by a Responsible Officer
to the effect that such projections have been prepared on the basis of sound
financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness
of any material assumptions on which such projections were prepared;

immediately
upon learning thereof, a report of all matters materially affecting the value,
enforceability or collectability of any portion of the Collateral in excess of
$250,000; after the withdrawal by the Administrative Agent of its authority to
do so, a Loan Party shall not, without the Administrative Agent’s prior written
consent, compromise or adjust any Accounts (or extend the time for payment
thereof) or accept any returns of merchandise or grant any additional
discounts, allowances or credits thereon;

concurrently
with the delivery of the financial statements referred to in Section 8.1(a) and
(b), a certificate of such Loan Party signed by a Responsible Officer of such
Loan Party stating such Loan Party is in compliance in all material respects
with all federal, state and 

 47
 

 

local laws relating to environmental
protection and control and occupational safety and health; to the extent that
such Loan Party is not in material compliance with the foregoing laws, the
certificate shall set forth with specificity all areas of non-compliance and
the proposed action it will implement in order to achieve material compliance;

written
notification of any litigation in excess of $250,000 at any time pending in the
aggregate, affecting such Loan Party, whether or not the claim is covered by
insurance, and of any suit or administrative proceeding, which may adversely
affect the Collateral or such Loan Party’s business, assets, operations,
condition or prospects (financial or otherwise);

prompt written
notification of the occurrence of (i) any Default or Event of Default; (ii) any event, development
or circumstance whereby the financial statements most recently furnished to the Administrative Agent fail in any material
respect to present fairly, in accordance with GAAP consistently applied, the
financial condition and operating results of such Loan Party as of the date of
such financial statements; (iii) any accumulated retirement plan funding
deficiency under the Internal Revenue Code; (iv) each and every default or
event of default by such Loan Party which has resulted in acceleration of, or which
might result in the acceleration of, the maturity of any Indebtedness in excess
of $500,000 and the amount of Indebtedness involved; and (v) any other
development in the business or affairs of such Loan Party which would
reasonably be expected to have a Material Adverse Effect in each case
describing the nature thereof and the action such Loan Party proposes to take
with respect thereto;

immediate
notification if any of its Accounts arise out of contracts between a Loan Party
and the United States, any state, or any department, agency or instrumentally
of any of them;

promptly upon
receipt of the same from any of the following: a Dealer Note Purchase Party,
ITT, the Senior Notes Trustee, or any Senior Note Holder a copy of any notice
or other communication pertaining to the occurrence of an event of default
under any agreement, instrument or document of such Loan Party with or
concerning such Person, or pertaining to the occurrence of any event, which
with the giving of notice, the passage of time, or both, would constitute an
event of default under any such agreement, instrument or document;

such
additional information as the Administrative Agent may reasonably request
(including but not limited to, financial projections, in form and content, and
at intervals satisfactory to the Administrative Agent) to enable the
Administrative Agent and each Lender to determine whether the terms,
representations, warranties, covenants, agreements, provisions and conditions
of this Agreement have been complied with by the Loan Parties. Without the
necessity of any request by the Lender, each Loan Party shall automatically
provide to each Lender: (i) copies of all environmental audits and reviews,
(ii) notice, at least thirty (30) days prior to such Loan Party’s opening of any
new office or place of business, or any proposed new or different location(s)
of Collateral (which Collateral shall only be removed, except with respect to
dispositions of Collateral that are permitted under the Security Agreement,
from such location(s) with the prior written consent of the Administrative
Agent and the Required Lenders, which shall not be unreasonably withheld, but
which shall not be considered to have been unreasonably withheld as to any
matters pertaining to continuous perfection of all of the Liens of the
Administrative Agent for the ratable benefit of the Lenders), or such Loan
Party’s closing of
any existing office or place of business, and (iii) promptly upon such
Loan Party’s learning 

 48
 

 

thereof, notice of any labor dispute to which
such Loan Party may become a party, any strikes or walkouts relating to any of its plants or
other facilities, and the expiration of any labor contract to which it is a
party or by which it is bound;

promptly upon
becoming aware of the same, written notice of any violation of any law,
statute, regulation or ordinance of any governmental entity, or of any agency
thereof, applicable to it which may materially adversely affect the Collateral
or the business, assets, operations or condition (financial or otherwise) of
any Borrower or the Loan Parties taken as a whole and which violation, if it
were to continue, involves or could reasonably be expected to involve in excess
of $250,000 in the aggregate to finally and fully satisfy and resolve. In
calculating the foregoing dollar amount, there shall be included any and all
amounts necessary, in the sole judgment of the Administrative Agent, exercised
in good faith, to discharge the pertinent violation, including without
limitation all principal, interest, premium, penalties, assessments and other
charges imposed or which might be sought or imposed at any time in connection
therewith. Nothing contained herein, however, is or shall be deemed to
authorize any non-payment of taxes when due;

by no later
than the last Business Day of each month, promptly furnish to the
Administrative Agent with a copy to each Lender a report listing the amount of
outstanding notes purchased by a Dealer Note Purchase Party, if applicable,
during such month;

written
notification of any intention on the part of any Borrower to discharge its
present accountants or any withdrawal or resignation by such independent
accountants from their acting in such capacity; and

written
notification of any change in Borrower’s president, chief executive officer,
chief financial officer (without regard to the title(s) actually given to the
persons discharging the duties customarily discharged by officers with those
titles).

Payment of Indebtedness.

Pay, discharge or
otherwise satisfy at or before maturity (subject, where applicable, to
specified grace periods and, in the case of trade payables, to normal payment
practices) all of its obligations and liabilities of whatsoever nature, except
when the amount or validity thereof is currently being contested in good faith
by appropriate proceedings and it shall have provided for such reserves: (a)
prior to any Event of Default which is continuing, and provided that the amount
in controversy is $500,000 or less, as it may reasonably deem proper or
necessary; and (b) subsequent to any Event of Default which is continuing, or
in the event that the amount in controversy is $100,000 or more, as the
Administrative Agent may reasonably deem proper and necessary. The foregoing
exception shall not apply, however, with respect to any Indebtedness to any of
the following Persons: any Dealer Note Purchase Party, if applicable, the
Senior Notes Trustee, the Senior Note Holders, NYCIDA, and/or any Person who
such Borrower is obligated to cause to enter into an Intercreditor Agreement
with the Lender.

Conduct of Business and Maintenance of Existence and Assets.

Conduct
continuously and operate actively its business according to good business
practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except for dispositions of Collateral that are permitted under the Security
Agreement), including, without limitation, all 

 49
 

 

licenses, patents, copyrights, trade names,
trade secrets and trademarks; (b) keep in full force and effect its existence
and comply in all material respects with the laws and regulations governing the
conduct of its business; (c) make all such reports and pay all such franchise
and other taxes and license fees and do all such other acts and things as may
be lawfully required to maintain its rights, licenses, leases, powers and
franchises under the laws of the United States or any political subdivision
thereof; (d) file all federal, state and local tax returns and other reports
such Loan Party is required by law to file, maintain adequate reserves for the
payment of all taxes, assessments, governmental charges, and levies imposed
upon it, its income, or its profits, or upon any property belonging to it, and
pay and discharge all such taxes, assessments, governmental charges and levies
prior to the date on which penalties attach thereto, except where the same are
being contested in good faith by appropriate proceedings and provided that in
such event adequate reserves have been established with respect to each such
claim being contested. If any tax by any governmental authority is or may be
imposed on or as a result of any transaction between it and any Lender which
such Lender may be required to withhold or pay, or if any taxes, assessments or
other charges remain unpaid after the date fixed for their payment, or if any
Lien other than a Permitted Encumbrance shall be claimed which, in the
Administrative Agent’s reasonable opinion, may create a valid Lien or
encumbrance on the Collateral, the Administrative Agent may without notice to
it pay the tax, assessment, charge or claim, excepting only such taxes as are
being contested by it in good faith and by proper proceedings, funded with
adequate reserves as set forth in this Agreement and the Loan Parties hereby
jointly and severally indemnify and hold the Administrative Agent harmless in
respect of all such items. The amount of any such payment shall be charged to
the Loan Account of the applicable Borrower as a Revolving Credit Loan and,
until it shall furnish the Administrative Agent with an indemnity therefor (or
supply the Administrative Agent with evidence satisfactory to the
Administrative Agent that due provision for the payment thereof has been made);
(e) at all times make prompt payment of contributions required to meet the
minimum funding standards set forth in Sections 302 and 305 of ERISA with
respect to each Plan; (ii)  notify the
Administrative Agent and each Lender as soon as practicable of any Reportable
Event; and (iii) furnish to the Administrative Agent and each Lender, promptly
upon the Administrative Agent’s request therefor, such additional information
concerning any Plan or any other such employee benefit plan as may be
reasonably requested.

Perfection of Security Interest/Intercreditor Agreements.

Take all
action, that may be necessary or desirable, or that the Administrative Agent
may reasonably request, so as at all time to maintain the validity, perfection,
enforceability and priority of the Administrative Agent’s security interest(s)
in the Collateral for the ratable benefit of the Lenders or to enable the
Administrative Agent or any Lender to protect, exercise or enforce its rights
hereunder and in the Collateral, including, without limitation, (i) immediately
discharging Liens other than Permitted Encumbrances and other Liens not
exceeding in any instance and/or in the aggregate the sum of $250,000 which are
being contested by a Loan Party in good faith, by appropriate proceedings and
for which adequate reserves have been established by Loan Party, except only
that such Liens, even if otherwise permitted and being so contested, shall be
immediately discharged at the Administrative Agent’s request, at any point in
time that in the Administrative Agent’s sole discretion, exercised in good
faith, the Administrative Agent determines that the continued existence thereof
does or might interfere with any of the Administrative Agent’s or the Lenders’
rights, remedies or entitlements under this Agreement, or the Administrative
Agent’s or any Lender’s ability to realize upon any Collateral 

 50
 

 

in which first priority Liens have been
granted to Administrative Agent for the ratable benefit of the Lenders under this Agreement,
(ii) obtaining landlord or mortgagee or lien waivers, (iii) delivering to the
Administrative Agent, endorsed or accompanied by such instruments of assignment
as the Administrative Agent may specify, and stamping or marking, in such
manner as the Administrative Agent may specify, any and all chattel paper (except
for any Dealer Notes purchased by a Dealer Note Purchase Party in an aggregate
amount at any time outstanding not to exceed $15,000,000), instruments, letters
of credits and advances thereof and documents evidencing or forming a part of
the Collateral, (iv) entering into warehousing, lockbox and other custodial
arrangements satisfactory to the Administrative Agent, and (v) executing and
delivering instruments of pledge, mortgages, notices and assignments, in each
case in form and substance reasonably satisfactory to the Administrative Agent,
relating to the creation, validity, perfection, maintenance or continuation of
the Administrative Agent’s security interest for the ratable benefit of the
Lenders under the Uniform Commercial Code or other applicable law.  Without limiting any of the rights of the
Administrative Agent or any Lender, including those under this Agreement, if
landlord waivers or warehouse waivers satisfactory to the Administrative Agent
cannot be obtained within 120 days following the Closing Date, the
Administrative Agent shall have the additional right to establish a reserve
until such time, if any, as
said waivers are obtained, of six months rent, in each case, for each
Collateral location for which any such waiver has not been provided by a
Borrower to the Administrative Agent.

Without
limiting the foregoing, enter into such Intercreditor Agreements as the
Administrative Agent may at any time and from time to time require, with any
Person(s) who has (have) or who the Administrative Agent, in its sole
discretion exercised in good faith, believes may have or may assert any Claims
in relation to any of the Collateral, or who may impede or interfere with, or
be in a position to impede or interfere with, any of the Administrative Agent’s
or Lender’s rights or remedies under or in connection with this Agreement
and/or any of the other Basic Documents, or the Administrative Agent’s or any
Lender’s ability to deal with the Collateral in the manner permitted under this
Agreement.

Execute any and
all other instruments or documents and take such other action as may be
required to perfect the Administrative Agent’s security interest in the
Collateral for the ratable benefit of the Lenders.  Each of the Loan Parties hereby authorizes
the Administrative Agent to file all financing statements and continuation
financing statements as are necessary in the Administrative Agent’s sole
discretion to perfect and maintain a first priority security interest in all of
the Collateral.

If requested
by the Administrative Agent, (i) cause all Dealer Notes entered into before or
after the Closing Date to be executed by the maker thereof and (ii) deliver
each such Note to a collateral agent acceptable to the Administrative Agent in
its sole and absolute discretion under documentation in form and substance
satisfactory to the Administrative Agent in its sole and absolute discretion.

Cause (i) all
Intercompany Indebtedness to be subordinate in all respects to the Obligations
owing to the Lenders and the Administrative Agent under this Agreement and (ii)
all notes, negotiable instruments or other written instruments that evidence
Intercompany Indebtedness to be endorsed to indicate such subordination and
(iii) copies of all documents and instruments evidencing Intercompany
Indebtedness to be promptly delivered to the Administrative Agent.

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All reasonable
charges, expenses and fees the
Administrative Agent may incur in doing any of the foregoing, and any local
taxes relating thereto, shall be charged to the Borrowers’ Account and added to
the Obligations, or at the Administrative Agent’s option, shall be paid to the Administrative Agent immediately
upon demand; provided, however, and notwithstanding anything to the contrary in
this Agreement or in any other Loan Document if the execution and delivery of
this Agreement or any Loan Document results in the imposition or assessment of
any recording,
stamp or similar tax or assessment in connection with Steinway Hall that would
not otherwise have been imposed or assessed but for the execution and delivery
of this Agreement, the Loan Parties shall have no obligation to pay such
recording or similar tax and any adverse effect on the Collateral subject to
the Steinway Hall Mortgage resulting from any such failure to pay the same shall
not constitute a Default or any Event of Default hereunder. In the event that
waivers (other than landlord waivers, which are governed above) cannot be
obtained by the Closing Date, or within a reasonable period of time thereafter
as determined in the sole discretion exercised in good faith of the
Administrative Agent exercised in good faith, then the Administrative Agent may
hold such additional reserves as it may deem necessary or desirable in order to
safeguard the interest of the Lenders in the Collateral located at such
premises.

Collateral.

Safeguard and protect all
Collateral for the Lenders’ general account. 
Notwithstanding anything to the contrary in this Section 8.6, the
Lenders agree that the Administrative Agent shall, at any time, on written request
of the Borrowers release the Steinway Hall Mortgage and the Steinway Hall ALR
or assign the mortgagee’s interest in the Steinway Hall Mortgage and the
Steinway Hall ALR encumbering Steinway Hall to any person identified by
Borrowers, provided that, such assignment shall be without recourse and without
representation or warranty, express or implied.

Defense of Lenders’ Interests.

Defend each and all of
the Lenders’ interests in the Collateral against any and all Persons
whatsoever. At any time following an Event of Default or demand by the
Administrative Agent for payment of any Obligations in accordance with this
Agreement, the Administrative Agent shall have the right to take possession of
the indicia of the Collateral and the Collateral in whatever physical form contained, including without
limitation: labels, stationery, documents, instruments and advertising
materials. If the Administrative Agent exercises such right to take possession
of the Collateral, (i) each of the Loan Parties shall, upon demand, assemble
such indicia or such Collateral in accordance with the Administrative Agent’s
instructions and make such indicia available to the Administrative Agent at a
place reasonably convenient to the Administrative Agent, and (ii) each of the
Loan Parties shall, and the Administrative Agent may, at its option, instruct
all suppliers, carriers, forwarders, warehouses or others receiving or holding
cash, checks, Inventory, documents or instruments in which the Administrative
Agent holds a paramount security interest to deliver the same to the
Administrative Agent and/or subject to the Administrative Agent’s order and if
they shall come into a Loan Party’s possession, they, and each of them, shall
be held by such Loan Party in trust for the benefit of the Administrative
Agent, and such Loan Party will immediately deliver them to the Administrative
Agent in their original form together with any necessary endorsement. In
addition, with respect to all Collateral, the Administrative Agent and each
Lender shall be entitled to all of the rights and remedies set forth herein, in
any of the Security Documents or as provided by the Uniform Commercial Code or
other applicable law.

Books and
Records.

Keep proper books of record and account, in which full, true and correct
entries shall be made of all dealings or transactions of or in relation to its
business and affairs; (ii) set up

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on its books accruals with respect to all taxes, assessments, charges,
levies and claims; and (iii) set up on its books, from its earnings, allowances
against doubtful Accounts, advances and investments and all other proper
accruals (including without limitation by reason of enumeration, accruals for
premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which allowances shall be
established out of such earnings, on a reasonably current basis and shall be
set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by such Loan Party.

Maintain an
inventory reporting system that provides accurate current stock, cost and sales
records of Inventory, that accurately and sufficiently itemizes and describes
the kinds, types and quantities of inventory and the cost and selling price
thereof, that shows all additions, sales, claims, returns, and allowances with
respect to the Inventory.  The
Administrative Agent hereby confirms and acknowledges, that as of the date of
this Agreement, that the Loan Parties’ current inventory reporting systems
satisfy all of the requirements under this Section 8.8(b).

Keep reports
and records on the Concert and Artist Bank Pianos, that accurately and
sufficiently itemizes and describes the location, the types and quantities of
such pianos, the value of the same and if applicable, the selling price
thereof.

Financial
Disclosure.

Irrevocably
authorize and direct all accountants and auditors employed by any of them at
any time during the term of this Agreement to exhibit and deliver to the
Administrative Agent and each Lender copies of such Party’s financial
statements, trial balances or other accounting records of any sort in the
accountant’s or auditor’s possession, including without limitation all
management letters and consultant reports, and to disclose to the Lender any
information such accountants may have concerning their respective financial
status and business operations.  Each of
the Loan Parties hereby agrees to use its best efforts to cause their accountants
and auditors to enter into written agreements with the Administrative Agent in
order to implement this provision, which must be in form and substance
acceptable to the Administrative Agent in the Administrative Agent’s reasonable
discretion; in the event of the failure of such Loan Party’s accountants to so
finalize any such agreements, such Loan Party agrees: (i) to then take such
further action, as the Lender may from time to time reasonably request, in
order to obtain such agreements, including without limitation retaining another
accounting firm, and/or (ii) that the Administrative Agent shall be authorized
to assist such Loan Party in locating and retaining other accountants for such
Loan Party, who will enter into such agreements, to which retention such Loan
Party agrees not to unreasonably withhold its consent and which retention shall
also be at the sole cost and expense of such Loan Party (as long as reasonable)
and for which the Administrative Agent shall have no liability whatsoever. Each
of the Loan Parties also hereby authorizes, and shall cause SMI and each of its
respective Subsidiaries to authorize, all federal, state and municipal
authorities to furnish to the Administrative Agent and each Lender copies of
reports or examinations relating to any of them, whether made by such Loan
Party or otherwise.

Compliance with Laws.

Comply with all acts,
rules, regulations and orders of any legislative, administrative or judicial
body or official applicable to the Collateral or any part thereof or to the
operation of such Loan 

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Party’s business, the
non-compliance with which would have a material adverse effect on the
Collateral, or the operations, business or condition (financial or otherwise)
of such Loan Party.

Inspection of
Premises; Audits and Examinations

(a)           Upon reasonable prior notice (except
that upon the occurrence and during the continuation of an Event of Default, no
such notice shall be required) grant to the Administrative Agent and the
Lenders, and their respective representatives, access to and the right to
audit, check, inspect and make abstracts and copies from the books, records,
audits, correspondence and all other papers relating to the Collateral of each
Loan Party and the operation of their respective businesses.  Provided, however, the Administrative Agent
will not conduct such inspection, audit or examination, unless Loans and/or and
any other Obligations are outstanding and in no event more than once in any six
month period, unless an Event of Default has occurred and is continuing.  The Administrative Agent, any Lender and any
of their agents may enter upon any of their respective premises including,
without limitation, any premises where Collateral is located, with reasonable
prior notice (except that upon the occurrence and during the continuation of an
Event of Default, no such notice shall be required), at any time during
business hours (or after business hours upon the occurrence and during the
continuation of an Event of Default) and for the purpose of inspecting, conducting
on-site audits and examinations of Borrower’s Collateral and any and all
records pertaining thereto and the operation of any of such businesses.  Notwithstanding anything to the contrary
herein, the Lenders hereby agree that the Administrative Agent may, in its
reasonable discretion waive one, but no more than one, of the two annual audits
provided under this Section 8.11 , provided that the following conditions have
been met (i) no Event of Default has occurred and is continuing; (ii) the
Borrower’s Excess Availability is at least $50,000,000 and (iii) the amount of
all Outstanding RC Extensions of Credit is less than or equal to $30,000,000.

Payment of Taxes.

If any Non-Excluded Taxes
by any governmental authority is or may be imposed on or as a result of any
transaction between a Loan Party and the Administrative Agent or any Lender
where the Administrative Agent or any Lender may be required to withhold or pay
or if any Non-Excluded Taxes remain unpaid after the date fixed for their
payment, or if any claim shall be made which, in the Administrative Agent’s
opinion, would possibly create a valid Lien or claim on the Collateral, the
Administrative Agent may without notice to the Borrowers pay such Non-Excluded
Taxes, and each of the Loan Parties hereby indemnify and hold the
Administrative Agent harmless in respect thereof. The amount of any payment by
the Administrative Agent under this Section 8.12 shall be charged to any of
Borrowers’ account(s) as a Revolving Credit Loan and added to the Obligations
and, until the Borrowers shall furnish Administrative Agent with an indemnity
therefor (or supply the Administrative Agent with evidence satisfactory to the
Administrative Agent that due provision for the payment thereof has been made),
the Administrative Agent may hold without interest any balance standing to a
Borrower’s credit to the extent necessary to cover such charges and the
Administrative Agent shall retain its security interest for the ratable benefit
of the Lenders in any and all Collateral held by it.

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Payment of Leasehold Obligations.

Pay, when and as due, its rental obligations under all
leases under which it is a tenant, and shall otherwise comply, in all material
respects, with all other terms of such leases and keep them in full force and
effect and, at the Administrative Agent’s request, will provide evidence of
having done so.

Government
Receivables.

Take all steps deemed
necessary or desirable, in the Administrative Agent’s reasonable judgment, to
protect the Lenders’ interest in the Collateral under the Federal Assignment of
Claims Act or other applicable state or local statutes or ordinances and
deliver to the Administrative Agent for the ratable benefit of the Lenders
appropriately endorsed, any instrument or chattel paper connected with any
Account arising out of contracts between it and the United States, any state or
locality, or any department, agency or instrumentality of any of them.

Guarantees/General Security Agreements.

Cause each of its future
Subsidiaries that is not an “Unrestricted Subsidiary” (as defined in the Senior
Notes Indenture) and that, under the terms of the Senior Notes Indenture, is
required to become a “Guarantor” thereunder, to execute and deliver to the
Administrative Agent and each Lender an
instrument pursuant to which such Subsidiary shall become a Loan Party
hereunder and bound hereby to the extent set forth in Section 22 of the
Security Agreement and a separate Guarantee and such Security Documents as
shall be necessary or advisable, in the opinion of the Administrative Agent,
for such Subsidiary to grant Liens on substantially all of its property in
favor of the Administrative Agent for the ratable benefit of the Lenders. The
Administrative Agent and each Lender shall also be entitled to such incumbency
certificates, certified copies of charter documents and resolutions and such
legal opinions and other documents and instruments as shall be consistent with
those delivered pursuant to Section 7.2 hereof.

Purpose of
Loans.

To the extent
available under this Agreement, use the proceeds of the Loans to repay the Term
Loan, to pay transactional and legal expenses associated herewith, for working
capital and other legally permitted business purposes, including without
limitation the Refinancing of Indebtedness in the manner contemplated by
Section 9.11 hereof.

Additional Notes and Refinancing Documents.

Upon the
consummation of any of the following, promptly deliver to the Administrative
Agent copies of all documentation relating to (i) the issuance of Additional
Notes; or (ii) the Refinancing of any of the Additional Notes, Senior Notes or
Intercompany Indebtedness, as the case may be.

Environmental
Laws.

Comply with
and use commercially reasonable efforts to ensure compliance by all tenants and
subtenants, if any, with, all applicable Environmental Laws and obtain and
comply in all material respects with and maintain, and use commercially
reasonable efforts to ensure that all tenants and subtenants obtain and comply
in all material respects with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws except to the extent that failure to do so could not be reasonably
expected to have a Material Adverse Effect.

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Conduct and
complete all investigations, studies, sampling and testing, and all remedial,
removal and other actions required under Environmental Laws and promptly comply
in all material respects with all lawful orders and directives of all
Governmental Authorities regarding Environmental Laws except to the extent that
the same are being contested in good faith by appropriate proceedings and the
pendency of such proceedings could not be reasonably expected to have a
Material Adverse Effect.

Additional Assurances.

Take such further
actions, to refrain from taking further actions and to execute and deliver to
the Administrative Agent and each Lender, upon request, such instruments,
documents and agreements, as the Administrative Agent may, at any time and from
time to time reasonably request, in order to carry out the intent, purposes,
terms or conditions of this Agreement and the other Basic Documents.

NEGATIVE COVENANTS

Each Loan Party
hereby agrees that, so long as any of the Commitments remain in effect or any
amount is owing to any Lender or the Administrative Agent hereunder or under
any other Loan Document, it shall not:

Fixed Charge Coverage.

Upon the occurrence of a
Trigger Event and continuing until such time that (i) if the Trigger Event is
based on Excess Availability, the Borrowers maintain Excess Availability of at
least $20,000,000 for thirty (30) consecutive days or (ii) if the Trigger Event
is based on an Event of Default, such Event of Default is waived or cured, if
applicable, permit a Fixed Charge Coverage Ratio of less than 1.10 to 1 for
each period of four consecutive fiscal quarters ending on the last day of each
fiscal quarter of SMI.

Limitation on
Indebtedness.

Create, incur, assume or
suffer to exist any Indebtedness (exclusive of trade debt and accrued expenses
incurred in the ordinary course of business), except:

Indebtedness
of the Borrowers under this Agreement;

Intercompany
Indebtedness and any Refinancing of the same, provided, that the same shall be
subordinated to the Obligations and be evidenced by a written instrument which
has been marked with a legend reflecting such subordination and pledge, a copy
of which has been delivered to the Administrative Agent for the benefit of the
Lenders;

Indebtedness
of the Borrowers and any of their Subsidiaries incurred to in connection with
capital expenditures;

Indebtedness
or other obligations to a Dealer Note Purchase Party pursuant to the Dealer
Note Purchase Agreement not to exceed $15,000,000 in the aggregate;

Indebtedness
of any Loan Party to any direct or indirect Subsidiary of SMI in existence on
the date hereof as identified on Schedule 9.2 hereto and subject to
Administrative Agent’s prior consent, any Refinancing of the same;

 56
 

 

the Senior
Notes and any guarantees of the Senior Notes and any Refinancings of the same
with senior notes or subordinated notes that are obligations of SMI provided
that such notes are on such customary terms and conditions as are then
available in the market for issuers of similar credit profile;

the Additional
Notes and any guarantees of the Additional Notes and any Refinancings of the
same with unsecured notes or subordinated secured notes (and if such notes are
subordinated secured notes, subject to an Intercreditor Agreement, in form and
substance reasonably acceptable to the Administrative Agent) that are
obligations of the Loan Parties provided that such notes are on such customary
terms and conditions as are then available in the market for issuers of similar
credit profile;

any other
Indebtedness of any Loan Party which is absolutely and unconditionally
subordinated in payment to the Loans to the Lenders; provided that the
terms and conditions thereof are acceptable to the Administrative Agent and
each Lender in its sole discretion exercised in good faith; and

pension
liabilities of the Loan Parties that do not result in the representations and
warranties in Section 6.11 being incorrect in any material respect.

For
the avoidance of doubt, notwithstanding anything to the contrary set forth in
this Agreement or any Loan Document, the Loan Parties may issue, guarantee, or
Refinance the Senior Notes, any Additional Notes and any Intercompany
Indebtedness without the consent of the Administrative Agent or any of the
Lenders, provided, that any such Refinancing complies with the applicable
requirements set forth in the definition of “Senior Notes,” “Additional Notes,”
or “Intercompany Indebtedness,” as the case may be.

Limitation on Liens.

Create or
suffer to exist any Liens or claims upon or against any of its property or
assets now owned or hereafter acquired, except Permitted Encumbrances. Without
limiting the foregoing, no additional Liens on any of such property and/or
assets of it, SMI or any of their respective Subsidiaries, shall be offered or
granted to any of the following Persons: the Senior Notes Trustee, the Senior
Note Holders and/or any Persons who under this Agreement the Lenders are
entitled to have such Borrower cause to enter into an Intercreditor Agreement
with the Administrative Agent for the benefit of the Lenders, unless and until
the Lenders are offered and granted a first and paramount Lien in the identical
property and/or assets intended to be offered or granted to such other Persons,
as additional collateral for all of the Loans and an Intercreditor Agreement
with any such Person(s) is in place, in form and substance acceptable to the
Administrative Agent, in its sole discretion, exercised in good faith.

Enter into any
transaction which materially and adversely affects the Collateral or its
ability to repay the Loans.

Limitation on
Guarantee Obligations.

Be or become liable in respect of any
Guarantee Obligation except (i) Guarantee Obligations in connection with the
Senior Notes, (ii) Guarantee Obligations in connection with the Additional
Notes, (iii) ITT Guarantees from time to time outstanding having a maximum
liability at any one time outstanding not to exceed $2,000,000 and (iv) other
Guarantee Obligations (A) that could otherwise have been incurred in the
ordinary course of business but 

 57
 

 

for the provisions of this Section 9.4(a), and (B) for which written
consent from the Administrative Agent has been obtained, which consent will not
be unreasonably withheld.

Without limiting the foregoing, no additional Guarantees
from it, SMI, or any of their respective present or future Subsidiaries, shall
be offered or granted to any of the following: any Dealer Note Purchase Party,
the Senior Notes Trustee, the Senior Notes Holders and/or any Person who under
this Agreement the Lenders are entitled to have such Loan Party cause to enter
into an Intercreditor Agreement with the Administrative Agent for the ratable
benefit of the Lenders, unless and until the Lenders are additionally offered a
Guaranty from the same party and the Guaranty is executed and delivered in
favor of the Administrative Agent for the benefit of the Lenders from such
party(ies), for all of the Obligations, which Guaranty must be in form and
substance acceptable to the Administrative Agent, in its sole discretion, exercised in good
faith.  In no event shall a Loan Party
become liable for a Guarantee Obligation in respect of a Non-Guarantor
Subsidiary.

Limitation on
Fundamental Changes.

Except in
connection with a Permitted Acquisition, in respect of clauses (a) through (c)
and clause (e) below,

Enter into any
merger, consolidation or other reorganization with or into any other Person,
(b) acquire all or a substantial portion of the assets or stock of any Person,
(c) permit any other Person to consolidate with or merge with it, (d) change
its jurisdiction of incorporation, or (e) otherwise engage in any other
material changes in or to its corporate structure or identity.

Limitation on Leases.

Enter as lessee into any
lease arrangement for real or personal property (unless capitalized) if after
giving effect thereto, aggregate annual rental payments for all leased property
would exceed $6,000,000 plus any and all amounts due in connection with land
and building lease obligations in connection with Steinway Hall, in any one
fiscal year, but no lease payments may be made by a Loan Party to a Loan Party
or to a Non-Guarantor Subsidiary.

Limitation on Dividends.

Declare, pay or make any
dividend or distribution on any shares of its Capital Stock (other than
dividends or distributions payable in its Capital Stock, or split-ups or reclassifications
of its Capital Stock or dividends paid by a Loan Party to a Loan Party),
provided however, that the preceding limitations shall not apply at any time to
any transaction permitted by Section 9.9(c) hereof.

[Reserved].

Limitation on Investments; Acquisitions.

Make any acquisition of
any Proposed Acquisition Target or Investments, except, provided
however, that if no Event of Default shall have occurred and be continuing it
may:

make Permitted
Acquisitions.

make
Investments (x) in connection with Permitted Acquisitions of the type defined
in Section (b) of the definition of Permitted Acquisitions, and (y) in
aggregate amount not to exceed (A) $50,000,000 less (B) the amount of
all Permitted Acquisitions (of the type 

 58
 

 

defined in subsection (a) of the definition
of Permitted Acquisitions) made pursuant to Section 9.9(a) hereof, provided,
that with respect to sub-paragraph (y) above, 
that no single Investment shall exceed $15,000,000; provided, however,
that in no event shall a Loan Party make any Investment in any Non-Guarantor
Subsidiary without the consent of the Administrative Agent except for (i)
Investments permitted under Section 9.10 or (ii) Investments in the form of
term loans or capital contributions in an aggregate amount not to exceed (X)
the Allowed Investment Amount (defined below) less (Y) the amount of
Investments made pursuant to Section 9.9(c).

Redeem,
repurchase, retire or otherwise acquire or distribute dividends in respect of
the stock of any Loan Party in an aggregate amount not to exceed (A)
$25,000,000 plus (B) fifty percent (50%) of the cumulative consolidated
SMI net income earned 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.

make
Investments in (i) bank certificates of deposit and savings accounts, (ii)
obligations of the United States, (iii) prime commercial paper maturing within
ninety (90) days of the acquisition by any Loan Party and (iv) deposits made in
connection with Permitted Encumbrances.

Loans.

Make or suffer to exist advances, loans or extensions
of credit or capital contributions (“Loans”) to any Non-Guarantor
Subsidiary at any time (except for Loans existing on the date hereof and
disclosed on Schedule 9.10 or allowed pursuant to Section
9.9(b)), or to any other Person which exceed $1,000,000 in the aggregate at any
one time, other than (a) Intercompany Indebtedness, (b) Loans consisting of
Indebtedness of employees evidenced by promissory notes incurred in connection
with the acquisition of Capital Stock of SMI (c) non-cash allocations of fees
and expenses to Non-Guarantor Subsidiaries of Steinway in the ordinary course
of business, (d) the Dealer Notes, and (e) Steinway Dealer Loans, provided,
that, immediately after giving effect to any such Loan, Excess Availability
shall not be less than $25,000,000.

Limitation on Optional Payments and Modifications of Debt Instruments.

At any time,
without the prior written consent of the Administrative Agent or the Required
Lenders, directly, or indirectly: (a) pay, prepay, or redeem (or provide any
escrow for the redemption of) any Indebtedness (other than to the Lenders) or
otherwise, directly or indirectly, take any step or action which causes,
results in or otherwise results in or may result in the payment, prepayment,
retirement, redemption or other acquisition of any such Indebtedness prior to
the end of the term of this Agreement including, without limitation, any
sinking fund or any equivalent funding arrangement, whether of principal,
premium, interest or otherwise; or (b) grant any right to any party to whom any
such Indebtedness is owing, through the end of the term of this Agreement,
which would before or after any Default or Event of Default, entitle any such
Person to call for or receive, a payment thereon, or a prepayment or an
acceleration thereof, other than in accordance with such amortization schedules
previously delivered by Conn-Selmer to the Administrative Agent. The above
limitations shall not, however, preclude (i) a Loan Party, to the extent made
in the ordinary course of such Loan Party’s business and prior to the
occurrence of a Default or an Event of Default which is continuing, from making
normal interest and amortization payments on any of such Indebtedness when due,
but only to the limited extent set forth in the amortization schedules
heretofore executed and delivered by Conn-Selmer to the Administrative Agent,
(ii) the
repurchase or redemption by SMI of not more than $15,000,000 

 59
 

 

aggregate principal amount of Senior Notes in any calendar year,
provided that (A) no Default or Event of Default has occurred and is continuing
or would result therefrom and (B) immediately after giving effect to any
such repurchase or redemption, Excess Availability shall not be less than
$25,000,000, or (iii) the
Refinancing of the Senior Notes, Additional Notes or Intercompany Indebtedness
in accordance with Section 9.2 hereof. 
Except as expressly permitted above, subsequent to the occurrence of a
Default or an Event of Default which is continuing, however, such Loan Party
shall not pay, prepay, or redeem any Indebtedness (other than to the Lenders)
or otherwise, directly or indirectly, take any step or action which causes,
results in or otherwise results in or may result in the payment, prepayment,
retirement, redemption or other acquisition of any such Indebtedness prior to
the end of the term of this Agreement, whether of principal, premium, interest or
otherwise, including without limitation of any amounts that otherwise would
have constituted normal interest amortization payments in accordance with the
amortization schedules heretofore executed and delivered by Conn-Selmer to the
Administrative Agent.

SMI will not
effect a legal or covenant defeasance pursuant to Article 8 of the Senior Notes
Indenture without the prior written consent of the Administrative Agent.

[Reserved].

Limitation on Transactions with Affiliates.

Except as expressly
permitted hereunder, directly or indirectly purchase, acquire or lease any
property from, or sell, transfer or lease any property to, or otherwise deal
with, any Affiliate, except transactions in the ordinary course of business, on
an arms-length basis on terms no less favorable than terms which would have
been obtainable from a Person other than an Affiliate, which have been
disclosed in writing to the Administrative Agents.  Notwithstanding the foregoing, this Section
9.13 shall not apply to any employment or management contract between any Loan
Party and Dana Messina or Kyle Kirkland.

Fiscal Year and Accounting Changes.

(a)           Change its fiscal year from December
31 of each year, or (b) make any change in (i) accounting treatment and
reporting practices except as permitted by GAAP or (ii) tax reporting treatment
except as permitted by law.

Limitation on Negative Pledge Clauses.

Enter into with any Person any agreement, other than
(a) this Agreement, (b) the Senior Notes Documents, (c) documents related to
any Additional Notes and (d) any industrial revenue bonds, purchase money
mortgages or Financing Leases permitted by this Agreement (in which cases, any
prohibition or limitation shall only be effective against the assets financed
thereby), which prohibits or limits the ability of the Borrower or any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired.

Nature or Location(s) of Business.

Substantially change the
nature of the business in which it is presently engaged, enter into any new
business, or except as specifically permitted herein, purchase or invest,
directly or indirectly, in any assets or property other than in the ordinary
course of business, which assets or property are useful in, necessary for and
are to be used in its business as presently conducted. It 

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shall not transfer its
executive offices, or open new manufacturing plants, or transfer existing
manufacturing plants, or maintain warehouses or records with respect to
Accounts or Inventory, at any locations other than those at which the same are
presently kept or maintained, as set forth on Schedule 9.16 hereto,
except with Administrative Agent’s prior written consent and after the delivery
to the Administrative Agent of financing statements, if required by the
Administrative Agent, in form satisfactory to the Administrative Agent.

Partnership,
Etc.

Enter into any
partnership, joint venture or similar arrangement except pursuant to terms that
could not be reasonably expected to have a Material Adverse Effect.

[Reserved].

Pledge of
Credit.

Now or hereafter pledge
the Lenders’ credit on any purchases or for any purpose.

Amendments to
Documents.

At any time, without the
prior written consent of the Administrative Agent, amend, modify or change the
terms of, or in any material respect waive or relinquish any rights to or
causes of action under or arising out of, any Senior Notes Document or other
Basic Document, except in accordance with the Refinancing of the Senior Notes
in accordance with Section 9.2(f) or otherwise in accordance with the
definition of Senior Notes.

Limitations Applicable to SMI.

Make any material change
in the nature or conduct of the business as of the Closing Date of SMI and its
Subsidiaries taken as a whole.

Governing Documents.

Amend its certificate of incorporation (except to
increase the number of authorized shares of common stock), partnership
agreement or other Governing Documents, without the prior written consent of
the Required Lenders, which shall’ not be unreasonably withheld or delayed.

Limitation on Securities Issuances by
Subsidiaries.

(A) Permit any Subsidiary to issue any shares of
Capital Stock that are not “certificated securities” (as defined in § 8-102 of
the Uniform Commercial Code as in effect in the State of New York on the date
hereof) and are not pledged to the Administrative Agent pursuant to a Pledge
Agreement or (B) issue or permit any Subsidiary to issue any shares of
preferred stock.

Disposition of Collateral.

Make any disposition of
Collateral, nor cause any other Loan Party to make any disposition thereof,
whether by sale, lease or otherwise except only: (a) for the sale of Inventory
in the ordinary course of business; and (b) that without the Administrative Agent’s
prior written consent, the Loan Parties may make disposition of other assets,
not exceeding, however, up to $1,000,000 in the aggregate in any fiscal year
(and (a) and (b) are herein referred to individually and collectively as “Permitted
Collateral Dispositions”). All Net Proceeds arising as a result of
dispositions of Collateral made in accordance with this Section 9.24 must be
applied in accordance with Section 12.4 hereof.

Notwithstanding anything
to the contrary in this Section 9.24, the Borrowers may (i) sell Steinway Hall
without the prior written consent of the Administrative Agent and (ii) retain
and 

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use all proceeds received
by Borrowers in connection with such sale in its business operations or as
otherwise permitted by this Agreement.

EVENTS OF DEFAULT

If any of the following
events shall occur and be continuing:

Borrowers
shall fail to pay any principal of any Loan when due and in accordance with the
terms of this Agreement; or Borrowers shall fail to pay any interest on any
Loan, or any other amount payable hereunder or under the other Loan Documents
or the Fee Letter, or failure by a Guarantor to perform its obligations under
the Guarantee; or

Any
representation or warranty made or deemed made by a Loan Party herein or in any
of the other Basic Documents or which is contained in any certificate, document
or financial or other statement furnished by it at any time under or in
connection with this Agreement or any such other Basic Documents shall prove to
have been false or misleading in any material respect on or as of the date made
or deemed made or furnished; or

failure by a
Loan Party to (i) furnish financial information when due and at reasonable
times during business hours when requested by the Administrative Agent upon
prior notice pursuant to the terms of this Agreement, or (ii) permit the
inspection of its books or records; or

issuance of a
notice of Lien, claim, levy assessment, injunction or attachment against a
material portion of the property of any Borrower or the Loan Parties taken as a whole, which has not been fully
bonded or removed within forty-five (45) days after the same has occurred, provided that the applicable Loan
Party has indicated to the Administrative Agent that the same is to be fully
bonded or removed and such Loan Party is diligently proceeding during said
forty-five (45) day period to fully bond or remove the same; or

failure by any
Loan Party to comply with any agreement contained in Section 9 of this
Agreement; or

failure or
neglect of a Loan Party, to perform, keep or observe any term, provision,
condition, covenant herein contained, or contained in any other agreement or
arrangement now or hereafter entered into between any of them and the
Administrative Agent and the Lenders, which failure continues for thirty (30)
days after notice from the Administrative Agent to the applicable Loan Party of
such breach; provided however, that: (i) no such notice from the Administrative
Agent to such Loan Party or any other such Person shall be necessary in the
event such Loan Party is otherwise aware of such failure or non-compliance;
(ii) such grace period shall not apply and an Event of Default shall exist
promptly upon such breach, if: (X) such breach is an event or circumstance set
forth in subparagraphs (g) through (p), inclusive, below, (Y) following receipt
of such notice from the Administrative Agent, such Loan Party does not
immediately notify the Administrative Agent in writing that it intends to
remedy or rectify, or alternatively, such Loan Party, is incapable of remedying
or rectifying, such failure or non-compliance by the end of such thirty (30)
day grace period, and (Z) such Loan Party, does not diligently proceed during
such thirty (30) day grace period to remedy or rectify such failure or
non-compliance; or

any judgment
is rendered or judgment liens filed against one or more Loan Parties, for an
amount in excess of $500,000 which within forty-five (45) days of such
rendering 

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or filing is not either satisfied, stayed or
discharged of record (excluding any such judgment or lien which is to be fully
paid through insurance coverages, such that the applicable Loan Party or Loan
Parties, as the case may be, shall not be out-of-pocket for payment of such
judgment or lien, except only for any deductible amount not to exceed $100,000
in the aggregate, provided that the insurance company has confirmed the
foregoing to the Administrative Agent, in writing and in form and substance
reasonably acceptable to the Administrative Agent, and that no aspect(s) of the
relevant policy(ies) is (are) otherwise being contested by the insurer, such
that the aggregate total liability of such Loan Party or Loan Parties, as the
case may be, in
connection therewith is or is not likely to exceed a total of $500,000); or

Any Loan Party
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of
its present business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (v) have a petition in bankruptcy under
any state or federal bankruptcy law filed against it or be adjudicated a
bankrupt or insolvent, (vi) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within sixty (60) days, any petition filed against it in any
involuntary case under such bankruptcy laws, (viii) dissolve, terminate its
existence, cease to conduct its business as now conducted, suspend business,
sell all or substantially all of its assets, (ix) call a meeting of creditors, or (x) take any action for the
purpose of effecting any of the foregoing; or

should any
Person who the Lenders are entitled to have the Loan Parties cause to enter
into an Intercreditor Agreement with the Administrative Agent for the benefit
of the Lenders, at any time breach their respective obligations thereunder to
the Lenders, challenge any Intercreditor Agreement with the Administrative
Agent, take any action` with a view towards challenging the validity or
effectiveness of any such Intercreditor Agreement or any term or provision
thereof, or seeking to modify or invalidate any term or provision thereof, or
otherwise not be in full compliance with their respective responsibilities
and/or undertakings to or with the Administrative Agent thereunder, or

any of
Administrative Agent’s Lien in Accounts, Inventory and/or General Intangibles
and/or in the Collateral pledged by the Loan Parties for the ratable benefit of
the Lenders, which at all times is to constitute a first and paramount Lien in
favor of the Administrative Agent for the ratable benefit of the Lenders, for
any reason ceases to be or is not a valid and perfected Lien having a first
priority interest; or

a default of
the obligations of any Loan Party under any other agreement, instrument or
arrangement to which any of them are a party, or by which any of them or their
respective assets may be bound, which materially adversely affects any of the
respective conditions or affairs (financial or otherwise) of any Borrower or
the Loan Parties taken as a whole; without limiting the foregoing, in any
instance where the amount in controversy or the obligations in default, which
have been accelerated, or which are capable of being accelerated, under such other
agreement exceed a total of $500,000 in the aggregate, it shall conclusively be
presumed that such an adverse consequence results from any such default; or

termination
(except in accordance with the terms thereof in the absence of any default
thereunder) or breach of any of the Basic Documents, or any Guarantee or
similar 

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agreement executed and delivered to the
Administrative Agent or the Lenders in connection with the Loans, or if any
Guarantor attempts to terminate, challenges the validity of, or its liability
under, any such Guaranty or similar agreement; or

any Change in
Control; or

any material
provision of this Agreement or of any of the other Basic Documents shall, for
any reason, cease to be valid and binding on any Loan Party, or if any of them shall
so claim in writing to the Administrative Agent or to any Lender; or

each and all
of the events of default, as now or hereafter constituted, of any Loan Party
under any agreement, instrument or document with or concerning any of the
following Persons: the Senior Notes Trustee, the Senior Notes Holders, NYCIDA,
ITT or any Person(s) with whom the Lenders have the right, in accordance with
this Agreement to require the Loan Parties to enter into an Intercreditor
Agreement, which events of default have not been cured during any applicable
grace period, shall also constitute an Event of Default under this Agreement,
whether or not any such Person(s) has (have) declared an event of default,
otherwise taken any enforcement or other action with respect thereto, or any
such Person(s) has (have) waived the event of default or extended the relevant
grace period, except if any such waiver extends or cures such event of default through the end
of the term of this Agreement, this shall not constitute an Event of Default
hereunder; or

one or more
judgments or decrees shall be entered against any Borrower or any of its
Subsidiaries involving in the aggregate a liability (not paid or fully covered
by insurance) of $500,000 or more, and all such judgments or decrees shall not
have been vacated, discharged, stayed or bonded pending appeal within 60 days
from the entry thereof; or

(i) for any
reason any of the Security Documents shall cease, to be in full force and
effect, or the Borrower or any other Loan Party which is a party to any of the
Security Documents shall so assert or (ii) the Lien created by any of the
Security Documents shall cease to be enforceable and of the same effect and
priority purported to be created thereby;

then, and in any such
event, (A) if such event is an Event of Default specified in clause (h) of this
Section with respect to any Loan Party, automatically the Commitments shall
immediately terminate and the Loans hereunder (with accrued interest thereon)
and all other amounts owing under this Agreement shall immediately become due
and payable, and (B) if such event is any other Event of Default, either or
both of the following actions may be taken: (i) with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the Required
Lenders, the Administrative Agent shall, by notice to the Borrowers declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii)
with the consent of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent shall, by notice
to the Borrowers, declare the Loans hereunder (with accrued interest thereon)
and all other amounts owing under this Agreement (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries of
the then outstanding Letters of Credit have presented the documents required thereunder) to be due and payable
forthwith, whereupon the same shall immediately become due and payable.

All Letters of Credit with respect to which presentment for honor shall
not have occurred at the time of an acceleration pursuant to the preceding
paragraph, the Borrowers shall at such time deposit in a cash collateral
account opened by the Administrative Agent an amount equal to the aggregate
then undrawn and unexpired amount of such Letters of Credit. The Borrowers
hereby grant to the 

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Administrative
Agent, for the benefit of the L/C Participants, a security interest in such
cash collateral to secure all Obligations. Amounts held in such cash collateral
account shall be applied by the Administrative Agent to the payment of drafts
drawn under such Letters of Credit, and the unused portion thereof after all
such Letters of Credit shall have expired or been fully drawn upon, if any,
shall be applied to repay other Obligations of the Borrowers hereunder and
under the Notes. After all such Letters of Credit shall have expired or been
fully drawn upon, all Reimbursement Obligations have been satisfied, and all
other Obligations of the Borrowers under this Agreement and under the Notes
have been paid in full, the balance, if any, in such cash collateral account
shall be returned to the Borrowers.

The Borrowers shall execute and deliver to the Administrative Agent,
for the account of the L/C Participants, such further documents and instruments
as the Administrative Agent may request to evidence the creation and perfection
of the within security interest in such cash collateral account.

Without limiting any of the Lenders’ other rights and remedies
hereunder, including without limitation those following the occurrence of any
Event of Default, if any material adverse change occurs in the condition,
affairs, or prospects (financial or otherwise) of any Loan Party, including without
limitation any such change which in the Administrative Agent’s opinion impairs
the Collateral or the ability of any Borrower or the Loan Parties taken as a
whole to perform the obligations under the Loan Documents to the Administrative
Agent and the Lenders under or in connection with this Agreement or the other
Basic Documents, then until such material adverse change shall finally cease to
exist, the Lenders in such an event shall also have the right to cease making
any Revolving Credit Loans to the Borrowers under or in relation to this
Agreement and there shall be no obligations of the Lenders in this respect and
all of such obligations shall be considered to be of no force and effect for so
long as any such material adverse change may continue to exist.

THE ADMINISTRATIVE AGENT

Appointment.

Each Lender hereby
irrevocably designates and appoints GMAC/CF as the Administrative Agent of such
Lender under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes the Administrative Agent, in such capacity, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Administrative Agent shall not have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Administrative Agent.

Delegation of Duties.

The Administrative Agent
may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys in-fact
selected by it with reasonable care.

Exculpatory Provisions.

Neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates shall be (i) liable for any action lawfully taken or omitted to
be taken by it or 

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such Person under or in
connection with this Agreement or any other Loan Document (except for its or
such Person’s own gross negligence or willful misconduct) or (ii) responsible
in any manner to any of the
Lenders for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in
connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of the Borrower to
perform its obligations hereunder or thereunder. The Administrative Agent shall
not be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Borrowers.

Reliance by Administrative Agent.

The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Borrowers or any other Loan Party), independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Administrative Agent. The Administrative Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate or it shall first be indemnified
to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Lenders or the Required Lenders,
as applicable in accordance with the terms of this Agreement, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Loans.

Notice of Default.

The Administrative Agent
shall not be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default hereunder unless the Administrative Agent has
received notice from a Lender or the Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a “notice
of default”. In the event that the Administrative Agent receives such a notice,
the Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
provided that unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Lenders.

Non-Reliance on Administrative Agent and Other Lenders.

Each Lender expressly
acknowledges that neither the Administrative Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any 

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representations or
warranties to it and that no act by the Administrative Agent hereinafter taken,
including any review of the affairs of the Borrowers or any other Loan Party,
shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender
represents to the Administrative Agent that it has, independently and without
reliance upon the Administrative Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of the Borrowers and the other Loan
Parties and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to
make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrowers. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or under the other Loan Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrowers or any other Loan Party which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.

Indemnification.

The Lenders agree
to indemnify the Administrative Agent in its capacity as such (to the extent
not reimbursed by the Borrowers and without limiting the obligation of the
Borrowers to do so), ratably according to their respective Credit Exposure
Percentages in effect on the date on which indemnification is sought, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the
Administrative Agent’s gross negligence or willful misconduct. The agreements
in this Section shall survive the payment of the Loans and all other amounts
payable hereunder.

Administrative Agent in Its Individual Capacity.

The Administrative Agent
and its Affiliates may make loans to, accept deposits from and generally engage
in any kind of business with the Borrowers and the other Loan Parties as though
the Administrative Agent were not the Administrative Agent hereunder and under
the other Loan Documents. With respect to the Loans made by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not the Administrative Agent, and the terms “Lender” and “Lenders”
shall include the Administrative Agent in its individual capacity.

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Successor Administrative Agent.

The Administrative Agent
may resign as Administrative Agent upon 10 days’ notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from
among the Lenders a successor
Administrative Agent for the Lenders, which successor Administrative Agent
shall be approved by the Borrowers, whereupon such successor Administrative
Agent shall succeed to the rights, powers and duties of the Administrative
Agent, and the term “Administrative Agent” shall mean such successor
Administrative Agent effective upon such appointment and approval, and the
former Administrative Agent’s rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent’s resignation as
Administrative Agent, the provisions of this Section 11 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.

MISCELLANEOUS

Amendments and
Waivers.

Neither this Agreement
nor any other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section 12.1.  The Required Lenders may,
or, with the written consent of the Required Lenders, the Administrative Agent
may, from time to time, (a) enter into with the Loan Parties written
amendments, supplements or modifications hereto and to the other Loan Documents
for the purpose of adding any provisions to this Agreement or the other Loan
Documents or changing in any manner the rights of the Lenders or of the Loan
Parties hereunder or thereunder or (b) waive, on such terms and conditions as
the Required Lenders or the Administrative Agent, as the case may be, may specify
in such instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or
modification shall (i) reduce the amount or extend the scheduled date of
maturity of any Loan or of any installment thereof, or reduce the stated rate
of any interest or fee payable hereunder or extend the scheduled date of any
payment thereof or increase the aggregate amount or extend the expiration date
of any Lender’s Commitments, in each case without the consent of each Lender
affected thereby, or (ii) amend, modify or waive any provision of this Section
12.1 or any provision of this Agreement or any other Loan Document that requires
the consent of all of the Lenders or reduce the percentage specified in the
definition of Required Lenders, or consent to the assignment or transfer by the
Loan Parties of any of its rights and obligations under this Agreement and the
other Loan Documents or release all or substantially all of the Collateral or
release all or substantially all of the Guarantors from their obligations under
the Guarantees, in each case without the written consent of all the Lenders, or
(iii) amend, modify or waive any provision of Section 11 without the written
consent of the then Administrative Agent. 
Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the Lenders and shall be binding upon the Loan
Parties, the Lenders, the Administrative Agent and all future holders of the
Loans. In the case of any waiver, the Loan Parties, the Lenders and the
Administrative Agent shall be restored to their former positions and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereto.

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Term.

This Agreement
shall inure to the benefit of and shall be binding upon the respective
successors and permitted assigns of each of the Loan Parties, the
Administrative Agent, and each Lender. Furthermore, this Agreement shall
continue in full force and effect until September  30, 2011
(the “Termination Date”) unless renewed in accordance with this Section
12.2. This Agreement may be renewed by mutual agreement of the parties hereto
for an unlimited number of one year periods after the Termination Date (each a “Renewal
Period”), provided that the parties agree in writing to such renewal (i)
with respect to the first
Renewal Period, at least sixty days prior to the Termination Date and (ii) with
respect to any subsequent Renewal Period, at least sixty days prior to the Business Day preceding the
anniversary of the Termination Date. The Loan Parties may terminate this
Agreement at any time prior to the Termination Date upon sixty days’ prior
written notice to the Administrative Agent and each Lender and upon payment in
full of all obligations owing to the Administrative Agent and the Lenders
hereunder, provided, however, if Borrowers voluntarily terminate
this Agreement prior to the first anniversary of the Closing Date, Borrowers
must also pay the Early Termination Fee pursuant to Section 3.5(b).

[Reserved].

Application of Payments.

(a)           Until
such time as a Default or Event of Default shall have occurred and be
continuing, all proceeds of Collateral, may be applied by the Administrative
Agent as follows:

FIRST
to the payment of all reasonable and invoiced costs and expenses of the
Administrative Agent in connection with the collection of such payments or the
sale of any Collateral or otherwise in connection with this Agreement or any of
the other Loan Documents, including all court costs and the fees and expenses
of its agents and legal counsel, the repayment of all advances made by the
Lenders on behalf of the Borrowers in connection with the preservation of any
Collateral or any exercise of remedies under the Loan Documents and any other
costs or expenses incurred in connection with the exercise of any right or
remedy hereunder or under any of the other Loan Documents;

SECOND,
to the payment in full of any and all Agent’s Advances.

THIRD,
the payment in full of any interest accrued and unpaid on the Loans.

FOURTH,
to the payment in full of any outstanding Revolving Credit Loans and, if
required by Section 10, to cash collateralize any Letters of Credit;

FIFTH,
to the payment in full of all other Obligations then due and payable;

SIXTH,
to the Borrowers, their successors or assigns, or as a court of competent
jurisdiction may otherwise direct.

Upon the
occurrence and during the continuance of a Default or Event of Default, the
Administrative Agent at the direction of the Required Lenders shall have the
continuing and exclusive right to apply or reverse and reapply any and all
proceeds of Collateral to any portion of the Loans.

To the extent
that a Loan Party makes a payment or the Administrative Agent receives any
payment or proceeds of the Collateral for a Loan Party’s benefit, which is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, debtor in possession, receiver,
custodian or any other party under any bankruptcy law, common law or equitable
cause, then, to such extent, the Loans or part thereof intended to be satisfied
shall be revived and continue as if such payment or proceeds had not been
received by the Administrative Agent.

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Limitation on Guarantee.

Notwithstanding any other provision of this Agreement,
the amount guaranteed by each Guarantor in accordance with the provisions of
this Agreement and under the Guarantee shall be limited to the extent, if any,
required so that its obligations under this Agreement or the Guarantee shall
not be subject to avoidance under Section 548 of the Federal Bankruptcy Code or
to being set aside or annulled under any applicable state law relating to fraud
on creditors. In determining the limitations, if any, on the amount of a
guarantor’s obligations hereunder or under the Guarantee pursuant to the
preceding sentence, any rights of subrogation or contribution which such
guarantor may have under this Agreement, the Guarantee or applicable law shall
be taken into account.

Notices.

All notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (including by facsimile transmission) and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made (a) in the
case of delivery by hand, when delivered, (b) in the case of delivery by mail, five business days after being
deposited in the mails, postage prepaid, (c) in the case of delivery by
facsimile transmission, when sent and receipt has been electronically confirmed
or (d) in the case of overnight courier, the next business day after timely
delivery to such courier, addressed as follows in the case of the Loan Parties
and the Administrative Agent, and as set forth in Schedule I in the case of the
other parties hereto, or to such other
address as may be hereafter notified by the respective parties hereto:

	
  The Borrowers:

  	
  Conn-Selmer, Inc..

  
	
   

  	
  c/o Steinway Musical Instruments, Inc.

  
	
   

  	
  800 South Street

  
	
   

  	
  Suite 305

  
	
   

  	
  Waltham, MA 02453

  
	
   

  	
  Attention: Dennis Hanson

  
	
   

  	
  Fax: (781) 894-9803

  
	
   

  	
   

  
	
   

  	
  Steinway, Inc.

  
	
   

  	
  c/o Steinway Musical Instruments, Inc.

  
	
   

  	
  800 South Street

  
	
   

  	
  Suite 305

  
	
   

  	
  Waltham, MA 02453

  
	
   

  	
  Attention: Dennis Hanson

  
	
   

  	
  Fax: (781) 894-9803

  
	
   

  	
   

  
	
   

  	
  Boston Piano Company, Inc.

  
	
   

  	
  c/o Steinway Musical Instruments, Inc.

  
	
   

  	
  800 South Street

  
	
   

  	
  Suite 305

  
	
   

  	
  Waltham, MA 02453

  
	
   

  	
  Attention: Dennis Hanson

  
	
   

  	
  Fax: (781) 894-9803

  
	
   

  	
   

  
	
  With a copy to:

  	
  Milbank, Tweed, Hadley & McCloy, LLP

  
	
   

  	
  601 South Figueroa Street, 30th Fl.

  
	
   

  	
  Los Angeles, CA 90017

  
	
   

  	
  Attention: Neil Wertlieb

  
	
   

  	
  Fax: (213) 629-5063

  

 

 70
 

 

 

	
  The Guarantors:

  	
  As set forth on Schedule I hereto

  
	
   

  	
   

  
	
  The
  Administrative Agent:

  	
  GMAC Commercial
  Credit LLC

  
	
   

  	
  1290 Avenue of the Americas

  
	
   

  	
  New York, New York, 10104

  
	
   

  	
  Attention: David Duffy

  
	
   

  	
  Fax: (212) 884-7313

  
	
   

  	
   

  
	
  With a copy to:

  	
  Honigman Miller Schwartz and Cohn LLP

  
	
   

  	
  2290 First National Building

  
	
   

  	
  660 Woodward Avenue

  
	
   

  	
  Detroit, MI 48226-3506

  
	
   

  	
  Attention: Donald F. Baty, Jr. or

  
	
   

  	
  Marcia Bennett Boyce

  
	
   

  	
  Fax: (313) 465-7315

  

 

Notwithstanding the
foregoing, any notice or communication to the Administrative Agent or the
Lenders under this Agreement
that is sent by means other than U.S. mail, shall also be mailed in the
ordinary course to the Administrative Agent and the Lenders by regular U.S.
Mail.

No Waiver;
Cumulative Remedies.

No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power
or privilege. None of the undertakings, agreements, warranties, covenants and
representations of each of the Loan Parties contained in this Agreement or the
other Basic Documents and no Event of Default by any or all of the Loan Parties
under this Agreement or the other Basic Documents shall be deemed to have been
suspended or waived by the Administrative Agent and/or the Lenders, as
applicable, unless such suspension or waiver is by an instrument in writing
specifying such suspension or waiver and is signed by a duly authorized
representative of the Administrative Agent and/or the Lenders, as applicable
and directed to the Loan Parties. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law,

Payment of Expenses and Taxes.

Each Borrower
hereby jointly and severally agrees (i) to pay or reimburse the Administrative
Agent for all reasonable costs, and expenses, including, without limitation,
reasonable attorneys fees paid or incurred by the Administrative Agent (A) in
the preparation, entering into, modification, amendment, enforcement and/or
closing of this Agreement and the other Basic Documents, (B) any amendment or
modification of this Agreement or the other Basic Documents or any consents or
waivers hereunder, (C) any sale or attempted sale of any interest herein to an
Assignee (excluding, however, any points or other fees paid by the Lender to
any such Assignee which shall be at the Lender’s sole cost and expense), (D) in
the administration of this Agreement and the other Basic Documents and the
transactions contemplated hereby and thereby and consultations with counsel in
connection therewith (E) in instituting, maintaining, preserving, enforcing and
foreclosing on the Administrative Agents’ security interest or Lien in any of
the Collateral for the ratable benefit of the Lenders, whether through judicial
proceedings or otherwise, (F) as to any attempt to (x) monitor e.g., any field
examination or collateral analysis), inspect, or verify or (y) protect or
collect or (z), sell, liquidate or otherwise dispose of the Collateral and (G)
in connection with any advice given to the 

 71
 

 

Administrative Agent with respect to its
rights and obligations under this Agreement and all related agreements; and
(ii) to pay or reimburse the Lenders and the Administrative Agent for all
reasonable costs, and expenses, including without limitation reasonable
attorneys fees paid or incurred by the Lenders and the Administrative Agent in
connection with any enforcement or collection proceedings, whether in any
action, suit or litigation, any bankruptcy, insolvency, receivership,
foreclosure, winding up or liquidation proceedings or other similar proceeding
affecting creditors’ rights generally workout restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated). All amounts payable by the
Borrowers pursuant to this Section 12 may be charged to the Borrowers’ accounts
when incurred by the Administrative Agent and/or the Lenders as applicable and
shall be part of the Obligations.

In any such
event described in Section 12.8(a), the reasonable attorneys’ fees arising from
such services and all reasonably incurred expenses, costs, charges and other
fees of such counsel, of the Administrative Agent or any Lender or relating to
any of the events or actions described in this Section shall be payable, on
demand, by the Borrowers to the Lenders and shall be additional Obligations
hereunder secured by
the Collateral. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include accountants’ fees, appraisers’
fees, costs and expenses; court costs and expenses; photocopying and
duplicating expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges;
secretarial over-time charges; and expenses for travel, lodging and food paid
or incurred in connection with the performance of such legal services.

Additionally,
if any taxes or fees or cost (including but not limited to the cost of any searches,
filing fees and recording fees) shall be payable on account of the execution or
delivery of this Agreement, or the execution, delivery, issuance or recording
of any of the other Basic Documents, or the creation of any of the Loan
hereunder, by reason of any existing or hereafter enacted federal or state
statute, the Borrowers will pay all such taxes, (except for any income taxes
payable by the Administrative Agent or any Lender or measured by any
compensation received by the Administrative Agent or any Lender under this
Agreement) including, but not limited to, any interest and/or penalty thereon,
and will indemnify and hold the Administrative Agent and each Lender harmless
from and against liability in connection therewith.

The provisions
of the proviso set forth in the last paragraph of Section 8.5 shall override
any inconsistent or contrary provisions of this Section 12.8.

 72
 

 

Additional Indemnity.

Each of the Loan Parties shall indemnify the
Administrative Agent and each Lender (an “Indemnified Party”) from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, fees and disbursements of counsel)
which may be imposed on, incurred by, or asserted against the Indemnified Party
in any litigation, proceeding or investigation instituted or conducted by any
governmental agency or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement, whether or not the Indemnified Party is a party
thereto, except to the extent that any of the foregoing arises out of gross
negligence or willful misconduct by such Indemnified Party. This indemnity
shall survive termination of this Agreement.

Successors and Assigns; Participations and Assignments.

This Agreement
shall be binding upon and inure to the benefit of the Loan Parties, the
Lenders, the Administrative Agent and their respective successors and assigns,
except that none of the Loan Parties may assign or transfer any of its rights
or obligations under this Agreement without the prior written consent of each
Lender.

Any Lender
may, in the ordinary course of its commercial banking business and in
accordance with applicable law, at any time sell (i) prior to any Default or
Event of Default to any Eligible Person and (ii) upon the occurrence or during
the continuation of any Default or Event of Default to any Person (each such
Eligible Person and Person, as applicable, a “Participant”)
participating interests in any Loan owing to such Lender, any Commitment of
such Lender or any other interest of such Lender hereunder and under the other
Loan Documents. In the event of any such sale by a Lender of a participating
interest to a Participant, such Lender’s obligations under this Agreement to
the other parties to this Agreement shall remain unchanged, such Lender shall
remain solely responsible for the performance thereof, such Lender shall remain
the holder of any such Loan for all purposes under this Agreement and the other
Loan Documents, the Loan Parties and the Administrative Agent shall continue to
deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement and the other Loan Documents and such Lender
shall provide notice to the Loan Parties of such sale as soon as practicable
thereafter. Each Loan Party agrees that if amounts outstanding under this
Agreement are due or unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall, to the maximum extent permitted by applicable law, be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement, provided
that, in purchasing such participating interest, such Participant shall be
deemed to have agreed to share with the Lenders the proceeds thereof as
provided in Section 12.11(a) as fully as if it were a Lender hereunder.  Each Borrower also agrees that each
Participant shall be entitled to the benefits of Section 5.7 with respect to
its participation in the Commitments and the Loans outstanding from time to
time as if it was a Lender; provided that, in the case of Section 5.7,
such Participant shall have complied with the requirements of said Section and provided,
further, that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred
by such transferor Lender to such Participant had no such transfer occurred.

 73
 

 

Any Lender
may, in the ordinary course of its commercial banking business and in
accordance with applicable law, at any time and from time to time assign to any
Lender or any affiliate thereof or, with the consent of (i) the Administrative
Agent (which consent shall not be unreasonably withheld) and (ii) if no Default
or Event of Default shall have occurred and be continuing the Borrowers (which
consent shall not be unreasonably withheld), to an additional bank or financial
institution (an “Assignee”) all or any part of its rights and
obligations under this Agreement and the other Loan Documents pursuant to an
Assignment and Acceptance, substantially in the form of Exhibit U, with
appropriate completions (an “Assignment and Acceptance”), executed by
such Assignee, such assigning Lender (and, in the case of an Assignee that is
not then a Lender or an affiliate thereof, by the Administrative Agent) and
delivered to the Administrative Agent for its acceptance and recording in the
Register. Upon such execution, delivery, acceptance and recording, from and
after the effective date determined pursuant to such Assignment and Acceptance,
(x) the Assignee thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with Commitments as set forth therein, and (y) the assigning Lender
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender’s rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto).

The
Administrative Agent, on behalf of the Loan Parties, shall maintain at the
address of the Administrative Agent referred to in Section 12.6 a copy of each
Assignment and Acceptance delivered to it and a register (the “Register”)
for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amounts of the Loans owing to, each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Loan
Parties, the Administrative Agent and the Lenders may (and, in the case of any Loan or other
obligation hereunder not evidenced by a Note, shall) treat each Person whose
name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan
Documents, notwithstanding any notice to the contrary. Any assignment of any
Loan or other obligation hereunder not evidenced by a Note shall be effective
only upon appropriate entries with respect thereto being made in the Register.
The Register shall be available for inspection by the Loan Parties or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.

Upon its
receipt of an Assignment and Acceptance executed by an assigning Lender and an
Assignee (and, in the case of an Assignee that is not then a Lender or an
affiliate thereof, by the Borrowers and the Administrative Agent) together with
payment to the Administrative Agent of a registration and processing fee of
$3,500, the Administrative Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) on the effective date determined pursuant thereto record
the information contained therein in the Register and give notice of such
acceptance and recordation to the Lenders and the Borrowers.

The Borrowers
authorize each Lender to disclose to any Participant or Assignee (each, a “Transferee”)
and any prospective Transferee, subject to the provisions of Section 12.19, any
and all financial information in such Lender’s possession concerning the Loan
Parties and their Affiliates which has been delivered to such Lender by or on
behalf of the Borrowers pursuant to this Agreement or which has been delivered
to such Lender by or on behalf of the 

 74
 

 

Borrowers in connection with such Lender’s
credit evaluation of the Borrowers and its Affiliates prior to becoming a party
to this Agreement.

For avoidance
of doubt, the parties to this Agreement acknowledge that the provisions of this
Section concerning assignments of Loans and Notes relate only to absolute
assignments and that such provisions do not prohibit assignments creating
security interests, including, without limitation, any pledge or assignment by
a Lender of any Loan or Note to any Federal Reserve Bank in accordance with
applicable law.

Adjustments; Set-off.

If any Lender
shall at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 10(h), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender’s Loans, or interest thereon, such benefited Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender’s Loan, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefited Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefited Lender, such purchase shall
be rescinded, and the purchase price and benefits returned, to the extent of
such recovery, but without interest. The Borrowers agree that each Lender so
purchasing a portion of another Lender’s Loan may exercise all rights of
payment (including, without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion.

In addition to
any rights and remedies of the Lenders provided by law, each Lender shall have
the right, without prior notice
to the Borrowers, any such notice being expressly waived by the Borrowers to
the extent permitted by applicable law, upon any amount becoming due and
payable by the Borrowers hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of the Borrowers.  Each Lender agrees promptly to notify the
Borrowers and the Administrative Agent after any such set-off and application
made by such Lender, provided that the failure to give such notice shall
not affect the validity of such set-off and application,

 75
 

 

Counterparts.

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

Severability.

Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.

Amendment and Restatement; Integration.

Acknowledgment
of Existing Loan Indebtedness.  The Borrowers acknowledge that as of September 29, 2006, the Borrowers were
indebted to Lenders (exclusive of contingent reimbursement obligations and
accrued, but unpaid interest) in the amount of $8,103,559.07 (after taking into
account the funds held by the Administrative Agent for the account of the
Borrowers) plus fees and costs provided for in the Existing Loan Documents (the
“Existing Loan Indebtedness”). 
The Borrowers further acknowledge that the Existing Loan Indebtedness is
owing to Lenders without setoff, recoupment, defense, deduction, counterclaim,
credit, allowance or adjustment, whether in law or equity, of any nature or
kind.

Acknowledgment
and Release. 
Each Loan Party acknowledges and agrees that the Administrative Agent
and each Lender fully performed all of their obligations under the Existing
Credit Agreement and the Existing Loan Documents.  Each Loan Party also acknowledges and agrees
that the actions taken by the Administrative Agent and each Lender to date in
furtherance of the foregoing agreements and all other loan and security
documents are reasonable and appropriate under the circumstances and are within
their rights under such agreements and applicable law.  Notwithstanding the foregoing, in
consideration of the agreements and understandings herein, each Loan Party and
their respective employees, agents, officers, directors, affiliates,
subsidiaries, shareholders, attorneys, associates, executors, heirs, administrators,
successors and assigns (collectively, “Associates”), hereby release,
discharge, forever acquit and covenant not to sue the Administrative Agent and
each Lender and each of their Associates from all claims based on facts in
existence as of the Closing Date related to the Existing Credit Agreement or
the Existing Loan Documents, or the business relationship among the Loan
Parties, the Administrative Agent or any Lender, whether or not any such claim
is known or unknown.

Effect of
Restatement. 
The parties acknowledge and agree that this Agreement amends, modifies
and restates the Existing Indebtedness to Lender under the Existing Credit
Agreement; provided that the execution and delivery of this Agreement
does not constitute (a) a novation or (b) a waiver or release of any
indebtedness or other monetary obligations owing to Lender under the Existing
Credit Agreement.  On the date of this
Agreement, all Existing Indebtedness shall constitute Obligations hereunder and
all outstanding Loans advanced under the Existing Credit Agreement will be
deemed Loans advanced under this Agreement. 
The parties hereto acknowledge
and agree that (a) the Liens and security interests granted under the Security
Documents (as defined under the Existing Credit Agreement) are continuing and
in full 

 76
 

 

force and effect and, upon the amendment and restatement of the
Existing Credit Agreement and (b) any Security Documents (as defined in the
Existing Credit Agreement) being amended and restated pursuant to the Loan
Documents and such Liens and security interests secure and continue to secure
the payment of the obligations of the Loan Parties under this Agreement and the
other Loan Documents, and that the outstanding amount of Term Loan,
$14,621,246.70, is hereby repaid in full with the Revolving Credit Loans made
by Lenders for Borrowers’ account under this Agreement.

This Agreement
and the other Loan Documents represent the agreement of the Borrowers, the
Administrative Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Administrative Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.

GOVERNING LAW.

THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW PRINCIPLES).

Submission To Jurisdiction; Waivers.

Each Loan Party hereby
irrevocably and unconditionally:

submits for
itself and its property in any legal action or proceeding relating to this
Agreement and the other Loan Documents to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;

consents that
any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in
an inconvenient court and agrees not to plead or claim the same;

agrees that
service of process in any such action or proceeding may be effected by mailing
a copy thereof by registered or certified mail (or any substantially similar
form of mail), postage prepaid, to the Borrowers at its address set forth in
Section 12.6 or at such other address of which the Administrative Agent shall
have been notified pursuant thereto;

agrees that
nothing herein shall affect the right to effect service of process in any other
manner permitted by law or shall limit the right to sue in any other
jurisdiction; and

waives, to the
maximum extent not prohibited by law, any right it may have to claim or recover
in any legal action or proceeding referred to in this Section any special,
exemplary, punitive or consequential damages;

Acknowledgements.

Each Loan Party hereby
acknowledges that:

 77
 

 

it has been
advised by counsel in the negotiation, execution and delivery of this Agreement
and the other Loan Documents;

neither the
Administrative Agent nor any Lender has any fiduciary relationship with or duty
to the Loan Parties arising out of or in connection with this Agreement or any
of the other Loan Documents, and the relationship between the Borrowers and the
other Loan Parties, on one hand, and Administrative Agent and Lenders, on the
other hand, in connection herewith or therewith is solely that of debtor and
creditor; and

no joint
venture is created hereby or by the other Loan Documents or otherwise exists by
virtue of the transactions contemplated hereby among the Lenders or among the
Loan Parties and the Lenders.

WAIVERS OF
JURY TRIAL.

THE LOAN PARTIES,
THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

Confidentiality.

Each Lender agrees to
keep confidential all non-public information provided to it by the Borrowers
pursuant to this Agreement that is designated by a Loan Party in writing as
confidential; provided that nothing herein shall prevent any Lender from
disclosing any such information (i) to the Administrative Agent or any other
Lender, (ii) to any Transferee which agrees to comply with the provisions of
this Section 12.19, (iii) to its employees, directors, agents, attorneys,
accountants and other professional advisors, (iv) upon the request or demand of
any examiner or other Governmental Authority having jurisdiction over such
Lender, (v) in response to any order of any court or other Governmental
Authority or as may otherwise be required pursuant to any Requirement of Law,
or (vii) in connection with the exercise of any remedy hereunder.

[Signature Pages Follow]

 78

 

 

	
  

  	
  CONN-SELMER, INC., Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  EVP

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STEINWAY, INC., Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  EVP

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BOSTON PIANO COMPANY, INC., 

  
	
   

  	
  Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  EVP

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GMAC COMMERCIAL FINANCE LLC, as 

  
	
   

  	
  Administrative Agent and Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Duffy

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  David Duffy

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Director

  	
   

  
								

 

[Third Amended and
Restated Credit Agreement Signature Page]

 

 

	
   

  	
  BANK OF
  AMERICA, N.A., as Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher O’Halloran

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Christopher O’Halloran

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
							

 

 

 

	
  

  	
  THE
  BANK OF NEW YORK, as Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Anthony Creanza

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Anthony Creanza

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
						

 

 

 

	
  

  	
  TD
  BANKNORTH, N.A., as Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Matthew Leighton

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Matthew Leighton

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
						

 

 

 

	
  

  	
  LASALLE
  BUSINESS CREDIT, LLC, as 

  
	
   

  	
  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ernest J. Abati

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Ernest J. Abati

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  First Vice President

  	
   

  
						

 

 

 

	
  

  	
  ISRAEL
  DISCOUNT BANK OF NEW 

  
	
   

  	
  YORK,
  as Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ronald J. Bongiovanni

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Ronald J. Bongiovanni

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President I

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James M. Morton

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  James M. Morton

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
						

 

 

 

SCHEDULE I

GUARANTORS

	
  

  	
  STEINWAY
  MUSICAL INSTRUMENTS, 

  
	
   

  	
  INC.,
  as Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  SR. EVP

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE
  STEINWAY PIANO COMPANY, 

  
	
   

  	
  INC.,
  as Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  EVP

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  S&B
  RETAIL, INC., as Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  EVP

  	
   

  
	
   

  	
   

  
	
   

  	
  THE
  O.S. KELLY COMPANY, as 

  
	
   

  	
  Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Dennis M. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  EVP

  	
   

  
						

 

 

SCHEDULE 1.1

PERMITTED
ENCUMBRANCES

1.               Workers’
Compensation deposits

2.               Textron Financial

3.               NYCIDA

 

SCHEDULE 2.1

LENDER COMMITMENTS

	
  Lender

  	
   

  	
  Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  GMAC Commercial
  Finance LLC

  	
   

  	
  $

  	
  30,664,000

  	
   

  
	
  Bank of America,
  N.A.

  	
   

  	
  $

  	
  26,000,000

  	
   

  
	
  The Bank of New
  York

  	
   

  	
  $

  	
  15,800,000

  	
   

  
	
  TD Banknorth,
  N.A.

  	
   

  	
  $

  	
  15,800,000

  	
   

  
	
  LaSalle
  Businesses Credit, LLC

  	
   

  	
  $

  	
  12,100,000

  	
   

  
	
  Israel Discount
  Bank of New York

  	
   

  	
  $

  	
  9,636,000

  	
   

  
	
  Total
  Commitments:

  	
   

  	
  $

  	
  110,000,000

  	
   

  

 

 

SCHEDULE 4.5

COLLATERAL LOCATIONS

ATTACHED.

 

SCHEDULE 6.6

MATERIAL LITIGATION

In the ordinary
course of business, the Company is party to various legal actions that
management believes are routine in nature and incidental to the operation of
the business.  While the outcome of such
actions cannot be predicted with certainty, the Company believes that, based on
its experience in dealing with these matters, their ultimate resolution will
not have a material adverse impact on the Company’s business, financial
condition or results of operations or prospects.

Current Litigation

1.                                       Ames
True Temper, Inc., vs. Conn-Selmer, Inc., Steinway Musical Instruments, Inc.,
John M. Stoner, Jr., and Judy A. Schuchart on December 22, 2005.

2.             Daniel Rivera and Texas Band and Orchestra, LLC, vs.
Con-Selmer, Inc. on

September 9, 2005.

3.             Patricia Bazin vs. Leblanc SNC on October 11, 2005.

4.             Yevgeniya Solovey
vs. Steinway Musical Instruments, Inc., on June 7, 2006.

 

SCHEDULE 6.11

ERISA

	
  Plan Name

  	
   

  	
  Type

  of

  Plan

  
	
   

  	
   

  	
   

  
	
  1.       The Steinway
  Musical Pension Plan

  	
   

  	
  DPB

  
	
   

  	
   

  	
   

  
	
  2.       Savings
  Plan for Employees of Steinway

  Musical Instruments, Inc. and Subsidiaries

  	
   

  	
  DCP

  
	
   

  	
   

  	
   

  
	
  3.       Conn-Selmer
  Salaired Employees 401(K) &

  Profit Sharing Plan

  	
   

  	
  DCP

  
	
   

  	
   

  	
   

  
	
  4.       Conn-Selmer,
  Inc. Eastlake Employees

  401(K) Profit Sharing Plan and Trust

  	
   

  	
  DCP

  
	
   

  	
   

  	
   

  
	
  5.       Conn-Selmer,
  Inc. Union Employees’ 401(K)

  Savings Plan

  	
   

  	
  DCP

  
	
   

  	
   

  	
   

  
	
  6.       O.S. Kelly
  Co. Employee Profit Sharing

  Plan and Trust

  	
   

  	
  DCP

  
	
   

  	
   

  	
   

  
	
  7.       O.S. Kelly
  Bargaining Unit Employees

  Savings and Retirement Plan

  	
   

  	
  DCP

  
	
   

  	
   

  	
   

  
	
  8.       Leblanc,
  Inc. 401(k) Savings Plan

  	
   

  	
  DCP

  

 

 

SCHEDULE 6.13

SUBSIDIARIES

ATTACHED

 

SCHEDULE 6.15

LABOR 
CONTRACTS TO EXPIRE

1.                                       Working
Agreement between Conn-Selmer, Inc., and United Automobile, Aerospace and
Agriculture Implement Workers of America, Local No. 615 expiring March 31,2007.

2.                                       Working
Agreement between Vincent Bach Division of Conn-Selmer, Inc and United
Automobile, Aerospace and Agricultural Implement Workers of America Local No.
634 expired April 1, 2006 (Union members currently on strike)

3.                                       Agreement
between Conn-Selmer, Inc. and U.A.W. Local 2359 expiring February 16, 2008.

4.                                       Agreement
between Steinway, Inc. d/b/a Steinway & Sons and Local 102 F.W. AFL-CIO
expiring December 31, 2006

5.                                       Labor
Contract Agreement between Musser Division and Carpenter Local 1027
Mill-Cabinet-Industrial Division affiliate of Chicago Regional Council of
Carpenters of the United Brotherhood of Carpenters and Jointers of America
expiring November 16, 2007.

6.                                       Labor
Contract Agreement between Frank Holton Company and Local No. M94 of the
International Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths,
Forgers and Helpers expiring July 20, 2008.

7.                                       Agreement
between OS Kelly and the International Brotherhood of Boilermakers, Iron
Shipbuilders, Blacksmiths, Forgers and Helpers expiring November 8 2007.

 

SCHEDULE 6.20

ENVIRONMENTAL MATTERS

For environmental
matters:

·                  See
“Commitments and Contingent Liabilities” in the Quarterly Report of
Steinway Musical Instruments, Inc. filed with the Securities and Exchange Commission
for the quarter ended June 30, 2006.

·                  See “Item 3. Legal Proceedings —
Environmental Matters” in the Annual Report of Steinway Musical
Instruments, Inc. filed with the Securities and Exchange Commission for the
year ended December 30, 2005

 

SCHEDULE 9.2

EXISTING INDEBTEDNESS TO SUBSIDIARIES

1.               Promissory Note of
Conn-Selmer, Inc., dated September 1, 2006 in an aggregate principal amount of
$92,000,000.00.

2.               Revolving
Promissory Note of Steinway, Inc., dated September 1, 2006 in an aggregate principal
amount of $28,624,000.00.

3.               Promissory Note of
Steinway, Inc. dated September 1, 2006, in an aggregate principal amount of
$80,000,000.00.

4.               Intercompany
Revolving Notes between the Borrowers.

 

SCHEDULE 9.10

INVESTMENTS IN NON-GUARANTOR SUBSIDIARIES

1.               Conn-Selmer-Leblanc
SNC Inter-company Loan in an aggregate principal amount of $1,818,870.

2.               Conn-Selmer-Leblanc
SNC Inter-company Loan in an aggregate principal amount of $2,797,044.

3.               Conn-Selmer-Vincent
Bach International Inter-company Loan in an aggregate principal amount of
$567,000.

 

SCHEDULE 9.16

LOCATION OF BUSINESS

SEE SCHEDULE 4.5

 

EXHIBIT A

ACCOUNTANT’S LETTER

[BORROWERS’
LETTERHEAD]

[Date]

Deloitte & Touche

[Accountant Address]

Re:                               GMAC
Commercial Finance LLC (together with its agents and affiliates, in its
capacity as administrative agent to the Lenders, the “Administrative Agent”)

Ladies and Gentlemen:

As you know, Deloitte
& Touche LLP (“Accountant”) provides Conn-Selmer, Inc., Steinway,
Inc. and Boston Piano Company, Inc. (“Borrowers”) with various
accounting services including, without limitation, auditing Borrowers’
financial statements (the “Accounting Services”).  Borrowers are entering into that certain
Third Amended and Restated Credit Agreement with the Administrative Agent and the
lenders party thereto (“Lenders”) (as the same may be amended, restated
modified or supplemented from time to time, the “Credit Agreement”) and
other related agreements (collectively, the “Loan Documents”).  This letter is the authorization for Accountant
and its employees and agents to discuss with the Administrative Agent various
aspects of the Accounting Services, our business and financial affairs and to
respond to questions relating thereto directly to the Administrative Agent as
and when requested. If and when such requests are made, please advise us of the
nature of the request and your response thereto.

The instructions given by
this letter shall be irrevocable until the Loan Documents are terminated and
the Borrowers have repaid all of the Obligations owing to the Lenders under the
Loan Documents.

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  STEINWAY, INC.

  
	
   

  	
  CONN-SELMER, INC.

  
	
   

  	
  BOSTON PIANO COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Acknowledged and agreed:

  	
   

  
	
   

  	
   

  
	
  DELOITTE & TOUCHE

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

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