Document:

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                                                                    EXHIBIT 10.7
                               SUBSIDIARY GUARANTY

                  This SUBSIDIARY GUARANTY (this "Guaranty"), dated as of March
24, 2000, by and among the Guarantors identified as such on the signature page
hereof (each, a "Guarantor" and collectively, "Guarantors"), and GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation, individually and as agent
(in such capacity, "Agent") for itself and the lenders from time to time party
to the Credit Agreement hereinafter defined ("Lenders").

                              W I T N E S S E T H:
                               - - - - - - - - - -

                  WHEREAS, pursuant to that certain Credit Agreement dated as of
the date hereof by and among Baldwin Piano & Organ Company, a Delaware
corporation ("Borrower"), the Persons named therein as Credit Parties, Agent and
the Persons signatory thereto from time to time as Lenders (as from time to time
amended, restated, supplemented or otherwise modified, the "Credit Agreement")
Lenders have agreed to make Loans to, and incur Letter of Credit Obligations for
the benefit of, Borrower.

                  WHEREAS, Guarantors are subsidiaries of Borrower and as such
will derive direct and indirect economic benefits from the making of the Loans
and other financial accommodations provided to Borrower pursuant to the Credit
Agreement; and

                  WHEREAS, in order to induce Agent and Lenders to enter into
the Credit Agreement and other Loan Documents and to induce Lenders to make the
Loans and to incur Letter of Credit Obligations as provided for in the Credit
Agreement, Guarantors have agreed to guarantee payment of the Obligations;

                  NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, and to induce Lenders to provide the Loans and
other financial accommodations under the Credit Agreement, it is agreed as
follows:

                  1. DEFINITIONS. Capitalized terms used herein shall have the
meanings assigned to them in the Credit Agreement, unless otherwise defined
herein.

                  References to this "Guaranty" shall mean this Guaranty,
including all amendments, modifications and supplements and any annexes,
exhibits and schedules to any of the foregoing, and shall refer to this Guaranty
as the same may be in effect at the time such reference becomes operative.

                  2. THE GUARANTY.

                  2.1. Guaranty of Guaranteed Obligations of Borrower. Each
Guarantor hereby jointly and severally unconditionally guarantees to Agent and
Lenders, and their respective successors, endorsees, transferees and assigns,
the prompt payment (whether at stated maturity,

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by acceleration or otherwise) and performance of the Obligations of Borrower
(hereinafter the "Guaranteed Obligations"). Guarantors agree that this Guaranty
is a guaranty of payment and performance and not of collection, and that their
obligations under this Guaranty shall be primary, absolute and unconditional,
irrespective of, and unaffected by:

                           (a) the genuineness, validity, regularity,
         enforceability or any future amendment of, or change in this Guaranty,
         any other Loan Document or any other agreement, document or instrument
         to which any Credit Party and/or Guarantors are or may become a party;

                           (b) the absence of any action to enforce this
         Guaranty or any other Loan Document or the waiver or consent by Agent
         and/or Lenders with respect to any of the provisions thereof;

                           (c) the existence, value or condition of, or failure
         to perfect its Lien against, any Collateral for the Guaranteed
         Obligations or any action, or the absence of any action, by Agent in
         respect thereof (including, without limitation, the release of any such
         security); or

                           (d) the insolvency of any Credit Party; or

                           (e) any other action or circumstances which might
         otherwise constitute a legal or equitable discharge or defense of a
         surety or guarantor,

it being agreed by each Guarantor that its obligations under this Guaranty shall
not be discharged until the Termination Date. Each Guarantor shall be regarded,
and shall be in the same position, as principal debtor with respect to the
Guaranteed Obligations. Each Guarantor agrees that any notice or directive given
at any time to Agent which is inconsistent with the waiver in the immediately
preceding sentence shall be null and void and may be ignored by Agent and
Lenders, and, in addition, may not be pleaded or introduced as evidence in any
litigation relating to this Guaranty for the reason that such pleading or
introduction would be at variance with the written terms of this Guaranty,
unless Agent and Lenders have specifically agreed otherwise in writing. It is
agreed among each Guarantor, Agent and Lenders that the foregoing waivers are of
the essence of the transaction contemplated by the Loan Documents and that, but
for this Guaranty and such waivers, Agent and Lenders would decline to enter
into the Credit Agreement.

                  2.2. Demand by Agent or Lenders. In addition to the terms of
the Guaranty set forth in Section 2.1 hereof, and in no manner imposing any
limitation on such terms, it is expressly understood and agreed that, if, at any
time, the outstanding principal amount of the Guaranteed Obligations under the
Credit Agreement (including all accrued interest thereon) is declared to be
immediately due and payable, then Guarantors shall, without demand, pay to the
holders of the Guaranteed Obligations the entire outstanding Guaranteed
Obligations due and owing to such holders. Payment by Guarantors shall be made
to Agent in immediately available Federal funds to an account designated by
Agent or at the address set forth herein for the giving

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of notice to Agent or at any other address that may be specified in writing from
time to time by Agent, and shall be credited and applied to the Guaranteed
Obligations.

                  2.3. Enforcement of Guaranty. In no event shall Agent have any
obligation (although it is entitled, at its option) to proceed against Borrower
or any other Credit Party or any Collateral pledged to secure Guaranteed
Obligations before seeking satisfaction from any or all of the Guarantors, and
Agent may proceed, prior or subsequent to, or simultaneously with, the
enforcement of Agent's rights hereunder, to exercise any right or remedy which
it may have against any Collateral, as a result of any Lien it may have as
security for all or any portion of the Guaranteed Obligations.

                  2.4. Waiver. In addition to the waivers contained in Section
2.1 hereof, Guarantors waive, and agree that they shall not at any time insist
upon, plead or in any manner whatever claim or take the benefit or advantage of,
any appraisal, valuation, stay, extension, marshaling of assets or redemption
laws, or exemption, whether now or at any time hereafter in force, which may
delay, prevent or otherwise affect the performance by Guarantors of their
Guaranteed Obligations under, or the enforcement by Agent or Lenders of, this
Guaranty. Guarantors hereby waive diligence, presentment and demand (whether for
non-payment or protest or of acceptance, maturity, extension of time, change in
nature or form of the Guaranteed Obligations, acceptance of further security,
release of further security, composition or agreement arrived at as to the
amount of, or the terms of, the Guaranteed Obligations, notice of adverse change
in Borrower's financial condition or any other fact which might increase the
risk to Guarantors) with respect to any of the Guaranteed Obligations or all
other demands whatsoever and waive the benefit of all provisions of law which
are or might be in conflict with the terms of this Guaranty. Guarantors
represent, warrant and jointly and severally agree that, as of the date of this
Guaranty, their obligations under this Guaranty are not subject to any offsets
or defenses against Agent or Lenders or any Credit Party of any kind. Guarantors
further jointly and severally agree that their obligations under this Guaranty
shall not be subject to any counterclaims, offsets or defenses against Agent or
any Lender or against any Credit Party of any kind which may arise in the
future.

                  2.5. Benefit of Guaranty. The provisions of this Guaranty are
for the benefit of Agent and Lenders and their respective successors,
transferees, endorsees and assigns, and nothing herein contained shall impair,
as between any Credit Party and Agent or Lenders, the obligations of any Credit
Party under the Loan Documents. In the event all or any part of the Guaranteed
Obligations are transferred, indorsed or assigned by Agent or any Lender to any
Person or Persons, any reference to "Agent" or "Lender" herein shall be deemed
to refer equally to such Person or Persons.

                  2.6. Modification of Guaranteed Obligations, Etc. Each
Guarantor hereby acknowledges and agrees that Agent and Lenders may at any time
or from time to time, with or without the consent of, or notice to, Guarantors
or any of them:

                           (a) change or extend the manner, place or terms of
         payment of, or renew or alter all or any portion of, the Guaranteed
         Obligations;

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                           (b) take any action under or in respect of the Loan
         Documents in the exercise of any remedy, power or privilege contained
         therein or available to it at law, equity or otherwise, or waive or
         refrain from exercising any such remedies, powers or privileges;

                           (c) amend or modify, in any manner whatsoever, the
         Loan Documents;

                           (d) extend or waive the time for any Credit Party's
         performance of, or compliance with, any term, covenant or agreement on
         its part to be performed or observed under the Loan Documents, or waive
         such performance or compliance or consent to a failure of, or departure
         from, such performance or compliance;

                           (e) take and hold Collateral for the payment of the
         Guaranteed Obligations guaranteed hereby or sell, exchange, release,
         dispose of, or otherwise deal with, any property pledged, mortgaged or
         conveyed, or in which Agent or Lenders have been granted a Lien, to
         secure any Obligations;

                           (f) release anyone who may be liable in any manner
         for the payment of any amounts owed by Guarantors or any Credit Party
         to Agent or any Lender;

                           (g) modify or terminate the terms of any
         intercreditor or subordination agreement pursuant to which claims of
         other creditors of any Guarantor or any Credit Party are subordinated
         to the claims of Agent and Lenders; and/or

                           (h) apply any sums by whomever paid or however
         realized to any amounts owing by any Guarantor or any Credit Party to
         Agent or any Lender in such manner as Agent or any Lender shall
         determine in its discretion;

and Agent and Lenders shall not incur any liability to Guarantors as a result
thereof, and no such action shall impair or release the Guaranteed Obligations
of Guarantors or any of them under this Guaranty.

                  2.7. Reinstatement. This Guaranty shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Credit Party or any Guarantor for liquidation or reorganization,
should any Credit Party or any Guarantor become insolvent or make an assignment
for the benefit of creditors or should a receiver or trustee be appointed for
all or any significant part of such Credit Party's or such Guarantor's assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Guaranteed Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by Agent or any Lender, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Guaranteed Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.

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                  2.8. Deferral of Subrogation, Etc. Notwithstanding anything to
the contrary in this Guaranty, or in any other Loan Document, each Guarantor
hereby:

                  (a) expressly and irrevocably waives, on behalf of itself and
its successors and assigns (including any surety) until the Termination Date,
any and all rights at law or in equity to subrogation, to reimbursement, to
exoneration, to contribution, to indemnification, to set off or to any other
rights that could accrue to a surety against a principal, to a guarantor against
a principal, to a guarantor against a maker or obligor, to an accommodation
party against the party accommodated, to a holder or transferee against a maker,
or to the holder of any claim against any Person, and which such Guarantor may
have or hereafter acquire against any Credit Party in connection with or as a
result of such Guarantor's execution, delivery and/or performance of this
Guaranty, or any other documents to which such Guarantor is a party or
otherwise; and

                  (b) acknowledges and agrees (i) that this waiver is intended
to benefit Agent and Lenders and shall not limit or otherwise effect any
Guarantor's liability hereunder or the enforceability of this Guaranty, and (ii)
that Agent, Lenders and their respective successors and assigns are intended
third party beneficiaries of the waivers and agreements set forth in this
Section 2.8 and their rights under this Section 2.8 shall survive payment in
full of the Guaranteed Obligations.

                  2.9. Election of Remedies. If Agent may, under applicable law,
proceed to realize benefits under any of the Loan Documents giving Agent and
Lenders a Lien upon any Collateral owned by any Credit Party, either by judicial
foreclosure or by non-judicial sale or enforcement, Agent may, at its sole
option, determine which of such remedies or rights it may pursue without
affecting any of such rights and remedies under this Guaranty. If, in the
exercise of any of its rights and remedies, Agent shall forfeit any of its
rights or remedies, including its right to enter a deficiency judgment against
any Credit Party, whether because of any applicable laws pertaining to "election
of remedies" or the like, Guarantors hereby consent to such action by Agent and
waive any claim based upon such action, even if such action by Agent shall
result in a full or partial loss of any rights of subrogation which Guarantors
might otherwise have had but for such action by Agent. Any election of remedies
which results in the denial or impairment of the right of Agent to seek a
deficiency judgment against any Credit Party shall not impair each Guarantor's
obligation to pay the full amount of the Guaranteed Obligations. In the event
Agent shall bid at any foreclosure or trustee's sale or at any private sale
permitted by law or the Loan Documents, Agent may bid all or less than the
amount of the Guaranteed Obligations and the amount of such bid need not be paid
by Agent but shall be credited against the Guaranteed Obligations. The amount of
the successful bid at any such sale shall be conclusively deemed to be the fair
market value of the collateral and the difference between such bid amount and
the remaining balance of the Guaranteed Obligations shall be conclusively deemed
to be the amount of the Guaranteed Obligations guaranteed under this Guaranty,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Agent
and Lenders might otherwise be entitled but for such bidding at any such sale.

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                  2.10. Funds Transfers. If any Guarantor shall engage in any
transaction as a result of which Borrower is required to make a mandatory
prepayment with respect to the Guaranteed Obligations under the terms of the
Credit Agreement (including any sale of such Guarantor's Stock or assets), such
Guarantor shall distribute to, or make a contribution to the capital of,
Borrower an amount equal to the mandatory prepayment required under the terms of
the Credit Agreement.

                  3. DELIVERIES. In a form satisfactory to Agent, Guarantors
shall deliver to Agent (with sufficient copies for each Lender), concurrently
with the execution of this Guaranty and the Credit Agreement, the Loan Documents
and other instruments, certificates and documents as are required to be
delivered by Guarantors to Agent under the Credit Agreement.

                  4. REPRESENTATIONS AND WARRANTIES. To induce Lenders to make
the Loans and incur Letter of Credit Obligations under the Credit Agreement,
Guarantors jointly and severally make the representations and warranties as to
each Guarantor contained in the Credit Agreement, each of which is incorporated
herein by reference, and the following representations and warranties to Agent
and each Lender, each and all of which shall survive the execution and delivery
of this Guaranty:

                  4.1. Corporate Existence; Compliance with Law. Each Guarantor
(i) is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation; (ii) is duly qualified to conduct
business and is in good standing in each other jurisdiction where its ownership
or lease of property or the conduct of its business requires such qualification,
except where the failure to be so qualified would not result in exposure to
losses, damages or liabilities in excess of $50,000; (iii) has the requisite
corporate power and authority and the legal right to own, pledge, mortgage and
operate its properties, to lease the property it operates under lease, and to
conduct its business as now, heretofore and proposed to be conducted; (iv) has
all licenses, permits, consents or approvals from or by, and has made all
material filings with, and has given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (v) is in compliance with its charter and by-laws; and
(vi) is in compliance with all applicable provisions of law, except where the
failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

                  4.2. Executive Offices. Each Guarantor's executive office and
principal place of business are as set forth in Schedule I hereto.

                  4.3. Corporate Power; Authorization; Enforceable Guaranteed
Obligations. The execution, delivery and performance of this Guaranty and all
other Loan Documents and all instruments and documents to be delivered by each
Guarantor hereunder and under the Credit Agreement are within such Guarantor's
corporate power, have been duly authorized by all necessary or proper corporate
action, including the consent of stockholders where required, are not in
contravention of any provision of such Guarantor's charter or by-laws, do not
violate any law or regulation, or any order or decree of any Governmental
Authority, do not conflict with or

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result in the breach of, or constitute a default under, or accelerate or permit
the acceleration of any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which any Guarantor is a party
or by which any Guarantor or any of its property is bound, do not result in the
creation or imposition of any Lien upon any of the property of any Guarantor,
other than those in favor of Agent, for itself and the benefit of Lenders, and
the same do not require the consent or approval of any Governmental Authority or
any other Person except those referred to in Section 2.1(c) of the Credit
Agreement, all of which have been duly obtained, made or complied with prior to
the Closing Date. On or prior to the Closing Date, this Guaranty and each of the
Loan Documents to which any Guarantor is a party shall have been duly executed
and delivered for the benefit of or on behalf of such Guarantor, and each shall
then constitute a legal, valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms.

                  5. FURTHER ASSURANCES. Each Guarantor agrees, upon the written
request of Agent or any Lender, to execute and deliver to Agent or such Lender,
from time to time, any additional instruments or documents reasonably considered
necessary by Agent or such Lender to cause this Guaranty to be, become or remain
valid and effective in accordance with its terms.

                  6. PAYMENTS FREE AND CLEAR OF TAXES. All payments required to
be made by each Guarantor hereunder shall be made to Agent and Lenders free and
clear of, and without deduction for, any and all present and future Taxes. If
any Guarantor shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder, (a) the sum payable shall be increased as much as
shall be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 6) Agent or
Lenders, as applicable, receive an amount equal to the sum they would have
received had no such deductions been made, (b) such Guarantor shall make such
deductions, and (c) such Guarantor shall pay the full amount deducted to the
relevant taxing or other authority in accordance with applicable law. Within
thirty (30) days after the date of any payment of Taxes, each applicable
Guarantor shall furnish to Agent the original or a certified copy of a receipt
evidencing payment thereof. Each Guarantor shall jointly and severally indemnify
and, within ten (10) days of demand therefor, pay Agent and each Lender for the
full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts
payable under this Section 6) paid by Agent or such Lender, as appropriate, and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes were correctly or legally
asserted.

                  7. OTHER TERMS.

                  7.1. Entire Agreement. This Guaranty, together with the other
Loan Documents, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements
relating to a guaranty of the loans and advances under the Loan Documents and/or
the Guaranteed Obligations.

                  7.2. Headings. The headings in this Guaranty are for
convenience of reference only and are not part of the substance of this
Guaranty.

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                  7.3. Severability. Whenever possible, each provision of this
Guaranty shall be interpreted in such a manner to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.

                  7.4. Notices. Whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by any other party, or
whenever any of the parties desires to give or serve upon another any such
communication with respect to this Guaranty, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing and
shall be addressed to the party to be notified as follows:

                  (a)      If to Agent, at:

                           General Electric Capital Corporation
                           800 Connecticut Avenue, Two North
                           Norwalk, Connecticut  06854
                           Attention: Account Manager - Baldwin Piano
                           Telecopier No.:  (203) 852-3630
                           Telephone No.:  (203) 852-3616

                           with copies to:

                           O'Melveny & Myers LLP
                           153 East 53rd Street
                           New York, New York
                           Attention:  Peter V. Pantaleo
                           Telecopier No.:  (212)326-2061
                           Telephone No.:  (212) 326-200

                  (b) If to any Lender, at the address of such Lender specified
                  in the Credit Agreement.

                  (c) If to any Guarantor, at the address of such Guarantor
                  specified on Schedule I hereto.

or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been validly served, given or delivered (i) upon the earlier of

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actual receipt and three (3) Business Days after the same shall have been
deposited with the United States mail, registered or certified mail, return
receipt requested, with proper postage prepaid, (ii) upon transmission, when
sent by telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States mail as otherwise provided in this Section 7.4), (iii) one (1)
Business Day after deposit with a reputable overnight carrier with all charges
prepaid, or (iv) when delivered, if hand-delivered by messenger.

                  7.5. Successors and Assigns. This Guaranty and all obligations
of Guarantors hereunder shall be binding upon the successors and assigns of each
Guarantor (including a debtor-in-possession on behalf of such Guarantor) and
shall, together with the rights and remedies of Agent, for itself and for the
benefit of Lenders, hereunder, inure to the benefit of Agent and Lenders, all
future holders of any instrument evidencing any of the Obligations and their
respective successors and assigns. No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Obligations or any portion thereof or interest therein
shall in any manner affect the rights of Agent and Lenders hereunder. Guarantors
may not assign, sell, hypothecate or otherwise transfer any interest in or
obligation under this Guaranty.

                  7.6. No Waiver; Cumulative Remedies; Amendments. Neither Agent
nor any Lender shall by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies hereunder, and no waiver shall be valid
unless in writing, signed by Agent and then only to the extent therein set
forth. A waiver by Agent, for itself and the ratable benefit of Lenders, of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Agent or any
Lender, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Guaranty may be waived, altered, modified,
supplemented or amended except by an instrument in writing, duly executed by
Agent and Guarantors.

                  7.7. Termination. This Guaranty is a continuing guaranty and
shall remain in full force and effect until the Termination Date. Upon payment
and performance in full of the Guaranteed Obligations, Agent shall deliver to
Guarantors such documents as Guarantors may reasonably request to evidence such
termination.

                  7.8. Counterparts. This Guaranty may be executed in any number
of counterparts, each of which shall collectively and separately constitute one
and the same agreement.

                  7.9. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN

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DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS GUARANTY AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH GUARANTOR HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY,
CITY OF NEW YORK, NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG GUARANTORS, AGENT OR ANY
LENDER PERTAINING TO THIS GUARANTY OR TO ANY MATTER ARISING OUT OF OR RELATING
TO THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT AGENT AND
GUARANTORS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD
BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK, AND,
PROVIDED, FURTHER, THAT NOTHING IN THIS GUARANTY SHALL BE DEEMED OR OPERATE TO
PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
GUARANTEED OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR
OF AGENT, FOR THE BENEFIT OF AGENT AND LENDERS. EACH GUARANTOR EXPRESSLY SUBMITS
AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY SUCH COURT, AND EACH GUARANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT. EACH GUARANTOR HEREBY WAIVES PERSONAL SERVICE
OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT
AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH GUARANTOR AT THE ADDRESS
SET FORTH ON SCHEDULE I HERETO AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

                  7.10. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), EACH GUARANTOR
AND AGENT DESIRES THAT DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED
BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OR ARBITRATION, EACH
GUARANTOR AND AGENT WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO RESOLVE ANY

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DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN
CONNECTION WITH THIS GUARANTY AND THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO.

                  7.11. Limitation on Guaranteed Obligations. Notwithstanding
any provision herein contained to the contrary, each Guarantor's liability
hereunder shall be limited to an amount not to exceed as of any date of
determination the greater of:

                  (a) the net amount of all Loans and other extensions of credit
(including Letters of Credit) advanced under the Credit Agreement and directly
or indirectly re-loaned or otherwise transferred to, or incurred for the benefit
of, such Guarantor, plus interest thereon at the rate specified in the Credit
Agreement; or

                  (b) the amount which could be claimed by the Agent and Lenders
from such Guarantor under this Guaranty without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute of common law after taking into account, among other
things, such Guarantor's right of contribution and indemnification from each
other Guarantor under Section 7.12.)

                  7.12. Contribution with Respect to Guaranteed Obligations.

                  (a) To the extent that any Guarantor shall make a payment
under this Guaranty of all or any of the Guaranteed Obligations (a "Guarantor
Payment") which, taking into account all other Guarantor Payments then
previously or concurrently made by the other Guarantors, exceeds the amount
which such Guarantor would otherwise have paid if each Guarantor had paid the
aggregate Guaranteed Obligations satisfied by such Guarantor Payment in the same
proportion that such Guarantor's "Allocable Amount" (as defined below) (in
effect immediately prior to such Guarantor Payment) bore to the aggregate
Allocable Amounts of all of Guarantors in effect immediately prior to the making
of such Guarantor Payment, then, following indefeasible payment in full in cash
of the Obligations and termination of the Commitments, such Guarantor shall be
entitled to receive contribution and indemnification payments from, and be
reimbursed by, each of the other Guarantors for the amount of such excess, pro
rata based upon their respective Allocable Amounts in effect immediately prior
to such Guarantor Payment.

                  (b) As of any date of determination, the "Allocable Amount" of
any Guarantor shall be equal to the maximum amount of the claim which could then
be recovered from such Guarantor under this Guaranty without rendering such
claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law.

                  (c) This Section 7.12 is intended only to define the relative
rights of Guarantors and nothing set forth in this Section 7.12 is intended to
or shall impair the obligations of Guarantors, jointly and severally, to pay any
amounts as and when the same shall become due and payable in accordance with the
terms of this Guaranty.

                                       11
<PAGE>   12

                  (d) The rights of the parties under this Section 7.12 shall be
exercisable upon the full and indefeasible payment of the Guaranteed Obligations
and the termination of the Credit Agreement and the other Loan Documents.

                  (e) The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute assets of any
Guarantor to which such contribution and indemnification is owing.

                  7.13. Security. To secure payment of each Guarantor's
obligations under this Guaranty, concurrently with the execution of this
Guaranty, each Guarantor has entered into a Security Agreement pursuant to which
each Guarantor has granted to Agent for the benefit of Lenders a security
interest in substantially all of its personal property.

                  7.14. Credit Agreement. Each Guarantor agrees to perform,
comply with and be bound by the covenants contained in Sections 4, 5 and 6 of
the Credit Agreement as if each Guarantor were a Credit Party signatory to the
Credit Agreement., which covenants are incorporated herein by reference.

                            [signature page follows]

                                       12
<PAGE>   13

                  IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Guaranty of the date first above written.

                              THE WURLITZER COMPANY

                              By:      /s/ DUANE D. KIMBLE
                                  ------------------------------
                                  Duane D. Kimble
                                  Vice President and Chief Financial Officer

                              BALDWIN TRADING COMPANY

                              By:      /s/ DUANE D. KIMBLE
                                  ------------------------------
                                  Duane D. Kimble
                                  Vice President and Chief Financial Officer

                              GENERAL ELECTRIC CAPITAL CORPORATION,
                               AS AGENT

                              By:      /s/ CHARLES CHIODO
                                  ------------------------------
                                  Charles Chiodo
                                  A Duly Authorized Signatory

                                      S-1
<PAGE>   14

                                   SCHEDULE I

                  Executive Office, Principal Place of Business

                               4680 Parkway Drive
                             Mason, Ohio 45040-5301<PAGE>   1
                                                                    EXHIBIT 10.8

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

                            BALDWIN CANADA GUARANTEE

                            Made as of March 24, 2000

                                     Between

                   THE BALDWIN PIANO COMPANY (CANADA) LIMITED,
               a corporation incorporated under the laws of Canada
                                  ("GUARANTOR")

                                       and

                      GENERAL ELECTRIC CAPITAL CORPORATION,
                      a New York corporation, individually and as agent for
                      itself and the Lenders signatory to the Credit Agreement
                      hereinafter defined

                                    ("AGENT")

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

                             [McMILLAN BINCH LOGO]

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>                                                                                                             <C>
RECITALS..........................................................................................................1

SECTION 1 - INTERPRETATION........................................................................................1
         1.1    Definitions.......................................................................................1
                (1)     Borrower..................................................................................1
                (2)     Business Day..............................................................................2
                (3)     Guarantee.................................................................................2
                (4)     Guaranteed Obligations....................................................................2
                (5)     Guaranteed Parties........................................................................2
                (6)     Lenders...................................................................................2
                (7)     Person....................................................................................2
                (8)     Tax and Taxes.............................................................................2
         1.2    Other Defined Terms...............................................................................2
         1.3    References........................................................................................2
         1.4    Rules of Interpretation...........................................................................2

SECTION 2 - GUARANTEE.............................................................................................2

SECTION 3 - PAYMENT...............................................................................................3
         3.1    Payment on Demand.................................................................................3
         3.2    No Set-Off........................................................................................3
         3.3    Taxes.............................................................................................3
         3.4    Tax Gross-up......................................................................................3

SECTION 4 - OBLIGATIONS ABSOLUTE..................................................................................3

SECTION 5 - INDEMNITY.............................................................................................4

SECTION 6 - OBLIGATIONS CONTINUING................................................................................4
         6.1    No Reduction......................................................................................4
         6.2    Effect of Rescission..............................................................................4

SECTION 7 - OBLIGATIONS NOT AFFECTED..............................................................................4
         7.1    Obligations Not Affected..........................................................................4
         7.2    Waiver............................................................................................5
         7.3    No Obligation to Take Action Against Borrower.....................................................6
         7.4    Dealing With Borrower and Others..................................................................6
         7.5    Acknowledgement...................................................................................6
         7.6    Accounts Stated...................................................................................7
         7.7    Postponement......................................................................................7

SECTION 8 - REPRESENTATIONS AND WARRANTIES OF GUARANTOR...........................................................7
         8.1    Representations and Warranties....................................................................7

SECTION 9 - GENERAL...............................................................................................8
         9.1    Notices...........................................................................................8
         9.2    Successor Agent...................................................................................9
         9.3    Judgment Currency.................................................................................9
         9.4    Applicable Law...................................................................................10
</TABLE>

                                      (i)
<PAGE>   3

<TABLE>
<S>                                                                                                             <C>
         9.5    Jurisdiction.....................................................................................10
         9.6    Costs and Expenses...............................................................................10
         9.7    No Waiver, Cumulative Remedies...................................................................11
         9.8    Waiver of Rights of Subrogation, Reimbursement, Etc..............................................11
         9.9    Guarantee in Addition to Other Obligations.......................................................11
         9.10   Entire Agreement.................................................................................11
         9.11   Severability.....................................................................................12
         9.12   Successors and Assignees.........................................................................12
</TABLE>

                                      (ii)
<PAGE>   4

                            BALDWIN CANADA GUARANTEE

This Guarantee is made as of March 24, 2000, between

                           THE BALDWIN PIANO COMPANY (CANADA) LIMITED,
                           a corporation incorporated under the laws of Canada,
                           ("Guarantor")

                                                and

                           GENERAL ELECTRIC CAPITAL CORPORATION,
                           (together with its successors and assigns, "Agent")

RECITALS

A. Pursuant to that certain Credit Agreement dated as of the date hereof among
Baldwin Piano & Organ Company ("BORROWER"), the other Persons named therein as
Credit Parties, Agent and the Persons named therein as Lenders (including all
annexes, exhibits and schedules thereto, as from time to time amended, restated,
supplemented and otherwise modified, the "CREDIT AGREEMENT"), Lenders have
agreed to make Loans to Borrower and to incur Letter of Credit Obligations on
behalf of Borrower.

B. Guarantor is a direct wholly-owned subsidiary of Borrower.

C. In connection with making the Loans and incurring Letter of Credit
Obligations as provided for in the Credit Agreement, and as a condition
precedent thereto, Lenders require that Guarantor shall have executed and
delivered a guarantee of the obligations of Borrower under the Credit Agreement
and the other Loan Documents.

         NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce Lenders to provide the Loans and other
financial accommodations under the Credit Agreement, it is agreed as follows:

SECTION 1 - INTERPRETATION

1.1 DEFINITIONS. In this Guarantee:

(1) BORROWER has the meaning given to it in paragraph A of the Recitals.

(2) BUSINESS DAY means any day that is not (i) a Saturday, a Sunday or a day on
which banks are required or permitted to be closed in the State of New York, or
(ii) a day on which Agent is not open for business.

<PAGE>   5
                                     - 2 -

(3) GUARANTEE means this Baldwin Canada Guarantee, as amended, restated,
supplemented and otherwise modified from time to time.

(4) GUARANTEED OBLIGATIONS has the meaning given to it in Section 2 of this
Guarantee.

(5) GUARANTEED PARTIES has the meaning given to it in Section 2 of this
Guarantee.

(6) LENDERS has the meaning given to it in the Credit Agreement.

(7) PERSON has the meaning given to it in Section 7.1(1) of this Guarantee.

(8) TAX and TAXES each has the meaning given to it in Section 3.2(2) of this
Guarantee.

1.2 OTHER DEFINED TERMS. Capitalized terms used herein and not otherwise defined
have the meanings given to them in the Credit Agreement.

1.3 REFERENCES. Unless something in the subject matter or context is
inconsistent therewith, all references to Sections are to sections and
subsections of this Guarantee. The words "hereto", "herein", "hereof",
"hereunder" and similar expressions refer to this Guarantee and not to any
particular Section, paragraph or other portion hereof.

1.4 RULES OF INTERPRETATION. In this Guarantee, unless otherwise specifically
provided, the singular includes the plural and vice versa and "in writing" or
"written" includes printing, typewriting or any electronic means of
communication capable of being visibly reproduced at the point of reception,
including telecopier.

SECTION 2 - GUARANTEE

         Guarantor hereby irrevocably and unconditionally guarantees to Agent
for the benefit of each of the Lenders and Agent and their respective
successors, transferees and assigns (collectively, the "GUARANTEED PARTIES") the
punctual and complete payment and satisfaction when due (whether at stated
maturity, by acceleration or otherwise), and at all times thereafter, of all the
indebtedness, liabilities and obligations of Borrower, present and future,
direct and indirect, absolute and contingent, matured and unmatured, at any time
or from time to time existing or arising under or by virtue of or otherwise in
connection with the Credit Agreement and any other Loan Documents to which
Borrower is party which are or may become at any time and from time to time
owing or payable by Borrower to the Guaranteed Parties, or any of them, or which
remain owing and unpaid to the Guaranteed Parties, or any of them (the
"GUARANTEED OBLIGATIONS").

SECTION 3 - PAYMENT

3.1 PAYMENT ON DEMAND. Guarantor agrees to make immediate payment to the
Guaranteed Parties, or any of them, of all Guaranteed Obligations owing or
payable at that time to the Guaranteed Parties, or any of them, upon demand for
payment therefor by Agent to Guarantor. Any payment made under this Guarantee
shall be applied in reduction of the Guaranteed Obligations, as contemplated by
the Credit Agreement.

<PAGE>   6
                                     - 3 -

3.2 NO SET-OFF. Each payment to be made by Guarantor hereunder in respect of the
Guaranteed Obligations shall be payable in the currency or currencies in which
such Guaranteed Obligations are denominated, and shall be made:

(1) without set-off or counterclaim; and

(2) free and clear of and without deduction or withholding for or on account of
any present and future taxes, levies, imposts, stamp taxes, duties, charges to
tax, fees, deductions, withholdings and any conditions or restrictions resulting
in charges to tax and all penalties, interest and other payments on or in
respect thereof ("TAX" or "TAXES") unless Guarantor is compelled by law to make
payment subject to such Taxes.

3.3 TAXES. All Taxes in respect of this Guarantee or any amounts payable or paid
under this Guarantee shall be paid by Guarantor when due and, in any event,
prior to the date on which penalties attach thereto. Guarantor will indemnify
each of the Guaranteed Parties against and in respect of all such Taxes.

3.4 TAX GROSS-UP. Without limiting the generality of the foregoing, if any Taxes
(other than those imposed on or measured by the net income of Agent or a Lender
by the jurisdictions under the laws of which Agent or such Lender is organized
or is resident or carries on business) or amounts in respect thereof must be
deducted or withheld from any amounts payable or paid by Guarantor hereunder,
Guarantor shall pay such additional amounts as may be necessary to ensure that
each of the Guaranteed Parties receives a net amount equal to the full amount
which it would have received had payment (including of any additional amounts
payable under this Section 3.4) not been made subject to such Taxes. Within
thirty (30) days of each payment by Guarantor hereunder of Taxes or in respect
of Taxes, Guarantor shall deliver to Agent satisfactory evidence (including
originals, or certified copies, of all relevant receipts) that such Taxes have
been duly remitted to the appropriate authority or authorities.

SECTION 4 - OBLIGATIONS ABSOLUTE

         The obligations of Guarantor hereunder are and shall be absolute and
unconditional.

SECTION 5 - INDEMNITY

         As an original and independent obligation under this Guarantee,
Guarantor shall:

(1) indemnify each of the Guaranteed Parties and keep each of the Guaranteed
Parties indemnified against all costs, losses, expenses and liabilities of
whatever kind resulting from the failure by Borrower to make due and punctual
payment of any of the Guaranteed Obligations or resulting from any of the
Guaranteed Obligations being or becoming void, voidable, unenforceable or
ineffective against Borrower (including, but without limitation, all legal and
other costs, charges and expenses incurred by the Guaranteed Parties, or any of
them, in connection with preserving or enforcing, or attempting to preserve or
enforce, its rights under this Guarantee); and

<PAGE>   7
                                     - 4 -

(2) pay on demand the amount of such costs, losses, expenses and liabilities
whether or not any of the Guaranteed Parties have attempted to enforce any
rights against Borrower or any other Person or otherwise.

SECTION 6 - OBLIGATIONS CONTINUING

6.1 NO REDUCTION. The obligations of Guarantor hereunder shall be continuing and
shall remain in full force and effect so long as any obligations of Borrower
under the Credit Agreement remain outstanding and until all the Guaranteed
Obligations have been paid and satisfied in full. The obligations of Guarantor
hereunder shall not be satisfied, reduced, affected or discharged by any
intermediate payment, settlement or satisfaction of the whole or any part of the
principal, interest, fees and other monies or amounts which may at any time be
or become owing or payable under or by virtue of or otherwise in connection with
the Guaranteed Obligations or the Loan Documents.

6.2 EFFECT OF RESCISSION. The obligations of Guarantor hereunder shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
payment which would otherwise have reduced the obligations of Guarantor
hereunder (whether such payment shall have been by or on behalf of Borrower, or
by or on behalf of Guarantor) is rescinded or reclaimed from any of the
Guaranteed Parties upon the insolvency, bankruptcy, liquidation or
reorganization of Borrower or Guarantor or otherwise, all as though such payment
had not been made.

SECTION 7 - OBLIGATIONS NOT AFFECTED

7.1 OBLIGATIONS NOT AFFECTED. The obligations of Guarantor hereunder shall not
be affected or impaired by any act, omission, matter or thing whatsoever,
occurring before, upon or after any demand for payment hereunder (and whether or
not known to Guarantor or any of the Guaranteed Parties) which, but for this
provision, might constitute a whole or partial defence to a claim against
Guarantor hereunder or might operate to release or otherwise exonerate Guarantor
from any of its obligations hereunder or otherwise affect such obligations,
whether occasioned by default of any of the Guaranteed Parties or otherwise,
including, without limitation:

(1) any limitation of status or power, disability, incapacity or other
circumstance relating to Borrower, or any individual, partnership, other
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental body or other entity of whatever nature
(each, a "PERSON"), including any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, winding-up or other
proceeding involving or affecting Borrower, Guarantor, any other Credit Party or
any other Person;

(2) any irregularity, defect, unenforceability or invalidity in respect of any
indebtedness or other obligation of Borrower, any other Credit Party or any
other Person under the Loan Documents or any other document or instrument;

(3) any failure of Borrower, any other Credit Party or any other Person, whether
or not without fault on their part, to perform or comply with any of the
provisions of the Loan Documents or to give notice thereof to Guarantor;

<PAGE>   8
                                     - 5 -

(4) the taking or enforcing or exercising or the refusal or neglect to take or
enforce or exercise any right or remedy against Borrower, any other Credit Party
or any other Person or their respective assets, or the release or discharge of
any such right or remedies;

(5) the granting of time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to Borrower, any other
Credit Party or any other Person;

(6) any amendment, variation, modification, supplement or replacement of the
Loan Documents or any other document or instrument;

(7) any change in the ownership, control, name, objects, businesses, assets,
capital structure or constitution of Borrower, Guarantor, any other Credit Party
or any other Person;

(8) any merger or amalgamation of Borrower, Guarantor or any other Credit Party
with any Person or Persons;

(9) the occurrence of any change in the laws, rules, regulations or ordinances
of any jurisdiction or by any present or future action of any governmental body
or court amending, varying, reducing or otherwise affecting, or purporting to
amend, vary, reduce or otherwise affect, any of the Guaranteed Obligations or
the obligations of Guarantor under this Guarantee;

(10) the existence of any claim, set-off or other rights which Guarantor may
have at any time against Borrower, the Guaranteed Parties, any other Credit
Party or any other Person, or which Borrower may have at any time against the
Guaranteed Parties, whether in connection with the Loan Documents or otherwise;
and

(11) any other circumstance (other than by complete, irrevocable payment) that
might otherwise constitute a legal or equitable discharge or defence of Borrower
under the Loan Documents, or of Guarantor in respect of its guarantee hereunder.

7.2 WAIVER. Without in any way limiting the provisions of Section 7.1 of this
Guarantee, Guarantor hereby waives notice of acceptance hereof, notice of any
liability of Guarantor hereunder, notice or proof of reliance by the Guaranteed
Parties upon the obligations of Guarantor hereunder, and diligence, presentment,
demand for payment on Borrower, protest, notice of dishonour or non-payment of
any of the Guaranteed Obligations, or other notice or formalities to Borrower,
of any kind whatsoever.

7.3 NO OBLIGATION TO TAKE ACTION AGAINST BORROWER. Neither Agent nor any of the
other Guaranteed Parties shall have any obligation to enforce any rights or
remedies or to take any other steps against Borrower, any other Credit Party or
any other Person or any property of Borrower, any other Credit Party or any
other Person before Agent is entitled to demand payment and performance by
Guarantor of its liabilities and obligations under this Guarantee, and Guarantor
hereby waives all benefit of discussion. The obligations of Guarantor hereunder
are independent of the Guaranteed Obligations and a separate action or actions
may be brought and prosecuted against Guarantor to enforce this Guarantee,
irrespective of whether any action is brought against Borrower or whether
Borrower is joined in any such action or actions.

<PAGE>   9
                                     - 6 -

7.4 DEALING WITH BORROWER AND OTHERS. The Guaranteed Parties, without releasing,
discharging, limiting or otherwise affecting in whole or in part Guarantor's
obligations and liabilities hereunder and without the consent of or notice to
Guarantor, may:

(1) grant time, renewals, extensions, compromises, concessions, waivers,
releases, discharges and other indulgences to Borrower, any other Credit Party
or any other Person;

(2) amend, vary, modify, supplement or replace any Loan Document or any other
related document or instrument;

(3) take or abstain from taking securities or collateral from Borrower or any
other Credit Party, or from perfecting securities or collateral of Borrower or
any other Credit Party;

(4) release, discharge, compromise, realize, enforce or otherwise deal with or
do any act or thing in respect of (with or without consideration) any and all
collateral, mortgages or other security given by Borrower, any other Credit
Party or any third party with respect to the obligations or matters contemplated
by the Credit Agreement;

(5) accept compromises or arrangements from Borrower or any other Credit Party;

(6) apply all monies at any time received from Borrower or any other Credit
Party, or from securities upon such part of the Guaranteed Obligations as they
may see fit or change any such application in whole or in part from time to time
as they may see fit; and

(7) otherwise deal with, or waive or modify their right to deal with, Borrower
or any other Credit Party, and all other Persons and securities as they may see
fit.

7.5 ACKNOWLEDGEMENT. Guarantor hereby acknowledges communication of the terms of
the Loan Documents and of all the provisions therein contained and consents to
and approves the same.

7.6 ACCOUNTS STATED. Guarantor shall be bound by any account settled between
Borrower and the Guaranteed Parties, and if no such account has been so settled
immediately before demand for payment under this Guarantee, any account stated
by Agent shall be accepted by Guarantor as prima facie evidence in the absence
of manifest error of the amount which at the date of the account so stated is
due by Borrower to the Guaranteed Parties or remains unpaid by Borrower to the
Guaranteed Parties.

7.7 POSTPONEMENT. Until the Guaranteed Obligations are paid and otherwise
satisfied in full and Guarantor has satisfied all of its obligations pursuant to
this Guarantee including, without limitation, pursuant to Section 3 of this
Guarantee, all indebtedness and liabilities, present and future, of Borrower to
Guarantor are hereby postponed to the liabilities to the Guaranteed Parties and
all moneys received by Guarantor in respect of the indebtedness and liabilities
of Borrower to Guarantor shall be received in trust for the Guaranteed Parties
and forthwith upon receipt shall be paid over to Agent on behalf of the
Guaranteed Parties, the whole without in any way limiting or lessening the
liability of Guarantor under the guarantee contained in this Guarantee; and this
postponement is independent of such guarantee and shall remain in full effect
notwithstanding that the liability of Guarantor under such guarantee may be
extinct; provided that nothing in this

<PAGE>   10
                                     - 7 -

Section 7.7 shall restrict in any way any payments in respect of the
indebtedness and liabilities of Borrower to Guarantor which are expressly
permitted by the Credit Agreement.

SECTION 8 - REPRESENTATIONS AND WARRANTIES OF GUARANTOR

8.1 REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Agent
on behalf of the Guaranteed Parties as follows and acknowledges and confirms
that the Guaranteed Parties are relying upon such representations and
warranties:

(1) Guarantor is a corporation duly incorporated and validly existing under the
laws of Canada and has all requisite power and authority to execute, deliver and
perform this Guarantee;

(2) Guarantor is duly qualified to conduct business and is in good standing in
each other jurisdiction where its ownership or lease of property or the conduct
of its business requires such qualification, except where the failure to be so
qualified would not result in exposure to losses, damages or liabilities in
excess of $50,000;

(3) the execution, delivery and performance by Guarantor of this Guarantee is
within its corporate power, has been duly authorized by all necessary corporate
action, does not contravene any law or governmental regulation or any
contractual restriction binding on or affecting Guarantor or any of its
property;

(4) no authorization or approval or other action by, and no notice to or filing
with, any governmental body is required for the due execution, delivery and
performance by Guarantor of this Guarantee;

(5) all of the issued shares in the capital of Guarantor of every class are
owned beneficially and of record by Borrower; and

(6) this Guarantee is a legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with its terms subject to (i)
applicable bankruptcy, insolvency and similar laws affecting the enforcement of
creditors' rights generally and (ii) equitable principles.

SECTION 9 - GENERAL

9.1 NOTICES. Except as otherwise provided herein, any notice, demand, request,
consent, approval, declaration or other communication to be served, given or
delivered by one party to the other in connection with or under this Guarantee
shall be in writing and shall be deemed to have been validly served, given or
delivered (a) upon transmission, when transmission occurs at or before 5:00 p.m.
on any Business Day, or, if transmission occurs after such time on such Business
Day, on the Business Day immediately following such Business Day, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery as
otherwise provided in this Section 9.1), (b) one Business Day after deposit with
a reputable overnight courier with all charges prepaid, or (c) when delivered,
if hand-delivered by messenger, all of which shall be addressed to the party to
be notified and sent to the address or facsimile number indicated below or to
such other address (or facsimile number) as may be substituted by notice given
as herein provided. The

<PAGE>   11
                                     - 8 -

giving of any notice to Guarantor required hereunder may be waived in writing by
Guarantor. Communications with Guarantor under this Section 9.1 shall be
addressed as follows:

         The Baldwin Piano Company (Canada) Limited
         c/o 4680 Parkway Drive
         Mason, Ohio
         45040-5301
         Attention:         Chief Financial Officer
         Telecopier No.:    (513) 754-4664
         Telephone No.:     (513) 754-4647

with a copy to:

         Graydon Head & Richey
         511 Walnut Street
         Suite 1900
         Cincinnati, Ohio
         45202
         Attention:        Jeffrey Rohr
         Telecopier No.:   (513) 651-3836
         Telephone No.:    (513) 629-2852

Communications with Agent under this Section 9.1 shall be addressed as follows:

         General Electric Capital Corporation
         800 Connecticut Avenue, Two North
         Norwalk, Connecticut
         06854
         Attention:        Baldwin Piano Account Manager
         Telecopier No.:   (203) 852-3630
         Telephone No.:    (203) 852-3616

with copies to:

         O'Melveny & Myers LLP
         153 East 53rd Street
         New York, New York 10022
         Attention:        Peter V. Pantaleo
         Telecopier No.:   (212) 326-2061
         Telephone No.:    (212) 326-2000

         and

         General Electric Capital Corporation
         201 High Ridge Road
         Stamford, Connecticut
         06927-5100

<PAGE>   12
                                     - 9 -

         Attention:        Corporate Counsel - Commercial Finance
         Telecopier No.:   (203) 316-7889
         Telephone No.:    (203) 316-7552

9.2 SUCCESSOR AGENT. In the event that Agent for the time being under the Credit
Agreement shall resign or be removed and a successor agent thereafter shall be
appointed in accordance with Section 9.7 of the Credit Agreement, then upon such
successor agent agreeing in writing to be bound by the provisions of this
Guarantee as Agent hereunder, all references herein to Agent in this Guarantee
shall be deemed to be references to such successor agent as and from such date
and such successor agent shall receive and become vested with all the rights,
powers, privileges and duties of the retiring or removed Agent and the retiring
or removed Agent shall be discharged from its further duties and obligations as
Agent under this Guarantee.

9.3 JUDGMENT CURRENCY. Without limiting and in addition to Section 1.1 of the
Credit Agreement, if for the purposes of obtaining judgment in any court in any
jurisdiction with respect to this Guarantee or any other Loan Document to which
Guarantor is party it becomes necessary to convert into the currency of such
jurisdiction (herein called the "JUDGMENT CURRENCY") any amount due hereunder in
any currency other than the Judgment Currency, then conversion shall be made at
the rate of exchange prevailing on the Business Day before the day on which
judgment is given. For this purpose, "rate of exchange" means the rate at which
Agent would, on the relevant date at or about 12:00 noon (New York time), be
prepared to sell a similar amount of such currency in New York against the
Judgment Currency. In the event that there is a change in the rate of exchange
prevailing between the Business Day before the day on which the judgment is
given and the date of payment of the amount due, Guarantor will, on the date of
payment, pay such additional amounts (if any) as may be necessary to ensure that
the amount paid on such date is the amount in the Judgment Currency which when
converted at the rate of exchange prevailing on the date of payment is the
amount then due under this Guarantee or such other applicable Loan Document in
such other currency. Any additional amount due from Guarantor under this Section
9.3 will be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect of any of the Loan
Documents.

9.4 APPLICABLE LAW. This Guarantee shall be conclusively deemed to be a contract
made under, and shall for all purposes be governed by, and construed and
interpreted in accordance with, the laws of the Province of Ontario and the
federal laws of Canada applicable therein in effect from time to time without
prejudice to or limitation of any other rights or remedies available under the
laws of any jurisdiction where property or assets of Guarantor may be found.

9.5 JURISDICTION.

(1) Guarantor irrevocably agrees that any suits, actions or proceedings arising
out of or in connection with this Guarantee (collectively "PROCEEDINGS") may be
brought in any New York State Court or U.S. Federal Court sitting in the State
of New York or in any court in the Province of Ontario and submits and attorns
to the non-exclusive jurisdiction of each such court.

(2) Guarantor irrevocably waives any objections which it may have now or
hereafter to the laying of the venue of any Proceedings in any court referred to
in paragraph (1) and any claim

<PAGE>   13
                                     - 10 -

that any such Proceedings have been brought in an inconvenient forum and further
irrevocably agrees that a judgment in any Proceedings brought in any such court
shall be conclusive and binding upon Guarantor and may be enforced in any courts
to the jurisdiction of which such parties may be subject by Proceedings upon
such judgment.

(3) Nothing contained in this Section 9.5 shall limit the right of Agent or any
other Guaranteed Party to take Proceedings against Guarantor in any other court
of competent jurisdiction nor shall the taking of Proceedings in one or more
jurisdictions preclude the taking of Proceedings in any other jurisdiction,
whether concurrently or not.

(4) Guarantor hereby irrevocably consents generally to the fullest extent
permitted by law in respect of any Proceedings to the giving of any relief and
the issue of any process in connection with such Proceedings including, without
limitation, the making, enforcement or execution against any property whatsoever
(irrespective of its use or intended use) of any order or judgment which may be
made or given in such Proceedings.

(5) Guarantor hereby irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to the Loan Documents or this Guarantee,
the transactions contemplated hereby or thereby or the actions of any Guaranteed
Party in the negotiation, administration, performance or enforcement hereof or
thereof.

9.6 COSTS AND EXPENSES. Guarantor shall pay on demand by Agent any and all
reasonable costs, fees and expenses (including, without limitation, reasonable
legal fees and expenses) incurred by Agent in enforcing any of its rights under
this Guarantee.

9.7 NO WAIVER, CUMULATIVE REMEDIES. No failure to exercise and no delay in
exercising, on the part of the Lender, any right, remedy, power or privilege
hereunder or under the Loan Documents, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder or under the Loan Documents preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein and under the Loan Documents are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.

9.8 WAIVER OF RIGHTS OF SUBROGATION, REIMBURSEMENT, ETC. Guarantor hereby
irrevocably waives any claim or other rights that it may now or hereafter
acquire against Borrower or any other Credit Party, that arise from the
existence, payment, performance or enforcement of the Guaranteed Obligations
under this Guarantee, the Credit Agreement or any other Loan Document,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of any Guaranteed Party against Borrower or any other Credit
Party, or any collateral, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without limitation,
the right to take or receive from Borrower, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim, remedy or right; provided, however, that such waiver
shall terminate at such time, if any, as the Guaranteed Obligations and all
other amounts payable under this Guarantee have been paid in full and all
obligations of the Guaranteed Parties under the Loan Documents have

<PAGE>   14
                                     - 11 -

terminated; provided that Agent shall be entitled to hold any Potential
Preference Payment (as hereafter defined) in trust for the benefit of the
Guaranteed Parties and shall forthwith pay such amount to the Guaranteed
Parties, to be credited and applied following the expiry of the potential
preference period, to the Guaranteed Obligations, whether matured or unmatured,
in accordance with the terms of the Credit Agreement. The term "POTENTIAL
PREFERENCE PAYMENT" shall mean any payment or other transfer received for the
benefit of the Guaranteed Parties for or on account of the Guaranteed
Obligations which could be avoided by a trustee in bankruptcy for Borrower, or
by or for the benefit of other creditors of Borrower as a "preference" or a
"preferential transfer" or for any other reason under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect in any bankruptcy,
insolvency or similar proceeding with respect to Borrower. Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by the Credit Agreement and that the waiver
set forth in this Section 9.8 is knowingly made in contemplation of such
benefits.

9.9 GUARANTEE IN ADDITION TO OTHER OBLIGATIONS. The obligations of Guarantor
under this Guarantee are in addition to and not in substitution for any other
obligations to Agent or to any of the other Guaranteed Parties in relation to
the Loan Documents and any guarantees, indemnities or security at any time held
by or for the benefit of any of them.

9.10 ENTIRE AGREEMENT. This Guarantee, including all documents contemplated
hereby, constitutes the entire agreement between the parties with respect to the
subject matter and supersedes all prior negotiations, undertakings,
representations and understandings.

9.11 SEVERABILITY. Any provision of this Guarantee which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.

9.12 SUCCESSORS AND ASSIGNEES. This Guarantee shall be binding upon and enure to
the benefit of Guarantor and Agent and the other Guaranteed Parties and their
respective successors and permitted assignees, except that Guarantor may not
assign any of its obligations hereunder.

                           [INTENTIONALLY LEFT BLANK]

<PAGE>   15
                                     - 12 -

         IN WITNESS WHEREOF, Guarantor has caused this Guarantee to be duly
executed and delivered by its proper and duly authorized officers as of the day
and year first above written.

The parties have executed this Agreement.

                                    THE BALDWIN PIANO COMPANY (CANADA)
                                    LIMITED

                                    By:        /s/ DUANE KIMBLE
                                              ----------------------------
                                              Duane Kimble
                                              Chief Financial Officer

                                    GENERAL ELECTRIC CAPITAL CORPORATION

                                    By:        /s/ CHARLES CHIODO
                                              ----------------------------
                                              Charles Chiodo
                                              Duly Authorized Signatory

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