AMENDMENT NO. 2 TO RIGHTS AGREEMENT

Exhibit 10.1

AMENDMENT NO. 2 TO

RIGHTS AGREEMENT

This AMENDMENT NO. 2 TO RIGHTS AGREEMENT, dated as of June 30, 2013 (this “Amendment”), is between Steinway Musical Instruments, Inc., a Delaware corporation (the “Company”), and Continental Stock Transfer & Trust Company, as Rights Agent (the “Rights Agent”).  This Amendment amends the Rights Agreement dated as of September 26, 2011, as amended by Amendment No. 1 to Rights Agreement dated as of February 20, 2013, between the Company and the Rights Agent (the “Rights Agreement”).  Capitalized terms used herein but not defined shall have the meanings set forth in the Rights Agreement.

RECITALS

WHEREAS, the Company proposes to enter into an Agreement and Plan of Merger by and among KSTW Holdings, Inc., a Delaware corporation (“Parent”), KSTW Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Acquisition Sub”), and the Company (as amended, supplemented, modified or replaced from time to time, the “Merger Agreement”);

WHEREAS, the Board of Directors of the Company has determined that the Merger Agreement and the terms and conditions set forth therein and the transactions contemplated thereby, including, without limitation, the Offer and the Merger (as both are defined in the Merger Agreement), are advisable and are fair to and in the best interests of the Company and its stockholders;

WHEREAS, the Board of Directors of the Company has determined, in connection with its consideration of the Merger Agreement, that it is necessary and desirable to amend the Rights Agreement as set forth herein;

WHEREAS, pursuant to Section 28 of the Rights Agreement, the provisions of the Rights Agreement contemplated to be amended hereby may be amended without the approval of any holders of Right Certificates;

WHEREAS, this Amendment is permitted by Section 28 of the Rights Agreement; and

WHEREAS, pursuant to Section 28 of the Rights Agreement, the Company hereby directs that the Rights Agreement shall be amended as set forth in this Amendment.

NOW THEREFORE, in consideration of the foregoing premises and mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Rights Agent hereby agree as follows:

AMENDMENT

Section 1. Amendment to Section 1.  Section 1 of the Rights Agreement is hereby amended and supplemented by adding a new subsection (r) which shall read as follows:

“(r)  “Merger Agreement” shall mean the Agreement and Plan of Merger, dated as of June 30, 2013, by and among KSTW Holdings, Inc., a Delaware corporation (“Parent”), KSTW Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Acquisition Sub”), and the Company (as such agreement is amended, supplemented, modified or replaced from time to time).”

Section 2. Amendment to Section 7(a).  Section 7(a) of the Rights Agreement is hereby amended by adding the following sentence to the end thereof which shall read as follows:

“Notwithstanding anything to the contrary in this Agreement, immediately prior to the Offer Closing (as defined in the Merger Agreement) this Agreement shall automatically terminate (without any further action of the parties hereto), all Rights established hereunder shall automatically expire and such time shall be deemed the Final Expiration Date for all purposes of this Agreement.”

Section 3. Addition of New Section 36.  The Rights Agreement is amended by adding a new Section 36 thereof which shall read as follows:

“Section 36.  Certain Exceptions with respect to Merger Agreement.  Notwithstanding any provision of this Agreement to the contrary, a Distribution Date and a Shares Acquisition Date shall be deemed not to have occurred, each of Parent, Acquisition Sub and their Affiliates and Associates shall be deemed not to have become an Acquiring Person, and no holder of any Rights shall be entitled to exercise such Rights under, or be entitled to any rights pursuant to, any of Sections 3, 7, 11 or 13 of this Agreement, in any such case by reason of (a) the approval, execution or delivery of the Merger Agreement or any amendments thereof approved in advance by the Board of Directors of the Company or (b) the commencement or, prior to termination of the Merger Agreement, the consummation of any of the transactions contemplated by the Merger Agreement in accordance with their respective provisions, including without limitation, the Offer or the Merger (as each are defined in the Merger Agreement).

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Section 4. Effective Date. This Amendment shall be deemed effective as of the date first written above, as if executed on such date.

Section 5. Governing Law.  This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by, and construed in accordance with, the laws of such State applicable to contracts made and to be performed entirely within such State.

Section 6. Severability.  The terms, provisions, covenants or restrictions of this Amendment shall be deemed severable and the invalidity or unenforceability of any term, provision, covenant or restriction shall not affect the validity or enforceability of the other term, provision, covenant or restriction hereof.  If any term, provision, covenant or restriction of this Amendment, or the application thereof to any person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable term, provision, covenant or restriction shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable term, provision, covenant or restriction and (b) the remainder of this Amendment and the application of such term, provision, covenant or restriction to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such term, provision, covenant or restriction, or the application thereof, in any other jurisdiction.

Section 7. Notice.  The Rights Agent and the Company hereby waive any notice requirement with respect to each other under the Rights Agreement, if any, pertaining to the matters covered by this Amendment.

Section 8. Effect of Amendment.  Except as amended as set forth above, the Rights Agreement shall continue in full force and effect.  Nothing in this Amendment shall be construed to modify any provision of the Rights Agreement other than those specifically amended as set forth above.

Section 9. Successors and Assigns.  This Amendment shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

Section 10. Counterparts.  This Amendment may be executed in one or more counterparts, all of which shall be considered an original and all of which together shall constitute one and the same instrument.  This Amendment shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party.

Section 11. Facsimile Signature.  This Amendment may be executed by facsimile signature and a facsimile signature shall constitute an original for all purposes.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.

	STEINWAY MUSICAL INSTRUMENTS, INC.
	By:	/s/ Xxxxxx X. Xxxxxx
	Name:		Xxxxxx X. Xxxxxx
	Title: Senior Executive Vice President and Chief Financial Officer
	CONTINENTAL STOCK TRANSFER & TRUST COMPANY
	By:	/s/ Xxxx X. Xxxxx, Xx.
	Name:		Xxxx X. Xxxxx, Xx.
	Title: Vice President

[SIGNATURE PAGE TO AMENDMENT NO. 2 TO RIGHTS AGREEMENT]