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&lt;p style="MARGIN: 0in 0in 0pt; punctuation-wrap: simple;"&gt;&lt;b&gt;&lt;font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold;" size="2"&gt;(3)&lt;/font&gt;&lt;/b&gt;&lt;b&gt;&lt;font style="FONT-SIZE: 3pt; FONT-WEIGHT: bold;" size="1"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&lt;/font&gt;&lt;/b&gt; &lt;b&gt;&lt;font style="FONT-SIZE: 10pt; FONT-WEIGHT: bold;" size="2"&gt;Recent Events&lt;/font&gt;&lt;/b&gt;&lt;/p&gt;
&lt;p style="MARGIN: 0in 0in 0pt; punctuation-wrap: simple;"&gt;&amp;#160;&lt;/p&gt;
&lt;p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt; punctuation-wrap: simple;"&gt;&lt;font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2"&gt;On June&amp;#160;30, 2013, Steinway Musical Instruments,&amp;#160;Inc. (&amp;#8220;SMI&amp;#8221;) entered into an Agreement and Plan of Merger (the &amp;#8220;Merger Agreement&amp;#8221;) with KSTW Holdings,&amp;#160;Inc., a Delaware corporation (&amp;#8220;Parent&amp;#8221;), and KSTW Acquisition,&amp;#160;Inc., a Delaware corporation and a wholly owned subsidiary of Parent (&amp;#8220;Acquisition Sub&amp;#8221;), providing for the merger of Acquisition Sub with and into SMI, with SMI being the surviving corporation and a wholly owned subsidiary of Parent (the &amp;#8220;Merger&amp;#8221;).&amp;#160; Parent and Acquisition Sub are affiliates of Kohlberg Management VII, L.P. (&amp;#8220;Kohlberg&amp;#8221;).&lt;/font&gt;&lt;/p&gt;
&lt;p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt; punctuation-wrap: simple;"&gt;&amp;#160;&lt;/p&gt;
&lt;p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt; punctuation-wrap: simple;"&gt;&lt;font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2"&gt;On July&amp;#160;15, 2013, Acquisition Sub commenced a cash tender offer (the &amp;#8220;Offer&amp;#8221;) to acquire all of the outstanding shares of SMI common stock.&amp;#160; Upon the successful closing of the Offer, stockholders of SMI who tender their shares in the Offer will receive $35.00 per share, in cash, payable without interest and less any applicable withholding taxes.&lt;/font&gt;&lt;/p&gt;
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&lt;p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt; punctuation-wrap: simple;"&gt;&lt;font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2"&gt;The Offer will expire at 11:59&amp;#160;p.m., New York City time, on August&amp;#160;21, 2013, unless extended in accordance with the terms of the Merger Agreement and the applicable rules&amp;#160;and regulations of the SEC.&amp;#160; Consummation of the Offer is subject to customary conditions, including, among others, (i)&amp;#160;the valid tender of the number of shares that would represent at least a majority of the outstanding shares of common stock of SMI; (ii)&amp;#160;Parent&amp;#8217;s receipt of the proceeds of the debt financing; (iii)&amp;#160;the Rights Agreement shall have no force or effect with respect to the Offer and the Merger; (iv)&amp;#160;the absence of certain legal impediments to the consummation of the Merger; and (v)&amp;#160;the absence of any change, event or occurrence that has had or would reasonably be expected to have a material adverse effect on SMI.&lt;/font&gt;&lt;/p&gt;
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&lt;p style="TEXT-INDENT: 0.25in; MARGIN: 0in 0in 0pt;"&gt;&lt;font style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt;" size="2"&gt;The Merger Agreement provides for a 45-day &amp;#8220;go-shop&amp;#8221; period, which will end on August&amp;#160;14, 2013, during which time SMI may solicit alternative proposals to the transaction with Kohlberg. Any shares not tendered in the Offer will be acquired in a second-step merger at the same cash price as paid in the Offer.&amp;#160; The transaction is expected to close in the third quarter of 2013.&lt;/font&gt;&lt;/p&gt;
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